Exhibit 10.1   
Agreement and Plan of Merger
by and among
Art Technology Group, Inc.,
Einstein Acquisition Corp.,
eShopperTools.com, Inc.,
Scott Anderson, as Stockholder Representative, and
the Principal Stockholders Identified on Schedule I

 

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TABLE OF CONTENTS

                  Article 1 The Merger     1  
 
               
 
  1.1   The Merger     1  
 
  1.2   Effective Time; Closing.     1  
 
  1.3   Effect of the Merger     2  
 
  1.4   Articles of Incorporation; Bylaws.     2  
 
  1.5   Directors and Officers     2  
 
  1.6   Effect on Capital Stock     2  
 
  1.7   Adjustments to Base Consideration Based on Company Balance Sheet     5  
 
  1.8   Adjusted Working Capital; Determination     5  
 
  1.9   Determination of Adjusted Working Capital.     6  
 
  1.10   Escrow Agreement     8  
 
  1.11   Stockholder Representative.     10  
 
  1.12   Delivery of Merger Consideration.     13  
 
  1.13   No Further Ownership Rights in Company Capital Stock     14  
 
  1.14   Taking of Necessary Action; Further Action     14  
 
  1.15   Dissenters’ Rights.     14  
 
  1.16   Certain Definitions     15  
 
                Article 2 Representations and Warranties of the Company     19  
 
               
 
  2.1   Organization; Subsidiaries.     19  
 
  2.2   Company Capitalization.     20  
 
  2.3   Obligations With Respect to Capital Stock     21  
 
  2.4   Authority; Non-Contravention.     21  
 
  2.5   Financial Statements.     22  
 
  2.6   No Undisclosed Liabilities     23  
 
  2.7   Absence of Certain Changes or Events.     23  
 
  2.8   Taxes.     24  
 
  2.9   Title to Properties.     26  
 
  2.10   Intellectual Property.     27  
 
  2.11   Compliance with Laws.     33  
 
  2.12   Litigation     33  
 
  2.13   Employee Benefit Plans.     34  
 
  2.14   Employment Matters.     35  
 
  2.15   Environmental Matters.     36  
 
  2.16   Certain Contracts     37  
 
  2.17   Related-Party Matters     39  
 
  2.18   Brokers’ and Finders’ Fees     39  
 
  2.19   Insurance     39  
 
  2.20   Customers; Accounts Receivable.     39  
 
  2.21   Board Approval     40  
 
  2.22   Minutes and Stock Records     40  
 
  2.23   Accounting System     40  
 
  2.24   Corrupt Practices     40  

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  2.25   Disclosure     41  
 
                Article 3 Representations and Warranties of Principal
Stockholders     41  
 
               
 
  3.1   Organization     41  
 
  3.2   Authority; Non-Contravention.     41  
 
  3.3   Title to Company Stock; Status as Company Stockholder     42  
 
  3.4   Waiver of Appraisal Rights     42  
 
  3.5   Agreements with the Company     42  
 
  3.6   Brokers’ and Finders’ Fees     43  
 
                Article 4 Representations and Warranties of Parent and Merger
Sub     43  
 
               
 
  4.1   Organization of Parent and Merger Sub     43  
 
  4.2   Authority; Non-Contravention.     43  
 
  4.3   Litigation     44  
 
  4.4   Board Approval     44  
 
  4.5   Disclosure     44  
 
                Article 5 Conduct Prior to the Effective Time     44  
 
               
 
  5.1   Conduct of Business by the Company     44  
 
  5.2   Covenant of Parent     47  
 
                Article 6 Additional Agreements     47  
 
               
 
  6.1   Antitrust and Other Filings.     47  
 
  6.2   Information Statement; Company Stockholder Meeting.     48  
 
  6.3   Tax Matters.     48  
 
  6.4   Confidentiality     50  
 
  6.5   Access to Information     50  
 
  6.6   No Solicitation.     51  
 
  6.7   Public Disclosure     51  
 
  6.8   Reasonable Efforts; Notification.     52  
 
  6.9   Third Party Consents     53  
 
  6.10   Certain Employee Benefits     53  
 
                Article 7 Survival of Representations; Indemnification     54  
 
               
 
  7.1   Indemnification by Company Stockholders     54  
 
  7.2   Indemnification by Parent and Merger Subs     54  
 
  7.3   Survival of Representations     55  
 
  7.4   Process of Indemnification for Parent Claims and Stockholder Claims.    
55  
 
                Article 8 Conditions to the Merger     59  
 
               
 
  8.1   Conditions to Obligations of Each Party to Effect the Merger     59  
 
  8.2   Additional Conditions to Obligations of the Company     60  
 
  8.3   Additional Conditions to the Obligations of Parent and Merger Sub     60
 
 
                Article 9 Termination, Amendment and Waiver     62  
 
               
 
  9.1   Termination     62  

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  9.2   Notice of Termination; Effect of Termination     63  
 
  9.3   Fees and Expenses.     63  
 
  9.4   Amendment     64  
 
  9.5   Extension; Waiver     64  
 
                Article 10 General Provisions     64  
 
               
 
  10.1   Notices     64  
 
  10.2   Interpretation     65  
 
  10.3   Counterparts; Facsimile     65  
 
  10.4   Entire Agreement; Third Party Beneficiaries     66  
 
  10.5   Severability     66  
 
  10.6   Other Remedies; Specific Performance; Fees.     66  
 
  10.7   Governing Law     66  
 
  10.8   Rules of Construction     66  
 
  10.9   Assignment     67  
 
  10.10   Waiver of Jury Trial     67  

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Agreement and Plan of Merger
     This Agreement and Plan of Merger (this “Agreement”) is made and entered
into as of January 19, 2008, among Art Technology Group, Inc., a Delaware
corporation (“Parent”), Einstein Acquisition Corp., an Oregon corporation and a
wholly owned subsidiary of Parent (“Merger Sub”), eShopperTools.com, Inc., an
Oregon corporation (the “Company”), Scott Anderson, as the representative of the
company stockholders (together with his replacement, the “Stockholder
Representative”), and the company stockholders listed on Schedule I hereto (the
“Principal Stockholders”).
Recitals
     A.      The respective Boards of Directors of Parent, Merger Sub and the
Company have approved this Agreement, and declared advisable the merger of
Merger Sub with and into the Company (the “Merger”) upon the terms and subject
to the conditions of this Agreement and in accordance with the Oregon Business
Corporation Act (the “BCA”), and the other transactions contemplated by this
Agreement.
     B.      For the avoidance of doubt, the parties agree that it is intended
that for federal income tax purposes, the Merger shall constitute a taxable
transaction and shall not constitute a reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”).
     C.      Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent’s willingness to enter into this Agreement,
the Principal Stockholders are entering into Voting Agreements with Parent in
the form of Exhibit A (the “Voting Agreements”).
     In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
Article 1
The Merger
     1.1     The Merger. Upon the terms and subject to the conditions of this
Agreement and the applicable provisions of the BCA, at the Effective Time (as
defined below), Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation of the Merger (the “Surviving
Corporation”).
     1.2      Effective Time; Closing. (a) Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
articles of merger consistent with this Agreement with the Secretary of State of
the State of Oregon in accordance with the relevant provisions of the BCA (the
“Articles of Merger”) (the time of such filing (or such later time as may be
agreed in writing by the Company and Parent and specified in the Articles of
Merger) being the “Effective Time”) as soon as practicable on or after the
Closing Date (as defined below).

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               (b)      The closing of the Merger (the “Closing”) shall take
place at the offices of Foley Hoag llp, Seaport World Trade Center West, 155
Seaport Boulevard, Boston, Massachusetts, at a time and date to be specified by
the parties, which shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Article 8 (other than
those that by their nature will be satisfied at the Closing) or at such other
time, date and location as the parties hereto agree in writing (the “Closing
Date”).
     1.3      Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the BCA. Without limiting the generality of the foregoing, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
     1.4      Articles of Incorporation; Bylaws.
               (a)      The Articles of Merger shall provide that, at the
Effective Time, the articles of incorporation of the Surviving Corporation shall
be in the form of the articles of incorporation of the Merger Sub as in effect
immediately prior to the Effective Time.
               (b)      At the Effective Time, the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall become the Bylaws of the
Surviving Corporation until thereafter amended.
     1.5      Directors and Officers. At the Effective Time, the directors of
Merger Sub, serving in such capacity immediately prior to the Effective Time,
shall be the directors of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified. At the Effective Time,
the officers of the Company, holding office immediately prior to the Effective
Time, shall be the officers of the Surviving Corporation, and shall serve at the
pleasure of the board of directors of the Surviving Corporation.
     1.6      Effect on Capital Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holders of any of the
Company Capital Stock (as defined below):
               (a)      Conversion of Company Capital Stock. Each share of
Company Capital Stock issued and outstanding immediately prior to the Effective
Time, other than any shares of Company Capital Stock to be canceled pursuant to
Section 1.6(c), any Dissenting Shares (as defined, and to the extent provided in
Section 1.15(a)), and any shares of Series A Preferred Stock that are not
converted to Company Common Stock immediately prior to the Effective Time, and
in lieu thereof are paid a liquidation preference amount in accordance with the
terms of the Company’s Articles of Incorporation, as amended, will be canceled
and extinguished and automatically converted into the right to receive the
applicable Per Share Merger Consideration (as defined in Section 1.6(b) below)
upon surrender by the holder thereof of the certificate representing such share
of Company Capital Stock in the manner provided in Section 1.12.
               (b)      For purposes of this Agreement:

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                    (i)      The “Adjusted Base Consideration” shall consist of
an amount in cash equal to $9,992,500 (the “Base Consideration”), such amount to
be (A) decreased by the amount of any indebtedness of the Company for borrowed
money outstanding immediately prior to the Effective Time (including, without
limitation, (y) the redemption amount, including unpaid principal of and accrued
interest and redemption premium, of any outstanding Convertible Promissory Notes
that have not been converted to Company Capital Stock as of such time) and
(z) amounts payable in liquidation of Series A Preferred Stock in accordance
with the terms of the Company’s Articles of Incorporation, as amended, to
holders of shares of Series A Preferred Stock failing to elect to convert such
shares of Series A Preferred Stock to Company Common Stock prior to the
Effective Time, and (B) increased by the amount of any Base Consideration
Increment or (C) decreased by the amount of any Base Consideration Decrement, as
the case may be, as each such term is defined in Section 1.7 below.
                    (ii)     The “Per Share Merger Consideration” payable in
respect of each share of Company Capital Stock (other than shares of Series A
Preferred Stock that are not converted to Company Common Stock immediately prior
to the Effective Time) outstanding immediately prior to the Effective Time shall
be an amount in cash equal to the Adjusted Base Consideration divided by the
number of Common Share Equivalents outstanding at such time, and the “Merger
Consideration” paid or payable to any holder of Company Capital Stock by reason
of the Merger shall mean an amount in cash equal to the product of the Per Share
Merger Consideration payable in respect of such class of Company Capital Stock
multiplied by the number of shares of such class of outstanding Company Capital
Stock held of record by such holder immediately prior to the Effective Time.
                    (iii)    The “Company Common Stock” shall consist of the
Company’s common stock, par value $.01, and the “Company Capital Stock” shall
consist of all outstanding capital stock of the Company, including the Common
Stock, and the Series A Convertible Preferred Stock, par value $.01 (the
“Series A Preferred Stock”).
                    (iv)     The “Company Convertible Securities” shall consist
of each outstanding share of Series A Preferred Stock and each stock option,
warrant, or other convertible security to acquire shares of Common Stock.
                    (v)      “Common Share Equivalent” shall mean each share of
Common Stock (i) outstanding immediately prior to the Effective Time or
(ii) into or for which any Company Convertible Securities outstanding
immediately prior to the Effective Time are convertible or exercisable as of the
Effective Time without regard to the vesting provisions of any such Company
Convertible Securities, and assuming (A) the conversion to Common Stock of the
Series A Preferred Stock, excluding any shares of Series A Preferred Stock which
are not converted to Company Common Stock in accordance with the terms of the
Company’s Articles of Incorporation, as amended, as of the Effective Time,
(ii) the conversion to Common Stock of any Convertible Promissory Notes that are
then so convertible, (iii) the exercise on a cash basis of all outstanding
options to purchase Company common stock, and (iv) the exercise on a net
exercise basis of all outstanding warrants to purchase Company common stock. The
number of

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Common Share Equivalents shall be determined in accordance with the Articles of
Incorporation of the Company as in effect as of the Effective Time, and, as of
the date of this Agreement, is as on Schedule II attached hereto. Between the
date hereof and the Effective Time, Schedule II may be updated by the Company as
necessary to reflect the conversion of any Company Convertible Securities, the
impact of the failure of any holder of Series A Preferred Stock to convert such
shares into Company Common Stock, or the exercise or cancellation of any Company
Option or Company Warrant that is outstanding on the date of this Agreement,
provided, that any such update shall be consistent with the Articles of
Incorporation of the Company and with the terms of this Agreement and of the
relevant security (in accordance with its terms as then in effect, giving effect
to any amendment or modification thereto that is permitted or contemplated by
this Agreement) and shall be delivered by the Company to Parent prior to the
Effective Time.
                    (vi)     The “Company Stockholders” shall consist of the
holders of outstanding shares of Company Capital Stock and the holders of
outstanding Company Convertible Securities, and the “Company Option Holders”
shall consist of each holder of an outstanding Company Option, in each case
immediately prior to the Effective Time.
                    (vii)    The “Convertible Promissory Notes” shall mean any
of those convertible promissory notes of the Company described in Part 2.2 of
the Company Disclosure Schedule.
               (c)      Cancellation of Company-Owned and Parent-Owned Stock.
Each share of Common Stock held by the Company or owned by Merger Sub, Parent or
any direct or indirect wholly owned subsidiary of the Company or of Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
               (d)      Effect of Merger on Stock Options and Warrants.
                    (i)      At the Effective Time, all options to purchase
Common Stock then outstanding, whether under the Company’s 2000 Stock Incentive
Plan or 2004 Stock Incentive Plan (collectively, the “Company Option Plans”) or
pursuant to another Company compensatory plan or otherwise (each a “Company
Option”) will be accelerated so as to be exercisable in full and will be cashed
out as soon as practicable after the Effective Time by payment to or for the
account of the holder thereof, through the Company’s ordinary payroll process,
of an amount, in cash, equal to the sum of (a) the product of (i) the Per Share
Consideration payable in respect of the Company Common Stock, multiplied by
(ii) the number of shares of Company Common Stock subject to such option, less
(b) the aggregate exercise price of such shares, as set forth in the option, and
less (c) any applicable tax withholding. The aggregate amount of such payments
(the “Option Cash-out Amount”) will be made available by Parent to the Company
following the Effective Time as necessary to enable the Company to make such
payments. Of the Option Cash-Out Amount payable to each holder of a Company
Option, a portion shall be delivered to the Escrow Agent to be held and
disbursed pursuant to the Escrow Agreement referred to in Section 1.10 below.

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                    (ii)     The Company shall take all necessary action such
that each outstanding warrant to acquire Company Capital Stock (the “Company
Warrants”) shall, immediately prior to the Effective Time, become vested and
exercisable in full and shall, to the extent not exercised prior to the
Effective Time, be terminated at the Effective Time.
               (e)      Capital Stock of Merger Sub. Each share of common stock,
par value $0.01 per share, of Merger Sub (“Merger Sub Common Stock”), issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, $0.01 par
value per share, of the Surviving Corporation.
     1.7      Adjustments to Base Consideration Based on Company Balance Sheet.
If as of the Closing Date, the Company’s Adjusted Working Capital is greater or
less than $50,000, then the amount of the Base Consideration shall be increased
or decreased, as follows.
               (a)      If the Adjusted Working Capital exceeds $50,000, then
the Base Consideration shall be increased by the amount of such excess (a “Base
Consideration Increment”).
               (b)      If the Adjusted Working Capital is less than $50,000,
then the Base Consideration shall be decreased by the amount of such deficiency
(a “Base Consideration Decrement”).
     1.8      Adjusted Working Capital; Determination. For purposes of
Section 1.7, the following terms shall have the meanings set forth below:
               (a)      “Adjusted Working Capital” shall mean an amount equal to
the sum of (i) the current assets of the Company, reduced by (I) any deferred
tax asset and (II) any amounts received by the Company as the exercise price of
options or warrants exercised between December 31, 2007 and the Closing), minus
(ii) the current liabilities of the Company, (A) including an accrual for
(I) any accrued and unpaid salary, wages, vacation and sick pay and other
deferred compensation, (II) any Transaction Expenses incurred or to be incurred
in connection with the transactions contemplated by this Agreement, and
(III) any and all Taxes due as of the Effective Time and (B) excluding the
amount of any current indebtedness for borrowed money, including accrued
interest and any redemption premium thereon, that is outstanding immediately
prior to the Effective Time and that has been deducted from the Base
Consideration pursuant to Section 1.6(b)(i)(A) above, each such amount to be
determined as of the Closing Date in accordance with GAAP, in a manner
consistent with past practices of the Company; plus or minus (iii) any other
adjustments agreed upon on in writing by Parent and the Company; provided that
in no event shall any Excluded Adjustment be taken into account for purposes of
determining the Adjusted Working Capital.
               (b)      “Excluded Adjustment” shall mean any change in a current
asset or a current liability as compared with its amount at December 31, 2007
that is:
                    (i)      the result of a change in estimate by the Company
(whether effected by way of reversal or omission of a previously accrued
liability or in any other manner) which change in estimate is not made in
response to any of the following

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occurring after December 31, 2007: (A) a bona fide transaction entered into by
the Company, (B) a payment made or received by the Company (C) action of an
unaffiliated third party or (D) an event or change of circumstances external to
the Company, or
                    (ii)     the result of any transaction or action by the
Company that would constitute a breach of the Company’s obligations under
Section 5.1 below.
               (c)      “Transaction Expense” shall mean any expense directly
attributable to the negotiation and consummation of the transactions
contemplated by this Agreement, including, but not limited to, severance
payments, bonus payments and retention payments that become due by reason of the
consummation of the Merger, fees and disbursements of Davis, Wright & Tremaine
LLP, counsel to the Company, fees and disbursements of counsel employed by the
Company to defend any claim, suit, action or proceeding commenced or threatened
against the Company that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement, fees and disbursements of Acumen
Financial Services Group, PC, the Company’s independent public accountants (the
“Company Auditors”), and amounts payable to the Company’s financial advisor, if
any, or to the Stockholder Representative.
     1.9      Determination of Adjusted Working Capital.
               (a)      On or before the fifth business day preceding the date
fixed for the Closing (as defined in Section 1.2), the Company shall deliver to
Parent a certificate, in reasonable detail and otherwise reasonably satisfactory
to Parent, setting forth its good faith estimate of the Adjusted Working Capital
of the Company as of the Closing Date determined in accordance with Section 1.8
(the “Preliminary Working Capital Certificate”). At the Closing, the Company
shall deliver to Parent a certificate in reasonable detail setting forth its
determination of the Adjusted Working Capital as of the Closing Date determined
in accordance with Section 1.8 (the “Closing Working Capital Certificate”).
               (b)      On or before the 45th day following the Closing, Parent
shall notify the Stockholder Representative in writing whether it accepts or
disputes the accuracy of the Company’s determination of the Adjusted Working
Capital as set forth on the Closing Working Capital Certificate.
                    (i)      If Parent accepts the Company’s determination of
the Adjusted Working Capital, or if it fails within such 45-day period to notify
the Company in writing of any dispute with respect thereto, then the Closing
Working Capital Certificate shall be deemed final and conclusive and binding
upon all parties.
                    (ii)     If Parent disputes the accuracy of the Closing
Working Capital Certificate and the Company’s determination of the Adjusted
Working Capital, Parent shall within the 45-day period referred to above provide
written notice to the Stockholder Representative (the “Dispute Notice”), setting
forth in reasonable detail those items that Parent disputes, the amounts of any
adjustments that are necessary in its judgment for the computation of the
Adjusted Working Capital to conform to the requirements of this Agreement, and
the basis for its suggested adjustments. During the 30-day period following
delivery of a Dispute Notice, Parent and the Stockholder Representative will

