Exhibit 10.2
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
     SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the “Agreement”),
dated March 12, 2009 amends and restates in its entirety that Agreement and Plan
of Merger dated September 9, 2008, as amended by that First Amendment to
Agreement and Plan of Merger dated November 10, 2008 among Flow International
Corporation, a Washington corporation (“Parent”), Orange Acquisition
Corporation, a Washington corporation and a wholly-owned subsidiary of Parent
(“Sub”), OMAX Corporation, a Washington corporation (“Company”), John B. Cheung,
John H. Olsen, James M. O’Connor and Puget Partners, L.P., the holders of
forty-five percent (45%) of the issued and outstanding ownership interests
(other than holders of Company Options) in the Company (collectively referred to
as the “Major Shareholders”), and John B. Cheung, Inc., a personal holding
corporation owned by John B. Cheung (the “Shareholders’ Representative”) as
agent and attorney-in-fact for the holders of Company Shares (as defined in
Section 2.1).
     WHEREAS, in order to induce the parties to enter into this Agreement,
Parent has agreed to pay, contemporaneously with the execution of this
Agreement, Company $2,000,000 in cash from Parent, receipt of which amount is
hereby acknowledged;
     INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the
mutual representations, warranties, covenants, and agreements in this Agreement,
the parties hereby agree as follows:
ARTICLE I
THE MERGER
     1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, Sub will be merged with and into Company (the “Merger”). Articles of
Merger (“Articles of Merger”) will be duly prepared by the parties, executed by
Surviving Corporation (as defined below) and thereafter delivered to the
Secretary of State of Washington for filing, as provided in the Washington
Business Corporation Act (the “WBCA”) as soon as practicable on or after the
Closing Date (as defined in Section 1.2). The Merger will become effective upon
the later of the acceptance for filing of the Articles of Merger by the
Secretary of State of Washington or at such later time as is provided in the
Articles of Merger (the “Effective Time”).
     1.2 Closing. The closing of the Merger (“Closing”) will take place as soon
as practicable after satisfaction or waiver of the last to be fulfilled of the
conditions set forth in Article VII (the “Closing Date”), at the offices of K&L
Gates LLP at 925 Fourth Avenue, Suite 2900, Seattle, Washington 98104, unless
another date or place is agreed to in writing by Parent and Company.
     1.3 Effects of the Merger. At the Effective Time: (i) the separate
existence of Sub will cease and Sub will be merged with and into Company and
Company will continue as the surviving corporation and as a wholly owned
subsidiary of Parent (after the Merger, Company is

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sometimes referred to in this Agreement as the “Surviving Corporation”);
(ii) the certificate of incorporation of Company will be amended in its entirety
to be the same as the certificate of incorporation of Sub, as in effect
immediately before the Effective Time, until later amended in accordance with
the WBCA; (iii) the bylaws of Surviving Corporation will be amended and restated
in their entirety to be the same as the bylaws of Sub, as in effect immediately
before the Effective Time, until later amended in accordance with the provisions
thereof, the certificate of incorporation and the WBCA; (iv) the directors and
officers of Sub immediately before the Effective Time will be the directors and
officers of the Surviving Corporation in each case until their respective
successors have been duly elected, designated, or qualified or until their
earlier death, resignation, or removal in accordance with the Surviving
Corporation’s certificate of incorporation and bylaws; and (v) the Merger will,
from and after the Effective Time, have all the effects provided by
Chapter 23B.11 RCW of the WBCA and other applicable law.
ARTICLE II
EFFECT OF THE MERGER; DELIVERY OF CONSIDERATION
     2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action (except as provided in Section 4.5 and in this
Section 2.1) on the part of Sub, Parent, Company, or the holder of any shares of
Company capital stock (“Company Shares”):
          2.1.1 Capital Stock of Sub. Each share of Sub common stock, no par
value per share, issued and outstanding immediately before the Effective Time,
will be converted into one validly issued, fully paid, and nonassessable share
of Surviving Corporation common stock (“Surviving Corporation Common Stock”),
with the stock certificate of Sub evidencing ownership of such share of
Surviving Corporation Common Stock.
          2.1.2 Cancellation of Company Shares. Each Company Share owned
directly or indirectly by Company or by any subsidiary (as defined in
Section 10.2) of Company will automatically be cancelled and retired and will
cease to exist and no consideration will be delivered or deliverable in exchange
for such Company Shares. Company will obtain a written consent to such
cancellation from any subsidiary, whether or not wholly owned, that owns Company
Shares.
          2.1.3 Conversion of Company Securities. Subject to the limitations on
payments and the timing of payments as set forth in Section 2.2, Section 2.3 and
Article VIII, each Company Share and Company Option (as defined below) validly
issued and outstanding immediately before the Effective Time (other than
Appraisal Shares, as defined in Section 2.1.6, and those Company Shares referred
to in Section 2.1.2), will, without any action on the part of the holder thereof
(except as set forth in this Section 2.1.3) be converted into, or with respect
to Company Options, cancelled in exchange for, their respective conversion
payment (“Conversion Payment”), which will be calculated as follows:
               (a) Each share of Company common stock, no par value (the
“Company Common Shares”), issued and outstanding immediately before the
Effective Time will convert into the right to receive (i) an amount in cash
equal to the Per Share Cash Consideration (as defined below), (ii) the Per Share
Stock Consideration (as defined below), and (iii) the Per Share Contingent
Consideration (as defined below).

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               (b) Each Company Option (as defined below) that is validly issued
and unexpired, unexercised, and outstanding immediately before the Closing will
be exercised immediately before Closing, with the consent of the holder thereof,
(such person, the “Option Holder”), for Company Shares; provided that the right
of the Option Holder to receive the Per Share Cash Consideration (as defined
below) shall be subject first to deduction for (i) the respective aggregate
exercise price of the Company Option(s) being exercised, (ii) any previous loans
or advances to such Option Holder related to the previous acquisition of Company
Shares by the exercise of options, and (iii) the amount of any applicable
payroll, income tax or other withholding taxes being paid on behalf of the
Option Holder arising from the exercise of a Company Option (collectively, the
“Option Advances”), which shall be treated as a partial payment of the Per Share
Cash Consideration due the former Option Holder.
     At the Effective Time, all Company Shares will be cancelled and will cease
to exist and each certificate (a “Certificate”) previously representing any
Company Shares will represent only the right to receive the applicable
Conversion Payment as provided by this Section 2.1.3. The amount that the
holders of Company Shares are entitled to receive at Closing under this
Section 2.1.3 will be reduced by their pro rata share of (i) the Escrow Amount
(as defined in Section 2.2.1), (ii) the Employee Retention Pool Amount (as
defined in Section 2.2.2), and (iii) in the case of the Option Holders, the
amount of Option Advances.
     The numbers used below and in the pro forma calculations in the attached
Schedule 2.1, each rounded to the nearest dollar are for purposes of
illustration of the Per Share Cash Consideration only and will be adjusted and
set forth in the final Schedule 2.1, which will be determined in accordance with
the following procedures, adjustments, and definitions and when approved in
writing by Parent and Company before Closing will be the final and determinative
interpretation of the following, each term used as defined below:

                 
 
        (i)  
Base Cash Amount
  $ [•]      
 
        (ii)  
Plus: Option Consideration
  $ [•]      
 
        (iii)  
Less: Working Capital Deficit, or plus Working Capital Credit (defined in
Section 2.3(a))
  $ [•]      
 
        (iv)  
Less: Expenses
           
 
        (v)  
Subtotal: Gross Distributable Cash Amount (defined below)
  $ [•]      
 
        (vi)  
Divided by: Participating Common Share Equivalents (PCSEs)
  $ [•]      
 
        (vii)  
Per Share Cash Consideration
  $ [•]  

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The following definitions will be used in making the above calculation and for
purposes of this Article II:
     “Base Cash Amount” means $61,000,000, increased by ALI and less the
Employee Retention Pool Amount and less the amounts provided for in Section 6.9.
     “Company Options” means each unexpired, unexercised vested (following
vesting immediately prior to Closing in accordance with Section 3.1.23) Company
Option that is outstanding immediately before the Closing with an exercise price
less than the Per Share Amount as finally determined.
     “Expenses” means the fees (including financial advisory and professional
fees), costs, expenses, bonuses, and charges incurred by Company in connection
with the Transactions, including fees for services provided by the parties as
listed on Schedule 2.1.3, which schedule shall be provided by Company to Parent
prior to Closing, and fees to be paid by Parent pursuant to Section 6.9, except
to the extent such fees, costs, expenses, bonuses and charges were paid or
accrued prior to the computation of Net Working Capital or are included in the
computation of Net Working Capital.
     “Gross Distributable Cash Amount” means the Base Cash Amount, plus the
Option Consideration and the Working Capital Credit, and less (a) the Working
Capital Deficit, and (b) Expenses.
     “Gross Distributable Contingent Consideration” means the contingent
consideration payable pursuant to Section 2.1.5below.
     “Gross Distributable Stock Consideration” means the consideration payable
pursuant to Section 2.1.4below.
     “Option Consideration” means the aggregate exercise price of all Company
Options outstanding immediately before Closing (and before the exercise of such
Company Options pursuant to this Section), and including the aggregate of any
previous loans or advances to Option Holders related to the previous acquisition
of Company Shares by the exercise of options.
     “PCSEs” or “Participating Common Stock Equivalents” means all of the
Company Common Shares including Company Common Shares issued upon exercise of
Company Options outstanding immediately before Closing.
     “Per Share Cash Consideration” means the Gross Distributable Cash Amount
divided by the PCSEs.
     “Per Share Contingent Consideration” means the Gross Distributable
Contingent Consideration divided by the PCSEs.
     “Per Share Stock Consideration” means the Gross Distributable Stock
Consideration divided by the PCSEs.

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          2.1.4 Stock Consideration. Subject to the terms and conditions of
Section 2.1.3 above, the Conversion Payment shall include the right to receive
shares of Parent Common Stock, $.01 par value (“Parent Common Stock”) to be
issued pro rata to the holders of PCSEs, in a number reflecting a value, at
Parent’s discretion, up to $14,000,000, based upon the average daily closing
price per share of Parent Common Stock quoted on the The NASDAQ Global Market
during the ten (10) trading day period ending two (2) business days prior to
Closing (“Closing Share Price”). For each whole dollar of value that the Parent
Common Stock exceeds $4,000,000, the Base Cash Amount will be reduced by one
(1) whole dollar. For each whole dollar of value that the Stock Consideration is
less than $4,000,000, the Base Cash Amount will be increased by one (1) whole
dollar. Notwithstanding any other provision of this Agreement, neither
certificates nor scrip for fractional shares of Parent Common Stock shall be
issued in the Merger. Each holder of Company Common Shares who otherwise would
have been entitled to a fraction of a share of Parent Common Stock (after taking
into account all PCSEs delivered by such holder) shall receive in lieu thereof
cash (without interest) in an amount determined by multiplying the fractional
share interest to which such holder would otherwise be entitled by the Closing
Share Price, rounded to the nearest whole cent.
          2.1.5 Contingent Consideration. Subject to the terms of Section 2.1.3
above, and subject to the right of a holder of PCSEs to make an Interim Election
as set forth below, the Conversion Payment shall include the right to receive an
aggregate amount up to $52,000,000, which shall be paid on the third anniversary
of Closing based on the average daily closing share price for Parent Common
Stock quoted on The NASDAQ Global Market or similar quotation service for the
six (6) months ending thirty six (36) months after Closing, or if no such
quotation is available, the average daily closing share price for Parent Common
Stock for the last six (6) months that such quotations were available (“Average
Share Price”). The calculation of Average Share Price shall be adjusted as
appropriate in the event of any stock split or stock dividend by Parent. If any
amounts become payable pursuant to this Section 2.1.5, Parent shall have the
option of distributing Parent Common Stock to the holders of PCSEs in lieu of
such cash, which shall be based on the Average Share Price, or if an Interim
Election is made as described below, the Interim Average Share Price. If the
Average Share Price is:
     a. less than or equal to $6.99, no payment or distribution shall be made
under this Section 2.1.5;
     b. equal to $7.00, a payment of an additional $5,000,000 shall be paid to
the holders of the PCSEs; or
     c. between $7.01 and $14.00, additional amounts shall be derived on a
straight line interpolation basis between $5,000,000 and $52,000,000 and
distributed to the holders of PCSEs accordingly .
     If, during the period beginning on the last day of the sixth (6th) full
month after Closing and ending on the last day of the thirty-fifth (35th) full
month after Closing (“Interim Election Period”), the average daily closing share
price of Parent Common Stock for the trailing six (6) month period quoted on The
NASDAQ Global Market or similar quotation service is equal to or greater than
$7.00 (“Interim Average Share Price”), a holder of PCSEs may elect to receive
contingent consideration under this Section 2.1.5 on the basis of the Interim
Average Share Price

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in lieu of the Average Share Price (“Interim Election”). No later than the fifth
(5th) day of every calendar month during the Interim Election Period, Parent
shall publish on its website, a monthly statement of the Interim Average Share
Price for the applicable trailing six month period and all prior trailing six
month periods in a format reasonably acceptable to the Shareholders’
Representative. A holder of PCSEs may only make an Interim Election once for all
the PCSEs held, any Interim Election is permanent and may not be revoked, and
any Interim Election will also be subject to the terms and conditions of the
Escrow Agreement. Any Interim Election will be reported to Parent on an Interim
Election form substantially in the form attached hereto as Exhibit 2.1.5, and
may be made in the first fifteen (15) calendar days of any month, following the
sixth (6th) full calendar month after Closing, with reference to the Interim
Average Share Price occurring during the prior six (6) calendar months then
elapsed. For example, if the Closing occurs on June 15, 2009, and the Interim
Average Share Price for the 6 months beginning July 1, 2009 and ending
December 31, 2009 is $7.50, then a holder of PCSEs may elect between January 1
to January 15, 2010 to make an Interim Election on a $7.50 basis. Such election
will be deemed valid if postmarked or otherwise sent with a documented
confirmation, on or before the end of business (5:00 PM Pacific Time) of the
15th day of the open election period (the first fifteen calendar days of each
month). If a holder of PCSEs does not make a valid Interim Election during the
Interim Election Period, then that holder shall receive contingent consideration
using the Average Share Price as described above. The right to any payment under
this Section 2.1.5 shall be personal, non-negotiable, and non-transferable
except by operation of law or by will.
          2.1.6 Appraisal Rights. Company Shares validly issued and outstanding
immediately before the Effective Time and held by a holder who has not consented
to the Merger in writing and who is entitled to demand and properly demands
appraisal rights for such Company Shares in accordance with the WBCA (the
“Appraisal Shares”) will not be converted into a right to receive the Conversion
Payment unless such holder fails to perfect or withdraws or otherwise loses such
holder’s appraisal rights. If, after the Effective Time, such holder fails to
perfect or withdraws or otherwise loses such holder’s appraisal rights, such
Company Shares will be treated as if they had been converted as of the Effective
Time in accordance with Section 2.1.3, without any interest. Company will give
Parent prompt notice of any demands received by Company for appraisal rights,
and Parent will have the right to participate in all negotiations and
proceedings with respect to such demands. Company will not, except with the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands. Any amounts paid to a holder by Company in
accordance with appraisal rights in excess of the Per Share Amount such holder
would have otherwise received will be deducted from the Escrow Amount (as
defined in Section 2.2 below) and will not be reimbursed by Parent or any
affiliate of Parent.
     2.2 Escrow.
          2.2.1 Escrow Amount. At Closing, an amount equal to $8,450,000 (pro
rata based upon the total consideration to be received by such holder at
Closing, the “Escrow Amount”) will not be distributed to holders of Company
Shares in accordance with Section 2.1.3 but rather will be deposited by Parent
with, and held by BNY Mellon Shareowner Services or other bank or trust company
as Parent may choose in its discretion, as escrow agent, in an escrow fund in
accordance with the Escrow Agreement substantially in the form attached hereto
as

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Exhibit 2.2.1(a) (the “Escrow Agreement”) to fund payments related to Net
Working Capital to the extent required by Section 2.3 and to be the sole and
exclusive remedy to secure claims by Parent or Surviving Corporation for
indemnification under this Agreement, in accordance with and subject to the
terms of Article VIII. The Escrow Amount will be funded by an unsecured
promissory note substantially as attached hereto as Exhibit 2.2.1(b) (the
“Escrow Note”). Parent will have the option of paying the Escrow Note, upon
release of the Escrow Amount, in either cash or Parent Common Stock. Any Parent
Common Stock that Parent elects to use to pay the Escrow Note pursuant to this
Section 2.1.1 will be valued based on the average daily closing share price for
Parent Common Stock quoted on The NASDAQ Global Market or similar quotation
service for the ten (10) trading days prior to payment of the Escrow Note The
release of the Escrow Amount will occur promptly following eighteen (18) months
from the Closing, and shall be subject to the terms hereof and of the Escrow
Agreement; provided, however, that in the event of any conflict between this
Agreement and the Escrow Agreement, the terms of the Escrow Agreement will
control. The Escrow Agreement shall provide that interest accruing to the Escrow
Amount shall become part of the escrowed funds and that for purposes of
distribution, such interest shall follow the principal amount.
          2.2.2 Employee Retention Pool. At Closing, cash in the aggregate
amount as provided on Schedule 2.2.2, which schedule shall be provided by
Company to Parent at least five business days prior to Closing (the “Employee
Retention Pool Amount”, and together with the Escrow Amount, the “Escrow
Amounts”) that would otherwise be received by holders of Company Shares in
accordance with Section 2.1.3 (pro rata based upon the total consideration to be
received by such holder at Closing) will not be distributed to or made available
for holders of Company Shares in accordance with Section 2.1.3 but rather will
be deposited by Parent with, and held by Foster Pepper PLLC or such bank or
trust company as Parent may choose in its discretion, as escrow agent, in an
escrow fund (the “Employee Retention Escrow”) in accordance with the Employee
Retention Escrow Agreement substantially in the form attached hereto as
Exhibit 2.2.2 (the “Employee Retention Escrow Agreement”, and together with the
Escrow Agreement, the “Escrow Agreements”) to fund payments related to the
employee retention pool to be created in accordance with Section 6.8(d). The
release to Parent or Company of the portion of the Employee Retention Pool
Amount earned by eligible employees, as listed on Schedule 2.2.2, who are
employed with Parent or Company on the six (6) month anniversary of the Closing
or who have satisfied any other conditions necessary to earn their respective
retention bonuses, as specified on Schedule 2.2.2, plus the employer’s share of
FICA (OASDI and Medicare) taxes on such portion will occur shortly after the six
(6) month anniversary of Closing or earlier for eligible employees terminated
prior to the six month anniversary of Closing, with the remaining portion (if
any) of the Employee Retention Pool Amount to be used to pay fees and expenses
of the Employee Retention Escrow or retained under the Employee Retention Escrow
Agreement until immediately prior to the distribution of the Escrow Amount. As
soon as practicable after the six (6) month anniversary of the Closing, or
earlier for eligible employees terminated prior to the six month anniversary of
Closing, and Company’s or Parent’s receipt of the applicable funds from the
Employee Retention Escrow, Company or Parent shall pay retention bonuses (less
applicable tax withholdings and any other required withholdings or deductions)
to the eligible employees who earned the right to receive such bonuses and remit
the employees’ withheld taxes plus the employer’s share of FICA taxes to the
applicable taxing authority. Immediately prior to the distribution of the Escrow
Amount,

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the remaining Employee Retention Escrow Amount (including any interest accruing
thereto but less any fees and expenses of the Employee Retention Escrow) will be
thereupon deposited with the Disbursing Agent for distribution. For the
avoidance of doubt, such remaining Employee Retention Escrow Amount shall not be
available for the securing of indemnification claims, the reimbursement of fees
and expenses, or the funding of payments relating to Net Working Capital. All
releases of the Employee Retention Pool Amount will be subject to the terms
hereof and of the Employee Retention Escrow Agreement; provided further, that in
the event of any conflict between this Agreement and the Employee Retention
Escrow Agreement, the terms of the Employee Retention Escrow Agreement will
control.
     2.3 Net Working Capital.
               (a) On the Closing Date, Company will have Net Working Capital
that is not less than $7,000,000 (“Minimum Working Capital”), nor more than
$9,000,000 (“Maximum Working Capital”) To the extent that Company has Net
Working Capital on the Closing Date that is less than the Minimum Working
Capital, such deficiency will be deducted from the Base Amount in accordance
with Section 2.1.3 as the “Working Capital Deficit.” To the extent that Company
has Net Working Capital on the Closing Date that is greater than the Maximum
Working Capital, such excess will be added to the Base Amount in accordance with
Section 2.1.3 as the “Working Capital Credit.”
               (b) For purposes of this Agreement, the term “Net Working
Capital” means: (i) Total Current Assets (as defined below) less (ii) all
accrued Total Current Liabilities (as defined below) and less (iii) ALI. “ALI”
is defined as $10,000,000 adjusted by amounts described on Schedule 2.3(b)(i).
“Fixed assets, net,” “intangible assets,” deferred tax assets and deferred tax
liabilities will be excluded from the determination of Net Working Capital. For
avoidance of doubt, “Total Current Assets” as reflected on the Closing Balance
Sheet will include: (i) cash and cash equivalents; (ii) short-term investments;
(iii) accounts receivable outstanding not more than sixty (60) days from their
due date and other receivables net of doubtful accounts; (iv) inventories (net
of allowance for obsolete inventory) and (v) prepaid expenses and other current
assets. “Total Current Liabilities” as reflected on the Closing Balance Sheet
will include: (w) accounts payable; (x) accrued taxes, payroll and benefits;
(y) other “Current Liabilities”; and (z) the current portion (due within twelve
(12) months) of any Debt. Each of the foregoing terms will be determined in
accordance with GAAP, as consistently applied, to the extent described above
except as otherwise provided in this Section 2.3(b). “Debt” means all funded
indebtedness, determined without duplication, and includes notes; capitalized
leases; bank term and revolving credit loans; obligations related to drawn
letters of credit; bonds evidencing funded indebtedness; debentures; borrowings
from lending institutions other than banks; subordinated loans and subordinated
debt securities with or without stated maturity; bank bills; bank overdrafts;
obligations with respect to the factoring or discounting of accounts receivable
and other instruments; any dividends payable to the holders of Company Shares;
and accrued interest and expense and penalties on any of the foregoing
(including prepayment penalties). For the avoidance of doubt, a sample
calculation of Net Working Capital is attached hereto as Schedule 2.3(b)(ii).
               (c) At least thirty (30) business days before the anticipated
Closing Date, Company will prepare, subject to the reasonable approval of
Parent, a computation of the pro forma Net Working Capital and ALI based upon
the financial information reflected in the most recent unaudited month-end
balance sheet of the Company (the “Pro Forma Calculations”). Parent will be
provided access to the books and records of the Company as may be reasonably
necessary to review the Pro Forma Calculations.

