Document:

Exhibit 10.1 Asset Purchase Agreement

    Exhibit
      10.1

     

     

     

     

     

     

     

     

     

    
 

    ASSET
      PURCHASE AGREEMENT

     

    BY
      AND BETWEEN

     

    CLARIENT,
      INC.,

     

    CLRT
      ACQUISITION,
      LLC,

     

    TRESTLE
      HOLDINGS INC.

     

    AND

     

    TRESTLE
      ACQUISITION CORP.

     

    

     

    Dated
      as of June 19, 2006 

     

     

     

     

     

     

     

     

     

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    TABLE
      OF CONTENTS

     

    

      
        	 	
                 

              	
                Page

              
	
                 

              	
                Article
                  I DEFINITIONS

              	
                2

              
	
                1.1

              	
                Certain
                  Definitions

              	
                2

              
	
                 

              	
                Article
                  II PURCHASE AND SALE OF ASSETS

              	
                12

              
	
                2.1

              	
                Purchase
                  and Sale of Assets

              	
                12

              
	
                2.2

              	
                Assumption
                  of Liabilities

              	
                15

              
	
                2.3

              	
                Consideration
                  for Purchased Assets

              	
                18

              
	
                2.4

              	
                Allocation
                  of Purchase Price

              	
                18

              
	
                2.5

              	
                Closing

              	
                19

              
	
                2.6

              	
                Nontransferable
                  Assets

              	
                20

              
	
                2.7

              	
                Taking
                  of Necessary Action; Further Action

              	
                20

              
	
                 

              	
                Article
                  III REPRESENTATIONS AND WARRANTIES OF SELLERS

              	
                21

              
	
                3.1

              	
                Organization,
                  Qualification, and Corporate Power

              	
                21

              
	
                3.2

              	
                Authorization

              	
                21

              
	
                3.3

              	
                Sellers’
                  SEC Filings

              	
                22

              
	
                3.4

              	
                Subsidiaries

              	
                22

              
	
                3.5

              	
                No
                  Conflicts

              	
                22

              
	
                3.6

              	
                Consents

              	
                22

              
	
                3.7

              	
                Sellers’
                  Financial Statements

              	
                23

              
	
                3.8

              	
                Internal
                  Controls

              	
                23

              
	
                3.9

              	
                Accounts
                  Receivable

              	
                24

              
	
                3.10

              	
                Customers
                  and Suppliers

              	
                24

              
	
                3.11

              	
                No
                  Undisclosed Liabilities

              	
                25

              
	
                3.12

              	
                No
                  Changes

              	
                25

              
	
                3.13

              	
                Events
                  Subsequent to Most Recent Fiscal Period End

              	
                25

              
	
                3.14

              	
                Legal
                  Compliance

              	
                27

              
	
                3.15

              	
                Tax
                  Matters

              	
                29

              
	
                3.16

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

              	
                30

              
	
                3.17

              	
                Intellectual
                  Property

              	
                31

              
	
                3.18

              	
                Contracts

              	
                37

              
	
                3.19

              	
                Commercialization
                  of Product

              	
                39

              
	
                3.20

              	
                Insurance

              	
                39

              
	
                3.21

              	
                Litigation

              	
                40

              
	
                3.22

              	
                Product
                  Warranty, Product Liability and Recalls

              	
                40

              
	
                3.23

              	
                Employees

              	
                40

              
	
                3.24

              	
                Employee
                  Matters and Benefit Plans

              	
                40

              
	
                3.25

              	
                Environment,
                  Health, and Safety

              	
                42

              
	
                3.26

              	
                Certain
                  Business Relationships With Sellers

              	
                43

              

      

    

     

    
      
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          i
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        TABLE
          OF CONTENTS

        (Continued)

         

      

    

     

    

      
        	 	 	
                Page 

              
	
                3.27

              	
                No
                  Adverse Developments

              	
                43

              
	
                3.28

              	
                Foreign
                  Corrupt Practices Act

              	
                43

              
	
                3.29

              	
                Fees

              	
                43

              
	
                3.30

              	
                Complete
                  Copies of Materials

              	
                43

              
	
                3.31

              	
                Board
                  Approval

              	
                43

              
	
                3.32

              	
                Stockholder
                  Approval

              	
                44

              
	
                3.33

              	
                Information

              	
                44

              
	
                3.34

              	
                No
                  Liquidation, Insolvency, Winding-Up

              	
                44

              
	
                3.35

              	
                Preferences

              	
                45

              
	
                3.36

              	
                Assets

              	
                45

              
	
                3.37

              	
                Disclosure

              	
                45

              
	
                3.38

              	
                No
                  Limitation on Other Representation

              	
                45

              
	
                 

              	
                Article
                  IV REPRESENTATIONS AND WARRANTIES OF BUYER

              	
                45

              
	
                4.1

              	
                Organization,
                  Qualification, and Corporate Power

              	
                46

              
	
                4.2

              	
                Authorization

              	
                46

              
	
                4.3

              	
                No
                  Conflicts

              	
                46

              
	
                4.4

              	
                Consents

              	
                46

              
	
                4.5

              	
                Brokers’
                  Fees

              	
                47

              
	
                4.6

              	
                Availability
                  of Funds

              	
                47

              
	
                4.7

              	
                Litigation

              	
                47

              
	
                 

              	
                Article
                  V PRE-CLOSING COVENANTS

              	
                47

              
	
                5.1

              	
                Operation
                  of Business

              	
                47

              
	
                5.2

              	
                Access
                  to Information

              	
                49

              
	
                5.3

              	
                Notice
                  of Developments

              	
                50

              
	
                5.4

              	
                No
                  Solicitation

              	
                50

              
	
                5.5

              	
                Stockholder
                  Meeting

              	
                53

              
	
                 

              	
                Article
                  VI ADDITIONAL AGREEMENTS

              	
                54

              
	
                6.1

              	
                Reasonable
                  Efforts

              	
                54

              
	
                6.2

              	
                Notices
                  and Consents

              	
                54

              
	
                6.3

              	
                Patent
                  Matters.

              	
                55

              
	
                 

              	
                Article
                  VII OTHER AGREEMENTS AND COVENANTS

              	
                56

              
	
                7.1

              	
                Confidentiality

              	
                56

              
	
                7.2

              	
                Additional
                  Documents and Further Assurances

              	
                56

              
	
                7.3

              	
                Take-over
                  Statutes

              	
                56

              
	
                7.4

              	
                Parent
                  Vote

              	
                57

              
	
                7.5

              	
                Reasonable
                  Cooperation of Buyer

              	
                57

              
	
                7.6

              	
                Agreement
                  to Perform

              	
                57

              
	
                7.7

              	
                Attorney-In-Fact

              	
                57

              

      

    

    
      
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        TABLE
          OF CONTENTS

        (Continued)

      

    

    
      	 	 	
              Page  

            
	
              7.8

            	
              Discharge
                of Excluded Liabilities

            	
              57

            
	
              7.9

            	
              Guarantee

            	
              57

            
	
              7.10

            	
              Collection
                of Accounts Receivable.

            	
              58

            
	
              7.11

            	
              Hired
                Employees.

            	
              59

            
	
               

            	
              Article
                VIII CONDITIONS TO THE CLOSING

            	
              59

            
	
              8.1

            	
              Conditions
                to Buyer’s Obligations

            	
              59

            
	
              8.2

            	
              Conditions
                to Sellers’ Obligations

            	
              60

            
	
              8.3

            	
              Frustration
                of Closing Conditions

            	
              61

            
	
               

            	
              Article
                IX TAX MATTERS

            	
              61

            
	
              9.1

            	
              Tax
                Books and Records.

            	
              61

            
	
              9.2

            	
              Allocation
                of Taxes.

            	
              62

            
	
              9.3

            	
              Transfer
                Taxes.

            	
              62

            
	
              9.4

            	
              Notices.

            	
              63

            
	
              9.5

            	
              Withholding
                Exemption.

            	
              63

            
	
               

            	
              Article
                X TERMINATION

            	
              63

            
	
              10.1

            	
              Termination
                of the Agreement

            	
              63

            
	
              10.2

            	
              Effect
                of Termination

            	
              65

            
	
              10.3

            	
              Fees
                and Expenses

            	
              65

            
	
              10.4

            	
              Repayment
                of Bridge Loans

            	
              66

            
	
               

            	
              Article
                XI MISCELLANEOUS

            	
              66

            
	
              11.1

            	
              Press
                Releases and Public Announcements

            	
              66

            
	
              11.2

            	
              No
                Third-Party Beneficiaries

            	
              66

            
	
              11.3

            	
              Entire
                Agreement

            	
              66

            
	
              11.4

            	
              Amendment

            	
              66

            
	
              11.5

            	
              Waivers

            	
              66

            
	
              11.6

            	
              Successors
                and Assigns

            	
              67

            
	
              11.7

            	
              Counterparts

            	
              67

            
	
              11.8

            	
              Notices

            	
              67

            
	
              11.9

            	
              Governing
                Law

            	
              68

            
	
              11.10

            	
              Forum
                Selection; Consent to Jurisdiction

            	
              68

            
	
              11.11

            	
              Waiver
                of Jury Trial

            	
              68

            
	
              11.12

            	
              Severability

            	
              69

            
	
              11.13

            	
              Construction

            	
              69

            
	
              11.14

            	
              Attorneys’
                Fees

            	
              69

            
	
              11.15

            	
              Nonsurvival
                of Representations and Warranties

            	
              69

            
	
              11.16

            	
              Specific
                Performance

            	
              69

            
	
              11.17

            	
              Time
                of Essence

            	
              69

            
	
              11.18

            	
              Interpretation
                and Rules of Construction

            	
              69

            

    

    
      
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        TABLE
          OF CONTENTS

        (Continued)

      

    

    

    

      
        	 	 	 Page 
	
                11.19

              	
                Representation
                  by Counsel

              	
                70

              
	
                11.2

              	
                Disclosure
                  Letter

              	
                70

              

      

    

     

    INDEX
      OF SCHEDULES

     

    
      	
              Schedule

               

            	
              Description

               

            
	
              Schedule
                1.1(a)

               

            	
              Sellers’
                2006 Operating Forecast

               

            
	
              Schedule 1.1(b)

               

            	
              Hired
                Employees

               

            
	
              Schedule
                2.1(b)(i) 

               

            	
              Assumed
                Contracts

               

            
	
              Schedule  2.1(c)(xiii)

            	
              Certain
                Excluded Assets 

               

            
	
              Schedule
                2.1(b)(i)

            	
              Certain
                Excluded Liabilities

               

            
	
              Schedule 
                2.2(b)(ii)

            	
              Deferred
                Revenue

               

            
	
              Schedule
                2.2(b)(v)

            	
              Vendors

               

            
	
              Schedule
                8.1(h)

            	
              Material
                Consents

               

            

    

    

    

    
      
        
           

        

        
        

      

      
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          iv
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    ASSET
      PURCHASE AGREEMENT

     

    This
      ASSET PURCHASE AGREEMENT (this “Agreement”)
      is
      made and entered into as of June 19, 2006, by and among Clarient, Inc. a
      Delaware corporation (“Clarient”),
      CLRT
      Acquisition, LLC, a Delaware limited liability company and wholly-owned
      subsidiary of Clarient (“Buyer”),
      Trestle Holdings Inc., a Delaware corporation (“Parent”)
      and
      Trestle Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
      of
      Parent (“Trestle
      Sub,”
and
      together with Parent, the “Sellers”).
      Buyer
      and Clarient, on the one hand, and Sellers, on the other hand, are sometimes
      referred to herein individually as a “Party”
and
      collectively as the “Parties.”

     

    RECITALS

     

    A.  Sellers
      desire to sell to Buyer, and Buyer desires to purchase from Sellers, on the
      terms and subject to the conditions set forth herein, certain of the assets
      of
      Sellers described herein, and Sellers desire Buyer to assume certain of Sellers’
liabilities, which Buyer would agree to assume on the terms and subject to
      the
      conditions set forth herein.

     

    B.  The
      respective boards of directors of each of Clarient, Buyer and Sellers believes
      it is in the best interests of their respective corporations and stockholders
      that the transactions contemplated hereby be consummated and, in furtherance
      thereof, have approved this Agreement and the transactions contemplated
      hereby.

     

    C.  Concurrently
      with the execution and delivery of this Agreement, Parent and Clarient have
      entered into those certain Consulting Agreements dated as of even date herewith,
      by and among Clarient, Parent, Trestle Sub and the individuals named therein
      (the “Consulting
      Agreements”)
      pursuant to which Parent, through certain of its employees, shall provide
      consulting services to Buyer and Clarient.

     

    D.  Parent
      is
      the borrower pursuant to that certain interest bearing secured senior promissory
      note dated February 27, 2006, in the aggregate principal amount of $250,000,
      made by Parent in favor of Clarient (as amended to date, the “First
      Bridge Note”).

     

    E.  In
      order
      to facilitate the transactions contemplated in this Agreement, concurrently
      with
      the execution and delivery of this Agreement, Parent, Trestle Sub and Clarient
      are (i) entering into that certain Second Loan and Security Agreement dated
      as
      of even date herewith (the “Second
      Loan and Security Agreement”)
      pursuant to which Clarient will, from time to time and upon the terms and
      conditions contained therein, loan additional funds to Parent in the aggregate
      amount of $500,000, evidenced by a promissory note in the form attached thereto
      (the “Subsequent
      Bridge Note”)
      and
      (ii) extending the maturity of the First Bridge Note.

     

    F.  Buyer
      and
      Sellers desire to make certain representations, warranties, covenants and other
      agreements in connection with the transactions contemplated hereby.

     

    NOW,
      THEREFORE, in consideration of the covenants and representations set forth
      herein, and for other good and valuable consideration, the Parties agree as
      follows:

     

    
      
        
        

      

      
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          1
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ARTICLE
        I 

    

     

    

    DEFINITIONS

     

    
      	1.1  	
              Certain
                Definitions

            

    

     

    As
      used
      in this Agreement, the following terms have the following meanings (terms
      defined in the singular to have a correlative meaning when used in the plural
      and vice versa). Certain other terms are defined in the text of this
      Agreement.

     

    “Acquisition
      Proposal”
shall
      mean any offer or proposal made by a Person other than Buyer or its Affiliates
      for (i) a merger, consolidation, share exchange, business combination or
      other similar transaction or series of related transactions involving either
      Seller, (ii) any tender offer, exchange offer or other offer for, or
      acquisition or series of related acquisitions by any Person or group (within
      the
      meaning of Regulation 13D under the Exchange Act) of beneficial ownership of,
      20% or more of the outstanding common stock or outstanding voting capital stock
      of either Seller, (iii) any issuance, sale or other disposition of
      securities (or options, rights or warrants to purchase, or securities
      convertible into or exchangeable for, such securities) in each case by a Seller
      representing 20% or more of the voting power of such Seller, (iv) any sale,
      lease, exchange, transfer or other disposition (including by way of merger,
      consolidation, license or exchange), in a single transaction or a series of
      related transactions, of 20% or more of the Business or of the Purchased Assets
      or accounting for 20% or more of the consolidated revenues of Parent (other
      than
      the sale by Sellers to customers of Instruments and associated licenses and
      service obligations in the Ordinary Course of Business). The term Acquisition
      Proposal shall also include any proposal or offer made by a Person other than
      Buyer and its Affiliates with respect to any other transaction having similar
      effect as any of the foregoing with respect to either Seller, other than the
      transactions contemplated by this Agreement (excluding an internal combination
      of one or more Sellers with each other and/or their Subsidiaries notwithstanding
      the foregoing provisions).

     

    “Adjustment
      Amount”
means
      the amount of any impairment or reduction of any of a Seller’s assets that
      occurs between the Current Balance Sheet Date and the Closing Date, other than
      in the Ordinary Course of Business, including any such impairment or reduction
      of assets that occurs as a result of (i) theft, destruction or loss, (ii) any
      write down or write off of the value of such assets or (iii) payments outside
      of
      the Ordinary Course of Business such as the payment of any compensation,
      satisfaction of liabilities or other payments prohibited by Section 5.1;
      provided,
      however,
      the
      Adjustment Amount shall not exceed $300,000.

     

    “Adjustment
      Schedule”
has
      the
      meaning set forth in Section
      2.3(b).

     

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

     

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

     

    “Allocation” has
      the
      meaning set forth in Section 2.4.

     

    
      
         

        
        

      

      
        -
          2
          -

        
          

        

      

      
        
        

      

    

    “Ancillary
      Agreements”
means
      all agreements and instruments delivered pursuant to this Agreement, including
      the Consulting Agreement.

     

    “Assumed
      Contracts”
has
      the
      meaning set forth in Section 2.1(b)(i).

     

    “Assumed
      Liabilities”
has
      the
      meaning set forth in Section 2.2(b).

     

    “Base
      Price”
means
      (i) cash in an amount equal to $3,000,000, less (ii) the amount of Assumed
      Liabilities that are required to be reflected on the Closing Balance Sheet,
      less
      (iii) all amounts paid for services at or prior to the time of Closing by
      Clarient or Buyer to Sellers in connection with the Consulting Agreements,
      less
      (iv) the Adjustment Amount, less (v) the Factoring Deductible, less (vi)
      $150,000, if the Patent Condition shall not have been satisfied by Sellers’ at
      the time of Closing.

     

    “Bridge
      Notes”
means
      the First Bridge Note and the Subsequent Bridge Note.

     

    “Business”
means
      Sellers’ and their respective Subsidiaries’ business of developing,
      manufacturing and selling digital tissue imaging devices and products, image
      management and workflow applications, and telemedicine applications linking
      dispersed users and data primarily to the healthcare and pharmaceutical markets,
      and supporting such applications, as currently conducted by Sellers and as
      currently proposed to be conducted by Sellers.

     

    “Business
      Day”
means
      any day other than a Saturday or Sunday or a day on which national banking
      institutions in the City of Los Angeles, California are authorized or obligated
      by law or executive order to be closed.

     

    “Business
      Facility”
means
      is any property including the land, the improvements thereon, the groundwater
      thereunder and the surface water thereon, that is or at any time has been owned,
      operated, occupied, controlled or leased by Sellers or any of their Subsidiaries
      in connection with the operation of its business.

     

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

     

    “Buyer
      Material Adverse Effect”
means
      any circumstance, event, change in, or effect on, Clarient and Buyer or their
      business that, either alone or in combination with any other circumstances,
      events, changes in, or effects on, Clarient and Buyer or their business is,
      or
      is would reasonably be expected to have a material adverse effect on the ability
      of Clarient and Buyer to consummate the transactions contemplated by this
      Agreement; provided,
      however,
      that
      none of the following shall be deemed to constitute or be taken into account
      in
      determining whether there has been or will or could be a “Buyer Material Adverse
      Effect”: (1) any change resulting from or arising out of general market,
      economic or political conditions (including any change arising out of acts
      of
      war, weather conditions or other force majeure events), (2) any change in
      the price or trading value of Clarient’s securities, in and of itself or
      (3) any change in the industries in which Clarient and Buyer conduct their
      business, provided
      that
      in
      the case of (1) or (3) such changes do not have a substantially disproportionate
      impact on Buyer and Clarient as compared to other similarly situated
      participants in the industries in which they conduct their
      business.

     

    
      
         

         

        
        

      

      
        -
          3
          -

        
          

        

      

      
        
        

      

    

    “Buyer’s Knowledge”
means
      with respect to Buyer, and with respect to any matter in question, the actual
      knowledge of any of Buyer’s and Clarient’s officers or members of its board of
      directors after reasonable inquiry, and shall include all similar uses of the
      concept, including “aware,” “known to” and “knowledge of.”

     

    “Buyer’s
      Transfer Taxes”
      has the
      meaning set forth in Section
      9.3.

     

    “Change
      of Recommendation”
has
      the
      meaning set forth in Section 5.4(e).

     

    “Clarient”
has
      the
      meaning set forth in the preamble.

     

    “Consulting
      Agreement”
has
      the
      meaning set forth in the recitals.

     

    “Closing”
has
      the
      meaning set forth in Section
      2.5.

     

    “Closing
      Accounts Receivable Statement”
means
      a
      list of all accounts receivable of the Sellers and their Subsidiaries as of
      the
      Closing Balance Sheet Date, which has been prepared by Sellers in a manner
      consistent with the preparation of the Current Accounts Receivable Statement
      and
      for which (i) all of the accounts receivable set forth therein arose in the
      Ordinary Course of Business, are carried at values determined in accordance
      with
      GAAP consistently applied and are, to Seller’s Knowledge, collectible except to
      the extent of reserves therefor set forth in the Closing Balance Sheet (except
      that unaudited interim financial statements do not contain footnotes and other
      presentation items that may be required by GAAP and are subject to normal
      year-end audit adjustments, which are not material in amount or significance
      in
      the aggregate); (ii) except as set forth in Section 3.7(b) of the Sellers’
Disclosure Letter, no person other than Buyer or its Affiliates has any Lien
      on
      any of the accounts receivable set forth therein, (iii) no request or agreement
      for deduction or discount has been made with respect to any of the accounts
      receivable set forth therein, except to the extent of reserves therefor set
      forth in the Closing Balance Sheet; and (iv) the accounts receivable set forth
      therein and the other debts arising therefrom are not, to Sellers’ Knowledge,
      subject to any counterclaim or set-off and there are no claims or disputes
      with
      regard to any such accounts receivable except to the extent of the reserves
      reflected on the Closing Balance Sheet.

     

    “Closing
      Balance Sheet”
means
      an unaudited consolidated balance sheet of Parent dated as of a date that is
      not
      more than three days prior to the Closing Date which (i) is prepared by
      Sellers in a manner consistent with the preparation of the Current Balance
      Sheet
      and (ii) presents fairly and accurately in all material respects the Sellers’
financial condition as of the Closing Balance Sheet Date in accordance with
      GAAP
      (except that unaudited interim financial statements do not contain footnotes
      and
      other presentation items that may be required by GAAP and are subject to normal
      year-end audit adjustments, which are not material in amount or significance
      in
      the aggregate).

     

    “Closing
      Balance Sheet Date”
means
      the date of the Closing Balance Sheet.

     

    “Closing
      Date”
has
      the
      meaning set forth in Section
      2.5.

     

    “COBRA”
means
      the Consolidated Omnibus Budget Reconciliation Act of 1985, as
      amended.

     

    
      
         

         

        
        

      

      
        -
          4
          -

        
          

        

      

      
        
        

      

    

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

     

    “Confidential
      IP Information”
has
      the
      meaning set forth in Section
      3.17(i)

     

    “Confidentiality
      Agreement”
means
      the Mutual Non-Disclosure Agreement dated August 10, 2005 between Parent and
      Clarient.

     

    “Contract”
means
      any agreement, contract, lease, note, loan, evidence of indebtedness, purchase
      order, letter of credit, indenture, security or pledge agreement, franchise
      agreement, undertaking, covenant not to compete, covenant not to sue, employment
      agreement, license, instrument, obligation, commitment or other arrangement
      to
      which either Seller is a party or is bound, whether oral or written.

     

    “Copyrights”
means
      copyrights, copyright registrations, or any application therefor, in the U.S.
      or
      any foreign country, or any other right corresponding thereto throughout the
      world, including, without limitation, moral rights.

     

    “Current
      Accounts Receivable Statement”
has
      the
      meaning set forth in Section 3.9.

     

    “Current
      Balance Sheet”
has
      the
      meaning set forth in Section
      3.7(b).

     

    “Current
      Balance Sheet Date”
means
      March 31, 2006.

     

    “Disposal
      Site”
means
      a
      location where Hazardous Materials are treated or disposed of. 

     

    “DOL”
means
      the Department of Labor.

     

    “Employee”
means
      any current or former or retired employee, consultant or director of Sellers
      or
      any of their respective Subsidiaries.

     

    “Employment
      Statutes”
has
      the
      meaning set forth in Section
      2.2(c)(xii).

     

    “Environmental
      Laws”
means
      all applicable laws, rules, regulations, orders, treaties, statutes, and codes
      promulgated by any Governmental Body which prohibit, regulate or control any
      Hazardous Material or any Hazardous Material Activity, including, without
      limitation, the Comprehensive Environmental Response, Compensation, and
      Liability Act of 1980, the Resource Recovery and Conservation Act of 1976,
      the
      Federal Water Pollution Control Act, the Clean Air Act, the Hazardous Materials
      Transportation Act, the Clean Water Act, comparable laws, rules, regulations,
      ordinances, orders, treaties, statutes, and codes of other Governmental Bodies,
      the regulations promulgated pursuant to any of the foregoing, and all amendments
      and modifications of any of the foregoing, all as amended to date.

     

    “Environmental
      Permit”
means
      any approval, permit, license, clearance or consent required under applicable
      Environmental Laws.

     

    
      
         

        
        

      

      
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          5
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    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended.

     

    “ERISA Affiliate”
means
      any other person or entity that is a member of a “controlled group of
      corporations” with or under “common control” with Sellers or any of their
      Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the
      Code and the regulations issued thereunder
      but
      excluding Buyer, Clarient or their Affiliates.

     

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

     

    “Excluded
      Assets”
has
      the
      meaning set forth in Section 2.1(c).

     

    “Excluded
      Liabilities”
has
      the
      meaning set forth in Section 2.2(c).

     

    “Expense
      Amount”
means
      the lesser of (A) $125,000 in cash or (B) the direct expenses
      (including reasonable attorney’s fees and accounting and financial advisory
      costs) of the terminating Party incurred in connection with the transactions
      contemplated hereunder.

     

    “Factored
      Accounts”
means
      any of Sellers’ accounts and/or receivables sold to a factor or otherwise
      factored by Sellers within 60 days prior to Closing that remain uncollected
      by
      the factor as of the Closing.

     

    “Factoring
      Deductible”
means
      the total face amount of the Factored Accounts.

     

    “FDA”
has
      the
      meaning set forth in Section 3.14(c).

     

    “FDCA”
has
      the
      meaning set forth in Section 3.14(a).

     

    “FICA”
has
      the
      meaning set forth in Section 3.15(b).

     

    “First
      Bridge Note”
has
      the
      meaning set forth in the recitals.

     

    “FMLA”
means
      the Family Medical Leave Act of 1993, as amended.

     

    “FUTA”
has
      the
      meaning set forth in Section 3.15(b).

     

    “GAAP”
means
      United States generally accepted accounting principles in effect from time
      to
      time applied on a consistent basis throughout the periods
      indicated.

     

    “Governmental
      Body”
means
      any (i) nation, province, state, county, city, town, village, district, or
      other
      jurisdiction of any nature; (ii) federal, provincial, state, local, municipal,
      foreign, or other government; (iii) governmental or quasi-governmental authority
      of any nature (including any governmental agency, branch, department, official,
      or entity and any court or other tribunal); (iv) multi-national organization
      or
      body; or (v) body exercising, or entitled to exercise, any administrative,
      executive, judicial, legislative, police, regulatory, or taxing authority or
      power of any nature.

     

    “Hazardous
      Material”
means
      any material or substance that is prohibited or regulated by any Environmental
      Law or that has been designated by any Governmental Body to 

     

    
      
         

         

        
        

      

      
        -
          6
          -

        
          

        

      

      
        
        

      

    

    be
      radioactive, toxic or hazardous, including without limitation, asbestos, urea,
      formaldehyde, PCBs, radon gas, crude oil or any fraction thereof, all forms
      of
      natural gas, petroleum products or by-products or derivatives.

     

    “Hazardous
      Materials Activity”
means
      the transportation, transfer, recycling, storage, use, treatment, manufacture,
      removal, remediation, release, exposure of others to, sale, or distribution
      of
      any Hazardous Material or any product containing a Hazardous Material.

     

    “Hired
      Employees”
means
      each of the persons listed on Schedule 1.1(a).

     

    “Instruments”
shall
      mean the following instruments, devices and applications sold by Sellers in
      the
      Business: MedMicro Non-Robotic Retrofit, MedMicro Robotic Retrofit, MedMicro
      Non-Robotic, MedMicro Robotic, MedMicro Robotic Plus, MedMicro Slideloader,
      Digital Slide Module Single Slide, Digital Slide Module Slideloader, Grossing
      Standalone, Grossing Upgrade, Slide Clip 4, 3 Chip Digital Camera Replacement,
      Xcellerator Digital Slide Server (software only) and Xcellerator Edu
      Workbench/Desktop (software only). 

     

    “Intellectual
      Property Rights”
means
      any or all of the following and all rights in, arising out of, or associated
      therewith: all U.S., international or foreign (i) Patents; (ii) trade
      secrets and/or nonpublic know-how, including, for example, inventions,
      discoveries, improvements, concepts, ideas, methods, processes, designs,
      schematics, drawings, formulae, technical data, specifications, research and
      development information, technology, databases, inventions for with patent
      applications have not yet been filed and other technical information, and other
      rights in know-how and confidential or proprietary information;
      (iii) Copyrights; (iv) rights in World Wide Web addresses and domain
      names and sites and applications and registrations therefor;
      (vii) Trademarks; and (viii) similar, corresponding or equivalent
      rights to any of the foregoing anywhere in the world, including, without
      limitation, moral rights.

     

    “Intellectual
      Property Rights Agreements”
has
      the
      meaning set forth in Section 3.17(m).

     

    “International
      Employee Plan”
means
      any Sellers’ Employee Plan for the benefit of Employees who perform services
      outside the United States.

     

    “Invention”
means
      the Invention described by the Invention Patent.

     

    “Invention
      Patent”
means
      that certain “regions of interest” patent (no. 6,993,169) held by Trestle
      Sub.

     

    “IRS”
means
      the Internal Revenue Service.

     

    “Lien”
means
      any mortgage, pledge, lien, charge, claim, security interest, adverse claims
      of
      ownership or use, restrictions on transfer, defect of title or other encumbrance
      of any sort, other than (a) mechanic’s, materialmen’s, and similar liens
      with respect to any amounts not yet due and payable, (b) liens for taxes
      not yet due and payable, and other Permitted Encumbrances.

     

    
      
         

        
        

      

      
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          7
          -

        
          

        

      

      
        
        

      

    

    “Multiemployer
      Plan”
means
      any “Pension Plan” (as defined below) which is a “multiemployer plan,” as
      defined in Section 3(37) of ERISA.

     

    “Ordinary
      Course of Business”
means,
      with respect to any Party, the usual, regular and ordinary course of such
      Party’s normal operations in substantially the same manner as heretofore
      conducted. 

     

    “Other
      Claim”
means
      that certain patent no. 6,466,690. 

     

    “Outside
      Date”
has
      the
      meaning set forth in Section
      10.1(b).

     

    “Parent”
has
      the
      meaning set forth in the preamble.

     

    “Party”
or,
      collectively, “Parties”
shall
      have the meaning set forth in the preamble.

     

    “Patent
      Condition”
has
      the
      meaning set forth in Section 6.3(b).

     

    “Patents”
means
      (i) patents, utility models, design registrations, certificates of
      invention, patents of addition or substitution, or other governmental grants
      for
      the protection of inventions or industrial designs anywhere in the world,
      including, without limitation, any reissues, renewals, re-examinations or
      extensions thereof; and (ii) any applications for any of the foregoing,
      including, without limitation, any international, provisional, divisional,
      continuation, continuation-in-part, or continued prosecution applications.
      

     

    “Pension
      Plan”
means
      any Sellers’ Employee Plan which is an “employee pension benefit plan,” within
      the meaning of Section 3(2) of ERISA.

     

    “Permits”
has
      the
      meaning set forth in Section
      3.14(a).

     

    “Permitted
      Encumbrances”
means
      (i) statutory liens, charges, assessments, security interests, claims,
      obligations, understandings or arrangements for governmental charges not yet
      due
      and payable or the amount or validity of which is being contested in good faith,
      (ii) pledges or deposits in connection with, or to secure, workers’
compensation, unemployment insurance, pension or other employee benefits,
      (iii) restrictions on transfer arising out of or related to securities
      laws, (iv) any obligations arising under the Assumed Contracts and Liens
      arising out of the acts of Buyer, and (v) any other Liens that are not,
      individually or in the aggregate, material to the Business.

     

    “Person”
means
      any individual, corporation (including any non-profit corporation), general
      or
      limited partnership, limited liability company, joint venture, estate, trust,
      association, organization, labor union, Governmental Body or other
      entity.

     

    “Post-Closing
      Tax Period”
means
      any Tax Period beginning after the Closing Date and that portion of a Straddle
      Period beginning after the Closing Date.

     

    “Pre-Closing
      Tax Period”
means
      any Tax Period ending on or before the Closing Date and the portion of any
      Straddle Period ending on the Closing Date.

     

    
      
         

         

        
        

      

      
        -
          8
          -

        
          

        

      

      
        
        

      

    

    “Proxy
      Statement”
means
      the proxy statement to be distributed to the stockholders of Parent in
      connection with seeking the Stockholder Approval, including any preliminary
      proxy statement, definitive proxy statement or supplement or amendment thereto,
      in each case filed with the SEC in accordance with the terms and provisions
      of
      this Agreement.

     

    “PTO”
has
      the
      meaning set forth in Section
      3.17(a).

     

    “Purchase
      Price”
means
      the assumption by Buyer of the Assumed Liabilities plus cash in amount equal
      to
      the Base Price.

     

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

     

    “Records”
has
      the
      meaning set forth in Section 2.1(b)(iii).

     

    “Reexamination”
means
      an examination by the PTO of the validity and enforceability of the Invention
      Patent prompted by the ex parte request made to the PTO on or around
      May 18, 2006. 

     

    “Registered
      Intellectual Property Rights”
means
      any and all Intellectual Property Rights that is or are the subject of an
      application, certificate, filing, registration or other document issued by,
      filed with, or recorded by, any Governmental Body or other public or private
      legal authority at any time.

     

    “Representatives”
means,
      with respect to a Person, that Person’s officers, directors, employees,
      accountants, counsel, investment bankers, financial advisors, agents and other
      representatives.

     

    “SEC”
means
      the United States Securities and Exchange Commission.

     

    “SEC
      Filings”
has
      the
      meaning set forth in Section 3.3.

     

    “Second
      Loan and Security Agreement”
has
      the
      meaning set forth in the recitals.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

     

    “Security
      Agreement”
means
      that certain Loan and Security Agreement, dated as of February 27, 2006 by
      and
      among Clarient and Sellers.

     

    “Sellers”
has
      the
      meaning set forth in the preamble.

     

    “Sellers’
      Board Recommendation”
has
      the
      meaning set forth in Section 3.31.

     

    “Sellers’
      Disclosure Letter”
has
      the
      meaning set forth in the introduction to Article
      III.