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meet and negotiate in good faith with a view to resolving their disagreements
over the disputed items. During such 30-day period and until the final
determination of the Working Capital Adjustment, if any, the Stockholder
Representative will be provided with such access to the financial books and
records of the Business and, subject to access procedures acceptable to Parent’s
independent public accounts (the “Parent Auditors”), the workpapers of the
Parent Auditors, as it may reasonably request to enable it to respond to any
Dispute Notice. If the parties resolve their differences over the disputed items
in accordance with the foregoing procedure, the Working Capital Adjustment shall
be the amount agreed upon by them.
                    (iii)    If the parties fail to resolve their differences
over the disputed items with such 30-day period, then Parent and the Stockholder
Representative shall forthwith jointly request that the Accounting Arbitrator
make a binding determination as to the disputed items in accordance with this
Agreement. The “Accounting Arbitrator” shall mean such national or regional firm
of independent accountants as may be agreed upon by Parent and the Stockholder
Representative. Within 10 days following the delivery of a Dispute Notice, each
of Parent and the Stockholder Representative shall propose to the other in
writing at least two such firms acceptable to it to act as Accounting
Arbitrator. Any firm currently engaged as the independent public accounting firm
for any party to this Agreement shall be ineligible to be proposed by such party
serve as an arbitrator without the consent of Parent and the Stockholder
Representative. If the parties have not, by the end of the 30-day period
referred to above, agreed upon an Accounting Arbitrator, then the Accounting
Arbitrator shall be selected by one party, drawn by lot, from the list of firms
proposed by the other party.
                    (iv)     The Accounting Arbitrator will under the terms of
its engagement have no more than 75 days from the date of referral and no more
than 15 days from the final submission of information and testimony by the
Parent and the Stockholder Representative within which to render its written
decision with respect to the disputed items, which decision shall be final and
binding upon the parties and enforceable by any court of competent jurisdiction.
The Accounting Arbitrator shall review such submissions and base its
determination solely on such submissions. In resolving any disputed item, the
Accounting Arbitrator may not assign a value to any item greater than the
greatest value for such item claimed by either party or less than the smallest
value for such item claimed by either party. Parent and the Company Stockholders
(by way of the General Indemnity Escrow) shall each bear the costs and expenses
of the Accounting Arbitrator based on the percentage which the portion of the
contested adjustment amount not awarded to each party bears to the amount
actually contested by such party (e.g., if Parent makes an adjustment claim for
$1,000,000 and the Stockholder Representative only contests $500,000 of the
amount claimed by Parent, and if the Accounting Arbitrator resolves the dispute
by awarding Parent $300,000 of the $500,000 contested, then the Accounting
Arbitrator’s costs and expenses will be allocated 60% to the Company
Stockholders and 40% to Parent).
                    (v)      If the Adjusted Working Capital, determined as set
forth above, is greater than $50,000, then the amount of Base Consideration
shall be increased as set forth in Section 1.7(a) above, and Parent shall
promptly, and in any event within five

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business days after such determination, (i) deliver to each Company Stockholder
such portion of the Base Consideration Increment, as would have been deliverable
to such Company Stockholder if the final determination of the Adjusted Working
Capital had been made immediately prior to the Effective Time, and (ii) direct
the Escrow Agent (as defined below) to release to the Company Stockholders, as
their interests may appear, any property then held for their accounts in the
Working Capital Escrow (as defined below).
                    (vi)     If the Adjusted Working Capital, determined as set
forth above, is less than $50,000, then the amount of Base Consideration shall
be reduced by an amount as set forth in Section 1.7(b) above, and Parent shall
be entitled to direct that the Escrow Agent deliver to Parent from the Working
Capital Escrow (and, in the event that the Working Capital Escrow is
insufficient, from the General Indemnity Escrow, as defined below)), for the
account of each Company Stockholder, that portion of the Base Consideration
delivered to the Escrow Agent for the account of each Company Stockholder as
would not have been payable to such Company Stockholder if the final
determination of the Adjusted Working Capital had been made immediately prior to
the Effective Time. If, after such delivery to Parent, any property shall remain
in the Working Capital Escrow, Parent will promptly instruct the Escrow Agent to
release the balance of such property to the Company Stockholders, as their
interests may appear.
     1.10    Escrow Agreement. At the Closing, Parent will deduct from the
Merger Consideration and Option Cash-Out Payments and deliver to Computershare
Trust Company, Inc., as escrow agent (the “Escrow Agent”), for the account of
the Company Stockholders and the Company Option Holders, pursuant to an escrow
agreement (the “Escrow Agreement”) in substantially the form attached as
Exhibit B hereto, the following amounts:
               (a)      cash in an amount equal to $1,100,000 (the “General
Indemnity Escrow”);
               (b)      cash in an amount equal to $1,100,000 (the “Special
Indemnity Escrow”);
               (c)      cash in an amount equal to $550,000 (the “Working
Capital Escrow”); and
               (d)      cash in the amount of $10,000 (the “Stockholders
Representative Escrow”), to fund the out-of-pocket expenses of the Stockholders
Representative pursuant to Section 1.11 below.
     The amount deposited for the account of each Company Stockholder and
Company Option Holder in the General Indemnity Escrow, Special Indemnity Escrow,
Working Capital Escrow and Stockholders Representative Escrow shall be
proportionate to the Merger Consideration received by each (and, in the case of
Company Option Holders, the Option Cash-out Amount received by each), as more
fully set forth on Schedule II.
     The Escrow Agreement will provide, among other things, for the
establishment of subaccounts whereby the amounts delivered to and disbursed by
the Escrow Agent for the

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account of each Company Stockholder and Company Option Holder shall be
separately accounted for.
     In the event that there is a dispute concerning the Adjusted Working
Capital that is not resolved prior to the Effective Time of the Merger, and if
the final determination of the Adjusted Working Capital results in a downward
adjustment to the Base Consideration pursuant to Section 1.7 above of a
magnitude such that it would, had it been given effect immediately prior to the
Effective Time of the Merger, have resulted in an adjustment to the conversion
ratio of the Company’s Series A Stock under the terms of the Company’s Articles
of Incorporation, then in such event the parties agree that the allocation of
Merger Consideration among the Company Stockholders and Company Option Holders,
as set forth on Schedule II, will be modified in a manner mutually acceptable to
Parent and the Stockholder Representative so as to equitably reflect the impact
of such adjustment to the Series A Stock conversion ratio. The Escrow Agreement
will provide for a mechanism whereby the respective interests of the Company
Stockholders and Company Option Holders in the General Indemnity Escrow, Special
Indemnity Escrow, Working Capital Escrow and Stockholders Representative Escrow
will be adjusted to reflect an allocation of the amounts held for the accounts
of the participants that gives effect to the allocation of Merger Consideration
consistent with Schedule II as so modified.
     The Escrow Agreement will also provide that:
     (i) twelve months after the Closing the General Indemnity Escrow (less the
amount of any claims paid and pending claims asserted by Parent in good faith of
which the Escrow Agent has received notice) will be released from the escrow
account and distributed to the Company Stockholders and (in the case of the
Company Option Holders) to the Company, for distribution to the Company Option
Holders, net of any required tax withholding;
     (ii) twelve months after the Closing, the Special Indemnity Escrow (less
the amount of any claims paid and pending claims asserted by Parent in good
faith of which the Escrow Agent has received notice) will be released from the
escrow account and distributed to the Company Stockholders and (in the case of
the Company Option Holders) to the Company, for distribution to the Company
Option Holders, net of any required tax withholding; and
     (iii) six months after the Closing Date (or such lesser period as is
necessary to finally determine the Adjusted Working Capital under Section 1.9(b)
above) the Working Capital Escrow (less the amount of any claims paid and
pending claims asserted by Parent in good faith of which the Escrow Agent has
received written notice) will be released from the escrow account and
distributed to the Company Stockholders and (in the case of the Company Option
Holders) to the Company, for distribution to the Company Option Holders, net of
any required tax withholding.
     Parent and the Company Stockholders (including the Company Option Holders)
shall each be responsible for 50% of the costs relating the establishment and
administration of the Escrow Agreement, including the fees and expenses of the
Escrow Agent. Such escrow-related costs will be paid initially by Parent, and
the Escrow Agreement will provide for the reimbursement of Parent out of the
Working Capital Escrow or, if the Working Capital Escrow has been exhausted or
distributed, out of the General Indemnity Escrow, for the Company

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Stockholders’ share of such costs, promptly upon submission to the Escrow
Agreement and the Stockholder Representative of an invoice therefor.
     1.11    Stockholder Representative.
               (a)      Each Principal Stockholder hereby appoints, and by
operation of the merger each other Company Stockholder (including each Company
Option Holder) shall be deemed to have appointed, Scott Anderson (including any
replacement for him as designated herein, the “Stockholder Representative”) the
attorney-in-fact of such person, with full power and authority, including power
of substitution, acting in the name of and for and on behalf of such person with
respect to this Agreement and any of the other Transaction Documents, including
to (i) deliver to Parent at the Closing the certificates representing the
outstanding Company Capital Stock and receive for the account of the Company
Stockholders and disburse to them as their interests may appear any Merger
Consideration payable to them at the Closing or at any subsequent time;
(ii) execute and deliver to Parent at the Closing all certificates and documents
to be delivered to Parent by the Company Stockholders pursuant to this Agreement
and the other Transaction Documents, including, without limitation, the Escrow
Agreement; (iii) incur expenses on behalf of the Company Stockholders in
connection with this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby as the Stockholder Representative
may deem appropriate; (iv) during the time that property remains in escrow
pursuant to the Escrow Agreement, to give and receive all notices required to be
given under this Agreement and the other agreements contemplated hereby to which
all of the Company Stockholders are a party, including the Escrow Agreement; and
(v) take such action on behalf of the Company Stockholders as the Stockholder
Representative may deem appropriate in respect of: (1) waiving any inaccuracies
in the representations or warranties of Parent or Merger Sub contained in this
Agreement or the other Transaction Documents; (2) amending or waiving any
provision of this Agreement or the other Transaction Documents; (3) taking such
other action as any Company Stockholder is authorized to take under this
Agreement or the other Transaction Documents; (4) receiving all documents or
certificates and making all determinations, on behalf of any Company
Stockholder, required under this Agreement or the other Transaction Documents;
(5) resolving any dispute with Parent over any aspect of this Agreement or the
other Transaction Documents, including the calculation of Adjusted Working
Capital and claims for indemnification hereunder; (6) all such other matters as
the Stockholder Representative may deem necessary or appropriate to consummate
the transactions contemplated by this Agreement or the other Transaction
Documents; (7) taking all such action as may be necessary after the Closing Date
to carry out any of the transactions contemplated by this Agreement or the other
Transaction Documents; and (8) entering into any agreement to effectuate any of
the foregoing which shall have the effect of binding any Company Stockholder as
if such person had personally entered into such agreement. This appointment and
power of attorney shall be deemed as coupled with an interest and all authority
conferred hereby shall be irrevocable whether by the death or incapacity of any
such person or the occurrence of any other event or events. The Parent shall be
entitled to rely upon any communication or writings given by or to, or executed
by, the Stockholder Representative and all actions, decisions and instructions
of the Stockholder Representative shall be conclusive and binding upon all of
the Company Stockholders. To the extent that the terms of this Agreement or any
of the documents executed in connection herewith require Parent or Merger Sub to
obtain the consent of any Company Stockholder, such consent may be made or given
by the Stockholder Representative.

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Notwithstanding the foregoing, notices which are to be given under this
Agreement to the Company Stockholders shall only be effective if given to each
Company Stockholder, in accordance with Section 10.1 hereof.
               (b)      In the event that the Stockholder Representative dies,
becomes unable to perform his responsibilities hereunder or resigns from such
position, the remaining Company Stockholders shall, by election of the Company
Stockholders (or, if applicable, their respective heirs, legal representatives,
successors and assigns) who held a majority of the shares of Common Share
Equivalents issued and outstanding immediately prior to the Effective Time,
select another representative to fill such vacancy and such substituted
representative shall be deemed to be the Stockholder Representative for all
purposes of this Agreement.
               (c)      In the performance of his duties hereunder, the
Stockholder Representative shall be entitled to rely upon any document or
instrument reasonably believed by him to be genuine and accurate. The
Stockholder Representative may assume that any person purporting to give any
notice in accordance with the provisions hereof has been duly authorized to do
so. In the absence of proven gross negligence or willful misconduct, (i) the
Stockholder Representative shall not be liable to the Company Stockholders with
respect to his performance of the functions specified in this Agreement, and
(ii) no Company Stockholder shall commence, prosecute or maintain any actions or
proceedings against the Stockholder Representative with respect to his
performance of the functions specified in this Agreement, except in cases of
gross negligence or willful misconduct. In determining the occurrence of any
fact, event or contingency, the Stockholder Representative may request from any
of the Company Stockholders or any other person such reasonable additional
evidence as the Stockholder Representative in his sole discretion may deem
necessary, and may at any time inquire of and consult with others, including any
of the Company Stockholders, and shall not be liable to any Company Stockholder
for any damages resulting from any delay in acting hereunder pending receipt and
examination of additional evidence requested. The Stockholder Representative
shall be entitled to be indemnified and held harmless by each Company
Stockholder against any damages incurred without gross negligence or willful
misconduct on the part of the Stockholder Representative and arising out of or
in connection with the acceptance or administration of his duties hereunder with
each Company Stockholder being, severally and not jointly, liable for such
Company Stockholder’s pro rata share (based on their respective interests in the
Adjusted Base Consideration), of any such claim for indemnification by the
Stockholder Representative.
               (d)      By their execution of this Agreement, the Principal
Stockholders agree and by operation of the merger each other Company Stockholder
shall be deemed to have agreed, that:
                    (i)      Parent and Merger Sub shall be able to rely
conclusively on the instructions and decisions of the Stockholder Representative
as to the determination and payment of the Adjusted Working Capital and the
defense and/or settlement of any Claims for which the Company Stockholders may
be required to indemnify Parent pursuant to Article 7 hereof, and no party
hereunder shall have any cause of action against Parent or Merger Sub for any
action taken in reliance upon the instructions or decisions of the Stockholder
Representative;

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                    (ii)     all actions, decisions and instructions of the
Stockholder Representative shall be conclusive and binding upon all of the
Company Stockholders and no Company Stockholder shall have any cause of action
against the Stockholder Representative for any action taken or not taken,
decision made or instruction given by the Stockholder Representative under this
Agreement, except for fraud or willful breach of this Agreement by the
Stockholder Representative;
                    (iii)    the provisions of this Section 1.11 are independent
and severable, are irrevocable and coupled with an interest and shall be
enforceable notwithstanding any rights or remedies that any Company Stockholder
may have in connection with the transactions contemplated by this Agreement; and
                    (iv)     the provisions of this Section 1.11 shall be
binding upon the heirs, legal representatives, successors and assigns of each
Company Stockholder, and any references in this Agreement to a Company
Stockholder or the Company Stockholders shall mean and include the successors to
the Company Stockholder rights hereunder, whether pursuant to testamentary
disposition, the laws of descent and distribution or otherwise.
               (e)      Following the Closing and subject to the terms of
Sections 6.4 and 6.7 hereof, Parent shall provide the Stockholder Representative
with reasonable access to such information about the Company as the Stockholder
Representative may reasonably request for purposes of performing his duties and
exercising the rights of the Company Stockholders hereunder.
               (f)      Any fees and expenses incurred by the Stockholder
Representative in connection with actions taken pursuant to the terms of this
Agreement, including reasonable, actual expenses incurred or paid to counsel or
other third parties in investigating, negotiating, arbitrating or settling any
claim hereunder will be paid by the Company Stockholders in proportion to their
respective pro rata interest in the Adjusted Base Consideration and may, on
request of the Stockholder Representative, be paid from amounts deposited in the
Working Capital Escrow or General Indemnity Escrow that are released from escrow
and distributable to the Company Stockholders as provided in the Escrow
Agreement. At any time prior to the General Indemnity Escrow Termination Date,
the Stockholder Representative may by written notice to the Escrow Agent make a
claim for reimbursement of Transaction Expenses incurred through the date of
such notice as well as an additional amount for future Transaction Expenses to
the extent reasonably budgeted in good faith by the Stockholder Representative
for resolution of any disputes between members of the Parent Group and the
Company Stockholders under this Agreement or any Transaction Document as
provided in this Section 1.11. Such amounts shall be paid by the Escrow Agent
from the Stockholder Representative Escrow. If the Stockholders Representative
Escrow shall have been exhausted, upon the release of the Working Capital Escrow
or the General Indemnity Escrow to the Company Stockholders, the Escrow Agent
shall pay to the Stockholder Representative, out of amounts otherwise payable to
the Company Stockholders from either the Working Capital Escrow or the General
Indemnity Escrow, any unpaid Expense Claims (as defined in, and in accordance
with the terms of, the Escrow Agreement). Any amounts held by the Stockholder
Representative for the payment of Transaction Expenses shall be released to the
Company Stockholders on the earlier of (i) such

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date when the Stockholder Representative determines in good faith that no
additional Transaction Expenses will be incurred, and (ii) the second
anniversary of the General Indemnity Escrow Release Date.
     1.12    Delivery of Merger Consideration.
               (a)      At the Closing or as soon as practicable thereafter,
each Company Stockholder shall deliver to Parent (i) all certificates which
immediately prior to the Effective Time represented issued and outstanding
shares of Company Capital Stock (each individually, a “Certificate” and
collectively, the “Certificates”) or an affidavit of lost certificate and, if
requested by Parent, an indemnity with respect to such lost certificate in form
and substance reasonably satisfactory to Parent (the “Affidavit”) and (ii) an
executed Letter of Transmittal and Certificate, including a Form W-9, in the
form of Exhibit C hereto (the “Transmittal Certificate”). Each Company
Stockholder shall be entitled to receive in exchange therefor the applicable
Merger Consideration allocable to such Company Stockholder (including the
General Indemnity Escrow, the Special Indemnity Escrow and the Working Capital
Escrow if, as and when distributable to such Company Stockholder in accordance
with the Escrow Agreement). Company Option Holders shall not be required to
exercise Company Options or tender exercise notices in order to receive the
Option Cash-out Amount, it being understood that such holders shall receive
their proportionate amount of the Merger Consideration solely by virtue of
application of Section 1.6(d) of this Agreement, without additional action of
such holder. The total amount of Merger Consideration issuable to each Company
Stockholder in exchange for his or its shares shall be listed on Schedule II
hereto, as updated as of the Effective Time by the Company and delivered to
Parent at the Closing.
               (b)      Until surrendered, each Certificate shall, after the
Effective Time, represent only the right to receive the Merger Consideration
into which the shares of Company Capital Stock formerly represented thereby
shall have been converted pursuant to Section 1.6 hereof. At and after the
Effective Time, the holders of any Company Capital Stock shall cease to have any
rights as Company Stockholders, except for the right to surrender Certificates
pursuant to Section 1.12(a). As of the Closing, the stock transfer books of the
Company shall be closed, and after the Closing there shall be no transfers on
such stock transfer books.
               (c)      Required Withholding. Each of Parent and the Surviving
Corporation shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Agreement to any holder or
former holder of Company Capital Stock such amounts as may be required to be
deducted or withheld therefrom under the Code or under any provision of state,
local or foreign tax law or under any other applicable Legal Requirement. To the
extent such amounts are so deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been paid to the person to whom
such amounts would otherwise have been paid.
               (d)      No Liability. Notwithstanding anything to the contrary
in this Section 1.12, neither Parent, the Surviving Corporation nor any other
party hereto shall be liable to a holder of shares of Parent Common Stock or
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.

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     1.13    No Further Ownership Rights in Company Capital Stock. All Merger
Consideration issued in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Capital Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Capital Stock
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article 1.
     1.14    Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Company, the officers and directors of
the Company and Merger Sub will take all such lawful and necessary action.
Parent shall cause Merger Sub to perform all of its obligations relating to this
Agreement and the transactions contemplated hereby.
     1.15    Dissenters’ Rights.
               (a)      Notwithstanding any provision of this Agreement to the
contrary other than Section 1.15(b), any shares of Company Capital Stock held by
a holder who has demanded and perfected appraisal or dissenter’s rights for such
shares in accordance with Section 60.554 of the BCA and who, as of the Effective
Time, has not effectively withdrawn or lost such appraisal or dissenters’ rights
(“Dissenting Shares”), shall not be converted into or represent a right to
receive Merger Consideration pursuant to Section 1.6, but instead shall be
converted into the right to receive only such consideration as may be determined
to be due with respect to such Dissenting Shares under the BCA. From and after
the Effective Time, a holder of Dissenting Shares shall not be entitled to
exercise any of the voting rights or other rights of a shareholder of the
Surviving Corporation.
               (b)      Notwithstanding the provisions of Section 1.6(a), if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under the BCA shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder’s shares shall no longer be
Dissenting Shares and shall automatically be converted into and represent only
the right to receive Merger Consideration as provided in Section 1.6(a) without
interest thereon, upon surrender of the certificate representing such shares
pursuant to Section 1.12.
               (c)      The Company shall give Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to the
BCA and received by the Company which relate to any such demand for appraisal
and (ii) the opportunity to participate in all negotiations and proceedings
which take place prior to the Effective Time with respect to demands for
appraisal under the BCA. The Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any demands for
appraisal of Common Stock or offer to settle or settle any such demands.