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               (d) At least three (3) business days before the anticipated
Closing Date, Company will prepare, subject to the reasonable approval of
Parent, an unaudited estimated balance sheet of Company as of the anticipated
Closing Date as mutually expected by the parties (the “Preliminary Closing
Balance Sheet”), a computation of the Net Working Capital as of the expected
Closing Date based upon the financial information reflected in the Preliminary
Closing Balance Sheet (the “Preliminary Closing Date NWC”) and a computation of
ALI as of the expected Closing Date based upon the financial information
reflected in the Preliminary Closing Balance Sheet (the “Preliminary Closing
Date ALI”). The Preliminary Closing Balance Sheet, the Preliminary Closing Date
NWC and the Preliminary Closing Date ALI calculation will be provided as
Schedule 2.3(c) and become a part of this Agreement. The Preliminary Closing
Balance Sheet will be prepared in accordance with GAAP consistently applied by
the Company, except as otherwise provided in Section 2.3(b) above, and will
fairly and accurately present the financial position of Company as of the
anticipated Closing Date. The parties will use the Preliminary Closing Balance
Sheet, the Preliminary Closing Date NWC and the Preliminary Closing Date ALI to
calculate the Per Share Amount for purposes of payment at the Closing in
accordance with Section 2.1.3.
               (e) Within thirty (30) days after the Closing Date, Parent will
prepare and deliver to the Shareholders’ Representative an unaudited balance
sheet of Company as of the Closing Date, determined in accordance with GAAP,
except as otherwise provided in Section 2.3(b) above, and which, to the
knowledge of Parent, fairly and accurately presents the financial position of
Company as of the date of such balance sheet (the “Proposed Closing Balance
Sheet”), along with its calculation of Net Working Capital as of the Closing
Date (“Proposed Closing Date NWC”) and its calculation of ALI as of the Closing
Date (“Proposed Closing Date ALI” ). The Shareholders’ Representative will be
provided access to the books and records of the Company as may be reasonably
necessary for the execution of its duties hereunder.
               (f) Within ten (10) days after the delivery by Parent of the
Proposed Closing Balance Sheet and calculation of its Proposed Closing Date NWC
and Proposed Closing Date ALI under Section 2.3(e), the Shareholders’
Representative will deliver to Parent a written notice either approving or
objecting to the Proposed Closing Balance Sheet and the accompanying Proposed
Closing Date NWC calculation and Proposed Closing Date ALI (the “Review
Notice”). The Review Notice will reasonably state a description of the
Shareholders’ Representative’s differences, if any, with Parent’s determination
of the Proposed Closing Balance Sheet and the Proposed Closing Date NWC and
Proposed Closing Date ALI calculations, together with proposed revisions (such
revised Proposed Closing Balance Sheet being referred to as the “Counter
Proposed Closing Balance Sheet”), along with revisions to the Proposed Closing
Date NWC and Proposed Closing Date ALI calculations. A failure by the
Shareholders’ Representative to so deliver the Review Notice to Parent within
such period will be deemed an approval of and agreement with the Proposed
Closing Balance Sheet and the Proposed Closing Date NWC and Proposed Closing
Date ALI calculations of Parent, and such Proposed Closing Balance Sheet and the
accompanying Proposed Closing Date NWC and Proposed Closing Date ALI
calculations of Parent will be deemed the Closing Balance Sheet and the final
and conclusive calculation of the Proposed Closing Date NWC (the “Final Closing
Date NWC” ) and the Proposed Closing Date ALI (the “Final Closing Date ALI” ).
               (g) If the Proposed Closing Balance Sheet and the accompanying
Proposed Closing Date NWC and Proposed Closing Date ALI calculation of Parent
are disputed by the Shareholders’ Representative in accordance with this
Section 2.3, the Shareholders’ Representative and Parent will negotiate in good
faith in an effort to resolve any differences regarding such determination. If
Parent and the Shareholders’ Representative agree on the Proposed Closing
Balance Sheet, Proposed

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Closing Date NWC and Proposed Closing Date ALI, the amount they agree upon will
be final, conclusive and binding as the Final Closing Date NWC and Final Closing
Date ALI, but if the objection cannot be resolved by such negotiation within
thirty (30) days after Parent’s receipt of the Review Notice (the
“Reconciliation Deadline”), the Proposed Closing Balance Sheet, the Counter
Proposed Closing Balance Sheet, the Review Notice, and all work papers related
thereto (collectively, the “Determination Materials”), will be submitted to the
Seattle, Washington offices of KPMG LLP or of a nationally recognized accounting
firm as Parent and the Shareholders’ Representative may mutually agree to (which
agreement will not be unreasonably withheld or delayed) (the “Accounting
Arbitrator”), which will review the Determination Materials and will determine
the Final Closing Date NWC, which will include a determination of the Final
Closing Date ALI. The Accounting Arbitrator will not undertake any review of any
matters not specifically identified by the Shareholders’ Representative as being
in dispute in the Review Notice and may not assign a value to any item greater
than the greatest value for such items claimed by either party or less than the
smallest value for such items claimed by either party, and its determination may
not be outside the range comprised of Parent’s calculation of Proposed Closing
Date NWC and Proposed Closing Date ALI and Shareholders’ Representative’s
calculation of Proposed Closing Date NWC and Proposed Closing Date ALI. The
Accounting Arbitrator will make its determination in accordance with GAAP and in
accordance with the provisions herein defining Net Working Capital to the extent
they are inconsistent with GAAP. The Accounting Arbitrator’s decision as to
Proposed Closing Date NWC and Proposed Closing Date ALI as of the Closing Date
will be final, conclusive, and binding as the Final Closing Date NWC and Final
Closing Date ALI. The parties will cause the Accounting Arbitrator to notify the
parties in writing of its determination within thirty (30) days following the
receipt of the Determination Materials. The fees and expenses of the Accounting
Arbitrator will be borne equally by Parent and the Shareholders’ Representative
(who shall in turn have recourse to the Escrow Amount for reimbursement of such
expenses pursuant to Section 10.13(c) below). All determinations in accordance
with this Section 2.3(g) will be in writing and will be delivered to the parties
hereto.
               (h) If the Final Closing Date NWC (as determined in accordance
with Sections 2.3(f) or 2.3(g) above) is less than the Preliminary Closing Date
NWC, then an amount equal to the difference between (i) the Preliminary Closing
Date NWC, and (ii) the Final Closing Date NWC will be paid to Parent out of the
Escrow Amount to the extent the Final Closing Date NWC is less than the Minimum
Working Capital, in accordance with the terms of the Escrow Agreement. Such
adjustment will not be subject to the Threshold Amount (as defined in
Section 8.6). If the Final Closing Date NWC is greater than the Preliminary
Closing Date NWC, then Parent will cause the amount equal to the difference
between (i) the Final Closing Date NWC, and (ii) the Preliminary Closing Date
NWC, to be delivered, within ten (10) days after such final determination, to
the Disbursing Agent for disbursement as provided in Section 2.4 below to the
extent the Final Closing Date NWC is greater than the Maximum Working Capital.
In addition, if the Preliminary Closing Date NWC is (i) more than the Maximum
Working Capital and the Final Closing Date NWC is less than the Maximum Working
Capital, the amount equal to the difference between the Preliminary Closing Date
NWC and the Maximum Working Capital will be paid to Parent out of the Escrow
Amount, or (ii) less than the Minimum Working Capital and the Final Closing Date
NWC is more than the Minimum Working Capital then Parent will cause the amount
equal to the difference between the Preliminary Closing Date NWC and the Minimum
Working Capital to be delivered, within ten (10) days after such final
determination, to the Disbursing Agent for disbursement as provided in
Section 2.4 below.
               (i) If the Final Closing Date ALI (as determined in accordance
with Sections 2.3(f) or 2.3(g) above) is less than the Preliminary Closing Date
ALI, then an amount equal to the difference between (i) the Preliminary Closing
Date ALI, and (ii) the Final Closing Date ALI will be paid to Parent out of the
Escrow Amount If the Final Closing Date ALI is greater than the Preliminary
Closing Date ALI, then Parent will cause the amount equal to the difference
between (i) the Final Closing

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Date ALI, and (z) the Preliminary Closing Date ALI, to be delivered, within ten
(10) days after such final determination, to the Disbursing Agent for
disbursement as provided in Section 2.4.
               (j) Nothing in this Section 2.3 will be deemed to limit the
indemnification rights of the Indemnified Parties in accordance with
Article VIII hereof with respect to any breach of any representation and
warranty of this Agreement, including without limitation, a breach of any of the
representations contained in Section 3.1.5.
               (k) For purposes of this Agreement, “Closing Balance Sheet” means
the balance sheet of Company as of the Closing Date determined in accordance
with this Section 2.3.
     2.4 Delivery of Consideration.
          2.4.1 Disbursing Agent. Promptly after the Effective Time, Parent will
(i) make available to BNY Mellon Shareowner Services or other bank or trust
company as Parent may choose in its discretion (the “Disbursing Agent”), the
shares of Parent Common Stock issuable pursuant to Section 2.1.4, in exchange
for shares of Company Common Stock outstanding immediately prior to the
Effective Time less the Escrow Amounts to be contributed therefrom pro rata, and
(ii) deposit with the Disbursing Agent an amount of cash sufficient to pay the
aggregate Gross Distributable Cash Amount and any cash amounts payable under
Section 2.1.4, less the Escrow Amounts to be contributed therefrom pro rata.
          2.4.2 Exchange Procedures. Promptly after the Effective Time, Parent
will instruct the Disbursing Agent to pay by check or wire transfer of same day
funds the cash portion of any applicable Conversion Payments, under Section 2.1
and subject to Section 2.2 hereof, and to send a certificate or certificates (or
book entry) representing the stock portion of any applicable Conversion Payments
under Section 2.1.3 and subject to Section 2.2 hereof to each record holder of
Company Shares as of the Effective Time (or to such broker or institution as any
such record holder may designate), other than to those holders of Appraisal
Shares not entitled to payment, as promptly as practicable following (i) the
submission of a Certificate to the Disbursing Agent and a duly executed letter
of transmittal (the “Letter of Transmittal”) by such holder of record, which
will specify that risk of loss and title to the Certificates will pass, only
upon proper delivery of such documents to the Disbursing Agent, and which will
be in the form and have such provisions as Parent and Company may reasonably
specify, and (ii) the surrender of the Certificates in exchange for the
applicable Conversion Payment by such holder of record (which Certificates will
then be canceled). If any Certificate has been lost, stolen, or destroyed, upon
the making of an affidavit of that fact by the Person claiming such document to
be lost, stolen, or destroyed and, if required by the Surviving Corporation, the
payment of any reasonable fees, and the posting by such Person of a bond, in
such reasonable amount as Parent may direct as indemnity against any claim that
may be made against it with respect to such document, the Disbursing Agent will
issue in exchange for such lost, stolen, or destroyed document, the applicable
Conversion Payments to which the holder is entitled under this Article II.
          2.4.3 No Further Ownership Rights in Company Shares. The applicable
Conversion Payment delivered upon surrender in exchange for Company Shares in
accordance with the terms hereof will be deemed to have been delivered in full
satisfaction of all rights pertaining to such Company Shares. After the
Effective Time, no further transfers will be made

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on the stock transfer books of Company of Company Shares issued before the
Effective Time. When the Merger becomes effective, all Company Shares issued
before then (other than Appraisal Shares) will cease to exist, and each
Certificate previously representing any such shares will represent only the
right to receive the applicable Conversion Payment as described in Section 2.1.3
subject to the terms of this Agreement. If, after the Effective Time,
Certificates are presented to Surviving Corporation or the Disbursing Agent for
transfer, they will be cancelled and exchanged as provided in this Article II,
except as otherwise provided by law.
          2.4.4 Return to Parent. The Disbursing Agent will redeliver or repay
to Parent any cash made available to the Disbursing Agent and not exchanged for
Certificates within twelve (12) months after the Effective Time. After such time
any holder of Certificates who has not yet delivered or surrendered such
Certificates to the Disbursing Agent, subject to applicable law, will look as a
general creditor only to Parent for payment of the applicable Conversion
Payment. Despite any provision of this Agreement, to the fullest extent
permitted by applicable law, neither Parent, the Disbursing Agent, Surviving
Corporation, the Shareholders’ Representative, nor any other party will be
liable to any holder of Company Shares for any cash delivered to a public
official according to applicable abandoned property, escheat, or similar law.
          2.4.5 Withholding Rights. Parent or the Disbursing Agent will be
entitled to deduct and withhold from the applicable Conversion Payment otherwise
payable under this Agreement to any Person (as defined in Section 10.2) who was
a holder of Company Shares immediately before the Effective Time, such amounts
as Parent or the Disbursing Agent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the “Code”), or any provision of state, local, or foreign tax law.
Any such withheld amounts will be timely paid over to the appropriate
Governmental Entity (as defined in Section 3.1.4). To the extent that amounts
are so withheld by Parent or the Disbursing Agent, such withheld amounts will be
treated for all purposes of this Agreement as having been paid to the holder of
the Certificates in respect of which such deduction and withholding was made by
Parent or the Disbursing Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
     3.1 Representations and Warranties of Company. Except as set forth in a
correspondingly numbered disclosure schedule delivered by Company to Parent
dated as of the date hereof (the “Company Disclosure Schedule”), Company
represents to Parent and Sub as follows (all references in the subsections of
this Section 3.1 to “Company” will include Company’s subsidiaries except to the
extent specifically excluded or except as otherwise clearly required by the
context):
          3.1.1 Organization, Standing, and Power.
               (a) Each of Company and its subsidiaries is an entity duly
organized and validly existing under the laws of its jurisdiction of
incorporation or organization. Company has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its
businesses as now being conducted. Company is duly qualified and in good
standing to do business in each jurisdiction in which the character of the
property owned, leased, or operated by it or the nature of its

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activities makes such qualification necessary (all such jurisdictions are listed
in Section 3.1.1(a) of the Company Disclosure Schedule), except in such
jurisdictions in which a failure to be so organized, existing, or in good
standing or to have such corporate power and authority would not materially
impair the ability of Company to consummate the Transactions or would not
result, or reasonably be expected to result, individually or in the aggregate,
in a material adverse effect on the financial condition, business, assets or
results of operations of Company and its subsidiaries, taken as a whole, other
than any effect resulting from (1) the announcement of the Transactions or the
proposal thereof or this Agreement and the transactions contemplated hereby,
(2) changes after the date hereof in general economic conditions or the industry
in which the Company operates, provided that the impact of such fact,
circumstance, event, change, effect or occurrence is not disproportionately
adverse to the Company, or (3) actions taken by Company after the date hereof
at, and in accordance with the written direction or request of Parent (“Company
Material Adverse Effect”).
               (b) Company has delivered or made available to Parent or its
counsel complete and correct copies of Company’s articles of incorporation,
bylaws, stock records and minute books and the comparable governing instruments
and minutes of each of its subsidiaries, in each case, as amended to the date
hereof. The minute books of Company contain correct and complete records of all
material proceedings and actions taken at all meetings of, or effected by
written consent of, the shareholders of Company and its board of directors (and
each committee thereof), and the stock records of Company contain correct and
complete records of all original issuances and subsequent transfers,
repurchases, and cancellations of Company’s capital stock. Company is the owner,
directly or indirectly, of all outstanding shares of capital stock of each of
its subsidiaries (other than directors’ qualifying and similar shares, the
ownership of which is identified in Section 3.1.1(b) of the Company Disclosure
Schedule) free and clear of all liens, pledges, security interests, claims, or
other encumbrances and all such shares are duly authorized, validly issued,
fully paid, and nonassessable. Section 3.1.1(b) of the Company Disclosure
Schedule lists all subsidiaries of Company, together with each subsidiary’s
jurisdiction of incorporation or formation, the jurisdictions in which it is
qualified to conduct business, and its authorized capitalization. Other than the
subsidiaries so listed, Company does not own or control, directly or indirectly,
shares of capital stock of any other corporation, or any interest in any
partnership, joint venture, or other non-corporate business entity or
enterprise.
          3.1.2 Capital Structure.
               (a) The authorized capital stock of Company consists of
(i) 10,750,000 shares of stock consisting of 10,000,000 Company Common Shares,
no par value, of which, as of the date hereof, 4,741,128 shares are issued and
outstanding, and (ii) 750,000 shares of Preferred Stock, no par value (“Company
Preferred Shares”), 333,334 of which have been designated Series A Convertible
Preferred Stock, none of which as of the date hereof are issued and outstanding.
As of the date hereof, 1,866,500 Company Common Shares are reserved for issuance
under the OMAX Corporation 2005 Stock Option Plan, including carryover from the
issuance of options for Company Common Shares are reserved for issuance under
the OMAX Corporation 1993 Stock Option Plan (together, the “Incentive Plans”).
Options for 1,494,850 Company Common Shares (“Company Options”) have been
granted and remain outstanding. All Company Shares, Company Options, and any
other securities of Company outstanding as of the date hereof (collectively
referred to as “Company Securities”), and the record owners of such securities
are as set forth in Section 3.1.2 of the Company Disclosure Schedule, and no
such securities are held by Company in its treasury. True and complete copies of
all Company stock option plans and the forms of any other instruments setting
forth the rights of all Company Securities as of the date hereof have been
delivered to Parent or its counsel.

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               (b) All outstanding Company Common Shares are, and Company Shares
issued upon exercise of any Company Options when issued in accordance with the
respective terms thereof will be, validly issued, fully paid, nonassessable, and
not subject to any preemptive rights or similar rights under the WBCA, Company’s
articles of incorporation or bylaws, or to any agreement to which Company is a
party or by which Company may be bound. Except for the shares described above
issuable in connection with the exercise of Company Options (all as set forth in
Section 3.1.2(a) of the Company Disclosure Schedule) there are no options,
warrants, calls, conversion rights, commitments, agreements, contracts,
understandings, restrictions, equity-linked securities, or rights of any
character to which Company is a party or by which Company may be bound
obligating Company to issue additional shares of the capital stock of Company.
Other than as set forth in Section 3.1.2(a) Company does not have outstanding
any bonds, debentures, notes nor does it owe any other indebtedness, the holders
of which (i) have the right to vote (or are convertible or exercisable into
securities having the right to vote) with holders of Company Common Shares on
any matter or (ii) are or will become entitled to receive any payment as a
result of the Transactions. Other than as set forth in Section 3.1.2(a) Company
does not have outstanding any restricted stock, restricted stock units, stock
appreciation rights, stock performance awards, dividend equivalents, or other
stock-based or equity-linked securities of a similar nature. There is no
agreement or right allowing for the repurchase or redemption of any capital
stock or convertible securities of Company, and Company has not repurchased any
of its capital stock. There are no agreements requiring Company to contribute to
the capital of, or lend or advance funds to, any subsidiaries of Company.
Company is not party to nor to its knowledge is any shareholder of Company a
party to, any voting agreement, voting trust, or similar agreement or
arrangement relating to any class or series of its capital stock, or any
agreement or arrangement providing for registration rights with respect to any
capital stock or other securities of Company. There are no accrued and unpaid
dividends with respect to any outstanding shares of Company capital stock.
Company does not own or hold the right to acquire any shares of capital stock or
any other security or interest in any other Person.
               (c) All of the issued and outstanding Company Securities have
been offered, issued, and sold by Company in compliance with applicable federal
and state securities laws.
               (d) To Company’s knowledge, no shareholder of Company has granted
options or other rights to purchase any Company Securities from such
shareholder.
          3.1.3 Authority. Company has all requisite corporate power and
authority to execute and deliver this Agreement, subject to approval of the
shareholders of Company to consummate the Transactions. The execution and
delivery by Company of this Agreement and the performance of Company’s
obligations hereunder have been duly and validly authorized by all necessary
corporate action on the part of Company, subject only to approval of the Merger
and this Agreement by the shareholders of Company. This Agreement has been duly
executed and delivered by Company and constitutes a valid and binding obligation
of Company enforceable in accordance with its terms, except to the extent that
enforceability may be limited by the effect of (a) any applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws affecting the
enforcement of creditors’ rights generally, and (b) general equitable
principles, regardless of whether such enforceability is considered in a
proceeding at law or in equity.
          3.1.4 Consents and Approvals; No Violations. Subject to the
satisfaction of the conditions in Sections 7.1 and 7.3, the execution and
delivery of this Agreement or any other agreement or document contemplated by
this Agreement do not, and the consummation of the Transactions will not,
conflict with or result in any violation of, or default (with or without notice

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or lapse of time, or both) under, or give rise to a right of termination,
cancellation, or acceleration of any obligation or to loss of a material benefit
under, or the creation of a lien, pledge, security interest, charge, or other
encumbrance on assets (any such conflict, violation, default, right, loss, or
creation, a “Violation”) under (a) any provision of the articles of
incorporation or bylaws of Company or the comparable governing instruments of
any subsidiary of Company, or (b) any loan or credit agreement, note, bond,
mortgage, indenture, contract, lease, or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Company or its properties or
assets, other than, in the case of clause (b), any such Violation that would not
result, or reasonably be expected to result, individually or in the aggregate,
in a Company Material Adverse Effect. No consent, approval, order, or
authorization of, or registration, declaration, or filing with or exemption by,
any court, administrative agency, or commission or other governmental authority
or instrumentality, whether domestic or foreign (each a “Governmental Entity”)
(collectively any consents or waivers with respect to Violations under clauses
(a) and (b) of the first sentence of this Section 3.1.4, “Consents”), is
required by or with respect to Company in connection with the execution and
delivery of this Agreement or the consummation by Company of the Transactions,
except for Consents, if any, relating to the filing of the Articles of Merger in
accordance with the WBCA and except for such other Consents that if not obtained
or made would not result, or reasonably be expected to result, individually or
in the aggregate, in a Company Material Adverse Effect.
          3.1.5 Financial Statements. The (a) audited consolidated balance
sheets of Company and its subsidiaries as of December 31, 2006 and December 31,
2007 (the “Balance Sheet Date”) and the related audited consolidated statements
of income, changes in owner’s equity, and cash flow for the 12 months ended
December 31, 2005, December 31, 2006 and December 31, 2007, and (b) an unaudited
consolidated balance sheet of Company and its subsidiaries as of December 31,
2008 (the “Interim Balance Sheet Date”), and the related unaudited consolidated
statements of income, changes in owner’s equity, and cash flow for the year then
ended (collectively, the “Financial Statements”) that have been provided to
Parent or will be provided prior to Closing comply in all material respects with
all accounting requirements applicable to Company and its subsidiaries, have
been prepared in accordance with generally accepted accounting principles
(“GAAP”) consistently applied (except as may be indicated in the notes thereto),
and fairly present, in all material respects, the consolidated financial
position of Company and its subsidiaries as at the dates thereof and the results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, recurring audit adjustments not
material in scope or amount). There has been no change in Company’s accounting
policies or the methods of making accounting estimates or changes in estimates
that are material to the Financial Statements. Section 3.1.5 of the Company
Disclosure Schedule lists, and Company has delivered to Parent copies of the
documentation creating or governing, all securitization transactions and
“off-balance sheet arrangements” (as defined in Item 303(c) of Regulation S-K
promulgated by the SEC) effected by Company or its subsidiaries since the
Balance Sheet Date. There are no material liabilities, claims or obligations of
any nature, whether accrued, absolute, contingent, anticipated or otherwise,
whether due or to become due, that are not reflected in the Financial Statements
or the notes thereto. Except as disclosed in the Financial Statements, neither
Company nor its