     

    “Sellers’
      Employee Plan”
means
      each employment, consulting, severance, termination, retirement, profit sharing,
      bonus, incentive, deferred compensation, retention, change in control, savings,
      life, health, disability, accident, medical, insurance, vacation, other welfare
      fringe benefit or other employee compensation stock option, restricted stock
      or
      other 

     

    
      
         

        
        

      

      
        -
          9
          -

        
          

        

      

      
        
        

      

    

    equity-based
      plan, program, policy, practice, contract, agreement or other arrangement
      providing for compensation, severance, termination pay, deferred compensation,
      performance awards, stock or stock-related awards, fringe benefits or other
      employee benefits or remuneration of any kind, funded or unfunded, including
      without limitation, each “employee benefit plan,” within the meaning of Section
      3(3) of ERISA which is maintained, contributed to, or required to be contributed
      to, by Sellers or any of their Subsidiaries for the benefit of any Employee
      or
      any dependent thereof and with respect to which Sellers or any of their
      Subsidiaries has or reasonably could be expected to have any material liability
      or obligation.

     

    “Sellers’
      Financial Statements”
has
      the
      meaning set forth in Section
      3.7(b).

     

    “Sellers’
      Intellectual Property”
means
      any and all Technology and any and all Intellectual Property Rights, including
      Registered Intellectual Property Rights, that is or are owned (in whole or
      in
      part) by or exclusively licensed to Sellers or any of their
      Subsidiaries.

     

    “Sellers’
      Knowledge”
means
      with respect to either Seller or Sellers, and with respect to any matter in
      question, the actual knowledge of any of either Seller’s officers or members of
      its board of directors, including without limitation Maurizio Vecchione, Barry
      Hall, Jack Zeineh, Steve Barbee and Eric Stoppenhagen, after reasonable inquiry,
      and shall include all similar uses of the concept, including “aware,” “known to”
and “knowledge of.”

     

    “Sellers’
      Material Adverse Effect”
means
      any circumstance, event, change in, or effect on, the Business or Sellers that,
      either alone or in combination with any other circumstances, events, changes
      in,
      or effects on, the Business or Sellers is, or would reasonably be expected
      to
      have a material adverse effect on (a) the Business, the Purchased Assets or
      the
      Assumed Liabilities or (b) the ability of Sellers to consummate the
      transactions contemplated by this Agreement; provided,
      however,
      that
      none of the following shall be deemed to constitute or be taken into account
      in
      determining whether there has been or will or could be a “Sellers’ Material
      Adverse Effect”: (w) any change resulting from or arising out of general
      market, economic or political conditions (including any change arising out
      of
      acts of war, weather conditions or other force majeure events), (x) any
      change in the price or trading value of Parent’s securities, in and of itself,
      (y) any change in the industries in which Sellers conduct their Business or
      (z) any change resulting from any matter disclosed in (i) the SEC Filings,
      (ii) Sellers’ 2006 operating forecast attached as Schedule
      1.1(b)
      or (iii)
      the Sellers’ Disclosure Letter; provided
      that
      in
      the case of clauses (w) or (y), such changes do not have a substantially
      disproportionate impact on the Business as compared to other similarly situated
      participants in the industries in which Sellers conduct the
      Business.

     

    “Sellers’
      Registered Intellectual Property Rights”
has
      the
      meaning set forth in Section
      3.17(a).

     

    “Sellers’
      Transfer Taxes”
has
      the
      meaning set forth in Section
      9.3.

     

    “Significant
      Customers”
has
      the
      meaning set forth in Section 3.10.

     

    “Significant
      Suppliers”
has
      the
      meaning set forth in Section 3.10.

     

    
      
         

         

        
        

      

      
        -
          10
          -

        
          

        

      

      
        
        

      

    

    “Stockholder
      Approval”
means
      the approval of the transactions contemplated by this Agreement by the
      affirmative vote of the holders of a majority of the outstanding stock of each
      of the Sellers.

     

    “Stockholder
      Meeting”
      has the
      meaning set forth in Section
      5.5(a).

     

    “Straddle
      Period”
means
      any Tax Period beginning before and ending after the Closing Date. 

     

    “Subsequent
      Bridge Note”
has
      the
      meaning set forth in the recitals.

     

    “Subsidiary” or
      “Subsidiaries”
of
      any
      Person means any corporation, partnership, limited liability company, joint
      venture or other legal entity of which such Person (either alone or through
      or
      together with any other Subsidiary), owns, directly or indirectly, more than
      50%
      of the stock or other equity interests the holder of which is generally entitled
      to vote for the election of the board of directors or other governing body
      of
      such corporation or other legal entity, or of which such Person is the managing
      member, general partner, or which such Person is otherwise contractually
      entitled to direct and control such entity.

     

    “Superior
      Proposal”
means
      an unsolicited, bona fide written (on its most recently amended or modified
      terms, if amended or modified) Acquisition Proposal (with all of the percentages
      included in the definition of Acquisition Proposal increased to 50%) made by
      a
      Person (other than Buyer or its Affiliates) after the date hereof that did
      not
      result from a breach of Section
      5.4
      and that
      if consummated would be on terms that Parent’s board of directors in good faith
      concludes (after consultation with its financial advisor and outside counsel)
      (i) will result in a transaction that is more favorable to Parent’s
      stockholders (in their capacities as stockholders), from a financial point
      of
      view, than the transactions contemplated by this Agreement (including any
      binding revision hereto proposed by Buyer in response to such proposal or
      otherwise) and (ii) is reasonably probable of being completed in a prompt
      manner.

     

    “Superior
      Proposal Notice”
has
      the
      meaning set forth in Section
      5.4(c).

     

    “Takeover
      Statute”
      has the
      meaning set forth in Section
      7.3.

     

    “Tangible
      Personal Property”
means
      each item or distinct group of furniture, fixtures, equipment, machinery,
      computers, servers, communications and networking equipment and other tangible
      personal property currently owned, leased or subleased by the Sellers and any
      of
      their Subsidiaries for the operation of the Business.

     

    “Tax”
or,
      collectively, “Taxes”,
      means
      (i) any and all federal, state, local and foreign taxes, assessments and
      other governmental charges, duties, impositions and liabilities in the nature
      of
      a tax, including taxes based upon or measured by gross receipts, income,
      profits, sales, use and occupation, and value added, ad valorem, transfer,
      franchise, withholding, payroll, recapture, employment, excise and property
      taxes, together with all interest, penalties and additions imposed with respect
      to such amounts; (ii) any liability for the payment of any amounts of the
      type described in clause (i) as a result of being or ceasing to be a member
      of an affiliated, consolidated, combined or unitary group for any period
      (including, without limitation, any liability under Treas. Reg.
      Section 1.1502-6 or any comparable provision of foreign, state or

     

    
      
         

        
        

      

      
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          11
          -

        
          

        

      

      
        
        

      

    

    local
      law); and (iii) any liability for the payment of any amounts of the type
      described in clause (i) or (ii) as a result of any express or implied
      obligation to indemnify any other person or as a result of any obligations
      under
      any agreements or arrangements with any other person with respect to such
      amounts and including any liability for taxes of a predecessor
      entity.

     

    “Tax
      Period”
means
      any period prescribed by any Governmental Body for which a Tax Return is
      required to be filed or a Tax is required to be paid.

     

    “Tax
      Returns”
means
      any return, declaration, report, claim for refund, transfer pricing report
      or
      information return or statement relating to Taxes, including any schedule or
      attachment thereto, and including any amendment thereof.

     

    “Technology”
means
      any or all of the following: (i) works of authorship including, without
      limitation, computer programs, source code and executable code, whether embodied
      in software, firmware or otherwise, documentation, designs, files, net lists,
      records, data and mask works; (ii) inventions (whether or not patentable),
      improvements, and technology; (iii) proprietary or confidential
      information, including technical data and customer and supplier lists, trade
      secrets, discoveries, processes, formulas, and know how; (iv) databases,
      data compilations and collections and technical data; (v) tools, methods
      and processes; and (vi) all instantiations of the foregoing in any form and
      embodied in any media.

     

    “Termination
      Fee”
means
      cash in the amount of $90,000 in immediately available funds.

     

    “Third
      Party”
has
      the
      meaning set forth in Section
      5.4(c).

     

    “Trademarks”
means
      trade names, trade dress, brand names, logos, common law trademarks and service
      marks, trademark and service mark registrations and applications therefor and
      all goodwill associated therewith throughout the world.

     

    “Transfer
      Taxes”
has
      the
      meaning set forth in Section
      9.3.

     

    “Transfer
      Tax Returns”
has
      the
      meaning set forth in Section
      9.3.

     

    “Treasury
      Regulations”
means
      the Treasury Regulations promulgated under the Code.

     

    “Trestle
      Sub”
has
      the
      meaning set forth in the preamble.

     

    “Voting
      Agreements”
has
      the
      meaning set forth in the recitals.

     

     

    ARTICLE
      II

     

    PURCHASE
      AND SALE OF ASSETS

     

     

    
      	2.1  	
              Purchase
                and Sale of Assets

            

    

    . 
      

    
      
        
        

      

      
        -
          12
          -

        
          

        

      

      
        
        

      

    

     

    (a)  Purchase
      and Sale

     

    .
      Upon
      the terms and subject to the conditions set forth herein, at the Closing (as
      defined in Section 2.5
      hereof),
      Buyer shall purchase from Sellers, and Sellers shall irrevocably sell, convey,
      transfer, assign and deliver to Buyer, the Purchased Assets (as defined in
      Section 2.1(b)
      hereof),
      free and clear of any and all Liens.

     

    (b)  Definition
      of Purchased Assets

     

    .
      For all
      purposes of and under this Agreement, the term “Purchased
      Assets”
shall
      mean, refer to and include all of Sellers’ right, title and interest in and to
      all tangible and intangible assets, properties and rights, wherever located,
      which are owned, used or held (directly or indirectly) for use by Sellers to
      the
      extent owned, used or held (directly or indirectly) for use by Sellers or their
      respective Subsidiaries as of the Closing (but specifically excluding the
      Excluded Assets (as defined in Section 2.1(c)
      hereof))
      in connection with or relating to the Business, including, without limitation,
      the following:

     

    (i)  all
      rights and benefits under each of the Contracts of Sellers set forth on
Schedule 2.1(b)(i)
      and the
      unfilled customer purchase orders entered into by Sellers in the Ordinary Course
      of Business from and after the execution of this Agreement and outstanding
      at
      the Closing (a list of such purchase orders to be provided by Sellers to Buyer
      at Closing) (collectively, “Assumed
      Contracts”);

     

    (ii)  all
      Tangible Personal Property, including but not limited to the Tangible Personal
      Property (A) used or held for use by the Sellers’ and their Subsidiaries at
      the locations where the Business is conducted, (B) in the possession or
      control of any of Sellers’ employees or (C) otherwise owned, leased or held
      by Sellers or their Subsidiaries at the Closing Date;

     

    (iii)  to
      the
      extent relating to the Purchased Assets or the Assumed Liabilities, all
      operating data and original records (including computer files and electronic
      media), including without limitation, books (other than corporate minutes,
      Tax
      books and records, stock record books and other books relating to the
      organization, maintenance, and existence of Sellers as a corporation), records
      and accounts, correspondence, research and development files, drug master files,
      regulatory support files, regulatory applications, correspondence and submission
      files, production records, technical, accounting, manufacturing, quality control
      and procedural files and manuals, customer and vendor lists, customer complaint
      files, device and product operation manuals, sales and marketing literature,
      purchase orders and invoices and copies of all employment records related to
      the
      Hired Employees (collectively, the “Records”);
      provided
      that, in
      the case of any Records which relate to both the Purchased Assets or the Assumed
      Liabilities, on the one hand, and the other businesses or assets or liabilities
      of Sellers, on the other hand, Sellers shall have the right to redact any
      portion of the Records solely to the extent that they relate to such other
      businesses and assets; provided,
      further,
      Sellers
      shall have the right to retain copies of any portion of the Records to the
      extent reasonably necessary, including, in Sellers’ discretion, to effect an
      orderly dissolution of Sellers;

     

    
      
        
        

      

      
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          13
          -

        
          

        

      

      
        
        

      

    

    (iv)  original
      sets of all lab notebooks, manufacturing procedures, equipment calibration
      settings and other technical information;

     

    (v)  all
      of
      Sellers’ right, title and interest in and to the Sellers’ Intellectual Property,
      and any and all Intellectual Property Rights that relate to or are used or
      held
      for use in connection with the Business;

     

    (vi)  the
      current telephone and facsimile numbers used in the Business and held by
      Sellers;

     

    (vii)  all
      rights to the Internet website addresses used in the Business and held by
      Sellers;

     

    (viii)  all
      rights, claims, causes of action, rights of recovery or set-off, warranty rights
      or other similar rights of Sellers, whether known, unknown, matured or
      unmatured, accrued or contingent, against third parties, including under express
      or implied warranties from suppliers and claims existing at the Closing Date
      under insurance policies, to the extent and in the proportion relating to the
      Purchased Assets or Assumed Liabilities;

     

    (ix)  all
      transferable franchises, Permits, licenses, agreements, waivers and
      authorizations issued by or obtained from any Governmental Body, to the extent
      held or used by any Seller or any of its Subsidiaries in connection with, or
      required for, the operation, use and exploitation of the Purchased Assets or
      the
      assumption, payment, performance and discharge of the Assumed
      Liabilities;

     

    (x)  all
      customer lists used in the Business; and

     

    (xi)  all
      cash
      and cash equivalents and the accounts and notes receivable of the Sellers
      existing as of the Closing; and

     

    (xii)  all
      other
      assets, properties, claims, rights and interests of Sellers which exist on
      the
      Closing Date, of every kind and nature and description, whether tangible or
      intangible, real, personal or mixed, wherever located, which relate to or are
      used or held for use solely in connection with the Business, other than any
      Excluded Assets (as defined below) or any items excluded in (i) through (xi)
      above.

     

    (c)  Definition
      of Excluded Assets

     

    .
      Notwithstanding anything to the contrary set forth in this Section 2.1
      or
      elsewhere in this Agreement, the term “Purchased
      Assets”
shall
      not mean, refer to or include the following (collectively, the “Excluded
      Assets”)
      to the
      extent owned, used or held for use by Sellers or any of its Affiliates as of
      the
      Closing:

     

    (i)  the
      assets of any Sellers’ Employee Plan held for the exclusive purpose of
      satisfying obligations under such Sellers’ Employee Plan;

     

    (ii)  any
      Contracts to which Sellers are a party or by which Sellers are bound not
      expressly assumed in Section 2.1(b)
      above;

     

    
      
        
        

      

      
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          14
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    (iii)  the
      corporate charter and bylaws, qualifications to transact business as a foreign
      corporation, arrangements with registered agents relating to foreign
      qualifications, taxpayer and other identification numbers, seals, minute books,
      stock transfer books, blank stock certificates, and other documents relating
      to
      the organization, maintenance, and existence of Sellers as a
      corporation;

     

    (iv)  all
      securities of any Subsidiaries of Sellers;

     

    (v)  all
      refunds of Taxes with respect to the Business and with respect to the Purchased
      Assets, in either case attributable to any Pre-Closing Tax Period and similar
      recoveries and benefits of Sellers and their respective
      Subsidiaries;

     

    (vi)  all
      claims, actions, deposits, prepayments, refunds, causes of action, rights of
      recovery, warranty rights, rights of set off, and rights of recoupment of any
      kind or nature (including any such item relating to Taxes) to the extent not
      otherwise included in the Purchased Assets;

     

    (vii)  all
      rights of Sellers under this Agreement, each Ancillary Agreement or any
      agreement, certificate, instrument or other document executed and delivered
      by
      Sellers or Buyer in connection with the transactions contemplated hereby or
      thereby, or any side agreement between Sellers and Buyer or its Affiliates
      entered into on or after the date hereof, including Sellers’ right to receive
      the Purchase Price as contemplated herein;

     

    (viii)  all
      books, records, files, documents, data, information and correspondence of
      Sellers, including without limitation Tax books and records, other than the
      Records or to the extent not otherwise included in the Purchased Assets or
      as
      otherwise provided in Section
      9.1;
      provided
      that
      Buyer shall be entitled to make copies of Sellers’ Tax books and records to the
      extent reasonably necessary for Buyer’s operation of the Business following the
      Closing, including Buyer’s compliance with Tax laws and
      regulations;

     

    (ix)  any
      of
      Sellers’ rights with respect to claims arising out of Excluded Liabilities;

     

    (x)  All
      attorney-client privileged communications provided to Sellers by Kaye Scholer
      LLP with respect to this Agreement, any Ancillary Agreement, the transactions
      contemplated herein and therein, and/or to Parent, or any of Parent’s directors’
or officers’, with respect to the Securities Act, the Exchange Act or other
      applicable securities laws; 

     

    (xi)  all
      rights of Sellers under any insurance policies maintained by Sellers for the
      benefit of their respective directors and officers in their capacities as
      directors and officers including any premiums in connection therewith;

     

    (xii)  all
      rights, title and interest in and to all properties, assets and rights of
      Sellers that do not relate to the Business; 

     

    (xiii)  all
      assets properties or rights set forth on Schedule 2.1(c)(xiii)
      hereto;
      and

     

    
      
        
        

      

      
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          15
          -

        
          

        

      

      
        
        

      

    

    (xiv)  the
      Factored Accounts and the corresponding asset accounts (including any residual
      rights to receive payments from the factor on account of the Factored Accounts);
      provided
      that any
      cash amounts repaid to Sellers by the factor or any underlying account debtor
      in
      respect of the Factored Accounts at or prior to Closing shall not constitute
      Excluded Assets.

     

    
      	2.2  	
              Assumption
                of Liabilities

            

    

     

    . 
      

     

    (a)  Assumption

     

    .
      Upon
      the terms and subject to the conditions set forth herein, at the Closing, Buyer
      shall assume from Sellers, and Sellers shall irrevocably convey, transfer and
      assign to Buyer, all of the Assumed Liabilities (as defined in Section 2.2(b)
      hereof).
      Buyer shall not assume any liabilities of Sellers pursuant hereto, other than
      the Assumed Liabilities.

     

    (b)  Definition
      of Assumed Liabilities

     

    .
      For all
      purposes of and under this Agreement, the term “Assumed
      Liabilities”
shall
      mean, refer to and include only the following liabilities of Sellers (and shall
      specifically exclude the Excluded Liabilities (as defined in Section 2.2(c)
      hereof)):

     

    (i)  all
      obligations, duties and liabilities of Sellers continuing after the Closing
      under the Assumed Contracts, to the extent such liabilities (A) were not due
      to
      have been satisfied or discharged prior to the Closing Date and (B) do not
      arise
      from any breach or default under such Assumed Contract occurring prior to the
      Closing Date and (C) are not included on Schedule 2.2(b)(i);
      provided,
      however,
      that
      for Instruments that were to have been delivered by Sellers to customers
      pursuant to Assumed Contracts no more than seven (7) days prior to Closing
      but
      that have not been delivered at Closing, Buyer shall also assume the obligation
      of delivering such Instruments to such customers to the extent that such
      Instruments to be delivered are transferred to Buyer as Purchased Assets at
      the
      time of Closing, and Sellers shall retain all other liabilities under the
      Assumed Contracts that were due to have been satisfied or discharged prior
      to
      the Closing Date;

     

    (ii)  all
      obligations, duties, liabilities and items relating to (A) deferred revenue
      shown on Schedule
      2.2(b)(ii) and (B) deferred
      revenue provided under customer contracts entered into by Sellers in the
      Ordinary Course of Business from and after the execution of this Agreement
      remaining outstanding at the Closing (a list of such customer contracts and
      the
      associated outstanding deferred revenue to be provided by Sellers to Buyer
      at
      Closing); 

     

    (iii)  all
      obligations, duties and liabilities arising as a result of the post-Closing
      employment by Buyer or Clarient of any Hired Employee, other than any Excluded
      Liability;

     

    (iv)  all
      obligations, duties and liabilities relating to warranties contained in written
      customer agreements for Instruments sold in the Ordinary Course of
      Business;

     

    
      
        
        

      

      
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    (v)  all
      obligations, duties and liabilities relating to vendor purchase orders submitted
      by Sellers in the Ordinary Course of Business from and after the date hereof
      until the Closing to any of the vendors indicated on Schedule
      2.2(b)(v)
      for the
      purpose of purchasing inventory;

     

    (vi)  all
      obligations, duties and liabilities arising as a result of the post-Closing
      ownership or use by Buyer and Clarient of the Purchased Assets, other than
      any
      Excluded Liabilities;
      and

     

    (vii)  Buyer’s
      Transfer Taxes.

     

    (c)  Definition
      of Excluded Liabilities

     

    .
      Sellers
      and their Subsidiaries shall retain, and shall be responsible for paying,
      performing and discharging when due, and Buyer shall not assume or have any
      responsibility for, any obligations, duties and liabilities of Sellers’ and
      their respective Subsidiaries other than Assumed Liabilities, whether arising
      prior to, on or after the Closing Date (collectively, “Excluded
      Liabilities”),
      including, without limitation:

     

    (i)  all
      obligations, duties and liabilities of Sellers under this Agreement, the
      Ancillary Agreements or any other certificate, instrument or other agreement
      entered into in connection with the transactions contemplated
      hereby;

     

    (ii)  obligations,
      duties and liabilities related to or arising out of the use or ownership of
      any
      Excluded Asset;

     

    (iii)  obligations,
      duties and liabilities to the extent arising from or as a result of any business
      of Sellers, including the Business, other than the Assumed Liabilities,
      including any action, suit, claim or proceeding thereto, regardless of when
      filed and regardless of whether an accrual in respect thereof is included on
      the
      Current Balance Sheet or the Closing Balance Sheet.

     

    (iv)  other
      than Buyer’s Transfer Taxes, any liabilities for Taxes of the Sellers, or any
      member of any consolidated, affiliated, combined or unitary group of
      corporations of which any Seller is or has been a member, for Taxes and any
      liabilities for Taxes attributable to the Purchased Assets for any Pre-Closing
      Tax Period arising from the operation of the Business prior to the
      Closing;

     

    (v)  all
      accounting, consulting, finders, investment banking, legal and similar fees
      and
      expenses incurred by Sellers in connection with the negotiation of this
      Agreement or any Ancillary Agreement, and the consummation of the transactions
      contemplated hereby and thereby;

     

    (vi)  any
      liabilities or obligations of Sellers under any Contracts other than the Assumed
      Contracts; 

     

    (vii)  any
      and
      all warranty liabilities or obligations of Sellers and their respective
      Subsidiaries to the extent not Assumed Liabilities; 

     

    
      
        
        

      

      
        -
          17
          -

        
          

        

      

      
        
        

      

    

    (viii)  the
      liabilities and obligations set forth on Schedule
      2.2(b)(i);

     

    (ix)  any
      infringement or alleged infringement of any Intellectual Property Rights of
      any
      other Person, including but not limited to Sellers’ Intellectual Property,
      arising out of any action of Sellers on or prior to the Closing or any
      misappropriation or misuse of any Technology or any other right of another
      Person arising out of any action of Sellers prior to the Closing;

     

    (x)  any
      liability of Sellers arising by reason of any violation or alleged violation
      of
      any judgment, order, decree, statute, law, rule of common law, code and
      regulations to the extent such liability results from or arises out of events,
      facts or circumstances occurring or existing prior to the Closing;

     

    (xi)  any
      liabilities or obligations of Sellers or their ERISA Affiliates or respective
      Subsidiaries arising out of or in connection with (A) any Sellers’ Employee Plan
      at any time maintained, sponsored, contributed to or required to be contributed
      to by or with respect to Sellers or their ERISA Affiliate or respective
      Subsidiaries or (B) any employment practices of Sellers or their ERISA
      Affiliates or respective Subsidiaries; 

     

    (xii)  all
      liabilities and obligations of Sellers and their ERISA Affiliates and respective
      Subsidiaries to any current, former or prospective Employees or any of their
      spouses, beneficiaries or other dependents (including the Hired Employees during
      the period employed by Sellers through their termination by Sellers) including
      without limitation, any liabilities or obligations under any federal, state
      or
      municipal employment, labor or employment discrimination law, including without
      limitation, the National Labor Relations Act, Title VII of the Civil Rights
      Act
      of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
      Act
      of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards
      Act, ERISA, the Worker Adjustment and Retraining Notification Act, the Family
      and Medical Leave Act, the Immigration Reform and Control Act of 1986, the
      California Fair Employment and Housing Act, the California Family Rights Act,
      and the California Labor Code, and all amendments to each such Act as well
      as
      the regulations issued thereunder (together, the “Employment
      Statutes”);
      and

     

    (xiii)  all
      obligations and liabilities, whether absolute or contingent, other than Assumed
      Liabilities.

     

    
      	2.3  	
              Consideration
                for Purchased Assets

            

    

     

    .
      

     

    (a)  On
      the
      terms and subject to the conditions set forth in this Agreement, the
      consideration for the Purchased Assets shall be Buyer’s payment to Sellers of
      the Purchase Price as provided herein.

     

    (b)  On
      the
      second Business Day prior to the Closing, Sellers shall deliver to Buyer (i)
      the
      Closing Balance Sheet, (ii) the Closing Accounts Receivable Statement, together
      with an aging schedule indicating a range of days elapsed since invoice, (iii)
      a
      schedule reflecting Sellers’ calculation of the Adjustment Amount, if any (the
“Adjustment
      Schedule”),
      

     

    
      
         

         

        
        

      

      
        -
          18
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	2.4  	
              Allocation
                of Purchase Price

            

    

     

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

     

    
      	2.5  	
              Closing

            

    

     

    .
      

     

    (a)  Closing
      Place, Time and Date.
      Unless
      this Agreement is earlier terminated pursuant to Article
      X
      hereof,
      the closing of the transactions contemplated by this Agreement (the
“Closing”)
      shall
      be held at the offices of Latham & Watkins LLP, 650 Town Center Drive,
      20th
      Floor,
      Costa Mesa, California, at 11:00 a.m. on the date which is two (2) Business
      Days
      following the satisfaction or waiver of the conditions to Closing set forth
      in
      Article VIII hereof, or at such other place and such other time and/or date
      as the Parties hereto shall mutually agree (the actual date on which the Closing
      shall occur being referred to herein as the “Closing
      Date”).

     

    (b)  Closing
      Deliveries

     

    .
      

    
      
        
        

      

      
        -
          19
          -

        
          

        

      

      
        
        

      

    

     

    (i)  At
      the
      Closing, unless otherwise provided, Buyer shall deliver, or cause to be
      delivered, to Sellers, as applicable, the following, dated as of the Closing
      Date and executed for and on behalf of Buyer by a duly authorized officer
      thereof:

     

    (1)  the
      Purchase Price, which shall be delivered in the form of a wire transfer to
      Seller’s designated account of immediately available funds in an amount equal to
      the Base Price minus the unpaid principal and interest on all
      of
      the Bridge Notes;

     

    (2)  the
      original of each of the Bridge Notes for cancellation in accordance with the
      terms thereof, together with a termination of the Security Agreements in
      accordance with their terms, and any UCC termination statements and other
      filings relating thereto;

     

    (3)  one
      or
      more instruments of assumption, in customary form and substance reasonably
      satisfactory to Buyer and Sellers and their respective counsel;

     

    (4)  the
      certificates and other documents required to be delivered pursuant to
Section
      8.2;
      and

     

    (5)  any
      and
      all other instruments, certificates and agreements contemplated by Article
      VIII
      or
Article
      IX
      hereof
      or as Sellers may reasonably request in order to effectively make Buyer
      responsible for all Assumed Liabilities pursuant hereto to the fullest extent
      permitted by applicable law.

     

    (ii)  At
      the
      Closing, Sellers shall deliver, or cause to be delivered, to Buyer the
      following, dated as of the Closing Date and executed for and on behalf of
      Sellers by duly authorized officers thereof:

     

    (1)  a
      bill of
      sale, in customary form and substance reasonably satisfactory to Buyer and
      Sellers and their respective counsel;

     

    (2)  one
      or
      more instruments of assumption, in customary form and substance reasonably
      satisfactory to Buyer and Sellers and their respective counsel;

     

    (3)  an
      instrument of assignment of Patents, in customary form and substance reasonably
      satisfactory to Buyer and Sellers and their respective counsel;

     

    (4)  an
      instrument of assignment of Copyrights, in customary form and substance
      reasonably satisfactory to Buyer and Sellers and their respective
      counsel;

     

    (5)  an
      instrument of assignment of Trademarks, in customary form and substance
      reasonably satisfactory to Buyer and Sellers and their respective counsel;
      

     

    (6)  the
      certificates and other documents required to be delivered pursuant to
Section
      8.1;
      and

     

    (7)  any
      and
      all other instruments, certificates and agreements contemplated by
      Article VIII hereof or as Buyer may reasonably request in order to
      effectively 

     

    
      
         

         

        
        

      

      
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          20
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	2.6  	
              Nontransferable
                Assets

            

    

     

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

     

    
      	2.7  	
              Taking
                of Necessary Action; Further
                Action

            

    

     

    . 
      From time to time after the Closing Date, the Parties shall execute and deliver
      such other instruments of sale, transfer, conveyance, assignment and
      confirmation and take such action as the other Party may reasonably determine
      is
      necessary to transfer, convey and assign to Buyer, and to confirm Buyer’s title
      to or interest in, the Purchased Assets, to put Buyer in actual possession
      and
      operating control thereof, to assist Buyer in exercising all rights with respect
      thereto and to assist in hiring and transferring the Hired Employees to Buyer’s
      employ, to hold Buyer harmless with respect to the Excluded Liabilities, and
      for
      Buyer to assume the Assumed Liabilities and hold Seller’s harmless with respect
      thereto. Sellers hereby constitute and appoint Buyer and its successors and
      assigns as its true and lawful attorney in fact in connection with the
      transactions contemplated by this instrument, with full power of substitution,
      in the name and stead of Sellers but on behalf of and for the benefit of the
      Buyer and its successors and assigns, to demand and receive any and all of
      the
      assets, properties, rights and business hereby conveyed, assigned, and
      transferred or intended so to be, and to give receipt and releases for and
      in
      respect of the same and any part thereof, and from time to time to institute
      and
      prosecute, in the name of Sellers or otherwise, for the benefit of the Buyer
      or
      its successors and assigns, proceedings at law, in equity, or otherwise, which
      the Buyer or its successors or assigns reasonably deem proper in order to
      collect or reduce to possession or endorse any of the Purchased Assets and
      to do
      all acts and things in relation to the Purchased Assets which the Buyer or
      its
      successors or assigns reasonably deem desirable.

     

    
      
        
        

      

      
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          21
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    ARTICLE
      III  

     

    REPRESENTATIONS
      AND WARRANTIES OF SELLERS

     

    Subject
      to such exceptions as are specifically disclosed in the disclosure letter
      (referencing the appropriate section numbers) supplied by Sellers to Buyer
      (the
“Sellers’
      Disclosure Letter”),
      Sellers hereby represent and warrant to Buyer that the statements contained
      in
      this Article III are true and correct as of the date of this Agreement and
      will be true and correct as of the Closing (as though made at the Closing);
      provided,
      that
      representations and warranties made as of a specified date will be true and
      correct as of such date.

     

    
      	3.1  	
              Organization,
                Qualification, and Corporate
                Power

            

    

     

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

     

    
      	3.2  	
              Authorization

            

    

     

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

     

    
      
        
        

      

      
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          22
          -

        
          

        

      

      
        
        

      

    

    
      	3.3  	
              Sellers’
                SEC Filings

            

    

     

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

     

    
      	3.4  	
              Subsidiaries

            

    

     

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

     

    
      	3.5  	
              No
                Conflicts

            

    

     

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

     

    
      	3.6  	
              Consents

            

    

     

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

     

    
      	3.7  	
              Sellers’
                Financial Statements

            

    

     

    
      
         

         

        
        

      

      
        -
          23
          -

        
          

        

      

      
        
        

      

    

    . 
      

     

    (a)  As
      of
      their respective dates, the consolidated financial statements of Sellers and
      their Subsidiaries
      included
      in the
      Sellers’ SEC Filings since January 1, 2006 complied as to form in all material
      respects with applicable accounting requirements and the published rules and
      regulations of the SEC applicable with respect thereto. Such financial
      statements are in accordance with the books and records of Sellers and have
      been
      prepared in accordance with GAAP applied on a consistent basis throughout the
      periods indicated and consistent with each other (except that unaudited interim
      financial statements do not contain footnotes and other presentation items
      that
      may be required by GAAP and are subject to normal year-end audit adjustments,
      which are not material in amount or significance in the aggregate). Such
      financial statements present fairly and accurately in all material respects
      Sellers’ financial condition, operating results as of the dates and during the
      periods indicated therein all in accordance with GAAP (except that unaudited
      interim financial statements do not contain footnotes and other presentation
      items that may be required by GAAP and are subject to normal year-end audit
      adjustments, which are not material in amount or significance in the
      aggregate).

     

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

     

    
      	3.8  	
              Internal
                Controls

            

    

     

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

     

    
      	3.9  	
              Accounts
                Receivable

            

    

     

    
      
         

         

        
        

      

      
        -
          24
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    The
      Sellers have made available to Buyer a list of all accounts receivable of the
      Sellers and their Subsidiaries as of the Current Balance Sheet Date (the
“Current Accounts
      Receivable Statement”),
      together with an aging schedule indicating a range of days elapsed since
      invoice. All of such accounts receivable listed on the Current Accounts
      Receivable Statement arose in the Ordinary Course of Business, are carried
      at
      values determined in accordance with GAAP consistently applied (except that
      unaudited interim financial statements do not contain footnotes and other
      presentation items that may be required by GAAP and are subject to normal
      year-end audit adjustments, which are not material in amount or significance
      in
      the aggregate), and are to Sellers’ Knowledge, collectible except to the extent
      of reserves therefor set forth in the Current Balance Sheet for receivables
      arising subsequent to the Current Balance Sheet Date as reflected on the books
      and records of the Sellers and their Subsidiaries (which are prepared in
      accordance with GAAP, except that unaudited interim financial statements do
      not
      contain footnotes and other presentation items that may be required by GAAP
      and
      are subject to normal year-end audit adjustments, which are not material in
      amount or significance in the aggregate), in each case, except as otherwise
      set
      forth in Sellers’ Disclosure Letter. No Person other than Buyer and its
      affiliates has any Lien on any of such accounts receivable and no request or
      agreement for deduction or discount has been made with respect to any of the
      accounts receivable. To the Knowledge of Seller, the accounts receivable set
      forth in the Current Accounts Receivable Statement and other debts arising
      therefrom are not subject to any counterclaim or set-off and there are no claims
      or disputes with regard to any such accounts receivable except to the extent
      of
      the reserves reflected on the Current Balance Sheet. Since the Current Balance
      Sheet Date, Sellers have not made any change in their credit policies, nor
      have
      they materially deviated therefrom.