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     1.16    Certain Definitions. As used herein, the following terms shall have
the following meanings:
               (a)      “Acquisition Proposal” shall mean any offer or proposal
(other than an offer or proposal by Parent or Merger Sub) relating to or
involving: (i) any acquisition or purchase by any Person or “group” (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of beneficial ownership (as defined in Rule 13d-3 under the Exchange
Act) of more than 15% of the total number of outstanding voting securities of
any Target Company, as defined below; (ii) any tender offer or exchange offer
that if consummated would result in any Person or “group” (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
having beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of
more than 15% of the total number of outstanding voting securities of any Target
Company, as defined below; (iii) any merger, consolidation, business combination
or similar transaction involving any Target Company pursuant to which the
stockholders of the Company or such Subsidiary immediately preceding such
transaction hold less than 85% of the equity interests in the surviving or
resulting entity of such transaction; (iv) any sale, lease, exchange, transfer,
license (other than in the ordinary course of business), acquisition, or
disposition of any material assets of any Target Company; or (v) any liquidation
or dissolution of any Target Company. “Affiliate” of a specified Person shall
mean each other Person who controls, is controlled by, or is under common
control with the specified Person.
               (b)      “COBRA” shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
               (c)      “Commercially Available Software” shall mean any
commercially available third-party “off-the-shelf” software licensed to the
Company on a non-exclusive basis.
               (d)      “Company Employee Plan” shall mean any program, policy,
practice, trust, Contract or other plan providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other benefits or remuneration of any kind, whether written or
unwritten, funded or unfunded, which is or has been maintained, contributed to,
or required to be contributed to, by the Company for the benefit of any Employee
or any relative or dependent of any Employee, including (i) each “employee
benefit plan” within the meaning of Section 3(3) of ERISA, (ii) any stock, stock
option, stock appreciation right, stock purchase, bonus, deferred compensation,
pension, profit-sharing, commission, retirement, severance, retention, change of
control, or similar plan or Contract, and (iii) any provision in any staff
handbook or written employment policies for any Target Company.
               (e)      “Company Material Adverse Effect” means any change,
event, circumstance or effect (whether or not such change, event, circumstance
or effect constitutes a breach of a representation, warranty or covenant
regarding the Company in this Agreement) that is, or is reasonably likely to be,
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition, operations or results of operations or
prospects of the Company, taken as a whole, exclusive of any effect arising from
or related to: (i) any general condition affecting the industry in which the
Company is engaged and that does not affect the Company disproportionately, as
compared to other companies in such industry; (ii) the

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announcement or pendency of this Agreement or any of the transactions
contemplated hereby, or the disclosure of the identity of Parent as the acquiror
of the Company; (iii) acts of war or terrorism; or (iv) general economic,
political and financial market changes that do not affect the Company
disproportionately.
               (f)      “Company Option” shall mean each outstanding unexercised
option to purchase Company Stock, whether or not vested or exercisable, granted
under any Company Option Plan.
               (g)      “Confidential Information” shall mean any information
concerning the business and affairs of Parent and its Subsidiaries or the
Company, as the case may be, that is not already generally available to the
public, other than (i) information which becomes generally available to the
public other than as a result of a disclosure in violation of this Agreement,
and (ii) information which becomes available to the applicable Party on a
non-confidential basis from a Person who is not known or reasonably suspected
(in each case after reasonable inquiry) by such Party to be bound not to
disclose the information. All information concerning the business and affairs of
Parent and its Subsidiaries and the Company (including the information contained
in the Company Disclosure Schedule) shall be presumed to be Confidential
Information, and the applicable Party who receives such Confidential Information
shall have the burden of proving that any such information is not Confidential
Information.
               (h)      “Contract” shall mean any contract, agreement,
instrument, license, lease, mortgage, note, bond, debenture, indenture,
guarantee, permit, franchise, concession, plan, option, warranty, purchase
order, insurance policy, obligation, covenant, undertaking, arrangement or other
legally binding commitment or of any nature, whether written or oral.
               (i)      “Employee” shall mean any current, former or retired
employee, officer, director of the Company or any ERISA Affiliate.
               (j)      “Employee Agreement” shall mean each management,
employment, retention, severance, change-of-control, consulting,
indemnification, relocation, repatriation, expatriation, visa, work permit or
similar Contract between the Company or any ERISA Affiliate and any Employee or
consultant, including any offer letter.
               (k)      “Encumbrances” shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, restrictive
covenant, claim, infringement, interference, option, right of first refusal,
preemptive right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset) and, in the case of leasehold real property, rent and
service charges.
               (l)      “Environmental Claim” shall mean any written notice
alleging potential liability (including potential liability for investigatory
costs, cleanup costs, response or remediation costs, natural resources damages,
property damages, personal injuries, fines or penalties) arising out of, based
on or resulting from (a) the presence, or release of any

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Environmental Material at any location, whether or not owned by that party or
any of its Affiliates or (b) circumstances forming the basis of any violation,
or alleged violation, of any Environmental Law and which could reasonably be
expected to have a Company Material Adverse Effect.
               (m)      “Environmental Laws” shall mean any and all statutes,
regulations and ordinances relating to the protection of public health, safety
or the environment.
               (n)      “Environmental Material” shall mean PCBs, asbestos,
petroleum and its by-products, any substance that has been designated by any
Governmental Entity or by applicable law to be radioactive, toxic, hazardous or
otherwise a danger to public health or the environment, and all other substances
or constituents that are regulated by, or form the basis of liability under, any
Environmental Law.
               (o)      “ERISA” shall mean the Employee Retirement Income
Security Act of 1974, as amended.
               (p)      “ERISA Affiliate” shall mean any other Person under
common control with the Company within the meaning of Sections 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder.
               (q)      “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended.
               (r)      “Family Member” shall mean any spouse, parent,
grandparent, child, grandchild or sibling or any other person sharing the same
household.
               (s)      “FMLA” shall mean the Family Medical Leave Act of 1993,
as amended.
               (t)      “Governmental Entity” shall mean any court or any
administrative, regulatory or governmental body, agency, commission, panel,
authority, organization or instrumentality, whether domestic, foreign or
international.
               (u)      “IRS” shall mean the Internal Revenue Service.
               (v)      “Knowledge” with respect to the Company and a particular
fact or matter, shall mean: (i) the actual awareness of such fact or matter by
any of Todd Humphrey, Bruce D’Ambrosio or Jane Jorgensen, (ii) the awareness
that any of the foregoing persons would be reasonably likely to obtain in the
course of conducting a reasonably comprehensive investigation of matters within
the scope of such person’s responsibilities concerning the existence of such
fact or matter, and (iii) any information contained in the Company’s books and
records that any of the foregoing persons would be expected to obtain in the
course of such person’s recent review of such books and records, and “Known”
shall have the corresponding meaning.
               (w)      “Legal Requirement” shall mean any federal, state,
local, municipal, provincial, foreign, international or other law, statute,
constitution, treaty, principle of common law, resolution, ordinance, code,
edict, decree, rule, regulation, ruling or requirement issued,

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enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity.
               (x)      “Multiemployer Plan” shall mean any Pension Plan (as
defined below) which is a “multiemployer plan,” as defined in Section 3(37) of
ERISA.
               (y)      “Pension Plan” shall mean each Company Employee Plan
which is an “employee pension benefit plan,” within the meaning of Section 3(2)
of ERISA.
               (z)      “Person” shall mean any individual, corporation
(including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization, entity or Governmental Entity.
               (aa)    “Required Stockholder Vote” shall mean the affirmative
vote, at a meeting of the stockholders of the Company duly called in accordance
with the Company Charter Documents and Section 60.487 of the BCA, of a majority
of all the votes entitled to be cast by the holders of the Company’s outstanding
Common Stock and Series A Preferred Stock, voting together as a single class.
               (bb)    “Subsidiary” of a specified entity shall mean any
corporation, partnership, limited liability company, joint stock company, joint
venture or other legal entity of which the specified entity (either alone or
through or together with any other Subsidiary) owns, directly or indirectly, 50%
or more of the stock or other equity, partnership or other ownership interests
the holders of which are generally entitled to vote for the election of the
Board of Directors or other governing body of such corporation or other legal
entity.
               (cc)    “Target Company” shall mean the Company and any of its
Subsidiaries.
               (dd)    “Tax” or “Taxes” shall mean any federal, state, local,
municipal, provincial, foreign or international income, gross receipts,
business, license, payroll, telecommunications, employment, excise, severance,
stamp, stamp duty, stamp duty land transaction tax, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value-added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not and including any obligations to
indemnify or otherwise assume or succeed to the Tax liability of any other
Person.
               (ee)    “Tax Return” shall mean any return (including any land
transaction return), declaration, report, claim for refund, notice, assessment,
election or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
               (ff)    “Transaction Documents” shall mean this Agreement, the
Voting Agreements, the Escrow Agreement, the Note and Warrant Amendment and
Exercise

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Agreements and each of the other agreements and instruments to be executed and
delivered by any party in connection with the consummation of the transactions
contemplated hereby.
Article 2
Representations and Warranties of the Company
     As of the date of this Agreement and as of the Closing Date, the Company
represents and warrants to Parent and the Merger Sub as set forth in this
Article 2, subject to any exceptions expressly stated in the disclosure schedule
delivered by the Company to Parent dated as of the date hereof and certified on
behalf of the Company by a duly authorized officer of the Company (the “Company
Disclosure Schedule”). Exceptions on the Company Disclosure Schedule shall
specifically identify the representation to which they relate; provided,
however, that any matter disclosed pursuant to one section or subsection of the
Company Disclosure Schedule is deemed disclosed for such other sections or
subsections of the Company Disclosure Schedule as, and only to the extent that,
it is readily apparent that such matter relates to such other section or
subsection of the Company Disclosure Schedule and the level of particularity and
manner of disclosure of the matter expressly disclosed in one section or
subsection of the Company Disclosure Schedule would make a reasonable person
aware that such disclosure is relevant to such other sections or subsections.
     2.1      Organization; Subsidiaries.
               (a)      Each Target Company (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized; (ii) has the requisite corporate or other power and
authority to own, lease and operate its assets and properties and to carry on
its business as now being conducted; and (iii) is duly qualified or licensed to
do business in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not have a Company Material Adverse Effect. Part
2.1(a) of the Company Disclosure Schedule lists each Subsidiary of the Company
and each jurisdiction where any Target Company is qualified or licensed to do
business. Part 2.1(a) of the Company Disclosure Schedule indicates the
jurisdiction of organization of each entity listed therein, the capitalization
of each such entity (other than the Company), and the ownership of all
securities of such entity, including the direct or indirect equity interest of
each Target Company therein (all of which are held free and clear of all
Encumbrances).
               (b)      Other than the Subsidiaries identified in Part 2.1(a) of
the Company Disclosure Schedule, no Target Company owns any capital stock of, or
any equity interest of any nature in, any Person. No Target Company has agreed
or is obligated to make, or is bound by any written or oral Contract as in
effect as of the date hereof or as may hereinafter be in effect under which it
may become obligated to make any future investment in or capital contribution to
any other Person. No Target Company has at any time been a general partner of
any general partnership, limited partnership or other Person.
               (c)      The Company has delivered or made available to Parent
true and correct copies of the Articles of Incorporation and Bylaws of the
Company and similar governing

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instruments of each of its Subsidiaries, each as amended to date (collectively,
the “Company Charter Documents”), and each such instrument is in full force and
effect. No Target Company is in violation of any of the provisions of the
Company Charter Documents. The Company has delivered or made available to Parent
all proposed or considered amendments to the Company Charter Documents that the
Company intends to adopt on or prior to the Closing Date.
               (d)      Part 2.1(d) of the Company Disclosure Schedule lists all
of the current directors and officers (or equivalent) of each Target Company.
     2.2      Company Capitalization.
               (a)      The authorized capital stock of the Company consists
solely of (i) 15,000,000 shares of Common Stock, of which 1,211,528 shares are
issued and outstanding on the date of this Agreement and (ii) 5,000,000 shares
of Series A Preferred Stock, of which 957,200 shares are issued and outstanding
on the date of this Agreement. Except as aforesaid, there are no other
authorized, issued or outstanding shares of capital stock of the Company. The
outstanding shares of Common Stock and Series A Preferred Stock and the Company
Convertible Securities, including the Convertible Promissory Notes, are held of
record by the Persons named in Part 2.2(a) of the Company Disclosure Schedule in
the amounts set forth opposite their respective names. All outstanding shares of
Company Capital Stock are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Articles of Incorporation or Bylaws of the Company or any Contract to which any
Target Company is a party or by which it is bound. There are no shares of
Company Capital Stock held in treasury by the Company.
               (b)      The Company Option Plans are the only equity plans of
any Target Company. Part 2.2(b) of the Company Disclosure Schedule sets forth
the following information with respect to each Company Option and Company
Warrant outstanding on the date of this Agreement: (i) the name of the optionee
or holder; (ii) the number and type of shares of Company Stock subject to such
Company Option or Company Warrant; (iii) the exercise price of such Company
Option or Company Warrant; (iv) the date on which such Company Option was
granted; (v) the date on which such Company Option expires, (vi) if applicable,
the Company Option Plan pursuant to which such Company Option was granted, and
(vii) whether the exercisability of such Company Option will be accelerated in
any way by the transactions contemplated by this Agreement, indicating the
extent of any such acceleration. The Company has made available to Parent
accurate and complete copies of each Company Option Plan, each Company Warrant
and each form of Contract evidencing any Company Options, and each Convertible
Promissory Note. Except as set forth in Part 2.2(b) of the Company Disclosure
Schedule, there are no Contracts or arrangements of any character to which any
Target Company is bound obligating any Target Company to accelerate the vesting
of any Company Option as a result of any of the transactions contemplated
hereby. The Company Options and Company Warrants may be treated in the manner
described in Section 1.6(d).
               (c)      All securities of each Target Company have been issued
and granted in compliance in all material respects with (i) all applicable
securities laws and other applicable Legal Requirements and (ii) all
requirements set forth in applicable Contracts.

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               (d)      Schedule II accurately sets forth as of the date of this
Agreement, and any updated Schedule II delivered by the Company to Parent at the
Closing will accurately set forth as of the Effective Time, the amount of the
Merger Consideration, including the Escrow Fund required to be allocated to each
Company Stockholder under the terms of the Articles of Incorporation of the
Company and this Agreement.
     2.3      Obligations With Respect to Capital Stock. Except as set forth in
Parts 2.2(b) and 2.3 of the Company Disclosure Schedule, there are no equity
securities, partnership interests or other ownership interests of any class, or
any securities exchangeable or convertible into or exercisable for any of the
foregoing, issued, reserved for issuance or outstanding with respect to the
Company or, except as set forth in Part 2.1(a) of the Company Disclosure
Schedule, with respect to any other Target Company. Except as set forth in
Part 2.2(b) or Part 2.3 of the Company Disclosure Schedule, there are no
subscriptions, options, warrants, equity securities, convertible debt,
partnership interests or other ownership interests, calls, rights (including
preemptive rights) or Contracts of any character to which any Target Company is
a party or by which it is bound obligating any Target Company to issue, deliver
or sell, or repurchase, redeem or otherwise acquire, any equity securities,
partnership interests or other ownership interests of any Target Company or
obligating any Target Company to grant, extend, accelerate the vesting of or
enter into any such subscription, option, warrant, equity security, call, right
or Contract. There are no registration rights, and there is no voting trust,
proxy, rights agreement, “poison pill” anti-takeover plan or other Contract to
which any Target Company is a party or by which it is bound with respect to any
equity security of any class of the Company or any equity security, partnership
interest or other ownership interest of any class of any other Target Company.
     2.4      Authority; Non-Contravention.
               (a)      The Company has all requisite corporate power and
authority to enter into this Agreement and the Escrow Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by the Company of this Agreement and the Escrow Agreement and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Company, subject only to obtaining the Required Stockholder Vote for the
adoption and approval of this Agreement and the Merger, and the filing of the
Articles of Merger pursuant to the BCA. The Required Stockholder Vote is
sufficient for the Company’s stockholders to approve and adopt this Agreement
and approve the Merger, and no other approval of any holder of any securities of
the Company is required in connection with the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery of this
Agreement by Parent, Merger Sub, the Company Stockholders and the Company
Stockholder Representative, constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally and general principles of equity. Assuming the due
authorization, execution and delivery of the Escrow Agreement by Parent, Merger
Sub, the Escrow Agent and the Company Stockholder Representative, the Escrow
Agreement, when executed and delivered by the Company, will constitute the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms,

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except as enforceability may be limited by bankruptcy and other similar laws
affecting the rights of creditors generally and general principles of equity.
               (b)      The execution and delivery by the Company of this
Agreement and the Escrow Agreement do not, and the performance by the Company of
this Agreement and the Escrow Agreement will not, (i) conflict with or violate
the Company Charter Documents, (ii) subject to compliance with the requirements
set forth in Section 2.4(c), conflict with or violate any Legal Requirement
applicable to any Target Company or by which any Target Company or any of its
material properties or assets is bound or affected, or (iii) except as set forth
in Part 2.4(b) of the Company Disclosure Schedule, result in any material breach
of or constitute a material default (or an event that with notice or lapse of
time or both would become a material default) under, or materially impair a
Target Company’s rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of any Target Company pursuant to, any material Contract to
which any Target Company is a party or by which any Target Company or its
properties or assets are bound or affected, except as set forth in Part 2.4(b)
of the Company Disclosure Schedule. No consent, waiver or approval of any
Person, nor any notice to any Person, is required to be obtained or made under
any Contract to which any Target Company is a party or by which any Target
Company or any of its properties or assets is bound or affected in connection
with the execution and delivery by the Company of this Agreement or the
performance of this Agreement by the Company, except for such consents, waivers,
approvals and notices as have duly been obtained.
               (c)      No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or other
Person, is required to be obtained or made by the Company in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for the filing of the Articles of Merger with the
Secretary of State of the State of Oregon and appropriate documents with the
relevant authorities of other states in which the Company is qualified or
licensed to do business.
     2.5      Financial Statements.
               (a)      Part 2.5 of the Company Disclosure Schedule includes
complete and correct copies of (i) the unaudited consolidated balance sheet and
statement of income of the Company as of December 31, 2007 and for the six
months ended December 31, 2007 and (ii) the consolidated balance sheets and
statements of income, stockholders’ equity and cash flows of the Company as of
June 30, 2006 and 2007 and for the fiscal years ended 2006 and 2007, together
with the unqualified audit report thereon of the Company Auditors. Collectively,
the financial statements referred to in the immediately preceding sentence are
sometimes referred to herein as the “Company Financial Statements” and the
balance sheet of the Company as of December 31, 2007 is sometimes referred to
herein as the “Company Balance Sheet.” Each of the Company Financial Statements
(x) was prepared in accordance with GAAP, applied on a consistent basis
throughout the periods involved, and (y) fairly presents the consolidated
financial position of the Target Companies as at the respective dates thereof
and the consolidated results of the Target Companies’ operations and cash flows
for the periods indicated, except that the unaudited Company Financial
Statements may not contain all the footnotes required by GAAP, and were or

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are subject to normal and recurring year-end adjustments that the Company does
not reasonably expect to be material, individually or in the aggregate.
               (b)      The Company has not been notified by any accountant that
such accountant has formed the conclusion that any of the Company Financial
Statements should be restated, that the Company should modify its accounting for
any period, or that the Company has any material weakness or significant
deficiency in its internal control over financial reporting.
     2.6      No Undisclosed Liabilities. No Target Company has any liabilities
(absolute, accrued, contingent or otherwise), except for (a) liabilities and
obligations shown on the Company Balance Sheet, (b) liabilities and obligations
incurred since the date of the Company Balance Sheet in the ordinary course of
business consistent with past practice and not material in the aggregate,
(c) liabilities and obligations disclosed in this Agreement or the Company
Disclosure Schedule, and (d) contingent liabilities not required under GAAP to
be reflected on the Company Balance Sheet and not material in the aggregate.
Except as set forth in Part 2.6 of the Company Disclosure Schedule, the Target
Companies do not have any material off-balance sheet arrangements as defined in
Item 303(a)(4)(ii) of Regulation S-K promulgated by the United States Securities
and Exchange Commission.
     2.7      Absence of Certain Changes or Events.
               (a)      Since the date of the Company Balance Sheet, there has
not been: (i) any occurrence that has had, or that may reasonably be expected to
have, a Company Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of any Target Company’s capital stock, or any
purchase, redemption or other acquisition by any Target Company of any Target
Company’s capital stock or any other securities of any Target Company or any
grant or issuance of any options, warrants, calls or rights to acquire any such
shares or other securities, (iii) any split, combination or reclassification of
any Target Company’s capital stock, (iv) any granting by any Target Company of
any increase in compensation or fringe benefits to any directors, officers,
employees or consultants of any Target Company, or any payment by any Target
Company of any bonus to any directors, officers, employees or consultants of any
Target Company, (v) any acquisition, sale or transfer of any material asset by
any Target Company other than software licenses granted by the Company to
customers in the ordinary course of business and consistent with past practice,
(vi) any change by any Target Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, (vii) any material
revaluation by any Target Company of any of its assets, including writing off
notes or accounts receivable, (viii) any granting by any Target Company of any
increase in severance or termination pay, (ix) any cancellation or termination
of any development, licensing, distribution, sales, services or other similar
Contract with respect to any Intellectual Property Rights (as defined in
Section 2.10), except by the Company in the ordinary course of business
consistent with past practice, (x) any cancellation, compromise, waiver or
release of any right or claim (or series of rights or claims) involving more
than $20,000, (xi) any material damage, destruction or loss (whether or not
covered by insurance) to any property or assets material to the conduct of the
business of any Target Company; (xii) any creation of any Encumbrance on any of
the property or assets of any Target Company, (xiii) any capital expenditure in
excess of $10,000, (xiv) any creation of any indebtedness for borrowed money in
excess of $10,000, other

