Document:

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                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                                ATS MEDICAL, INC.

                          SEABISCUIT ACQUISITION CORP.

                              3F THERAPEUTICS, INC.

                                       AND

                         THE STOCKHOLDER REPRESENTATIVE

                          DATED AS OF JANUARY 23, 2006

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                                Table of Contents

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ARTICLE 1 THE MERGER.....................................................     1
   1.1     The Merger....................................................     1
   1.2     Effective Time of the Merger..................................     1
   1.3     Effects of the Merger.........................................     2
   1.4     Closing.......................................................     2
   1.5     Certificate of Incorporation..................................     2
   1.6     Bylaws........................................................     2
   1.7     Directors and Officers........................................     2

ARTICLE 2 CONVERSION OF SECURITIES.......................................     2
   2.1     Consideration for the Merger..................................     2
   2.2     Escrow........................................................     4
   2.3     Net Operating Assets Adjustment...............................     5
   2.4     Dissenting Shares.............................................     7
   2.5     Exchange Procedures...........................................     7
   2.6     No Further Rights in Company..................................     9
   2.7     No Fractional Shares of Parent Common Stock...................    10
   2.8     Lost Certificates.............................................    10
   2.9     Withholding Rights............................................    10
   2.10    Further Assurances............................................    10

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................    11
   3.1     Corporate Organization and Power..............................    11
   3.2     Certificate of Incorporation of Company; No Subsidiaries......    11
   3.3     Authorization.................................................    11
   3.4     Capitalization of the Company.................................    12
   3.5     Non-Contravention.............................................    13
   3.6     Consents and Approvals........................................    13
   3.7     Joint Proxy Statement; Registration Statement; Other
           Information...................................................    13
   3.8     Financial Statements; Undisclosed Liabilities.................    14
   3.9     Absence of Certain Changes....................................    15
   3.10    Assets and Properties.........................................    16
   3.11    Manufacturing and Marketing Rights............................    17
   3.12    FDA and Regulatory Matters....................................    17
   3.13    Reimbursement/Billing.........................................    19
   3.14    Compliance with Applicable Laws...............................    20
   3.15    Compliance Program............................................    20
   3.16    Permits.......................................................    21
   3.17    Inventories...................................................    21
   3.18    Receivables; Payables.........................................    21
   3.19    Grants, Incentives and Subsidies..............................    21
   3.20    Litigation....................................................    22
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                                Table of Contents
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   3.21    Contracts.....................................................    22
   3.22    Benefit Plans.................................................    24
   3.23    Labor and Employment Matters..................................    28
   3.24    Intellectual Property.........................................    30
   3.25    Environmental Compliance......................................    31
   3.26    Insurance.....................................................    33
   3.27    Tax Matters...................................................    33
   3.28    Bank Accounts; Powers of Attorney.............................    36
   3.29    Orders, Commitments and Returns...............................    36
   3.30    Product Liability Claims......................................    36
   3.31    Warranties....................................................    36
   3.32    Relations with Suppliers and Customers........................    37
   3.33    Indemnification Obligations...................................    37
   3.34    Absence of Certain Business Practices.........................    37
   3.35    Brokers.......................................................    37
   3.36    Minute Books..................................................    38
   3.37    Approval of Merger............................................    38
   3.38    Affiliate Letters.............................................    38
   3.39    Opinion of the Company's Financial Advisor....................    38
   3.40    Investigation by Parent.......................................    38

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
          SUBSIDIARY.....................................................    38
   4.1     Organization and Qualification................................    39
   4.2     Authorization.................................................    39
   4.3     Capitalization................................................    39
   4.4     Valid Issuance of Parent Common Stock.........................    40
   4.5     Non-Contravention.............................................    40
   4.6     Consents and Approvals........................................    40
   4.7     Parent SEC Documents; Financial Reports.......................    41
   4.8     Joint Proxy Statement; Registration Statement; Other
           Information...................................................    42
   4.9     FDA and Regulatory Matters....................................    42
   4.10    Reimbursement/Billing.........................................    43
   4.11    Compliance with Applicable Laws...............................    44
   4.12    Compliance Program............................................    45
   4.13    Contracts.....................................................    45
   4.14    Benefit Plans.................................................    45
   4.15    Tax Matters...................................................    47
   4.16    Disclosure....................................................    48
   4.17    Brokers.......................................................    48
   4.18    Investigation by Company......................................    48
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                                Table of Contents
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ARTICLE 5 COVENANTS......................................................    48
   5.1     Conduct of the Business.......................................    48
   5.2     Company's Agreements as to Specified Matters..................    49
   5.3     Full Access...................................................    50
   5.4     Confidentiality...............................................    51
   5.5     Filings; Consents; Removal of Objections......................    51
   5.6     Further Assurances; Cooperation; Notification.................    52
   5.7     Joint Proxy Statement; Registration Statement.................    52
   5.8     Stockholder Meetings or Communication with Stockholders.......    53
   5.9     Update Disclosure; Breaches...................................    54
   5.10    No Solicitation...............................................    55
   5.11    Public Announcements..........................................    55
   5.12    Preparation of Tax Returns: Tax Matters.......................    55
   5.13    Repayment of Related Party Indebtedness.......................    57
   5.14    State Takeover Statutes.......................................    57
   5.15    Stockholder Litigation........................................    57
   5.16    NASDAQ Listing................................................    57
   5.17    Notice of Breach..............................................    57
   5.18    Parent Board Seat.............................................    58
   5.19    Incentive Program for Continuing Employees....................    58
   5.20    Issuance of Milestone Consideration...........................    59
   5.21    Recovery of Edwards Holdback Amount...........................    60
   5.22    Stockholder Approvals; Delivery of Certain Agreements.........    60
   5.23    Affiliate Letters.............................................    61
   5.24    General Restrictions on Transfer of Parent Common Stock.......    61
   5.25    Company 401(k) Plan...........................................    62
   5.26    Company Options...............................................    62
   5.27    Amendment to Certain Agreements...............................    63

ARTICLE 6 CONDITIONS TO PARENT'S AND MERGER SUBSIDIARY'S OBLIGATIONS.....    63
   6.1     Representations and Warranties True...........................    63
   6.2     Performance...................................................    63
   6.3     Filed Certificate of Merger...................................    63
   6.4     Required Approvals and Consents...............................    63
   6.5     No Proceeding or Litigation...................................    64
   6.6     Legislation...................................................    64
   6.7     No Material Adverse Effect....................................    64
   6.8     Certificates..................................................    64
   6.9     Other Receipts; Good Standing.................................    64
   6.10    Opinions of Company Counsel...................................    64
   6.11    Escrow Agreement..............................................    64
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   6.12    Exchange Agreement............................................    65
   6.13    Share Transfer Restriction Agreements.........................    65
   6.14    Estimated Reduction Amount Certificate........................    65
   6.15    Dissenting Shares.............................................    65
   6.16    Resignation and Release.......................................    65
   6.17    Tax Withholding Forms.........................................    65
   6.18    Cancellation of Options and Warrants..........................    65
   6.19    Affiliates' Letters...........................................    65

ARTICLE 7 CONDITIONS TO COMPANY'S OBLIGATIONS............................    65
   7.1     Representations and Warranties True...........................    65
   7.2     Performance...................................................    66
   7.3     Filed Certificate of Merger...................................    66
   7.4     Corporate Approvals...........................................    66
   7.5     No Proceeding or Litigation...................................    66
   7.6     Legislation...................................................    66
   7.7     No Material Adverse Effect....................................    66
   7.8     Certificates..................................................    66
   7.9     Other Receipts; Good Standing.................................    66
   7.10    Opinion of Parent Counsel.....................................    67
   7.11    Escrow Agreement..............................................    67
   7.12    Exchange Agreement............................................    67
   7.13    NASDAQ Listing................................................    67

ARTICLE 8 TERMINATION....................................................    67
   8.1     Methods of Termination........................................    67
   8.2     Procedure Upon Termination....................................    68
   8.3     Effect of Termination.........................................    68

ARTICLE 9 SURVIVAL AND INDEMNIFICATION...................................    69
   9.1     Survival......................................................    69
   9.2     Indemnification by Stockholders...............................    69
   9.3     Indemnification by Parent.....................................    70
   9.4     Claims for Indemnification....................................    70
   9.5     Indemnification Limits........................................    72
   9.6     Right of Set-Off..............................................    73
   9.7     Expenses of Stockholder Representative........................    73

ARTICLE 10 ARBITRATION...................................................    74
   10.1    Dispute.......................................................    74
   10.2    Mediation.....................................................    74
   10.3    Arbitration...................................................    74
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ARTICLE 11 DEFINITIONS...................................................    75
   11.1    Definitions...................................................    75

ARTICLE 12 MISCELLANEOUS.................................................    90
   12.1    Notices.......................................................    90
   12.2    Amendments; No Waivers........................................    91
   12.3    Expenses......................................................    92
   12.4    Successors and Assigns........................................    92
   12.5    Governing Law.................................................    92
   12.6    Counterparts; Effectiveness...................................    92
   12.7    Entire Agreement..............................................    92
   12.8    Captions......................................................    92
   12.9    Severability..................................................    92
   12.10   Construction..................................................    92
   12.11   Cumulative Remedies...........................................    93
   12.12   Third Party Beneficiaries.....................................    93
   12.13   Appointment of Stockholder Representative; Enforcement of
           Rights, Benefits and Remedies.................................    93
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                          AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January
23, 2006, is entered into by and among ATS Medical, Inc., a Minnesota
corporation ("Parent"), Seabiscuit Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of Parent ("Merger Subsidiary"), 3F Therapeutics,
Inc., a Delaware corporation (the "Company"), and Boyd D. Cox, as Stockholder
Representative (the "Stockholder Representative" and, together with Parent,
Merger Subsidiary and the Company, the "Parties").

     WHEREAS, the Board of Directors of each of the Company, Parent and Merger
Subsidiary have (i) determined that the Merger is fair and in the best interests
of their respective stockholders and (ii) approved the merger of Merger
Subsidiary with and into the Company, with the Company surviving, in accordance
with the terms and conditions of this Agreement;

     WHEREAS, for federal income tax purposes, the Merger is intended to qualify
as a reorganization within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder and this Agreement is to be treated as a plan
of reorganization within the meaning of said Section 368(a); and

     WHEREAS, the Parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe various
conditions to the Merger.

     NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Parent, Merger Subsidiary and the Stockholder
Representative hereby agree as follows:

                                    ARTICLE 1
                                   THE MERGER

1.1  The Merger. Upon the terms and subject to the conditions hereof, in
     accordance with the Delaware General Corporate Law (the "DGCL"), at the
     Effective Time, Merger Subsidiary shall be merged with and into the Company
     (the "Merger"), with the Company as the surviving corporation in the Merger
     (the "Surviving Corporation"), which shall continue its corporate existence
     under the laws of the State of Delaware. At the Effective Time, the
     separate existence of Merger Subsidiary shall thereupon cease and the
     Company shall succeed to and assume all of the rights and obligations of
     Merger Subsidiary in accordance with DGCL. As a result of the Merger, the
     Company will continue as a wholly owned subsidiary of Parent. The name of
     the Surviving Corporation shall be the name of the Company.

1.2  Effective Time of the Merger. Subject to the provisions of this Agreement,
     the Parties shall cause the Merger to be consummated on the close of
     business on the Closing Date by filing a certificate of merger of the
     Company and Merger Subsidiary, or other appropriate documents, with the
     Secretary of State of the State of Delaware (the "Certificate of Merger")
     in such form as required by, and executed in accordance with,

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     the relevant provisions of the DGCL as soon as practicable on or before the
     Closing Date. The Merger shall become effective at the close of business on
     the Closing Date or, if later, such time as the Certificate of Merger is
     duly filed with the Secretary of State of Delaware, or at such subsequent
     date or time as the Parties shall agree and specify in the Certificate of
     Merger (the date and time the Merger becomes effective being hereinafter
     referred to as the "Effective Time").

1.3  Effects of the Merger. The Merger shall have the effects set forth in the
     applicable provisions of the DGCL. Without limiting the generality of the
     foregoing, and subject thereto, at the Effective Time all of the property,
     rights, privileges, powers and franchises of the Company and Merger
     Subsidiary shall vest in the Surviving Corporation, and all debts,
     liabilities and duties of the Company and Merger Subsidiary shall become
     the debts, liabilities and duties of the Surviving Corporation.

1.4  Closing. Upon the terms and subject to the conditions set forth in Articles
     6 and 7 and the termination rights set forth in Article 8, the closing (the
     "Closing") will take place at the offices of Oppenheimer Wolff & Donnelly
     LLP, 45 South Seventh Street, Suite 3300, Minneapolis, MN 55402, at 10:00
     a.m. on the second Business Day following the satisfaction or waiver
     (subject to applicable law) of the conditions (excluding conditions that,
     by their nature, cannot be satisfied until the Closing Date) set forth in
     Articles 6 and 7, unless this Agreement has been theretofore terminated
     pursuant to its terms or unless another place, time or date is agreed to by
     the Parties (the date of the Closing, the "Closing Date").

1.5  Certificate of Incorporation. In connection with the Merger and at the
     Effective Time, the Certificate of Incorporation of the Company shall be
     amended and restated to read substantially in the form of the Certificate
     of Incorporation of Merger Subsidiary until duly amended in accordance with
     the terms thereof and of the DGCL.

1.6  Bylaws. In connection with the Merger and at the Effective Time, the bylaws
     of the Company shall be amended to read substantially in the form of the
     bylaws of Merger Subsidiary until duly amended in accordance with the terms
     thereof and of the DGCL.

1.7  Directors and Officers. The persons who shall serve as the directors of the
     Surviving Corporation and the persons who shall serve as the officers of
     the Surviving Corporation after the Effective Time shall be the persons
     indicated on Schedule 1.7, attached hereto, until their respective
     successors are duly elected and qualified.

                                    ARTICLE 2
                            CONVERSION OF SECURITIES

2.1  Consideration for the Merger. Subject to the terms and conditions of this
     Agreement and the DGCL, at the Effective Time, by virtue of the Merger and
     without any action on the part of Parent, the Company, Merger Subsidiary or
     any Stockholder:

     (a)  Treasury Stock. All shares of Company Capital Stock that are held by
          the Company as treasury stock or that are owned by the Company, Parent
          or any of its

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          subsidiaries (other than those held in a fiduciary capacity for the
          benefit of third parties) immediately prior to the Effective Time
          shall cease to be outstanding and shall be canceled and retired and
          shall cease to exist and no Parent Common Stock or other consideration
          shall be delivered in exchange therefor.

     (b)  Company Capital Stock. Each share of Company Capital Stock that is
          issued and outstanding immediately prior to the Effective Time (other
          than shares canceled pursuant to Section 2.1(a) and Dissenting Shares)
          shall be canceled and converted into, and become a right to receive,
          deliverable upon surrender of the certificate representing such share
          as provided in Section 2.5 below:

          (i)  at the Effective Time, such number of fully paid and
               nonassessable shares of Parent Common Stock equal to the Closing
               Ratio (the aggregate number of such shares, plus the Escrow
               Shares and Reduction Shares, the "Initial Merger Consideration"),
               rounded down, as to each Stockholder, to the nearest whole share
               after giving effect to the conversion of all shares of Company
               Common Stock into such consideration (for purposes of clarity,
               the parties hereto acknowledge that, at the Effective Time, the
               Stockholders' shares of Company Capital Stock issued and
               outstanding immediately prior to the Effective Time shall be
               canceled and converted into, and become a right to receive,
               subject to the terms conditions set forth in this Agreement and
               the Escrow Agreement, the Initial Merger Consideration);

          (ii) unless and until the earlier of (A) the date of expiration of the
               Contingent Period, and (B) such date as all of the Total
               Contingent Shares have either been issued pursuant hereto and/or
               set-off in accordance with Section 9.6 hereof, and, in either
               case, subject to Section 5.20 (Issuance of Milestone
               Consideration), Section 5.21 (Recovery of Edwards Holdback
               Amount), and Section 9.6 (Right to Set-Off), as of each Milestone
               Date, such number of fully paid and nonassessable shares of
               Parent Common Stock as is equal to the Milestone Ratio (all of
               the shares of Parent Common Stock issuable pursuant to this
               Section 2.1(b)(ii) are collectively referred to herein as the
               "Milestone Consideration"), rounded down, as to each Stockholder,
               to the nearest whole share after giving effect to the conversion
               of all shares of Company Common Stock into such consideration.

          At the Effective Time, all shares of Company Capital Stock outstanding
          immediately prior to the Effective Time shall cease to be outstanding
          and shall be canceled and retired and shall cease to exist, and each
          holder of a certificate that immediately prior to the Effective Time
          represented any such shares of Company Capital Stock shall thereafter
          cease to have any rights with respect to such shares of Company
          Capital Stock, except the right to receive the applicable portion of
          the Merger Consideration to be issued in consideration therefor plus
          cash for any fractional shares of Parent Common Stock as provided in
          Section 2.7. Notwithstanding the foregoing, the Parties agree that a
          portion of the Initial

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          Merger Consideration payable to the Stockholders pursuant to this
          Section 2.1(b) for their shares of Company Capital Stock will be held
          in escrow pursuant to the terms and conditions of Section 2.2 of this
          Agreement. The total Merger Consideration shall not, in any case,
          exceed nineteen million (19,000,000) shares of Parent Common Stock,
          which shares of Parent Common Stock are comprised of up to nine
          million (9,000,000) shares issued as Initial Merger Consideration and
          up to ten million (10,000,000) shares issued as Milestone
          Consideration, in each case with appropriate adjustments thereto in
          the event of any stock splits, stock combinations, stock dividends,
          recapitalizations or other similar transaction in Parent Common Stock
          after the date hereof.

     (c)  Company Stock Options and Company Warrants. The Company shall require
          that all Company Stock Options and Company Warrants will be canceled
          unless exercised no later than immediately prior to the Effective Time
          and that all shares of Company Preferred Stock shall be converted into
          shares of Company Common Stock as of immediately prior to and
          conditional upon the occurrence of the Effective Time.

     (d)  Capital Stock of Merger Subsidiary. Each issued and outstanding share
          of capital stock of Merger Subsidiary outstanding as of immediately
          prior to the Effective Time shall be canceled and converted into and
          become one (1) share of the common stock, par value $0.01 per share,
          of the Surviving Corporation.

2.2  Escrow. At the Closing, Parent shall deposit, or cause to be deposited,
     with the escrow agent (the "Escrow Agent"), for the benefit of the
     Stockholders, a certificate (issued in the name of the Escrow Agent or its
     nominee) representing 900,000 fully paid and nonassessable shares of Parent
     Common Stock (the "Escrow Shares"), which Escrow Shares represent ten
     percent (10%) of the Initial Merger Consideration. The Escrow Shares shall
     be delivered to the Escrow Agent for following purposes: (a) securing and
     satisfying the indemnification obligations of the Stockholders as set forth
     in Article 9 of this Agreement; (b) to satisfy the payment obligation, if
     any, of Stockholders under Section 2.3 of this Agreement; and (c) to
     provide a means for parent to exercise its set-off rights pursuant to
     Section 5.21 (Recovery of Edwards Holdback Amount). The Escrow Shares shall
     be held and disposed of in accordance with the terms and conditions of this
     Agreement and the Escrow Agreement, in a form reasonably acceptable to the
     parties thereto (the "Escrow Agreement"), to be entered into at the
     Effective Time, by and among Parent, the Stockholder Representative and the
     Escrow Agent. The Escrow Shares shall be deemed deducted on a pro rata
     basis from the Initial Merger Consideration each of the Stockholders would
     otherwise have been entitled to receive as part of the Initial Merger
     Consideration for their shares of Company Capital Stock at the Effective
     Time pursuant to Section 2.1(b)(i), and, subject to the provisions of this
     Agreement and the Escrow Agreement. The Escrow Shares shall be held as a
     trust fund and shall not be subject to any lien, attachment, trustee
     process or any other judicial process of any creditor of any party.
     Approval of this Agreement and the Merger by the Stockholders shall
     constitute approval of the Escrow Agreement and of all of the arrangements
     relating thereto, including without limitation the placement of the Escrow
     Shares in escrow, and the approval of the appointment of the Stockholder
     Representative.

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     The Escrow Shares shall not be distributed to the Stockholders until at
     least eighteen (18) months after the Effective Time and shall only be
     distributed in accordance with the terms and conditions of this Agreement
     and the Escrow Agreement (the actual date the Escrow Shares are distributed
     is referred to as the "Distribution Date"). In the event that Parent shall
     have asserted, prior to the Distribution Date, a claim for indemnification
     pursuant to Article 9, Parent and the Stockholder Representative shall
     endeavor in good faith to determine a reasonable estimate of the maximum
     amount of such claim, which claim shall be set off in accordance with
     Section 9.6 and the Escrow Agreement, and shall instruct the Escrow Agent
     to deliver any excess amount of Escrow Shares to the Exchange Agent for
     distribution to the Stockholders in accordance with the Exchange Agreement.
     Upon Final Resolution of the indemnification claim(s), there shall be
     returned to Parent that number of Escrow Shares equal to the quotient of
     the aggregate claim(s) being so paid divided by the Average Market Price,
     but appropriately adjusted in the event that there occurs any stock
     dividend, stock split, or similar event with respect to the Parent Stock
     after the Effective Time, and the Escrow Shares will be deemed permanently
     reduced and released from escrow and automatically returned to the status
     of authorized and unissued shares of Parent capital stock and such Escrow
     Shares shall not be available for distribution to the Stockholders, all in
     accordance with the terms of the Escrow Agreement.

2.3  Net Operating Assets Adjustment.

     (a)  Between the date of this Agreement and the Closing, the Parties agree
          to meet and review in good faith, among other matters, the following
          information: (i) a financial operating report (presented by calendar
          month from and after December 1, 2005), including a review of the
          previous month's balance sheet and profit and loss statement, as well
          as a comparison of the actual net operating assets calculated using
          the same lines items and financial data as used to calculate Projected
          Net Operating Assets reflected in the Operating Budget (the "Actual
          Net Operating Assets") against Projected Net Operating Assets (as
          reflected in the Operating Budget), with reasonably specific
          information as to the sources and uses thereof, (ii) the status of
          Model 1000 commercialization efforts, (iii) the commercialization
          status of Enable and development efforts for Entrata, and (iv) the
          clinical and regulatory status of Enable and Entrata, (v) a review of
          the status of matters relating to Intellectual Property (including
          without limitation prosecution and registration), and (vi) such other
          matters as either party may reasonably request. The Parties shall hold
          such meetings at least once each calendar month (each such meeting, a
          "Monthly Meeting"). The Parties will hold the final Monthly Meeting
          not less than five (5) Business Days but no more than ten (10)
          Business Days prior to the Closing Date, and in addition to the
          foregoing, shall consider the amount of any Reduction Amount (and
          resulting Reduction Shares). Following the final Monthly Meeting, but
          at least two (2) Business Days prior to the Closing Date, the Company
          shall deliver to Parent a statement containing (y) its good faith
          estimate of the amount, if any, by which Projected Net Operating
          Assets exceeds Actual Net Operating Assets, setting forth the specific
          reasons for such excess (such excess, the "Estimated Reduction

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<PAGE>

          Amount"), and (z) a statement signed by the Company's Chief Executive
          Officer and Chief Financial Officer certifying that, except as
          described in the Estimated Reduction Amount, the Company has been
          operated in accordance with the Operating Budget (the "Estimated
          Reduction Amount Certificate").

     (b)  Within thirty (30) days after the Closing Date, Parent shall deliver
          to the Stockholder Representative a closing date balance sheet
          prepared in accordance with GAAP applied on a consistent basis and
          consistent with the past accounting practices of Company (the "Closing
          Date Balance Sheet"), setting forth, among other things, any proposed
          adjustments to the Estimated Reduction Amount. If Parent fails to
          deliver a Closing Date Balance Sheet within such thirty- (30-) day
          period, Parent shall be deemed to have accepted and agreed to the
          Estimated Reduction Amount.

     (c)  If the Closing Date Balance Sheet is either (i) accepted in writing by
          the Stockholder Representative, or (ii) is not disputed in writing by
          the Stockholder Representative within ten (10) days of the delivery of
          the Closing Date Balance Sheet by the delivery of a written report
          setting forth in reasonable detail any proposed adjustments to the
          Closing Date Balance Sheet (the "Dispute Notice"), the Parties shall
          be deemed to have mutually accepted and agreed to the Closing Date
          Balance Sheet.

     (d)  If the Stockholder Representative timely delivers the Dispute Notice
          to Parent, and Parent and the Stockholder Representative are unable to
          resolve such dispute within five (5) days following the delivery of
          the Dispute Notice, the dispute shall be resolved in accordance with
          the provisions set forth in Section 10.3. "Actual Reduction Amount"
          means the amount, if any, by which Projected Net Operating Assets
          exceeds Actual Net Operating Assets as finally determined by the
          parties, through arbitration or otherwise.

     (e)  If the Actual Reduction Amount exceeds the Estimated Reduction Amount,
          then such excess shall be payable to Parent solely through the Escrow
          Agent's delivery to Parent of a number of Escrow Shares with a value
          that is equal to the Adjustment Amount divided by the Parent Closing
          Share Price, rounded down to the nearest whole share. Upon
          determination of such number of Escrow Shares, such shares shall
          automatically be deemed to return to the status of authorized and
          unissued shares of Parent capital stock.

     (f)  If the Estimated Reduction Amount exceeds the Actual Reduction Amount
          (such excess, or the Estimated Reduction Amount, whichever is the
          lesser), then a number of shares of Parent Common Stock equal to the
          Adjustment Amount divided by the Parent Closing Share Price, rounded
          down to the nearest whole share, shall be deposited with the Exchange
          Agent for distribution to the Stockholders in accordance with the
          terms of the Exchange Agreement. The adjustment amount determined in
          accordance with either subsection 2.3 (e) or (f) as applicable shall
          be referred to as the "Adjustment Amount."

                                       6

<PAGE>

     (g)  If applicable, the decision of an arbitrator engaged pursuant to
          Section 2.3(d) shall be final and binding on the Stockholder
          Representative and Parent. The fees, costs and expenses of the
          arbitrator shall be borne by the Stockholders, and released to Parent
          from the Escrow Account, at the Parent Closing Share Price, if the
          Actual Reduction Amount, as finally determined by the arbitrator, is
          ten percent (10%) or more than the Estimated Reduction Amount (such
          amount to be borne by the Stockholders, the "Arbitrator Fee");
          otherwise, such fees, costs and expenses shall be borne by Parent.

     (h)  Notwithstanding any other provision in this Agreement to the contrary,
          in no event will the Initial Merger Consideration aggregate to more
          than nine million (9,000,000) shares of Parent Common Stock (including
          Escrow Shares deposited into escrow with the Escrow Agent on the
          Closing Date) (with appropriate adjustments thereto in the event of
          any stock splits, stock combinations, stock dividends,
          recapitalizations or other similar transaction in Parent Common Stock
          after the date hereof and prior to the Effective Time).

2.4  Dissenting Shares. Notwithstanding anything in this Agreement to the
     contrary, to the extent (if at all) that holders of Company Capital Stock
     are entitled to appraisal rights under Section 262 of the DGCL, shares of
     Company Capital Stock issued and outstanding immediately prior to the
     Effective Time and held by a holder who has properly exercised and
     perfected his, her or its demand for appraisal rights under Section 262 of
     the DGCL (the "Dissenting Shares"), will not be converted into the right to
     receive the Merger Consideration, but the holders of Dissenting Shares will
     be entitled to receive from the Company such consideration as will be
     determined pursuant to Section 262 of the DGCL; provided, however, that if
     any such holder will have failed to perfect or will effectively withdraw or
     lose his, her or its right to appraisal and payment under each of the DGCL,
     such holder's shares of Company Capital Stock will thereupon be deemed to
     have been converted as of the Effective Time into the right to receive the
     Merger Consideration, without any interest thereon, and such shares will
     not be deemed to be Dissenting Shares. The Company will give Parent (a)
     prompt notice of any notices or demands for appraisal or payment for shares
     of Company Capital Stock received by the Company prior to the Closing and
     (b) the opportunity to participate and direct all negotiations and
     proceedings with respect to any such demands or notices. Prior to the
     Closing, the Company will not, without the prior written consent of Parent,
     make any payment with respect to, or settle, offer to settle or otherwise
     negotiate any demands.

2.5  Exchange Procedures.

     (a)  At or prior to the Effective Time, Parent shall appoint Wells Fargo
          Bank, N.A. to serve as the exchange agent hereunder (the "Exchange
          Agent"). Parent shall deposit with the Exchange Agent, for the benefit
          of the holders of shares of Company Capital Stock (other than shares
          canceled pursuant to Section 2.1(a) and Dissenting Shares), (i) at the
          Effective Time, a number of shares of Parent Common Stock equal to the
          Closing Date Shares, (ii) on or immediately prior to the Distribution
          Date and subject to the terms of this Agreement and the Escrow
          Agreement, the remaining Escrow Shares, if any, and, if applicable
          (iii) within

                                       7

<PAGE>

          two (2) Business Days of each Milestone Date, a number of shares of
          Parent Common Stock equal to that portion of the Milestone
          Consideration payable in connection with such Milestone Date (such
          shares being hereafter referred to as the "Exchange Fund") pursuant to
          the terms of this Agreement and an agreement among Parent, the Company
          and the Exchange Agent, in a form reasonably acceptable to the parties
          thereto (the "Exchange Agreement"). The Exchange Agent shall, pursuant
          to irrevocable instructions, deliver the shares of Parent Common Stock
          contemplated to be paid pursuant to Section 2.1 out of the Exchange
          Fund. Except as contemplated by Section 2.5(e), the Exchange Fund must
          not be used for any other purpose. Parent shall pay the fees and
          expenses of the Exchange Agent, and Parent will indemnify the Exchange
          Agent against actions taken by the Exchange Agent pursuant to this
          Agreement and the Exchange Agreement, other than for acts or omissions
          which constitute willful misconduct or gross negligence.

     (b)  As promptly as reasonably practicable after the Effective Time, Parent
          shall cause the Exchange Agent to mail to each holder of record of a
          Company Certificate or Company Certificates (to the extent such
          certificates have not already been submitted to the Exchange Agent)
          which immediately prior to the Effective Time represented outstanding
          shares (other than shares canceled pursuant to Section 2.1(a) and
          Dissenting Shares) of Company Capital Stock (i) a form of letter of
          transmittal (which will be in customary form and will specify that
          delivery will be effected, and risk of loss and title to the Company
          Certificates will pass, only upon proper delivery of the Company
          Certificates to the Exchange Agent), and (ii) instructions for use in
          effecting the surrender of the Company Certificates in exchange for
          the applicable portion of the Merger Consideration into which the
          number of shares of Company Capital Stock previously represented by
          such Company Certificates will have been converted pursuant to this
          Agreement.

     (c)  Upon surrender to the Exchange Agent of a Company Certificate for
          cancellation, together with such letter of transmittal, duly executed
          and completed in accordance with the instructions thereto, and such
          other documents as may be reasonably required by the Exchange Agent
          pursuant to such instructions, the holder of such Company Certificate
          will be entitled to receive in exchange therefor the applicable
          portion of the Merger Consideration for each share of Company Capital
          Stock formerly represented by such Company Certificate and the amount
          of any cash payable in lieu of a fractional share of Parent Common
          Stock to which such holder is entitled pursuant to Section 2.7, to be
          distributed within five (5) days of (i) the Closing Date, (ii) on the
          Distribution Date and subject to the terms of this Agreement and the
          Escrow Agreement, the remaining Escrow Shares, if any, and, if
          applicable (iii) a Milestone Date, in each case after giving effect to
          any required tax withholding and without interest, and the Company
          Certificate so surrendered will immediately be canceled. In the event
          of a transfer of ownership of shares of Company Capital Stock prior to
          the Effective Time which is not registered in the transfer records of
          the Company, the applicable portion of the Merger Consideration may be
          issued to a transferee if

                                       8

<PAGE>

          the Company Certificate representing such shares of Company Capital
          Stock is presented to the Exchange Agent, accompanied by all documents
          required to evidence and effect such transfer and by evidence that any
          applicable stock transfer taxes have been paid. Until surrendered as
          contemplated by this Section 2.5, each Company Certificate will be
          deemed at all times after the Effective Time for all purposes to
          represent only the right to receive upon such surrender the applicable
          portion of the Merger Consideration with respect to the shares of
          Company Capital Stock formerly represented thereby.

     (d)  Following the Effective Time, there will be no further registration of
          transfers on the stock transfer books of the Surviving Corporation of
          the shares of Company Capital Stock that were outstanding immediately
          prior to the Effective Time. If, after the Effective Time, Company
          Certificates are presented to Parent or the Surviving Corporation for
          any reason, they will be canceled and exchanged as provided in this
          Section 2.5. From and after the Effective Time, holders of Company
          Certificates will cease to have any rights as stockholders of the
          Company, except as provided by law.

     (e)  To the extent permitted by applicable law, any portion of the Exchange
          Fund that remains undistributed to the holders of shares of Company
          Capital Stock six (6) months after (i) the Effective Time as to those
          Shares referenced in Section 2.5(a)(i), (ii) the Distribution Date as
          to the remaining Escrow Shares, if any, and, if applicable or (iii) a
          Milestone Date, as applicable, will be delivered to Parent, upon
          demand, and any holders of shares of Company Capital Stock who have
          not theretofore complied with this Article 2 must thereafter look
          only, as general creditors, to Parent for the Merger Consideration,
          without interest. Any portion of the Exchange Fund remaining unclaimed
          by holders of shares of Company Capital Stock two (2) years after (i)
          the Effective Time, (ii) the Distribution Date and, if applicable
          (iii) a Milestone Date, as applicable (or such earlier date, as is
          immediately prior to such time as such amounts would otherwise escheat
          to or become property of any government entity), will, to the extent
          permitted by applicable law, become the property of Parent free and
          clear of any claims or interest of any person previously entitled
          thereto.

     (f)  Notwithstanding Section 2.1, none of the Exchange Agent, Parent, the
          Company, Merger Subsidiary or the Surviving Corporation will be liable
          to any holder of shares of Company Capital Stock for any Merger
          Consideration delivered to a public official pursuant to any
          applicable abandoned property, escheat or similar law.

2.6  No Further Rights in Company. All shares of Parent Common Stock issued, and
     all cash paid for fractional shares of Parent Common Stock, to the
     Stockholders upon conversion of shares of Company Capital Stock in
     accordance with the terms of this Article 2 shall be deemed to have been
     issued or paid in full satisfaction of all obligations of Parent and the
     Company pertaining to the shares of Company Capital Stock.

                                       9

<PAGE>

2.7  No Fractional Shares of Parent Common Stock. No certificates or scrip or
     shares of Parent Common Stock representing fractional shares of Parent
     Common Stock or book-entry credit of the same shall be issued upon the
     surrender for exchange of Company Capital Stock and such fractional share
     interests will not entitle the owner thereof to vote or to have any rights
     of a stockholder of Parent or a holder of shares of Parent Common Stock. In
     lieu of any such fractional share, Parent shall cause the Exchange Agent to
     pay each holder of Company Capital Stock that would otherwise have been
     entitled to a fraction of a share of Parent Common Stock upon surrender of
     Company Capital Stock (determined after taking into account all shares of
     Company Capital Stock delivered by such holder), upon such surrender, cash
     (without interest) in an amount equal to such holder's proportionate
     interest in the value of the Excess Shares pursuant to the terms hereof. In
     determining the amount payable to all holders of Company Capital Stock,
     Parent shall determine the excess of (i) the number of full shares of
     Parent Capital Stock issuable pursuant to this Agreement, over (ii) the
     aggregate number of full shares of Parent Common Stock to be distributed to
     Stockholders (such excess, the "Excess Shares"), and Parent shall calculate
     the value of the Excess Shares based upon the Parent Closing Share Price or
     the Parent Milestone Share Price, as and if applicable. The Exchange Agent
     shall make available such amounts to such holders of Company Certificates
     formerly representing Shares subject to and in accordance with the terms of
     Section 2.5(c).

2.8  Lost Certificates. If any Company Certificate shall have been lost, stolen
     or destroyed, upon the making of an affidavit of that fact by the Person
     claiming such Company Certificate to be lost, stolen or destroyed and, if
     required by Parent, the posting by such Person of a bond in such reasonable
     amount as Parent may direct as indemnity against any claim that may be made
     against it with respect to such Company Certificate, Parent will deliver in
     exchange for such lost, stolen or destroyed Company Certificate the
     applicable Merger Consideration with respect to the Company Capital Stock
     formerly represented thereby (including any cash in lieu of fractional
     shares of Parent Common Stock to which the holders thereof are entitled
     pursuant to Section 2.7).

2.9  Withholding Rights. Parent shall be entitled to deduct and withhold from
     the consideration otherwise payable pursuant to this Agreement to any
     former holder of shares of Company Common Stock such amounts as it is
     required to deduct and withhold with respect to the making of such payment
     under the Code, or any provision of U.S. state or local or foreign Tax law.
     To the extent that amounts are so withheld or paid over to or deposited
     with the relevant Governmental Authority by Parent, such amounts shall be
     treated for all purposes of this Agreement as having been paid to the
     Person in respect of which such deduction and withholding was made by
     Parent. On or prior to Closing, each Stockholder shall provide Parent with
     IRS Form W-9, Form W-8BEN, Form W-8ECI, or other applicable form,
     establishing exemption from any backup or income Tax withholding on the
     Merger Consideration.

2.10 Further Assurances. At and after the Effective Time, the officers and
     directors of the Surviving Corporation shall be authorized to execute and
     deliver, in the name and on behalf of the Surviving Corporation, any deeds,
     bills of sale, assignments or assurances and to take and do, in the name
     and on behalf of the Surviving Corporation, any other

                                       10

<PAGE>

     actions and things necessary to vest, perfect or confirm of record or
     otherwise in the Surviving Corporation any and all right, title and
     interest in, to and under any of the rights, properties or assets acquired
     or to be acquired by the Surviving Corporation as a result of, or in
     connection with, the Merger.

                                   ARTICLE 3
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     As a material inducement to Parent and Merger Subsidiary to enter into this
Agreement, with the understanding that Parent and Merger Subsidiary will be
relying thereon in consummating the transactions contemplated hereunder, the
Company hereby represents and warrants to Parent and Merger Subsidiary that
except as set forth in the Disclosure Schedule delivered by the Company to
Parent and Merger Subsidiary on the date hereof (the "Disclosure Schedule"), the
statements contained in this Article 3 are true and correct as to the date of
this Agreement and, subject to Section 5.9, will be true and correct as of the
Closing Date. The Disclosure Schedule is arranged in sections corresponding to
the sections and subsections of this Article 3, and disclosure in one section of
the Disclosure Schedule shall constitute disclosure for all sections of the
Disclosure Schedule only to the extent to which the applicability of such
disclosure is reasonably apparent.

3.1  Corporate Organization and Power. The Company is a corporation duly
     organized, validly existing and in good standing under the laws of the
     State of Delaware and has all requisite corporate power and authority to
     carry on its business as now conducted and to own, lease and operate the
     assets and properties of the Company as now owned, leased and operated. The
     Company is duly qualified or licensed to do business as a foreign
     corporation and is in good standing in every jurisdiction in which the
     character or location of its properties and assets owned, leased or
     operated by the Company or the nature of the business conducted by the
     Company requires such qualification or licensing, except where the failure
     to be so qualified, licensed or in good standing in such other jurisdiction
     could not reasonably be expected to have, individually or in the aggregate,
     a Material Adverse Effect on the Company. The Company is qualified or
     licensed to do business as a foreign corporation only in the State of
     California.

3.2  Certificate of Incorporation of Company; No Subsidiaries. The Company has
     heretofore delivered to Parent complete and accurate copies of its
     Certificate of Incorporation and Bylaws, as currently in effect. The
     Company does not, directly or indirectly, own or control or has any
     capital, equity, partnership, participation or other ownership interest in
     any corporation, partnership, joint venture or other business association
     or entity.

