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

Exhibit 10.2
 
Agreement and Plan of Reorganization
 
by and among

ShoreTel, Inc.,

Mets Acquisition Corp.,

Mets Acquisition II LLC,

M5 Networks, Inc.

and

Fortis Advisors LLC, as Effective Time Holders’ Agent

Dated as of January 31, 2012
 
 
 

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

 
 
Exhibits
 

     
Exhibit A
-
Definitions
Exhibit B-1
-
List of Initial Signatories to Company Stockholder Consent
Exhibit B-2
-
Form of Company Stockholder Consent
Exhibit B-3
-
Form of Company Stockholder Agreement
Exhibit C-1
-
List of Company Key Stockholders
Exhibit C-2
-
Form of Investment Representation Letter and Lock-Up Agreement
Exhibit C-3
-
List of Company Qualified Stockholders
Exhibit D
-
List of Key Employees
Exhibit E
 
List of Signatories to Non-Competition Agreements
Exhibit F-1
-
Form of Certificate of Merger
Exhibit F-2
-
Form of Second Certificate of Merger
Exhibit G
-
Form of Escrow Agreement
Exhibit H
-
Form of Parachute Payment Waiver
Exhibit I-1
-
List of Contracts Requiring Consent
Exhibit I-2
-
List of Contracts Requiring Termination
Exhibit I-3
-
List of Contracts Requiring Amendment
Exhibit J-1
-
Form of IRS Notice
Exhibit J-2
-
Form of FIRPTA Notice
Exhibit K
 
Form of Joinder Agreement

 
 
 

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

 
 
AGREEMENT AND PLAN OF REORGANIZATION
 
This Agreement and Plan of Reorganization (this “Agreement”) is made and entered
into as of January 31, 2012 (the “Agreement Date”), by and among ShoreTel, Inc.,
a Delaware corporation (“Acquirer”), Mets Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Acquirer (“Sub I”), Mets Acquisition
II LLC, a Delaware limited liability company and wholly owned subsidiary of
Acquirer (“Sub II”, together with Sub I, the “Merger Subs”), M5 Networks, Inc.,
a Delaware corporation (the “Company”), and Fortis Advisors LLC, a Delaware
limited liability company, solely with respect to express references herein, as
Effective Time Holders’ Agent (as defined in Section 8.7).
 
RECITALS
 
A.          The Boards of Directors of the Company, Merger Subs and Acquirer
have determined that it would be advisable and in the best interests of the
stockholders of their respective companies that Sub I merge with and into the
Company (the “First Merger”), pursuant to which the Company would be the
surviving corporation and become a wholly owned subsidiary of Acquirer, and, as
part of the same overall transaction, the surviving entity of the First Merger
would merge with and into Sub II (the “Second Merger”, and together with the
First Merger, the “Mergers”), with Sub II to survive the Second Merger and
continue as a wholly owned subsidiary of Acquirer, all on the terms and subject
to the conditions set forth in this Agreement, and, in furtherance thereof, have
approved the Mergers, this Agreement and the other transactions contemplated by
this Agreement.
 
B.           The Mergers taken together are intended to qualify to be a tax free
reorganization under Section 368(a)(i)(A) of the Code.
 
C.           Pursuant to the First Merger, among other things, the issued and
outstanding shares of capital stock of the Company shall be converted into the
right to receive cash and shares of Acquirer Common Stock in the manner set
forth herein.
 
D.          The Company, Merger Subs and Acquirer desire to make certain
representations, warranties, covenants and other agreements in connection with
the Mergers as set forth herein.
 
E.           Immediately following execution of this Agreement and as a material
inducement to the willingness of Acquirer to enter into this Agreement, each
Company Stockholder listed on Exhibit B-1 will execute and deliver (a) a written
consent substantially in the form attached hereto as Exhibit B-2 (the “Company
Stockholder Consent”) approving the Mergers and related items and adopting this
Agreement and (b) a stockholder agreement substantially in the form attached
hereto as Exhibit B-3 (the “Company Stockholder Agreement”).
 
F.           Concurrently with the execution of this Agreement and as a material
inducement to the willingness of Acquirer to enter into this Agreement, each of
the Company Securityholders identified on Exhibit C-1 hereto (each a “Company
Key Stockholder”) is executing and delivering to Acquirer an Investment
Representation Letter and Lock-Up Agreement in substantially the form attached
hereto as Exhibit C-2, in each case to become effective upon the Closing.
 
G.           Concurrently with the execution of this Agreement and as a material
inducement to the willingness of Acquirer to enter into this Agreement, certain
employees of the Company and its Subsidiaries identified on Exhibit D (the “Key
Employees”) have executed employee offer letters (including a non-disclosure and
inventions assignment agreement and such other forms provided by Acquirer and as
are part of Acquirer’s standard policy for commencement of employment) with
Acquirer (collectively, the “Employment Documents”), in each case to become
effective upon the Closing.
 
 
1

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

 
 
H.           Concurrently with the execution of this Agreement and as a material
inducement to the willingness of Acquirer to enter into this Agreement, each of
the Company Securityholders identified on Exhibit E is entering into a
non-competition agreement with Acquirer (each, a “Non-Competition Agreement”),
in each case to become effective upon the Closing.
 
Now, Therefore, in consideration of the representations, warranties, covenants
and other agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
 
ARTICLE 1
The Mergers
 
1.1           The Mergers.  At the Effective Time (as such term is defined in
Section 1.4), on the terms and subject to the conditions set forth in this
Agreement, the Certificate of Merger in substantially the form attached hereto
as Exhibit F-1 (the “Certificate of Merger”) and the applicable provisions of
Delaware Law, Sub I shall merge with and into the Company, the separate
corporate existence of Sub I shall cease and the Company shall continue as the
surviving corporation and shall become a wholly owned subsidiary of
Acquirer.  The Company, as the surviving corporation after the First Merger, is
hereinafter sometimes referred to as the “First Step Surviving Corporation.”  At
the Second Effective Time (as such term is defined in Section 1.4), on the terms
and subject to the conditions set forth in this Agreement, the Second
Certificate of Merger in substantially the form attached hereto as Exhibit F-2
(the “Second Certificate of Merger”) and the applicable provisions of Delaware
Law, the First Step Surviving Corporation shall merge with and into Sub II, the
separate corporate existence of First Step Surviving Corporation shall cease and
Sub II shall continue as the surviving entity and a wholly owned subsidiary of
Acquirer (the surviving entity after the Second Merger, or its successor, is
sometimes referred to herein as the “Final Surviving LLC”).
 
1.2           Closing.  Unless this Agreement is earlier terminated in
accordance with Article 7, the closing of the transactions contemplated hereby
(the “Closing”) shall take place (i) as promptly as practicable (and in any
event within five (5) Business Days) after the satisfaction or waiver of each of
the conditions set forth in Article 6 (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions) or (ii) as such other time and date as the Acquirer
and the Company may agree in writing.  The Closing shall take place at the
offices of Fenwick & West LLP, Silicon Valley Center, 801 California Street,
Mountain View, California, or at such other location as the parties hereto
agree.  The date on which the Closing occurs is herein referred to as the
“Closing Date.”
 
1.3           Closing Deliveries.
 
(a)           Acquirer Deliveries.  Acquirer shall deliver to the Company, at or
prior to the Closing, each of the following:
 
(i)          a certificate, dated as of the Closing Date, executed on behalf of
Acquirer by a duly authorized officer of Acquirer to the effect that each of the
conditions set forth in clause (a) of Section 6.2 has been satisfied;
 
 
2

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

 
 
(ii)         an Escrow Agreement, in substantially the form attached hereto as
Exhibit G (the “Escrow Agreement”), dated as of the Closing Date and executed by
Acquirer and the Escrow Agent; and
 
(iii)        the Second Certificate of Merger, executed on behalf of Sub II by a
duly authorized officer of Sub II.
 
(b)           Company Deliveries.  The Company shall deliver to Acquirer, at or
prior to the Closing, each of the following:
 
(i)          a certificate, dated as of the Closing Date and executed on behalf
of the Company by its Chief Executive Officer, to the effect that each of the
conditions set forth in clause (a) of Section 6.3 has been satisfied;
 
(ii)         a certificate, dated as of the Closing Date and executed on behalf
of the Company by its Secretary, certifying the Company’s (A)  Sixth Amended and
Restated Certificate of Incorporation, (B) Bylaws, (C) board resolutions
adopting this Agreement, approving the Mergers and the other transactions
contemplated by this Agreement and declaring the advisability thereof, (D)
stockholder resolutions adopting this Agreement and approving the Mergers and
the other transactions contemplated by this Agreement and other matters in
Acquirer’s reasonable discretion;
 
(iii)        a certificate from the Secretaries of State of the States of
Delaware, New York and Illinois and each other State or other jurisdiction in
which the Company or any Subsidiary is qualified to do business as a foreign
corporation, dated within three (3) days prior to the Closing Date and
certifying that the Company or such Subsidiary is in good standing;
 
(iv)        the Company Closing Financial Certificate;
 
(v)         the Company Stockholder Consent executed by each Company Stockholder
listed on Exhibit B-1;
 
(vi)        a Non-Competition Agreement executed by each of the Company
Securityholders identified on Exhibit E;
 
(vii)       the Employment Documents executed by each of the employees of the
Company or any Subsidiary (other than the Named Executives and the Key
Employees) who accepts Acquirer’s offer of employment effective upon the
Closing;
 
(viii)      evidence satisfactory to Acquirer of the resignation of each of the
directors and each of the officers of the Company and of each Subsidiary in
office immediately prior to the Closing as directors and/or officers, as
applicable, of the Company and of each such Subsidiary, effective no later than
immediately prior to the Effective Time;
 
(ix)        a Parachute Payment Waiver, in substantially the form attached
hereto as Exhibit H (the “Parachute Payment Waiver”), executed by each Person
required to execute such a waiver pursuant to Section 4.13 hereof;
 
(x)         unless otherwise instructed by Acquirer no later than two (2)
Business Days prior to the Closing, resolutions adopted by Company’s Board of
Directors terminating Company’s 401(k) plan (the “Company 401(k) Plan”) no later
than the day prior to Closing;
 
 
3

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

 
 
(xi)        evidence satisfactory to Acquirer of (A) the novation or consent to
assignment of any Person whose novation or consent to assignment, as the case
may be, may be required in connection with the Mergers or any other transaction
contemplated by this Agreement under the contracts listed or described on
Exhibit I-1 hereto, (B) the termination of each of the contracts of the Company
listed or described on Exhibit I-2 hereto, and (C) the amendment of each of the
contracts of the Company listed or described on Exhibit I-3 hereto in the manner
described on such exhibit with respect to each such contract;
 
(xii)        the Spreadsheet and a certificate executed on behalf of the Company
by its Chief Executive Officer, dated as of the Closing Date, certifying that
such Spreadsheet is true, correct and complete;
 