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than bridge financing permitted by Section 6.6(b), (xv) any entering into,
amendment, modification, cancellation or termination of any material Contract
other than in the ordinary course of business consistent with past practice or
(xvi) entering into any Contract to do any of the foregoing.
     2.8      Taxes.
               (a)      Each Target Company has filed all Tax Returns that it
was required to file under applicable Legal Requirements. All such Tax Returns
were correct and complete in all material respects and were prepared in
substantial compliance with all applicable Legal Requirements. All Taxes due and
owing by any Target Company (whether or not shown on any Tax Return) have been
paid. No Target Company is currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by a
Governmental Entity in a jurisdiction where a Target Company does not file Tax
Returns that such Target Company is or may be subject to taxation by that
jurisdiction. There are no liens for Taxes (other than Taxes not yet due and
payable) upon any of the assets of any Target Company.
               (b)      Each Target Company has withheld and paid all Taxes
required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
               (c)      No foreign, federal, state, or local tax audits or
administrative or judicial Tax proceedings are pending or, to the Company’s
Knowledge, being contemplated with respect to any Target Company. No Target
Company has received from any foreign, federal, state, or local Governmental
Entity (including jurisdictions where such Target Company has not filed Tax
Returns) any (i) written notice indicating an intent to open an audit or other
review, (ii) request for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any Governmental Entity against any Target Company. Part 2.8(c) of
the Company Disclosure Schedule lists all foreign, federal, state and local
income Tax Returns filed with respect to any Target Company for taxable periods
ended on or after June 30, 2002, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of an
audit. The Company has delivered to Parent correct and complete copies of all
such Tax Returns and all examination reports, and statements of deficiencies
assessed against or agreed to by any Target Company since July 1, 2002.
               (d)      No Target Company has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
               (e)      Except as set forth in Part 2.8(e) of the Company
Disclosure Schedule, no Target Company is a party to any contract or plan that
would result, separately or in the aggregate, in the payment of (a) any “excess
parachute payment” within the meaning of Code Section 280G (or any corresponding
provision of state, local or foreign Tax law) or (a) an amount that would not be
deductible pursuant to Code Section 162(m).
               (f)      No Target Company has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified

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in Code Section 897(c)(1)(A)(ii). Each Target Company has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662. No Target Company is a party to or bound by any Tax allocation or
sharing Contract. No Target Company (A) has been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was the Company) or (B) has any liability for the Taxes of any
Person (other than any Target Company) under Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise.
               (g)      To the Company’s knowledge, Part 2.8(g) of the Company
Disclosure Schedule sets forth the following information with respect to each
Target Company (or, in the case of clause (B) below, with respect to each of the
Company’s Subsidiaries) as of the most recent practicable date (but not earlier
than June 30, 2007) (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions contemplated
hereby): (A) the basis of the Target Company in its assets; (B) the basis of the
Company in the stock of each Subsidiary (or the amount of any excess loss
account); (C) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable to each Target Company; and (D) the amount of any
deferred gain or loss allocable to each Target Company arising out of any
intercompany transaction.
               (h)      The unpaid Taxes of the Target Companies (A) did not, as
of the date of the Company Balance Sheet, exceed the reserve for Tax liability
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Company
Balance Sheet (rather than in any notes thereto) and (B) will not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Target Companies in filing
their Tax Returns. Since the date of the Company Balance Sheet, no Target
Company has incurred any liability for Taxes other than in the ordinary course
of business consistent with past practice.
               (i)      No Target Company will be required to include any item
of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of
any:
                    (i)      change in method of accounting for a taxable period
ending on or prior to the Closing Date;
                    (ii)     “closing agreement” as described in Code
Section 7121 (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date;
                    (iii)    intercompany transaction or excess loss account
described in Treasury Regulations under Code Section 1502 (or any corresponding
or similar provision of state, local or foreign income Tax law);
                    (iv)     installment sale or open transaction disposition
made on or prior to the Closing Date; or
                    (v)      prepaid amount received on or prior to the Closing
Date.

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               (j)      No Target Company has distributed stock of another
Person, or has had its stock distributed by another Person, in a transaction
that was purported or intended to be governed in whole or in part by Code
Section 355 or Code Section 361.
               (k)      No Target Company has engaged in any transaction that
constitutes a “listed transaction,” “reportable transaction” or substantially
similar transaction as described under Section 6011 of the Code and Treasury
regulations promulgated thereunder.
               (l)      No Target Company is party to or has any obligation
under any Tax sharing, Tax indemnity or Tax allocation agreement or any similar
contract or arrangement, whether or not written.
               (m)      No Target Company owns any interest in an entity
characterized as a partnership for federal income Tax purposes.
               (n)      No Target Company is or ever has been a party to a
transaction or contract that is in conflict with the Tax rules on transfer
pricing in any relevant jurisdiction.
               (o)      None of the assets of any Target Company (a) is
“tax-exempt use property” within the meaning of Code Section 168(h),
(b) directly or indirectly secures any debt the interest on which is Tax exempt
under Code Section 103(a) or (c) is subject to a lease under Code Section
7701(h) or under any predecessor section.
     2.9      Title to Properties.
               (a)      No Target Company holds any interest in real property,
other than the leaseholds described in Part 2.9 of the Company Disclosure
Schedule (such property being the “Leased Real Property”). Part 2.9 of the
Company Disclosure Schedule lists all real property leases (including
underleases, serviced office Contracts and any licenses, consents and approvals
required from the landlords and any superior landlords with respect to any such
lease) to which any Target Company is a party and each amendment thereto. All
such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that would give rise to a
claim against any Target Company in excess of $10,000. Such leases permit the
current occupation and use of such real property by the Target Companies. The
Leased Real Property comprises all the real property occupied or otherwise used
by the Target Companies.
               (b)      Each Target Company has good and marketable title to,
or, in the case of leased properties and assets, valid leasehold interests in,
all of its material tangible properties and assets, real, personal and mixed,
used or held for use in its business, free and clear of any Encumbrances except
for liens for Taxes not yet due and payable and such Encumbrances, if any, which
are not, individually or in the aggregate, material in character, amount or
extent. The Leased Real Property is free of any tenancy, sub-tenancy, license or
other Contract entitling a person other than the Target Companies to occupy the
whole or any part. There are no outstanding actions, disputes, claims or demands
between any Target Company and any third party affecting the Leased Real
Property or any neighboring property or any boundary walls and fences, or with
respect to any easement, right or means of access to the Leased Real Property.

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To the Knowledge of the Company, there is no resolution, proposal, scheme or
order, whether or not formally adopted, that would materially interfere with the
use or occupation of, or access to, the Leased Real Property by the Target
Companies.
               (c)      All of the tangible properties and assets of the Target
Companies are in adequate operating condition to conduct the operations of the
Target Companies in substantially the same manner as currently conducted.
               (d)      Except as set forth in the leases set forth in Part 2.9
of the Company Disclosure Schedule, no Target Company has any material
liability, actual or contingent, arising directly or indirectly out of any
Contract, underlease, tenancy, conveyance, transfer or any other deed or
document relating to real property or to any estate or interest in real property
entered into by any Target Company including any actual or contingent liability
arising directly or indirectly out of (i) any estate or interest held by any
Target Company as original lessee or underlessee; (ii) any guarantee given by
any Target Company in relation to a lease or underlease; or (iii) any other
covenant made by any Target Company in favor of any lessor or head lessor.
     2.10    Intellectual Property.
               (a)      For purposes of this Agreement, “Intellectual Property
Rights” shall mean all intellectual property rights anywhere in the world held
or used (whether or not owned) by any Target Company in the conduct of its
business, including: (i) all trademarks, service marks, trade names, Internet
domain names, trade dress, and the goodwill associated therewith, and all
registrations or applications for registration thereof (collectively, the
“Company Marks”); (ii) all patents, patent applications and continuations,
industrial design registrations and applications therefor (collectively, the
“Company Patents”); (iii) all copyrights, database rights and moral rights in
both published works and unpublished works, including all such rights in
software, user and training manuals, marketing and promotional materials,
websites, internal reports, business plans and any other expressions, mask
works, firmware and videos, whether registered or unregistered, and all
registrations or applications for registration thereof (collectively, the
“Company Copyrights”); and (iv) trade secret and confidential information,
including such rights in inventions (whether or not reduced to practice),
know-how, customer lists, technical information, proprietary information,
technologies, processes, formulae, software, data, plans, drawings and blue
prints, whether tangible or intangible and whether stored, compiled, or
memorialized physically, electronically, photographically or otherwise
(collectively, the “Company Secret Information”). For purposes of this
Section 2.10, “software” shall mean any and all: (w) computer programs and
applications, including any and all software implementations of algorithms,
models and methodologies, whether in source code or object code, (x) databases
and compilations, including any and all data and collections of data, whether
machine readable or otherwise, (y) descriptions, flow-charts, library functions,
algorithms, architecture, structure, display screens and development tools, and
other information, work product or tools used to design, plan, organize or
develop any of the foregoing and (z) all documentation, including user manuals
and training materials, relating to any of the foregoing. For purposes of this
Section 2.10, “exclusively licensed” shall mean licensed or entitled to use
pursuant to a Contract that imposes any restriction (whether by territory,
field, market, period of time or other criterion) on the licensor’s right to
use, or grant licenses to third parties with respect to, any Intellectual
Property Right in connection with the Contract.

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               (b)      Part 2.10 (b) of the Company Disclosure Schedule
contains a true, complete and correct list of: (i) all the software that any
Target Company licenses or has licensed or otherwise makes or has made available
to customers, including all modules, components, add-ons and other options,
(ii) each item of third-party software that constitutes or has constituted an
element of any of the software that any Target Company licenses or has licensed
or otherwise makes or has made available to customers, including all modules,
components, add-ons and other options (iii) each license or other Contract with
respect to each such item of third-party software, and (iv) all other
third-party software used by any Target Company (including Commercially
Available Software) and indicates each license or other Contract with respect to
such third-party software (other than Commercially Available Software). For
purposes of this Section 2.10, “third party software” means any software in
which all Intellectual Property Rights are not owned by the Company or another
Target Company.
               (c)      The Company or another Target Company: (i) owns all
right, title and interest in and to the Intellectual Property Rights, free and
clear of all Encumbrances (other than licenses to customers of any Target
Company required to be disclosed (or specifically exempted from disclosure)
pursuant to Section 2.16(e) and distribution and reseller Contracts required to
be disclosed (or specifically exempted from disclosure) pursuant to
Section 2.16(f)), or (ii) is licensed to use, or otherwise possesses legally
valid and enforceable rights to use, the Intellectual Property Rights that it
does not so own. With respect to (i) each registered Company Mark, (ii) each
material unregistered Company Mark, (iii) each Company Patent and (iv) each
registered Company Copyright, Part 2.10(c) of the Company Disclosure Schedule
sets forth (A) a complete and correct list of each of the foregoing which is
owned by the Company or another Target Company (which list identifies the owner
thereof), (B) a complete and correct list of each of the foregoing which is
exclusively licensed to the Company or another Target Company (which list
identifies the applicable license or other Contract and the licensee or
entitlement holder), and (C) a complete and correct list of each of the
foregoing which is material to any product, service or operation of the Company
and which the Company or another Target Company is licensed or otherwise
entitled to use (which list identifies the applicable license or other Contract
and the licensee or entitlement holder). The Target Companies have made all
necessary filings, recordations and payments to maintain their interests in the
Intellectual Property Rights owned or licensed (but, with respect to
Intellectual Property Rights not exclusively licensed to Target Companies, only
to the extent that such filing, recordation or payment obligations are imposed
by the license or other Contract therefor) by any Target Company, except where
the omission to make such a filing or recordation (but not payment) can be cured
without undue effort or expense and without material prejudice to the Target
Company, except to the extent that the Company has made a business judgment
prior to the date of this Agreement not to continue to register or maintain (or
prosecute applications for) patents, registered copyrights, registered
trademarks or registered service marks which are not currently used by any
Target Company. None of the products, services or technology developed, used,
sold, offered for sale or licensed or proposed for development, use, sale, offer
for sale or license by any Target Company infringes, violates, passes off on or
otherwise misuses or has infringed, violated, passed off on or otherwise misused
any copyright, trade secret, trademark or service mark or, to the Company’s
Knowledge, any patent rights or other intellectual property rights, of any
Person. Except as set forth in Part 2.10(c) of the Company Disclosure Schedule,
the Company has received no written notice of any claim that any of the
products, services or technology developed, used, sold, offered for sale or
licensed or proposed for development, use, sale, offer for sale or license by
any Target Company

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infringes, violates, passes off on or otherwise misuses or has infringed,
violated, passed off on or otherwise misused any intellectual property rights of
any third party. Except as set forth in Parts 2.10(c) or 2.10(n) of the Company
Disclosure Schedule, no Target Company requires or has required any copyrights,
patents, trade secrets, trademarks, service marks or other intellectual property
rights of any third party in order to develop, use, sell, offer for sale or
license its products or services or in relation to the processes employed by the
Target Companies in connection with the operation of their respective businesses
substantially as conducted to date, other than commercially available
intellectual property rights that are not material in amount or expense.
               (d)      All the issued Company Patents owned by or exclusively
licensed to any Target Company are subsisting and the Company has no Knowledge
of any facts that could form a reasonable basis to conclude that any such
Company Patents are not valid. To the Company’s Knowledge, (i) all the material
issued Company Patents not owned by or exclusively licensed to any Target
Company are valid and subsisting, (ii) if and when the Company Patents owned by
any Target Company that have not been issued are so issued, such Company Patents
will be valid and subsisting, (iii) none of the issued Company Patents owned by
or exclusively licensed to any Target Company is being or has been infringed,
(iv) none of the material issued Company Patents not owned by or exclusively
licensed to any Target Company is being or has been infringed, (v) none of the
Company Patents owned by or exclusively licensed to any Target Company that have
not been issued would have been infringed had they been issued, and (vi) neither
the validity nor the enforceability of any of the foregoing has been challenged
by any Person.
               (e)      All the Company Marks owned by or exclusively licensed
to any Target Company are subsisting and are valid. To the Company’s Knowledge,
(i) all of the material Company Marks not owned by or exclusively licensed to
any Target Company are valid and subsisting, (ii) none of the Company Marks
owned by or exclusively licensed to any Target Company is being or has been
infringed, violated, passed off on or otherwise misused or diluted, (iii) none
of the material Company Marks not owned by or exclusively licensed to any Target
Company is being or has been infringed, violated, passed off on or otherwise
misused or diluted, (iv) none of the Company Marks is being or has been opposed
or challenged, and (v) no proceeding has been commenced or threatened or is
reasonably anticipated that would seek to prevent the use by any Target Company
of any such Company Mark.
               (f)      All the Company Copyrights, whether or not registered,
owned by or exclusively licensed to any Target Company are valid and, once
registered, enforceable. To the Company’s Knowledge, (i) all the material
Company Copyrights, whether or not registered, not owned by or exclusively
licensed to any Target Company, are valid and, once registered, enforceable,
(ii) none of the Company Copyrights owned by or exclusively licensed to any
Target Company is being or has been infringed, and the validity of such Company
Copyrights is not being and has not been challenged or threatened in any way,
(iii) none of the material Company Copyrights not owned by or exclusively
licensed to any Target Company is being or has been infringed, and the validity
of such Company Copyrights is not being and has not been challenged or
threatened in any way, and (iv) no proceeding has been commenced or threatened
or is reasonably anticipated that would seek to prevent the use by any Target
Company of any

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such Company Copyright. No Person has any moral rights in any of the
Intellectual Property Rights owned by any Target Company.
               (g)      The Target Companies have taken commercially reasonable
measures to protect the secrecy, confidentiality and value of the Company Secret
Information, consistent with prevailing practices in the software industry
sector in which the Target Companies operate. To the Company’s Knowledge, no
Company Secret Information has been: (i) used by any third party, or divulged to
any third party, except in the ordinary course of business of Target Companies
pursuant to written and binding provisions designed to protect the
confidentiality of the Company Secret Information; or (ii) used, divulged or
appropriated for the benefit of any Person (other than any Target Company) or
otherwise misappropriated.
               (h)      No Intellectual Property Right is subject to any
outstanding order, proceeding (other than pending proceedings pertaining to
uncontested applications for patent, trademark or copyright registration) or
stipulation that restricts in any manner the licensing thereof by any Target
Company; provided that, in the case of Intellectual Property Rights licensed to
the Company, such representation is made to the Company’s Knowledge.
               (i)      To the Company’s Knowledge, none of the present or
former employees or consultants engaged in the development of Intellectual
Property Rights (including software) or in performing sales and marketing
functions on behalf of any Target Company is or was obligated under any Contract
with any third party which conflicts or did conflict with such employee’s or
consultant’s rights to develop Intellectual Property Rights (including software)
or engage in such sales and marketing functions on behalf of any Target Company.
               (j)      Except as set forth in Part 2.10(j) of the Company
Disclosure Schedule, all present and former contractors, agents and consultants
of each Target Company who are or were involved in the creation of any of the
Intellectual Property Rights on behalf of a Target Company, and all present and
former employees of each Target Company, have executed an assignment of
inventions agreement to vest in the Company or its Subsidiary, as appropriate,
exclusive ownership of the Intellectual Property Rights so created by them, and
such assignment includes a complete, perpetual and irrevocable waiver of moral
rights by all authors of any applicable Company Copyrights, to the extent
allowed by applicable law. Without limiting the generality of the foregoing,
Bruce D’Ambrosio has assigned to the Company each of the patents identified in
Part 2.10(j) of the Company Disclosure Schedule, and each such assignment has
been recorded at the United States Patent and Trademark Office and in each other
location necessary so as to vest in the Company exclusive ownership of such
patents. All present and former contractors, agents and consultants of each
Target Company who have or have had access to Company Secret Information, and
all present and former employees of any Target Company, have executed
nondisclosure agreements to protect the confidentiality of Company Secret
Information.
               (k)      Without limiting the generality of the foregoing, all
the software that any Target Company licenses or licensed or otherwise makes or
made available to customers was: (i) developed by employees of a Target Company
within the scope of their employment and subject to their obligation to assign
inventions and patents therein; or (ii) developed by independent contractors or
consultants who assigned all of their right, title and interest in and to

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that software to the Company; or (iii) otherwise acquired or licensed by the
Company from a third party by a Contract that is disclosed in Part 2.10(c) of
the Company Disclosure Schedule or under an Open Source license listed in
Part 2.10(n) of the Company Disclosure Schedule, and in each case under clauses
(i) and (ii) complete, perpetual and irrevocable waivers of moral rights were
obtained from all authors of such software, to the extent allowed by applicable
law.
               (l)      No funding or grant provided to any Target Company by
any Government Entity or other third party has affected or will affect, in any
manner, the Intellectual Property Rights, and no such Government Entity or other
third party has any right, title or interest in the Intellectual Property
Rights.
               (m)      All material Contracts relating to the Intellectual
Property Rights to which a Target Company is a party are in full force and
effect, except such as have expired naturally at the end of their terms and are
not material to the Company and are enforceable by the Target Company party to
such Contract. The consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination, or suspension of any such Contract. Each Target
Company is in material compliance with, and has not materially breached any term
of any of such Contracts, and, to the Company’s Knowledge, all other parties to
such Contracts are in compliance in all material respects with, and have not
materially breached any term of, such Contracts. Following the Closing Date, the
Surviving Corporation and its Subsidiaries will be permitted to exercise all of
the rights of the Target Companies under such Contracts to the same extent the
Target Companies would have been able to had the transactions contemplated by
this Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Target
Companies would otherwise have been required to pay.
               (n)      Part 2.10(n) of the Company Disclosure Schedule lists
all Open Source Materials (as defined below) used by any Target Company in any
way, and describes the manner in which such Open Source Materials have been or
are currently used. Such description includes whether (and, if so, how) the Open
Source Materials were embedded, linked (including dynamic linking), modified
and/or distributed by any Target Company and whether and the extent to which
each of the Open Source Materials was used to develop, distribute or design any
Target Company products to link with (including dynamic linking at runtime) or
access in any way (whether by calls, execution branching, interprocess control
or other technique of any kind whatsoever) any Open Source Materials. Except as
set forth in Part 2.10(n) of the Company Disclosure Schedule, the Target
Companies have not (i) incorporated Open Source Materials into, or combined Open
Source Materials with, any Intellectual Property Rights or any Target Company
products, (ii) distributed Open Source Materials in conjunction with any
Intellectual Property Rights or any Target Company products or (iii) used Open
Source Materials that create, or purport to create, obligations for any Target
Company with respect to Intellectual Property Rights or any Target Company
products or grant, or purport to grant, to any third party, any rights or
immunities under Intellectual Property Rights (including using any Open Source
Materials that require, as a condition of use, modification and/or distribution
of such Open Source Materials that other software incorporated into, derived
from or distributed with such Open Source Materials be (A) made available or
distributed in source code form; (B) licensed for the purpose of making
derivative works; (C) licensed under terms that allow reverse engineering,
reverse assembly or disassembly of any kind; or (D) redistributable at no
charge). No