3.3  Authorization. The Company has all requisite corporate power and corporate
     authority to enter into this Agreement and, subject to obtaining the
     necessary approval of its stockholders with respect to the Merger, to carry
     out the transactions contemplated herein. The Board of Directors of the
     Company has taken, and prior to the Closing the Stockholders will have
     taken, all action required by law, the Company's Certificate of
     Incorporation and Bylaws and otherwise to duly and validly authorize and
     approve the execution, delivery and performance by the Company of this
     Agreement and the consummation by the Company of the transactions
     contemplated herein and no other

                                       11

<PAGE>

     corporate proceedings on the part of the Company or any Subsidiary are, or
     will be, necessary to authorize this Agreement or to consummate the
     transactions contemplated hereby. The affirmative vote of holders of at
     least: (a) a majority of the outstanding shares of Company Capital Stock,
     voting together as a single class; and (b) sixty-seven percent (67%) of the
     outstanding shares of Company Preferred Stock, voting separately as a
     class, are the only votes of the holders of any class or series of the
     Company's capital stock necessary to approve and adopt this Agreement and
     to consummate the Merger. This Agreement has been, and each of the
     agreements, if any, required by Article 6 to be entered into by the
     Company, will be, duly and validly executed and delivered by the Company
     and constitute or, upon execution and delivery will constitute, the legal,
     valid and binding obligations of the Company, enforceable against it in
     accordance with the respective terms, subject to laws of general
     application relating to bankruptcy, insolvency, reorganization, moratorium
     or other similar laws affecting creditors' rights generally and rules of
     law governing specific performance, injunctive relief or other equitable
     remedies.

3.4  Capitalization of the Company. The authorized capital stock of the Company
     consists of (a) 35,000,000 shares of Company Common Stock, 4,886,480 shares
     of which are issued and outstanding; (b) 1,875,000 shares of Series A
     Preferred Stock, par value $.001 per share, all of which shares are issued
     and outstanding, (c) 3,416,668 shares of Series B Preferred Stock, par
     value $.001 per share, all of which shares are issued and outstanding, (d)
     900,000 shares of Series C Preferred Stock, par value $.001 per share, all
     of which shares are issued and outstanding, (e) 3,842,708 shares of Series
     D Preferred Stock, par value $.001 per share, 3,719,631 shares of which are
     issued and outstanding, and (f) 8,888,889 shares of Series E Preferred
     Stock, par value $.001 per share, 2,666,667 shares of which are issued and
     outstanding. All of the issued and outstanding shares of Company Capital
     Stock are duly authorized, validly issued, fully paid, nonassessable and
     free of preemptive rights. All issued and outstanding shares of Company
     Capital Stock are owned (of record) solely by the Stockholders in the exact
     amounts and in the exact percentages on a fully converted basis as set
     forth in the Disclosure Schedule. There are 135,667 shares of Company
     Common Stock reserved for future issuance pursuant to Company Stock Plans,
     1,020,866 shares subject to outstanding Company Stock Options, 183,321
     shares of Company Common Stock subject to certain outstanding Company
     Warrants identified in Section 3.4 of the Disclosure Schedule and 205,128
     shares of Senior D Preferred stock subject to the remaining Company
     Warrants identified in of Section 3.4 of the Disclosure Schedule, and all
     such Company Stock Options and Company Warrants are held (of record) solely
     by the holders and in the exact amounts, as set forth in the Disclosure
     Schedule. Except as set forth in the Disclosure Schedule, there are no
     other outstanding (w) shares of capital stock or other voting securities of
     the Company, (x) securities of the Company convertible into or exchangeable
     for shares of capital stock or voting securities of the Company, (y)
     options, warrants, conversion privileges, rights of first refusal,
     contracts, understandings, agreements or other rights to purchase or
     acquire from the Company, and, no obligations of the Company to issue, any
     capital stock, voting securities or securities convertible into or
     exchangeable for capital stock or voting securities of the Company, and (z)
     equity equivalent interests in the ownership or earnings of the Company or
     other similar rights (collectively, "Company

                                       12

<PAGE>

     Securities"). Except as set forth in the Disclosure Schedule, there are no
     outstanding obligations of the Company to repurchase, redeem or otherwise
     acquire any Company Securities. Except as set forth in the Disclosure
     Schedule, there are no agreements, voting trusts or other agreements or
     understandings to which the Company is a party or by which it is bound
     relating to the voting or registration of any shares of capital stock of
     the Company.

3.5  Non-Contravention. Neither the execution, delivery and performance by the
     Company of this Agreement nor the consummation of the transactions
     contemplated herein will (a) contravene or conflict with the Certificate of
     Incorporation or Bylaws of the Company, (b) contravene or conflict with or
     constitute a violation of any provision of any Applicable Law binding upon
     or applicable to the Company or any of the Company's assets, (c) result in
     the creation or imposition of any Lien on any of the Company's assets,
     other than Permitted Liens, or (d) be in conflict with, constitute (with or
     without due notice or lapse of time or both) a default under, result in the
     loss of any material benefit under, or give rise to any right of
     termination, cancellation, increased payments or acceleration under any
     terms, conditions or provisions of any note, bond, lease, mortgage,
     indenture, license, contract, franchise, permit, instrument or other
     agreement or obligation to which the Company is a party, or by which any of
     its properties or assets may be bound, except in any case under clause (b)
     or clause (d) of this Section 3.5 where such conflicts or other occurrences
     could not reasonably be expected to have, individually or in the aggregate,
     a Material Adverse Effect on the Company.

3.6  Consents and Approvals. No consent, approval, order or authorization of or
     from, or registration, notification, declaration or filing with
     (hereinafter sometimes separately referred to as a "Consent" and sometimes
     collectively as "Consents") any individual or entity, including without
     limitation any Governmental Authority or Person, is required in connection
     with the execution, delivery or performance of this Agreement by the
     Company or the consummation by the Company of the transactions contemplated
     herein, other than the requirements of the DGCL for filing of appropriate
     documents to effect the Merger, the consent of the stockholders of the
     Company and the consent of the third parties to Contracts to which the
     Company is a party which Contracts are identified in Section 3.6 of the
     Disclosure Schedule. There are no facts relating to the identity or
     circumstances of the Company that would prevent or materially delay
     obtaining any of the Consents.

3.7  Joint Proxy Statement; Registration Statement; Other Information. The
     material, information, financial statements and exhibits with respect to
     the Company and supplied by the Company to Parent (and its legal counsel
     and accounting advisors ) for inclusion into the joint proxy statement
     prepared by Parent and included as part of the Registration Statement (such
     proxy statement/prospectus, together with written consent resolutions and
     any letter or other materials to the Stockholders included therein are
     referred to in this Agreement as the "Joint Proxy Statement") shall not, at
     the time the Joint Proxy Statement is first mailed or supplemented, contain
     any untrue statement of a material fact or omit to state any material fact
     required to be stated therein or necessary to make the statements therein,
     in light of the circumstances under which they are made, not misleading, or
     to correct any statement made in any earlier communication with respect

                                       13

<PAGE>

     to the solicitation of any proxy or approval for the Merger in connection
     with which the Joint Proxy Statement shall be mailed, except that no
     representation or warranty is made by the Company with respect to any
     information regarding the Parent, Merger Subsidiary or any Affiliate of the
     Parent or Merger Subsidiary that is contained or incorporated by reference
     in the Joint Proxy Statement.

3.8  Financial Statements; Undisclosed Liabilities.

     (a)  The Company has delivered to Parent true, correct and complete copies
          of (i) the unaudited balance sheet, as of November 30, 2005 of the
          Company and the Subsidiaries (the "Latest Balance Sheet") and the
          unaudited statements of income, stockholders' equity and cash flows of
          the Company for the eleven-month period ended November 30, 2005 (such
          statements of income, stockholders' equity and cash flows and the
          Latest Balance Sheet being herein referred to as the "Latest Financial
          Statements") and (ii) the audited balance sheet, as of December 31,
          2002, 2003 and 2004 of the Company and the related audited statements
          of income, stockholders' equity and cash flows of the Company for each
          of the years ended December 31, 2002, 2003 and 2004 (collectively, the
          "Annual Financial Statements"). The Latest Financial Statements and
          the Annual Financial Statements are based upon the information
          contained in the books and records of the Company and fairly and
          accurately present the financial condition of the Company as of the
          dates thereof and results of operations for the periods referred to
          therein. The Annual Financial Statements have been prepared in
          accordance with GAAP, applied on a consistent basis and consistent
          with the past accounting practices of the Company. The Latest
          Financial Statements have been prepared in accordance with GAAP
          applicable to unaudited interim financial statements (and thus may not
          contain all notes and may not contain prior period comparative data
          which are required for compliance with GAAP), on a basis consistent
          with the Annual Financial Statements, subject to normal recurring
          year-end adjustments. The Company's internal controls and procedures
          are sufficient to ensure that the Latest Financial Statements and the
          Annual Financial Statements are accurate in all material respects.

     (b)  Except as set forth in the Disclosure Schedule, all accounts, books
          and ledgers related to the business of the Company are properly kept,
          are accurate and complete in all material respects, and there are no
          material inaccuracies or discrepancies of any kind contained or
          reflected therein. Except as set forth in the Disclosure Schedule, the
          Company does not have any of its records, systems, controls, data, or
          information recorded, stored, maintained, operated or otherwise wholly
          or partly dependent upon or held by any means (including any
          electronic, mechanical or photographic process, whether computerized
          or not) which (including all means of access thereto and therefrom)
          are not under the exclusive ownership (excluding licensed software
          programs) and direct control of the Company.

     (c)  Except as and to the extent reflected in the Latest Balance Sheet, the
          Company has no liabilities or obligations (whether accrued, absolute,
          contingent,

                                       14

<PAGE>

          unliquidated or otherwise, whether due or to become due, whether known
          or unknown, and regardless of when asserted) arising out of
          transactions or events heretofore entered into, or any action or
          inaction, or any state of facts existing, with respect to or based
          upon transactions or events heretofore occurring, except (i)
          liabilities of not more than Two Million Five Hundred Thousand Dollars
          ($ 2,500,000) in the aggregate that have arisen after the date of the
          Latest Balance Sheet in the ordinary course of business, consistent
          with past custom and practice (none of which is a liability for breach
          of contract, breach of warranty, violation of Applicable Law, tort,
          infringement, claim or lawsuit), (ii) liabilities disclosed on Section
          3.8 of the Disclosure Schedule, or (iii) Liabilities under Contracts
          set forth on Section 3.21 of the Disclosure Schedule.

3.9  Absence of Certain Changes. Except as otherwise authorized by this
     Agreement, since November 30, 2005, the Company has owned and operated its
     assets, properties and businesses in the ordinary course of business and
     consistent with past practice and there has not been:

     (a)  to the Company's knowledge, any change, effect, event, occurrence,
          state of facts or development that individually or in the aggregate,
          has had or could reasonably be expected to have a Material Adverse
          Effect on the Company;

     (b)  except as set forth in the Disclosure Schedule, any declaration,
          setting aside or payment of any dividend or other distribution with
          respect to any shares of capital stock of the Company, or any
          repurchase, redemption or other acquisition by the Company (other than
          any wholly-owned subsidiary) of any outstanding shares of capital
          stock or other equity or debt securities of, or other ownership
          interests in, the Company;

     (c)  any split, combination or reclassification of any of its capital
          stock;

     (d)  except as set forth in the Disclosure Schedule, any amendment of any
          provision of the Certificate of Incorporation, Bylaws or other
          governing documents of, or of any material term of any outstanding
          security issued by, the Company;

     (e)  any incurrence, assumption or guarantee by the Company of any
          indebtedness for borrowed money;

     (f)  any change in any method of accounting or accounting practice by the
          Company, except for any such change required by reason of a change in
          GAAP and concurred with by the Company's independent public
          accountants;

     (g)  issuance of any equity or debt securities of the Company other than
          pursuant to the Company Stock Plans, Company Stock Options or Company
          Warrants in the ordinary course of business and consistent with past
          practice;

     (h)  acquisition or disposition of assets material to the Company, taken as
          a whole, except for sales of inventory in the ordinary course of
          business consistent with

                                       15

<PAGE>

          past practice, any acquisition or disposition of capital stock of any
          third party, or any merger or consolidation with any third party, by
          the Company;

     (i)  any creation or assumption by the Company of any Lien, other than
          Permitted Liens;

     (j)  any individual capital expenditure (or series of related capital
          expenditures) either involving more than $10,000 or outside the
          ordinary course of business;

     (k)  any material damage, destruction or loss (whether or not covered by
          insurance) from fire or other casualty to its tangible property;

     (l)  any material increase in the base salary of any officer or employee of
          the Company;

     (m)  except as set forth in the Disclosure Schedule, any adoption,
          amendment, modification, or termination of any Benefit Plan or any
          other bonus, profit-sharing, incentive, severance or other similar
          plan for the benefit of any of its directors, officers or employees;

     (n)  entry by the Company into any joint venture, partnership or similar
          agreement with any person;

     (o)  any filing of any amended Tax Return, settlement of any Tax claim or
          assessment relating to the Company, payment of any estimated Taxes in
          excess of $10,000, change in method of Tax accounting, or consent to
          the extension or waiver of the limitations period applicable to any
          claim or assessment with respect to Taxes; or

     (p)  any authorization of, or commitment or agreement to take any of, the
          foregoing actions except as otherwise permitted by this Agreement.

3.10 Assets and Properties.

     (a)  The Company has good and valid right, title and interest in and to or,
          in the case of leased properties or properties held under license,
          good and valid leasehold or license interests in, all of its assets
          and properties, including, but not limited to, all of the machinery,
          equipment, terminals, computers, vehicles, and all other assets and
          properties (real, personal or mixed, tangible or intangible) reflected
          in the Latest Balance Sheet and all of the assets purchased or
          otherwise acquired since the date of the Latest Balance Sheet, except
          those assets and properties disposed of in the ordinary course of
          business after the date of the Latest Balance Sheet. The Company holds
          title to each such owned property and owned asset free and clear of
          all Liens, except Permitted Liens.

     (b)  To the Company's knowledge, (i) the current use and operation of all
          real property is in compliance with all Applicable Laws (including
          without limitation laws relating to parking, zoning and land use) and
          public and private covenants and restrictions, (ii) the Company has
          not received any written notice of non-

                                       16

<PAGE>

          compliance with any Applicable Laws and (iii) utilities, access and
          parking, if any, for each such real property are adequate for the
          current use and operation of each such real property. To the Company's
          knowledge, there are no zoning, building code, occupancy restriction
          or other land-use regulation proceedings or any proposed change in any
          Applicable Laws, which could materially detrimentally affect the use
          or operation of any real property, nor has the Company received any
          notice of any special assessment proceedings affecting the real
          property, or applied for any change to the zoning or land use status
          of the real property. To the Company's knowledge, the Company has
          obtained all licenses, permits, approvals, easements and rights of way
          (and all such items are currently in full force and effect) required
          from any Governmental Authority having jurisdiction over each real
          property or from private parties for the current use and operation of
          each real property. The Company is not a foreign person, as the term
          foreign person is defined in Section 1445(f)(3) of the Code.

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

3.12 FDA and Regulatory Matters.

     (a)  The Company has obtained all necessary and applicable approvals,
          clearances, authorizations, licenses and registrations required by
          United States or foreign governments or government agencies, to permit
          the design, development, pre-clinical and clinical testing,
          manufacture, labeling, sale, distribution and promotion of its
          products in jurisdictions where it currently conducts such activities
          with respect to each product (collectively, the "Company Licenses").
          The Company is in compliance in all material respects with the terms
          and conditions of each Company License. The Company is in compliance
          in all material respects with all Applicable Laws regarding
          registration, license, certification for each site at which a product
          is manufactured, labeled, sold, or distributed. To the extent any
          product has been exported from the United States, the Company has
          exported such product in compliance in all material respects with
          Applicable Laws. All manufacturing operations performed by or on
          behalf of the Company have been and are being conducted in all
          material respects in compliance with the applicable Quality Systems
          regulations of the FDA and, to the extent applicable to the Company,
          counterpart regulations in the European Union and all other countries
          where compliance is required. All non-clinical laboratory studies of
          products sponsored by the Company and intended to be used to support
          regulatory clearance or approval, have been and are being conducted in
          compliance in all material respects with the FDA's good Laboratory
          Practice for Non-Clinical Studies regulations (21 CFR Part 58) in the
          United States and, to the extent applicable to the Company,
          counterpart regulations in the European Union and all other countries.
          The Company is in compliance in all material respects with all
          applicable reporting requirements for all Company Licenses or plant

                                       17

<PAGE>

          registrations including, but not limited to, applicable adverse event
          reporting requirements in the United States and outside of the United
          States under Applicable Law. The Disclosure Schedule sets forth a list
          of all Company Licenses.

     (b)  Except as set forth in the Disclosure Schedule, the Company is in
          compliance in all material respects with all FDA and non-United States
          equivalent agencies and other Applicable Laws relating to the
          maintenance, compilation and filing of reports, including medical
          device reports, with regard to the Company's products. The Disclosure
          Schedule sets forth a list of all applicable adverse event reports
          related to the Products or the Company's Model 1000 heart valve,
          including any Medical Device Reports (as defined in 21 CFR 803). The
          Disclosure Schedule sets forth a list of all complaint review and
          analysis reports of the Company, including information regarding
          complaints by product and root cause analysis of closed complaints,
          which reports are correct in all material respects.

     (c)  Except as set forth in the Disclosure Schedule, the Company has not
          received any written notice or other written communication from the
          FDA or any other Governmental Authority (i) contesting the pre-market
          clearance or approval of, the uses of or the labeling and promotion of
          any of the Company's products or (ii) otherwise alleging any violation
          of Applicable Law by the Company.

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

     (e)  The Company has conducted all of its clinical trials with reasonable
          care and in all material respects in accordance with all Applicable
          Laws and the stated protocols for such clinical trials.

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

                                       18

<PAGE>

3.13 Reimbursement/Billing.

     (a)  The Company's products have not yet received final approval by the FDA
          and thus reimbursement for the products and related services are
          subject to various limitations by federal and other payors. The
          Company's 3F Aortic Bioprosthesis(TM) was recognized as a Category B2
          device by FDA and thus was eligible for Medicare coverage during and
          under the investigational device exemption. Medicare (Title XVIII of
          the Social Security Act ("Medicare")), covers heart valve procedures
          and pays the hospital for the costs of the inpatient services under a
          prospective payment system, utilizing diagnosis related groups (DRGs).
          Applicable DRGs include DRGs 104 and 105 for cardiac valve procedures
          which pay hospitals in the range of $38,000 and $28,000 respectively
          for the procedures during 2006. Coverage and payment under state
          Medicaid programs (Title XIX of the Social Security Act ("Medicaid"))
          and private third party payors ("Third Party Payors") are similarly
          subject to various limitations and coverage and payment will vary
          widely by payor. The Company provided hospital investigational sites
          with basic reimbursement information in 2003 (a copy of a May 27, 2003
          reimbursement letter has been provided to Parent). The Company is
          neither a provider nor a supplier under Medicare, Medicaid or any
          other government-sponsored health care program (collectively,
          "Government Programs"), and does not bill any Government Program or
          Third Party Payor for its products.

     (b)  There is no pending, nor to the knowledge of the Company, threatened,
          proceeding or investigation under any Government Program involving the
          Company. The Company's sales and marketing practices are, and have
          been, in compliance in all material respects with all Applicable Laws
          and all policies of applicable Third Party Payors and Government
          Programs.

     (c)  To Company's knowledge, the Company has not arranged with or
          contracted with (by employment or otherwise) any person who is
          excluded from participation in any Government Program for the
          provision of items or services for which payment may be made under any
          such Government Program. None of the officers, directors, agents or
          managing employees (as such term is defined in 42 U.S.C. Section
          1320a-5(b)) of the Company, has been excluded from any Government
          Program or been subject to sanction pursuant to 42 U.S.C. Section
          1320a-7a or 1320a-8 or been convicted of a crime described at 42
          U.S.C. Section 1320a-7b.

     (d)  Neither the Company, any director, officer or employee of the Company,
          nor any agent acting on behalf of or for the benefit of any of the
          Company, has directly or indirectly in connection with the Company:
          (i) offered or paid any remuneration, in cash or in kind, to or made
          any financial arrangements with, any past, present or potential
          customers, past or present suppliers, patients, contractors or
          employees of Third Party Payors or Government Programs in order to
          obtain business or payments from such persons other than in the
          ordinary course of business; (ii) given or agreed to give, any gift or
          gratuitous payment of any kind, nature or description (whether in
          money, property or services) to any customer or

                                       19

<PAGE>

          potential customer, supplier or potential supplier, contractor, Third
          Party Payor or any other person other than in connection with
          promotional or entertainment activities in the ordinary course of
          business and in compliance with the Company's compliance program; or
          (iii) made any false entries on any of the Company's books or records
          for any purpose prohibited by Applicable Law.

     (e)  Neither the Company, nor any director, officer or employee of the
          Company is a party to any contract to provide services, lease space or
          lease equipment to the Company with any physician, health care
          facility, hospital or other person who is in a position to make or
          influence referrals to the Company where such contract or provision of
          services or space is prohibited by Applicable Law.

3.14 Compliance with Applicable Laws. The Company has not violated or infringed,
     nor is it in violation or infringement of, any Applicable Law or any order,
     writ, injunction or decree of any Governmental Authority in connection with
     its activities except to the extent the same would not have a Material
     Adverse Effect on the Company. The Company and each of its officers,
     directors, agents and employees are in material compliance with all
     Applicable Laws, including, but not limited to, Applicable Laws relating to
     Government Programs and to billing and health care fraud (including the
     federal Anti-Kickback Law, 42 U.S.C. Section 1320a-7b(b), the Stark I and
     II Laws, 42 U.S.C. Section 1395nn, as amended, and the False Claims Act, 31
     U.S.C. Section 3729 et seq. and any regulations related thereto, as well as
     with any similar state statutes) except to the extent the same would not
     have a Material Adverse Effect on the Company. To the Company's knowledge,
     no claims have been filed against the Company alleging a violation of any
     Applicable Law. The Company is not a "covered entity" or a "business
     associate" within the meaning of the HIPAA Privacy, Security and other
     Administrative Simplification Regulations.

3.15 Compliance Program. The Company has made available to Parent a copy of the
     Company's current compliance program materials, including all program
     descriptions, code of conduct documents for employees, officers and
     independent contractors, ethics and risk area policy materials, training
     and education materials, auditing and monitoring protocols, reporting
     mechanisms, and disciplinary policies. The Company (i) is not a party to a
     Corporate Integrity Agreement with the Office of the Inspector General of
     the Department of Health and Human Services, (ii) has no reporting
     obligations pursuant to any settlement agreement entered into with any
     governmental body, (iii) to its knowledge, has not been the subject of any
     Government Program investigation conducted by any governmental body, (iv)
     has not been a defendant in any qui tam/False Claims Act litigation (other
     than by reason of an unsealed complaint of which the Company has no
     knowledge), and (v) has not been served with or received any search
     warrant, subpoena, civil investigation demand, contact letter, or to the
     Company's knowledge, telephone or personal contact by or from any
     governmental body. For purposes of this Agreement the term "compliance
     program" refers to programs of the type described in the compliance
     guidance published by the Office of the Inspector General of the Department
     of Health and Human Services.

                                       20

<PAGE>

3.16 Permits. The Disclosure Schedule sets forth those approvals,
     authorizations, certificates, consents, licenses, orders and permits and
     other similar authorizations of all Governmental Authorities (and all other
     Persons) of the Company which are necessary to conduct its business and own
     and operate its properties, other than those the failure of which to have
     would not have a Material Adverse Effect on the Company (the "Permits").
     Each Permit is valid and in full force and effect and none of the Permits
     will be terminated, revoked, modified or become terminable or impaired in
     any respect by reason of the Merger except as would not have a Material
     Adverse Effect on the Company. The Company has conducted its business in
     compliance with all material terms and conditions of the Permits. The term
     Permits shall not include any Company License.

3.17 Inventories. All inventories of the Company reflected in the Latest Balance
     Sheet (a) consist of items of usable and salable in the ordinary course of
     business, (b) are salable in the ordinary course of business, (c) conform
     to the specifications established therefor, and (d) have been manufactured
     in accordance with all Applicable Laws. The quantities of all inventories,
     materials and supplies of the Company are not obsolete, damaged,
     slow-moving, defective or excessive and the present quantities of all
     inventory, materials and supplies of the Company are reasonable in the
     present circumstances of the business of the Company, as a whole, as
     currently conducted, except for items that are obsolete or below standard
     quality, all of which are immaterial to the overall financial condition of
     the Company, taken as a whole, and have been adequately allowed for in the
     Latest Balance Sheet.

3.18 Receivables; Payables.

     (a)  The accounts receivables and other receivables reflected on the Latest
          Balance Sheet, and those arising in the ordinary course of business
          after the date thereof, have arisen from bona fide transactions in the
          ordinary course of business, are not subject to valid counterclaims or
          setoffs and are collectible in accordance with their terms, except as
          and to the extent of the bad debt allowance reflected on the Latest
          Balance Sheet.

     (b)  The Disclosure Schedule contains a listing of all outstanding and
          unpaid accounts payable that are as of November 30, 2005 more than
          sixty (60) days past due or that relate to services that were
          performed more than ninety (90) days prior to November 30, 2005. The
          Disclosure Schedule will be supplemented pursuant to Section 5.9 to
          contain a listing of all outstanding and unpaid accounts payable that
          are, as of five (5) Business Days prior to the Closing Date, more than
          sixty (60) days past due or that relate to services that were
          performed more than ninety (90) days prior to the Closing Date. All
          account payables so listed in the Disclosure Schedule arose from bona
          fide transactions in the ordinary course of the Company's business.

3.19 Grants, Incentives and Subsidies. From and after January 1, 2000 (a) the
     Company has had no pending or outstanding grants, incentives or subsidies
     (collectively, "Grants") from any Governmental Authority, and (b) the
     Company has not applied for any Grant.

                                       21

<PAGE>

3.20 Litigation. There are no (a) actions, suits, claims, hearings,
     arbitrations, proceedings (public or private) or governmental
     investigations that have been brought by any Governmental Authority or any
     other Person, nor any claims or any investigations or reviews by any
     Governmental Authority against or affecting the Company, pending or, in any
     case, to the Company's knowledge, threatened, against or by the Company or
     any of its assets or which seek to enjoin or rescind the transactions
     contemplated by this Agreement; and (b) existing orders, judgments or
     decrees of any Governmental Authority naming the Company as an affected
     party or otherwise affecting any of the assets or the business of the
     Company.

3.21 Contracts.

     (a)  The Disclosure Schedule lists the following Contracts of the Company
          (collectively, the "Scheduled Contracts"):

          (i)  Each Contract providing for the lease of real property by the
               Company or which is used by Company in connection with the
               operation of its business.

          (ii) Each Contract relating to all machinery, tools, equipment, motor
               vehicles, rolling stock and other tangible personal property
               (other than inventory and supplies) owned, leased or used by the
               Company, except for items which do not, in the aggregate, have a
               total value of more than $10,000 or having a remaining term of
               longer than six (6) months or that are not cancelable by the
               Company in its discretion and without penalty upon notice of
               sixty (60) days or less.

          (iii) Each Contract to which the Company is a party that would
               reasonably be expected to involve payments by or to the Company
               in excess of $10,000 or the loss of which would have a Material
               Adverse Effect.

          (iv) All Contracts relating to, or evidences of, or guarantees of, or
               providing security for, indebtedness or the deferred purchase
               price of property (whether incurred, assumed, guaranteed or
               secured by any asset).

          (v)  Each independent sales representative or distribution agreement,
               supply agreement or similar Contract relating to or providing for
               the marketing or manufacturing of the Company's products, which
               agreement is not terminable upon sixty (60) days notice or less
               without penalty therefor or which involves payments of in excess
               of $10,000.

          (vi) Each consulting, development, joint development, research and
               development regulatory or similar Contract relating to
               development of the Company's products or Intellectual Property
               and each Contract under which the Company has granted or obtained
               a license to Intellectual Property, other than commercial
               software licenses.

                                       22

<PAGE>

          (vii) All acquisition, partnership, joint venture, teaming
               arrangements or other similar Contracts.

          (viii) Any Contract under which the Company has agreed not to compete
               or has granted to a third party an exclusive right that restricts
               or otherwise adversely affects the ability of the Company to
               conduct its business.

          (ix) All Benefit Plans.

          (x)  All Contracts with any "disqualified individual" (as defined in
               Section 280G(c) of the Code) which contains any severance or
               termination pay liabilities which would result in a disallowance
               of the deduction for any "excess parachute payment" (as defined
               in Section 280G(b)(l) of the Code) under Section 280G of the
               Code.

          (xi) Every Contract between the Company and any of the Company's
               officers, directors or more than 5% stockholders, or any entity
               in which any of the Company's officers, directors or more than 5%
               stockholders has a greater than 2% equity interest.

          (xii) All Contracts for clinical or marketing trials relating to the
               Company's products and all Contracts with physicians, hospitals
               or other healthcare providers, or other scientific or medical
               advisors.

          (xiii) All Contracts not identified in clause (xii) that relate to the
               Company's compliance with or obligation to comply with the
               requirements of the HIPAA Portability Regulations and HIPAA
               Privacy, Security and Other Administrative Simplification
               Regulations, including without limitation all business associate
               agreements, subcontractor agreements, administrative service
               agreements, confidentiality agreements and similar contracts.

     (b)  The Company has delivered to Parent true and correct copies (or
          summaries, in the case of any oral Contracts) of all Scheduled
          Contracts. None of the Scheduled Contracts contain a provision
          requiring the consent of any party with respect to the consummation of
          the transaction contemplated herein. No notice of default arising
          under any Scheduled Contract has been delivered to or by the Company.
          Each Scheduled Contract is a legal, valid and binding obligation of
          the Company and each other party thereto, enforceable against each
          such party thereto in accordance with its terms, except as may be
          limited by applicable bankruptcy, insolvency, reorganization,
          moratorium or similar laws affecting creditors' rights generally and
          subject to general principles of equity, and neither the Company nor
          the other party thereto is in breach, violation or default thereunder
          except for such breach, violation or default as would not, either
          individually or in the aggregate, have a Material Adverse Effect.

                                       23

<PAGE>

3.22 Benefit Plans.

     (a)  The Disclosure Schedule identifies each Pension Plan, including
          without limitation any such plan that is excluded from coverage by
          Section 4 of ERISA or is a "Multiemployer Plan" within the meaning of
          Section 3(37) or 4001(a)(3) of ERISA, that the Company or any other
          ERISA Affiliate sponsors, maintains, contributes to, is required to
          contribute to or has or could have any liability of any nature,
          whether known or unknown, direct or indirect, fixed or contingent. To
          the knowledge of the Company, each such Pension Plan that is a
          Multiemployer Plan has been operated in all material respects in
          accordance with its terms and in compliance in all material respects
          with the applicable provisions of ERISA, the Code and other Applicable
          Law. Each such other Pension Plan has been operated in all material
          respects in accordance with its terms and in compliance in all
          material respects with the applicable provisions of ERISA, the Code
          and all other Applicable Law. All Pension Plans that are intended to
          be qualified under the provisions of Section 401(a) of the Code
          satisfy in form and operation all applicable qualification
          requirements and have not received in the preceding seven (7) years or
          committed to receive a transfer of assets and/or liabilities or
          spin-off from another plan, except transfers, which were intended to
          qualify as transfers from eligible rollover distributions within the
          meaning of Code Section 402(c)(4). Neither the Company nor any ERISA
          Affiliate has sponsored, maintained or contributed to any Pension Plan
          which, during the preceding seven (7) years, has been terminated,
          including by way of merger with or into another Pension Plan.

     (b)  No Pension Plan is now or has in the past seven (7) years been
          "top-heavy" pursuant to Section 416 of the Code.

     (c)  The Disclosure Schedule sets forth the name of each ERISA Affiliate.

     (d)  Neither the Company nor any ERISA Affiliate has or could have any
          liability of any nature, whether known or unknown, direct or indirect,
          fixed or contingent, to any Pension Plan, the Pension Benefit Guaranty
          Corporation or any other person, arising directly or indirectly under
          Title IV of ERISA other than liability pursuant to Section 4007 for
          premiums which are not yet due (without regard to any waiver). No
          "reportable event," within the meaning of Section 4043 of ERISA, has
          occurred with respect to any Pension Plan subject to Title IV of
          ERISA. Neither the Company nor any ERISA Affiliate has ceased
          operations at any facility or withdrawn from any Pension Plan in a
          manner which could subject the Company or any ERISA Affiliate to
          liability under Section 4062(e), 4063 or 4064 of ERISA. Neither the
          Company nor any ERISA Affiliate maintains, contributes to or has
          participated in or agreed to participate in any Pension Plan that is a
          Multiemployer Plan. Neither the Company nor any ERISA Affiliate has
          been a party to a sale of assets to which Section 4204 of ERISA
          applied with respect to which it could incur any withdrawal liability
          (including any contingent or secondary withdrawal liability) to any
          Multiemployer Plan. Neither the Company nor any ERISA Affiliate has
          incurred, or has experienced an event that will,

                                       24

<PAGE>

          within the ensuing twelve (12) months, result in, a "complete
          withdrawal" or "partial withdrawal," as such terms are defined
          respectively in Sections 4203 and 4205 of ERISA, with respect to a
          Pension Plan which is a Multiemployer Plan, and nothing has occurred
          that could result in such a complete or partial withdrawal. Neither
          the Company nor any ERISA Affiliate has incurred a decline in
          contributions to any Multiemployer Plan such that, if the current rate
          of contributions continues, a seventy percent (70%) decline in
          contributions (as defined in Section 4205 of ERISA) will occur within
          the next three (3) plan years.

     (e)  The Disclosure Schedule identifies each Welfare Plan, whether insured
          or otherwise, including without limitation any such plan that is a
          Multiemployer Plan within the meaning of Section 3(37) of ERISA, which
          the Company or any ERISA Affiliate sponsors, maintains, contributes
          to, is required to contribute to, or has or could have any liability
          of any nature, whether known or unknown, direct or indirect, fixed or
          contingent. To the knowledge of the Company, each such Welfare Plan
          that is a Multiemployer Plan has been operated in all material
          respects in accordance with its terms and in compliance in all
          material respects with applicable provisions of ERISA, the Code and
          other Applicable Law. Each such other Welfare Plan has been operated
          in all material respects in accordance with its terms and in
          compliance in all material respects with the applicable provisions of
          ERISA, the Code, the Health Insurance Portability and Accountability
          Act of 1996, Public Law 104-191 as codified in the Code and ERISA
          ("HIPAA") and corresponding regulations, including the HIPAA
          Portability Regulations and the HIPAA Privacy, Security and other
          Administrative Simplification Regulations and all other Applicable
          Law. Benefits under each Welfare Plan are fully insured by an
          insurance company unrelated to the Company or any ERISA Affiliate. No
          insurance policy or contract requires or permits retroactive increase
          in premiums or payments due thereunder. Neither the Company nor any
          ERISA Affiliate has established or contributed to, is required to
          contribute to or has or could have any liability of any nature,
          whether known or unknown, direct or indirect, fixed or contingent,
          with respect to any "voluntary employees' beneficiary association"
          within the meaning of Section 501(c)(9) of the Code, "welfare benefit
          fund" within the meaning of Section 419 of the Code, "qualified asset
          account" within the meaning of Section 419A of the Code or "multiple
          employer welfare arrangement" within the meaning of Section 3(40) of
          ERISA. No Welfare Plan that is a Multiemployer Plan imposes any
          post-withdrawal liability or contribution obligations upon the Company
          or any ERISA Affiliate. Except as set forth in the Disclosure
          Schedule, neither the Company nor any ERISA Affiliate maintains,
          contributes to or has or could have any liability of any nature,
          whether known or unknown, direct or indirect, fixed or contingent,
          with respect to medical, health, life or other welfare benefits for
          present or future terminated employees or their spouses or dependents
          other than as required by COBRA or any comparable state law.

     (f)  The Disclosure Schedule identifies each Compensation Plan that the
          Company or any ERISA Affiliate maintains, contributes to, is required
          to contribute to or has

                                       25

<PAGE>

          any liability of any nature, direct or indirect, fixed or contingent.
          Each Compensation Plan has been operated in all material respects in
          accordance with its terms and in compliance in all material respects
          with the applicable provisions of all Applicable Law.

     (g)  The Company has properly determined and timely collected and reported
          all Federal Insurance Contribution Act ("FICA") taxes imposed under
          Sections 3101 and 3111 of the Code on remuneration for employment that
          constitutes "wages" within the meaning of Section 3121(a) of the Code,
          including amounts of deferred compensation under nonqualified deferred
          compensation plans, agreements or arrangements.

     (h)  The Disclosure Schedule identifies each Pension Plan, Welfare Plan or
          Compensation Plan (each, a "Benefit Plan" and, collectively, "Benefit
          Plans"), that is or may be, in whole or in part, subject to Section
          409A of the Code; except as set forth on the Disclosure Schedule. To
          the Company's knowledge, each such Benefit Plan complies in form with
          Section 409A of the Code and no service provider under any Section
          409A Benefit Plan is subject to additional income tax under Section
          409A of the Code.

     (i)  There are no facts or circumstances which could, directly or
          indirectly, subject the Company or any ERISA Affiliate to any (i)
          excise tax or other liability under Chapters 43, 46 or 47 of Subtitle
          D of the Code, (ii) penalty tax or other liability under Chapter 68 of
          Subtitle F of the Code or (iii) civil penalty, damages or other
          liabilities arising under Section 502 of ERISA.

     (j)  Full payment has been made of all amounts which the Company or any
          ERISA Affiliate is required, under Applicable Law, the terms of any
          Benefit Plan, or any agreement relating to any Benefit Plan, to have
          paid as a contribution, premium or other remittance thereto or benefit
          thereunder or the Company and each ERISA Affiliate has made adequate
          provisions for reserves or accruals in accordance with GAAP to meet
          contribution, benefit or funding obligations arising under Applicable
          Law or the terms of any Benefit Plan or related agreement. Each
          Pension Plan that is subject to the minimum funding standards of
          Section 412 of the Code and/or Section 302 of ERISA meets those
          standards and has not incurred any accumulated funding deficiency
          within the meaning of Section 412 or 418B of the Code or Section 302
          of ERISA and no waiver of any minimum funding requirements has been
          applied for or obtained with respect to any Pension Plan. There will
          be no change on or before Closing Date in the operation of any Benefit
          Plan or any documents with respect thereto which will result in an
          increase in the benefit liabilities under such Benefit Plans, except
          as may be required by Applicable Law.

     (k)  The Company and each ERISA Affiliate has timely complied in all
          material respects with all reporting and disclosure obligations with
          respect to the Benefit Plans imposed by the Code, ERISA or other
          Applicable Law.

                                       26

<PAGE>

     (l)  There are no pending or, to the knowledge of the Company, threatened
          claims, suits, audits or proceedings against the Company or any other
          party by present or former employees of the Company, Benefit Plan
          participants (or their beneficiaries, spouses or dependents),
          including, without limitation, claims against the assets of any trust,
          involving any Benefit Plan, or any rights or benefits thereunder,
          other than the ordinary and usual claims for benefits by participants
          or beneficiaries.

     (m)  Except as set forth on the Disclosure Schedule, the transactions
          contemplated herein do not result in any payment (whether of severance
          pay or otherwise), forgiveness of debt, distribution, increase in
          benefits, obligation to fund, or the acceleration of accrual, vesting,
          funding or payment of any contribution or benefit under any Benefit
          Plan.

     (n)  No employer other than the Company and/or an ERISA Affiliate is
          permitted to participate or participates in the Benefit Plans. No
          leased employees (as defined in Section 414(n) of the Code) or
          independent contractors are eligible for, or participate in, any
          Benefit Plans.

     (o)  No action or omission of the Company or any ERISA Affiliate or any
          director, officer, employee, or agent thereof in any way restricts,
          impairs or prohibits Parent, the Company, the Surviving Corporation,
          any other ERISA Affiliate or any successor from amending, merging, or
          terminating any Benefit Plan in accordance with the express terms of
          any such plan and Applicable Law.

     (p)  The Company has delivered or made available to Parent, true and
          complete copies of all Benefit Plan documents and related trust
          agreements or other agreements or contracts evidencing any funding
          vehicle with respect thereto, including all amendments. The Company
          has delivered or made available to Parent true and complete copies of:

          (i)  the three most recent annual reports on Treasury Form 5500,
               including all schedules and attachments thereto, with respect to
               any Benefit Plan for which such a report is required;

          (ii) the three most recent actuarial reports with respect to any
               Pension Plan that is a "defined benefit plan" within the meaning
               of Section 414(j) of the Code;

          (iii) the form of summary plan description, including any summary of
               material modifications thereto or other modifications
               communicated to participants, currently in effect with respect to
               each Benefit Plan;

          (iv) the most recent determination letter with respect to each Pension
               Plan intended to qualify under Section 401(a) of the Code and the
               full and complete application therefor submitted to the Internal
               Revenue Service; and

                                       27

<PAGE>

          (v)  all professional opinions, material internal memoranda, material
               correspondence with regulatory authorities (such as a copy of all
               documents relating to a voluntary correction submission with the
               Department of Labor or the IRS) and administrative policies,
               manuals, interpretations and the like with respect to each
               Benefit Plan.