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subsidiaries is a guarantor or indemnitor of any indebtedness or other liability
of any other Person.
          3.1.6 No Defaults. Company is not, and has not received notice that it
would be with the passage of time, in default or violation of any term,
condition, or provision of (i) the articles of incorporation or bylaws of
Company or any comparable governing instrument of any subsidiary, (ii) any
judgment, decree, or order, or (iii) any loan or credit agreement, note, bond,
mortgage, indenture, contract, agreement, lease, license, or other instrument to
which Company is now a party or by which it or any of its properties or assets
may be bound, except with respect to (iii) for Violations that would not result,
or reasonably be expected to result, individually or in the aggregate, in a
Company Material Adverse Effect.
          3.1.7 Litigation. There is no claim, action, suit, or proceeding
pending or, to the knowledge of Company, threatened, against or affecting
Company, any of its officers, directors, or employees, or any of its properties
before any court or arbitrator or any Governmental Entity. There is no
investigation pending or, to the knowledge of Company, threatened against
Company, before any Governmental Entity. Section 3.1.7 of the Company Disclosure
Schedule sets forth as of the date hereof, with respect to any pending action,
suit, proceeding, or investigation to which Company is a party, the forum, the
parties thereto, the subject matter thereof, and the amount of damages claimed,
or the nature of any other relief sought.
          3.1.8 No Material Adverse Change. Since the Balance Sheet Date, there
has not been a Company Material Adverse Effect. Except as contemplated by this
Agreement, since the Balance Sheet Date, there has not been:
               (a) any declaration, setting aside, or payment of any dividend or
other distribution, stock split, reclassification, subdivision, or exchange with
respect to any Company Shares;
               (b) any amendment of any provision of the articles of
incorporation or bylaws of, or of any term of any outstanding security issued
by, Company;
               (c) any incurrence, assumption, or guarantee by Company of any
indebtedness for borrowed money, or any mortgage, pledge, imposition of any
security interest, claim, encumbrance, or other restriction on any of the
assets, tangible or intangible, of Company;
               (d) a material change to any tax election or any accounting
method, or any settlement or consent to any claim or assessment relating to
taxes incurred, or incurrence of any obligation to make any payment of, or in
respect of, taxes, except in the ordinary course of business, or agreement to
extend or waive the statutory period of limitations for the assessment or
collection of taxes;
               (e) any (i) grant of severance or termination pay to any
director, officer, or employee of Company, (ii) entry into any employment,
deferred compensation (based upon the meaning of such term before the adoption
of Code Section 409A), or other similar agreement (or any material amendment to
any such existing agreement) with any director, officer, or employee of Company,
(iii) increase in benefits payable under any existing severance or termination
pay policies or employment agreements, (iv) increase in compensation, bonus, or
other benefits payable to directors, officers, or employees of Company in excess
of 4% of total compensation for such individual as of January 1, 2008, in each
case other than those required by written contractual agreements, or (v)
acceleration of, or

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amendment or change to, the period of exercisability, vesting, or exercise price
of options, restricted stock, stock bonus, or other awards granted under the
Incentive Plans (including any discretionary acceleration of the exercise
periods by Company’s board of directors, the compensation committee of Company’s
board of directors, or a committee overseeing the Incentive Plans as permitted
under such plans) or authorization of cash payments in exchange for any options,
warrants, restricted stock, stock bonus, or other awards granted under any of
such plans except, in each case, as may be required under applicable law or the
existing terms of the Incentive Plans or other related agreements;
               (f) any issuance of capital stock or securities convertible into
capital stock of Company (including grants or other issuances of options,
warrants, or other rights to acquire capital stock of Company) other than in
accordance with the exercise of Company Options;
               (g) any acquisition or disposition of assets (other than in the
ordinary course of business), any acquisition or disposition of capital stock of
any third party, or any merger or consolidation with any third party;
               (h) any entry by Company into any joint venture, partnership, or
limited liability company or operating agreement with any Person;
               (i) any damage, destruction, or loss (whether or not covered by
insurance) affecting Company’s properties or business that has resulted, or
would reasonably be expected to result, individually or in the aggregate, in a
Company Material Adverse Effect;
               (j) any granting by Company of a security interest in or lien on
any material property or assets of Company;
               (k) any cancellation of debt or waiver of any claim or right
individually or in the aggregate in excess of $25,000;
               (l) any capital expenditure or acquisition of any property,
plant, and equipment by Company for a cost in excess of $100,000 in the
aggregate;
               (m) any discharge or satisfaction by Company of any lien or
encumbrance, or any payment of any obligation or liability (absolute or
contingent) other than current liabilities shown on the balance sheet included
in the Financial Statements as of the Balance Sheet Date and current liabilities
incurred since the Balance Sheet Date in the ordinary course of business;
               (n) any termination, modification, or rescission of, or waiver by
Company of rights under, any existing contract resulting, or reasonably likely
to result, individually or in the aggregate, in a Company Material Adverse
Effect;
               (o) any material grant or assignment of Company Intellectual
Property;
               (p) any event or condition resulting individually or in the
aggregate in a Company Material Adverse Effect; or
               (q) any agreement, authorization, or commitment, whether in
writing or otherwise, to take any action described in this Section 3.1.8.

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          3.1.9 Absence of Undisclosed Liabilities. Company has no liabilities,
obligations, or contingencies (whether absolute, accrued, or contingent) except
(i) liabilities, obligations, or contingencies (each a “Liability” and
collectively, “Liabilities”) that are accrued or reserved against in the
consolidated balance sheet of Company as of the Balance Sheet Date;
(ii) additional Liabilities reserved against since the Balance Sheet Date that
(x) have arisen in the ordinary course of business, and (y) are accrued or
reserved against on the books and records of Company; (iii) additional
Liabilities incurred since the Balance Sheet Date that (x) have arisen in the
ordinary course of business, and (y) are not accrued or reserved against on the
books and records of Company and none of which, individually or in the
aggregate, are expected to exceed $100,000; (iv) additional Liabilities that are
expressly provided for in any of Company’s contracts that are not required to be
reflected in Company’s financial statements under GAAP; or (v) Liabilities
reflecting expenses with respect to any litigation or dispute between Company
and Parent as set forth in Section 3.1.9 (v) of the Company Disclosure Schedule.
          3.1.10 No Violations. Company is in compliance with all applicable
federal, state, local, or foreign statutes, laws, ordinances, rules, judgments,
orders, and regulations of any Governmental Entity applicable to its business
and operations, except for violations that would not result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material
Adverse Effect. Neither Company, nor any Person acting on behalf of Company has,
directly or indirectly, on behalf of or with respect to Company (i) made or
received any unreported political contribution, (ii) made or received any
payment that was not legal to make or receive, (iii) created or used any
“off-book” bank or cash account or “slush fund,” or (iv) violated the Foreign
Corrupt Practices Act of 1977, as amended. All permits required to conduct the
business of Company as currently conducted have been obtained, are in full force
and effect, and are being complied with, except where the failure to hold or to
be in compliance with such permits would not result, or reasonably be expected
to result, individually or in the aggregate, in a Company Material Adverse
Effect.
          3.1.11 Certain Agreements. Except as contemplated by this Agreement,
neither the execution and delivery of this Agreement nor the consummation of the
Transactions will (i) result in any payment (including severance, unemployment
compensation, parachute payment, bonus, or otherwise) becoming due to any
director, employee, or independent contractor of Company, from Company under any
Plan (as defined in Section 3.1.13), agreement, document, or otherwise,
(ii) increase any benefits payable under any Plan, agreement, or document, or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits.
          3.1.12 Employees. Since the inception of Company (or any predecessor
entity, if applicable), Company has been in compliance with all then applicable
laws and regulations respecting employment, termination of employment, hiring,
discrimination in employment, terms and conditions of employment, wages, hours,
and occupational safety and health and employment practices, and has not engaged
in any unfair labor practice. Since the inception of Company (or any predecessor
entity, if applicable), Company has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries, and other payments to its
employees, including any common law employees, and is not liable for any arrears
of wages (including commissions, bonuses, or other compensation), or any taxes
or any penalty for failure

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to comply with any of the foregoing (or, if any arrears, penalty, or interest
were assessed against Company regarding the foregoing, it has been fully
satisfied). Company is not liable for any payment to any trust or other fund or
to any governmental or administrative authority with respect to unemployment
compensation benefits, social security, social benefits, or other benefits or
obligations for employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending
claims against Company under any workers’ compensation plan or policy or for
long-term disability. There are no controversies pending or, to Company’s
knowledge, threatened, between Company and any of its employees, or any works
council or similar body, which controversies have or could reasonably be
expected to result in an action, suit, proceeding, claim, arbitration, or
investigation before any agency, court, or tribunal, foreign or domestic,
including claims for compensation, severance benefits, vacation time, vacation
pay, or pension benefits, or any other claim pending in any court or
administrative agency from any current or former employee or any other Person
arising out of Company’s status as employer or purported employer or any
workplace practices or policies whether in the form of claims for
discrimination, harassment, unfair labor practices, grievances, wage and hour
violations, wrongful discharge, or otherwise. Company is not a party to any
collective bargaining agreement or other labor union contract nor does Company
know of any activities or proceedings of any labor union to organize any
employees of Company. Section 3.1.12 of the Company Disclosure Schedule lists
all countries in which a works council or similar employee organization
represents employees of Company. To Company’s knowledge, no employees of Company
are or have in the past been in violation of any term of any employment
contract, non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by Company
because of the nature of the business conducted by Company or work performed by
the employee or to the use of trade secrets or proprietary information of
others. All releases of employment claims in favor of Company obtained from
employees during the three-year period preceding the Effective Date are
effective and binding to release all employment claims for each such employee.
          3.1.13 Employee Benefit Plans.
               (a) Section 3.1.13(a) of the Company Disclosure Schedule lists
each employee benefit, equity incentive plan, or compensation plan or program
covering currently active, former, or retired employees of Company (“Plan”).
Company has provided or made available to Parent a copy of each Plan document
(or, if there is no Plan document, a written description), and where applicable,
any related trust agreement, annuity, or insurance contract and, where
applicable, the three most recent annual reports (Form 5500) filed with the U.S.
Department of Labor-EBSA, including all attachments and schedules thereto. To
the extent applicable, each Plan complies in all material respects with the
requirements of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and the Code, and any Plan intended to be qualified under Code Section
401(a) or 423 is so qualified and has been so qualified since its creation, and
its related trust is tax-exempt and has been since its creation. No Plan is
covered by Title IV of ERISA or Code Section 412. No “prohibited transaction,”
as defined in ERISA Section 406 or Code Section 4975, has occurred with respect
to any Plan. Each Plan has been maintained and administered in compliance with
its terms and with the requirements prescribed by all statutes, orders, rules,
and regulations, including ERISA and the Code, applicable to such Plans. There
are no pending or anticipated claims against or otherwise involving any of the
Plans (excluding claims for benefits incurred in the ordinary course of Plan
activities) and no suit, action, or other litigation has been brought against or
with respect to any Plan. All contributions, reserves, or premium payments to
each Plan accrued to the date hereof have been made or provided for. Company has
not incurred any liability

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under Subtitle C or D of Title IV of ERISA with respect to any “single-employer
plan,” within the meaning of ERISA Section 4001(a)(15), currently or formerly
maintained by Company, or any entity that is considered one employer with
Company under ERISA Section 4001(a)(14). Company has not incurred, and will not
incur as a result of the Transactions, any withdrawal liability under Subtitle E
of Title IV of ERISA with respect to any “multiemployer plan,” within the
meaning of ERISA Section 4001(a)(3). Company has no obligation for retiree
health or life benefits under any Plan, except as required by applicable law or
to avoid excise taxes under Code Section 4980B. There are no restrictions on the
rights of Company to amend or terminate any Plan without incurring any liability
thereunder (other than ordinary administrative expenses) and satisfaction of
applicable notice. There have been no unwritten or unexpected amendments to,
written interpretation of, or announcements (whether or not written) by Company
relating to coverage under, any Plan. No tax under Code Section 4980B (other
than a tax that has been fully satisfied) has been incurred in respect of any
Plan that is a group health plan, as defined in Code Section 5000(b)(1). No act
or omission has occurred (or will occur as a result of the transactions
contemplated by this Agreement) and no condition exists with respect to any
employee benefit plan (within the meaning of Section 3(3) of ERISA), equity
incentive plan, or compensation plan or program, currently or previously
sponsored, contributed to, maintained or administered by the Company or any
subsidiary entity that is or was an ERISA Affiliate of the Company (as defined
below) that would subject the Company (or the assets of any such plan or
program) to any fine, penalty, tax or liability of any kind imposed under ERISA,
the Code or other applicable legal requirements (other than liabilities for
benefits accrued under plans or programs for employees of the Company and their
beneficiaries).
               (b) Neither Company nor any entity that is or was considered one
employer with Company under ERISA Section 4001(a)(14) or Code Sections 414(b),
(c), or (m) (“ERISA Affiliate”) has ever maintained, had an obligation to
contribute to, contributed to, or had any liability with respect to any current
or former employee benefit plan that is or has been subject to Title IV of ERISA
(including any “multiemployer plan” within the meaning of ERISA
Section 4001(a)(3)). No Plan is a multiple employer welfare arrangement as
defined in ERISA Section 3(40).
               (c) All Plans that are subject to the laws of any jurisdiction
outside the United States are in compliance with and have been operated
consistent with their terms and all applicable laws (including relevant tax
laws), and the requirements of any trust deed under which they were established,
in all material respects. Section 3.1.13(c) of the Company Disclosure Schedule
identifies all of Company’s employee benefit plans that are subject to the laws
of any jurisdiction outside the United States. With respect to each Plan, no
event has occurred, and there exists no condition or set of circumstances, that
would subject Company, directly or indirectly, to any material liability arising
under any applicable laws, including relevant tax laws (including any liability
to or under any such Plan or any indemnity agreement to which Company is a
party), excluding liability for routine benefit claims and funding obligations.
With respect to each such Plan, there are no funded benefit obligations for
which the contributions have not been made or properly accrued and there are no
unfunded benefit obligations that have not been accounted for by reserves, or
otherwise properly footnoted, on the Financial Statements.
               (d) No Plan is subject to any ongoing or scheduled audit,
investigation, or other administrative proceeding of the Internal Revenue
Service (“IRS”), the U.S. Department of Labor, or any other federal, state, or
local governmental entity.
               (e) No event has occurred or circumstance exists that could
result in a material increase in premium costs of Plans that are insured, or a
material increase in benefit costs of such Plans that are self-insured. For
avoidance of doubt, general increases in the cost of medical services or
supplies or prescription pharmaceuticals are not considered events or
circumstances to be considered. Each Plan that provides self-insured benefits is
subject to a stop-loss insurance policy under which the

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Company is an insured party and the Company has complied with all terms of such
stop-loss policy and has timely paid all premiums owing with respect to such
stop-loss policy through the date of this Agreement. The transaction
contemplated by this Agreement will not cancel, impair, or reduce amounts
payable under any such stop-loss insurance policy.
          3.1.14 Real Property; Leases. Company does not own, and has never
owned, real property. Company has made available to Parent copies of all leases
or subleases in effect on the date hereof under which Company leases (i) real
property (as either a tenant, subtenant, or lessor), or (ii) personal property
that requires annual payments in excess of $25,000 with respect to each such
lease or sublease of personal property (in case of either clause (i) or (ii), a
“Company Lease”). No default exists under any Company Lease. No Company Lease is
terminable because of the execution of this Agreement or the consummation of the
Transactions. Section 3.1.14 of the Company Disclosure Schedule lists each
Company Lease. Each Company Lease is in full force and effect in accordance with
its respective terms. No consent is required from any party under any Company
Lease in connection with the completion of the Transactions, and Company has not
received notice that a party to any Company Lease intends to cancel, terminate,
or refuse to renew any Company Lease or to exercise any option or other right
thereunder, except where the failure to receive such consent, or where such
cancellation, termination, or refusal, would not result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material
Adverse Effect.
          3.1.15 Environmental.
               (a) Except as would not result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse Effect,
no Hazardous Material (as defined below) has been released by Company (except as
specifically authorized, such as by permits issued by a Governmental Entity),
onto or under any property occupied by Company or any affiliate of Company, nor,
to Company’s knowledge, has any Hazardous Material migrated beneath such
properties.
               (b) Except as would not result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse Effect,
Company has not transported, stored, used, manufactured, disposed of, released,
or exposed its employees or others to, Hazardous Materials (collectively,
“Hazardous Materials Activities”) in violation of any Environmental Law (as
defined below) in effect on or before the Effective Time.
               (c) Company currently holds all environmental approvals, permits,
licenses, clearances, and consents necessary for the conduct of Company’s
Hazardous Material Activities and other businesses of Company as such activities
and businesses are currently being conducted (collectively, “Environmental
Permits”), except where the absence of such Environmental Permits would not
result, or reasonably be expected to result, individually or in the aggregate,
in a Company Material Adverse Effect.
               (d) No legal action, proceeding, revocation proceeding, amendment
procedure, writ, or injunction is pending and, to Company’s knowledge, no
action, proceeding, revocation proceeding, amendment procedure, writ, or
injunction has been threatened by any Governmental Entity against Company
concerning any Environmental Permit, Hazardous Material, or any Hazardous
Materials Activity of Company. Company has received no written notification that
it is or may be liable for natural resource damages, the investigation or
cleanup of Hazardous Materials, or for the response costs incurred by others in
conducting such investigation or cleanup, which, in either case would not
result, or

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reasonably be expected to result, individually or in the aggregate, in a Company
Material Adverse Effect. To the knowledge of Company, no fact or circumstance
currently exists that is reasonably likely to involve Company in any material
environmental litigation or impose upon Company any material environmental
liability.
               (e) Company has not, either by agreement or (to Company’s
knowledge) by operation of law, assumed or undertaken any liability (including
future or contingent liabilities) of another person or entity under any
Environmental Law, including any obligation for investigation, cleanup,
corrective action, or natural resource damages with respect to Hazardous
Materials.
               (f) Neither Company nor, to the knowledge of Company, any of its
agents, possess copies of any reports concerning the presence or possible
presence of released Hazardous Materials on real property currently or formerly
owned, leased, or occupied by Company, including any environmental site
assessment reports.
               (g) “Hazardous Material” means any substance that any
Governmental Entity, in accordance with applicable federal, state, or local law,
has designated to be radioactive, toxic, hazardous, or otherwise a danger to
health or the environment, including PCBs, friable asbestos, petroleum,
urea-formaldehyde, and all substances listed as hazardous substances in
accordance with the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste in accordance
with the United States Resource Conservation and Recovery Act of 1976, as
amended, and the regulations promulgated in accordance with said laws, but
excluding office and janitorial supplies lawfully used or stored for their
intended purposes.
               (h) “Environmental Law” means all applicable foreign, domestic,
federal, state, local, or other laws, regulations, ordinances, or other binding
requirements of Governmental Entities, all applicable orders, judgments, or
binding determinations of administrative or judicial authorities, and any
required permit, license, or other authorization, concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Material.
          3.1.16 Customers and Suppliers.
               (a) As of the date hereof: (i) Company has no material
outstanding dispute in excess of $50,000 that has been communicated orally or in
writing, concerning its business operations, including any Company Technology
(as defined in Section 3.1.20) or services with any distributor or customer who,
in the 24 months ended as of the date of this Agreement, was one of the 20
largest sources of revenues recognized under GAAP for Company during such period
(each, a “Significant Customer”); (ii) Section 3.1.16(a) of the Company
Disclosure Schedule lists each Significant Customer and the percentage of
Company’s total revenues such Significant Customer represented during such
period; (iii) Company has not received any oral or written notice from any
Significant Customer that such Significant Customer will not continue as a
customer or distributor of Surviving Corporation after Closing or that such
distributor or customer intends to terminate or materially modify existing
agreements with Company or Surviving Corporation; and (iv) no purchaser,
reseller, or distributor of Company’s services has asserted any claims of breach
of warranty in excess of $5,000 with regard to such services nor does Company
have any indemnity liability for any such services to purchasers, resellers, or
distributors. To Company’s knowledge, Company could not reasonably be expected
as a result of

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warranty or liability claims against it to be required to modify in any material
respect any of Company’s services that are material to Company.
               (b) As of the date hereof: (i) Company has no material
outstanding dispute in excess of $50,000 that has been communicated orally or in
writing, concerning technology, products, or services provided by any supplier
who, in the 24 months ended as of the date of this Agreement, was (a) one of the
ten largest suppliers of technology, products, or services to Company, based on
amounts paid or payable, or (b) provided third-party software used in connection
with any Company Technology, products, or services during such period (each, a
“Significant Supplier”); (ii) Section 3.1.16(b) of the Company Disclosure
Schedule lists each Significant Supplier; and (iii) Company has not received any
oral or written notice from any Significant Supplier that such supplier will not
continue as a supplier to the Surviving Corporation after the Closing or that
such supplier intends to terminate or materially modify existing agreements with
Company or the Surviving Corporation.
               (c) To Company’s knowledge no supplier, distributor, or customer
has any interest in any real or personal, tangible or intangible property,
including Company Owned Intellectual Property (as defined in
Section 3.1.20(a)(ii)), used in or pertaining to the business of Company.
          3.1.17 Material Contracts.
               (a) Section 3.1.17 of the Company Disclosure Schedule sets forth
all of the following contracts to which Company is a party as of the date of
this Agreement (the “Material Contracts”):
                    (i) any agreement (A) relating to the employment of, or the
performance of services by, any employee, consultant, or other Person other than
ordinary course, at-will written or oral offers or agreements terminable without
notice and without the payment of any severance or penalty and other than
employment arrangements required by law, (B) in accordance with which Company is
or may become obligated to make any severance, termination, or similar payment
to any current or former employee or director, other than with respect to
agreements listed or described in the Company Disclosure Schedule as applicable
to all Company employees generally, or applicable to all Company employees in
specified jurisdictions outside of the United States, (C) in accordance with
which Company is or may become obligated to make any bonus, commission, or
similar payment to any current or former employee or director, other than with
respect to agreements listed or described in the Company Disclosure Schedule as
applicable to all Company employees generally, or applicable to all Company
employees in specified jurisdictions outside of the United States, or (D) in
accordance with which Company may be required to provide, or accelerate the
vesting of, any payments, benefits, or equity rights upon the occurrence of any
of the Transactions, other than with respect to the acceleration of Options
pursuant to their terms or pursuant to this Agreement;
                    (ii) any agreement that provides for indemnification of any
officer, director, employee, or agent of Company;
                    (iii) any agreement imposing any restriction on the right or
ability of Company, or that, after consummation of the Merger, would impose a
restriction on the right or ability of Parent or any of its subsidiaries, to
compete in any line of business or in any geographic region with any other
Person or to transact business or deal in any other manner with any other
Person;

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                    (iv) any agreement with a third party in accordance with
which Company (A) has paid $100,000 or more during the year ended December 31,
2008, or (B) is obligated to pay $100,000 or more during the year beginning
January 1, 2009;
                    (v) any agreement with a distributor, VAR, reseller, OEM,
marketing partner, or Significant Customer;
                    (vi) any agreement of partnership or joint venture, limited
liability company or operating agreement that would give rise to an obligation
on the part of Company to form a joint venture or to acquire securities of a
third party;
                    (vii) any In-Licenses (as defined in Section 3.1.20);
                    (viii) any other contract, agreement, or commitment not
otherwise listed in Section 3.1.17 of the Company Disclosure Schedule, (A) the
termination of which would result, or reasonably be expected to result,
individually or in the aggregate, in a Company Material Adverse Effect, or (B)
that, if no required consent regarding the Transactions is obtained, would
result, or reasonably be expected to result, individually or in the aggregate,
in a Company Material Adverse Effect or a material adverse effect on the
operation of the business of Company in the same manner as the business of
Company is currently operated;
                    (ix) any union contract or collective bargaining agreement;
                    (x) any material Company Lease;
                    (xi) except for trade indebtedness incurred in the ordinary
course of business and except as disclosed in the Financial Statements, any
instrument evidencing or related in any way to indebtedness for borrowed money
by way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, or otherwise.
               (b) Each Material Contract is in full force and effect and is a
valid and binding obligation of Company, and neither Company nor, to the
knowledge of Company, any other party thereto is in breach of, or default under,
any such Material Contract, except for such failures to be in full force and
effect and such breaches and defaults that would not result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material
Adverse Effect. As of the date hereof, none of the parties to any of the
Material Contracts identified in Section 3.1.17 of the Company Disclosure
Schedule has expressed in writing an intent to terminate or materially reduce
the amount of its business with Company in the future.
               (c) Company acknowledges that it has provided only blank form
versions of certain Material Contracts to Parent or Parent’s counsel in the
course of due diligence leading to the execution of this Agreement. The actual
Material Contracts corresponding to such disclosed form versions do not contain
materially different terms than such form versions.
          3.1.18 Taxes.
               (a) For the purposes of this Agreement, the terms “tax” and
“taxes” mean all federal, state, local, and foreign income taxes (including any
tax on or based upon net income, gross income, income as specially defined,
earnings, profits or selected items of income, earnings or profits), capital
taxes, gross receipts taxes, environmental taxes, sales taxes, use taxes, ad
valorem taxes, value