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Intellectual Property Right or Company product is subject to the terms of
license of any such Open Source Materials. Except as set forth in Part 2.10(n)
of the Company Disclosure Schedule, no Target Company has used Program Code (as
defined below) that includes the Linux kernel version 2.4 or any later version.
“Open Source Materials” means any software, library, utility, tool or other
computer or program code (collectively, “Program Code”) that is licensed or
distributed as “free software”, “freeware”, “open source software” or under any
terms or conditions that impose any requirement that any software using, linked
with, incorporating, distributed with, based on, derived from or accessing
Program Code: (i) be made available or distributed in source code form; (ii) be
licensed for the purpose of making derivative works; (iii) be licensed under
terms that allow reverse engineering, reverse assembly or disassembly of any
kind; or (iv) be redistributable at no charge. Open Source Materials shall
include any Program Code licensed or distributed under any of the following
licenses or distribution models or similar licenses or distribution models: the
GNU General Public License (GPL), GNU Lesser General Public License or GNU
Library General Public License (LGPL), Mozilla Public License (MPL), BSD
licenses, the Artistic License, the Netscape Public License, the Sun Community
Source License, (SCSL), the Sun Industry Standards License (SISL) and the Apache
License. The Target Companies have fully complied with the terms on which Open
Source Materials have been licensed to the Target Companies. No Target Company
has used or distributed Open Source Materials, or incorporated Open Source
Materials into any Target Company proprietary software products, in such a
manner that would require that any Target Company proprietary software products
be (A) made available or distributed in source code form; (B) licensed for the
purpose of making derivative works; (C) licensed under terms that allow reverse
engineering, reverse assembly or disassembly of any kind; or (D) redistributed
or redistributable at no charge.
               (o)      Part 2.10(o) of the Company Disclosure Schedule lists
each item of Commercially Available Software used by the Company for which the
aggregate fees have exceeded, or are reasonably expected to exceed, $2,500 per
year or $10,000 for a perpetual license (regardless of the number of sites,
users, seats, installed CPUs or other measurement criteria).
               (p)      Part 2.10(p) of the Company Disclosure Schedule lists
all Government Contracts in connection with which Intellectual Property Rights
have or may have been developed, conceived or reduced to practice by any Target
Company while performing any services for the United States Government or any
governmental authority, including, without limitation, the National Institutes
of Health, the National Science Foundation or the Department of Defense
(“Government-Supported IP”), and identifies as such any Government-Supported IP
that is used or included in or is material to the use of the Company’s
recommendation engine or its hosted recommendation services CleverSet
recommendation engine or its hosted recommendation services (including its
CleverSet Modeler software and CleverSet Tracker software, as identified in
Part 2.10(b) of the Company Disclosure Schedule) (“Critical Government-Supported
IP”). Except as provided in Part 2.10(p) of the Company Disclosure Schedule, all
Target Companies have elected to take title to any Company Patents within the
Government-Supported IP in accordance with the requirements of all applicable
contracts, regulations and laws, and have made all required disclosures and
filings in connection therewith in order to maintain and protect the Target
Company’s ownership of all right, title and interest in and to the Company
Patents within the Government-Supported IP. All Target Companies have taken all
reasonable steps to limit the disclosure by the United States Government or any

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governmental authority of any Company Secret Information within the
Government-Supported IP to the maximum extent possible under applicable
contracts, regulations and law, including without limitation by marking all such
Company Secret Information with restrictive legends. All Target Companies have
taken reasonable steps to limit the disclosure by the United States Government
or any governmental authority of any Company software or technical data within
the Government-Supported IP to the maximum extent possible under applicable
contracts, regulations and law, including without limitation by asserting
appropriate restrictions and marking all such Company software and technical
data with restrictive legends, and any rights retained by the United States
Government or any governmental authority to disclose or license to others any
such Company software or technical data are not such as could reasonably be
expected to have a Company Material Adverse Effect.
     2.11    Compliance with Laws.
               (a)      Since January 1, 2003, no Target Company has been in
conflict with, or in default or violation of (i) any material Legal Requirement
applicable to such Target Company or by which such Target Company or any of its
properties or assets was or is bound or affected, or (ii) any material Contract
to which such Target Company was or is a party or by which such Target Company
or any of its properties or assets was or is bound or affected. No investigation
or review by any Governmental Entity is pending or, to the Company’s Knowledge,
has been threatened or is reasonably anticipated against any Target Company,
nor, to the Company’s Knowledge, has any Governmental Entity indicated an
intention to conduct an investigation of any Target Company. There is no
Contract, judgment, injunction, order or decree binding upon any Target Company
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of any Target Company, any
acquisition of material property by any Target Company or the conduct of
business by any Target Company as currently conducted.
               (b)      The Target Companies hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities that are
material to or required for the operation of the business of the Target
Companies as currently conducted (collectively, the “Company Permits”). The
Target Companies are in compliance, in all material respects, with the terms of
the Company Permits. Without limiting the generality of the foregoing, each
Target Company possesses all facility and personnel security clearances required
by any Government Entity for the performance of any contract between the Target
Company and such Government Entity, and the consummation of the Merger and of
the other transactions contemplated hereby will not constitute a breach or
default under or otherwise adversely affect any such security clearance.
     2.12    Litigation. Except as disclosed in Part 2.12 of the Company
Disclosure Schedule, there are no claims, suits, actions or proceedings pending
or, to the Company’s Knowledge, threatened against, relating to or affecting any
Target Company, before any Governmental Entity or any arbitrator. No
Governmental Entity has at any time challenged or questioned in a writing
delivered to any Target Company the legal right of any Target Company to design,
offer or sell any of its products or services in the present manner or style
thereof or otherwise to conduct its business as currently conducted or that
otherwise has had or is reasonably likely to have a Company Material Adverse
Effect. To the Company’s Knowledge,

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no event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that would reasonably be expected to, cause or provide a
bona fide basis for a director or executive officer of any Target Company to
seek indemnification from any Target Company.
     2.13    Employee Benefit Plans.
               (a)      Part 2.13(a) of the Company Disclosure Schedule contains
an accurate and complete list of each Company Employee Plan and each Employee
Agreement, including a list of each document comprising or embodying any
material part thereof or relating thereto, and each staff handbook or written
employment policies for each Target Company. Except as disclosed in Part 2.13(a)
of the Company Disclosure Schedule, no Target Company is paying compensation or
other payment to any former Employee (or relative or dependent) or former
consultant.
               (b)      The Company has made available to Parent accurate and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the IRS, the most recent annual report
(Form 5500, with all applicable attachments), and all related trust, insurance
and other funding Contracts that implement each Company Employee Plan (to the
extent applicable), and all documents embodying each Employee Agreement.
               (c)      Each of the Company and its ERISA Affiliates has
performed in all material respects all obligations required to be performed by
it under, is not in default or violation of, and the Company has no Knowledge of
any default or violation by any other party to, each Company Employee Plan or
Employee Agreement, and each Company Employee Plan has been maintained, funded
and administered in all material respects in accordance with its terms and in
compliance in form and in operation with all applicable Legal Requirements
(including ERISA and the Code), including the maintenance of reasonably accurate
records. Each Company Employee Plan that is intended to meet the requirements of
a “qualified plan” under Section 401(a) of the Code has received a written
determination, advisory or opinion letter from the IRS that such Company
Employee Plan is so qualified, and nothing has occurred since the date of such
determination or letter that could reasonably be expected to adversely affect
the qualified status of such plan. No “prohibited transaction,” within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Company Employee Plan. There are no actions, suits, claims, proceedings or
investigations pending, or, to the Company’s Knowledge, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan and, to the Knowledge of the Company, there are no facts or
circumstances which may give rise to any such action, suit, claim, proceeding or
investigation. Each Company Employee Plan can be amended, terminated or
otherwise discontinued either before or after the Effective Time in accordance
with its terms, without liability to Parent, the Surviving Corporation, the
Company or any of their ERISA Affiliates (other than ordinary administration
expenses typically incurred in a termination event and payment of benefits
pursuant to such Company Employee Plan). Except as set forth in Part 2.13(c) of
the Company Disclosure Schedule, all contributions due from the Company or any
ERISA Affiliate with respect to any of the Company Employee Plans have been made
as required under ERISA or have been accrued on the Company Balance Sheet and no
further contributions will be due or will have accrued thereunder as of the
Closing Date.

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               (d)      Neither any Target Company nor any ERISA Affiliate
contributes to, has any obligation to contribute to, or has any liability under
or with respect to any Pension Plan which is subject to Title IV of ERISA or
Section 412 of the Code.
               (e)      Neither any Target Company nor any ERISA Affiliate
contributes to, has any obligation to contribute to, or has any liability
(including withdrawal liability as defined in ERISA Section 4201) under or with
respect to any Multiemployer Plan.
               (f)      No Company Employee Plan or Employee Agreement provides,
or has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any Person for any reason, except as may be
required by COBRA, Part 6 of Title I of ERISA or other applicable statute.
               (g)      Neither the Company nor any ERISA Affiliate has in any
material respect violated any of the health care continuation requirements of
COBRA, the requirements of FMLA or any similar provisions of law applicable to
any Employees.
               (h)      The execution of this Agreement and the consummation of
the transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Company Employee Plan, Employee Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, loss of rights, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
               (i)      Each Company Employee Plan required to be listed in
Part 2.13(a) of the Company Disclosure Schedule that is a “nonqualified deferred
compensation plan” (as defined in Section 409A(d)(1) of the Code) and was in
existence prior to October 3, 2004, has not been “materially modified” (within
the meaning of Section 885(d)(2)(B) of the American Jobs Creation Act of 2004
and any applicable guidance issued thereunder) since October 3, 2004, in a
manner which would cause amounts deferred in taxable years beginning before
January 1, 2005, under such plan to be subject to Section 409A of the Code. Each
Company Employee Plan required to be listed in Part 2.13(a) of the Company
Disclosure Schedule that is a “nonqualified deferred compensation plan” (as
defined in Section 409A(d)(1) of the Internal Revenue Code) and which has not
been terminated has been operated since January 1, 2005 in good faith compliance
with the provisions of Section 409A of the Code, Notice 2005-1 and the proposed
regulations issued under Section 409A.
     2.14    Employment Matters.
               (a)      Each Target Company: (i) is in compliance in all
material respects with all applicable Legal Requirements respecting employment,
employment practices, immigration, terms and conditions of employment and wages
and hours; (ii) has withheld all amounts required by any Legal Requirement or by
Contract to be withheld from the wages, salaries and other payments to
Employees; (iii) has properly classified independent contractors for purposes of
all applicable Legal Requirements; (iv) is not liable for any arrears of wages
or any Taxes (other than wages (and Taxes thereon) which have accrued in the
ordinary course of business but which are not yet payable) or any penalty for
failure to comply with any of the foregoing; and (v) is not

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liable for any payment to any trust or other fund or to any Governmental Entity,
with respect to unemployment compensation benefits, social security,
withholdings or remittances applicable to employee wages, 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, or,
to the Company’s Knowledge, threatened actions, suits, claims or proceedings
against any Target Company under any workers’ compensation policy or long-term
disability policy. To the Company’s Knowledge, no Employee or consultant of any
Target Company has violated any employment, consulting, non-disclosure,
non-competition, non-solicitation or other Contract by which such Employee is
bound (nor any Legal Requirement relating to unfair competition, trade secrets
or proprietary information) as a result of providing services to any Target
Company or disclosing or using any information in connection with such services.
There are no controversies pending or, to the Company’s Knowledge, threatened
between any Target Company and any Employee that would be reasonably likely to
be material to any Target Company. Except as set forth on Part 2.14(a) of the
Company Disclosure Schedule, no Target Company has any Employee Agreement
currently in effect that is not terminable at will by a Target Company without
any payment pursuant thereto or in connection therewith (other than agreements
for the sole purpose of providing for the confidentiality of proprietary
information or assignment of inventions). No Target Company will have any
liability to any Employee or to any other Person as a result of the termination
of any employee leasing Contract.
               (b)      No work stoppage, labor strike, slowdown, lockout or
other labor dispute against any Target Company is pending or, to the Company’s
Knowledge, threatened. No Employee of any Target Company is represented by any
union or other labor organization. The Company has no Knowledge of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
Company’s Knowledge, threatened relating to any labor, safety or discrimination
matters involving any Employee, including charges of unfair labor practices or
discrimination complaints. No Target Company has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. No Target
Company is or has been a party to, or bound by, any collective bargaining or
union Contract with respect to Employees, and no collective bargaining or union
Contract is being negotiated by any Target Company.
               (c)      No Target Company has taken any action that could
constitute a mass layoff, group termination, mass termination, or plant closing
which may trigger notice requirements or liability under any Legal Requirement,
including collective dismissal laws.
     2.15    Environmental Matters.
               (a)      Each Target Company is in compliance in all material
respects with all applicable Environmental Laws. No Target Company has received
any written communication that alleges that any Target Company is not in
compliance with applicable Environmental Laws. To the Knowledge of the Company,
there are no circumstances that may prevent or interfere with compliance by any
Target Company with all applicable Environmental Laws. All Company Permits and
other governmental authorizations currently held by any Target Company pursuant
to any Environmental Law are in full force and effect, the Target Companies are
in compliance in all material respects with all of the terms of such Company
Permits and authorizations, and no other Company Permits or authorizations are
required by any Target Company for the conduct of

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their respective businesses. The management, handling, storage, transportation,
treatment and disposal by the Target Companies of all Environmental Materials
have been in compliance in all material respects with all applicable
Environmental Laws.
               (b)      There is no Environmental Claim pending or, to the
Company’s Knowledge, threatened or reasonably anticipated against or involving
any Target Company or, to the Company’s Knowledge, against any Person whose
liability for any Environmental Claim any Target Company has or may have
retained or assumed either contractually or by operation of law, nor, to the
Company’s Knowledge, is there any circumstance that might form the basis for any
Environmental Claim.
     2.16    Certain Contracts. Except as otherwise set forth in the applicable
lettered subsection of Part 2.16 of the Company Disclosure Schedule, no Target
Company is a party to or is bound by any:
               (a)      Contract any of the benefits of which will be increased,
or the vesting of benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
               (b)      Contract of indemnification (other than indemnification
against infringement of intellectual property rights of third parties on terms
consistent with industry practice that is included in the ordinary course of
business in contracts with the Company’s customers), any guaranty by a Target
Company or any instrument evidencing indebtedness by way of direct loan, sale of
debt securities, purchase money obligation, conditional sale, or otherwise;
               (c)      Contract containing covenants purporting to limit or
which effectively limit any Target Company’s freedom to compete in any line of
business or in any geographic area or which would so limit Parent, the Company
or the Surviving Corporation or any of their respective Subsidiaries after the
Effective Time or granting any exclusive distribution or other exclusive rights;
               (d)      Contract relating to the disposition or acquisition by
any Target Company of assets not in the ordinary course of business, including
by means of any merger, consolidation or the like;
               (e)      Contract with any customer with continuing obligations,
including, without limitation, any requirements to provide professional services
or to do customization or provide platform transfer rights, involving more than
$10,000 in any twelve-month period in any individual case;
               (f)      development, licensing, distribution, resale or other
Contract with regard to the development, acquisition, licensing, distribution or
resale of any Intellectual Property Rights, other than (i) licenses to customers
of any Target Company required to be disclosed (or specifically exempted from
disclosure) pursuant to Section 2.16(e), (ii) Contracts required to be disclosed
pursuant to Section 2.10, and (iii) Contracts under which a Target Company
licenses Commercially Available Software from a third party;

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               (g)      Contract to forgive any indebtedness of any Person to
any Target Company;
               (h)      loan Contract, promissory note or other evidence of
indebtedness for borrowed money;
               (i)      Contract (other than Contracts disclosed pursuant to
Section 2.10) pursuant to which any Target Company (A) uses any intellectual
property of any third party that is material to the operation of its business
(including Commercially Available Software), (B) incorporates any third-party
intellectual property in any of its products; or (C) has granted to any third
party an exclusive license of any Intellectual Property Rights owned by any
Target Company or any license of source code (including customary source code
escrow Contracts entered into in the ordinary course of business);
               (j)      Contract (other than Contracts disclosed pursuant to
Section 2.10) which may obligate any Target Company to make aggregate payments
in excess of $15,000 to any third party during the period from the date of this
Agreement to December 31, 2008;
               (k)      Contract (other than Contracts disclosed pursuant to
Section 2.10) pursuant to which any Target Company (A) reasonably expects to
receive aggregate payments in excess of $50,000 during the period from the date
of this Agreement to December 31, 2008 or (B) reasonably expects to recognize
revenue in such aggregate amount during such period;
               (l)      Contract currently in force providing for capital
expenditures by any Target Company in excess of $10,000;
               (m)      power of attorney or agency Contract;
               (n)      other Contract that cannot be terminated by the Target
Company party thereto within 30 days without any liability or obligation in
excess of $15,000;
               (o)      Contract with any Governmental Entity;
               (p)      other Contract entered into outside the ordinary course
of business or at other than arm’s length; or
               (q)      other Contract currently in effect that is material to
any Target Company’s business as presently conducted or proposed to be
conducted.
     Each Contract that is required to be disclosed in the Company Disclosure
Schedule pursuant to this Section 2.16 or otherwise shall be referred to herein
as a “Company Contract.” Each Company Contract is valid and in full force and
effect in accordance with its terms. No Target Company, nor to the Company’s
Knowledge, any other party thereto, is in breach, violation or default under,
and no Target Company has received written notice alleging that it has breached,
violated or defaulted under, any of the terms or conditions of any Company
Contract in such a manner as would permit any other party thereto to cancel or
terminate any such Company Contract, or would permit any other party to seek
material damages or other remedies for any or all such alleged breaches,
violations, or defaults.

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     2.17    Related-Party Matters. No stockholder, director, officer or
employee of any Target Company (nor, to the Knowledge of the Company, any Person
affiliated or associated with any of the foregoing or in which any of the
foregoing has any interest, nor any Family Member of any of the foregoing) (i)
has any interest, direct or indirect, in (A) any customer, supplier or
competitor of any Target Company, (B) any other Person with whom any Target
Company has a material business relationship (other than any interest arising
solely from the ownership of less than 1% of the publicly traded securities of
any Person), or (C) any Intellectual Property Rights or any other assets or
property, real or personal, tangible or intangible, used in or pertaining to the
business of the Target Companies (other than any interest arising solely through
the ownership of any Company Stock) or (ii) is or was a party to or has or had
any interest, direct or indirect, in any Contract or other transaction with any
Target Company (other than (W) compensation paid to any employee who is not a
director or officer of any Target Company, (X) benefits available generally on
the same terms to all employees of the Target Companies, (Y) grants of options
disclosed in Part 2.2(b) of the Company Disclosure Schedule, and
(Z) reimbursement for reasonable expenses incurred on behalf of any Target
Company).
     2.18    Brokers’ and Finders’ Fees. Other than as set forth in Part 2.18 of
the Company Disclosure Schedule, the Company has not incurred and will not incur
any Transaction Expenses and no Target Company has incurred, nor will any of
them incur, directly or indirectly, any liability for brokerage or finders’ fees
or agents’ commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
     2.19    Insurance. Part 2.19 of the Company Disclosure Schedule sets forth
a description of each insurance policy or bond which provides coverage for any
Target Company. Each Target Company has provided notice to its insurers in
accordance with the applicable insurance policies or bonds of all potential
claims of which such Target Company has Knowledge, and there is no material
claim pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies have been paid, and each
Target Company is otherwise in compliance in all material respects with the
terms of such policies and bonds. To the Knowledge of the Company, there has
been no threatened or reasonably anticipated termination of, or material premium
increase with respect to, any of such policies. No Target Company has incurred
any material uninsured loss or casualty, nor does the Company have Knowledge of
any circumstance or occurrence that could result in a material uninsured loss or
casualty for any Target Company. No Target Company has made any knowing or
intentional misrepresentation of, or knowingly or intentionally omitted to
disclose, any material fact to any of its insurers that might justify denial by
such insurer of any coverage under any such policy or bond.
     2.20    Customers; Accounts Receivable.
               (a)      Part 2.20 of the Company Disclosure Schedule separately
lists each customer of each Target Company from which the Company (i) derived
revenue in excess of $100.00 in any twelve month period since July 1, 2004, or
(ii) received payments aggregating $10,000 or more in the year ended
December 31, 2007. No current customer has indicated to any Target Company that
it will or may stop buying, discontinue services, or materially decrease