     

    
      	3.10  	
              Customers
                and Suppliers

            

    

     

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

     

    
      	3.11  	
              No
                Undisclosed Liabilities

            

    

     

    
      
         

         

        
        

      

      
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          25
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	3.12  	
              No
                Changes

            

    

     

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

     

    
      	3.13  	
              Events
                Subsequent to Most Recent Fiscal Period
                End

            

    

     

    . 
      Since March 31, 2006 to the date of this Agreement, neither the Business nor
      any
      of the Purchased Assets has suffered any adverse change that would reasonably
      be
      expected to result in a Sellers’ Material Adverse Effect. Without limiting the
      generality of the foregoing, since such date except as provided in this
      Agreement, the Ancillary Agreements, the Bridge Notes and the transactions
      contemplated hereby and thereby, neither the Sellers nor any Subsidiary of
      a
      Seller have, as it relates to the Business, any of the Purchased Assets or
      any
      of the Assumed Liabilities:

     

    (a)  sold,
      leased, transferred, or assigned any assets or properties, tangible or
      intangible, outside the Ordinary
      Course of Business;

     

    (b)  except
      as
      otherwise set forth in Section 3.13(b)
      of the
      Sellers’ Disclosure Letter, assumed or become bound under or obligated by any
      Contract or extended or modified the terms of any Contract of the type required
      to be listed in Section 3.18 of the Sellers’ Disclosure Letter;

     

    (c)  had
      any
      party accelerate, terminate, make modifications to, or cancel any Assumed
      Contract to which Sellers or any of their Subsidiaries is a party or by which
      any of them are bound, and neither Sellers nor any of their Subsidiaries has
      modified, canceled or waived or settled any debts or claims held by them,
      outside the Ordinary Course of Business, or waived or settled any rights or
      claims of a substantial value, whether or not in the Ordinary Course of
      Business;

     

    
      
        
        

      

      
        -
          26
          -

        
          

        

      

      
        
        

      

    

    (d)  permitted
      any of the Purchased Assets of Sellers or any of their respective Subsidiaries,
      tangible or intangible, to become subject to any Lien and no Lien held for
      the
      benefit of Sellers or their Subsidiaries related to the Business has been
      released or discharged;

     

    (e)  made
      any
      capital expenditures except in the Ordinary Course of Business and not exceeding
      $50,000 in the aggregate of all such capital expenditures, other than in
      connection with the purchase of inventory held for sale;

     

    (f)  made
      any
      capital investment in, or any loan to, any Person other than a Seller in an
      amount in excess of $50,000;

     

    (g)  created,
      incurred, assumed, prepaid or guaranteed any indebtedness for borrowed money
      and
      capitalized lease obligations, or extended or modified any existing
      indebtedness;

     

    (h)  experienced
      a change in relations with their employees or any of their Subsidiaries as
      a
      group that would reasonably be expected to result in a Sellers’ Material Adverse
      Effect;

     

    (i)  authorized
      or permitted any change in the Certificate of Incorporation or Bylaws of Sellers
      or any of their respective Subsidiaries;

     

    (j)  experienced
      any damage, destruction, or loss (whether or not covered by insurance) to any
      Purchased Assets or any of Sellers or any of their respective Subsidiaries’
other property in excess of $50,000 in the aggregate of all such damage,
      destruction and losses whether or not covered by insurance; 

     

    (k)  cancelled,
      amended or renewed any insurance policy that provides coverage with respect
      to
      the Purchased Assets, the Business or any Hired Employee;

     

    (l)  suffered
      any repeated, recurring or prolonged shortage, cessation or interruption of
      communications, customer access, supplies or utility services which has had
      or
      would reasonably be expected to have a Sellers’ Material Adverse
      Effect;

     

    (m)  except
      as
      otherwise set forth in Section 3.13(m)
      of the
      Sellers’ Disclosure Letter, (i) adopted, entered into or modified any Sellers’
Employee Plan, (ii) entered into any collective bargaining agreement,
or
      (iii)
      paid, announced, promised or granted, whether orally or in writing, any increase
      in the wages, salaries, compensation, bonuses, incentives, pensions, severance
      or termination payments, fringe benefits or other benefits to any Employees,
      including without limitation any increase or change pursuant to any Sellers’
Employee Plan (except as required by law or, with respect to non-executive
      Employees only, in the Ordinary Course of Business);

     

    (n)  except
      in
      connection with the sale of Sellers’ regular products in the Ordinary Course of
      Business, entered into a sale, lease, license, transfer or other disposition
      of
      any products in connection with which, or entry into, renewal of, or
      modification or amendment in any material respect of any Contract under which
      Sellers or any of their Subsidiaries provided or is obligated to provide any
      (i)
      warranties or indemnities relating to products or the Business, 

     

    
      
         

         

        
        

      

      
        -
          27
          -

        
          

        

      

      
        
        

      

    

    (ii) service
      level guarantees or assurances, or commitments under which Sellers would be
      required to deliver any future product or upgrade, or (iii) pricing,
      discounting, service or maintenance terms or provisions;

     

    (o)  revalued
      any of their respective assets or properties (whether tangible or intangible),
      including writing off notes or accounts receivable;

     

    (p)  changed
      any of the accounting principles followed by them or the method of applying
      such
      principles;

     

    (q)  entered
      into any transaction other than in the Ordinary Course of Business;

     

    (r)  made
      or
      changed any material election with respect to Taxes, adopted or changed any
      material accounting method with respect to Taxes, amended any Tax Return,
      entered into any Tax allocation agreement, Tax sharing agreement, Tax indemnity
      agreement or closing agreement, settled or compromised on any claim, notice,
      audit report or assessment with respect to Taxes, or consented to any extension
      or waiver of the limitation period applicable to any claim or assessment with
      respect to Taxes, in each case, to the extent related to any Purchased Asset;
      and

     

    (s)  become
      obligated to do any of the foregoing.

     

    
      	3.14  	
              Legal
                Compliance

            

    

     

    .

     

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

     

    (b)  Sellers
      and their Subsidiaries have in effect all material Permits necessary for the
      conduct of their business and the use of their properties, products and assets,
      as presently 

     

    
      
         

        
        

      

      
        -
          28
          -

        
          

        

      

      
        
        

      

    

    conducted
      and used; and neither the Sellers nor any of their respective Subsidiaries
      have
      received any notice or communication from any Governmental Body regarding (i)
      any actual or possible violation of applicable law or any Permit or any failure
      to comply with any applicable law or the requirements of any Permit, or (ii)
      any
      actual or possible revocation, withdrawal, suspension, cancellation, limitation,
      termination or modification of any Permit.

     

    (c)  Sellers
      and each of their Subsidiaries, as well as the Sellers’ and their Subsidiaries’
third party manufacturers, suppliers, distributors or other third party
      contractors, develop, test, manufacture, label, store, market, promote and
      distribute their products in material compliance with all applicable federal
      statutes, and rules and regulations promulgated by the United States Food and
      Drug Administration (“FDA”)
      and
      with applicable laws, rules, regulations, and standards of any comparable
      Governmental Body, including, but not limited to, the FDCA and its implementing
      regulations at 21 C.F.R. Parts 801, 803, 806, 807, 812, 814 and 820. All of
      the
      products currently marketed by the Sellers and each of their Subsidiaries have,
      where required by the FDCA and its implementing regulations or other applicable
      statutes, rules and regulations, been approved or cleared for sale by the FDA
      and all other applicable Governmental Bodies. For all of the products currently
      marketed by the Company and its Subsidiaries outside the United States, the
      Company and its Subsidiaries have obtained all necessary regulatory approvals
      from all applicable foreign regulatory authorities. Except as set forth in
      Section 3.14 of the Sellers’ Disclosure Letter, neither the Sellers nor any
      their Subsidiaries have received any notice from, or otherwise have knowledge
      of, the FDA or any other Governmental Body, threatening to limit, suspend,
      or
      revoke any product marketing clearance or approval, change the marketing
      classification or labeling of, or otherwise require market removal or withdrawal
      of any of the Sellers’ or their Subsidiaries’ products. 

     

    (d)  All
      information, claims, reports and statistics and other data and conclusions
      derived therefrom, utilized as the basis for or submitted in connection with
      any
      and all requests for Permits of the FDA relating to the Sellers and their
      Subsidiaries and their respective products, when submitted to the FDA were
      true,
      complete and correct in all material respects as of the date of submission
      and
      any necessary or required updates, changes, corrections or modification to
      such
      information, claims, reports, statistics and other data have been submitted
      to
      the FDA. 

     

    (e)  Except
      as
      set forth on Section 3.14(e)
      of the
      Sellers’ Disclosure Letter, the Sellers and their Subsidiaries have
      not
      received, nor have knowledge of any facts that furnish any basis for, any Form
      FDA-483 inspectional observations or untitled or warning letters from the FDA,
      or any other similar communications from the FDA or any applicable Governmental
      Body; and there have been no voluntary or involuntary recalls, corrective
      actions, removals, field notifications, import alerts, product detentions,
      product seizures, governmental investigations, or civil or criminal enforcement
      action initiated, or, to Sellers’ Knowledge, proposed, requested, or threatened
      relating to the products or the Sellers or any of their
      Subsidiaries.

     

    (f)  All
      pre-clinical trials and clinical trials conducted by or on behalf of the Sellers
      and their Subsidiaries have been, and are being conducted in material compliance
      with experimental protocols, procedures and controls pursuant to accepted
      professional scientific standards and all applicable federal statutes and rules
      and regulations promulgated by the FDA 

     

    
      
         

        
        

      

      
        -
          29
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    relating
      thereto, including without limitation the FDCA and its applicable implementing
      regulations at 21 C.F.R. Parts 50, 54, 56 and 812.

     

    (g)  Except
      as
      set forth on Section 3.14(g)
      of the
      Sellers’ Disclosure Letter, no officer or, to Sellers’ Knowledge, any employee
      or agent of the Sellers of any their Subsidiaries has committed any act, made
      any statement, or failed to make any statement, that would reasonably be
      expected to cause the FDA to invoke its policy respecting “Fraud, Untrue
      Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56
      Fed. Reg. 46191 (September 10, 1991) and any amendments thereto in a manner
      affecting the Business.

     

    (h)  Except
      as
      set forth on Section 3.14(h)
      of the
      Sellers’ Disclosure Letter, none of the Sellers and their Subsidiaries, the
      officers of Sellers or, to Sellers’ Knowledge, the employees and agents of the
      Sellers and their Subsidiaries, have been convicted of any crime or engaged
      in
      any conduct that would reasonably be expected to result in a material debarment
      or exclusion (i) under 21 U.S.C. Section 335a, or (ii) any similar state law,
      rule or regulation.
      As of
      the date hereof, to Sellers’ Knowledge, no claims, actions or proceedings that
      would reasonably be expected to result in such a material debarment or exclusion
      are pending or threatened against the Sellers or any of their Subsidiaries,
      or
      the officers, employees or agents of the Sellers or any of their
      Subsidiaries. 

     

    (i)  Neither
      the Sellers nor any of their Subsidiaries are enrolled as a supplier or provider
      under Medicare, Medicaid, or any other governmental health care program or
      third
      party payment program or is a party to any participation agreement for payment
      by any such governmental health care program and third party payment
      program.

     

    
      	3.15  	
              Tax
                Matters

            

    

     

    .
      The
      representations of Sellers under this Section 3.15
      are
      limited to Taxes (i) for which Buyer would be liable, as a transferee or
      otherwise, or (ii) that have or would create a Lien on the Purchased
      Assets.

     

    (a)  Sellers
      and each of their Subsidiaries
      have timely filed all Tax Returns that they were required to file. All such
      Tax
      Returns were correct and complete in all material respects. All Taxes owed
      by
      Sellers and each of their Subsidiaries (whether or not shown on any Tax Return)
      were paid in full when due or are being contested in good faith and are
      supported by adequate reserves on the Sellers’ Financial Statements. No Seller
      nor any of their Subsidiaries is currently the beneficiary of any extension
      of
      time within which to file any Tax Return. To Sellers’ Knowledge, no claim has
      ever been made by an authority in a jurisdiction in which a Seller or any of
      its
      Subsidiaries does not file Tax Returns that it is or may be subject to taxation
      by that jurisdiction.

     

    (b)  Sellers
      and each of their Subsidiaries have withheld and paid when due all Taxes
      required to have been withheld and paid in connection with amounts paid or
      owing
      to any employee, independent contractor, creditor, stockholder or other third
      party, including without limitation, with respect to its employees, all federal,
      state and municipal income and employment Taxes, including without limitation,
      Taxes pursuant to the Federal Insurance Contribution Act (“FICA”),
      and
      Taxes pursuant to the Federal Unemployment Tax Act (“FUTA”).
      Neither
      Seller 

     

    
      
         

        
        

      

      
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          30
          -

        
          

        

      

      
        
        

      

    

    is
      a
“foreign person” as defined in Section 1445(f)(3) of the Code. Sellers are not
      required to withhold with respect to the transactions contemplated herein
      pursuant to the tax withholding provisions of Section 3406 of the Code or of
      Subchapter A of Chapter 3 of the Code. 

     

    (c)  There
      are
      no Liens upon any property or assets of Sellers or any Subsidiary relating
      to or
      attributable to Taxes, except for Liens for Taxes not yet due and
      payable.

     

    (d)  No
      deficiencies for Taxes have been claimed, proposed in writing or assessed by
      any
      taxing or other Governmental Body against the Sellers or their Subsidiaries
      that
      have not otherwise been paid, settled or contested in good faith. There are
      no
      investigations, disputes or claims or other actions for or relating to any
      additional liability for or relating to any liability for Taxes with respect
      to
      the Sellers or their Subsidiaries for which Sellers have received written
      notice, or to Sellers’ Knowledge is currently threatened. Neither Seller nor any
      of their Subsidiaries has waived any statute of limitations in respect of Taxes
      or agreed to any extension of time with respect to a Tax assessment or
      deficiency.

     

    (e)  Sellers
      have made available to Buyer all federal and state income and all state sales
      and use Tax Returns requested by Buyer for all periods since January 1,
      2004.

     

    (f)  All
      material elections with respect to Taxes affecting the Purchased Assets as
      of
      the date hereof, to the extent such elections are not shown on or in the Tax
      Returns of the Sellers or their Subsidiaries that have been delivered to the
      Buyer by the Sellers prior to the date hereof, are set forth in Section
3.15(f)
      of the
      Sellers’ Disclosure Letter.

     

    (g)  Neither
      Seller nor any of their Subsidiaries has been a member of an affiliated group
      of
      corporations within the meaning of Section 1504 of the Code (other than the
      affiliated group of which Parent is the common parent) or has any liability
      for
      the Taxes of any other Person (i) under Treasury Regulation Section 1.1502-6
      (or
      any similar provision of state, local or foreign law), (ii) as a transferee
      or
      successor, (iii) by contract or (iv) otherwise.

     

    (h)  There
      are
      no, and at the Closing Date there will be no, Tax-sharing agreements or similar
      arrangements (including indemnity agreements) with respect to or involving
      the
      Sellers, their Subsidiaries or the Purchased Assets.

     

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

            

    

     

    . 
      

     

    (a)  Neither
      Sellers nor any of their Subsidiaries
      own any real property, nor have any of them ever owned any real property. All
      current leases of Sellers and their respective Subsidiaries relating to the
      Purchased Assets or Assumed Liabilities are in full force and effect, are valid
      and effective in accordance with their respective terms, and there is not,
      under
      any of such leases, any existing default or event of default (or event which
      with notice or lapse of time, or both, would constitute a default) on the part
      of any of them and, to the Knowledge of the Sellers, on the part of any other
      party thereto.

     

    
      
        
        

      

      
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    (b)  Except
      as
      set forth in Section 3.16(b) of
      Sellers’ Disclosure Letter, Sellers have the necessary power and right to sell,
      assign, transfer, convey and deliver the Purchased Assets to Buyer. Except
      as
      set forth in Section 3.16(b) of
      Sellers’ Disclosure Letter, following the consummation of the transactions
      contemplated by this Agreement and the Ancillary Agreements and the execution
      of
      the instruments of transfer contemplated by this Agreement and the Ancillary
      Agreements, Buyer will own, with good, valid and marketable title, or lease,
      under valid and subsisting leases, or otherwise acquire the interests of Sellers
      and their Subsidiaries in the Purchased Assets, free and clear of any Liens
      without any increase in rentals, royalties, or license or other fees imposed
      on
      Buyer as a result of, or arising from, the consummation of the transactions
      contemplated by this Agreement and the Ancillary Agreements.

     

    (c)  Section 3.16(c)
      of
      Sellers’ Disclosure Letter lists each material item of equipment with a value of
      $50,000 or more owned or leased by Sellers or any of their respective
      Subsidiaries and used primarily in connection with the Business. 

     

    (d)  At
      all
      times since the Balance Sheet Date, Sellers or their Subsidiaries have caused
      the Purchased Assets to be maintained in accordance with good business practice,
      and all the Purchased Assets are in good operating condition and repair, subject
      to normal wear and tear.

     

    
      	3.17  	
              Intellectual
                Property

            

    

     

    . 
      

     

    (a)  Section 3.17(a) of
      Sellers’ Disclosure Letter lists all rights to Sellers’ Intellectual Property,
      including but not limited to, Registered Intellectual Property Rights owned
      by,
      filed in the name of, or applied for, by Sellers or any of their Subsidiaries
      (the “Sellers’
      Registered Intellectual Property Rights”)
      and
      lists any proceedings or actions before any court, tribunal (including the
      United States Patent and Trademark Office (the “PTO”)
      or
      equivalent authority anywhere in the world) related to Sellers’ Intellectual
      Property.
      Other
      than the Sellers’ Intellectual Property listed in Section 3.17(a) of
      Sellers’ Disclosure Letter, (i) no provisional applications, nonprovisional
      applications, substitutions, extensions, reissues, reexaminations, renewals,
      divisions, continuations, continuations-in-part, parents or other related
      applications have been filed or issued with respect to Technology used in and/or
      necessary to the conduct of the business of Sellers as currently conducted,
      and,
      to the Knowledge of Sellers, as currently planned or contemplated to be
      conducted by, and (ii) no counterpart applications of the Sellers’
Intellectual Property listed have been filed or issued in any
      country.

     

    (b)  Except
      to
      the extent that would not reasonably be expected to result in a Sellers’
Material Adverse Effect, each item of Sellers’ Registered Intellectual Property
      Rights are valid and subsisting, and all necessary registration, maintenance
      and
      renewal fees in connection with Sellers’ Registered Intellectual Property Rights
      have been paid and all necessary documents and certificates in connection with
      Sellers’ Registered Intellectual Property Rights have been filed with the
      relevant patent, copyright, trademark or other authorities in the United States
      or foreign jurisdictions, as the case may be, for the purposes of maintaining
      such Registered Intellectual Property Rights. Except as set forth on
      Section 3.17(b)
      of the
      Sellers’ Disclosure Letter, there are no actions that must be taken by Sellers
      or any of their Subsidiaries 

     

    
      
         

         

        
        

      

      
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          32
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    within
      one hundred twenty (120) days of the Closing Date, including the payment of
      any
      registration, maintenance or renewal fees or the filing of any responses to
      PTO
      office actions, documents, applications or certificates for the purposes of
      obtaining, maintaining, perfecting or preserving or renewing any Registered
      Intellectual Property Rights. Sellers own all right, title and interest in
      and
      to, or have the valid right or license to, Sellers’ Intellectual Property free
      and clear of all encumbrances. In each case in which Sellers or any of their
      Subsidiaries have acquired any Technology or Intellectual Property Right from
      any person, Sellers or such Subsidiary have obtained a valid and enforceable
      assignment or license sufficient to transfer to Buyer such rights in such
      Technology and Intellectual Property Rights (including the right to seek past
      and future damages with respect thereto) as are necessary or useful for the
      conduct of the Business as currently conducted. To the maximum extent provided
      for by, and in accordance with, applicable laws and regulations, Sellers and
      each of their Subsidiaries have recorded each such assignment of a Registered
      Intellectual Property Right assigned to Sellers with the relevant Governmental
      Body, including the PTO, the U.S. Copyright Office, or their respective
      equivalents in any relevant foreign jurisdiction, as the case may be. Except
      as
      set forth on Section 3.17(b)
      of the
      Sellers’ Disclosure Letter, Sellers have not claimed a particular status,
      including “Small Business Status,” in the application for any Intellectual
      Property Rights, which claim of status was at the time made, or which has since
      become, inaccurate or false or that will no longer be true and accurate as
      a
      result of the Closing. 

     

    (c)  Sellers
      have no Knowledge of any facts or circumstances that would render Sellers’
Intellectual Property invalid or unenforceable. Without limiting the foregoing,
      Sellers and each of their Subsidiaries know of no information, materials, facts,
      or circumstances, including any information or fact that would constitute prior
      art, that would render any of Sellers’ Intellectual Property invalid or
      unenforceable, or would adversely effect any pending application for Sellers’
Registered Intellectual Property Right and neither Sellers nor any of their
      Subsidiaries have misrepresented, or failed to disclose, and have no Knowledge
      of any misrepresentation or failure to disclose, any fact or circumstances
      in
      any application for Sellers’ Registered Intellectual Property Right that would
      constitute fraud or a misrepresentation with respect to such application or
      that
      would otherwise affect the validity or enforceability of Sellers’ Registered
      Intellectual Property Right.
      To
      Sellers’ Knowledge, there is no unauthorized use, disclosure, infringement, or
      misappropriation, or notice of invalidity or unenforceability, of any Sellers’
Intellectual Property, by any third party, including for example any employee
      or
      former employee of the Sellers. The Sellers have not sought or received any
      opinion of counsel, oral or written, regarding any intellectual property right
      of a third party. To Sellers’ Knowledge, there is no substantial basis for a
      claim that Sellers, in the operation of the business of the Sellers, are
      infringing or have infringed on or misappropriated any intellectual property
      right of any third party.

     

    (d)  Each
      item
      of Sellers’ Intellectual Property is free and clear of any Liens (1) except
      as set forth in Section 3.17(d)
      of the
      Sellers’ Disclosure Letter and (2) except for non-exclusive licenses granted to
      end-user customers in the Ordinary Course of Business. Except as set forth
      in
      Section 3.17(d)
      of the
      Sellers’ Disclosure Letter, to Sellers’ Knowledge, Sellers are the exclusive
      owner or exclusive licensee of all Sellers’ Intellectual Property. Without
      limiting the foregoing: (i) Sellers and each of their Subsidiaries are the
      exclusive owner of all Trademarks used in connection with the operation or
      conduct of the business of Sellers, including the sale, licensing, distribution
      or provision of any products or services by Sellers; 

     

    
      
         

         

        
        

      

      
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          33
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    (ii) Sellers
      and each of their Subsidiaries own exclusively, and has good title to, all
      Copyrights that are products of Sellers or which Sellers otherwise purports
      to
      own; and (iii) to the extent that any Patents would otherwise be infringed
      by any product or services of Sellers, such Patents constitute Sellers’
Intellectual Property. 

     

    (e)  Except
      as
      set forth in Section 3.17(e)
      of the
      Sellers’ Disclosure Letter, all of Sellers’ Intellectual Property will be fully
      transferable, alienable or licensable by Buyer without restriction and without
      payment of any kind to any third party.
      The
      Sellers have not transferred any portion of ownership of any Sellers’
Intellectual Property to any third party or knowingly permitted any Sellers’
Intellectual Property to enter the public domain or, with respect to any
      Sellers’ Intellectual Property for which any of the Sellers has submitted an
      application or obtained a registration, to lapse (other than (i) through the
      expiration of a registered Sellers’ Intellectual Property at the end of its
      maximum statutory term or (ii) applications abandoned and listed in
      Section 3.17(e)
      of the
      Sellers’ Disclosure Letter). After the Closing, all Sellers’ Intellectual
      Property will be fully transferable, alienable or licensable by Buyer without
      restriction and without payment of any kind to any third party.

     

    (f)  Except
      as
      set forth in Section 3.17(f)
      of the
      Sellers’ Disclosure Letter, to the extent that Sellers’ Technology has been
      developed or created by a third party for Sellers, Sellers have a written
      agreement with such third party with respect thereto and Sellers thereby either
      (i) have obtained ownership of, and are the exclusive owner of, or
      (ii) have obtained a license (sufficient for the conduct of its business as
      currently conducted and as proposed to be conducted) to all such third party’s
      Intellectual Property Rights in such Technology, to the fullest extent it is
      legally possible to do so.
      To
      Sellers’ Knowledge, to the extent that any third party intellectual property is
      incorporated into, integrated or bundled with, or used by Sellers in the
      development, manufacture or compilation of any product under Sellers’
Intellectual Property, or any of Sellers’ Intellectual Property relates to any
      development by Sellers that involves the derivation or use of specifications
      or
      technical information derived from the products of third parties, Sellers have
      a
      written agreement with such third party with respect thereto pursuant to which
      Sellers either have obtained complete, unencumbered and unrestricted ownership
      of, and are the exclusive owners of, or have obtained perpetual, nonterminable
      licenses sufficient for the conduct of its business as currently conducted
      by
      Sellers and as presently proposed to be conducted by Sellers to all such third
      party intellectual property.

     

    (g)  Except
      as
      set forth on Section 3.17(g)
      of the
      Sellers’ Disclosure Letter and with exception of “shrink-wrap” or similar widely
      available commercial end-user licenses, all Technology used in or necessary
      to
      the conduct of Sellers and each of their Subsidiaries’ business as presently
      conducted or currently contemplated to be conducted by Sellers were written
      and
      created solely by either (i) employees of Sellers acting within the scope
      of their employment who have assigned all of their rights in such Technology,
      including Intellectual Property Rights therein, to Sellers or (ii) by third
      parties who have validly and irrevocably assigned all of their rights, including
      Intellectual Property Rights therein, to Sellers, and no third party owns or
      has
      any rights to any Sellers’ Intellectual Property. 

     

    (h)  Except
      as
      set forth in Section 3.17(h)
      of the
      Sellers’ Disclosure Letter, all employees and consultants of Sellers and their
      Subsidiaries have entered into a valid and binding written agreement with
      Sellers sufficient to vest title in Sellers of all Technology and Intellectual
      

     

    
      
         

         

        
        

      

      
        -
          34
          -

        
          

        

      

      
        
        

      

    

    Property
      Rights created by such employee or consultant in the scope of his or her
      services or employment for Sellers.
      No
      current or former employee, consultant or independent contractor of Sellers
      has
      any right, license, claim or interest whatsoever in, to or under any Sellers’
Intellectual Property. To Sellers’ Knowledge, no current or former employee,
      consultant or independent contractor of Sellers: (i) is in violation of any
      term or covenant of any Contract relating to employment, invention disclosure,
      invention assignment, nondisclosure or noncompetition or any other Contract
      with
      any other party by virtue of such employee, consultant or independent contractor
      being employed by, or performing services for, Sellers or using trade secrets
      or
      proprietary information of others without permission; or (ii) has developed
      any
      technology, software or other copyrightable, patentable or otherwise proprietary
      work for Sellers that is subject to any agreement under which such employee,
      consultant or independent contractor has assigned or otherwise granted,
      or is obligated to assign or otherwise grant, to any third party any rights
      (including Sellers’ Intellectual Property) in or to such technology, software or
      other copyrightable, patentable or otherwise proprietary work.

     

    (i)  Sellers
      have taken all steps that are reasonably required to protect Sellers’ rights in
      confidential information and trade secrets of Sellers or provided by any other
      person to Sellers and to protect and preserve the confidentiality of all
      confidential or nonpublic information included in the Sellers’ Intellectual
      Property (“Confidential
      IP Information”).
      Without limiting the foregoing, Sellers and each of their Subsidiaries have,
      and
      enforce, a policy requiring each employee, consultant and contractor to execute
      a proprietary information, confidentiality and assignment agreement,
      substantially in the form(s) attached as Section 3.17(i)
      of the
      Sellers’ Disclosure Letter, and all current and former employees, consultants
      and contractors of Sellers and their Subsidiaries have executed such an
      agreement.
      To
      Sellers’ Knowledge, all use, disclosure or appropriation of Confidential IP
      Information owned by Sellers by or to a third party has been pursuant to the
      terms of a written agreement between Sellers and such third party. To Sellers’
Knowledge, all use, disclosure or appropriation of Confidential IP Information
      not owned by Sellers has been pursuant to the terms of a written agreement
      or
      other legal binding arrangement between Sellers and the owner of such
      Confidential IP Information, or is otherwise lawful. 

     

    (j)  Except
      as
      set forth on Section 3.17(j)
      of the
      Sellers’ Disclosure Letter, to Sellers’ Knowledge, no Person who has licensed
      Technology or Intellectual Property Rights to Sellers has ownership rights
      or
      license rights to improvements made by Sellers in such Technology or
      Intellectual Property Rights. 

     

    (k)  Except
      as
      set forth in Section 3.17(k)
      of the
      Sellers’ Disclosure Letter, neither Sellers nor any of their Subsidiaries have
      transferred ownership of, granted any exclusive license of or right to use,
      or
      authorized the retention of any exclusive rights to use or joint ownership
      of,
      any Sellers’ Intellectual Property to any other Person. 

     

    (l)  Other
      than inbound “shrink-wrap” and similar publicly available commercial binary code
      end-user licenses and outbound “shrink-wrap” licenses substantially in the form
      set forth on Section 3.17(l)(A)
      of
      the Sellers’ Disclosure Letter, the Contracts listed in
      Section 3.17(l)(B)
      of
      the Sellers’ Disclosure Letter lists all material Contracts to which Sellers are
      parties with respect to any Technology or Intellectual Property Rights. Except
      as set forth in Section 3.17(l)(C)
      of
      the Sellers’ Disclosure Letter, neither Sellers nor any of their Subsidiaries

     

    
      
         

         

        
        

      

      
        -
          35
          -

        
          

        

      

      
        
        

      

    

    are
      in
      breach of nor has any of them failed to perform under, any of the foregoing
      Contracts, and, to Sellers’ Knowledge, no other party to any such Contract is in
      breach thereof or has failed to perform thereunder.
      Sellers
      do not have an explicit or implied legal obligation, absolute or contingent,
      to
      any Person to sell, transfer or assign any of the Sellers’ Intellectual
      Property. Sellers have not made any assignment or granted any license, and
      are
      not under any obligation to grant any such license or rights, including any
      or
      all of the Sellers’ Intellectual Property, to any Person, under any of the
      Sellers’ Intellectual Property. None of the licenses, sublicenses, assignments
      or other Contracts listed in Section 3.17(l)(B)
      of
      the Sellers’ Disclosure Letter grants, or sets forth or creates an obligation to
      grant, any third party exclusive rights in, to or under any Sellers’
Intellectual Property, or grants, or sets forth or creates an obligation to
      grant, any third party the right to sublicense any Sellers’ Intellectual
      Property.

     

    (m)  Sellers
      are not and shall not be as a result of the execution or effectiveness of this
      Agreement, or the performance of its obligations under this Agreement, in
      material breach of any Contract to which Sellers are a party relating to any
      Sellers’ Intellectual Property (the “Intellectual
      Property Rights Agreements”).
      The
      consummation of the transactions contemplated by this Agreement will neither
      result in the modification, cancellation, termination, suspension of, or
      acceleration of any payments with respect to the Intellectual Property Rights
      Agreements, nor give any non-Sellers party to any Intellectual Property Rights
      Agreement the right to do any of the foregoing. Following the Closing, Buyer
      will be permitted to exercise all of the rights of the Sellers under the
      Intellectual Property Rights Agreements to the same extent Sellers would have
      been able had the transactions contemplated by this Agreement not occurred
      and
      without the payment of any additional amounts or consideration other than
      ongoing fees, royalties or payments that Sellers would otherwise be required
      to
      pay. Neither the execution or effectiveness of this Agreement nor the
      performance of the obligations of the Sellers under this Agreement will cause
      the forfeiture or termination of, or give rise to a right of forfeiture or
      termination of any Sellers’ Intellectual Property, or impair the right of Buyer
      to use, possess, sell or license any Sellers’ Intellectual Property or portion
      thereof. 

     

    (n)  Section 3.17(n)
      of the
      Sellers’ Disclosure Letter lists all material contracts, licenses and agreements
      between Sellers and any other person wherein or whereby Sellers or any of their
      Subsidiaries have agreed to, or assumed, any obligation or duty to warrant,
      indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur
      any
      obligation or liability or provide a right of rescission with respect to the
      infringement or misappropriation by Sellers or any of their Subsidiaries or
      such
      other Person of the Intellectual Property Rights of any Person other than
      Sellers or any of their Subsidiaries.

     

    (o)  Except
      as
      set forth in Section 3.17(o)
      of the
      Sellers’ Disclosure Letter, to the Sellers’ Knowledge, there are no contracts,
      licenses or agreements between Sellers or any of their Subsidiaries and any
      other person with respect to Sellers’ Intellectual Property under which there is
      any dispute regarding the scope of such agreement, or performance under such
      agreement, including with respect to any payments to be made or received by
      Sellers or any of their Subsidiaries thereunder.

     

    (p)  Except
      as
      otherwise set forth in Section 3.17(p)
      of the
      Sellers’ Disclosure Letter, to Sellers’ Knowledge, the operation of the business
      of Sellers as currently conducted or as contemplated to be conducted by Sellers,
      including but not limited to the design, development, 

     

    
      
         

         

        
        

      

      
        -
          36
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    use,
      import, branding, advertising, promotion, marketing, manufacture and sale of
      the
      products, technology or services (including products, technology or services
      currently under development) of Sellers do not and will not when conducted
      by
      Buyer in substantially the same manner following the Closing, infringe or
      misappropriate any Intellectual Property Right of any Person, violate any right
      of any Person (including any right to privacy or publicity) or constitute unfair
      competition or trade practices under the laws of any jurisdiction, and Sellers
      have not received notice from any Person claiming that such operation or any
      act, product, technology or service (including products, technology or services
      currently under development) of Sellers infringe or misappropriate any
      Intellectual Property Right of any Person or constitutes unfair competition
      or
      trade practices under the laws of any jurisdiction (nor do Sellers have any
      Knowledge of any basis therefor).

     

    (q)  To
      Sellers’ Knowledge, no Person is infringing or misappropriating Sellers’
Intellectual Property. Except as otherwise set forth in
      Section 3.17(q)
      of the
      Sellers’ Disclosure Letter, Sellers have not obtained a legal opinion analyzing
      or assessing the validity or scope of any Sellers’ Intellectual Property. To
      Sellers’ Knowledge or reasonably suspected by Sellers, there have been no
      instances of infringement and/or misappropriation of Sellers’ Intellectual
      Property. Sellers have not brought any action, suit or proceeding for
      infringement or misappropriation of, or declaration regarding, any Sellers’
Intellectual Property, breach of any Intellectual Property Rights Agreement,
      or
      violation of any covenant not to compete. 