(xiii)       (A) the Pay-off Letters and documentation in a form and substance
reasonably satisfactory to Acquirer evidencing that all security interests in
any assets of the Company under the Loans (as defined in Section 5.22) may be
released pursuant to the terms described in the Pay-off Letters (as defined in
Section 5.22), and (B) executed UCC-2 or UCC-3 termination statements executed
by each Person holding a security interest in any assets of the Company or any
Subsidiary as of the Closing Date terminating any and all such security
interests and evidence reasonably satisfactory to Acquirer that all Encumbrances
(other than Permitted Encumbrances) on assets of the Company and its
Subsidiaries shall have been released prior to or shall be released
simultaneously with the Closing;
 
(xiv)      FIRPTA documentation, including (A) a notice to the Internal Revenue
Service, in accordance with the requirements of Treasury Regulation Section
1.897-2(h)(2), in substantially the form attached hereto as Exhibit J-1, dated
as of the Closing Date and executed by the Chief Executive Officer of the
Company on behalf of the Company, together with written authorization for
Acquirer to deliver such notice form to the Internal Revenue Service on behalf
of the Company after the Closing, and (B) a FIRPTA Notification Letter, in
substantially the form attached hereto as Exhibit J-2, dated as of the Closing
Date and executed by the Chief Executive Officer of the Company on behalf of the
Company;
 
(xv)       a Joinder Agreement in substantially the form attached hereto as
Exhibit K executed by a sufficient number of Company Securityholders such that
holders of at least 95% of the shares of Company Common Stock that are issued
and outstanding immediately prior to the Effective Time (or issuable upon the
conversion of Company Series A Preferred Stock, Company Series B Preferred
Stock, Company Series C Preferred Stock or the exercise of Company Options,
Company Warrants or other Company Rights that are issued and outstanding
immediately prior to the Effective Time) have executed a Stockholder Agreement
or Joinder Agreement;
 
(xvi)      either (1) written consents and waivers executed by such number of
eligible Company Stockholders as is required by the terms of Section
280G(b)(5)(B) of the Code so as to render the parachute payment provisions of
Section 280G of the Code inapplicable to any and all accelerated vesting
payments, benefits, options and/or stock provided pursuant to agreements,
contracts or arrangements that might otherwise result, separately or in the
aggregate, in the payment of any amount and/or the provision of any benefit that
would not be deductible by reason of Section 280G of the Code, with such
stockholder approval or non-approval to be obtained in a manner which satisfies
all applicable requirements of Section 280G(b)(5)(B) of the Code and the
Treasury Regulations thereunder, including Q&A-7 of Section 1.280G-1 of such
Treasury Regulations, or (2) in the absence of such stockholder approval, none
of those payments or benefits shall be paid or payable or provided, pursuant to
the Parachute Payment Waivers delivered to Acquirer pursuant to Section
1.3(b)(ix) above;
 
 
4

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

 
 
(xvii)     correct and complete copies of all election statements under Section
83(b) of the Code, if any, that are in the Company’s possession or subject to
its control with respect to any unvested securities or other property issued by
the Company, any Subsidiary or any ERISA Affiliate to any of their respective
employees, non-employee directors, consultants and other service providers;
 
(xviii)    confirmatory assignments of Intellectual Property from all of its
current and former employees and independent contractors and consultants
identified on Schedule 5.10 in each case in a form that is reasonably acceptable
to Acquirer;
 
(xix)       a Company Warrant Termination Agreement executed by each of the
Company Warrantholders;
 
(xx)        the Certificate of Merger, executed by the Company;
 
(xxi)       an Investment Representation Letter and Lock-Up Agreement executed
by each of the Company Stockholders that will be entitled to receive shares of
Acquirer Common Stock pursuant to Section 1.8(a)(ii); and
 
(xxii)     evidence satisfactory to Acquirer that all promissory notes due and
owing from Company employees to the Company shall have be repaid in full prior
to the Closing or amended to account for a set-off from the net amounts payable
to such employees for their Company Securities in the Merger.
 
1.4           Effective Time.  At the Closing, after the satisfaction or waiver
of each of the conditions set forth in Article 6, Sub I and the Company shall
cause the Certificate of Merger to be filed with the Secretary of State of the
State of Delaware, in accordance with the relevant provisions of Delaware Law
(the time of acceptance by the Secretary of State of the State of Delaware of
such filing or such later time as may be agreed to by Acquirer and the Company
and set forth in the Certificate of Merger being referred to herein as the
“Effective Time”). Promptly following the Effective Time, but in no event later
than three (3) Business Days thereafter, the Company and Sub II shall cause the
Second Certificate of Merger to be filed with the Secretary of State of the
State of Delaware, in accordance with the relevant provisions of Delaware Law
(the time of acceptance by the Secretary of State of the State of Delaware of
such filing or such later time as agreed to by Acquirer and the Company and set
forth in the Second Certificate of Merger being referred to herein as the
“Second Effective Time”).
 
1.5           Effect of the Mergers.  At the Effective Time, the effect of the
First Merger shall be as provided in this Agreement, the Certificate of Merger
and the applicable provisions of Delaware Law.  Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Sub I shall vest in
the First Step Surviving Corporation, and all debts, liabilities and duties of
the Company and Sub I shall become debts, liabilities and duties of the First
Step Surviving Corporation.  At the Second Effective Time, the effect of the
Second Merger shall be as provided in this Agreement, the Second Certificate of
Merger and the applicable provisions of Delaware Law.  Without limiting the
generality of the foregoing, and subject thereto, at the Second Effective Time,
all the property, rights, privileges, powers and franchises of Sub II and the
First Step Surviving Corporation shall vest in the Final Surviving LLC, and all
debts, liabilities and duties of Sub II and the First Step Surviving Corporation
shall become the debts, liabilities and duties of the Final Surviving LLC.
 
 
5

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

 
 
1.6           Certificate of Incorporation and Bylaws.
 
(a)           At the Effective Time, (i) the Certificate of Incorporation of the
First Step Surviving Corporation shall be amended in its entirety to read as set
forth in the Certificate of Merger, until thereafter amended as provided by
Delaware Law, and (ii) the Bylaws of Sub I shall become the Bylaws of the First
Step Surviving Corporation, until thereafter amended as provided by Delaware
Law, the Certificate of Incorporation of the First Step Surviving Corporation
and such Bylaws.
 
(b)           At the Second Effective Time, (i) the Certificate of Formation of
Sub II, as in effect immediately prior to the Second Effective Time, shall be
the Certificate of Formation of the Final Surviving LLC, until thereafter
amended as provided by Delaware Law (the “Final Surviving Entity Certificate of
Formation”), and (ii) the Limited Liability Company Agreement of Sub II, as in
effect immediately prior to the Second Effective Time, shall become the Limited
Liability Company Agreement of the Final Surviving LLC (the “Final Surviving
Entity Limited Liability Company Agreement”), until thereafter amended as
provided by Delaware Law, the Final Surviving Entity Certificate of Formation
and Final Surviving entity Limited Liability Company Agreement.
 
1.7           Directors and Officers.
 
(a)           At the Effective Time, (i) the members of the Board of Directors
of Sub I immediately prior to the Effective Time shall be appointed as the
members of the Board of Directors of the First Step Surviving Corporation
immediately after the Effective Time until their respective successors are duly
elected or appointed and qualified, and (ii) the officers of Sub I immediately
prior to the Effective Time shall be appointed as the officers of the First Step
Surviving Corporation immediately after the Effective Time until their
respective successors are duly appointed.
 
(b)           At the Second Effective Time, (i) the members of the Board of
Directors of Sub II immediately prior to the Second Effective Time shall be
appointed as the members of the Board of Directors of the Final Surviving LLC
immediately after the Second Effective Time until their respective successors
are duly elected or appointed and qualified, and (ii) the officers of Sub II
immediately prior to the Second Effective Time shall be appointed as the
officers of the Final Surviving LLC immediately after the Second Effective Time
until their respective successors are duly appointed.
 
1.8           Effect on Capital Stock and Options.
 
(a)           Treatment of Company Capital Stock, Company Options and Company
Warrants.  On the terms and subject to the conditions set forth in this
Agreement, and without any action on the part of any holder of the Company
Capital Stock, Company Options and/or Company Warrants: 
 
(i)           Company Series A Preferred Stock, Company Series B Preferred Stock
and Company Series C Preferred Stock.  At the Effective Time, each holder of
share of the Company Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock shall be treated as if such shares had been converted
into shares of Company Common Stock immediately prior to the Effective Time in
accordance with Section 4.1.1 of Company’s Sixth Amended and Restated
Certificate of Incorporation (the “Conversion”).
 
 
6

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

 
 
(ii)          Company Common Stock Held by Company Qualified Stockholders.  At
the Effective Time, each share of Company Common Stock (which, for the avoidance
of doubt, includes each share of Company Common Stock deemed to have been issued
upon conversion of all shares of Company Preferred Stock and other than
Dissenting Shares and shares owned by the Company) issued and outstanding
immediately prior to the Effective Time held by a Company Qualified Stockholder
shall be automatically converted into the right to receive, subject to and in
accordance with Section 1.9, (A) cash in an amount equal to the Common Qualified
Closing Cash Amount Per Share, (B) a number of shares of Acquirer Common Stock
equal to the Common Qualified Closing Stock Amount Per Share, (C) the right to
receive upon release from escrow pursuant to Section 1.9(c)(iii) and the terms
and conditions set forth in this Agreement and the Escrow Agreement, cash in an
amount equal to up to the Common Qualified General Escrow Cash Amount Per Share
(subject to reduction for payment of Indemnifiable Damages (as defined in
Section 8.2) pursuant to the indemnification obligations of the Effective Time
Holders under Article 8), (D) the right to receive upon release from escrow
pursuant to Section 1.9(c)(iii) and the terms and conditions set forth in this
Agreement and the Escrow Agreement, a number of shares of Acquirer Common Stock
equal to up to the Common Qualified General Escrow Stock Amount Per Share
(subject to reduction for payment of Indemnifiable Damages (as defined in
Section 8.2) pursuant to the indemnification obligations of the Effective Time
Holders under Article 8), (E) the right to receive upon release from escrow
pursuant to Section 1.9(c)(iii) and the terms and conditions set forth in this
Agreement and the Escrow Agreement, cash in an amount equal to up to the Common
Qualified Special Escrow Cash Amount Per Share (subject to reduction for payment
of Indemnifiable Damages (as defined in Section 8.2) pursuant to the
indemnification obligations of the Effective Time Holders under Article 8), (F)
the right to receive upon release from escrow pursuant to Section 1.9(c)(iii)
and the terms and conditions set forth in this Agreement and the Escrow
Agreement, a number of shares of Acquirer Common Stock equal to up to the Common
Qualified Special Escrow Stock Amount Per Share (subject to reduction for
payment of Indemnifiable Damages (as defined in Section 8.2) pursuant to the
indemnification obligations of the Effective Time Holders under Article 8), and
(G) the right to receive cash in an amount equal to the pro rata share allocable
to such share of Company Common Stock of any Earnout Payment payable pursuant to
Section 5.20.  The number of shares of Acquirer Common Stock each Company
Qualified Stockholder is entitled to receive pursuant to each of the clauses
(B), (D) and (F) in this Section 1.8(a)(ii) for the shares of Company Common
Stock held by such Company Qualified Stockholder as of the Effective Time
(including shares of Company Common Stock deemed to have been issued upon
conversion of all shares of Company Preferred Stock held by such Company
Qualified Stockholder as of the Effective Time) shall be rounded down to the
nearest whole number of shares of Acquirer Common Stock and computed after
aggregating all shares of Company Common Stock held by such Company Qualified
Stockholder.  The amount of cash each Company Qualified Stockholder is entitled
to receive pursuant to each of the clauses (A), (C), (E) and (G) in this Section
1.8(a)(ii) for the shares of Company Capital Stock held by such Company
Qualified Stockholder as of immediately prior to the Effective Time shall be
rounded to the nearest cent and computed after aggregating cash amounts for all
shares of Company Capital Stock represented by a particular stock certificate
held by such Company Qualified Stockholder.
 