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the rate of buying services or products of any Target Company in comparison with
that contained in its current agreement with the Company.
               (b)      The receivables shown on the Company Balance Sheet arose
in the ordinary course of business, consistent with past practice, and have been
collected or are collectible in the book amounts thereof, less the allowance for
doubtful accounts provided for on the Company Balance Sheet. The Company’s
allowances for doubtful accounts and warranty returns are reasonable and have
been prepared in accordance with GAAP consistently applied and in accordance
with the Company’s past practices. The Target Companies’ receivables arising
after the date of the Company Balance Sheet and prior to the Closing Date arose
in the ordinary course of business. To the Company’s Knowledge, none of the
Target Companies’ receivables is subject to any material claim of setoff,
recoupment or counterclaim, and it has no Knowledge of any specific facts or
circumstances (whether asserted or unasserted) that could give rise to any such
claim. No receivables are contingent upon the performance by any Target Company
of any obligation that has not fully been performed on such Target Company. No
Person has any Encumbrance on any of such receivables, and no Contract for
deduction or discount has been made with respect to any of such receivables.
     2.21    Board Approval. The Board of Directors of the Company has
unanimously approved this Agreement and recommended that the stockholders of the
Company approve and adopt this Agreement and approve the Merger. Section 60.825
of the BCA applicable to a “business combination” (as defined therein) will not
apply to the execution, delivery or performance of this Agreement or the
consummation of the Merger or the other transactions contemplated by this
Agreement.
     2.22    Minutes and Stock Records. The minute books of each Target Company
contain records that are accurate in all material respects of all meetings and
consents in lieu of meetings of its Board of Directors (or equivalent) and any
committees thereof (whether permanent or temporary), and of its stockholders (or
equivalent) since inception, and such records accurately reflect all
transactions referred to in such minutes and consents. The stock books (or
equivalent) of each Target Company accurately reflect the ownership of the
capital stock (or equivalent) of such Target Company. The Company has made
available to Parent true, correct and complete copies of the minutes, consents
and stock books (and equivalents) of each Target Company.
     2.23    Accounting System. The books of account of the Company are adequate
to enable the Company to prepare its Financial Statements in accordance with
GAAP. The books and records of the Company accurately reflect, in all material
respects, its income, expenses, assets and liabilities and the Company maintains
internal accounting controls which provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP.
     2.24    Corrupt Practices. No Target Company has taken any action which
would cause it to be in violation of the Foreign Corrupt Practices Act of 1977,
as amended, or any rules and regulations thereunder. No Target Company has paid
any commission or made any payment whether to secure business or otherwise to
any Person which in the hands of such Person would in accordance with the
relevant Legal Requirement be regarded as illegal or improper. No

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director, officer, employee, agent or other Person acting on behalf of any
Target Company has been a party to the use of any assets of any Target Company
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to any activity, including any political activity, or to the
establishment or maintenance of any unlawful or unrecorded fund of monies or
other assets, or to the making of any false or fictitious entries in the books
or records of any Target Company, or to the making of any unlawful payment.
     2.25    Disclosure. No representation or warranty of the Company or of any
Principal Stockholder in this Agreement, as modified by the Company Disclosure
Schedule, or in any other Transaction Document contains any untrue statement of
a material fact, or omits or omits to state any material fact required to be
stated in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. There is no
fact Known to the Company and not disclosed to Parent in writing that is
reasonably likely to give rise to a Company Material Adverse Effect or to have
the effect of preventing, materially delaying, making illegal or otherwise
interfering with the Merger and the other transactions contemplated by this
Agreement.
Article 3
Representations and Warranties of Principal Stockholders
     Each Principal Stockholder, severally and not jointly, represents and
warrants to Parent and Merger Sub as set forth in this Article 3.
     3.1      Organization. The Principal Stockholder (if not a natural person)
is duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.
     3.2      Authority; Non-Contravention.
               (a)      The Principal Stockholder has all requisite power and
authority (including all requisite power and authority as a corporation or other
entity) to enter into this Agreement and the Escrow Agreement and to consummate
the transactions contemplated hereby and thereby. If the Principal Stockholder
is not a natural person, the execution and delivery of this Agreement and the
Escrow Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary action on the part of the
Principal Stockholder (including authorization by the board of directors or
other managing body and by the stockholders or other securityholders of the
Principal Stockholder). This Agreement has been duly executed and delivered by
the Principal Stockholder and, assuming the due authorization, execution and
delivery of this Agreement by Parent, Merger Sub, the Company, the Stockholder
Representative and the other Principal Stockholders, constitutes the valid and
binding obligation of the Principal Stockholder, enforceable against the
Principal Stockholder in accordance with its terms, except as enforceability may
be limited by bankruptcy and other similar laws affecting the rights of
creditors generally and general principles of equity. Assuming the due
authorization, execution and delivery of the Escrow Agreement by Parent, Merger
Sub, the Stockholder Representative and the Escrow Agent, the Escrow Agreement,
when executed and delivered by the Stockholder Representative on behalf of the
Principal Stockholder, will constitute the valid and binding obligation of the
Principal Stockholder,

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enforceable against the Principal Stockholder in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws
affecting the rights of creditors generally and general principles of equity.
               (b)      The execution and delivery of this Agreement and the
Escrow Agreement by or on behalf of the Principal Stockholder does not, and the
performance of this Agreement and the Escrow Agreement by or on behalf of the
Principal Stockholder will not, (i) if the Principal Stockholder is not a
natural person, conflict with or violate the certificate of incorporation,
by-laws or other organizational documents of the Principal Stockholder,
(ii) conflict with or violate any Legal Requirement applicable to the Principal
Stockholder or by which the Principal Stockholder or any of its properties or
assets is bound or affected, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or result in the creation of an Encumbrance on any of the
securities of any Target Company pursuant to, any Contract to which the
Principal Stockholder is a party or by which the Principal Stockholder or any of
its properties or assets is bound or affected. No consent, waiver or approval of
any Person, nor any notice to any Person, is required to be obtained or made
under any Contract to which the Principal Stockholder is a party or by which the
Principal Stockholder or any of its properties or assets is bound or affected in
connection with the execution and delivery by or on behalf of the Principal
Stockholder of this Agreement or the Escrow Agreement or the performance of this
Agreement or the Escrow Agreement by or on behalf of the Principal Stockholder.
               (c)      No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or other
Person, is required to be obtained or made by the Principal Stockholder in
connection with the execution and delivery by or on behalf of the Principal
Stockholder of this Agreement or the Escrow Agreement or the performance of this
Agreement or the Escrow Agreement by or on behalf of the Principal Stockholder.
     3.3      Title to Company Stock; Status as Company Stockholder. The
Principal Stockholder holds of record and owns the number of shares of Company
Capital Stock set forth next to the name of the Principal Stockholder on
Part 2.2(a) of the Company Disclosure Schedule, free and clear of any
Encumbrances. The Principal Stockholder agrees to be bound be all provisions of
this Agreement and to be subject to all obligations imposed on the Principal
Stockholder as a Company Stockholder hereunder.
     3.4      Waiver of Appraisal Rights. The Principal Stockholder acknowledges
that he, she or it (a) has received a copy of Section 60.554 of the BCA and the
notice provided for by Section 60.657 of the BCA, and (b) will not exercise any
right pursuant to Section 60.554 of the BCA (or otherwise) to dissent from the
Merger or to demand an appraisal of the fair value of the shares of Company
Capital Stock held by the Principal Stockholder.
     3.5      Agreements with the Company. Except to the extent the Company
Disclosure Schedule specifically names the Principal Stockholder as a party
thereto, neither the Principal Stockholder nor any of its properties or assets
is a party or otherwise subject to any Contract to which any Target Company is a
party or by which any Target Company or any of its properties or assets is bound
or affected.

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     3.6      Brokers’ and Finders’ Fees. The Principal Stockholder has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders’ fees or agents’ commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
Article 4
Representations and Warranties of Parent and Merger Sub
     As of the date of this Agreement and as of the Closing Date, Parent and
Merger Sub, jointly and severally, represent and warrant to the Company and the
Company Stockholders as set forth in this Article 4, subject to any exceptions
expressly stated in the disclosure schedule delivered by Parent to the Company
dated as of the date hereof and certified by a duly authorized officer of Parent
(the “Parent Disclosure Schedule”). Exceptions on the Parent Disclosure Schedule
shall specifically identify the representation to which they relate; provided,
however, that any matter disclosed pursuant to one section or subsection of the
Parent Disclosure Schedule is deemed disclosed for such other sections or
subsections of the Parent Disclosure Schedule as, and only to the extent that,
it is reasonably apparent that such matter relates to such other section or
subsection of the Parent Disclosure Schedule and the level of particularity and
manner of disclosure of the matter expressly disclosed in one section or
subsection of the Parent Disclosure Schedule would make a reasonable person
aware that such disclosure is relevant to such other sections or subsections.
     4.1      Organization of Parent and Merger Sub. Each of Parent and Merger
Sub (i) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized; (ii) has the
corporate or other power and authority to own, lease and operate its assets and
property and to carry on its business as now being conducted; and (iii) except
as would not be material to Parent, is duly qualified or licensed to do business
in each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary.
     4.2      Authority; Non-Contravention.
               (a)      Parent and Merger Sub have all requisite corporate power
and authority to enter into the Transaction Documents and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub, subject only to the filing of the Articles
of Merger. The Transaction Documents have been duly executed and delivered by
Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company and each Principal Stockholder, constitute the valid and
binding obligations of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with their terms, except as enforceability may be
limited by bankruptcy and other similar laws affecting the rights of creditors
generally and general principles of equity.
               (b)      The execution and delivery of the Transaction Documents
by Parent and Merger Sub do not, and the performance of the Transaction
Documents by Parent and Merger Sub will not (i) conflict with or violate the
Parent Charter Documents or (ii) subject to

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compliance with the requirements set forth in Section 4.2(c) below, conflict
with or violate any material law, rule, regulation, order, judgment or decree
applicable to Parent or Merger Sub or by which any of their respective material
properties is bound or affected.
               (c)      No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or other person
is required to be obtained or made by Parent or Merger Sub in connection with
the execution and delivery of the Transaction Documents or the consummation of
the Merger, except for (i) the filing of the Articles of Merger with the
Secretary of State of the State of Oregon, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal, foreign and state securities (or related)
laws and the securities or antitrust laws of any foreign country, and (iii) such
other consents, authorizations, filings, approvals and registrations which if
not obtained or made would not be material to Parent or the Surviving
Corporation or have a material adverse effect on the ability of the parties
hereto to consummate the Merger.
     4.3      Litigation. Except as set forth on Part 4.3 of the Parent
Disclosure Schedule, there are no claims, suits, actions or proceedings pending
or, to the knowledge of Parent, threatened against, relating to or affecting
Parent or any of its subsidiaries, before any Governmental Entity or any
arbitrator that seeks to restrain or enjoin the consummation of the transactions
contemplated by the Transaction Documents or which could reasonably be expected,
either singularly or in the aggregate with all such claims, actions or
proceedings, to be material to Parent or have a material adverse effect on the
ability of the parties hereto to consummate the Merger.
     4.4      Board Approval. The Board of Directors of Parent has approved the
execution and delivery of the Transaction Documents and the performance of all
actions contemplated under the Transaction Documents by Parent and Merger Sub.
     4.5      Disclosure. No representation or warranty of Parent of Merger Sub
in this Agreement, as modified by the Parent Disclosure Schedule, or in any
other Transaction Document contains any untrue statement of a material fact, or
omits to state any material fact required to be stated in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made.
Article 5
Conduct Prior to the Effective Time
     5.1      Conduct of Business by the Company. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, the Company and each
of its subsidiaries shall, except to the extent that Parent shall otherwise
consent in writing, carry on its business in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable laws and regulations,
pay its debts and Taxes in the ordinary course of business, consistent with past
practice, subject to good faith disputes over such debts or Taxes, pay or
perform other material obligations in the ordinary course of business consistent
with past practice, and use its commercially reasonable efforts, consistent with
past practice to (i) preserve intact its present business organization,
(ii) keep available the services of

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its present officers and employees, (iii) collect its accounts receivable and
any other amounts payable to it when due and otherwise enforce any obligations
owed to it by others substantially in accordance with their terms, and
(iv) preserve its relationships with customers, suppliers, licensors, licensees,
and others with which it has business dealings. In addition, the Company will
promptly notify Parent of any material event involving its business or
operations.
     In addition, except as permitted by the terms of this Agreement, without
the prior written consent of Parent, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, the Company shall not do any of the
following and shall not permit its subsidiaries to do any of the following:
               (a)      Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or repurchase of restricted
stock, or reprice options granted to any employee, consultant, director or
authorize cash payments in exchange for any options or take any such action with
regard to any warrant or other right to acquire the Company’s capital stock;
               (b)      Grant any severance or termination pay to any officer or
employee except pursuant to written agreements in effect, or policies existing,
on the date hereof and as previously disclosed in writing to Parent, or adopt
any new severance plan;
               (c)      Transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to the Company
Intellectual Property, other than non-exclusive licenses in the ordinary course
of business and consistent with past practice;
               (d)      Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock;
               (e)      Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of the Company or its subsidiaries,
except repurchases of unvested shares at cost in connection with the termination
of the employment relationship with any employee pursuant to option agreements
or purchase agreements in effect on the date hereof;
               (f)      Issue, deliver, sell, authorize, pledge or otherwise
encumber any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible securities, other than (i) the
issuance, delivery and/or sale of shares of Common Stock pursuant to the
exercise of currently outstanding Company Convertible Securities, or
(ii) pursuant to a bridge financing permitted by Section 6.6(b).
               (g)      Cause, permit or propose any amendments to the Company
Charter Documents or to the charter documents of any subsidiary;
               (h)      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

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business or any corporation, partnership, association or other business
organization or division thereof; or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company or enter into any material joint ventures, strategic relationships
or alliances or make any material loan or advance to, or investment in, any
person, except for loans or capital contributions to a subsidiary or advances of
routine business or travel expenses to employees, officers or directors in the
ordinary course of business, consistent with past practice;
               (i)      Sell, lease, license, encumber or otherwise dispose of
any properties or assets which are material, individually or in the aggregate,
to the business of the Company;
               (j)      Incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of the
Company, enter into any “keep well” or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing other than (i) in connection with the financing of ordinary
course trade payables consistent with past practice, (ii) pursuant to existing
credit facilities in the ordinary course of business, or (ii) pursuant to a
bridge financing permitted by Section 6.6(b);
               (k)      Adopt or amend any employee benefit plan or employee
stock purchase or employee stock option plan, or enter into any employment
contract or collective bargaining agreement (other than offer letters and letter
agreements entered into in the ordinary course of business consistent with past
practice with employees who are terminable “at will”), pay any special bonus or
special remuneration to any director or employee, or increase the salaries or
wage rates or fringe benefits (including rights to severance or indemnification)
of its directors, officers, employees or consultants other than in the ordinary
course of business, consistent with past practice, or change in any material
respect any management policies or procedures; provided that, notwithstanding
the foregoing, the Company may agree to pay, and may accrue, the Transaction
Bonuses;
               (l)      Make any capital expenditures outside of the ordinary
course of business in excess of $10,000 in the aggregate;
               (m)      Modify, amend or terminate any material Company Contract
or waive, release or assign any material rights or claims thereunder; provided,
that (i) the renewal in the ordinary course of business of any software
maintenance agreement that is in force on the date of this Agreement, which
renewal is on terms substantially as favorable to the Company as those of the
agreement currently in force, shall not be deemed to constitute a modification
or amendment prohibited by this clause (m) and (ii) the consent of Parent to any
such modification, amendment or termination shall not unreasonably be withheld
or delayed;
               (n)      Enter into any development services, licensing,
distribution, sales, sales representation or other similar agreement or
obligation with respect to any material Intellectual Property or enter into any
contract of a character required to be disclosed by Section 2.16 other than such
agreements entered into in the ordinary course of business consistent with past
practices, including pricing and contract terms;

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               (o)      Materially revalue any of its assets or, except as
required by GAAP, make any change in accounting methods, principles or
practices;
               (p)      Discharge, settle or satisfy any disputed claim,
litigation, arbitration, disputed liability or other controversy (absolute,
accrued, asserted or unasserted, contingent or otherwise), including any
liability for Taxes, other than the discharge or satisfaction in the ordinary
course of business consistent with past practice, or in accordance with their
terms, of liabilities reflected or reserved against in the Company Balance Sheet
in the ordinary course of business consistent with past practice, or waive any
material benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which the Company or any of
its subsidiaries is a party; provided, however, that the discharge or settlement
of any disputed claim, liability or other controversy in the amount of less than
$10,000 shall not be deemed to be prohibited by the foregoing;
               (q)      Engage in any action with the intent to directly or
indirectly adversely affect any of the transactions contemplated by this
Agreement, including with respect to any “poison pill” or similar plan,
agreement or arrangement, or any anti-takeover, control share acquisition, fair
price, moratorium or other similar statute; or
               (r)      Agree in writing or otherwise to take any of the actions
described in Section 5.1(a) through 5.1(q) above.
     5.2      Covenant 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) that Parent will promptly
apply for or otherwise seek, and use its commercially reasonable efforts to
obtain, all consents and approvals, and make all filings, required for the
consummation of the Merger.
Article 6
Additional Agreements
     6.1      Antitrust and Other Filings.
               (a)      As promptly as practicable after the execution of this
Agreement, each of the Company and Parent will prepare and file any pre-merger
notification forms required by the merger notification or control laws and
regulations of any applicable jurisdiction, as agreed to by the parties (the
“Antitrust Filings”) and (ii) any other filings required to be filed by it under
the Exchange Act, the Securities Act or any other federal, state or foreign laws
relating to the Merger and the transactions contemplated by this Agreement (the
“Other Filings”). The Company and Parent each shall promptly supply the other
with any information which may be required in order to effectuate any filings
pursuant to this Section 6.1.
               (b)      Each of the Company and Parent will notify the other
promptly upon the receipt of any comments from any government officials in
connection with any filing made pursuant hereto and of any request by any
government officials for amendments or supplements to any Antitrust Filings or
Other Filings or for additional information and will supply the other with
copies of all correspondence between such party or any of its representatives,
on the one

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hand, and the government officials, on the other hand, with respect to the
Merger or any Antitrust Filing or Other Filing. Each of the Company and Parent
will cause all documents that it is responsible for filing with regulatory
authorities under this Section 6.1 to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set forth in an
amendment or supplement to any Antitrust Filing or Other Filing, the Company or
Parent, as the case may be, will promptly inform the other of such occurrence
and cooperate in filing with the government officials such amendment or
supplement.
     6.2      Information Statement; Company Stockholder Meeting. Promptly after
the execution of this Agreement, but in any event no later than five (5 )
business days thereafter, the Company shall mail to the Company Stockholders an
information statement (the “Information Statement”) for use by the Company in
connection with its solicitation of the approval of the holders of outstanding
Company Capital Stock of the Merger, this Agreement and the transactions
contemplated by this Agreement at a special meeting of the Company Stockholders
to be duly called and convened under Oregon Law (the “Special Meeting”). The
Information Statement shall be in form and substance reasonably acceptable to
each of Parent and the Company. The Information Statement shall include
(i) proper notice under Oregon Law that the holders of outstanding Company
Capital Stock are or may be entitled to assert dissenters’ or appraisal rights
under such law, (ii) a copy of this Agreement, and (iii) a copy of any other
documents and all information required to be disclosed to Company Stockholders
under Oregon Law to approve the Merger, this Agreement and the transactions
contemplated by this Agreement. Each of Parent and the Company shall provide
promptly to the other such information concerning its business and affairs as
any other shall reasonably request for inclusion in such Information Statement.
The Company will promptly advise Parent, and Parent will promptly advise the
Company, if at any time prior to the Effective Time either the Company or
Parent, as applicable, shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Information Statement in
order to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. Promptly after the dissemination of
the Notice of Stockholders Special Meeting and Information Statement and in
accordance with Oregon Law, the Company shall duly hold the Special Meeting in
accordance with Oregon Law necessary to obtain the necessary approval and
adoption of the Merger, this Agreement and the transactions contemplated by this
Agreement.
     6.3      Tax Matters.
               (a)      Prior to the Closing. Without the prior written consent
of Parent (which consent shall not be unreasonably withheld), the Company shall
not make or change any election, change an annual accounting period, adopt or
change any accounting method, file any amended Tax Return, enter into any
closing agreement, settle any Tax claim or assessment, surrender any right to
claim a refund of Taxes, consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment, or take any other similar
action relating to the filing of any Tax Return or the payment of any Tax.
               (b)      Following the Closing. The following provisions shall
govern the allocation of responsibility as between Parent and the Company
Stockholders for certain tax matters following the Closing Date:

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                    (i)      Tax Indemnification. In accordance with the
indemnification provisions of Article 7 and subject to any limitations contained
therein, the Company Stockholders shall jointly and severally indemnify the
Company, any Company Subsidiary, Parent and each Parent affiliate and hold them
harmless from and against without duplication, any loss, claim, liability,
expense, or other damage attributable to the following Taxes, net of any
reserves set forth on the Company Balance Sheet: (i) all Taxes (or the
non-payment thereof) of the Company or any such Company Subsidiary for all
taxable periods ending on or before the Closing Date and the portion through the
end of the Closing Date for any taxable period that includes (but does not end
on) the Closing Date (“Pre-Closing Tax Period”), (ii) all Taxes of any member of
an affiliated, consolidated, combined or unitary group of which the Company or
any Company Subsidiary (or any predecessor of the Company or any such Company
Subsidiary) is or was a member on or prior to the Closing Date, including
pursuant to Treasury Regulation §1.1502-6 or any analogous or similar state,
local, or foreign law or regulation, and (iii) any and all Taxes of any person
(other than the Company or any Company Subsidiary) imposed on the Company or any
such Company Subsidiary as a transferee or successor, by contract or pursuant to
any law, rule, or regulation, which Taxes relate to an event or transaction
occurring before the Closing.
                    (ii)     Straddle Period. 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 the Company
for the Pre-Closing Tax Period shall be determined based on an interim closing
of the books as of the close of business on the Closing Date (and for such
purpose, the taxable period of any partnership or other pass-through entity in
which the Company holds a beneficial interest shall be deemed to terminate at
such time) and the amount of other Taxes of the Company for a Straddle Period
that relates to the Pre-Closing Tax Period shall 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 number of days in such Straddle Period.
                    (iii)    Responsibility for Filing Tax Returns. Parent shall
prepare or cause to be prepared and file or cause to be filed in a timely manner
all Tax Returns for the Company that are filed after the Closing Date. Parent
shall permit the Stockholder Representative to review and comment on each such
Tax Return for a Pre-Closing Tax Period
                    (iv)     Cooperation on Tax Matters.
                      (1)      Parent, the Company, the Surviving Corporation
and the Company Stockholders shall cooperate fully, as and to the extent
reasonably requested by the other Party, in connection with the filing of Tax
Returns pursuant to this Section 6.3 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other Party’s request) the provision of records and information
that are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of

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any material provided hereunder. The Company, the Surviving Corporation and the
Company Stockholders agree (A) to retain all books and records with respect to
Tax matters pertinent to the Company relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Parent and the Company Stockholders, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
Party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other Party so requests, Parent or the
Company Stockholders, as the case may be, shall allow the other Party to take
possession of such books and records.
                      (2)      All transfer, documentary, sales, use, stamp,
registration and other such Taxes (including all applicable real estate transfer
Taxes) and related fees (including any penalties, interest and additions to Tax)
(“Transfer Taxes”) arising out of or incurred in connection with the
transactions contemplated by this Agreement shall be borne by the Company
Stockholders. All necessary Tax Returns and other documentation with respect to
all such Transfer Taxes shall be prepared and filed when due by the party
primarily responsible under applicable Legal Requirement for filing such Tax
Returns, and, if required by applicable Legal Requirement, Parent or the
relevant Company Stockholder, as applicable, will join in the execution of any
such Tax Returns.
                      (3)      Parent and the Company Stockholders further
agree, upon request, to provide the other Party with all information that either
Party may be required to report pursuant to Code Sections 6043 or 6043A, or
Treasury Regulations promulgated thereunder.
                    (v)      Tax-Sharing Agreements. All tax-sharing agreements
or similar agreements with respect to or involving the Company shall be
terminated as of the Closing Date and, after the Closing Date, the Company shall
not be bound thereby or have any liability thereunder.
     6.4      Confidentiality. The parties acknowledge that the Company and
Parent have previously executed that certain Nondisclosure Agreement dated
October 7, 2007 (the “Confidentiality Agreement”), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms.
     6.5      Access to Information. Parent, on the one hand, and the Company,
on the other, will afford the other party and the other party’s accountants,
counsel and other representatives reasonable access to its properties, books,
records and personnel during the period prior to the Effective Time to obtain
all information concerning the business, including the status of product
development efforts, properties, results of operations and personnel, as the
other party may reasonably request. No information or knowledge obtained by a
party in any investigation pursuant to this Section 6.5 will affect or be deemed
to modify any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the Merger.