     

    (r)  No
      Sellers’ Intellectual Property or service of Sellers is subject to any
      proceeding or outstanding decree, order, judgment or settlement agreement or
      stipulation that restricts in any manner the use, transfer or licensing thereof
      by Sellers or may affect the validity, use or enforceability of Sellers’
Intellectual Property. 

     

    (s)  With
      respect to Sellers’ Intellectual Property, except as set forth in Section
3.17(s)
      of the
      Sellers’ Disclosure Letter no claim has been asserted or suggested, no threat or
      inquiry has been made, no notification has been received regarding third party
      intellectual property rights, including an offer to license or grant any other
      rights or immunities under any Intellectual Property Rights of any third party,
      and no litigation, arbitration or other adversary proceeding is pending, or,
      to
      Sellers’ Knowledge, is threatened. To Sellers’ Knowledge, none of the Sellers’
Intellectual Property is subject to any pending or threatened outstanding order,
      contract, stipulation, proceeding, or notification, including without limitation
      any pending interference, opposition, cancellation, reissue, reexamination,
      or
      other challenge or adversarial proceeding, restricting in any manner the use,
      transfer, or licensing by Sellers of any Intellectual Property Rights, or which
      may affect the validity, use or enforceability of any Sellers’ Intellectual
      Property. No freedom to operate, patent clearance, right to market or right
      to
      use studies or analyses have been performed by or on behalf of Sellers with
      respect to the Intellectual Property Rights of third parties.

     

    (t)  Except
      as
      set forth on Section 3.17(t)
      of the
      Sellers’ Disclosure Letter, Sellers’ Intellectual Property constitutes all the
      Technology and Intellectual Property Rights used in and/or necessary to the
      conduct of the business of Sellers as currently conducted, and, to the Knowledge
      of Sellers, as currently planned or contemplated to be conducted by Sellers,
      including, without limitation, the design, development, manufacture, use, import
      and sale of 

     

    
      
         

        
        

      

      
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          37
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    products,
      technology and performance of services (including products, technology or
      services currently under development).

     

    (u)  Neither
      this Agreement nor the transactions contemplated by this Agreement, including
      the assignment to Buyer, by operation of law or otherwise, of any Contracts
      to
      which Sellers are a party, will result in (i) Buyer’s granting to any third
      party any right to or with respect to any Technology or Intellectual Property
      Right owned by, or licensed to, either of them, (ii) Buyer’s being bound
      by, or subject to, any non-compete or other restriction on the operation or
      scope of their respective businesses, or (iii) Buyer’s being obligated to
      pay any royalties or other amounts to any third party in excess of those payable
      by Seller,
      prior
      to the Closing.

     

    (v)  Except
      as
      set forth in Section 3.17(v)
      of the
      Sellers’ Disclosure Letter, there are no royalties, fees, honoraria or other
      payments payable by Sellers to person or entity by reason of the ownership,
      development, use, license, sale or disposition of Sellers’ Intellectual
      Property, other than salaries and sales commissions paid to employees and sales
      agents in the Ordinary Course of Business.

     

    
      	3.18  	
              Contracts

            

    

     

    . 
      Section 3.18
      of the
      Sellers’ Disclosure Letter lists the following Contracts under which Sellers or
      any of their respective Subsidiaries are obligated or by which Sellers or any
      of
      their assets are bound (other than Contracts with Buyer or Clarient):

     

    (a)  any
      Contract (or group of related Contracts) that (i) involves
      the future payment of greater than $50,000 per annum or which extends for more
      than one (1) year, (ii) involves any payment or obligation to any Affiliate
      of Sellers or any of their Subsidiaries other than in the Ordinary Course of
      Business, (iii) involves the sale, lease, license or other disposition of
      any material assets (including intangible property) or (iv) involves any
      license of Sellers’ Intellectual Property (other than in connection with sales
      of products and services in the Ordinary Course of Business);

     

    (b)  any
      Contract under which the consequences of a default or termination would
      reasonably be expected to have a Sellers’ Material Adverse Effect;

     

    (c)  any
      Contract (or group of related Contracts) for the purchase or sale of
      commodities, supplies, products, or other personal property, or for the
      furnishing or receipt of services, the performance of which will involve
      consideration in excess of $50,000;

     

    (d)  any
      Contract concerning a partnership or joint venture;

     

    (e)  any
      Contract (or group of related Contracts) under which Sellers have created,
      incurred, assumed, or guaranteed any indebtedness for borrowed money or any
      capitalized lease obligation in excess of $50,000 or under which a Lien has
      been
      imposed on any of the Purchased Assets;

     

    (f)  any
      Contract to which Sellers or any of their Subsidiaries are a party or otherwise
      bound and which contains covenants of Sellers or any Subsidiary not to compete
      or 

     

    
      
         

         

        
        

      

      
        -
          38
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    engage
      in
      the Business, in any geographic area or with any Person or covenants of any
      other person not to compete with Sellers or any of their Subsidiaries or engage
      in the Business;

     

    (g)  any
      executory Contract under which Sellers or any of their Subsidiaries have
      advanced or loaned any amount to any of their respective Employees;

     

    (h)  any
      executory Contract pursuant to which Sellers or any of their Subsidiaries are
      obligated to provide maintenance, service, support or training for its services
      or products, together with the amounts of deferred revenue associated with
      the
      executory support and service obligations under such Contracts, all of which
      has
      been accrued in the Current Balance Sheet in accordance with GAAP, consistently
      applied or has arisen since the date of the Current Balance Sheet in the
      Ordinary Course of Business;

     

    (i)  any
      revenue or profit participation Contract;

     

    (j)  any
      license or Contract under which Sellers or any of their respective Subsidiaries
      (i) have granted to any Person rights with respect to any Sellers’
Intellectual Property (other than end user licenses in connection with sales
      of
      products and services in the Ordinary Course of Business), (ii) have agreed
      to encumber, not assert, transfer or sell rights in or with respect to any
      Sellers’ Intellectual Property, (iii) are parties or otherwise bound and
      which provides for the development of any Technology or Sellers’ Intellectual
      Property, independently or jointly or (iv) are parties or otherwise bound
      and pursuant to which Sellers or any of their respective Subsidiaries acquired
      or are authorized to use any Intellectual Property Rights of any current or
      former employee or other Person; 

     

    (k)  any
      Contract for the purchase or sale of materials, supplies, equipment, merchandise
      or services that contains an escalation clause or that obligates Sellers or
      any
      of their Subsidiaries to purchase all or substantially all of its requirements
      of a particular product or service from a supplier or to make periodic minimum
      purchases of a particular product or service from a supplier, which is not
      terminable on not more than 30 days notice (without penalty or
      premium);

     

    (l)  any
      Contract with customers or suppliers for the sharing of fees, the rebating
      of
      charges or other similar arrangements;

     

    (m)  any
      Contract obligating Sellers or any of their Subsidiaries to deliver maintenance
      services or future product enhancements (in each case other than agreements
      with
      end users in connection with sales of products and services in the Ordinary
      Course of Business) or containing a “most favored nation” pricing
      clause;

     

    (n)  any
      Contract obligating Sellers to provide source code to any third party for
      Sellers’ Intellectual Property;

     

    (o)  any
      Contract granting exclusive distribution rights with respect to any part of
      the
      Business;

     

    (p)  any
      Contract relating to the acquisition by Sellers of any operating business or
      the
      capital stock of any other person;

     

    
      
        
        

      

      
        -
          39
          -

        
          

        

      

      
        
        

      

    

    (q)  any
      Contract requiring the payment to any Person of a brokerage or sales commission
      or a finder’s or referral fee (other than to Burnham Hill Partners and
      arrangements to pay commissions or fees to employees in the Ordinary Course
      of
      Business); 

     

    (r)  any
      Contract material to Sellers for which performance has not been completed that
      is not listed in clauses (a) through (q) and not made in the Ordinary Course
      of
      Business.

     

    Sellers
      have delivered to Buyer a correct and complete copy of each written Contract
      (as
      amended to date) listed in Section 3.18
      of the
      Sellers’ Disclosure Letter and a written summary setting forth the terms and
      conditions of each oral Contract referred to in Section 3.18
      of the
      Sellers’ Disclosure Letter. With respect to each such Contract that constitutes
      an Assumed Contract: (A) the agreement, with respect to Sellers or any of
      their Subsidiaries and, to Sellers’ Knowledge, all other parties thereto, is
      legal, valid, binding, enforceable, and in full force and effect in all
      respects; (B) none of Sellers, any of their respective Subsidiaries nor, to
      Sellers’ Knowledge, any other party is in material breach or default, and no
      event has occurred, which with notice or lapse of time would constitute a
      material breach or default, or permit termination, modification, or
      acceleration, under the Contract; and (C) neither Sellers nor any of their
      Subsidiaries have received notice that any party has repudiated any provision
      of
      the Contract. Except as set forth on Section 3.6
      of the
      Sellers’ Disclosure Letter, Sellers have obtained or will obtain prior to the
      Closing Date, all necessary consents, waivers and approvals of parties to any
      such Contract as are required thereunder in connection with the transactions
      contemplated by this Agreement or, with respect to any Assumed Contract,
      necessary for such Assumed Contract to remain in effect without modification
      after the Closing. Except as set forth on Section 3.6
      or
      Section 3.18
      of the
      Sellers’ Disclosure Letter, following the Closing, Buyer will be permitted to
      exercise all of Sellers’ and any of its Subsidiaries’ rights under the Assumed
      Contracts to the same extent Sellers would have been able to had the
      transactions contemplated by this Agreement not occurred and without the payment
      of any additional amounts or consideration other than ongoing fees, royalties
      or
      payments which Sellers or such Subsidiary would otherwise be required to pay.
      

     

    
      	3.19  	
              Commercialization
                of Product

            

    

     

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

     

    
      	3.20  	
              Insurance

            

    

     

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

     

    
      
         

         

        
        

      

      
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          40
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	3.21  	
              Litigation

            

    

     

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

     

    
      	3.22  	
              Product
                Warranty,
                Product Liability and Recalls

            

    

     

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

     

    
      
         

         

        
        

      

      
        -
          41
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	3.23  	
              Employees

            

    

     

    .

     

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

     

    
      	3.24  	
              Employee
                Matters and Benefit Plans

            

    

    
      
        

         

        (a) Plans. Section
          3.24
          of
          the
          Sellers’
Disclosure Letter contains an accurate and complete list of each Sellers’
Employee Plan. None of Sellers nor any of their Subsidiaries has any commitment
          to establish, adopt or enter into any new Sellers’ Employee Plan, or to modify
          any existing Sellers’ Employee Plan in any material respect prior to the Closing
          (except to the extent required by law or to conform any Sellers’ Employee Plan
          to the requirements
          of any applicable law). With respect to each Sellers’ Employee Plan, the Company
          has made available to Buyer complete copies of (i) each Sellers’ Employee Plan
          (or, if not written, a written summary of its material terms) and all amendments
          thereto, (ii) all summary plan descriptions including any summary of material
          modifications, and (iii) all filings made with any governmental entities,
          including but not limited any filings under the Employee Plans Compliance
          Resolution System or the Department of Labor Delinquent Filer
          Program
          concerning any issue or matter that could reasonably be expected to result
          in
          any material liability.

         

        (b) Employee
          Plan Compliance.
          Except
          as set forth in Section
          3.24
          of
the
          Sellers’ Disclosure Letter, (i) there are no actions, suits or claims pending,
          or, to the Knowledge of Sellers, threatened or reasonably anticipated (other
          than routine claims for benefits) against any Sellers’ Employee Plan or against
          the assets of Sellers’ Employee Plan, and (ii) there are no audits, inquiries or
          proceedings pending or, to the Knowledge of Sellers, threatened by the
          IRS or
          DOL with respect to any Sellers’ Employee Plan, which in either case reasonably
          could be expected to result in material liability to any of Sellers or
          their
          Subsidiaries.

         

        (c) Pension
          Plans.
          Neither
          Seller nor any ERISA Affiliate sponsors, maintains, contributes to or has
          an
          obligation to contribute to, or has, during the past six years, 

         

        
          
            
            

          

          
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              42
              -

            
              

            

          

          
            
            

          

        

        sponsored,
          maintained, contributed to or had an obligation to contribute to any
          Pension
          Plan subject to Title IV of ERISA or Section 412 of the Code,
          any
          Multiemployer Plan or any multiple employer plan (within the meaning of
          Section
          413 of the Code). 

         

        (d) Effect
          of Transactions.
          Except
          as set forth on Section 3.24
          of the
          Sellers’ Disclosure Letter, with respect to the Hired Employees, neither the
          execution and delivery of this Agreement, nor the consummation of the
          transactions contemplated hereby, either alone or in combination with another
          event (whether contingent or otherwise) will (i) entitle any Hired Employee
          to
          any material payment; (ii) materially increase the amount of compensation
          or
          benefits due to any Hired Employee; (iii) accelerate the vesting, funding
          or
          time of payment of any compensation, equity award or other benefit to any
          Hired
          Employee; or (iv) result in any “parachute payment” under Section 280G of the
          Code.

         

        (e)  No
          Post-Employment Obligations. Neither
          Sellers
          nor any of their Subsidiaries has any obligation to provide health, accident,
          disability, life insurance or death benefits with respect to any current
          or
          former Employees, or the spouses, dependents or beneficiaries of any current
          or
          former Employees, beyond the termination of employment or service of such
          Employee, except as may be required by COBRA or other applicable
          law
          (the
“Continuation Coverage Requirements”).

         

        (f) COBRA
          Compliance.
          All
          group health plans of the Sellers and their Subsidiaries have been operated
          in
          compliance with all applicable Continuation Coverage Requirements in all
          material respects. 

         

      

       

      (f) COBRA
        Compliance.
        All
        group health plans of the Sellers and their Subsidiaries have been operated
        in
        compliance with all applicable Continuation Coverage Requirements in all
        material respects. 

       
(f) COBRA
      Compliance.
      All
      group health plans of the Sellers and their Subsidiaries have been operated
      in
      compliance with all applicable Continuation Coverage Requirements in all
      material respects. 

     

    (g) International
      Employee Plans.
      None of
      Sellers nor any of their Subsidiaries maintains, sponsors, participates in,
      contributes to or has any obligation to contribute to any International Employee
      Plan, or has incurred any material liability with respect to any such plan
      that
      has not been satisfied in full.

     

    
      	3.25  	
              Environment,
                Health, and Safety

            

    

     

    .

     

    (a)  Condition
      of Property.
      As of
      the Closing, except in compliance with Environmental Laws in a manner that
      could
      not reasonably be expected to subject Buyer or Clarient to liability, no
      Hazardous Materials are present on any Business Facility currently owned,
      operated, occupied, controlled or leased by Sellers or any Subsidiary.

     

    (b)  Hazardous
      Materials Activities.
      Sellers
      and each of their Subsidiaries have conducted all Hazardous Material Activities
      relating to the Business in compliance in all material respects with all
      applicable Environmental Laws. Except as set forth in Section 3.25(b)
      of the
      Sellers’ Disclosure Letter, the Hazardous Materials Activities of Sellers and
      each of their Subsidiaries prior to the Closing have not resulted in the
      exposure of any person to a Hazardous Material in a manner which has caused
      or
      could reasonably be expected to cause a significant adverse health effect to
      any
      such person. 

     

    (c)  Permits.
      Section
3.25(c)
      of
      Sellers’ Disclosure Letter accurately describes all of the Environmental Permits
      currently held by Sellers and their Subsidiaries and relating to 

     

    
      
         

         

        
        

      

      
        -
          43
          -

        
          

        

      

      
        
        

      

    

    its
      business and the listed Environmental Permits are all of the Environmental
      Permits necessary for the continued conduct of any Hazardous Material Activity
      of Sellers and each of their Subsidiaries relating to its business as such
      activities are currently being conducted. All such Environmental Permits are
      valid and in full force and effect. Sellers and each of their Subsidiaries
      have
      complied in all material respects with all covenants and conditions of any
      Environmental Permit which is or has been in force with respect to its Hazardous
      Materials Activities. To Sellers’ Knowledge, no circumstances exist which could
      cause any Environmental Permit to be revoked, modified, or rendered
      non-renewable upon payment of the permit fee. 

     

    (d)  Environmental
      Litigation.
      Except
      as set forth in Section 3.25(d)
      of the
      Sellers’ Disclosure Letter, no action, proceeding, revocation proceeding,
      amendment procedure, writ, injunction or claim is pending, or to Sellers’
Knowledge, threatened, concerning any Environmental Permit or any Hazardous
      Materials Activity of Sellers or any of their Subsidiaries relating to its
      business, or any Business Facility.

     

    (e)  Hazardous
      Material Disposal.
      No
      action, proceeding, liability or claim is pending or, to Sellers’ Knowledge, is
      threatened against Sellers or any of their Subsidiaries with respect to any
      transfer or release of Hazardous Materials relating to the Business to a
      Disposal Site which could reasonably be expected to subject Sellers or any
      of
      their Subsidiaries to material liability.

     

    (f)  Environmental
      Liabilities.
      Sellers
      are not aware of any fact or circumstance, which could result in any
      environmental liability which would reasonably be expected to result in a
      Sellers’ Material Adverse Effect. 

     

    (g)  Reports
      and Records.
      Sellers
      have delivered to Buyer or made available for inspection by Buyer and their
      agents, representatives and employees all records in Sellers’ and its
      Subsidiaries’ possession concerning the Hazardous Materials Activities of
      Sellers or any of their Subsidiaries relating to their respective businesses
      and
      all environmental audits and environmental assessments of any Business Facility
      in the possession of Sellers or any of their Subsidiaries. Sellers have complied
      with all environmental disclosure obligations imposed by applicable law with
      respect to this transaction. 

     

    
      	3.26  	
              Certain
                Business Relationships With
                Sellers

            

    

     

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

     

    
      	3.27  	
              No
                Adverse Developments

            

    

     

    
      
         

         

        
        

      

      
        -
          44
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	3.28  	
              Foreign
                Corrupt Practices Act

            

    

     

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

     

    
      	3.29  	
              Fees

            

    

     

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

     

    
      	3.30  	
              Complete
                Copies of Materials

            

    

     

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

     

    
      	3.31  	
              Board
                Approval

            

    

     

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

     

    
      	3.32  	
              Stockholder
                Approval

            

    

     

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

     

    
      	3.33  	
              Information

            

    

     

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

     

    
      
         

         

        
        

      

      
        -
          45
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	3.34  	
              No
                Liquidation, Insolvency,
                Winding-Up

            

    

     

    .

     

    (a)  As
      of the
      date of this Agreement and as of the Closing Date, no judgment, order or decree
      has been made, or petition presented, or resolution passed for the winding-
      up
      or liquidation of the Sellers or their Subsidiaries
      or the Business, and there is not outstanding: 

     

    (i)  any
      petition or judgment, order or decree for the winding up of Sellers or their
      Subsidiaries;

     

    (ii)  any
      appointment of a receiver over the whole or part of the undertaking of assets
      of
      Sellers or their Subsidiaries;

     

    (iii)  any
      petition or order for administration of Sellers or their
      Subsidiaries;

     

    (iv)  any
      voluntary arrangement between Sellers and any of their creditors;

     

    (v)  any
      assignment for the benefit of the Sellers’ creditors or similar creditor
      arrangement or remedy;

     

    (vi)  any
      voluntary petition, involuntary petition or order for relief with respect to
      the
      Sellers under the Bankruptcy Code, 11 U.S.C. Section 101, et seq.;

     

    (vii)  any
      distress or execution or other process levied in respect of Sellers which
      remains undischarged; and 

     

    (viii)  any
      unfulfilled or unsatisfied judgment or court order against Sellers or their
      Subsidiaries.

     

    (b)  Neither
      Seller has been deemed unable to pay its debts as they come due within the
      meaning of applicable law.

     

    (c)  The
      operations of Sellers have not been terminated.

     

    
      
        
        

      

      
        -
          46
          -

        
          

        

      

      
        
        

      

    

    (d)  Buyer
      acknowledges and consents that following the Closing, Sellers may wind up,
      liquidate or dissolve in accordance with applicable law. 

     

    
      	3.35  	
              Preferences

            

    

     

    . 
      To Sellers’ Knowledge the following statements are, after giving effect to the
      transactions contemplated hereby, true and correct:

     

    (a)  The
      aggregate value of all assets and properties of Sellers and their Subsidiaries,
      at their respective then present fair saleable values, exceeds the amount of
      all
      the debts and liabilities (including, without limitation, contingent,
      subordinated, unmatured and unliquidated liabilities) of Sellers and their
      Subsidiaries. Sellers understand that, in this context, “present fair saleable
      value” means the amount which may be realized within a reasonable time through a
      sale within such period by a capable and diligent businessperson from an
      interested buyer who is willing to purchase under ordinary selling conditions.
      In determining the present fair saleable value of Sellers’ and their
      Subsidiaries’ contingent liabilities (such as litigation, guarantees and pension
      plan liabilities), Sellers have considered such liabilities that could possibly
      become actual or matured liabilities. 

     

    (b)  The
      consideration received by Sellers in connection with the transactions
      contemplated hereby constitutes reasonably equivalent consideration for the
      Purchased Assets. Immediately after giving effect to the transactions
      contemplated by this Agreement, Sellers shall have adequate capital to carry
      on
      and to perform their obligations under the Excluded Liabilities.

     

    
      	3.36  	
              Assets

            

    

     

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

     

    
      	3.37  	
              Disclosure

            

    

     

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

     

    
      	3.38  	
              No
                Limitation on Other
                Representation

            

    

     

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

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES OF BUYER

     

    
      
         

         

        
        

      

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

     

    
      	4.1  	
              Organization,
                Qualification, and Corporate
                Power

            

    

     

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

     

    
      	4.2  	
              Authorization

            

    

     

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

     

    
      	4.3  	
              No
                Conflicts

            

    

     

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

     

    
      	4.4  	
              Consents

            

    

     

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

     

    
      
         

        
        

      

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

     

    
      	4.5  	
              Brokers’
                Fees

            

    

     

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

     

    
      	4.6  	
              Availability
                of Funds

            

    

     

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

     

    
      	4.7  	
              Litigation

            

    

     

    . 
      There is no action, suit, inquiry, proceeding or investigation by or before
      any
      Governmental Body pending, or to Buyer’s Knowledge, overtly threatened against
      or involving Buyer or Clarient that could have a Buyer Material Adverse Effect
      or that questions or challenges the validity of this Agreement or any action
      taken or to be taken by Buyer or Clarient pursuant to this Agreement or in
      connection with the transactions contemplated hereby.

     

    ARTICLE
      V  

     

    PRE-CLOSING
      COVENANTS

     

    With
      respect to the period between the execution of this Agreement and the earlier
      of
      the termination of this Agreement and the Closing, unless otherwise provided
      or
      contemplated herein:

     

    
      	5.1  	
              Operation
                of Business

            

    

     

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

     

    
      
         

         

        
        

      

      
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    ongoing
      Business at the Closing. Sellers shall promptly notify Buyer of any event or
      occurrence or emergency not in the Ordinary Course of Business, and any material
      event involving it to the extent any of the foregoing had or would reasonably
      be
      expected to have a Sellers’ Material Adverse Affect. Except (i) as contemplated
      or permitted by this Agreement, including Section 5.4(c), (ii) as contemplated
      by the Ancillary Agreements or the Bridge Notes, or (iii) as set forth in
      Section 5.1 of the Sellers’ Disclosure Letter, Sellers and each of their
      Subsidiaries shall not, without the prior written consent of Buyer, which
      consent shall not be unreasonably withheld, conditioned or delayed, do any
      of
      the following:

     

    (a)  Enter
      into any commitment or transaction involving an amount in excess of
      $50,000
      other than sales of products and services in the Ordinary Course of
      Business
      or
      obtaining renewals or extensions of the Sellers’ existing policies of insurance
      (including director or officer liability insurance) on substantially the same
      terms as currently in effect;

     

    (b)  (i) Sell
      or enter into any license agreement with respect to Sellers’ Intellectual
      Property with any person or entity other than in connection with sales of
      products and services in the Ordinary Course of Business or (ii) buy or
      enter into any license agreement with respect to the Intellectual Property
      of
      any person or entity;

     

    (c)  Transfer
      to any person or entity any rights to Sellers’ Intellectual Property (other than
      pursuant to non-exclusive licenses to customers in connection with sales of
      products and services in the Ordinary Course of Business);

     

    (d)  Enter
      into or amend any Contracts outside the Ordinary Course of Business pursuant
      to
      which any other party is granted marketing, distribution or similar rights
      of
      any type or scope with respect to any products or technology of Sellers or
      any
      of their respective Subsidiaries;

     

    (e)  Amend,
      cancel or otherwise modify (or agree to do so) or violate the terms of, any
      of
      the Assumed Contracts;

     

    (f)  Permit
      any of the Purchased Assets to become subject to any Lien;

     

    (g)  Modify,
      cancel or waive or settle any debts or claims held by Sellers, outside the
      Ordinary Course of Business, or waive or settle any rights or claims of a
      substantial value, whether or not in the Ordinary Course of
      Business;

     

    (h)  Commence
      or settle any litigation relating to the Purchased Assets, Assumed Liabilities
      or the Business other than any litigation between the Parties that is related
      to
      the transactions contemplated by this Agreement or any Ancillary
      Agreement;

     

    (i)  Cause
      or
      permit any amendments to its certificate of incorporation or bylaws or other
      organizational documents except as contemplated in Section 6.1;

     

    (j)  Acquire
      or agree to acquire by merging or consolidating with, or by purchasing any
      assets or equity securities of, or by any other manner, any business or any
      corporation, partnership, association or other business organization or division
      thereof, or 

     

    
      
         

         

        
        

      

      
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    otherwise
      acquire or agree to acquire any assets which are material, individually or
      in
      the aggregate, to the Business;

     

    (k)  Sell,
      lease, license or otherwise dispose of any assets or properties that would
      otherwise be Purchased Assets (other than sales to customers of products and
      services in the Ordinary Course of Business, and non-exclusive licenses granted
      to customers in connection therewith);

     

    (l)  Incur
      any
      indebtedness for borrowed money or guarantee any such indebtedness or issue
      or
      sell any debt securities of Sellers or guarantee any debt securities of others,
      other than in connection with the sale of accounts and/or receivables to a
      factor in the Ordinary Course of Business;

     

    (m)  Grant
      any
      loans to others or purchase debt securities of others or amend the terms of
      any
      outstanding loan agreement except for advances to employees for travel and
      business expenses in the Ordinary Course of Business;

     

    (n)  Grant
      any
      severance or termination pay to any employee outside the Ordinary Course of
      Business;

     

    (o)  Revalue
      any of its assets, including without limitation writing down the value of
      inventory or writing off any of the notes or accounts receivable except in
      each
      case, as required by GAAP;

     

    (p)  Pay,
      discharge or satisfy, in an amount in excess of $50,000 individually (or, in
      the
      case of any Person or group of related Persons, $100,000 in the aggregate for
      all payments to such Person or Persons), any claim, liability or obligation
      (absolute, accrued, asserted or unasserted, contingent or otherwise), other
      than
      the payment, discharge or satisfaction in the Ordinary Course of Business of
      liabilities reflected or reserved against in the Financial Statements or
      obligations arising in the Ordinary Course of Business after the date of the
      Financial Statements.

     

    (q)  Make
      or
      change any material election in respect of Taxes, adopt or change any material
      accounting method in respect of Taxes, enter into any Tax sharing agreement,
      Tax
      indemnity agreement, Tax allocation agreement or closing agreement, settle
      any
      claim or assessment in respect of Taxes, or consent to any extension or waiver
      of the limitation period applicable to any claim or assessment in respect of
      Taxes;

     

    (r)  Enter
      into any strategic or joint marketing arrangement or agreement involving the
      Business or any of the Purchased Assets, other than the renewal of agreements
      with distributors of Sellers’ products on substantially the same
      terms
      as those
      in existence on the date hereof; 

     

    (s)  (i)
      adopt, enter into or modify any Sellers’ Employee Plan, (ii) enter into any
      collective bargaining agreement, or (iii) pay, announce, promise or grant,
      whether orally or in writing, any increase in the wages, salaries, compensation,
      bonuses, incentives, pensions, severance or termination payments, fringe
      benefits or other benefits to any Employees, including without limitation any
      increase or change pursuant to any Sellers’ Employee Plan (except as

     

    
      
         

         

        
        

      

      
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    required
      by law or, with respect to non-executive Employees only, in the Ordinary Course
      of Business);

     

    (t)  Declare
      or pay any dividend or distribution (whether in cash or other assets) to any
      stockholder of either Seller other than distributions from Trestle Sub to
      Parent;

     

    (u)  Take,
      or
      agree in writing or otherwise to take, any of the actions described in
Sections 5.1(a)
      through
5.1(t)
      above,
      or any other action that would prevent Sellers from performing or cause Sellers
      not to perform its covenants hereunder.

     

    
      	5.2  	
              Access
                to Information

            

    

     

    . 
      

     

    (a)  Sellers
      will permit Buyer, and its Representatives to have access at all reasonable
      times, and in a manner so as not to unreasonably interfere with its normal
      business operations, to its business and operations. Neither such access,
      inspection and furnishing of information to Buyer
      and
      its
      Representatives, nor any investigation by Buyer and its Representatives, shall
      in any way diminish or otherwise affect Buyer’s right to rely on any
      representation or warranty made by Sellers hereunder. As of the date hereof,
      Buyer is not aware of any breach by Sellers of any representation or warranty
      herein.

     

    (b)  In
      addition to any other notices or access required by this Agreement, Sellers
      shall on a weekly basis provide Buyer with a report that identifies Sellers’
cash transactions occurring during the previous week and contains (i) an updated
      trial balance sheet of Sellers, (ii) an updated trial accounts receivable
      statement of Sellers, (iii) an updated trial accounts payable statement of
      Sellers, and (iv) a schedule of changes to Sellers’ management estimates,
      reserves and accruals since the date of the last Seller trial balance
      sheet.

     

    
      	5.3  	
              Notice
                of Developments

            

    

     

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

     

    
      	5.4  	
              No
                Solicitation

            

    

     

    .
      

     

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

     

    
      
         

        
        

      

      
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    all
      existing activities, discussions or negotiations, if any, with any Persons
      with
      respect to, or that could reasonably be expected to result in any Acquisition
      Proposal. Except as provided in this Section 5.4,
      from
      the date of this Agreement until the earlier of termination of this Agreement
      or
      the Closing, Sellers shall not, and will cause its Subsidiaries and its and
      their Representatives to not, directly or indirectly:

     

    (i)  initiate,
      solicit or knowingly encourage or induce any inquiry, or take any action
      intended to facilitate the making or announcement of, any offer or proposal
      which constitutes or is reasonably likely to lead to any Acquisition
      Proposal;

     

    (ii)  participate
      or engage in any discussions or negotiations regarding an Acquisition Proposal
      or furnish or disclose any non-public information relating to either Seller
      or
      any of their Subsidiaries, or their businesses, assets, liabilities or prospects
      or afford access to the properties, books or records of either Seller or any
      of
      their Subsidiaries to, any Person regarding an Acquisition Proposal except
      as
      provided in Section
      5.4(c);

     

    (iii)  enter
      into any letter of intent, agreement in principle, acquisition agreement,
      understanding or similar agreement contemplating or relating to an Acquisition
      Proposal (other than a confidentiality and standstill agreement as contemplated
      in this Section 5.4);
      or

     

    (iv)  approve,
      endorse or recommend any Acquisition Proposal (except to the extent specifically
      permitted by this Section
      5.4).

     

    (b)  Sellers
      shall promptly notify Buyer (but in no event later than the
      end
      of the next Business Day) after receipt by a Seller of any Acquisition Proposal
      or any request for information or inquiry which could reasonably be expected
      to
      lead to an Acquisition Proposal. Such notice shall identify the Person or group
      making such Acquisition Proposal, request or inquiry and include a copy of
      all
      written materials provided in connection with such Acquisition Proposal, request
      or inquiry or, if such Acquisition Proposal, request or inquiry is not in
      writing, provide a summary of the material terms and conditions of any such
      Acquisition Proposal, request or inquiry. After receipt of the Acquisition
      Proposal, request or inquiry, Sellers shall promptly keep Buyer informed in
      all
      material respects of the status and details (including material amendments
      or
      proposed material amendments) of any such Acquisition Proposal, request or
      inquiry.

     

    (c)  If,
      prior
      to obtaining the Stockholder Approval either Seller receives an Acquisition
      Proposal that was not solicited in violation of Section
      5.4(a)
      that the
      board of directors of Sellers determines in good faith, after consultation
      with
      outside counsel and its financial advisor (1) constitutes a Superior
      Proposal or (2) could reasonably be expected to result in a Superior
      Proposal, Sellers shall promptly provide to Buyer written notice that shall
      state expressly (A) that such Seller has received an Acquisition Proposal
      that constitutes a Superior Proposal or that could reasonably be expected to
      result in a Superior Proposal, and (B) the identity of the Person (the
“Third
      Party”)
      making
      such Acquisition Proposal and the material terms and conditions of the
      Acquisition Proposal (the “Superior
      Proposal Notice”)
      and
      may then take the following actions (either directly or through its Subsidiaries
      or any of their Representatives) if the board of directors of Sellers
      determines, after consultation with outside 

     

    
      
         

         

        
        

      

      
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    counsel,
      that to do so is necessary to comply with its fiduciary obligations to Sellers’
stockholders under applicable law:

     

    (i)  furnish
      nonpublic information to the Third Party, provided,
      that
      (A) prior to so furnishing, Sellers receive from the Third Party an
      executed confidentiality agreement containing customary standstill provisions
      and other terms and conditions that are no less restrictive to such Third Party
      than the terms and conditions of the Confidentiality Agreement, and (B) on
      the date of the provision of any non-public information to such Third Party,
      Sellers furnish a copy of such non-public information of Sellers to Buyer (to
      the extent such non-public information has not been previously so furnished);
      and

     

    (ii)  participate
      or engage in any discussions or negotiations with the Third Party with respect
      to the Acquisition Proposal.

     

    (d)  For
      a
      period of not less than three
      Business Days prior to Sellers accepting a definitive Superior Proposal, Sellers
      shall, if requested by Buyer, negotiate in good faith with Buyer to revise
      this
      Agreement so that the Acquisition Proposal that constituted a Superior Proposal
      no longer constitutes a Superior Proposal. The terms and conditions of this
      Section
      5.4(d)
      shall
      again apply to any subsequent Superior Proposal after any changes made to this
      Agreement.