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added taxes, transfer taxes, franchise taxes, license taxes, withholding taxes
or other withholding obligations, payroll taxes, employment taxes, excise,
severance, social security premiums, workers’ compensation premiums, employment
insurance or compensation premiums, stamp taxes, occupation taxes, premium
taxes, property taxes, windfall profits taxes, alternative or add-on minimum
taxes, goods and services tax, customs duties or other taxes of any kind
whatsoever imposed by any taxing authority (domestic or foreign) on such entity
or for which such entity is responsible, and any interest, penalties, additional
taxes, additions to tax or other amounts imposed with respect to the foregoing.
               (b) Company has timely filed (or caused to be filed) all federal,
state, local, and foreign tax returns, reports, information statements, and
similar statements (“Returns”) required to be filed, which Returns are true,
correct, and complete in all respects. Company has timely paid when due, or
fully accrued in accordance with GAAP on the Financial Statements, all taxes in
respect of all periods (or portions thereof), whether or not any Return reflects
such taxes. The unpaid taxes of Company will not, as of the Closing Date, exceed
the reserves for tax liability set forth on the Closing Balance Sheet. Company
has not engaged in any “reportable transaction” within the meaning of Code
Section 6707A(c)(1). Company has not taken any position on any Return that is or
would be subject to penalties under Code Section 6662. Company is not currently
the beneficiary of any extension of time to file any Return that has not yet
been filed. All material elections with respect to taxes made by or with respect
to Company are set forth in Section 3.1.18(b) of the Company Disclosure
Schedule. Company has provided to Parent or made available true and correct
copies of all filed Returns and related work papers, all correspondence with any
taxing authorities, any tax planning memoranda, or other material tax data of
Company, in each case with respect to taxes and Returns for which the statute of
limitations has not expired.
               (c) No deficiencies or adjustments that remain outstanding for
any tax have been claimed, proposed, assessed, or threatened. No authority in a
jurisdiction where Company does not file Returns has ever made any claim that
Company is or may be subject to taxation by that jurisdiction. Section 3.1.18(c)
of the Company Disclosure Schedule accurately sets forth the years for which
Company’s federal, state, local, and foreign Returns have been audited and any
years that are the subject of a pending audit by the IRS or any applicable
state, local, or foreign taxing authorities. Except as so disclosed, Company has
not received written notice of any pending or threatened tax audit or
examination and Company has not waived or entered into any other agreement with
respect to any statute of limitation with respect to its taxes or Returns.
Section 3.1.18(c) of the Company Disclosure Schedule sets forth as of the date
hereof (i) the tax basis of Company in its assets, (ii) the current and
accumulated earnings and profits of Company, (iii) the amount of any net
operating loss carryover, net capital loss carryover, unused investment credit
or other credit carryover and charitable contribution carryover of Company, and
(iv) the amount of any deferred gain or loss allocable to Company or excess loss
account of Company. Section 3.1.18(c) of the Company Disclosure Schedule sets
forth as of the date hereof a list of all joint ventures, partnerships, limited
liability companies, or other business entities (within the meaning of Treasury
Regulation Section 301.7701-3) in which Company has an interest. No consent or
agreement has been made under former Code Section 341(f) by or on behalf of
Company or any predecessor thereof. Company has no interests in real estate that
would be subject to any real estate excise, transfer, or other similar tax
because of the consummation of the Transactions.
               (d) There are no liens for taxes upon the assets of Company
except for taxes not yet due and payable. Company has withheld all taxes
required to be withheld by it in respect of wages, salaries, and other payments
to all employees, officers, and directors and any taxes required to be withheld
from any other Person and has timely paid all such amounts withheld to the
proper taxing authority. Company is not party to any tax sharing or tax
allocation agreements and has not been a member of any affiliated group of
corporations within the meaning of Code Section 1504 (other than the

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group of which Company is currently the common parent). Company has no liability
for taxes of any other Person under Treasury Regulation Section 1.1502-6 (or any
similar provisions of state, local or foreign law) as a transferee or successor,
by contract, or otherwise. Company neither has nor had a “permanent
establishment” (as defined in any applicable income tax treaty) in any country
other than the United States. There are no outstanding rulings or requests for
rulings from any taxing authority with respect to Company. Company neither is
nor has ever been a “United States real property holding corporation” within the
meaning of Code Section 897. The use of any net operating loss carryover, net
capital loss carryover, unused investment credit, or other credit carryover of
Company is not subject to any limitation in accordance with Code Section 382 or
otherwise.
               (e) Company has not participated in, or cooperated with, an
international boycott within the meaning of Code Section 999. Company is not
required to include in income any adjustment in accordance with Code Section
481(a) (or similar provisions of other law or regulations) in its current or in
any future taxable period, because of a change in accounting method, nor has the
IRS (or other taxing authority) proposed any such change in accounting method.
In connection with the consummation of the Transactions, no payments of money or
other property, acceleration of benefits, or provisions of other rights have or
will be made hereunder, under any agreement contemplated by this Agreement, or
under any other agreement or arrangement to which Company is a party that would
be reasonably likely to result in imposition of the sanctions imposed under Code
Sections 280G and 4999, determined without regard to whether such payment is
reasonable compensation for services performed or to be performed in the future,
and whether or not some other later action or event would be required to cause
such payment, acceleration, or provision to be triggered. Neither Company,
Parent, or any affiliate of Parent will be obligated to pay, or reimburse any
individual for, any excise taxes or similar taxes imposed on any employee or
former employee of, or individual providing services to, Company under Code
Section 4999 or any similar provisions as a result of the consummation of the
Transactions, either alone or in connection with any other event. None of the
assets of Company is property that is required to be treated as owned by any
other Person in accordance with the “safe harbor lease” provisions of former
Section 168(f)(8) of the Internal Revenue Code of 1954 as amended and in effect
immediately before the enactment of the Tax Reform Act of 1986 and none of the
assets of Company is “tax exempt use property” within the meaning of Code
Section 168(h). None of the assets of Company secures any debt the interest on
which is tax exempt under Code Section 103.
               (f) Company has not constituted either a “distributing
corporation” or a “controlled corporation” in a distribution of stock qualifying
for tax-free treatment under Code Section 355 (i) in the two years before the
date of this Agreement, or (ii) in a distribution that could otherwise
constitute part of a “plan” or “series of related transactions” (within the
meaning of Code Section 355(e)) in conjunction with the Transactions.
               (g) All Plans or arrangements to which Company is a party that
are “nonqualified deferred compensation plans” within the meaning of Code
Section 409A(d)(1) satisfy the requirements of Code Sections 409A(a)(2),
409A(a)(3) and 409A(a)(4) and the guidance thereunder and have been operated in
accordance with such requirements.
               (h) No outstanding Company Share is non-transferable and subject
to a substantial risk of forfeiture within the meaning of Section 83 of the
Code, and no payment to any holder of Company Shares of any Conversion Payments
in accordance with this Agreement will result in compensation income to such
holder of Company Shares.
          3.1.19 Interests of Officers. None of Company’s officers, directors or
employees has any interest in any property, real or personal, tangible or
intangible, including inventions,

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copyrights, trademarks, or trade names, used in the business of Company, nor to
the knowledge of Company does any supplier, distributor, or customer of Company.
          3.1.20 Technology and Intellectual Property Rights.
               (a) Definitions:
                    (i) “Intellectual Property” means any or all of the
following and all rights in, arising out of, or associated therewith: (x) all
United States, international, and foreign: (1) patents, utility models, and
applications therefor, and all reissues, divisions, re-examinations, renewals,
extensions, provisionals, continuations and continuations-in-part thereof, and
equivalent or similar rights anywhere in the world in inventions and
discoveries, including invention disclosures; (2) all trade secrets and other
rights in know-how and confidential or proprietary information; (3) all mask
works and copyrights, registrations and applications therefor, and all other
rights corresponding thereto (including moral rights), throughout the world;
(4) all rights in World Wide Web addresses and domain names and applications and
registrations therefor, all trade names, logos, common law trademarks and
service marks, trade dress, trademark and service mark registrations, and
applications therefor, and all goodwill associated therewith throughout the
world; and (5) any similar, corresponding, or equivalent rights to any of the
foregoing in (1) through (4) above, anywhere in the world (items (1) through
(5) collectively, “Intellectual Property Rights”); and (y) any and all of the
following: computer software and code, including software and firmware listings,
assemblers, applets, compilers, source code, object code, net lists, design
tools, user interfaces, application programming interfaces, protocols, formats,
documentation, annotations, comments, data, data structures, databases, data
collections, system build software and instructions, design documents,
schematics, diagrams, product specifications, know-how, show-how, techniques,
algorithms, routines, works of authorship, processes, prototypes, test
methodologies, supplier and customer lists, trade secrets, materials that
document design or design processes, or that document research or testing
(including design, processes, and results); any media on which any of the
foregoing is recorded; and any other tangible embodiments of any of the
foregoing or of Intellectual Property Rights (“Technology”).
                    (ii) “Company Owned Intellectual Property” means all
Intellectual Property owned by Company.
                    (iii) “Company Licensed Intellectual Property” means all
Intellectual Property owned by third Persons and licensed to Company. Unless
otherwise noted, all references to “Company Intellectual Property” refer to both
Company Owned Intellectual Property and Company Licensed Intellectual Property.
               (b) Section 3.1.20(b) of the Company Disclosure Schedule lists:
                    (i) all of Company’s registrations and applications for
registration for Company Owned Intellectual Property (including without
limitation all patents issued and/or assigned to Company and all applications
for patents filed or held by Company);
                    (ii) all licenses, sublicenses, reseller, distribution,
customer, and other agreements or arrangements in accordance with which any
other Person is authorized by Company to have access to, resell, distribute, or
use Company Owned Intellectual Property or to exercise any other right with
regard thereto;

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                    (iii) all agreements and licenses in accordance with which
Company has been granted a license to any Company Licensed Intellectual Property
(other than license agreements for standard “shrink wrapped, off-the-shelf”
third party Intellectual Property that is otherwise commercially available for a
cost of not more than U.S. $5,000 for a perpetual license for a single user or
work station (or $50,000 in the aggregate for all users and work stations))
where such Company Licensed Intellectual Property is used by Company in
connection with the development, support, or maintenance of Company’s products,
Technology or service offerings (“In-Licenses”);
                    (iv) any obligations of exclusivity (including license
rights granted by Company to any third party in Company Intellectual Property or
other exclusivity grants), covenants not to sue, noncompetition,
nonsolicitation, right of first refusal, parity of treatment and/or most favored
nation status, or right of first refusal or negotiation, parity of treatment, or
most favored nation status to which Company is subject and that relate to and/or
restrict any Company Intellectual Property Rights or Company Technology,
products or services that are provided using Company Intellectual Property,
including without limitation for each such obligation an identification of any
territorial limitations on such obligation;
                    (v) any grants to Company of exclusivity (including
exclusive license rights granted to Company by any third party in Company
Licensed Intellectual Property or other exclusivity grants), covenants not to
sue, noncompetition, nonsolicitation, right of first refusal or negotiation,
parity of treatment, or most favored nation status; and
                    (vi) all current Company products, Technology, and service
offerings made commercially available by Company.
               (c) Company owns free and clear of conditions, liens, pledges,
security interests, claims, or other encumbrances, adverse claims, or other
restrictions or any requirement of any past, present, or future royalty
payments, all rights necessary to carry out, or that otherwise are material to,
the current and anticipated future (as contemplated by Company) business of
Company and has had all rights reasonably necessary to carry out, or that
otherwise were material to, the business of Company.
               (d) Company is not, nor as a result of the execution or delivery
of this Agreement, or performance of Company’s obligations hereunder, will
Company be, in violation of any license, sublicense, or other agreement relating
to Company Intellectual Property, including any In-License. Without limiting the
foregoing, (i) the “License Agreement” between Aesop, Inc. and Company dated
April 15, 1997 (last signed June 29, 1997), remains in force as of the Effective
Date; (ii) Company has renewed the exclusivity provisions under that agreement
at least through the Closing Date and given any renewal notices required to be
given on or before Closing Date to continue such exclusivity; and (iii) to
Company’s knowledge, as of the Closing Date Robomatics, Inc. has not marketed
water-jet cutting equipment utilizing the Aesop technology licensed to Company
under that agreement.
               (e) Neither the (i) use, reproduction, modification,
manufacturing, distribution, licensing, sublicensing, sale, offering for sale,
import, or any other exercise of rights in Company Owned Intellectual Property,
(ii) operation of Company’s business, including Company’s provision of
Technology, products or services, nor (iii) the use, reproduction, modification,
manufacture, distribution, licensing, sublicensing, sale, offering for sale or
other exploitation of any of Company’s products, services, or Technology,
infringes any Intellectual Property Rights, or any other intellectual property,
proprietary, or personal right, of any Person, or constitutes unfair competition
or unfair trade practice under the laws of the applicable jurisdiction. To the
knowledge of Company, there is no

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unauthorized use, infringement, or misappropriation of any of the Company Owned
Intellectual Property by any third party, employee, or former employee.
               (f) Company has not received written notice of any claims
(i) challenging the validity, effectiveness or ownership by Company of any
Company Owned Intellectual Property, or (ii) that any of the actions described
in Section 3.1.20(e)(i), (ii) or (iii) above infringes, or will infringe on, any
third party Intellectual Property Right or constitutes unfair competition or
unfair trade practices under the laws of the applicable jurisdiction, nor, to
the knowledge of Company, are there any valid grounds for any bona fide claim of
any such kind.
               (g) No parties other than Company possess any current or
contingent rights of any kind to any source code included in Company Owned
Intellectual Property, nor has Company granted any current or contingent rights
of any kind to any source code that is part of any Company Licensed Intellectual
Property.
               (h) Section 3.1.20(h) of the Company Disclosure Schedule lists
all parties who have created any material portion of, or otherwise have any
rights in or to, Company Owned Intellectual Property other than employees of
Company who meet all of the following requirements: (i) their work in any
Company product, Technology, or service was created by them entirely within the
scope of their employment by Company, (ii) their copyrightable work product in
any Company product, Technology, or service is owned by Company as a work made
for hire under U.S. copyright law, and (iii) any inventions of such employees
that are included or implemented in any Company product, Technology, or service
have been assigned to Company under Company’s standard form employee invention
assignment agreement.
               (i) Company has secured from all current and former non-employee
consultants and contractors of Company who have created any material portion of,
or otherwise have any rights in or to, any Company Owned Intellectual Property,
valid and enforceable written assignments to Company of any such consultants’
and contractors’ contribution or rights therein and Company has provided true
and complete copies of such assignments or licenses to Parent.
               (j) Company has taken commercially reasonable steps to protect
rights in confidential information (both of Company and that of third Persons
that Company has received under an obligation of confidentiality). Company has
obtained legally binding written agreements from all employees and third parties
with whom Company has shared its confidential information or confidential
information that Company is obligated to treat as confidential and that require
those employees and third parties to keep such information confidential.
               (k) Company is in compliance in all material respects with all
applicable laws, rules, regulations, and Company contractual obligations
governing the collection, interception, storage, receipt, purchase, sale,
transfer and use (“Collection and Use”) of personal, consumer, or customer
information, including name, address, telephone number, electronic mail address,
social security number, bank account number or credit card numbers
(collectively, “Customer Information”). Company’s Collection and Use of such
Customer Information are in accordance in all material respects with Company’s
privacy policy as published on its website or any other privacy policies
presented to consumers or customers and to which Company is bound or otherwise
subject and any contractual obligations of Company to its customers regarding
privacy. Company does not use in connection with the provision of its
Technology, products or services or collect or receive social security numbers
or credit card numbers. Company takes commercially reasonable steps to protect
the confidentiality, integrity and security of its software, databases, systems,
networks and Internet sites and all information stored or contained therein or
transmitted thereby from unauthorized or improper Collection and Use. The

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execution or delivery of this Agreement or any other agreement or document
contemplated by this Agreement, or the performance of Company’s obligations
hereunder or thereunder, will not materially violate any such applicable law,
rule, or regulation or any of Company’s privacy policies or any contractual
obligation of Company governing the Collection and Use of Customer Information.
               (l) Section 3.1.20(l)(i) of the Company Disclosure Schedule
identifies all licenses entered into by Company with regard to any third party
source code. Section 3.1.20(l)(ii) of the Company Disclosure Schedule identifies
all such licenses that may not be assigned to Parent.
               (m) No Company software or software used in any Company
Technology, product or service (including Company software under development)
has been, is, or, upon consummation of the Merger, will be, in whole or in part,
governed by an Excluded License. For purposes of this Agreement, an “Excluded
License” is any license that requires, as a condition of modification or
distribution of software subject to the Excluded License, that (i) such software
and/or other software combined or distributed with such software be disclosed or
distributed in source code form, or (ii) such software and/or other software
combined or distributed with such software and any associated intellectual
property be licensed on a royalty free basis (including for the purpose of
making additional copies or derivative works).
               (n) Company has not incorporated into any Company software or
software used in any Company product, Technology, or service any code, modules,
utilities, or libraries that are covered in whole or in part by a license that
triggers the discontinuance of some or all license rights if certain patent
enforcement suits are brought by Company.
               (o) Company has not incorporated into any Company software or
software used in any Company product, Technology, or service any code, modules,
utilities, or libraries that are covered in whole or in part by a license that
requires that Company give attribution for its use of such code, modules,
utilities, or libraries.
               (p) Company has not participated in any standards-setting
organizations or activities that would affect the proprietary nature of any
Company Intellectual Property or restrict the ability of Company to enforce,
license or exclude others from using any Company Intellectual Property.
               (q) The Merger will not give rise to, any Company obligations of
exclusivity (including exclusive license rights granted by Company to any third
party in Company Intellectual Property or other exclusivity grants), covenants
not to sue, non-competition, non-solicitation, right of first refusal or
negotiation, parity of treatment, most favored nation status, or other material
restriction on the operation of Company’s business.
               (r) The Merger will not give rise to or cause under any
agreements relating to Company Intellectual Property (i) a right of termination
under, or a breach of, or any loss or change in the rights or obligations of
Company, (ii) an obligation to pay any royalties or other amounts to any third
Person in excess of those that Company is otherwise obligated to pay absent a
Merger, or (iii) Parent’s granting to any third party any right to or with
respect to any of Parent’s Intellectual Property.
               (s) Company is not under any contractual obligation (i) to
include any Company Licensed Intellectual Property in any Company product,
Technology, or service, or (ii) to obtain a third party’s approval of any
Company product, Technology, or service at any stage in the development,
licensing, distribution, or sale of that product, Technology, or service.

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               (t) Company has no obligation to perform services for any third
party other than (i) customer support and maintenance services for those
customers listed in Section 3.1.20(t)(i) of the Company Disclosure Schedule, and
(ii) professional services for those customers listed in Section 3.1.20(t)(ii)
of the Company Disclosure Schedule.
               (u) All granted or issued patents and all mask works, registered
trademarks, and copyright registrations held by Company at any time, are valid,
enforceable, and subsisting. Section 3.1.20(u) of the Company Disclosure
Schedule accurately identifies and describes each filing, payment, and action
that must be made or taken on or before the date that is 120 days after the date
of this Agreement in order to maintain each such item of Company Owned
Intellectual Property in full force and effect.
               (v) Company has not exported or re-exported its products,
services, or Technology, directly or indirectly, in violation of law either to:
(i) any countries that are subject to U.S., Canadian, or European Union export
restrictions or export restrictions of any other jurisdiction in which Company
operates or is otherwise subject; or (ii) any end-user who Company knows or has
reason to know will utilize them in the design, development, or production of
nuclear, chemical, or biological weapons; and Company has complied with all
end-user, end-use, and destination restrictions issued by the U.S., Canada, the
European Union, and any other jurisdiction to which Company operates or is
subject.
               (w) The Company software or software used in any Company
Technology, product or service: (i) has sufficiently documented source code
enabling a reasonably skilled software developer to understand, modify, compile
and otherwise utilize all aspects of the related Technology without reference to
other sources of information; (ii) is complete; (iii) is free from known
material defects or deficiencies, errors in design, and operating defects;
(iv) to Company’s knowledge, does not require a material upgrade or replacement
within the 12-month period after the Closing Date and none are planned; and
(v) does not contain any disabling mechanisms or protection features which are
designed to disrupt or prevent the use of the Company Technology, product or
service, including computer viruses, time locks or any code, instruction or
device that may be used without authority to access, modify, delete or damage
any of the Company software or any system or equipment on which any of the
Company software is installed or in connection with which it may operate.
          3.1.21 Vote Required. The affirmative vote of the holders of a
majority of the outstanding Company Common Shares (the “Company Shareholder
Approval”) voting together as a single class at a shareholder meeting or in
accordance with a written consent is the only vote of the holders of Company’s
capital stock necessary to approve this Agreement and the consummation of the
Transactions.
          3.1.22 Brokers’ and Other Fees. Neither Company nor its shareholders,
directors, officers, or employees has employed any investment banker, broker,
finder, or other intermediary that has been retained by, or is authorized to act
on behalf of, Company that would be entitled to any fee or commission from
Company, Parent, or any of Parent’s affiliates in connection with or upon
consummation of the Transactions.
          3.1.23 Change of Control. With regard to any Company Options granted
under the Incentive Plans that do not presently provide for automatic
acceleration of vesting upon a change of control, Company shall take action to
make such options exercisable or vested immediately prior to Closing.
Section 3.1.23 of the Company Disclosure Schedule sets forth the number of
Company Common Shares that are subject to options, warrants, or awards that are
not

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exercisable or vested before the Effective Time and that are subject to partial
or complete acceleration of vesting or exercisability as a result of the Merger
or termination of any employment or contractor arrangement, the name of the
Person who holds such option, warrant, or other award, and the applicable
percentage of acceleration of the vesting or exercisability.
          3.1.24 Complete Copies of Materials. Company has delivered or made
available to Parent or its counsel true and complete copies of each document
listed in the Company Disclosure Schedule.
          3.1.25 Board Recommendation. Company’s board of directors has
unanimously (i) determined that this Agreement and the Transactions, including
the Merger, are advisable and in the best interests of Company and its
shareholders, (ii) approved and adopted this Agreement and the Transactions,
including the Merger, and (iii) subject to the other terms and conditions of
this Agreement, resolved to recommend the Merger and approval and adoption of
this Agreement and each of the Transactions by Company’s shareholders, and, as
of the date of this Agreement, none of such actions by Company’s board of
directors has been amended, rescinded, or modified.
          3.1.26 Insurance. Company has made available to Parent or its counsel
a copy of all insurance policies and all self-insurance programs and
arrangements relating to the business, assets, and operations of Company. All
premiums due and payable under all such policies have been paid and Company is
otherwise in compliance with the terms of such policies and bonds. As of the
date of this Agreement, there has been no threatened termination of, or premium
increase with respect to, any such policies.
          3.1.27 Accounts Receivable. All of the accounts receivable shown on
the consolidated balance sheet of Company as of the Interim Balance Sheet Date
have been collected or are current and collectible in the aggregate recorded
amounts thereof (less the allowance for doubtful accounts also appearing in such
balance sheet and net of returns and payment discounts allowable by Company’s
policies) and can reasonably be anticipated to be paid in full without outside
collection efforts within 90 days of the due date, and are not subject to
counterclaims or setoffs.
          3.1.28 Personal Property. As of the date hereof Company has good and
marketable title, free and clear of all title defects, security interests,
pledges, options, claims, liens, encumbrances, and restrictions of any nature
whatsoever (including leases, chattel mortgages, conditional sale contracts,
purchase money security interests, collateral security arrangements, and other
title or interest-retaining agreements) to all inventory, receivables,
furniture, machinery, equipment, and other personal property, tangible or
otherwise, reflected on the consolidate balance sheet of Company as of the
Interim Balance Sheet Date or used in Company’s business as of the Interim
Balance Sheet Date even if not reflected thereon. Section 3.1.28 of the Company
Disclosure Schedule lists (i) all computer equipment and (ii) all other personal
property having a depreciated book value of $5,000 or more currently used by
Company in the conduct of its business, and all such equipment and property, in
the aggregate, is in good operating condition and repair, reasonable wear and
tear excepted.

