Document:

Exhibit 4.3

                          REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement ("Agreement") is entered into as of
the 23rd day of July, 2004, by and among SRKP 1, Inc., a Delaware corporation
(the "Company"), and the undersigned parties listed under Investor on the
signature page hereto (each, an "Investor" and collectively, the "Investors").

         The Investors currently hold all of the issued and outstanding
securities of the Company; and

         The Investors and the Company desire to enter into this Agreement to
provide the Investors with certain rights relating to the registration of shares
of Common Stock (as defined below) held by them.

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

1.       DEFINITIONS. The following capitalized terms used herein have the
following meanings:

         "Agreement" means this Agreement, as amended, restated, supplemented,
or otherwise modified from time to time.

         "Commission" means the Securities and Exchange Commission, or any other
federal agency then administering the Securities Act or the Exchange Act.

         "Common Stock" means the common stock, par value $0.001 per share, of
the Company.

         "Company" is defined in the preamble to this Agreement.

         "Demand Registration" is defined in Section 2.1.1.

         "Demanding Holder" is defined in Section 2.1.1.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, all as
the same shall be in effect at the time.

         "Form S-3" is defined in Section 2.3.

         "Indemnified Party" is defined in Section 4.3.

         "Indemnifying Party" is defined in Section 4.3.

         "Investor" is defined in the preamble to this Agreement.

         "Investor Indemnified Party" is defined in Section 4.1.

         "IPO" is defined as the Company's initial public offering of its
securities in ___________, 2004, pursuant to a Registration Statement on Form
SB-2, as amended.

         "Maximum Number of Shares" is defined in Section 2.1.4.

         "Notices" is defined in Section 6.3.

         "Piggy-Back Registration" is defined in Section 2.2.1.

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         "Prospectus" means the Company's prospectus relating to the IPO.

         "Register," "registered" and "registration" mean a registration
effected by preparing and filing a registration statement or similar document in
compliance with the requirements of the Securities Act, and the applicable rules
and regulations promulgated thereunder, and such registration statement becoming
effective.

         "Registrable Securities" means all of the shares of Common Stock held
by Investors. Registrable Securities includes shares of capital stock or other
securities of the Company issued as a dividend or other distribution with
respect to or in exchange for or in replacement of such shares of Common Stock.
As to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when: (a) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been sold, transferred, disposed of or exchanged in
accordance with such Registration Statement; (b) such securities shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration under the
Securities Act; (c) such securities shall have ceased to be outstanding; or (d)
the Securities and Exchange Commission makes a definitive determination to the
Company that the Registrable Securities are salable under Rule 144(k).

         "Registration Statement" means a registration statement filed by the
Company with the Commission in compliance with the Securities Act and the rules
and regulations promulgated thereunder for a public offering and sale of Common
Stock (other than a registration statement on Form S-4 or Form S-8, or its
successor, or any registration statement covering only securities proposed to be
issued in exchange for securities or assets of another entity).

         "Release Date" means the date upon which the Company consummates a
"business combination" with a "target business" as contemplated in the Company's
prospectus relating to its IPO.

         "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder, all as the same
shall be in effect at the time.

         "Underwriter" means a securities dealer who purchases any Registrable
Securities as principal in an underwritten offering and not as part of such
dealer's market-making activities.

2.       REGISTRATION RIGHTS.

         2.1    Demand Registration.

                2.1.1 Request for Registration. At any time and from time to
time on or after a date which is six (6) months following the Release Date, the
holders of a majority-in-interest of the Registrable Securities held by the
Investors or the transferees of the Investors, may make a written demand for
registration under the Securities Act of all or part of their Registrable
Securities (a "Demand Registration"). Any demand for a Demand Registration shall
specify the number of shares of Registrable Securities proposed to be sold and
the intended method(s) of distribution thereof. The Company will notify all
holders of Registrable Securities of the demand, and each holder of Registrable
Securities who wishes to include all or a portion of such holder's Registrable
Securities in the Demand Registration (each such holder including shares of
Registrable Securities in such registration, a "Demanding Holder") shall so
notify the Company within fifteen (15) days after the receipt by the holder of
the notice from the Company. Upon any such request, the Demanding Holders shall
be entitled to have their Registrable Securities included in the Demand
Registration, subject to Section 2.1.4 and the provisos set forth in Section
3.1.1. The Company shall not be obligated to effect more than an aggregate of
two (2) Demand Registrations under this Section 2.1.1 in respect of Registrable
Securities.

                2.1.2 Effective Registration. A registration will not count as a
Demand Registration until the Registration Statement filed with the Commission
with respect to such Demand Registration has been declared effective and the
Company has complied with all of its obligations under this Agreement with
respect thereto; provided, however, that if, after such Registration Statement
has been declared effective, the offering of Registrable Securities pursuant to
a Demand Registration is interfered with by any stop order or injunction of the
Commission or any other governmental agency or court, the Registration Statement
with respect to such Demand Registration will be deemed not to have been
declared effective, unless and until, (i) such stop order or injunction is
removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of
the Demanding Holders thereafter elect to continue the offering; provided,
further, that the Company shall not be obligated to file a second Registration
Statement until a Registration Statement that has been filed is counted as a
Demand Registration or is terminated.

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                2.1.3 Underwritten Offering. If a majority-in-interest of the
Demanding Holders so elect and such holders so advise the Company as part of
their written demand for a Demand Registration, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. In such event, the right of any holder to include its
Registrable Securities in such registration shall be conditioned upon such
holder's participation in such underwriting and the inclusion of such holder's
Registrable Securities in the underwriting to the extent provided herein. All
Demanding Holders proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in customary form with
the Underwriter or Underwriters selected for such underwriting by a
majority-in-interest of the holders initiating the Demand Registration.

                2.1.4 Reduction of Offering. If the managing Underwriter or
Underwriters for a Demand Registration that is to be an underwritten offering
advises the Company and the Demanding Holders in writing that the dollar amount
or number of shares of Registrable Securities which the Demanding Holders desire
to sell, taken together with all other shares of Common Stock or other
securities which the Company desires to sell and the shares of Common Stock, if
any, as to which registration has been requested pursuant to written contractual
piggy-back registration rights held by other stockholders of the Company who
desire to sell, exceeds the maximum dollar amount or maximum number of shares
that can be sold in such offering without adversely affecting the proposed
offering price, the timing, the distribution method, or the probability of
success of such offering (such maximum dollar amount or maximum number of
shares, as applicable, the "Maximum Number of Shares"), then the Company shall
include in such registration: (i) first, the Registrable Securities as to which
Demand Registration has been requested by the Demanding Holders (pro rata in
accordance with the number of shares of Registrable Securities which such
Demanding Holder has requested be included in such registration, regardless of
the number of shares of Registrable Securities held by each Demanding Holder)
that can be sold without exceeding the Maximum Number of Shares; (ii) second, to
the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (i), the shares of Common Stock or other securities that the
Company desires to sell that can be sold without exceeding the Maximum Number of
Shares; (iii) third, to the extent that the Maximum Number of Shares has not
been reached under the foregoing clauses (i) and (ii), the shares of Common
Stock for the account of other persons that the Company is obligated to register
pursuant to written contractual arrangements with such persons and that can be
sold without exceeding the Maximum Number of Shares; and (v) fourth, to the
extent that the Maximum Number of Shares have not been reached under the
foregoing clauses (i), (ii), and (iii), the shares of Common Stock that other
stockholders desire to sell that can be sold without exceeding the Maximum
Number of Shares.

                2.1.5 Withdrawal. If a majority-in-interest of the Demanding
Holders disapprove of the terms of any underwriting or are not entitled to
include all of their Registrable Securities in any offering, such
majority-in-interest of the Demanding Holders may elect to withdraw from such
offering by giving written notice to the Company and the Underwriter or
Underwriters of their request to withdraw prior to the effectiveness of the
Registration Statement filed with the Commission with respect to such Demand
Registration. If the majority-in-interest of the Demanding Holders withdraws
from a proposed offering relating to a Demand Registration, then such
registration shall not count as a Demand Registration provided for in Section
2.1.1.

         2.2    Piggy-Back Registration.

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                2.2.1 Piggy-Back Rights. If at any time on or after a date which
is six (6) months following the Release Date the Company proposes to file a
Registration Statement under the Securities Act with respect to an offering of
equity securities, or securities or other obligations exercisable or
exchangeable for, or convertible into, equity securities, by the Company for its
own account or for stockholders of the Company for their account (or by the
Company and by stockholders of the Company including, without limitation,
pursuant to Section 2.1), other than a Registration Statement (i) filed in
connection with any employee stock option or other benefit plan, (ii) for an
exchange offer or offering of securities solely to the Company's existing
stockholders, (iii) for an offering of debt that is convertible into equity
securities of the Company or (iv) for a dividend reinvestment plan, then the
Company shall (x) give written notice of such proposed filing to the holders of
Registrable Securities as soon as practicable but in no event less than ten (10)
days before the anticipated filing date, which notice shall describe the amount
and type of securities to be included in such offering, the intended method(s)
of distribution, and the name of the proposed managing Underwriter or
Underwriters, if any, of the offering, and (y) offer to the holders of
Registrable Securities in such notice the opportunity to register the sale of
such number of shares of Registrable Securities as such holders may request in
writing within five (5) days following receipt of such notice (a "Piggy-Back
Registration"). The Company shall cause such Registrable Securities to be
included in such registration and shall use its best efforts to cause the
managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of the Company and to permit the sale or other disposition of such
Registrable Securities in accordance with the intended method(s) of distribution
thereof. All holders of Registrable Securities proposing to distribute their
securities through a Piggy-Back Registration that involves an Underwriter or
Underwriters shall enter into an underwriting agreement in customary Form with
the Underwriter or Underwriters selected for such Piggy-Back Registration.

                2.2.2 Reduction of Offering. If the managing Underwriter or
Underwriters for a Piggy-Back Registration that is to be an underwritten
offering advises the Company and the holders of Registrable Securities in
writing that the dollar amount or number of shares of Common Stock which the
Company desires to sell, taken together with shares of Common Stock, if any, as
to which registration has been demanded pursuant to written contractual
arrangements with persons other than the holders of Registrable Securities
hereunder, the Registrable Securities as to which registration has been
requested under this Section 2.2, and the shares of Common Stock, if any, as to
which registration has been requested pursuant to the written contractual
piggy-back registration rights of other stockholders of the Company, exceeds the
Maximum Number of Shares, then the Company shall include in any such
registration:

                      (i)  If the registration is undertaken for the Company's
         account: (A) first, the shares of Common Stock or other securities that
         the Company desires to sell that can be sold without exceeding the
         Maximum Number of Shares; (B) second, to the extent that the Maximum
         Number of Shares has not been reached under the foregoing clause (A),
         the shares of Common Stock, if any, including the Registrable
         Securities, as to which registration has been requested pursuant to
         written contractual piggy-back registration rights of security holders
         (pro rata in accordance with the number of shares of Common Stock which
         each such person has actually requested to be included in such
         registration, regardless of the number of shares of Common Stock with
         respect to which such persons have the right to request such inclusion)
         that can be sold without exceeding the Maximum Number of Shares; and

                      (ii) If the registration is a "demand" registration
         undertaken at the demand of persons other than the holders of
         Registrable Securities pursuant to written contractual arrangements
         with such persons, (A) first, the shares of Common Stock for the
         account of the demanding persons that can be sold without exceeding the
         Maximum Number of Shares; (B) second, to the extent that the Maximum
         Number of Shares has not been reached under the foregoing clause (A),
         the shares of Common Stock or other securities that the Company desires
         to sell that can be sold without exceeding the Maximum Number of
         Shares; and (C) third, to the extent that the Maximum Number of Shares
         has not been reached under the foregoing clauses (A) and (B), the
         Registrable Securities as to which registration has been requested
         under this Section 2.2 (pro rata in accordance with the number of
         shares of Registrable Securities held by each such holder); and (D)
         fourth, to the extent that the Maximum Number of Shares has not been
         reached under the foregoing clauses (A), (B) and (C), the shares of
         Common Stock, if any, as to which registration has been requested
         pursuant to written contractual piggy-back registration rights which
         such other stockholders desire to sell that can be sold without
         exceeding the Maximum Number of Shares.

                2.2.3 Withdrawal. Any holder of Registrable Securities may elect
to withdraw such holder's request for inclusion of Registrable Securities in any
Piggy-Back Registration by giving written notice to the Company of such request
to withdraw prior to the effectiveness of the Registration Statement. The
Company may also elect to withdraw a registration statement at any time prior to
the effectiveness of the Registration Statement. Notwithstanding any such
withdrawal, the Company shall pay all expenses incurred by the holders of
Registrable Securities in connection with such Piggy-Back Registration as
provided in Section 3.3.

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         2.3    Registrations on Form S-3. The holders of Registrable Securities
may at any time and from time to time, request in writing that the Company
register the resale of any or all of such Registrable Securities on Form S-3 or
any similar short-Form registration which may be available at such time ("Form
S-3"); provided, however, that the Company shall not be obligated to effect such
request through an underwritten offering. Upon receipt of such written request,
the Company will promptly give written notice of the proposed registration to
all other holders of Registrable Securities, and, as soon as practicable
thereafter, effect the registration of all or such portion of such holder's or
holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other holder or holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration pursuant to this Section 2.3: (i) if Form S-3 is not available for
such offering; or (ii) if the holders of the Registrable Securities, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at any aggregate price to the public of less than $500,000.
Registrations effected pursuant to this Section 2.3 shall not be counted as
Demand Registrations effected pursuant to Section 2.1.

3.       REGISTRATION PROCEDURES.

         3.1    Filings; Information. Whenever the Company is required to effect
the registration of any Registrable Securities pursuant to Section 2, the
Company shall use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended method(s) of distribution
thereof as expeditiously as practicable, and in connection with any such
request:

                3.1.1 Filing Registration Statement. The Company shall, as
expeditiously as possible and in any event within sixty (60) days after receipt
of a request for a Demand Registration pursuant to Section 2.1, prepare and file
with the Commission a Registration Statement on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of all Registrable Securities to be
registered thereunder in accordance with the intended method(s) of distribution
thereof, and shall use its best efforts to cause such Registration Statement to
become and remain effective for the period required by Section 3.1.3; provided,
however, that the Company shall have the right to defer any Demand Registration
for up to thirty (30) days, and any Piggy-Back Registration for such period as
may be applicable to deferment of any demand registration to which such
Piggy-Back Registration relates, in each case if the Company shall furnish to
the holders a certificate signed by the Chief Executive Officer of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company, it would be materially detrimental to the Company and its stockholders
for such Registration Statement to be effected at such time; provided further,
however, that the Company shall not have the right to exercise the right set
forth in the immediately preceding proviso more than once in any 365-day period
in respect of a Demand Registration hereunder.

                3.1.2 Copies. The Company shall, prior to filing a Registration
Statement or prospectus, or any amendment or supplement thereto, furnish without
charge to the holders of Registrable Securities included in such registration,
and such holders' legal counsel, copies of such Registration Statement as
proposed to be filed, each amendment and supplement to such Registration
Statement (in each case including all exhibits thereto and documents
incorporated by reference therein), the prospectus included in such Registration
Statement (including each preliminary prospectus), and such other documents as
the holders of Registrable Securities included in such registration or legal
counsel for any such holders may request in order to facilitate the disposition
of the Registrable Securities owned by such holders.

                3.1.3 Amendments and Supplements. The Company shall prepare and
file with the Commission such amendments, including post-effective amendments,
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and in compliance with the provisions of the Securities Act until all
Registrable Securities and other securities covered by such Registration
Statement have been disposed of in accordance with the intended method(s) of
distribution set forth in such Registration Statement (which period shall not
exceed the sum of one hundred eighty (180) days plus any period during which any
such disposition is interfered with by any stop order or injunction of the
Commission or any governmental agency or court) or such securities have been
withdrawn.

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                3.1.4 Notification. After the filing of a Registration
Statement, the Company shall promptly, and in no event more than two (2)
business days after such filing, notify the holders of Registrable Securities
included in such Registration Statement of such filing, and shall further notify
such holders promptly and confirm such advice in writing in all events within
two (2) business days of the occurrence of any of the following: (i) when such
Registration Statement becomes effective; (ii) when any post-effective amendment
to such Registration Statement becomes effective; (iii) the issuance or
threatened issuance by the Commission of any stop order (and the Company shall
take all actions required to prevent the entry of such stop order or to remove
it if entered); and (iv) any request by the Commission for any amendment or
supplement to such Registration Statement or any prospectus relating thereto or
for additional information or of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the securities covered by such
Registration Statement, such prospectus will not contain an 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 not misleading, and promptly make
available to the holders of Registrable Securities included in such Registration
Statement any such supplement or amendment; except that before filing with the
Commission a Registration Statement or prospectus or any amendment or supplement
thereto, including documents incorporated by reference, the Company shall
furnish to the holders of Registrable Securities included in such Registration
Statement and to the legal counsel for any such holders, copies of all such
documents proposed to be filed sufficiently in advance of filing to provide such
holders and legal counsel with a reasonable opportunity to review such documents
and comment thereon, and the Company shall not file any Registration Statement
or prospectus or amendment or supplement thereto, including documents
incorporated by reference, to which such holders or their legal counsel shall
object.

                3.1.5 State Securities Laws Compliance. The Company shall use
its best efforts to (i) register or qualify the Registrable Securities covered
by the Registration Statement under such securities or "blue sky" laws of such
jurisdictions in the United States as the holders of Registrable Securities
included in such Registration Statement (in light of their intended plan of
distribution) may request and (ii) take such action necessary to cause such
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental authorities as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be necessary or advisable to enable the holders of
Registrable Securities included in such Registration Statement to consummate the
disposition of such Registrable Securities in such jurisdictions; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (e) or subject itself to taxation in any such
jurisdiction.

                3.1.6 Agreements for Disposition. The Company shall enter into
customary agreements (including, if applicable, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of such Registrable Securities. The
representations, warranties and covenants of the Company in any underwriting
agreement which are made to or for the benefit of any Underwriters, to the
extent applicable, shall also be made to and for the benefit of the holders of
Registrable Securities included in such registration statement. No holder of
Registrable Securities included in such registration statement shall be required
to make any representations or warranties in the underwriting agreement except,
if applicable, with respect to such holder's organization, good standing,
authority, title to Registrable Securities, lack of conflict of such sale with
such holder's material agreements and organizational documents, and with respect
to written information relating to such holder that such holder has furnished in
writing expressly for inclusion in such Registration Statement.

                3.1.7 Cooperation. The principal executive officer of the
Company, the principal financial officer of the Company, the principal
accounting officer of the Company and all other officers and members of the
management of the Company shall cooperate fully in any offering of Registrable
Securities hereunder, which cooperation shall include, without limitation, the
preparation of the Registration Statement with respect to such offering and all
other offering materials and related documents, and participation in meetings
with Underwriters, attorneys, accountants and potential investors.

                3.1.8 Records. The Company shall make available for inspection
by the holders of Registrable Securities included in such Registration
Statement, any Underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other professional
retained by any holder of Registrable Securities included in such Registration
Statement or any Underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, as shall be necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information requested
by any of them in connection with such Registration Statement.

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                3.1.9 Opinions and Comfort Letters. The Company shall furnish to
each holder of Registrable Securities included in any Registration Statement a
signed counterpart, addressed to such holder, of (i) any opinion of counsel to
the Company delivered to any Underwriter and (ii) any comfort letter from the
Company's independent public accountants delivered to any Underwriter. In the
event no legal opinion is delivered to any Underwriter, the Company shall
furnish to each holder of Registrable Securities included in such Registration
Statement, at any time that such holder elects to use a prospectus, an opinion
of counsel to the Company to the effect that the Registration Statement
containing such prospectus has been declared effective and that no stop order is
in effect.

                3.1.10 Earnings Statement. The Company shall comply with all
applicable rules and regulations of the Commission and the Securities Act, and
make available to its stockholders, as soon as practicable, an earnings
statement covering a period of twelve (12) months, beginning within three (3)
months after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder.

                3.1.11 Listing. The Company shall use its best efforts to cause
all Registrable Securities included in any registration to be listed on such
exchanges or otherwise designated for trading in the same manner as similar
securities issued by the Company are then listed or designated or, if no such
similar securities are then listed or designated, in a manner satisfactory to
the holders of a majority of the Registrable Securities included in such
registration.

         3.2    Obligation to Suspend Distribution. Upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3.1.4(iv), or, in the case of a resale registration on Form S-3 pursuant to
Section 2.3 hereof, upon any suspension by the Company, pursuant to a written
insider trading compliance program adopted by the Company's Board of Directors,
of the ability of all "insiders" covered by such program to transact in the
Company's securities because of the existence of material non-public
information, each holder of Registrable Securities included in any registration
shall immediately discontinue disposition of such Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such holder receives the supplemented or amended prospectus contemplated
by Section 3.1.4(iv) or the restriction on the ability of "insiders" to transact
in the Company's securities is removed, as applicable, and, if so directed by
the Company, each such holder will deliver to the Company all copies, other than
permanent file copies then in such holder's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice.

         3.3    Registration Expenses. The Company shall bear all costs and
expenses incurred in connection with any Demand Registration pursuant to Section
2.1, any Piggy-Back Registration pursuant to Section 2.2, and any registration
on Form S-3 effected pursuant to Section 2.3, and all expenses incurred in
performing or complying with its other obligations under this Agreement, whether
or not the Registration Statement becomes effective, including, without
limitation: (i) all registration and filing fees; (ii) fees and expenses of
compliance with securities or "blue sky" laws (including fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities); (iii) printing expenses; (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees); (v) the fees and expenses incurred in connection with the listing of
the Registrable Securities as required by Section 3.1.11; (vi) National
Association of Securities Dealers, Inc. fees; (vii) fees and disbursements of
counsel for the Company and fees and expenses for independent certified public
accountants retained by the Company (including the expenses or costs associated
with the delivery of any opinions or comfort letters requested pursuant to
Section 3.1.9); (viii) the fees and expenses of any special experts retained by
the Company in connection with such registration and (ix) the fees and expenses
of one legal counsel selected by the holders of a majority-in-interest of the
Registrable Securities included in such registration. The Company shall have no
obligation to pay any underwriting discounts or selling commissions attributable
to the Registrable Securities being sold by the holders thereof, which
underwriting discounts or selling commissions shall be borne by such holders.
Additionally, in an underwritten offering, all selling stockholders and the
Company shall bear the expenses of the underwriter pro rata in proportion to the
respective amount of shares each is selling in such offering.

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         3.4    Information. The holders of Registrable Securities shall provide
such information as may reasonably be requested by the Company, or the managing
Underwriter, if any, in connection with the preparation of any Registration
Statement, including amendments and supplements thereto, in order to effect the
registration of any Registrable Securities under the Securities Act pursuant to
Section 2 and in connection with the Company's obligation to comply with federal
and applicable state securities laws.

4.       INDEMNIFICATION AND CONTRIBUTION.

         4.1    Indemnification by the Company. The Company agrees to indemnify
and hold harmless each Investor and each other holder of Registrable Securities,
and each of their respective officers, employees, affiliates, directors,
partners, members, attorneys and agents, and each person, if any, who controls
an Investor and each other holder of Registrable Securities (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an
"Investor Indemnified Party"), from and against any expenses, losses, judgments,
claims, damages or liabilities, whether joint or several, arising out of or
based upon any untrue statement (or allegedly untrue statement) of a material
fact contained in any Registration Statement under which the sale of such
Registrable Securities was registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arising out of or based upon any omission (or alleged omission) to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any rule or regulation promulgated thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration; and the Company shall promptly reimburse the Investor
Indemnified Party for any legal and any other expenses reasonably incurred by
such Investor Indemnified Party in connection with investigating and defending
any such expense, loss, judgment, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such expense, loss, claim, damage or liability arises out of or is based
upon any untrue statement or allegedly untrue statement or omission or alleged
omission made in such Registration Statement, preliminary prospectus, final
prospectus, or summary prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to the Company, in
writing, by such selling holder expressly for use therein. The Company also
shall indemnify any Underwriter of the Registrable Securities, their officers,
affiliates, directors, partners, members and agents and each person who controls
such Underwriter on substantially the same basis as that of the indemnification
provided above in this Section 4.1.

         4.2    Indemnification by Holders of Registrable Securities. Each
selling holder of Registrable Securities will, in the event that any
registration is being effected under the Securities Act pursuant to this
Agreement of any Registrable Securities held by such selling holder, indemnify
and hold harmless the Company, each of its directors and officers and each
underwriter (if any), and each other person, if any, who controls such selling
holder or such underwriter within the meaning of the Securities Act, against any
losses, claims, judgments, damages or liabilities, whether joint or several,
insofar as such losses, claims, judgments, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
allegedly untrue statement of a material fact contained in any Registration
Statement under which the sale of such Registrable Securities was registered
under the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based upon any
omission or the alleged omission to state a material fact required to be stated
therein or necessary to make the statement therein not misleading, if the
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by such selling holder expressly
for use therein, and shall reimburse the Company, its directors and officers,
and each such controlling person for any legal or other expenses reasonably
incurred by any of them in connection with investigation or defending any such
loss, claim, damage, liability or action. Each selling holder's indemnification
obligations hereunder shall be several and not joint and shall be limited to the
amount of any net proceeds actually received by such selling holder.

                                       8
<PAGE>

         4.3    Conduct of Indemnification Proceedings. Promptly after receipt
by any person of any notice of any loss, claim, damage or liability or any
action in respect of which indemnity may be sought pursuant to Section 4.1 or
4.2, such person (the "Indemnified Party") shall, if a claim in respect thereof
is to be made against any other person for indemnification hereunder, notify
such other person (the "Indemnifying Party") in writing of the loss, claim,
judgment, damage, liability or action; provided, however, that the failure by
the Indemnified Party to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability which the Indemnifying Party may have to
such Indemnified Party hereunder, except and solely to the extent the
Indemnifying Party is actually prejudiced by such failure. If the Indemnified
Party is seeking indemnification with respect to any claim or action brought
against the Indemnified Party, then the Indemnifying Party shall be entitled to
participate in such claim or action, and, to the extent that it wishes, jointly
with all other Indemnifying Parties, to assume control of the defense thereof
with counsel satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume control of
the defense of such claim or action, the Indemnifying Party shall not be liable
to the Indemnified Party for any legal or other expenses subsequently incurred
by the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that in any action in
which both the Indemnified Party and the Indemnifying Party are named as
defendants, the Indemnified Party shall have the right to employ separate
counsel (but no more than one such separate counsel) to represent the
Indemnified Party and its controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, with the fees and expenses of
such counsel to be paid by such Indemnifying Party if, based upon the written
opinion of counsel of such Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, consent to entry of judgment or effect any
settlement of any claim or pending or threatened proceeding in respect of which
the Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such judgment or
settlement includes an unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding.

         4.4    Contribution.

                4.4.1 If the indemnification provided for in the foregoing
Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of
any loss, claim, damage, liability or action referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the Indemnified Parties and the
Indemnifying Parties in connection with the actions or omissions which resulted
in such loss, claim, damage, liability or action, as well as any other relevant
equitable considerations. The relative fault of any Indemnified Party and any
Indemnifying Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such Indemnified Party or such Indemnifying Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

                4.4.2 The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding Section
4.4.1. The amount paid or payable by an Indemnified Party as a result of any
loss, claim, damage, liability or action referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no holder of Registrable
Securities shall be required to contribute any amount in excess of the dollar
amount of the net proceeds (after payment of any underwriting fees, discounts,
commissions or taxes) actually received by such holder from the sale of
Registrable Securities which gave rise to such contribution obligation. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

5.       UNDERWRITING AND DISTRIBUTION.

         5.1    Rule 144. The Company covenants that it shall file any reports
required to be filed by it under the Securities Act and the Exchange Act and
shall take such further action as the holders of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holders to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 under the
Securities Act, as such Rules may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission.

                                       9
<PAGE>

6.       MISCELLANEOUS.

         6.1    Other Registration Rights. The Company represents and warrants
that no person, other than a holder of the Registrable Securities, has any right
to require the Company to register any shares of the Company's capital stock for
sale or to include shares of the Company's capital stock in any registration
filed by the Company for the sale of shares of capital stock for its own account
or for the account of any other person.

         6.2    Assignment; No Third Party Beneficiaries. This Agreement and the
rights, duties and obligations of the Company hereunder may not be assigned or
delegated by the Company in whole or in part. This Agreement and the rights,
duties and obligations of the holders of Registrable Securities hereunder may be
freely assigned or delegated by such holder of Registrable Securities in
conjunction with and to the extent of any transfer of Registrable Securities by
any such holder. This Agreement and the provisions hereof shall be binding upon
and shall inure to the benefit of each of the parties and their respective
successors and the permitted assigns of the Investor or holder of Registrable
Securities or of any assignee of the Investor or holder of Registrable
Securities. This Agreement is not intended to confer any rights or benefits on
any persons that are not party hereto other than as expressly set forth in
Article 4 and this Section 6.2.

         6.3    Notices. All notices, demands, requests, consents, approvals or
other communications (collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall be personally served, delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice. Notice shall be deemed given on the
date of service or transmission if personally served or transmitted by telegram,
telex or facsimile; provided, that if such service or transmission is not on a
business day or is after normal business hours, then such notice shall be deemed
given on the next business day. Notice otherwise sent as provided herein shall
be deemed given on the next business day following timely delivery of such
notice to a reputable air courier service with an order for next-day delivery.

         To the Company:

                SRKP 1, Inc.
                1900 Avenue of the Stars, Suite 310
                Los Angeles, CA  90076
                Attention:  President

         with a copy to:

                Kirkpatrick & Lockhart LLP
                10100 Santa Monica Boulevard, 7th Floor
                Los Angeles, CA  90067
                Attn:  Thomas J. Poletti, Esq.