     

    (e)  Except
      as
      expressly permitted by Section
      5.4(f),
      neither
      Sellers board of directors nor any committee of Sellers board of directors
      shall
      (i) withdraw or modify, or propose publicly to withdraw or modify, in a
      manner adverse to Buyer, Sellers’ Board Recommendation or (ii) approve or
      recommend, or propose publicly to approve or recommend, any Acquisition Proposal
      (any action described in the foregoing (i) or (ii) being referred to as a
“Change
      of Recommendation”).
      Any
      such
      Change of Recommendation or the entry by a Seller into any letter of intent,
      agreement in principle, acquisition agreement, understanding or similar
      agreement contemplating or relating to an Acquisition Proposal shall not change
      the approval of Sellers board of directors for purposes of causing any state
      takeover statute or other state law to be applicable to the transactions
      contemplated hereunder.

     

    (f)  In
      the
      event that prior to obtaining the Stockholder Approval, Sellers board of
      directors determines in good faith, after consultation with its financial
      advisor and outside counsel, that an Acquisition Proposal not solicited in
      violation of Section 5.4(a)
      has not
      been withdrawn and continues to constitute a Superior Proposal following the
      expiration of the three Business Day period referenced in Section 5.4(d),
      Sellers
      may effect a Change of Recommendation and/or terminate this Agreement in
      accordance with Section 10.1(d)(i);
      provided
      that
      Sellers board of directors has concluded in good faith, following consultation
      with outside legal counsel, that, in light of such Superior Proposal, the
      failure of Sellers board of directors to effect a Change of Recommendation
      or to
      terminate this Agreement is necessary to comply with its fiduciary obligations
      to either of Sellers stockholders under applicable law;
      provided further,
      however
      that
      Sellers shall not terminate this Agreement pursuant to Section 10.1(d)(i),
      and any
      purported termination pursuant to Section 10.1(d)(i)
      shall be
      void and of no force or effect, unless Sellers shall have complied in all
      material respects with all of the provisions of this Section 5.4,
      including the notification provisions in this Section 5.4,
      and
      with 

     

    
      
         

         

        
        

      

      
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    all
      applicable requirements of Section 10.3
      (including the payment of the Termination Fee prior to or concurrently with
      such
      termination).

     

    (g)  Sellers
      shall provide Buyer with three Business Days prior notice (or such lesser prior
      notice as is provided to the members of Sellers board of directors) of any
      meeting of Sellers board of directors or committee of Sellers board of directors
      at which the Sellers board of directors or committee thereof is reasonably
      expected to discuss any Acquisition Proposal.

     

    Nothing
      contained in this Section 5.4
      or
      elsewhere in this Agreement shall prohibit Parent from (x) taking and
      disclosing to its stockholders a position contemplated by Rule 14e-2(a)
      under the Exchange Act, or (y) making any disclosure to the stockholders of
      the Sellers if Parent’s board of directors determines in good faith (after
      consultation with its outside legal counsel) that the failure to make such
      disclosure would be reasonably expected to be a breach of its duty of candor
      under applicable law; provided,
      however,
      that
      any action taken or disclosure made under this Section 5.4
      shall
      not limit or modify the effect that any such action or disclosure may have
      under
      any other provision of this Agreement.

     

    
      	5.5  	
              Stockholder
                Meeting

            

    

     

    . 
      

     

    (a)  Parent
      shall, as promptly as reasonably
      practicable following the execution of this Agreement and subject to
Section
      5.4(f),
      establish a record date for, duly call, give notice of convene and hold a
      meeting of its stockholders solely for the purpose of seeking the Stockholder
      Approval (“Stockholder
      Meeting”).
      In
      connection with the Stockholder Meeting, Parent, acting through the Parent
      board
      of directors, will (i) subject to Section 5.4(f)
      make the
      Sellers’ Board Recommendation, (ii) use its commercially reasonable efforts
      (including postponing or adjourning the Stockholder Meeting to solicit
      additional proxies) to obtain and shall take all other reasonable action
      necessary or advisable to secure, the Stockholder Approval and
      (iii) otherwise comply with Parent’s Certificate of Incorporation, bylaws
      and applicable law in connection with such meeting.

     

    (b)  As
      promptly as reasonably practicable after the date of this Agreement, Parent
      shall prepare and file with the SEC, and shall use its commercially reasonable
      efforts to have cleared by the SEC, the Proxy Statement (together with any
      amendments thereof or supplements thereto) to be distributed in connection
      with
      the Stockholder Meeting. Buyer and Sellers each shall promptly and timely
      provide all information relating to its respective businesses or operations
      necessary for inclusion in the Proxy Statement to satisfy all requirements
      of
      applicable state and United States federal securities laws and neither the
      Proxy
      Statement nor any amendment or supplement to the Proxy Statement, will be filed
      or made by the Sellers, in each case without providing Buyer a reasonable
      opportunity to review and comment thereon.

     

    (c)  Sellers
      shall notify Buyer of the receipt of any comments of the SEC with respect to
      the
      Proxy Statement and of any requests by the SEC for any amendment or supplement
      thereto or for additional information and shall provide a copy of such comments
      or requests to Buyer promptly after receipt, and shall promptly provide to
      Buyer
      copies of all correspondence 

     

    
      
         

         

        
        

      

      
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    between
      Sellers or any Representative Sellers and the SEC. Sellers shall give Buyer
      and
      its counsel the reasonable opportunity to review and comment on any proposed
      responses to comments, which review shall be concluded as promptly as possible
      after the receipt by Buyer of Sellers proposed responses to SEC comments or
      other correspondence to the SEC. If at any time after the date the Proxy
      Statement is mailed to Parent’s stockholders and prior to the Stockholder
      Meeting any information relating to the Sellers or Buyer, or any of their
      respective Affiliates, directors, or officers, should be discovered by the
      Sellers or Buyer which should be set forth in an amendment or supplement to
      the
      Proxy Statement, so that either such document would not include any untrue
      statement of a material fact or omit to state any material fact necessary to
      make the statements therein, in light of the circumstances under which they
      were
      made, not misleading, the Party that discovers such information shall promptly
      notify the other Parties hereto and Parent shall promptly file an amendment
      or
      supplement describing such information promptly with the SEC and, to the extent
      required by applicable law or the SEC, disseminated to Parent’s
      stockholders.

     

    As
      promptly as reasonably practicable after the Proxy Statement has been cleared
      by
      the SEC, Parent shall mail the Proxy Statement to the holders of Parent’s common
      stock as of the record date established for the Stockholder Meeting. Unless
      the
      board of directors of Parent shall have effected a Change in Recommendation,
      the
      Proxy Statement shall include the Seller Board recommendation, provided
      that
      nothing herein shall prohibit Parent from supplementing or amending the Proxy
      Statement if there has been a Change in Recommendation.

     

    ARTICLE
      VI

     

    ADDITIONAL
      AGREEMENTS

     

    
      	6.1  	
              Reasonable
                Efforts

            

    

     

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

     

    
      	6.2  	
              Notices
                and Consents

            

    

     

    .
      

     

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

     

    
      
         

        
        

      

      
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    with
      the
      transactions contemplated by this Agreement so as to preserve all material
      rights of or benefits to Buyer relating to the Purchased Assets, the Assumed
      Liabilities or the Business. Each of the Parties will give any notices to,
      make
      any filings with, and use its reasonable best efforts to obtain any
      authorizations, consents, and approvals of Governmental Bodies in connection
      with the relevant matters identified in the Sellers’ Disclosure Letter or as
      otherwise required in connection with the transactions contemplated by this
      Agreement.

     

    (b)  Subject
      to applicable laws relating to the exchange of information and the preservation
      of any applicable attorney-client privilege, work-product doctrine, self-audit
      privilege or other similar privilege, Buyer and Sellers shall have the right
      to
      review and reasonably comment on in advance, and to the extent practicable
      each
      will consult the other on, all the information relating to Buyer or Sellers,
      as
      the case may be, and any of their respective Subsidiaries, that appear in any
      filing made or oral communication with, or written materials submitted to,
      any
      Person and/or any Governmental Body in connection with the transactions
      contemplated hereby or by the Ancillary Agreements; provided,
      however,
      that
      Buyer and Sellers may, as each deems advisable and necessary, (x) redact
      any information concerning Buyer’s valuation of Buyer, and (y) designate
      any competitively sensitive material provided to the other under this
Section 6.2
      as
“outside counsel only,” in which case, such materials and the information
      contained therein shall be given only to the outside legal counsel of the
      recipient and will not be disclosed by such outside counsel to employees,
      officers, or directors of the recipient unless express permission is obtained
      in
      advance from the source of the materials (Buyer or Sellers, as the case may
      be)
      or its legal counsel. In exercising the foregoing right, each of Buyer and
      Sellers shall act reasonably and as promptly as practicable. Notwithstanding
      anything to the contrary in this Agreement, Buyer shall not be required to
      offer
      or commit to divest any business or assets or agree to any limitation on the
      conduct of its or any of its Subsidiaries' businesses, and Sellers shall not
      enter into any such agreement, or make any such commitment, or offer to enter
      into any such agreement or to make any such commitment, with respect to its
      or
      any of its Subsidiaries' assets or businesses, without the prior written consent
      of Buyer.

     

    (c)  Subject
      to applicable law and the preservation of any applicable attorney-client
      privilege, Buyer and Sellers each shall, upon request by the other, furnish
      the
      other with all information concerning itself, its Subsidiaries, directors,
      officers and stockholders and such other matters as may be reasonably necessary
      or advisable in connection with the Proxy Statement or any other statement,
      filing, notice or application made by or on behalf of Buyer, Sellers or any
      of
      their respective Subsidiaries to any Person in connection with the transactions
      contemplated hereby or by the Ancillary Agreements.

     

    (d)  Subject
      to any confidentiality obligations and the preservation of any attorney-client
      privilege, Buyer and Sellers each shall keep the other apprised of
      the
      status of matters relating to completion of the transactions contemplated hereby
      or by the Ancillary Agreements, including promptly furnishing the other with
      copies of notices or other communications received by Buyer or Sellers, as
      the
      case may be, or any of its Subsidiaries, from any Person with respect to the
      transactions contemplated hereby or by the Ancillary Agreements.
      Each of
      Buyer and Sellers agree not to participate, or to permit its Subsidiaries to
      participate, in any substantive meeting or discussion, either in person or
      by
      telephone, with any Governmental Body in connection with the transactions
      contemplated hereby or by the Ancillary 

     

    
      
         

         

        
        

      

      
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    Agreements
      unless it consults with the other Party in advance and, to the extent not
      prohibited by such Governmental Body, gives the other Party the opportunity
      to
      attend and participate.

     

    6.3  Patent
      Matters. 

     

    (a)  Sellers
      shall use their reasonable efforts to satisfy the Patent Condition prior to
      Closing, including but not limited to providing Buyer with instruments and
      documents that will allow Sellers (or Buyer, as its successor in interest)
      to
      successfully withstand the Reexamination. From and after the date hereof until
      the Closing, Sellers shall use
      their
      reasonable efforts to take all actions and to do all things necessary, proper,
      or advisable in order to defend all lawsuits or other legal, regulatory or
      other
      proceedings to which either Seller is a party challenging or affecting the
      validity or enforceability of Sellers’ Registered Intellectual Property Rights
      and shall cooperate with Buyer following the Closing in Buyer’s efforts in doing
      the same.

     

    (b)  For
      the
      purposes of this Agreement, the “Patent
      Condition”
shall
      be deemed to have been satisfied by Sellers if, prior to the Closing, Sellers
      have provided Buyers with (1) a letter from the PTO informing Sellers that
      it
      has elected to not pursue further the Reexamination regarding the Invention
      Patent or (2) appropriate affidavits sworn by either the Inventors identified
      in
      the Invention Patent or, to the extent allowed by the PTO, by Sellers, in either
      case supported by documentary or other evidence that Buyer has determined in
      its
      sole but reasonable discretion is sufficient to demonstrate with reasonable
      certainty that the Invention was conceived by the inventors set forth in the
      Invention Patent prior to the effective date of the reference cited in the
      Other
      Claim. To be useful in satisfying the Patent Condition, the technical disclosure
      contained in any such evidence must make the showing of facts, in character
      and
      weight, to establish reduction to practice of the Invention as claimed in the
      Invention Patent prior to the effective date of the reference cited in the
      Other
      Claim, or conception of the Invention as claimed in the Invention Patent prior
      to the effective date of the reference cited in the Other Claim coupled with
      due
      diligence from prior to said date to a subsequent reduction to practice or
      to
      the filing of the application for the Invention Patent. The documentary or
      other
      evidence provided by the Sellers may include, without limitation: (a) inventor
      notebooks, notes, and other electronic records maintained by the inventors
      with respect to the Invention (b) internal discussions (e-mails, memos, etc.)
      regarding the Invention, (c) drafts of patent applications with respect to
      the
      Invention or the Invention Patent, (d) interview of a patent attorney (or a
      colleague or team member) regarding the Invention, (e) any contemporaneous
      disclosures to a patent attorney or company’s legal department, (f) any drafts
      of presentations or articles for conferences, lectures, trade-shows or other
      internal peer-review, (g) any disclosure materials given to investors,
      third-party collaborators, partners, manufacturers regarding the Invention,
      (h)
      any bill-of-materials for prototype, manufacture, design of the Invention,
      (i)
      any internal funding or project proposals with respect to the Invention, (j)
      any
      milestones or project-progress reports with respect to the Invention and (k)
      minutes from team meetings (during relevant time period) discussing the
      Invention; provided, however, that the provision of any document or any other
      evidence shall not be deemed to have satisfied the Patent Condition unless
      and
      until Buyer has determined in its sole but reasonable discretion that the Patent
      Condition has been satisfied.

     

    ARTICLE
      VII

     

    OTHER
      AGREEMENTS AND COVENANTS

     

    
      
        
        

      

      
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      	7.1  	
              Confidentiality

            

    

     

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

     

    
      	7.2  	
              Additional
                Documents and Further
                Assurances

            

    

     

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

     

    
      	7.3  	
              Take-over
                Statutes

            

    

     

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

     

    
      	7.4  	
              Parent
                Vote

            

    

     

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

     

    
      	7.5  	
              Reasonable
                Cooperation of Buyer

            

    

     

    
      
         

         

        
        

      

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

     

    
      	7.6  	
              Agreement
                to Perform

            

    

     

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

     

    
      	7.7  	
              Attorney-In-Fact

            

    

     

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

     

    
      	7.8  	
              Discharge
                of Excluded Liabilities

            

    

     

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

     

    
      	7.9  	
              Guarantee

            

    

     

    .

     

    (a)  Clarient
      hereby irrevocably and unconditionally guarantees to Sellers, as primary obligor
      and not merely as surety, the performance of all obligations hereunder of Buyer
      and the due and punctual payment by Buyer in full of any amounts payable by
      Buyer pursuant to this Agreement. 

     

    (b)  To
      the
      fullest extent permitted by applicable law, Clarient waives presentment to,
      demand of payment from and protest to Sellers, and also waives notice of
      acceptance of its guarantee and notice of protest for nonpayment. To the fullest
      extent permitted by applicable law, the obligations of Clarient hereunder shall
      not be affected by (i) the failure of Sellers to assert any claim or demand
      or to exercise or enforce any right or remedy against Buyer under the provisions
      of this Agreement or otherwise, or (ii) any rescission, waiver, amendment
      or modification of, or any release from any of the terms or provisions, of
      this
      Agreement.

     

    
      
        
        

      

      
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    (c)  Clarient
      agrees that the guarantee pursuant to this Section 7.9
      constitutes an absolute, unconditional, present and continuing guarantee of
      payment and not of collection, and waives any right to require that any resort
      be had by Sellers to (i) Sellers’ rights against any other person,
      including Buyer, or (ii) any other right or remedy available to Sellers by
      contract, applicable law or otherwise. It is the intent of the guarantee
      pursuant to this Section
      7.9
      that
      Sellers shall have resort to Clarient without asserting or resorting to any
      remedy against Buyer and without demand to it, as though Clarient were primarily
      liable for any payment due hereunder.

     

    
      	7.10  	
              Collection
                of Accounts Receivable.

            

    

     

    

     

    (a) Subject
      to subsections (b) and (c) below, no later than five business days following
      the
      90th
      day
      following the Closing Date, Buyer shall remit to Parent an amount equal to
      57%
      of all amounts received by Buyer in payment of accounts receivable existing
      at
      the Closing Date, to the extent such payments (i) are received by Buyer within
      90 days following the invoice of such amount by a Seller and (ii) reflect
      payment due by customers in respect of Instruments sold by a Seller prior to
      the
      Closing Date (such amount, the “Remittance
      Amount”);
      provided, however, that the Remittance Amount shall not exceed the amount of
      Sellers’ accounts payable assumed by Buyer at Closing pursuant to this
      Agreement.

     

    (b) All
      amounts received by Buyer and its Affiliates from a customer during the time
      period described in subsection (a) shall be first applied to the oldest debt
      owed by such customer (i.e. by due date), unless (i) such oldest debt has been
      disputed by the customer, in which case the payment will be allocated to the
      next oldest undisputed debt owed by such customer or (ii) the payment refers
      to
      an invoice number, in which case the payment will be allocated to the invoiced
      debt notwithstanding clause (i) above. 

     

    (c) Buyer
      shall use its commercially reasonable efforts to collect payment of such
      accounts receivable consistent with Clarient’s efforts to collect Clarient’s
      other accounts receivable of like type and amount; provided
      however
      that
      neither Buyer nor Clarient shall be under any obligation to (i) institute any
      legal proceedings to collect such accounts receivable or (ii) take any action
      Clarient determines in its sole discretion to be adverse to either Buyer or
      Clarient. Sellers shall not, except upon Buyer’s prior written consent,
      institute collection proceedings with respect to such accounts receivable.
      Notwithstanding the foregoing, to the extent that Buyer reasonably determines
      in
      good faith that due to oversight or otherwise, amounts that should have been
      considered in calculating the Adjustment Amount or amounts by which the Assumed
      Liabilities were underaccrued for by Sellers on the Closing Balance Sheet were
      excluded from such calculations, Buyer shall be permitted to offset such amounts
      against the remittance of the Remittance Amount.

     

    
      	7.11  	
              Hired
                Employees. 

            

    

     

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

     

    
      
         

         

        
        

      

      
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    Employees
      arising in connection with such Hired Employees' employment with Parent and
      its
      Subsidiaries and the termination thereof.

     

    (b)  Immediately
      after the Closing, Clarient shall offer employment with Clarient or Buyer to
      each of the Hired Employees, (i) at a salary level substantially comparable
      to
      that in effect with respect to each such Hired Employee as of the date hereof,
      and (ii) with employee benefits which are, with respect to each such Hired
      Employee, no less favorable in the aggregate than the benefits provided to
      similarly situated employees of Clarient.

     

    (c)  No
      provision of this Section 7.11
      shall
      create any third-party beneficiary or other rights in any Hired Employee,
      including without limitation in respect of continued employment with Buyer
      or
      its Affiliates for any period of time. No provision of this Section shall
      obligate Buyer or any of its Affiliates to adopt or maintain any employee
      benefit plan or arrangement at any time.

     

    ARTICLE
      VIII

     

    CONDITIONS
      TO THE CLOSING

     

    
      	8.1  	
              Conditions
                to Buyer’s Obligations

            

    

     

    . 
      The obligations of Buyer to consummate the transactions contemplated hereunder
      are subject to the fulfillment or satisfaction on, and as of the Closing, of
      each of the following conditions (any one or more of which may be waived in
      writing by Buyer):

     

    (a)  Representations
      and Warranties.
      The
      representations and warranties of Sellers set forth in Article III shall be
      true and correct, without giving effect to any qualification as to materiality
      or Sellers’ Material Adverse Effect contained in any specific representation or
      warranty, as of the Closing with the same force and effect as if made on and
      as
      of the Closing except (i) to the extent expressly made as of a particular
      date, in which case as of such date and (ii) where any failures of any such
      representations and warranties to be true and correct would not reasonably
      be
      expected to have, individually or in the aggregate, a Sellers’ Material Adverse
      Effect. 

     

    (b)  Covenants.
      Sellers
      shall have performed or complied in all respects with all agreements and
      covenants required by this Agreement to be performed or complied with by Sellers
      on or prior to the Closing, except where any failure to so perform or comply
      would not reasonably be expected to have, individually or in the aggregate,
      a
      Sellers’ Material Adverse Effect.

     

    (c)  No
      Actions.
      No
      unfavorable injunction, judgment, order, decree, ruling, or charge has been
      issued by any Governmental Body or before any arbitrator which would restrain,
      enjoin or otherwise prohibit or prevent consummation of any of the material
      transactions contemplated by this Agreement. 

     

    (d)  Closing
      Balance Sheet; Closing Accounts Receivable Statement.
      Sellers
      shall have delivered to Buyer, and Buyer shall be reasonably satisfied with
      the
      preparation of (i) the Closing Balance Sheet, which shall have been
      prepared in the manner described in Section
      

     

    
      
         

         

        
        

      

      
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    1.1
      hereof,
      and (ii) the Closing Accounts Receivable Statement, which shall have been
      prepared in the manner described in Section
      1.1
      hereof.

     

    (e)  No
      Material Adverse Effect.
      From
      the date of the Current Balance Sheet, there shall not have been any event
      or
      development which has resulted in a Sellers’ Material Adverse Effect nor shall
      there have occurred any event or development which would reasonably be expected
      to result in the future in a Sellers’ Material Adverse Effect.

     

    (f)  Certificates.
      The
      Presidents of Sellers shall have delivered to Buyer a certificate to the effect
      that each of the conditions specified above in Sections 8.1(a)
      to
8.1(e) is
      satisfied in all respects.

     

    (g)  Delivery
      of Documents.
      Sellers
      shall have executed and delivered to Buyer the assignment and conveyance
      instruments described
      in
Section
      2.5(b)(ii)
      hereof.

     

    (h)  Consents
      and Authorizations.
      The
      Parties shall have received all authorizations, consents, orders and approvals
      of all Governmental Bodies necessary for the consummation of the transactions
      contemplated by this Agreement and the Ancillary Agreements, and all third
      party
      consents set forth on Schedule
      8.1(h)
      (the
“Material
      Consents”).

     

    (i)  Stockholder
      Approval.
      Parent
      shall have received the Stockholder Approval.

     

    
      	8.2  	
              Conditions
                to Sellers’ Obligations

            

    

     

    . 
      The obligations of Sellers to consummate the transactions contemplated hereunder
      are subject to the fulfillment or satisfaction on, and as of the Closing, of
      each of the following conditions (any one or more of which may be in writing
      waived by Sellers):

     

    (a)  Representations
      and Warranties.
      The
      representations and warranties of Buyer set forth in Article IV shall be
      true and correct, without giving effect to any qualification as to materiality
      or Buyer Material Adverse Effect contained in any specific representation or
      warranty, as of the Closing with the same force and effect as if made on and
      as
      of the Closing except (i) to the extent expressly made as of a particular
      date, in which case as of such date and (ii) where any failure of any such
      representations and warranties to be true and correct would not reasonably
      be
      expected to have, individually or in the aggregate, a Buyer Material Adverse
      Effect.

     

    (b)  Covenants.
      Buyer
      shall have performed or complied in all respects with all agreements and
      covenants required by this Agreement to be performed or complied with by them
      on
      or prior to the Closing, except where any failures to so perform or comply
      would
      not reasonably be expected to have, individually or in the aggregate, a Buyer
      Material Adverse Effect.

     

    (c)  No
      Actions.
      No
      unfavorable injunction, judgment, order, decree, ruling, or charge has been
      issued by any Governmental Body or before any arbitrator which (A) would
      restrain, enjoin or otherwise prohibit or prevent consummation of any of the
      material transactions 

     

    
      
         

         

        
        

      

      
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    contemplated
      by this Agreement or (B) would reasonably be expected to result in a Buyer
      Material Adverse Effect.

     

    (d)  Certificate.
      The
      Chief Executive Officer of Clarient shall have delivered to Sellers a
      certificate to the effect that each of the conditions specified above in
Sections 8.2(a)
      to
8.2(c)
      (inclusive) is satisfied in all respects.

     

    (e)  Payment
      of Purchase Price.
      Buyer
      shall have paid the entire Purchase Price as contemplated hereby.

     

    (f)  Stockholder
      Approval.
      Parent
      shall have received the Stockholder Approval.

     

    (g)  Consents
      and Authorizations.
      The
      Parties shall have received all authorizations, consents, orders and approvals
      of all Governmental Bodies necessary for the consummation of the transactions
      contemplated by this Agreement and the Ancillary Agreements.

     

    
      	8.3  	
              Frustration
                of Closing Conditions

            

    

     

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

     

    ARTICLE
      IX

     

    TAX
      MATTERS

     

    
      	9.1  	
              Tax
                Books and Records.

            

    

     

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

     

    
      
        
        

      

      
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          64
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      	9.2  	
              Allocation
                of Taxes.

            

    

     

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

     

    
      	9.3  	
              Transfer
                Taxes.

            

    

     

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

     

    
      
         

         

        
        

      

      
        -
          65
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    Party
      shall control the conduct of such audit or other proceeding, provided that
      the
      other Party shall be entitled to participate in such audit or other proceeding
      at its own expense. The controlling Party shall not resolve or settle such
      audit
      or other investigation without the other Party’s written consent, which consent
      shall not be unreasonably withheld or delayed, and Sellers and Buyer shall
      bear
      and pay any additional Transfer Taxes payable as a result thereof pursuant
      to
      this Section
      9.3.
      

     

    
      	9.4  	
              Notices.

            

    

     

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

     

    
      	9.5  	
              Withholding
                Exemption.

            

    

     

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

     

    

    ARTICLE
      X

     

    TERMINATION

     

    
      	10.1  	
              Termination
                of the Agreement

            

    

     

    . 
      The Parties may terminate this Agreement as provided below:

     

    (a)  by
      mutual
      written consent of Buyer and the Sellers at any time prior to the
      Closing;

     

    (b)  By
      either
      Sellers or Buyer upon written notice to the other Parties:

     

    (i)  if,
      prior
      to the Closing, a court of competent jurisdiction or other Governmental
      Body shall have enacted, issued, promulgated, enforced or entered any statute,
      rule, regulation, executive order, decree, judgment, injunction or other order,
      in any case that is in effect and that permanently prevents or prohibits
      consummation of the material transactions contemplated in this Agreement or
      the
      Ancillary Agreements, provided
      that the
      Party seeking to terminate this Agreement pursuant to this Section
      10.1(b)(i)
      shall
      have used its commercially reasonable efforts to prevent such prohibition and
      to
      cause any such prohibition to be vacated or otherwise rendered of no effect;
      or

     

    (ii)  if
      the
      Closing has not occurred by September 30, 2006 (such date, as the same may
      be
      extended as set forth in the following clause the “Outside
      Date”);
      provided,
      

     

    
      
         

         

        
        

      

      
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          66
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    however,
      that
      the Outside Date may be extended by Buyer or Sellers (by providing written
      notice thereof to the other Party within five Business Days prior to and
      including September 30, 2006 up to and including October 31, 2006), in the
      event
      all conditions to effect the transactions contemplated by this Agreement, other
      than the Stockholder Approval, have been obtained; provided,
      further,
      that
      the right to terminate this Agreement pursuant to this Section 10.1(b)(ii)
      shall
      not be available to any Party whose failure to fulfill any obligation under
      this
      Agreement has been the cause of, or resulted in, the failure of the Closing
      to
      occur by the Outside Date, or

     

    (iii)  if
      the
      Stockholder Approval shall not have been obtained following a vote at the
      Stockholder Meeting (or any adjournment or postponement thereof) at which the
      required number of shares to approve the transactions contemplated by this
      Agreement were present and entitled to vote and the vote to approve the
      transactions contemplated by this Agreement was taken; provided,
      that no
      termination by a Party pursuant to this Section 10.1(b)(iii)
      shall be
      effective unless (A) such failure was not due to a breach by such Party of
      its obligations hereunder and (B) concurrently therewith such Party has
      fulfilled its obligations, if any, under Section 10.3;

     

    (c)  By
      Buyer,
      at any time prior to the Closing, upon written notice to Sellers,
      if:

     

    (i)  (A) the
      board
      of
      directors of Parent or any committee thereof shall have effected a Change of
      Recommendation, (B) the board of directors of Parent or any committee
      thereof shall have resolved to effect a Change of Recommendation, (C) the
      board of directors of Parent or any committee thereof shall have failed to
      affirm its recommendation in respect of the transactions contemplated hereunder
      within five Business Days of a request to do so by Buyer, or (D) for any
      reason Parent fails to call or hold the Stockholder Meeting by the fifth
      Business Day prior to the Outside Date;

     

    (ii)  if
      either
      Seller shall have breached in any material respect any of its representations,
      warranties, covenants or agreements contained in this Agreement or the Ancillary
      Agreements, such that any of the conditions to Buyer’s obligation to effect the
      Closing would fail to be satisfied at the time of termination and such breach
      cannot be cured or has not been cured, in all material respects, within 30
      days
      after notice of such breach from Buyer or, if sooner, the day prior to the
      Outside Date; or

     

    (iii)  if
      since
      the date of this Agreement, there shall have been any event, development or
      change of circumstance that constitutes, has had or would reasonably be expected
      to have, individually or in the aggregate, a Sellers’ Material Adverse Effect
      and such Sellers’ Material Adverse Effect is not cured in all respects, or
      cannot be cured, within 30 days of notice thereof from Buyer (or, if sooner,
      the
      day prior to the Outside Date)

     

    (d)  By
      Sellers, at any time prior to the Closing, upon written notice to
      Buyer:

     

    (i)  pursuant
      to and in compliance with Section 5.4(f);
      or 

     

    (ii)  if
      Buyer
      shall have breached in any material respect any of the representations,
      warranties, covenants or agreements contained in this Agreement or the Ancillary
      Agreements, such that any of the conditions to Sellers’ obligations to effect
      the 

     

    
      
         

        
        

      

      
        -
          67
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    Closing
      would fail to be satisfied at the time of termination and such breach cannot
      be
      or has not been cured, in all material respects, within 10 days after notice
      of
      such breach from Sellers or, if sooner, the day prior to the Outside
      Date.

     

    
      	10.2  	
              Effect
                of Termination

            

    

     

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

     

    
      	10.3  	
              Fees
                and Expenses

            

    

     

    .
      

     

    (a)  Each
      Party will bear its own costs and expenses (including legal and accounting
      fees
      and expenses) incurred in connection with this Agreement and the transactions
      contemplated hereby.

     

    (b)  If
      this
      Agreement is terminated pursuant to Section
      10.1(c)(i)(A)
      -
      (C)
      at any
      time, then Sellers shall jointly and severally pay the Termination Fee to Buyer
      within two Business Days after the termination of this Agreement.

     

    (c)  If
      (i) this Agreement is terminated pursuant to Section
      10.1(b)(iii),
      and
      (ii) prior to the Stockholder Meeting, an Acquisition Proposal has been
      made by any Third Party, and (iii) such Acquisition Proposal was outstanding
      at
      the time of the Stockholder Meeting then the Sellers shall jointly and severally
      pay to Buyer the Termination Fee within two Business Days after the termination
      of this Agreement.

     

    (d)  If
      this
      Agreement is terminated by either Seller pursuant to Section 10.1(d)(i),
      then
      Sellers shall jointly and severally pay to Buyer the Termination Fee prior
      to or
      concurrently with such termination.

     

    (e)  If
      this
      Agreement is terminated (i) by Buyer pursuant to Section 10.1(c)(ii),
      (ii)
      by
      Buyer pursuant to Section 10.1(c)(i)(D),
      or
      (iii) by Sellers pursuant to Section 10.1(d)(ii),
      then
      the non-terminating Party shall pay to the terminating Party the Expense Amount
      within two Business Days after the termination of this Agreement.

     

    (f)  Any
      payments made under this Section 10.3
      shall be
      made by wire transfer of immediately available funds to an account designated
      by
      the Party entitled to receive payment. Buyer and Sellers acknowledge and agree
      that the agreements contained in this Section 10.3
      are an
      integral part of the transactions contemplated by this Agreement, and that,
      without these agreements, neither Buyer nor Sellers would enter into this
      Agreement. Accordingly, if Buyer or Sellers fail promptly to pay any amount
      due
      pursuant to this Section 10.3,
      and, in
      order to obtain such payment, Buyer or Sellers, as the case may be,

     

    
      
         

         

        
        

      

      
        -
          68
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    commences
      a suit that results in a judgment against the other Party for the Termination
      Fee or other amounts due pursuant to this Section 10.3,
      such
      defaulting Party shall pay to the prevailing Party its costs and expenses
      (including attorneys’ fees and expenses) in connection with such suit, together
      with interest on the amount due pursuant to this Section 10.3
      from the
      date such payment was required to be made until the date of payment at the
      prime
      rate of Citibank, N.A. in effect on the date such payment was required to be
      made.

     

    
      	10.4  	
              Repayment
                of Bridge Loans

            

    

     

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

     

    ARTICLE
      XI

     

    MISCELLANEOUS

     

    
      	11.1  	
              Press
                Releases and Public
                Announcements

            

    

     

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

     

    
      	11.2  	
              No
                Third-Party Beneficiaries

            

    

     

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

     

    
      	11.3  	
              Entire
                Agreement

            

    

     

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

     

    
      
         

        
        

      

      
        -
          69
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	11.4  	
              Amendment

            

    

     

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

     

    
      	11.5  	
              Waivers

            

    

     

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

     

    
      	11.6  	
              Successors
                and Assigns

            

    

     

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

     

    
      	11.7  	
              Counterparts

            

    

     

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

     

    
      	11.8  	
              Notices

            

    

     

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

     

    
      
         

        
        

      

      
        -
          70
          -

        
          

        

      

      
        
        

      

    

    of
      deposit with Federal Express or similar overnight courier, freight prepaid
      or
      (d) upon facsimile, if delivered by facsimile transmission with copy by
      certified or registered first class mail, postage prepaid, return receipt
      requested and shall be addressed to the intended recipient as set forth below
      unless sent by facsimile on a day which is not a Business Day, in which case
      on
      the next Business Day thereafter:

     

    If
      to
      Buyer:

     

    Clarient,
      Inc.

    31
      Columbia

    Aliso
      Viejo, CA 92656

    Attn:
      Chief Financial Officer

    Facsimile:
      (949) 425-5701

     

    Copy
      to:

     

    Latham
      & Watkins, LLP

    Attn:
      Alex Voxman, Esq.