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          3.1.29 Guarantees and Suretyships. Company has no powers of attorney
outstanding, (other than those issued in the ordinary course of business with
respect to tax matters). Company has no obligations or liabilities (absolute or
contingent) as guarantor, surety, cosigner, endorser, co-maker, indemnitor, or
otherwise with respect to the obligations or liabilities of any Person.
          3.1.30 Certain Transactions. Except for (a) relationships with Company
as an officer, director, or employee (and compensation by Company in
consideration of such services) and (b) relationships with Company as holders of
Company Securities, none of the directors, officers, or holders of 5% or more of
the Company Shares, or any member of any of their families, is presently a party
to, or was a party to during the year preceding the date of this Agreement, any
transaction with Company, including any contract, agreement, or other
arrangement (i) providing for the furnishing of services to or by,
(ii) providing for rental of real or personal property to or from, or
(iii) otherwise requiring payments to or from, any such person or any
corporation, partnership, trust, or other entity in which any such person has or
had a 5% or more interest (as a shareholder, partner, beneficiary, or otherwise)
or is or was a director, officer, employee, or trustee.
          3.1.31 Government Contracts.
               (a) “Government Contracts” means any agreement, commitment,
undertaking, or arrangement of any kind with a government agency, government
prime contractor, government grant recipient, or higher-tier government
subcontractor to which Company is a party as of the date of this Agreement.
               (b) Company is in compliance with all legal requirements of all
Government Contracts.
               (c) Company has not, in obtaining or performing any Government
Contract, violated any material aspect or provision of any of the following:
(i) the Federal Acquisition Regulation or any applicable agency supplement
thereto; (ii) any state procurement law or regulation; and (iii) any other
applicable procurement law or regulation.
               (d) To the knowledge of Company, there are not and have not been
any irregularities, misstatements, or omissions relating to any Government
Contracts, including certifications.
               (e) Company is not undergoing, and has not undergone, any audit
of any Government Contract, and Company has no knowledge of any basis for any
impending audit, arising under or relating to any Government Contract, except
for routine audits conducted during the ordinary course of business.
               (f) Company has taken adequate steps to ensure that its right,
title and interest in inventions, technical data, computer software, and
copyrightable material developed under any Government Contract have been
retained and protected.
          3.1.32 Disclosure. No representation or warranty made by Company in
this Agreement, nor any document, written information, financial statement,
certificate, or exhibit prepared and furnished or to be prepared and furnished
by Company or its Representatives (as

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defined in Section 4.1.3) under this Agreement, or in connection with the
Transactions, including information supplied by Company for inclusion in the
Registration Statement on Form S-4 of Parent (or such other or successor form as
shall be appropriate, the “Registration Statement”) pursuant to which the shares
of Parent Common Stock to be issued in the Merger will be registered with the
Securities and Exchange Commission (“SEC”) , when read together in their
entirety, contains as of the date hereof or will contain, at the time the
Registration Statement is declared effective by the SEC or upon the consummation
of the Merger any untrue statement of a material fact, or omits as of the date
hereof or will omit upon the consummation of the Merger to state a material fact
necessary to make the statements or facts contained herein or therein, not
misleading, in light of the circumstances under which they were made.
          3.1.33 Reliance. Company makes the foregoing representations and
warranties with the knowledge and expectation that Parent and Sub are placing
reliance thereon.
     3.2 Representations and Warranties of Major Shareholders. Each Major
Shareholder represents and warrants, severally but not jointly, to and for the
benefit of Parent and Sub as follows:
          3.2.1 Authority. Each Major Shareholder has full power and authority
to execute and deliver this Agreement and all other documents and agreements to
be executed by such Major Shareholder as contemplated hereunder, and to perform
his, her, or its obligations hereunder and thereunder. This Agreement and all
other documents and agreements to be executed by Major Shareholder as
contemplated hereunder constitutes the valid and legally binding obligations of
such Major Shareholder enforceable against each in accordance with their terms,
except as such enforcement may be limited by bankruptcy, insolvency, moratorium,
or other similar laws affecting or relating to the enforcement of creditors’
rights generally and general principles of equity.
          3.2.2 Voting Agreements. Except as contemplated by this Agreement,
each Major Shareholder is not a party to any voting agreement, voting trust, or
similar agreement or arrangement relating to any class or series of its capital
stock, or any agreement or arrangement providing for registration rights with
respect to any capital stock or other securities of Company.
          3.2.3 Non-Contravention; Consents. The execution and delivery of this
Agreement, and all other documents and agreements to be executed by the Major
Shareholders as contemplated by this Agreement, and the consummation of the
Transactions will not, conflict with, or result in any Violation of (i) any
injunction, judgment, order, decree, ruling, charge, or other restriction of any
Governmental Entity to which a Major Shareholder is subject, or (ii) any
agreement, contract, lease, license, instrument, or other arrangement to which a
Major Shareholder is a party, or by which it is bound, or to which any of its
Company Securities are subject. No Major Shareholder was, is, or will be
required to make a filing with, give any notice to, or to obtain any consent
from, any Person or any Governmental Entity in connection with the execution and
delivery of this Agreement or any other agreement or document contemplated by
this Agreement or the consummation or performance of any of the Transactions.
          3.2.4 Reliance. Each Major Shareholder makes the foregoing
representations and warranties with the knowledge and expectation that Parent
and Sub are placing reliance thereon.

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     3.3 Representations and Warranties of Parent and Sub. Parent and Sub
represent to Company as follows:
          3.3.1 Organization; Standing and Power. Each of Parent and Sub is a
corporation duly organized and validly existing and in good standing, as
applicable, under the laws of its jurisdiction of incorporation or organization.
Each of Parent and Sub has all requisite corporate power and authority to own,
lease, and operate its properties and to carry on its businesses as now being
conducted, and is duly qualified to do business in each jurisdiction in which
the character of the property owned, leased, or operated by it or the nature of
its activities makes such qualification necessary, except in such jurisdictions
in which a failure to so qualify would not result, or be reasonably expected to
result, individually or in the aggregate, in a material adverse effect on the
financial condition, business, assets, or results of operations of Parent, Sub
and either of their subsidiaries, taken as a whole, or that would materially
impair the ability of Parent or Sub to consummate the Transactions (“Parent
Material Adverse Effect”).
          3.3.2 Authority. Each of Parent and Sub has all requisite corporate
power and authority to execute and deliver this Agreement, to consummate the
Transactions. The execution and delivery by Parent and Sub of this Agreement and
the performance of Parent’s and Sub’s respective obligations hereunder have been
duly and validly authorized by all necessary corporate action on the part of
Parent and Sub, as applicable. This Agreement has been duly executed and
delivered by Parent and Sub and constitutes a valid and binding obligation of
Parent and Sub enforceable in accordance with its terms, except to the extent
that enforceability may be limited by the effect of (i) any applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors’ rights generally, and (ii) general
equitable principles, regardless of whether such enforceability is considered in
a proceeding at law or in equity.
          3.3.3 Consents and Approvals; No Violations. Subject to satisfaction
of the conditions set forth in Sections 7.1 and 7.2, the execution and delivery
of this Agreement do not, and the consummation of the Transactions will not,
conflict with or result in any Violation of (a) any provision of the restated
articles of incorporation or bylaws of Parent or the articles of incorporation
or bylaws of Sub, or (b) any loan or credit agreement, note, bond, mortgage,
indenture, contract, lease, or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Parent or Sub or their respective
properties or assets, other than, in the case of (b), any such Violation that
would not result, or reasonably be expected to result, individually or in the
aggregate in a Parent Material Adverse Effect. No Consent is required by or with
respect to Parent or Sub in connection with the execution and delivery of this
Agreement by Parent or Sub or the consummation by Parent and Sub of the
Transactions, except for the filing of the Articles of Merger in accordance with
the WBCA, the filing with the SEC and NASD of the Registration Statement, the
filing of a Form 8-K with the SEC and NASD within the statutory period following
the date of this Agreement, any filings as may be required under applicable
state securities laws, the securities laws of any foreign country, or under the
rules and regulations of The NASDAQ Global Market, and except for such other
Consents that if not obtained would not result, or reasonably be expected to
result, in a Parent Material Adverse Effect.

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          3.3.4 Disclosure. No representation or warranty made by Parent or Sub,
nor any document, written information, statement, financial statement,
certificate, or exhibit prepared and furnished or to be prepared and furnished
by Parent or its Representatives under this Agreement, when read together in
their entirety, contains upon the date hereof or will contain upon the
consummation of the Merger any untrue statement of a material fact, or omits
upon the date hereof or will omit upon the consummation of the Merger to state a
material fact necessary to make the statements or facts contained herein or
therein, not misleading, in light of the circumstances under which they were
made.
          3.3.5 SEC Reports. Parent has filed all reports and other documents
with the SEC required to be filed or furnished by Parent since April 30, 2007
(such documents, together with any current reports filed during such period by
Parent with the SEC on a voluntary basis on Form 8-K, the (“Parent SEC
Reports”). As of their respective filing dates, the Parent SEC Reports
(i) complied in all material respects with, to the extent in effect at the time
of filing, the applicable requirements of the Securities Act and the Exchange
Act and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
          3.3.6 Compliance with Law. Except as would not, individually or in the
aggregate, materially impair the ability of Parent or Sub to consummate the
transactions contemplated hereby, neither Parent nor any of its Subsidiaries is
in violation of, or in default under, any Law, in each case, applicable to
Parent or any of its Subsidiaries or any of their respective assets and
properties.
          3.3.7 Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby and has not owned any assets,
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
          3.3.8 Proxy Materials. None of the information supplied by Parent or
Sub for inclusion in the proxy materials distributed by Company will, at the
date such materials are first mailed to shareholders of the Company or at the
time of the Company Special Meeting of Shareholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
          3.3.9 Brokers or Finders. No investment banker, broker, finder,
consultant or intermediary other than Houlihan Lokey Howard & Zukin Capital,
Inc. and Cascadia Capital, LLC, the fees and expenses of which will be paid by
Parent, is entitled to any investment banking, brokerage, finder’s or similar
fee or commission in connection with this Agreement or the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
any of its Subsidiaries.

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          3.3.10 Acquiring Person. None of Parent, Sub or their respective
Affiliates is or ever has been, with respect to the Company, an “acquiring
person”, or an “affiliate” or “associate” of an “acquiring person” (as such
terms are defined in Chapter 23B.19 of the WBCA). Sub will not be, with respect
to the Company after the Merger, an “affiliate or associate” of an “acquiring
person” (as such terms are defined in Chapter 23B.19 of the WBCA).
          3.3.11 Reliance. Parent makes the foregoing representations and
warranties with the knowledge and expectation that Company is placing reliance
thereon.
ARTICLE IV
COVENANTS OF COMPANY
     All references in the subsections of this Article IV to “Company” includes
Company’s subsidiaries except to the extent specifically excluded or except as
otherwise clearly required by the context. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Company agrees (except as expressly
contemplated by this Agreement, or with Parent’s prior written consent) that:
     4.1 Conduct of Business.
          4.1.1 Ordinary Course — Cooperation . Company will carry on its
business in the ordinary course consistent with past practice, will continue to
observe its obligations to comply with the requirements of all applicable laws
and regulations, and will use commercially reasonable efforts to: preserve
intact its present business organization; keep available the services of its
present officers, consultants, and employees; and maintain satisfactory
relationships with licensors, licensees, customers, suppliers, contractors,
distributors, and others having business relationships with it. Company will
promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of business of Company that would result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material
Adverse Effect. Company will (with reasonable business expediency) advise and
consult in good faith with Parent before it takes any action to:
               (a) grant any severance or termination pay to any officer,
director, or employee of Company that will be fully paid or fully accrued on the
Closing Balance Sheet, other than those made in Company’s ordinary course of
business and consistent with past practices and to the extent required by law,
or by Company’s existing severance plans and agreements as disclosed in the
Company Disclosure Schedule;
               (b) transfer to any third Person ownership of Company
Intellectual Property Rights other than in conjunction with the sales of Company
products or services in the ordinary course of business;
               (c) except as contemplated by Company Disclosure
Schedule 4.1.1(c), declare, set aside, or pay any dividend or other distribution
with respect to any shares of capital stock of Company that will be fully paid
or fully accrued on the Closing Balance Sheet;
               (d) incur, assume, or guarantee any indebtedness for borrowed
money that is included in the calculation of Net Working Capital, including any
extensions or successor agreements in substitution thereof, other than
draw-downs in the ordinary course of business on lines of credit existing as of
the date of this Agreement;

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               (e) commence a lawsuit other than: (i) for the routine collection
of bills; or (ii) in such cases where Company in good faith determines that
failure to commence a suit would result in a material impairment of a valuable
aspect of Company’s business;
               (f) extend an offer of employment to a candidate for an officer
position of vice president or above or any position with annual compensation in
excess of $100,000;
               (g) accelerate the vesting of Company stock options, as permitted
under the Company’s stock option plans for options outstanding as of the date of
this Agreement;
               (h) except as contemplated by Company Disclosure
Schedule 4.1.1(h), adopt or pay, accelerate, or accrue salary or other payments
or benefits or promise or make discretionary employer contributions to, under,
or with respect to any pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, group insurance, severance pay, retirement, or
other employee benefit plan, agreement, or arrangement, or any employment or
consulting agreement with or for the benefit of any Company director, officer,
employee, agent, or consultant, whether past or present, or amend any such
existing plan, agreement, or arrangement, in each case such as will not result
in any obligation, debt or agreement existing after the Closing Date;
               (i) breach, modify, amend, or terminate any of Company’s Material
Contracts, or waive, release, or assign any rights or claims under any of
Company’s Material Contracts, except as expressly required by this Agreement or
except in the ordinary course of business;
               (j) enter into any Material Contract or any other contract that
would require Company to expend a sum in excess of $100,000 but no greater than
$200,000, except in the ordinary course of business;
               (k) except as contemplated by Company Disclosure
Schedule 4.1.1(k), adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan or grant agreement (other than amendments
required by law or to comply with the Code or as requested by Parent under
Section 6.8(c)), or enter into any employment contract, pay any special bonus or
special remuneration to any director, officer, consultant, or employee, or
increase the salaries or wage rates or fringe benefits (including rights to
severance or indemnification) of its directors, officers, consultants, or
employees other than increases as required by law, or make any change in its
existing borrowing or lending arrangements for or on behalf of any of such
Persons under an employee benefit plan or otherwise such as will not result in
any obligation, debt or agreement existing after the Closing Date;
               (l) except as contemplated by Company Disclosure
Schedule 4.1.1(l), pay or make any accrual or arrangement for payment of any
pension, retirement allowance, or other employee benefit under any existing
plan, agreement, or arrangement to any officer, director, or employee or pay or
agree to pay or make any accrual or arrangement for payment to any officers,
directors, or employees of Company or any amount relating to unused vacation
days, such as will not result in any obligation, debt or agreement existing
after the Closing Date;
               (m) make any capital expenditure in excess of $100,000 but no
greater than $200,000, such as will not result in any obligation, debt or
agreement existing after the Closing Date; or

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               (n) except as required or permitted under this Agreement,
knowingly take any action that would or is reasonably likely to make any
representation or warranty of Company contained in this Agreement inaccurate,.
          4.1.2 Ordinary Course — Approval. In addition to the notice provisions
of Section 4.1.2, Company will not, without the prior written consent of Parent,
which consent will not be unreasonably withheld:
               (a) grant any severance or termination pay to any officer,
director, or employee of Company that will not be fully paid or fully accrued on
the Closing Balance Sheet, other than those made in Company’s ordinary course of
business and consistent with past practices and to the extent required by law,
or by Company’s existing severance plans and agreements as disclosed in the
Company Disclosure Schedule;
               (b) declare, set aside, or pay any cash dividend or other cash
distribution with respect to any shares of capital stock of Company that will
not be fully paid or fully accrued on the Closing Balance Sheet, or pay any
other dividend or distribution with respect to any shares of capital stock of
Company, or repurchase, redeem, or acquire any outstanding shares of capital
stock or other equity securities of, or other ownership interests in, Company,
or effect any stock split (forward or reverse), combination or reclassification,
or otherwise change its capitalization or capital structure in any manner from
the way it existed on the date hereof;
               (c) incur, assume, or guarantee any indebtedness for borrowed
money that is not reflected in the calculation of Net Working Capital, other
than draw-downs in the ordinary course of business on lines of credit existing
as of the date of this Agreement;
               (d) transfer to any third Person ownership of Company
Intellectual Property Rights which is not in the ordinary course of business;
               (e) amend any material provision of the articles of incorporation
or bylaws of Company, or any term of any outstanding security issued by Company;
               (f) change any method of accounting or accounting practice by
Company, except for any such change required by reason of a change in GAAP or
with prior agreement with Company’s auditor;
               (g) assign, transfer, dispose of, or license assets of Company,
grant any license of any assets of Company, or acquire or dispose of capital
stock of any third party or merge or consolidate with any third party in each
case other than in the ordinary course of business;
               (h) enter into any joint venture, partnership, limited liability
company, or operating agreement with any Person;
               (i) grant or issue any capital stock, securities convertible into
capital stock of Company, restricted stock, restricted stock units, stock
appreciation rights, stock options, warrants, or other equity rights;

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               (j) commence a lawsuit pertaining to the Company’s intellectual
property, or settle, compromise, or otherwise terminate any litigation, claim,
investigation, or other settlement negotiation with any third Person;
               (k) fail to keep in full force insurance policies covering
Company’s properties and assets under substantially similar terms and conditions
as Company’s current policies;
               (l) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization, or other reorganization
(other than the Merger);
               (m) acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association, or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets;
               (n) except as contemplated by Company Disclosure
Schedule 4.1.2(n), adopt or pay, accelerate, or accrue salary or other payments
or benefits or promise or make discretionary employer contributions to, under,
or with respect to any pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, group insurance, severance pay, retirement, or
other employee benefit plan, agreement, or arrangement, or any employment or
consulting agreement with or for the benefit of any Company director, officer,
employee, agent, or consultant, whether past or present, or amend any such
existing plan, agreement, or arrangement, in each case such as would result in
any obligation, debt or agreement existing after the Closing Date, or which is
not in the ordinary course of business or as required by law;
               (o) enter into any Material Contract or any other contract that
would require Company to expend a sum greater than $200,000, except in the
ordinary course of business;
               (p) except as contemplated by Company Disclosure
Schedule 4.1.2(p), adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan or grant agreement (other than amendments
required by law or to comply with the Code or as requested by Parent under
Section 6.8(c)), or enter into any employment contract, pay any special bonus or
special remuneration to any director, officer, consultant, or employee, or
increase the salaries or wage rates or fringe benefits (including rights to
severance or indemnification) of its directors, officers, consultants, or
employees other than increases as required by law, or make any change in its
existing borrowing or lending arrangements for or on behalf of any of such
Persons under an employee benefit plan or otherwise such as would result in any
obligation, debt or agreement existing after the Closing Date;
               (q) except as contemplated by Company Disclosure
Schedule 4.1.2(q), pay or make any accrual or arrangement for payment of any
pension, retirement allowance, or other employee benefit under any existing
plan, agreement, or arrangement to any officer, director, or employee or pay or
agree to pay or make any accrual or arrangement for payment to any officers,
directors, or employees of Company or any amount relating to unused vacation
days, such as would result in any obligation, debt or agreement existing after
the Closing Date, and other than in the ordinary course of business consistent
with past practice and except as required by law;
               (r) make any capital expenditure in excess of $200,000, or such
as would result in any obligation, debt or agreement existing after the Closing
Date;

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               (s) grant rights or licenses to Company Intellectual Property to
any standards organization or to any third Person in compliance with the
requirements of any standards organization, or use or incorporate any
intellectual property from any standards organization in Company’s software or
software used in any Company product, Technology, or service;
               (t) authorize, commit, or agree to take any of the foregoing
actions except as otherwise permitted by this Agreement; or
               (u) except as required or permitted under this Agreement,
knowingly take any action that would or is reasonably likely to (i) result in
any of the conditions to the Merger in Article VII not being satisfied, or
(ii) impair the ability of Company to consummate the Merger in accordance with
the terms of this Agreement.
          4.1.3 Exclusivity; Acquisition Proposals.
               (a) Unless and until this Agreement has been terminated by either
party in accordance with Section 9.1 hereof, Company agrees that it will not
(and will use its commercially reasonable efforts to ensure that none of its
officers, directors, agents, employees, or affiliates, or any investment banker,
financial advisor, attorney, accountant, or other advisor, agent, or
representative (collectively, “Representatives”)) take or cause or permit any
Person to take, directly or indirectly, any of the following actions with any
party other than Parent and its designees: (i) solicit, encourage, initiate, or
participate in any negotiations, inquiries, or discussions with respect to any
offer or proposal to acquire all or any significant part of Company, its
business, assets, or capital shares, whether by merger, consolidation, other
business combination, purchase of capital stock purchase of assets, license (but
excluding non-exclusive licenses entered into in the ordinary course of
business), lease, tender or exchange offer, or otherwise (each of the foregoing,
a “Restricted Transaction”); (ii) disclose, in connection with a Restricted
Transaction, any nonpublic information to any Person other than Parent or its
Representatives concerning Company’s business or properties or afford to any
Person other than Parent or its Representatives access to its properties, books,
or records, except as required by law or in accordance with a governmental
request for information; (iii) enter into or execute any agreement relating to a
Restricted Transaction; or (iv) make or authorize any public statement,
recommendation, or solicitation in support of any Restricted Transaction or any
offer or proposal relating to a Restricted Transaction other than with respect
to the Merger. If Company is contacted by any third party expressing an interest
in discussing a Restricted Transaction, Company will promptly, but in no event
later than 24 hours following Company’s knowledge of such contact, notify Parent
in writing of such contact and the identity of the party so contacting Company
and any information conveyed to Company by such third party in connection with
such contact or relating to such Restricted Transaction, and will promptly, but
in no event later than 24 hours, advise Parent of any material modification or
proposed modification thereto.
               (b) Neither the board of directors of Company nor any committee
thereof will directly or indirectly (i) (A) withdraw (or amend or modify in a
manner adverse to Parent), or publicly propose to withdraw (or amend or modify
in a manner adverse to Parent), the approval, recommendation, or declaration of
advisability by the board of directors of Company or any such committee thereof
of this Agreement, the Merger, or the Transactions, or (B) recommend, adopt, or
approve, or propose publicly to recommend, adopt, or approve, any Acquisition
Proposal (any action described in this clause (i) being referred to as a “Change
of Recommendation”) or (ii) approve or recommend, or publicly propose to approve
or recommend, or allow Company or any subsidiary of Company to execute or enter
into, any letter of intent, memorandum of understanding, agreement in principle,
merger agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement, or other similar agreement, arrangement, or
understanding (X) constituting or