     (q)  The Company has delivered or made available to Parent true and correct
          copies of the Welfare Plan documents establishing compliance with the
          HIPAA Privacy and Security Regulations, including appointment of a
          privacy official, its Notice of HIPAA Privacy Practices, privacy
          policies and procedures, and the plan administrator's Group Health
          Plan document amendment certification.

3.23 Labor and Employment Matters.

     (a)  The Disclosure Schedule sets forth a complete and accurate list of all
          employees, officers and directors of the Company as of January 23,
          2005 which list includes their base salaries, bonus and any other
          related information (e.g., PTO balances, commissions, etc.). All
          employees of the Company are employed on an "at-will" basis. The
          Company has also previously delivered to Parent (to the extent
          permitted by law) a complete and accurate list of the titles, current
          annual salary rates and all regular bonuses paid or payable or other
          bonuses paid or payable, as of November 30, 2005 (or within nine (9)
          months thereafter), to all consultants, contractors and other such
          individuals employed or engaged or retained by the Company as of
          November 30, 2005 who were performing services for the Company and
          whose then annual (or annualized) rate of compensation exceeded
          $75,000.

     (b)  The Disclosure Schedule identifies all employees who are currently on
          leave for any reason or who are receiving disability or workers'
          compensation or any other similar type of benefit from the Company.

     (c)  None of the Company's employees is covered by a collective bargaining
          agreement and, to the Company's knowledge, there is no union or other
          organization seeking or claiming to represent any such employees.

     (d)  There is no labor dispute under a collective bargaining agreement or
          with respect to representation questions, strike, work stoppage or
          lockout, or, to the Company's knowledge, threat thereof, by or with
          respect to any employee.

     (e)  To the Company's knowledge, the Company has not engaged in any unfair
          labor practice, and the Company is not aware of any pending or
          threatened labor board proceeding of any kind, including any such
          proceeding against the Company.

     (f)  To the Company's knowledge, no grievance or arbitration demand or
          proceeding has been filed or is threatened against the Company.

                                       28

<PAGE>

     (g)  No citation has been issued under the Occupational Safety and Health
          Act ("OSHA") against the Company and no notice of contest, claim,
          complaint, charge, investigation or other administrative enforcement
          proceeding involving the Company has been filed or is pending or, to
          the Company's knowledge, threatened against the Company under OSHA or
          any other applicable law relating to occupational safety and health.

     (h)  The Company has not taken any action that would constitute a "mass
          layoff," "mass termination" or "plant closing" within the meaning of
          the United States Worker Adjustment and Retraining Notification Act or
          otherwise trigger notice requirements or liability under any federal,
          local, state or foreign plant closing notice or collective dismissal
          law.

     (i)  The Company is in material compliance with all applicable Laws,
          regulations and orders and all contracts or collective bargaining
          agreements governing or concerning labor relations, union and
          collective bargaining, conditions of employment, employment
          discrimination and harassment, wages, hours or occupational safety and
          health, including, without limitation, ERISA, the Fair Labor Standards
          Act, the Immigration Reform and Control Act of 1986, the National
          Labor Relations Act, the Civil Rights Acts of 1866, 1964 and 1991, the
          Equal Pay Act, the Age Discrimination in Employment Act, the Americans
          with Disabilities Act, FMLA, the Worker Adjustment and Retraining
          Notification Act, the OSHA, Uniformed Services Employment and
          Reemployment Rights Act, the Davis-Bacon Act, the Walsh-Healy Act, the
          Service Contract Act, Executive Order 11246, and the Rehabilitation
          Act of 1973 and all amendments and regulations under such acts
          (collectively, the "Labor Laws") except where such non-compliance
          would not have a Material Adverse Effect on the Company. The Company
          is not liable for any liabilities, judgments, decrees, orders,
          arrearage of wages or Taxes, fines or penalties for failure to comply
          with any of the Labor Laws, other than those which would not have a
          Material Adverse Effect on the Company.

     (j)  To the Company's knowledge, no employee of the Company is in violation
          of any contract or commitment with a third party that restricts him or
          her from engaging in any activity related to the business of the
          Company or competing with any person.

     (k)  All individuals who are performing or have performed services for the
          Company and who are or were classified by the Company as "independent
          contractors" qualify for such classification under Section 530 of the
          Revenue Act of 1978 or Section 1706 of the Tax Reform Act of 1986, as
          applicable, and such individuals are not entitled to any benefits
          under the Benefit Plans maintained by the Company.

                                       29

<PAGE>

3.24 Intellectual Property.

     (a)  Except for Intellectual Property relating to commercial, off-the-shelf
          software, the Disclosure Schedule lists all Intellectual Property that
          is registered with, has been applied for, or has been issued by the
          U.S. Patent and Trademark Office or a corresponding foreign
          governmental or public authority and all Intellectual Property that:
          (i) (only for purposes of this Section 3.24(a)(i), "Intellectual
          Property" means all rights of the Company in issued patents, pending
          patent applications, trademarks (whether registered or not), trademark
          applications, service mark registrations and service mark
          applications, trade names, trade dress, uniform resource locators,
          Internet domain names, Internet domain name applications, corporate
          names, and material trade secrets and know-how related to the
          Products) is owned by, licensed to or otherwise controlled by the
          Company; or (ii) has been licensed to or from third parties, including
          a description of each license agreement, the name of the licensee or
          licensor, as the case may be, and the date and term of the agreement.
          The Company has delivered or made available, to the extent not
          publicly available, to Parent complete and accurate copies of
          correspondence, litigation documents, agreements, file histories and
          office actions relating to the patents and patent applications listed
          in the Disclosure Schedule. Each item of Intellectual Property owned
          or used by the Company immediately prior to the Effective Time
          hereunder will be owned or available for use by Parent or its
          subsidiaries on identical terms and conditions immediately after the
          Effective Time.

     (b)  The Company owns, free and clear of any Lien, and possesses all right,
          title and interest, or holds a valid license, in and to all Core
          Intellectual Property. All patents issued (for purposes of clarity, as
          of the date hereof and as of the Closing Date, as applicable) included
          in the Core Intellectual Property are valid and enforceable. To the
          Company's knowledge and except as set forth in the Disclosure
          Schedule, the Company owns, free and clear of any Lien, and possesses
          all right, title and interest, or holds a valid license, in and to all
          Non-Core Intellectual Property, and has taken reasonable action to
          protect the Intellectual Property. To the Company's knowledge, all
          patents included in the Non-Core Intellectual Property are valid and
          enforceable. To the Company's knowledge, the Intellectual Property
          owned or licensed by the Company constitutes all the intellectual
          property necessary to the conduct of the business of the Company as it
          is currently conducted and as it is currently contemplated to be
          conducted. Except as set forth in the Disclosure Schedule, there are
          no royalties, fees, honoraria or other payments payable by the Company
          to any Person by reason of the ownership, development, modification,
          use, license, sublicense, sale, distribution or other disposition of
          the Intellectual Property other than salaries and sales commissions
          paid to employees and sales agents in the ordinary course of business.
          The Company has taken reasonable security measures to protect the
          secrecy, confidentiality and value of the Intellectual Property.

     (c)  The Disclosure Schedule lists the Internet domain names included in
          the Intellectual Property. To the Company's knowledge and except as
          set forth in the

                                       30

<PAGE>

          Disclosure Schedule, the Company is the registrant and sole legal and
          beneficial owner of the Internet domain names included in the
          Intellectual Property, free and clear of all Liens. Except as set
          forth in the Disclosure Schedule, the Company is the owner of any
          trademark which underlies a domain name included in the Intellectual
          Property. Except as set forth in the Disclosure Schedule, the Company
          is not aware of any pending or threatened actions, suits, claims,
          litigation or proceedings relating to the domain names included in the
          Intellectual Property. The Company has operated the websites
          identified in the Disclosure Schedule, unless otherwise noted therein.

     (d)  All personnel, including employees, agents (except with respect to
          legal counsel engaged by the Company to perform legal services not
          rising to the level of inventorship), consultants and contractors, who
          have contributed to or participated in the conception or development,
          or both, of the Intellectual Property on behalf of the Company and all
          officers and technical employees of the Company either (i) have been a
          party to "work-for-hire" arrangements or agreements with the Company
          in accordance with applicable federal and state law that has accorded
          the Company full, effective, sole, exclusive and original ownership of
          all tangible and intangible property thereby arising, or (ii) have
          executed appropriate instruments of assignment in favor of the Company
          as assignee that have conveyed to the Company effective, sole and
          exclusive ownership of all tangible and intangible property arising
          thereby, unless otherwise noted in the Disclosure Schedule.

     (e)  For purposes of clarity, as of the date hereof and as of the Closing
          Date, as applicable, except as set forth in the Disclosure Schedule,
          the conduct of the Company's business has not infringed,
          misappropriated or conflicted with and does not infringe,
          misappropriate or conflict with any intellectual property right of any
          other Person, nor has the Company received any notice from any third
          party of any infringement, misappropriation or violation by the
          Company of any intellectual property right of any third party and no
          notice has been received by any third party challenging the Company's
          ownership to any of the Intellectual Property. No claim by any third
          party contesting the validity of any patents included in the Core
          Intellectual Property has been made, is currently outstanding or is
          threatened or reasonably expected to arise. To the Company's
          knowledge, no claim by any third party contesting the validity of any
          patents included in the Non-Core Intellectual Property has been made,
          is currently outstanding or is threatened or reasonably expected to
          arise. To the knowledge of the Company, no third party is infringing
          any Intellectual Property right of the Company.

3.25 Environmental Compliance.

     (a)  Neither the Company, nor any previous owner, tenant, occupant or user
          of any Properties (which Properties are listed on the Disclosure
          Schedule) engaged in or permitted, direct or indirect, operations or
          activities upon, or any use or occupancy of the Properties, or any
          portion thereof, for the purpose of or in any way involving the
          handling, manufacture, treatment, storage, use, generation,

                                       31

<PAGE>

          emission, release, discharge, refining, dumping or disposal of any
          Environmentally Regulated Materials (whether legal or illegal,
          accidental or intentional, direct or indirect) on, under, in or about
          the Properties, or transported any Environmentally Regulated Materials
          to, from or across the Properties, nor are any Environmentally
          Regulated Materials presently constructed, deposited, stored, placed
          or otherwise located on, under, in or about the Properties, nor have
          any Environmentally Regulated Materials migrated from the Properties
          upon or beneath other properties, nor have any Environmentally
          Regulated Materials migrated or threatened to migrate from other
          properties upon, about or beneath the Properties. To the Company's
          knowledge, the Properties do not contain any: (i) underground or
          aboveground storage tanks; (ii) asbestos; (iii) equipment containing
          polychlorinated biphenyls ("PCBs"); (iv) underground injection wells;
          or (v) septic tanks in which process waste water or any
          Environmentally Regulated Materials have been disposed.

     (b)  The Company is in compliance with applicable Environmental, Safety and
          Health Laws except where non-compliance therewith would not have a
          Material Adverse Effect on the Company and, to the Company's
          knowledge, and has obtained all Permits required under applicable
          Environmental, Safety and Health Laws.

     (c)  No enforcement, investigation, cleanup, removal, remediation or
          response or other governmental or regulatory actions have been
          asserted or, to the Company's knowledge, threatened with respect to
          operations conducted on the Properties by the Company or against the
          Company with respect to or regarding the Properties pursuant to any
          Environmental, Safety and Health Laws.

     (d)  To the Company's knowledge, there are no past or present events,
          conditions, circumstances, incidents, actions or omissions relating to
          or affecting the Company or its business or assets that violate, or
          would reasonably be expected to violate after the Closing, any
          Environmental, Safety and Health Laws, or that would reasonably be
          expected to give rise to any Environmental Liability.

     (e)  The Company is not aware of any past or present events, conditions,
          circumstances, activities, practices, incidents, actions or plans with
          respect to or of the Company which may reasonably be expected to
          interfere with or prevent compliance or continued compliance with
          Environmental, Safety and Health Laws.

     (f)  All machinery, tools, devices and equipment operated by the Company or
          any Subsidiary on the Properties have been operated in compliance with
          all Environmental, Safety and Health Laws, and all such equipment
          currently is operational and in good condition.

     (g)  The Company has delivered to Parent all environmental documents,
          studies and reports in its possession or under its control relating
          to: (i) any facilities or real property ever owned, operated or leased
          by the Company; or (ii) any actual Environmental Liability of the
          Company.

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<PAGE>

3.26 Insurance. The Disclosure Schedule contains an accurate and complete list
     of all insurance policies owned or held by the Company, including, but not
     limited to, fire and other casualty, general liability, theft, life,
     workers' compensation, health, directors and officers, business
     interruption and other forms of insurance owned or held by the Company,
     specifying the insurer the policy number, and the term of the coverage. All
     present policies are in full force and effect and all premiums with respect
     thereto have been paid. The Company has not been denied any form of
     insurance and no policy of insurance has been revoked or rescinded during
     the past five (5) years. All items set forth on the Disclosure Schedule
     that have resulted, or are reasonably likely to result, in Damages, are or
     are reasonably expected to be, as the case may be, fully covered by the
     insurance policies set forth in Section 3.26 of the Disclosure Schedule.

3.27 Tax Matters.

     (a)  Section 3.27(a) of the Disclosure Schedule sets forth a complete and
          accurate list of all Tax Returns (other than Forms W-2 and 1099) filed
          by the Company since January 1, 1999. "Tax Return" shall mean any
          return (including any information return), report, statement,
          schedule, notice, form, election, or other document or information
          filed with or submitted to, or required to be filed with or submitted
          to, any Governmental Authority in connection with the determination,
          assessment, collection, or payment of any tax or in connection with
          the administration, implementation, or enforcement of or compliance
          with any legal requirement relating to any tax.

     (b)  Each of the Company and any combined or unitary group of which the
          Company is or was a member, has prepared and timely filed or will
          timely prepare and timely file all Tax Returns any of them is required
          to file (taking into account any extensions) on or prior to the
          Closing Date. As of the time of filing, such Tax Returns were or will
          be accurate and correct in all material respects and did not or will
          not contain a disclosure statement under Section 6662 of the Code (or
          any predecessor provision or comparable provision of state, local or
          foreign law). The Company has made or will make all such Tax Returns
          available to Parent, with copies of such Tax Returns filed after the
          effective date of this Agreement provided to Parent at least three (3)
          Business Days prior to filing such Tax Return.

     (c)  The Company has paid or will pay or has adequately and specifically
          provided for or will provide for (on its Latest Financial Statements
          in accordance with GAAP (exclusive of any reserves for deferred taxes
          established to reflect timing differences between book and taxable
          income pursuant to Statement of Financial Accounting Standards No.
          109)) all Taxes (whether or not shown on any Tax Return) that are due
          and owing with respect to all taxable periods (or portions thereof)
          ending on or before the Closing Date.

     (d)  No claim for assessment or collection of Taxes is presently being
          asserted against the Company and the Company is not a party to any
          pending action, proceeding, or investigation by any Governmental
          Authority, and no such action, proceeding or investigation been
          threatened in a writing delivered to the Company. No claim

                                       33

<PAGE>

          has been made in any jurisdiction where the Company does not file Tax
          Returns that the Company may be subject to Tax by that jurisdiction.

     (e)  The Company is not a party to any agreement, contract, arrangement or
          plan that (i) has resulted or would result, separately or in the
          aggregate, in connection with this Agreement or any change of control
          of the Company, in the payment of any "excess parachute payments"
          within the meaning of Section 280G of the Code; or (ii) would obligate
          the Company to provide "gross-up" benefits with respect to any excise
          tax due on any "excess parachute payments" within the meaning of
          Section 280G of the Code.

     (f)  All deficiencies and assessments of Taxes of the Company resulting
          from an examination of any Tax Returns by any Governmental Authority
          on or before the Closing Date have been or will be paid and there are
          no pending examinations currently being made by any Governmental
          Authority nor has there been any written or oral notification to the
          Company of any intention to make an examination of any Tax Returns by
          any Governmental Authority. There are no outstanding agreements or
          waivers extending the statutory period of limitations applicable to
          any Tax Return for any period.

     (g)  For purposes of computing Taxes and the filing of Tax Returns, the
          Company has not failed to treat as "employees" any individual
          providing services to the Company who reasonably would be expected to
          be classified as an "employee" under the applicable rules or
          regulations of any Governmental Authority with respect to such
          classification.

     (h)  The Company has (i) complied with all Applicable Laws relating to the
          withholding of Taxes and the payment thereof (including, without
          limitation, withholding of Taxes under Sections 1441 and 1442 of the
          Code, or similar provisions under any foreign laws); (ii) timely and
          properly withheld from individual employee wages and paid over to the
          proper Governmental Authority all amounts required to be so withheld
          and paid over under all Applicable Laws; and (iii) properly determined
          and timely collected and reported all Federal Insurance Contributions
          Act (FICA) taxes imposed under Sections 3101 and 3111 of the Code on
          remuneration for employment that constitutes "wages" within the
          meaning of Section 3121(a) of the Code, including amounts of deferred
          compensation under nonqualified deferred compensation plans,
          agreements or arrangements.

     (i)  The Company is not involved in, subject to, or a party to any joint
          venture, partnership, contract or other arrangement that is treated as
          a "partnership" for federal, state, local or foreign income Tax
          purposes. The Company does not own any interest in an entity that is
          classified as an entity that is "disregarded as an entity separate
          from its owner" under Treasury Regulations Section 301.7701-3(b).

                                       34

<PAGE>

     (j)  The Company has not requested any extension of time within which to
          file any Tax Return, which Tax Return has not since been filed.

     (k)  The Company is not required to include in income any adjustment under
          Section 481(a) of the Code by reason of a voluntary change in
          accounting method initiated by the Company.

     (l)  The Company is, and at all times has been, a corporation or
          association taxable as a corporation for United States income tax
          purposes.

     (m)  The Company is not, and has not been at any time, a United States real
          property holding corporation within the meaning of Section 897(c)(2)
          of the Code. Except as provided on Section 3.27(m) of the Disclosure
          Schedule, each of the Stockholders is a "United States person" within
          the meaning of Code Section 7701(a)(30).

     (n)  The Company is not a party to or bound by any obligations under any
          Tax sharing, Tax allocation, Tax indemnity or similar agreement or
          arrangement.

     (o)  The Company has not, within three (3) years preceding the date hereof,
          been either a "distributing" or "controlled" corporation (as such
          terms are defined in Section 355(a)(1) of the Code) in a transaction
          structured to qualify as a tax-free distribution under Section 355 of
          the Code.

     (p)  The Company has not received any written ruling related to Taxes,
          entered into any agreement with a taxing authority relating to Taxes
          or authorized any person to represent it before a taxing authority
          pursuant to a power of attorney or otherwise.

     (q)  There are (and immediately following the Effective Time, there will
          be) no liens for Taxes upon any of the assets or properties of the
          Company other than liens for Taxes not yet due and payable. There is
          no outstanding closing agreement, ruling request, request to consent
          to change a method of accounting, subpoena or request for information
          with or by a Governmental Authority with respect to the Company or
          their income, assets, properties, payroll, operation or business.

     (r)  The Company is not or has not been a party to any transaction where a
          deferred intercompany gain was generated under Section 1502 of the
          Code and the Treasury Regulations promulgated thereunder.

     (s)  The Company has not engaged in a reportable transaction under Section
          1.6011-4(b) of the U.S. Treasury Regulations or any similar provision
          of state law or in a transaction that is the same as or substantially
          similar to one of the types of transactions that the Internal Revenue
          Service has determined to be a tax avoidance transaction and
          identified by notice, regulation, or other form of published guidance
          as a listed transaction, as set forth in Section 1.6011-4(b)(2) of the
          Treasury Regulations.

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<PAGE>

     (t)  Except as provided in Section 3.28(t) of the Disclosure Schedule,
          prior to the transaction contemplated by this Agreement, the Company
          has not been subject to an "ownership change" with the meaning of
          Section 382(g) of the Code and no "Section 382 limitation" within the
          meaning of Section 382 of the Code applies to limit the Company's
          ability to utilize its net operating losses or other Tax attributes.

     (u)  The transactions contemplated in this Agreement will not cause the
          Company to lose or no longer qualify for Tax incentives, Tax holidays,
          Tax rebates or special Tax rate relief (including, without limitation,
          an unemployment tax experience factor in any state or locality that is
          less than the factor applicable to new businesses of the type operated
          by the Company) or other favorable Tax benefits authorized by any
          Governmental Authority to which the Company is or was entitled prior
          to the effectiveness of this Agreement, and Parent is not required to
          provide any notice of the change in control of Company, including the
          Company's successor after the Merger, to any Governmental Authority.

3.28 Bank Accounts; Powers of Attorney. The Disclosure Schedule sets forth: (a)
     the names of all financial institutions, investment banking and brokerage
     houses, and other similar institutions at which the Company maintain
     accounts, deposits, safe deposit boxes of any nature, and the names of all
     persons authorized to draw thereon or make withdrawals therefrom and a
     description of such accounts; and (b) the names of all persons or entities
     holding general or special powers of attorney from the Company and copies
     thereof.

3.29 Orders, Commitments and Returns. All accepted and unfulfilled orders for
     the sale of products and the performance of services entered into by the
     Company and all outstanding contracts or commitments for the purchase of
     supplies, materials and services by or from the Company were made in bona
     fide transactions in the ordinary course of business. There are no material
     claims against the Company to return products by reason of alleged
     over-shipments, defective products or otherwise, or of products in the
     hands of customers, retailers or distributors under an understanding that
     such products would be returnable.

3.30 Product Liability Claims. The Company has not ever received a claim, or
     incurred any uninsured or insured liability, for or based upon failure to
     warn, California Proposition 65, breach of product warranty (other than
     warranty service and repair claims incurred in the ordinary course of
     business and expensed as warranty expense on the Latest Financial
     Statements for the period in which incurred), strict liability in tort,
     general negligence, negligent manufacture of product, negligent provision
     of services or any other allegation of liability, including or resulting
     in, but not limited to, product recalls, arising from the materials,
     design, testing, manufacture, packaging, labeling (including instructions
     for use) or sale of its products or from the provision of services.

3.31 Warranties. All products manufactured or sold, and all services provided,
     by the Company have complied, and are in compliance with all contractual
     requirements, warranties or covenants, express or implied, applicable
     thereto, and with all applicable governmental, trade association or
     regulatory specifications therefor or applicable thereto

                                       36

<PAGE>

     except where such compliance would not have a Material Adverse Effect on
     the Company. No product or service manufactured, sold, delivered or
     performed by the Company subject to any guaranty, warranty or other
     indemnity beyond the applicable standard terms and conditions set forth in
     the Disclosure Schedule. The terms of all standard and all material
     non-standard product and service warranties and product return, sales
     credit, discount, warehouse allowance, advertising allowance, demo sales
     and credit policies of the Company are specifically set forth in the
     Disclosure Schedule. The Company has delivered to Parent prior to the date
     hereof complete and accurate copies of all such warranties and/or policies.

3.32 Relations with Suppliers and Customers. No material current supplier of the
     Company has canceled any contract or order for provision of, and there has
     been no threat by any such supplier not to provide, raw materials,
     products, supplies or services to the business of the Company either prior
     to or following the Effective Time. The Company has not received any notice
     from any customer that accounted for more than five percent (5%) of the
     consolidated revenues of the Company during the last full fiscal year to
     the effect that such customer intends to materially decrease the amount of
     business it does with the Company either prior to or following the
     Effective Time, and the Company has not received any complaint of a
     material nature from any such customer. The Disclosure Schedule lists each
     supplier to the Company that is the source of a particular raw material,
     product, supply or service with respect to which locating and qualifying a
     replacement source would involve significant cost or delay.

3.33 Indemnification Obligations. The Company is not a party to any Contract
     that contains any provisions requiring the Company to indemnify any Person
     (excluding indemnities contained in the Company's standard terms and
     conditions of sale, copies of which have been provided to Parent), except
     for those Contracts identified in the Disclosure Schedule as containing
     indemnification provisions.

3.34 Absence of Certain Business Practices. Neither the Company, any director,
     officer, employee or agent of the Company, nor any other person acting on
     behalf of the Company, has, directly or indirectly, given or agreed to give
     any gift or similar benefit or agreed to make or made any payment to any
     customer, supplier, governmental employee or other person who is or may be
     in a position to help or hinder the business of the Company, taken as a
     whole (or assist it in connection with any actual or proposed transaction)
     which (a) would reasonably be expected to subject the Company, Parent or
     Merger Subsidiary to any damage or penalty in any civil, criminal or
     governmental litigation proceeding, or (b) violated or violates any
     Applicable Law, other than those violations which would not have a Material
     Adverse Effect on the Company, Parent or Merger Subsidiary.

3.35 Brokers. Neither the Company nor any of its directors, officers or
     employees has employed any broker, finder, or financial advisor or incurred
     any liability for any brokerage fee or commission, finder's fee or
     financial advisory fee, in connection with the transactions contemplated
     hereby.

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3.36 Minute Books. The minute books of the Company, as previously made available
     to Parent and its representatives, contain, in all material respects,
     complete and accurate records of all meetings of and corporate actions or
     written consents by the stockholders, Boards of Directors, and committees
     of the Boards of Directors of the Company.

3.37 Approval of Merger. The vote by Domain Partners IV, LP, Domain Partners
     III, L.P., Domain Associates, L.L.C., DP III Associates, L.P., DP IV
     Associates, L.P., 3F Partners Limited Partnership and 3F Partners Limited
     Partnership II (collectively, the "Principal Stockholders") of all shares
     of Company Common Stock and Company Preferred Stock owned by them is
     sufficient, when taken in the aggregate, to satisfy the stockholder
     approval requirements of this Agreement for all purposes under the
     Company's Certificate of Incorporation and Bylaws and the DGCL, as each of
     the foregoing is currently in effect.

3.38 Affiliate Letters. Concurrently with the execution and delivery of this
     Agreement, the Company has delivered executed letters covering Rule 145
     matters in the form required by Parent from each Principal Stockholder.

3.39 Opinion of the Company's Financial Advisor. The Board of Directors of the
     Company has received an opinion from UBS Securities LLC, financial advisor
     to the Company, to the effect that as of the date of the opinion and
     subject to the qualifications and limitations stated therein, the aggregate
     consideration to be received in the Merger by the holders of shares of the
     Company Common Stock (other than holders executing written consents in
     connection with the Merger and their respective Affiliates) is fair, from a
     financial point of view, to such holders.

3.40 Investigation by Parent. Notwithstanding anything to the contrary in this
     Agreement, but subject to Section 5.17, (a) no investigation by Parent
     shall affect the representations and warranties of the Company under this
     Agreement or contained in any other writing to be furnished to Parent in
     connection with the transactions contemplated hereunder, and (b) such
     representations and warranties shall not be affected or deemed waived by
     reason of the fact that Parent knew or should have known that any of the
     same is or might be inaccurate in any respect, provided that Parent has
     given notice to the Company of such inaccuracy prior to the Effective Time
     as provided in Section 5.17(a).

                                    ARTICLE 4
                        REPRESENTATIONS AND WARRANTIES OF
                          PARENT AND MERGER SUBSIDIARY

     As a material inducement to the Company to enter into this Agreement, with
the understanding that the Company will be relying thereon in consummating the
transactions contemplated hereunder, Parent and Merger Subsidiary hereby,
jointly and severally, represent and warrant to the Company that, except as
otherwise disclosed in the SEC filings of all forms, reports, schedules,
registration statements and definitive proxy statements filed by Parent since,
and including, its Form 10-K filed March 14, 2005, as amended, the statements
contained in this Article 4 are true and correct as to the date of this
Agreement and will be true and correct as of the Closing Date.

                                       38

<PAGE>

4.1  Organization and Qualification. Parent and Merger Subsidiary are
     corporations duly organized, validly existing and in good standing under
     the laws of their respective states of incorporation and each has all
     requisite corporate power and authority required to own, operate and lease
     their respective assets and properties as now owned, leased and operated
     and to carry on their respective businesses as now being conducted. Parent
     and Merger Subsidiary are each duly qualified or licensed to do business as
     a foreign corporation and are in good standing in every jurisdiction in
     which the character or location of their properties and assets owned,
     leased or operated by them or the nature of their business require such
     licensing or qualification, except where the failure to be so qualified,
     licensed or in good standing in such other jurisdiction would not,
     individually or in the aggregate, have a Material Adverse Effect on Parent
     or Merger Subsidiary. Merger Subsidiary is a recently formed Delaware
     corporation that has not conducted, and prior to the Effective Time will
     not conduct, any activities other than those incident to its formation and
     in connection with the consummation of the Merger.

4.2  Authorization. Parent and Merger Subsidiary have the requisite corporate
     power and authority to enter into this Agreement and to carry out the
     transactions contemplated hereunder. The Boards of Directors of Parent and
     Merger Subsidiary and Parent, as the sole shareholder of Merger Subsidiary,
     have taken all action required by law, their respective Certificates of
     Incorporation and Bylaws and otherwise to duly and validly authorize and
     approve the execution, delivery and performance by Parent and Merger
     Subsidiary of this Agreement and the consummation by Parent and Merger
     Subsidiary of the transactions contemplated herein and no other corporate
     proceedings on the part of Parent or Merger Subsidiary are, or will be,
     necessary to authorize this Agreement or to consummate the transactions
     contemplated hereby. This Agreement has been duly and validly executed and
     delivered by each of them and, assuming the due authorization, execution
     and delivery by the Company of this Agreement, constitutes the legal, valid
     and binding obligations of Parent and Merger Subsidiary enforceable against
     each of them in accordance with its terms, subject to laws of general
     application relating to bankruptcy, insolvency, reorganization, moratorium
     or other similar laws affecting creditors' rights generally and rules of
     law governing specific performance, injunctive relief or other equitable
     remedies.

4.3  Capitalization.

     (a)  The capitalization of Parent as set forth in the financial statements
          most recently filed by Parent with the SEC is true and correct as of
          the date of such financial statements. There are no other outstanding
          (w) shares of capital stock or other voting securities of Parent, (x)
          securities of Parent or any of its subsidiaries convertible into or
          exchangeable for shares of capital stock or voting securities of
          Parent, (y) options, warrants, conversion privileges, contracts,
          understandings, agreements or other rights to purchase or acquire from
          Parent or any of its subsidiaries, and, no obligations of Parent or
          any of its subsidiaries to issue, any capital stock, voting securities
          or securities convertible into or exchangeable for capital stock or
          voting securities of Parent, and (z) equity equivalent interests in
          the ownership or earnings of Parent or any of its subsidiaries or
          other similar rights (collectively, "Parent Securities"). There are no
          outstanding obligations of

                                       39

<PAGE>

          Parent to repurchase, redeem or otherwise acquire any Parent
          Securities. There are no stockholder agreements, voting trusts or
          other agreements or understandings to which Parent is a party or by
          which it is bound relating to the voting or registration of any shares
          of capital stock of Parent.

     (b)  The authorized capital stock of Merger Subsidiary consists of 1,000
          shares of common stock, par value $0.01 per share, all of which are
          duly authorized, validly issued, fully paid and nonassessable and free
          of any preemptive rights in respect thereof and all of which are owned
          by Parent.

4.4  Valid Issuance of Parent Common Stock. The Parent Common Stock to be issued
     in connection with the Merger, when issued and delivered in accordance with
     the terms hereof, will be duly and validly issued, fully paid and
     nonassessable and will be issued in compliance with all applicable federal
     and state securities laws; provided, however, that such shares of Parent
     Common Stock will be subject to restrictions on transfer of shares of
     capital stock imposed by the rules and regulations of the Securities Act,
     the Exchange Act or state securities laws.

4.5  Non-Contravention. The execution and delivery of this Agreement by Parent
     and Merger Subsidiary and the consummation of the transactions contemplated
     hereby will not: (a) violate any provision of the Articles of Incorporation
     or Certificate of Incorporation, as applicable, Bylaws or other governing
     document of Parent and Merger Subsidiary; (b) violate any statute, rule,
     regulation, order, or decree of any federal, state, local, or foreign body
     or authority by which Parent or Merger Subsidiary or any of their
     respective properties or assets may be bound; or (c) result in any
     violation or breach of, or constitute (with or without due notice or lapse
     of time or both) a default under, result in the loss of any material
     benefit under, or give rise to any right of termination, cancellation,
     increased payments, or acceleration under, or result in the creation of any
     Lien on any of the properties or assets of Parent or Merger Subsidiary
     under, any of the terms, conditions, or provisions of any note, bond,
     mortgage, indenture, license, franchise, permit, authorization, agreement,
     or other instrument or obligation to which Parent or Merger Subsidiary is a
     party, or by which it or any of its properties or assets may be bound,
     except, (x) in the cases of clauses (b) or (c), where such violations,
     breaches, defaults, or other occurrences that could not reasonably be
     expected to have, individually or in the aggregate, a Material Adverse
     Effect.

4.6  Consents and Approvals. No filing with or permit, consent, or approval of
     any Governmental Authority is required by Parent or Merger Subsidiary in
     connection with the execution and delivery of this Agreement and the
     consummation of the transactions contemplated hereby, except for (i) any
     applicable requirements of the Securities Act, the Exchange Act, state
     takeover or securities laws, the rules of NASDAQ and the HSR Act, and (ii)
     the filing and recordation of the Certificate of Merger as required by the
     Delaware Law.

                                       40

<PAGE>

4.7  Parent SEC Documents; Financial Reports.

     (a)  Parent has filed with the SEC, at or prior to the time due, and has
          heretofore made available to the Company true and complete copies of,
          all forms, reports, schedules, registration statements and definitive
          proxy statements (together with all information incorporated therein
          by reference, the "Parent SEC Reports") required to be filed by it
          with the SEC since January 1, 2005. As of their respective dates, the
          Parent SEC Reports complied as to form and content in all material
          respects with the requirements of the Exchange Act or the Securities
          Act, as the case may be, and the rules and regulations of the SEC
          thereunder applicable to such Parent SEC Reports. As of their
          respective dates, as of the Closing Date and as of the date any
          information from such Parent SEC Reports has been incorporated by
          reference, the Parent SEC Reports did not contain any untrue statement
          of a material fact or omit to state a material fact required to be
          stated therein or necessary in order to make the statements therein,
          in light of the circumstances under which they were made, not
          misleading. Since the last day of the quarter end reported upon by
          Parent by the filing with the SEC of Parent's most recent Quarterly
          Report on Form 10-Q, with respect to Parent and the Merger Subsidiary,
          there has not been any change, effect, event, occurrence, state of
          facts or development that, individually or in the aggregate, has had
          or could reasonably be expected to have a Material Adverse Effect on
          Parent or Merger Subsidiary.

     (b)  Each of the financial statements of Parent (including the related
          notes) included or incorporated by reference in the Parent SEC Reports
          (including any similar documents filed after the date of this
          Agreement) comply as to form and content in all material respects with
          applicable accounting requirements and the published rules and
          regulations of the SEC with respect thereto, have been prepared in
          accordance with generally accepted accounting principles (except, in
          the case of unaudited statements, as permitted by Form 10-Q of the
          SEC) applied on a consistent basis during the periods involved (except
          as may be indicated in the notes thereto) and fairly present the
          consolidated financial position of Parent and its consolidated
          subsidiaries as of the dates thereof and the consolidated results of
          their operations and cash flows for the periods then ended (subject to
          normal year-end adjustments in the case of any unaudited interim
          financial statements). Except for liabilities and obligations incurred
          in the ordinary course of business consistent with past practice,
          since the date of the most recent consolidated balance sheet included
          in the Parent SEC Reports, neither Parent nor any of its subsidiaries
          has any liabilities or obligations of any nature (whether accrued,
          absolute, contingent or otherwise) required by GAAP to be set forth on
          a consolidated balance sheet of Parent and its consolidated
          subsidiaries or in the notes thereto.

     (c)  Parent has heretofore furnished or made available to the Company
          complete and correct copies of all amendments and modifications that
          have not been filed by Parent with the SEC to all agreements,
          documents and other instruments that previously had been filed by
          Parent with the SEC and are currently in effect.

                                       41

<PAGE>

4.8  Joint Proxy Statement; Registration Statement; Other Information. The
     information, taken as a whole, with respect to Parent or its subsidiaries
     to be included in the Joint Proxy Statement or the Registration Statement
     will not, in the case of the Joint Proxy Statement or any amendments
     thereof or supplements thereto, at the time of the mailing of the Joint
     Proxy Statement or any amendments or supplements thereto, and at the time
     of the Parent Special Meeting, or, in the case of the Registration
     Statement, at the time it becomes effective or at the effective time of any
     post-effective amendment, contain any untrue statement of a material fact
     or omit to state any material fact required to be stated therein or
     necessary in order to make the statements therein, in light of the
     circumstances under which they were made, not misleading, except that no
     representation is made by Parent or Merger Subsidiary with respect to
     information supplied in writing by the Company or any affiliate of the
     Company specifically for inclusion in the Joint Proxy Statement or the
     Registration Statement. Each of the Joint Proxy Statement and Registration
     Statement (as it relates to Parent) will comply as to form and content in
     all material respects with the provisions of the Exchange Act and the
     Securities Act, as applicable.

4.9  FDA and Regulatory Matters.

     (a)  Parent has obtained all necessary and applicable approvals,
          clearances, authorizations, licenses and registrations required by
          United States or foreign governments or government agencies, to permit
          the design, development, pre-clinical and clinical testing,
          manufacture, labeling, sale, distribution and promotion of its
          products in jurisdictions where it currently conducts such activities
          with respect to each product (collectively, the "Parent Licenses").
          Parent is in compliance in all material respects with the terms and
          conditions of each Parent License. Parent is in compliance in all
          material respects with all Applicable Laws regarding registration,
          license, certification for each site at which a product is
          manufactured, labeled, sold, or distributed. To the extent any product
          has been exported from the United States, Parent has exported such
          product in compliance in all material respects with Applicable Laws.
          All manufacturing operations performed by or on behalf of Parent have
          been and are being conducted in all material respects in compliance
          with the applicable Quality Systems regulations of the FDA and, to the
          extent applicable to Parent, counterpart regulations in the European
          Union and all other countries where compliance is required. All
          non-clinical laboratory studies of products sponsored by Parent and
          intended to be used to support regulatory clearance or approval, have
          been and are being conducted in compliance in all material respects
          with the FDA's good Laboratory Practice for Non-Clinical Studies
          regulations (21 CFR Part 58) in the United States and, to the extent
          applicable to Parent, counterpart regulations in the European Union
          and all other countries. Parent is in compliance in all material
          respects with all applicable reporting requirements for all Parent
          Licenses or plant registrations including, but not limited to,
          applicable adverse event reporting requirements in the United States
          and outside of the United States under Applicable Law.

                                       42

<PAGE>

     (b)  The Company is in compliance in all material respects with all FDA and
          non-United States equivalent agencies and other Applicable Laws
          relating to the maintenance, compilation and filing of reports,
          including medical device reports, with regard to the Company's
          products. Parent has disclosed to the Company all applicable adverse
          event reports related to its products, including any Medical Device
          Reports (as defined in 21 CFR 803). Parent has disclosed to the
          Company all complaint review and analysis reports of Parent, including
          information regarding complaints by product and root cause analysis of
          closed complaints, which reports are correct in all material respects.

     (c)  Parent has not received any written notice or other written
          communication from the FDA or any other Governmental Authority (i)
          contesting the pre-market clearance or approval of, the uses of or the
          labeling and promotion of any of Parent's products or (ii) otherwise
          alleging any violation of Applicable Law by Parent.

     (d)  There have been no recalls, field notifications or seizures ordered or
          adverse regulatory actions taken or, to Parent's knowledge, threatened
          by the FDA or any other Governmental Authority with respect to any of
          the Parent's products, including any facilities where any such
          products are produced, processed, packaged or stored, except where
          such occurrences could not reasonably be expected to have,
          individually or in the aggregate, a Material Adverse Effect. Parent
          has not, within the last three years, either voluntarily or at the
          request of any Governmental Authority, initiated or participated in a
          recall of any product or provided post-sale warnings regarding any
          product, except where such occurrences could not reasonably be
          expected to have, individually or in the aggregate, a Material Adverse
          Effect.

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

4.10 Reimbursement/Billing.

     (a)  Parent's products are covered by: (a) Medicare, under a national
          coverage decision providing for payment for its products in the
          amounts disclosed to the Company; (b) Medicaid; and (c) Third Party
          Payors. Any Third Party Payor that has been requested to approve
          Parent's products for reimbursement and has declined to do so has been
          disclosed to the Company. Parent is neither a provider nor a supplier
          under any Government Program, and does not bill any Government Program
          or Third Party Payor for its products.

                                       43

<PAGE>

     (b)  There is no pending, nor to the knowledge of Parent, threatened,
          proceeding or investigation under any Government Program involving
          Parent. Parent's sales and marketing practices are, and have been, in
          compliance in all material respects with all Applicable Laws and all
          policies of applicable Third Party Payors and Government Programs.