(iii)         Company Common Stock Held by Company Non-Qualified
Stockholders.  At the Effective Time, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time held by a Company
Non-Qualified Stockholder (which, for the avoidance of doubt, includes each
share of Company Common Stock deemed to have been issued upon conversion of all
shares of Company Preferred Stock and other than Dissenting Shares and shares
owned by the Company) shall be automatically converted into the right to
receive, subject to and in accordance with Section 1.9, (A) cash in an amount
equal to the Common Non-Qualified Closing Amount Per Share, (B) the right to
receive upon release from escrow pursuant to Section 1.9(c)(iii) and the terms
and conditions of this Agreement and the Escrow Agreement, cash in an amount
equal to up to the Common Non-Qualified General Escrow Amount Per Share (subject
to reduction for payment of Indemnifiable Damages (as defined in Section 8.2)
pursuant to the indemnification obligations of the Effective Time Holders under
Article 8), (C) the right to receive upon release from escrow pursuant to
Section 1.9(c)(iii) and the terms and conditions of this Agreement and the
Escrow Agreement, cash in an amount equal to up to the Common Non-Qualified
Special Escrow Amount Per Share (subject to reduction for payment of
Indemnifiable Damages (as defined in Section 8.2) pursuant to the
indemnification obligations of the Effective Time Holders under Article 8) and
(D) the right to receive cash in an amount equal to the pro rata share allocable
to such share of Company Common Stock of any Earnout Payment payable pursuant to
Section 5.20.  The amount of cash each Company Non-Qualified Stockholder is
entitled to receive pursuant to this Section 1.8(a)(iii) for the shares of
Company Capital Stock held by such Company Non-Qualified Stockholder as of
immediately prior to the Effective Time shall be rounded to the nearest cent and
computed after aggregating cash amounts for all shares of Company Capital Stock
represented by a particular stock certificate held by such Company Non-Qualified
Stockholder.
 
 
7

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

 
 
(iv)         Company Options.  At the Effective Time, each vested Company Option
that is unexpired, unexercised and outstanding immediately prior to the
Effective Time shall, on the terms and subject to the conditions set forth in
this Agreement, be cancelled and extinguished and automatically converted into,
subject to and in accordance with Section 1.9, the right to receive, for each
share of Company Common Stock subject to such Company Option (A) the Option
Cash-Out Closing Amount Per Share, (B) the right to receive upon release from
escrow pursuant to Section 1.9(c)(iii) and the terms and conditions of this
Agreement and the Escrow Agreement, cash in an amount equal to up to the Option
Cash-Out General Escrow Amount Per Share (subject to reduction for payment of
Indemnifiable Damages (as defined in Section 8.2) pursuant to the
indemnification obligations of the Effective Time Holders under Article 8), (C)
the right to receive upon release from escrow pursuant to Section 1.9(c)(iii)
and the terms and conditions of this Agreement and the Escrow Agreement, cash in
an amount equal to up to the Option Cash-Out Special Escrow Amount Per Share
(subject to reduction for payment of Indemnifiable Damages (as defined in
Section 8.2) pursuant to the indemnification obligations of the Effective Time
Holders under Article 8) and (D) the right to receive cash in an amount equal to
the pro rata share allocable to each share of Company Common Stock subject to
such Company Option of any Earnout Payment payable pursuant to Section
5.20.  The amount of cash each Company Optionholder is entitled to receive
pursuant to this Section 1.8(a)(iv) for the Company Options held by such Company
Optionholder as of immediately prior to the Effective Time shall be rounded to
the nearest cent and computed after aggregating cash amounts for all Company
Options held by such Company Optionholder. At the Effective Time, each then
outstanding Company Option issued under the Company’s 2010 Stock Option and
Grant Plan that is unvested and unexercisable, shall be cancelled and
extinguished without consideration payable in respect thereof.
 
(v)         Company Warrants.  At the Effective Time, each Company Warrant that
is unexpired, unexercised and outstanding immediately prior to the Effective
Time shall, on the terms and subject to the conditions set forth in this
Agreement, be cancelled and extinguished and automatically converted into,
subject to and in accordance with Section 1.9, the right to receive, for each
share of Company Common Stock (which, for the avoidance of doubt, includes each
share of Company Common Stock deemed to have been issued upon conversion of all
shares of Company Capital Stock upon the exercise or contingent exercise of such
Company Warrant prior to the Closing) subject to such Company Warrant (A) the
Warrant Cash-Out Closing Amount Per Share, (B) the right to receive upon release
from escrow pursuant to Section 1.9(c)(iii) and the terms and conditions of this
Agreement and the Escrow Agreement, cash in an amount equal to up to the Warrant
Cash-Out General Escrow Amount Per Share (subject to reduction for payment of
Indemnifiable Damages (as defined in Section 8.2) pursuant to the
indemnification obligations of the Effective Time Holders under Article 8), (C)
the right to receive upon release from escrow pursuant to Section 1.9(c)(iii)
and the terms and conditions of this Agreement and the Escrow Agreement, cash in
an amount equal to up to the Warrant Cash-Out Special Escrow Amount Per Share
(subject to reduction for payment of Indemnifiable Damages (as defined in
Section 8.2) pursuant to the indemnification obligations of the Effective Time
Holders under Article 8) and (D) the right to receive cash in an amount equal to
the pro rata share allocable to each share of Company Common Stock subject to
such Company Warrant of any Earnout Payment payable pursuant to Section
5.20.  The amount of cash each Company Warrantholder is entitled to receive
pursuant to this Section 1.8(a)(v) for the Company Warrants held by such Company
Warrantholder as of immediately prior to the Effective Time shall be rounded to
the nearest cent and computed after aggregating cash amounts for all Company
Warrants held by such Company Warrantholder.
 
 
8

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

 
 
(vi)         Total Adjusted Purchase Price.  Notwithstanding anything to the
contrary contained in this Agreement, in no event shall the aggregate
consideration distributable by Acquirer to the Company Securityholders exceed
the sum of (A) the Total Adjusted Purchase Price (less the sum of (i) the
Aggregate Company Option Exercise Prices and (ii) the Aggregate Company Warrant
Exercise Prices) and (B) the total Earnout Payments payable pursuant to Section
5.20.
 
(vii)       Conversion of Sub I Stock.  At the Effective Time, each share of
capital stock of Sub I that is issued and outstanding immediately prior to the
Effective Time will, by virtue of the First Merger and without further action on
the part of the sole stockholder of Sub I, be converted into and become one
share of common stock of the First Step Surviving Corporation (and the shares of
the First Step Surviving Corporation into which the shares of Sub I capital
stock are so converted shall be the only shares of the First Step Surviving
Corporation’s capital stock that are issued and outstanding immediately after
the Effective Time).  Each certificate evidencing ownership of shares of Sub I
common stock will evidence ownership of such shares of common stock of the First
Step Surviving Corporation.
 
(viii)       Treatment of Sub I Stock and Sub II Membership Interests.  At the
Second Effective Time, all of the shares of common stock of the First Step
Surviving Corporation that are issued and outstanding immediately prior to the
Second Effective Time will, by virtue of the Second Merger and without further
action on the part of the sole stockholder of Sub I, be cancelled and
extinguished without any conversion thereof.  At the Second Effective Time, all
of the membership interests of Sub II that is issued and outstanding immediately
prior to the Second Effective Time will constitute, all of the membership
interests of the Final Surviving LLC.  Such membership interests shall be the
only equity interests of the Final Surviving LLC outstanding immediately after
the Second Effective Time.
 
(b)           Treatment of Company Capital Stock Owned by the Company.  All
shares of Company Capital Stock that are owned by the Company as treasury stock
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
 
(c)           Adjustments.  In the event of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into capital stock), reorganization, reclassification, combination,
recapitalization or other like change with respect to the Company Capital Stock
occurring after the date hereof and prior to the Effective Time, all references
in this Agreement to specified numbers of shares of any class or series affected
thereby, and all calculations provided for that are based upon numbers of shares
of any class or series (or trading prices therefor) affected thereby, shall be
equitably adjusted to the extent necessary to provide the parties the same
economic effect as contemplated by this Agreement prior to such stock split,
reverse stock split, stock dividend, reorganization, reclassification,
combination, recapitalization or other like change.
 
(d)           Appraisal Rights.  Notwithstanding anything contained herein to
the contrary, any Dissenting Shares shall not be converted into the right to
receive the cash amount provided for in Section 1.8, but shall instead be
converted into the right to receive such consideration as may be determined to
be due with respect to any such Dissenting Shares pursuant to Delaware
Law.  Each holder of Dissenting Shares who, pursuant to the provisions of
Delaware Law, becomes entitled to payment thereunder for such shares shall
receive payment therefor in accordance with Delaware Law (but only after the
value therefor shall have been agreed upon or finally determined pursuant to
such provisions).  If, after the Effective Time, any Dissenting Shares shall
lose their status as Dissenting Shares, then any such shares shall immediately
be converted into the right to receive the cash amount provided for in Section
1.8 in respect of such shares as if such shares never had been Dissenting
Shares, and Acquirer shall deliver (or cause to be delivered) to the holder
thereof, at (or as promptly as reasonably practicable after) the applicable time
or times specified in Section 1.9(c), following the satisfaction of the
applicable conditions set forth in Section 1.9(c), the cash amount to which such
holder would be entitled in respect thereof under this Section 1.8 as if such
shares never had been Dissenting Shares.  The Company shall give Acquirer (i)
prompt notice of any demands for appraisal or purchase received by the Company,
withdrawals of such demands, and any other instruments served pursuant to
Delaware Law and received by the Company and (ii) the right to direct all
negotiations and proceedings with respect to demands for appraisal or purchase
under Delaware Law.  The Company shall not, except with the prior written
consent of Acquirer, or as otherwise required under Delaware Law, voluntarily
make any payment or offer to make any payment with respect to, or settle or
offer to settle, any claim or demand in respect of any Dissenting Shares.  The
payout of consideration under this Agreement to the stockholders of the Company
(other than to holders of Dissenting Shares who shall be treated as provided in
this Section 1.8 and under Delaware Law) shall not be affected by the exercise
or potential exercise of appraisal rights or dissenters’ rights under Delaware
Law by any other stockholder of the Company.
 