    633
      West
      Fifth Street, Suite 4000

    Los
      Angeles, CA 90071-2007

    Facsimile:
      (213) 891-8763

    

     

    If
      to
      Sellers:

     

        c/o
      Trestle
      Holdings, Inc.

        199
      Technology Drive #105

        Irvine,
      California 92618

        Attention:
      Maurizio Vecchione

        Facsimile:
      (949) 673-1058

     

    Copy
      to:

     

    Kaye
      Scholer LLP

        1999
      Avenue
      of the Stars, Suite 1700

        Los
      Angeles,
      California 90067

        Attn:
      Barry
      L. Dastin, Esq.

        Facsimile:
      (310) 788-1200

     

    Any
      Party
      may change the address to which notices, requests, demands, claims, and other
      communications hereunder are to be delivered by giving seven (7) days’ advance
      written notice to the other Party pursuant to the provisions above.

     

    
      	11.9  	
              Governing
                Law

            

    

     

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

     

    
      
         

        
        

      

      
        -
          71
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	11.10  	
              Forum
                Selection; Consent to
                Jurisdiction

            

    

     

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

     

    
      	11.11  	
              Waiver
                of Jury Trial

            

    

     

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

     

    
      	11.12  	
              Severability

            

    

     

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

     

    
      	11.13  	
              Construction

            

    

     

    
      
         

        
        

      

      
        -
          72
          -

        
          

        

      

      
        
        

      

    

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

     

    
      	11.14  	
              Attorneys’
                Fees

            

    

     

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

     

    
      	11.15  	
              Nonsurvival
                of Representations and
                Warranties

            

    

     

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

     

    
      	11.16  	
              Specific
                Performance

            

    

     

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

     

    
      	11.17  	
              Time
                of Essence

            

    

     

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

     

    
      	11.18  	
              Interpretation
                and Rules of Construction

            

    

     

    .
      In this
      Agreement, except to the extent otherwise provided or that the context otherwise
      requires:

     

    (a)  when
      a
      reference is made in this Agreement to an Article, Section, Exhibit or Schedule,
      such reference is to an Article or Section of, or a Schedule
      or
      Exhibit to, this Agreement;

     

    (b)  the
      table
      of contents and headings for this Agreement are for reference purposes only
      and
      do not affect in any way the meaning or interpretation of this Agreement;

     

    (c)  whenever
      the words “include,” “includes” or “including” are used in this Agreement, they
      are deemed to be followed by the words “without limitation”; 

     

    
      
        
        

      

      
        -
          73
          -

        
          

        

      

      
        
        

      

    

    (d)  the
      words
“hereof,” “herein” and “hereunder” and words of similar import, when used in
      this Agreement, refer to this Agreement as a whole and not to any particular
      provision of this Agreement; 

     

    (e)  all
      terms
      defined in this Agreement have the defined meanings when used in any certificate
      or other document made or delivered pursuant hereto, unless otherwise defined
      therein; 

     

    (f)  the
      definitions contained in this Agreement are applicable to the singular as well
      as the plural forms of such terms; 

     

    (g)  any
      law
      defined or referred to herein or in any agreement or instrument that is referred
      to herein means such law or statute as from time to time amended, modified
      or
      supplemented, including by succession of comparable successor laws;

     

    (h)  references
      to a Person are also to its successors and permitted assigns;

     

    (i)  the
      use
      of “or” is not intended to be exclusive unless expressly indicated
      otherwise;

     

    (j)  the
      titles, captions or headings of the Articles and Sections herein are inserted
      for convenience of reference only and are not intended to be a part of or to
      affect the meaning or interpretation of this Agreement.

     

    
      	11.19  	
              Representation
                by Counsel

            

    

     

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

     

    
      	11.20  	
              Disclosure
                Letter

            

    

     

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

     

    [Remainder
      of page intentionally left blank.]

     

    

    

    
      
        
          

        

        
        

      

      
        -
          74
          -

        
          

        

      

      
        
        

        
          

           

        

      

    

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

     

    

     

    

     

    Buyer:      CLRT
      ACQUISITION, LLC

     

    By:  

    Name:
       

    Title:
       

     

    

     

    Clarient:  CLARIENT,
      INC.

     

    By:
       

    Name:
       

    Title:
       

    

     

    Parent:  TRESTLE
      HOLDINGS, INC.

     

    By:
       

    Name:
       

    Title:
       

    

     

    Trestle
      Sub:  TRESTLE
      ACQUISITION CORP.

     

    By:
       

    Name:
       

    Title:Exhibit 10.2 Second Loan Agreement

    

      Exhibit
        10.2

      

       

      SECOND
        LOAN AND SECURITY AGREEMENT

       

      THIS
        SECOND LOAN AND SECURITY AGREEMENT (this “Agreement”)
        is
        entered into as of June 19, 2006, by and among CLARIENT, INC., a Delaware
        corporation (“Lender”),
        TRESTLE HOLDINGS, INC., a Delaware corporation (“Borrower”)
        and
        the Guarantors (as defined herein) hereto.

       

      RECITALS

       

      WHEREAS,
        Lender is engaged in negotiations with Borrower for the purposes of acquiring
        certain assets of Borrower and Trestle Acquisition Corp., a Delaware corporation
        and a wholly-owned subsidiary of Borrower (“Trestle
        Sub”),
        pursuant to an asset purchase agreement (the “Asset
        Purchase Agreement”);

       

      WHEREAS,
        Lender previously loaned to Borrower the sum of $250,000 pursuant to a Loan
        and
        Security Agreement dated February 27, 2006 (as amended to date, the
“Original
        Loan and Security Agreement”),
        in
        order to provide Borrower with additional operating capital while Lender
        and
        Borrower were negotiating the Asset Purchase Agreement; 

       

      WHEREAS,
        concurrently with the execution and delivery of the Asset Purchase Agreement
        Borrower and Lender now wish to enter into this Second Loan and Security
        Agreement, pursuant to which Lender shall lend to Borrower additional funds
        from
        time to time on a short-term secured basis in the principal amount of up
        to
        $500,000; 

       

      WHEREAS,
        each Guarantor acknowledges and confirms that, as a subsidiary of Borrower,
        (a)
        it will benefit from the advancement of funds under this Agreement, (b) the
        loans by Lender constitute valuable consideration to Guarantor, (c) this
        Agreement is intended to be an inducement to Lender to extend the loans to
        Borrower, and (d) Lender is relying upon the Subsidiary Guarantees (as defined
        herein) in making and advancing the loans to Borrower; and

       

      WHEREAS,
        Lender, Borrower and each Guarantor desire to enter into this Agreement to
        set
        forth the terms on which Lender will lend to Borrower and Borrower will repay
        loans to Lender.

       

      NOW,
        THEREFORE, in consideration of the premises and the mutual agreements contained
        herein and for other good and valuable consideration the receipt and sufficiency
        of which is hereby acknowledged, the parties hereto agree as
        follows:

       

      AGREEMENT

       

      1.  Definitions
        and Construction

       

      1.1  Definitions

       

      .
        As used
        in this Agreement, the following terms shall have the following
        definitions:

       

      
        
           

           

          
          

        

        
          -
            1
            -

          
            

          

        

        
          
          

        

      

      “Affiliate”
means
        any other Person controlling or controlled by or under common Control with
        such
        specified Person.

       

      “Agreement”
means
        this Second Loan and Security Agreement, as amended, supplemented, waived
        or
        otherwise modified from time to time pursuant to the terms hereof.

       

      “Asset
        Purchase Agreement” shall
        have the meanings set forth in the recitals.

       

      “Borrower”
shall
        have the meaning set forth in the preamble hereto.

       

      “Borrower
        Financial Statements”
means
        the consolidated financial statements of Borrower, including the notes thereto,
        contained in Borrower’s most recently filed Annual Report on Form 10-KSB and
        most recently filed Quarterly Report on Form 10-QSB.

       

      “Borrower’s
        Books” means
        all
        of Borrower’s books and records including: ledgers; records concerning
        Borrower’s assets or liabilities, the Collateral, business operations or
        financial condition; and all computer programs, or tape files, and the
        equipment, containing such information.

       

      “Business
        Day”
means
        any day that is not a Saturday, Sunday, or other day on which banks in the
        State
        of California are authorized or required by law to close.

       

      “Collateral” means:

       

      (a)  All
        present and future accounts, general intangibles and other rights of the
        Grantors to the payment of money no matter how evidenced, all chattel paper,
        instruments and other writings evidencing any such right, and all goods
        repossessed or returned in connection therewith; 

       

      (b)  All
        inventory of Grantors, now owned or hereafter acquired, and all raw materials,
        work in process, materials used or consumed in Grantors’ businesses and finished
        goods, together with all additions and accessions thereto and replacements
        therefor, and products thereof; 

       

      (c)  All
        patents and patent applications of Grantors and all rights corresponding
        thereto
        throughout the world, and all unpatented or unpatentable developments and
        inventions and all license fees, royalties and other similar items received
        in
        connection therewith;

       

      (d)  All
        trademarks, service marks and logos of Grantors, and all United States, state
        and/or foreign applications for registration thereof, all trade names, trade
        styles, designs, and the like, all elements of package or trade dress of
        goods,
        the goodwill of Grantors’ businesses connected with the use of, and symbolized
        by any of the above, and all property of Grantors necessary to produce any
        products sold under any of the above;

       

      (e)  All
        copyrights and copyrighted works in which any Grantor has any right, title,
        or
        interest throughout the world, all derivative works thereof, all copyright
        registrations and all applications therefor, and United States and/or foreign
        applications 

       

      
        
           

          
          

        

        
          -
            2
            -

          
            

          

        

        
          
          

        

      

      for
        registration and registrations thereof, and all accounts, accounts receivable
        and contracts receivable generated by such copyrights;

       

      (f)  
        All
        computer software programs developed or to be developed by any Grantor or
        in
        which any Grantor asserts or could assert a proprietary interest; all personal
        property, including but not limited to source codes, object codes or similar
        information, which is necessary to the practical utilization of such programs;
        and all tangible property of Grantors embodying or incorporating any such
        programs; 

       

      (g)  All
        trade
        secrets, proprietary information, customer lists, instructional materials,
        working drawings, manufacturing techniques, process technology documentation,
        and product formulations of Grantors and all property and assets of Grantors,
        whether tangible or intangible, which are or a Person may deem to be
        Intellectual Property of Grantors;

       

      (h)  All
        rights under any agreement granting any right to use any patent, trademark,
        copyright, computer software program or any other property or right to property
        specified in paragraphs (c) through (g) above, whether a Grantor is the grantor
        or the grantee under such agreement;

       

      (i)  All
        renewals, modifications, amendments, re-issues, divisions, continuations
        in
        whole or part, and extensions of any property identified in paragraphs (c)
        through (g) above; 

       

      (j)  All
        now
        existing and hereafter acquired books and records relating to the foregoing
        property identified in paragraphs (a) through (i) above and all equipment
        containing such books and records;

       

      (k)  All
        Proceeds of the foregoing property identified in paragraphs (a) through (j)
        above; and

       

      (l)  Any
        and
        all claims, rights and interests in any of the foregoing of the above and
        all
        substitutions for, additions and accessions to and proceeds
        thereof.

       

      “Commitment”
means
        Lender’s obligations to make loans to Borrower, subject to and in accordance
        with the terms of this Agreement.

       

      “Control”
        (including, with correlative meaning, the terms “controlling”,
        “controlled
        by,”
        “under
        common Control with”
and
        similar phrases) means with respect to any Person, the possession, directly
        or
        indirectly, of the power to direct, or cause the direction of, the management
        or
        policies of a Person, whether through the ownership of voting securities,
        by
        contract or otherwise.

       

      “Copyright
        Office”
means
        the United States Copyright Office.

       

      “Default” means
        any
        event, act or condition which with the passing of time or the giving of notice
        or both would become an Event of Default hereunder.

       

      
        
           

           

          
          

        

        
          -
            3
            -

          
            

          

        

        
          
          

        

      

      “Default
        Rate”
means
        the per
        annum rate
        of
        interest equal to 10% per annum, but such rate shall in no event be more
        than
        the highest rate permitted by applicable law.

       

      “Event
        of Default” shall
        have the meaning set forth in Section
        9.

       

      “Exchange
        Act”
        means
        the Securities Exchange Act of 1934, as amended, or any successor or similar
        statute and the rules and regulations of the SEC promulgated thereunder as
        in
        effect from time to time.

       

      “Extraordinary
        Corporate Transaction”
means
        (a) the sale, lease, license, exchange, disposition of, moving, relocation,
        or
        transfer or similar transaction involving Borrower’s or any of its Subsidiaries’
assets or of a greater than 10% equity interest in Borrower or any of its
        Subsidiaries, or the declaration or payment by Borrower or any of its
        Subsidiaries of any dividend, any change in the capital structure of Borrower
        or
        any of its Subsidiaries; (b) any recapitalization, reorganization, merger,
        consolidation or other transaction or transactions (whether by sale, gift
        or
        other transfer or disposition), which transaction or transactions individually
        or in the aggregate result in the transfer of a 10% or greater beneficial
        interest in Borrower or any of its Subsidiaries; (c) any transaction involving
        the transfer or licensing of any of Borrower’s or its Subsidiaries’ Intellectual
        Property to any other Person; or (d) the execution by Borrower or any of
        its
        Subsidiaries of an agreement, term sheet, letter of intent, exclusive
        negotiating agreement or other agreement in principle (whether or not binding
        upon Borrower or the other party or parties thereto) relating to any of the
        transactions described in clauses (a) through (c) above. Notwithstanding
        the
        foregoing, the following shall not constitute an Extraordinary Corporate
        Transaction: (i) transactions expressly contemplated or permitted by any
        written
        agreements between Borrower and Lender; (ii) sales of inventory and the grant
        of
        non-exclusive, limited licenses for software that is embedded in or regularly
        accompanies such inventory, all as in the ordinary and usual course of
        Borrower’s business as presently conducted; (iii) sales or other dispositions in
        the ordinary course of business of assets that have become worn out or obsolete
        or that are promptly being replaced; (iv) the sale of accounts and/or
        receivables to a factor in the ordinary course of business consistent with
        past
        practice; (v) Borrower’s repurchase of stock from former contractors or
        employees of Borrower or its Subsidiaries in accordance with the terms of
        stock
        option, stock purchase, profit sharing or similar plans in effect as of the
        date
        of this Agreement and approved by Borrower’s Board of Directors, at a price not
        greater than the actual, cash price that such employee paid to acquire such
        securities;
        (vi)
        Borrower’s entry into capital leases or Indebtedness incurred solely to purchase
        equipment that is secured in accordance with clause (e) of the definition
        of
        Permitted Liens and is not in excess of the lesser of the purchase price
        of such
        equipment or the fair market value of such equipment on the date of acquisition;
        (vii) Borrower’s incurrence of Indebtedness, the proceeds of which are used to
        satisfy all outstanding Obligations under this Agreement; and (viii) Borrower’s
        issuance of securities under any employee compensatory stock option plan
        of
        Borrower that has been approved by Borrower’s Board of Directors. 

       

      “Funding
        Date”
means
        any date on which a Loan is made to or for the account of Borrower under
        this
        Agreement.

       

      “GAAP”
means
        generally accepted accounting principles in the United States of America
        in
        effect from time to time.

       

      
        
          32

           

          
          

        

        
          -
            4
            -

          
            

          

        

        
          
          

        

      

      “Governmental
        Authority” means
        (a)
        any federal, state, county, municipal or foreign government, or political
        subdivision thereof, (b) any governmental or quasi-governmental agency,
        authority, board, bureau, commission, department, instrumentality or public
        body, (c) any court or administrative tribunal or (d) with respect to any
        Person, any arbitration tribunal or other non-Governmental Authority to whose
        jurisdiction that Person has consented.

       

      “Grantors”
means
        Borrower and each Guarantor.

       

      “Guarantor”
means
        Trestle Acquisition Corp., a Delaware corporation, and any other Person that
        executes a counterpart signature page to this Agreement pursuant to Section
        4.10
        of this
        Agreement for the purposes of providing a Subsidiary Guarantee.

       

      “Indebtedness”
means
        (without double counting), at any time and with respect to any Person, (a)
        indebtedness of such Person for borrowed money (whether by loan or the issuance
        and sale of debt securities) or for the deferred purchase price of property
        or
        services purchased (other than amounts constituting trade payables arising
        in
        the ordinary course of business); (b) obligations of such Person in respect
        of
        letters of credit, acceptance facilities, or drafts or similar instruments
        issued or accepted by banks and other financial institutions for the account
        of
        such Person; (c) obligations of such Person under capital leases and any
        financing lease involving substantially the same economic effect; (d) deferred
        payment obligations of such Person resulting from the adjudication or settlement
        of any litigation or claim to the extent not already reflected as a current
        liability on the balance sheet of such Person; or (e) indebtedness of others
        of
        the type described in clauses (a) through (d) which such Person has (i) directly
        or indirectly assumed, guaranteed, endorsed (otherwise than for collection
        or
        deposit in the ordinary course of business), co-made or discounted or sold
        with
        recourse, or (ii) secured by a Lien on any of the assets of such Person whether
        or not such Person has directly or indirectly assumed or guaranteed such
        indebtedness.

       

      “Intellectual
        Property”
means
        licenses,
        permits, franchises, authorizations, patents, copyrights, trademarks, trade
        secrets, trade names, inventions, discoveries, designs, patentable technology
        and art, methodologies, trade secrets, know how, service marks, Internet
        domain
        names and any other tangible, intangible or intellectual property
        rights.

       

      “Intellectual
        Property Security Agreements”
means
        the Intellectual Property Security Agreements by and between Lender and each
        of
        Grantors, in substantially the form attached hereto as Exhibit
        A.

       

      “Lender”
shall
        have the meaning set forth in the preamble hereto.

       

      “Lender’s
        Expenses” means
        all
        reasonable costs or expenses (including reasonable attorneys’ fees and expenses)
        incurred by Lender in connection with enforcing or defending the Loan Documents,
        including in the exercise of any rights or remedies afforded hereunder or
        under
        applicable law, whether or not suit is brought.

       

      “Lien” means
        any
        pledge, bailment, lease, mortgage, deed of trust, pledge, security interest,
        hypothecation, assignment, encroachment, lien (statutory or otherwise), claim,
        option, reservation, priority, preferential arrangement, easement or other
        encumbrance of any kind.

       

      
        
           

          
          

        

        
          -
            5
            -

          
            

          

        

        
          
          

        

      

      “Loans”
shall
        have the meaning
        given such term in Section 2.1 and “Loan”
shall
        mean any one of the Loans.

       

      “Loan
        Documents”
means,
        collectively, this Agreement, the Note, the Intellectual Property Security
        Agreements and any and all other agreements, certificates, instruments or
        documents made, given or delivered in connection with the consummation of
        the
        transactions contemplated by this Agreement.

       

      “Maturity
        Date” means,
        with respect to each Loan, the first to occur of (a) an Extraordinary Corporate
        Transaction, (b) the date of acceleration of the Loan by Lender following
        an Event of Default, (c) the Outside Date (as such term is defined in the
        Asset
        Purchase Agreement) or (d) following termination of the Asset Purchase Agreement
        under circumstances resulting in any accelerated repayment of the “Bridge Notes”
pursuant to Section 10.4 of the Asset Purchase Agreement, the date such
        accelerated repayment is to be made pursuant to Section 10.4 of the Asset
        Purchase Agreement.

       

      “Minimum
        Funding Amount”
means
        $125,000.

       

      “Note”
means
        the secured promissory note in the form attached hereto as Exhibit
        B
        issued
        pursuant to this Agreement.

       

      “Notice
        of Borrowing”
means
        a
Notice
        of
        Borrowing in substantially the form of Exhibit
        C hereto.

       

      “Obligations” means
        all
        Indebtedness, fees, charges, expenses and attorneys’ fees and costs and other
        amounts, obligations, covenants, and duties owing by Borrower to Lender pursuant
        to or evidenced by the Loan Documents (whether or not for the payment of
        money),
        whether direct or indirect, absolute or contingent, due or to become due,
        now
        existing or hereafter arising, including the principal and interest and any
        other amounts due with respect to any Loan, and all Lender’s Expenses that
        Borrower is required to pay or reimburse by the Loan Documents, by law, or
        otherwise.

       

      “Obligee
        Guarantee”
shall
        have the meaning set forth in Section
        4.7.

       

      “Original
        Loan and Security Agreement”
        shall
        have the meaning set forth in the recitals.

       

      “Permitted
        Liens”
means
        the following:

       

      (a)  The
        Liens
        created by this Agreement;

       

      (b)  The
        liens
        created by the Original Loan and Security Agreement;

       

      (c)  Any
        Liens
        existing as of the date hereof and disclosed in Schedule 1.1(a);

       

      (d)  Liens
        for
        Taxes, fees, assessments or other charges or levies of a Governmental Authority,
        either not delinquent or being contested in good faith by appropriate
        proceedings, provided
        the
        same
        have no superior priority over Lender’s Lien in the Collateral and have been
        reserved for on Borrower’s Books;

       

      
        
          
          

        

        
          -
            6
            -

          
            

          

        

        
          
          

        

      

      (e)  Liens
        to
        secure payment of worker’s compensation, employment insurance, or other social
        security obligations of Borrower in the ordinary course of Borrower’s
        business;

       

      (f)  Liens
        (i)
        upon or in any equipment (other than inventory) acquired or held by Borrower,
        to
        secure the purchase price of such equipment or Indebtedness incurred solely
        for
        the purpose of financing the acquisition of such equipment, or (ii) existing
        on
        such equipment at the time of its acquisition from a Person that is not an
        Affiliate of Borrower, provided
        that
        the
        Lien is confined solely to the equipment so acquired, and the Proceeds of
        such
        equipment;

       

      (g)  Liens
        on
        equipment leased by Borrower pursuant to an operating lease in the ordinary
        course of business (including Proceeds thereof and accessions thereto) incurred
        solely for the purpose of financing the lease of such equipment;

       

      (h)  Leases
        or
        subleases and licenses or sublicenses granted in the ordinary course of
        Borrower’s business and any interest or title of lessor or licensor under any
        lease or license if the leases, subleases, licenses or sublicenses do not
        prohibit granting Lender a security interest;

       

      (i)  Easements,
        reservations, rights-of-way, restrictions, minor defects or irregularities
        in
        title and other similar charges or encumbrances affecting real property that
        could not reasonably be expected to have a material adverse effect on the
        financial condition, operations or business of Borrower;

       

      (j)  Liens
        that are not prior to the Lien of Lender which constitute rights of set-off
        of a
        customary nature or banker’s Liens with respect to amounts on deposit, whether
        arising by operation of law or by contract, in connection with arrangements
        entered into with banks in the ordinary course of business;

       

      (k)  Liens
        of
        materialmen, mechanics, warehousemen, carriers, or other similar Liens arising
        in the ordinary course of business or by operation of law or regulation and
        securing obligations not yet due; 

       

      (l)  Liens
        incurred in connection with the extension, renewal or refinancing of Borrower’s
        Indebtedness secured by Liens of the type described in clause (b) above,
        provided
        that
        any
        extension, renewal or replacement Lien shall be limited to the Property
        encumbered by the existing Lien and the principal amount of the Indebtedness
        being extended, renewed or refinanced does not increase; and

       

      (m)  Liens
        on
        present and future accounts and receivables which are sold or factored in
        the
        ordinary course of business consistent with past practice and general
        intangibles relating thereto.

       

      “Person” means
        and
        includes any individual, any partnership, any corporation, any business trust,
        any joint stock company, any limited liability company, any unincorporated
        association or any other entity and any Governmental Authority.

       

      
        
           

          
          

        

        
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      “Proceeds”
means
        whatever is received when Collateral, proceeds or equipment are sold, exchanged,
        collected or otherwise disposed of, both cash and non-cash, including the
        proceeds of insurance payable by reason of loss of or damage to Collateral
        or
        proceeds and any license fees, royalties and other similar items received
        in
        connection with Collateral.

       

      “Property” means
        any
        interest in any kind of property or asset, whether real, personal or mixed,
        whether tangible or intangible.

       

      “PTO”
means
        the United States Patent and Trademark Office.

       

      “Responsible
        Officer”
means
        each of the President and the Chief Financial Officer of Borrower.

       

      “SEC”
means
        the United States Securities and Exchange Commission.

       

      “Securities
        Act”
means
        the Securities Act of 1933, as amended, or any successor or similar statute
        and
        the rules and regulations of the SEC promulgated thereunder as in effect
        from
        time to time.

       

      “Subsidiary” means
        any
        corporation, partnership or other legal entity of which 50% or more of the
        outstanding capital stock or other equity interests entitled to vote for
        the
        election of directors or other governing body of such corporation or other
        legal
        entity (otherwise than as the result of a default) is owned directly or
        indirectly by Borrower or any Subsidiary of Borrower.

       

      “Subsidiary
        Guarantee”
means
        the guarantee by each Guarantor of the Obligations under this Agreement and
        the
        Note, as provided by this Agreement.

       

      “Tax”
or
        “Taxes”
means
        (a) any and all taxes (whether federal, state and local, domestic or foreign)
        including income, gross receipts, profits, property, sales, use, capital
        stock,
        net worth, occupation,
        value
        added, ad valorem, transfer, franchise, recapture, excise, windfall,
        withholding, payroll, social security, workers’ compensation, unemployment
        compensation or employment taxes, tariffs, imposts, duties, levies, fees
        or
        governmental charges of any nature whatsoever, together with any interest,
        penalties or additions to tax imposed with respect to any of the foregoing,
        and
        (b) any obligations under any agreements or arrangements with respect to
        any tax
        or taxes described in clause (a) above.

       

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

       

      “Trestle
        Sub”
        shall
        have the meaning set forth in the recitals.

       

      “UCC”
means
        the Uniform Commercial Code of the State of California as in effect on the
        date
        hereof and as amended from time to time hereafter or, when used in relation
        to

       

      
        
           

          
          

        

        
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      a
        specific filing or termination, the Uniform Commercial Code of the State
        wherein
        such filing or termination statement is made.

       

      1.2  Other
        Interpretive Provisions

       

      .
        References
        in this Agreement to “Articles,” “Sections,” “Exhibits,” “Schedules” and
“Annexes” are to recitals, articles, sections, exhibits, schedules and annexes
        herein and hereto unless otherwise indicated. References in this Agreement
        and
        each of the other Loan Documents to any document, instrument or agreement
        shall
        include (a) all exhibits, schedules, annexes and other attachments thereto,
        (b) all documents, instruments or agreements issued or executed in
        replacement thereof, and (c) such document, instrument or agreement, or
        replacement or predecessor thereto, as amended, modified and supplemented
        from
        time to time and in effect at any given time. The words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement or any other
        Loan Document shall refer to this Agreement or such other Loan Document,
        as the
        case may be, as a whole
        and
        not to any particular provision of this Agreement or such other Loan Document,
        as the case may be. The words “include” and “including” and words of similar
        import when used in this Agreement or any other Loan Document shall not be
        construed to be limiting or exclusive. The meanings given to terms defined
        herein shall be equally applicable to both the singular and plural forms
        of such
        terms. Unless otherwise indicated in this Agreement or any other Loan Document,
        all accounting terms used in this Agreement or any other Loan Document shall
        be
        construed, and all accounting and financial computations hereunder or thereunder
        shall be computed, in accordance with GAAP.

       

      2.  Loan
        And Terms Of Payment

       

      2.1  Commitment

       

      .
        Subject
        to the terms and conditions of this Agreement and relying upon the
        representations and warranties herein set forth as and when made or deemed
        to be
        made, Lender agrees to make loans to Borrower upon the Borrower’s request in
        accordance with Section
        2.2
        hereof,
        from time to time prior to the Maturity Date (the “Loans”);
        provided
        that
        the
        amount of the initial Loan shall be $250,000 and that the aggregate principal
        amount of the Loans requested shall not exceed $500,000 and, except with
        the
        prior consent of Lender in Lender’s sole discretion, the amount of each
        requested Loan for any Loan other than the initial Loan shall not be less
        than
        the Minimum Funding Amount. If prepaid, the principal of the Loans may not
        be
        re-borrowed.

       

      2.2  Procedure
        for Requesting
        a Loan

       

      (a)  Notice.
        

       

      Whenever
        Borrower desires that Lender make a Loan (other than the initial Loan), Borrower
        shall so notify Lender by telephone at least five Business Days in advance
        of
        the desired Funding Date, which notice shall be irrevocable. Each such telephone
        notification shall be promptly confirmed by a Notice of Borrowing. 

       

      (b)  Disbursement.
        Subject
        to the satisfaction of the conditions set forth in Sections
        3.1 and
        3.2
        with
        respect to the initial Loan and the satisfaction of the conditions 

       

      
        
           

          
          

        

        
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      set
        forth
        in Section
        3.2 with
        respect to each subsequent Loan, Lender shall disburse the requested Loan;
        provided
        that
        the
        initial Loan shall be deemed to have been requested by Borrower and shall
        be
        disbursed by Lender as soon as practicable but no later than the next succeeding
        Business Day following execution of this Agreement and the satisfaction of
        the
        conditions under Sections 3.1 and 3.2 or such other date as the parties hereto
        shall agree. 

       

      2.3  Loan
        Interest Rate. 

       

       Borrower
        shall pay interest on the unpaid principal amount of each Loan from the Funding
        Date of such Loan until such Loan has been paid in full, at
        a
per
        annum rate
        of
        8%. All computations of interest on each Loan shall be based on a year of
        360
        days for actual days elapsed provided,
        however,
        that
        per diem interest shall be calculated on the basis of the actual number of
        days
        elapsed over a year of 365 days. Notwithstanding any other provision hereof,
        the
        amount of interest payable hereunder shall not in any event exceed the maximum
        amount permitted by applicable law.

       

      2.4  Termination
        of Commitment. 

       

      Notwithstanding
        anything in the Loan Documents, Lender’s Commitment shall terminate on the
        earlier of (i) at Lender’s sole election, the occurrence and continuance of any
        Default or Event of Default hereunder, (ii) the Maturity Date, and (iii)
        termination of the Asset Purchase Agreement for any reason.

       

      2.5  Use
        of Proceeds

       

      .
        The
        proceeds of the Loans shall be used solely for working capital
        purposes.

       

      2.6  Maturity

       

      .
        All
        unpaid principal and accrued interest with respect to each Loan, together
        with
        all other Obligations, shall be due and payable in full on the Maturity Date.
        Borrower shall not be obligated to make any principal or interest payments
        on
        the Loans other than upon the Maturity Date. Lender may, and is hereby
        authorized by Borrower to, endorse in Borrower’s Books appropriate notations
        regarding Lender’s interest in the Loans; provided,
        however, that
        the
        failure to make, or an error in making, any such notation shall not limit
        or
        otherwise affect the Obligations of Borrower hereunder.

       

      2.7  Repayments

       

      .

      (a)  Mandatory
        Payment. Upon
        the
        Maturity Date, all Obligations shall become immediately due and payable and
        Borrower
        shall immediately pay to Lender the outstanding principal amount of each
        Loan,
        all accrued interest on such Loans and all other sums, if any, that shall
        have
        become due and payable hereunder with respect to the Obligations.

       

      
        
          
          

        

        
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      (b)  Optional
        Prepayment; No Prepayment Penalty. In
        addition to the provisions of Section
        2.7(a),
        Borrower
        may prepay any Loan without penalty, premium or other charge. Prepayments
        shall
        be applied first to Obligations other than accrued interest and principal,
        then
        to accrued and unpaid interest through and including the date of payment
        and
        then to principal.

       

      2.8  Other
        Payment Terms.

       

      (a)  Place
        and Manner. Borrower
        shall make all payments due to Lender by payment to Lender at the address
        specified in Section
        11,
        in
        lawful
        money of the United States and in same day or immediately available
        funds.

       

      (b)  Default
        Rate. If
        either
        (i) any amounts required to be paid by Borrower under this Agreement or the
        other Loan Documents (including principal, interest, or any fees or other
        amounts) remain unpaid after such amounts are due, or (ii) an Event of
        Default has occurred and is continuing, Borrower shall pay interest on the
        aggregate, outstanding Obligations hereunder from the date due or from the
        date
        of the Event of Default, as applicable, until such past due amounts are paid
        in
        full or until all Events of Defaults are cured, as applicable, at a per
        annum rate
        equal to the Default Rate. All computations of such interest shall be based
        on a
        year of 360 days for actual days elapsed; provided,
        however,
        that
        per diem interest shall be calculated on the basis of the actual number of
        days
        elapsed over a year of 365 days.

       

      2.9  Crediting
        Payments

       

      .
        The
        receipt by Lender of any wire transfer of funds, check, or other item of
        payment
        shall be immediately applied conditionally to reduce Obligations, but shall
        not
        be considered a payment on account unless such wire transfer is of immediately
        available federal funds and is made to the appropriate deposit account of
        Lender
        or unless and until such check or other item of payment is honored when
        presented for payment. Notwithstanding anything to the contrary contained
        herein, any wire transfer or payment received by Lender after 3:00 p.m.
        California time shall be deemed to have been received by Lender as of the
        opening of business on the immediately following Business Day.

       

      3.  Conditions
        of Loans

       

      3.1  Conditions
        Precedent to Initial Loan

       

      .
        The
        obligation of Lender to make the initial Loan is subject to the conditions
        precedent that:

       

      (a)  Lender
        shall have received
        this
        Agreement duly executed by Grantors.

       

      (b)  Lender
        shall have received a copy of the resolutions of Borrower’s Board of Directors,
        in form and substance reasonably satisfactory to Lender, authorizing (1)
        the
        execution, delivery and performance of this Agreement and the other Loan
        Documents, (2) the Loans contemplated hereunder, and (3) the transactions
        contemplated thereunder, certified by the Secretary of the Borrower as of
        the
        Funding Date of the initial Loan, 

       

      
        
           

           

          
          

        

        
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      which
        certificate shall be in form and substance satisfactory to Lender and shall
        state that the resolutions thereby certified have not been amended, modified,
        revoked or rescinded and are in full force and effect.

       

      (c)  A
        Responsible Officer of Borrower shall have executed and delivered to Lender
        the
        Note in the amount of $500,000.

       

      (d)  Lender
        shall have received such documents, instruments and agreements, including
        UCC
        financing statements or amendments to UCC financing statements and documents
        or
        filings with the PTO, the Copyright Office or any applicable state office,
        as
        Lender shall reasonably request to evidence the perfection and first priority
        (subject to Permitted Liens) of the security interests in the Collateral
        granted
        to Lender pursuant to Section
        5,
        including an Intellectual Property Security Agreement for each Grantor, in
        each
        case executed and delivered by duly authorized officers of Grantors, together
        with completed schedules thereto in form and substance satisfactory to the
        Lender.