         To an Investor, to:

                Richard Rappaport
                c/o SRKP 1, Inc.
                1900 Avenue of the Stars, Suite 310
                Los Angeles, CA  90076

                The Amanda Rappaport Trust
                c/o SRKP 1, Inc.
                1900 Avenue of the Stars, Suite 310
                Los Angeles, CA  90076
                Attn:  Richard Rappaport, Trustee

                The Kailey Rappaport Trust
                c/o SRKP 1, Inc.
                1900 Avenue of the Stars, Suite 310
                Los Angeles, CA  90076
                Attn: Richard Rappaport Trustee

                                       10
<PAGE>

                Debbie Schwartzberg
                c/o SRKP 1, Inc.
                1900 Avenue of the Stars, Suite 310
                Los Angeles, CA  90076

                Glenn Krinsky
                c/o SRKP 1, Inc.
                1900 Avenue of the Stars, Suite 310
                Los Angeles, CA  90076

                Charles Frisco
                c/o SRKP 1, Inc.
                1900 Avenue of the Stars, Suite 310
                Los Angeles, CA  90076

         6.4    Severability. This Agreement shall be deemed severable, and the
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.

         6.5    Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one (1) and the same instrument.

         6.6    Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements, representations, understandings, negotiations and discussions
between the parties, whether oral or written.

         6.7    Modifications and Amendments. No amendment, modification or
termination of this Agreement shall be binding upon any party unless executed in
writing by such party.

         6.8    Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.

         6.9    Waivers and Extensions. Any party to this Agreement may waive
any right, breach or default which such party has the right to waive, provided
that such waiver will not be effective against the waiving party unless it is in
writing, is signed by such party, and specifically refers to this Agreement.
Waivers may be made in advance or after the right waived has arisen or the
breach or default waived has occurred. Any waiver may be conditional. No waiver
of any breach of any agreement or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach thereof nor of any other agreement
or provision herein contained. No waiver or extension of time for performance of
any obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.

         6.10   Remedies Cumulative. In the event that the Company fails to
observe or perform any covenant or agreement to be observed or performed under
this Agreement, the Investor or any other holder of Registrable Securities may
proceed to protect and enforce its rights by suit in equity or action at law,
whether for specific performance of any term contained in this Agreement or for
an injunction against the breach of any such term or in aid of the exercise of
any power granted in this Agreement or to enforce any other legal or equitable
right, or to take any one or more of such actions, without being required to
post a bond. None of the rights, powers or remedies conferred under this
Agreement shall be mutually exclusive, and each such right, power or remedy
shall be cumulative and in addition to any other right, power or remedy, whether
conferred by this Agreement or now or hereafter available at law, in equity, by
statute or otherwise.

                                       11
<PAGE>

         6.11   Governing Law. This Agreement shall be governed by, interpreted
under, and construed in accordance with the internal laws of the [State of New
York] applicable to agreements made and to be performed within the [State of New
York], without giving effect to any choice-of-law provisions thereof that would
compel the application of the substantive laws of any other jurisdiction.

         6.12   Waiver of Trial by Jury. Each party hereby irrevocably and
unconditionally waives the right to a trial by jury in any action, suit,
counterclaim or other proceeding (whether based on contract, tort or otherwise)
arising out of, connected with or relating to this Agreement, the transactions
contemplated hereby, or the actions of the Investor in the negotiation,
administration, performance or enforcement hereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       12
<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed and delivered by their duly authorized representatives
as of the date first written above.

                                        SRKP 1, Inc..
                                        a Delaware corporation

                                        By:
                                            ------------------------------------
                                              Name:  Richard Rappaport
                                              Title:  President

INVESTORS:

--------------------------------
Richard Rappaport

--------------------------------
The Amanda Rappaport Trust
Richard Rappaport, Trustee

--------------------------------
The Kailey Rappaport Trust
Richard Rappaport, Trustee

--------------------------------
Debbie Schwartzberg

--------------------------------
Glenn Krinsky

--------------------------------
Charles Frisco

                                       13Unassociated Document

EXHIBIT
10.1 

 

AGREEMENT
AND PLAN OF MERGER

 

BY
AND AMONG

 

INNCARDIO,
INC.,

 

CENGENT
ACQUISITION CORP.

 

AND

 

CENGENT
THERAPEUTICS INC.

 

DATED
MARCH 24,
2005

 

 

 

 

TABLE
OF CONTENTS

 

 

		
       PAGE

	
      ARTICLE
      I THE MERGE
	
      1

	
      SECTION
      1.1 The Merger
	
      1

	
      SECTION
      1.2 Closing
	
      2

	
      SECTION
      1.3 Effective Time
	
      2

	
      SECTION
      1.4 Effects of the Merger
	
      2

	
      SECTION
      1.5 Certificate of Incorporation and By-laws of the Surviving
      Corporation
	
      2

	
      SECTION
      1.6 Directors and Officers
	
      2

	
      ARTICLE
      II EFFECT OF THE MERGER ON THE CAPITAL STOCK F THE CONSTITUENT
      CORPORATIONS; EXCHANGE OF CERTIFICATES
	
      3

	
      SECTION
      2.1 Effect on Capital Stock
	
      3

	
      SECTION
      2.2 Fractional Shares
	
      6

	
      SECTION
      2.3 Exchange of Certificates.
	
      7

	
      SECTION
      2.4 Certain Adjustments
	
      9

	
      SECTION
      2.5 Shares of Dissenting Shareholders
	
      9

	
      SECTION
      2.6 Stock Options
	
      10

	
      SECTION
      2.7 Warrants
	
      10

	
      SECTION
      2.8. Convertible Promissory Notes
	
      11

	
      SECTION
      2.9. Escrow of Merger Consideration
	
      12

	
      SECTION
      2.10 Tax-Free Reorganization
	
      12

	
      ARTICLE
      III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	
      12

	
      SECTION
      3.1 Organization, Standing and Corporate Power
	
      13

	
      SECTION
      3.2 Subsidiaries
	
      13

	
      SECTION
      3.3 Capital Structure
	
      13

	
      SECTION
      3.4 Authority; Noncontravention
	
      14

	
      SECTION
      3.5 Financial Statements; Undisclosed Liabilities
	
      15

	
      SECTION
      3.6 Company Contracts
	
      16

	
      SECTION
      3.7 Absence of Certain Changes
	
      18

	
      SECTION
      3.8 Permits; Compliance with Applicable Laws
	
      20

	
      SECTION
      3.9 Absence of Litigation
	
      21

	
      SECTION
      3.10 Tax Matters
	
      21

	
      SECTION
      3.11 Employee Benefit Plans
	
      23

	
      SECTION
      3.12 Labor Matters
	
      26

	
      SECTION
      3.13 Environmental Matters
	
      27

	
      SECTION
      3.14 Intellectual Property
	
      28

	
      SECTION
      3.15 Insurance Matters
	
      30

	
      SECTION
      3.16 Transactions with Affiliates
	
      30

	
      SECTION
      3.17 Voting Requirements
	
      31

	
      SECTION
      3.18 Brokers
	
      31

	
      SECTION
      3.19 Real Property
	
      31

	
      SECTION
      3.20 Tangible Personal Property
	
      32

	
      SECTION
      3.21 Investment Company
	
      32

	
      SECTION
      3.22 Board Approval
	
      32

	
      SECTION
      3.23 Books and Records
	
      32

	
      SECTION
      3.24 Accuracy of Information
	
      32

	
      ARTICLE
      IV REPRESENTATIONS AND WARRANTIES OF PARENT
	
      33

	
      SECTION
      4.1 Organization, Standing and Corporate Power
	
      33

	
      SECTION
      4.2 Subsidiaries
	
      33

	
      SECTION
      4.3 Capital Structure
	
      34

	
      SECTION
      4.4 Authority; Noncontravention
	
      34

	
      SECTION
      4.5 Parent Documents
	
      35

	
      SECTION
      4.6 Parent Contracts
	
      36

	
      SECTION
      4.7 Absence of Certain Changes
	
      38

	
      SECTION
      4.8 Permits; Compliance with Applicable Laws
	
      41

	
      SECTION
      4.9 Absence of Litigation
	
      41

	
      SECTION
      4.10 Tax Matters
	
      42

	
      SECTION
      4.11 Employee Benefit Plans
	
      43

	
      SECTION
      4.12 Labor Matters
	
      43

	
      SECTION
      4.13 Environmental Matters
	
      44

	
      SECTION
      4.14 Intellectual Property
	
      45

	
      SECTION
      4.15 Insurance Matters
	
      46

	
      SECTION
      4.16 Transactions with Affiliates
	
      46

	
      SECTION
      4.17 Voting Requirements
	
      47

	
      SECTION
      4.18 Brokers
	
      47

	
      SECTION
      4.19 Real Property
	
      47

	
      SECTION
      4.20 Tangible Personal Property
	
      47

	
      SECTION
      4.21 Investment Company
	
      47

	
      SECTION
      4.22 Board Approval
	
      47

	
      SECTION
      4.23 Books and Records
	
      48

	
      SECTION
      4.24 Accuracy of Information
	
      48

	
      ARTICLE
      V COVENANTS RELATING TO CONDUCT OF BUSINESS
	
      48

	
      SECTION
      5.1 Conduct of Business by the Company
	
      48

	
      SECTION
      5.2 Advice of Changes
	
      49

	
      SECTION
      5.3 No Solicitation by the Company
	
      50

	
      SECTION
      5.4 Conduct of Business by Parent
	
      50

	
      SECTION
      5.5 No Solicitation by Parent
	
      52

	
      SECTION
      5.6 Transition
	
      53

	
      ARTICLE
      VI ADDITIONAL AGREEMENTS
	
      53

	
      SECTION
      6.1 Preparation of the Form S-4
	
      53

	
      SECTION
      6.2 Shareholders’ Meeting
	
      55

	
      SECTION
      6.3 Letters of Company’s Accountants
	
      56

	
      SECTION
      6.4 Access to Information; Confidentiality
	
      56

	
      SECTION
      6.5 Commercially Reasonable Efforts
	
      56

	
      SECTION
      6.6 Indemnification, Exculpation and Insurance
	
      57

	
      SECTION
      6.7 Fees and Expenses
	
      57

	
      SECTION
      6.8 Public Announcements
	
      58

	
      SECTION
      6.9 Corporate Governance of Parent
	
      58

	
      SECTION
      6.10 Agreements with Holders of Company Securities
	
      58

	
      SECTION
      6.11 Shareholder Litigation
	
      59

	
      SECTION
      6.12 Voting Agreements and Lock-Up Agreements
	
      60

 

 

 

	
      SECTION
      6.13 Employee Benefits
	
      60

	
      SECTION
      6.14 Convertible Credit Line Facility; Secured Credit Line
      Facility
	
      61

	
      SECTION
      6.15 Directors and Officers Insurance
	
      61

	
      SECTION
      6.16 Stock Exchange Listing
	
      61

	
      SECTION
      6.17 Liens on Intellectual Property
	
      61

	
      SECTION
      6.18 Opinion Letter Forms
	
      61

	
      SECTION
      6.19 Waiver of Default
	
      62

	
      SECTION
      6.20 Consents or Waivers Required Pursuant to Purchase Agreement and from
      holders of Convertible Promissory Notes
	
      62

	
      SECTION
      6.21 Payments Pursuant to Section 6.7 of this Agreement
	
      62

	
      ARTICLE
      VII CONDITIONS PRECEDENT
	
      63

	
      SECTION
      7.1 Conditions to Each Party’s Obligation to Effect the
    Merger
	
      63

	
      SECTION
      7.2 Conditions to Obligations of Parent and Merger Sub
	
      64

	
      SECTION
      7.3 Conditions to Obligations of the Company
	
      65

	
      SECTION
      7.4 Frustration of Closing Conditions
	
      66

	
      ARTICLE
      VIII TERMINATION, AMENDMENT AND WAIVER
	
      66

	
      SECTION
      8.1Termination
	
       

	
      SECTION
      8.2 Effect of Termination
	
      67

	
      SECTION
      8.3 Amendment
	
      68

	
      SECTION
      8.4 Extension; Waiver
	
      68

	
      ARTICLE
      IX GENERAL PROVISIONS
	
      68

	
      SECTION
      9.1 Nonsurvival of Representations, Warranties and
    Agreements
	
      68

	
      SECTION
      9.2 Notices
	
      68

	
      SECTION
      9.3 Definitions
	
      69

	
      SECTION
      9.4 Interpretation
	
      70

	
      SECTION
      9.5 Counterparts
	
      70

	
      SECTION
      9.6 Entire Agreement; No Third-Party Beneficiaries
	
      70

	
      SECTION
      9.7 Governing Law
	
      71

	
      SECTION
      9.8 Assignment
	
      71

	
      SECTION
      9.9 Consent to Jurisdiction
	
      71

	
      SECTION
      9.10 Headings
	
      71

	
      SECTION
      9.11 Severability
	
      71

	
      SECTION
      9.12 Enforcement
	
      71

 

 

 

 

EXHIBITS

 

Exhibit
A - Lock-Up
Period Legend

 

INDEX
OF DEFINED TERMS

 

	
      DEFINED
      TERMS
	
      SECTION
      DEFINED

	
      5%
      Holder
	
      Section
      6.12

	
      Action
	
      Section
      3.9(a)

	
      Adjustment
      Event
	
      Section
      2.4

	
      affiliate
	
      Section
      9.3(a)

	
      Agreement
	
      Preamble

	
      Aggregate
      Merger Consideration
	
      Section
      2.1(n)(i)

	
      Articles
      of Merger
	
      Section
      1.3

	
      CGCL
	
      Recitals

	
      Closing
      Date
	
      Section
      1.2

	
      Code
	
      Section
      2.6(a)

	
      Company
	
      Preamble

	
      Company
      Acquisition Proposal
	
      Section
      5.3(a)

	
      Company
      Articles of Incorporation
	
      Section
      3.3(d)

	
      Company
      Convertible Promissory Note
	
      Section
      2.8

	
      Company
      Common Stock
	
      Recitals

	
      Company
      Contract
	
      Section
      3.6(b)

	
      Company
      Disclosure Schedule
	
      Article
      III

	
      Company
      Financial Statements
	
      Section
      3.5

	
      Company
      Junior Allocation
	
      Section
      2,9

	
      Company
      Junior Stock
	
      Recitals

	
      Company
      Preferred Allocation
	
      Section
      2.9

	
      Company
      Preferred Stock
	
      Section
      9.3(f)

	
      Company
      Series A Preferred Stock
	
      Section
      2.1(c)

	
      Company
      Series B Preferred Stock
	
      Section
      2.1(d)

	
      Company
      Series C Preferred Stock
	
      Section
      2.1(e)

	
      Company
      Series D Preferred Stock
	
      Section
      2.1(f)

	
      Company
      Series E Preferred Stock
	
      Section
      2.1(j)

	
      Company
      Series F Preferred Stock
	
      Section
      2.1(g)

	
      Company
      Series G Preferred Stock
	
      Section
      2.1(h)

	
      Company
      Series H Preferred Stock
	
      Section
      2.1(i)

	
      Company
      Shareholder Meeting
	
      Section
      6.2

	
      Company
      Significant Contracts
	
      Section
      3.6(b)

	
      Company
      Stock Certificates
	
      Section
      2.3(b)

	
      Company
      Stock Option
	
      Section
      2.6(a)

	
      Company
      Stock Plans
	
      Section
      3.3(a)

	
      Company
      Warrant
	
      Section
      2.7

	
      Contract
	
      Section
      3.6(b)

	
      Continuing
      Employees
	
      Section
      6.3(a)

	
      Convertible
      Credit Line Facility
	
      Section
      2.1(n)(v)

	
      Convertible
      Promissory Note Merger Consideration
	
      Section
      2.8

	
      Dissenting
      Shares
	
      Section
      2.5

 

 

	
      Effective
      Time
	
      Section
      1.3

	
      Employee
      Plans
	
      Section
      3.11(a)

	
      Environmental
      Laws
	
      Section
      3.13(d)(i)

	
      Environmental
      Permits
	
      Section
      3.13(d)(ii)

	
      ERISA
	
      Section
      3.11(a)

	
      ERISA
      Affiliate
	
      Section
      3.11(a)

	
      Escrow
	
      Section
      2.9

	
      Escrow
      Agent
	
      Section
      2.9

	
      Exchange
      Act
	
      Section
      4.4(c)

	
      Exchange
      Agent
	
      Section
      2.3(a)

	
      Excluded
      Parent Shares
	
      Section
      2.1(n)(ii)

	
      Fiduciary
	
      Section
      3.11(e)

	
      Form
      S-4
	
      Section
      6.1(a)

	
      GAAP
	
      Section
      3.5

	
      Government
      Entities
	
      Section
      3.4(c)

	
      Governmental
      Entity
	
      Section
      3.4(c)

	
      Hazardous
      Substances
	
      Section
      3.13(d)(iii)

	
      HSR
      Act
	
      Section
      3.4(c)

	
      Indemnified
      Parties
	
      Section
      6.6(a)

	
      Indebtedness
	
      Section
      3.6(b)(xii)

	
      Intellectual
      Property
	
      Section
      3.4(a)

	
      IRS
	
      Section
      3.11(g)

	
      ISO
	
      Section
      2.6(a)

	
      Junior
      Stock Merger Consideration
	
      Section
      2.1(j)

	
      knowledge
	
      Section
      9.3(e)

	
      Letter
      of Transmittal
	
      Section
      2.3(b)

	
      Liens
	
      Section
      3.2

	
      Lock-Up
      Period
	
      Section
      2.1(l)

	
      material
      adverse change
	
      Section
      9.3(b)

	
      material
      adverse effect
	
      Section
      9.3(b)

	
      Merger
	
      Recitals

	
      Merger
      Consideration
	
      Section
      2.1(j)

	
      Merger
      Sub
	
      Preamble

	
      MultiEmployer
      Plans
	
      Section
      3.11(d)

	
      Other
      Company Documents
	
      Section
      3.8(c)

	
      Other
      Parent Documents
	
      Section
      4.8(c)

	
      Parent
	
      Preamble

	
      Parent
      Acquisition Proposal
	
      Section
      5.5(a)

	
      Parent
      Authorized Preferred Stock
	
      Section
      4.3

	
      Parent
      Common Stock
	
      Section
      4.3(a)

	
      Parent
      Contracts
	
      Section
      4.6

	
      Parent
      Disclosure Schedule
	
      Article
      IV

	
      Parent
      Employee Plans
	
      Section
      4.11(a)

	
      Parent
      Employee Stock Options
	
      Section
      4.3(b)

	
      Parent’s
      Articles of Incorporation
	
      Section
      4.3(a)

	
      Parent
      SEC Documents
	
      Section
      4.5

	
      Parent
      Stock Plans
	
      Section
      4.3(a)

	
      Permits
	
      Section
      3.8(a)

	
      Permitted
      Liens
	
      Section
      3.9(b)

	
      Permitted
      Parent Action
	
      Section
      5.4

	
      person
	
      Section
      9.3(c)

	
      Preferred
      Merger Consideration
	
      Section
      2.1(i)

	
      Prospectus
	
      Section
      6.1(a)

	
      Qualified
      Financing
	
      Section
      2.1(n)(iii)

	
      Related
      Person
	
      Section
      3.16

	
      Release
	
      Section
      3.13(d)(iv)

	
      Requisite
      Regulatory Approvals
	
      Section
      7.1(b)

	
      Residual
      Merger Consideration
	
      Section
      2.1(n)(iv)

	
      Restraints
	
      Section
      7.2(c)

	
      SEC
	
      Section
      2.6(c)

	
      Secretary
	
      Section
      1.3

	
      Secured
      Credit Line Facility
	
      Section
      2.1(n)(v)

	
      Securities
      Act
	
      Section
      2.1(l)

	
      Series
      A Merger Consideration
	
      Section
      2.1(c)

	
      Series
      B Merger Consideration
	
      Section
      2.1(d)

	
      Series
      C Merger Consideration
	
      Section
      2.1(e)

	
      Series
      D Merger Consideration
	
      Section
      2.1(f)

	
      Series
      F Merger Consideration
	
      Section
      2.1(g)

	
      Series
      G Merger Consideration
	
      Section
      2.1(h)

	
      Series
      H Merger Consideration
	
      Section
      2.1(i)

	
      Software
	
      Section
      3.14(a)

	
      SOXA
	
      Section
      4.5(a)

	
      Stakeholder
	
      Section
      6.22

	
      Stakeholder
      Representative
	
      Section
      2.9

	
      subsidiary
	
      Section
      9.3(d)

	
      Surviving
      Corporation
	
      Section
      1.1

	
      Tangible
      Personal Property
	
      Section
      3.20

	
      Tax
	
      Section
      3.10(i)(i)

	
      Taxes
	
      Section
      3.10(i)(i)

	
      Tax
      Return
	
      Section
      3.10(i)(ii)

	
      URBCA
	
      Recitals

 

 

AGREEMENT
AND PLAN OF MERGER (this
"Agreement") made
and entered into on this 24th day of
March 2005, by and among INNCARDIO,
INC., a Utah
corporation ("Parent"),
CENGENT
ACQUISITION CORP., a
California corporation and wholly owned subsidiary of Parent ("Merger
Sub"), and
CENGENT
THERAPEUTICS INC., a
California corporation (the "Company").

 

W
I T N E S S E T H:

 

WHEREAS,
each of
Parent, Merger Sub and the Company desire Parent to consummate a business
combination with the Company in a transaction whereby, upon the terms and
subject to the conditions set forth in this Agreement, Merger Sub will merge
with and into the Company (the "Merger"), each
outstanding share of common stock, no par value, of the Company ("Company
Common Stock") and
each outstanding share of the Company Series E Preferred Stock (together with
the Company Common Stock, the “Company
Junior Stock”) (other
than shares cancelled and retired pursuant to Section 2.1(b) and Dissenting
Shares), will be converted into the right to receive the Junior Stock Merger
Consideration and each outstanding share of preferred stock of the Company,
excluding the Company Series E Preferred Stock, (other than shares cancelled and
retired pursuant to Section 2.1(b) and Dissenting Shares) will be converted into
the right to receive the Preferred Merger Consideration, and the Company will be
the surviving corporation in the Merger; 

 

WHEREAS, the
Board of Directors of the Company unanimously has determined and resolved that
the Merger and all of the transactions contemplated by this Agreement are in the
best interest of the holders of Company Junior Stock and Company Preferred
Stock, that the
Merger is fair and advisable, and has approved this Agreement in accordance with
the California General Corporation Law, as amended (the "CGCL"), and
has further resolved unanimously to recommend to all holders of Company Common
Stock and Company Preferred Stock that they
authorize, approve and adopt this Agreement and the transactions contemplated
hereby; and

 

WHEREAS, the
Board of Directors of Parent unanimously has determined and resolved that the
Merger and all of the transactions contemplated by this Agreement are in the
best interest of Parent and the holders of Parent Common Stock and has adopted
this Agreement in accordance with the applicable Utah Revised Business
Corporation Act, as amended (the "URBCA"), and
Parent, as sole shareholder of Merger Sub, has adopted this Agreement in
accordance with the CGCL.

 

NOW,
THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

 

 

ARTICLE
I

 

THE
MERGER

 

SECTION
1.1 The
Merger

 

. Upon
the terms and subject to the conditions set forth in this Agreement and in
accordance with the CGCL, at the Effective Time Merger Sub shall be merged with
and into the Company and the Company shall be the surviving corporation in the
Merger (the "Surviving
Corporation") and,
as such, the Company shall continue its corporate existence as a direct, wholly
owned subsidiary of Parent under the laws of the State of California, and the
separate corporate existence of Merger Sub thereupon shall cease.

SECTION
1.2 Closing

 

. Subject
to the satisfaction or, to the extent permitted by applicable law, waiver of the
conditions to consummation of the Merger contained in Article VII hereof, the
closing of the Merger (the "Closing") shall
take place at 10:00 a.m., New York City local time, on a date to be specified by
the parties (the "Closing
Date"), which
date shall not be later than the third business day next following the
satisfaction or, to the extent permitted by applicable law, waiver of the
conditions set forth in Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or, to
the extent permitted by applicable law, waiver of those conditions), unless
another time or date is agreed to by the parties hereto. The Closing will be
held at the offices of Parent at 712 Fifth Avenue, 19th Floor,
New York, New York 10019 or at such other location as is agreed to by the
parties hereto.

SECTION
1.3 Effective
Time

 

. Upon
the terms and subject to the conditions set forth in this Agreement, at the
Closing the parties shall cause the Merger to be consummated by filing with the
Secretary of State of the State of California (the "Secretary")
articles of merger (the "Articles
of Merger") duly
executed and so filed in accordance with the CGCL and shall make all other
filings and recordings required under the CGCL to effectuate the Merger and the
transactions contemplated by this Agreement. The Merger shall become effective
at such time as the Articles of Merger is duly filed with the Secretary, or at
such subsequent date or time as Parent and the Company mutually shall agree and
specify in the Articles of Merger (the time the Merger becomes so effective
being hereinafter referred to as the "Effective
Time").

SECTION
1.4 Effects
of the Merger

 

. The
Merger shall have the effects set forth in the CGCL, including without
limitation Section 1107 thereof.

SECTION
1.5 Certificate
of Incorporation and By-laws of the Surviving
Corporation

 

. The
certificate of incorporation of the Surviving Corporation shall be amended and
restated to mirror the certificate of incorporation of the Merger Sub and as so
amended shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended or restated as provided therein or by applicable law.
The by-laws of Merger Sub in effect immediately prior to the Effective Time
shall be the by-laws of the Surviving Corporation until thereafter amended or
restated as provided therein or by applicable law.

SECTION
1.6 Directors
and Officers

 

. The
directors of Merger Sub at the Effective Time shall, from and after the
Effective Time, be and become the directors of the Surviving Corporation until
their successors shall have been duly elected and qualified or until their
earlier death, resignation or removal in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation and the CGCL. The
officers of Merger Sub at the Effective Time shall, from and after the Effective
Time, be and become the officers of the Surviving Corporation until their
successors shall have been duly appointed and qualified or until their earlier
death, resignation or removal in accordance with the certificate of
incorporation and the by-laws of the Surviving Corporation. 

ARTICLE
II

 

EFFECT
OF THE MERGER ON THE CAPITAL STOCK

OF
THE CONSTITUENT CORPORATIONS;

EXCHANGE
OF CERTIFICATES

 

SECTION
2.1 Effect
on Capital Stock

 

. At the
Effective Time, by virtue of the Merger and automatically without any action on
the part of any holder of capital stock of Parent, Merger Sub or the Company,
respectively:

(a) Capital
Stock of Merger Sub. Each
then outstanding share of common stock, no par value, of Merger Sub shall be
converted into and become one duly authorized, validly issued, fully paid and
nonassessable share of common stock, no par value, of the Surviving
Corporation.

(b) Cancellation
of Treasury Stock and Parent Owned Stock. Each
share of Company Common Stock and Company Preferred Stock then issued and held
in the Company's treasury and each share of Company Common Stock and Company
Preferred Stock then owned by Parent, Merger Sub or any other wholly owned
subsidiary of Parent, shall be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.

(c) Series
A Preferred Stock. Subject
to Section 2.9 below, each share of the Series A Preferred Stock, no par value,
of the Company (“Company
Series A Preferred Stock”) issued
and outstanding immediately prior to the Effective Time (other than shares
cancelled and retired pursuant to Section 2.1(b) and Dissenting Shares), shall
be converted into and become the right to receive collectively on a pro rata
basis with all outstanding shares of Company Series A Preferred Stock, subject
to Section 2.2, 2.40% of the
Residual Merger Consideration (the “Series
A Merger Consideration”).

(d) Series
B Preferred Stock. Subject
to Section 2.9 below, each share of the Series B Preferred Stock, no par value,
of the Company (“Company
Series B Preferred Stock”) issued
and outstanding immediately prior to the Effective Time (other than shares
cancelled and retired pursuant to Section 2.1(b) and Dissenting Shares), shall
be converted into and become the right to receive collectively on a pro rata
basis with all outstanding shares of Company Series B Preferred Stock, subject
to Section 2.2, 5.30% of the
Residual Merger Consideration (the “Series
B Merger Consideration”).

(e) Series
C Preferred Stock. Subject
to Section 2.9 below, each share of the Series C Preferred Stock, no par value,
of the Company (“Company
Series C Preferred Stock”) issued
and outstanding immediately prior to the Effective Time (other than shares
cancelled and retired pursuant to Section 2.1(b) and Dissenting Shares), shall
be converted into and become the right to receive collectively on a pro rata
basis with all outstanding shares of Company Series C Preferred Stock, subject
to Section 2.2, 5.49% of the
Residual Merger Consideration (the “Series
C Merger Consideration”).

(f) Series
D Preferred Stock. Subject
to Section 2.9 below, each share of the Series D Preferred Stock, no par value,
of the Company (“Company
Series D Preferred Stock”) issued
and outstanding immediately prior to the Effective Time (other than shares
cancelled and retired pursuant to Section 2.1(b) and Dissenting Shares), shall
be converted into and become the right to receive collectively on a pro rata
basis with all outstanding shares of Company Series D Preferred Stock, subject
to Section 2.2, 32.79% of the
Residual Merger Consideration (the “Series
D Merger Consideration”).