 
9

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

 
 
(e)           Rights Not Transferable.  The rights of the Company
Securityholders as of immediately prior to the Effective Time are personal to
each such Company Securityholder and shall not be transferable for any reason
otherwise than by operation of law, will or the laws of descent and
distribution.  Any attempted transfer of such right by any holder thereof
(otherwise than as permitted by the immediately preceding sentence) shall be
null and void.
 
(f)            Fractional Shares.  No fractional shares of Acquirer Common Stock
will be issued in connection with the Mergers, but in lieu thereof each holder
of shares of Company Common Stock who would otherwise be entitled to a fraction
of a share of Acquirer Common Stock (after aggregating for each particular stock
certificate representing Company Capital Stock all fractional shares of Acquirer
Common Stock to be received by such holder) shall receive from Acquirer an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction and (ii) the Acquirer Stock Value.
 
1.9           Surrender of Certificates.
 
(a)            Exchange Agent.  Computershare Trust Company, N.A. shall act as
exchange agent (the “Exchange Agent”) in the Mergers.
 
(b)           Acquirer to Cause Deposit of Total Adjusted Purchase Price.  As
soon as reasonably practicable after the Closing Date (and in no event later
than three (3) Business Days after the Closing Date), Acquirer shall deliver (or
cause to be delivered) to the Exchange Agent for exchange in accordance with
this Article 1, (i) the cash payable pursuant to Sections 1.8(a)(ii)(A),
1.8(a)(iii)(A), 1.8(a)(iv)(A) and 1.8(a)(v)(A) (for the avoidance of doubt, not
including the cash to be deposited into escrow in connection herewith pursuant
to the provisions of Sections 1.8(a)(ii)(C), 1.8(a)(ii)(E), 1.8(a)(iii)(B),
1.8(a)(iii)(C), 1.8(a)(iv)(B), 1.8(a)(iv)(C), 1.8(a)(v)(B), 1.8(a)(v)(C),
Section 1.9(c)(iii) and Article 8), (ii) the shares of Acquirer Common Stock
issuable pursuant to Section 1.8(a)(ii)(B) (for the avoidance of doubt, not
including the shares of Acquirer Common Stock to be deposited into escrow in
connection herewith pursuant to the provisions of Sections
1.8(a)(ii)(D), 1.8(a)(ii)(F), Section 1.9(c)(iii) and Article 8), and (iii) cash
in an amount sufficient to permit payment of cash in lieu of any fractional
shares pursuant to Section 1.8(f).
 
 
10

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

 
 
(c)            Exchange Procedures.
 
(i)           As soon as reasonably practicable after the Closing Date, the
Exchange Agent shall mail to every holder of record of Company Capital Stock
that was issued and outstanding immediately prior to the Effective Time and that
has not previously delivered its Certificates (as defined below) together with a
properly completed and duly executed letter of transmittal in customary form
(the “Letter of Transmittal”) and every Company Optionholder and Company
Warrantholder: (A) a form of Letter of Transmittal and (B) instructions for use
of the Letter of Transmittal in effecting the surrender of certificates,
warrants, option agreements or other instruments which immediately prior to the
Effective Time represented issued and outstanding Company Capital Stock, Company
Options or Company Warrants that were converted into the right to receive cash
and/or shares of Acquirer Common Stock (and cash in lieu of fractional shares)
pursuant to Section 1.8(a) (the “Certificates”) in exchange for
certificates.  The Letter of Transmittal shall specify that delivery of
Certificates shall be effected, and risk of loss and title to Certificates shall
pass, only upon receipt thereof by the Exchange Agent, together with a properly
completed and duly executed Letter of Transmittal, duly executed on behalf of
each Person effecting the surrender of such Certificates, and shall be in such
form and have such other provisions as Acquirer or the Exchange Agent may
reasonably specify, including that the Effective Time Holders agree to be bound
by the provisions of Section 1.9 and Article 8 of this Agreement and agree to
release the Company and the Final Surviving LLC from any claims, rights,
liabilities and causes of action whatsoever based upon, relating to or arising
out of the Certificates.
 
(ii)         As soon as reasonably practicable after the date of delivery to the
Exchange Agent of a Certificate, together with a properly completed and duly
executed Letter of Transmittal and any other documentation required thereby, (A)
the holder of record of such Certificate shall be entitled to receive a check
representing the cash amount that such holder has the right to receive pursuant
to Section 1.8(a) in respect of such Certificate (which for the avoidance of
doubt excludes the Escrow Cash) and, solely with respect to the Common Qualified
Stockholders, a certificate representing the number of whole shares of Acquirer
Common Stock that such holder has the right to receive pursuant to Section
1.8(a)(ii)(B) in respect of such Certificate (along with any payment in lieu of
fractional shares that such holder has the right to receive pursuant to Section
1.8(f) in respect to such Certificate), and shares of Acquirer Common Stock that
such holder has the right to receive pursuant to Sections 1.8(a)(ii)(D) and
1.8(a)(ii)(F) will be deposited into escrow on such holder’s behalf pursuant to
Section 1.9(c)(iii) and Article 8 and (B) such Certificate shall be canceled.
 
(iii)        Acquirer to Cause Deposit of Escrow Cash, Escrow Shares and Agent
Expense Amount.  As soon as reasonably practicable after the Closing Date (and
in no event later than three (3) Business Days after the Closing Date), Acquirer
shall cause to be deposited with Computershare Trust Company, N.A. (or another
institution selected by Acquirer and reasonably satisfactory to the Company) as
escrow agent (the “Escrow Agent”) the Escrow Cash, the Escrow Shares and the
Agent Expense Amount. The Escrow Cash and the Escrow Shares shall constitute
security for the indemnification obligations of such Effective Time Holders
pursuant to Article 8, and shall be held in and distributed in accordance with
the provisions of the Escrow Agreement. The Agent Expense Account shall held in
and distributed in accordance with the provisions of the Escrow Agreement and be
available to cover the Effective Time Holders’ Agent Expenses and such funds
shall not be available to Acquirer to cover Indemnifiable Damages and no portion
of the Agent Expense Amount shall constitute part of the Escrow Fund.  The
shares of Acquirer Common Stock distributable pursuant to Sections 1.8(a)(ii)(D)
and 1.8(a)(ii)(F) shall be vested Acquirer Common Stock not subject to any
repurchase rights or other restrictions.
 
 
11

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

 
 
(d)           No Interest.  No interest shall accumulate on any shares of
Acquirer Common Stock issuable, or cash payable in connection with the Mergers
(other than interest accrued on the Escrow Cash according to the Escrow
Agreement).
 
(e)           Transfers of Ownership.  If any shares of Acquirer Common Stock
issuable or cash amount payable pursuant to Sections 1.8(a) and (f), is to be
issued or paid to a Person other than the Person to which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
payment thereof that the Certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the Person requesting such
exchange shall have paid to Acquirer or any agent designated by it any transfer
or other Taxes required by reason of the issuance of the shares of Acquirer
Common Stock or payment of cash in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Acquirer or any agent designated by it that such Tax has been paid or is not
payable.
 
(f)            No Liability.  Notwithstanding anything to the contrary in this
Section 1.9, none of the Escrow Agent, the Final Surviving LLC or any party
hereto shall be liable to any person for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
 
(g)           Unclaimed Shares; Unclaimed Cash.  Any cash or certificates of
shares of Acquirer Common Stock (including any distributions made thereon) or
portion of funds (including any interest earned thereon) held by the Exchange
Agent which have not been delivered to any holders of Certificates pursuant to
this Article 1 within six (6) months after the Effective Time shall promptly be
returned to Acquirer, and thereafter each holder of a Certificate who has not
theretofore complied with the exchange procedures set forth in and contemplated
by Section 1.9 shall look only to the Final Surviving LLC (subject to abandoned
property, escheat and similar laws) for its claim, only as a general unsecured
creditor thereof, to shares of Acquirer Common Stock issuable or cash amounts
payable pursuant to Section 1.8(a).  Notwithstanding anything to the contrary
contained herein, if any Certificate has not been surrendered prior to the
earlier of the third anniversary of the Effective Time or such date on which the
merger consideration contemplated by Section 1.8 in respect of such Certificate
would otherwise escheat to or become the property of any Governmental Entity,
any Acquirer Common Stock issuable or cash payable in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of Acquirer, free and clear of all claims or interests of any Person
previously entitled thereto.
 
1.10         No Further Ownership Rights in the Company Capital Stock, Company
Options or Company Warrants.  All cash and shares of Acquirer Common Stock paid
or payable and/or issued or issuable following the surrender for exchange of
shares of Company Capital Stock, Company Warrants and Company Options in
accordance with the terms hereof shall be so paid or payable and/or issued or
issuable in full satisfaction of all rights pertaining to such shares of Company
Capital Stock, Company Warrants and/or Company Options, and there shall be no
further registration of transfers on the records of the Final Surviving LLC of
shares of Company Capital Stock, Company Warrants or Company Options which were
issued and outstanding immediately prior to the Effective Time.  If, after the
Effective Time, any Certificate is presented to the Final Surviving LLC for any
reason, such Certificate shall be canceled and exchanged as provided in this
Article 1.
 
1.11         Lost, Stolen or Destroyed Certificates.  In the event any
Certificate shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such Certificate, following the making of an affidavit of
that fact by the record holder thereof, such shares of Acquirer Common Stock and
cash as may be required pursuant to Section 1.8 in respect of such Certificate;
provided, however, that Acquirer or the Exchange Agent may, in its discretion
and as a condition precedent to the issuance thereof, require the record holder
of such Certificate to deliver a bond in such sum or execute an indemnification
agreement as Acquirer or the Exchange Agent may direct as indemnity against any
claim that may be made against Acquirer, the Final Surviving LLC, the Exchange
Agent and/or any of their respective representatives or agents with respect to
such Certificate.
 