     (c)  To Parent's knowledge, Parent has not arranged with or contracted with
          (by employment or otherwise) any person who is excluded from
          participation in any Government Program for the provision of items or
          services for which payment may be made under any such Government
          Program. None of the officers, directors, agents or managing employees
          (as such term is defined in 42 U.S.C. Section 1320a-5(b)) of Parent,
          has been excluded from any Government Program or been subject to
          sanction pursuant to 42 U.S.C. Section 1320a-7a or 1320a-8 or been
          convicted of a crime described at 42 U.S.C. Section 1320a-7b.

     (d)  Neither Parent, any director, officer or employee of Parent, nor any
          agent acting on behalf of or for the benefit of any of the foregoing,
          has directly or indirectly in connection with Parent: (i) offered or
          paid any remuneration, in cash or in kind, to or made any financial
          arrangements with, any past, present or potential customers, past or
          present suppliers, patients, contractors or employees of Third Party
          Payors or Government Programs in order to obtain business or payments
          from such persons other than in the ordinary course of business; (ii)
          given or agreed to give, any gift or gratuitous payment of any kind,
          nature or description (whether in money, property or services) to any
          customer or potential customer, supplier or potential supplier,
          contractor, Third Party Payor or any other person other than in
          connection with promotional or entertainment activities in the
          ordinary course of business and in compliance with Parent's compliance
          program; or (iii) made any false entries on any of Parent's books or
          records for any purpose prohibited by Applicable Law.

     (e)  Neither Parent, nor any director, officer or employee of Parent is a
          party to any contract to provide services, lease space or lease
          equipment to Parent with any physician, health care facility, hospital
          or other person who is in a position to make or influence referrals to
          Parent where such contract or provision of services or space is
          prohibited by Applicable Law.

4.11 Compliance with Applicable Laws. Parent has not violated or infringed, nor
     is it in violation or infringement of, any Applicable Law or any order,
     writ, injunction or decree of any Governmental Authority in connection with
     its activities except to the extent the same would not have a Material
     Adverse Effect on Parent. Parent and each of its officers, directors,
     agents and employees has complied in all material respects with Applicable
     Laws relating to Government Programs and to billing and health care fraud
     (including the federal Anti-Kickback Law, 42 U.S.C. Section 1320a-7(b), the
     Stark I and II Laws, 42 U.S.C. Section 1395nn, as amended, and the False
     Claims Act, 31 U.S.C. Section 3729 et seq. and any regulations related
     thereto, as well as with any similar state statutes). No claims have been
     filed against Parent alleging a violation of any Applicable Law. Parent

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<PAGE>

     is not a "covered entity" or a "business associate" within the meaning of
     the HIPAA Privacy, Security and other Administrative Simplification
     Regulations.

4.12 Compliance Program. Parent has made available to the Company a copy of
     Parent's current compliance program materials, including all program
     descriptions, code of conduct documents for employees, officers and
     independent contractors, ethics and risk area policy materials, training
     and education materials, auditing and monitoring protocols, reporting
     mechanisms, and disciplinary policies. Parent (i) is not a party to a
     Corporate Integrity Agreement with the Office of the Inspector General of
     the Department of Health and Human Services, (ii) has no reporting
     obligations pursuant to any settlement agreement entered into with any
     governmental body, (iii) to its knowledge, has not been the subject of any
     Government Program investigation conducted by any governmental body, (iv)
     has not been a defendant in any qui tam/False Claims Act litigation (other
     than by reason of an unsealed complaint of which the Company has no
     knowledge), and (v) has not been served with or received any search
     warrant, subpoena, civil investigation demand, contact letter, or to
     Parent's knowledge, telephone or personal contact by or from any
     governmental body. For purposes of this Agreement the term "compliance
     program" refers to programs of the type described in the compliance
     guidance published by the Office of the Inspector General of the Department
     of Health and Human Services.

4.13 Contracts. None of the contracts attached as exhibits to any of the SEC
     Reports (collectively, "Filed Contracts") contains a provision requiring
     the consent of any party with respect to the consummation of the
     transaction contemplated herein. No notice of default arising under any
     Filed Contract has been delivered to or by Parent. Each Filed Contract is a
     legal, valid and binding obligation of Parent and each other party thereto,
     enforceable against each such party thereto in accordance with its terms,
     except as may be limited by applicable bankruptcy, insolvency,
     reorganization, moratorium or similar laws affecting creditors' rights
     generally and subject to general principles of equity, and neither Parent
     nor the other party thereto is in breach, violation or default thereunder
     except for such breach, violation or default as would not have a Material
     Adverse Effect on Parent.

4.14 Benefit Plans.

     (a)  Neither Parent nor any ERISA Affiliate of Parent sponsors, maintains,
          contributes to, is required to contribute to or has or could have any
          liability of any nature, whether known or unknown, direct or indirect,
          fixed or contingent, with respect to, any Pension Plan that is subject
          to Title IV of ERISA or is a "Multiemployer Plan" within the meaning
          of Section 3(37) or 4001(a)(3) of ERISA.

     (b)  Each Benefit Plan sponsored by Parent or an ERISA Affiliate of Parent
          has been operated in all material respects in accordance with its
          terms and in compliance in all material respects with the applicable
          provisions of all Applicable Law.

     (c)  Parent has properly determined and timely collected and reported all
          FICA taxes imposed under Sections 3101 and 3111 of the Code on
          remuneration for

                                       45

<PAGE>

          employment that constitutes "wages" within the meaning of Section
          3121(a) of the Code, including amounts of deferred compensation under
          nonqualified deferred compensation plans, agreements or arrangements.

     (d)  There will be no change on or before Closing Date in the operation of
          any Parent Benefit Plan or any documents with respect thereto which
          will result in an increase in the benefit liabilities under such
          Benefit Plans, except as may be required by Applicable Law.

     (e)  Parent and each ERISA Affiliate of Parent have timely complied in all
          material respects with all reporting and disclosure obligations with
          respect to the Benefit Plans imposed by the Code, ERISA or other
          Applicable Law.

     (f)  There are no pending or, to the knowledge of Parent, threatened
          claims, suits, audits or proceedings against Parent or any other party
          by present or former employees of Parent, Benefit Plan participants
          (or their beneficiaries, spouses or dependents), including, without
          limitation, claims against the assets of any trust, involving any
          Benefit Plan, or any rights or benefits thereunder, other than the
          ordinary and usual claims for benefits by participants or
          beneficiaries.

     (g)  The transactions contemplated herein do not result in any payment
          (whether of severance pay or otherwise), forgiveness of debt,
          distribution, increase in benefits, obligation to fund, or the
          acceleration of accrual, vesting, funding or payment of any
          contribution or benefit under any Parent Benefit Plan.

     (h)  No employer other than Parent and/or an ERISA Affiliate of Parent is
          permitted to participate or participates in the Parent Benefit Plans.
          No leased employees (as defined in Section 414(n) of the Code) or
          independent contractors are eligible for, or participate in, any
          Parent Benefit Plans.

     (i)  Parent has made available to the Company true and complete copies of
          all Parent Benefit Plan documents and related trust agreements or
          other agreements or contracts evidencing any funding vehicle with
          respect thereto, including all amendments. Parent has made available
          to the Company true and complete copies of:

          (i)  the three most recent annual reports on Treasury Form 5500,
               including all schedules and attachments thereto, with respect to
               any Benefit Plan for which such a report is required;

          (ii) the three most recent actuarial reports with respect to any
               Pension Plan that is a "defined benefit plan" within the meaning
               of Section 414(j) of the Code;

          (iii) the form of summary plan description, including any summary of
               material modifications thereto or other modifications
               communicated to participants, currently in effect with respect to
               each Benefit Plan;

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<PAGE>

          (iv) the most recent determination letter with respect to each Pension
               Plan intended to qualify under Section 401(a) of the Code and the
               full and complete application therefor submitted to the Internal
               Revenue Service; and

          (v)  all professional opinions, material internal memoranda, material
               correspondence with regulatory authorities (such as a copy of all
               documents relating to a voluntary correction submission with the
               Department of Labor or the IRS) and administrative policies,
               manuals, interpretations and the like with respect to each
               Benefit Plan.

     (j)  Parent has delivered or made available to the Company true and correct
          copies of the Welfare Plan documents establishing compliance with the
          HIPAA Privacy and Security Regulations, including appointment of a
          privacy official, its Notice of HIPAA Privacy Practices, privacy
          policies and procedures, and the plan administrator's Group Health
          Plan document amendment certification.

4.15 Tax Matters.

     (a)  Except with respect to open-market purchases of Parent's stock
          pursuant to a general stock repurchase program of Parent that has not
          been created or modified in connection with the Merger, neither Parent
          nor any Person related to Parent within the meaning of Treas. Reg.
          Sections 1.368-1(e)(3), (e)(4) and (e)(5) has any plan or intention to
          repurchase, redeem or otherwise acquire any of the stock of Parent
          issued to the Stockholders pursuant to this Agreement following the
          Merger. Neither Parent nor any such Related Person has acquired any
          Company Securities in contemplation of the Merger, or otherwise as
          part of a plan of which the Merger is a part.

     (b)  Prior to the Merger, Parent will be in control of Merger Subsidiary,
          and following the Merger, Parent will be in control of the Company,
          within the meaning of Section 368(c) of the Code. Parent has no plan
          or intention to cause the Company, after the Effective Time, to issue
          additional shares of stock that would result in Parent losing control
          of the Company within the meaning of Section 368(c) of the Code.

     (c)  Following the Merger, Parent, or a member of its qualified group of
          corporations (as defined by Treasury Regulation Section
          1.368-1(d)(4)(ii)), will continue the historic business of the Company
          (or will continue at least one significant line of the Company's
          historic business), or use a significant portion of the Company's
          historic business assets in a business, in a manner consistent with
          Treasury Regulation Section 1.368-1(d).

     (d)  Neither Parent nor Merger Subsidiary is an "investment company" as
          defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.

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<PAGE>

     (e)  Following the Merger, to the best of Parent's knowledge, the Company
          will hold at least 90 percent of the fair market value of the
          Company's net assets and at least 70 percent of the fair market value
          of the Company's gross assets and at least 90 percent of the fair
          market value of Merger Subsidiary's net assets and at least 70 percent
          of the fair market value of Merger Subsidiary's gross assets held
          immediately prior to the Effective Time. For purposes of this
          representation, amounts paid by the Company to any dissenting
          Stockholders, amounts used by the Company to pay Merger expenses,
          amounts paid by the Company to redeem stock, securities, warrants or
          options of the Company as part of any overall plan of which the Merger
          is a part, and amounts distributed by the Company to the Stockholders
          (except for any regular, normal dividends) as part of an overall plan
          of which the Merger is a part, in each case will be treated as
          constituting assets of the Company immediately prior to the Effective
          Time.

4.16 Disclosure. No representation or warranty by Parent or Merger Subsidiary in
     this Agreement and no statement contained or to be contained in any
     document, certificate or other writing furnished or to be furnished by
     either Parent or Merger Subsidiary to the Company in connection with the
     transactions contemplated by this Agreement, contains or will contain any
     untrue statement of a material fact or omits or will omit to state any
     material fact necessary in order to make the statements therein, in the
     light of the circumstances under which they were made, not misleading.

4.17 Brokers. Neither Parent nor Merger Subsidiary, nor any of their directors,
     officers or employees has employed any broker, finder, or financial advisor
     or incurred any liability for any brokerage fee or commission, finder's fee
     or financial advisory fee, in connection with the transactions contemplated
     hereby.

4.18 Investigation by Company. Notwithstanding anything to the contrary in this
     Agreement, but subject to Section 5.17(b), (a) no investigation by the
     Company shall affect the representations and warranties of Parent or Merger
     Subsidiary under this Agreement or contained in any other writing to be
     furnished to the Company in connection with the transactions contemplated
     hereunder, and (b) such representations and warranties shall not be
     affected or deemed waived by reason of the fact that the Company knew or
     should have known (except to the extent disclosed in the SEC filings of all
     forms, reports, schedules, registration statements and definitive proxy
     statements filed by Parent since, and including, its Form 10-K filed March
     14, 2005, as amended,) that any of the same is or might be inaccurate in
     any respect; provided, however, that the Company has given notice to Parent
     of such inaccuracy prior to the Effective Time as provided in Section
     5.17(b) hereof.

                                    ARTICLE 5
                                    COVENANTS

5.1  Conduct of the Business. Except as contemplated by this Agreement or to the
     extent that Parent otherwise consents in writing, during the period from
     the date of this Agreement until the earlier of the termination of this
     Agreement or the Closing, the Company shall maintain its assets and
     properties and carry on its business and operations in accordance

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     with the Operating Budget (except and to the extent otherwise expressly
     approved in writing by Parent before any expense variations are incurred);
     and the Company shall use its commercially reasonable efforts to preserve
     intact its business organizations, existing business relationships
     (including without limitation its relationships with officers, employees,
     dealers, distributors, independent contractors, customers and suppliers),
     good will and going concern value.

5.2  Company's Agreements as to Specified Matters. Except as specifically set
     forth on the Operating Budget (including the process of prior written
     approval by Parent for any changes thereto or deviations therefrom), or on
     the Disclosure Schedule, or as contemplated by this Agreement or as may be
     otherwise agreed in writing by Parent, from the date hereof until the
     earlier of the termination of this Agreement or the Closing, the Company
     shall not:

     (a)  Amend its Certificate of Incorporation or Bylaws (or other similar
          governing instruments);

     (b)  Except for trade payables incurred in the ordinary course of business
          and consistent with past practice, create, incur or assume any
          indebtedness for borrowed money or issue any debt securities or
          assume, guarantee or endorse the obligations of any Person, or make
          any loans, advances or capital contributions to, or investments in,
          any other Person;

     (c)  Pay, discharge or satisfy any claims, liabilities or obligations in
          any amount;

     (d)  Permit or allow any of its properties or assets which are material to
          the operation of their businesses to be subjected to any Lien, except
          Permitted Liens;

     (e)  Write down the value of any inventory or write off as uncollectible
          any notes or accounts receivable or any trade accounts or trade notes;

     (f)  Cancel or amend any debts, waive any claims or rights or sell,
          transfer or otherwise dispose of any properties or assets, other than
          for such debts, claims, rights, properties or assets which,
          individually or in the aggregate, are not material to the conduct of
          the Company's business;

     (g)  License, sell, transfer, pledge, modify, disclose, dispose of or
          permit to lapse any right to the use of any Intellectual Property
          Rights other than for such Intellectual Property Rights which,
          individually or in the aggregate, are not material to the conduct of
          the Company's business;

     (h)  Sell, assign, lease, license, transfer or otherwise dispose of, or
          mortgage, pledge or encumber (other than with Permitted Liens), any of
          its assets (other than Intellectual Property Rights);

     (i)  (i) Terminate, enter into, adopt, institute or otherwise become
          subject to or amend in any material respect any collective bargaining
          agreement or employment or similar agreement or arrangement with any
          of its directors, officers or employees;

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<PAGE>

          (ii) terminate, enter into, adopt, institute or otherwise become
          subject to or amend in any material respect any Benefit Plan; (iii)
          contribute, set aside for contribution or authorize the contribution
          of any amounts for any such Benefit Plan except as required (and not
          discretionary) by the terms of such Benefit Plan; or (iv) grant or
          become obligated to grant any bonus or general increase in the
          compensation of any directors, officers or employees (including
          without limitation any such increase pursuant to any Benefit Plan);

     (j)  Make or enter into any commitment for capital expenditures for
          additions to property, plant or equipment;

     (k)  Except as specifically contemplated by this Agreement, (i) declare,
          pay or set aside for payment any dividend or other distribution in
          respect of, or split, combine or reclassify, its capital stock or
          other securities (including without limitation distributions in
          redemption or liquidation) or redeem, purchase or otherwise acquire
          any shares of its capital stock or other securities; (ii) issue, grant
          or sell any shares of its capital stock or equity securities of any
          class, or any options, warrants, conversion or other rights to
          purchase or acquire any such shares or equity securities or any
          securities convertible into or exchangeable for such shares or equity
          securities, except issuance of Company Common Stock pursuant to the
          exercise of Company Stock Options outstanding on the date hereof;
          (iii) become a party to any merger, exchange, reorganization,
          recapitalization, liquidation, dissolution or other similar corporate
          transaction; or (iv) organize any new subsidiary, acquire any capital
          stock or other equity securities or other ownership interest in, or
          assets of, any person or entity or otherwise make any investment by
          purchase of stock or securities, contributions to capital, property
          transfer or purchase of any properties or assets of any person or
          entity;

     (l)  Pay, lend or advance any amounts to, or sell, transfer or lease any
          properties or assets to, or enter into any agreement or arrangement
          with, any director, officer, employee or stockholder;

     (m)  Terminate, enter into or amend in any material respect any Scheduled
          Contract, or take any action or omit to take any action which will
          cause a breach, violation or default (however defined) under any
          Scheduled Contract;

     (n)  Resolve any dispute or examination related to Taxes, make any election
          with respect to Taxes or apply for any change in Tax accounting
          method; or

     (o)  Agree, whether in writing or otherwise, to take any action described
          in this subsection.

5.3  Full Access. The Company shall afford to Parent and its directors,
     officers, employees, counsel, accountants, investment advisors and other
     authorized representatives and agents, at Parent's expense, reasonable
     access to the facilities, properties, books and records of the Company in
     order that Parent may have full opportunity to make such

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<PAGE>

     investigations as it shall desire to make of the affairs of the Company;
     provided, however, that any such investigation shall be conducted in such a
     manner as not to interfere unreasonably with business operations and the
     Company shall furnish such additional financial and operating data and
     other information as Parent shall, from time to time, reasonably request
     and which the Company is able to obtain without unreasonable expense;
     provided, further, that any such investigation shall not affect or
     otherwise diminish or obviate in any respect any of the representations and
     warranties of the Company herein.

5.4  Confidentiality. Each of the parties hereto agrees that it will not use, or
     permit the use of, any of the information relating to any other party
     hereto furnished or made available to it in connection with the
     transactions contemplated herein ("Information") for any purpose or in any
     manner other than solely in connection with its evaluation or consummation
     of the transactions contemplated by this Agreement in a manner that the
     disclosing party has approved and shall in no event use or permit the use
     of any of such Information in a manner or for a purpose detrimental to such
     other party, and that they will not disclose, divulge, provide or make
     accessible (collectively, "Disclose"), or permit the Disclosure of, any of
     the Information to any person or entity, other than solely to their
     responsible directors, officers, employees, investment advisors,
     accountants, counsel and other authorized representatives and agents
     (collectively, the "Representatives") who have a "need to know" to carry
     out the purposes of this Agreement, except as may be required by judicial
     or administrative process or, in the opinion of such party's regular
     counsel, by other requirements of Applicable Law; provided, however, that
     prior to any Disclosure of any Information permitted hereunder, the
     disclosing party shall first obtain the recipients' undertaking to comply
     with the provisions of this subsection with respect to such Information.
     Each party shall instruct its Representatives to observe the terms of this
     Agreement and shall be responsible for any breach of this Agreement by any
     of its Representatives. The term "Information" as used herein shall not
     include any information relating to a party which the party receiving such
     information can show: (i) to have been rightfully in its possession prior
     to its receipt from another party hereto; (ii) to be now or to later become
     generally available to the public through no fault of the receiving party;
     (iii) to have been received separately by the receiving party in an
     unrestricted manner from a person entitled to disclose such information; or
     (iv) to have been developed independently by the receiving party without
     regard to any Information received in connection with this transaction.
     Each party hereto also agrees to promptly return to the party from whom
     originally received all original and duplicate copies of materials
     containing Information and to destroy any summaries, analyses or extracts
     thereof or based thereon (whether in hard copy form or intangible media)
     should the transactions contemplated herein not occur. A party hereto shall
     be deemed to have satisfied its obligations to hold the Information
     confidential if it exercises the same care as it takes with respect to its
     own similar information, which shall in no event be less than reasonable
     care. The provisions of this Section 5.4 shall survive indefinitely any
     termination of this Agreement.

5.5  Filings; Consents; Removal of Objections. Subject to the terms and
     conditions herein, the parties hereto shall use commercially reasonable
     efforts to take or cause to be taken

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<PAGE>

     all actions and do or cause to be done all things necessary, proper or
     advisable under Applicable Laws to consummate and make effective, as soon
     as reasonably practicable, the transactions contemplated hereby, including
     without limitation obtaining all Consents of any person or entity, whether
     private or governmental, required in connection with the consummation of
     the transactions contemplated herein. In furtherance, and not in limitation
     of the foregoing, it is the intent of the parties to consummate the
     transactions contemplated herein at the earliest practicable time, and they
     respectively agree to exert commercially reasonable efforts to that end,
     including without limitation: (a) the removal or satisfaction, if possible,
     of any objections to the validity or legality of the transactions
     contemplated herein; and (b) the satisfaction of the conditions to
     consummation of the transactions contemplated hereby.

5.6  Further Assurances; Cooperation; Notification.

     (a)  Each party hereto shall, before, at and after Closing, execute and
          deliver such instruments and take such other actions as the other
          party or parties, as the case may be, may reasonably require in order
          to carry out the intent of this Agreement including the satisfaction
          of all conditions contained in Articles 6 and 7 of this Agreement.

     (b)  The Company shall cooperate with Parent to promptly develop plans for
          the management of the businesses after the Closing, including without
          limitation plans relating to productivity, marketing, operations and
          improvements, and the Company shall further cooperate with Parent to
          provide for the implementation of such plans as soon as practicable
          after the Closing. Subject to Applicable Law, Company shall confer on
          a regular and reasonable basis with one or more representatives of
          Parent to report on material operational matters and the general
          status of ongoing operations.

     (c)  At all times from the date hereof until the Closing, each party shall
          promptly notify the other in writing of the occurrence of any event
          which it reasonably believes will or is reasonably likely to result in
          a failure by such party to satisfy the conditions specified in
          Articles 6 or 7 of this Agreement.

5.7  Joint Proxy Statement; Registration Statement.

     (a)  The Company shall cooperate with Parent in order to timely assist in
          the preparation and filing with the SEC, as soon as reasonably
          practicable, of the Joint Proxy Statement and Registration Statement.
          The Company shall use all reasonable efforts to cause the definitive
          Joint Proxy Statement (together with either written consent
          resolutions for execution by the Stockholders or forms of proxy) to be
          mailed to the Stockholders as soon as reasonably practicable following
          effectiveness of the Registration Statement of which the Joint Proxy
          Statement is a part, with the date of mailing as mutually determined
          by the Company and Parent.

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<PAGE>

     (b)  Parent shall, with the cooperation of the Company, prepare and file,
          as soon as reasonably practicable, a registration statement under the
          Securities Act registering the shares of Parent Common Stock to be
          issued in the Merger (the "Registration Statement"), which
          Registration Statement shall include the Joint Proxy Statement. Parent
          will use all reasonable efforts to have the Registration Statement
          declared effective by the SEC as promptly thereafter as practicable.
          Parent shall also take any action required to be taken under state
          blue sky or securities laws in connection with the issuance of Parent
          Common Stock pursuant to the Merger. The Company shall furnish to
          Parent all information concerning the Company and the holders of its
          capital stock, and shall take such other action and otherwise
          cooperate, as Parent may reasonably request in connection with any
          such action.

     (c)  Parent shall notify the Company promptly of the receipt of comments of
          the SEC with respect to the transactions contemplated hereby and of
          any request by the SEC for amendments or supplements to the
          Registration Statement and shall supply the Company with copies of all
          material correspondence with the SEC with respect to the transactions
          contemplated hereby.

     (d)  If at any time prior to the Effective Time, any event should occur
          relating to the Company or the Company's officers or directors that is
          required to be described in an amendment or supplement to the
          definitive Joint Proxy Statement or the Registration Statement, the
          Company shall promptly inform Parent. If at any time prior to the
          Effective Time, any event shall occur relating to Parent or Merger
          Subsidiary or their respective officers or directors that is required
          to be described in an amendment or supplement to the definitive Joint
          Proxy Statement or the Registration Statement, Parent shall promptly
          inform the Company. Whenever any event occurs that should be described
          in an amendment of, or supplement to, the definitive Joint Proxy
          Statement or the Registration Statement, the Company or Parent, as the
          case may be, shall, upon learning of such event, promptly notify the
          other and consult and cooperate with the other in connection with the
          preparation of a mutually acceptable amendment or supplement. The
          parties shall promptly file such amendment or supplement with the SEC
          and mail such amendment or supplement as soon as practicable after it
          is cleared by the SEC.

5.8  Stockholder Meetings or Communication with Stockholders.

     (a)  The Company shall, in accordance with Applicable Law and its
          Certificate of Incorporation and Bylaws, either solicit written
          consent resolutions or duly call, give notice of, convene and hold a
          special meeting (as the same may be duly adjourned, the "Company
          Special Meeting") of its stockholders for the purpose of approving and
          adopting the agreement of merger (as such term is used in Section 251
          of the DGCL) set forth in this Agreement and approving the Merger. If
          the Company determines to conduct a Company Special Meeting, the
          Company agrees to use its reasonable efforts to cause the Company
          Special Meeting to occur within sixty (60) days after the date on
          which the Registration Statement becomes effective, but not earlier
          than twenty (20) business days after the date the

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<PAGE>

          Joint Proxy Statement is first mailed to its stockholders. If Company
          determines to solicit written consent resolutions, the Company will
          mail the same as part of the Joint Proxy Statement, on or immediately
          after the same date it is mailed by Parent to its shareholders. The
          Company shall include in the Joint Proxy Statement the recommendation
          of its Board of Directors ("Company Board Recommendation") that its
          stockholders vote in favor of the approving and adopting the agreement
          of merger (as such term is used in Section 251 of the DGCL) set forth
          in this Agreement and approving the Merger, subject to the duties of
          the Board of Directors of the Company to make any further disclosure
          to the stockholders (which shall not, unless expressly stated,
          constitute a withdrawal or adverse modification of such
          recommendation).

     (b)  Parent shall, in accordance with Applicable Law and its Articles of
          Incorporation and Bylaws, duly call, give notice of, convene and hold
          a special meeting (as the same may be duly adjourned, the "Parent
          Special Meeting") of its stockholders for the purpose of approving the
          issuance of Parent Common Stock in connection with the Merger. Parent
          agrees to use its reasonable efforts to cause the Parent Special
          Meeting to occur within sixty (60) days after the date on which the
          Registration Statement becomes effective, but not earlier than twenty
          (20) business days after the date the Joint Proxy Statement is first
          mailed to its stockholders. Parent shall include in the Joint Proxy
          Statement the recommendation of its Board of Directors that its
          stockholders vote in favor of the issuance of Parent Common Stock in
          connection with the Merger.

5.9  Update Disclosure; Breaches. Not less than five (5) Business Days prior the
     Closing, the Company shall supplement or amend the Disclosure Schedule (a)
     if any representation or warranty made by the Company in this Agreement was
     when made, or has subsequently become, untrue in any material respect, and
     (b) of the occurrence or non-occurrence of any event the occurrence or
     non-occurrence of which may cause any condition to the obligations of any
     party hereto to effect the transactions contemplated by this Agreement not
     to be satisfied. Notwithstanding the foregoing, provided that, from the
     date of this Agreement until the Closing, no action taken by the Company in
     compliance with the Operating Budget, or otherwise taken in accordance with
     the prior written consent of Richard A. Curtis, Parent's Vice President,
     Marketing and Business Development or Jack Judd, Parent's Chief Financial
     Officer, shall be deemed to result in a Material Adverse Effect of the
     Company unless such action otherwise constitutes a breach of any
     representation, warranty or covenant of the Company set forth in this
     Agreement. For purposes of determining the accuracy as of the Closing of
     the representations and warranties of the Company contained in Article 3 in
     order to determine the fulfillment of the conditions set forth in Section
     6.1 and to determine whether a material breach has occurred pursuant to
     Section 8.1(d), the Disclosure Schedule will be deemed to exclude any
     material information contained in any update to the Disclosure Schedule
     delivered after the date of this Agreement. The delivery of any notice
     pursuant to this Section 5.9 shall not cure any breach of any
     representation or warranty requiring disclosure of such matter prior to the
     date of this Agreement or otherwise limit or affect the rights of, or the
     remedies available to, Parent.

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<PAGE>

5.10 No Solicitation. The Company agrees (i) it will negotiate exclusively with
     Parent and its authorized representatives regarding the transaction
     contemplated hereby and will not, directly or indirectly, encourage or
     solicit the submission of, entertain inquiries, proposals or offers from,
     or enter into any agreement or negotiate with any person or entity (other
     than Parent and other any such actions taken in connection with the
     Third-Party Right) for the acquisition of the Company (whether by merger,
     combination, sale of assets, sale of stock or otherwise) or other
     disposition of assets or technology other than in the ordinary course of
     business, and (ii) it will not furnish to any person any information with
     respect to any transaction prohibited by this Section 5.10. The Company
     agrees to take the necessary steps to promptly inform any such third party
     of the obligations undertaken in this Section 5.10 and this Agreement. The
     Company agrees to promptly inform Parent of any such inquiry from any such
     third party, including the material terms thereof (including without
     limitation, any terms regarding price) and the identity of the Person
     making such inquiry, and to keep Parent informed, on a current basis, of
     the status and terms of any such proposals or offers.

5.11 Public Announcements. None of the parties hereto shall make any public
     announcement with respect to the transactions contemplated herein without
     the prior written consent of the other parties, which consent shall not be
     unreasonably withheld or delayed, except as required by Applicable Law,
     rule or regulation. The parties shall maintain this Agreement and the terms
     hereof in strict confidence, and neither party shall disclose this
     Agreement or any of its terms to any third party unless specifically
     ordered to do so by a court of competent jurisdiction after consulting with
     the other party or unless required by Applicable Law or regulation
     including, but no limited to, the rules and regulation of the Securities
     and Exchange Commission and the NASDAQ Stock Market. Notwithstanding the
     foregoing, the parties may, on a confidential basis, advise and release
     information regarding the existence and content of this Agreement or the
     transactions contemplated hereby to their respective Affiliates or any of
     their agents, accountants, attorneys and prospective lenders or investors
     in connection with or related to the transactions contemplated by this
     Agreement.

5.12 Preparation of Tax Returns: Tax Matters.

     (a)  Pre-Closing Tax Returns. The Company shall timely file at its expense
          all Tax Returns required to be filed by the Company or any Subsidiary
          on or before the Closing Date; provided, however, that, after the date
          hereof, the Company shall not file any such Tax Returns, or other
          returns, elections, claims for refund or information statements with
          respect to any liabilities for Taxes (other than federal, state or
          local sales, use, property, withholding or employment tax returns or
          statements) for any Tax period in a manner that is inconsistent with
          past practice, and Parent shall promptly be provided a copy of such
          Tax Returns prior to the Closing Date.

     (b)  Post-Closing Tax Returns. Parent will file (or cause to be filed) all
          Tax Returns of the Company and any Subsidiary required to be filed
          after the Closing Date, including Tax Returns for Tax Periods (or
          portions thereof) ending on or prior to the Closing Date. Neither
          Parent nor its Affiliates or representatives shall take

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<PAGE>

          any action (i) inconsistent with the tax treatment of the Merger as a
          sale of stock by the Stockholders or (ii) which has the direct or
          indirect effect of treating the Merger as a purchase of assets by
          Parent or the Merger Subsidiary.

     (c)  Tax Election. The Stockholders will cause the Company not to make any
          new elections with respect to Taxes, or any changes in current
          elections with respect to Taxes after the date of the Latest Balance
          Sheet without the prior written consent of Parent.

     (d)  Clearance Certificates. The Stockholders will on or before the Closing
          Date hereof provide Parent with any clearance certificates or similar
          documents that may be required by any Governmental Authority in order
          to relieve Parent of any obligation to withhold any portion of the
          Merger Consideration.

     (e)  Termination of Tax Allocation Agreements. Any and all tax allocation
          or sharing agreements or arrangements (other than this Agreement),
          whether or not written, that may have been entered into by and between
          Company or its Subsidiaries, on the one hand, and any other person,
          shall be terminated as to the Company and the Subsidiaries as of the
          Effective Time, and no payments which are owed by or to the Company or
          any Subsidiary pursuant thereto shall be made thereunder.

     (f)  Assistance and Cooperation. Each of Parent and Stockholders will
          provide the other with such assistance as may reasonably be requested
          by each of them in connection with the preparation of any Tax Return,
          any audit or other examination by any Governmental Authority, or any
          judicial or administrative proceedings relating to liability for
          Taxes, and each will provide the other with any records or information
          which may be relevant to such Tax Return, audit or examination,
          proceedings or determination. Such assistance shall include making
          employees available on a mutually convenient basis to provide
          additional information and explanation of any material provided
          hereunder and shall include providing copies of any relevant Tax
          Return and supporting work schedules.

     (g)  Tax Withholding. Parent or the Exchange Agent shall be entitled to
          deduct and withhold from the Merger Consideration or other payments
          otherwise payable pursuant to this Agreement, the amounts required to
          be deducted and withheld under the Code, or any provision of state,
          local or foreign tax law, with respect to the making of such payments.
          To the extent that amounts are so withheld, such withheld amounts
          shall be promptly remitted by Parent or the Exchange Agent to the
          applicable Governmental Authority requiring such withholding and shall
          be treated for all purposes of this Agreement as having been paid to
          the person for whom such deduction and withholding was made.

     (h)  Imputed Interest. Stockholders acknowledge that a portion of the
          Milestone Consideration they may receive pursuant to Section 2.1(b)
          will be considered to be imputed interest. Parent will compute and
          report such imputed interest as provided in Section 1.483-4 of the
          Treasury Regulations.

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5.13 Repayment of Related Party Indebtedness. Prior to the Effective Time (a)
     the Stockholders shall repay to the Company all amounts outstanding as
     advances to or receivables from the Stockholders, each of which advances or
     receivables is specifically reflected in Section 5.13 of the Disclosure
     Schedule, and (b) the Company shall repay all amounts outstanding under
     loans to the Company from any Stockholder, each of which loans to the
     Company is specifically reflected in Section 5.13 of the Disclosure
     Schedule.

5.14 State Takeover Statutes. The Company and its Board of Directors shall (a)
     take all reasonable actions necessary to ensure that no "Fair Price,"
     "Control Share Acquisition," "Moratorium" or other anti-takeover statute,
     or similar statute or regulation, is or becomes applicable to this
     Agreement, the Written Consents, the Merger or any of the other
     transactions contemplated hereby or thereby and (b) if any "Fair Price,"
     "Control Share Acquisition," "Moratorium" or other anti-takeover statute,
     or similar statute or regulation, becomes applicable to this Agreement, the
     Written Consents, the Merger or any other transaction contemplated hereby
     or thereby, take all reasonable action necessary to ensure that the Merger
     and the other transactions contemplated hereby and thereby may be
     consummated as promptly as practicable on the terms contemplated hereby and
     otherwise to minimize the effect of such statute or regulation on the
     Merger and the other transactions contemplated hereby and thereby.

5.15 Stockholder Litigation. The parties shall cooperate and consult with one
     another, to the fullest extent possible, in connection with any stockholder
     litigation against any of them or any of their respective directors or
     officers with respect to the transactions contemplated by this Agreement.
     In furtherance of and without in any way limiting the foregoing, each of
     the parties shall use its respective reasonable best efforts to prevail in
     such litigation so as to permit the consummation of the transactions
     contemplated by this Agreement in the manner contemplated by this
     Agreement. Notwithstanding the foregoing, the Company shall not compromise
     or settle any litigation commenced against it or its directors or officers
     relating to this Agreement or the transactions contemplated hereby
     (including the Merger) without Parent's prior written consent.

5.16 NASDAQ Listing. Parent shall prepare and submit to NASDAQ a listing
     application for the Parent Common Stock to be issued in the Merger pursuant
     to Article 2. The Company shall cooperate with Parent in such listing
     application.

5.17 Notice of Breach.

     (a)  From the date of this Agreement until the Closing Date, Parent shall
          provide prompt written notice to the Company of any fact or
          circumstance of which Parent is aware and which, to Parent's actual
          knowledge at the time it becomes aware of such fact or circumstance,
          constitutes a material breach of any representation or warranty of
          Company set forth in Article 3.

     (b)  From the date of this Agreement until the Closing Date, the Company
          shall provide prompt written notice to Parent of any fact or
          circumstance of which the Company is aware and which, to the Company's
          actual knowledge at the time it

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<PAGE>

          becomes aware of such fact or circumstance, constitutes a material
          breach of any representation or warranty of Parent set forth in
          Article 4.

5.18 Parent Board Seat. Promptly upon the consummation of the Merger, the
     Stockholder Representative shall be entitled to designate a person
     reasonably acceptable to Parent and Parent's nominating committee (the
     "Board Nominee") to serve as a member of Parent's Board of Directors until
     the next annual meeting of Parent's shareholders (the "Initial Meeting").
     Parent agrees to (a) appoint the Board Nominee to Parent's Board of
     Directors, (b) use at least the same level of effort to cause the Board
     Nominee to be elected to Parent's Board of Directors as those efforts used
     in connection with the election of its other board members, and (c)
     immediately prior to the Closing, increase the size of Parent's Board of
     Directors by one member to six (6) members total. If the Board Nominee
     originally appointed should be removed or have his or her service
     terminated from Parent's Board of Directors by reason of his or her death
     or disability, the Stockholder Representative shall have the one-time right
     to designate a successor Board Nominee reasonably acceptable to Parent and
     Parent's nominating committee (the "Successor Board Nominee"), and,
     following such designation, Parent agrees to take the actions described in
     (a) and (b) of this Section 5.18 with respect to the Successor Board
     Nominee. In the period between the time that the Board Nominee or Successor
     Board Nominee, as applicable, is elected or appointed to Parent's Board of
     Directors and the next succeeding annual meeting of Parent's shareholders,
     the Board Nominee or Successor Board Nominee, as applicable, may be removed
     from Parent's Board of Directors only for cause or otherwise required in
     accordance with applicable law. If the Board Nominee or Successor Board
     Nominee, as applicable, is elected to Parent's Board of Directors at the
     Initial Meeting, and only for so long as the Board Nominee or Successor
     Board Nominee, as applicable, is (x) so elected at subsequent meetings, and
     (y) not removed for cause or because such removal would be in the Parent's
     interest, then prior to each such meeting of Parent's shareholders at which
     directors are elected through the calendar year ending December 31, 2013
     (or, if earlier, the calendar year in which all Milestone Consideration has
     been fully issued to the Company's stockholders in accordance with this
     Agreement and/or set-off against claims as provided in Section 9.6), Parent
     shall re-nominate the Board Nominee or Successor Board Nominee, as
     applicable, to Parent's Board of Directors. The Stockholder Representative
     agrees to supply to Parent in writing within a reasonable amount of time
     prior to each such annual meeting any information about the Board Nominee
     or the Successor Board Nominee as may be reasonably requested by Parent or
     required by Applicable Law.

5.19 Incentive Program for Continuing Employees. In consultation with the
     Company's chief executive officer, Parent shall identify individual
     employees of the Company prior to the Closing to whom offers of employment
     retention, or continuing employment with the Company shall be made (the
     "Continuing Employees"). At or prior to the Closing, Parent, in its sole
     and absolute discretion, shall determine (a) which of the Continuing
     Employees (the "Selected Continuing Employees") will be eligible to
     participate in a retention incentive program funded by Parent (the
     "Incentive Program"), (b) any agreements, which may include but are not
     limited to employment and non-competition agreements, to be entered into by
     the Selected Continuing Employees prior to such

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     employees being deemed eligible to participate in the Incentive Program,
     (c) the amount and type of consideration to be paid pursuant to the
     Incentive Program, and (d) the timing of when such consideration shall be
     paid to the Selected Continuing Employees.

5.20 Issuance of Milestone Consideration.

     (a)  During the Contingent Period, Parent will use, and will cause the
          Surviving Corporation and their Affiliates to use, commercially
          reasonable efforts to (i) complete the Milestones, and (ii) in good
          faith not undertake any action the primary purpose of which is to
          negatively impact the amount or potential for issuance of Milestone
          Consideration.

     (b)  In the event that, after the date of the Closing but on or prior to
          the required date of issuance of any Milestone Consideration, the
          shares of Parent Common Stock shall be changed into or exchanged for a
          different number or kind of shares of stock or other securities of
          Parent or of another corporation (whether by reason of merger,
          consolidation, recapitalization, reclassification, stock split,
          reverse stock split, combination or otherwise) or if the number of
          shares of Parent Common Stock shall be increased solely through the
          payment of a stock dividend, then there shall be substituted for or
          added to each share of Milestone Consideration which may become
          issuable, the number and kind of shares of stock or other securities
          into which each outstanding share of Parent Common Stock shall be so
          changed, or for which each such share shall be exchanged, or to which
          each such share shall be entitled, as the case may be.