(g) Series
F Preferred Stock. Subject
to Section 2.9 below, each share of the Series F Preferred Stock, no par value,
of the Company (“Company
Series F Preferred Stock”) issued
and outstanding immediately prior to the Effective Time (other than shares
cancelled and retired pursuant to Section 2.1(b) and Dissenting Shares), shall
be converted into and become the right to receive collectively on a pro rata
basis with all outstanding shares of Company Series F Preferred Stock, subject
to Sections 2.2 and (with respect to Company Warrants) 2.7, 3.94% of the
Residual Merger Consideration (the “Series
F Merger Consideration”).

(h) Series
G Preferred Stock. Subject
to Section 2.9 below, each share of the Series G Preferred Stock, no par value,
of the Company (“Company
Series G Preferred Stock”) issued
and outstanding immediately prior to the Effective Time (other than shares
cancelled and retired pursuant to Section 2.1(b) and Dissenting Shares), shall
be converted into and become the right to receive collectively on a pro rata
basis with all outstanding shares of Company Series G Preferred Stock, subject
to Sections 2.2 and (with respect to Company Warrants) 2.7, 15.08% of the
Residual Merger Consideration (the “Series
G Merger Consideration”).

(i) Series
H Preferred Stock. Subject
to Section 2.9 below, each share of the Series H Preferred Stock, no par value,
of the Company (“Company
Series H Preferred Stock”) issued
and outstanding immediately prior to the Effective Time (other than shares
cancelled and retired pursuant to Section 2.1(b) and Dissenting Shares), shall
be converted into and become the right to receive collectively on a pro rata
basis with all outstanding shares of Company Series H Preferred Stock, subject
to Section 2.2, 25.00% of the
Residual Merger Consideration (the “Series
H Merger Consideration”). The
Series H Merger Consideration, together with the Series A Merger Consideration,
the Series B Merger Consideration, the Series C Merger Consideration, the Series
D Merger Consideration, the Series F Merger Consideration, the Series G Merger
Consideration and the Series H Merger Consideration, is sometimes hereinafter
collectively referred to as the “Preferred
Merger Consideration”.

(j) Company
Junior Stock. Subject
to Section 2.9 below, each then outstanding share of Company Common Stock and
each share of the Series E Preferred Stock, no par value, of the Company
(“Company
Series E Preferred Stock”) issued
and outstanding immediately prior to the Effective Time (other than shares
cancelled and retired pursuant to Section 2.1(b) and Dissenting Shares), shall
be converted into and become the right to receive collectively on a pro rata
basis with all outstanding shares of Company Junior Stock, subject to Section
2.2, 10.00% of the
Residual Merger Consideration subject to amounts reserved for issuance pursuant
to Sections 2.6 and 2.7 (the “Junior
Stock Merger Consideration”,
together with the Preferred Merger Consideration and the Convertible Promissory
Note Merger Consideration, the “Merger
Consideration”). The
Junior Stock Merger Consideration includes the amount of Parent Common Stock
reserved for issuance pursuant to Sections 2.6 and 2.7 with respect to the
Company Stock Options and the Company Warrants. Except as expressly stated in
writing elsewhere in this Agreement, the Merger Consideration consists
exclusively of shares of Parent Common Stock.

(k) If after
the date hereof but prior to the Effective Time, any holder of Company Preferred
Stock converts such preferred stock into Company Common Stock, in accordance
with the terms of such Company Preferred Stock, then the Preferred Merger
Consideration allocated to such Company Preferred Stock shall be reallocated to
the Junior Stock Merger Consideration in equitable fashion.

(l) Shares of
Parent Common Stock issued as Merger Consideration shall be registered under the
Securities Act of 1933, as amended (the “Securities
Act”) and
shall be listed on the OTC Bulletin Board, pursuant to Section 6.1 hereof,
provided that such shares shall be subject to a lock-up period after the
Effective Time (the “Lock-Up
Period”) as
hereinafter set forth in this Paragraph, and each certificate representing such
shares shall bear the appropriate restrictive legend as set forth on Exhibit A
attached hereto; provided, however, that, subject to the following proviso, any
securityholder to whom 1,000 shares or less of Parent Common Stock is issued as
Merger Consideration pursuant to the Closing of this Agreement (but not
securityholders for whom shares of Parent Common Stock are reserved for issuance
pursuant to this Agreement after the Closing upon exercise of Company Stock
Options or Company Warrants or upon conversion of Company Convertible Promissory
Notes) shall not be subject to the lock-up described in this Section 2.1(l) and
the certificates representing such shares shall not include the restrictive
legend; provided, further, that the foregoing exclusion from the lock-up shall
not apply if the aggregate number of shares so excluded exceeds 100,000 shares
without the express prior written consent of the Parent. If Parent has
consummated a Qualified Financing on or prior to the Closing Date, the Lock-Up
Period, during which the transfer of shares of the Merger Consideration shall be
prohibited, shall be for a period of the GREATER of Six (6) months after the
consummation of the Qualified Financing or Six (6) months after the Closing
Date. If Parent has not consummated a Qualified Financing on or prior to the
Closing Date, the Lock-Up Period, during which the transfer of shares of the
Merger Consideration shall be prohibited, shall be for a period of the LESSER of
(i) the time period of the Lock-Up Period required by a placement agent or
underwriter in connection with the Qualified Financing or Twelve (12) months
after the Closing Date. Notwithstanding the foregoing, if Parent’s officers or
directors, Bioaccelerate Holdings, Inc., or any 5% holder who executes and
delivers a lock-up agreement pursuant to Section 6.12 of this Agreement are
released by the Parent and by the placement agent or underwriter in connection
with the Qualified Financing from the corresponding lock-up during the aforesaid
Lock-Up Period, the lock-up shall terminate at the same time as to the Company
security holders who were subjected to the Lock-Up Period. Furthermore,
notwithstanding the foregoing, the parties have also agreed that the payments to
be made in shares of Parent Common Stock set forth
on Section 2.1(n)(i)(d) of the Company Disclosure Schedule pursuant
to the
letter agreement referred to in Section
6.21 shall be subject to the lock-up for the Lock-Up Period unless
otherwise released pursuant to the letter agreement.

(m) At the
Effective Time, the Company Preferred Stock and the Company Common Stock shall
cease to be outstanding and be cancelled and retired.

(n) As used
in this Agreement:

(i) "Aggregate
Merger Consideration" means
the amount equal to the following: 

(a) the
sum of the number of Parent Common Stock outstanding at the Effective Time, on a
fully diluted basis, less any “Excluded Parent Shares” as hereinafter defined,
DIVIDED BY

(b)
fifty-five percent (55%), MULTIPLIED BY

(c)
forty-five percent (45%), AND LESS

(d)
(1) the
number of shares of Parent Common Stock which is the quotient obtained by
dividing (x) the sum of fees, costs and expenses (including, without limitation,
legal, accountant and other professional fees and expenses) incurred and unpaid
(or paid directly or indirectly through utilization of credit furnished directly
or indirectly by Bioaccelerate Holdings, Inc.) by the Company (or paid by the
Parent on or after the Effective Time) or paid
or to be paid in cash in
connection with the negotiation, execution and consummation of the Merger, this
Agreement, and the transactions, agreements, instruments and documents
contemplated thereby and hereby, as well as any portion
of any and all
broker fees or commissions paid or
to be paid in cash at Closing as set forth in Section 6.21, the fees
and expenses for the tail insurance policy to be acquired by the Company
pursuant to this Agreement, and the fees and expenses set forth on Schedule
3.5(b) or Schedule 6.7(a) of the
Company Disclosure Schedule to be
paid at Closing as set forth in Section 6.21, by (y) 3.00; and (2)
that number
of shares of Parent Common Stock set forth
in Section 2.1(n)(i)(d) of the Company Disclosure Schedule.

(ii) “Excluded
Parent Shares” means
(a) any shares of Parent Common Stock issued in a Qualified Financing between
the date hereof and the Effective Time or (b) any shares of Parent Common Stock
that may be issued or issuable upon exercise, exchange or conversion of (x) any
Parent securities sold to investors in a Qualified Financing between the date
hereof and the Effective Time or (y) any securities issued or issuable to
Bioaccelerate Holdings, Inc. in connection with the Convertible Credit Line
Facility or the Secured Credit Line Facility.

(iii) “Qualified
Financing” means
an equity financing by Parent of at least $20,000,000, exclusive of any amount
of the Secured Credit Line Facility outstanding.

(iv)  “Residual
Merger Consideration” means
the amount equal to the Aggregate Merger Consideration less the Convertible
Promissory Note Merger Consideration as set forth in Section 2.8.

 

(v)  “Convertible
Credit Line Facility” and
“Secured
Credit Line Facility” have
the meanings set forth in Section 6.14 of this Agreement.

 

SECTION
2.2 Fractional
Shares

 

. No
certificates representing fractional shares of Parent Common Stock shall be
issued upon the surrender for exchange of Company Stock Certificates. In the
event that a holder of a Company Stock Certificate would be entitled to receive
in the Merger a fractional share interest in exchange for such Company Stock
Certificate, then (i) any such fractional share greater than or equal to
one-half of a share (0.5) shall be rounded up to the next whole share number and
(ii) any such fractional share less than one-half of a share (0.5) shall be
rounded down to the preceding whole share number.

SECTION
2.3 Exchange
of Certificates.

(a) As soon
as reasonably practicable following (1) the Effective Time in the event the
Qualified Financing occurs prior to the Effective Time or (2) the release of the
Aggregate Merger Consideration from Escrow pursuant to Section 2.9 (and in any
event, on or after the Effective Time within Three (3) Business Days of
receiving from the Company or the Escrow Agent, as the case may be, a written
statement (the “Merger
Consideration Statement”)
setting forth the calculation of the Merger Consideration issuable or to be
reserved for issuance to each of the Company’s security holders of record, with
reasonable supporting detail), Parent shall deposit with Parent’s transfer
agent, Liberty Stock Transfer, or a nationally reputable bank or trust company
in the United States as may be designated by Parent (the "Exchange
Agent"), for
the benefit of the holders of shares of Company Common Stock and Company
Preferred Stock and for exchange in accordance with this Section 2.3, the
Aggregate Merger Consideration issuable pursuant to Section 2.1 less the merger
consideration allocated and reserved with respect to the (i) Company Stock
Options, (ii) Company Warrants, and (iii) Company Convertible Promissory Notes;
provided, that the Escrow Agent shall have released any certificate(s) delivered
to Escrow Agent by Company pursuant to Section 2.9, as appropriate.

(b) As soon
as reasonably practicable after the Effective Time or the release of the
Aggregate Merger Consideration from Escrow as set forth in Section 2.9, as
applicable, and in no event later than Seven (7) business days after receipt by
the Parent from the Company after the Effective Time or from the Escrow Agent
upon the release of Escrow as set forth in Section 2.9 below of the Merger
Consideration Statement and the addresses of record for the Company’s security
holders, Parent shall cause the Exchange Agent to mail to each holder of record
of a certificate (or certificates) which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock or Company Preferred
Stock, as the case may be (the "Company
Stock Certificates") and to
each holder of a Company Convertible Promissory Note, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Company Stock Certificate(s) or to the Company Convertible
Promissory Note shall pass, only upon delivery of the Company Stock
Certificate(s) or Company Convertible Promissory Note (or affidavits of loss in
lieu of such certificates or promissory notes) (the "Letter
of Transmittal”) to the
Exchange Agent and shall be in such form and have such other provisions as
Parent or the Exchange Agent reasonably may specify, together with a substitute
Form W-9) and (ii) instructions for use thereof in surrendering Company Stock
Certificate(s) or Company Convertible Promissory Notes in exchange for the
Merger Consideration. Upon surrender to the Exchange Agent of a Company Stock
Certificate or a Company Convertible Promissory Note in proper form for
cancellation, together with a duly executed letter of transmittal, the holder of
such Company Stock Certificate or Company Convertible Promissory Note shall be
entitled to receive in exchange therefor a certificate (or certificates)
representing such whole number of shares of Parent Common Stock such Company
shareholder or note holder is entitled to receive pursuant to Section 2.1,
Section 2.2 or Section 2,8 in such denominations and registered in such names as
such holder may request, and Exchange Agent shall mail such certificate (or
certificates) to such holder in accordance with the Letter of Transmittal. The
shares represented by the Company Stock Certificate or Company Convertible
Promissory Note so surrendered shall forthwith be cancelled. Without limiting
the generality of the foregoing (and notwithstanding any other provisions of
this Agreement), no interest shall be paid or accrued in respect of any of the
Merger Consideration. The Letter of Transmittal shall provide (i) procedures for
holders whose Company Stock Certificates or Company Convertible Promissory Notes
are lost, stolen or destroyed to receive the Merger Consideration and (ii)
procedures for the transfer of ownership of shares of the Company Common Stock
or Company Convertible Promissory Notes that are not registered on the stock or
promissory note transfer books and records of the Company. Until surrendered in
accordance with this Section 2.3 and as specified in the Letter of Transmittal,
each Company Stock Certificate and each Company Convertible Promissory Note
shall be deemed at all times from and after the Effective Time to represent only
the right to receive upon such surrender the Merger Consideration as provided in
this Article II. 

(c) Notwithstanding
any other provisions of this Agreement, no dividends or other distributions
declared or made after the Effective Time in respect of shares of Parent Common
Stock having a record date after the Effective Time shall be paid to the holder
of any unsurrendered Company Stock Certificate or unsurrendered Company
Convertible Promissory Note until the holder shall surrender such Company Stock
Certificate or such Company Convertible Promissory Note as provided in this
Section 2.3. Subject to applicable law, following surrender of any such Company
Stock Certificate or such Company Convertible Promissory Note, there shall be
paid to the holder of the certificates representing shares of Parent Common
Stock issued in exchange therefor, in each case without any interest thereon,
(i) at the time of such surrender, the amount of dividends or other
distributions, if any, having a record date after the Effective Time theretofore
payable with respect to such shares of Parent Common Stock and not paid, less
the amount of all required withholding Taxes in respect thereof, and (ii) at the
appropriate payment date subsequent to surrender, the amount of dividends or
other distributions having a record date after the Effective Time but prior to
the date of such surrender and having a payment date subsequent to the date of
such surrender and payable with respect to such shares of Parent Common Stock,
less the amount of all required withholding Taxes in respect
thereof.

(d) All
shares of Parent Common Stock issued upon surrender of Company Stock
Certificates or Company Convertible Promissory Notes in accordance with this
Article II and as specified in the Letter of Transmittal shall be deemed to have
been issued and paid in full satisfaction of all rights pertaining to such
shares of Company Common Stock or Company Preferred Stock or such Company
Convertible Promissory Notes represented thereby and, as of the Effective Time,
the stock and promissory note transfer books and records of the Company shall be
closed and there shall be no further registration of transfers on the stock or
promissory note transfer books and records of the Company of shares of Company
Common Stock and Company Preferred Stock or Company Convertible Promissory Notes
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Company Stock Certificates or Company Convertible Promissory Notes are
properly presented to the Surviving Corporation for any reason (but otherwise in
accordance with this Article II and as specified in the Letter of Transmittal),
they shall be cancelled and exchanged as provided in this Section
2.3.

(e) At any
time following (1) the twelve-month anniversary of the Effective Time in the
event the Qualified Financing has occurred prior to the Effective Time or (2)
the twelve-month anniversary of the release of the Aggregate Merger
Consideration from Escrow as set forth in Section 2,9, Parent shall be entitled
to require the Exchange Agent to deliver to it any remaining portion of the
Merger Consideration not theretofore distributed to former holders of shares of
Company Common Stock, Company Preferred Stock and former holders of Company
Convertible Promissory Notes (including any interest, if any, received with
respect thereto and other income resulting from investments thereof by the
Exchange Agent, as directed by Parent), and such former holders shall be
entitled to look only to the Parent (subject to abandoned property, escheat and
other similar laws) with respect to the Merger Consideration and dividends or
other distributions with respect to Parent Common Stock, if any, payable upon
due surrender of their Company Stock Certificates or their Company Convertible
Promissory Notes, in all cases without any interest thereon and less all
required withholding Taxes. Notwithstanding the foregoing, neither the Parent
nor the Exchange Agent shall be liable to any holder of a Company Stock
Certificate or Company Convertible Promissory Note for Merger Consideration (or
dividends or distributions in respect thereof) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
law.

SECTION
2.4 Certain
Adjustments

 

. If
after the date hereof and prior to the Effective Time and to the extent
permitted by this Agreement, the outstanding shares of Parent Common Stock,
Company Common Stock or Company Preferred Stock shall be changed into a
different number, class or series of shares by reason of any reclassification,
recapitalization or combination, forward stock split, reverse stock split, stock
dividend or rights issued in respect of such stock, or any similar event shall
occur (any such action, an "Adjustment
Event"), the
Merger Consideration shall be adjusted correspondingly to provide to the holders
of Company Common Stock and the Company Preferred Stock the right to receive the
same economic effect as contemplated by this Agreement immediately prior to such
Adjustment Event and Parent’s payment obligations likewise shall be
correspondingly adjusted such that it shall be required to pay and deliver not
more than the aggregate Merger Consideration contemplated by this
Agreement. The
parties acknowledge and agree that Parent may increase its authorized, but
unissued securities pursuant to Section 5.4(a), and that change shall not result
in any adjustment pursuant to this Section.

SECTION
2.5 Shares
of Dissenting Shareholders

 

.
Notwithstanding anything in this Agreement to the contrary, any shares of
Company Common Stock and Company Preferred Stock that are outstanding as of the
Effective Time and that are held by a shareholder who has properly exercised his
appraisal rights under Chapter 13 of the CGCL (the "Dissenting
Shares) shall
not be converted into the right to receive the Merger Consideration;
provided,
however, if any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such shareholder’s right to dissent from the Merger under the CGCL and to
receive such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to and subject to the requirements of the CGCL, each
share of such holder’s Company Common Stock or Preferred Stock, as the case may
be, thereupon shall be deemed to have been converted into and to have become, as
of the Effective Time, the right to receive, without any interest thereon, the
Junior Stock Merger Consideration or Preferred Merger Consideration
respectively, in accordance with Section 2.1. The Company shall give Parent
prompt written notice of (i) all demands for appraisal or payment for shares of
Company Common Stock or Company Preferred Stock received by the Company prior to
the Effective Time in accordance with the CGCL and (ii) any settlement or offer
to settle any such demands.

SECTION
2.6 Stock
Options

(a) At or
prior to the Effective Time each outstanding option to purchase shares of
Company Common Stock (a “Company
Stock Option”)
granted under the Company Stock Plans and granted outside the Company Stock
Plans shall be
amended to constitute an option to acquire such Junior Stock Merger
Consideration as the holder of such Company Stock Option would have been
entitled to receive in the Merger had such holder exercised such Company Stock
Option in full immediately prior to the Effective Time; provided, however, that
with respect to any Company Stock Option which is an incentive stock option (an
“ISO”) within
the meaning of Section 422A of the Internal Revenue Code of 1986, as amended
(the “Code”), the
determination of the exercise price, number of shares purchasable and terms and
conditions of vesting shall in all respects comply with Section 424(a) of the
Code. 

(b) As
promptly as practicable (1) after the Effective Time in the event the Qualified
Financing has occurred prior to the Effective Time or (2) after the release of
the Aggregate Merger Consideration from Escrow pursuant to Section 2,9, Parent
shall deliver to each holder of a Company Stock Option a notice that accurately
reflects the changes to such options as contemplated by subsection (a) of this
Section 2.6.

(c) The
Merger Consideration allocated to the Company Stock Options shall be reserved
out of the Junior Stock Merger Consideration by Parent for issuance upon the
exercise of all Company Stock Options after the Effective Time. Notwithstanding
the foregoing, if any Company Stock Option expires or is forfeited or cancelled,
pursuant to its terms, after the Effective Date, the Parent Common Stock
underlying such stock option shall no longer be reserved and shall be
released
as treasury stock to
Parent. With respect to the Parent Common Stock underlying the Company Stock
Options, Parent shall, no later than Ten (10) days after the Effective Time
(notwithstanding that such shares shall be subject to the Lock-Up Period) (i)
file with the Securities and Exchange Commission (the “SEC”) a
Registration Statement on Form S-8 and use its best efforts to have such
registration statement become and remain continuously effective under the
Securities Act and, if the Company is then listed on a national stock exchange,
file with such exchange a listing application and use its best efforts to have
such shares admitted to trading thereon upon exercises of Company Stock Options;
provided, that listing shall not be required prior to the expiration of the
applicable Lock-Up Period. 

SECTION
2.7
Warrants

 

. 

(a) At the
Effective Time, to the extent not exercised prior to the Effective Time, each
outstanding warrant to purchase shares of Company Common Stock or Company
Preferred Stock (a “Company
Warrant”) set
forth on Schedule
2.7 of the Company Disclosure Schedule hereof
shall be amended as permitted under such Company Warrant to constitute a warrant
to acquire such Junior Stock Merger Consideration or Preferred Stock Merger
Consideration, as applicable, as the holder of such Company Warrants would have
been entitled to receive in the Merger had such holder exercised such Company
Warrant in full immediately prior to the Effective Time. Every other Company
Warrant shall be cancelled upon the Effective Time.

(b) As
promptly as practicable after (1) the Effective Time in the event the Qualified
Financing has occurred prior to the Effective Time or (2) the release of the
Aggregate Merger Consideration from Escrow pursuant to Section 2,9, Parent shall
deliver to each holder of a Company Warrant a notice that accurately reflects
the Junior Stock Merger Consideration or Preferred Stock Merger Consideration,
as applicable, each such holder is entitled to receive upon the exercise of such
holder’s Company Warrant.

(c) The
Merger Consideration allocated to the Company Warrants shall be reserved for
issuance out of the Junior Stock Merger Consideration or the Preferred Stock
Merger Consideration, as applicable, by Parent for issuance upon exercise in
full of all Company Warrants after the Effective Time and the Parent shall
register such Parent Common Stock reserved for issuance upon the exercise of the
Company Warrants on the Form S-4, but such shares shall be subject to the
Lock-Up Period. Notwithstanding the foregoing, upon the expiration of the
Company Warrants, such Parent Common Stock reserved for issuance upon the
exercise of the Company Warrants shall no longer be reserved and shall be
released as treasury stock to Parent.

SECTION
2.8. Convertible
Promissory Notes

 

. Subject
to Section 2.9 below, at the Effective Time, to the extent not converted prior
to the Effective Time, each outstanding senior secured convertible promissory
note of the Company (a “Company
Convertible Promissory Note”) set
forth on Schedule
2.8 of the Company Disclosure Schedule hereof
shall be cancelled upon the right to receive, subject to Section 2.2, that
number of shares of Parent Common Stock equal to (a) the sum of (i) the
outstanding principal amount and any accrued but unpaid interest of such Company
Convertible Promissory Note and (ii)
one hundred fifty percent (150%) of the outstanding principal amount of such
Company Convertible Promissory Note, divided by the
lesser of (1) $3.00 per share or (2) the price
per share used in the Qualified Financing, or in the
event the Qualified Financing does not occur on or
before the date that is six (6) months after the Closing Date, the weighted
average
closing price per share of Parent Common Stock over the twenty (20) trading day
period ending three (3) days prior to the date
that is six (6) months after the Closing Date; provided, that in
no event shall such number of shares be greater than the number of shares of
Parent Common Stock in the Aggregate Merger Consideration (such
sum, collectively with all the Company Convertible Promissory Notes, the
“Convertible
Promissory Note Merger Consideration”). 

SECTION
2.9. Escrow
of Merger Consideration

 

In the
event the Qualified Financing does not occur prior to the Effective Time, Parent
shall cause the Aggregate Merger Consideration to be delivered in escrow (the
“Escrow”) to
an escrow
agent designated by the Company (the “Escrow
Agent”)
pursuant to an escrow agreement to be entered into by and among the Company,
Escrow Agent and a representative of the holders of Company Convertible
Promissory Notes, the Company Preferred Stock and the Company Junior Stock and
holders of Company Stock Options and Company Warrants thereto who shall be
designated by the Board of Directors of the Company (the “Stakeholder
Representative”). As
soon as practicable after the earlier of the closing of the Qualified Financing
or the date
that is six (6) months after the Closing Date, the
Escrow Agent shall determine the amount of the Aggregate Merger Consideration
due to the holders of the Company Convertible Promissory Notes in accordance
with Section 2.8 and shall determine the amount of Residual Merger Consideration
due to the holders of the Company Preferred Stock and Company Warrants for
Company Preferred Stock in accordance with Section 2.1(c) through (i) and
Section 2.7 (the “Company
Preferred Allocation”) and
the holders of Company Junior Stock, Company Stock Options and Company Warrants
for Company Common Stock in accordance with Sections 2.1(j), 2.6 and 2.7 (the
“Company
Junior Allocation”).
Notwithstanding
anything to the contrary in this Agreement, in the event the Convertible
Promissory Note Merger Consideration as calculated pursuant to Section 2.8 of
this Agreement should exceed Ninety Percent (90%) of the Aggregate Merger
Consideration, the Convertible Promissory Note Merger Consideration shall be
adjusted to such lower figure as shall equal Ninety Percent (90%) of the amount
of the Aggregate Merger Consideration, and the holders of the Company Preferred
Stock, the Company Junior Stock, the Company Stock Options and Company Warrants
shall be entitled to receive, in the aggregate, not less than Ten Percent (10%)
of the Aggregate Merger Consideration which shall be allocated pursuant to the
Company Preferred Allocation and the Company Junior Allocation set forth in this
Section 2.9. As soon as practicable after the closing of the Qualified
Financing or the
date that is six (6) months after the Closing Date, the
Escrow Agent shall provide the Exchange Agent with the information required by
the Merger Consideration Statement with respect to the release of the Escrow,
the allocation of Aggregate Merger Consideration pursuant to this Section 2.9
and any stock certificate for Parent Common Stock representing the Aggregate
Merger Consideration held by Escrow Agent. 

SECTION
2.10 Tax-Free Reorganization

 

. The
Merger is intended to be a reorganization within the meaning of Section 368 of
the Code, and this Agreement is intended to be a “plan of reorganization” within
the meaning of the regulations promulgated under Section 368 of the
Code.

 

ARTICLE
III

 

 

REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

 

Except as
set forth on the Disclosure Schedule delivered by the Company to Parent prior to
the execution of this Agreement (the "Company
Disclosure Schedule") and
making specific reference to the particular subsection(s) of this Agreement to
which exception is being taken, the Company hereby represents and warrants to
Parent and Merger Sub as follows:

SECTION
3.1 Organization,
Standing and Corporate Power

 

.

 

(a) Each of
the Company and its subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate or other
power, as the case may be, and requisite authority to carry on its business as
presently being conducted. Each of the Company and its subsidiaries is duly
qualified or licensed to conduct business and is in good standing in each
jurisdiction listed in Section
3.1 of the Company Disclosure Schedule. Each of
the Company and its subsidiaries is duly qualified or licensed to conduct
business in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing individually or in the aggregate
would not reasonably be expected to have a material adverse effect on the
Company.

 

(b) The
Company has delivered or made available to Parent prior to the execution of this
Agreement complete and correct copies of the articles of incorporation and
by-laws or other organizational documents of the Company and its subsidiaries,
as in effect at the date of this Agreement, and which shall be in effect as of
the Closing Date. 

 

SECTION
3.2 Subsidiaries

 

. Section
3.2 of the Company Disclosure Schedule lists
the names and jurisdiction of incorporation or organization of all the
subsidiaries of the Company, whether consolidated or unconsolidated. The
outstanding securities of the subsidiaries of the Company are set forth in
Section
3.2 of the Company Disclosure Schedules and all
outstanding shares of capital stock of, or other equity interests in, each such
subsidiary: (i) have been duly authorized, validly issued and are fully paid and
nonassessable; (ii) are owned directly or indirectly by the Company, free and
clear of all pledges, claims, liens, charges, encumbrances, adverse claims,
mortgages and security interests of any kind or nature whatsoever (collectively,
"Liens"); and
(iii) are free of all other restrictions (including restrictions on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests) that would prevent the operation by the Surviving Corporation of such
subsidiary’s business as presently conducted. Except as set forth above or in
Section
3.2 of the Company Disclosure Schedule, the
Company does not own, directly or indirectly, any capital stock of or other
equity or voting interests in any person.

 

SECTION
3.3 Capital
Structure The
authorized capital stock of the Company is as set forth in Section
3.3 of the Company Disclosure Schedules. Such
Company Disclosure Schedule sets forth, as of the date hereof, the number of
shares of each class or type issued, the number held in treasury, the number
reserved for issuance and the reason the same are reserved for issuance, and
whether any of the foregoing are held by subsidiaries and, if so, how many. As
used in this Agreement, each incentive or other stock option plan, other
agreement and arrangements providing for equity-based compensation to any
director, employee, consultant or independent contractor of the Company or any
of its subsidiaries shall sometimes hereafter be referred to as "Company
Stock Plans". The
number of Company Stock Options as of the date hereof, the number of shares
subject to each such Company Stock Option, the grant date, exercise price, term
and vesting schedule of each such Company Stock Option and the names of the
holders thereof is set forth on Section
3.3 of the Company Disclosure Schedules. As of
the date hereof, the number of shares of the Company Common Stock subject to
Company Stock Options issued under a Company Stock Plan and the number of such
shares subject to Company Stock Options issued outside any Company Stock Plan
are set forth in Section
3.3 of the Company Disclosure Schedules. As of
the date hereof, the number of Company Warrants issued and outstanding is as set
forth in Section
2.7 of the Company Disclosure Schedules. As of
the date hereof, the Company Convertible Promissory Notes are as set forth in
Section
2.8 of the Company Disclosure Schedules, and the
number and type of securities of the Company reserved for issuance upon
conversion of Company Convertible Promissory Notes is set forth in Section
2.7 of the Company Disclosure Schedules. Except
as set forth in this Section and except for changes since the date of this
Agreement resulting from the exercise of Company Stock Options or Company
Warrants or the conversion of Company Preferred Stock or Company Convertible
Promissory Notes outstanding on such date, there are no outstanding (i) shares
of capital stock or other securities (voting or otherwise) of the Company, (ii)
securities of the Company convertible into or exchangeable for shares of capital
stock or securities (voting or otherwise) of the Company, or (iii) options,
warrants or other rights to acquire from the Company, directly or indirectly, or
obligations of the Company to issue, any capital stock or securities (voting or
otherwise), or any other securities convertible into or exchangeable for capital
stock or securities of the Company. All outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Company’s Amended and Restated Articles of Incorporation as amended by the
Certificates of Amendment (the “Company’s
Articles of Incorporation”) or any
agreement to which the Company is a party or by which the Company may be
bound.