 
12

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

 
 
1.12         Tax Consequences.  It is the intent of the parties hereto that, for
U.S. federal income tax purposes, the Mergers shall constitute a
“reorganization” within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a “plan of reorganization” in respect of the Mergers
for purposes of Sections 354 and 361 of the Code.  Acquirer makes no
representations or warranties to the Company or to any holder of Company Capital
Stock, Company Options or Company Warrants regarding the Tax treatment of the
Mergers, or any of the Tax consequences to the Company or any holder of Company
Capital Stock, Company Options or Company Warrants of this Agreement, the
Mergers or any of the other transactions or agreements contemplated hereby.  The
Company acknowledges that the Company and the holders of Company Capital Stock,
Company Options and Company Warrants are relying solely on their own Tax
advisors in connection with this Agreement, the Mergers and the other
transactions and agreements contemplated hereby.  Notwithstanding anything to
the contrary set forth herein, this Agreement shall be amended and Acquirer
shall not be required to complete the Second Merger if Acquirer reasonably
determines, in consultation with its tax and legal advisors and with the
Company, that the cash portion of the merger consideration (excluding any amount
treated as imputed interest, though including the full potential amount of the
Earnout Payments and any cash amounts deposited into escrow pursuant to the
provisions of Sections 1.8(a)(ii)(C), 1.8(a)(ii)(E), 1.8(a)(iii)(B),
1.8(a)(iii)(C), 1.8(a)(v)(B), 1.8(a)(v)(C), Section 1.9(c)(iii) and Article 8)
paid to Company Stockholders in respect of the shares of Company Capital Stock
held by them as of the Effective Time exceeds 60% of the total consideration
(the “Threshold”) paid or payable to the Company Stockholders (excluding any
amount treated as imputed interest, though including the full potential amount
of the Earnout Payments and any cash amounts deposited into escrow pursuant to
the provisions of Sections 1.8(a)(ii)(C), 1.8(a)(ii)(E), 1.8(a)(iii)(B),
1.8(a)(iii)(C), 1.8(a)(iv)(B), 1.8(a)(iv)(C), 1.8(a)(v)(B), 1.8(a)(v)(C),
Section 1.9(c)(iii) and Article 8), and for purposes hereof, with each share of
Acquirer Common Stock deemed to have a value equal to the closing price of
Acquirer Common Stock as quoted on the NASDAQ Stock Market on the Agreement
Date.  Notwithstanding anything to the contrary set forth herein, if the
Threshold is exceeded, the Mergers will be treated by the parties as a taxable
stock purchase of the Company for all purposes hereunder.
 
1.13         Withholding Rights.  After consultation with the Effective Time
Holders’ Agent, Acquirer, the Final Surviving LLC and the Exchange Agent shall
be entitled to deduct and withhold from the cash and shares of Acquirer Common
Stock otherwise deliverable under this Agreement, and from any other payments
otherwise required pursuant to this Agreement, to any holder of any shares of
Company Capital Stock, any Company Options, any Company Warrants or any
Certificates such amounts in cash or shares as Acquirer, the Final Surviving LLC
or the Exchange Agent is required to deduct and withhold with respect to any
such deliveries and payments under the Code or any provision of state, local,
provincial or foreign Tax law.  To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been delivered and paid to such holders in respect of which such deduction and
withholding was made.
 
1.14         Exemption from Registration.  The shares of Acquirer Common Stock
to be issued in connection with the Mergers may, under certain circumstances, be
issued in a transaction exempt from registration under the Securities Act, by
reason of Section 4(2) thereof and/or Regulation D promulgated thereunder (a
“Private Placement”) and, in which case, may not be re-offered or resold other
than in conformity with the registration and/or qualification requirements of
the Securities Act and other applicable State blue sky securities laws and
regulations or pursuant to an exemption therefrom.  The certificates issued by
Acquirer with respect to the shares of Acquirer Common Stock issued hereunder
shall, if issued pursuant to a Private Placement, be legended to the effect
described above and shall include such additional legends as necessary to comply
with applicable U.S. federal securities laws, State blue sky securities laws and
such other restrictions as shall be set forth in the Company Stockholder
Agreement and the Investment Representation Letter and Lock-Up Agreement, if
applicable.  If the shares of Acquirer Common Stock to be issued in the Merger
are issued pursuant to a Private Placement, then Acquirer shall prepare and file
a registration statement on Form S-3 (or any successor form) with the SEC
covering the resale of such shares of Acquirer Common Stock issued in connection
with the Merger within 30 days after the Closing (assuming timely receipt of the
Spreadsheet, all information relating to the Effective Time Holders for
inclusion in such registration statement, and all signatures, opinions and
consents required for such registration statement) and Acquirer shall use its
reasonable best efforts to cause such registration statement to become effective
as promptly as practicable after filing and to keep such registration statement
effective until one year after the Closing.
 
 
13

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

 
 
1.15         Taking of Necessary Action; Further Action.  If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Final Surviving LLC with full
right, title and interest in, to and under, and/or possession of, all assets,
property, rights, privileges, powers and franchises of the Company, the officers
and directors of the Final Surviving LLC are fully authorized,  in the name and
on behalf of the Company or otherwise, to take all lawful action necessary or
desirable to accomplish such purpose or acts, so long as such action is not
inconsistent with this Agreement.
 
ARTICLE 2
Representations and Warranties of the Company
 
Subject to the disclosures set forth in the disclosure letter of the Company
delivered to Acquirer concurrently with the parties’ execution of this Agreement
(the “Company Disclosure Letter”) (each of which disclosures, in order to be
effective, shall clearly indicate the Section and, if applicable, the Subsection
of this Article 2 to which it relates (unless and only to the extent the
relevance to other representations and warranties is reasonably apparent from
the actual text of the disclosures), and each of which disclosures shall also be
deemed to be representations and warranties made by the Company to Acquirer
under this Article 2), the Company represents and warrants to Acquirer, as of
the date hereof and as of the Closing Date, as follows:
 
2.1           Organization, Standing, Power and Subsidiaries.
 
(a)           Each of the Company and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization.  Each of the Company and each Subsidiary has the
corporate power to own its properties and to conduct its business as now being
conducted and as currently proposed by it to be conducted and is duly qualified
to do business and is in good standing in each jurisdiction where the failure to
be so qualified and in good standing, individually or in the aggregate with any
such other failures, would result in a material adverse effect on the
Company.  Neither the Company nor any Subsidiary is in violation of any of the
provisions of its certificate of incorporation or bylaws or equivalent
organizational or governing documents.
 
(b)           Schedule 2.1(b) of the Company Disclosure Letter sets forth a
true, correct and complete list of the Subsidiaries.  The Company owns, of
record and beneficially, 100% of the issued and outstanding shares of capital
stock and other securities of each of its Subsidiaries, free and clear of all
Encumbrances, and all such shares are duly authorized, validly issued, fully
paid and nonassessable and are not subject to any preemptive right or right of
first refusal.  Other than the Subsidiaries listed in Schedule 2.1(b) of the
Company Disclosure Letter, the Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any Person.  None of the
Company or any of its Subsidiaries has agreed or is obligated to make any future
investment in or capital contribution to any Person.  There are no outstanding
subscriptions, options, warrants, “put” or “call” rights, exchangeable or
convertible securities or other Contracts of any character relating to the
issued or unissued capital stock or other securities of any Subsidiary, or
otherwise obligating the Company or any Subsidiary to issue, transfer, sell,
purchase, redeem or otherwise acquire or sell any such securities.
 
 
14

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

 
 
(c)           Schedule 2.1(c) of the Company Disclosure Letter sets forth a
true, correct and complete list of: (i) the names of the members of the Board of
Directors (or similar body) of the Company and each of its Subsidiaries; (ii)
the names of the members of each committee of the Board of Directors (or similar
body) of the Company and each of its Subsidiaries; and (iii) the names and
titles of the officers of the Company and each of its Subsidiaries.
 
2.2           Capital Structure.
 
(a)           Authorized and Outstanding Capital Stock of Company.  The
authorized capital stock of the Company consists solely of (i) 10,000,000 shares
of Company Common Stock, and (ii) 5,000,000 shares of Company Preferred Stock,
of which 1,205,043 shares are designated as Company Series A Preferred Stock,
767,512 shares are designated as Company Series B Preferred Stock and 700,000
shares are designated as Company Series C Preferred Stock.  A total of
2,629,629.856 shares of Company Common Stock, 1,191,210 shares of Company Series
A Preferred Stock, 619,570 shares of Company Series B Preferred Stock and
651,764 shares of Company Series C Preferred Stock are issued and outstanding as
of the Agreement Date.  The Company holds no treasury stock.  The number of
issued and outstanding shares of Company Capital Stock held by each Company
Stockholder as of the Agreement Date is set forth on Schedule 2.2(a)-1 of the
Company Disclosure Letter.  No shares of Company Capital Stock are issued or
outstanding as of the Closing Date that are not set forth on Schedule 2.2(a)-1
except for shares of Company Common Stock issued pursuant to the exercise of
outstanding Company Options listed on Schedule 2.2(b).  All issued and
outstanding shares of Company Capital Stock have been duly authorized and
validly issued, are fully paid and nonassessable, are not subject to any right
of rescission or “put” right, right of first refusal, preemptive right or “call”
right, and have been offered, issued, sold and delivered by Company in material
compliance with all requirements of Applicable Laws and all requirements set
forth in applicable Contracts.  There is no Liability for dividends accrued and
unpaid by Company.  The Company has never declared or paid any dividends on any
shares of Company Capital Stock.  There is no Liability for dividends accrued
and unpaid by Company.  As of the date of the Agreement, each share of Company
Preferred Stock is, and will be as of the Closing Date, convertible into one
share of Company Common Stock (after giving effect to any anti-dilution and
similar adjustments).
 
(b)           Company Options and Other Equity Rights.  As of the Agreement
Date, the Company has reserved 1,840,936 shares of Company Common Stock for
issuance to employees, non-employee directors and consultants pursuant to the
Company Option Plans, of which 1,173,776 shares are subject to outstanding and
unexercised Company Options, and 232,414 shares remain available for issuance
thereunder.  Schedule 2.2(b)-1 of the Company Disclosure Letter sets forth, as
of the Agreement Date, a true, correct and complete list of all holders of
outstanding Company Options (including if the Company Optionholder is not an
employee of the Company, a description of the relationship between such Company
Optionholder and the Company) whether or not granted under the Company Option
Plans, including the number of shares of Company Common Stock subject to each
Company Option, the date of grant, the exercise or vesting schedule (and the
terms of any acceleration thereof), the exercise price per share, the Tax status
of such option under Section 422 of the Code, the term of each Company Option
and the plan from which such Company Option was granted.  A true and correct
copy of the Company Option Plans, the standard agreement under the Company
Option Plans and each agreement for each Company Option that does not conform to
the standard agreement under the Company Option Plans have been delivered or
made available by Company to Acquirer’s legal counsel.
 
 
15

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

 
 
 All outstanding Company Options have been issued and granted in compliance with
all requirements of Applicable Legal Requirements and all requirements set forth
in applicable Contracts to which Company is a party or by which Company is
bound.  Schedule 2.2(b)-2 of the Company Disclosure Letter sets forth, as of the
Agreement Date, a true, correct and complete list of all holders of outstanding
Company Warrants, including the number of shares and type of Company Capital
Stock subject to each Company Warrant, the date of grant, the exercise or
vesting schedule (and the terms of any acceleration thereof), the exercise price
per share and the term of each Company Warrant. Except for the Company Options
and Company Warrants described in Schedules 2.2(b)-1 and 2.2(b)-2 of the Company
Disclosure Letter, there are no options, warrants, calls, rights or Contracts of
any character to which the Company is a party or by which it is bound obligating
the Company to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any Company Shares, Company
Options, Company Warrants or other Company Rights, or any Company Voting Debt
(as defined below) or obligating the Company to grant, extend, accelerate the
vesting and/or repurchase rights of, change the price of, or otherwise amend or
enter into any such option, warrant, call, Contract or other Company
Right.  Except for the Company’s 2001 Equity Incentive Plan and as set forth on
Schedule 2.2(b)-3, neither the Company Option Plans, nor any Company Option nor
any other Contract to which Company is a party to or is bound relating to any
shares of Company Capital Stock or other security of Company that is entitled
(or is exercisable into a security that is entitled) to receive a portion of the
merger consideration hereunder requires or otherwise provides for any
accelerated vesting or exercisability of any such security in connection with
the Mergers or any other transaction contemplated by this Agreement or upon
termination of employment or service with the Company or with Acquirer following
the Mergers or otherwise.  The vesting terms applicable to all Company Options
that are unvested and outstanding as of the date of this Agreement and as of
prior to the Effective Time shall have been accelerated (in accordance with the
terms of the applicable Company Option Plan or otherwise) or terminated as of
immediately prior to the Effective Time, and no unvested Company Options shall
remain outstanding and exercisable as of the Effective Time.  Each of the
Company Key Stockholders is an accredited investor.
 