     (c)  In the event of a Parent Change of Control (i) Parent shall require
          the third party in such transaction (the "Acquiror") to assume all of
          Parent's duties and obligations hereunder, including without
          limitation those relating to the Milestones and the Milestone
          Consideration, and (ii) the Stockholders will be entitled to receive
          Milestone Consideration following achievement of the Milestones in the
          manner and subject to the conditions set forth herein; provided,
          however, that, upon achievement of a Milestone following a Parent
          Change of Control, the Stockholders shall be entitled to receive, in
          lieu of the Parent Common Stock that would otherwise have been payable
          hereunder, the consideration that they would have been entitled to
          receive from Acquiror had that Milestone been achieved immediately
          prior to the Parent Change of Control.

     (d)  Notwithstanding any other provision in this Agreement, and excluding
          the Initial Merger Consideration, in no event will more than an
          aggregate of ten million (10,000,000) shares of Parent Common Stock
          (or the equivalent in the case of a Parent Change of Control) be
          issued to the Stockholders hereunder (subject to appropriate
          adjustments to such 10,000,000 shares in the event of any stock
          splits, stock combinations, stock dividends, recapitalizations or
          other similar transaction in Parent Common Stock after the date
          hereof).

     (e)  Parent agrees to reserve and keep available out of its authorized but
          unissued shares of Parent Common Stock, solely for the purpose of
          effecting the issuance

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          of the Milestone Consideration, such number of Parent Common Stock as
          shall from time to time be sufficient to effect the issuance of the
          Milestone Consideration. If at any time the number of authorized but
          unissued shares of Parent Common Stock shall not be sufficient to
          effect the issuance of the Milestone Consideration, this corporation
          will take such corporate action as may be necessary to increase its
          authorized but unissued shares of Parent Common Stock to such number
          of shares as shall be sufficient for such purpose, including, without
          limitation, engaging in best efforts to obtain the requisite
          stockholder approval of any necessary amendment to Parent's Articles
          of Incorporation.

5.21 Recovery of Edwards Holdback Amount. If any portion of the Edwards Holdback
     Amount is not received on or prior to January 15, 2007, Parent may
     permanently set-off against (and permanently reduce) any shares of Parent
     Common Stock otherwise distributable to the Stockholders as Escrow Shares
     (and such reduced Escrow Shares shall thereupon automatically be deemed
     authorized and unissued capital stock of Parent) or Milestone Consideration
     a number of such shares equal to the quotient obtained by dividing (a) the
     unpaid portion of the Edwards Holdback Amount, by (b) the average of the
     closing sale price (such closing price as reported by The NASDAQ Stock
     Market at the end of regular trading) of one share of Parent Common Stock
     on the NASDAQ National Market System (or such other national securities
     trading system as the Parent Common Stock is approved and listed for
     trading) on each of the sixty (60) trading days ending on (and including)
     January 15, 2007. If Parent so exercises its right of set-off pursuant to
     this Section 5.21 and, upon the request of the Stockholder Representative
     and only if there is a good faith claim supported by valid facts and legal
     authority to do so, Parent shall use commercially reasonable efforts to
     pursue a good faith claim(s) to recover such unpaid portion of the Edwards
     Holdback Amount; provided, however, that Parent shall be under no such
     obligation if the non-payment of the Edwards Holdback Amount was due to the
     Company's breach of the Master Agreement prior to the Closing; provided,
     further, that Parent shall not be entitled to set off any shares of Parent
     Common Stock in connection with the Edwards Holdback Amount if Parent's
     failure to receive such amount is due to Parent's or Surviving
     Corporation's post-Closing breach of the Edwards Agreement (where such
     breach did not commence prior to the Closing). Parent shall remit all
     amounts recovered, if any, to the Stockholder Representative; provided,
     however, that Parent and the Stockholders shall each bear one-half of all
     costs, fees, expenses and other amounts (including without limitation
     attorney fees, expert witness fees, and any other similar expenses)
     (collectively, "Holdback Expenses") reasonably incurred by Parent in
     connection with such recovery with respect to the first $2,000,000
     recovered; provided, further, that, with respect to any amounts recovered
     in excess of $2,000,000, all Holdback Expenses not recovered by Parent
     pursuant to this sentence shall be paid to Parent and all amounts in excess
     thereof shall be remitted to the Stockholder Representative.

5.22 Stockholder Approvals; Delivery of Certain Agreements. By 11:59 p.m.
     Minneapolis time on the date of this Agreement, and following execution and
     delivery of this Agreement, the Principal Stockholders, and each director
     of the Company who is also a Stockholder, shall have delivered to Parent
     (a) executed written consents approving this

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     Agreement, the Merger and all transactions related thereto (the "Written
     Consents"); and (b) executed Share Transfer Restriction Agreements. The
     failure to timely deliver any of the documents described in this Section
     5.22 shall result in the immediate termination of this Agreement, and
     abandonment of the transactions contemplated herein, without further action
     by any party hereto.

5.23 Affiliate Letters. Within ten (10) business days after the date of this
     Agreement, the Company shall deliver to Parent a letter identifying all
     persons who are to the Company's knowledge "affiliates" of the Company for
     purposes of Rule 145 under the Securities Act. The Company shall use
     reasonable efforts to cause each such person to deliver to Parent, prior to
     the Effective Time, a written agreement covering Rule 145 matters in
     customary form and reasonably acceptable to Parent and the Company from
     each such person.

5.24 General Restrictions on Transfer of Parent Common Stock. The Company agrees
     to cause each Stockholder who may hold, following payment of the Initial
     Merger Consideration, and, assuming the payment thereof, any Milestone
     Consideration, more than 100,000 shares of Parent Common Stock (each such
     Stockholder, a "Significant Stockholder") and who has not previously
     delivered such agreement pursuant to Section 5.22, to execute and deliver
     to Parent on or prior to the Closing Date a Share Transfer Restriction
     Agreement, in the form mutually agreed upon by Parent and the Company (the
     "Share Transfer Restriction Agreement"), which Share Transfer Restriction
     Agreement shall contain, among others, the following restrictions:

     (a)  With respect to Initial Merger Consideration other than Escrow Shares,
          in no event will any Significant Stockholder sell, transfer, assign,
          pledge, hypothecate or otherwise dispose of ("Transfer") all or any
          portion of such Initial Merger Consideration prior to the six- (6-)
          month anniversary of the Closing Date (the "Initial Lock-Up Period").
          During each of the five (5) months following the Initial Lock-Up
          Period, this transfer restriction shall lapse with respect to
          one-sixth (1/6th) of such Initial Merger Consideration received by
          such Stockholder. On the date that is six (6) months after Initial
          Lock-Up Period, the transfer restriction shall lapse with respect to
          the remaining portion of such Initial Merger Consideration.

     (b)  With respect to Escrow Shares distributed to Stockholders, if any, in
          no event will any Significant Stockholder Transfer all or any portion
          of his, her or its Escrow Shares except that, during each of the five
          (5) months following the Distribution Date, this transfer restriction
          shall lapse with respect to one-sixth (1/6th) of the Escrow Shares
          received by such Stockholder. On the date that is six (6) months after
          the Distribution Date, the transfer restriction shall lapse with
          respect to the remaining portion of such Escrow Shares.

     (c)  With respect to Milestone Consideration actually issued to
          Stockholders, if any, in no event will any Significant Stockholder
          Transfer all or any portion of his, her or its Milestone Consideration
          except that, during each of the five (5) months following each
          Milestone Date, this transfer restriction shall lapse with respect to

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          one-sixth (1/6th) of the Milestone Consideration received by such
          Stockholder on such date. On the date that is six (6) months after
          each Milestone Date, the transfer restriction shall lapse with respect
          to the remaining portion of such Milestone Consideration.

5.25 Company 401(k) Plan.

     (a)  Parent reserves the right to request in writing that the Company cease
          contributions to and/or terminate one or more of the Company Pension
          Plans, Welfare Plans and Compensation Plans, such termination to be
          effective immediately prior to (and conditional upon) the Effective
          Time, and the Company will take such requested action.

     (b)  Notwithstanding Section 5.25(a) the Company will cease contributions
          to and terminate each Company Pension Plan qualified under Code
          Section 401(k) (the "Company 401(k) Plan"), and will in the form and
          substance satisfactory to Parent, (i) adopt written resolutions to
          terminate such Company 401(k) Plan and to fully (100%) vest all
          participants under said Company 401(k) Plan, such termination and
          vesting to be effective no later than one business day preceding the
          Closing Date; provided, however, that such Company 401(k) Plan
          termination may be made contingent upon the consummation of the
          transactions contemplated by this Agreement and (ii) deliver, prior to
          the Closing Date, notice of the Company 401(k) Plan termination to
          participants and any trustees and custodians of the Company 401(k)
          Plan and/or its assets. As soon as practicable after the Closing Date,
          Parent will cause the Surviving Corporation to prepare IRS Form 5310,
          with full disclosure of the transaction and the fact that Company
          employees participating in the Company 401(k) Plan as of the Closing
          Date will become participants in the Parent's 401(k) Plan as soon as
          administratively feasible following the Closing Date. Parent reserves
          the right to suspend the distribution of benefits from the Company
          401(k) Plan to participants who are employees of the Surviving
          Corporation until the later of the receipt of a favorable
          determination letter from the IRS with respect to the termination of
          such Company 401(k) Plan and the completion of final testing and
          record keeping for such Company 401(k) Plan. Parent will cause the
          Parent 401(k) Plan to credit each employee of the Surviving
          Corporation with service such employee completed with the Company as
          of the Closing Date solely for purposes of calculating eligibility
          service and vesting service under the Parent 401(k) Plan

5.26 Company Options. As soon as practicable following the execution of this
     Agreement, the Company will (i) cause all holders of Company Stock Options
     granted under the Company Stock Option Plans to, not later than fifteen
     (15) days prior to the Effective Time, agree in writing that any Company
     Stock Options outstanding as of the Effective Time shall terminate and be
     cancelled at such time, and (ii) cause all appropriate action to be taken
     to terminate the Company Stock Plans as of the Effective Time. The Company
     shall provide such evidence of all such actions as Parent may reasonably
     request.

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5.27 Amendment to Certain Agreements. As promptly as possible following the
     execution of this Agreement, the Company will use commercially reasonable
     efforts to negotiate an amendment to License Agreement, dated as of
     September 18, 2003, entered into by and between The Cleveland Clinic
     Foundation and the Company (as successor to VenPro Corporation), as amended
     by the Amendment to License Agreement, dated as of November 16, 2004,
     entered into by and between The Cleveland Clinic Foundation and the Company
     in form and substance reasonably acceptable to Parent.

                                   ARTICLE 6
           CONDITIONS TO PARENT'S AND MERGER SUBSIDIARY'S OBLIGATIONS

     The obligation of Parent and Merger Subsidiary to effect the transactions
contemplated herein shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived by
Parent:

6.1  Representations and Warranties True. The representations and warranties of
     the Company contained in this Agreement (a) qualified by "materiality" or
     "Material Adverse Effect" shall be true and correct in all respects and the
     representations and warranties of the Company not so qualified shall be
     true and correct in all material respects, in each case, as of the date
     when made (it being understood that, in determining the accuracy of such
     representations and warranties for purposes of this Section 6.1, and except
     as otherwise specifically set forth herein, any disclosure made pursuant to
     Section 5.9 shall be disregarded), and (b) such representations and
     warranties of the Company shall be true and correct at and as of the
     Closing as though such representations and warranties were made at and as
     of such time except as would not have a Material Adverse Effect on the
     Company.

6.2  Performance. The Company shall have performed and complied in all material
     respects with all agreements, covenants, obligations and conditions
     required by this Agreement to be performed or complied with by the Company
     on or prior to the Closing.

6.3  Filed Certificate of Merger. The Certificate of Merger shall have been
     filed with the Secretary of State of Delaware.

6.4  Required Approvals and Consents.

     (a)  All action required by Applicable Law and otherwise to be taken by the
          Board of Directors of the Company and the Stockholders to authorize
          the execution, delivery and performance of this Agreement and the
          consummation of the transactions contemplated hereby shall have been
          duly and validly taken.

     (b)  All action required by Applicable Law and otherwise to be taken by the
          shareholders of Parent to authorize the execution, delivery and
          performance of this Agreement and the consummation of the transactions
          contemplated hereby shall have been duly and validly taken.

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     (c)  All Consents of or from all Governmental Authorities required
          hereunder to consummate the transactions contemplated herein, and all
          Consents of or from all persons and entities other than Governmental
          Authorities shall have been delivered, made or obtained, and Parent
          shall have received copies thereof.

     (d)  Any and all filings and submissions required under any laws or
          regulations applicable to Parent for the consummation of the
          transactions contemplated by this Agreement shall have been timely
          made, and a response satisfactory to Parent shall have been received,
          or Parent shall be satisfied with the lack of any response, and all
          applicable statutory waiting periods shall have elapsed.

6.5  No Proceeding or Litigation. No suit, action, investigation, inquiry or
     other proceeding by any Governmental Authority or other person or entity
     shall have been instituted or threatened that (a) questions the validity or
     legality of the transactions contemplated hereby, or (b) is reasonably
     expected either individually or in the aggregate, to have a Material
     Adverse Effect on the Company or the Subsidiaries taken as a whole.

6.6  Legislation. No Applicable Law shall have been enacted which prohibits,
     restricts or delays the consummation of the transactions contemplated
     hereby or any of the conditions to the consummation of such transaction.

6.7  No Material Adverse Effect. Parent shall not have discovered any fact,
     event or circumstance which has not been disclosed to Parent in the
     Disclosure Schedule as of the date of this Agreement which has had, or
     would reasonably be expected to have, a Material Adverse Effect on the
     Company taken as a whole.

6.8  Certificates. Parent shall have received such certificates of the Company's
     officers, in a form and substance reasonably satisfactory to Parent, dated
     the Closing Date, to evidence compliance with the conditions set forth in
     this Article 6 and such other matters as may be reasonably requested by
     Parent.

6.9  Other Receipts; Good Standing. Parent shall have received (a) copies of the
     Certificate of Incorporation, or similar governing document of the Company,
     certified by the Secretary of State of the State of Delaware, and (b)
     Certificates of Good Standing (or their equivalent) from the Secretary of
     State of the State of Delaware and from the Secretary of State of the State
     of California.

6.10 Opinions of Company Counsel. Parent shall have received an opinion from
     Reed Smith LLP, counsel to the Company, dated the Closing Date, in a form
     reasonably acceptable to Parent.

6.11 Escrow Agreement. The Stockholder Representative and Escrow Agent shall
     have executed and delivered the Escrow Agreement in a form reasonably
     acceptable to the parties thereto.

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6.12 Exchange Agreement. The Company, the Stockholder Representative and
     Exchange Agent shall have executed and delivered the Exchange Agreement in
     a form reasonably acceptable to the parties thereto.

6.13 Share Transfer Restriction Agreements. Each of the Significant Stockholders
     shall have executed and delivered the Share Transfer Restriction Agreement.

6.14 Estimated Reduction Amount Certificate. The Company shall have delivered,
     and the Company's Chief Executive Officer and Chief Financial Officer shall
     have executed, the Estimated Reduction Amount Certificate.

6.15 Dissenting Shares. Not more than five percent (5%) of the issued and
     outstanding shares of Company Capital Stock as of the Closing Date shall be
     Dissenting Shares and, in any case, no Person who holds (individually or in
     the aggregate with such Person's Affiliates) more than two percent (2%) of
     the Company's fully diluted outstanding shares of Company Capital Stock
     shall have exercised its dissenters' rights under the DGCL.

6.16 Resignation and Release. Parent shall have received Letters of Resignation
     and Release of Claims, dated effective as of the Effective Time, in
     substantially the form of Exhibit A from the officers and directors of the
     Company.

6.17 Tax Withholding Forms. Parent shall have received, from each Stockholder,
     IRS Form W-9, Form W-8BEN, Form W-8ECI, or other applicable form, as
     appropriate, establishing exemption from any backup or income Tax
     withholding on the Merger Consideration.

6.18 Cancellation of Options and Warrants. The Company shall have delivered
     written evidence satisfactory to Parent that all Company Stock Options and
     Warrants have been cancelled or exercised in accordance with Section
     2.1(c).

6.19 Affiliates' Letters. Parent shall have received a letter from each of the
     Affiliates of the Company pursuant to Section 5.23 hereof.

                                   ARTICLE 7
                       CONDITIONS TO COMPANY'S OBLIGATIONS

     The obligation of the Company to effect the transactions contemplated
herein shall be subject to the satisfaction at or prior to the Closing of each
of the following conditions, any of which may be waived by the Company:

7.1  Representations and Warranties True. The representations and warranties of
     Parent and Merger Subsidiary contained in this Agreement (a) qualified by
     "materiality" or "Material Adverse Effect" shall be true and correct in all
     respects and the representations and warranties of Parent and Merger
     Subsidiary not so qualified shall be true and correct in all material
     respects, in each case, as of the date when made, and (b) such
     representations and warranties of Parent and Merger Subsidiary shall be
     true and correct at and as of the Closing as though such representations
     and warranties were made at and as of such time except as would not have a
     Material Adverse Effect on the Company.

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7.2  Performance. Parent shall have performed and complied in all material
     respects with all agreements, covenants, obligations and conditions
     required by this Agreement to be performed or complied with by Parent at or
     prior to the Closing.

7.3  Filed Certificate of Merger. The Certificate of Merger shall have been
     filed with the Secretary of State of Delaware.

7.4  Corporate Approvals.

     (a)  The Boards of Directors of Parent and Merger Subsidiary and Parent, as
          sole stockholder of Merger Subsidiary, shall have approved the
          transactions contemplated hereby and the stockholders of Parent shall
          have approved the transactions contemplated by this Agreement as to
          the extent and by the vote required by the laws of the State of
          Minnesota, the charter documents of Parent and NASDAQ regulations. All
          action required to be taken by Parent to authorize the execution,
          delivery and performance of this Agreement by Parent and the
          consummation of the transactions contemplated hereby shall have been
          duly and validly taken.

     (b)  All Consents of or from all Governmental Authorities required
          hereunder to consummate the transactions contemplated herein, and all
          Consents of or from all persons and entities other than Governmental
          Authorities shall have been delivered, made or obtained, and Parent
          shall have received copies thereof..

7.5  No Proceeding or Litigation. No suit, action, investigation, inquiry or
     other proceeding by any Governmental Authority or other person or entity
     shall have been instituted or threatened that (a) questions the validity or
     legality of the transactions contemplated hereby, or (b) which is
     reasonably expected either individually or in the aggregate, to have a
     Material Adverse Effect on Parent.

7.6  Legislation. No Applicable Law shall have been enacted which prohibits,
     restricts or delays the consummation of the transactions contemplated
     hereby or any of the conditions to the consummation of such transaction.

7.7  No Material Adverse Effect. The Company shall not have discovered any fact,
     event or circumstance which has not been disclosed to the Company as of the
     date of this Agreement which has had, or would reasonably be expected to
     have, a Material Adverse Effect on Parent taken as a whole.

7.8  Certificates. Parent shall have furnished the Company with such
     certificates of Parent's officers, in a form and substance reasonably
     acceptable to the Company, dated the Closing Date, to evidence compliance
     with the conditions set forth in this Article 7 and such other matters as
     may be reasonably requested by the Company.

7.9  Other Receipts; Good Standing. The Company shall have received (a) copies
     of the Articles of Incorporation or Certificate of Incorporation, as
     applicable, or similar governing document of Parent and Merger Subsidiary,
     certified by the Secretary of State

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     of the state of incorporation of Parent and Merger Subsidiary, and (b)
     Certificates of Good Standing (or their equivalent) from the Secretary of
     State of each state in which Parent is qualified to transact business.

7.10 Opinion of Parent Counsel. Parent shall have delivered to Company an
     opinion from Oppenheimer Wolff & Donnelly LLP, counsel to Parent, dated the
     Closing Date, in a form reasonably acceptable to the Company.

7.11 Escrow Agreement. Parent and the Escrow Agent shall have executed and
     delivered the Escrow Agreement in a form reasonably acceptable to the
     parties thereto and the appropriate funding obligations with respect
     thereto shall have been satisfied.

7.12 Exchange Agreement. Parent and the Exchange Agent shall have executed and
     delivered the Exchange Agreement in a form reasonably acceptable to the
     parties thereto.

7.13 NASDAQ Listing. All of the shares of Parent Common Stock issuable as Merger
     Consideration shall be listed with NASDAQ.

                                    ARTICLE 8
                                   TERMINATION

8.1  Methods of Termination. Subject to the other provisions of this Article 8,
     and in addition to the provisions set forth in Section 5.22, this Agreement
     may be terminated and the transactions contemplated herein may be abandoned
     at any time notwithstanding approval thereof by the Stockholders, at any
     time prior to the Closing:

     (a)  By mutual written consent of Parent, Merger Subsidiary and the
          Company; or

     (b)  By Parent and Merger Subsidiary on or after the Termination Date, if
          any of the conditions provided for in Article 6 of this Agreement have
          not been reasonably satisfied or waived in writing by Parent prior to
          such date (unless the failure results primarily from a breach by
          Parent or Merger Subsidiary of any representation, warranty or
          covenant contained in this Agreement); or

     (c)  By the Company on or after the Termination Date, if any of the
          conditions provided for in Article 7 of this Agreement have not been
          reasonably satisfied or waived in writing by the Company prior to such
          date (unless the failure results primarily from a breach by the
          Company of any representation, warranty or covenant contained in this
          Agreement); or

     (d)  By Parent and Merger Subsidiary if there has been a material breach of
          any representation, warranty, covenant or agreement which remains
          uncured for thirty (30) days after written notice thereof on the part
          of the Company set forth in this Agreement; or

     (e)  By the Company if there has been a material breach of any
          representation, warranty, covenant or agreement which remains uncured
          for thirty (30) days after

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          written notice thereof on the part of Parent or Merger Subsidiary set
          forth in this Agreement; or

     (f)  By either party if any court of competent jurisdiction or any other
          governmental body has issued an order, decree or ruling or taken any
          other action permanently enjoining, restraining or otherwise
          prohibiting the transactions contemplated hereby and such order,
          decree, ruling or other action has become final and non-appealable; or

     (g)  By Parent upon written notice to the Company if the Board of Directors
          of the Company withdraws, modifies or changes its recommendation
          regarding the approval of this Agreement or the Merger in a manner
          adverse to Parent; or

     (h)  By Company upon written notice to Parent if, prior to obtaining the
          approval of the stockholders of Parent, the Board of Directors of
          Parent withdraws, modifies or changes its recommendation regarding the
          approval of this Agreement or the Merger in a manner adverse to the
          Company; or

     (i)  By Company, if the average of the closing sale price (such closing
          price as reported by The NASDAQ Stock Market at the end of regular
          trading) of one share of Parent Common Stock on the NASDAQ National
          Market System (or such other national securities trading system as the
          Parent Common Stock is approved and listed for trading) in any period
          of sixty (60) consecutive trading days during the period from the date
          hereof through the Closing Date is equal to or less than $1.50 per
          share;

     (j)  By Parent, if the average of the closing sale price (such closing
          price as reported by The NASDAQ Stock Market at the end of regular
          trading) of one share of Parent Common Stock on the NASDAQ National
          Market System (or such other national securities trading system as the
          Parent Common Stock is approved and listed for trading) in any period
          of sixty (60) consecutive trading days during the period from the date
          hereof through the Closing Date is equal to or less than $1.50 per
          share.

8.2  Procedure Upon Termination. In the event of termination and abandonment
     pursuant to Section 8.1, written notice thereof will forthwith be given to
     the other party or parties, and, subject to Article 9, the transactions
     contemplated herein will be abandoned, without further action by any party
     hereto.

8.3  Effect of Termination. If this Agreement is terminated as provided herein:

     (a)  each party will, upon request, return all documents, work papers and
          other material of any other party (and all copies thereof) relating to
          the transactions contemplated herein, whether so obtained before or
          after the execution hereof, to the party furnishing the same;

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     (b)  the obligations of Sections 5.4 (Confidentiality), 5.11 (Public
          Announcements), 12.3 (Expenses) and Article 10 (Arbitration) will
          continue to be applicable; and

     (c)  except as otherwise provided herein to the contrary, no party hereto
          shall have any liability to any other party to this Agreement except
          for any willful or intentional breach of, or knowing misrepresentation
          made in, this Agreement occurring prior to termination of this
          Agreement.

                                   ARTICLE 9
                          SURVIVAL AND INDEMNIFICATION

9.1  Survival. The representations and warranties of each party contained in
     this Agreement, and the indemnification obligations of the Company and the
     Stockholders under this Article 9, will survive the Closing and shall
     expire eighteen (18) months after the Closing Date. Notwithstanding the
     preceding sentence (a) the representations and warranties contained in
     Sections 3.22 (Benefit Plans), 3.25 (Environmental Compliance) and 3.27
     (Tax Matters), and the indemnification obligations of the Company and the
     Stockholders with respect thereto, shall survive the Closing for a period
     of three (3) months after all applicable statutes of limitations with
     respect to any claims governing the respective matters set forth therein
     have expired, and (b) the representations and warranties contained in
     Section 3.24 (Intellectual Property), and the indemnification obligations
     of the Company and the Stockholders with respect thereto, shall survive the
     Closing and shall terminate on the earlier of (i) the date on which the all
     of the Milestone Consideration has been issued or paid as provided in this
     Agreement or set-off as provided in Section 9.6 hereof, or (ii) the
     expiration of the Contingent Period. Notwithstanding the foregoing, any
     representation or warranty that would otherwise terminate in accordance
     with this Section 9.1 shall continue to survive, if a notice of Claim
     pursuant to this Article 9 shall have been timely given under Section 9.4
     on or prior to such termination date, until the related claim has been
     satisfied or otherwise resolved as provided herein; provided, however, that
     no further Claims for any breach of such extended representation or
     warranty shall be brought from or after the expiration of such eighteen
     (18) month period. The right to indemnification or any other remedy based
     on representations, warranties, covenants and obligations in this Agreement
     will not be affected by any investigation conducted with respect to, or any
     knowledge acquired (or capable of being acquired) at any time, whether
     before or after the execution and delivery of this Agreement or the Closing
     Date, with respect to the accuracy or inaccuracy of or compliance with, any
     such representation, warranty, covenant or obligation; provided, however,
     that, with respect to any particular claim by Parent, Parent shall have
     complied with Section 5.17(a) (Notice of Breach); provided, further, that,
     with respect to any particular claim by the Stockholder Representative, the
     Company shall have complied with Section 5.17(b) (Notice of Breach).

9.2  Indemnification by Stockholders. Subject to Section 9.5, the Stockholders,
     severally and not jointly, agree to indemnify, defend and hold harmless
     Parent, its directors, officers, employees, agents and Affiliates, from and
     against any and all Damages asserted against, relating to, imposed upon,
     suffered or incurred by Parent, Merger Subsidiary, its officers, directors,
     employees, agents and Affiliates, in connection with enforcing their

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     indemnification rights pursuant to this Section 9.2 by reason of or
     resulting from (a) any untrue representation of, or breach of warranty by,
     the Company in any part of this Agreement, (b) any non-fulfillment of any
     covenant, agreement or undertaking of the Company in any part of this
     Agreement, (c) any Liabilities for any Taxes of the Company, the
     Subsidiaries or any respective predecessor in interest with respect to any
     tax period or portion thereof ending on or before the Closing Date,
     regardless of whether such Liabilities for Taxes arise out of or constitute
     a breach of any representation, warranty or covenant in this Agreement, but
     only to the extent any such Liabilities for Taxes exceeds any reserve for
     such Taxes specifically established in the Latest Balance Sheet, (d) one
     half of any payments made with respect to Dissenting Shares pursuant to the
     DGCL in excess of the Merger Consideration per share of Company Capital
     Stock held by holders of Dissenting Shares, (e) any failure by the Company
     to fulfill its obligations under Section 5.26 (Company Options), (f) any
     dispute, claim or disagreement by and among the Stockholder Representative
     and the Stockholders, and (g) the failure of the Company to obtain
     assignments from inventors as disclosed in Section 3.24 of the Disclosure
     Schedule.

9.3  Indemnification by Parent. Subject to Section 9.5, Parent and the Surviving
     Corporation agree to indemnify, defend and hold harmless each of the
     Stockholders, its directors, officers, employees, agents and Affiliates
     from and against any and all Damages asserted against, relating to, imposed
     upon, suffered or incurred by them in connection with enforcing their
     indemnification rights pursuant to this Section 9.3 by reason of or
     resulting from (a) any untrue representation of, or breach of warranty by,
     Parent or Merger Subsidiary in any part of this Agreement, (b) any
     non-fulfillment of any covenant, agreement or undertaking of Parent or
     Merger Subsidiary in any part of this Agreement, and (c) any liability of
     the Company or the Surviving Corporation arising out of the operation of
     the Company, Surviving Corporation or any Subsidiary or any of their
     respective businesses after the Closing Date.

9.4  Claims for Indemnification.

     (a)  Subject to Section 9.1, whenever any claim arises for indemnification
          hereunder the party seeking indemnification (the "Indemnified Party"),
          will promptly notify in writing (the "Indemnification Notice") the
          party from whom indemnification is sought (the "Indemnifying Party")
          of the claim and, when known, the facts constituting the basis for
          such claim; provided, however, that any failure to give such notice
          will not waive any rights of the Indemnified Party, except to the
          extent the rights of the Indemnifying Party are materially prejudiced.
          In the event that the Stockholders are seeking indemnification as the
          Indemnified Party hereunder, or indemnification is sought against the
          Stockholders as an Indemnifying Party hereunder, then in either such
          case, the Stockholder Representative shall be entitled to act on
          behalf of, and receive notice on behalf of, the Stockholders for any
          and all purposes stated therein. In the case of any such claim for
          indemnification hereunder resulting from or in connection with any
          claim or legal proceedings of a third party (a "Third Party Claim"),
          the notice to the Indemnifying Party will specify with reasonable
          specificity, if known, the basis under which the right to
          indemnification is being asserted and the amount or

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          an estimate of the amount of the liability arising therefrom. The
          Indemnifying Party shall have the right to dispute and defend all
          Third Party Claims and thereafter so defend and pay any adverse final
          judgment or award or settlement amount in regard thereto. Such defense
          shall be controlled by the Indemnifying Party, and the cost of such
          defense shall be borne by the Indemnifying Party, except that the
          Indemnified Party shall have the right to participate in such defense
          at its own expense; provided, however, that the Indemnifying Party
          must first acknowledge that the claim is a bona fide indemnification
          claim under this Agreement. The Indemnified Party shall cooperate in
          all reasonable respects in the investigation, trial and defense of any
          such claim, including making personnel, books, and records relevant to
          the claim available to the Indemnifying Party, without charge, except
          for reasonable out-of-pocket expenses. If the Indemnifying Party fails
          to take action within thirty (30) days as set forth above, then the
          Indemnified Party shall have the right to pay, compromise or defend
          any Third Party Claim and to assert the amount of any payment on the
          Third Party Claim plus the reasonable expenses of defense or
          settlement of the claim. The Indemnified Party shall also have the
          right and upon delivery of advance written notice to such effect to
          the Indemnifying Party, exercisable in good faith, to take such action
          as may be reasonably necessary to avoid a default judgment prior to
          the assumption of the defense of the Third Party Claim by the
          Indemnifying Party, and any reasonable expenses incurred by
          Indemnified Party so acting shall be paid by the Indemnifying Party.
          Except as otherwise provided herein, the Indemnified Party will not,
          except at its own cost and expense, settle or compromise any Third
          Party Claim for which it is entitled to indemnification hereunder
          without the prior written consent of the Indemnifying Party, which
          will not be unreasonably withheld. The parties intend that all
          indemnification claims be made as promptly as practicable.

     (b)  If the Indemnifying Party is of the opinion that the Indemnified Party
          is not entitled to indemnification, or is not entitled to
          indemnification in the amount claimed in the Indemnification Notice,
          the Indemnifying Party will deliver, within ten (10) business days
          after the receipt of the Indemnification Notice, a written objection
          to such claim which will include, to the extent actually known to the
          Indemnifying Party: (i) specifications in reasonable detail of the
          aspects or details objected to, and (ii) the grounds for such
          objection. If the Indemnifying Party files timely written notice of
          objection to any claim for indemnification, the validity and amount of
          such claim will be determined by arbitration pursuant to Article 10.
          If timely notice of objection is not delivered or if a claim by an
          Indemnified Party is expressly admitted in writing by an Indemnifying
          Party or if an arbitration award is made in favor of an Indemnified
          Party, the Indemnified Party, as a non-exclusive remedy, will have the
          right to set-off the amount of such claim or award against any amount
          yet owed, whether due or to become due, by the Indemnified Party or
          any subsidiary thereof to any Indemnifying Party by reason of this
          Agreement or any agreement or arrangement or contract to be entered
          into at the Closing.

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9.5  Indemnification Limits.

     (a)  Subject to the remainder of this Section 9.5 and except for fraud, the
          indemnification provisions set forth in this Article 9 shall be the
          sole and exclusive remedy for the Indemnified Party for a breach of
          any representation, warranty or covenant by the Indemnifying Party and
          shall be in lieu of any rights the Indemnified Party may have under
          law or in equity with respect to any such breaches or otherwise. The
          liability of each Stockholder as an Indemnifying Party under Section
          9.2 shall be limited to such Stockholder's interest in the Escrow
          Shares and the Milestone Consideration, if any. The aggregate
          liability of Parent and Merger Subsidiary under Section 9.3 shall be
          limited to the aggregate amount of the Merger Consideration paid to
          the Stockholders.

     (b)  Except as expressly provided otherwise herein, and subject to the
          provisions of Section 9.4 and 9.5(c), (i) neither the Stockholders nor
          Parent, as the case may be, will be entitled to indemnification for
          any Damages under this Article 9 unless the aggregate of all Damages
          to such party is more than $200,000 (the "Basket Amount"), other than
          Damages under clauses (c) and (e) of Section 9.2 or Damages related to
          claims based upon breaches of representations and warranties made
          under Sections 3.4 (Capitalization of the Company) and 4.3
          (Capitalization of Parent), which shall not be subject to the Basket
          Amount, and (ii) when the aggregate amount of all Damages subject to
          the Basket Amount equals or exceeds the Basket Amount, Parent or the
          Stockholders, as the case may be, will be entitled to full
          indemnification of all claims for which indemnification is to be
          provided under this Article 9 in excess of the $200,000 that
          constitutes the Basket Amount for such party. Amounts set-off by
          Parent in connection with Section 5.21 shall not be applied against
          the Basket Amount; provided, however, that all un-reimbursed expenses
          that may become due to Parent as a result of, and incurred in
          connection with, the pursuit of any good-faith claim under Section
          5.21 shall be applied against the Basket Amount. The parties hereto
          agree that the Basket Amount for each party is a deductible amount and
          that the Basket Amount will not be deemed to be a definition of
          "material" for any purpose in this Agreement.

     (c)  Except as expressly provided otherwise herein, and subject to the
          provisions of Section 9.4, Parent will not be entitled to
          indemnification for any Damages under this Article 9 arising in
          connection with any breach by the Company of Section 3.24
          (Intellectual Property) unless the aggregate of all such Damages is
          more than $400,000 (the "IP Basket Amount"). When the aggregate amount
          of all such Damages subject to the IP Basket Amount equals or exceeds
          the IP Basket Amount, Parent will be entitled to indemnification of
          seventy-five percent (75%) of all claims in excess of the $400,000
          that constitutes to the Basket Amount, with the remaining twenty-five
          percent (25%) being borne by Parent. The parties hereto agree that the
          IP Basket Amount will not be deemed to be a definition of "material"
          for any purpose in this Agreement.

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     (d)  The parties shall make appropriate adjustments for any insurance
          benefits actually received by the Indemnified Party in determining
          Damages for purposes of this Article 9.

9.6  Right of Set-Off. Parent shall be entitled to set-off against any shares of
     Parent Common Stock otherwise issuable by Parent to the Stockholders as
     Escrow Shares or Milestone Consideration under this Agreement any amounts
     to which Parent is entitled pursuant to a claim for indemnification by
     Parent under this Article 9, including without limitation any claim for
     indemnification under Subsections (c) through (g) of Section 9.2
     (collectively, the "Set-Off Amounts"); provided, however, that Parent
     deposits with the Escrow Agent (with respect to Set-Off Shares derived from
     Milestone Consideration), or instructs the Escrow Agent to retain (with
     respect to Escrow Shares), that number of shares of Parent Common Stock
     having a value equal to such Set-Off Amounts in the escrow account to be
     held and disposed of by the Escrow Agent pursuant to the terms of the
     Escrow Agreement pending resolution of any such claim and shall be
     determined as follows: (i) with respect to Escrow Shares, by dividing (a)
     the Set-Off Amount, by (b) the average of the closing sale price (such
     closing price as reported by The NASDAQ Stock Market at the end of regular
     trading) of one share of Parent Common Stock on the NASDAQ National Market
     System (or such other national securities trading system as the Parent
     Common Stock is approved and listed for trading) on each of the sixty (60)
     trading days ending on (and including) the Distribution Date, and (ii) with
     respect to Set-Off Shares, any shares of Parent Common Stock constituting
     Set-Off Amounts derived from the payment of any Milestone Consideration, if
     any, shall be valued at the Parent Milestone Share Price (in either case,
     the resulting number of such shares are referred to as, the "Set-Off
     Shares"). Neither the exercise of, nor the failure to exercise, such right
     of set-off will constitute an election of remedies or limit Parent in any
     manner in the enforcement of any other remedies that may be available to
     it. Upon Final Resolution of the indemnification claim(s), there shall be
     returned by the Escrow Agent to Parent that number of Escrow Shares or
     Set-Off Shares equal to the quotient of the aggregate claim(s) being so
     paid divided by the Average Market Price, but appropriately adjusted in the
     event that there occurs any stock dividend, stock split, or similar event
     with respect to the Parent Stock after the Effective Time, and the Escrow
     Shares will be deemed permanently reduced and released from escrow and
     automatically returned to the status of authorized and unissued shares of
     Parent Capital Stock and such Set-Off Shares shall not be available for
     distribution to the Stockholders, all in accordance with the terms of the
     Escrow Agreement.

9.7  Expenses of Stockholder Representative. The reasonable out-of-pocket costs
     and expenses of the Stockholder Representative in connection with this
     Agreement or the Escrow Agreement (including legal and other fees incurred
     in connection with the defense of claims under Article 9) shall be paid by
     the Stockholders. On or prior to the Closing Date, in order to make funds
     available for expenses and costs incurred by the Stockholder Representative
     on behalf of the Stockholders, the Company shall: (a) pay Twenty Thousand
     Dollars ($20,000) into an escrow account established by the Stockholder
     Representative (the "Representative's Escrow Account"), and (b) designate
     up to twenty-five thousand (25,000) shares of Parent Common Stock (out of
     the Initial

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     Merger Consideration) as additional Reduction Shares (thereby reducing the
     Closing Date Shares that would have otherwise been available to
     Stockholders) and notify Parent in writing at least three (3) business days
     prior to Closing that such designated number of shares shall be issued into
     the Representative's Escrow Account on the Closing Date. The costs of
     establishing and maintaining the Representative's Escrow Account shall be
     paid by the Stockholders (and the funds in such escrow may be used for this
     purpose). Any funds and/or Reduction Shares remaining in the
     Representative's Escrow Account after satisfaction of all such costs and
     expenses shall be distributed to each of the Stockholders according to the
     same ratio as provided under Section 2.2 of this Agreement.

                                   ARTICLE 10
                                   ARBITRATION

10.1 Dispute. Except for any controversy, claim or dispute arising out of the
     failure by any party to this Agreement to consummate the Merger and the
     transactions contemplated by this Agreement and subject to the last
     sentence of this Section 10.1, any controversy, claim or dispute of
     whatever nature arising between the parties under this Agreement or in
     connection with the transactions contemplated hereunder, including those
     arising out of or relating to the breach, termination, enforceability,
     scope or validity hereof, whether such claim existed prior to or arises on
     or after the Effective Time (a "Dispute"), shall be resolved by mediation
     or, failing mediation, by binding arbitration. The agreement to mediate and
     arbitrate contained in this Article 10 shall continue in full force and
     effect despite the expiration, rescission or termination of this Agreement.
     Notwithstanding the foregoing, prior to Closing either party may seek
     injunctive relief with respect to any controversy or claim arising out of
     or relating to any provision of this Agreement in any court of competent
     jurisdiction.

10.2 Mediation. No party shall commence an arbitration proceeding pursuant to
     the provisions set forth below unless such party shall first give a written
     notice (an "Arbitration Dispute Notice") to the other parties setting forth
     the nature of the Dispute. The parties shall attempt in good faith to
     resolve the Dispute by mediation under the CPR Institute for Dispute
     Resolution ("CPR") Model Mediation Procedure for Business Disputes (the
     "CPR Procedure") in effect at the time of the Dispute. If the parties
     cannot agree on the selection of a mediator within twenty (20) days after
     receipt of the Arbitration Dispute Notice, the mediator will be selected in
     accordance with the CPR Procedure.