SECTION
3.4 Authority;
Noncontravention  (a) The
Company has the corporate power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby. Except
for any required approval by the Company’s shareholders in connection with the
consummation of the Merger, all corporate acts and proceedings required to be
taken by or on the part of the Company to authorize the Company to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby have been duly and validly taken. This Agreement constitutes
a valid and binding agreement of the Company.

 

(b) The
execution and delivery of this Agreement does not and the consummation of the
transactions contemplated hereby will not conflict with or result in a violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any material
obligation under (i) any provision of the Company’s Articles of Incorporation,
(ii) any loan or credit agreement, note, mortgage, indenture, lease or other
Company Significant Contract or (iii) instrument, permit, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or its properties or assets, except, with respect to clauses (ii) and
(iii) only, for those which individually or in the aggregate would not
reasonably be expected to have a material adverse effect on the
Company.

(c) The
execution, delivery and performance by the Company of this Agreement and the
consummation of the Merger by the Company require no consent, approval, order or
authorization of, action by or in respect of, or registration or filing with,
any governmental body, court, agency, official or authority (each, a
“Governmental
Entity,”
collectively “Government
Entities”) other
than the filing of a certificate of merger with the California Secretary of
State and (ii) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
“HSR
Act”).

 

(d) The
execution and delivery of this Agreement and the consummation of the Merger will
not result in the creation of any Lien upon any asset of the Company.

(e) Except as
set forth in Section
3.4(e) of the Company Disclosure Schedule, no
consent, approval, waiver or other action by any person (other than the
governmental authorities referred to in (b) above) under any indenture, lease,
instrument or other material contract, agreement or document to which the
Company is a party or by which the Company is bound is required or necessary
for, or made necessary by reason of, the execution, delivery and performance of
this Agreement by the Company or the consummation of the Merger, except for
those which individually or in the aggregate would not reasonably be expected to
have a material adverse effect on the Company.

SECTION
3.5 Financial
Statements; Undisclosed Liabilities (a)
The
Company has furnished to the Parent true, correct and complete copies of: (i)
audited balance sheets of the Company and its subsidiaries as of December 31,
2002 and December 31 2003 and an unaudited balance sheet of the Company and its
subsidiaries as of December 31, 2004; and (ii) audited income statements of the
Company and its subsidiaries as of December 31, 2002 and December 31, 2003 and
an unaudited income statement of the Company and its subsidiaries for the year
ended December 31, 2004 (collectively, the “Company
Financial Statements”). The
Company Financial Statements have been prepared by the Company and its
subsidiaries on the basis of the books and records maintained by the Company and
its subsidiaries in the ordinary course of business in a manner consistently
used and applied throughout the periods involved. The Financial Statements have
been prepared in accordance with generally accepted accounting principles
(“GAAP”) and
fairly present in all material respects the financial condition of the Company
and its subsidiaries as at the respective dates thereof, except that the Company
and its subsidiaries’ unaudited balance sheet as of December 31, 2004 and income
statements for the twelve-month period ended December 31, 2004 are subject to
normal year end adjustments in the ordinary course of business, but none of
those adjustments are, or shall be, material. 

 

(b) Except
for liabilities (i) set forth in Section
3.5 of the Company Disclosure Schedule or (ii)
reflected in the Company’s audited financial statements as at, and for the
period ending, December 31, 2003, the Company has no material liabilities or
obligations, whether absolute, accrued, contingent or otherwise. Since December
31, 2003, the Company has incurred no material liabilities or obligations,
whether absolute, accrued, contingent or otherwise except as set forth in
Section
3.5 of the Company Disclosure Schedule. Any
such material liabilities or obligations incurred for the period from January 1,
2004 through December 31, 2004 were incurred in the ordinary course of the
Company’s business consistent with past practices and are reflected in the
Company Financial Statements in accordance with GAAP on the basis of the books
and records maintained by the Company and its subsidiaries in the ordinary
course of business in a manner consistently used and applied throughout the
periods involved. Any such material liabilities or obligations incurred since
December 31, 2004 were incurred (x) in the ordinary course of the Company’s
business consistent with past practices or (y) in connection with the
negotiation and consummation of this Agreement and the transactions contemplated
hereby.

 

SECTION
3.6 Company
Contracts

 

. (a)
Section
3.6 of the Company Disclosure Schedule lists
all Company Significant Contracts other than non-disclosure agreements and
non-solicitation agreements entered into in the ordinary course of business
which are not material to the Company. Each Company Significant Contract is
valid and binding on and enforceable against the Company (or, to the extent a
subsidiary of the Company is a party, such subsidiary) and, to the knowledge of
the Company, each other party thereto and is in full force and effect. Neither
the Company nor any of its subsidiaries is in breach or default under any
Company Significant Contract. Neither the Company nor any subsidiary of the
Company knows of, or has received notice of, any violation, default, right of
acceleration of any obligation or loss of a material benefit under (nor, to the
knowledge of the Company, does there exist any condition which with the passage
of time or the giving of notice or both would result in such a violation,
default, right of acceleration of any obligation or loss of a material benefit,
under) any Company Significant Contract by any other party thereto. Prior to the
date hereof, the Company has delivered to Parent true and complete copies of all
Company Significant Contracts. 

 

(b) As used
in this Agreement, “Contract” shall
mean any contract, note, bond, restrictive agreement of any kind, mortgage,
indenture, evidence of indebtedness, guarantee, make-well or make-whole
agreement, license agreement, lease, arrangement, commitment or other instrument
or obligation to which a person or any of its subsidiaries is a party or by
which such person or any of its subsidiaries is bound or to which any of such
person’s or any of its subsidiaries’ assets or properties are subject, in each
such case whether written or oral. As used in this Agreement, “Company
Contract” shall
mean any Contract of the Company or any of its subsidiaries. As used in this
Agreement, “Company
Significant Contract” shall
mean any Contract which is material to the Company including, without
limitation, each of the following: 

 

(i) any
Contract that (A) involves the payment or potential payment, pursuant to
the terms of any such Contract, by or to the Company or any of its subsidiaries,
of more than $50,000 individually or more than $200,000 in the aggregate and
(B) cannot be terminated within thirty (30) calendar days after giving
notice of termination without resulting in any material cost or penalty to the
Company or any of its subsidiaries;

 

(ii) any
Contract which contains provisions which in any non-de minimis manner restrict,
or may restrict, the conduct of business as presently conducted by the Company
or any of its subsidiaries;

 

(iii) any
Contract restricting in any way the right of the Company or any subsidiary to
engage in business or to compete in any business;

 

(iv) any
Contract providing for the indemnification or surety by the Company or any
subsidiary of the Company;

 

(v) any
strategic alliance, revenue sharing joint venture or partnership agreement of
the Company or any subsidiary of the Company;

 

(vi) any
Contract which grants any right of first or last refusal or right of first or
last offer or similar right or that limits or purports to limit the ability of
the Company or any of its subsidiaries to own, operate, sell, transfer, pledge
or otherwise dispose of any material amount of assets or business;

 

(vii) any
Contract providing for any material future payments that are conditioned, in
whole or in part, on a change of control of the Company or any of its
subsidiaries;

 

(viii)
any employment agreement or any agreement or arrangement with any officer,
director or key employee of the Company or any subsidiary of the
Company;

 

(ix) any
Contract of the Company or any of its subsidiaries providing for or pertaining
to employment or consultation services for a specified or unspecified term
except for (A)
Contracts involving payment of less than $50,000 individually or less than
$200,000 in the aggregate, and (B) Contracts which can be terminated within
thirty (30) calendar days after giving notice of termination without resulting
in any material cost or penalty to the Company or any of its subsidiaries,
including, without limitation, any material severance pay or post-employment
liabilities or obligations of the Company or any of its
subsidiaries;

 

(x) any
Contract pertaining to the use of or granting of any right to use or practice
any rights under any Intellectual Property of the Company, whether the Company
is the licensee or licensor thereunder, except for
Contracts under which the Company or any of its subsidiaries is a licensee or
“off-the-shelf” software provided that, to the
Company’s knowledge, there is no default under any such Contract;

 

(xi) any
Contract pursuant to which the Company or any of its subsidiaries leases or uses
any real property; 

 

(xii) any
Contract relating to Indebtedness of the Company or any of its subsidiaries in
excess of $50,000 or to preferred stock issued by the Company or any of its
subsidiaries (other than Indebtedness owing to or preferred stock owned by the
Company or any of its wholly-owned subsidiaries). As used in this Agreement the
term “Indebtedness” means,
with respect to a person, all obligations of such person (i) for borrowed
money, (ii) evidenced by notes, bonds, debentures or similar instruments,
(iii) for the deferred purchase price of goods or services (other than
trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases, (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any other person, and
(vi) make-well or make-whole agreements entered into on behalf of any other
person;

 

(xiii)
any Contract with distributors, dealers, manufacturers, manufacturer’s
representatives, sales agencies, franchisees, or pre-clinical or clinical trial
testing entities;

 

(xiv) any
Contract relating to (A) the future disposition or acquisition of any
assets or properties of the Company or any of its subsidiaries, other than
dispositions or acquisitions in the ordinary course of business consistent with
past practice, and (B) any merger or other type of business
combination;

 

(xv) any
Contract between or among the Company or any of its subsidiaries, on the one
hand, and any officer, director, employee or shareholder of the Company or any
of its subsidiaries, or any affiliate or associate of the Company (other than
the Company or any of its subsidiaries, which inter-company transactions are not
the subject of this clause), on the other hand;

 

(xvi) any
collective bargaining or similar labor Contracts;

 

(xvii)
any Contracts that (A) limit or contain restrictions on the ability of the
Company or any of its subsidiaries to declare or pay dividends on, to make any
other distribution in respect of or to issue or purchase, redeem or otherwise
acquire its capital stock, to incur Indebtedness, to incur or suffer to exist
any lien, to purchase or sell any assets and properties, to change the lines of
business in which it participates or engages or to engage in any business
combination or (B) require the Company or any of its subsidiaries to
maintain specified financial ratios or levels of net worth or other indicia of
financial condition;

 

(xviii)
any Contract that (A) involves the payment or potential payment, pursuant
to the terms of any such Contract, by or to the Company or any of its
subsidiaries, of more than $50,000 and (B) cannot be terminated within
thirty (30) calendar days after giving notice of termination without resulting
in any material cost or penalty to the Company or any of its subsidiaries; and

 

(xix) any
Contract not made in the ordinary course of business which is material to the
Company and its subsidiaries, taken as a whole, or which reasonably would be
expected (x) to delay the consummation of the Merger or any of the transactions
contemplated by this Agreement or (y) to have a material adverse effect on the
Company.

 

SECTION
3.7 Absence
of Certain Changes

 

. Except
for the execution and delivery of this Agreement and the transactions to take
place pursuant hereto on the Closing Date, since December 31, 2003, (i) there
has not been any material adverse change in the Company or any event which
either individually or when aggregated with other event(s) has or reasonably
would be expected to have a material adverse effect on the Company, or (ii)
there are not, to the Company’s knowledge, any facts, circumstances or events
that make it reasonably likely that the Company will not be able to fulfill its
obligations under this Agreement in all material respects. Without limiting the
foregoing, except as set forth in Section
3.7 of the Company Disclosure Schedule, there
has not occurred between December 31, 2003 and the date hereof: 

 

(i)  any
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company or any subsidiary not wholly owned
by the Company, or any direct or indirect redemption, purchase or other
acquisition by the Company or any subsidiary of any such capital stock of or any
option or warrant with respect to the Company or any subsidiary not wholly owned
by the Company;

 

(ii)  any
authorization, issuance, sale or other disposition by the Company or any
subsidiary of any shares of capital stock of or option or warrant with respect
to the Company or any subsidiary, or any modification or amendment of any right
of any holder of any outstanding shares of capital stock of or any option or
warrant with respect to the Company or any subsidiary;

 

(iii)  (x) any
increase in the salary, wages or other compensation of any officer, employee or
consultant of the Company or any subsidiary whose annual salary is, or after
giving effect to such change would be, $50,000 or more; (y) any
establishment or modification of (A) targets, goals, pools or similar
provisions in respect of any fiscal year under any compensation or benefit plan,
employment Contract or other employee compensation arrangement or
(B) salary ranges, increase guidelines or similar provisions in respect of
any compensation or benefit plan, employment Contract or other employee
compensation arrangement; or (z) any adoption, entering into, amendment,
modification or termination (partial or complete) of any compensation or benefit
plan except to the extent required by applicable law and, in the event
compliance with legal requirements presented options, only to the extent that
the option which the Company or subsidiary reasonably believed to be the least
costly was chosen; 

 

(iv)  (A) incurrences
by the Company or any of the subsidiaries of Indebtedness in an aggregate
principal amount exceeding $50,000 (net of any amounts discharged during such
period), or (B) any voluntary purchase, cancellation, prepayment or
complete or partial discharge in advance of a scheduled payment date with
respect to, or waiver of any right of the Company or any subsidiary under, any
Indebtedness of or owing to the Company or any subsidiary (in either case other
than any Indebtedness of the Company or a subsidiary owing to the Company or a
wholly-owned subsidiary);

 

(v)  any
physical damage, destruction or other casualty loss (whether or not covered by
insurance) affecting any of the plant, real or personal property or equipment of
the Company or any subsidiary in an aggregate amount exceeding
$50,000;

 

(vi)  any
material change in (x) any pricing, investment, accounting, financial
reporting, inventory, credit, allowance or tax practice or policy of the Company
or any subsidiary, (y) any method of calculating any bad debt, contingency
or other reserve of the Company or any subsidiary for accounting, financial
reporting or tax purposes or (z) the fiscal year of the Company or any
subsidiary;

 

(vii)  any
write-off or write-down of or any determination to write off or down any of the
assets and properties of the Company or any subsidiary in an aggregate amount
exceeding $50,000;

 

(viii)  any
acquisition or disposition of, or incurrence of a lien upon, any assets and
properties of the Company or any subsidiary, other than in the ordinary course
of business consistent with past practice;

 

(ix)  any
(x) amendment of the certificate or articles of incorporation or by-laws
(or other comparable corporate charter documents) of the Company or any
subsidiary, (y) reorganization, liquidation or dissolution of the Company
or any subsidiary or (z) merger or other type of business combination
involving the Company or any subsidiary and any other person (other than the
Company or another wholly-owned subsidiary of the Company);

 

(x)  any
entering into, amendment, modification, termination (partial or complete) or
granting of a waiver under or giving any consent with respect to any Contract
which is required (or had it been in effect on the date hereof would have been
required) to be disclosed in the Disclosure Schedule pursuant to Section
3.6;

 

(xi)  any
lapse, or any material breach or default under, or the incurrence of any
material penalty or loss or diminishment of rights under, or the occurrence of
any event which, with notice or the passage of time or both, could constitute
the same, with respect to any Company Significant Contract;

 

(xii)  capital
expenditures or commitments for additions to property, plant or equipment of the
Company and any subsidiary constituting capital assets in an aggregate amount
exceeding $50,000, in the aggregate;

 

(xiii)  any
commencement or termination by the Company or any subsidiary of any line of
business;

 

(xiv)  any
transaction by the Company or any subsidiary with any officer, director, or
shareholder of the Company or any subsidiary, or any affiliate or associate of
any of them (other than the Company or any subsidiary) other than on an
arm’s-length basis on terms substantially the same as those available from
unrelated third parties; or

 

(xv)  any
entering into of an agreement to do or engage in any of the foregoing after the
date hereof.

 

SECTION
3.8 Permits;
Compliance with Applicable Laws

 

(a) The
Company and its subsidiaries own and/or possess all permits, licenses,
variances, authorizations, exemptions, orders, registrations and approvals of
all Governmental Entities which are required for the operation of the respective
businesses of the Company and its subsidiaries (the "Permits") as
presently conducted, except for those the failure to own or possess would not
reasonably be expected to have a material adverse effect on the Company. Each
such Permit is listed in Section
3.8 of the Company Disclosure Schedule. Each of
the Company and its subsidiaries is in compliance with the terms of its Permits
and all the Permits are in full force and effect and no suspension, modification
or revocation of any of them is pending or, to the knowledge of the Company,
threatened, except where the failure to be in full force and effect individually
or in the aggregate would not reasonably be expected to have a material adverse
effect on the Company.

 

(b) Each of
the Company and its subsidiaries is in compliance in all respects with all
applicable statutes, laws, regulations, ordinances, Permits, rules, writs,
judgments, orders, decrees and arbitration awards of each Governmental Entity
applicable to the Company or its subsidiaries, except where the failure to be in
compliance, individually or in the aggregate, would not reasonably be expected
to have a material adverse effect on the Company.

 

(c) Except
for filings with respect to Taxes which is the subject of Section 3.10, and not
covered by this Section 3.8(c), the Company and each of its subsidiaries have
filed all regulatory reports, schedules, forms, registrations and other
documents, together with any amendments required to be made with respect
thereto, that they were required to file with each Governmental Entity (the
"Other
Company Documents"), and
have paid all fees and assessments, if any, due and payable in connection
therewith, except where the failure to make such payments and filings
individually or in the aggregate would not have a material adverse effect on the
Company. 

 

SECTION
3.9 Absence
of Litigation (a) As
used in this Agreement with respect to any person, an “Action” is any
litigation, action, suit, case, proceeding, administrative charge or citation,
investigation or arbitration against, relating to, or affecting such person or
any of its subsidiaries or any of their respective assets or properties.
Section
3.9(a) of the Company Disclosure Schedule contains
a true and current summary description of each pending and, to the Company’s
knowledge, threatened Action with respect to the Company or any of its
subsidiaries.

 

(b)
Except as
disclosed in Section
3.9(b) of the Company Disclosure Schedule, there
is no Action relating to the Company or any of its subsidiaries by or before any
Governmental Entity or otherwise pending or, to the best of the Company’s
knowledge, threatened, which could reasonably be expected to have a material
adverse effect on the Company nor, to the best of the Company’s knowledge, are
there any facts or circumstances which could reasonably be expected to give rise
to any such Action.

 

(c)
Except as
disclosed in Section
3.9(c) of the Company Disclosure Schedule, there
is no Action relating to the Company or any of its subsidiaries by or before any
Governmental Entity or otherwise pending or, to the best of the Company’s
knowledge, threatened, which could reasonably be expected to delay, prohibit,
make illegal, or have a material adverse effect on the consummation of this
Agreement or the transactions contemplated hereby, or the benefits to the
parties hereto intended hereby and thereby.

 

(d) Prior to
the execution of this Agreement, the Company has delivered to Parent all
responses of counsel for the Company and its subsidiaries to auditors’ requests
for information delivered in connection with the Company Financial Statements
(together with any updates provided by such counsel) regarding Actions pending
or threatened against, relating to or affecting the Company or any of its
subsidiaries.

 

SECTION
3.10 Tax
Matters

 

(a) Each of
the Company and each of its subsidiaries has (i) timely filed (or there have
been timely filed on its behalf) with the appropriate Governmental Entities all
United States federal income and other Tax Returns required to be filed by it
(giving effect to all extensions), except where the failure to file any such Tax
Returns in a timely fashion or at all would not reasonably be expected to have a
material adverse effect on the Company, and such Tax Returns are true, correct
and complete in all material respects; (ii) timely paid in full (or there has
been timely paid in full on its behalf) all United States federal income and
other material Taxes required to have been paid by it; and (iii) made adequate
provision (or adequate provision has been made on its behalf) for all accrued
Taxes not yet due. The accruals and provisions for Taxes reflected in the
Company’s Financial Statements are adequate in accordance with GAAP for all
Taxes accrued or accruable through the date of such statements.

 

(b) As of the
date of this Agreement, no Federal, state, local or foreign audits, suits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or any of its subsidiaries,
and neither the Company nor any subsidiary of the Company has received a written
notice of any material pending or proposed claims, audits or proceedings with
respect to Taxes.

 

(c) No
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Tax has been proposed, asserted, or assessed in
writing by any Governmental Entity against, or with respect to, the Company or
any of its subsidiaries. There is no action, suit or audit now in progress,
pending or, to the knowledge of the Company, threatened against or with respect
to the Company or any of its subsidiaries with respect to any material
Tax.

 

(d) Neither
the Company nor any of its subsidiaries has been included in any "consolidated,"
"unitary" or "combined" Tax Return (other than Tax Returns which include only
the Company and any of its subsidiaries) provided for under the laws of the
United States, any foreign jurisdiction or any state or locality with respect to
Taxes for any taxable year.

 

(e) No
election under Section 341(f) of the Code has been made by the Company or any of
its subsidiaries.

 

(f) No claim
has been made in writing by any Governmental Entities in a jurisdiction where
the Company or any of its subsidiaries does not file Tax Returns that any such
entity is, or may be, subject to taxation by that jurisdiction.

 

(g) Each of
the Company and each of its subsidiaries has made available to Parent correct
and complete copies of (i) all of their Tax Returns filed within the past three
years, (ii) all audit reports, letter rulings, technical advice memoranda and
similar documents issued by a Governmental Entity within the past three years
relating to the Federal, state, local or foreign Taxes due from or with respect
to the Company or any of its subsidiaries, and (iii) any closing letters or
agreements entered into by the Company or any of its subsidiaries with any
Governmental Entities within the past three years with respect to
Taxes.

 

(h) Neither
the Company nor any of its subsidiaries has received any notice of deficiency or
assessment from any Governmental Entity for any amount of Tax that has not been
fully settled or satisfied, and to the knowledge of the Company and its
subsidiaries no such deficiency or assessment is proposed.

 

(i) For
purposes of this Agreement:

 

(i) 
"Tax" or
"Taxes" shall
mean shall mean all federal, state, county, local, foreign and other taxes of
any kind whatsoever (including, without limitation, income, profits, premium,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production, transfer, license, stamp, environmental, withholding,
employment, unemployment compensation, payroll related and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustment related to
any of the foregoing.

 

(ii) "Tax
Return" shall
mean any return, information report or filing with respect to Taxes, including
any schedules attached thereto and including any amendments
thereof.

 

SECTION
3.11 Employee
Benefit Plans

 

 

(a) As used
in this Agreement, the term “Employee
Plan” shall
mean, with respect to any person, all pension, stock option, stock purchase,
phantom stock, bonus, compensation, benefit, welfare, profit-sharing,
retirement, disability, vacation, severance, hospitalization, medical, surgical,
dental, optical, psychiatric, insurance, incentive, deferred compensation, death
and other similar fringe or employee benefit plans, funds, programs or
arrangements, whether written or oral, in each of the foregoing cases which
covers, is maintained for the benefit of, or relates to any or all current or
former employees of such person or any other entity (an "ERISA
Affiliate")
related to such person under Section 414(b), (c), (m) and (o) of the Code,
including, without limitation, subsidiaries of such person. Section
3.11 of the Company Disclosure Schedule contains
a true and complete list of all of the Company’s Employee Plans. Section
3.11 of the Company Disclosure Schedule
identifies and includes but is not limited to, each of the Company’s Employee
Plans that is subject to Section 302 or Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or
Section 412 of the Code. Neither the Company nor any ERISA Affiliate of the
Company has any commitment or formal plan, whether or not legally binding, to
create any additional Employee Plan or modify or change any existing Employee
Plan other than as may be required by the express terms of such Employee Plan or
applicable law.

 

(b) With
respect to each Employee Plan that has been qualified or is intended or required
to be qualified under the Code or that is an "Employee Benefit Plan" within the
meaning of Section 3.3 of ERISA, such Employee Plan has been duly executed and
adopted by all necessary and appropriate action of the Board of Directors of the
Company (or a duly constituted committee thereof).

 

(c) With
respect to the Employee Plans, all required contributions for all periods ending
before the Closing Date have been or will be paid in full by the Closing Date.
Subject only to normal retrospective adjustments in the ordinary course, all
required insurance premiums have been or will be paid in full with regard to
such Employee Plans for policy years or other applicable policy periods ending
on or before the Closing Date by the Closing Date. As of the date hereof, none
of the Employee Plans has unfunded benefit liabilities, as defined in Section
4001(a)(16) of ERISA. 

 

(d) The
Company has no "multiemployer plans," as defined in Section 3(37) or Section
4001(a)(3) of ERISA or Section 414 (“MultiEmployer
Plans”), and
never has had any such plans.

 

(e) With
respect to each Employee Plan (i) no prohibited transactions that are not exempt
under Section 406, et
seq. of ERISA
or Section 4975 of the Code have occurred or are expected to occur as a result
of the Merger or the transactions contemplated by this Agreement, (ii) no
action, suit, grievance, arbitration or other type of litigation, or claim with
respect to the assets of any Employee Plan (other than routine claims for
benefits made in the ordinary course of plan administration for which plan
administrative review procedures have not been exhausted or relating to
qualified domestic relations orders) is pending or, to the knowledge of the
Company, threatened or imminent against the Company, any ERISA Affiliate or any
fiduciary, as such term is defined in Section 3(21) of ERISA ("Fiduciary"),
including, but not limited to, any action, suit, grievance, arbitration or other
type of litigation, or claim regarding conduct that allegedly interferes with
the attainment of rights under any Employee Plan and (iii) the Company has no
knowledge of any facts which would reasonably be expected to give rise to or
could reasonably be expected to give rise to any such actions, suits,
grievances, arbitration or other type of litigation, or claims with respect to
any Employee Plan. To the knowledge of the Company, neither the Company, nor its
directors, officers, employees or any Fiduciary has any material amounts of
liability for failure to comply with ERISA or the Code for any action or failure
to act in connection with the administration or investment of such plan. None of
the Employee Plans is subject to any pending investigations or to the knowledge
of the Company threatened investigations from any Governmental Agencies who
enforce applicable laws under ERISA and the Code.

 

(f) Each of
the Employee Plans is, and has been, operated in accordance with its terms and
each of the Employee Plans, and administration thereof, is, and has been in
compliance with the requirements of any and all applicable statutes, orders or
governmental rules or regulations currently in effect, including, but not
limited to, ERISA and the Code, except where the failure to comply individually
or in the aggregate would not have a material adverse effect on the Company. All
required reports and descriptions of the Employee Plans (including but not
limited to Form 5500 Annual Reports, Form 1024 Application for Recognition of
Exemption Under Section 501(a), Summary Annual Reports and Summary Plan
Descriptions) have been timely filed and distributed as required by ERISA and
the Code. Any notices required by ERISA or the Code or any other state or
federal law or any ruling or regulation of any state or federal administrative
agency with respect to the Employee Plans, including but not limited to any
notices required by Section 204(h), Section 606 or Section 4043 of ERISA or
Section 4980B of the Code, have been appropriately given, except where the
failure to comply individually or in the aggregate would not have a material
adverse effect on the Company.

 

(g) Except in
the case of a master or prototype plan, the Internal Revenue Service (the
"IRS") has
issued a favorable determination letter with respect to each Employee Plan
intended or required to be "qualified" within the meaning of Section 401(a) of
the Code that has not been revoked and, to the knowledge of the Company, no
circumstances exist that could adversely affect the qualified status of any such
plan and the exemption under Section 501(a) of the Code of the trust maintained
thereunder. Each Employee Plan intended to satisfy the requirements of Section
125, 501(c)(9) or 501(c)(17) of the Code has satisfied such requirements in all
material respects.

 

(h) With
respect to each Employee Plan to which the Company or any ERISA Affiliate made,
or was required to make, contributions on behalf of any employee during the
five-year period ending on the last day of the most recent plan year end prior
to the Closing Date, (i) no liability under Title IV or Section 302 of ERISA has
been incurred by the Company or any ERISA Affiliate that has not been satisfied
in full, and (ii) to the knowledge of the Company, no condition exists that
presents a material risk to the Company or any ERISA Affiliate of incurring any
such liability and (iii) the present value of accrued benefits under such plan,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such plan’s actuary with respect to such
plan did not exceed, as of its latest valuation date, the then current value of
the assets of such plan allocable to such accrued benefits. No Employee Plan or
any trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recently ended fiscal
year.

 

(i) No
Employee Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by Section 4980B of the Code, Section 601 of ERISA or other applicable
law, (ii) death benefits under any "pension plan," (iii) benefits the full cost
of which is borne by the employee (or his beneficiary) or (iv) Employee Plans
that can be amended or terminated by the Company without consent. The Company
does not have any current or projected liability with respect to post-employment
or post-retirement welfare benefits for retired, former, or current employees of
the Company.

 

(j) No
material amounts payable under the Employee Plans will fail to be deductible for
Federal income tax purposes by virtue of Section 162(m) or Section 280(g) of the
Code except as expressly set forth in Section 3.11(j) of the Company Disclosure
Schedule .

 

(k) To the
extent that the Company or any of its subsidiaries is deemed to be a fiduciary
with respect to any Plan that is subject to ERISA, the Company or such
subsidiary (i) during the past five years has complied with the requirements of
ERISA and the Code in the performance of its duties and responsibilities with
respect to such employee benefit plan and (ii) has not knowingly caused any of
the trusts for which it serves as an investment manager, as defined in Section
3(38) of ERISA, to enter into any transaction that would constitute a
"prohibited transaction" under Section 406 et
seq. of ERISA
or Section 4975 of the Code, with respect to any such trusts, except for
transactions that are the subject of a statutory or administrative
exemption.