(c)           No Voting Arrangements or Registration Rights.  Except as
contemplated by this Agreement, there are no voting agreements applicable to any
outstanding shares of Company Capital Stock or Company Options to which Company
is a party or, to Company’s knowledge, otherwise.  Company is not under any
obligation to register under the Securities Act any of its presently outstanding
shares of stock or other securities or any stock or other securities that may be
subsequently issued.
 
(d)           No Voting Debt.  No bonds, debentures, notes or other indebtedness
of the Company or any of its Subsidiaries (i) granting its holder the right to
vote on any matters on which stockholders may vote (or which is convertible
into, or exchangeable for, securities having such right) or (ii) the value of
which is any way based upon or derived from capital or voting stock of Company,
is issued or outstanding as of the Agreement Date (collectively, “Company Voting
Debt”).
 
2.3           Authority; Noncontravention.
 
(a)           The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.  The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Company’s
Board of Directors.  This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.  The Board of
Directors of the Company, by resolutions duly adopted (and not thereafter
modified or rescinded) by the unanimous vote of the Board of Directors of the
Company, has approved and adopted this Agreement and approved the Mergers,
determined that this Agreement and the terms and conditions of the Mergers and
this Agreement are advisable and in the best interests of the Company and the
Company Stockholders, and directed that the adoption of this Agreement be
submitted to the Company Stockholders for consideration and unanimously
recommended that all of the Company Stockholders adopt this Agreement.  The
affirmative votes of (i) the holders of a majority of the outstanding shares of
Company Common Stock and Company Preferred Stock (voting together as a single
voting class on an as-converted to Company Common Stock basis) and (ii) the
holders of at least sixty-nine percent (69%) of the outstanding shares of
Company Preferred Stock (voting as a separate voting class on an as-if converted
to Common Stock basis) are the only votes of the holders of the Company Capital
Stock necessary to adopt this Agreement and approve the Mergers (the “Company
Stockholder Approval”).  The execution of the Company Stockholder Consent by the
Company Stockholders listed on Exhibit B-1 is sufficient for the Company
Stockholder Approval.
 
 
16

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

 
 
(b)           The execution and delivery of this Agreement by the Company does
not, and the consummation of the transactions contemplated hereby will not, (i)
result in the creation of any Encumbrance on any of the material properties or
assets of the Company or any Subsidiary or to the knowledge of the Company, any
of the shares of Company Capital Stock or (ii) conflict with, or result in any
violation of or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under, or require any consent, approval or
waiver from any Person pursuant to, (A) any provision of the Amended and
Restated Certificate of Incorporation or Bylaws or other equivalent
organizational or governing documents of the Company or any Subsidiary, in each
case as amended to date, (B) any Material Contract, or (C) any Legal
Requirements applicable to the Company or any Subsidiary or any of their
respective material properties or assets, except in the case of clauses (ii) (B)
or (C), where such violation, default, termination, cancellation or acceleration
would not have a material effect on the Company.
 
(c)           No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to the Company or any Subsidiary in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, and (ii) such consents,
authorizations, filings, approvals, notices and registrations which, if not
obtained or made, would not be material to the Company’s ability to consummate
the Merger or to perform its obligations under this Agreement and would not
prevent, materially alter or delay any of the transactions contemplated by this
Agreement.
 
(d)           The Company and the Company’s Board of Directors and stockholders
have taken all actions such that the restrictive provisions of any “fair price,”
“moratorium,” “control share acquisition,” “business combination,” “interested
shareholder” or other similar anti-takeover statute or regulation, and any
anti-takeover provision in the governing documents of the Company or its
Subsidiaries will not be applicable to any of the Company, its Subsidiaries,
Acquirer, the Final Surviving LLC, or to the execution, delivery of, or
performance of the transactions contemplated by this Agreement or the Voting
Agreements, including the consummation of the Mergers or any of the other
transactions contemplated hereby or thereby.
 
2.4           Financial Statements.
 
(a)           The Company has made available to Acquirer its audited
consolidated financial statements for each of the two (2) fiscal years ended
December 31, 2009 and December 31, 2010 and its unaudited consolidated financial
statements for the year ended December 31, 2011 (including, in each case,
balance sheets, statements of operations and statements of cash flows)
(collectively, the “Financial Statements”), which are included as Schedule
2.4(a) of the Company Disclosure Letter.  The Financial Statements (i) are
derived from and in accordance with the books and records of the Company, (ii)
complied as to form with applicable accounting requirements with respect thereto
as of their respective dates, (iii) have been prepared in accordance with GAAP
(except that the unaudited Financial Statements do not contain footnotes)
applied on a consistent basis throughout the periods indicated and consistent
with each other, (iv) fairly and accurately present the consolidated financial
condition of the Company and the Subsidiaries at the dates therein indicated and
the consolidated results of operations and cash flows of the Company and the
Subsidiaries for the periods therein specified, and (v) are true, complete and
correct in all material respects.
 
 
17

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

 
 
(b)           Neither the Company nor any Subsidiary has any Liabilities of any
nature other than (i) those set forth or adequately provided for in the Balance
Sheet included in the Financial Statements as of December 31, 2011 (the “Company
Balance Sheet”), (ii) those incurred in the conduct of the Company’s business
since December 31, 2011 (the “Company Balance Sheet Date”) in the ordinary
course, consistent with past practice, which are of the type that ordinarily
recur and, individually or in the aggregate, are not material in nature or
amount and do not result from any breach of Contract, warranty, infringement,
tort or violation of law, and (iii) those incurred by the Company in connection
with the execution of this Agreement.  Except for Liabilities reflected in the
Financial Statements, the Company has no off balance sheet Liability of any
nature to, or any financial interest in, any third party or entities, the
purpose or effect of which is to defer, postpone, reduce or otherwise avoid or
adjust the recording of expenses incurred by the Company.  All reserves that are
set forth in or reflected in the Company Balance Sheet have been established in
accordance with GAAP consistently applied and are adequate.
 
(c)           The Company has established and maintains a system of internal
accounting controls sufficient to provide reasonable assurances (i) that
transactions of the Company and its Subsidiaries are being executed and made
only in accordance with appropriate authorizations of management and the Board
of Directors of Company, and (ii) that transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP.  Neither the
Company, any of its Subsidiaries nor Company’s independent auditors, nor to the
Company’s knowledge, any current or former employee, consultant or director of
Company or any of its Subsidiaries, has identified or been made aware of any
fraud, whether or not material, that involves Company’s management or other
current or former employees, consultants directors of Company or any of its
Subsidiaries, or any claim or allegation regarding any of the foregoing.
 
(d)           Neither the Company nor any of its Subsidiaries nor, to the
Company’s knowledge, any director, officer, employee, auditor, accountant or
representative of the Company or any of its Subsidiaries has received or
otherwise had or obtained knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, in each case, regarding deficient
accounting or auditing practices, procedures, methodologies or methods of the
Company or any of its subsidiaries or their respective internal accounting
controls or any material inaccuracy in the Company’s financial statements.  No
attorney representing the Company or any of its Subsidiaries, whether or not
employed by the Company or any of its Subsidiaries, has reported to the Board of
Directors of the Company or any committee thereof or to any director or officer
of the Company evidence of a material violation of securities laws, breach of
fiduciary duty or similar violation by the Company, its Subsidiaries or any of
their respective officers, directors, employees or agents.
 
(e)           As of the Company Balance Sheet Date, there are no material
deficiencies or material weaknesses in the design or operation of the Company’s
internal controls which could adversely affect the Company’s ability to record,
process, summarize and report financial data.  As of the Company Balance Sheet
Date, there were no material loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5, as amended by SAFS No. 11,
113 and 114  (“Statement No. 5”) issued by the Financial Accounting Standards
Board in March 1975) that are not adequately provided for in the Company Balance
Sheet as required by said Statement No. 5.  There has been no change in the
Company accounting policies since the Company’s inception, except as described
in the Financial Statements.
 
 
18

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

 
 
(f)            Schedule 2.4(f) of the Company Disclosure Letter accurately lists
all Company Debt, including, for each item of Company Debt, the Contract
governing the Company Debt and the interest rate, maturity date and any assets
or properties securing such Company Debt.  All Company Debt may be prepaid at
the Closing without penalty under the terms of the Contracts governing such
Company Debt.
 
(g)           Schedule 2.4(g) of the Company Disclosure Letter sets forth the
names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which the Company and its Subsidiaries
maintain accounts of any nature and the names of all persons authorized to draw
thereon or make withdrawals therefrom.
 