       

      (e)  Lender
        shall have received a certificate of each Grantor, dated the Funding Date
        of the
        initial Loan, as to the incumbency and signature of the officers of such
        Grantor
        executing any Loan Document, in form and substance satisfactory to Lender,
        duly
        executed by the Secretary of each Grantor.

       

      (f)  Lender
        shall have received copies of the articles of incorporation and bylaws of
        each
        Grantor, certified as of the Funding Date of the initial Loan as true, complete
        and correct copies thereof by the Secretary of each Grantor.

       

      (g)  Lender
        shall have received a good standing certificate from each Grantor’s state of
        incorporation and the states in which Grantor’s principal place of business is
        located, together with certificates of the applicable Governmental Authorities
        stating that such Grantor is in compliance with the franchise tax laws of
        each
        such state, each dated as of a recent date.

       

      3.2  Conditions
        Precedent to each
        Loan

       

      .
        The
        obligation of Lender to make each Loan, including the initial Loan, except
        as
        specifically noted, is further subject to the following conditions:

       

      (a)  Other
        than with respect to the initial Loan, Borrower
        and Lender shall have executed a Notice of Borrowing with respect to the
        proposed Loan.

       

      (b)  Each
        of
        the representations and warranties made by Grantors pursuant to this Agreement
        or any other Loan Document and each of the representations and warranties
        contained in any certificate or statement furnished at any time by or on
        behalf
        of each Grantor pursuant to this Agreement or any other Loan Document or
        certificate or other document delivered herewith or therewith, shall, except
        to
        the extent that they relate to a particular date, be true, complete and correct
        in all respects on and as of the date it was made and on and as of such date
        as
        if made on and as of such date. Each Grantor shall have complied with each
        and
        every covenant and agreement contained herein, no Default or Event of Default
        shall have occurred and be continuing on such date or after 

       

      
        
           

          
          

        

        
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      giving
        effect to the Loan. With respect to the initial Loan, Lender shall have received
        a certificate, in form and substance satisfactory to Lender, duly executed
        by a
        Responsible Officer and dated as of the Funding Date of the initial Loan,
        to the
        foregoing effect.

       

      3.3  Covenant
        to Deliver

       

      .
        Borrower agrees to deliver each item required to be delivered to Lender as
        a
        condition to the Loan, if such Loan is made. Borrower expressly agrees that
        the
        extension of such Loan prior to the receipt by Lender of any such item shall
        not
        constitute a waiver by Lender of Borrower’s obligation to deliver such
        item.

       

      4.  Subsidiary
        Guarantees

       

      4.1  Guarantee.
        Subject
        to this Article
        3,
        each of
        the Guarantors hereby, jointly and severally, unconditionally guarantees
        to
        Lender and its successors and assigns, irrespective of the validity and
        enforceability of any of the Loan Documents or the Obligations of Borrower
        hereunder or thereunder, that:

       

      (a)  the
        principal of and interest on the
        Note
        shall be promptly paid in full when due, whether at maturity, by acceleration
        or
        otherwise, and interest on the overdue principal of and interest on the Note
        at
        the Default Rate, if applicable, and all other Obligations of Borrower to
        Lender, shall be promptly paid in full or performed, all in accordance with
        the
        terms hereof and thereof; and 

       

      (b)  in
        case
        of any extension of time of payment or renewal of the Note or any of such
        other
        Obligations, that the same shall be promptly paid in full when due or performed
        in accordance with the terms of the extension or renewal, whether at stated
        maturity, by acceleration or otherwise.

       

      Failing
        payment when due of any amount so guaranteed or any performance so guaranteed
        for whatever reason, the Guarantors shall be jointly and severally obligated
        to
        pay the same immediately. Each Guarantor agrees that this is a guarantee
        of
        payment and not a guarantee of collection.

       

      4.2  Guarantee
        Absolute and Unconditional. The
        Guarantors hereby agree that their obligations hereunder are unconditional,
        irrespective of the validity, regularity or enforceability of this Agreement,
        the Note or any other Loan Document, the absence of any action to enforce
        the
        same, any waiver or consent by Lender or its successors or assigns with respect
        to any provisions hereof or thereof, the recovery of any judgment against
        Borrower, any action to enforce the same or any other circumstance which
        might
        otherwise constitute a legal or equitable discharge or defense of a
        guarantor.

       

      4.3  Amendments,
        etc. with respect to the Borrower Obligations.
        Each
        Guarantor shall remain obligated hereunder and under each other Loan Document
        notwithstanding that, without any reservation of rights against any Guarantor
        and without notice to or further assent by any Guarantor, any demand for
        payment
        of any of the Obligations made by Lender may be rescinded by Lender and any
        of
        the Obligations continued, and the Obligations, or the liability of any other
        Person upon or for any part thereof, or any collateral 

       

      
        
           

           

          
          

        

        
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      security
        or guarantee therefor or right of offset with respect thereto, may, from
        time to
        time, in whole or in part, be renewed, extended, amended, modified, accelerated,
        compromised, waived, surrendered or released by Lender, and the other Loan
        Documents and any other documents executed and delivered in connection therewith
        may be amended, modified, supplemented or terminated, in whole or in part,
        as
        Lender may deem advisable from time to time, and any collateral security,
        guarantee or right of offset at any time held by Lender for the payment of
        the
        Obligations may be sold, exchanged, waived, surrendered or released. Lender
        shall have no obligation to protect, secure, perfect or insure any Lien at
        any
        time held by it as security for the Obligations or for the guarantee contained
        in this Article
        3
        or any
        property subject thereto.

       

      4.4  Waivers.
        Each
        Guarantor hereby waives, for the benefit of Lender and its successors,
        indorsees, transferees and assigns: 

       

      (a)  any
        right
        to require any Person, as a condition of payment or performance by such
        Guarantor, to (i) proceed against Borrower, any other guarantor (including
        any
        other Guarantor) of the Obligations or any other Person, (ii) proceed against
        or
        exhaust any security held from Borrower, any such other guarantor or any
        other
        Person, (iii) proceed against or have resort to any balance of any deposit
        account or credit on the books of Lender and its successors, indorsees,
        transferees and assigns in favor of Borrower or any other Person, or (iv)
        pursue
        any other remedy in the power of Lender and its respective successors,
        indorsees, transferees and assigns whatsoever; 

       

      (b)  any
        defense arising by reason of the incapacity, lack of authority or any disability
        or other defense of Borrower or any other Guarantor including any defense
        based
        on or arising out of the lack of validity or the unenforceability of the
        Obligations or any agreement or instrument relating thereto or by reason
        of the
        cessation of the liability of Borrower or any other Guarantor from any cause
        other than payment in full of the Obligations; 

       

      (c)  any
        defense based upon any statute or rule of law which provides that the obligation
        of a surety must be neither larger in amount nor in other respects more
        burdensome than that of the principal; 

       

      (d)  any
        defense based upon any errors or omissions in the administration of the
        Obligations by any agent, Lender and their respective successors, indorsees,
        transferees and assigns, except behavior which amounts to bad faith;

       

      (e)  (i)
        any
        principles or provisions of law, statutory or otherwise, which are or might
        be
        in conflict with the terms hereof and any legal or equitable discharge of
        such
        Guarantor’s obligations hereunder, (ii) the benefit of any statute of
        limitations affecting such Guarantor’s liability hereunder or the enforcement
        hereof, (iii) any rights to set-offs, recoupments and counterclaims, and
        (iv) promptness, diligence and any requirement that any agent, Lender, and
        their respective successors, indorsees, transferees and assigns protect,
        secure,
        perfect or insure any security interest or lien or any property subject thereto;
        

       

      
        
          
          

        

        
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      (f)  notices,
        demands, presentments, protests, notices of protest, notices of dishonor
        and
        notices of any action or inaction, including acceptance hereof, notices of
        default hereunder, or any agreement or instrument related thereto, notices
        of
        any renewal, extension or modification of the Obligations or any agreement
        related thereto, notices of any extension of credit to Borrower and notices
        of
        any of the matters referred to in Section 2
        and any
        right to consent to any thereof; and 

       

      (g)  any
        defenses or benefits that may be derived from or afforded by law which limit
        the
        liability of or exonerate guarantors or sureties, or which may conflict with
        the
        terms hereof. Each Guarantor hereby waives and relinquishes any duty on the
        part
        of Lender (should any such duty exist) to disclose to any Guarantor any matter
        of fact or other information related to the business, operations or condition
        (financial or otherwise) of Borrower or its properties or to any Loan Document
        or the transactions undertaken pursuant to, or contemplated by, any such
        Loan
        Document, whether now or in the future known by Lender.

       

      4.5  Authority
        of Guarantors or Borrower. It
        is not
        necessary for Lender and its respective successors, indorsees, transferees
        and
        assigns to inquire into the capacity or powers of any Guarantor or Borrower
        or
        the officers, directors or any agents acting or purporting to act on behalf
        of
        any of them.

       

      4.6  Bankruptcy.
        

       

      (a)  The
        guarantee contained in this Article
        3
        shall
        continue to be effective, or be reinstated, as the case may be, if at any
        time
        payment, or any part thereof, of any of the Obligations is rescinded or
        recovered directly or indirectly from Lender or its respective successors,
        indorsees, transferees, and assignees as a preference, fraudulent transfer
        or
        otherwise, or must otherwise be restored or returned by Lender upon the
        insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrower
        or any Guarantor, or upon or as a result of the appointment of a receiver,
        intervenor or conservator of, or trustee or similar officer for, Borrower
        or any
        Guarantor or any substantial part of its property, or otherwise, all as though
        such payments had not been made.

       

      (b)  So
        long
        as any Obligations remain outstanding, no Guarantor shall, without the prior
        written consent of Lender, commence or join with any other Person in commencing
        any bankruptcy, reorganization or insolvency case or proceeding of or against
        Borrower or any other Guarantor. The obligations of Guarantors hereunder
        shall
        not be reduced, limited, impaired, discharged, deferred, suspended or terminated
        by any case or proceeding, voluntary or involuntary, involving the bankruptcy,
        insolvency, receivership, reorganization, liquidation or arrangement of Borrower
        or any other Guarantor or by any defense which Borrower or any other Guarantor
        may have by reason of the order, decree or decision of any court or
        administrative body resulting from any such proceeding.

       

      4.7  Subordination
        of Other Obligations. Any
        Indebtedness of Borrower or any Guarantor now or hereafter held by any Guarantor
        (the “Obligee
        Guarantor”)
        is
        hereby 

       

      
        
           

          
          

        

        
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      subordinated
        in right of payment to the Obligations, and any such indebtedness collected
        or
        received by the Obligee Guarantor after an Event of Default has occurred
        and is
        continuing shall be held in trust and shall forthwith be paid over for the
        benefit of Lender and its respective successors, indorsees, transferees and
        assigns to be credited and applied against the Obligations but without
        affecting, impairing or limiting in any manner the liability of the Obligee
        Guarantor under any other provision hereof.

       

      4.8  Subrogation.
        Each
        Guarantor agrees that it shall not be entitled to any right of subrogation
        in
        relation to Lender in respect of any of the Obligations until payment in
        full of
        all Obligations guaranteed hereby. Each Guarantor further agrees that, as
        between the Guarantors, on the one hand, and Lender, on the other hand, (a)
        the
        maturity of the Obligations guaranteed hereby may be accelerated as provided
        in
Article
        9
        hereof
        for the purposes of the Subsidiary Guarantees, notwithstanding any stay,
        injunction or other prohibition preventing such acceleration in respect of
        the
        obligations guaranteed hereby, and (b) in the event of any declaration of
        acceleration of such obligations, such obligations (whether or not due and
        payable) shall forthwith become due and payable by the Guarantors for the
        purpose of the Subsidiary Guarantees.

       

      4.9  Limitation
        on Guarantor Liability.
        Each
        Guarantor, and by its acceptance of the Note, Lender, hereby confirms that
        it is
        the intention of all such parties that the Subsidiary Guarantee of such
        Guarantor not constitute a fraudulent transfer or conveyance for purposes
        of any
        law or statute relating to bankruptcy, the Uniform Fraudulent Conveyance
        Act,
        the Uniform Fraudulent Transfer Act or any similar federal or state law to
        the
        extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
        intention, Lender and the Guarantors hereby irrevocably agree that the
        obligations of such Guarantor shall be limited to the maximum amount that
        shall,
        after giving effect to such maximum amount and all other contingent and fixed
        liabilities of such Guarantor that are relevant under such laws, and after
        giving effect to any collections from, rights to receive contribution from
        or
        payments made by or on behalf of any other Guarantor in respect of the
        obligations of such other Guarantor under this Article
        3,
        result
        in the obligations of such Guarantor under its Subsidiary Guarantee not
        constituting a fraudulent transfer or conveyance.

       

      4.10  Additional
        Subsidiary Guarantees. In
        the
        event that Borrower creates or acquires any Subsidiary after the date of
        this
        Agreement, then that newly acquired or created Subsidiary shall become a
        Guarantor, and execute a counterpart signature page to this Agreement to
        secure
        the Subsidiary Guarantee. Such newly acquired or created Subsidiary shall
        also
        execute all security agreements (including an Intellectual Property Security
        Agreement) reasonably requested by Lender to secure its interest in the
        Collateral, and such documents and filings as reasonably requested by Lender
        to
evidence
        the perfection and first priority of the security interests in the Collateral
        subject to Permitted Liens.
        Borrower shall cause such Subsidiary to comply with the provisions of this
        Section
        4.10
        and this
Article
        4,
        to the
        extent applicable. 

       

      5.  Creation
        Of Security Interest

       

      5.1  Creation
        of Security Interest

       

      
        
           

          
          

        

        
          -
            16
            -

          
            

          

        

        
          
          

        

      

      .
        This
        Agreement constitutes a “security agreement” within the meaning of the UCC.
In
        order
        to secure the payment and performance of the Obligations, each
        Grantor hereby grants,
        assigns, transfers, pledges, and sets over
        to
        Lender, subject to the Permitted Liens, a
        first-priority security interest in and Lien on all of that Grantor’s
        right, title and interest in and to the Collateral, in each case whether
        now
        owned or hereafter at any time acquired by the Grantor and wherever
        located.  

       

      5.2  Perfection
        of Security Interests

       

      .

       

      (a)  Filing
        of Financing Statements. 
        Without
        limiting any rights of Lender under the UCC, each Grantor hereby
        authorizes Lender to file one or more financing or continuation statements,
        and
        amendments thereto, including one or more financing statements indicating
        that
        such financing statements cover all assets or all personal property (or words
        of
        similar effect) of such Grantor,
        in each
        case without the signature of such Grantor,
        and
        regardless of whether any particular asset described in such financing
        statements falls within the scope of the UCC or the granting clause of this
        Agreement. 

       

      (b)  PTO
        Filings.
        On a
        continuing basis, each Grantor
        shall
        make, execute, acknowledge and deliver, and file and record in the proper
        filing
        and recording places, all such instruments and documents, including any
        documents for filing with the PTO, the Copyright Office or any applicable
        state
        office as Lender may reasonably request. Lender may record this Agreement,
        an
        abstract thereof, or any other document describing Lender’s interest in the
        Collateral with the PTO or the Copyright
        Office
        at the
        expense of Lender. 

       

      5.3  Duration
        of Security Interest

       

      .
        Each
        Grantor agrees that this Agreement shall create a continuing security interest
        in the Collateral which shall remain in effect until the payment in full
        and the
        satisfaction of all Obligations, whereupon such security interest shall
        terminate. Notwithstanding anything to the contrary herein, the security
        interest created by this Agreement (including all representations, warranties
        and covenants contained herein) shall continue to be effective or be reinstated,
        as the case may be, if at any time any amount received by Lender in respect
        of
        the Obligations is rescinded or must otherwise be restored or returned by
        Lender
        or its respective successors, indorsees, transferees and assignees as a
        preference, fraudulent transfer or otherwise, or must be restored or redeemed
        by
        Lender upon or as a result of, the appointment of a receiver, intervenor
        or
        conservator of, or trustee or similar officer for any Grantor or any substantial
        part of its property, or otherwise, all as though such payments had not been
        made. Upon termination of the security interest, Lender shall, at the Grantors’
sole cost and expense, execute such further documents and take such further
        actions as may be necessary to effect the release contemplated by this
Section
        5.3,
        including duly executing and delivering termination statements for filing
        in all
        relevant jurisdictions under the UCC. Notwithstanding anything to the contrary
        herein, upon the factoring of any of the Grantor’s accounts and receivables in
        the ordinary course of business and consistent with past practices, Lender’s
        security interest in such accounts and receivables will be automatically
        released and of no further force and effect.

       

      
        
          
          

        

        
          -
            17
            -

          
            

          

        

        
          
          

        

      

      5.4  Possession
        of Collateral

       

      .
        So long
        as no Event of Default has occurred and is continuing, each Grantor shall
        remain
        in full possession, enjoyment and control of its Collateral (except only
        as may
        be otherwise required by Lender for perfection of its security interest therein)
        and shall be entitled to manage, operate and use the same and each part thereof
        with the rights and franchises appertaining thereto; provided,
        however,
        that
        the possession, enjoyment, control and use of the Collateral shall at all
        times
        be subject to the observance and performance of the terms of this
        Agreement.

       

      5.5  Delivery
        of Additional Documentation Required

       

      .
        Each
        Grantor shall from time to time execute and deliver to Lender, all documents
        Lender may reasonably request, in form satisfactory to Lender, to perfect
        and
        continue Lender’s first priority, perfected security interests in the Collateral
        (subject to Permitted Liens) and in order to consummate fully all of the
        transactions contemplated under the Loan Documents.

       

      5.6  Right
        to Inspect

       

      .
        Lender
        (through any of its officers, employees, or agents) shall have the right,
        upon
        reasonable prior notice, from time to time during any Grantor’s usual business
        hours, to inspect such Grantor’s Books and to make copies thereof and to check,
        test, and appraise the Collateral in order to verify such Grantor’s financial
        condition or the amount, condition of, or any other matter relating to, the
        Collateral.

       

      5.7  Authorization
        to Supplement

       

      .
        If any
        Grantor shall obtain rights to any new Intellectual Property, including any
        patentable inventions or become entitled to the benefit of any patent
        application or patent for any reissue, division, or continuation, of any
        patent,
        the provisions of this Agreement shall automatically apply thereto. Such
        Grantor(s) shall give prompt notice in writing to Lender with respect to
        any
        such new Intellectual Property rights. Without limiting the Grantors’
obligations under this Section
        5.7,
        each
        Grantor authorizes Lender unilaterally to modify this Agreement by amending
        Schedule
        6.8
        to
        include any such new patent rights. Notwithstanding the foregoing, no failure
        to
        so modify this Agreement or amend Schedule
        6.8
        shall in
        any way affect, invalidate or detract from Lender’s continuing security interest
        in all Collateral, whether or not listed on Schedule
        6.8.

       

      6.  Representations
        And Warranties

       

      Each
        Grantor, jointly and severally, represents and warrants as follows:

       

      6.1  Due
        Organization and Qualification

       

      .
        Each
        Grantor
        (a) is
        duly organized and validly existing under the laws of the State of Delaware
        and
        (b) is duly qualified to do business and is in good standing in all other
        jurisdictions in which the nature of its business or the ownership or leasing
        of
        its properties makes such authorization or qualification necessary except
        for
        such jurisdictions where the failure to be so 

       

      
        
           

           

          
          

        

        
          -
            18
            -

          
            

          

        

        
          
          

        

      

      authorized
        or qualified could not materially adversely effect such Grantor’s
        ability
        to satisfy its obligations under this Agreement and the Loan.

       

      6.2  Authority

       

      .
        Each
        Grantor has all necessary power and authority to execute, deliver, and perform
        in accordance with the terms thereof, the Loan Documents to which it is a
        party.
        Each Grantor
        has the
        power and authority, and the legal right, to own and operate its property,
        to
        lease the property it operates as lessee or lessor and to conduct the business
        in which it is presently engaged and presently proposes to engage.

       

      6.3  Subsidiaries

       

      .
        No
        Grantor has any Subsidiaries, except those listed in Schedule
        6.3
        hereto.

       

      6.4  Conflict
        with Other Instruments, etc

       

      .
        Neither
        the execution and delivery of any Loan Document to which any Grantor is a
        party
        nor the consummation of the transactions therein contemplated nor compliance
        with the terms, conditions and provisions thereof will conflict with or result
        in a breach of (a) any of the terms, conditions or provisions of the articles
        of
        incorporation and the by-laws, or other organizational documents of such
        Grantor
        or (b) any law or any regulation, order, writ, injunction or decree of any
        court
        or Governmental Authority or (c) any material agreement or instrument to
        which
        such Grantor is a party or by which it or any of its properties is bound
        or to
        which it or any of its properties is subject, or constitute a default
        thereunder, except to the extent that such conflict, breach or default could
        not
        reasonably be expected to have a material adverse effect on the ability of
        such
        Grantor to perform its obligations under this Agreement, or result in the
        creation or imposition of any Lien, other than Permitted Liens.

       

      6.5  Authorization;
        Enforceability

       

      .
        Each
        Grantor
        has the
        power and authority, and the legal right, to make, execute, deliver and perform
        the Loan Documents, borrow or guaranty each Loan hereunder, as the case may
        be,
        and to consummate the transactions contemplated hereby and thereby, and such
        Grantor
        has
        taken all necessary action to authorize the execution, delivery and performance
        of the Loan Documents, the borrowing of each Loan on the terms and conditions
        of
        this Agreement, and the consummation of the transactions contemplated hereby
        and
        thereby. No consent or authorization of, filing with, notice to or other
        similar
        act by or in respect of, any Governmental Authority or any other Person is
        required to be obtained or made by or on behalf of such Grantor
        in
        connection with the execution, delivery, performance, validity or enforceability
        of the Loan Documents to which it is a party, the borrowing or the guaranty
        of
        such Loan hereunder, as the case may be, or the consummation of the transactions
        contemplated hereby and thereby. Each of the Loan Documents has been duly
        executed and delivered by such Grantor. Each of the Loan Documents constitutes
        a
        legal, valid and binding obligation of such Grantor
        enforceable against such
        Grantor
        in
        accordance with its respective terms.

       

      6.6  No
        Prior Encumbrances

       

      
        
           

           

          
          

        

        
          -
            19
            -

          
            

          

        

        
          
          

        

      

      .
        Each
        Grantor has good and indefeasible title to the Collateral consisting of
        Intellectual Property held by it, free and clear of all Liens except for
        the
        first priority lien held by the Lender and Permitted Liens of the type described
        in clauses (a), (b), (d) and (e) of the definition of Permitted Liens contained
        herein. Each Grantor has good and indefeasible title to all other Collateral
        held by it, free and clear of all Liens except for the first priority lien
        held
        by the Lender and Permitted Liens. 

       

      6.7  Name;
        Location of Chief Executive Office, Principal Place of Business and
        Collateral

       

      .
        No
        Grantor has done business under any name other than that specified on the
        signature page hereof. The chief executive office, principal place of business,
        and the place where each Grantor maintains its records concerning the Collateral
        are presently located at the addresses set forth on Schedule 6.7.
        All of
        the tangible Collateral, including the books and records related thereto,
        is
        presently located at the addresses set forth on Schedule
        6.7.

       

      6.8  Intellectual
        Property

       

      .
        A true,
        correct and complete list of all of the existing Collateral consisting of
        patents and patent applications or registrations, registered trademarks and
        registered copyrights owned by each Grantor, in whole or in part, is set
        forth
        in Schedule
        6.8.
        No
        claim of infringement has been made or threatened in writing or otherwise
        with
        respect to any of Borrower’s Intellectual Property. 

       

      6.9  Litigation

       

      .
        To
        Grantors’ knowledge, there are no actions or proceedings pending by or against
        Borrower before any court or administrative agency in which an adverse decision
        could have a material adverse effect on the Grantors, taken as a whole, or
        the
        aggregate value of the Collateral. No Grantor has knowledge of any such
        threatened actions or proceedings. Borrower will promptly notify Lender in
        writing if any action, proceeding or governmental investigation involving
        a
        Grantor is commenced that may result in damages or costs to the Grantors,
        taken
        as a whole, of $50,000 or more in the aggregate.

       

      6.10  Liabilities

       

      .
        Other
        than with respect to the Loan, Grantors do not have any Indebtedness except
        as
        described on Schedule
        6.10.

       

      6.11  Financial
        Statements

       

      .
        The
        Borrower Financial Statements present fairly in all material respects Borrower’s
        consolidated financial condition as of the dates thereof and Borrower’s
        consolidated results of operations at the dates and during the periods indicated
        therein in accordance with GAAP (subject, in the case of unaudited statements,
        to normal, recurring year-end adjustments). The Borrower Financial Statements
        complied as to form in all material respects with applicable accounting
        requirements and with the published rules and regulations of the SEC with
        respect thereto as of their respective dates, and have been prepared in
        accordance with GAAP applied on 

       

      
        
           

          
          

        

        
          -
            20
            -

          
            

          

        

        
          
          

        

      

      a
        basis
        consistent throughout the periods indicated and consistent with each other
        (except as may be expressly indicated in the notes thereto or, in the case
        of
        unaudited statements included in Quarterly Reports on Forms 10-QSB, as permitted
        by Form 10-QSB of the SEC).

       

      6.12  Solvency

       

      .
        Borrower and each of its Subsidiaries is solvent and able to pay its debts
        (including trade debts) as they mature.

       

      6.13  Taxes

       

      .
        Borrower
        has filed all federal, state and local, domestic or foreign Tax Returns and
        all
        other Tax Returns that are required to be filed by it and it has paid all
        Taxes
        due pursuant to such returns or pursuant to any deficiency, notice of proposed
        assessment, audit, assessment or other similar notice received by it in writing
        other than those being contested in good faith in appropriate proceedings
        and
        for which reserves have been established in the Borrower Financial Statements
        and any other financial statements of Borrower delivered to Lender prior
        to the
        date hereof. There are no audits, assessments or claim for assessments, and
        no
        basis upon which such a claim can be made to the best knowledge of Borrower
        after reasonable review and due inquiry. The charges, accrual and reserves
        on
        Borrower’s books and records in respect of Taxes are adequate. Borrower has not
        given or been requested to give a waiver of the statute of limitations relating
        to the payment of federal or other Taxes or the audit of any Tax
        period.

       

      6.14  Full
        Disclosure

       

      .
        No
Grantor
        has knowledge of any fact that could materially adversely affect the ability
        of
        any Grantor to perform its obligations under this Agreement, the Note or
        the
        other Loan Documents or which could result in an Event of Default.

       

      7.  Affirmative
        Covenants

       

      Each
        Grantor covenants and agrees that, until the full and complete payment of
        the
        Obligations, such Grantor shall do all of the following:

       

      7.1  Payment
        of Obligations

       

      .
        Pay,
        discharge or otherwise satisfy at or before maturity or before they become
        delinquent, as the case may be, all of its obligations of whatever nature,
        except where the amount or validity thereof is currently being contested
        in good
        faith by appropriate proceedings diligently conducted and which are reserved
        against on Borrower’s Books and except for those obligations communicated by
        Borrower to Lender in writing to the extent Borrower has reached an agreement
        with the obligee of such obligations to extend the maturity date
        thereof.

       

      7.2  Good
        Standing

       

      .
        Maintain its corporate existence and its good standing in the State of Delaware
        and maintain qualification in each jurisdiction in which the failure to so
        qualify could reasonably be expected to have a material adverse effect on
        the
        financial condition, operations or business of the Grantors, taken as a
        whole.

       

      
        
          
          

        

        
          -
            21
            -

          
            

          

        

        
          
          

        

      

      7.3  Maintenance
        of Agreements

       

      .
        Maintain in force all licenses, approvals and agreements, the loss of which
        would reasonably be likely to have a material adverse effect on such Grantor’s
        ability to perform its obligations under this Agreement.

       

      7.4  Notice
        of Defaults

       

      .
        As soon
        as possible, and in any event within five days after the discovery of a Default
        or an Event of Default provide Lender with a certificate signed by a Responsible
        Officer setting forth the facts relating to or giving rise to such Default
        or
        Event of Default and the action which Borrower proposes to take with respect
        thereto.

       

      7.5  Taxes

       

      .
        Make
        due and timely payment or deposit of all federal, state, and local Taxes
        required of it by law or imposed upon any properties belonging to it, and
        each
        Grantor will make timely payment or deposit of all Tax payments and withholding
        Taxes required of it by applicable laws, including those laws concerning
        F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
        Taxes, and will, upon request, furnish Lender with proof reasonably satisfactory
        to Lender indicating that such Grantor has made such payments or deposits;
        provided
        that
        such Grantor need not make any payment if the amount or validity of such
        payment
        is contested in good faith by appropriate proceedings and is adequately reserved
        against by such Grantor.

       

      7.6  Use;
        Maintenance

       

      .
        At its
        expense, maintain the Collateral in good condition, reasonable wear and tear
        excepted, and comply in all material respects with all laws, rules and
        regulations to which the use and operation of the Collateral may be or become
        subject. So long as no Event of Default has occurred and is continuing, Grantors
        shall have the right to quietly possess and use the Collateral as provided
        herein without interference by Lender.

       

      7.7  Loss;
        Damage; Destruction and Seizure

       

      .
        Each
        Grantor shall bear the risk of the Collateral held by it being lost, stolen,
        destroyed, damaged beyond repair, rendered permanently unfit for use, or
        seized
        by a Governmental Authority for any reason whatsoever at any time until the
        expiration or termination of this Agreement.

       

      7.8  Further
        Assurances

       

      .
        At any
        time and from time to time Borrower shall, at its expense, execute and deliver
        such further instruments and take such further action as may reasonably be
        requested by Lender (including
        obtaining any bailee acknowledgments required by Lender), in order to perfect
        and protect the security interests granted or purported to be granted hereby
        and
        to enable Lender to exercise and enforce its rights and remedies hereunder
        with
        respect to any Collateral.

       

      
        
          
          

        

        
          -
            22
            -

          
            

          

        

        
          
          

        

      

      8.  Negative
        Covenants

       

      Each
        Grantor covenants and agrees that until the full and complete payment of
        the
        Obligations, such Grantor will not do any of the following:

       

      8.1  Chief
        Executive Office; Location of Collateral

       

      .
        During
        the continuance of this Agreement, change the chief executive office or
        principal place of business or remove or cause to be removed the Collateral
        or
        the records concerning the Collateral from the premises listed on Schedule
        6.7 without
        10 days prior written notice to Lender.

       

      8.2  Change
        of Name or State of Incorporation

       

      .
        Change
        such Grantor’s name or state of incorporation.

       

      

       

      8.3  Limitation
        on Indebtedness

       

      .
        Create,
        incur, assume or suffer to exist any Indebtedness, except:

       

      (a)  Indebtedness
        of each Grantor under this Agreement
        and the
        Original Loan and Security Agreement; 

       

      (b)  other
        Indebtedness (including accrued interest thereon) outstanding on the original
        Funding Date and listed on Schedule
        6.10 and
        any
        refinancing thereof, provided
        that
        such refinancing does not increase the principal amount of the Indebtedness
        being refinanced or the interest rate applicable thereto; and

       

      (c)  Indebtedness
        not to exceed $100,000 in the aggregate at any time outstanding.

       

      8.4  Liens

       

      .
        Create,
        incur, assume or suffer to exist any Lien or any other encumbrance of any
        kind
        with respect to any of its Property, whether now owned or hereafter acquired,
        except for Permitted Liens.

       

      9.  Events
        Of Default

       

      Any
        one
        or more of the following events shall constitute an Event of Default under
        this
        Agreement:

       

      9.1  Payment
        Default

       

      .
        If
        Borrower fails to pay when due and payable or when declared due and payable
        in
        accordance with the Loan Documents, any portion of the Obligations.

       

      9.2  Certain
        Covenant Defaults

       

      
        
           

           

          
          

        

        
          -
            23
            -

          
            

          

        

        
          
          

        

      

      .
        If any
        Grantor fails to perform any obligation under Section
        7.6,
        or
        violates any of the covenants contained in Article
        8
        of this
        Agreement.

       

      9.3  Other
        Covenant Defaults

       

      .
        If any
        Grantor fails or neglects to perform, keep, or observe any other term,
        provision, condition, covenant, or agreement contained in this Agreement,
        in any
        of the other Loan Documents, or in any other present or future agreement
        between
        any Grantor and Lender that does not provide for a specific exception from
        this
Section
        9.3,
        and as
        to any default under such other term, provision, condition, covenant or
        agreement that can be cured, has failed to cure such default within 15 Business
        Days after Borrower’s
        knowledge of the
        occurrence of such default.

       

      9.4  Material
        Adverse Effect

       

      .
        If
        following the date hereof there occurs an event, act, condition or change
        which
        had, has or could reasonably be expected to (a) materially impair the prospects
        of repayment of any portion of the Obligations owing to Lender or a material
        impairment of the value or priority of Lender’s security interests in the
        Collateral or
        (b) materially impair any right or remedy of the Lender under any Loan
        Document.

       

      9.5  Other
        Agreements

       

      .
        Default
        shall be made with respect to any payment of any Indebtedness of Borrower
        under
        the Original Loan and Security Agreement or other Indebtedness in excess
        of
        $50,000 when due or the performance of any covenant, agreement or other
        obligation incurred in connection with any such Indebtedness, if the effect
        of
        such default is to permit the acceleration of the maturity of such Indebtedness
        and such default shall not be remedied, cured, waived or consented to by
        the
        holder of such Indebtedness within the applicable grace
        period, or any other circumstances arise (other than the mere passage of
        time)
        by reason of which Borrower is required to repurchase or offer to holders
        of
        Indebtedness of any such Person, the opportunity to have purchased, any such
        Indebtedness.

       

      9.6  Judgments

       

      .
        Final
        judgment for the payment of money shall be rendered by a court of competent
        jurisdiction against a Grantor
        and
        such
Grantor
        shall
        not
        discharge the same or provide for its discharge in accordance with its terms,
        or
        procure a stay of execution thereof within 10 days from the date of entry
        thereof and within a period of 30 days, or such longer period during which
        execution of such judgment shall have been stayed, appeal therefrom and cause
        the execution thereof to be stayed during such appeal, and such judgment
        together with all other such judgments of the Borrower or its Subsidiaries
        shall
        exceed in the aggregate $50,000.

       

      9.7  Misrepresentations

       

      .
        If any
        warranty, representation, statement, or report made to Lender by any Grantor
        or
        any officer, employee, agent, or director of a Grantor is untrue in any material
        respect when made.