 

(l) No person
will be entitled to a "gross up" or other similar payment in respect of excise
taxes under Section 4999 of the Code with respect to the transactions
contemplated by this Agreement.

 

(m) None of
the Employee Plans have been completely or partially terminated except in
compliance with applicable law in all material respects, there are no remaining
liabilities with respect to any such complete or partial termination, and none
of the Employee Plans has been the subject of a "reportable event" as that term
is defined in Section 4043 of ERISA. No amendment has been adopted which would
require the Company or any ERISA Affiliate to provide security pursuant to
Section 307 of ERISA or Section 401(a)(29) of the Code. 

 

SECTION
3.12 Labor
Matters

 

(a) With
respect to employees of the Company and its subsidiaries: (i) to the knowledge
of the Company, no senior executive or key employee has any plans to terminate
employment with the Company or any of its subsidiaries; (ii) there is no unfair
labor practice charge or complaint against the Company or any of its
subsidiaries pending or, to the knowledge of the Company or any of its
subsidiaries, threatened before the National Labor Relations Board or any other
comparable Governmental Entity; (iii) there is no demand for recognition made by
any labor organization or petition for election filed with the National Labor
Relations Board or any other comparable Governmental Entity; (iv) there are, and
have been, no collective bargaining agreements; and (v)
there is no litigation, arbitration proceeding, governmental investigation,
administrative charge, citation or action of any kind pending or, to the
knowledge of the Company, proposed or threatened against the Company or any of
its subsidiaries relating to employment, employment practices, terms and
conditions of employment or wages, benefits, severance and hours.

 

(b) Section
3.12(b) of the Company Disclosure Schedule lists
the name, title, date of employment and current annual salary of each current
salaried employee whose total annual compensation exceeds $100,000 (whether cash
or otherwise, including such items as options) of each current officer and
director of the Company or any of its subsidiaries, and each current salaried
employee of the Company or any of its subsidiaries. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
and thereby will not (i) result in any payment (including severance,
unemployment compensation, tax gross-up, bonus or otherwise) becoming due to any
current or former director, employee or independent contractor of the Company or
any of its subsidiaries, from the Company or any of its subsidiaries under any
Employee Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Employee Plan or otherwise, or (iii) result in the
acceleration of the time of payment, exercise or vesting of any such
benefits.

 

(c) Section
3.12(c) of the Company Disclosure Schedule lists
all contracts, agreements, plans or arrangements covering any employee, officer
or director of the Company or its subsidiaries containing “change of control,”
“stay-put,” transition, retention, severance or similar provisions, and sets
forth the names and titles of all such employees, officers or directors, the
amounts payable under such provisions, whether such provisions would become
payable as a result of the Merger and the transactions contemplated by this
Agreement, and when such amounts would be payable to such employees, officers or
directors, all of which are in writing, have heretofore been duly approved by
the Company’s Board of Directors, and true and complete copies of all of which
have heretofore been delivered to Parent. There is no contract, agreement, plan
or arrangement (oral or written) covering any employee, officer or director of
the Company that individually or collectively could give rise to the payment of
any amount that would not be deductible pursuant to the terms of Section 280G of
the Code.

 

SECTION
3.13 Environmental
Matters Except
for such matters which would not, individually or in the aggregate, reasonably
be expected to result in a material adverse effect on the Company:

 

(a) (i) The
Company and its subsidiaries are in compliance with all applicable Environmental
Laws; (ii) neither the Company nor any of its subsidiaries has received any
written communication from any person or governmental entity that alleges that
the Company or any of its subsidiaries are not in compliance with applicable
Environmental Laws; and (iii) there have not been any Releases in any reportable
quantity, or in violation of any Environmental Law, of Hazardous Substances by
the Company or any of its subsidiaries, or, to the knowledge of the Company, by
any other party at any property currently or formerly owned, leased or operated
by the Company or any of its subsidiaries that occurred during the period of the
Company’s or any of its subsidiaries’ ownership, lease or operation of such
property or, to the knowledge of the Company, prior thereto, and no property now
or previously owned or leased by the Company or any subsidiary is listed or
proposed for listing on the National Priorities List promulgated pursuant to
CERCLA or on any similar state list of sites requiring investigation or
clean-up.

(b) The
Company and its subsidiaries have all Environmental Permits necessary for the
conduct and operation of their business, and all such permits are in good
standing or, where applicable, a renewal application has been timely filed and
is pending agency approval, and the Company and its subsidiaries are in
compliance with all terms and conditions of all such Environmental Permits and
are not required to make any expenditure in order to obtain or renew any
Environmental Permits.

(c) There are
no Environmental claims pending or, to the knowledge of the Company, threatened,
against the Company or any of its subsidiaries, or against any real or personal
property or operation that the Company or any of its subsidiaries owns, leases
or manages.

(d)  Except as
set forth on Section
3.13(d) of the Company Disclosure Schedules, neither
the Company, any of its subsidiaries, nor, to the knowledge of the Company, any
prior owner or lessee of any property now or previously owned or leased by the
Company or any subsidiary, has handled any Hazardous Substance on any property
now or previously owned or leased by the Company or any subsidiary; and, without
limiting the foregoing, to the knowledge of the Company, (i) no
polychlorinated biphenyl is or has been present, (ii) no asbestos is or has
been present, and (iii) there are no underground storage tanks, active or
abandoned.

(e)
 To the
knowledge of the Company, neither the Company nor any subsidiary has transported
or arranged for the transportation of any Hazardous Substance to any location
which is the subject of any Action that could lead to claims against Parent,
Merger Sub, the Company or any subsidiary for clean-up costs, remedial work,
damages to natural resources or personal injury claims, including, but not
limited to, claims under CERCLA.

(f) There are
no Liens arising under or pursuant to any Environmental Law on any real property
owned or leased by the Company or any subsidiary, and no action of any
Governmental Authority has been taken or, to the knowledge of the Company, is in
process which could subject any of such properties to such Liens, and neither
the Company nor any subsidiary would be required to place any notice or
restriction relating to the presence of any Hazardous Substance at any property
owned by it in any deed to such property.

(g)
There
have been no environmental investigations, studies, audits, tests, reviews or
other analyses conducted by, or which are in the possession of, the Company or
any subsidiary in relation to any property or facility now or previously owned
or leased by the Company or any subsidiary which have not been delivered to
Parent prior to the execution of this Agreement.

(h) As used
in this Agreement:

 

(i) "Environmental
Laws" shall
mean any and all binding and applicable local, municipal, state, federal or
international law, statute, treaty, directive, decision, judgment, award,
regulation, decree, rule, code of practice, guidance, order, direction, consent,
authorization, permit or similar requirement, approval or standard concerning
(A) occupational, consumer and/or public health and safety, and/or (B)
environmental matters (including without limitation clean-up standards and
practices), with respect to operations, buildings, equipment, soil, sub-surface
strata, air, surface water, or ground water, whether set forth in applicable law
or applied in practice, whether to facilities such as those of the Company
Properties in the jurisdictions in which the Company Properties are located or
to facilities such as those used for the transportation, storage or disposal of
Hazardous Substances generated by the Company and/or its subsidiaries or
otherwise.

 

(ii) “Environmental
Permits” shall
mean Permits required by Environmental Laws.

 

(iii) "Hazardous
Substances" shall
mean any and all chemicals, materials, substances, wastes, dangerous substances,
hazardous substances, toxic substances, radioactive substances, hazardous
wastes, special wastes, controlled wastes, oils, petroleum and petroleum
products, hazardous chemicals and any other materials which are regulated by the
Environmental Laws or otherwise found or determined to be potentially harmful to
human health or the environment, and any other chemical, material, substance or
waste, exposure to which is now or hereafter prohibited, limited or regulated by
any Governmental Authority.

 

(iv) “Release” shall
mean any spilling, leaking, pumping, emitting, emptying, discharging, injecting,
escaping, leaching, migrating, dumping or disposing of Hazardous Substances
(including, without limitation, the abandonment or discarding of barrels,
containers or other closed receptacles containing Hazardous Substances) into the
environment.

 

SECTION
3.14 Intellectual
Property

 

(a) Section
3.14(a) of the Company Disclosure Schedule sets
forth, for the Intellectual Property (as defined below) owned by or licensed by
the Company or any of its subsidiaries, a complete and accurate list (including
date of registration, expiration date, and whether owned or licensed) of all
U.S. and foreign (i) patents and patent applications, (ii) trademark or service
mark registrations and applications, (iii) copyright registrations and
applications, and (iv) Internet domain names. To the knowledge of the Company,
the Company or one of its subsidiaries owns or has the valid right to use all
patents and patent applications, trademarks, service marks, trademark or service
mark registrations and applications, trade names, logos, designs, Internet
domain names, slogans and general intangibles of like nature, together with all
goodwill related to the foregoing, copyrights, copyright registrations, renewals
and applications, Software (as defined below), technology, trade secrets and
other confidential information, know-how, proprietary processes, formulae,
algorithms, models and methodologies, licenses, agreements and all other
proprietary rights (collectively, the "Intellectual
Property"), owned
by the Company or used in the business of the Company as it currently is
conducted. "Software" means
any and all (i) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code, (ii) databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise, (iii) descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing, (iv) the technology supporting and content contained on
any owned or operated Internet site(s), and (v) all documentation, including
user manuals and training materials, relating to any of the foregoing. The
Company and its subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of their trade secrets. Neither the
Company nor any subsidiary is, or has received any notice that it is, in default
(or with the giving of notice or lapse of time or both, would be in default)
under any license to use such Intellectual Property, nor is there any default
(or any condition which, with the giving of notice or lapse of time or both,
would constitute a default) under any license out by the Company of any such
Intellectual Property. This Agreement and the transactions contemplated hereby
will not conflict with, or result in a default in respect of, or a diminishment
of rights with respect to (whether with the giving of notice or lapse of time or
both), any Intellectual Property licensed by the Company.

 

(b) As of the
date hereof, all of the Intellectual Property owned by the Company or one of its
subsidiaries is free and clear of all Liens, except as set forth on Section
3.14(b)(i) of the Company Disclosure Schedule. The
Company or one of its subsidiaries is listed in the records of the appropriate
United States, state or, to the Company’s knowledge, foreign agency as, the sole
owner of record for each application and registration listed in Section
3.14(a) of the Company Disclosure Schedule.

 

(c) All of
the registrations owned by the Company and listed in Section
3.14(a) of the Company Disclosure Schedule are
valid, subsisting, enforceable, in full force and effect, and have not been
cancelled, expired, abandoned or otherwise terminated and all renewal fees in
respect thereof have been duly paid and are currently in compliance with all
formal legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications). There is no
pending or, to the Company’s knowledge, threatened opposition, interference,
invalidation or cancellation proceeding before any court or registration
authority in any jurisdiction against the registrations and applications owned
by the Company and listed in Section
3.14(a) of the Company Disclosure Schedule or, to
the Company’s knowledge, against any other Intellectual Property used by the
Company or its subsidiaries. 

 

(d) To the
knowledge of the Company, the conduct of the Company’s and its subsidiaries’
business as currently conducted or planned by the Company to be conducted does
not, in any material respect, infringe upon (either directly or indirectly such
as through contributory infringement or inducement to infringe), dilute,
misappropriate or otherwise violate any Intellectual Property owned or
controlled by any third party.

 

(e) To the
Company’s knowledge, no third party is misappropriating, infringing, diluting,
or violating any Intellectual Property owned by or licensed to or by the Company
or its subsidiaries and no such claims have been made against a third party by
the Company or its subsidiaries.

 

(f) Each
material item of Software, which is used by the Company or its subsidiaries in
connection with the operation of their businesses as currently conducted, is
either (i) owned by the Company or its subsidiaries, (ii) currently in the
public domain or otherwise available to the Company without the need of a
license, lease or consent of any third party, or (iii) used under rights granted
to the Company or its subsidiaries pursuant to a written agreement, license or
lease from a third party.

 

(g) Section
3.14 of the Company Disclosure Schedule sets
forth Company's product candidates (the "Company
Products") except
for any category of Company Products specifically indicated to be excluded on
that Schedule (Company Products in a category so excluded are hereinafter
referred to as “Excluded
Company Products”), and
each Company Product (other than the Excluded Company Products) is in the phase
of clinical trials as set forth in Section
3.14. of the Company Disclosure Schedule. To the
knowledge of the Company, the consummation of the Merger and the transactions
contemplated in this Agreement will not alter or impair the Company’s ability
with respect to the Company’s Intellectual Property, the Company Products or the
development of the Company Products in any respect.

 

SECTION
3.15 Insurance
Matters

 

. The
Company and its subsidiaries have all material primary insurance with
financially sound and nationally recognized insurance carriers providing
insurance coverage that is customary in amount and scope for other companies in
the industry in which the Company and its subsidiaries operate. All such
insurance policies are listed in Section
3.15 of the Company Disclosure Schedule and are
in full force and effect, all premiums due and payable thereon have been paid
and no written or oral notice of cancellation or termination has been received
and is outstanding. The insurance coverage provided by the policies listed in
Schedule
3.15 of the Company Disclosure Schedule will not
terminate or lapse by reason of the transactions contemplated by this Agreement.
Neither the Company nor any subsidiary has received notice that any insurer
under any policy listed in Schedule
3.15 of the Company Disclosure Schedule is
denying liability with respect to a claim thereunder or defending under a
reservation of rights clause.

 

SECTION
3.16 Transactions
with Affiliates

 

. Except
as disclosed in Section
3.16 of the Company Disclosure Schedule, there
are (i) no outstanding amounts payable to or receivable from, or advances by the
Company or any of its subsidiaries to, and neither the Company nor any of its
subsidiaries is otherwise a creditor of or debtor to, any officer, director, or
shareholder of the Company or any of its subsidiaries, or any affiliate or
associate of any of them (any such person, a “Related
Person”), other
than as part of the normal and customary terms of such persons’ employment or
service as an officer, director or employee of the Company or any of its
subsidiaries; (ii) no Related Person provides or causes to be provided any
assets, services or facilities to the Company or any subsidiary;
(iii) neither the Company nor any subsidiary provides or causes to
be provided any assets, services or facilities to any Related Person; and
(iv) neither the Company nor any subsidiary beneficially owns, directly or
indirectly, any assets or property of any Related Person, that would be required
to be disclosed pursuant to Item 404 of Regulation S-K of the Exchange Act if
the Company were subject to Regulation S-K. Except as disclosed in Section 3.16
of the Company Disclosure Schedule, each of
the liabilities
and transactions listed in Section 3.16
of the Company Disclosure Schedule was
incurred or engaged in, as the case may be, on an arm’s-length
basis.

 

SECTION
3.17 Voting
Requirements

 

. Except
as set forth in Section
3.17 of the Company Disclosure Schedule, the
affirmative vote (in person or by duly authorized and valid proxy at the Company
Shareholders Meeting) of the holders of a majority of the outstanding shares of
Company Common Stock, the holders of a majority of the outstanding shares of the
Company’s Preferred Stock and the holders of a majority of the outstanding
shares of the Company’s Preferred Stock expressly excluding the shares of
Company Series E Preferred Stock, voting together as a single class, in favor of
the adoption of this Agreement is the only vote of the holders of any class or
series of the Company’s capital stock required by applicable law and the
Company’s organizational instruments to duly effect such adoption, and the
number of shares that must be voted in favor of the adoption of this Agreement
by each class of the Company’s securities are set forth in Section
3.17 of the Company Disclosure Schedule.

 

SECTION
3.18 Brokers

 

. Except
as set forth in Section
3.18 of the Company Disclosure Schedule, no
broker, investment banker, financial advisor, finder, consultant or other person
is entitled to any broker’s, finder’s, financial advisor’s or other similar fee,
compensation or commission, however and whenever payable, in connection with the
Merger and the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. 

 

SECTION
3.19 Real
Property

 

.
(a)
Each of
the Company and its subsidiaries has valid leaseholds in all real estate leased
by it, other than Permitted Liens. Neither the Company nor any of its
subsidiaries owns any real property. Section
3.19(a) of the Company Disclosure Schedule sets
forth a complete list of all real property leased, subleased, or otherwise
occupied or used by the Company and its Subsidiaries as lessee. 

 

(b) As used
in this Agreement, “Permitted
Liens” shall
mean: (i) Liens for Taxes not yet due or delinquent or as to which there is a
good faith dispute and for which there are adequate provisions on the books and
records of the Company or Parent, as the case may be, in accordance with GAAP,
(ii) with respect to real property, any Lien, encumbrance or other title defect
which is not in a liquidated amount (whether material or immaterial) and which
does not, individually or in the aggregate, interfere materially with the
current use or materially detract from the value or marketability of such
property (assuming its continued use in the manner in which it is currently
used) and (iii) inchoate materialmen’s, mechanics’, carriers’, workmen’s and
repairmen’s liens arising in the ordinary course and not past due and payable or
the payment of which is being contested in good faith by appropriate
proceedings. As used with respect to real property, the term “Permitted
Liens” shall
also include any Lien reflected (A) on the Company’s and its subsidiaries’ or
Parent’s and its subsidiaries’, as the case may be, title reports and (B) in
Section
3.19(b)(i) of the Company Disclosure Schedule or
Section
4.19 of the Parent Disclosure Schedule, as the
case may be,, provided, that
none of the same shall materially interfere with the use of such real property
by the Company or any of its subsidiaries or Parent or any of its subsidiaries,
as the case may be, as the same is currently used or planned to be used, and
that none of the same materially detracts from the economic value of such real
property.

 

SECTION
3.20 Tangible
Personal Property. Except
as would not materially impair the Company and its operations or the operations
of its subsidiaries, the machinery, equipment, furniture, fixtures and other
tangible personal property (the "Tangible
Personal Property") owned,
leased or used by the Company or any of its subsidiaries is in the aggregate
sufficient and adequate to carry on their respective businesses in all material
respects as presently conducted and is, in the aggregate and in all material
respects, in good operating condition and repair, normal wear and tear excepted.
Section
3.20 of the Company Disclosure Schedule lists
the Company’s Tangible Personal Property having a replacement cost of not less
than $500 for each item. The Company and its subsidiaries are in possession of
and have good title to, or valid leasehold interests in or valid rights under
contract to use, the Tangible Personal Property material to the Company and its
subsidiaries, taken as a whole, free and clear of all Liens, other than
Permitted Liens. No related party owns any Tangible Personal Property utilized
by the Company in its business as currently conducted.

 

SECTION
3.21 Investment
Company. Neither
the Company nor any of its subsidiaries is an investment company required to be
registered as an investment company pursuant to the Investment Company
Act.

 

SECTION
3.22 Board
Approval. Pursuant
to meetings duly noticed and convened in accordance with all applicable laws and
at each of which a quorum was present, the Board of Directors of the Company,
after full and deliberate consideration, has (i) duly approved this Agreement
and resolved that the Merger and the transactions contemplated hereby are fair
to, advisable and in the best interests of the Company’s shareholders, (ii)
resolved to recommend that the Company’s shareholders approve the Merger and the
transactions contemplated hereby and (iii) directed that the Merger be submitted
for consideration by the holders of Company Common Stock and Company Preferred
Stock.

 

SECTION
3.23 Books
and Records. Each of
the Company and the subsidiaries maintains and has maintained accurate books and
records in accordance with GAAP reflecting its assets and liabilities and
accounts, notes and other receivables and inventory are recorded accurately, and
proper and adequate procedures are implemented to effect the collection thereof
on a current and timely basis. 

 

SECTION
3.24 Accuracy
of Information. To the
knowledge of the Company, neither this Agreement, the Company Disclosure
Schedule nor any other document, schedule, exhibit, certificate or instrument
provided by the Company or any of the Company’s subsidiaries or any of their
respective employees or agents to Parent in connection with the transactions
contemplated hereby contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained therein, not
misleading. None of the information supplied or to be supplied by the Company in
writing specifically for inclusion or incorporation by reference in (i) the Form
S-4 will, at the time the Form S-4 becomes effective under the Securities Act,
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,
not misleading, except that no representation or warranty is made by the Company
with respect to statements made based on information supplied by Parent
specifically for inclusion or incorporation by reference in the Form S-4.

 

ARTICLE
IV

 

REPRESENTATIONS
AND WARRANTIES OF PARENT

 

Except as
set forth on the Disclosure Schedule delivered by Parent to the Company prior to
the execution of this Agreement (the "Parent
Disclosure Schedule") and
making specific reference to the particular subsection(s) of this Agreement to
which exception is being taken, Parent
hereby represents and warrants to the Company as follows:

SECTION
4.1 Organization,
Standing and Corporate Power.

 

(a) Each of
Parent, its subsidiaries and Merger Sub is a corporation or other legal entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate or other
power, as the case may be, and requisite authority to carry on its business as
presently being conducted. Each of Parent and its subsidiaries is duly qualified
or licensed to do business and is in good standing in each jurisdiction listed
in Section
4.1 of the Parent Disclosure Schedule. Each of
Parent and its subsidiaries is duly qualified or licensed to conduct business in
each jurisdiction in which the nature of its business or the ownership, leasing
or operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions where the failure to be so qualified or licensed
or to be in good standing individually or in the aggregate would not reasonably
be expected to have a material adverse effect on Parent.

 

(b) Parent
has delivered or made available to the Company prior to the execution of this
Agreement complete and correct copies of the certificate of incorporation and
by-laws or other organizational documents of Parent, its subsidiaries and Merger
Sub, as in effect at the date of this Agreement, and which shall be in effect as
of the Closing Date (subject to any amendments permitted under Section 5.4(a)
hereof).

 

SECTION
4.2 Subsidiaries

 

. (a) Section
4.2 of the Parent Disclosure Schedule lists
the names and jurisdiction of incorporation or organization of all the
subsidiaries of Parent, whether consolidated or unconsolidated. The outstanding
securities of the subsidiaries of Parent are set forth in Section
4.2 of the Parent Disclosure Schedules and all
outstanding shares of capital stock of, or other equity interests in, each such
subsidiary: (i) have been duly authorized, validly issued and are fully paid and
nonassessable and (ii) are owned directly or indirectly by Parent, free and
clear of all Liens. Except as set forth above or in Section
4.2 of Parent Disclosure Schedule, Parent
does not own, directly or indirectly, any capital stock of or other equity or
voting interests in any person.

 

(b) Merger
Sub is a newly formed corporation with no material assets or liabilities, except
for liabilities arising under this Agreement. Merger Sub will not conduct any
business or activities other than the issuance of its capital stock to Parent
prior to the Merger.

 

SECTION
4.3 Capital
Structure. (a) The
authorized capital stock of Parent consists of 50,000,000 shares of common
stock, $0.001 par value (the "Parent
Common Stock"), and
no shares of preferred stock of Parent ("Parent
Authorized Preferred Stock"). As of
the date hereof: (i) 18,000,000 shares of Parent Common Stock were issued and
outstanding; (ii) no (0) shares of Parent Common Stock were held by Parent in
its treasury; (iii) no (0) shares of Parent Common Stock were held by
subsidiaries of Parent; (iv) currently no shares of Parent Common Stock were
reserved for issuance pursuant to the stock-based plans identified in
Section
4.3 of the Parent Disclosure Schedule (such
plans, collectively, the "Parent
Stock Plans"), of
which approximately no (0) shares are subject to outstanding employee stock
options or other rights to purchase or receive Parent Common Stock granted under
the Parent Stock Plans (collectively, "Parent
Employee Stock Options"); and
(v) no shares of Parent Common Stock are reserved for issuance pursuant to
convertible securities. Except as set forth in this Section, there are no
outstanding (i) shares of capital stock or other securities (voting or
otherwise) of the Parent, (ii) securities of the Parent convertible into or
exchangeable for shares of capital stock or securities (voting or otherwise) of
the Parent, or (iii) options, warrants or other rights to acquire from the
Parent, directly or indirectly, or obligations of the Parent to issue, any
capital stock or securities (voting or otherwise), or any other securities
convertible into or exchangeable for capital stock or securities of the Parent.
All outstanding shares of capital stock of Parent have been, and all shares
thereof which may be issued pursuant to this Agreement or otherwise will be,
when issued, duly authorized and validly issued and are fully paid and non
assessable. All shares of capital stock of Parent outstanding as of the date
hereof have been, and all shares which shall be issued as part of the Merger
Consideration will be, when issued, fully paid and nonassessable and not subject
to preemptive rights created by statute, the Parent’s Articles of Incorporation
as amended by the Articles of Amendment (the “Parent’s
Articles of Incorporation”) or any
agreement to which the Parent is a party or by which the Parent may be bound.

 

(b) Parent
has a sufficient number of duly authorized but unissued shares of Parent Common
Stock to issue the maximum number of such shares contemplated by Article II of
this Agreement as the Merger Consideration.

 

SECTION
4.4 Authority;
Noncontravention. (a)
Parent
and Merger Sub have the corporate power and authority to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
Except for any required approval by Parent’s shareholders in connection with the
consummation of the Merger, all corporate acts and proceedings required to be
taken by or on the part of Parent and Merger Sub to authorize Parent and Merger
Sub, as the case may be, to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby have been duly and validly
taken. This Agreement constitutes a valid and binding agreement of Parent and
Merger Sub.

 

(b) The
execution and delivery of this Agreement does not and the consummation of the
transactions contemplated hereby will not conflict with or result in a violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any material
obligation under (i) any provision of Parent’s or Merger Sub’s articles of
incorporation, (ii) any loan or credit agreement, note, mortgage, indenture,
lease or other Parent Contract or (iii) instrument, permit, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or Merger Sub or their properties or assets.

(c) The
execution, delivery and performance by Parent and Merger Sub of this Agreement
and the consummation of the Merger by Parent and Merger Sub requires no consent,
approval, order or authorization of, action by or in respect of, or registration
or filing with, any Governmental Entity other than (i) the filing of a
certificate of merger in accordance with the Secretary; (ii)
compliance with any applicable requirements of the HSR Act, if any; and with
respect to Parent, (iii)
approval of, and declaration of effectiveness of, the registration statement
filed on Form S-4 with respect to the shares of Parent Common Stock issued as
Merger Consideration, (iv) listing of the shares of Parent Common Stock issued
as Merger Consideration on the OTC Bulletin Board, (v) compliance with any
applicable requirement of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”); (vi)
compliance with the Securities Act; and (vii) compliance with any state
securities or blue sky laws.

(d) The
execution and delivery of this Agreement and the consummation of the Merger will
not result in the creation of any Lien upon any asset of Parent. 

(e) Except as
set forth in Section
4.4(e) of the Parent Disclosure Schedule, no
consent, approval, waiver or other action by any person (other than the
governmental authorities referred to in (b) above) under any indenture, lease,
instrument or other material contract, agreement or document to which Parent is
a party or by which Parent is bound is required or necessary for, or made
necessary by reason of, the execution, delivery and performance of this
Agreement by Parent or the consummation of the Merger.

SECTION
4.5 Parent
Documents. (a)
As of
their respective filing dates, (i) Parent’s Annual Report on Form 10-KSB for its
fiscal year ended December 31, 2004, and all reports, schedules, forms,
information statements and other documents (including exhibits) filed by Parent
with the SEC subsequent to such fiscal year end (together with all
certifications required pursuant to the Sarbanes-Oxley Act of 2002
("SOXA"), the
"Parent
SEC Documents")
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Documents, except as amended or
supplemented by a subsequently filed Parent SEC Document, and (ii) no Parent SEC
Documents, as of their respective dates, contained (except for such matters as
were amended or supplemented by a subsequently filed Parent SEC Document, if
any), and no Parent SEC Document filed subsequent to the date hereof through the
Closing Date will contain as of their respective dates, any untrue statement of
a material fact or omitted, and no Parent SEC Document filed subsequent to the
date hereof and through the Closing Date will omit as of their respective dates,
to state a material fact required to be stated therein or necessary to make the
statements therein (in the case of registration statements of Parent under the
Securities Act, in light of the circumstances under which they were made) not
misleading (excluding information furnished by Company or shareholders of
Company for inclusion therein, as to which no representation or warranty is
given by Parent).

 

(b) The
financial statements of Parent included in the Parent SEC Documents (including
the related notes) complied as to form, as of their respective dates of filing
with the SEC (except as subsequently amended or supplemented by a subsequent
Parent SEC Document, if at all), 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 GAAP (except, in the case
of unaudited statements, as permitted by Quarterly Report on Form l0-QSB of the
SEC) applied on a consistent basis during the periods and at the dates involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial condition of Parent and its subsidiaries at the dates
thereof and the consolidated results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to notes and
normal year-end audit adjustments that were not, or with respect to any such
financial statements contained in any Parent SEC Documents to be filed
subsequently to the date hereof are not reasonably expected to be, material in
amount or effect). Except for liabilities (i) set forth in Section
4.5 of the Parent Disclosure Schedule, (ii)
reflected in Parent’s audited financial statements as at, and for the period
ending, December 31, 2004, including, without limitation, any liabilities
described in any notes thereto (or liabilities for which neither accrual nor
footnote disclosure is required pursuant to GAAP), (iii) incurred in the
ordinary course of business since December 31, 2004 consistent with Parent’s
past practices, or (iv) in connection with the negotiation and consummation of
this Agreement and the transactions contemplated hereby, Parent has no material
liabilities or obligations, whether absolute, accrued, contingent or otherwise.