2.5           Absence of Certain Changes.  Since the Company Balance Sheet Date,
each of the Company and its Subsidiaries has conducted its business only in the
ordinary course consistent with past practices, and since such date:
 
(a)           there has not occurred a Material Adverse Effect on the Company;
 
(b)           neither the Company nor any Subsidiary has made or entered into
any Contract or letter of intent with respect to, or otherwise effected, any
acquisition, sale, license, disposition or transfer of any material asset of the
Company or any Subsidiary (other than Standard Outbound IP Agreements (as
defined in Section 2.10(a)(ix)) entered into with its customers in the ordinary
course of its business consistent with its past practice);
 
(c)           except as required by GAAP, there has not occurred any change in
accounting methods or practices (including any change in depreciation or
amortization policies or rates or revenue recognition policies or establishment
of reserves) by the Company or any Subsidiary or any revaluation by the Company
of any of its or any Subsidiary’s assets;
 
(d)           there has not occurred any declaration, setting aside, or payment
of a dividend or other distribution with respect to any securities of the
Company, or any direct or indirect redemption, purchase or other acquisition by
the Company of any of its securities, or any change in any rights, preferences,
privileges or restrictions of any of its outstanding securities;
 
(e)           neither the Company nor any Subsidiary has amended, renewed or
terminated any Material Contract (other than in the ordinary course consistent
with past practices), and there has not occurred any default or material breach
under any Material Contract to which the Company or any Subsidiary is a party or
by which it is, or any of its assets or properties are, bound;
 
(f)            there has not occurred any material amendment or change to the
Company’s certificate of incorporation or Bylaws or other equivalent
organizational or governing documents of the Company or any Subsidiary;
 
 
19

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

 
 
(g)           except as otherwise required or permitted pursuant to this
Agreement and as disclosed in Section 2.5(g) of the Company Disclosure Letter,
there has not occurred any increase in or modification of the compensation or
benefits payable or to become payable by the Company or any Subsidiary to any of
its directors, officers, employees or consultants (other than increases in the
ordinary course in connection with the Company’s annual salary review in the
base salaries of employees who are not officers in an amount that does not
exceed 10% of such base salaries), any adoption or modification of any Company
Employee Plans (as defined in Section 2.13(a)), any material modification of any
“nonqualified deferred compensation plan” within the meaning of Section 409A of
the Code and the regulations thereunder, or any new loans or advances or
extension of existing loans or advances to any such Persons (other than routine
expense advances to employees of the Company or any Subsidiary consistent with
past practice and loans permitted under the Company’s 401(k) Plan), and neither
the Company nor any Subsidiary has entered into any Contract to grant or provide
(nor has granted any) severance, acceleration of vesting or other similar
benefits to any such Persons;
 
(h)           there has not occurred any change in title, office or position, or
material reduction in the responsibilities of, or change in identity with
respect to the management, supervisory or other key personnel of the Company or
any Subsidiary and there has not occurred any terminations, suspensions or
resignations with respect to the management, supervisory or other key personnel
of the Company or any Subsidiary, any termination of employment of a material
number of employees, or any labor dispute or claim of unfair labor practices
involving the Company or any Subsidiary;
 
(i)             neither the Company nor any Subsidiary has incurred, created or
assumed any Encumbrance (other than a Permitted Encumbrance) on any of its
material assets or material properties, any Liability for borrowed money or any
Liability as guarantor or surety with respect to the obligations of any other
Person;
 
(j)             neither the Company nor any Subsidiary has cancelled or waived
any Liabilities owed to it;
 
(k)            neither the Company nor any Subsidiary has made any deferral of
the payment of any accounts payable other than in the ordinary course of
business, consistent with past practice, or in an amount in excess of $50,000,
or given any discount, accommodation or other concession other than in the
ordinary course of business, consistent with past practice, in order to
accelerate or induce the collection of any receivable;
 
(l)             neither the Company nor any Subsidiary has made any material
change in the pricing of its products or services or in the manner in which it
extends discounts, credits or warranties to customers or otherwise deals with
its customers;
 
(m)           there has been no damage, destruction or loss, whether or not
covered by insurance, affecting the material assets, properties or business of
the Company or any Subsidiary;
 
(n)           neither the Company nor any Subsidiary has sold, disposed of,
transferred or licensed to any Person any rights to any Company Intellectual
Property (as defined in Section 2.10(a)(v)) other than in the ordinary course of
business consistent with past practices, or has acquired or licensed from any
Person any Intellectual Property (as defined in Section 2.10(a)(iii)) or sold,
disposed of, transferred or provided a copy of any Company Source Code (as
defined in Section 2.10(a)(xi)) to any Person; and
 
(o)           there has not occurred any entry into any Contract by the Company
or any Subsidiary to do any of the things described in the preceding clauses (a)
through (p) (other than negotiations and agreements with Acquirer and its
representatives regarding the transactions contemplated by this Agreement).
 
 
20

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

 
 
2.6           Litigation.  Except as set forth on Schedule 2.6 of the Company
Disclosure Letter there is no private or governmental action, suit, proceeding,
claim, mediation, arbitration or investigation pending against the Company or
any of its Subsidiaries before any Governmental Entity (a “Legal Proceeding”),
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary or any of their respective assets or properties or any of their
respective directors, officers or employees (in their capacities as such or
relating to their employment, services or relationship with the Company or any
of its Subsidiaries).  There is no judgment, decree, injunction or order against
the Company or any Subsidiary, any of their respective assets or properties, or,
to the knowledge of the Company, any of their respective directors, officers or
employees (in their capacities as such or relating to their employment, services
or relationship with the Company or any of its Subsidiaries).  Neither the
Company nor any Subsidiary has any Legal Proceedings pending against any other
Person as of the Agreement Date.
 
2.7           Restrictions on Business Activities.  There is no Contract,
judgment, injunction, order or decree binding upon the Company or any Subsidiary
which has or would reasonably be expected to have, whether before or after
consummation of the Mergers, the effect of prohibiting, restricting or impairing
any current or presently proposed business practice of the Company or any
Subsidiary, any acquisition of property by the Company or any Subsidiary or the
conduct or operation of the Business or limiting the freedom of the Company or
any Subsidiary to engage in any line of business, to sell, license or otherwise
distribute services or products in any market or geographic area, or to compete
with any Person.
 
2.8           Compliance with Laws; Governmental Permits.
 
(a)           Each of the Company and each Subsidiary has complied in all
material respects with, is not in material violation of, and has not received
any notices of violation with respect to, any Legal Requirement with respect to
the conduct of the Business, or the ownership or operation of the Business where
the violation of which would result in a material effect on the
Company.  Neither the Company nor any of its Subsidiaries, nor any director,
officer, Affiliate or employee thereof (in their capacities as such or relating
to their employment, services or relationship with the Company or any of its
Subsidiaries), has given, offered, paid, promised to pay or authorized payment
of any money, any gift or anything of value, with the purpose of influencing any
act or decision of the recipient in his or her official capacity or inducing the
recipient to use his or her influence to affect an act or decision of a
government official or employee, to any (i) governmental official or employee,
(ii) political party or candidate thereof, or (iii) Person while knowing that
all or a portion of such money or thing of value would be given or offered to a
governmental official or employee or political party or candidate thereof.
 
(b)           Each of the Company and each Subsidiary has obtained each federal,
national, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a Governmental Entity (i) pursuant to which the
Company or any Subsidiary currently operates or holds any interest in any of its
material assets or properties or (ii) that is required for the operation of the
Business or the holding of any such interest (all of the foregoing consents,
licenses, permits, grants, and other authorizations, collectively, the “Company
Authorizations”), except where the failure to so obtain would not result in a
material effect on the Company, and all of the Company Authorizations are in
full force and effect.  Neither the Company nor any Subsidiary has received any
written notice or other communication from any Governmental Entity regarding (i)
any actual or possible violation of law or any Company Authorization or any
failure to comply with any term or requirement of any Company Authorization or
(ii) any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Company Authorization.  None of the Company
Authorizations will be terminated or impaired, or will become terminable, in
whole or in part, as a result of the consummation of the transactions
contemplated by this Agreement.
 
 
21

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

 
 
2.9           Title to, Condition and Sufficiency of Assets.
 
(a)           Each of the Company and each Subsidiary has good and valid title
to all of their respective properties, and interests in properties and assets,
real and personal, reflected on the Company Balance Sheet or acquired after the
Company Balance Sheet Date (except properties and assets, or interests in
properties and assets, sold or otherwise disposed of since the Company Balance
Sheet Date in the ordinary course of business consistent with past practice),
or, with respect to leased properties and assets, valid leasehold interests in
such properties and assets which afford the Company valid leasehold possession
of the properties and assets that are the subject of such leases, in each case,
free and clear of all Encumbrances, except (i) Permitted Encumbrances, (ii) such
imperfections of title and non-monetary Encumbrances as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise impair business operations involving
such properties, and (iii) liens securing indebtedness that is reflected on the
Company Balance Sheet.  Notwithstanding the foregoing, the representations in
this Section 2.9(a) do not apply to Company Intellectual Property, which are
covered by the representations in Section 2.10.  Schedule 2.9(a) of the Company
Disclosure Letter identifies each parcel of real property leased by the Company
or any Subsidiary.  Neither the Company nor any Subsidiary currently owns any
real property.
 
(b)           The assets owned by the Company and each of its Subsidiaries (i)
constitute all of the assets that are necessary to conduct, operate, and
continue the Business, and (ii) constitute all of the assets that are used in
the Business, without (A) the need for Acquirer to acquire or license any other
asset, property or Intellectual Property, or (B) the breach or violation of any
Contract.
 
2.10         Intellectual Property.
 
(a)           As used in this Agreement, the following terms shall have the
meanings indicated below:
 
(i)           “Intellectual Property Rights” means any and all of the following
and all rights in, arising out of, or associated therewith, throughout the
world: patents, utility models, and applications therefor and all reissues,
divisions, re-examinations, renewals, extensions, provisionals, continuations
and continuations-in-part thereof, and all other rights in inventions and
discoveries anywhere in the world (including rights in invention disclosures);
common law and statutory rights associated with trade secrets, confidential and
proprietary information, and know how; industrial designs and any registrations
and applications therefor; trade names, logos, trade dress, trademarks and
service marks, trademark and service mark registrations, trademark and service
mark applications, and any and all goodwill associated with and symbolized by
the foregoing items; Internet domain name applications and registrations,
Internet and World Wide Web URLs or addresses; copyrights, copyright
registrations and applications therefor, and all other rights corresponding
thereto; and moral and economic rights of authors and inventors, however
denominated, and any similar or equivalent rights to any of the foregoing.
 
(ii)          “Proprietary Information and Technology” means any and all of the
following: works of authorship, computer programs, source code and executable
code, whether embodied in software, firmware or otherwise, assemblers, applets,
compilers, user interfaces, application programming interfaces, protocols,
architectures, documentation, annotations, comments, designs, files, records,
schematics, test methodologies, test vectors, emulation and simulation tools and
reports, hardware development tools, models, prototypes, breadboards and other
devices, data, data structures, databases, data compilations and collections,
inventions (whether or not patentable), invention disclosures, discoveries,
improvements, technology, proprietary and confidential ideas and information,
know-how and information maintained as trade secrets, tools, concepts,
techniques, methods, processes, formulae, patterns, algorithms and
specifications, customer lists and supplier lists and any and all instantiations
or embodiments of the foregoing or of any Intellectual Property Rights in any
form and embodied in any media.
 
 
22

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

 
 
(iii)         “Intellectual Property” means (A) Intellectual Property Rights;
and (B) Proprietary Information and Technology.
 
(iv)         “Company-Owned Intellectual Property” means any and all
Intellectual Property that is owned by the Company or any Subsidiary.
 
(v)         “Company Intellectual Property” means any and all Company-Owned
Intellectual Property and any and all Third Party Intellectual Property that is
licensed to the Company or any Subsidiary.
 
(vi)        “Company Intellectual Property Agreements” means any material
Contract to which the Company or any Subsidiary is a party or is otherwise bound
and (A) pursuant to which the Company or any Subsidiary has granted to a third
party any rights with respect to any Company Intellectual Property or licensed
from a third party any Third Party Intellectual Property, or (B) that otherwise
governs any Company Intellectual Property.
 
(vii)       “Company Registered Intellectual Property” means all United States,
international and foreign: (A) patents and patent applications (including
provisional applications); (B) registered trademarks or service marks,
applications to register trademarks or service marks, intent-to-use
applications, or other registrations or applications related to trademarks or
service marks; (C) registered Internet domain names; (D) registered copyrights
and applications for copyright registration; and (E) any other Intellectual
Property Right that is the subject of an application, certificate, filing,
registration or other document issued, filed with, or recorded by any
governmental authority owned by, registered or filed in the name of, the Company
or any of its Subsidiaries.
 