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related to, or that is intended to or could reasonably be expected to lead to,
any Acquisition Proposal or (Y) requiring it to abandon, terminate, or fail to
consummate the Merger or any other transaction contemplated by this Agreement.
               (c) The obligation of Company to call, give notice of, convene,
and hold a shareholders’ meeting will not be limited or otherwise affected by
the commencement, disclosure, announcement, or submission to it of any
Acquisition Proposal.
               (d) “Acquisition Proposal” means any inquiry, proposal, or offer
from any Person relating to, or that could reasonably be expected to lead to a
Restricted Transaction.
     4.2 Breach of Representations and Warranties; Notification; Access to
Information.
               (a) Despite anything in this Agreement to the contrary, from the
date hereof to the earlier of the Effective Time or the termination of this
Agreement in accordance with Section 9.1, Company will (i) confer with Parent
and its respective Representatives, at such times as they may request, about
appropriate operational and integration matters to the extent permitted by law,
(ii) in the event of, and promptly after becoming aware of, the occurrence of or
the pending or threatened occurrence of any event that would cause or constitute
a breach of any of the representations and warranties in Section 3.1, give
detailed written notice thereof to Parent and use commercially reasonable
efforts to promptly remedy any such material breach or inaccuracy, and
(iii) promptly notify Parent of any change in the normal course of any business,
operations, or financial condition of Company or its assets or properties, or
any emergency related thereto. Without limiting the generality of the foregoing,
Company will promptly notify Parent of (A) any discussions or actions (of any
type, preliminary or otherwise) relating to bankruptcy of Company, (B) any
complaints, investigations, or hearings (or communications indicating that any
complaints, investigations, or hearings may be contemplated) of any Governmental
Entity (for which Company has received written or oral notice), (C) any loss of
or damage to any material property owned by Company, (D) any change in material
existing relationships with outside third parties (for which Company has
received written or oral notice), (E) the institution or threat of any
litigation that could affect Company, (F) the failure of Company to comply with
or satisfy any covenant, condition, or agreement to be complied with or
satisfied by it in accordance with this Agreement, or (G) any other matter that
could result, individually or in the aggregate, in a Company Material Adverse
Effect.
               (b) Company will, subject to applicable law, afford Parent and
its respective Representatives reasonable access during normal business hours
during the period before the Effective Time to (i) Company’s properties, books,
contracts, commitments, communications (including e-mail), and records, and
(ii) all other information concerning the business, properties, and personnel of
Company, as Parent may reasonably request that is necessary to complete the
transaction and prepare for an orderly transition of operations after the
Effective Time. Company agrees to provide to Parent and its Representatives
copies of monthly internal financial statements within 30 days of completion of
such month. No information or knowledge obtained in any investigation in
accordance with this Section 4.2 will affect or be deemed to modify any
representation or warranty in this Agreement or the conditions to the
obligations of Parent to consummate the Merger. Company will permit Parent’s
Representatives to meet with the officers of Company responsible for the
financial statements and internal controls of Company and its subsidiaries to
discuss such matters as Parent may deem reasonably necessary or appropriate to
satisfy its obligations under Section 302 and 906 of the Sarbanes-Oxley Act of
2002 and any rules and regulations relating thereto.
     4.3 Consents and Notices. Company will promptly apply for or otherwise
seek, and use commercially reasonable efforts to obtain, all Consents and to
provide all notices set forth in

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Company Disclosure Schedule 4.3 (without the expenditure of any out-of-pocket
payments to a third party to obtain such third party’s consent or approval), and
make all filings, required with respect to Company for the consummation of the
Merger.
     4.4 Commercially Reasonable Efforts. Company will use commercially
reasonable best efforts in good faith to, and the Major Shareholders will use
their commercially reasonable best efforts in good faith to cause Company to,
effect the Transactions and to fulfill and cause to be fulfilled the conditions
to Closing under this Agreement as promptly as practicable and otherwise to
enable consummation of the Transactions.
     4.5 Notice to Holders of Company Shares. Company will promptly comply with
the shareholder notice requirements of the WBCA.
     4.6 Tax Returns. Except as set forth in Company Disclosure Schedule 4.6,
before the Closing Date, Company will properly and timely file or cause to be
filed all Returns with respect to Company and any of its subsidiaries for all
taxable periods that have ended before the Closing Date and will pay (or cause
any applicable subsidiaries to pay) all taxes required to be paid for such
periods. All such Returns will be prepared consistent with past practice, and
will be subject to approval of Parent, which will not be unreasonably withheld.
Company will (i) notify Parent promptly if Company receives written notice of
any tax audit, the assessment of any tax, the assertion of any tax lien, or any
request, notice, or demand for taxes by any taxing authority, (ii) provide
Parent a description of any such matter in reasonable detail (including a copy
of any written materials received from the taxing authority), and (iii) take no
action with respect to such matter without the consent of Parent, which will not
be unreasonably withheld. Company will not (v) amend any Return previously
filed, (w) incur any obligation to make any payment of, or in respect of, any
taxes, except in the ordinary course of business, (x) make or revoke any tax
election that may affect Company, (y) agree to extend or waive the statutory
period of limitations for the assessment or collection of any tax, or (z) enter
into any agreement or settlement with respect to any tax, without the prior
advisement and consultation of Parent.
     4.7 Intellectual Property. Company will not incorporate any software that
is subject to an Excluded License into any part of any Company software or
service; use any software that is subject to an Excluded License in whole or in
part in the development of any Company software or services in a manner that may
subject the software, services, or content available therefrom, in whole or in
part, to an Excluded License; or combine or distribute Company software or
services (including any content available therefrom) with any software that is
subject to an Excluded License.
     4.8 Parachute Payments. Before the Effective Time, Company will submit to
all Persons entitled to vote (within the meaning of the Treasury Regulations
under Code Section 280G) the material facts concerning all payments that Parent
reasonably believes, in the absence of shareholder approval of such payments,
would be “parachute payments” as defined in Code Section 280G(b)(2) (“Parachute
Payments”), in form and substance reasonably satisfactory to Parent and its
counsel, which will satisfy all requirements of the WBCA and Code
Section 280G(b)(5)(B) and the Treasury Regulations thereunder, and Company will
solicit the consent of holders of Company Shares to the Parachute Payments.
Company’s board of

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directors will recommend approval of the Parachute Payments, unless Company’s
board of directors believes in good faith, after consultation with Company’s
counsel, that such recommendation would be inconsistent with the fiduciary
duties of Company’s board of directors under applicable law.
     4.9 Deliveries. Company will deliver to Parent (i) as promptly as
practicable after the execution of this Agreement, audited balance sheets of
Company as of December 31, 2008 and the related audited statements of income,
changes in owner’s equity, and cash flow for the 12 months then ended; (ii) an
unaudited balance sheet of Company as of month-end for the month immediately
preceding the month of Closing (or as of month-end for the month that is
2 months preceding the month of Closing if Closing occurs on any of the first 10
business days of a month) (in either case, the “Pre-Closing Balance Sheet
Date”), and the related unaudited statements of income, changes in owner’s
equity, and cash flow from the period from January 1, 2009 until the Pre-Closing
Balance Sheet Date; (iii) the Preliminary Closing Balance Sheet no later than
three business days before the anticipated Closing Date; and (iv) all minute
books of Company and its subsidiaries before Closing.
     4.10 Shareholder Approval. Company will take all action, and the Major
Shareholders will use their best efforts to cause Company to take all action,
necessary in accordance with the WBCA and Company’s articles of incorporation
and bylaws to solicit consent or to hold and convene a special meeting of the
shareholders of the Company to be held as soon as practicable to submit this
Agreement, the Merger, and related matters for the consideration and approval of
the shareholders of the Company.
     4.11 Option Agreements. As soon as practicable (and in no event later than
30 days prior to Closing), the Company shall amend those grant agreements
governing Company Options as shall be mutually identified by Company and Parent,
to provide that such Company Options shall only become vested and exercisable
immediately prior to a Change in Control, as defined under Code Section 409A and
the Treasury regulations and available guidance issued thereunder. The Company
shall take all actions necessary for such amendments to be enforceable,
including, without limitation, obtaining the written consent of each affected
option holder to the amendment to his or her option grant agreement.
ARTICLE V
COVENANTS OF PARENT
     During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, Parent
agrees (except as expressly contemplated by this Agreement or with Company’s
prior written consent, which will not be unreasonably withheld) that:
     5.1 Breach of Representations and Warranties. In the event of, and promptly
after becoming aware of, the occurrence of or the pending or threatened
occurrence of any event that would cause or constitute a breach of any of the
representations and warranties set forth in Section 3.3, Parent will give
detailed notice thereof to Company and will use commercially reasonable efforts
to prevent or promptly remedy such breach or inaccuracy.

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     5.2 Commercially Reasonable Efforts. Parent will use commercially
reasonable best efforts in good faith to effect the Transactions and to fulfill
and cause to be fulfilled the conditions to Closing under this Agreement as
promptly as practicable and otherwise to enable consummation of the
Transactions, including the obtaining of sufficient available funds (through
existing credit arrangements or otherwise) on terms satisfactory to Parent, and
reserving sufficient authorized and unissued Parent Common Stock to pay the
Conversion Payment when payable.
ARTICLE VI
ADDITIONAL AGREEMENTS
     In addition to the foregoing, Parent and Company each agree to take the
following actions after the execution of this Agreement.
     6.1 Non-Disclosure Agreement. Company and Parent agree that the
Non-Disclosure Agreement by and among Company and Parent dated October 24, 2007
(“Non-Disclosure Agreement”), the Agreement on Confidentiality of Settlement
Communications between Company and Parent dated October 24, 2007 (“Settlement
Communications Agreement”) and any supplements and addendums to those agreements
subsequently executed, will continue in full force and effect and will be
applicable to all Confidential Information (as defined in the Non-Disclosure
Agreement) and Settlement Communications (as defined in the Settlement
Communications Agreement) exchanged in connection with this Agreement and the
Transactions.
     6.2 Legal Conditions to the Merger. Subject to Section 9.1(c), each of
Parent, Sub, and Company (a) will take all reasonable actions necessary to
comply promptly with all legal requirements that may be imposed on it with
respect to the Merger and will promptly cooperate with and furnish information
to each other in connection with any such requirements imposed upon the other,
and (b) will take, and will cause its respective subsidiaries to take, all
reasonable actions to obtain (and to cooperate with the other parties in
obtaining) any consent, approval, order, or authorization of, or any exemption
by, any Governmental Entity, or other third party, required to be obtained or
made by Company or Parent or their respective subsidiaries in connection with
the Merger or the taking of any action contemplated thereby or by this
Agreement.
     6.3 Proxy Statement and Registration Statement. As promptly as practicable
after the execution of this Agreement, Company and Parent shall prepare, and
(i) Company shall distribute to the shareholders of the Company, a proxy
statement and materials relating to the adoption of this Agreement by the
shareholders of Company, and (ii) Parent shall file with the SEC, the
Registration Statement. As promptly as practicable following receipt of SEC
comments thereon and with the cooperation of Company, Parent shall file with the
SEC amendments to the Registration Statement which comply in form with
applicable SEC requirements, and shall use all commercially reasonable efforts
to cause the Registration Statement to become effective as soon thereafter as
practicable. Parent will notify Company promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff or any
other government officials for amendments or supplements to the Registration
Statement or for additional information. Whenever any event occurs that is
required to be set forth in an

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amendment or supplement to the Registration Statement and/or the proxy statement
and related materials, Each party shall promptly inform the other of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to shareholders of Company, such amendment
or supplement. The proxy statement of Company shall solicit the adoption of this
Agreement by the shareholders of Company and shall include the approval of this
Agreement and the Merger by the Board of Directors of Company and the
recommendation of the Board of Directors of Company to Company’s shareholders
that they vote in favor of the adoption of this Agreement. Company and Parent
agree to cooperate and provide information and disclosure as required for the
completion of the proxy statement and Registration Statement.
     6.4 Officers and Directors. Parent will cause the Surviving Corporation to
maintain Company’s existing indemnification provisions (including with respect
to advancement of expenses) as of the date hereof with respect to present and
former directors, officers, employees, and agents of Company and all other
Persons who may presently serve or have served at Company’s request as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise (collectively, the “Indemnified Parties”)
for all expenses, judgments, fines, and amounts paid in settlement by reason of
actions or omissions or alleged actions or omissions occurring at or before the
Effective Time to the fullest extent permitted or required under applicable law
and Company’s articles of incorporation and bylaws in effect as of the date of
this Agreement (to the extent consistent with applicable law), for a period of
five years after the Effective Time, as well as any rights to indemnification
and advancement of expenses provided in employment agreements or indemnification
agreements between Company and any Indemnified Parties, and will cause Surviving
Corporation to perform (and guarantees that Surviving Corporation will perform)
its obligations under such indemnification provisions and agreements in
accordance with their respective terms. The provisions of this Section 6.4 are
for the benefit of, and will be enforceable by, each of the Indemnified Parties,
their heirs, and their Representatives.
     6.5 Expenses. All costs and expenses incurred in connection with this
Agreement and the Transactions will be paid by the party incurring such expense.
     6.6 Additional Agreements. In case at any time after the Effective Time any
further action is reasonably necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities, and franchises of Company or
Sub, the proper officers and directors of each corporation that is a party to
this Agreement will take all such action.
     6.7 Public Announcements. Neither Parent nor Company will make any public
announcement concerning this Agreement and the Transactions without the prior
written consent of the other party, and will furnish to the other party all
releases before publication. Promptly following the receipt of the Federal Trade
Commission’s approval of the Merger, Parent will distribute a public
announcement substantially in the form attached hereto as Exhibit 6.7(a).
Promptly following the execution of this Agreement, Parent will distribute a
public announcement substantially in the form attached hereto as Exhibit 6.7(b).
Nothing in this Agreement will prevent Company or Parent at any time from
furnishing any information to any Governmental Entity or from issuing any
release, each as required by law, in which circumstance

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Company or Parent, as applicable will make commercially reasonable efforts to
consult with Parent or Company as applicable in advance to the extent
practicable and in any event will notify Parent or Company as applicable as soon
as practicable. Neither Parent nor Company will make any communication to
customers or announcements to its employees with respect to the Transactions
without the prior written consent of Parent or Company, as applicable.
     6.8 Employee Matters.
               (a) Company will cooperate with regard to the recruitment and
hiring of employees by Parent or continuing employment with Company. Company
will present offers of continued employment to such employees of Company as are
designated by Company prior to Closing. Such offers will be in a form acceptable
to Parent and will be presented in a manner and at times acceptable to Parent,
provided that offers will be made to the Company executives set forth on Company
Disclosure Schedule 6.8 substantially in the forms attached hereto as
Exhibit 6.8(a). Except as expressly agreed to in writing by Sub or Parent, no
specific terms and conditions of employment, including terms and conditions
pertaining to length of employment, are guaranteed. Company will use
commercially reasonable efforts to assist Parent with its recruitment efforts
and to satisfy the requirements of Section 7.2.6 before Closing.
               (b) Company will cooperate with Parent to develop appropriate
communications to Company employees regarding the Transactions and a transition
plan in contemplation of Closing, including delivering other notices to
employees as requested by Parent and which are reasonably acceptable to Company.
               (c) (i) At Parent’s request and immediately before the Effective
Time, Company will terminate or cause to be terminated any or all of the Plans
set forth in Section 3.1.13 of the Company Disclosure Schedule that are intended
to be qualified within the meaning of Code Section 401(a), with such termination
to be effective before the Effective Time. Additionally, at Parent’s request,
and before the Effective Time, Company will terminate or cause to be terminated
or amend or cause to be amended any or all other employee benefit plans,
policies, and arrangements set forth in Section 3.1.13 of the Company Disclosure
Schedule, at the time and in such manner as Parent may direct, with Parent
having sole and exclusive authority to determine the continuation, amendment, or
termination of such plans in accordance with applicable federal and state laws.
Any continuation, amendment or termination under this subsection (i) shall not
be effective until immediately prior to the Effective Time (with the
effectiveness of such amendment or termination being conditioned upon the
occurrence of Closing).
                    (ii) In the event that Company, pursuant to Parent’s
request, terminates or causes to be terminated prior to the Effective Time any
or all of the Plans or other employee benefit plans, policies, and arrangements
as described in subsection (i) above, then Parent shall take all reasonable
action so that employees of Company shall be entitled to participate in the
Parent Benefit Plans (as defined in subparagraph (iii) below) that are of a
similar type as such terminated Company plans to the same extent as
similarly-situated employees of Parent as of the Effective Time (it being
understood that inclusion of the employees of Company in the Parent Benefit
Plans may occur at different times with respect to different plans), provided
that nothing contained herein shall require Parent to make any grants to any
former employee of Company under any discretionary equity compensation plan of
Parent or to establish new Parent Benefit Plans that do not exist at the time
such Company plans are terminated, and subject to the other limitations set
forth in subsection (iii) below. Each of

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Company and Parent acknowledge and agree that all provisions contained within
this Section 6.8(c)(ii) with respect to employees are included for the sole
benefit of Company and Parent and shall not create any right (a) in any other
person, including, any current participant in any Parent Benefit Plans or
Company benefit plans or any beneficiary thereof or (b) to continued employment
with Company, Parent or any of their respective affiliates.
                    (iii) In the event Parent does not have Company terminate or
amend any or all Company Plans or other employee benefit plans, policies, and
arrangements as set forth in (i) above, then as soon as Parent determines, in
its sole discretion, that such actions are administratively practicable, Parent
shall take all reasonable action so that employees of Company shall be entitled
to participate in each comparable employee benefit plan, program or arrangement
of Parent of general applicability (the “Parent Benefit Plans”) to the same
extent as similarly-situated employees of Parent (it being understood that
inclusion of the employees of Company in the Parent Benefit Plans may occur at
different times with respect to different plans), provided that coverage shall
be continued under the corresponding benefit plans of Company until such
employees are permitted to participate in the comparable Parent Benefit Plan and
provided further, however, that nothing contained herein shall require Parent to
make any grants to any former employee of Company under any discretionary equity
compensation plan of Parent. Parent shall use commercially reasonable efforts to
cause each Parent Benefit Plan in which employees of Company are eligible to
participate to recognize, for purposes of determining eligibility to participate
in the vesting of benefits under the Parent Benefit Plans, the service of such
employees with Company to the same extent as such service was credited for such
purpose by Company, provided, however, that such service shall not be recognized
to the extent that such recognition would result in a duplication of benefits.
At such time as employees of Company become eligible to participate in a
medical, dental or health plan of Parent, Parent shall use commercially
reasonable efforts to cause each such plan to (a) waive any preexisting
condition limitations to the extent such conditions are covered under the
applicable medical, health or dental plans of Parent, (b) provide full credit
under such plans for any deductibles, co-payment and out-of-pocket expenses
incurred by the employees and their beneficiaries during the portion of the
calendar year prior to such participation and (c) waive any waiting period
limitation or evidence of insurability requirement which would otherwise be
applicable to such employee on or after the Effective Time to the extent such
employee had satisfied any similar limitation or requirement under an analogous
Plan prior to the Effective Time. Nothing in this Agreement (including this
Section 6.8) will be deemed to (i) require Parent to establish an employee
benefit plan; (ii) limit or otherwise affect the right of Parent to modify or
terminate any Parent Benefit Plan without establishing a replacement plan, in
each case as Parent may determine in its sole discretion; (iii) require Parent
to provide employee benefits to any former employee of the Company after such
employee’s employment with Company or Parent has terminated; or (iv) incur
material additional costs to obtain waivers or recognition from any insurance
carrier or benefit plan administrator. Each of Company and Parent acknowledge
and agree that all provisions contained within this Section 6.8(c)(iii) with
respect to employees are included for the sole benefit of Company and Parent and
shall not create any right (x) in any other person, including, without
limitation, any third party beneficiary rights or any right in any current
participant in any Parent Benefit Plans or Company benefit plans or any
beneficiary thereof or (y) to continued employment with Company, Parent or any
of their respective affiliates.

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                    (d) As set forth in Section 2.2.2 above, Parent agrees to
designate the Employee Retention Pool Amount for (i) retention bonuses for
certain Company employees selected by Company after consultation with Parent,
(ii) fees and expenses of the Employee Retention Escrow, and (iii) the
employer’s share of FICA (OASDI and Medicare) taxes on such retention bonuses.
The initial allocation of the portion of the Employee Retention Pool Amount that
is left after taking into account the estimated amount of the employer’s share
of FICA taxes on the bonuses and fees and expenses of the Employee Retention
Escrow (“Initial Bonus Allocation”) among such employees will be at Company’s
discretion after consultation with Parent. The retention bonuses will be subject
to certain conditions and retention requirements determined by Company after
consultation with Parent. Each such employee will have the opportunity to earn
the amount allocated for that individual should he or she meet the requirements
contained in Exhibit 2.2.2. In the event that any individual employee does not
earn the amounts allocated to him or her due to his or her failure to meet
applicable conditions or retention requirements, such amounts (plus the portion
of the Employee Retention Pool Amount allocated for the estimated employer’s
share of FICA on such amount, “FICA Allocation”) will not be paid or reallocated
to other employees. Any bonus amounts that are not earned as of the six-month
anniversary of the Closing plus the FICA Allocation on such unearned amounts
will remain in the Employee Retention Escrow until such time as the Escrow
Amount is to be distributed, at which time such amounts shall be paid to the
Escrow Agent under the Escrow Agreement pursuant to Section 2.2.2 above and the
terms of the Employee Retention Escrow Agreement.
     6.9 Additional Payments. Parent agrees to pay, within five business days
following the Effective Time, those fees and expenses of litigation as set forth
in Section 3.1.9(v) of the Company Disclosure Schedule.
     6.10 Escrow Note. Contemporaneous with the Closing, Parent shall deposit
the duly executed Escrow Note or shares of Parent Common Stock equal to the
Escrow Amount with the Escrow Agent.
ARTICLE VII
CONDITIONS PRECEDENT
     7.1 Conditions to Each Party’s Obligation to Effect the Merger. The
respective obligations of each party to consummate the Merger are subject to the
satisfaction, or to the extent permitted by applicable law, the written waiver
at or before the Effective Time, of each of the following conditions:
          7.1.1 Shareholder Approval. This Agreement and the Transactions will
have received Company Shareholder Approval.
          7.1.2 Registration Statement. The Registration Statement shall have
been declared effective by the SEC, and no stop orders or injunctions shall have
been filed with respect to such Registration Statement, and all requisite
filings and approvals shall have been made and obtained from the NASD and The
NASDAQ Global Market, as appropriate.
          7.1.3 Consents. Other than the filing of the Articles of Merger with
the Secretary of State of Washington, all Consents, third party consents, and
notices that are legally required to be obtained or provided for the
consummation of the Merger and the Transactions,

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including those listed on Schedule 4.3, will have been satisfied, filed,
occurred, or been obtained, in accordance with the terms and conditions of all
applicable agreements other than such Consents and third party consents as
Parent and Company agree Company and Parent will not seek or obtain.
          7.1.4 No Order. No Governmental Entity of competent jurisdiction will
have enacted, issued, promulgated, enforced, or entered any statute, rule,
regulation, executive order, decree, injunction, or other order (whether
temporary, preliminary, or permanent) that (i) is in effect, and (ii) has the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger (which illegality or prohibition would have a material impact on Company
if the Merger were consummated notwithstanding such statute, rule, regulation,
executive order, decree, injunction, or other order).
          7.1.5 No Material Adverse Effect. Parent shall have concluded that the
completion of the Transactions will not have a Parent Material Adverse Effect,
including the Company.
     7.2 Conditions of Obligations of Parent and Sub. The obligations of Parent
and Sub to consummate the Merger are further subject to the satisfaction or
waiver at or before the Effective Time of each of the following conditions:
          7.2.1 Representations and Warranties of Company. The representations
and warranties of Company in this Agreement will be true and correct in all
respects on the date hereof and as of the Closing Date with the same force and
effect as if made on the Closing Date, except to the extent the failure of such
representations and warranties of Company to be true and correct has not
resulted, individually or in the aggregate, in a Company Material Adverse Effect
(and except that those representations and warranties which address matters only
as of a particular date will have been true and correct only on such date), it
being understood that, for purposes of determining the accuracy of such
representations and warranties, all materiality qualifications and other
qualifications based on the word “material” in such representations and
warranties will be disregarded. Parent and Sub will have received a certificate
with respect to the foregoing signed on behalf of Company by the Chief Executive
Officer and the Chief Financial Officer of Company.
          7.2.2 Performance of Obligations of Company. Company will have
performed in all material respects all agreements and covenants required to be
performed by it under this Agreement before the Closing Date. Parent will have
received a certificate signed on behalf of Company by the Chief Executive
Officer and the Chief Financial Officer of Company to such effect.
          7.2.3 No Company Material Adverse Effect. From the date of this
Agreement until the Closing Date, there has been no change, event, circumstance,
development, or effect that resulted, individually or in the aggregate, in a
Company Material Adverse Effect, and Parent will have received a certificate to
that effect signed on behalf of Company by the Chief Executive Officer and the
Chief Financial Officer of Company.
          7.2.4 Legal Action. There will not be pending any action, proceeding,
or other application brought by any Governmental Entity: (i) challenging or
seeking to restrain or