 

(c) Each of
Parent, its directors and its senior financial officers has consulted to the
extent necessary with Parent's independent auditors and with Parent's outside
counsel with respect to, and (to the extent applicable to Parent) is familiar in
all material respects with all of the requirements of, SOXA. Parent hereby
reaffirms, represents and warrants to the Company the matters and statements
made in the certifications filed with the SEC pursuant to Sections 302 and 906
of SOXA as if such certifications were made as of the Closing Date.

 

SECTION
4.6 Parent
Contracts. (a)
Section
4.6 of the Parent Disclosure Schedule lists
all Parent Contracts other than non-disclosure agreements and non-solicitation
agreements entered into in the ordinary course of business which are not
material to the Parent. Each Parent Contract is valid and binding on and
enforceable against Parent (or, to the extent a subsidiary of Parent is a party,
such subsidiary) and, to the knowledge of Parent, each other party thereto and
is in full force and effect. Neither Parent nor any of its subsidiaries is in
breach or default under any Parent Contract. Neither the Parent nor any
subsidiary of the Parent knows of, or has received notice of, any violation,
default, right of acceleration of any obligation or loss of a material benefit
under (nor, to the knowledge of the Company, does there exist any condition
which with the passage of time or the giving of notice or both would result in
such a violation, default, right of acceleration of any obligation or loss of a
material benefit, under) any Parent Contract by any other party thereto. Prior
to the date hereof, Parent has made available to the Company true and complete
copies of all Parent Contracts. 

 

(b) As used
in this Agreement, “Parent
Contracts” shall
mean: 

 

(i) any
Contract that (A) involves the payment or potential payment, pursuant to
the terms of any such Contract, by or to Parent or any of its subsidiaries, of
more than $50,000 individually or more than $200,000 in the aggregate and
(B) cannot be terminated within thirty (30) calendar days after giving
notice of termination without resulting in any material cost or penalty to
Parent or any of its subsidiaries;

 

(ii) any
Contract which contains provisions which in any non-de minimis manner restrict,
or may restrict, the conduct of business as presently conducted by Parent or any
of its subsidiaries;

 

(iii) any
Contract restricting in any way the right of Parent or any subsidiary to engage
in business or to compete in any business;

 

(iv) any
Contract providing for the indemnification or surety by Parent or any of its
subsidiaries;

 

(v) any
strategic alliance, revenue sharing joint venture or partnership agreement of
Parent or any subsidiary of Parent;

 

(vi) any
Contract which grants any right of first or last refusal or right of first or
last offer or similar right or that limits or purports to limit the ability of
Parent or any of its subsidiaries to own, operate, sell, transfer, pledge or
otherwise dispose of any material amount of assets or business;

 

(vii) any
Contract providing for any material future payments that are conditioned, in
whole or in part, on a change of control of Parent or any of its
subsidiaries;

 

(viii)
any employment agreement or any agreement or arrangement with any officer,
director or key employee of Parent or any subsidiary of Parent;

 

(ix) any
Contract of Parent or any of its subsidiaries providing for or pertaining to
employment or consultation services for a specified or unspecified term
except for (A)
Contracts involving payment of less than $50,000 individually or less than
$200,000 in the aggregate, and (B) Contracts which can be terminated within
thirty (30) calendar days after giving notice of termination without resulting
in any material cost or penalty to Parent or any of its subsidiaries, including,
without limitation, any material severance pay or post-employment liabilities or
obligations of Parent or any of its subsidiaries;

 

(x) any
Contract pertaining to the use of or granting of any right to use or practice
any rights under any Intellectual Property of Parent, whether Parent is the
licensee or licensor thereunder, except for
Contracts under which Parent or any of its subsidiaries is a licensee or
“off-the-shelf” software provided that, to
Parent’s knowledge, there is no default under any such Contract;

 

(xi) any
Contract pursuant to which Parent or any of its subsidiaries leases or uses any
real property; 

 

(xii) any
Contract relating to Indebtedness of Parent or any of its subsidiaries in excess
of $50,000 or to preferred stock issued by Parent or any of its subsidiaries
(other than Indebtedness owing to or preferred stock owned by Parent or any of
its wholly-owned subsidiaries);

 

(xiii)
any Contract with distributors, dealers, manufacturers, manufacturer’s
representatives, sales agencies, franchisees, or pre-clinical or clinical trial
testing entities;

 

(xiv) any
Contract relating to (A) the future disposition or acquisition of any
assets or properties of Parent or any of its subsidiaries, other than
dispositions or acquisitions in the ordinary course of business consistent with
past practice, and (B) any merger or other type of business
combination;

 

(xv) any
Contract between or among Parent or any of its subsidiaries, on the one hand,
and any officer, director, employee or shareholder of Parent or any of its
subsidiaries, or any affiliate or associate of any Parent (other than Parent or
any of its subsidiaries, which inter-company transactions are not the subject of
this clause), on the other hand;

 

(xvi) any
collective bargaining agreement or labor contracts;

 

(xvii)
any Contracts that (A) limit or contain restrictions on the ability of
Parent or any of its subsidiaries to declare or pay dividends on, to make any
other distribution in respect of or to issue or purchase, redeem or otherwise
acquire its capital stock, to incur Indebtedness, to incur or suffer to exist
any lien, to purchase or sell any assets and properties, to change the lines of
business in which it participates or engages or to engage in any business
combination or (B) require Parent or any of its subsidiaries to maintain
specified financial ratios or levels of net worth or other indicia of financial
condition;

 

(xviii)
any Contract that (A) involves the payment or potential payment, pursuant
to the terms of any such Contract, by or to Parent or any of its subsidiaries,
of more than $50,000 and (B) cannot be terminated within thirty (30)
calendar days after giving notice of termination without resulting in any
material cost or penalty to Parent or any of its subsidiaries; and 

 

(xix) any
Contract not made in the ordinary course of business which is material to Parent
and its subsidiaries, taken as a whole, or which reasonably would be expected
(x) to delay the consummation of the Merger or any of the transactions
contemplated by this Agreement or (y) to have a material adverse effect on
Parent.

 

SECTION
4.7 Absence
of Certain Changes. Except
for liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, and except as disclosed in the Parent SEC Documents filed
and publicly available prior to the date hereof, since
December 31, 2004, there has not been any of the following: (i) any material
adverse change in Parent or any event which either individually or when
aggregated with other event(s) has or reasonably would be expected to have a
material adverse effect on Parent, or (ii) to Parent’s knowledge, any facts,
circumstances or events that make it reasonably likely that Parent will not be
able to fulfill its obligations under this Agreement in all material respects,
any
occurrence which would be required to be disclosed in Parent’s annual report on
Form 10-KSB if the end of the period for which such report was due was the date
hereof, but not including, with respect to this clause (iii), disclosure that
would be reported only in financial statements or notes thereto, or management’s
discussion or analysis concerning the same, in respect of periods ending on the
date hereof. Without
limiting the foregoing, except as set
forth in Section
4.7 of the Parent Disclosure Schedule, there
has not occurred between December 31, 2004 and the date hereof: 

 

(i) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of Parent or any subsidiary not wholly owned by
Parent, or any direct or indirect redemption, purchase or other acquisition by
Parent or any subsidiary of any such capital stock of or any option or warrant
with respect to Parent or any subsidiary not wholly owned by
Parent;

 

(ii) any
authorization, issuance, sale or other disposition by Parent or any subsidiary
of any shares of capital stock of or option or warrant with respect to Parent or
any subsidiary, or any modification or amendment of any right of any holder of
any outstanding shares of capital stock of or any option or warrant with respect
to Parent or any subsidiary;

 

(iii) (x) any
increase in the salary, wages or other compensation of any officer, employee or
consultant of Parent or any subsidiary whose annual salary is, or after giving
effect to such change would be, $50,000 or more; (y) any establishment or
modification of (A) targets, goals, pools or similar provisions in respect of
any fiscal year under any compensation or benefit plan, employment Contract or
other employee compensation arrangement or (B) salary ranges, increase
guidelines or similar provisions in respect of any compensation or benefit plan,
employment Contract or other employee compensation arrangement; or (z) any
adoption, entering into, amendment, modification or termination (partial or
complete) of any compensation or benefit plan except to the extent required by
applicable law and, in the event compliance with legal requirements presented
options, only to the extent that the option which Parent or subsidiary
reasonably believed to be the least costly was chosen; 

 

(iv) (A)
incurrences by Parent or any of the subsidiaries of Indebtedness in an aggregate
principal amount exceeding $50,000 (net of any amounts discharged during such
period), or (B) any voluntary purchase, cancellation, prepayment or complete or
partial discharge in advance of a scheduled payment date with respect to, or
waiver of any right of Parent or any subsidiary under, any Indebtedness of or
owing to Parent or any subsidiary (in either case other than any Indebtedness of
Parent or a subsidiary owing to Parent or a wholly-owned
subsidiary);

 

(v) any
physical damage, destruction or other casualty loss (whether or not covered by
insurance) affecting any of the plant, real or personal property or equipment of
Parent or any subsidiary in an aggregate amount exceeding $50,000;

 

(vi) any
material change in (x) any pricing, investment, accounting, financial reporting,
inventory, credit, allowance or tax practice or policy of Parent or any
subsidiary, (y) any method of calculating any bad debt, contingency or other
reserve of Parent or any subsidiary for accounting, financial reporting or tax
purposes or (z) the fiscal year of Parent or any subsidiary;

 

(vii) any
write-off or write-down of or any determination to write off or down any of the
assets and properties of Parent or any subsidiary in an aggregate amount
exceeding $50,000;

 

(viii) any
acquisition or disposition of, or incurrence of a lien upon, any assets and
properties of Parent or any subsidiary, other than in the ordinary course of
business consistent with past practice;

 

(ix) any (x)
amendment of the certificate or articles of incorporation or by-laws (or other
comparable corporate charter documents) of Parent or any subsidiary, (y)
reorganization, liquidation or dissolution of Parent or any subsidiary or (z)
merger or other type of business combination involving Parent or any subsidiary
and any other person (other than Parent or another wholly-owned subsidiary of
Parent);

 

(x) any
entering into, amendment, modification, termination (partial or complete) or
granting of a waiver under or giving any consent with respect to any Contract
which is required (or had it been in effect on the date hereof would have been
required) to be disclosed in the Disclosure Schedule pursuant to Section
3.6;

 

(xi) any
lapse, or any material breach or default under, or the incurrence of any
material penalty or loss or diminishment of rights under, or the occurrence of
any event which, with notice or the passage of time or both, could constitute
the same, with respect to any Parent Contract;

 

(xii) capital
expenditures or commitments for additions to property, plant or equipment of
Parent and any subsidiary constituting capital assets in an aggregate amount
exceeding $50,000, in the aggregate;

 

(xiii) any
commencement or termination by Parent or any subsidiary of any line of
business;

 

(xiv) any
transaction by Parent or any subsidiary with any officer, director, or
shareholder of Parent or any subsidiary, or any affiliate or associate of any of
them (other than Parent or any subsidiary) other than on an arm’s-length basis
on terms substantially the same as those available from unrelated third parties;
or

 

(xv) any
entering into of an agreement to do or engage in any of the foregoing after the
date hereof.

 

SECTION
4.8 Permits;
Compliance with Applicable Laws

 

 

(a) Parent
and its subsidiaries own and/or possess all Permits which are required for the
operation of the respective businesses of Parent and its subsidiaries as
presently conducted, except for those the failure to own or possess would not
reasonably be expected to have a material adverse effect on Parent. Each such
Permit is listed in Section
4.8 of the Parent Disclosure Schedule. Each of
Parent and its subsidiaries is in compliance with the terms of its Permits and
all the Permits are in full force and effect and no suspension, modification or
revocation of any of them is pending or, to the knowledge of Parent, threatened,
except where the failure to be in full force and effect individually or in the
aggregate would not reasonably be expected to have a material adverse effect on
Parent.

 

(b) Each of
Parent and its subsidiaries is in compliance with all applicable statutes, laws,
regulations, ordinances, permits, rules, writs, judgments, orders, decrees or
arbitration awards of any Governmental Entity applicable to Parent or its
subsidiaries except where the failure to be in compliance individually or in the
aggregate would not have a material adverse effect on the Parent.

 

(c) Except
for filings with the SEC and filings with respect to Taxes, which are the
subject of Sections 4.5 and 4.10, respectively, and not covered by this Section
4.8(b), the Parent and each of its subsidiaries have filed all regulatory
reports, schedules, forms, registrations and other documents, together with any
amendments required to be made with respect thereto, that they were required to
file with each Governmental Entity (the "Other
Parent Documents"), and
have paid all fees and assessments due and payable in connection therewith,
except where the failure to make such payments and filings individually or in
the aggregate would not have a material adverse effect on the Parent.

 

SECTION
4.9 Absence
of Litigation

 

.
(a)
Section
4.9(a) of Parent Disclosure Schedule contains
a true and current summary description of each pending and, to Parent’s
knowledge, threatened Action with respect to Parent or any of its
subsidiaries.

 

(b)
Except as
disclosed in Section
4.9(b) of Parent Disclosure Schedule, there
is no Action relating to Parent or any of its subsidiaries by or before any
Governmental Entity or otherwise pending or, to the best of Parent’s knowledge,
threatened, which could reasonably be expected to have a material adverse effect
on Parent nor, to the best of the Parent’s knowledge, are there any facts or
circumstances which could reasonably be expected to give rise to any such
Action.

 

(c)
Except as
disclosed in Section
4.9(c) of Parent Disclosure Schedule, there
is no Action relating to Parent or any of its subsidiaries by or before any
Governmental Entity or otherwise pending or, to the best of Parent’s knowledge,
threatened, which could reasonably be expected to delay, prohibit, make illegal,
or have a material adverse effect on the consummation of this Agreement or the
transactions contemplated hereby, or the benefits to the parties hereto intended
hereby and thereby.

 

(d) Prior to
the execution of this Agreement, Parent has delivered to the Company all
responses of counsel for Parent and its subsidiaries to auditors’ requests for
information delivered in connection with Parent’s audited financial statements
for the period ended January 31, 2004 (together with any updates provided by
such counsel) regarding Actions pending or threatened against, relating to or
affecting the Company or any of its subsidiaries

 

SECTION
4.10 Tax
Matters

 

(a) Each of
the Parent and each of its subsidiaries has (i) timely filed (or there have been
timely filed on its behalf) with the appropriate Governmental Entities all
United States federal income and other Tax Returns required to be filed by it
(giving effect to all extensions), except where the failure to file any such Tax
Returns in timely fashion or at all would not reasonably be expected to have a
material adverse effect, and such Tax Returns are true, correct and complete in
all material respects; (ii) timely paid in full (or there has been timely paid
in full on its behalf) all income and other material Taxes required to have been
paid by it; and (iii) made adequate provision (or adequate provision has been
made on its behalf) for all accrued Taxes not yet due. The accruals and
provisions for Taxes reflected in the Parent’s audited consolidated balance
sheet as of January 31, 2004 (and the notes thereto) and the most recent
quarterly financial statements (and the notes thereto) are adequate in
accordance with GAAP for all Taxes accrued or accruable through the date
thereof.

 

(b) As of the
date of this Agreement, no Federal, state, local or foreign audits, suits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Parent or any of its subsidiaries, and
neither the Parent nor any subsidiary of the Parent has received a written
notice of any material pending or proposed claims, audits or proceedings with
respect to Taxes.

 

(c) No
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Tax has been proposed, asserted, or assessed in
writing by any Governmental Entity against, or with respect to, Parent or any of
its subsidiaries. There is no action, suit or audit now in progress, pending or,
to the knowledge of Parent, threatened against or with respect to Parent or any
of its subsidiaries with respect to any material Tax.

 

(d) Neither
Parent nor any of its subsidiaries has been included in any "consolidated,"
"unitary" or "combined" Tax Return (other than Tax Returns which include only
Parent and any of its subsidiaries) provided for under the laws of the United
States, any foreign jurisdiction or any state or locality with respect to Taxes
for any taxable year.

 

(e) No
election under Section 341(f) of the Code has been made by Parent or any of its
subsidiaries.

 

(f) No claim
has been made in writing by any Governmental Entities in a jurisdiction where
Parent or any of its subsidiaries does not file Tax Returns that any such entity
is, or may be, subject to taxation by that jurisdiction.

 

(g) Each of
Parent and each of its subsidiaries has made available to Company correct and
complete copies of (i) all of their Tax Returns filed within the past three
years, (ii) all audit reports, letter rulings, technical advice memoranda and
similar documents issued by a Governmental Entity within the past three years
relating to the Federal, state, local or foreign Taxes due from or with respect
to Parent or any of its subsidiaries, and (iii) any closing letters or
agreements entered into by Parent or any of its subsidiaries with any
Governmental Entities within the past three years with respect to
Taxes.

 

(h) Neither
Parent nor any of its subsidiaries has received any notice of deficiency or
assessment from any Governmental Entity for any amount of Tax that has not been
fully settled or satisfied, and to the knowledge of Parent and its subsidiaries
no such deficiency or assessment is proposed.

 

SECTION
4.11 Employee
Benefit Plans

 

(a) Section
4.11 of the Parent Disclosure Schedule contains
a true and complete list of all of Parent’s and its subsidiaries’ Employee Plans
as of the date hereof (“Parent
Employee Plans”). With
respect to the Employee Plans, all required contributions for all periods ending
before the Closing Date have been or will be paid in full by the Closing Date.

 

(b) None of
the Parent Employee Plans is subject to any pending investigations or to the
knowledge of Parent threatened investigations from any Governmental Agencies who
enforce applicable laws under ERISA and the Code.

 

(c) Each of
the Parent Employee Plans is, and has been, operated in accordance with its
terms and each of the Parent Employee Plans, and administration thereof, is, and
has been in compliance with the requirements of any and all applicable statutes,
orders or governmental rules or regulations currently in effect, including, but
not limited to, ERISA and the Code, except where the failure to comply
individually or in the aggregate would not have a material adverse effect on
Parent. 

 

(d) No
material amounts payable under the Parent Employee Plans will fail to be
deductible for Federal income tax purposes by virtue of Section 162(m) of the
Code. 

 

(e) Neither
Parent nor any subsidiary of Parent has any current or projected liability with
respect to post-employment or post-retirement welfare benefits for retired,
former, or current employees of Parent or any subsidiary of Parent.

 

SECTION
4.12 Labor
Matters

 

(a) With
respect to employees (and to the extent applicable, former employees) of Parent
and its subsidiaries: (i) to the knowledge of Parent, no senior executive or key
employee has any plans to terminate employment with Parent or any of its
subsidiaries; (ii) there is no unfair labor practice charge or complaint against
Parent or any of its subsidiaries pending or, to the knowledge of Parent or any
of its subsidiaries, threatened before the National Labor Relations Board or any
other comparable Governmental Entity; (iii) there is no demand for recognition
made by any labor organization or petition for election filed with the National
Labor Relations Board or any other comparable Governmental Entity; (iv) there
are, and have been, no collective bargaining agreements; and (v) there is no
litigation, arbitration proceeding, governmental investigation, administrative
charge, citation or action of any kind pending or, to the knowledge of Parent,
proposed or threatened against Parent or any of its subsidiaries relating to
employment, employment practices, terms and conditions of employment or wages,
benefits, severance and hours.

 

(b) Section
4.12(b) of the Parent Disclosure Schedule lists
the name, title, date of employment and current annual salary of each current
salaried employee of Parent.

 

(c) Section
4.12(c) of the Parent Disclosure Schedule lists
all contracts, agreements, plans or arrangements covering any employee, officer
or director of Parent or its subsidiaries, all of which are in writing, have
heretofore been duly approved by the Parent’s Board of Directors, and true and
complete copies of all of which have heretofore been delivered to the
Company.

 

SECTION
4.13 Environmental
Matters

 

. Except
for such matters which would not, individually or in the aggregate, reasonably
be expected to result in a material adverse effect on Parent:

 

(a) (i)
Parent and its subsidiaries are in compliance with all applicable Environmental
Laws; (ii) neither Parent nor any of its subsidiaries has received any written
communication from any person or governmental entity that alleges that Parent or
any of its subsidiaries are not in compliance with applicable Environmental
Laws; and (iii) there have not been any Releases in any reportable quantity, or
in violation of any Environmental Law, of Hazardous Substances by Parent or any
of its subsidiaries, or, to the knowledge of Parent, by any other party, at any
property currently or formerly owned, leased or operated by Parent or any of its
subsidiaries that occurred during the period of Parent’s or any of its
subsidiaries’ ownership, lease or operation of such property or, to the
knowledge of Parent, prior thereto, and no property now or previously owned or
leased by Parent or any subsidiary is listed or proposed for listing on the
National Priorities List promulgated pursuant to CERCLA or on any similar state
list of sites requiring investigation or clean-up.

(b) Parent
and its subsidiaries have all Environmental Permits necessary for the conduct
and operation of their business, and all such permits are in good standing or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and Parent and its subsidiaries are in compliance with all
terms and conditions of all such Environmental Permits and are not required to
make any expenditure in order to obtain or renew any Environmental
Permits.

(c) There are
no Environmental claims pending or, to the knowledge of Parent, threatened,
against Parent or any of its subsidiaries, or against any real or personal
property or operation that Parent or any of its subsidiaries owns, leases or
manages.

(d)  Neither
Parent, any of its subsidiaries, nor, to the knowledge of Parent, any prior
owner or lessee of any property now or previously owned or leased by Parent or
any subsidiary, has handled any Hazardous Substance on any property now or
previously owned or leased by Parent or any subsidiary; and, without limiting
the foregoing, to the knowledge of Parent (i) no polychlorinated biphenyl
is or has been present, (ii) no asbestos is or has been present, and
(iii) there are no underground storage tanks, active or
abandoned.

(e)
To the
knowledge of Parent, neither Parent nor any subsidiary has transported or
arranged for the transportation of any Hazardous Substance to any location which
is the subject of any Action that could lead to claims against Parent, Merger
Sub, the Company or any subsidiary for clean-up costs, remedial work, damages to
natural resources or personal injury claims, including, but not limited to,
claims under CERCLA.

(f)
There are
no Liens arising under or pursuant to any Environmental Law on any real property
owned or leased by Parent or any subsidiary, and no action of any Governmental
Authority has been taken or, to the knowledge of Parent, is in process which
could subject any of such properties to such Liens, and neither Parent nor any
subsidiary would be required to place any notice or restriction relating to the
presence of any Hazardous Substance at any property owned by it in any deed to
such property.

(g)
There
have been no environmental investigations, studies, audits, tests, reviews or
other analyses conducted by, or which are in the possession of, Parent or any
subsidiary in relation to any property or facility now or previously owned or
leased by Parent or any subsidiary which have not been delivered to the Company
prior to the execution of this Agreement.

SECTION
4.14 Intellectual
Property

 

(a) Section
4.14(a) of Parent Disclosure Schedule sets
forth, for the Intellectual Property licensed to, or used in the business of,
Parent or any of its subsidiaries, a complete and accurate list of all U.S. and
foreign (i) patents and patent applications, (ii) trademark or service mark
registrations and applications, (iii) copyright registrations and applications,
(iv) Internet domain names, and (v) all licenses granted to or by Parent for the
use of the foregoing and all license agreements. To the knowledge of Parent,
Parent or one of its subsidiaries has the valid right to use the Intellectual
Property, licensed to Parent or used in the business of Parent as it currently
is conducted. 

 

(b) Neither
Parent nor any of its subsidiaries owns any Intellectual Property whether used
in its business or otherwise except as disclosed in Section
4.14 of Parent Disclosure Schedule,
including Parent’s rights, if any, as a licensor under licenses disclosed
therein.

 

(c) Except as
disclosed in Section
4.14 of Parent Disclosure Schedule, all
Intellectual Property utilized in the business of Parent and its subsidiaries is
pursuant to license agreements with third parties, copies of which have
previously been provided to the Company. Each such license agreement listed in
Section
4.14 of Parent Disclosure Schedule is valid
and binding on and enforceable against Parent (or, to the extent a subsidiary of
Parent is a party, such subsidiary) and, to the knowledge of Parent, each other
party thereto and is in full force and effect. To the knowledge of Parent there
is no pending or threatened opposition, interference, invalidation or
cancellation proceeding before any court or registration authority in any
jurisdiction against any Intellectual Property used by Parent or its
subsidiaries. 

 

(d) To the
knowledge of Parent, the conduct of Parent’s and its subsidiaries’ business as
currently conducted or planned by Parent to be conducted does not, in any
material respect, infringe upon (either directly or indirectly such as through
contributory infringement or inducement to infringe), dilute, misappropriate or
otherwise violate any Intellectual Property owned or controlled by any third
party.

 

(e) To
Parent’s knowledge, no third party is misappropriating, infringing, diluting, or
violating any Intellectual Property licensed to or by Parent or its subsidiaries
and, to the knowledge of Parent, no such claims have been made against a third
party by Parent or its subsidiaries.

 

(f) Parent
and its subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their trade secrets. Neither Parent nor
any subsidiary is, or has received any notice that it is, in default (or with
the giving of notice or lapse of time or both, would be in default) under any
license to use such Intellectual Property, nor is there any default (or any
condition which, with the giving of notice or lapse of time or both, would
constitute a default) under any license out by Parent of any such Intellectual
Property. This Agreement and the transactions contemplated hereby will not
conflict with, or result in a default in respect of, or a diminishment of rights
with respect to (whether with the giving of notice or lapse of time or both),
any Intellectual Property licensed by Parent.

 

(g) Section
4.14 of the Parent Disclosure Schedule sets
forth the Parent's product candidates (the "Parent
Products") except
for any category of Parent Products specifically indicated to be excluded on
that Schedule (Parent Products in a category so excluded are hereinafter
referred to as “Excluded
Parent Products”), and
each Parent Product (other than Excluded Parent Products) is in the phase of
clinical trials as set forth in Section
4.14. of the Parent Disclosure Schedule. To the
knowledge of the Parent, the consummation of the Merger and the transactions
contemplated in this Agreement will not alter or impair the Parent’s ability
with respect to the Parent’s Intellectual Property, the Parent Products or the
development of the Parent Products in any respect.

 

SECTION
4.15 Insurance
Matters

 

. No later
than the Effective Time, Parent and its subsidiaries will have all material
primary insurance with financially sound and nationally recognized insurance
carriers providing insurance coverage, including, but not limited to, directors
and officers liability insurance, that is customary in amount and scope for
other companies in the industry in which Parent and its subsidiaries operate. As
of the Effective Time, all such insurance policies will be in full force and
effect and all premiums due and payable thereon will be paid. The insurance
coverage provided by such policies will not terminate or lapse by reason of the
transactions contemplated by this Agreement. As of the Effective Time, neither
Parent nor any subsidiary will have received notice that any insurer under any
policy of Parent is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause.

 

SECTION
4.16 Transactions
with Affiliates.
There are
(i)  no outstanding amounts payable to or receivable from, or advances by
Parent or any of its subsidiaries to, and neither Parent nor any of its
subsidiaries is otherwise a creditor of or debtor to, any officer, director, or
shareholder of Parent or any Related Person, other than as part of the normal
and customary terms of such persons’ employment or service as an officer,
director or employee of Parent or any of its subsidiaries; (ii) no Related
Person provides or causes to be provided any assets, services or facilities to
Parent or any subsidiary; (iii) neither Parent nor any subsidiary provides
or causes to be provided any assets, services or facilities to any Related
Person; and (iv) neither Parent nor any subsidiary beneficially owns,
directly or indirectly, any assets or property of any Related Person, which, in
the case of clauses (i) - (iv) above, if required to be disclosed in Parent’s
Form 10-KSB, is not so disclosed. Each of the liabilities and transactions
identified on Parent’s Form 10-KSB or in Section 4.16
of the Parent Disclosure Schedule, if such
action occurred after December 31, 2004, was incurred or engaged in, as the case
may be, on an arm’s-length basis.

 

SECTION
4.17 Voting
Requirements. The
consent or approval of the holders of the outstanding shares of Parent Common
Stock or any other class of Parent capital stock is not required to approve the
Merger and the transactions contemplated by this Agreement under applicable law
and the Parent’s organizational instruments. The consent or affirmative vote of
holders of a majority of the outstanding shares of the capital stock of Merger
Sub is the only vote of holders of capital stock of Merger Sub required by
applicable law and Merger Sub’s organization instruments.

 

SECTION
4.18 Brokers. Except
as set forth in Section
4.18 of the Parent Disclosure Schedule, no
broker, investment banker, financial advisor, finder, consultant or other person
is entitled to any broker’s, finder’s, financial advisor’s or other similar fee,
compensation or commission, however and whenever payable, in connection with the
Merger and the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Sub.

 

SECTION
4.19 Real
Property. Each of
Parent and its subsidiaries has valid leaseholds in all real estate leased by
it, other than Permitted Liens. Neither Parent nor any of its subsidiaries owns
any real property. Section
4.19(a) of the Parent Disclosure Schedule sets
forth a complete list of all real property leased, subleased, or otherwise
occupied or used by Parent and its subsidiaries as lessee. 

 

SECTION
4.20 Tangible
Personal Property. Except
as would not materially impair Parent and its operations or the operations of
its subsidiaries, the Tangible Personal Property owned, leased or used by Parent
or any of its subsidiaries is in the aggregate sufficient and adequate to carry
on their respective businesses in all material respects as presently conducted
and is, in the aggregate and in all material respects, in good operating
condition and repair, normal wear and tear excepted. Section
4.20 of the Parent Disclosure Schedule lists
Parent’s Tangible Personal Property having a replacement cost of not less than
$500 for each item. Parent and its subsidiaries are in possession of and have
good title to, or valid leasehold interests in or valid rights under contract to
use, the Tangible Personal Property material to Parent and its subsidiaries,
taken as a whole, free and clear of all Liens, other than Permitted Liens. No
related party owns any Tangible Personal Property utilized by Parent in its
business as currently conducted.