10.3 Arbitration.

     (a)  If the Dispute has not been resolved by mediation as provided in
          Sections 10.1 and 10.2 within sixty (60) days after receipt of the
          Arbitration Dispute Notice or such greater period as the parties may
          agree upon in writing, or if a party fails to participate in a
          mediation, then the Dispute shall be determined by binding arbitration
          in Wilmington, Delaware. The arbitration shall be conducted in
          accordance with the Commercial Arbitration Rules of the American
          Arbitration Association ("AAA") in effect on the date on which the
          Arbitration Dispute Notice is sent, subject to any modifications
          contained in this Agreement. The

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          Dispute shall be determined by one (1) arbitrator, except that if the
          Dispute involves an amount in excess of $1,000,000, exclusive of
          interest and costs, three (3) arbitrators shall be appointed. Persons
          eligible to serve as arbitrators shall be members of the AAA Large,
          Complex Case Panel or a CPR Panel of Distinguished Neutrals, or
          persons who have professional credentials similar to those persons
          listed on such AAA or CPR panels. The award shall be in writing and
          include the findings of fact and conclusions of law upon which it is
          based.

     (b)  The arbitration shall be governed by the substantive laws of the State
          of Delaware, without regard to conflicts-of-law rules, and by the
          arbitration law of the Federal Arbitration Act (Title 9, U.S. Code).
          Judgment upon the award rendered may be entered in any court having
          jurisdiction.

     (c)  Except as otherwise required by law, the parties and the arbitrator(s)
          agree to keep confidential and not disclose to third parties any
          information or documents obtained in connection with the arbitration
          process, including the resolution of the Dispute. If a party fails to
          proceed with arbitration as provided in this Agreement, or
          unsuccessfully seeks to stay the arbitration, or fails to comply with
          the arbitration award, or is unsuccessful in vacating or modifying the
          award pursuant to a petition or application for judicial review, the
          other party or parties, as applicable, shall be entitled to be awarded
          costs, including reasonable attorneys' fees, paid or incurred in
          successfully compelling such arbitration or defending against the
          attempt to stay, vacate or modify such arbitration award and/or
          successfully defending or enforcing the award.

                                   ARTICLE 11
                                   DEFINITIONS

11.1 Definitions. The following terms, as used herein, have the following
     meanings:

     (a)  "AAA" shall have the meaning set forth in Section 10.3(a).

     (b)  "Acquiror" shall have the meaning set forth in Section 5.20(c).

     (c)  "Actual Reduction Amount" shall have the meaning set forth in Section
          2.3(d).

     (d)  "Adjustment Amount" shall have the meaning set forth in Section
          2.3(f).

     (e)  "Affiliate" means, with respect to any Person, (i) any Person directly
          or indirectly controlling, controlled by or under direct or indirect
          common control with such other Person, through the ownership of all or
          part of any Person, or (ii) any Person who may be deemed to be an
          "affiliate" under Rule 145 of the Securities Act of 1933, as amended.

     (f)  "Alternative Stockholder's Representative" shall have the meaning set
          forth in Section 12.13(a).

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     (g)  "Applicable Law" means, with respect to any Person, any domestic or
          foreign, federal, state or local common law or duty, case law or
          ruling, statute, law, ordinance, policy, guidance, rule,
          administrative interpretation, regulation, code, order, writ,
          injunction, directive, judgment, decree or other requirement of any
          Governmental Authority (including any Environmental, Safety and Health
          Laws) applicable to such Person or any of its Affiliates or Plan
          Affiliates or any of their respective properties, assets, officers,
          directors, employees, consultants or agents (in connection with such
          officer's, director's, employee's, consultant's or agent's activities
          on behalf of such Person or any of its Affiliates or Plan Affiliates).

     (h)  "Annual Financial Statements" shall have the meaning set forth in
          Section 3.8(a).

     (i)  "Arbitration Dispute Notice" shall have the meaning set forth in
          Section 10.2.

     (j)  "Arbitrator Fee" shall have the meaning set forth in Section 2.3(g).

     (k)  "Arbitrator Fee Reduction Shares" shall mean a number, calculated to
          five (5) decimal points, equal to the quotient obtained by dividing
          (i) the Arbitrator Fee, by (ii) the Parent Closing Share Price;
          provided, however, that if the Arbitrator Fee is equal to zero, the
          number of Arbitrator Fee Reduction Shares shall be equal to zero.

     (l)  "Average Market Price" means the average of the closing sale price
          (such closing price as reported by The NASDAQ Stock Market at the end
          of regular trading) of one share of Parent Common Stock on the NASDAQ
          National Market System (or such other national securities trading
          system as the Parent Common Stock is approved and listed for trading)
          on each of the sixty (60) trading days ending on and including the
          third business day preceding the date of a Final Decision or a written
          notice of consent or agreement to all or part of a claim against
          Escrow Shares or a claim related to Set-Off Shares, as the case may
          be.

     (m)  "Basket Amount" shall have the meaning set forth in Section 9.5(b).

     (n)  "Benefit Plan" shall have the meaning set forth in Section 3.22(h).

     (o)  "Board Nominee" shall have the meaning set forth in Section 5.18.

     (p)  "Business Day" means a day other than a Saturday, Sunday or other day
          on which commercial banks in Minneapolis, Minnesota are authorized or
          required by law to close.

     (q)  "CE-Approval Date" means the date upon which Parent or the Surviving
          Corporation receives notice that the Product qualifies for CE Marking
          for its marketing and sale into the European Free Trade Association
          and the European Union, and "CE-Approval" means the receipt by Parent
          or the Surviving Corporation of such notice.

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     (r)  "Certificate of Merger" shall have the meaning set forth in Section
          1.2.

     (s)  "Closing" shall have the meaning set forth in Section 1.4.

     (t)  "Closing Date" shall have the meaning set forth in Section 1.4.

     (u)  "Closing Date Balance Sheet" shall have the meaning set forth in
          Section 2.3(b).

     (v)  "Closing Date Shares" shall mean that number of Parent Common Shares
          equal to (i) 9,000,000 (with appropriate adjustments thereto in the
          event of any stock splits, stock combinations, stock dividends,
          recapitalizations or other similar transaction in Parent Common Stock
          after the date hereof and prior to the Effective Time), minus (ii) the
          Escrow Shares, minus (iii) the Reduction Shares, if any.

     (w)  "Closing Ratio" shall mean a number, calculated to five (5) decimal
          points, equal to the quotient obtained by dividing (i) the Closing
          Date Shares by (ii) the Fully-Diluted Outstanding Shares.

     (x)  "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
          1985, as amended, as set forth in Section 4980B of the Code, part 6 of
          Title I of ERISA and applicable regulations issued thereunder.

     (y)  "Code" shall have the meaning set forth in the Recitals.

     (z)  "Company 401(k) Plan" shall have the meaning set forth in Section
          5.25(b).

     (aa) "Company Board Recommendation" shall have the meaning set forth in
          Section 5.8(a).

     (bb) "Company Capital Stock" means Company Common Stock and Company
          Preferred Stock.

     (cc) "Company Certificate" and "Company Certificates" shall mean,
          individually and collectively, any certificate representing either
          shares of Company Common Stock or shares of Company Preferred Stock.

     (dd) "Company Common Stock" means the common stock, $.001 par value, of the
          Company.

     (ee) "Company Licenses" shall have the meaning set forth in Section
          3.12(a).

     (ff) "Company Preferred Stock" means the Series A Preferred Stock, $.001
          per share par value, the Series B Preferred Stock, $.001 per share par
          value, the Series C Preferred Stock, $.001 per share par value, the
          Series D Preferred Stock, $.001 per share par value, and the Series E
          Preferred Stock, $.001 per share par value of the Company.

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     (gg) "Company Securities" shall have the meaning set forth in Section 3.4.

     (hh) "Company Special Meeting" shall have the meaning set forth in Section
          5.8(a).

     (ii) "Company Stock Option" means an option to purchase a share of the
          Company's Common Stock granted pursuant to the Company Stock Option
          Plans.

     (jj) "Company Stock Option Plans" means the Stock Option Plan of 3F
          Therapeutics, Inc.

     (kk) "Company Warrants" means those warrants described in Section 3.4 the
          Disclosure Schedule.

     (ll) "Compensation Plan" means any material benefit or arrangement that is
          not either a Pension Plan or a Welfare Plan, including, without
          limitation, (i) each employment or consulting agreement, (ii) each
          arrangement providing for insurance coverage or workers' compensation
          benefits, (iii) each bonus, incentive bonus or deferred bonus
          arrangement, (iv) each arrangement providing termination allowance,
          severance or similar benefits, (v) each equity compensation plan, (vi)
          each current or deferred compensation agreement, arrangement or
          policy, (vii) each compensation policy and practice maintained by the
          Company or any ERISA Affiliate of the Company covering the employees,
          former employees, directors and former directors of the Company and
          the beneficiaries of any of them, and (viii) each agreement,
          arrangement or plan that provides for the payment of compensation to
          any person who provides services to the Company and who is not an
          employee, former employee, director or former director of the Company.

     (mm) "Consent" or "Consents" shall have the meaning set forth in Section
          3.6.

     (nn) "Contingent Period" means the period beginning on the Closing Date and
          ending December 31, 2013.

     (oo) "Continuing Employees" shall have the meaning set forth in Section
          5.19.

     (pp) "Contracts" means all contracts, agreements, options, leases,
          licenses, sales and accepted purchase orders, commitments and other
          instruments of any kind, whether written or oral, to which the Company
          is a party on the Closing Date, including the Scheduled Contracts.

     (qq) "Core Intellectual Property" means all patents and patent applications
          disclosing, having claims, whether pending or allowed as of the
          Closing Date, that read on, or that otherwise cover the Company's
          Model 1000 heart valve, the Products, deployment tools for deploying
          the foregoing in situ, and methods of delivery, placement and
          manufacturing related thereto.

     (rr) "CPR" shall have the meaning set forth in Section 10.2.

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     (ss) "CPR Procedure" shall have the meaning set forth in Section 10.2.

     (tt) "Damages" means all demands, claims, actions or causes of action,
          assessments, losses, damages, costs, expenses, Liabilities, judgments,
          awards, fines, sanctions, penalties, charges and amounts paid in
          settlement, without giving effect to any qualifications as to
          materiality or Material Adverse Effect contained in any representation
          or warranty contained herein, including, but not limited to, (i)
          interest on cash disbursements in respect of any of the foregoing at
          the "prime rate" as published in The Wall Street Journal, from time to
          time from the date each such cash disbursement is made until the
          Person incurring the same shall have been indemnified in respect
          thereof, and (ii) reasonable costs, fees and expenses of attorneys,
          accountants, bankers and other agents of the Person incurring such
          expenses.

     (uu) "DGCL" shall have the meaning set forth in Section 1.1.

     (vv) "Disclosure Schedule" shall have the meaning set forth in the preamble
          to Article 3.

     (ww) "Dispute" shall have the meaning set forth in Section 10.1.

     (xx) "Dispute Notice" shall have the meaning set forth in Section 2.3(c).

     (yy) "Dissenting Shares" shall have the meaning set forth in Section 2.4.

     (zz) "Distribution Date" shall have the meaning set forth in Section 2.2.

     (aaa) "Edwards Agreement" means that certain Master Agreement dated June 2,
          2005 between Edwards Lifesciences PVT, Inc. and the Company.

     (bbb) "Edwards Holdback Amount" means an amount equal to $2,000,000 held
          back pursuant to the Edwards Agreement.

     (ccc) "Effective Time" shall have the meaning set forth in Section 1.2.

     (ddd) "Environmental, Safety and Health Laws" means all Applicable Laws in
          any way relating to Environmentally Regulated Materials, toxic torts,
          occupational health and safety, or the environment, including, without
          limitation, the Safe Drinking Water and Toxic Enforcement Act
          ("Proposition 65"), the Federal Resource Conservation and Recovery Act
          ("RCRA"), the Federal Comprehensive Environmental Response
          Compensation and Liability Act ("CERCLA"), the Federal Clean Air Act,
          the Federal Water Pollution Control Act, the Federal Safe Drinking
          Water Act, the Federal Toxic Substances Control Act ("TSCA"), the
          Federal National Environmental Policy Act, the Federal Insecticide
          Fungicide and Rodenticide Act, the Federal Emergency Planning and
          Community Right to Know Act, the Federal Hazard Communication Act, the
          Federal Occupational Safety and Health Act, any requirements
          promulgated pursuant to these Applicable Laws, amendments, or
          restatements thereof or similar enactments

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          thereof, as is now or at any time hereafter may be in effect, or any
          analogous foreign, state or local Applicable Laws.

     (eee) "Environmental Liabilities" means all Liabilities of a Person
          (whether such Liabilities are owed by such Person to Governmental
          Authorities, third parties, or otherwise) whether currently in
          existence or arising hereafter which arise under any Environmental,
          Safety or Health Laws.

     (fff) "Environmentally Regulated Material" means any element, compound,
          waste, pollutant, contaminant, substance, material or any mixture
          thereof: (i) the presence of which requires investigation or
          remediation under any Applicable Law; (ii) that is defined as a
          "hazardous waste" or "hazardous substance," or chemicals known to
          cause cancer or reproductive toxicity under any Applicable Law; (iii)
          that is toxic, explosive, corrosive, flammable, infectious,
          radioactive, carcinogenic or mutagenic or otherwise hazardous and is
          regulated by any Governmental Authority having or asserting
          jurisdiction over the Company; (iv) the presence of which causes a
          nuisance, trespass or other tortious condition; (v) the presence of
          which poses a hazard to the health or safety of Persons; (vi) without
          limitation, that contains gasoline, diesel fuel or other petroleum
          hydrocarbons, polychlorinated biphenyls (PCBs), or asbestos, (vii)
          that gives rise to any exposure prohibition or warning requirement
          under any Environmental Law; or (viii) that is otherwise regulated in
          any way under any Environmental Law.

     (ggg) "ERISA" means the Employee Retirement Income Security Act of 1974, as
          amended.

     (hhh) "ERISA Affiliate" means any "person," within the meaning of Section
          7701(a)(1) of the Code, that together with the Company is considered a
          single employer pursuant to Section 414(b), (c), (m) or (o) of the
          Code or Section 3(5) or 4001(b)(1) of ERISA.

     (iii) "Escrow Agent" shall have the meaning set forth in Section 2.2.

     (jjj) "Escrow Agreement" shall have the meaning set forth in Section 2.2.

     (kkk) "Escrow Shares" shall have the meaning set forth in Section 2.2.

     (lll) "Estimated Reduction Amount" shall have the meaning set forth in
          Section 2.3(a).

     (mmm) "Estimated Reduction Amount Certificate" shall have the meaning set
          forth in Section 2.3(a).

     (nnn) "Excess Shares" shall have the meaning set forth in Section 2.7.

     (ooo) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     (ppp) "Exchange Agent" shall have the meaning set forth in Section 2.5(a).

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     (qqq) "Exchange Agreement" shall have the meaning set forth in Section
          2.5(a).

     (rrr) "Exchange Fund" shall have the meaning set forth in Section 2.5(a).

     (sss) "Extraordinary Transaction" shall mean (i) the transfer, whether by
          sale, license or otherwise, to a third party of a Product, and,
          concurrent therewith, Parent's discontinuance of its efforts to
          achieve the Milestones relating to that Product, as set forth in
          clause (i) or clause (ii) of the definition of Milestones.

     (ttt) "FDA" means the United States Food and Drug Administration.

     (uuu) "FICA" shall have the meaning set forth in Section 3.22(g).

     (vvv) "Filed Contracts" shall have the meaning set forth in Section 4.13.

     (www) "Final Decision" means a decision, order, judgment or decree of an
          arbitrator or court having jurisdiction that is either not subject to
          appeal or as to which notice of appeal has not been timely filed or
          served.

     (xxx) "Fully Diluted Outstanding Shares" means the total number of
          outstanding shares of Company Common Stock issued and outstanding as
          of immediately prior to the Effective Time plus all shares of Company
          Common Stock issuable or issued as of immediately prior to the
          Effective Time upon conversion (or giving effect to the conversion) of
          all outstanding shares of Company Preferred Stock.

     (yyy) "GAAP" means generally accepted accounting principles in the United
          States.

     (zzz) "Governmental Authority" means any foreign, domestic, federal,
          territorial, state or local governmental authority, quasi-governmental
          authority, instrumentality, court, government or self-regulatory
          organization, commission, tribunal or organization or any regulatory,
          administrative or other agency, or any political or other subdivision,
          department or branch of any of the foregoing.

     (aaaa) "Government Programs" shall have the meaning set forth in Section
          3.13(a).

     (bbbb) "Grants" shall have the meaning set forth in Section 3.19.

     (cccc) "Group Health Plan" means any group health plan, as defined in
          Section 5000(b)(1) of the Code.

     (dddd) "HIPAA" shall have the meaning set forth in Section 3.22(e).

     (eeee) "HIPAA Privacy, Security and other Administrative Simplification
          Regulations" means the regulations issued by the U.S. Department of
          Health and Human Services pursuant to the Health Insurance Portability
          and Accountability Act of 1996.

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     (ffff) "Holdback Expenses" shall have the meaning set forth in Section
          5.21.

     (gggg) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
          1976, as amended.

     (hhhh) "Incentive Program" shall have the meaning set forth in Section
          5.19.

     (iiii) "Indemnified Party" shall have the meaning set forth in Section
          9.4(a).

     (jjjj) "Indemnifying Party" shall have the meaning set forth in Section
          9.4(a).

     (kkkk) "Indemnification Notice" shall have the meaning set forth in Section
          9.4(a).

     (llll) "Information" shall have the meaning set forth in Section 5.4.

     (mmmm) "Initial Lock-Up Period" shall have the meaning set forth in Section
          5.24(a).

     (nnnn) "Initial Meeting" shall have the meaning set forth in Section 5.18.

     (oooo) "Initial Merger Consideration" shall have the meaning set forth in
          Section 2.1(b)(i).

     (pppp) "Intellectual Property" means all rights of the Company in patents,
          patent applications, trademarks (whether registered or not), trademark
          applications, service mark registrations and service mark
          applications, trade names, trade dress, logos, slogans, tag lines,
          uniform resource locators, Internet domain names, Internet domain name
          applications, corporate names, copyright applications, registered
          copyrighted works and commercially significant unregistered
          copyrightable works (including proprietary software, books, written
          materials, prerecorded video or audio tapes, and other copyrightable
          works), technology, software, trade secrets, know-how, technical
          documentation, specifications, data, designs and other intellectual
          property and proprietary rights, other than off-the-shelf computer
          programs.

     (qqqq) "IP Basket Amount" shall have the meaning set forth in Section
          9.5(c).

     (rrrr) "IRS" means the Internal Revenue Service.

     (ssss) "Joint Proxy Statement" shall have the meaning set forth in Section
          3.7.

     (tttt) "Labor Laws" shall have the meaning set forth in Section 3.23(i)

     (uuuu) "Latest Balance Sheet" shall have the meaning set forth in Section
          3.8(a).

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     (vvvv) "Latest Financial Statements" shall have the meaning set forth in
          Section 3.8(a).

     (wwww) "Liability" or "Liabilities" means any liabilities, obligations or
          claims of any kind whatsoever whether absolute, accrued or un-accrued,
          fixed or contingent, matured or un-matured, asserted or unasserted,
          known or unknown, direct or indirect, contingent or otherwise and
          whether due or to become due, including without limitation any foreign
          or domestic tax liabilities or deferred tax liabilities incurred in
          respect of or measured by the Company's or any Subsidiary's income, or
          any other debts, liabilities or obligations relating to or arising out
          of any act, omission, transaction, circumstance, sale of goods or
          services, state of facts or other condition which occurred or existed
          on or before the date hereof, whether or not known, due or payable,
          whether or not the same is required to be accrued on the financial
          statements or is disclosed on the Disclosure Schedule.

     (xxxx) "Lien" means, with respect to any asset, any mortgage, title defect
          or objection, lien, pledge, charge, security interest, hypothecation,
          restriction, encumbrance, adverse claim or charge of any kind in
          respect of such asset.

     (yyyy) "Material Adverse Effect" means, with respect to the Company or
          Parent, in either case as applicable, an individual or cumulative
          adverse change in or effect on the business, customers, customer
          relations, operations, properties, working capital condition
          (financial or otherwise), assets, properties, liabilities or prospects
          (financial or otherwise) of such party which (i) is reasonably
          expected to be materially adverse to the business, properties, working
          capital condition (financial or otherwise), assets, liabilities or
          prospects (financial or otherwise) of such party or its subsidiaries
          taken as a whole; or (ii) would prevent such party from consummating
          the transactions contemplated hereby, other than as a result of (A)
          changes, conditions or events that are generally applicable to the
          industry in which the Company, Parent or the Merger Subsidiary, as
          applicable, operates or the U.S. economy in general, or acts of war,
          armed hostilities or terrorism, or (B) changes in Applicable Law or
          U.S. GAAP or interpretations thereof.

     (zzzz) "Medicaid" shall have the meaning set forth in Section 3.13(a).

     (aaaaa) "Medicare" shall have the meaning set forth in Section 3.13(a).

     (bbbbb) "Merger" shall have the meaning set forth in Section 1.1.

     (ccccc) "Merger Consideration" means the aggregate consideration that
          becomes payable to the Stockholders under this Agreement, including
          the Initial Merger Consideration and the Milestone Consideration.

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     (ddddd) "Milestones" means the occurrence of any one or more of the
          following: (i) receipt by Parent or Surviving Corporation of
          CE-Approval for any Product on the CE-Approval Date; (ii) receipt by
          Parent or Surviving Corporation of PMA-Approval for any Product on the
          PMA-Approval Date; (iii) the consummation of an Extraordinary
          Transaction.

     (eeeee) "Milestone Consideration" shall have the meaning set forth in
          Section 2.1(b)(ii).

     (fffff) "Milestone Date" means the date of satisfaction of each and any
          Milestone satisfied during the Contingent Period.

     (ggggg) "Milestone Ratio" means a number, subject to adjustment as provided
          in this Agreement, calculated to five (5) decimal points, equal to the
          quotient obtained by dividing (i) Milestone Shares, by (ii) the
          Fully-Diluted Outstanding Shares.

     (hhhhh) "Milestone Shares" means a number equal to either:

          (i)  In the event that the Milestone satisfied in the applicable
               circumstance is either CE-Approval or PMA-Approval, then:

               (1)  assuming no Milestone Shares have been previously issued in
                    connection with an Extraordinary Transaction, one-half of
                    the Total Contingent Shares; or

               (2)  in the event that any of the Total Contingent Shares have
                    been previously issued in connection with an Extraordinary
                    Transaction, then (A) upon the first occurrence of the
                    satisfaction of such a Milestone, a number of shares of
                    Parent Common Stock equal to the quotient obtained by
                    dividing (x) the difference between (1) Total Contingent
                    Shares, and (2) the aggregate number of Total Contingent
                    Shares issued in connection with such Extraordinary
                    Transaction, by (y) two, provided the result is greater than
                    zero (and if the result is zero or less than zero, then no
                    additional shares of Parent Common Stock shall then be
                    deemed earned or issuable upon satisfaction of such
                    Milestone), and (B) upon the second occurrence of the
                    satisfaction of such a Milestone, all of the Remaining
                    Shares.

          (ii) In the event that the Milestone satisfied is an Extraordinary
               Transaction, (i) all Remaining Shares if the Net Proceeds
               therefrom equals or exceeds $35,000,000, or (ii) if the Net
               Proceeds therefrom are less than $35,000,000, a number of shares
               of Parent Common Stock equal to the product obtained by

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               multiplying (i) the Total Contingent Shares, by (ii) the quotient
               obtained by dividing (A) Net Proceeds, by (B) $35,000,000.

     (iiiii) "Monthly Meeting" shall have the meaning set forth in Section
          2.3(a).

     (jjjjj) "Net Proceeds" means that amount received by or payable to Parent
          or Surviving Corporation, or their respective Affiliates, in
          connection with an Extraordinary Transaction equal to (a) the gross
          proceeds thereof, reduced by (b) the sum of (i) all expenses incurred
          by Parent or Merger Subsidiary in connection with the Extraordinary
          Transaction, and (ii) the aggregate direct development and
          commercialization costs and expenses incurred by (A) the Company
          between December 1, 2005 and the Closing, and (B) Parent or Surviving
          Corporation following the Closing, in connection with the achievement
          of CE approval or PMA approval, as applicable, and increased by (c)
          the sum of (i) Ten Million Dollars ($10,000,000), and (ii) the Edwards
          Holdback Amount, if and to the extent received by the Surviving
          Corporation or Parent (it being understood that, if any portion of the
          Edwards Holdback Amount, net of expenses incurred by Parent in
          accordance with Section 5.21, if any, is recovered, then a
          recalculation of Net Proceeds shall be made at such time and any
          additional shares of Milestone Consideration that are owed to
          Stockholders (using the same value as was used in connection with
          Parent's exercise of set-off rights in accordance with Section 5.21)
          as a result of the receipt of this amount shall be deposited with the
          Exchange Agent for distribution to the Stockholders in accordance with
          Section 2.5 and the Exchange Agreement).

     (kkkkk) "Non-Core Intellectual Property" means all Intellectual Property
          except the Core Intellectual Property.

     (lllll) "OCS" shall have the meaning set forth in Section 3.19.

     (mmmmm) "Operating Budget" means that certain operating budget for the
          Company covering the period from December 1, 2005 through the Closing
          which has been mutually agreed to by the Company and Parent, a copy of
          which is attached hereto as Exhibit B.

     (nnnnn) "OSHA" shall have the meaning set forth in Section 3.23(g).

     (ooooo) "Parent Change of Control" means (a) any acquisition of Parent or
          Surviving Corporation by another person or entity (or group of persons
          or entities) by means of any transaction or series of transactions
          (including, without limitation, any reorganization, consolidation or
          merger of Parent or Surviving Corporation with or into any other
          entity) (i) in which the holders of Parent's or Surviving
          Corporation's (as applicable) outstanding capital stock immediately
          before the first such transaction do not, immediately after the
          consummation such transaction, retain stock or other

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          equity interests representing at least fifty percent (50%) of the
          voting power of the surviving entity of such transaction, or (ii)
          after which any such person or entity and its affiliates hold more
          than fifty percent (50%) of the voting power of Parent's or Surviving
          Corporation's outstanding capital stock; or (b) any sale, conveyance
          or disposition of all or substantially all of the assets of Parent or
          Surviving Corporation.

     (ppppp) "Parent Common Stock" means the common stock, $0.01 par value per
          share, of Parent.

     (qqqqq) "Parent Closing Share Price" means the average of the closing sale
          price (such closing price as reported by The NASDAQ Stock Market at
          the end of regular trading) of one share of Parent Common Stock on the
          NASDAQ National Market System (or such other national securities
          trading system as the Parent Common Stock is approved and listed for
          trading) on each of the sixty (60) trading days ending on (and
          including) the date immediately prior to the Closing Date.

     (rrrrr) "Parent Licensees" shall have the meaning set forth in Section
          4.9(a).

     (sssss) "Parent Milestone Share Price" means the average of the closing
          sale price (such closing price as reported by The NASDAQ Stock Market
          at the end of regular trading) of one share of Parent Common Stock on
          the NASDAQ National Market System (or such other national securities
          trading system as the Parent Common Stock is approved and listed for
          trading) on each of the sixty (60) trading days ending on (and
          including) the date that is fifteen (15) days following the
          CE-Approval Date or the PMA-Approval Date, as applicable.

     (ttttt) "Parent SEC Reports" shall have the meaning set forth in Section
          4.7(a).

     (uuuuu) "Parent Securities" shall have the meaning set forth in Section
          4.3(a).

     (vvvvv) "Parent Special Meeting" shall have the meaning set forth in
          Section 5.8(b).

     (wwwww) "PCBs" shall have the meaning set forth in Section 3.25(a).

     (xxxxx) "Pension Plan" means an "employee pension benefit plan" as such
          term is defined in Section 3(2) of ERISA.

     (yyyyy) "Permits" shall have the meaning set forth in Section 3.16.

     (zzzzz) "Permitted Liens" means (i) Liens for Taxes or governmental
          assessments, charges or claims the payment of which is not yet due, or
          for Taxes the validity of which are being contested in good faith by
          appropriate proceedings and which contested Taxes are described on the
          Disclosure Schedule; (ii) statutory Liens of landlords and Liens of
          carriers,

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          warehousemen, mechanics, materialmen and other similar Persons and
          other Liens imposed by Applicable Law incurred in the ordinary course
          of business for sums not yet delinquent or being contested in good
          faith; (iii) Liens relating to deposits made in the ordinary course of
          business in connection with workers' compensation, unemployment
          insurance and other types of social security or to secure the
          performance of leases, trade contracts or other similar agreements;
          (iv) Liens and encumbrances specifically identified in the Latest
          Balance Sheet; (v) Liens securing executory obligations under any
          lease that constitutes an "operating lease" under GAAP; (vi) Liens
          granted in connection with purchase money obligations; and (vii) other
          Liens set forth on the Disclosure Schedule; provided, however, that,
          with respect to each of clauses (i) through (vi), to the extent that
          any such Lien on any of the Company's or its Subsidiaries' assets
          arose prior to the date of the Latest Balance Sheet and relates to, or
          secures the payment of, a Liability that is required to be accrued for
          under GAAP, such Lien shall not be a Permitted Lien unless all such
          Liabilities have been fully accrued or otherwise reflected on the
          Latest Balance Sheet. Notwithstanding the foregoing, no Lien arising
          under the Code or ERISA with respect to the operation, termination,
          restoration or funding of any Benefit Plan sponsored by, maintained by
          or contributed to by the Company or any of its ERISA Affiliates or
          arising in connection with any excise tax or penalty tax with respect
          to such Benefit Plan shall be a Permitted Lien.

     (aaaaaa) "Person" means an individual, corporation, partnership, limited
          liability company, association, trust, estate or other entity or
          organization, including a Governmental Authority.

     (bbbbbb) "Plan Affiliate" means, with respect to any Person, any Benefit
          Plan sponsored by, maintained by or contributed to by such Person, and
          with respect to any Benefit Plan, any Person sponsoring, maintaining
          or contributing to such plan or arrangement.

     (cccccc) "PMA-Approval Date" means the date upon which Parent or the
          Surviving Corporation receives notice from the FDA that the Product
          has received PMA approval, including but not limited to final
          labeling, from the FDA to market the Product for the minimally
          invasive and transcatheter replacement of heart valves, and
          "PMA-Approval" means the receipt by Parent or the Surviving
          Corporation of such notice.

     (dddddd) "Principal Stockholders" shall have the meaning set forth in
          Section 3.37.

     (eeeeee) "Product" or "Products" means (i) the Company's aortic heart valve
          replacement technology known as the 3F Enable Aortic Heart Valve,(TM)
          (ii) the 3F Entrata Aortic Heart Valve System,(TM) and (iii) any
          product or products that are derived from such technologies.

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     (ffffff) "Properties" means any real property owned or leased by or to the
          Company or a Subsidiary.

     (gggggg) "Record Date" shall have the meaning set forth in Section 3.40.

     (hhhhhh) "Reduction Amount" means the aggregate dollar amount, if any, of
          the sum of the following: (i) deviations from the amounts for business
          operational line items stated in the Operating Budget during the
          period between the date of this Agreement and the Closing Date, other
          than deviations that were, before being incurred, specifically
          approved in writing by Richard A. Curtis, Parent's Vice President,
          Marketing and Business Development or Jack Judd, Parent's Chief
          Financial Officer, plus (ii) the amount by which the Company's actual
          transaction-related expenses incurred (including past due amounts
          owing to legal counsel for intellectual property matters, restructure
          fee payable to Company's senior lender, non-recurring employee
          expenses/severance, investment banking fees and expenses, legal
          counsel fees and expenses, accounting fees and expenses, alternative
          minimum tax liabilities and other directly related expenses) exceeds
          Three Million Six Hundred Thirty Six Thousand Eight Hundred Fifty
          Three Dollars ($3,636,853). Parent and Company shall review this at
          the final Monthly Meeting as provided in Section 2.3.

     (iiiiii) "Reduction Shares" means a number, calculated to five (5) decimal
          points, equal to the quotient obtained by dividing (i) the Estimated
          Reduction Amount, by (ii) the Parent Closing Share Price; provided,
          however, that if the Reduction Amount is equal to zero, the number of
          Reduction Shares shall be equal to zero.

     (jjjjjj) "Registration Statement" shall have the meaning set forth in
          Section 5.7(b).

     (kkkkkk) "Remaining Shares" means a number equal to (i) Total Contingent
          Shares, minus (ii) the aggregate number of shares of Parent Common
          Stock issued in connection with previous Milestones, if any.

     (llllll) "Representatives" shall have the meaning set forth in Section 5.4.

     (mmmmmm) "Representative's Escrow Account" shall have the meaning set forth
          in Section 9.7.

     (nnnnnn) "Scheduled Contracts" shall have the meaning set forth in Section
          3.21(a).

     (oooooo) "Securities Act" means the Securities Act of 1933, as amended.

     (pppppp) "SEC" means the Securities and Exchange Commission.

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     (qqqqqq) "Selected Continuing Employees" shall have the meaning set forth
          in Section 5.19.

     (rrrrrr) "Set-Off Amounts" shall have the meaning set forth in Section 9.6.

     (ssssss) "Share Transfer Restriction Agreement" shall have the meaning set
          forth in Section 5.24.

     (tttttt) "Significant Stockholder" shall have the meaning set forth in
          Section 5.24.

     (uuuuuu) "Stockholders" means the Persons who hold of record immediately
          prior to the Effective Time shares of Company Capital Stock.

     (vvvvvv) "Stockholder Representative" has the meaning set forth in the
          heading.

     (wwwwww) "Subsidiary" or "Subsidiaries" mean each corporation or other
          legal entity as to which more than 50% of the outstanding equity
          securities having ordinary voting rights or power at the time of
          determination is being made is owned or controlled, directly or
          indirectly, by the Company.

     (xxxxxx) "Successor Board Nominee" shall have the meaning set forth in
          Section 5.18.

     (yyyyyy) "Surviving Corporation" shall have the meaning set forth in
          Section 1.1.

     (zzzzzz) "Tax" or "Taxes" means all taxes imposed of any nature including
          federal, state, local or foreign net income tax, alternative or add-on
          minimum tax, profits or excess profits tax, franchise tax, gross
          income, adjusted gross income or gross receipts tax, employment
          related tax (including employee withholding or employer payroll tax,
          FICA or FUTA), real or personal property tax or ad valorem tax, sales
          or use tax, excise tax, stamp tax or duty, any withholding or back up
          withholding tax, value added tax, severance tax, prohibited
          transaction tax, premiums tax, environmental tax, intangibles tax or
          occupation tax, together with any interest or any penalty, addition to
          tax or additional amount imposed by any Governmental Authority
          (domestic or foreign) responsible for the imposition of any such tax,
          including, without limitation, any penalties for failing to report any
          "reportable transactions" required by Section 6011 of the Code. The
          term Tax shall also include any Liability of the Company or the
          Subsidiaries for the Taxes of any other Person under U.S. Treasury
          Regulations Section 1.1502-6 (or similar provisions of state, local or
          foreign law), as a transferee or successor by contract or otherwise.

     (aaaaaaa) "Tax Return" shall have the meaning set forth in Section 3.27(a).

     (bbbbbbb) "Termination Date" shall mean June 15, 2006.

     (ccccccc) "Third Party Claim" shall have the meaning set forth in Section
          9.4(a).

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     (ddddddd) "Third Party Payors" shall have the meaning set forth in Section
          3.13(a).

     (eeeeeee) "Total Contingent Shares" means 10,000,000 shares of Parent
          Common Stock (with appropriate adjustments thereto and to the formulae
          set forth in this Agreement in the event of any stock splits, stock
          combinations, stock dividends, recapitalizations or other similar
          transaction in Parent Common Stock after the date hereof).

     (fffffff) "Transfer" shall have the meaning set forth in Section 5.24(a).

     (ggggggg) "Welfare Plan" means an "employee welfare benefit plan" as such
          term is defined in Section 3(1) of ERISA (including without limitation
          a plan excluded from coverage by Section 4 of ERISA).

     (hhhhhhh) "Written Consents" shall have the meaning set forth in Section
          5.22.

                                   ARTICLE 12
                                  MISCELLANEOUS

12.1 Notices. All notices, requests, demands, claims and other communications
     hereunder shall be in writing. Any notice, request, demand, claim, or other
     communication hereunder shall be deemed duly given (a) if personally
     delivered, when so delivered, (b) if mailed, two (2) Business Days after
     having been sent by registered or certified mail, return receipt requested,
     postage prepaid and addressed to the intended recipient as set forth below,
     (c) if given by facsimile, once such notice or other communication is
     transmitted to the facsimile number specified below and electronic
     confirmation is received; provided, however, that such notice or other
     communication is promptly thereafter mailed in accordance with the
     provisions of clause (b) above, or (d) if sent through an overnight
     delivery service in circumstances to which such service guarantees next day
     delivery, the day following being so sent:

     If to the Company prior to Closing:

          To: 20412 James Bay Circle
              Lake Forest, CA 92630
              Attn: Walter Cuevas
              Fax: (949) 380-9399

          With a copy to:

              Reed Smith LLP
              1901 Avenue of the Stars, Suite 700
              Los Angeles, CA 90067
              Attn: Michael Sanders, Esq.
              Fax: (310) 734-5299

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<PAGE>

     If to the Company after Closing or to Parent or Merger Subsidiary:

          To: ATS Medical, Inc.
              3905 Annapolis Lane #105
              Minneapolis, Minnesota 55447
              Attn: Rick Curtis, Vice President Marketing and Business
                    Development
              Fax: (763) 553-1492

          With a copy to:

              Oppenheimer Wolff & Donnelly LLP
              3300 Plaza VII
              45 South Seventh Street
              Minneapolis, Minnesota 55402
              Attn: Thomas A. Letscher, Esq.
              Fax: (612) 607-7100

     If to the Stockholder Representative:

          To: Boyd D. Cox
              P.O. Box 573
              Fayetteville, Arkansas 72702

     Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.

12.2 Amendments; No Waivers.

     (a)  Subject to Applicable Law, any provision of this Agreement may be
          amended or waived if, and only if, such amendment or waiver is in
          writing and signed, in the case of an amendment, by all parties
          hereto, or in the case of a waiver, by the party against whom the
          waiver is to be effective.

     (b)  No waiver by a party of any default, misrepresentation or breach of
          warranty or covenant hereunder, whether intentional or not, shall be
          deemed to extend to any prior or subsequent default, misrepresentation
          or breach of warranty or covenant hereunder or affect in any way any
          rights arising by virtue of any prior or subsequent occurrence. No
          failure or delay by a party in exercising any right, power or
          privilege hereunder shall operate as a waiver thereof nor shall any
          single or partial exercise thereof preclude any other or further
          exercise thereof or the exercise of any other right, power or
          privilege. The rights and remedies herein provided shall be cumulative
          and not exclusive of any rights or remedies provided by law.

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<PAGE>

12.3 Expenses. Except as otherwise provided herein, all costs, fees and expenses
     incurred in connection with the negotiation, preparation, execution,
     delivery and performance of this Agreement and in closing and carrying out
     the transactions contemplated hereby shall be paid by the party incurring
     such cost or expense. This Section 12.3 shall survive the termination of
     this Agreement.

12.4 Successors and Assigns. This Agreement shall be binding upon and inure to
     the benefit of the parties hereto and their respective successors and
     permitted assigns. No party hereto may assign either this Agreement or any
     of its rights, interests or obligations hereunder without the prior written
     approval of each other party.

12.5 Governing Law. This Agreement shall be governed by, construed and enforced
     in accordance with the internal laws of the State of Delaware (regardless
     of the laws that might otherwise govern under applicable principles of
     conflicts of law).

12.6 Counterparts; Effectiveness. This Agreement may be signed in any number of
     counterparts and the signatures delivered by facsimile, each of which shall
     be an original, with the same effect as if the signatures thereto and
     hereto were upon the same instrument. This Agreement shall become effective
     when each party hereto shall have received a counterpart hereof signed by
     the other parties hereto.

12.7 Entire Agreement. This Agreement (including the Disclosure Schedule, all
     exhibits and schedules and all other agreements referred to herein or
     therein which are hereby incorporated by reference and the other agreements
     executed simultaneously herewith) constitutes the entire agreement between
     the parties with respect to the subject matter hereof and supersedes all
     prior agreements, understandings and negotiations, both written and oral,
     between the parties with respect to the subject matter of this Agreement,
     including, without limitation, the Letter of Intent. Neither this Agreement
     nor any provision hereof is intended to confer upon any Person other than
     the parties hereto any rights or remedies hereunder.