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prohibit the consummation of the Transactions, or seeking to obtain any material
damages in connection therewith; or (ii) seeking to prohibit or impose any
material limitations on Parent’s or Surviving Corporation’s ownership or
operation of all or any portion of Company’s business or to compel Parent or
Surviving Corporation to dispose of or hold separate all or any material portion
of the assets of Company as a result of the Transactions.
          7.2.5 Resignations. Parent will have received the resignations of all
of the officers and directors of Company as officers and directors and any
subsidiaries thereof as Parent shall designate (which resignations, other than
the right to serve as an officer or director, will not impair the rights of any
officer or director as employees of the Surviving Corporation).
          7.2.6 Certain Employees. As of immediately before Closing, (a) each
individual set forth in Company Disclosure Schedule 7.2.6 who is offered
employment with Parent or continued employment with Company with Parent’s
approval will have received (and executed, as applicable) an offer and employee
agreement in the form provided by Parent and an employee proprietary information
and nondisclosure agreement in the form provided by Parent, and (b) each
individual set forth on Schedule 6.8 will have executed an offer and employment
agreement as provided in Section 6.8(a), and each individual in (a) and (b)
above will not have taken any action or expressed any intent to terminate or
modify such acceptance, and will have in place all certifications, clearances,
and authorizations required to perform the duties of the specified position.
          7.2.7 Noncompetition Agreement. Each individual set forth on
Schedule 6.8 will have executed a non-competition and non-solicitation agreement
with Parent in the form attached hereto as Exhibit 7.2.7, and will not have
taken any action or expressed any intent to terminate or modify such agreement.
          7.2.8 Termination of Certain Agreements. All agreements set forth in
Company Disclosure Schedule 7.2.8 will have been terminated by the parties
thereto.
          7.2.9 Amendment of Certain Agreements. All agreements set forth in
Company Disclosure Schedule 7.2.9 will have been amended as provided in such
schedule, and such amendments will be in full force and effect.
          7.2.10 Opinion of Counsel. Parent will have received an opinion dated
as of the Closing Date of Foster Pepper PLLC reasonably satisfactory to Parent,
substantially in the form attached hereto as Exhibit 7.2.10. Parent will also
have received an opinion dated as of the Closing Date from Foster Pepper PLLC,
reasonably satisfactory to Parent and upon which Parent can rely under U.S.
Treasury Department Circular 230, opining as to whether the exercise of options
in April 2008 and the exercise of any options immediately prior to Closing,
which are intended by the Company to be incentive stock options may be properly
reported as incentive stock options (within the meaning of Code Section 422).
          7.2.11 Assignment of Rights to Company Intellectual Property. Company
and the employees, independent contractors (including former employees and
independent contractors) and customers of Company will have executed such
assignments and other documentation as

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may be reasonably requested by Parent to effectively transfer or confirm the
transfer of all right, title, and interest to Company Intellectual Property to
Company and/or Parent as its successor.
          7.2.12 Escrow Agreements. Shareholders’ Representative and BNY Mellon
Shareowner Services will have executed and delivered each of the Escrow
Agreements.
          7.2.13 Deliveries. Company will have made the deliveries required by
Section 4.9.
          7.2.14 Appraisal Rights. Not more than five percent (5%) of the
holders of Company Shares that are outstanding on the record date for the
determination of those shares entitled to vote for or against the Merger will
have demanded and perfected appraisal rights, and not effectively withdrawn or
lost such appraisal rights.
          7.2.15 Company Option Holders. Company shall have amended those
designated Company Options in accordance with Section 4.11 above, and all
holders of Company Options will have provided Parent with written consent to the
exercise of each of their respective Company Options in exchange for the right
to receive the Conversion Payment for such Company Options as set forth in
Section 2.1.3 hereof, and such consents will be in full force and effect.
          7.2.16 FIRPTA Certificate. Company will have delivered to Parent a
duly authorized and executed certificate stating that no interest in the Company
is a United States real property interest within the meaning of Section 897 of
the Code, which certificate (and delivery thereof) will comply in all respects
with the requirements set forth in Treasury Regulation Sections 1.1445-2(c)(3)
and 1.897-2(h).
          7.2.17 Shareholders’ Agreements. Each of the agreements of even date
herewith, entered into between Parent, Company, each of the Major Shareholders
and such other shareholders of the Company as necessary to provide agreements
representing a majority of the outstanding shares of the Company, shall be in
full force and effect.
     7.3 Conditions of Obligation of Company. The obligation of Company to
consummate the Merger is subject to the satisfaction, or to the extent permitted
by applicable law, the written waiver at or before the Effective Time of each of
the following conditions:
          7.3.1 Representations and Warranties of Parent and Sub. The
representations and warranties of Parent and Sub contained in this Agreement
will be true and correct in all respects on the date hereof and as of the
Closing Date with the same force and effect as if made on the Closing Date,
except to the extent the failure of such representations and warranties of
Company to be true and correct has not resulted, individually or in the
aggregate, in a Company Material Adverse Effect (and except that those
representations and warranties which address matters only as of a particular
date will have been true and correct only on such date), except, individually or
in the aggregate, as does not constitute a Parent Material Adverse Effect at the
Closing Date (it being understood that, for purposes of determining the accuracy
of such representations and warranties, all “Material Adverse Effect” and
materiality qualifications and

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other qualifications based on the word “material” in such representations and
warranties will be disregarded). Company will have received a certificate with
respect to the foregoing signed on behalf of Parent, with respect to the
representations and warranties of Parent, by an authorized officer of Parent and
a certificate with respect to the foregoing signed on behalf of Sub, with
respect to the representations and warranties of Sub, by an authorized officer
of Sub.
          7.3.2 Performance of Obligations of Parent and Sub. Parent and Sub
will have performed all agreements and covenants required to be performed by
them under this Agreement before the Closing Date, and Company will have
received a certificate signed on behalf of Parent and Sub by an authorized
officer of Parent and Sub to such effect.
          7.3.3 Escrow Agreements. Parent and BNY Mellon Shareowner Services
will have executed and delivered each of the Escrow Agreements.
ARTICLE VIII
INDEMNIFICATION
     8.1 Indemnification Relating to Agreement. Subject to the limitations set
forth in this Article VIII, the holders of the Company Shares and Company
Options jointly and severally (except as to those matters described in Section
8.5(b)(i) and (ii) below, as to which matters the indemnification obligations
hereunder shall be several and not joint for any amounts in excess of the
then-available Escrow Amount) will defend, indemnify, and hold Parent and
Surviving Corporation harmless from and against, and reimburse Parent and
Surviving Corporation with respect to, any and all losses, damages, liabilities,
claims, judgments, settlements, fines, costs, and expenses (including reasonable
attorneys’ fees) (“Indemnifiable Amounts”) of every nature whatsoever incurred
by Parent and Surviving Corporation by reason of or arising out of or in
connection with (i) any breach, or any claim (including claims by parties other
than Parent) that if true, would constitute a breach of any representation or
warranty of Company in this Agreement (as modified by the Company Disclosure
Schedule as of the date hereof) or in any certificate or other document
delivered to Parent in accordance with this Agreement, (ii) the failure, partial
or total, of Company to perform any agreement or covenant required by this
Agreement to be performed by it, (iii) any Working Capital Deficit adjustment to
the extent not paid in accordance with Section 2.3 and (iv) all taxes of Company
relating to all taxable periods ended on or before the Closing Date and the
portion of taxes of Company attributable to the portion of any Straddle Period
beginning as of the first day of such Straddle Period and ending as of the end
of the Closing Date (a “Pre-Closing Period”) (calculated in the manner set forth
in Section 8.3(c) (Straddle Period)), other than taxes on income recognized or
accrued by Company after January 2009 in respect of obligations of Parent not
paid in March 2009; in each case of (i) and (ii) above, without giving effect to
any “materiality” limitations or references to “material adverse effect” set
forth therein. The availability of the Escrow Amount to indemnify Parent will be
determined without regard to any right to indemnification to which any holder of
any interest in the Escrow Amount may have in his or her capacity as an officer,
director, employee, agent, or any other capacity of Company and no such holder
will be entitled to any indemnification from Company or Surviving Corporation
for amounts paid hereunder. Any payment to Parent in accordance with this
Article VIII will be treated for tax purposes as an adjustment to the
consideration for the Company Common Shares.

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     8.2 Third Party Claims.
               (a) If any third party shall notify Parent with respect to any
matter (a “Third-Party Claim”) which may give rise to a claim for
indemnification against any other party hereto (the “Indemnifying Party”) under
this Article VII, then Parent shall promptly (and in any event within 30
business days after receiving notice of the Third-Party Claim) notify each
Indemnifying Party thereof in writing.
               (b) Any Indemnifying Party will have the right at any time to
assume and thereafter conduct the defense of the Third-Party Claim with counsel
of his or its choice reasonably satisfactory to Parent; provided, that the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third-Party Claim without the prior written
consent of the Parent (not to be withheld unreasonably).
               (c) If the Indemnifying Party assumes the defense of such claim
or litigation resulting therefrom, Parent shall be entitled to participate in
the defense of the claim, but Parent shall bear the fees and expenses of any
additional counsel retained by it to conduct its defense unless any of the
following shall apply: (i) the employment of such counsel shall have been
authorized in writing by the Indemnifying Party or (ii) the Indemnifying Party’s
legal counsel shall advise the Indemnifying Party in writing, with a copy to
Parent, that there is a conflict of interest that would make it inappropriate
under applicable standards of professional conduct to have common counsel. If
clause (i) or (ii) in the immediately preceding sentence is applicable, then
Parent may employ separate counsel at the reasonable expense of the Indemnifying
Party to represent Parent, but in no event shall the Indemnifying Party be
obligated to pay the costs and expenses of more than one such separate counsel
for any one complaint, claim, action or proceeding in any one jurisdiction.
               (d) Unless and until an Indemnifying Party assumes the defense of
the Third-Party Claim as provided in this Section 8.2, however, Parent may
defend against the Third-Party Claim in any manner it reasonably and in good
faith may deem appropriate.
     8.3 Tax Contests.
               (a) To the extent Taxes paid by the Company for the Pre-Closing
Period (other than those items identified in Schedule 8.6) are not reserved for
and reflected in the Final Working Capital, the Company shall be entitled to
withdraw from the Escrow Amount, without defense, at or prior to the filing of
the Return, the amount due in excess of the reserve.
               (b) Parent shall prepare and file, or shall cause to be prepared
and filed, all Returns required to be filed by or with respect to the Company,
other than those Returns described under Section 4.6.
               (c) For purposes of Section 8.1(iv), in the case of any taxable
period that includes but does not end on the Closing Date (a “Straddle Period”),
the amount of any taxes based on or measured by income or receipts of Company
deemed to relate to a Pre-Closing Period will be determined based on an interim
closing of the books as of the close of business on the Closing Date, and the
amount of other taxes of Company for a Straddle Period which relate to a
Pre-Closing Period will be deemed to be the amount of such tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the total number of days in such Straddle Period.

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               (d) Parent, the Company and the Shareholders’ Representative
shall cooperate fully, as and to the extent reasonably requested, in connection
with the preparation and filing of Returns pursuant to this Section 8.3 and any
audit, investigation, litigation or other proceeding with respect to Taxes that
may be instituted after the Closing Date. Shareholders’ Representative shall
control the conduct, through counsel of Shareholders’ Representative’s own
choosing at his expense (which expense shall be reimbursable from the Escrow
Amount), of any audit or administrative or judicial proceeding involving any
asserted Tax liability of the Company (any such audit or proceeding relating to
an asserted Tax liability referred to herein as a “Tax Contest”) relating solely
to Pre-Closing Periods (except that Parent shall control any Tax Contest with
respect to taxes on income recognized or accrued by Company after January 2009
in respect of obligations of Parent not paid in March 2009), but Parent shall
have the right to participate in any such Tax Contest at its own expense and,
with the written consent of the Shareholders’ Representative, and at its
expense, may assume control of the conduct of such Tax Contest. If Shareholders’
Representative fails to assume control of the conduct of any such Tax Contest
within a reasonable period following the receipt by any party of notice of such
Tax Contest, Parent shall have the right to assume control of such Tax Contest
and shall be able to settle, compromise and/or concede such Tax Contest in its
sole discretion. Parent shall exercise the same level of client advocacy,
diligence and continuity of tax positions as Parent maintains for its own tax
matters prior to the merger.
               (e) (i) From and after the Closing Date, the holders of the
Company Shares and Company Options shall indemnify and hold Parent harmless from
and against and shall compensate and reimburse Parent for any and all Losses
(which will not be subject to any dollar threshold) arising out of or in
connection with any and all Taxes of the Company for all Pre-Closing Periods, or
which relate to an event or transaction occurring on or before the Closing Date,
to the extent such Losses exceed the amount, if any, reserved for and reflected
in the Final Working Capital.
                    (ii) In the event that any of the Parent or the Surviving
Corporation pays or receives a request by a taxing authority to pay any Taxes
relating to or arising from Pre-Closing Periods, Parent shall notify the
Shareholders’ Representative of any such payments or requests for payment.
Parent shall receive from the Escrow Amount amounts equal to such payments or
requests for payment no later than twenty (20) business days after the
Shareholders’ Representative receives such notification, unless the
Shareholders’ Representative timely elects to contest any such Tax in accordance
herewith, in which case Parent shall not receive any reimbursement for any such
Tax that it is required to pay until the conclusion of such contest.
                    (iii) If any third party notifies the Shareholders’
Representative of the existence of any audit, litigation or other proceeding
relating to Taxes of the Company for a Pre-Closing Period (a “Third-Party Tax
Claim”), the Shareholders’ Representative shall give notice to Parent within
fifteen (15) days of the notice of the Third-Party Tax Claim. The Shareholders’
Representative covenants and agrees not to settle or otherwise dispose of any
Third-Party Tax Claim, if such claim shall have adverse Tax consequences to
Parent, without first obtaining written consent from Parent of such settlement
or disposition.
               (f) To the extent the Company receives an expense deduction as a
result of the exercise of Company Options pursuant to Section 2.1.3(b), and such
deduction results in a tax loss for such taxable period, the loss will, at
Parent’s option, be applied as a tax loss carry-back to prior tax periods, and
the prior federal tax returns of the Company will be so amended at Parent’s
option to the extent permitted under the Code. Tax receivables derived from the
carryback of a net operating loss calculated at Closing, where such net
operating loss carryback relates to the expense deduction described in the
preceding sentence, will not be included as a part of Current Assets for
purposes of determining Net Working Capital. The parties agree to treat any
indemnification payment made pursuant to Section 8.3(e)

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and this Article VIII, as the case may be, as an adjustment to the consideration
for the Merger for federal, state, local and foreign income Tax purposes.
     8.4 Binding Effect. The indemnification provisions in this Article VIII are
an integral part of this Agreement and Merger in the absence of which Parent
would not have entered into this Agreement.
     8.5 Time Limit.
               (a) The representations, warranties, covenants, and agreements of
Company and Major Shareholders set forth in this Agreement will survive Closing
and will continue for eighteen (18) months thereafter (the “Termination Date”),
at which time all representations and warranties will expire.
               (b) Despite Section 8.5(a), no time limit will apply (other than
the date that is 30 days after the expiration of the applicable statute of
limitations period) for indemnification arising from: (i) fraud, willful breach,
or intentional misrepresentation by Company or the holders of Company Shares;
(ii) any breaches of representations and warranties in Sections 3.1.2 (Capital
Structure) and Sections 3.1.3 and 3.2.1 (Authority). Despite the above, no
representation, warranty, covenant, or agreement will expire to the extent
Parent has provided to the Shareholders’ Representative written notice of
Parent’s claim for indemnification in accordance with the terms of the Escrow
Agreement before the expiration of the applicable survival period.
     8.6 Limitations. Despite any other provision in this Article VIII, with
respect indemnification under Section 8.1(i) Parent and Surviving Corporation
will be entitled to indemnification thereunder only:
               (a) if the aggregate Indemnifiable Amounts exceed $500,000 (the
“Threshold Amount”); if and when the aggregate Indemnifiable Amounts exceed the
Threshold Amount, Parent will be entitled to be indemnified for all
Indemnifiable Amounts in excess of the Threshold Amount; and
               (b) in an aggregate amount up to the Escrow Amount.
Provided, however, that the limitations of this Section 8.6 do not apply to, and
any calculation of the Threshold Amount as it relates to other Indemnifiable
Amounts will not include, Indemnifiable Amounts arising out of (i) fraud,
willful breach, or intentional misrepresentation by Company or the holders of
Company Shares or Company Options; (ii) any breaches of representations and
warranties in Sections 3.1.2 (Capital Structure) and Sections 3.1.3 and 3.2.1
(Authority); and (iii) any taxes of Company as described in Section 8.1(iv) and
any breaches of representations and warranties in Section 3.1.18 (Taxes) and by
reason of or arising out of or in connection with those matters identified in
Schedule 8.6 attached hereto.
     8.7 Contribution. Holders of Company Shares will have no right of
contribution from the Surviving Corporation for liabilities for such holders’
obligations under this Article VIII.
     8.8 Exclusive Remedy. With the exception of (a) claims based upon fraud,
willful breach, or intentional misrepresentation, (b) claims under
Section 8.1(iv), (c) claims arising out

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of breaches of the representations and warranties in Section 3.1.2 (Capital
Structure), Sections 3.1.3 and 3.2.1 (Authority) and Section 3.1.18 (Taxes),
from and after the Effective Time, resort to indemnification under this
Article VIII will be the exclusive right and remedy of Parent and Surviving
Corporation for Indemnifiable Amounts or other damages under this Agreement (it
being understood that nothing in this Section 8.8 or elsewhere in this Agreement
will affect Parent’s or Surviving Corporation’s rights to equitable remedies to
the extent available).
ARTICLE IX
TERMINATION, AMENDMENT, AND WAIVER
     9.1 Termination. Despite anything in this Agreement to the contrary, this
Agreement may be terminated and the Transactions abandoned at any time before
the Effective Time:
               (a) by mutual written consent of Parent and Company, duly
authorized by Parent and by the board of directors of Company;
               (b) by either Parent or Company (provided that the terminating
party is not then in material breach of any representation, warranty, covenant,
or agreement contained in this Agreement) if (i) there has been a material
breach by the non-terminating party of any representation, warranty, covenant,
or agreement as set forth in the Agreement that results in the closing
conditions in Article VII in the terminating party’s favor not being capable of
being met by the date set forth in Section 9.1(d) below or (ii) if any
representation or warranty of the non-terminating party is or has been untrue or
inaccurate such that, in the aggregate, such untruths or inaccuracies would
result, or reasonably be expected to result, in a Company Material Adverse
Effect or a material adverse effect on a party’s ability to consummate the
Transactions; provided, however, that if in each case such breach is curable,
then this Agreement may not be terminated under this Section 9.1(b) until the
earlier of (i) 30 days after delivery of written notice of such untruth or
inaccuracy or breach, or (ii) the date on which the non-terminating party ceases
to exercise commercially reasonable efforts to cure such untruth or inaccuracy
or breach;
               (c) by either Parent or Company if any permanent injunction or
other order of a court or other competent authority preventing the Merger will
have become final and not subject to appeal; or
               (d) by Parent in its sole discretion at any time on or prior to
August 15, 2009 (the “Outside Date”), or by either Parent or Company if the
Merger has not been consummated by the Outside Date.
     9.2 Effect of Termination. In the event of termination of this Agreement by
either Company or Parent as provided in Section 9.1, this Agreement will become
void and have no effect, and there will be no liability or obligation on the
part of Parent, Sub, or Company, or their respective officers or directors,
except that (i) the provisions of Sections 6.1 (Non-Disclosure Agreement), 6.7
(Public Announcements), 9.2 (Effect of Termination), 10.6 (Governing Law), 10.10
(Specific Performance), 10.12 (Submission to Jurisdiction), and 10.13
(Shareholders’ Representative) and the Non-Disclosure Agreement will survive any
such termination and abandonment, and (ii) no party will be released or relieved
from any liability arising from the willful breach by such party of any of its
representations, warranties, covenants, or agreements as set forth in this
Agreement.