 

SECTION
4.21 Investment
Company. Neither
Parent nor any of its subsidiaries is an investment company required to be
registered as an investment company pursuant to the Investment Company
Act.

 

SECTION
4.22 Board
Approval. Pursuant
to meetings duly noticed and convened in accordance with all applicable laws and
at each of which a quorum was present, the Board of Directors of Parent, after
full and deliberate consideration, has duly adopted this Agreement and resolved
that the Merger and the transactions contemplated hereby are in the best
interests of Parent’s shareholders. The Board of Directors of Merger Sub
unanimously has duly approved this Agreement and has determined that the Merger
is advisable.

 

SECTION
4.23 Books
and Records. Each of
Parent and its subsidiaries maintains and has maintained accurate books and
records in accordance with GAAP reflecting its assets and liabilities and
accounts, notes and other receivables and inventory are recorded accurately, and
proper and adequate procedures are implemented to effect the collection thereof
on a current and timely basis. 

 

SECTION
4.24 Accuracy
of Information.
To the
knowledge of Parent, neither this Agreement, the Parent Disclosure Schedule nor
any other document, schedule, exhibit, certificate or instrument provided by the
Parent, any of the Parent’s subsidiaries, Merger Sub or any of their respective
employees or agents to the Company in connection with the transactions
contemplated hereby contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained therein, not
misleading. None of the information supplied or to be supplied by Parent
specifically for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 becomes effective under the Securities Act,
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
not misleading, except that no representation or warranty is made by Parent with
respect to statements made or incorporated by reference therein based on
information supplied by the Company specifically for inclusion or incorporation
by reference in the Form S-4. The Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations thereunder.

 

 

ARTICLE
V

 

COVENANTS
RELATING TO CONDUCT OF BUSINESS

 

SECTION
5.1 Conduct
of Business by the Company. Except
as
required by applicable law or regulation and except as otherwise contemplated by
this Agreement, until the earlier of the termination of this Agreement or the
Effective Time, the Company shall, and cause its subsidiaries to, conduct their
respective businesses in the ordinary course and consistent with past practices.
Except as set forth in Section
5.1 of the Company Disclosure Schedule, as
required by applicable law or regulation and except as otherwise contemplated by
this Agreement or except as previously consented to by Parent, in writing, after
the date hereof the Company shall not, and shall not permit any of its
subsidiaries to: 

(a) amend or
otherwise change its certificate of incorporation or by-laws;

 

(b) issue,
sell, pledge, dispose of, encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of (i) any shares of its capital stock of any
class, or options, warrants, convertible securities or other rights of any kind
to acquire shares of such capital stock, or any other ownership interest,
thereof, other
than (x) any
issuance pursuant to any outstanding security or agreement of Company disclosed
in accordance with this Agreement, or (y) any issuance or sale pursuant to any
plan for or agreement with any officer, director or employee of Company, or (ii)
any of its assets, tangible or intangible;

 

(c) declare,
set aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to its capital stock;

 

(d) (i)
reclassify, combine, split, or subdivide, directly or indirectly, any of its
capital stock, or (ii) redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock, except from any officer, director or
employee upon termination of such officer, director or employee in accordance
with any agreements to do the same which are expressly disclosed pursuant to
this Agreement;

 

(e) (i)
acquire (including, without limitation, for cash or shares of stock, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership or other business organization or division thereof or
any assets, or make any investment either by purchase of stock or securities,
contributions of capital or property transfer, or purchase any property or
assets of any other person, (ii) incur any indebtedness for borrowed money or
issue any debt securities other than the Company Convertible Promissory Notes or
assume, guarantee or endorse or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances, or (iii)
enter into any Contract which constitutes a Company Significant
Contract;

(f) make any
capital expenditure or enter into any contract or commitment therefore in excess
of $100,000, individually or in the aggregate;

(g) amend,
terminate or extend any Company Significant Contract;

(h) delay or
accelerate payment of any account payable or other liability of the Company
beyond or in advance of its due date or the date when such liability would have
been paid in the ordinary course of business consistent with past practice;

(i) take any
action, or permit any event or condition to occur or exist, which would cause
any representation or warranty of the Company to be untrue; or

(j) agree, in
writing or otherwise, to take or authorize any of the

foregoing
actions or any action which would make any representation or
warranty

contained
in Article III untrue or incorrect.

SECTION
5.2 Advice
of Changes. Each of
the Company, as one party, and Parent and Merger Sub, together as the second
party, shall promptly advise the other party orally and in writing to the extent
it has knowledge of (i) any representation or warranty made by it contained in
this Agreement that is qualified as to materiality becoming untrue or inaccurate
in any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by it to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; (iii) any suspension, termination,
limitation, modification, change or other alteration of any agreement,
arrangement, business or other relationship with any of the Company’s or its
subsidiaries’ respective customers, suppliers or sales or design personnel; and
(iv) any change or event having, or which, insofar as reasonably can be
foreseen, could have a material adverse effect on such party or on the accuracy
and completeness of its representations and warranties or the ability of such
party to satisfy the conditions set forth in Article VII; provided,
however, that no
such notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement; and provided further that a
failure to comply with this Section 5.2 shall not constitute a failure to be
satisfied of any condition set forth in Article VII unless the underlying
untruth, inaccuracy, failure to comply or satisfy, or change or event would
independently result in a failure of a condition set forth in Article VII to be
satisfied.

 

SECTION
5.3 No
Solicitation by the Company.
(a)
The
Company will promptly notify Parent after receipt of any offer with respect to a
Company Acquisition Proposal or any request for nonpublic information relating
to the Company or for access to the properties, books or records of the Company
by any person that may be considering making, or has made, an offer with respect
to a Company Acquisition Proposal and will keep Parent fully informed of the
status and details of any such offer, indication or request. “Company
Acquisition Proposal” means
any proposal for a merger or other business combination involving the Company or
the acquisition of any equity interest in, or a substantial portion of the
assets of, the Company, other than the transactions contemplated by this
Agreement.

(b) From the
date hereof until the termination hereof, the Company and the officers of the
Company will not and the Company will use its best efforts to cause its
directors, employees and agents not to, directly or indirectly, (i) take any
action to solicit, initiate or encourage any offer or indication of interest
from any person or entity with respect to any Company Acquisition Proposal, (ii)
engage in negotiations with, or disclose any nonpublic information relating to
the Company or (iii) afford access to the properties, books or records of the
Company to, any person or entity that may be considering making, or has made, an
offer with respect to a Company Acquisition Proposal.

SECTION
5.4 Conduct
of Business by Parent

 

. Except
as required
by applicable law or regulation and except as otherwise contemplated by this
Agreement, until the earlier of the termination of this Agreement or the
Effective Time, Parent shall, and cause its subsidiaries to conduct their
respective businesses in the ordinary course and consistent with past practices.
Except as set forth in Section
5.4 of the Parent Disclosure Schedule, as
required by applicable law or regulation and except as otherwise contemplated by
this Agreement or except as previously consented to by the Company, in writing,
after the date hereof Parent shall not, and shall not permit any of its
subsidiaries to: 

(a) amend or
otherwise change its certificate of incorporation or by-laws, other than to
increase the number of authorized shares of Parent Common Stock or Parent
preferred stock, or to otherwise implement the terms and conditions of this
Agreement, or as permitted by this Agreement;

 

(b) issue,
sell, pledge, dispose of, encumber or authorize the issuance, sale, pledge
disposition, grant or encumbrance of (i) any shares of its capital stock of any
class, or options, warrants, convertible securities or other rights of any kind
to acquire shares of such capital stock, or any other ownership interest
thereof, other
than (x) any
issuance in connection with a Qualified Financing, (y) any issuance pursuant to
any outstanding security or agreement of Parent, or (z) any issuance or sale
pursuant to any plan for or agreement with any officer, director or employee of
Parent; or (ii) any of its assets, tangible or intangible, except pursuant to
contracts or agreements identified in Parent
Disclosure Schedule;

 

(c) declare,
set aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to its capital stock, except, if at
all, with respect to shares which may be issued in a Qualified
Financing;

 

(d) (i)
reclassify, combine, split, or subdivide, directly or indirectly, any of its
capital stock, or (ii) redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock, except from any officer, director or
employee upon termination of such officer, director or employee;

 

(e) (i)
acquire (including, without limitation, for cash or shares of stock, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership or other business organization or division thereof or
any assets, or make any investment either by purchase of stock or securities,
contributions of capital or property transfer, or purchase any property or
assets of any other person, (ii) incur any indebtedness for borrowed money other
than pursuant to agreements disclosed in the Parent
Disclosure Schedule, or
issue any debt securities other than pursuant to agreements disclosed in the
Parent
Disclosure Schedule or
assume, guarantee or endorse or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances other than
pursuant to licensing/development agreements entered into in the ordinary course
of Parent’s business, consistent with past practice, or (iii) enter into any new
Parent Contract not otherwise permitted pursuant to this Agreement;

 

(f) make any
capital expenditure or enter into any contract or commitment therefore other
than pursuant to licensing/development agreements disclosed in Section
4.6 of the Parent Disclosure Schedule;

(g) amend,
terminate or extend any Parent Contract;

(h) delay or
accelerate payment of any account payable or other liability of the Company
beyond or in advance of its due date or the date when such liability would have
been paid in the ordinary course of business consistent with past
practice;

(i) take any
action, or permit any event or condition to occur or exist, which would cause
any representation or warranty of Parent to be untrue; or

(i) agree, in
writing or otherwise, to take or authorize any of the

foregoing
actions or any action which would make any representation or
warranty

contained
in Article IV untrue or incorrect.

 

Notwithstanding
the foregoing, and anything to the contrary in this Agreement, the parties
acknowledge and agree that Parent may negotiate, execute, deliver and perform
agreements to establish customary benefit and compensation arrangements for its
officers, directors and employees, appoint additional officers or directors and
hire new employees and enter into customary agreements with them, enter in to
customary arrangements to obtain insurance, enter into formal arrangements
concerning its occupancy and use of its current headquarters space in New York,
New York, amend, create and adopt such corporate governance policies,
procedures, rules and regulations, as may be appropriate in connection with
Parent’s listing application or SOXA, take actions which are appropriate or
necessary to enhance the corporate staffing and operations of Parent, and take
actions which are appropriate or necessary to memorialize the registration
rights of Parent’s stockholders as heretofore disclosed to Company’s management
(each of the foregoing, a “Permitted Parent Action”), and no such Permitted
Parent Action shall be deemed to breach any Parent representation, warranty,
covenant or agreement in this Agreement, provided, that no such Permitted Parent
Action shall have a material adverse effect on Parent and that Parent shall
notify the Company of each such Permitted Parent Action. In
appointing officers or directors between the date of this Agreement and the
Closing Date pursuant to this paragraph, Parent shall only appoint, if any at
all, (i) independent directors, (ii) other directors to replace existing
directors, and (iii) one or more officers to replace functions currently
performed by any officer or officers being replaced. In no event will any
contract with any officer be in an amount which individually, or taken together
with all other contracts with any such newly appointed officers, in the
aggregate, is material to Parent.

 

 

In
addition, notwithstanding the foregoing, and anything to the contrary in this
Agreement, the parties acknowledge and agree that Parent may amend its bylaws as
necessary or appropriate by resolution of its Board of Directors (x) to ratify
the number of directors constituting Parent’s Board of Directors, (y) to
increase the number of directors constituting Parent’s Board of Directors in
order that the number of directors constituting Parent’s Board of Directors
shall be four (4) directors thereafter up until the Effective Time, and (z) to
increase the number of directors constituting Parent’s Board of Directors as of
the Effective Time in order that the number of directors constituting Parent’s
Board of Directors shall be six (6) directors as of the Effective Time. In
addition, Parent’s Board of Directors may fill the vacancies so created in
accordance with Section 6.9 of this Agreement. Each of the foregoing actions
shall constitute a “Permitted Parent Action”, and no such Permitted Parent
Action shall be deemed to breach any Parent representation, warranty, covenant
or agreement in this Agreement.

 

SECTION
5.5 No
Solicitation by Parent

 

.
(a)
Parent
will promptly notify the Company after receipt of any offer or indication that
any person is considering making an offer with respect to a Parent Acquisition
Proposal or any request for nonpublic information relating to Parent or for
access to the properties, books or records of Parent by any person that may be
considering making, or has made, an offer with respect to a Parent Acquisition
Proposal and will keep the Company fully informed of the status and details of
any such offer, indication or request. “Parent
Acquisition Proposal” means
any proposal for a merger or other business combination involving Parent or the
acquisition of any equity interest in, or a substantial portion of the assets
of, Parent, other than (a) the transactions contemplated by this Agreement or
(b) a Qualified Financing, (c) any other transaction which Parent may enter into
without violating Section 5.4 of this Agreement.

(b) From the
date hereof until the termination hereof, Parent and the officers of Parent will
not and Parent will use its best efforts to cause its directors, employees and
agents not to, directly or indirectly, (i) take any action to solicit, initiate
or encourage any offer or indication of interest from any person or entity with
respect to any Parent Acquisition Proposal, (ii) engage in negotiations with, or
disclose any nonpublic information relating to Parent or (iii) afford access to
the properties, books or records of Parent to, any person or entity that may be
considering making, or has made, an offer with respect to a Parent Acquisition
Proposal.

SECTION
5.6 Transition. To the
extent permitted by applicable law, Parent and the Company shall, and shall
cause their respective subsidiaries, affiliates, officers and employees to, use
their commercially reasonable efforts to facilitate the integration of the
Company and its subsidiaries with the businesses of Parent and its subsidiaries
to be effective as of the Closing Date. 

 

 

ARTICLE
VI

 

ADDITIONAL
AGREEMENTS

 

SECTION
6.1 Preparation
of the Form S-4

 

.
(a)
As
promptly as practicable following the date of this Agreement and the receipt of
all appropriate information (including, without limitation, audited and
unaudited financial statements from the Company), Parent shall prepare and file
with the SEC (and the Company shall cooperate and participate in the preparation
of) a Registration Statement on Form S-4 (the “Form
S-4”), in
which a prospectus (the “Prospectus”) shall
be included for the purpose of registering the shares of Parent Common Stock
issued or reserved for issuance as part of the Merger Consideration and
permitting the resale of their respective Merger Consideration by the
securityholders of the Company and those affiliates of the Company identified in
Section
6.10 of the Company Disclosure Schedule as
provided in the last sentence of this Section 6.1(a), in each case subject to
the Lock-Up Period. Each of Parent and the Company shall use their reasonable
best efforts to (i) have the Form S-4 and the Prospectus declared effective
under the Securities Act as promptly as practicable after such filing and keep
the Form S-4 effective as long as necessary to consummate the Merger and the
transactions contemplated hereby, and (ii) the Prospectus "cleared" by the SEC’s
staff for mailing, if required, in connection with the Company Shareholder
Meeting as promptly as practicable after such filing. As promptly as practicable
after the Form S-4 is declared effective, and in no event later than Ten (10)
business days thereafter, the Company shall cause the Prospectus to be mailed to
its shareholders. In the event that the Prospectus has not remained in effect,
Parent shall file, with the SEC, no later than one (1) year after the Effective
Date, a registration statement under the Securities Act and a Prospectus for
resale covering all shares subject to the Prospectus which are not “freely
tradeable” and those shares held by affiliates of the Parent.

 

(b) The
Company and Parent shall cooperate with one another (i) in connection with the
preparation of the Prospectus and the Form S-4, (ii) in determining whether any
other action by or in respect of, or filing with, any governmental body, agency
or official, or authority or any actions, consents, approvals or waivers are
required to be obtained from parties to any leases and other material contracts
in connection with the consummation of the Merger, and (iii) in seeking any such
actions, consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the Prospectus or the Form
S-4 and seeking timely to obtain any such actions, consents, approvals or
waivers.

(c) Parent
shall use its commercially reasonable efforts to obtain consent from its
shareholders for all other actions contemplated herein, if any, which require
the consent of the shareholders of Parent, including without limitation the
actions set forth in Section 6.9. 

(d)  The
Company shall furnish to Parent and to Parent’s independent certified public
accountants such workpapers and supporting documentation, as well as such
consents by the Company’s independent public certified accountants, as Parent or
Parent’s independent certified public accountants may reasonably require in
order to include the Company’s financial statements and the related reports of
Company’s independent certified public accountants in Parent’s filing with the
SEC on Form S-4 or any other filing required to be made by Parent with the SEC.
The Company shall furnish all information concerning the Company as Parent may
reasonably request in connection with such actions and the preparation of the
Form S-4 and the Prospectus. 

 

(e)  On or
prior to the filing of Parent’s registration statement on Form S-4 contemplated
by this Agreement, the Company shall have furnished or arranged to be furnished
to Parent and to Parent’s independent certified public accountants such Company
financial statements, audited and unaudited (including, without limitation, the
Company Financial Statements and financial statements for such additional
periods as may be required under applicable laws and regulations), workpapers
and supporting documentation, as well as such consents by the Company’s
independent public certified accountants, as are Parent or Parent’s independent
certified public accountants shall have reasonably requested or may reasonably
require in order to include the Company financial statements and the related
reports of Company’s independent certified public accountants, in satisfaction
of all applicable SEC rules and regulations, in Parent’s registration statement
on Form S-4 to be filed with the SEC as contemplated by this Agreement and rely
upon the same. The Company’s financial statements included in the Form S-4
shall, at the time of filing of the Form S-4, satisfy the relevant SEC financial
reporting and filing requirements.

 

(f)  On or
prior to the Effective Time, the Company shall have furnished or arranged to be
furnished to Parent and to Parent’s independent certified public accountants
such workpapers and supporting documentation, as well as such consents by the
Company’s independent public certified accountants, as are Parent or Parent’s
independent certified public accountants shall have reasonably requested or may
reasonably require in order to include the Company financial statements and the
related reports of Company’s independent certified public accountants, in
satisfaction of all applicable SEC rules and regulations, in Parent’s
registration statement on Form S-4 as the same shall have been amended, if at
all, by Parent and as the Parent same shall have requested acceleration of
effectiveness by the SEC as contemplated by this Agreement, and rely upon the
same. The Company’s financial statements included in the Form S-4 shall, at the
time of effectiveness of the Form S-4, satisfy the relevant SEC financial
reporting and filing requirements.

 

(g)  On or
prior to the Effective Time, and in any event, as required prior to such date in
connection with any filings or disclosures Parent may deem necessary to make
under applicable securities laws, the Company will furnish to Parent and to
Parent’s independent certified public accountants such financial statements, and
such workpapers and supporting documentation, as well as such consents by the
Company’s independent public certified accountants, as Parent or Parent’s
independent certified public accountants have reasonably requested or may
reasonably require in order to include the Company Financial Statements and the
related reports of Company’s independent certified public accountants in
Parent’s filing with the SEC on Form 8-K covering this Agreement or in other
disclosures or filings that Parent may deem it necessary to make under
applicable securities laws, and rely upon the same. 

 

(h)  The Form
S-4 and Prospectus shall not, at (i) the time the Form S-4 is declared effective
by the SEC; (ii) the time the Prospectus (or any amendment thereof or supplement
thereto) is first mailed to shareholders of the Company; (iii) the time of the
Company’s Shareholders’ Meeting; and (iv) the Effective Time, 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 not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to Parent or any of its subsidiaries, or their respective officers or
directors, should be discovered by Parent which should be set forth in an
amendment or a supplement to the Form S-4 or Prospectus, Parent shall promptly
inform the Company. The Form S-4 or Prospectus shall comply in all material
respects as to form and substance with the requirements of the Securities Act,
the Exchange Act and the rules and regulations thereunder. Notwithstanding the
foregoing, Parent and Merger Subsidiary make no representation or warranty with
respect to any information supplied by the Company which is contained in, or
furnished in connection with the preparation of, any of the foregoing
documents.

 

(i)  The
information supplied by the Company for inclusion in the Form S-4 and Prospectus
shall not, at (i) the time the Form S-4 is declared effective; (ii) the time the
Prospectus (or any amendment thereof or supplement thereto) is first mailed to
the shareholders of the Company; (iii) the time of the Company’s Shareholders'
Meeting; and (iv) the Effective Time, 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 not misleading. If at any time
prior to the Effective Time any event or circumstance relating to the Company or
any of its subsidiaries or their respective officers or directors, should be
discovered by the Company which should be set forth in an amendment or a
supplement to the Form S-4 or Prospectus, the Company shall promptly inform
Parent. The information provided by the Company for inclusion in the Form S-4
and Prospectus shall comply in all material respects as to form and substance
with the requirements of the Securities Act, the Exchange Act and the rules and
regulations thereunder. Notwithstanding the foregoing, the Company makes no
representations or warranty with respect to any information supplied by Parent
or Merger Sub which is contained in, or furnished in connection with the
preparation of, any of the foregoing documents.

 

SECTION
6.2 Shareholders’
Meeting. The
Company shall cause a meeting of its shareholders (or take action by written
consent of its shareholders as permitted under applicable law) (the
“Company
Shareholders Meeting”) to be
duly called and held within 30 days following the effective date of the Form S-4
for the purpose of voting on the adoption of this Agreement.

SECTION
6.3 Letters
of Company’s Accountants. The
Company shall cause to be delivered to Parent a letter from the Company’s
independent accountants dated a date not later than the second business day next
preceding the date on which the Form S-4 shall become effective, addressed to
Parent, in form and substance reasonably satisfactory to Parent and customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form
S-4.

 

SECTION
6.4 Access
to Information; Confidentiality.
(a)
Each
party shall, and shall cause its subsidiaries to, afford to the other party and
to the officers, current employees, accountants, counsel, financial advisors,
agents, lenders and other representatives of such party and its subsidiaries,
reasonable access during normal business hours during the period prior to the
Effective Time to all its respective properties, books, contracts, commitments,
personnel and records and, during such period, each party shall, and shall cause
each of its subsidiaries to, furnish promptly to the other party (a) a copy of
each material report, schedule, registration statement and other document filed
by it with any Governmental Entity and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.

 

(b) The
parties will hold, and will use its best efforts to cause its officers,
directors, employees, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other party and its subsidiaries furnished to it in connection with the
transactions contemplated hereby, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by the
disclosing party, (ii) in the public domain through no fault of the disclosing
party, or (iii) later lawfully acquired by the disclosing party from sources;
provided that each party may disclose such information to its officers,
directors, employees, consultants, advisors and agents in connection with the
Merger so long as such persons are informed of the confidential nature of such
information and are directed to treat such information confidentially. Each
parties’ obligation to hold such information in confidence shall be satisfied if
it exercises the same care with respect to such information as it would exercise
to preserve the confidentiality of its own similar information. Notwithstanding
any other provision of this Agreement, if this Agreement is terminated, such
confidence shall be maintained and all confidential materials shall be destroyed
or delivered to their owner, upon request.

SECTION
6.5 Commercially
Reasonable Efforts. Except
where otherwise provided in this Agreement, each party will use its commercially
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the Merger as soon as practicable after the
satisfaction of the conditions set forth in Article VIII hereof, provided that
the foregoing shall not require the Company, Parent or Merger Sub to take any
action or agree to any condition that might, in the reasonable judgment of the
Company or Parent, as the case may be, have a material adverse effect on the
Company or Parent, respectively.

 

SECTION
6.6 Indemnification,
Exculpation and Insurance.
(a) All
rights to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the current
or former directors or officers of the Company and its subsidiaries as provided
in their respective certificates of incorporation or by-laws (or comparable
organizational instruments and agreements) and any existing indemnification
agreements or arrangements of the Company and its subsidiaries shall survive the
Merger and shall continue in full force and effect in accordance with their
terms, and shall not be amended, repealed or otherwise modified for a period of
six (6) years after the Effective Time in any manner that would adversely affect
the rights thereunder of such individuals for acts or omissions occurring at or
prior to the Effective Time.

 

(b) In the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation in which
any individual who is now or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer of
the Company or any of its subsidiaries (the "Indemnified
Parties"), is,
or is threatened to be, made a party, or arising out of or pertaining to (i) the
fact that he is or was a director, officer or current employee of the Company or
any of its subsidiaries or their respective predecessors or (ii) this Agreement
or any of the transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Time, the parties hereto agree to
cooperate and use their reasonable best efforts to defend against and respond
thereto. 

 

(c) For a
period of six (6) years after the Effective Time, the Surviving Corporation
shall maintain in effect the tail insurance policy purchased by the Company
prior to the Effective Time providing the Company’s current directors’ and
officers’ liability insurance covering acts or omissions occurring prior to the
Effective Time; provided,
however, that
the Surviving Corporation may substitute therefor policies of Parent or its
subsidiaries containing terms with respect to scope of coverage and amount no
less favorable to such directors or officers; and provided
further, that
Surviving Corporation shall not be
obligated to maintain any such insurance to the extent that doing so would
require payments in addition to the amounts paid for that tail insurance policy
by the Company prior to the Effective Time. 

 

(d) From and
after the Effective Time, the Parent shall cause the Surviving Corporation to
maintain in effect a directors’ and officer’s liability insurance policy
covering acts or omissions occurring after the Effective Time.

 

(e) Parent
shall cause the Surviving Corporation or any successor thereto, whether by
consolidation, merger or transfer of substantially all of its properties or
assets, to comply with its obligations under this Section 6.6. The provisions of
this Section 6.6 shall survive the Effective Time and are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and other person
named herein and his or her heirs and representatives.

 

(f) Prior to
the Effective Time Parent shall obtain the insurance policies required by
Section 4.15 hereof.

 

SECTION
6.7 Fees
and Expenses. All
costs, fees and expenses incurred in connection with the Merger, this Agreement
(including all instruments and agreements prepared and delivered in connection
herewith), and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses; provided that,
the Company shall not incur unreasonable fees and expenses and shall agree upon
a budget for the same with Parent promptly following the execution and delivery
of this Agreement; and provided further, that
the fees or bonuses to be paid in accordance with Section 6.21 of this Agreement
shall not be deemed to be unreasonable.
Simultaneously with the Closing as contemplated in the calculation of the
Aggregate Merger Consideration in Section 2.1(n), Parent shall pay the Company’s
reasonable incurred but unpaid fees and expenses, and the Company shall cause
its principal creditors (including, without limitation, its investment bankers,
attorneys and accountants and any persons or entities to whom fees or bonuses
are due pursuant to the agreements or arrangements disclosed in Section 3.5(b)
or 6.7(a) of the Company Disclosure Schedule or Section 6.21 of this Agreement)
in respect of transaction costs or other amounts due in connection with, or as a
consequence of, the Closing of the Merger, to confirm to Parent immediately
prior to the Effective Time that all such fees and expenses are paid (subject,
in the case of payments due under Section 6.21 of this Agreement, to performance
by Parent of its obligations under that Section at the Effective Time and, in
the case of P2 Partners, LLC only, upon the closing of the Qualified Financing)
and none are unbilled. In further explication of the preceding sentence, but
without limiting the same, Parent shall pay its own costs and expenses
(including, but not limited to, legal and accounting fees and expenses) of
preparing the Current Reports on Form 8-K concerning this Agreement and the
transactions related hereto and the Form S-4 Registration Statement and the
Prospectus included therein (including Parent’s financial statements), and the
Company shall pay its own costs and expenses (including, but not limited to,
legal and accounting fees and expenses) of furnishing whatever information
(including financial statements) and due diligence materials as may be required
from the Company in connection with the preparation of the Current Reports on
Form 8-K concerning this Agreement and the transactions related hereto and the
Form S-4 Registration Statement and the Prospectus included therein, and
reviewing and commenting upon the Current Reports on Form 8-K and the Form S-4
Registration Statement and the Prospectus included therein. The Company and the
Parent each shall pay its respective share of the cost of preparation of
proforma financial statements required for the Current Reports on Form 8-K and
the Form S-4 Registration Statement and the Prospectus included therein, if any
are so required. 

 

SECTION
6.8 Public
Announcements. Parent
and the Company shall consult with each other before issuing, and shall provide
each other the opportunity to review, comment upon and concur with any press
release or other public statements or announcements (including pursuant to Rule
165 under the Securities Act and Rule 14a-12 under the Exchange Act) and any
broadly distributed internal communications with respect to the Merger, this
Agreement and the transactions contemplated by this Agreement, and shall not
issue any such press release or make any such public statement or announcement
prior to such consultation, except as either party may determine is required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or inter-dealer quotation system
of a registered national securities association (provided prior notice is given
to the other party with a copy of any such disclosure). 

 

SECTION
6.9 Corporate
Governance of Parent. At the
Effective Time, 

 

(a) Parent’s
principal place of business shall remain in New York, New York and London,
England, its corporate headquarters shall remain in New York, New York, and
Parent shall maintain its corporate name. 

 

(b) At the
Effective Time, if it has not already done so, Parent shall take such actions as
are necessary to cause the number of directors comprising the Parent’s Board of
Directors to be increased to seven (7) directors effective as of the Effective
Time. At the Effective Time, the Board of Directors of Parent shall consist of
seven (7) directors, of whom three (3) shall be individuals designated in
writing by Cengent sufficiently in advance of the Effective Time for Parent to
furnish appropriate disclosures concerning such persons in required filings and
notices, and four (4) shall be individuals designated by Parent, one of whom
shall be Parent’s CEO and Chairman at the Effective Time. All such directors
shall serve in accordance with Parent’s articles of incorporation and by-laws.
Notwithstanding the foregoing, Parent may elect four of the aforesaid directors
to its Board of Directors prior to the Effective Time.