12.8 Captions. The captions herein are included for convenience of reference
     only and shall be ignored in the construction or interpretation hereof. All
     references to an Article or Section include all subparts thereof.

12.9 Severability. If any provision of this Agreement, or the application
     thereof to any Person, place or circumstance, shall be held by a court of
     competent jurisdiction to be invalid, unenforceable or void, the remainder
     of this Agreement and such provisions as applied to other Persons, places
     and circumstances shall remain in full force and effect only if, after
     excluding the portion deemed to be unenforceable, the remaining terms shall
     provide for the consummation of the transactions contemplated hereby in
     substantially the same manner as originally set forth at the later of the
     date this Agreement was executed or last amended.

12.10 Construction. The parties hereto intend that each representation, warranty
     and covenant contained herein shall have independent significance. If any
     party has breached any representation, warranty or covenant contained
     herein in any respect, the fact that there

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<PAGE>

     exists another representation, warranty or covenant relating to the same
     subject matter (regardless of the relative levels of specificity) that the
     party has not breached shall not detract from or mitigate the fact that the
     party is in breach of the first representation, warranty or covenant.

12.11 Cumulative Remedies. Except as otherwise provided herein, the rights,
     remedies, powers and privileges herein provided are cumulative and not
     exclusive of any rights, remedies, powers and privileges provided by law.

12.12 Third Party Beneficiaries. No provision of this Agreement shall create any
     third party beneficiary rights in any Person, including any employee of
     Parent or Merger Subsidiary or employee or former employee of the Company
     or any Affiliate thereof (including any beneficiary or dependent thereof).

12.13 Appointment of Stockholder Representative; Enforcement of Rights, Benefits
     and Remedies.

     (a)  By adopting this Agreement, the Stockholders hereby irrevocably
          constitute and appoint Boyd D. Cox as the Stockholder Representative
          (the "Stockholder Representative"), and such person whom the Company
          designates by written notice to Parent at least three (3) days prior
          to Closing as the alternative Stockholder Representative (the
          "Alternative Stockholder Representative"), effective as of the
          Effective Time, for the purpose of performing and consummating the
          transactions contemplated by this Agreement and the Escrow Agreement.
          By executing this Agreement, the Stockholder Representative hereby
          accepts such appointment without compensation for services in this
          capacity. The appointment of such Stockholder Representative is
          coupled with an interest and all authority hereby conferred shall be
          irrevocable and such Stockholder Representative is hereby authorized
          and directed to perform and consummate all of the transactions
          contemplated by this Agreement and the Escrow Agreement. Not by way of
          limiting the authority of the Stockholder Representative, each and all
          of the Stockholders, by their adoption of this Agreement, for
          themselves and their respective heirs, executors, administrators,
          successors and assigns hereby authorize the Stockholder Representative
          to:

          (i)  effect any amendment to this Agreement or the Escrow Agreement
               which the Stockholder Representative deems necessary or
               desirable,

          (ii) execute and deliver on their behalf all documents and instruments
               which may be executed and delivered pursuant to this Agreement or
               the Escrow Agreement, except that all stock powers and letters of
               transmittal with respect to the transfer of the Company Common
               Stock or Company Preferred Stock shall be personally executed by
               the Stockholders,

          (iii) make and receive notices and other communications pursuant to
               this Agreement or the Escrow Agreement and service of process in
               any legal

                                       93

<PAGE>

               action or other proceeding arising out of or related to this
               Agreement or the Escrow Agreement or any of the transactions
               hereunder,

          (iv) settle any dispute, claim, action, suit or proceeding arising out
               of or related to this Agreement or the Escrow Agreement or any of
               the transactions hereunder, including, without limitation, the
               calculation of the Merger Consideration or the defense,
               settlement or compromise of any claim, action or proceeding for
               which Parent or Merger Subsidiary may be entitled to
               indemnification,

          (v)  receive and distribute the Initial Merger Consideration and
               Milestone Consideration,

          (vi) appoint or provide for successor agents, and

          (vii) pay expenses incurred or which may be incurred by or on behalf
               of the Stockholders (and to be reimbursed by the Stockholders for
               their pro rata share of such expenses as and to the extent
               provided in the Operating Budget) in connection with this
               Agreement and the Escrow Agreement.

          In the event of the death or disability of the Stockholder
          Representative, the Alternative Stockholder Representative shall
          automatically become the Stockholder Representative and, in the event
          of the death or disability of such person, a majority of the remaining
          Stockholders shall promptly appoint a replacement. No person serving
          as the Stockholder Representative under this Agreement shall have any
          personal liability to any Stockholder or its permitted assigns with
          respect to any action taken, suffered or omitted by him hereunder as a
          Stockholder Representative while acting in good faith and in the
          absence of gross negligence or willful misconduct, and any act done,
          suffered or omitted pursuant to the advice of counsel shall be deemed
          hereunder to have been done in good faith, except to the extent that
          such person may have liability as a Stockholder hereunder. The
          Stockholders shall severally and not jointly indemnify the Stockholder
          Representative and hold him harmless against any loss, liability or
          expense incurred without bad faith or gross negligence on the part of
          the Stockholder Representative and arising out of or in connection
          with the acceptance or administration of their duties hereunder.

     (b)  Any claim, action, suit, or other proceeding, whether in law or
          equity, to enforce any right, benefit or remedy granted to
          Stockholders under this Agreement or the Escrow Agreement shall be
          asserted, brought, prosecuted or maintained only by the Stockholder
          Representative. With respect to any matter contemplated by this
          Section 12.13, the Stockholders shall be bound by any determination in
          favor of or against the Stockholder Representative or the terms of any
          settlement or release to which the Stockholder Representative shall
          become a party.

     (c)  Any notice given the Stockholder Representative will constitute notice
          to each and all of the Stockholders at the time the notice is given to
          the Stockholder

                                       94

<PAGE>

          Representative. Any action taken by, or instruction received from, the
          Stockholder Representative will be deemed to be action be, or notice
          or instruction from, each and all of the Stockholders. Parent may, and
          the Escrow Agent will, disregard any notice or instruction received
          directly from any of the Stockholders other than the Stockholder
          Representative.

     (d)  At any time during the term of the Escrow Agreement, holders of a
          majority in interest of the Escrow Shares can remove and replace the
          Stockholder Representative by sending notice and a copy of the written
          consent appointing such new individual or individuals signed by
          holders of a majority in interest of the Escrow Shares to Parent and
          the Escrow Agent.

                  [Remainder of Page Intentionally Left Blank]

                                       95

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

PARENT:                                 ATS MEDICAL, INC.

                                        By: /s/ Michael D. Dale
                                            ------------------------------------
                                            Michael D. Dale
                                            President and Chief
                                            Executive Officer

MERGER SUBSIDIARY:                      SEABISCUIT ACQUISITION CORP.

                                        By: /s/ Michael D. Dale
                                            ------------------------------------
                                            Michael D. Dale
                                            Chief Executive Officer

COMPANY:                                3F THERAPEUTICS, INC.

                                        By: /s/ Walter A. Cuevas
                                            ------------------------------------
                                            Walter A. Cuevas
                                            President and Chief
                                            Executive Officer

STOCKHOLDER REPRESENTATIVE:             /s/ Boyd D. Cox
                                        ----------------------------------------
                                        Boyd D. Cox

                                 SIGNATURE PAGE
                          AGREEMENT AND PLAN OF MERGER

<PAGE>

                                  EXHIBIT INDEX

EXHIBIT A Form of Letter of Resignation and Release of Claims

EXHIBIT B Operating Budget

                                    SCHEDULE

SCHEDULE 1.7 List of Officers and Directors of the Surviving Corporationexv10w1

 

Exhibit 10.1

STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of March 1, 2005, by and
among JOHN W. GREEN IV (“Green”) and RICHARD M. NORDSKOG (“Nordskog,” and with Green, each a
“Stockholder,” and together, the “Stockholders”) and NATIONAL DENTEX CORPORATION, a Massachusetts
corporation (“Buyer”).

W I T N E S S E T H:

     WHEREAS, Green Dental Laboratories, Inc., an Arkansas corporation (the “Company”), operates a
dental laboratory business (the “Laboratory”) at 1099 Wilburn Road, Heber Springs, AR 72543;

     WHEREAS, the Stockholders collectively own of record all of the issued and outstanding Shares
(as defined in Section 4(f)) of the Common Stock (as defined in Section 4(f)) of the Company, which
Shares represent all of the issued and outstanding capital stock of the Company; and

     WHEREAS, the Stockholders desire to sell to Buyer, and Buyer desires to purchase from the
Stockholders, the Shares, upon the terms and conditions hereinafter set forth.

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

     1. Purchase and Sale of the Shares. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the parties set forth herein,
the Stockholders hereby agree to sell to Buyer, and Buyer hereby agrees to purchase from the
Stockholders the Shares, on the Closing Date (as defined in Section 3), for the consideration set
forth in Section 2.

     2. Consideration.

          (a) Purchase Price. The purchase price shall be up to an aggregate purchase
price of up to Twenty Two Million Two Hundred Twenty-Four Thousand Dollars ($22,224,000)
(the “Purchase Price”), calculated and payable as follows:

               (i) At the Closing, Buyer shall pay an amount equal to Nineteen Million Seven
Hundred Eighty Thousand Three Hundred Eighty-Two Dollars ($19,780,382) by wire
transfer (the “Closing Payment”) to the Stockholders, and each Stockholder consents
and agrees that the Closing Payments shall be allocated among the Stockholders in
accordance with Schedule 2(a); and

               (ii) Buyer shall pay certain of the Stockholders up to Two Million Four Hundred
Forty-Three Thousand Six Hundred Eighteen Dollars ($2,443,618) (without interest, if
timely paid) payable, subject to the provisions of Section 2(e), in three (3) annual
installments, commencing on the first anniversary of the Closing Date, by check or
wire transfer (the “Deferred Payment”).

               (iii) The Closing Payment shall be adjusted pursuant to Sections 2(b), (c) and
(d).

          (b) Adjustments to the Closing Payment. The Closing Payment shall be adjusted
as of the Closing as follows:

 

 

               (i) The Closing Payment shall be increased dollar for dollar for the amount of
the cash balances and cash equivalents (including bank accounts, deposits in transit
with respect to automatic credit card charges authorized by customers, and
certificates of deposit), if any, of the Company as of the Closing Date, as
reflected on the Closing Balance Sheet, provided, however, cash and cash equivalents
shall exclude cash held by the Company as deposits (which are reflected on the
Closing Balance Sheet as liabilities) from other third parties.

               (ii) The Closing Payment shall be decreased dollar for dollar for the amount of
any liabilities other than Permitted Liabilities (as defined herein) as reflected on
the Closing Balance Sheet. The term “Permitted Liabilities” means the following:

                    (A) trade payables and accrued expenses incurred in the ordinary course
of business, including, but not limited to, payroll, payroll taxes, real
estate taxes, professional fees, and year 2005 profit-sharing expense; and

                    (B) employee withholding taxes; and

                    (C) note payable to Heber Springs State Bank #809132 of $96,019.76
(“Heber Springs Bank Note”).

               (iii) The Closing Payment shall be increased by $103,980.24, representing the
difference between amount of the Heber Springs Bank Note and $200,000.

               (iv) The preliminary adjustment to the Closing Payment shall be made on an
estimated basis at the Closing in accordance with the Pro Forma Closing Balance
Sheet (as defined in Section 2(c)(i)) and with any final adjustment and any
resulting payment to be made from the Stockholders on the one hand and the Buyer on
the other hand, or vice versa, shall be made within 15 days after completion of the
Closing Balance Sheet (as defined and prepared in accordance with the provisions of
Section 2(c)(ii)).

     (v) Any adjustments made to the Closing Payment pursuant to Sections 2(b)(i), (ii) and (iii)
shall be allocated to the Stockholders on a pro rata basis based upon the percentage of Shares
owned by such Stockholders, and such pro rata amounts shall increase or decrease, as applicable,
the amounts payable to the Stockholders pursuant to Schedule 2(a).

               (vi) There shall be no adjustment to the Closing Payment for any change in the
value of the Fixed Assets between December 31, 2004 and the Closing Date.

(c) Closing Balance Sheets.

               (i) On or prior to the Closing Date, the Stockholders and Buyer shall jointly
prepare a pro forma balance sheet of the Company as of the Closing Date (the “Pro
Forma Closing Balance Sheet”), determined on an accrual basis in accordance with
generally accepted accounting principles (“GAAP”) consistently applied and compiled
in accordance with Statements on Standards for Accounting and Review Services issued
by the American Institute of Certified Public Accountants, (the “Standards”), which
Pro Forma Closing Balance Sheet shall be utilized by the parties to assist in the
calculation of the preliminary adjustments to the Purchase Price and the preparation
of the Closing Balance Sheet as hereinafter provided.

               (ii) Within 60 days after the Closing Date, Buyer with the assistance of the
Stockholders shall prepare a balance sheet of the Company as of the Closing Date
(the “Closing Balance Sheet”), in accordance with GAAP and compiled in accordance
with the Standards. If the parties are unable to agree upon the Closing Balance
Sheet, or any portion thereof, within 15 days after the parties have commenced
resolution of the dispute, then the matter shall be submitted for resolution
to a mutually agreeable certified public accounting firm (the “Independent
Accountants”),

2

 

whose determination shall be final and binding upon the parties, and
whose fees shall be borne equally by the Stockholders and Buyer except, however,
that if the Independent Accountants determine that the Closing Balance Sheet
proposed by Buyer was correct in its entirety, then the Stockholders shall be solely
responsible for the fees of the Independent Accountants; if the Independent
Accountants determine that the dispute should be resolved in favor of the objections
raised in the Closing Balance Sheet by the Stockholders in its entirety, then Buyer
shall be solely responsible for the fees of the Independent Accountants.

          (d) Final Adjustments. To the extent that there are assets or liabilities
other than Permitted Liabilities, which were not (i) included in the Pro Forma Closing
Balance Sheet; or (ii) reflected in any adjustment made at the Closing to the Purchase
Price, but which are included in the Closing Balance Sheet or discovered subsequent thereto,
and which would, if they had been included in the Pro Forma Closing Balance Sheet, have
resulted in an adjustment to the Purchase Price, the amount thereof shall be deemed an
adjustment to the Purchase Price and the net amount due, whether from Buyer or the
Stockholders, shall be remitted to the other party within five (5) days of request therefor
from the party to whom such payment is due.

          (e) Payment of Deferred Payments. The Deferred Payment shall be determined and
payable as follows:

               (i) Deferred Payments.

                    (A) On the first (1st) anniversary of the Closing Date,
Buyer shall pay Green $814,540 of the Deferred Payment;

                    (B) on the second (2nd) anniversary of the Closing Date,
Buyer shall pay Green $814,540 of the Deferred Payment; and

                    (C) on the third (3rd) anniversary of the Closing Date,
Buyer shall pay Green $814,538 of the Deferred Payment.

               (ii) Payments Upon Death or Disability. In the event of the death or
disability of Green, any Deferred Payments due Green shall be paid to Green’s legal
representative, heirs or other beneficiaries, as directed by Green or his legal
representative, or applicable law.

               (iii) Interest and Acceleration. The Deferred Payments shall not bear
interest; provided, however, in the event that a Deferred Payment is not
received by Green within 20 days of its due date, Buyer agrees to pay Green interest
at the then maximum lawful rate of interest under Arkansas law until paid in
addition to the Deferred Payment; provided further, in the event that a
Deferred Payment is not received by Green within 20 days of its due date, any
additional Deferred Payments shall become immediately due and payable and shall bear
interest at the then maximum lawful rate of interest under Arkansas law until paid.

     3. Closing. The closing of the purchase and sale of the Shares (the “Closing”) shall
take place and be effective as of the commencement of business on March 1, 2005 (the “Closing
Date”).

     4. Representations and Warranties of the Stockholders. The Stockholders, except as
otherwise specifically provided for in this Agreement, jointly and severally, represent and warrant
to and agree with Buyer on and as of the date hereof and as of the Closing Date, as follows:

          (a) Organization. The Company is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Arkansas. The Company has all
requisite corporate power and authority to own its property and to carry on its business as
presently conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of the business conducted by the Company or its assets located therein requires
such qualification, except where failure to do so would not have a Material Adverse Effect
(meaning any material adverse

3

 

change, event, circumstance or development with respect to, or
material adverse effect on, the business, assets or properties, liabilities, capitalization,
condition (financial or other), prospects or results of operations of the Company, taken as
a whole. For the avoidance of doubt, the parties agree that the terms “material”,
“materially” or “materiality” as used in this Agreement with an initial lower case “m” shall
have their respective customary and ordinary meanings, without regard to this meaning). Set
forth on Schedule 4(a) is a true, correct and complete list of all jurisdictions in
which the Company is duly qualified as a foreign corporation to do business and the Company
is in good standing in each of these jurisdictions. The Company has no subsidiaries. The
Company has delivered to Buyer true, complete and correct copies of minutes of all meetings
of its directors (including committees thereof) and stockholders (or written actions or
consents in lieu of meetings) since January 1, 2000.

          (b) Authority and Binding Effect. Each Stockholder represents and warrants,
for himself or herself, severally and not jointly, that (i) such Stockholder has full legal
right, and complete and unrestricted power, authority and capacity to execute and deliver
this Agreement and the other agreements executed and deliver by him or her pursuant hereto,
to consummate the transaction contemplated hereby and perform his or her obligations under
this Agreement and the agreements executed and delivered by him or her pursuant hereto; and
(ii) this Agreement and all other agreements, documents and instruments have been duly
executed and delivered by such Stockholder and constitute a valid and binding obligation of
the Company and such Stockholders, as the case may be, enforceable against each of them in
accordance with their respective terms.

          (c) Non-contravention. The execution and delivery by the Stockholders of this
Agreement and all other agreements, documents and instruments to be executed in connection
herewith, and the consummation of the transactions contemplated and compliance with the
provisions contained hereby and thereby, do not, and will not, (i) conflict with or violate
any of the provisions of the charter documents, by-laws or other organization documents of
the Company; (ii) to the knowledge of the Stockholders, with or without the passage of time,
constitute a violation of, be a default (or an event that with notice or lapse of time or
both would become a default) under, give rise to any right of termination, amendment,
cancellation, acceleration or any other right under, conflict with, modify any obligations
under, require any consent, approval, notice or other action under, or increase the
liability of the Company or any Stockholder under, any contract, lease, indenture,
agreement, deed of trust, license, order, judgment or decree or other instrument to which
the Company or any Stockholder is a party or by which any of them is bound or to which any
of the Company’s assets are subject, and does not, and will not, violate or constitute a
default (or an event that with notice or lapse of time or both would become a default) under
any statute, rule, regulation, order, or ordinance of any governmental, judicial or
arbitrary body; (iii) result in the creation of any encumbrance, lien, mortgage, charge,
claim, option, pledge, license, sublicense, security interest, assignment by way of
security, call, proxy or similar restriction over the Shares or any assets or properties of
the Company; and (iv) conflict with, contravene or violate any law, statute, ordinance, rule
or regulation, or any order, writ, judgment, injunction, consent, decree, determination or
award of any court or any governmental agency or authority, currently in effect relating to
the Company or any of its properties or assets.

          (d) Compliance with Laws.

               (i) The Company is currently conducting, and has at all times conducted its
business in compliance in all respects with (A) its charter documents, by-laws and
other organizational documents; and (B) to the knowledge of the Stockholders, all
applicable Federal, state and local laws, statutes, rules, regulations, ordinances
and orders, judicial or administrative judgments, decrees, orders, settlements,
writs, injunctions or similar commands. Without limiting the generality of the
foregoing, the Company currently conducts, and has at all times conducted, its
business in compliance with all applicable Federal, state and local laws, statutes,
regulations, ordinances and rules concerning the collection, use, storage and
transmission of patient information.

               (ii) The Company is not in default with respect to any judgment, order, writ,
injunction, decree, demand or assessment issued by any court or of any Federal,
state, municipal or other governmental agency, authority, board, commission, bureau,
instrumentality or department relating to any aspect of its business or assets.

4

 

               (iii) The Company has not been charged or, to the knowledge of the Stockholders
threatened with, and is not under investigation with respect to, any violation of
any provision of any Federal, state, municipal or other law or administrative rule
or regulation relating to its business or assets.

               (iv) The Company currently is, and has at all times been, in compliance with
all requirements of insurance carriers applicable to its business or assets.

          (e) Governmental Approval; Permits.

               (i) Except as set forth on Schedule 4(e), no consent, approval or
authorization of, or registration, designation, declaration or filing with, any
governmental agency or authority, whether domestic, foreign, Federal, state,
municipal or other, on the part of the Company or any Stockholder, is required in
connection with the execution and delivery by the Stockholders of this Agreement,
the consummation of the transactions contemplated hereby, or the other agreements
executed and deliver by any Stockholder pursuant hereto.

               (ii) Set forth on Schedule 4(e) is a true, correct and complete list of
all licenses and permits which the Company possesses (the “Licenses”), copies of
which have been delivered previously by the Company to Buyer. The Company has all
licenses, permits and other governmental authorizations required for the conduct of
its business or ownership of its assets, the consummation of the transactions
contemplated hereby and is in compliance therewith. The Licenses are in full force
and effect without default or notice of default and will not be impaired as a result
of, and will remain in full force and effect after, the Stockholders’ execution of
this Agreement and the consummation of the transaction contemplated hereby.

          (f) Capitalization. The authorized capital stock of the Company consists of
1,000,000 shares of voting, common stock, $0.01 par value per share (“Common Stock”),
235,500 shares of which are issued and outstanding (the “Shares”). The Shares, as set forth
on Schedule 4(f), are owned of record by the Stockholders in the respective amounts
set forth on Schedule 4(f). No other shares of capital stock of the Company are
issued, outstanding or reserved for issuance. All of the outstanding shares of Common Stock
have been duly authorized, validly issued, fully paid and non-assessable and were not issued
in violation of any preemptive or other similar rights and are not subject to preemptive or
other similar rights. There are not authorized, issued or outstanding any commitments for
the purchase or sale of, or any options, warrants or other rights to subscribe for or
purchase any shares of the capital stock or other securities of the Company, nor is the
Company obligated in any other manner to issue shares of its capital stock or other
securities, including securities convertible into or exchangeable for capital stock. There
are no restrictions on the transfer of shares of the Company’s capital stock, including the
Shares, other than those imposed by relevant Federal and state securities laws. The Shares
have been offered and sold by the Company to the Stockholders in compliance with all Federal
and state securities laws. The Company has made available to Buyer true and correct copies
of the Company’s Articles of Incorporation and by-laws, each in effect as of the date
hereof. There are not any shareholders agreements, voting trusts, proxies or other similar
agreements or understandings with respect to or concerning the capital stock of the Company.
The Company has no outstanding stock appreciations rights, phantom stock or stock
equivalents.

          (g) Title to Purchased Shares. Each Stockholder, for himself or herself,
severally and not jointly, represents and warrants that: (i) the Shares set forth next to
such Stockholder’s name on Schedule 4(f) are owned of record and beneficially by
such Stockholder and such Stockholder will transfer such Shares to Buyer on the Closing
Date, free and clear of all liens, encumbrances, options or other rights of any nature; and
(ii) there are not authorized, issued or outstanding any agreements, commitments or understandings for the
purchase or sale of, or any options to purchase or other rights relating to, his or her
Shares.

          (h) Financial Statements. The Company has delivered to Buyer, and there is
attached as Schedule 4(h), a copy of the audited annual financial statement of the
Company for its fiscal years ended

5

 

December 31, 2001, 2002, 2003 and 2004 and internally
prepared financial statements for the year ended December 31, 2004 and for the 1-month
period ended January 31, 2005 (the “Financial Statements”). The Financial Statements are
(i) true, correct and complete; (ii) fairly present the financial condition and results of
operations of the Company as of the date thereof; (iii) were prepared in accordance with
GAAP and in a manner consistent with past practices; and (iv) were prepared in accordance
with the books, records and accounts of the Company, which books, records and accounts are
correct and complete in all material respects. Except to the extent reflected or reserved
against in the Financial Statements, the Company as of the date thereof did not have and
will not have any liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise, including, without limitation, Tax liabilities, due or to become
due or arising out of transactions entered into or any state of facts existing prior
thereto, other than obligations arising after the Closing under the Contracts, as disclosed
to Buyer.

          (i) Absence of Certain Changes or Events. Except as set forth on Schedule
4(i), since December 31, 2003, the Company has operated the business in the ordinary
course and the Company shall not have suffered any Material Adverse Effect and there has not
occurred any event, change or development which has had, or which would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or which
would, individually or in the aggregate, reasonably be expected to prevent or materially
interfere with or delay the consummation of the transaction contemplated hereby. Without
limiting the generality of the foregoing, except as set forth on Schedule 4(i),
since December 31, 2003, the Company has not:

               (i) made any change in its authorized capital or outstanding securities;

               (ii) issued, sold, delivered or agreed to issue, sell or deliver any capital
stock, bonds or other corporate securities, including convertible securities,
(whether authorized and unissued or held in the treasury), or granted or agreed to
grant any options, warrants or other rights calling for the issue, sale or delivery
thereof;

               (iii) borrowed or agreed to borrow any funds or incurred, or become subject to,
any obligation or liability (absolute or contingent), except obligations and
liabilities incurred in the ordinary course of business, consistent with past
practices, none of which are, individually or in the aggregate, materially adverse;

               (iv) declared, set aside, made, or agreed to make distributions of any assets
of any kind whatsoever in respect of its capital stock, or purchased, redeemed or
otherwise acquired, or agreed to purchase, redeem or otherwise acquire, any of its
outstanding capital stock;

               (v) unless replaced with assets, property or rights of equal or greater value,
sold, transferred or otherwise disposed of, or agreed to sell, transfer or otherwise
dispose of any of its assets, property or rights, or disposed of any inventory
except in the ordinary course of business consistent with past practices;

               (vi) entered or agreed to enter into any agreement or arrangement granting any
preferential rights to purchase any of its assets, property or rights, including
inventories, or requiring the consent of any party to the transfer and assignment of
any of such assets, property or rights;

               (vii) other than in the ordinary course of business, consistent with past
practices, made or permitted, or agreed to make or permit, any amendment or
termination of any contract, agreement or license to which it is a party or by which
it or any of its properties are subject;

               (viii) made, directly or indirectly, any accrual or arrangement for or payment
of bonuses (other than in the normal course of the Company) or special compensation
of any kind or any severance or termination pay to any present or former officer,
director or employee of the Company;

6

 

               (ix) except for customary raises granted its employees in accordance with its
past practices and disclosed to Buyer, increased the rate of compensation payable or
to become payable by it to any of its stockholders, officers, directors or employees
or adopted any new, or made any increase in any, profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement or other employee benefit plan
payment or arrangement made to, for or with any of such stockholders, officers,
directors or employees, except as agreed to by Buyer;

               (x) merged or consolidated, or agreed to merge or consolidate, with any other
corporation or entity, or acquired or agreed to acquire any corporation,
association, partnership, joint venture or other entity;

               (xi) created, incurred, assumed or guaranteed any indebtedness for money
borrowed, or mortgaged, pledged or subjected to any lien, pledge, mortgage, security
interest, conditional sales contract or other encumbrance of any nature whatsoever
any of its assets or properties, other than liens, if any, for current Taxes not yet
due and payable;

               (xii) waived any rights of substantial value, whether or not in the ordinary
course of business;

               (xiii) suffered any damage, destruction or loss, whether or not covered by
insurance, which could have a Material Adverse Effect, or suffered any repeated,
recurring or prolonged shortage, cessation or interruption of inventory shipments,
supplies or utility services required to conduct its business and operations or
suffered any change in its financial condition or in the nature of its business or
operations which has had or might have a Material Adverse Effect;

               (xiv) amended or modified, or granted any material exception to, its credit
criteria for new or existing customers;

               (xv) materially changed any of the accounting principles followed by it or the
methods of applying such principles, except as required by GAAP and disclosed in the
Financial Statements;

               (xvi) changed its method of billing or collecting accounts receivable;

               (xvii) entered into any transaction other than in the ordinary course of
business consistent with past practice;

               (xviii) made any commitment to make any capital expenditures that has not been
fully paid prior to the Closing Date in excess of $15,000 individually, or $35,000
in the aggregate;

               (xix) received condemnation proceedings commenced with respect to any asset or
property of the Company, including, without limitation, any Real Property (as
defined in Section 4(q)); or

               (xx) entered into any agreement or commitment to which the Company is a party,
whether oral or in writing, to take any action described in this Section 4(i).

          (j) Assumptions or Guaranties of Indebtedness of Other Persons. The Company
has not assumed, guaranteed, endorsed or otherwise become directly or contingently liable on
(including without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss), any indebtedness of any other person or entity.

          (k) Inventory and Accounts Receivable.

7

 

               (i) The Company has adequate and sufficient inventories of supplies for the
conduct of its business in the ordinary course, and all inventories of the Company
are in good, usable and merchantable condition.

               (ii) The accounts receivable (including loans receivable and advances) of the
Company: (A) are lawful and valid; (B) have arisen out of bona fide transactions in
the ordinary course of business; (C) have sufficient consideration, and (D) are not
subject to any offset, allowance, credit, refund, counterclaim or similar diminution
or discount, whether customary in the trade or otherwise. To the knowledge of the
Stockholders, there are no facts or circumstances (other than general economic
conditions) which would result in any material increase in the uncollectability of
such receivables, in excess of the reserves set forth on the Financial Statements.

          (l) Contracts.

               (i) Set forth on Schedule 4(l) is a complete list of all contracts,
agreements, leases, instruments, understandings and arrangements, either oral or in
writing, extending beyond the Closing Date to which the Company is a party or by
which the Company is bound, including, without limitation, all non-competition
agreements with current employees and any employees whose employment was terminated,
for any reason, on or after January 1, 2003, except for open purchase or sales
orders for less than $5,000 (collectively, the “Contracts”). A true and correct
copy of each of the Contracts, or a description of any oral Contracts, has been
furnished by the Company to Buyer.

               (ii) Except as set forth on Schedule 4(l), (A) the Company, and to the
knowledge of the Stockholders any other party, to any of the Contracts, is not in
default (and no event has occurred which, with notice or lapse of time or both,
would put the Company or such other party in default) in the performance of any of
their respective obligations under any of the Contracts, nor has there occurred any
event giving others (with notice or lapse of time or both) any rights of
termination, amendment, acceleration or cancellation of, any Contract; (B) each
Contract is valid, binding and enforceable and in full force and effect; (C) none of
the Stockholders have any knowledge of any breach or anticipated breach by any other
party to any Contract; (D) no approval or consent of any person is needed in order
that the Contracts may continue in full force and effect following the Closing Date
and the consummation of the transactions contemplated hereby; (E) the Contracts will
continue to be valid, binding and enforceable and in full force and effect
immediately following the Closing in accordance with the terms and conditions
thereof as in effect immediately prior to the Closing and the change in ownership of
the Company pursuant to this Agreement will not result in the termination of, or
results in a right of termination under any Contract; and (F) the Company has not
delivered or received any notice of termination or an intention to terminate or
amend in an adverse manner any Contract.

          (m) Assets and Properties.

               (i) Except as set forth on Schedule 4(m), (i) the Company has good,
valid and record title to and beneficial ownership of all of its assets and
properties and will retain after the Closing all of such assets and properties, free
and clear of all liens, charges, claims and encumbrances of any nature, except only
such assets as were eliminated in accordance with the provisions of Section 2(d);
(ii) the Fixed Assets include all equipment currently used by the Company to conduct
its business in the ordinary course, are sufficient to operate the Company’s
business after the Closing and are in good condition (ordinary wear and tear
excluded); (iii) the Company as of the Closing Date will not have any liabilities or
obligations of any nature, whether accrued, absolute, contingent, or otherwise,
including without limitation, Tax liabilities, due or to become due, which shall create, give rise to or result in a lien or
encumbrance in its assets or properties; and (iv) the Company owns or leases, or has
rights to use, all material assets and properties sufficient for the conduct of the
Company’s business as presently conducted by the Company.

8

 

(ii) (A) Schedule 4(m) sets forth an accurate and complete list and
description of all of the Intellectual Property (which shall mean all (1)
patent and patent rights, trademarks and trademark rights, trade names and
trade name rights, copyrights and copyright rights, service marks and
service mark rights, and all pending applications for and registrations of
the same; (2) brand names, trade dress, business and product names, logos
and slogans and all goodwill associated therewith; (3) proprietary
technology, including all know-how, trade secrets, quality control
standards, reports (including test reports), designs, processes, market
research and other data, computer software and programs (including, source
codes and related documentation), formulae, inventions and other ideas,
methodologies, and technical information; and (4) other intellectual
property) of the Company that is presently owned, held or used by the
Company, or under which the Company owns or holds any licenses, and
agreements relating to technology, know-how and processes that the Company
has licensed or authorized for use by others.

      (B) To the knowledge of the Stockholders, neither the Company, nor any
products or services sold or provided by the Company, has interfered with,
infringed upon, misappropriated, or violated any rights in Intellectual
Property of third parties, and the continued manufacture and sale of such
products and services by Buyer and the Company after Closing will not
interfere with, infringe upon, misappropriate or violate any right in the
Intellectual Property of third parties. The Company has not received any
claim, demand or notice alleging any such interference, infringement,
misappropriation or violation thereof. To the knowledge of the
Stockholders, no third party has interfered with, infringed upon,
misappropriated or violated any Intellectual Property of the Company. The
Company owns or possesses, and will convey to Buyer on the Closing Date,
adequate assignments, licenses or other valid rights to own the Intellectual
Property of the Company. The Intellectual Property of the Company
constitutes all the Intellectual Property that is material to the conduct of
the Company’s business as now conducted or proposed to be conducted. All
software used by the Company is used in accordance with all applicable
contracts. The Company has paid all amounts required to be paid in
connection with all software used by the Company.

      (C) None of the Intellectual Property of the Company is subject to any
lien or encumbrance in favor of any third party and the Company owns all
right, title and interest therein and thereto, except for licenses or rights
of use granted to customers in the ordinary course of business.

          (n) Litigation; and Claims. Except as set forth on Schedule 4(n),
there is no suit, action or legal, administrative, arbitration, mediation, investigation or
other proceedings of any nature pending, or to the knowledge of the Stockholders threatened,
(A) against the Company or any Stockholder; (B) which affects in any way the Company or any
Stockholder; or (C) which would materially and adversely affect the legality or validity of
this Agreement or the consummation of the transactions contemplated hereby, or the continued
operations and earnings of the Company.

          (o) Taxes.

               (i) The Company has (A) accurately prepared and timely filed with the
appropriate governmental agencies all Tax Returns required to be filed by it; (B)
paid, or accrued as a liability of the Company all Taxes, which have become due or will become due for the period
or periods ending on or before the Closing, pursuant to said Tax Returns or pursuant
to any assessment against the Company or pursuant to any Federal, state or local
law, including, without limitation, Federal, state and local income taxes, payroll
withholding and unemployment taxes, and sales, use, excise and property taxes; and
(C) withheld or collected all Taxes, to the extent required, and such Taxes have

9

 

been paid to the proper governmental authority or have been accrued on the books of
the Company as a liability.

               (ii) None of the Federal, state, local or other income, sales or other Tax
Returns of the Company have been audited or investigated by the Internal Revenue
Service or other appropriate taxing authorities, and to the knowledge of the
Stockholders no audit or investigation is threatened or contemplated. The
Stockholders have provided Buyer with true and complete copies of the Company’s
Federal and state income tax returns for the past three (3) years.

               (iii) There are no liens in favor of governmental agencies or authorities upon
any of the assets or properties of the Company, other than with respect to Taxes not
yet due and payable

               (iv) The Company has not: (A) received written notice from any jurisdiction
that the jurisdiction believes that the Company was required to file any Tax Return
that was not filed; (B) received a proposed assessment of Tax against the Company or
any of its assets or properties; (C) waived any statute of limitations with respect
to Taxes or agreed to an extension of time with respect to a Tax assessment or
deficiency; and (D) been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(l)(A)(ii) of the Code.

               (v) The Company is not: (A) a party to, or bound by, or has any obligation
under, any Tax allocation or sharing agreement or similar contract or arrangement or
any agreement that obligates it to make any payment computed by reference to the
Taxes, taxable income or taxable losses of any other person or entity; and (B) (I)
is or has ever been a member of an affiliated group of corporations filing a
consolidated Federal income tax return (other than a group the common parent of
which was the Company), or (II) has any liability for the Taxes of any person or
entity (other than the Company) under Treasury Regulations Section 1.1502-6 (or any
similar provision of any state, local, or foreign law), as a transferee or
successor, by contract, or otherwise; and (C) a “consenting corporation” within the
meaning of Section 341(f) of the Code, and none of the assets of the Company is
subject to an election under Section 341(f) of the Code.

               (vi) The Company will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (A) change in
method of accounting for a taxable period ending on or prior to the Closing Date;
(B) “closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state or local income tax law) executed on or
prior to the Closing Date; (C) intercompany transactions or any excess loss account
described in Treasury Regulations under Section 1502 of the Code (or any
corresponding or similar provision of state or local income tax law); (D)
installment sale or open transaction disposition made on or prior to the Closing
Date; or (E) prepaid amount received on or prior to the Closing Date.

               (viii) The Company has not distributed stock of another entity, or has had its
stock distributed by another person or entity, in a transaction that was purported
or intended to be governed in whole or in part by Section 355 or Section 361 of the
Code.

               (ix) Each Stockholder, severally and not jointly, represents and warrants that
such Stockholder has, with respect to the portion of the Company’s income allocated
to such Stockholder, (A) accurately prepared and timely filed with the appropriate
governmental agencies all Tax Returns required to be filed by him; (B) paid, or made
provision for the payment of, all Taxes, including all appropriate estimated Taxes,
which have become due or will become due for the period or periods ending on or
before the Closing, pursuant to said returns or pursuant to any assessment against
him or pursuant to any Federal, state or local law, including, without limitation,
Federal, foreign, state and local income taxes, excise and property taxes; and (C)
withheld or collected all Taxes, to the extent required, and such Taxes have been
paid to the proper governmental authority. Except as shown on Schedule
4(o), none of the Federal, foreign, state,

10

 

local or other income or other Tax
Returns of such Stockholder have been audited or investigated by the Internal
Revenue Service or other appropriate foreign, state or local taxing authorities, and
to the knowledge of such Stockholder no audit or investigation is threatened or
contemplated. No Stockholder has received written notice from any jurisdiction that
the jurisdiction believes that the Company was required to file any Tax Return that
was not filed.

               (x) “Tax” or “Taxes” shall mean (i) all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real and
personal property, profits, estimated, severance, occupation, production, capital
gains, employment, withholding, stamp, value added, alternative or add-on minimum,
sales, transfer, use, license, payroll and franchise taxes or any other tax, custom,
duty or governmental fee, or other like assessment or charge of any kind whatsoever,
imposed by the United States, or any state, county, local or foreign government or
subdivision or agency thereof, and such term shall include any interest, penalties
or additions to tax attributable to such taxes, charges, fees, levies or other
assessments and any obligations under any agreements or arrangements with any other
person or entity with respect to such amounts and including any liability for taxes
of a predecessor entity; and (ii) all obligations, including joint and several
liability pursuant to the law of any jurisdiction or otherwise, for the payment of
any of the types of taxes referred to in clause (i) of this definition as a result
of being a member of an affiliated, consolidated, combined, or unitary group for any
taxable period. “Tax Returns” shall mean any report, return, declaration or other
information required to be supplied to any taxing authority in connection with Taxes
(including any attached schedules), including, without limitation, any information
return, claim for refund, amended return and declaration of estimated Tax.

               (xi) Since October 1, 1995, the Company has been a validly electing “S”
Corporation within the meaning of Sections 1361 and 1362 of the Code.

          (p) No Change in Business. To the knowledge of the Stockholders, neither the
execution of this Agreement nor the consummation of the transactions contemplated hereby
will result in any cancellations or withdrawals of any business from the Company’s clients,
suppliers or customers.

          (q) Real Estate.

               (i) Owned Real Property.

                    (A) Set forth on Schedule 4(q) is a list of all the real
property owned by the Company (the “Owned Real Property”).

                    (B) There are no outstanding contracts for the sale of any of the Owned
Real Property.