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     9.3 Liquidated Damages. In the event that the transactions contemplated by
this Agreement are not consummated by the Outside Date, Parent will deliver to
Company on the next business day a $4,000,000 principal amount unsecured 2%
promissory note with a maturity of four years in the form attached hereto as
Exhibit 9.3 (such promissory note, the “Liquidated Damages”). Upon delivery of
the Liquidated Damages, all parties to this Agreement will be deemed to have
released all claims against any other party to this Agreement arising or that
could arise out of the negotiation, execution, or performance of this Agreement.
ARTICLE X
GENERAL PROVISIONS
     10.1 Notices. All notices, requests, demands, or other communications
required or permitted to be given under this Agreement will be in writing and
deemed given upon: (i) personal delivery, (ii) confirmed delivery by a standard
overnight courier or when delivered by hand, (iii) when mailed in the United
States by certified or registered mail, postage prepaid, addressed at the
following addresses (or at such address for a party as will be specified by
notice given hereunder), or (iv) transmitter’s confirmation of a receipt of a
facsimile transmission:

     
     (a) if to Parent or Sub, to:
  Flow International Corporation
23500 64th Avenue South
Kent, WA 98032
Attention: John Leness, General Counsel
Facsimile No.: (253) 813-3285
 
   
           With a copy to:
  K&L Gates llp
925 Fourth Avenue, Suite 2900
Seattle, WA 98104-1158
Attention: Robert S. Jaffe
Facsimile No.: 206-623-7022
 
   
     (b) if to Company, to:
  OMAX Corporation
21409 72nd Ave. South
Kent, WA 98032
Attention: James O’Connor
Facsimile No.: (253) 872-6190
 
   
           With a copy to:
  Foster Pepper PLLC
1111 Third Avenue
Seattle, WA 98101-3299
Attention: Robert Diercks
Facsimile No.: 206-447-9700

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     (c) if to Shareholders’ Representative to:
  John B. Cheung
John B. Cheung, Inc.
4905 Somerset Dr. S.E.
Bellevue, WA 98006
Telephone No.: 425-641-4688

     10.2 Interpretation. For purposes of this Agreement, “subsidiary” or
“subsidiaries” means with respect to any Person, any entity or entities of which
securities or other ownership interests having voting power sufficient to elect
a majority of its board of directors or other governing body are at any time
directly or indirectly owned by such Person. For purposes of this Agreement,
“Person” means an individual, corporation, partnership, association, limited
liability company, trust, estate, organization, or other entity. The words
“include,” “includes,” and “including” when used in this Agreement will be
deemed in each case to be followed by the words “without limitation.” The table
of contents and headings contained in this Agreement are for reference purposes
only and will not affect in any way the meaning or interpretation of this
Agreement. The “knowledge of” or other derivations of “know” in this Agreement
with respect to a party will mean the knowledge of the executive officers of
such party, after the exercise of reasonable inquiry and investigation by such
executive officers. As used in this Agreement, the term “affiliate” has the
meaning set forth in Rule 12b-2 promulgated under the Exchange Act. As used in
this Agreement, the term “business day” means any day other than a Saturday,
Sunday, or a day on which banking institutions in Seattle, Washington are
permitted or obligated by law to be closed for regular banking business. The
respective parties hereto and their attorneys have negotiated this Agreement and
the language hereof will not be construed for or against either party, as
drafter. A reference to a section, schedule, or an exhibit will mean a section
in, or schedule or exhibit to, this Agreement unless otherwise explicitly set
forth.
     10.3 Counterparts. This Agreement may be executed (i) in one or more
partially or fully executed counterparts, each of which will be deemed an
original and will bind the signatory, but all of which together will constitute
the same instrument, and (ii) by facsimile. The execution and delivery of a
Signature Page — Agreement and Plan of Merger, in the form annexed to this
Agreement, by any party hereto who will have been furnished the final form of
this Agreement will constitute the execution and delivery of this Agreement by
such party.
     10.4 Miscellaneous. This Agreement, the Non-Disclosure Agreement, and the
documents referred to in this Agreement (i) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof; (ii) is not intended to confer upon
any other Person any rights or remedies hereunder (except as otherwise expressly
provided in this Agreement and except that Section 6.4 is for the benefit of the
Indemnified Parties); and (iii) will not be assigned by operation of law or
otherwise except as otherwise specifically provided.
     10.5 No Joint Venture. Nothing in this Agreement will be deemed or
construed as creating a joint venture or partnership between any of the parties
hereto. No party is by virtue of

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this Agreement authorized as an agent, employee, or legal representative of any
other party. No party will have the power to control the activities and
operations of any other and their status is, and at all times, will continue to
be, that of independent contractors with respect to each other. No party will
have any power or authority to bind or commit any other. No party will hold
itself out as having any authority or relationship in contravention of this
Section 10.5.
     10.6 Governing Law. This Agreement will be governed in all respects,
including validity, interpretation, and effect, by the laws of the State of
Washington, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
     10.7 Amendment. Except as may otherwise be provided in this Agreement, any
provision of this Agreement may be amended or modified by the parties hereto
before the Closing Date, if, and only if such amendment or modification is in
writing and signed on behalf of each of the parties hereto; provided that after
the approval of this Agreement by the shareholders of Company, no such amendment
will be made except as allowed under applicable law.
     10.8 Extension, Waiver. At any time before the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties in this
Agreement or in any document delivered pursuant hereto made to such party, and
(iii) waive compliance with any of the agreements, covenants, or conditions in
this Agreement for the benefit of such party. Any agreement on the part of a
party hereto to any such extension or waiver will be valid only if set forth in
an instrument in writing and signed by the party against whom the waiver is to
be effective.
     10.9 Successors and Assigns. This Agreement will not be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion and without the consent of any other party, any or all of its rights,
interests, and obligations hereunder to (a) Parent, or (b) Parent and one or
more direct or indirect wholly-owned subsidiaries of Parent. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties hereto and their respective successors
and assigns.
     10.10 Specific Performance. The parties acknowledge and agree that any
breach of the terms of this Agreement would give rise to irreparable harm for
which money damages would not be an adequate remedy and accordingly the parties
agree that, in addition to any other remedies, each will be entitled to enforce
the terms of this Agreement by a decree of specific performance without the
necessity of proving the inadequacy of money damages as a remedy.
     10.11 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 will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions are not affected in any manner materially adverse to any party
hereto. Upon such determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the parties hereto will negotiate in
good faith to modify

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this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner.
     10.12 Submission to Jurisdiction. All actions and proceedings arising out
of or relating to this Agreement will be heard and determined exclusively in any
Washington state or federal court sitting in King County. The parties hereto
hereby (a) submit to the exclusive jurisdiction of any state or federal court
sitting in King County for the purpose of any action arising out of or relating
to this Agreement brought by any party hereto, and (b) irrevocably waive, and
agree not to assert by way of motion, defense, or otherwise, in any such action,
any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
execution, that the action is brought in an inconvenient forum, that the venue
of the action is improper, or that this Agreement or the Transactions may not be
enforced in or by any of the above-named courts.
     10.13 Shareholders’ Representative.
               (a) By virtue of the Company Shareholder Approval, and without
any further act of any holder of Company Shares, the holders of Company Shares
will be deemed to have appointed John B. Cheung, Inc. (previously defined as the
Shareholders’ Representative) as agent and attorney-in-fact for each holder of
Company Shares (except such shareholders, if any, holding Appraisal Shares) for
all matters relating to this Agreement, including to give and receive notices
and communications; to bind the holders of Company Shares to the terms of the
Escrow Agreements; to authorize delivery of cash and the exercise of the Escrow
Note from the Escrow Amount in satisfaction of claims by Parent or Surviving
Corporation; to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims; and to take all
actions necessary or appropriate in the judgment of the Shareholders’
Representative for the accomplishment of the foregoing.
               (b) The Shareholders’ Representative may be changed by the
holders of Company Shares from time to time upon not less than 30 days’ prior
written notice to Parent, provided that holders of a majority interest of the
Escrow Amount agree to such removal of John B. Cheung, Inc. and any successors
thereto and to the identity of the substituted agent. A Shareholders’
Representative may resign at any time upon giving at least 30 days’ written
notice to the holders of interest in the Escrow Account, except that no such
resignation will become effective until the appointment of a successor
Shareholders’ Representative. Upon resignation of a Shareholders’ Representative
or a successor Shareholders’ Representative thereto, the holders of a majority
interest of the Escrow Amount will agree on a successor Shareholders’
Representative thereto within 30 days after receiving such notice. If holders of
a majority interest of the Escrow Amount fail to agree upon a successor
Shareholders’ Representative within such time, the resigning Shareholders’
Representative will have the right to appoint a successor Shareholders’
Representative, or if a Shareholders’ Representative is not designated within
45 days after receipt of the initial notice, Parent will designate a successor
Shareholders’ Representative. Any successor Shareholders’ Representative will
execute and deliver an instrument accepting such appointment and, without
further acts, will be vested with all the rights, powers, and duties of the
predecessor Shareholders’ Representative as if originally named as Shareholders’
Representative and thereafter the resigning Shareholders’ Representative will be
discharged from any further duties and liability under this Agreement. No bond
will be required of any Shareholders’ Representative, and no Shareholders’
Representative will receive compensation for his or her services. Notices or
communications to or from the Shareholders’ Representative will constitute
notice to or from each of the holders of interest of the Escrow Amounts for all
matters relating to this Agreement.

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               (c) The Shareholders’ Representative will not be liable for any
act done or omitted hereunder as the Shareholders’ Representative while acting
in good faith. Holders of Company Shares on whose behalf the Escrow Amounts are
contributed will severally indemnify the Shareholders’ Representative and hold
the Shareholders’ Representative harmless against all loss, liability, or
expense incurred without bad faith or willful misconduct on the part of such
Shareholders’ Representative and arising out of or in connection with the
acceptance or administration of such Shareholders’ Representative’s duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Shareholders’ Representative. The Shareholders’ Representative
will be entitled to the advance and reimbursement of costs and expenses incurred
by or on behalf of the Shareholders’ Representative in the performance of their
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Shareholders’ Representative, in accordance with the
terms of the Escrow Agreements.
               (d) A decision, act, consent, or instruction of the Shareholders’
Representative relating to this Agreement will constitute a decision of the
holders of Company Shares and will be final, binding, and conclusive upon each
such holder. Parent, and all other persons entitled to indemnification under the
Escrow Agreements or any other document or agreement entered into in connection
herewith or therewith (the “Indemnified Persons”), may rely upon any such
decision, act, consent, or instruction of the Shareholders’ Representative as
being the decision, act, consent, or instruction of the holders of Company
Shares. Parent and all other Indemnified Persons are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent, or instruction of the Shareholders’ Representative.
[remainder of page intentionally blank]

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SIGNATURE PAGE— SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
     IN WITNESS WHEREOF, Parent, Sub, Company, the Major Shareholders, and the
Shareholders’ Representative have signed or caused their respective duly
authorized officers to sign this Agreement, all as of the date first written
above.

            FLOW INTERNATIONAL CORPORATION
      By   /s/ Charles M. Brown        Charles M. Brown       Its  President    
     

            ORANGE ACQUISITION CORPORATION
      By   /s/ John S. Leness        John S. Leness       Its  President        
 

           
OMAX CORPORATION
      By   /s/ John B. Cheung          John B. Cheung         Its               
SHAREHOLDERS’ REPRESENTATIVE
      John B. Cheung, Inc.         /s/ John B. Cheung          

(signature page continues)

 

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SIGNATURE PAGE—SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

            PUGET PARTNERS, L.P.
Major Shareholder       By:   John B. Cheung Inc.       Its  General Partner

            By   /s/ John B. Cheung       Its  President

               /s/ John B. Cheung          John B. Cheung         Major
Shareholder     /s/ James M. O’Conner       James M. O’Conner     Major
Shareholder       /s/ John H. Olsen       John H. Olsen     Major Shareholder  

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FLOW INTERNATIONAL CORPORATION
ORANGE ACQUISITION CORPORATION
OMAX CORPORATION
SHAREHOLDERS OF OMAX CORPORATION
SHAREHOLDERS’ REPRESENTATIVE
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
Dated as of September 9, 2008
Amended November 10, 2008
Amended and Restated [•], 2009

 

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TABLE OF CONTENTS

                              Page          
 
        ARTICLE I THE MERGER                
 
          1.1    
Effective Time of the Merger
    11     1.2    
Closing
    11     1.3    
Effects of the Merger
    11          
 
        ARTICLE II EFFECT OF THE MERGER; DELIVERY OF CONSIDERATION              
 
 
          2.1    
Effect on Capital Stock
    12     2.1.1    
Capital Stock of Sub
    12     2.1.2    
Cancellation of Company Shares
    12     2.1.3    
Conversion of Company Securities
    12     2.1.4    
Stock Consideration
    14     2.1.5    
Contingent Consideration
    15     2.1.6    
Appraisal Rights
    16     2.2    
Escrow
    16     2.2.1    
Escrow Amount
    16     2.2.2    
Employee Retention Pool
    17     2.3    
Net Working Capital
    18     2.4    
Delivery of Consideration
    21     2.4.1    
Disbursing Agent
    21     2.4.2    
Exchange Procedures
    21     2.4.3    
No Further Ownership Rights in Company Shares
    21     2.4.4    
Return to Parent
    22     2.4.5    
Withholding Rights
    22          
 
        ARTICLE III REPRESENTATIONS AND WARRANTIES                
 
          3.1    
Representations and Warranties of Company
    22     3.1.1    
Organization, Standing, and Power
    22     3.1.2    
Capital Structure
    23     3.1.3    
Authority
    24     3.1.4    
Consents and Approvals; No Violations
    24     3.1.5    
Financial Statements
    25     3.1.6    
No Defaults
    26     3.1.7    
Litigation
    26     3.1.8    
No Material Adverse Change
    26     3.1.9    
Absence of Undisclosed Liabilities
    28     3.1.10    
No Violations
    28     3.1.11    
Certain Agreements
    28     3.1.12    
Employees
    28     3.1.13    
Employee Benefit Plans
    29     3.1.14    
Real Property; Leases
    31     3.1.15    
Environmental
    31     3.1.16    
Customers and Suppliers
    32     3.1.17    
Material Contracts
    33     3.1.19    
Taxes
    34     3.1.19    
Interests of Officers
    36     3.1.20    
Technology and Intellectual Property Rights
    37     3.1.21    
Vote Required
    41     3.1.22    
Brokers’ and Other Fees
    41     3.1.23    
Change of Control
    41     3.1.24    
Complete Copies of Materials
    42     3.1.25    
Board Recommendation
    42     3.1.26    
Insurance
    42  

 

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                              Page     3.1.27    
Accounts Receivable
    42     3.1.28    
Personal Property
    42     3.1.29    
Guarantees and Suretyships
    43     3.1.30    
Certain Transactions
    43     3.1.31    
Government Contracts
    43     3.1.32    
Disclosure
    43     3.1.33    
Reliance
    44     3.2    
Representations and Warranties of Major Shareholders
    44     3.2.1    
Authority
    44     3.2.2    
Voting Agreements
    44     3.2.3    
Non-Contravention; Consents
    44     3.2.4    
Reliance
    44     3.3    
Representations and Warranties of Parent and Sub
    45     3.3.1    
Organization; Standing and Power
    45     3.3.2    
Authority
    45     3.3.3    
Consents and Approvals; No Violations
    45     3.3.4    
Disclosure
    46     3.3.4    
SEC Reports
    46     3.3.46    
Compliance with Law
    46     3.3.47    
Operations of Sub
    46     3.3.48    
Proxy Materials
    46     3.3.49    
Brokers or Finders
    46     3.3.4    
Acquiring Person
    47     3.3.11    
Reliance
    47          
 
        ARTICLE IV COVENANTS OF COMPANY                
 
          4.1    
Conduct of Business
    47     4.1.1    
Ordinary Course
    47     4.1.1    
Ordinary Course
    49     4.1.3    
Exclusivity; Acquisition Proposals
    51     4.2    
Breach of Representations and Warranties; Notification; Access to Information
    52     4.3    
Consents and Notices
    52     4.4    
Commercially Reasonable Efforts
    53     4.5    
Notice to Holders of Company Shares
    53     4.6    
Tax Returns
    53     4.7    
Intellectual Property
    53     4.8    
Parachute Payments
    53     4.9    
Deliveries
    54     4.10    
Shareholder Approval
    54     4.10    
Option Agreements
    54          
 
        ARTICLE V COVENANTS OF PARENT                
 
          5.1    
Breach of Representations and Warranties
    54     5.2    
Commercially Reasonable Efforts
    55          
 
        ARTICLE VI ADDITIONAL AGREEMENTS                
 
          6.1    
Non-Disclosure Agreement
    55     6.2    
Legal Conditions to the Merger
    55     6.4    
Proxy Statement and Registration Statement
    55     6.4    
Officers and Directors
    56     6.5    
Expenses
    56     6.6    
Additional Agreements
    56     6.7    
Public Announcements
    56     6.8    
Employee Matters
    57     6.9    
Additional Payments
    59     6.10    
Escrow Note
    59  

 

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                              Page          
 
        ARTICLE VII CONDITIONS PRECEDENT                
 
          7.1    
Conditions to Each Party’s Obligation to Effect the Merger
    59     7.1.1    
Shareholder Approval
    59     7.1.2    
Registration Statement
    59     7.1.3    
Consents
    59     7.1.4    
No Order
    60     7.1.5    
No Material Adverse Effect
    60     7.2    
Conditions of Obligations of Parent and Sub
    60     7.2.1    
Representations and Warranties of Company
    60     7.2.2    
Performance of Obligations of Company
    60     7.2.3    
No Company Material Adverse Effect
    60     7.2.4    
Legal Action
    60     7.2.5    
Resignations
    61     7.2.6    
Certain Employees
    61     7.2.7    
Noncompetition Agreement
    61     7.2.8    
Termination of Certain Agreements
    61     7.2.9    
Amendment of Certain Agreements
    61     7.2.10    
Opinion of Counsel
    61     7.2.11    
Assignment of Rights to Company Intellectual Property
    61     7.2.12    
Escrow Agreements
    62     7.2.13    
Deliveries
    62     7.2.14    
Appraisal Rights
    62     7.2.15    
Company Option Holders
    62     7.2.16    
FIRPTA Certificate
    62     7.2.17    
Shareholders’ Agreements
    62     7.3    
Conditions of Obligation of Company
    62     7.3.1    
Representations and Warranties of Parent and Sub
    62     7.3.2    
Performance of Obligations of Parent and Sub
    63     7.3.3    
Escrow Agreements
    63          
 
        ARTICLE VIII INDEMNIFICATION                
 
          8.1    
Indemnification Relating to Agreements
    63     8.2    
Third Party Claims
    64     8.3    
Tax Contests
    64     8.4    
Binding Effect
    66     8.5    
Time Limit
    66     8.6    
Limitations
    66     8.7    
Contribution
    66     8.8    
Exclusive Remedy
    66          
 
        ARTICLE IX TERMINATION, AMENDMENT, AND WAIVER                
 
          9.1    
Termination
    67     9.2    
Effect of Termination
    67     9.2    
Liquidated Damages
    68          
 
        ARTICLE X GENERAL PROVISIONS                
 
          10.1    
Notices
    68     10.2    
Interpretation
    69     10.3    
Counterparts
    69     10.4    
Miscellaneous
    69     10.5    
No Joint Venture
    69     10.6    
Governing Law
    70     10.7    
Amendment
    70     10.8    
Extension, Waiver
    70     10.9    
Successors and Assigns
    70  

 

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                              Page     10.10    
Specific Performance
    70     10.11    
Severability
    70     10.12    
Submission to Jurisdiction
    71     10.13    
Shareholders’ Representative
    71  

 

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LIST OF EXHIBITS AND SCHEDULES

     
Exhibit 2.1.5
  Form of Interim Election form
Exhibit 2.2.1(a)
  Form of Escrow Agreement
Exhibit 2.2.1(b)
  Form of Escrow Note
Exhibit 2.2.2
  Form of Employee Retention Escrow Agreement
Exhibit 2.3(a)
  Sample Net Working Capital adjustment calculations
Exhibits 6.7(a) and (b)
  Form of Public Announcements
Exhibit 6.8(a)
  Forms of Employment Agreement
Exhibit 7.2.7
  Form of Non-Competition and Non-Solicitation Agreement
Exhibit 7.2.10
  Form of Opinion of Counsel
Exhibit 9.3
  Form of Liquidated Damages Note
 
    Company Disclosure Schedule
Schedule 2.1
  Pro Forma Calculations
Schedule 2.1.3
  Transaction fees and expenses
Schedule 2.2.2
  Employee Retention Pool Amount
Schedule 2.3(b)(i)
  ALI calculation
Schedule 2.3(b)(ii)
  Sample Net Working Capital calculation
Schedule 2.3(c)
  Preliminary Closing Balance Sheet
Schedule 4.1.1(c)
  Dividends
Schedule 4.1.1(h)
  Salary and/or Benefit Increases
Schedule 4.1.1(k)
  Amendments to Benefit Plans
Schedule 4.1.1(l)
  Payments under Benefit Plans
Schedule 4.1.2(n)
  Salary and/or Benefit Increases Resulting in Post-Closing Obligations
Schedule 4.1.2(p)
  Amendments to Benefit Plans Resulting in Post-Closing Obligations
Schedule 4.1.2(q)
  Payments under Benefit Plans Resulting in Post-Closing Obligations
Schedule 4.3
  Required Consents
Schedule 4.6
  Tax Returns
Schedule 6.8
  Executives Receiving Offers from Company
Schedule 7.2.6
  Certain Employees
Schedule 7.2.8
  List of Agreements to be Terminated
Schedule 7.2.9
  List of Agreements to be Amended
Schedule 8.6
  Escrow Limitation Carve-Outs

 

--------------------------------------------------------------------------------

 

INDEX OF DEFINED TERMS

         
Accounting Arbitrator
    9  
Acquisition Proposal
    41  
affiliate
    59  
Agreement
    1  
ALI
    8  
Appraisal Shares
    6  
Articles of Merger
    1  
Average Share Price
    5  
Balance Sheet Date
    15  
Base Cash Amount
    4  
business day
    59  
Certificate
    3  
Change of Recommendation
    41  
Closing
    1  
Closing Balance Sheet
    10  
Closing Date
    1  
Closing Date NWC
    9  
Closing Share Price
    5  
Code
    12  
Collection and Use
    29  
Company
    1  
Company Common Shares
    3  
Company Disclosure Schedule
    12  
Company Intellectual Property
    27  
Company Lease
    20  
Company Licensed Intellectual Property
    27  
Company Material Adverse Effect
    12  
Company Options
    4  
Company Options
    13  
Company Owned Intellectual Property
    27  
Company Preferred Shares
    13  
Company Securities
    13  
Company Shareholder Approval
    31  
Company Shares
    2  
Consents
    14  
Conversion Payment
    2  
Counter Proposed Closing Balance Sheet
    9  
Customer Information
    29  
Debt
    8  
Determination Materials
    9  
Disbursing Agent
    10  
Effective Time
    1  
Employee Retention Escrow
    7  
Employee Retention Escrow Agreement
    7  
Employee Retention Pool Amount
    7  
Environmental Law
    22  
Environmental Permits
    21  
ERISA
    19  
Escrow Agreement
    6  
Escrow Agreements
    7  
Escrow Amount
    6  
Escrow Amounts
    7  
Escrow Note
    6  
Excluded License
    29  
Expenses
    4  
FICA Allocation
    48  
Final Closing Date NWC
    9  
Financial Statements
    15  
GAAP
    15  
Government Contracts
    33  
Governmental Entity
    14  
Gross Distributable Cash Amount
    4  
Gross Distributable Contingent Consideration
    4  
Gross Distributable Stock Consideration
    4  
Hazardous Material
    21  
Hazardous Materials Activities
    21  
Incentive Plans
    13  
include
    59  
includes
    59  
including
    59  
Indemnifiable Amounts
    53  
Indemnified Parties
    46  
Indemnified Persons
    62  
Indemnifying Party
    53  
Initial Bonus Allocation
    48  
In-Licenses
    27  
Intellectual Property
    26  
Intellectual Property Rights
    26  
Interim Balance Sheet Date
    15  
IRS
    20  
know
    59  
knowledge of
    59  
Letter of Transmittal
    11  
Liabilities
    17  
Liability
    17  
Major Shareholders
    1  
Material Contracts
    22  
Maximum Working Capital
    8  
Merger
    1  
Minimum Working Capital
    8  
Net Working Capital
    8  
Non-Disclosure Agreement
    45  
Option Consideration
    4  
Outside Date
    57  
Parachute Payments
    43  
Parent
    1  
Parent Benefit Plans
    47  
Parent Common Stock
    4  
Parent Material Adverse Effect
    35  
Parent SEC Reports
    35  
Participating Common Stock Equivalents
    4  
PCSEs
    4  

 

--------------------------------------------------------------------------------

 

         
Per Share Consideration
    4  
Per Share Contingent Consideration
    4  
Per Share Stock Consideration
    4  
Person
    59  
Plan
    19  
Pre-Closing Balance Sheet Date
    44  
Pre-Closing Period
    53  
Preliminary Closing Balance Sheet
    8  
Preliminary Closing Date NWC
    9  
Proposed Closing Balance Sheet
    9  
Reconciliation Deadline
    9  
Registration Statement
    33  
Representatives
    41  
Restricted Transaction
    41  
Returns
    24  
Review Notice
    9  
SEC
    33  
Settlement Communications Agreement
    45  
Shareholders’ Representative
    1  
Significant Customer
    22  
Significant Supplier
    22  
Straddle Period
    54  
Sub
    1  
subsidiaries
    59  
subsidiary
    59  
Surviving Corporation
    2  
Surviving Corporation Common Stock
    2  
tax
    24  
Tax Contest
    55  
taxes
    24  
Technology
    27  
Termination Date
    56  
Third-Party Claim
    53  
Third-Party Tax Claim
    55  
Threshold Amount
    56  
Total Current Assets
    8  
Total Current Liabilities
    8  
Violation
    14  
WBCA
    1  
without limitation
    59  
Working Capital Credit
    8  
Working Capital Deficit
    8