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     6.6      No Solicitation.
               (a)      From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to its terms, the
Company will not and will cause each Target Company not to, and the Company
Stockholders will not, nor will they authorize or permit any of their respective
officers, directors, Affiliates, or employees or any investment banker, attorney
or other consultant, advisor, representative or agent retained by any of them
to, directly or indirectly, (i) solicit, initiate, encourage or induce the
making, submission or announcement of any Acquisition Proposal, (ii) participate
in any discussions or negotiations regarding, or furnish to any Person any
nonpublic information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal, (iii) engage in discussions
with any Person with respect to any Acquisition Proposal, (iv) approve, endorse
or recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any Contract contemplating or otherwise relating to any
Acquisition Proposal. The Company will and will cause each Target Company to,
and the Company Stockholders will, immediately cease any and all existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding two
sentences by any Target Company, or by any officer, director, Affiliate or
employee of any Target Company or any of the Company Stockholders or any
investment banker, attorney or other consultant, advisor, representative or
agent of any Target Company or any of the Company Stockholders shall be deemed
to be a breach of this Section 6.6 by the Company.
               (b)      The foregoing shall not be deemed to prohibit the
Company from negotiating and obtaining bridge financing of up to $400,000 from
the Company’s current shareholders and other investors, executive officers,
and/or directors (provided that the effect of the Merger on any such bridge
lenders in the Transaction is not more favorable to such lenders in all material
respects as its effect on holders of the Company’s currently outstanding
Convertible Promissory Notes).
               (c)      In addition to the obligations of the Company and the
Company Stockholders set forth in Section 6.6(a), each of the Company and the
Company Stockholders as promptly as practicable, and in any event within 24
hours of its receipt, shall advise Parent orally and in writing of an
Acquisition Proposal or any request for nonpublic information or other inquiry
which the Company or such Company Stockholder believes or should reasonably
believe could lead to an Acquisition Proposal, the material terms and conditions
of such Acquisition Proposal, request or inquiry, and the identity of the Person
or group making any such Acquisition Proposal, request or inquiry. The Company
and the Company Stockholders will keep Parent informed as promptly as
practicable in all material respects of the status and details (including
material amendments or proposed amendments) of any such Acquisition Proposal,
request or inquiry.
     6.7      Public Disclosure. Parent and the Company will consult with each
other, and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger, this Agreement
or an Acquisition Proposal and will not

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issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange.
     6.8      Reasonable Efforts; Notification; Discharge of Certain
Liabilities.
               (a)      Upon the terms and subject to the conditions set forth
in this Agreement, each of the parties agrees to use all commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using all commercially reasonable
efforts to accomplish the following: (i) causing the conditions precedent set
forth in Article 8 to be satisfied, (ii) obtaining all necessary actions or
nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and making of all necessary registrations, declarations
and filings (including registrations, declarations and filings with Governmental
Entities) and taking all steps that may be necessary to avoid any suit, claim,
action, investigation or proceeding by any Governmental Entity, (iii) obtaining
all necessary consents, approvals or waivers from third parties, (iv) defending
any suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) executing and delivering any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. Notwithstanding anything in this Agreement to
the contrary, neither Parent nor any of its affiliates shall be under any
obligation to make proposals, execute or carry out agreements or submit to
orders providing for the sale or other disposition or holding separate (through
the establishment of a trust or otherwise) of any assets or categories of assets
of Parent or any of its affiliates or the Company or any of its subsidiaries or
the holding separate of the shares of Common Stock (or shares of stock of the
Surviving Corporation) or imposing or seeking to impose any limitation on the
ability of Parent or any of its subsidiaries or affiliates to conduct their
business or own such assets or to acquire, hold or exercise full rights of
ownership of the shares of Common Stock (or shares of stock of the Surviving
Corporation).
               (b)      Each of the Company and Parent will give prompt notice
to the other of (i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
Merger, (ii) any notice or other communication from any Governmental Entity in
connection with the Merger, (iii) any litigation relating to, involving or
otherwise affecting the Company, Parent or their respective subsidiaries that
relates to the consummation of the Merger. The Company shall give prompt notice
to Parent of any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate, or any failure of the Company to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement. Parent shall give prompt notice to the Company
of any representation or warranty made by it or Merger Sub contained in this
Agreement becoming untrue or inaccurate, or any failure of Parent or Merger Sub
to comply with or satisfy in any material respect any

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covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
               (c)      The Company shall give prompt notice to Parent of
receipt by the Company of any demand for appraisal rights pursuant to
Section 60.554 of the BCA.
               (d)      Parent will cause the Surviving Corporation to promptly
pay and discharge at or immediately following the Closing (i) the obligations of
the Company to redeem in accordance with its terms any Convertible Note
outstanding immediately prior to the Effective Time that is not converted to
Company Capital Stock prior to the Effective Time, and (ii) any accrued and
unpaid Transaction Expenses incurred by the Company prior to the Closing. Parent
will cause the Surviving Corporation to make the Option Cash-Out Payments in
accordance with Section 1.6(d) above, and will make available to the Surviving
Corporation such funds as are necessary to enable the making of such payments.
     6.9      Third Party Consents. As soon as practicable following the date
hereof, Parent and the Company will each use all commercially reasonable efforts
to obtain any consents, waivers and approvals under any of its or its
subsidiaries’ respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby, including without limitation, the Required Consents described in
Section 8.3 below.
     6.10    Certain Employee Benefits. As soon as practicable after the
execution of this Agreement, the Company and Parent shall confer and work
together in good faith to agree upon mutually acceptable employee benefit and
compensation arrangements (and terminate the Company Employee Plans immediately
prior to the Effective Time if appropriate). In addition, the Company agrees
that it and its subsidiaries shall terminate its and their 401(k) plans and, at
the request of Parent, any other Employee Plans, severance, separation,
retention and salary continuation plans, programs or arrangements, in each case
prior to the Effective Time. Each individual who is employed by the Company
immediately prior to the Effective Time shall remain an employee of the Company
following the Effective Time, provided, however that nothing in this
Section 6.10 shall be construed to limit the ability of the applicable employer
to terminate the employment of any such employee following the Effective Time in
accordance with applicable Legal Requirements. To the extent the applicable plan
permits, or can be amended to permit, Parent shall recognize each such
employee’s service with, or recognized by, the Company prior to the Closing Date
as service with Parent or its subsidiary, as applicable, in connection with any
pension plan, 401(k) savings plan and welfare benefit plan (including vacations
and holidays) maintained by Parent or such subsidiary that is made available by
Parent, in its sole discretion, to such employee following the Closing Date and
in which such employee elects to participate for purposes of any waiting period,
vesting, eligibility and benefit entitlements (but excluding benefit accruals
other than vacation) and shall cause all applicable welfare benefit plans to
waive any preexisting condition limitation, exclusion or waiting period for such
employees and their dependents, to the same extent such limitations, exclusions
or waiting periods were satisfied, covered or waived under similar Company
Benefit Plans. Parent shall credit such employees with any amounts paid prior to
the Closing Date under any Company

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Benefit Plan with respect to satisfaction of any applicable deductible amounts
and co-payment minimums under any Parent plans established as of the Closing
Date which provide similar benefits.
Article 7
Survival of Representations; Indemnification
     7.1      Indemnification by Company Stockholders. Subject to the terms,
conditions and limitations of this Article 7, each Company Stockholder hereby
agrees (without any right of contribution from the Company or the Surviving
Corporation or any right of indemnification against the Company or the Surviving
Corporation) to indemnify, defend and hold harmless Parent and each of its
Subsidiaries and each of their respective directors, officers, agents and
Affiliates (collectively, the “Parent Group”) from and against any loss,
liability, damage, cost or expense (including costs and reasonable attorneys’
fees and disbursements, but excluding any consequential, special or punitive
damages, except when asserted by a third party in a Third Party Claim)
(collectively, “Damages”) suffered, incurred or paid by any member of the Parent
Group which arise out of or result from any or all of the following:
               (a)      Any breach or inaccuracy of any representation or
warranty made by the Company in this Agreement or by the Company or any Company
Stockholder in any other Transaction Document;
               (b)      Any failure to perform or comply with any covenant,
agreement or obligation of the Company or any Company Stockholder contained in
this Agreement or the Company or any Company Stockholder in any other
Transaction Document;
               (c)      Any indemnification with respect to Tax matters provided
for pursuant to Section 6.3 hereto;
               (d)      Any downward adjustment to the Base Consideration based
on the Adjusted Working Capital provided for in Sections 1.7 through 1.9 hereto;
and
               (e)      Any claim identified or described in Part 7.1(e) of the
Company Disclosure Schedule.
     For purposes of this Section 7.1, and notwithstanding anything to the
contrary contained herein, the covenants and representations and warranties of
each of the Company Stockholders in the Transmittal Certificates and in
Article 3 of this Agreement are several obligations and, subject to the terms,
conditions and limitations set forth in this Article 7, the particular Company
Stockholder making those representations, warranties, or covenants will be
solely responsible for Damages that Parent or Merger Sub may suffer as a result
of any breach thereof by such Company Stockholder, and not for the breach
thereof by any other Company Stockholder.
     7.2      Indemnification by Parent and Merger Subs. Parent and Merger Sub,
jointly and severally, shall indemnify and hold harmless the Company
Stockholders, the Stockholders Representative and each of such Company
Stockholders’ and Stockholders Representative’s respective heirs, executors,
administrators, attorneys, agents and representatives (collectively,

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“Stockholders Group”) from and against any and all Damages suffered, incurred or
paid by any member of the Stockholders Group which arise out of or result from
any or all of the following:
               (a)      Any breach or inaccuracy of any representation or
warranty made by Parent or Merger Sub in this Agreement or in any agreement,
schedule, certificate or other document referred to in this Agreement; and
               (b)      Any failure to perform or comply with any covenant,
agreement or obligation of Parent or Merger Sub contained in this Agreement or
any agreement, certificate, document or other instrument referred to in this
Agreement.
     7.3      Survival of Representations. All representations and warranties
made by any party in this Agreement or any certificate or other writing
delivered pursuant hereto shall survive the Closing for a period of twelve
(12) months after the Closing Date (“Survival Period”) and shall not be deemed
waived by any investigation at any time made by or on behalf of any other party,
subject to the following provisions regarding the Survival Period:
               (a)      claims for fraud and any claim relating to title to the
Company Capital Stock or any breach of the representations contained in
Sections 2.2, 2.3, 2.4 and 2.8 and any indemnification provided for by
Sections 7.1(c) and 7.1(e) shall survive until the end of the applicable statute
of limitations period under applicable law.
               (b)      (i) if, at any time prior to the expiration of the
Survival Period, or other applicable expiration date specified in Section 7.3(a)
above, any member of the Parent Group (acting in good faith) delivers to the
Stockholders Representative a written notice alleging any inaccuracy or
misrepresentation in, or breach of, any such representation or warranty made by
the Company or the Company Stockholders, and asserting a claim (“Parent Claim”)
for recovery under this Article 7 based on such alleged inaccuracy or other
breach, then the claim asserted in such notice shall survive the applicable
expiration date until such time as such claim is fully and finally resolved, and
(ii) if, at any time prior to the expiration of the Survival Period, or other
expiration date, if applicable, any member of the Stockholders Group (acting in
good faith) delivers to Parent a written notice alleging any inaccuracy or
misrepresentation in, or breach of, any such representation or warranty made by
Parent or Merger Sub, and asserting a claim (“Stockholder Claim”) for recovery
under this Article 7 based on such alleged inaccuracy or other breach, then the
claim asserted in such notice shall survive the applicable expiration date until
such time as such claim is fully and finally resolved.
     7.4      Process of Indemnification for Parent Claims and Stockholder
Claims.
               (a)      Claims for Indemnification. Whenever any claim shall
arise for indemnification under this Agreement, the party entitled to
indemnification (the “Indemnified Party”) shall promptly notify the party
obligated to provide indemnification (the “Indemnifying Party”) of the claim in
writing and, when known, the facts constituting the basis for such claim;
provided, however, that the failure to so notify the Indemnifying Party shall
not relieve the Indemnifying Party of its obligation hereunder to the extent
such failure does not materially prejudice the Indemnifying Party. In the event
of any claim for indemnification hereunder resulting from or in connection with
any claim or legal proceeds by a third party, the notice to

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the Indemnifying Party shall specify, if known, the amount or an estimate of the
amount of the liability arising therefrom.
               (b)      Recovery by Parent. If the Stockholders Representative
does not dispute the basis or amount of any Parent Claim within 30 days of
receiving written notice thereof, Parent shall have the right promptly to
recover indemnity as and to the extent provided herein. If the Stockholders
Representative disagrees with the basis of the Parent Claim or the amount of
Damages caused thereby, then within 30 days of receiving written notice thereof,
the Stockholders Representative shall give notice to Parent of such disagreement
and, in that case, Parent shall have no right to recover indemnity hereunder
until such time, if at all, as (a) a court of competent jurisdiction issues a
final, non-appealable order specifying the amount of Parent’s recovery, in which
case Parent shall have the right promptly to recover the amount so specified
(subject to the limitations contained in Section 7.3 and Section 7.4(f) hereof)
or (b) Parent and the Stockholders Representative agree in writing to the amount
of Parent’s recovery, in which case Parent shall have the right promptly to
recover the amount so agreed.
               (c)      Recovery by Stockholders. If the Parent does not dispute
the basis or amount of any Stockholder Claim within 30 days of receiving written
notice thereof, Stockholders shall have the right promptly to recover indemnity
as and to the extent provided herein. If Parent disagrees with the basis of the
Stockholder Claim or the amount of Damages caused thereby, then within 30 days
of receiving written notice thereof, Parent shall give notice to the
Stockholders Representative of such disagreement and, in that case, Stockholders
shall have no right to recover indemnity hereunder until such time, if at all,
as (a) a court of competent jurisdiction issues a final, non-appealable order
specifying the amount of Stockholders’ recovery, in which case Stockholders
shall have the right promptly to recover the amount so specified (subject to the
limitations contained in Section 7.3 and Section 7.4(f) hereof) or (b) Parent
and the Stockholders Representative agree in writing to the amount of
Stockholders’ recovery, in which case Stockholders shall have the right promptly
to recover the amount so agreed.
               (d)      Third-Party Claims. Parent agrees to notify the
Stockholders Representative in writing of any Claims asserted by third parties
that, in the opinion of Parent, are reasonably likely to give rise to
indemnification of any member of the Parent Group hereunder (“Third-Party
Claims”). In the event of any Third Party Claim, the Indemnifying Party shall be
entitled: (a) to participate in such action and (b) to elect, by written notice
delivered to the Indemnified Party within 30 days after the Indemnifying Party’s
receipt of notice of the Third Party Claim, to defend, compromise or settle such
action, with counsel reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall cooperate with respect to any such participation,
defense, settlement or compromise. The Indemnified Party shall have the right to
employ its own counsel in any such case, but the fees and expenses of the
Indemnified Party’s counsel shall be at the sole expense of the Indemnified
Party unless: (i) the Indemnifying Party shall have authorized in writing
employment of such counsel at the expense of the Indemnifying Party; (ii) the
Indemnifying Party shall not have employed counsel reasonably satisfactory to
the Indemnified Party to defend such action within 30 days after the
Indemnifying Party received notice of the Asserted Liability; (iii) the
Indemnified Party shall have reasonably concluded, based upon advice of counsel,
that there are defenses available to the Indemnified Party that are different
from or additional to those available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to direct the defense of such
action on behalf

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of the Indemnified Party with respect to such different defenses); or
(iv) representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between such Indemnified Party and any other party represented by such
counsel in such proceeding, in any of which events the fees and expenses of one
additional counsel shall be borne by the Indemnifying Party. The Indemnifying
Party shall not settle or compromise any action or consent to the entry of a
judgment that: (a) does not provide for the claimant to give an unconditional
release to the Indemnified Party in respect of the Third Party Claim;
(b) involves relief other than monetary damages; (c) places restrictions or
conditions on the operation of the business of the Indemnified Party or any of
its Affiliates; or (d) involves any finding or admission of liability or of any
violation of applicable law. The Indemnifying Party shall not be liable for any
settlement of any claim or action effected without its written consent; provided
that such consent is not unreasonably withheld. After payment of any claim by
the Indemnifying Party, the Indemnified Party, if requested by the Indemnifying
Party, shall assign to the Indemnifying Party all rights the Indemnified Party
may have against any applicable account debtor or other responsible Person in
respect of such claim. If the Indemnifying Party chooses to defend any Third
Party Claim, the Indemnified Party shall make available to the Indemnifying
Party any books, records or other documents within its control that are
necessary or appropriate for such defense. Any expenses of any Indemnified Party
for which indemnification is available hereunder shall be paid upon written
demand therefor. Notwithstanding the foregoing, if an Indemnified Party
determines in good faith that there is a reasonable probability that an action
by a third party may adversely affect it or its Affiliates other than solely as
a result of monetary damages for which it would be entitled to indemnification
under this Agreement, the Indemnified Party may, by notice to the Indemnifying
Party, assume the exclusive right to defend, compromise, or settle such action,
and the Indemnifying Party will indemnify the Indemnified Party for the costs
associated therewith. The Indemnifying Party will not be bound by any settlement
of such an action effected without its consent (which will not be unreasonably
withheld).
               (e)      Recovery of Parent Claims. Subject to the limitations of
Section 7.3 and Section 7.4(f), if Parent shall be finally determined to be
entitled to indemnification hereunder; Parent shall first seek recovery from the
Company Stockholders for the amount of the related Parent Claim, as determined
hereunder, by (x) recovering from the Company Stockholders first out of the
General Indemnity Escrow (or in the case of Section 7.1(d), first the Working
Capital Escrow, and then if that is insufficient the General Indemnity Escrow;
or, in the case of Section 7.1(d), first the Special Indemnity Escrow, and then
if that is insufficient the General Indemnity Escrow, allocated among the
Company Stockholders on a pro rata basis based on the portion of the General
Indemnity Escrow, Special Indemnity Escrow and/or Working Capital Escrow
allocated to each of them as set forth in Schedule II and, if the General
Indemnity Escrow, Special Indemnity Escrow and/or Working Capital Escrow, as the
case may be, are not sufficient to recover payment for the required amount then
from other Merger Consideration previously received by the Principal
Stockholders with each Principal Stockholder contributing such Principal
Stockholder’s pro rata portion of such Merger Consideration, as set forth on
Schedule I, and (y) by setting off the related amount against any Parent
obligations to indemnify the Stockholder Group; and thereafter, shall be
entitled to recover payment directly from the Principal Stockholders; it being
understood that the indemnification provided by any Principal Stockholder in
respect of the representations in the Transmittal Certificates and Article 3 and
its covenants in this Agreement are several and not joint, such that any
indemnity in respect of a