                    (C) With respect to the Owned Real Property: (1) the Company has good
and marketable title to the Owned Real Property, in each case free and clear
of all encumbrances and liens other than (a) liens for taxes not yet due and
payable; (b) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and repairmen incurred in the ordinary
course of business, not material to the Company and not yet delinquent; and (c) matters of record, zoning,
building or other restrictions, variances, covenants, rights of way,
encumbrances, easements and other minor irregularities in title, none of
which, individually or in the aggregate, interfere with the present use of
or occupancy of any of the Owned Real Property or otherwise impair or
interfere with the business as presently conducted by the Company; (2) there
are no condemnation or appropriation or similar proceedings pending or
threatened against any of the Owned Real Property or the improvements
thereon; (3) the Owned Real Property, and the activities conducted by the
Company thereon, are not in violation of the certificate of occupancy or any
applicable building or zoning statute, regulation or ordinance, and

11

 

the
Company has not received any written notice from any governmental agency or
authority alleging any material violation by the Company at an Owned Real
Property of any applicable building, or zoning statute, regulation or
ordinance, which such alleged violation remains active and the Company has
not received any written notice of a default or breach under any of the
covenants, restrictions, conditions, rights of way or easements, if any,
affecting all or any portion of the Owned Real Property; (4) the Owned Real
Property, and the activities conducted by the Company thereon, are not in
violation of that restrictive covenants set forth in the Cleburne County
Industrial Park Restrictive Covenants dated October 27, 1987; (5) there are
no leases, subleases, licenses, concessions or any other contracts or
agreements granting to any person or entity other than the Company any right
to the possession, use, occupancy or enjoyment of any of the Owned Real
Property or any portion thereof; and (6) the Company is not obligated under
or bound by any option, right of first refusal, purchase contract or other
contractual right to sell or dispose of any Owned Real Property or any
portion thereof which Owned Real Property, individually or in the aggregate,
is material to the Company.

               (ii) Leased Real Property.

                    (A) Set forth on Schedule 4(q) is a list of all the real
property leased by the Company (the “Leased Real Property”, and together
with the Owned Real Property, the “Real Property”). A true and correct copy
of the lease agreements related to the Leased Real Property has been
furnished by the Company to Buyer.

                    (B) All rent, tenant reimbursables and other charges owed by the
Company with respect to the Leased Real Property for all periods prior to
the Closing Date have been paid in full.

               (iii) Condition of Real Property. All Real Property (including the
improvements located thereon) is in good operating condition and repair, including,
without limitation, all equipment, electrical, plumbing, sewerage and other
facilities and utility systems, consistent with its present use and has full legal
and practical access to public roads or streets and has all utilities and services
necessary for the proper and lawful conduct and operation of the business of the
Company as presently utilized. All Real Property and the use thereof for the
Company’s business conform in all material respects to all applicable Federal, state
and local laws, ordinances and regulations, including, without limitation, building
and zoning laws, OSHA regulations and the Americans with Disabilities Act, and
neither the Company nor the Stockholders have received any notice from any
governmental authority or any insurance rating bureau that the Real Property or the
use thereof for the Company’s business do not so conform.

          (r) Environmental Matters. To the knowledge of the Stockholders, the Company’s
business has not caused or allowed any violation of applicable environmental laws,
regulations, rules or ordinances.

          (s) Insurance.

               (i) The Company has in place public liability, casualty and other insurance
coverage insuring the products, properties, assets, business and operations of the
Company and its and their potential liabilities to third parties, and all general
liability policies maintained by the Company are in an amount and on such terms as
are reasonable and customary for businesses of the type conducted by the Company.
Since January 1, 2000, the Company has been covered by insurance policies in scope
and amount customary and reasonable for the business in which it has engaged since
such date.

               (i) Schedule 4(s) set forth a complete and correct list of all current
policies of theft, fire, liability, workmen’s compensation, life, property, casualty
and other insurance owned or held by the Company and for each policy shall specify
the insurer, the type of insurance, the amount of

12

 

coverage, the expiration date, the
policy number, if any, and any pending claims not wholly covered as to amount
thereunder. All such policies are in full force and effect, are sufficient for
compliance by the Company with all requirements of law and all agreements to which
the Company is a party (including, without limitation, the Contracts), and are
valid, outstanding and enforceable policies. Schedule 4(s) sets forth a
certificate(s) of insurance, issued within the past 30 days by the Company’s
insurance company, with respect to the insurance policies relating to the Real
Property. The Stockholders have delivered to the Buyer true and correct copies of
each insurance policy listed on Schedule 4(s).

               (iii) There are no outstanding unpaid premiums, and there are no provisions for
retrospective premium adjustments with the sole exception of worker’s compensation
insurance which, by law, is subject to audit and adjustment in subsequent time
periods. If there are any provisions for retrospective premium adjustments
contained in such policies, the Stockholders shall pay all such premium adjustments
which relate prior to Closing, as and when assessed.

               (iv) No notice of cancellation or non-renewal of, or disallowance of any claim
under, any such policy or binder has been received.

               (v) Neither the Company nor, to the knowledge of the Stockholders, any other
party to any insurance policy is in breach or default with respect to such insurance
policy (including with respect to the payment of all premiums due and payable and
the giving of notices thereunder), and no event has occurred which, with notice or
the lapse of time or both, would constitute such a breach or default, or permit
termination, modification or acceleration, under each such policy. Since the
respective dates of such policies, no notice of cancellation or non-renewal with
respect to any such policy has been received by the Company. The Company has not
received any letters relating to reservations of rights.

               (vi) There are no self-insurance arrangements affecting the Company.

          (t) Employees; and Employee Benefit Plans.

               (i) Set forth on Schedule 4(t) is the following information: (A) the
names of all of the Company’s employees, the job performed or position held by each
such person and a description of all fringe benefits, including, without limitation,
accrued and unpaid vacation and sick leave (expressed in time and dollars), and the
amount of all such benefits which will be accrued and owing to each such person as
of the Closing Date; and (B) a description of any plans providing pensions,
profit-sharing, insurance benefits or any other similar type of fringe benefits to
which the Company is a party or committed either orally, in writing or by law,
including all employee benefit plans (“Employee Benefit Plans”), as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), established by the Company or to which the Company contributes or is or
has been required to contribute.

               (ii) The Employee Benefit Plans and the related trusts comply and have complied
in all material respects with the provisions of ERISA, Internal Revenue Code of
1986, as amended (the “IRC”), and all other applicable laws, rules and regulations, and all necessary
governmental approvals for the Employee Benefit Plans have been obtained, including,
without limitation, qualification of the Employee Benefit Plans under the IRC. The
Employee Benefit Plans have been administered to date in compliance with the
requirements of ERISA, all other applicable laws, rules and regulations, and all
amendments thereto required by law have been duly and timely adopted by the Company.
True and complete copies of all reports or other documents required to be filed
with the Internal Revenue Service or the Department of Labor with respect to the
Employee Benefit Plans have been timely filed and the Company has delivered true and
complete copies of such reports to Buyer. To the knowledge of the Stockholders,
since December 31, 1974, no fiduciary of the Employee Benefit Plans has engaged in
any “prohibited transaction” (as defined in ERISA), no “reportable event” (as
defined in Section 4043(b) of ERISA) has occurred with respect to the Employee
Benefit Plans and there is no

13

 

unfunded vested liability or “accumulated funding
deficiency” (as defined in Section 302 of ERISA) with respect to the Employee
Benefits Plans. The Company, and any entities within the same group of trades or
businesses under common control, within the meaning of ERISA Section 4001(b)(1), as
the Company, (the “ERISA Affiliates”), do not have and has not had a material
liability under ERISA, the IRC, and all other applicable laws, rules and
regulations, including, without limitation, Title IV of ERISA, which has not been
paid in full.

               (iii) To the knowledge of the Stockholders, the Company and the ERISA
Affiliates have never maintained any plan or arrangement for providing medical or
non-pension benefits to terminated or retired employees or their dependents and have
never sponsored a or contributed to, or have had any liability or obligation in
respect of, any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).
None of the Employee Benefit Plans is maintained outside the jurisdiction of the
United States or covers any employee outside the United States.

          (u) Labor Matters. The Company has no collective bargaining agreements with
any labor unions. The Company is currently conducting, and has at all times conducted, its
business in compliance with all Federal, state and local statutes, laws, rules, ordinances
and regulations respecting employment and employment practices, discrimination (including,
without limitation, discrimination on the basis of age, gender, race or national origin),
sexual harassment, terms and conditions of employment and wages, hours, benefits, equal
employment opportunity, immigration and workers’ compensation or otherwise, and there are no
claims, notices and communications received from Federal or state officials with respect to
violations of any such laws which are unremedied, nor has the Company received any claims,
notices, or other instruments, asserting violation of any such laws, rules and regulations
whether oral or in writing, from any of its present or former employees, which is unresolved
as of the date hereof. The Company is not engaged in any unfair labor practices. The
Company is not a party to, or otherwise bound by, any consent decree with, or citation by,
any governmental agency or authority relating to employees or employment practices. The
Company is not liable for any severance pay or other payments to any employee or former
employee arising from the termination of employment, nor will the Company have any liability
under any benefit or severance policy, practice, agreement, plan, or program which exists or
arises, or may be deemed to exist or arise, under any applicable law or otherwise, as a
result of or in connection with the transactions contemplated hereunder or the termination
of any of the Employees on or prior to the Closing Date. The Company has not closed any
plant or facility, effectuated any layoffs of employees or implemented any early retirement,
separation or window program within the past three (3) years, nor has the Company planned or
announced any such action or program for the future. There are no pending or, to the
knowledge of the Stockholders, threatened: (i) actions, complaints, charges, inquiries,
proceedings or investigations by or on behalf of any employee, prospective employee, former
employee, labor organization or other representative of the employees; (ii) grievances or
arbitration proceedings which, if adversely decided, may reasonably, individually or in the
aggregate, create a liability or cause the Company to incur expenses or forgo operating
savings; (iii) unfair labor practice charges or complaints, disputes or grievances; (iv)
campaigns being conducted to solicit cards from any of the Employees to authorize
representation by any labor organization, and no such campaigns have been conducted within
the past three years; or (v) strikes, slow-downs, work stoppages, disputes, lockouts, labor
controversies or threats thereof, and the Company has not experienced any such labor
controversy within the past three (3) years.

          (v) Product Liability and Recalls. The Company has no liability under any pending, or
to the knowledge of the Stockholders threatened, claims for any injury to individuals or
property as a result of the ownership, possession or use of any product manufactured or sold
by the Company. Schedule 4(v) sets forth all voluntary, involuntary, pending and threatened
recalls relating to or carried out by the Company initiated on or after January 1, 2000.

          (w) Transactions with Affiliates. Except as set forth on Schedule
4(w), no Stockholder, or director or officer of the Company, nor any member of his or
her immediate family, owns or has, directly or indirectly, any ownership or other interest
in any business, other entity or otherwise, which is a party to, or in any asset or property
which is the subject of, agreements, arrangements or other relationships of any kind with
the Company.

14

 

          (x) Books and Records. The books of account, ledgers, order books and other
records and documents of the Company accurately and completely reflect all material
information relating to the business and affairs of the Company.

          (y) Brokerage. Neither the Stockholders nor the Company has engaged the
services of any broker, investment banker, financial advisor, finder or other person or
entity entitled to be paid a commission, fee or other compensation in connection with the
transactions provided for in this Agreement.

          (z) Disclosure. No representation or warranty made by the Stockholders in this
Agreement or in any statement or certificate furnished or to be furnished to Buyer pursuant
hereto or in connection herewith, contains or shall contain any untrue statement of a
material fact or omits or shall omit to state a material fact necessary to make the
statements contained therein not misleading. There is no material fact which adversely
affects, insofar as the Stockholders can now reasonably foresee, the Company’s business or
its assets or properties or prospects, or the ability of the Company or the Stockholders to
perform this Agreement or any of the transactions contemplated hereby, which has not been
set forth herein, in any Schedule hereto or in any document, certificate or statement
furnished by the Stockholders to Buyer pursuant hereto.

     5. Buyer’s Representations and Warranties. Buyer represents and warrants and agrees
with the Stockholders as follows:

          (a) Organization and Authority. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Massachusetts. Buyer
has all requisite power to own its property and to carry on its business as presently
conducted, and Buyer has complete and unrestricted power and authority to perform this
Agreement and the transactions contemplated hereby.

          (b) Binding Effect. This Agreement and all other agreements, documents and
instruments executed by Buyer in connection herewith are and will be the valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their respective terms,
and the execution, delivery and performance of this Agreement, and such other agreements,
documents and instruments executed by Buyer, and the transactions contemplated hereby and
thereby, have been duly and validly authorized and approved by Buyer’s Board of Directors.

          (c) Non-Contravention. The execution and delivery of this Agreement and all
other agreements, documents and instruments to be executed in connection herewith, and the
performance of the transactions contemplated hereby and thereby, do not, and will not,
constitute a violation of, be a default under, give rise to any right of termination,
cancellation or acceleration under, or conflict with the terms of, the Restated Articles of
Organization or By-laws of Buyer, each as amended to date, or any contract, lease,
indenture, agreement, order, judgment or decree to which Buyer is a party or by which it is
bound, and does not, and will not, violate or constitute a default under any statute, rule, regulation, order or ordinance of any
governmental, judicial or arbitrary body.

          (d) Litigation. There is no suit, action or legal, administrative, arbitration
or other proceedings of any nature pending, or to the knowledge of Buyer, threatened,
against Buyer which materially adversely affects Buyer, or which might materially and
adversely affect the legality or validity of this Agreement, or the consummation of the
transactions contemplated hereby.

          (e) Disclosure. No representation or warranty made by Buyer in this Agreement
or in any statement or certificate furnished or to be furnished to the Company or the
Stockholders pursuant hereto or in connection herewith, contains or shall contain any untrue
statement of material fact or omits or shall omit to state a material fact necessary to make
the statements contained therein not misleading.

          (f) Brokerage. Buyer has not engaged the services of any broker, investment
banker, financial advisor, finder, or other person or entity entitled to be paid a
commission, fee or other compensation in connection with the transactions provided for in
this Agreement.

15

 

          (g) Investment Representations.

               (i) Buyer is acquiring the Shares for its own account and for investment and
not with a view to any resale or distribution thereof within the meaning of the
Securities Act of 1933, as amended (the “Act”);

               (ii) The Buyer understands that the Shares have not been registered under the
Act and may not be offered, sold or otherwise transferred except pursuant to an
effective registration statement or pursuant to a duly available exemption from such
registration requirements;

               (iii) Buyer is an “accredited investor” as such term is defined in Rule 501(a)
of Regulation D under the Act and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
acquisition of the Shares, and having had access to, or having been furnished with,
such information as it has considered necessary, it has concluded that it is able to
bear those risks;

               (iv) Buyer has access to information regarding the Company, its present and
prospective business, assets, liabilities, and financial condition that the Buyer
considers necessary in making the decision to invest in the Shares. The undersigned
has had ample opportunity to ask questions of and receive answers from the
Stockholders and the Company’s representatives concerning this investment and to
obtain all documents requested in order to supplement or verify any of the
information supplied; and

               (v) Buyer understands and agrees that the offer and sale of the Shares were not
accomplished by the publication of any solicitation or advertisement.

          (h) Adequate Insurance. From and after Closing, Buyer will, or cause the
Company to, maintain in full force and effect commercially reasonable liability insurance
policies (including, without limitation, public liability, product liability, employment
practice liability insurance, etc.); provided, that such insurance policies will
provide, in the aggregate, substantially equivalent coverage to the coverage provided by the
Company’s insurance policies prior to the Closing.

     6. Conditions to Buyer’s Obligations. The obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to the satisfaction (unless waived by
Buyer) on or prior to the date hereof of each of the following conditions:

          (a) Representations and Warranties. All representations and warranties of the
Stockholders set forth in this Agreement and in any statement, certificate or other
instrument delivered to Buyer pursuant hereto or in connection herewith, shall have been
true and correct in all material respects on and as of the date of this Agreement, and shall
be true and correct in all material respects on and as of the Closing Date.

          (b) No Adverse Change. Except as set forth on Schedule 4(i), since
December 31, 2003, there shall not have been any material damage to or loss or destruction
of any of the Fixed Assets, or any Material Adverse Effect, or the imposition of any laws,
rules or regulations which could have a Material Adverse Effect, or any suit or action
brought against the Company the outcome of which could have a Material Adversely Effect the
condition (financial or otherwise) or operations of the Laboratory or the Company’s assets.

          (c) Compliance with Agreement. The Stockholders shall have performed and
complied with all of their obligations under this Agreement which are to be performed or
complied with by them on or prior to the date hereof.

          (d) Proceedings and Instruments Satisfactory. All proceedings, corporate or
other, to be taken by the Stockholders, or on their behalf or the Company, in connection
with the transactions contemplated by this Agreement, and all documents incident thereto,
shall be satisfactory in all respects to Buyer.

16

 

          (e) No Litigation. No investigation, suit, action or other proceeding shall be
threatened or pending against the Company or the Stockholders before any court or
governmental agency which seeks to restrain or prohibit or obtain damages or other relief in
connection with the performance of this Agreement or the consummation of the transactions
contemplated hereby.

          (f) Intentionally Omitted.

          (g) Non-Competition Agreement. Green shall have entered into a non-competition
agreement with Buyer in the form of Exhibit A (the “Non-Competition Agreement”).

          (h) Deliveries. The Stockholders shall have delivered (or cause to be
delivered) on or prior to the Closing Date, the following:

               (i) stock certificates representing the Shares, duly endorsed for transfer by
the respective Stockholder to Buyer;

               (ii) Intentionally Omitted;

               (iii) the Non-Competition Agreement duly executed by Green;

               (iv) a certificate of the Secretary of the Company as to the Company’s charter
documents, by-laws and incumbency and signatures of the Company’s officers;

               (v) the opinion of Gill Elrod Ragon Owen & Sherman, P. A., with respect to the
Company and Green, covering the matters set forth in Exhibit B;

               (vi) a copy of the charter documents of the Company, with all amendments
thereto, as certified as of a recent date by the Secretary of State of the State of
Arkansas;

               (vii) a certificate of the legal existence and corporate good standing of the
Company issued as of a recent date by the Secretary of State of the State of
Arkansas;

               (viii) certificate(s) of good standing to do business in all foreign
jurisdictions set forth on Schedule 4(a), issued as of a recent dated by the
Secretary of State of such foreign jurisdiction;

               (ix) a certificate of the tax good standing of the Company issued as of a
recent date by the applicable tax authority in the State of Arkansas and any other
foreign jurisdiction where the Company files any Tax Return;

               (x) the written resignations of the directors and officers of the Company, as
set forth on Schedule 6(h)(x), from their respective positions with the
Company;

               (xi) the stock books, stock ledgers, minute books and corporate seal of the
Company (all other records of the Company being located in the corporate premises,
or otherwise, of the Company);

               (xii) evidence that the Company has transferred title to the Ford F-250 vehicle
(VIN #: 1FTSW21P55EA19099) to Green;

               (xiii) Nordskog shall execute a amendment, ratification and reaffirmation of
his Noncompetition Agreement dated December 10, 1996 with the Company, such
ratification and reaffirmation to be in a form satisfactory in all respect to Buyer
and Buyer’s counsel;

17

 

               (xiv) evidence of termination of those certain Stock Purchase Agreements
between the Stockholders and the Company;

               (xv) evidence of termination of that certain Consulting Agreement dated as of
May 1, 2004 between the Company and Green Dental Laboratory Consulting, Inc., a
Florida corporation;

               (xvi) documents evidencing the discharge or release of any security interests,
liens or encumbrances on the assets and properties of the Company, including,
without limitation, UCC termination statements; and

               (xvii) such other documents, instruments and certificates not inconsistent with
the provisions of this Agreement, executed by the Company and/or the Stockholders,
as Buyer shall reasonably require to effectuate the purposes and intent of this
Agreement.

     7. Conditions to the Company’s and the Stockholders’ Obligations. The obligations of
the Stockholders to consummate the transactions contemplated by this Agreement are subject to the
satisfaction (unless waived by the Stockholders) on or prior to the date hereof of each of the
following conditions:

          (a) Representations and Warranties. All representations and warranties of
Buyer set forth in this Agreement and in any statement, certificate or other instrument
delivered to the Stockholders pursuant hereto or in connection herewith, shall have been
true and correct in all material respects on and as of the date of this Agreement, and shall
be true and correct in all material respects on and as of the Closing Date.

          (b) Compliance with Agreement. Buyer shall have performed and complied with
all of the obligations under this Agreement which are to be performed or complied with by it
on or prior to the date hereof.

          (c) Proceedings and Instruments Satisfactory. All proceedings, corporate or
other, to be taken by Buyer or on behalf of Buyer in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be satisfactory in
all material respects to the Company and the Stockholders.

          (d) No Litigation. No investigation, suit, action or other proceeding shall be
threatened or pending against Buyer before any court or governmental agency which seeks to
restrain or prohibit or obtain damages or other relief in connection with the performance of
this Agreement or the consummation of the transactions contemplated hereby.

          (e) Intentionally Omitted.

          (f) Non-Competition Agreement. Buyer shall have entered into the
Non-Competition Agreement with Green.

          (g) Deliveries. Buyer shall have delivered (or cause to be delivered) to the
Stockholders on or prior to the Closing Date the following:

               (i) the Closing Payment due under Section 2(a);

               (ii) Intentionally Omitted;

               (iii) the Non-Competition Agreement duly executed by Buyer delivered to Green;

               (iv) a certificate of the Clerk of Buyer as to (A) the votes of Buyer’s Board
of Directors authorizing and approving the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby, and (B)
the incumbency and signatures of Buyer’s officers;

18

 

               (v) a certificate of the legal existence and corporate good standing of Buyer
issued as of a recent date by the Secretary of State of the Commonwealth of
Massachusetts; and

               (vi) such other documents, instruments and certificates not inconsistent with
the provisions of this Agreement, executed by Buyer, as the Company and the
Stockholders shall reasonably require to effectuate the purposes and intent of this
Agreement.

     8. Survival of Representations.

          (a) Survival of Representations. All representations, warranties and agreements made
by any party in this Agreement or pursuant hereto shall survive the date hereof until the date on
which the last Deferred Payments under this Agreement are made by Buyer to Green, excluding
representations and warranties relating to Sections 4(f), 4(g), 4(o), and 4(t) which shall survive
until the expiration of the applicable statutes of limitations with respect to such representation
or warranty, notwithstanding any investigation by any party made either before or after the date
hereof.

          (b) Statements as Representations. All statements contained in any certificate,
schedule, list, document or other writing delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed representations and warranties within the meaning
of Section 8(a).

     9. Indemnification by the Stockholders.

          (a) Indemnity. The Stockholders shall, jointly and severally, indemnify,
defend and hold Buyer and the Company harmless from and against any and all claims,
liabilities, obligations, losses, damages, costs or expenses (including reasonable legal
fees, costs and expenses arising from or in connection with any action, suit, proceeding or
claim incident to any of the foregoing) (collectively, “Losses”) suffered by Buyer or the
Company resulting from or which arise out of (i) any acts or omissions of the Company or the
Stockholders arising or occurring prior to the Closing Date with respect to the Company’s
business, including, without limitation, any Losses related to the Company’s breach of
warranty with respect to the Company’s products or services produced or performed prior to
the Closing, or any product liability claim or other liability arising out of defective
products or services produced or performed by the Company prior to Closing; (ii) any breach
of any representation or warranty, covenant, agreement or obligation on the part of any or
all of the Stockholders under this Agreement, any Schedule or Exhibit to this Agreement or
under any agreement executed in connection therewith, or from any misrepresentation in or
omission from any certificate or other instrument furnished to Buyer pursuant hereto or in
connection herewith; (iii) any facts or circumstances relating to the Company existing or
arising on or prior to the Closing Date known to the Stockholders, including, without
limitation, tax claims, environmental claims, assessments or liabilities relating to tax periods ending on or prior to the Closing,
liabilities under or in respect of any litigation described on Schedule 4(n) and
liabilities arising from the elimination from the Company’s balance sheet of any notes or
other payables to the Stockholders or former stockholders of the Company; (iv) any failure
of the Company to comply as of the Closing Date with any Employee Benefit Plan laws, rules,
regulations or orders, including, without limitation, the so called GUST amendments; (v) any
failure of the Company to comply with any applicable bulk sales transfer laws; (vi) any
brokers’ or finders’ fees or compensation in connection with the transactions provided for
by this Agreement by any person or entity claiming a right to same because of having been
engaged by or having served any Stockholder or the Company; (vii) the Company’s ownership of
interests in Professional Dental Arts, LLC, a Colorado limited liability company or the sale
of such interests; and (vii) the purchase by Green of (A) 2,000 shares of Common Stock from
Ernest E. Robbins III; (B) 250 shares of Common Stock from Donald G. Archer; and (C) 250
shares of Common Stock from Patricia D. Riddle. Notwithstanding the foregoing, the
Stockholders shall not be liable for Permitted Liabilities included on the Closing Balance
Sheet in accordance with the provisions of Section 2.

          (b) Payment of Losses. Subject to the provisions of Section 9(c), Buyer shall
be reimbursed by the Stockholders on demand by Buyer to the Stockholders for any Losses
suffered by Buyer or the Company with respect to any liability or claim to which the
indemnity set forth in Section 9(a) relates. In addition, provided any liability or claim
to which the indemnity set forth in Section 9(a) relates is acknowledged by the

19

 

Stockholders
or is adjudicated or arbitrated as a liability or claim to which the indemnity set forth in
Section 9(a) relates through the mediation and arbitration provisions set forth in Section
14(h), Buyer shall have the right to set off and deduct the amount of any payment made by it
or Loss suffered by it with respect to such liability or claim to which the indemnity set
forth in Section 9(a) relates against the amount of any payment obligation of Buyer to the
Stockholders under this Agreement, including, without limitation, the Deferred Payments. In
addition, amount payable under this Section 9 shall be reduced by and to the extent that the
Company or Buyer receives proceeds under insurance policies specifically as a result of, and
in compensation for, the subject of an indemnification liability or claim.

          (c) Third-Party Claims. Should any claim be made against Buyer or the Company
by a person not a party to this Agreement with respect to any matter to which the indemnity
set forth in Section 9(a) relates (a “Third-Party Claim”), then Buyer shall promptly give
the Stockholders written notice of any such Third-Party Claim (including all available
information regarding the details of the Third-Party Claim). If the Stockholders
acknowledge to Buyer in writing that such Third-Party Claim is subject to the indemnity set
forth in Section 9(a), the Stockholders shall have the right to defend or settle any such
Third-Party Claim, at his sole expense, on his own behalf and with counsel of his own
choosing, which counsel shall be reasonably satisfactory to Buyer. In such defense or
settlement of any Third-Party Claim, Buyer shall cooperate with and assist the Stockholders
as is reasonable and may participate therein with its own counsel at its sole expense, and
Buyer’s written consent shall be a requirement to any settlement and disposition thereof,
which consent shall not be unreasonably withheld or delayed, provided that in any such
settlement or disposition, Buyer shall not be liable for any amounts under such settlement
or disposition and such settlement or disposition shall contain a complete release of Buyer
from any liability. Failure by Buyer to give notice within a reasonable period of time
shall not constitute a defense, in whole or in part, to any claim for indemnification by
Buyer, except only to the extent that such failure by Buyer shall result in a material
prejudice to the Company and the Stockholders. If the Stockholders do not notify Buyer
within 10 days after receipt of Buyer’s written notice of a Third-Party Claim that the
Stockholders intend to undertake the defense thereof, and that such claim is subject to the
indemnity set forth in Section 9(a), or if after undertaking such defense the Stockholders
fail to pursue such defense in a prudent manner, then Buyer shall have the right to contest,
settle or compromise such Third-Party Claim, and the Stockholders shall indemnify Buyer for
the full amount of all Losses paid or suffered by Buyer in respect thereof. So long as the
Stockholders have given Buyer timely notice that the Stockholders will undertake the defense
of the Third-Party Claim, and are defending such Third-Party Claim in good faith, Buyer
shall not pay or settle any such Third-Party Claim without the written consent of the
Stockholders.

          (d) Cumulative Remedies. Except as expressly provided herein, the remedies
provided to Buyer and the Company in this Section 9 shall be cumulative and shall not
preclude the assertion by Buyer of any other rights or the seeking of any other remedies
against the Stockholders.

          (e) All representations, warranties, covenants and agreements of the Stockholders in
this Agreement are made jointly and severally by the Stockholders (except for Sections 4(b),
4(g) and 4(o)(ix) which are made severally, not jointly). Notwithstanding anything to the
contrary contained herein, the indemnification obligations of the Stockholders under this
Section 9 with respect to the representation and warranties under Sections 4(b), 4(g) and
4(o)(ix) are made severally, and not jointly, and such indemnification obligations are not
subject to the provisions of Section 9(f).

          (f) Limitations on Indemnification.

               (i) The Stockholders shall not be required to indemnify Buyer or the Company
with respect to any Losses resulting from or arising out of matters described in
Section 9(a), unless and until the aggregate amount of all Losses exceeds $100,000
(the “Threshold Amount”), in which case the Stockholders shall be required to
indemnify Buyer or the Company only for the amounts by which such Losses exceed the
Threshold Amount. Losses thereafter may be asserted regardless of amount.

20

 

               (ii) The Stockholders’ maximum liability to Buyer or the Company under this
Section 9 shall not exceed $1,000,000. The maximum liability of each Stockholder to
Buyer or the Company under this Section 9 shall not exceed such Stockholder’s pro
rata share (based upon the percentage of Shares owned by such Stockholders as of the
Closing) of $1,000,000.

     10. Indemnification by Buyer.

          (a) Indemnity. Buyer shall indemnify, defend and hold the Stockholders
harmless from and against any and all Losses suffered by the Stockholders resulting from (i)
any breach of any representation or warranty, covenant, agreement or obligation on the part
of Buyer under this Agreement, any schedule to this Agreement or under any agreement
executed in connection herewith; (ii) any misrepresentation in or omission from any
certificate or other instrument furnished to the Stockholders pursuant hereto or in
connection herewith; and (iii) any claims for brokers’ or finders’ fees or compensation in
connection with the transactions provided for by this Agreement by any person, firm,
corporation or other entity claiming a right to same because of having been engaged by or
having served Buyer.

          (b) Payment of Losses. Subject to the provisions of Section 10(c), the
Stockholders shall be reimbursed by Buyer on demand for any Loss suffered by the
Stockholders with respect to any liability or claim to which the indemnity set forth in
Section 10(a) relates.

          (c) Third-Party Claims. Should any Third-Party Claim be made against the
Stockholders with respect to any matter to which the indemnity set forth in Section 10(a)
relates, then the Stockholders shall promptly give Buyer written notice of any such
Third-Party Claim and Buyer shall have the right to defend or settle any such Third-Party
Claim, at its sole expense, on its own behalf and with counsel of its own choosing, which
counsel shall be reasonably satisfactory to the Stockholders. The Stockholders agree that
Posternak Blankstein & Lund LLP is satisfactory. In such defense or settlement of any
claim, the Stockholders shall cooperate with and assist Buyer to the maximum extent
reasonably possible and may participate therein with his or her own counsel at his or her
own expense, and the Stockholders’ written consent shall be a requirement to any settlement
and disposition thereof, which consent shall not be unreasonably withheld or delayed.
Failure by the Stockholders to give notice within a reasonable period of time shall not
constitute a defense, in whole or in part, to any claim for indemnification by the
Stockholders, except only to the extent that such failure by the Stockholders shall result
in a material prejudice to Buyer. If Buyer does not notify the Stockholders within 10 days
after receipt of the Stockholders’ written notice of a Third-Party Claim that Buyer intends
to undertake the defense thereof, and that such claim is subject to the indemnity set forth
in Section 10(a), or if after undertaking such defense Buyer fails to pursue such defense in
a prudent manner, then the Stockholders shall have the right to contest, settle or
compromise the claim and Buyer shall indemnify the Stockholders for the full amount of all
Losses paid or suffered by the Stockholders in respect thereof. Notwithstanding the
foregoing, so long as Buyer is contesting any such Third Party Claim in good faith, the Stockholders shall not have the
right to pay or settle any such claim without the prior written consent of Buyer.

          (d) Cumulative Remedies. Except as expressly provided herein, the remedies
provided to the Stockholders in this Section 10 shall be cumulative and shall not preclude
the assertion by the Stockholders of any other rights or the seeking of any other remedies
against Buyer.

     11. Press Releases. Because Buyer is a publicly-traded company, it is subject to
strict guidelines regarding its disclosure of the transaction contemplated by this Agreement, and
accordingly, the Stockholders agree that they will not release, and shall not permit any person or
entity to release, any press releases or other similar announcements without Buyer’s prior approval
thereof.

     12. Conduct of the Business after the Closing. The parties agree and acknowledge
that after the Closing, Buyer shall not be obligated to offer it standard benefits package to any
employees of the Company, unless and until Buyer so determines to do so. It is Buyer’s intention
to operate the Company following the Closing in substantially the same manner as it was operated
prior to the Closing, including management, procedures, employee benefit plans, etc.

21

 

     13. Covenants and Agreements of the Stockholders and Buyer. The Stockholders and
Buyer agree that the consummation of the transaction contemplated by this Agreement will be a
disqualifying event and the Company’s S Corporation election shall terminate as of the Closing
Date. Buyer and the Stockholders agree that the Company’s 2005 tax year shall be treated as two
(2) tax years, the first of which ends on the Closing Date and the second of which begins on the
day after the Closing Date and ends on December 31, 2005. The Stockholders agree that they will
cause the tax return for the period from January 1, 2005 to the Closing Date to be prepared and
provided to Buyer, at the Stockholders’ sole expense, for review and filing by Buyer in a timely
manner consistent with the filing requirements under the Internal Revenue Code. Buyer agrees to
provide to the Stockholders and their agents, all information available from the books of the
Company, as reasonably requested by the Stockholders, for the preparation of said return.

     14. Miscellaneous Provisions.

          (a) Expenses. Each party shall be responsible for all of its fees and expenses
incurred by it in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. The Stockholders shall be responsible
for all fees and expenses of the Company incurred prior to the Closing in connection with
the execution and deliver of this Agreement and the consummation of the transactions
contemplated hereby.

          (b) Assignability; Binding Effect. This Agreement may not be assigned by any
of the parties hereto without the prior written consent of the others. Subject to the
foregoing, this Agreement shall be binding upon, and inure to the benefit of, the parties
hereto and their respective heirs, executors, administrators, successors and assigns.

          (c) Notice. All notices, payments, demands and requests required or permitted
hereunder shall be in writing and shall be deemed duly given if personally delivered or sent
by registered or certified mail, postage prepaid, return receipt requested, or by Federal
Express or other recognized overnight express couriers, or by fax and followed by hard copy,
to the parties hereto at the following addresses:

	 	 	 
	IF TO THE STOCKHOLDERS:

	 	To each Stockholder at his address set forth below his signature.

	 	 	 
	WITH A COPY TO:

	 	Charles C. Owen, Esq.
	 

	 	Gill Elrod Ragon Owen & Sherman, P. A.
	 

	 	425 West Capitol Avenue, Suite 3801
	 

	 	Little Rock, AR 72201
	 

	 	Fax: (501) 372-3359
	 
	 	 
	IF TO BUYER:

	 	National Dentex Corporation
	 

	 	526 Boston Post Road
	 

	 	Wayland, Massachusetts 01778
	 

	 	Attn: David L. Brown,
	 

	 	President and CEO
	 

	 	Fax: (508) 358-6199
	 
	 	 
	WITH A COPY TO:

	 	Donald H. Siegel, P.C.
	 

	 	Posternak Blankstein & Lund LLP
	 

	 	The Prudential Tower
	 

	 	800 Boylston Street
	 

	 	Boston, MA 02199-8004
	 

	 	Fax: (617) 367-2315

          Any party hereto may change its address for notice by giving notice of any such
change of address in the manner set forth above.

22

 

          (d) Governing Law. This Agreement and all issues related to the subject
matter hereof shall be governed by and construed in accordance with the laws of the State of
Arkansas.

          (e) Consent to Jurisdiction. The parties hereto consent to the jurisdiction of
the courts of the Circuit Court. Cleburne County, Heber Springs, Arkansas or the United
States District Court for the Eastern District of Arkansas, sitting in Little Rock,
Arkansas, well as the jurisdiction of all courts from which an appeal may be taken from such
courts, for the purposes of any suit, action or other proceeding relating to this Agreement
or with respect to any transactions contemplated hereby, and expressly waive any and all
objections the parties hereto may have as to the venue of such courts to settle or
adjudicate any claim or controversy arising hereunder.

          (f) Entire Agreement; Severability. This Agreement, together with the
Schedules and Exhibits and the Non-Competition Agreement, sets forth the entire agreement
and understanding among the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings with respect hereto. This
Agreement and said Schedules and Exhibits may not be amended, changed or modified except by
a written instrument duly executed by the parties hereto. The provisions of this Agreement
will be deemed severable, and if any provision of this Agreement is held illegal, void or
invalid under applicable law, such provision may be changed to the extent reasonably
necessary to make the provision legal, valid and binding. If any provision of this
Agreement is held illegal, void or invalid in its entirety, the remaining provisions of this
Agreement will not be affected but will remain binding in accordance with their terms.
Buyer may, nevertheless, declare this Agreement to be null and void if he, in his sole
discretion, deems the avoidance or invalidity of any provision hereunder to adversely affect
his interests.

          (g) No Waiver. No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default and of the same or similar nature.

          (h) Mediation and Arbitration. Except as otherwise provided in Section
2(e), the Non-Competition Agreement, or as otherwise agreed by the parties, any controversy,
dispute or claim between the parties arising out of, related to or in connection with this
Agreement or the performance or breach hereof shall be submitted to and settled as follows:

               (i) All controversies or claims arising out of or relating to this Agreement
shall be settled in the first instance by non-binding mediation under the Commercial
Mediation Rules of the American Arbitration Association (“AAA”) in Little Rock,
Arkansas as such rules are in effect on the date of delivery of demand for
mediation. The parties agree to use mutually acceptable professional mediation
services. Each party shall pay its own expenses, including legal fees, and agree to
share equally any other fees associated with the mediation, including the cost of
the mediator. Unless a settlement is mutually agreed to in writing, the
participants shall not be bound by the discussions or outcome of the mediation.

               (ii) If the dispute cannot be settled through mediation within 30 days of the
demand for same, the dispute shall be submitted to arbitration conducted by the AAA
in Little Rock, Arkansas, in accordance with the Commercial Arbitration Rules of the
AAA as then in effect; provided that the arbitration shall be by a single
arbitrator mutually selected by Buyer on the one hand, and the Stockholders on the
other hand, and if the parties do not agree within 20 days after the date of
notification of a request for such arbitration made by either party, the selection
of the single arbitrator shall be made by the AAA in accordance with said rules.
All discovery will be completed, and the arbitration will commence, within 30 days
after appointment of the arbitrator. Unless the

23

 

arbitrator finds that exceptional
circumstances justify delay, the hearing will be completed, and an award will be
rendered in writing, within 15 days after commencement of the hearing. In addition
to, and not in substitution for any and all other relief in law or equity that may
be granted by the arbitrator, the arbitrator may grant equitable relief and specific
performance to compel compliance hereunder. The determination of the arbitrator
shall be accompanied by a written opinion of the arbitrator and shall be final,
binding and conclusive on the parties, and judgment on the arbitrator’s award,
including without limitation equitable relief and specific performance, may be
entered in and enforced by any court having jurisdiction thereof.

               (iii) The fees and expenses of the AAA and of the arbitrator shall be shared
equally by Buyer on the one hand, and the Stockholders on the other hand.

               (iv) The provisions of this Section 14(h) shall not prohibit the parties from
pursuing any injunctive relief, temporary restraining orders or other remedies in
equity, available to the parties for a breach or threatened breach of this
Agreement.

          (i) Further Assurances. The parties hereto agree that they will, without
further consideration, from time to time hereafter, and at their own expense, execute and
deliver such other documents, and take such other action, as may reasonably be requested in
order to more effectively consummate the transactions contemplated hereby. The provisions
hereof shall survive the date hereof.

          (j) Counterparts. This Agreement may be signed in any number of counterparts,
including by facsimile, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGE TO FOLLOW]

24

 

[Signature page to Stock Purchase Agreement]

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed under seal as of the
date first above written.

	 	 	 
	STOCKHOLDERS:

	 	/s/
John W. Green IV
	 

	 	John W. Green IV
	 

	 	Address: 400 N. Flagler Avenue, Suite A#211
	 

	 	               W. Palm Beach, FL 33401
	 
	 	 
	 

	 	/s/ Richard M. Nordskog
	 

	 	Richard M. Nordskog
	 

	 	Address: 61 Whippoorwill Lane
	 

	 	               Heber Springs, AR 72543

	 	 	 	 	 
	BUYER:	 	NATIONAL DENTEX CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ David L. Brown
	 	 	Name: David L. Brown
	 	 	Title: President and Chief Executive Officer

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