       

      9.8  Enforceability

       

      
        
           

           

          
          

        

        
          -
            24
            -

          
            

          

        

        
          
          

        

      

      .
        If any
        Loan Document shall in any material respect cease to be, or any Grantor shall
        assert that any Loan Document is not, a legal, valid and binding obligation
        of
        such Grantor enforceable against it in accordance with its terms. If
the
        Loan
        Documents shall, for any reason, not give or shall cease to give Lender a
        perfected Lien in all of the Collateral with the priority contemplated by
        such
        Loan Documents and subject to no other Liens (except for Permitted Liens),
        other
        than by actions of the Lender.

       

      9.9  Bankruptcy
        or Insolvency

       

      .

       

      (a)  A
        Grantor
        shall commence any case, proceeding or other action (i) under any existing
        or
        future law or statute of any jurisdiction, domestic or foreign, relating
        to
        bankruptcy, insolvency, reorganization or relief of debtors, seeking to have
        an
        order for relief entered with respect to it, or seeking to adjudicate it
        a
        bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
        winding-up, liquidation, dissolution, composition or other relief with respect
        to it or its debts, or (ii) seeking appointment of a receiver, trustee,
        custodian, conservator or other similar official for it or for all or any
        substantial part of its Property, or a Grantor shall make a general assignment
        for the benefit of its creditors; 

       

      (b)  There
        shall be commenced against a Grantor any case, proceeding or other action
        of a
        nature referred to in clause (a) above which (i) results in the entry of
        an
        order for relief or any such adjudication or appointment or (ii) remains
        undismissed, undischarged, unstayed or unbonded for a period of 30 days;
        

       

      (c)  There
        shall be commenced against a Grantor any case, proceeding or other action
        seeking issuance of a warrant or writ of attachment, execution, distraint
        or
        similar process against all or any substantial part of its Property which
        results in the entry of an order for such relief which shall not have been
        vacated, discharged, stayed or bonded pending appeal within 30 days from
        the
        entry thereof; 

       

      (d)  A
        Grantor
        shall take any corporate action in furtherance of, or indicating its consent
        to,
        approval of or acquiescence in, any of the acts set forth in clause (a),
        (b), or
        (c) above; or 

       

      (e)  a
        Grantor
        shall be generally unable to, or shall admit its general inability to, pay
        its
        debts (except
        for those debts communicated by Borrower to Lender in writing to the extent
        Borrower has reached an agreement with the obligee of such debts to extend
        the
        maturity date thereof) as they become due.

       

      9.10  Extraordinary
        Corporate Transaction

       

      .
        If
        there shall occur any Extraordinary Corporate Transaction.

       

      10.  Lender’s
        Rights And Remedies

       

      10.1  Rights
        and Remedies

       

      
        
           

           

          
          

        

        
          -
            25
            -

          
            

          

        

        
          
          

        

      

      .
        Upon
        the occurrence and during the continuance of an Event of Default, Lender
        may
        terminate or suspend its Commitment. In addition, upon the occurrence and
        during
        the continuance of an Event of Default, Lender shall have the rights, options,
        duties and remedies of a secured party as permitted by law and, in addition
        to
        and without limitation of the foregoing, Lender may, at its election, without
        notice of election and without demand, do any one or more of the following,
        all
        of which are authorized by the Grantors:

       

      (a)  Declare
        all Obligations, whether evidenced by this Agreement, by any of the other
        Loan
        Documents, or otherwise, including the outstanding principal amount of
each
        Loan, immediately due and payable (provided that upon the occurrence of an
        Event
        of Default described in Section
        9.9
        all
        Obligations shall become immediately due and payable without any action by
        Lender);

       

      (b)  Without
        notice to or demand upon any Grantor, make such payments and do such acts
        as
        Lender considers necessary or reasonable to protect its security interest
        in the
        Collateral. Each Grantor agrees to assemble the Collateral if Lender so
        requires, and to make the Collateral available to Lender as Lender may
        designate. Each Grantor authorizes Lender to enter the premises where the
        Collateral is located, to take and maintain possession of the Collateral,
        or any
        part of it, and to pay, purchase, contest, or compromise any Lien which in
        Lender’s determination appears to be prior or superior to its security interest
        and to pay all expenses incurred in connection therewith. With respect to
        any of
        the Grantors’ owned premises, such Grantor hereby grants Lender a license to
        enter into possession of such premises and to occupy the same, without charge,
        for up to 120 days in order to exercise any of Lender’s rights or remedies
        provided herein, at law, in equity, or otherwise;

       

      (c)  Without
        notice to any Grantor, set off and apply to the Obligations any and all
        Indebtedness at any time owing to or for the credit or the account of a
        Grantor;

       

      (d)  Ship,
        reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
        for sale, and sell (in the manner provided for herein) the Collateral. Lender
        is
        hereby granted a license or other right, solely pursuant to the provisions
        of
        this Section
        10.1,
        to
        use,
        without charge, Grantors’ labels, patents, copyrights, rights of use of any
        name, trade secrets, trade names, trademarks, service marks, and advertising
        matter, or any Property of a similar nature, as it pertains to the Collateral,
        in completing production of, advertising for sale, and selling any Collateral
        and, in connection with Lender’s exercise of its rights under this Section
        10.1,
        Grantors’
        rights under all licenses and all franchise agreements shall inure to Lender’s
        benefit;

       

      (e)  Sell
        the
        Collateral at either a public or private sale, or both, by way of one or
        more
        contracts or transactions, for cash or on terms, in such manner and at such
        places (including Grantors’ premises) as Lender determines are commercially
        reasonable;

       

      (f)  Lender
        may credit bid and purchase at any public sale; and

       

      (g)  Any
        deficiency that exists after disposition of the Collateral as provided above
        will be paid immediately by the Grantors.

       

      
        
          
          

        

        
          -
            26
            -

          
            

          

        

        
          
          

        

      

      10.2  Waiver
        by Grantors

       

      .
        Upon
        the occurrence and during the continuance of an Event of Default, to the
        extent
        permitted by law, each Grantor covenants that it will not at any time insist
        upon or plead, or in any manner whatever claim or take any benefit or advantage
        of, any stay or extension law now or at any time hereafter in force, nor
        claim,
        take nor insist upon any benefit or advantage of or from any law now or
        hereafter in force providing for the valuation or appraisement of the Collateral
        or any part thereof prior to any sale or sales thereof to be made pursuant
        to
        any provision herein contained, or to the decree, judgment or order of any
        court
        of competent jurisdiction; nor, after such sale or sales, claim or exercise
        any
        right under any statute now or hereafter made or enacted by any state or
        otherwise to redeem the Property so sold or any part thereof, and, to the
        full
        extent legally permitted, except as to rights expressly provided herein,
        hereby
        expressly waives for itself and on behalf of each and every Person, except
        decree or judgment creditors of such Grantor acquiring any interest in or
        title
        to the Collateral or any part thereof subsequent to the date of this Agreement,
        all benefit and advantage of any such law or laws, and covenants that it
        will
        not invoke or utilize any such law or laws or otherwise hinder, delay or
        impede
        the execution of any power herein granted and delegated to Lender, but will
        suffer and permit the execution of every such power as though no such power,
        law
        or laws had been made or enacted.

       

      10.3  Lender
        to Hold in Trust

       

      .
        Upon
        the occurrence and during the continuance of an Event of Default, each Grantor
        will, upon receipt by it of any revenue, income, profits or other sums in
        which
        a security interest is granted hereunder, payable pursuant to any agreement
        or
        otherwise, or of any check, draft, note, trade acceptance or other instrument
        evidencing an obligation to pay any such sum, hold the sum or instrument
        in
        trust for Lender, segregate such sum or instrument from its own assets and
        forthwith, without any notice, demand or other action whatsoever (all notices,
        demands, or other actions on the part of the Lender being expressly waived),
        endorse, transfer and deliver any such sums or instruments or both, to Lender
        to
        be applied to the repayment of the Loans in accordance with the provisions
        of
        this Agreement.

       

      10.4  Effect
        of Sale

       

      .
        Any
        sale, whether under any power of sale hereby given or by virtue of judicial
        proceedings, shall operate to divest all right, title, interest, claim and
        demand whatsoever, either at law or in equity, of Grantors in and to the
        Property sold, and shall be a perpetual bar, both at law and in equity, against
        Grantors, their successors and assigns, and against any and all Persons claiming
        the Property sold or any part thereof under, by or through Grantors, their
        successors or assigns.

       

      10.5  Power
        of Attorney in Respect of the Collateral

       

      .
        Each
        Grantor does hereby irrevocably appoint Lender (which appointment is coupled
        with an interest) on the occurrence and continuance of an Event of Default,
        the
        true and lawful attorney in fact of such Grantor with full power of
        substitution, for it and in its name: (a) to ask, demand, collect, receive,
        receipt for, sue for, compound and give acquittance for any and all rents,
        issues, profits, avails, distributions, income, payment draws and other sums
        in
        which a security interest is granted under Section
        5
        with
        full power to settle, adjust or compromise any 

       

      
        
           

           

          
          

        

        
          -
            27
            -

          
            

          

        

        
          
          

        

      

      claim
        thereunder as fully as if Lender were a “Grantor” itself, (b) to receive payment
        of and to endorse the name of a Grantor to any items of Collateral (including
        checks, drafts and other orders for the payment of money) that come into
        Lender’s possession or under Lender’s control, (c) to make all demands, consents
        and waivers, or take any other action with respect to, the Collateral, (d)
        in
        Lender’s discretion to file any claim or take any other action or proceedings,
        either in its own name or in the name of such Grantor or otherwise, which
        Lender
        may reasonably deem necessary or appropriate to protect and preserve the
        right,
        title and interest of Lender in and to the Collateral, or (e) to otherwise
        act
        with respect thereto as though Lender were the outright owner of the
        Collateral.

       

      10.6  Remedies
        Cumulative

       

      .
        Lender’s rights and remedies under this Agreement, the Loan Documents, and all
        other agreements shall be cumulative. Lender shall have all other rights
        and
        remedies not inconsistent herewith as provided under the UCC, by law, or
        in
        equity. No exercise by Lender of one right or remedy shall be deemed an
        election, and no waiver by Lender of any Event of Default on Borrower’s part
        shall be deemed a continuing waiver. No delay by Lender shall constitute
        a
        waiver, election, or acquiescence by it.

       

      10.7  Application
        of Collateral Proceeds

       

      .
        The
        Proceeds of the Collateral, or any part thereof, and the proceeds and the
        avails
        of any remedy hereunder (as well as any other amounts of any kind held by
        Lender
        at the time of or received by Lender after, the occurrence of an Event of
        Default hereunder) shall be paid to and applied as follows:

       

      (a)  First,
        to
        the
        payment of any Lender’s Expenses;

       

      (b)  Second,
        to
        the
        payment to Lender of the amount then owing or unpaid on the Loans and all
        other
        Obligations with respect to each Loan, and if such proceeds shall be
        insufficient to pay in full the whole amount so due, owing or unpaid upon
        the
        Loans, then to the unpaid interest thereon, then to the unpaid principal
        amount
        of the Loans, and then to the payment of other amounts then payable to Lender
        under any of the Loan Documents; and

       

      (c)  Third,
        to
        the
        payment of the surplus, if any, to the applicable Grantor, its successors
        and
        assigns, or to whomsoever may be lawfully entitled to receive the
        same.

       

      10.8  Reinstatement
        of Rights

       

      .
        If
        Lender shall have proceeded to enforce any right under this Agreement or
        any
        other Loan Document by foreclosure, sale, entry or otherwise, and such
        proceedings shall have been discontinued or abandoned for any reason or shall
        have been determined adversely, then and in every such case (unless otherwise
        ordered by a court of competent jurisdiction), Lender shall be restored to
        its
        former position and rights hereunder with respect to the Property subject
        to the
        security interest created under this Agreement.

       

      10.9  Lender’s
        Liability for Collateral

       

      
        
           

          
          

        

        
          -
            28
            -

          
            

          

        

        
          
          

        

      

      .
        So long
        as Lender complies with its obligations, if any, under Section 9207 of the
        UCC,
        Lender shall not in any way or manner be liable or responsible for: (a) the
        safekeeping of the Collateral; (b) any loss or damage thereto occurring or
        arising in any manner or fashion from any cause; (c) any diminution in the
        value
        thereof; or (d) any act or default of any carrier, warehouseman, bailee,
        forwarding agency, or other Person whomsoever. All risk of loss, damage or
        destruction of the Collateral shall be borne by Grantors.

       

      10.10  Demand;
        Protest

       

      .
        Borrower waives demand, protest, notice of protest, notice of default or
        dishonor, notice of payment and nonpayment, notice of any default, nonpayment
        at
        maturity, release, compromise, settlement, extension, or renewal of accounts,
        documents, instruments, chattel paper, and guarantees at any time held by
        Lender
        on which Borrower may in any way be liable. 

       

      11.  Notices

       

      Unless
        otherwise provided in this Agreement, all notices or demands by any party
        relating to this Agreement or any other agreement entered into in connection
        herewith shall be in writing and (except for financial statements and other
        informational documents which may be sent by first-class mail, postage prepaid)
        shall be personally delivered or sent by certified mail, postage prepaid,
        return
        receipt requested, or by prepaid facsimile to Borrower and/or Guarantors
        or to
        Lender, as the case may be, at their respective addresses set forth
        below:

       

      If
        to
        Borrower: Trestle
        Holdings, Inc.

       

      or
        to any
        Guarantor: 199
        Technology Drive, Suite 105

       

      Irvine,
        California 92618

       

      Attention:
        Mr. Barry Hall

       

      FAX:
        (949) 673-1058

       

      If
        to
        Lender: Clarient,
        Inc.

       

      31
        Columbia

       

      Aliso
        Viejo, California 92656

       

      Attention:
        Mr. Jim Cureton

       

      FAX:
        (949)
        425-5701

       

      The
        parties hereto may change the address at which they are to receive notices
        hereunder, by notice in writing in the foregoing manner given to the
        other.

       

      12.  General
        Provisions

       

      12.1  Successors
        and Assigns

       

      .
        This
        Agreement shall bind and inure to the benefit of the respective successors
        and
        permitted assigns of each of the parties; provided, however, that neither
        this
        Agreement nor any rights hereunder may be assigned by Grantors without Lender’s
        prior written consent, which consent may be granted or withheld in Lender’s sole
        discretion. Lender shall have the right without the consent of or notice
        to any
        Grantor to sell, transfer, negotiate, or grant participations in all or any
        part
        of, or any interest in such Lender’s rights and benefits hereunder.

       

      
        
          
          

        

        
          -
            29
            -

          
            

          

        

        
          
          

        

      

      12.2  Time
        of Essence

       

      .
        Time is
        of the essence for the performance of all obligations set forth in this
        Agreement.

       

      12.3  Severability
        of Provisions

       

      .
        In
        case
        any provision of this Agreement shall be held to be invalid, illegal or
        unenforceable, it shall, to the extent possible, be modified in such manner
        as
        to be valid, legal and enforceable but so as to most nearly retain the intent
        of
        the parties, and if such modification is not possible, such provision shall
        be
        severed from this Agreement, and in either case the validity, legality and
        enforceability of the remaining provisions of this Agreement and the future
        application of such provision shall not in any way be affected or impaired
        thereby.

       

      12.4  Entire
        Agreement; Construction; Amendments and Waivers

       

      .

       

      (a)  This
        Agreement
        and each
        of the other Loan Documents dated as of the date hereof, taken together,
        constitute and contain the entire agreement between the Grantors and Lender
        and
        supersede any and all prior agreements, negotiations, correspondence,
        understandings and communications between the parties, whether written or
        oral,
        respecting the subject matter hereof.

       

      (b)  This
        Agreement is the result of negotiations between and has been reviewed by
        the
        Grantors and Lender executing this Agreement as of the date hereof and their
        respective counsel; accordingly,
        this
        Agreement shall be deemed to be the product of the parties hereto, and no
        ambiguity shall be construed in favor of or against Grantors or Lender.

       

      (c)  Any
        and
        all amendments, modifications, discharges or waivers of, or consents to any
        departures from any provision of this Agreement or of any of the other Loan
        Documents shall not be effective without the written consent of Lender. Any
        waiver or consent with respect to any provision of the Loan Documents shall
        be
        effective only in the specific instance and for the specific purpose for
        which
        it was given. No notice to or demand on any Grantor in any case shall any
        Grantor to any other or further notice or demand in similar or other
        circumstances. No delay or omission of Lender to exercise any right, whether
        before or after a default hereunder, shall impair any such right or shall
        be
        construed to be a waiver of any right or default, and the acceptance at any
        time
        by Lender of any past-due amount shall not be deemed to be a waiver of the
        right
        to require prompt payment when due of any other amounts then or thereafter
        due
        and payable.

       

      (d)  Any
        amendment, modification, waiver or consent effected in accordance with this
        Section
        12.4 shall
        be
        binding upon Lender and on the Grantors.

       

      12.5  Reliance
        by Lender

       

      
        
           

           

          
          

        

        
          -
            30
            -

          
            

          

        

        
          
          

        

      

      .
        All
        covenants, agreements, representations and warranties made herein by the
        Grantors, notwithstanding any investigation by Lender, be deemed to be material
        to and to have been relied upon by Lender.

       

      12.6  No
        Set-Offs by Grantors

       

      .
        All
        sums payable by the Grantors pursuant to this Agreement or any of the other
        Loan
        Documents shall be payable without notice or demand and shall be payable
        in
        United States Dollars without set-off or reduction of any manner
        whatsoever.

       

      12.7  Counterparts

       

      .
        This
        Agreement may be executed in any number of counterparts and by different
        parties
        on separate counterparts, each of which, when executed and delivered, shall
        be
        deemed to be-an original, and all of which, when taken together, shall
        constitute but one and the same Agreement.

       

      12.8  Survival

       

      .
        All
        covenants, representations and warranties made in this Agreement shall continue
        in full force and effect so long as any Obligations remain outstanding.

       

      12.9  Relationship
        of Parties

       

      .
        The
        Grantors and Lender acknowledge, understand and agree that the relationship
        between the Grantors and Lender is and at all time shall remain solely that
        of a
        borrower and lender or a guarantor and lender, as the case may be. Lender
        shall
        not under any circumstances be construed to be a partner or joint venturer
        of
        any Grantor or any of its Affiliates; nor shall Lender under any circumstances
        be deemed to be in a relationship of confidence or trust or a fiduciary
        relationship with any Grantor or any of its Affiliates, or to owe any fiduciary
        duty to any Grantor or any of its Affiliates. Lender does not undertake or
        assume any responsibility or duty to any Grantor or any of its Affiliates
        to
        select, review, inspect, supervise, pass judgment upon or otherwise inform
        any
        Grantor or any of its Affiliates of any matter in connection with its or
        their
        Property, any Collateral held by Lender or the operations of any Grantor
        or any
        of its Affiliates. Grantors and each of their Affiliates shall rely entirely
        on
        their own judgment with respect to such matters, and any review, inspection,
        supervision, exercise of judgment or supply of information undertaken or
        assumed
        by Lender in connection with such matters is solely for the protection of
        Lender, and neither any Grantor nor any of its Affiliates is entitled to
        rely
        thereon.

       

      12.10  Public
        Announcements

       

      .
        Grantors shall consult with and obtain the prior written consent of Lender
        before issuing any press release or otherwise making any public announcement,
        statement or acknowledgment of the existence of, or reveal publicly the terms,
        conditions and status of, the transactions provided for herein and shall
        not
        issue any such press release or make any such public statement prior to such
        consultation and consent; provided,
        however,
        that
        (1) following execution of this Agreement, Borrower shall be permitted to
        file a
        Current Report on Form 8-K 

       

      
        
           

           

          
          

        

        
          -
            31
            -

          
            

          

        

        
          
          

        

      

      with
        the
        U.S. Securities & Exchange Commission in the form agreed to by Borrower and
        Lender, and (2) in the event any material development or change related to
        or
        affecting this Agreement has occurred and Borrower in good faith determines
        that
        it is required by applicable law to make a press release or public announcement,
        such press release or public announcement shall not constitute a breach of
        this
        Agreement if Borrower shall have (a) given, to the extent reasonably possible,
        a
        copy of the proposed release or statement to Lender not less than two Business
        Days prior to its first use or publication, (b) attempted, to the extent
        reasonably possible, to clear such announcement, statement, acknowledgment
        or
        revelation with Lender and (c) considered in good faith any comments or changes
        Lender has offered to the proposed announcement or statement.

       

      12.11  Choice
        of Law and Venue; Jury Trial Waiver

       

      .
        THIS
        AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
        LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
        OF
        LAW. EACH OF THE GRANTORS AND LENDER HEREBY SUBMITS TO THE EXCLUSIVE
        JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF ORANGE,
        STATE OF CALIFORNIA. GRANTORS HEREBY
        WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
        SUCH
        SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL (RETURN RECEIPT REQUESTED)
        DIRECTED TO THEIR ADDRESS SET FORTH HEREIN AND SERVICE SO MADE SHALL BE DEEMED
        TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN
        THE
        U.S. MAILS, OR, AT LENDER’S OPTION, BY SERVICE UPON THE GRANTORS IN ANY OTHER
        MANNER PROVIDED UNDER THE RULES OF ANY SUCH COURTS. GRANTORS
        AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
        OR
        CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR
        ANY OF
        THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
        BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
        CLAIMS.

       

      12.12  No
        Obligation to Enter into Further
        Agreements

       

      .
        Each
        party acknowledges and agrees that this Agreement is not intended to create
        any
        legally binding obligations on the parties with respect to any transaction
        other
        than the transactions contemplated by this Agreement, and does not create
        any
        such legally binding obligations of any kind whatsoever with respect to entering
        into any potential strategic transaction between the parties. Neither the
        discussions or negotiations between the parties hereto nor this Agreement
        is
        intended to, and they do not, create any fiduciary or other special duties
        or
        other obligations between the parties hereto in any respect, including any
        implied covenant of good faith or fair dealing.

       

      [Signature
        page follows]

       

      
        
          
            

             

          

          
          

        

        
          -
            32
            -

          
            

          

        

        
          
          

          
          

        

      

      In
        Witness Whereof,
        the
        parties hereto have caused this Agreement to be executed as of the date first
        above written.

       

      

       

      
        	
                BORROWER:

                 

              	
                LENDER:

                 

              
	
                TRESTLE
                  HOLDINGS, INC.

                 

              	
                CLARIENT,
                  INC.

                 

              
	
                By:  

                 

                Name:  

                 

                Title:  

                 

              	
                By:  

                 

                Name:  

                 

                Title:  

                 

              
	
                 

                 

                GUARANTORS:

                 

                By
                  its signature, each of the undersigned consents to becoming a Guarantor
                  under this Agreement and affirms its obligation to be bound
                  hereby.

                 

              
	
                 

                 

                TRESTLE
                  ACQUISITION CORP. 

                 

              	
                 

                 

                __________________________
                  

                 

              
	 	 
	
                By:  

                 

                Name:  

                 

                Title:  

                 

              	
                By:  

                 

                Name:  

                 

                Title:  

                 

              

      

      

      
        
          
          

        

        
          -
            33
            -

          
            

          

        

        
          
          

        

      

      

      
        	
                Exhibits

                 

              	 
	 	
                A

              	
                Form
                  of Intellectual Property Security Agreement

              
	 	
                B

              	
                Form
                  of Note

              
	 	
                C

              	
                Form
                  of Notice of Borrowing

              
	 	 	 
	 	 
	
                Schedules:

                 

              	 
	 	
                1.1(a)

              	
                Existing
                  Liens

              
	 	
                6.3

              	
                Subsidiaries

              
	 	
                6.7

              	
                Location
                  of Records and Collateral

              
	 	
                6.8

              	
                Patents
                  and Patent Applications, Trademarks, Copyrights

              
	 	
                6.10

              	
                Existing
                  Indebtedness

              
	 	 	 

      

      

      

      

      

      

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

          

        

      

      Exhibit
        A

       

      INTELLECTUAL
        PROPERTY SECURITY AGREEMENT

       

      INTELLECTUAL
        PROPERTY SECURITY AGREEMENT (this “Agreement”)
        is
        entered into as of June 19, 2006 by and between by and between CLARIENT,
        INC., a
        Delaware corporation (“Lender”),
        and
        TRESTLE HOLDINGS, INC., a Delaware corporation (“Borrower”).

       

      RECITALS

       

      A. Lender
        has agreed to make certain advances of money from time to time and to extend
        certain financial accommodations to Borrower (the “Loan”)
        in the
        amount and manner set forth in that certain Second Loan and Security Agreement
        dated as of June 19, 2006 by and between Lender, Borrower and Guarantors
        (as the
        same may be amended, modified or supplemented from time to time, the
“Loan
        Agreement”).
        Capitalized terms not otherwise defined herein shall have the meanings ascribed
        to such terms in the Loan Agreement. Lender is willing to make the Loan to
        Borrower, but only upon the condition, among others, that Borrower shall
        grant
        to Lender a security interest in all of its copyrights, trademarks and patents
        to secure the obligations of Borrower under the Loan Agreement.

       

      B. Pursuant
        to the terms of the Loan Agreement, Borrower has granted to Lender a security
        interest in all of Borrower’s right, title and interest, whether presently
        existing or hereafter acquired, in, to and under all of the Collateral,
        including, without limitation, all of its copyrights, trademarks and
        patents.

       

      NOW,
        THEREFORE, for good and valuable consideration, receipt of which is hereby
        acknowledged, and intending to be legally bound, as collateral security for
        the
        prompt and complete payment when due of its obligations under the Loan Agreement
        and the other Loan Documents, Borrower hereby represents, warrants, covenants
        and agrees as follows:

       

      AGREEMENT

       

      To
        secure
        its obligations under the Loan Documents and under all other agreements now
        existing or hereafter arising between Borrower and Lender, Borrower assigns
        to
        Lender for security purposes, and grants and pledges to Lender, a security
        interest in all of Borrower’s right, title and interest in, to and under its
        Intellectual Property Collateral (including, without limitation, those
        copyrights, patents and trademarks listed on Schedules A, B and C hereto),
        together with the goodwill of the businesses associated with the trademarks,
        and
        including, without limitation, all proceeds thereof (such as, by way of example
        but not by way of limitation, license royalties and proceeds of infringement
        suits), the right to sue for past, present and future infringements, all
        rights
        corresponding thereto throughout the world and all re-issues, re-examinations,
        divisions continuations, renewals, termination rights, extensions and
        continuations-in-part thereof.

       

      This
        security interest is granted in conjunction with the security interest granted
        to Lender under the Loan Agreement. The rights and remedies of Lender with
        respect to the security interest granted hereby are in addition to those
        set
        forth in the Loan Agreement and the 

      
        
          A-

           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      other
        Loan Documents, and those which are now or hereafter available to Lender
        as a
        matter of law or equity. Each right, power and remedy of Lender provided
        for
        herein or in the Loan Agreement or any of the Loan Documents, or now or
        hereafter existing at law or in equity shall be cumulative and concurrent
        and
        shall be in a addition to every right, power or remedy provided for herein
        and
        the exercise by Lender of any one or more of the rights, powers or remedies
        provided for in this Agreement, the Loan Agreement or any of the other Loan
        Documents, or now or hereafter existing at law or in equity, shall not preclude
        the simultaneous or later exercise by any person or entity, including Lender,
        of
        any or all other rights, powers or remedies.

       

      Borrower
        represents and warrants that Schedules A, B, and C attached hereto set forth
        any
        and all intellectual property rights in connection to which Borrower has
        registered or filed an application with either the United States Patent and
        Trademark Office or the United States Copyright Office, as
        applicable.

       

      This
        Agreement may be executed in any number of counterparts, each of which when
        so
        executed shall be deemed to be an original and all of which counterparts
        together shall constitute one and the same instrument. 

       

      THIS
        AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
        SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
        INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY CONFLICT
        OF LAW PROVISIONS, EXCEPT TO THE EXTENT GOVERNED BY FEDERAL LAW, IN WHICH
        CASE
        FEDERAL LAW SHALL APPLY.

       

      This
        Agreement may not be amended, supplemented or modified, nor may the obligations
        of the parties hereto be waived, except pursuant to a writing signed by both
        Lender and Borrower.

       

      Borrower
        may not assign its rights or obligations under this Agreement or otherwise
        encumber or hypothecate its Intellectual Property Collateral without the
        consent
        of Lender. This Agreement shall be binding upon and inure to the benefit
        of
        Lender and Borrower and their respective successors and permitted
        assigns.

       

      

       

      [Signatures
        on Next Page]

      
        
          A-

           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties have caused this Intellectual Property Security
        Agreement to be duly executed by its officers thereunto duly authorized as
        of
        the first date written above.

       

      

      
        	
                BORROWER:

                 

              	
                LENDER:

                 

              
	
                TRESTLE
                  HOLDINGS, INC.

                 

              	
                CLARIENT,
                  INC.

                 

              
	 	 
	
                By:  

                 

                Name:  

                 

                Title:  

                 

              	
                By:  

                 

                Name:  

                 

                Title:  

                 

              
	
                Trestle
                  Holdings, Inc.

                 

                199
                  Technology Drive, Suite 105

                 

                Irvine,
                  California 92618

                 

                FAX:
                  (949) 673-1058

                 

              	
                Clarient,
                  Inc.

                 

                31
                  Columbia

                 

                Aliso
                  Viejo, California 92656

                 

                FAX:
                  (949) 425-5701

                 

              
	 	 

      

       

       

      

       

      

       

      

      
        
          A-

           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        A

       

      Registered
        Copyrights

       

      

       

      
        
          A-

           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      SCHEDULE
        B

       

      Patents

       

      

      

      
        
          A-

           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      SCHEDULE
        C

       

      Trademarks

       

      

       

      

       

      

       

      

      

      

      
        
          
            A-

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

          

        

      

      Exhibit
        b

       

      FORM
        OF NOTE

      

      SECURED
        PROMISSORY NOTE

      

      $500,000Dated:
        June 19, 2006

      

       

      FOR
        VALUE
        RECEIVED, the undersigned, TRESTLE HOLDINGS, INC., a Delaware corporation
        (“Borrower”),
        hereby promises to pay to the order of CLARIENT, INC., a Delaware corporation
        (“Lender”)
        the
        principal sum of Five Hundred Thousand Dollars ($500,000) or such lesser
        amount
        as has been advanced but not yet repaid under the Second Loan and Security
        Agreement referred to below, plus interest in the amount provided below,
        on the
        Maturity Date. Capitalized terms not defined in this Note shall have the
        meanings given to such capitalized terms in the Second Loan and Security
        Agreement (as defined herein).

       

      Interest
        on the unpaid principal amount of each Loan evidenced by this Note from the
        Funding Date of such Loan shall accrue at 8% per
        annum based
        on
        a year of 360 days for actual days elapsed; provided,
        however,
        that
        per diem interest shall be calculated on the basis of the actual number of
        days
        elapsed over a year of 365 days. 

      

      Principal,
        interest and all other amounts due with respect to the Loans, are payable
        in
        lawful money of the United States of America to Lender as set forth in the
        Second Loan and Security Agreement. The principal amount of each Loan and
        the
        interest rate applicable thereto, and all payments made with respect thereto,
        shall be recorded by Lender and, prior to any transfer hereof, endorsed on
        the
        grid attached hereto which is part of this Note. 

      

      This
        Note
        is the Note referred to in, and is entitled to the benefits of, the Second
        Loan
        and Security Agreement, dated as of June 19, 2006, to which Borrower and
        Lender
        are parties (the “Second
        Loan and Security Agreement”).
        The
        Second Loan and Security Agreement, among other things, (a) provides for
        the
        making of secured Loans to Borrower, and (b) contains provisions for
        acceleration of the maturity hereof upon the happening of certain stated
        events.

      

      This
        Note
        and the obligation of Borrower to repay the unpaid principal amount of the
        Loans, interest on the Loans and all other amounts due Lender under the Loan
        Documents are secured under the Second Loan and Security Agreement.

      

      Presentment
        for payment, demand, notice of protest and all other demands and notices
        of any
        kind in connection with the execution, delivery, performance and enforcement
        of
        this Note are hereby waived.

      

      Borrower
        shall pay all reasonable fees and expenses, including, without limitation,
        reasonable attorneys’ fees and costs, incurred by Lenders in the enforcement or
        attempt to enforce any of Borrower’s obligations hereunder not performed when
        due. This Note shall be governed by, and construed and interpreted in accordance
        with, the laws of the State of California.

      
        
          B-

          

           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

       

      IN
        WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one
        of its
        officers thereunto duly authorized on the date hereof.

       

      TRESTLE
        HOLDINGS, INC.

       

      By:  

       

      Name: 

       

      Title: 

       

      

      

       

      

       

      
        
          
            B-

            

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

          

        

      

      Exhibit
        C

       

      NOTICE
        OF BORROWING

       

      June
        19,
        2006

       

      Clarient,
        Inc.

      31
        Columbia

      Aliso
        Viejo, California 92656

      Attention:
        Mr. Jim Cureton

      

      Ladies
        and Gentlemen:

       

      Reference
        is made to the Second Loan and Security Agreement dated as of June 19, 2006
        (as
        it has been and may be amended from time to time, the “Loan
        Agreement,” the
        capitalized terms used herein as defined therein), between CLARIENT,
        INC., TRESTLE HOLDINGS, INC. (the
        “Company”)and
        the
GUARANTORS.
        Capitalized terms not defined in this Notice of Borrowing shall have the
        meanings given to such terms in the Loan Agreement.

       

      The
        undersigned is the Chief Financial Officer of the Company, and hereby requests
        a
        Loan under the Loan Agreement, and in that connection certifies as
        follows:

       

      1.  The
        amount of the proposed Loan is $[250,000]. The requested Funding Date of
        the
        proposed Loan is ________, 2006.

       

      2.  As
        of
        this date, no Event of Default, or event which with notice or the passage
        of
        time would constitute an Event of Default, has occurred and is continuing,
        or
        will result from the making of the proposed Loan.

       

      3.  All
        of
        the representations and warranties contained in Article
        6
        of the
        Loan Agreement and in each of the Loan Documents, and the information set
        forth
        in the schedules thereto, are and will be true and correct in all material
        respects, both before and after giving effect to the proposed Loan and to
        the
        application of the proceeds thereof, as though made on such date, unless
        stated
        to relate to a specific earlier date, in which case such representations
        and
        warranties shall be true and correct in all material respects as of such
        earlier
        date; and

       

      4.  No
        event
        which could reasonably be expected to have a material adverse effect on the
        ability of Borrower to fulfill its obligations under the Loan Agreement has
        occurred since the date of the most recent financial statements submitted
        to you
        by the Company.

       

      The
        Company agrees to notify you promptly before the funding of the Loan if any
        of
        the matters to which I have certified above shall not be true and correct
        on the
        requested Funding Date for such Loan.

       

      

       

      Very
        truly yours,

       

      

       

      _________________________

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