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breach by such Principal Stockholder may be recovered only from the escrow
property held by the Escrow Agent for the account of the Principal Stockholder
whose representation was breached or, to the extent otherwise permitted hereby,
from such Principal Stockholder.
               (f)      Threshold and Limitations.
                    (i)      No Parent Group member shall be entitled to receive
any indemnification payment with respect to any claim for indemnification under
this Article 7 (“Claims”) until the aggregate Damages for which the Parent Group
would otherwise be entitled to receive indemnification exceeds $100,000
(“Threshold”). Once such aggregate Loss exceeds the Threshold, the Parent Group
shall be entitled to indemnification for the aggregate amount of all Damages,
regardless of the Threshold. Notwithstanding the foregoing, Parent shall be
entitled to indemnification for all Damages based upon a claim of fraud or any
breach of the representations contained in Sections 2.2, 2.3, 2.4, 2.8, 3.2, 3.3
and 3.4, and any indemnification provided for by Sections 7.1(c), 7.1(d) and
7.1(e) without regard to the Threshold.
                    (ii)     Except as provided below for Damages based upon a
claim of fraud or any breach of the representations contained in Sections 2.2,
2.3, 2.4, 2.8, 3.2, 3.3 and 3.4, and any indemnification provided for by
Sections 7.1(c), 7.1(d) and 7.1(e), (A) the aggregate liability of all Company
Stockholders under this Article 7 (other than pursuant to Section 7.1(d)), shall
be limited to the amount of the General Indemnity Escrow (the “Escrow Value”),
(B) the aggregate liability of Parent and the Merger Sub under this Article 7,
shall be limited to the amount of the Escrow Value, and (C) the liability of any
Company Stockholder shall be limited to the amount of the Escrow Value
originally deposited in escrow for his or its account. With respect to any Claim
based on a claim of fraud, any breach of the representations contained in
Sections 2.2, 2.3, 2.4, 2.8, 3.2, 3.3 and 3.4 and any indemnification provided
for by Sections 7.1(c), the liability of each Company Stockholder shall be up to
the amount of the Merger Consideration actually received by such Company
Stockholder; with respect to any Claim based on the indemnification provided for
by Section 7.1(d), the aggregate liability of the Company Stockholders shall be
limited to the value of the General Indemnity Escrow plus the Working Capital
Escrow, it being understood that Parent shall first have recourse to the Working
Capital Escrow for any such Claim; and with respect to any Claim based on the
indemnification provided for by Section 7.1(e) the aggregate liability of the
Company Stockholders shall be limited to the sum of the General Indemnity Escrow
and the Special Indemnity Escrow it being understood that Parent shall first
have recourse to the Special Indemnity Escrow for any such Claim; provided, that
the indemnification provided by any Principal Stockholder in respect of the
representations in the Transmittal Certificates and Article 3 and its covenants
in this Agreement are several and not joint, such that no Principal Stockholder
shall be liable in indemnity for the breach of any such representation other
than those made by such Principal Stockholder, as the case may be.
                    (iii)    An indemnifying party shall not be obligated to
defend and hold harmless an indemnified party or otherwise be liable to such
party with respect to any claims made by indemnifying party after the expiration
of the applicable time period as set forth in, and subject to, Section 7.3.

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                    (iv)     In determining the amount of Damages for which any
Parent Group member is entitled assert a claim for indemnification, the amount
of any such Damages shall be determined after deducting therefrom the amount of
any insurance proceeds actually received by Parent or the Company in respect of
such matter (which recoveries Parent agrees to use and to cause the Company to
use commercially reasonable efforts to obtain). If an indemnification payment is
received by a member of the Parent Group hereunder, and such person or the
Company later receives insurance proceeds in respect of the related Damages,
Parent shall return to the Company Stockholders within 10 days of the receipt of
such insurance proceeds, Merger Consideration previously distributed to Parent
from the General Indemnity Escrow to the lesser of (A) the actual amount of
insurance proceeds and (B) the actual amount of the indemnification payment
previously paid by the Company Stockholders with respect to such Damages. If an
Indemnifying Party (as defined below) makes any indemnification payment
hereunder, such Indemnifying Party shall be subrogated, to the extent of such
payment, to all rights and remedies of the Indemnified Party (as defined below)
to any third party in connection with the Damages to which such payment relates.
               (g)      Remedies. The indemnification provisions of this
Article 7 are the sole and exclusive remedy of any party to this Agreement for a
breach of any representation, warranty or covenant contained in, or any
obligation arising under, this Agreement, as modified by the Disclosure
Schedule, other than a suit for specific performance.
               (h)      Effect of Certain Payments. The parties acknowledge and
agree that the amount of any disbursement from the Working Capital Escrow, from
the General Indemnity Escrow or the Special Indemnity Escrow for the account of
any Company Stockholder, and the amount of any other recovery by a member of the
Parent Group of indemnification from any Company Stockholder pursuant to this
Article 7, shall constitute, as to such Company Stockholder, a reduction in the
amount of Merger Consideration received by such Company Stockholder.
Article 8
Conditions to the Merger
     8.1      Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
               (a)      Stockholder Approvals. The Company shall have obtained
the Required Stockholder Vote.
               (b)      No Order. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger.
               (c)      No Restraints. There shall not be instituted or pending
any action or proceeding by any Governmental Entity (i) seeking to restrain,
prohibit or otherwise interfere

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with the ownership or operation by Parent or any of its subsidiaries of all or
any portion of the business of the Company or any of its subsidiaries or of
Parent or any of its subsidiaries or to compel Parent or any of its subsidiaries
to dispose of or hold separate all or any portion of the business or assets of
the Company or any of its subsidiaries or of Parent or any of its subsidiaries,
(ii) seeking to impose or confirm limitations on the ability of Parent or any of
its subsidiaries effectively to exercise full rights of ownership of the shares
of Common Stock (or shares of stock of the Surviving Corporation) including the
right to vote any such shares on any matters properly presented to shareholders
or (iii) seeking to require divestiture by Parent or any of its subsidiaries of
any such shares.
               (d)      Antitrust Filings. If applicable, all waiting periods
(and any extensions thereof) applicable to any Antitrust Filings relating to the
transactions contemplated hereby shall have expired or been terminated.
     8.2      Additional Conditions to Obligations of the Company. The
obligation of the Company to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
               (a)      Representations and Warranties. Each representation and
warranty of Parent and the Merger Sub contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect as if
made on the Closing Date except, in each case, or in the aggregate, as would not
have a material adverse effect on the ability of the parties to consummate the
transactions contemplated by this Agreement.
               (b)      Agreements and Covenants. Parent and Merger Sub shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them on
or prior to the Closing Date, and the Company shall have received a certificate
to such effect signed on behalf of Parent by an authorized officer of Parent.
               (c)      Escrow Agreement. Parent and the Escrow Agent shall have
executed and delivered the Escrow Agreement.
               (d)      Payment of Convertible Notes. Parent or Merger Sub shall
have paid, or shall have made provision for payment immediately following the
Effective Time, of the outstanding principal of and interest accrued and unpaid
on any Convertible Promissory Note outstanding immediately prior to the
Effective Time that was not converted into Company Capital Stock.
     8.3      Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
Parent:
               (a)      Representations and Warranties. Each representation and
warranty of the Company contained in this Agreement (i) shall have been true and
correct as of the date of

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this Agreement and (ii) shall be true and correct on and as of the Closing Date
with the same force and effect as if made on and as of the Closing Date except
in each case, or in the aggregate, as does not constitute a Company Material
Adverse Effect as of the Closing Date; or a material adverse effect on the
ability of the parties to consummate the transactions contemplated by this
Agreement. Parent shall have received a certificate with respect to the
foregoing signed on behalf of the Company by the Chief Executive Officer of the
Company.
               (b)      Agreements and Covenants. The Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date, and Parent shall have received a certificate to such effect
signed on behalf of the Company by the Chief Executive Officer of the Company.
               (c)      Legal Opinion. Parent shall have received an opinion of
Davis, Wright & Tremaine LLP, counsel to the Company, in substantially the form
attached as Exhibit D.
               (d)      Material Adverse Effect. No Company Material Adverse
Effect shall have occurred since the date of this Agreement and be continuing.
               (e)      Consents. (i) All required approvals or consents of any
Governmental Entity (with such permitted exceptions as are set forth on
Part 8.3(e) of the Parent Disclosure Schedule) or other person in connection
with the Merger and the consummation of the other transactions contemplated
hereby, including, without limitation, that of each person and entity identified
on Part 8.3(e) of the Parent Disclosure Schedule (the “Required Consents”),
shall have been obtained (and all relevant statutory, regulatory or other
governmental waiting periods, shall have expired, with such permitted exceptions
as are set forth on Part 8.3(e) of the Parent Disclosure Schedule) and (ii) all
such approvals and consents which have been obtained shall be on terms that are
not reasonably likely, directly or indirectly, to result in a Company Material
Adverse Effect.
               (f)      Dissenters’ Rights. As of the Closing Date, the
aggregate number of Dissenting Shares shall not exceed five percent (5%) of the
number of issued and outstanding shares of Company Capital Stock (on an as
converted to common stock basis).
               (g)      Escrow Agreement. The Stockholder Representative and the
Escrow Agent shall have executed and delivered the Escrow Agreement.
               (h)      Tax Certificate. The Target Company shall have delivered
to Parent a certificate that meets the requirements of Sections 1.1445-2(c)(3)
and 1.897-2(h) of the Treasury Regulations, certifying that the Company is not
and has not been a United States real property holding corporation (as defined
in Section 897(c)(2) of the Code) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
               (i)      Employment Agreements. The employees of the Company
described in Part 8.3(i) of the Company Disclosure Schedule, including those who
executed, contemporaneously with the execution and delivery of this Agreement,
an offer letter from Parent setting forth the terms of his continued employment
by the Company following the Closing (each a “Key Employee”) shall remain
employed by the Company and no such Key

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Employee shall have notified Parent or the Company of his or her intention to
terminate such employment or not to accept employment by Parent following the
Closing.
               (j)      Matters Relating to Convertible Notes and Warrants. The
Company and the holders of those certain Convertible Promissory Notes and
Company Warrants described therein shall have executed and delivered to the
Company an agreement or agreements in the form or forms attached as Exhibit E
hereto, providing for the acceleration of certain of such Company Warrants and
the agreement of such holders to elect the redemption of such Convertible
Promissory Notes and to exercise such Company Warrants, as the case may be,
immediately prior to the Effective Time (each a “Note and Warrant Amendment and
Exercise Agreement”), and all such Company Warrants that are subject to such
agreements shall have been converted or exercised, as the case may be, in
accordance with the applicable Note and Warrant Amendment and Exercise
Agreement.
               (k)      Consent of Company Auditors. The Company Auditors shall
have executed and delivered or stated in writing that they are prepared to
execute and deliver their consent to the incorporation by reference in any
registration statement of Parent of their audit opinion on the consolidated
financial statements of the Company as of June 30, 2006 and 2007 and for the
fiscal years then ended, which consent will be filed with the Securities and
Exchange Commission as part of Parent’s Current Report on Form 8-K disclosing
the consummation of the Merger and, if required by law, may be included in any
other current and periodic report filed by Parent with the Securities and
Exchange Commission.
               (l)      Patent Assignment. Bruce D’Ambrosio shall have executed
and delivered to the Company an assignment, in form and substance acceptable to
Parent, of U.S. patent application, serial no. 11/543,728, Tracking Methods and
Systems that Employ Bayesian Networks.
               (m)      Termination of Certain Consulting Agreements. Each
agreement specified in Part 2.2(b)(4),(5), (6), (7), and (8) of the Company
Disclosure Schedule shall have been terminated without liability on the part of
the Company.
Article 9
Termination, Amendment and Waiver
     9.1      Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the Required Stockholder Vote for
the adoption and approval of this Agreement and the Merger has been obtained:
               (a)      by mutual written consent executed by a duly authorized
officer of Parent and the Company;
               (b)      by either the Company or Parent if the Merger shall not
have been consummated by March 31, 2008 for any reason; provided, however, that
the right to terminate this Agreement under this Section 9.1(b) shall not be
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failure to act has been a principal cause of or resulted in the failure of the
Merger to occur on or before such date and such action or failure to act
constitutes a breach of this Agreement;
               (c)      by either the Company or Parent if a Governmental Entity
shall have issued an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is final and
nonappealable;
               (d)      by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 8.2(a) or
Section 8.2(b) would not be satisfied, provided that if such inaccuracy in
Parent’s representations and warranties or breach by Parent is curable by
Parent, then the Company may not terminate this Agreement under this
Section 9.1(d) for 30 days after delivery of written notice from the Company to
Parent of such breach and intent to terminate, provided Parent continues to
exercise commercially reasonable efforts to cure such breach (it being
understood that the Company may not terminate this Agreement pursuant to this
paragraph (d) if such breach by Parent is cured during such 30-day period, or if
the Company shall have materially breached this Agreement); or
               (e)      by Parent, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section 8.3(a) or
Section 8.3(b) would not be satisfied, provided that if such inaccuracy in the
Company’s representations and warranties or breach by the Company is curable by
the Company, then Parent may not terminate this Agreement under this
Section 9.1(e) for 30 days after delivery of written notice from Parent to the
Company of such breach, and intent to terminate, provided the Company continues
to exercise commercially reasonable efforts to cure such breach (it being
understood that Parent may not terminate this Agreement pursuant to this
paragraph (e) if such breach by the Company is cured during such 30-day period,
or if Parent shall have materially breached this Agreement).
     9.2      Notice of Termination; Effect of Termination. Any proper
termination of this Agreement under Section 9.1 will be effective immediately
upon the delivery of written notice of the terminating party to the other
parties hereto. In the event of the termination of this Agreement as provided in
Section 9.1, this Agreement shall be of no further force or effect, and all
further obligations of the parties shall terminate without further liability of
any such party, except (i) as set forth in this Section 9.2, Section 9.3 and
Article 10, each of which shall survive the termination of this Agreement, and
(ii) nothing herein shall relieve any party from liability for any willful
breach of this Agreement. No termination of this Agreement shall affect the
obligations of the parties contained in the Confidentiality Agreement, all of
which obligations shall survive termination of this Agreement in accordance with
their terms.
     9.3      Fees and Expenses. Except as set forth in Section 1.10, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated.

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     9.4      Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Parent, the Company and the Stockholder
Representative.
     9.5      Extension; Waiver. At any time prior to 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 made to such
party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
Article 10
General Provisions
     10.1    Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):

     
(a)
  if to Parent or Merger Sub, to:
 
   
 
  Art Technology Group, Inc.
 
  One Main Street
 
  Cambridge, MA 02142
 
  Facsimile: (617) 386-1142
 
  Attention: Chief Executive Officer
 
   
 
  with a copy to:
 
   
 
  Foley Hoag llp
 
  Seaport World Trade Center West
 
  155 Seaport Boulevard
 
  Boston, Massachusetts 02210
 
  Facsimile: (617) 832-7000
 
  Attention: John D. Patterson, Jr. and Robert W. Sweet, Jr.
 
   
(b)
  if to Company, to:
 
   
 
  eShopperTools.com Inc.
 
  1201 Western Avenue, Suite 400
 
  Seattle, Washington 98101
 
  Facsimile: (206) 903-8512
 
  Attention: Chief Executive Officer

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  with a copy to:
 
   
 
  Davis Wright Tremaine llp
 
  1201 Third Avenue, Suite 2200
 
  Seattle, Washington 98101-3045
 
  Fax: (206) 757-7700
 
  Attention: Jacob Heth and Stuart Campbell
 
   
(c)
  if to the Stockholder Representative:
 
   
 
  Cedar Grove Investments LLC
 
  1000 Second Avenue #1200
 
  Seattle, WA 98104
 
  Fax: 206-332-1201
 
  Attention: Mr. Scott Anderson

     10.2    Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The words “include,” “includes” and “including” when used herein
shall be deemed in each case to be followed by the words “without limitation.”
The table of contents and headings contained in this Agreement are only for
reference purposes and shall not affect in any way the meaning or interpretation
of this Agreement. When reference is made herein to “the business of” an entity,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such entity.
Reference to an agreement herein is to such agreement as amended in accordance
with its terms up to the date hereof. Reference to a statute herein is to such
statute, as amended.
     10.3    Counterparts; Facsimile. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart. For purposes of this Agreement, a
document (or signature page thereto) signed and transmitted by facsimile
machine, telecopier or electronic mail is to be treated as an original document.
The signature of any party thereon, for purposes hereof, is to be considered as
an original signature, and the document transmitted is to be considered to have
the same binding effect as an original signature on an original document. At the
request of any party, any facsimile, telecopy or scanned document is to be
re-executed in original form by the parties who executed the facsimile, telecopy
or scanned document. No party may raise the use of a facsimile machine,
telecopier or electronic mail or the fact that any signature was transmitted
through the use of a facsimile, telecopier or electronic mail as a defense to
the enforcement of this Agreement or any amendment or other document executed in
compliance with this Agreement.

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     10.4      Entire Agreement; Third Party Beneficiaries. This Agreement, its
Exhibits and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Company
Disclosure Schedule and the Parent Disclosure Schedule (a) 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, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder.
Without limiting the generality of the foregoing, the parties hereto acknowledge
that no party hereto makes, and each hereby disclaims, any representations or
warranties, express or implied, by such party other than as expressly set forth
herein or in any other Transaction Documents.
     10.5      Severability. In the event that any provision of this Agreement
or the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
     10.6      Other Remedies; Specific Performance; Fees.
                 (a)      Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof [in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity].
                 (b)      If any action, suit or other proceeding (whether at
law, in equity or otherwise) is instituted concerning or arising out of this
Agreement or any transaction contemplated hereunder, the prevailing party shall
recover, in addition to any other remedy granted to such party therein, all such
party’s costs and attorneys fees incurred in connection with the prosecution or
defense of such action, suit or other proceeding.
     10.7      Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.
     10.8      Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the

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application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
     10.9      Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
consent of the other parties hereto. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Any purported
assignment in violation of this Section 10.9 shall be void.
     10.10    Waiver of Jury Trial. EACH OF PARENT, THE COMPANY AND MERGER SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE
COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
*    *    *    *    *

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

            Art Technology Group, Inc.
        /s/ Robert D. Burke       By:   Robert D. Burke      Title:   President
and Chief Executive Officer   

            Einstein Acquisition Corp.
        /s/ Robert D. Burke       By:   Robert D. Burke      Title:   President
and Chief Executive Officer   

            eShopperTools.com, Inc.
        /s/ Todd Humphrey       By:  Todd Humphrey     Title:  Chief Executive
Officer          

            Stockholder Representative
      /s/ Scott Anderson       Scott Anderson           

 

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            PRINCIPAL STOCKHOLDERS:
      /s/ Michael P. Wellman     Name    

                  By:    Michael P. Wellman       Name:           Title:        

             
      /s/ Andreas S. Weigend     Name    

                  By:    Andreas Weigend       Name:   Dr. Andreas S. Weigend  
    Title:   Advisor    

             
      /s/ Robust Decisions Inc.     Name    

                  By:    David G. Ullman       Name:   David G. Ullman      
Title:   President    

             
      /s/ David G. Ullman     Name    

                  By:    David G. Ullman       Name:         Title:      

             
      /s/ Peter Norvig     Name    

                  By:    Peter Norvig       Name:   Peter Norvig       Title:  
Tech Advisory Board Member    

             
      /s/ Jan Hendrickson     Name    

                  By:    Jan Hendrickson       Name:           Title:        

             
      /s/ John R. Garrett     Name    

                  By:    John R. Garrett       Name:   John R. Garrett      
Title:   Stockholder    

             
      /s/ Craig Kinzer     Name    

                  By:    Craig Kinzer       Name:   CPII, LLC       Title:  
Manager    

             
      /s/ Craig Kinzer     Name    

                  By:    Craig Kinzer       Name:   Craig Kinzer       Title:  
     

             
      /s/ Robert M. Arnold     Name    

                  By:    Robert M. Arnold       Name:   Robert M. Arnold      
Title:        

             
      /s/ Jane L. Jorgensen Living Trust     Name    

                  By:    Jane Jorgensen       Name:   Jane Jorgensen      
Title:   Trustee    

             
      /s/ Robert D. Rector     Name    

                  By:    Robert D. Rector       Name:           Title:        

             
      /s/ Bruce D. D’Ambrosio Living Trust     Name    

                  By:    Bruce D. D’Ambrosio       Name:           Title:      
 

Principal Stockholder Signature Page to Agreement and Plan of Merger

 

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List of Exhibits

     
Schedule I
  Principal Stockholders
 
   
Schedule II
  Merger Consideration
 
   
Exhibit A
  Form of Voting Agreement
 
   
Exhibit B
  Escrow Agreement
 
   
Exhibit C
  Transmittal Certificate
 
   
Exhibit D
  Company Legal Opinion
 
   
Exhibit E
  Note and Warrant Amendment and Exercise Agreements