 

SECTION
6.10 Agreements
with Holders of Company Securities. The
Company shall use its reasonable best efforts to obtain and deliver to Parent
not later than twenty-five (25) days after the date hereof a written agreement,
reasonably acceptable to Parent in form and in substance, of all persons who are
(or may deemed to be) "affiliates" of the Company for purposes of Rule 145 under
the Securities Act (each of whom shall be so identified in Section
6.10 of the Company Disclosure Schedule).
Notwithstanding any other provision of this Agreement, any person whatsoever who
shall not have executed and delivered to Parent a written agreement reasonably
acceptable to Parent in form and substance as provided in this Section 6.10
shall not be entitled to have the Merger Consideration issued in the Merger to
such person covered by (and shall not be entitled to be included as a “selling
stockholder” in) the Prospectus for resale. The written agreement shall include,
without limitation, provisions setting forth the restrictions under the Initial
Lock-Up Period and the Lock-Up Period, customary stockholder information for
inclusion of shares in the Prospectus for resale, and customary agreements and
indemnifications by such stockholders in connection with the Prospectus for
resale. Promptly after the expiration of such 30-day period, the Company shall
cause to be delivered to each affiliate that shall not so execute such written
agreement as provided in this Section 6.10 a statement disclosing that the
shares of Parent Common Stock or other Merger Consideration (including, without
limitation, securities issuable to holders of Company Options, Company Warrants,
and Company Convertible Promissory Notes) to be issued to such person are
subject to transfer restrictions under each of Rule 145 and Rule 144 under the
Securities Act and, therefore, may not be sold, transferred or otherwise
disposed of except pursuant to an effective registration statement under, or in
accordance with an available exemption from the registration and prospectus
delivery requirements of, the Securities Act, and that the certificates
evidencing such shares of Parent Common Stock or other Parent securities, if
applicable, shall bear appropriate restrictive legends and stop transfer orders
shall be maintained by the Parent’s transfer agent in respect of such
shares.

 

SECTION
6.11 Shareholder
Litigation. Each of
the Company and Parent shall give the other the reasonable opportunity to
participate in the defense of any shareholder litigation against the Company or
Parent, as applicable, and its directors relating to the transactions
contemplated by this Agreement.

 

SECTION
6.12 Voting
Agreements and Lock-Up Agreement

 

(a)
Within twenty-five (25) days of the date hereof, Parent shall use its reasonable
best efforts to obtain and deliver to the Company written agreements, in a form
agreed upon in writing prior to the execution and delivery of this Agreement or
as is otherwise satisfactory in form and in substance to the Company, from
Parent’s officers and directors, Bioaccelerate Holdings, Inc., and holders of
Parent Common Stock owning more than five percent (the “5%
Holders”) of
Parent Common Stock agreeing to be bound by the lock-up provisions set forth in
Section 2.1(i) with respect to Parent Common Stock owned by such persons or
entities during the Lock-Up Period; provided, that Parent’s obligation shall be
firm, and not qualified as to “reasonable best efforts,” with respect to
Parent’s officers and directors and Bioaccelerate Holdings, Inc.

 

(b) Within
twenty-five (25) days of the date hereof, Company shall obtain and deliver to
Parent irrevocable agreements, in a form agreed upon in writing prior to the
execution and delivery of this Agreement or as is otherwise satisfactory in form
and in substance to Parent, from Company’s executive officers and directors and
from the holders of not less than Fifty-One percent (51%) of the outstanding
shares of each class of the Company’s capital stock that is required by
applicable law to consent to the Merger, whether voting together or as separate
classes, as the case may be, agreeing to vote to approve the proposal to adopt
this Agreement. 

 

(c) Within
twenty-five (25) days of the date hereof, Company shall obtain and deliver to
Parent written agreements, in a form agreed upon in writing prior to the
execution and delivery of this Agreement or as is otherwise satisfactory in form
and in substance to the Parent, from Company’s executive officers and directors
who hold Company Stock Options agreeing that all shares of Parent Common Stock
received after the Effective Time by them upon exercise of such options will be
subject to the lock-up provision set forth in Section 2.1(i) during the Lock-Up
Period.

 

SECTION
6.13 Employee
Benefits.
(a)
Parent
shall, or shall cause the Surviving Corporation and its subsidiaries to, (i)
give those employees who are, as of the Effective Time, employed by the Company
and its subsidiaries (the "Continuing
Employees") full
credit for purposes of eligibility, vesting and benefit accruals (other than for
purposes of benefit accruals under any defined benefit pension plan) under any
employee benefit plans or arrangements maintained by Parent, the Surviving
Corporation or any subsidiary of Parent or the Surviving Corporation for which
such Continuing Employees shall be eligible, for such Continuing Employees’
service with the Company or any subsidiary of the Company (or any predecessor
entity) to the same extent recognized by the Company and its subsidiaries, and
(ii) waive all limitations as to preexisting conditions, exclusions and waiting
periods, to the extent the same may be waived under any such plan, with respect
to participation and coverage requirements applicable to the Continuing
Employees under any welfare plan that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Effective Time under any welfare plan maintained
for the Continuing Employees immediately prior to the Effective Time, and (iii)
provide credit under any such welfare plan for any copayments, deductibles and
out-of-pocket expenditures for the remainder of the coverage period during which
any transfer of coverage occurs.

 

(b) At the
Effective Time, Surviving Corporation shall provide, or shall cause to be
provided, to the Continuing Employees compensation and employee benefit plans,
programs and arrangements that are, in the aggregate, comparable to those
generally provided to such employees as of the date hereof; provided,
however, that
nothing herein shall restrict Parent’s or the Surviving Corporation’s ability to
amend or terminate such compensation and employee benefit plans, programs and
arrangements in accordance with their terms.

 

(c) Parent
shall not be obligated to assume any compensation or employment benefit plans,
programs or arrangements of the Company or its subsidiaries.

 

(d) No
provision of this Agreement shall be deemed to constitute an offer, promise or
covenant of continuing employment, nor shall there be any third party
beneficiaries in respect of this Section 6.13.

 

SECTION
6.14 Convertible
Credit Line Facility; Secured Credit Line Facility. On or
prior to the execution and delivery of this Agreement, the parties hereto and
Bioaccelerate Holdings, Inc. shall have executed and delivered a credit line
facility in favor of the Company (the “Convertible
Credit Line Facility”).
Parent has entered into definitive agreements, in the form heretofore furnished
to the Company, whereby Bioaccelerate Holdings, Inc. has established a secured,
convertible credit line (the “Secured
Credit Line Facility”) in the
amount of $12,000,000 in favor of Parent for the period of one year following
the Effective Time. Upon the Effective Time, any indebtedness owed to
Bioaccelerate Holdings, Inc. under the Convertible Credit Line Facility shall be
rolled into and charged against the Secured Credit Line Facility, except as the
parties shall otherwise arrange in order that Bioaccelerate Holdings, Inc. will
have a perfected security interest in all of the assets of Parent, including the
Company and its assets, in respect of the Secured Credit Line Facility and with
a first priority security interest, succeeding to the first priority security
interest under the Convertible Credit Line Facility to the extent
possible.

 

SECTION
6.15 Directors
and Officers Insurance. Prior
to the Effective Time, Parent shall obtain, from a financially sound and
nationally recognized insurance carrier, directors’ and officers’ liability
insurance covering its and any of its subsidiaries directors and
officers.

 

SECTION
6.16 Stock
Exchange Listing.
Parent
shall use its reasonable best efforts to cause the shares of Parent Common Stock
to be issued in the Merger to be approved for listing on the OTC Bulletin Board
prior to the Effective Time.

 

SECTION
6.17 Liens
on Intellectual Property.
As of the
Effective Time, at the election of Parent, the Company shall cause all of the
Intellectual Property owned by the Company or one of its subsidiaries to be free
and clear of all Liens, except as otherwise agreed by the Parent in writing
prior to the Effective Time, other than Liens in favor of Bioaccelerate
Holdings, Inc. under the Convertible Credit Line if Bioaccelerate Holdings, Inc.
shall request that the same be amended, after payout of all lenders other than
Bioaccelerate Holdings, Inc., and restated on the terms of the Secured Credit
Line to be included within the Secured Credit Line.

 

SECTION
6.18 Opinion
Letter Forms.
Parent
and the Company shall have agreed upon the forms of opinion letter that Parent
shall receive from Fish & Richardson P.C. (or such other firm as may be
counsel to the Company) at Closing and that the Company shall receive from DLA
Piper Rudnick Gray Cary US LLP at Closing, respectively, within twenty-five (25)
days after the execution and delivery of this Agreement.

 

SECTION
6.19 Waiver
of Default.
The
Company shall have obtained and delivered to Parent within twenty-five (25) days
of the date hereof agreements with the Company’s lenders in respect of the Note
and Warrant Purchase Agreement, dated as of October 29, 2004, by and among the
Company, certain lenders listed therein, and Perseus-Soros BioPharmaceutical
Fund, LP, as representative and collateral agent, as amended to date (the
“Purchase
Agreement”),
whereby their agreements to waive and forbear from exercising rights with
respect to the breach of financial covenants contained in the Purchase Agreement
and the Convertible Promissory Notes shall continue for a forbearance period
ending upon the earlier of (a) the termination of this Agreement on the date
provided in Section 8.1(b)(i), (b) the date an acquisition or merger of the
Company is consummated, or (c) the termination of a commitment to consummate an
acquisition or merger of the Company by Parent.

 

SECTION
6.20 Consents
or Waivers Required Pursuant to Purchase Agreement and from holders of
Convertible Promissory Notes.
The
Company shall have obtained and delivered to Parent within twenty-five (25) days
of the date hereof (i) such consents and approvals from the Company’s lenders in
respect of the Purchase Agreement and the Convertible Promissory Notes as are
necessary or appropriate in order to execute, deliver and perform this Agreement
and the other agreements and transactions contemplated hereby and (ii) such
consents and/or approvals of the requisite holders of the Company Preferred
Stock and the Company Common Stock to terminate that certain Third Amended and
Restated Investors’ Rights Agreement between the Company and the parties listed
therein, which termination shall be effective only upon the Closing of the
Merger.

 

SECTION
6.21 Payments
Pursuant to Section 6.7 of this Agreement.
Parent, the
Company and the other parties identified in Section 3.5 of the Company
Disclosure Schedule have agreed that certain payments shall be made pursuant to
Section 6.7 of this Agreement to the
parties identified at Section 3.5 of the Company Disclosure Schedule in full
settlement of obligations to those parties, as set forth in a
letter agreement among Parent and the Company delivered as of the date hereof,
and the other parties shall have executed agreements memorializing these terms
with the Company. It is specifically understood and agreed among Parent, the
Company and such other parties that any of such payments which are made or to be
made in Parent Common Stock shall be subject to the lock-up set forth in this
Agreement for the entire Lock-Up Period, unless otherwise agreed in the letter
agreement.

 

SECTION
6.22 Stakeholder Representative. For
purposes of this Agreement, by their approval of the Merger to the extent
required, each of the holders of the Company Convertible Promissory Notes, the
Company Preferred Stock and the Company Junior Stock (the “Company
Stakeholders”) will be conclusively deemed to have consented to, approved and
agreed to be personally bound by: (1) the escrow agreement which may be entered
into pursuant to Section 2.9 by and between the Company, the Escrow Agent and
the Stakeholder Representative, (ii) the appointment of a person designated by
the Board of Directors of the Company to act as the Stakeholder Representative
and as attorney-in-fact and agent for and on behalf of the Company Stakeholders
as provided in this Agreement and the escrow agreement which may be entered into
and (iii) the taking by the Stakeholder Representative of any and all actions
and the making of any decisions required or permitted to be taken by the
Stakeholder Representative under this Agreement and the escrow agreement which
may be entered into pursuant to Section 2.9. The Stakeholder Representative will
have authority and power to act on behalf of each Company Stakeholder with
respect to the disposition, settlement or other handling of (a) the distribution
of the Aggregate
Merger Consideration upon the
release of Escrow or upon the date six (6) months after the Closing, and all
rights or obligations arising under the escrow agreement so long as all the
Company Stakeholders are treated in a manner consistent with Section 2.9 of this
Agreement and/or consent in writing to a different treatment. Each Company
Stakeholder will be bound by all actions taken by the Stakeholder Representative
in the distribution of the Aggregate
Merger Consideration as set
forth in Section 2.9, and the Escrow Agent and Parent shall be entitled to rely
on any action or decision of the Stakeholder Representative in connection
therewith or the performance of this Agreement as an action taken for, in the
name of, and on behalf of each individual Company Stakeholder.

 

 

ARTICLE
VII

 

CONDITIONS
PRECEDENT

 

SECTION
7.1 Conditions
to Each Party’s Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or, to the extent permitted by applicable law, waiver by each of
Parent and the Company on or prior to the Closing Date of the following
conditions:

 

(a) Shareholder
Approvals. The
Company shall have obtained the consent of the requisite holders of each class
of its capital stock as set forth in Section 3.17 to the Merger, this Agreement
and the transactions contemplated hereby. Merger Sub shall have obtained the
consent of the holders of its capital stock to the Merger, this Agreement and
the transactions contemplated hereby.

 

(b) Governmental
and Regulatory Approvals. Other
than the filing of the Articles of Merger provided for under Section 1.3 and the
expiration or early termination of the applicable pre-merger notification
waiting period pursuant to the HSR Act (as provided in Section 7.1(e)) if the
same is applicable, all consents, approvals and actions of, filings with and
notices to any Governmental Entity required by the Company, Parent or any of
their subsidiaries under applicable law or regulation to consummate the Merger
and the transactions contemplated by this Agreement, the failure of which to be
obtained or made would result in a material adverse effect on Parent’s ability
to conduct the business of the Company in substantially the same manner as
presently conducted, shall have been obtained or made (all such approvals and
the expiration of all such waiting periods, the "Requisite
Regulatory Approvals")

 

(c) No
Injunctions or Restraints. No
judgment, order, restraining order and/or injunction (temporary or otherwise),
decree, statute, law, ordinance, rule or regulation, entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity or
other legal restraint or prohibition (collectively, "Restraints") shall
be in effect preventing or materially delaying the consummation of the Merger;
provided,
however, that
each of the parties shall have used its best efforts to have such Restraint
lifted, vacated or rescinded.

 

(d) Form
S-4. The Form
S-4 shall have become effective under the Securities Act prior to the mailing by
the Company and Parent of the Prospectus to the shareholders of the Company, and
no stop order or proceedings seeking a stop order shall have been entered or be
pending before or threatened by the SEC.

 

(e) HSR
Act. The
pre-merger notification waiting period (and any extension thereof) applicable to
the Merger under the HSR Act, if any is applicable, shall have expired or been
terminated.

 

(f) Listing
of Parent Common Stock. The
shares of Parent Common Stock to be issued in the Merger shall have been
authorized for listing on OTC Bulletin Board.

 

SECTION
7.2 Conditions
to Obligations of Parent and Merger Sub. The
obligation of Parent and Merger Sub to effect the Merger is further subject to
satisfaction or waiver of the following conditions:

 

(a) Representations
and Warranties of the Company. The
representations and warranties of the Company set forth herein and in the
Company Disclosure Schedule shall be true and correct at and as of the Closing
Date, as if made at and as of such time (except to the extent expressly made as
of an earlier date, in which case such representations and warranties shall be
true and correct as of such date); provided that no representation or warranty
of the Company shall be deemed untrue or incorrect for purposes of this Section
7.2(a) as a consequence of the existence of any fact, event or circumstance
inconsistent with such representation or warranty, unless such fact, event or
circumstance, individually or when aggregated with all other facts, events or
circumstances inconsistent with any such representation or warranty of the
Company, has had or would be expected to result in a material adverse effect on
the Company, disregarding for these purposes any qualification or exception for,
or reference to, materiality in any such representation or warranty. Parent
shall have received a certificate of the Company’s President and Chief Financial
Officer to the foregoing effect.

 

(b) Performance
of Obligations of the Company. The
Company shall have performed, in all material respects, all obligations required
to be performed by it at or prior to the Closing Date under this Agreement
disregarding for these purposes any qualification or exception for, or reference
to, materiality in any such covenant. Parent shall have received a certificate
of the Company’s President and Chief Financial Officer to the foregoing
effect.

 

(c) Regulatory
Condition. No
condition or requirement shall have been imposed by one or more Governmental
Entities in connection with any required approval by them of the Merger that
requires the Company or any of its subsidiaries to be operated in a manner that
would have a material adverse effect on the Company or the Parent or on the
consummation of this Agreement and the transactions contemplated
hereby.

 

(d) No
Company Material Adverse Effect. There
shall not be or exist any change, effect, event, circumstance, occurrence or
state of facts that has had, has or which reasonably could be expected to have,
a material adverse effect on the Company. 

 

(e) Legal
Opinion. Parent
shall have received an opinion of Fish & Richardson P.C., counsel to the
Company, in the form agreed upon pursuant to this Agreement.

 

SECTION
7.3 Conditions
to Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:

 

(a) Representations
and Warranties. The
representations and warranties of Parent set forth herein and in the Parent
Disclosure Schedule shall be true and correct at and as of the Closing Date, as
if made at and as of such time (except to the extent expressly made as of an
earlier date, in which case such representations and warranties shall be true
and correct as of such date); provided that no representation or warranty of
Parent shall be deemed untrue or incorrect for purposes of this Section 7.3 (a)
as a consequence of the existence of any fact, event or circumstance
inconsistent with such representation or warranty, unless such fact, event or
circumstance, individually or when aggregated with all other facts, events or
circumstances inconsistent with any such representation or warranty of Parent,
has had or would be expected to result in a material adverse effect on Parent,
disregarding for these purposes any qualification or exception for, or reference
to, materiality in any such representation or warranty. The Company shall have
received a certificate of Parent’s Chief Executive Officer and Chief Financial
Officer to the foregoing effect.

 

(b) Performance
of Obligations of Parent. Parent
shall have performed in all material respects all obligations required to be
performed by it at or prior to the Closing Date under this Agreement
disregarding for these purposes any qualification or exception for, or reference
to, materiality in any such covenant. The Company shall have received a
certificate of Parent’s Chief Executive Officer and Chief Financial Officer to
the foregoing effect.

 

(c) Regulatory
Condition. No
condition or requirement shall have been imposed by one or more Governmental
Entities in connection with any required approval by them of the Merger that
requires Parent or any of its subsidiaries to be operated in a manner that would
have a material adverse effect on Parent or Company or on the consummation of
this Agreement or the transactions contemplated hereby.

 

(d) No
Parent Material Adverse Effect. There
shall not be or exist any change, effect, event, circumstance, occurrence or
state of facts that has had, has or which reasonably could be expected to have,
a material adverse effect on Parent.

 

(e) Legal
Opinion. The
Company shall have received an opinion of DLA Piper Rudnick Gray Cary US LLP,
counsel to Parent, in the form agreed upon pursuant to this
Agreement.

 

SECTION
7.4 Frustration
of Closing Conditions. Neither
Parent nor the Company may rely on the failure of any condition set forth in
Section 7.1, 7.2 or 7.3, as the case may be, to be satisfied if such failure was
caused by such party’s failure to use its own reasonable best efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to Section 6.5.

 

 

ARTICLE
VIII

 

TERMINATION,
AMENDMENT AND WAIVER

 

SECTION
8.1 Termination. This
Agreement may be terminated at any time prior to the Effective Time, whether or
not the Company’s shareholders have approved the Agreement:

 

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

 

(b) by either
Parent or the Company:

 

(i) if the
Merger shall not have been consummated at or prior to 5:00 p.m., New York time,
on October 15, 2005, provided,
however, that
this date shall be extended one (1) day for each day after May 15, 2005 the
Company has not provided the information required by Section 6.1; and
provided,
further, that
the right to terminate this Agreement pursuant to this Section 8.1(b)(i) shall
not be available to any party whose failure to perform any of its obligations
under this Agreement results in the failure of the Merger to be consummated by
such time and date;

 

(ii) if the
Company’s shareholders have not consented to the Merger, this Agreement and the
transactions contemplated hereby;

 

(iii) if any
Restraint having any of the effects set forth in Section 7.1(c) shall be in
effect and shall have become final and nonappealable; provided,
however, that
the party seeking to terminate this Agreement pursuant to this Section 8.1(b)
(iv) shall have used its reasonable best efforts to prevent the entry of such
Restraint and to have such Restraint vacated or removed; 

 

(iv) if any
Governmental Entity that must grant a Requisite Regulatory Approval shall have
denied the applicable Requisite Regulatory Approval and such denial shall have
become final and nonappealable; or

 

(v) if the
other party shall have failed to perform its covenants pursuant to Sections
6.10, 6.12, 6.14 or 6.18 of this Agreement within the respective time periods
specified therein;

 

(c) by
Parent, if the Company shall have breached any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach (A) would give rise to the failure of a condition set forth in Section
7.2(a) or (b), and (B) is either incapable of being cured by the Company or, if
curable, is not cured within 15 days of receipt from Parent of written notice
thereof;

 

(d) by the
Company, if Parent shall have breached any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach (A)
would give rise to the failure of a condition set forth in Section 7.3(a) or
(b), and (B) is either incapable of being cured by Parent or, if curable, is not
cured within 15 days of receipt from the Company written notice thereof;
or

 

(e) automatically,
without any notice or action by the Company or Parent, if Bioaccelerate
Holdings, Inc. shall fail to make any advance of funds when the same is due
pursuant to the terms of the Convertible Credit Line Facility and such failure
shall not have been cured within three (3) business days after receipt by
Bioaccelerate Holdings, Inc. of written notice of such failure, unless, prior
to the expiration of such three (3) business days cure period, the Company has
provided written notice (the “Waiver
Notice”) to
Bioaccelerate Holdings, Inc. and Parent stating that the Company desires that
this Agreement remain in effect notwithstanding such failure, and no more, which
Waiver Notice may not be revoked once given; provided, that no such Waiver
Notice shall constitute waiver of the Company’s rights under the Convertible
Credit Line Facility itself. In the event this Agreement has been terminated
pursuant to this Section 8.1(e), the Company shall receive such compensation as
is set forth in the Convertible Credit Line Facility and Bioaccelerate Holdings,
Inc. shall have no further obligations or liabilities in respect of such
Convertible Credit Line Facility.

 

The party
desiring to terminate this Agreement pursuant to clause (b), (c) or (d) of this
Section 8.1 shall provide written notice of such termination to the other party
in accordance with Section 8.2, specifying in reasonable detail the provision
hereof pursuant to which such termination is effected.

 

SECTION
8.2 Effect
of Termination. If this
Agreement is terminated by either the Company or Parent as provided in Section
8.1, this Agreement forthwith shall become void and have no effect, without any
liability or obligation on the part of Parent or the Company. This Section 8.2
and Article IX shall survive such termination, provided, however, that nothing
herein shall relieve any party from any liability (in contract, tort or
otherwise, and whether pursuant to an action at law or in equity) for any
knowing or willful breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement or in respect of fraud by
any party.

 

SECTION
8.3 Amendment. This
Agreement may be amended by the parties at any time; provided,
however, that
after receipt of approval by the Company’s shareholders, there shall not be made
any amendment that by law requires any further approval by the shareholders of
the Company without the further approval of such shareholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of all of
the parties to be bound thereby.

 

SECTION
8.4 Extension;
Waiver. At any
time prior to the Effective Time, a party may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties of the other party
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 8.3, waive compliance by the
other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.

 

ARTICLE
IX

 

GENERAL
PROVISIONS

 

SECTION
9.1 Nonsurvival
of Representations, Warranties and Agreements. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.

 

SECTION
9.2 Notices. All
notices, requests, claims, demands and other communications under this Agreement
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

 

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

 

Inncardio,
Inc.

712 Fifth
Avenue

New York,
New York 10019

Fax No.:
(212) 581-1922 

Attention:
Lee J. Cole

with a
copy (which shall not constitute notice pursuant to this Section 9.2)
to:

 

Michael
Hirschberg, Esq.

DLA Piper
Rudnick Gray Cary US LLP

1251
Avenue of the Americas

New York,
New York 10020-1104

Facsimile
No.: (212) 884-8670

(b) if to the
Company, to:

 

Cengent
Therapeutics Inc.

10929
Technology Place

San
Diego, CA 92127

Fax No.:
(858) 618-1041

Attention:
J. Gordon Foulkes, Ph.D.

with a
copy (which shall not constitute notice pursuant to this Section 9.2)
to:

Fish
& Richardson P.C.

12390 El
Camino Real

San
Diego, CA 92130-2081

Fax No.:
(858) 678.5099

Attention:
Edith A. Bauer, Esq.

SECTION
9.3 Definitions. For
purposes of this Agreement:

 

(a) an
"affiliate" of any
person means another person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such first person, where "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by contract, as
trustee or executor, or otherwise.

 

(b) "material
adverse change" or
"material
adverse effect" means,
when used in reference to the Company or Parent, any change, effect, event,
circumstance, occurrence or state of facts that is, or which reasonably could be
expected to be, materially adverse to the business, assets, liabilities,
condition (financial or otherwise) or results of operations of such party and
its subsidiaries, considered as an entirety; provided, however, that
the following shall not be taken
into account or given effect, either individually or in the aggregate, in
determining whether there has occurred or there reasonably could be expected to
occur, or whether there exists a change, effect, event, circumstance, occurrence
or state of facts that is or which reasonably could be expected to be, a
material adverse change or a material adverse effect: (i) any change, effect,
event, circumstance, occurrence or state of facts relating to the United States
economy or financial or securities markets in general, unless (A) constituting
or arising from a banking moratorium or general suspension of trading for more
than 10 consecutive trading days on any national securities exchange or U.S.
inter-dealer quotation system of a registered national securities association or
(B) involving a decline in the Dow Jones Industrial Average of more than 35%
measured over any five (5) trading day period), (ii) any adverse change, effect,
event, circumstance, occurrence or state of facts relating to the biotech
industry to the extent not affecting the referent person to a disproportionately
greater extent than other persons in industries in which the referent person
competes are or could reasonably be expected to be affected, or (iii) any
change, effect, event, circumstance, occurrence or state of facts directly
relating to and arising out of the public announcement or performance of this
Agreement and the transactions contemplated hereby.

 

(c) "person” means
an individual, corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization or other
entity.

 

(d) a
"subsidiary" of any
person means another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect not
less than a majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first person.

 

(e) "knowledge" means,
(i) with respect to the Company, the actual knowledge after reasonable due
inquiry, of the Company’s executive officers, and (ii) with respect to Parent,
the actual knowledge after reasonable due inquiry, of Parent’s executive
officers as well as Lee J. Cole (there being no inference thereby that Lee J.
Cole is an officer or executive officer of Parent). 

 

(f) “Company
Preferred Stock” means,
collectively, the Company Series A Preferred Stock, the Company Series B
Preferred Stock, the Company Series C Preferred Stock, the Company Series D
Preferred Stock, the Company Series E Preferred Stock, the Company Series F
Preferred Stock, the Company Series G Preferred Stock, and the Company Series H
Preferred Stock; provided that the Company Series E Preferred Stock shall
expressly be excluded in connection with any references to Preferred Merger
Consideration.

 

SECTION
9.4 Interpretation.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without limitation
unless the word “only” follows the words “include,” “includes” or “including.”
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. 

 

SECTION
9.5 Counterparts. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties. A facsimile copy of a signature page shall be deemed to be an
original signature page.

 

SECTION
9.6 Entire
Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) (a)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement and (b) except for the provisions of Section
6.6 which shall inure to the benefit of and be enforceable by the persons
referred to therein, are not intended to confer upon any person other than the
parties any rights or remedies.

 

SECTION
9.7 Governing
Law. This
Agreement shall be governed by, and construed in accordance with, the internal
substantive and procedural laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law or
choice of law of such State.

 

SECTION
9.8 Assignment. Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by operation of law or
otherwise by any of the parties hereto without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.

 

SECTION
9.9 Consent
to Jurisdiction. Each of
the parties hereto (a) consents to submit itself to the personal jurisdiction of
any Federal or State court located in Wilmington, Delaware in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal or State court sitting in Wilmington, Delaware, except for any
action in another jurisdiction to enforce any judgment previously obtained in
any such Federal or State court sitting in Wilmington, Delaware. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or any of the
transactions contemplated by this Agreement in any Federal or State court
located in Wilmington, Delaware, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.

 

SECTION
9.10 Headings. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.

 

SECTION
9.11 Severability. If any
term or other provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.

 

SECTION
9.12 Enforcement. The
parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are entitled
at law or in equity.

 

 

 

 

 

[The
remainder of this page is intentionally left blank.]

 

 

 

IN
WITNESS WHEREOF, Parent,
the Company and Merger Sub have caused this Agreement to be signed by their
respective officers thereunto duly authorized, all as of the date first written
above.

 

	 	
      INNCARDIO,
      INC.

       

	 	
       

      By
      /s/
      Bernard Ross

      Name:
      Bernard Ross

      Title:
      Chief Executive Officer

	 	 
	 	
      CENGENT
      ACQUISITION CORP.

	 	
      By
      /s/
      Bernard Ross 

      Name:
      Bernard Ross

      Title:
      Chief Executive Officer

	 	 
	 	
      CENGENT
      THERAPEUTICS INC.

	 	
      By
      /s/
      J. Gordon Foulkes 

      Name:
      J. Gordon Foulkes

      Title:
      President

 

Exhibit A

Lock-Up
Period Legend

The
shares represented by this Certificate are subject to restrictions on transfer,
which shall expire no later than ________, 2005 [INSERT DATE WHICH IS ONE YEAR
AFTER THE EFFECTIVE TIME], as set forth in Section 2.1(l) of that certain
Agreement and Plan of Merger, dated as of March 24, 2005, among the Company,
Cengent Acquisition Corp., and Cengent Therapeutics Inc. Copies of the Agreement
and Plan of Merger are maintained and are available for inspection at the
principal office of the Company.

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