(viii)      “Standard Inbound IP Agreements” means (i) non-disclosure agreements
entered into by the Company or a Subsidiary in the ordinary course of its
business, consistent with past practice (each a “Standard NDA”), granting to the
Company a limited right to use a third party’s confidential information, and
(ii) “shrink wrap” and similar generally available commercial end-user licenses
to software that is not redistributed with or used in the development or
provision of the Company Products that have an individual acquisition cost of
$15,000 or less.
 
(ix)         “Standard Outbound IP Agreements” means (i) Standard NDAs, granting
to a third party a limited right to use the Company’s confidential information,
and (ii) non-exclusive object code licenses of Company Products granted by the
Company or a Subsidiary in the ordinary course of its business consistent with
past practice on its standard unmodified form of customer agreement (a copy of
which has been made available to Acquirer’s counsel).
 
(x)          “Third Party Intellectual Property” means any and all Intellectual
Property that is owned by a third party.
 
(xi)         “Company Products” means all products or services produced,
marketed, licensed, sold, distributed or performed by or on behalf of the
Company or any Subsidiary and all products or services currently under
development by the Company or any Subsidiary which the Company or any Subsidiary
intends to make commercially available within twelve (12) months after the date
hereof.
 
 
23

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

 
 
(xii)        “Company Source Code” means, collectively, any software source code
or confidential manufacturing specifications or designs, any material portion or
aspect of software source code or confidential manufacturing specifications or
designs, or any material proprietary information or algorithm contained in or
relating to any software source code or confidential manufacturing
specifications or designs, of any Company-Owned Intellectual Property or Company
Products.
 
(b)           Subject to the disclosure set forth in Schedule 2.10(m) of the
Company Disclosure Letter, (i) the Company and its Subsidiaries own or have the
valid right or license to use and, to the extent that it does any of the
following, to develop, make, have made, offer for sale, sell, import, copy,
modify, create derivative works of, distribute, license, and dispose of, all
Intellectual Property used in the conduct of the Business and (ii) the Company
Intellectual Property is sufficient for the conduct of the Business.
 
(c)           Neither the Company nor any Subsidiary has transferred ownership
of, or agreed to transfer ownership of, any Intellectual Property that is or was
Company-Owned Intellectual Property, to any third party.  Neither the Company
nor any Subsidiary has permitted the Company’s rights in any Intellectual
Property that is or was Company-Owned Intellectual Property, to (i) enter the
public domain or, (ii) with respect to any Intellectual Property Rights for
which the Company or its Subsidiaries have submitted an application or obtained
a registration, to lapse (other than through the expiration of registered
Intellectual Property at the end of its maximum statutory term or with respect
to such applications or registrations which the Company or any of its
Subsidiaries have permitted to lapse or has cancelled or abandoned in its
reasonable business judgment).
 
(d)           The Company and its Subsidiaries own and have exclusive title to
each item of Company-Owned Intellectual Property free and clear of any
Encumbrances (other than Permitted Encumbrances).  After the Closing, all
Company-Owned Intellectual Property will be fully transferable and licensable by
Acquirer without restriction and without payment of any kind to any third
party.  The right, license and interest of the Company or a Subsidiary in and to
all Third Party Intellectual Property licensed to the Company or a Subsidiary
are free and clear of all Encumbrances (other than restrictions contained in the
applicable written license agreements with such Third Parties and Permitted
Encumbrances).
 
(e)           (i) Schedule 2.10(e)(i) of the Company Disclosure Letter lists all
Company Products (including services) that are owned by (A) the Company or any
Subsidiary and (B) a third party, respectively.  (ii) Schedule 2.10(e)(ii) of
the Company Disclosure Letter lists all Third Party Intellectual Property that
is incorporated into, integrated into, or bundled with any of the Company
Products owned by the Company or any Subsidiary (including any Third Party
Intellectual Property used to provide such Company Products that are services)
and identifies (A) the applicable Contract under which such Third Party
Intellectual Property is licensed to Company or a Subsidiary and (B) the Company
Product(s) into or with which such Third Party Intellectual Property is
incorporated, integrated, or bundled (including, with respect to such Company
Products that are services, the Company Product(s) which such Third Party
Intellectual Property is used to provide).
 
(f)            Schedule 2.10(f) of the Company Disclosure Letter lists (i) all
Company Registered Intellectual Property including the jurisdictions in which
each such item of Intellectual Property has been issued or registered or in
which any application for such issuance and registration has been filed, or in
which any other filing or recordation has been made; (ii) all actions that are
required to be taken by the Company or its Subsidiaries within 120 days of the
Agreement Date with respect to any of the Company Registered Intellectual
Property in order to avoid material prejudice to, impairment or abandonment of
such Company Registered Intellectual Property; and (iii) any proceedings or
actions before any court or tribunal anywhere in the world related to any of the
Company Registered Intellectual Property (other than ordinary course
pre-issuance proceedings and actions before the United States Patent and
Trademark Office (“PTO”) and other similar Governmental Entities that are
responsible for the issuance and registration of such Company Registered
Intellectual Property).
 
 
24

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

 
 
(g)           Each item of Company Registered Intellectual Property is
subsisting and, (with respect to patents, to the knowledge of the Company),
valid (or in the case of applications, applied for), all registration,
maintenance and renewal fees currently due in connection with such Company
Registered Intellectual Property have been paid and such Company Registered
Intellectual Property has been duly maintained.  Without limiting the foregoing,
the Company and its Subsidiaries have complied with the duty of candor and
disclosure to the PTO and any relevant foreign patent office with respect to all
patent applications filed by or on behalf of the Company or any Subsidiary (the
“Company Patent Applications”) and have made no material misrepresentation in
the Company Patent Applications.
 
(h)           With respect to the Company Intellectual Property Agreements:
 
(i)          Neither the Company nor any Subsidiary is or shall be as a result
of the execution and delivery or effectiveness of this Agreement or the
performance of the Company’s obligations under this Agreement, in breach of any
Company Intellectual Property Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the modification,
cancellation, termination, suspension of, or acceleration of any payments with
respect to any Company Intellectual Property Agreement, or (with or without
notice or lapse of time, or both) give any non-Company party to any Company
Intellectual Property Agreement the right to do any of the foregoing, where such
breach, modification, cancellation, or termination, or suspension or
acceleration of payments would not have a material effect on the Company.
 
(ii)         Following the Closing, the Company (as wholly owned by Acquirer)
will be permitted to exercise all of the Company’s and its Subsidiaries’ rights
under the Company Intellectual Property Agreements to the same extent the
Company and its Subsidiaries 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 Company or any Subsidiary would otherwise be required to pay.
 
(iii)        None of the Company Intellectual Property Agreements grants to any
third party exclusive rights to or under any Company Intellectual Property.
 
(iv)        Except as otherwise set forth in Schedule 2.10(h)(iv) of the Company
Disclosure Letter, none of the Company Intellectual Property Agreements grants
to any third party the right to sublicense any Company Intellectual Property.
 
(v)         Except as otherwise set forth in Schedule 2.10(h)(v) of the Company
Disclosure Letter, there are no disputes regarding the scope of any Company
Intellectual Property Agreements, or performance under any Company Intellectual
Property Agreements including with respect to any payments to be made or
received by the Company or any Subsidiary thereunder.
 
(vi)        No Company Intellectual Property Agreement requires the Company or a
Subsidiary to include any Third Party Intellectual Property in any Company
Product or obtain any third party’s approval of any Company Product at any stage
of development, licensing, distribution or sale of such Company Product.
 
 
25

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

 
 
(i)            Neither this Agreement nor the transactions contemplated by this
Agreement will result in: (i) Acquirer or any of its Affiliates granting to any
third party any right to or with respect to any Intellectual Property owned by
or licensed to Acquirer or any of its Affiliates, or (ii) Acquirer or any of its
Affiliates being bound by or subject to any exclusivity obligations, non-compete
or other restrictions on the operation or scope of their respective businesses,
or (iii) Acquirer or the Company being obligated to pay any royalties or other
material amounts to any third party in excess of those payable by any of them,
respectively, in the absence of this Agreement or the transactions contemplated
hereby.
 
(j)            There are no royalties, honoraria, fees or other payments payable
by the Company or any Subsidiary to any Person (other than salaries, or fees
payable to employees, consultants and independent contractors not contingent on
or related to use of their work product) as a result of the ownership, use,
possession, license-in, license-out, sale, marketing, advertising or disposition
of any Intellectual Property by the Company or any Subsidiary.
 
(k)            To the knowledge of the Company, there is no unauthorized use,
unauthorized disclosure, infringement or misappropriation of any Company-Owned
Intellectual Property by any third party.  Neither the Company nor any
Subsidiary has brought any Legal Proceeding for infringement or misappropriation
of any Intellectual Property Right or breach of any Company Intellectual
Property Agreement.
 
(l)            Except as otherwise set forth in Schedule 2.10(l) of the Company
Disclosure Letter, neither the Company nor any Subsidiary has been sued in any
suit, action or proceeding (or received any written notice or, to the knowledge
of the Company, threat) which involves a claim of infringement or
misappropriation of any Intellectual Property Right of any third party or which
contests the validity, ownership or right of the Company or any Subsidiary to
exercise any Intellectual Property Right.  Except as otherwise set forth in
Schedule 2.10(l) of the Company Disclosure Letter, neither the Company nor any
Subsidiary has received any written communication that involves an offer to
license or grant any other rights or immunities under any Intellectual Property
Right of a third party.
 
(m)           Except as otherwise set forth in Schedule 2.10(m)(i) of the
Company Disclosure Letter, the Company and its Subsidiaries are not infringing,
misappropriating or violating and have not infringed, misappropriated or
violated the Intellectual Property Rights of any third party.  In addition, the
operation of the Business, including (i) the design, development, manufacturing,
reproduction, branding, marketing, advertising, promotion, licensing, sale,
offer for sale, importation, distribution, provision and/or use of any Company
Product and (ii) the Company’s or any Subsidiary’s use of any product, device or
process used in the Business has not infringed, misappropriated, or violated,
and does not infringe, misappropriate, or violate the Intellectual Property
Rights of any third party, and does not constitute unfair competition or unfair
trade practices under the laws of any jurisdiction and, to the knowledge of the
Company, there is no substantial basis for a claim that the design, development,
manufacturing, reproduction, marketing, licensing, sale, offer for sale,
importation, distribution, provision and/or use of any Company Product or the
operation of the Business is infringing, misappropriating, or violating, or has
infringed, misappropriated, or violated any Intellectual Property Right of a
third party.
 
(n)           No Company-Owned Intellectual Property, Company Product owned by
Company or any Subsidiary or, to the knowledge of Company, any Company Product
owned by a third party is subject to any proceeding, outstanding decree, order,
judgment, settlement or co-existence agreement, stipulation, or “march in” right
that restricts  in any material manner the use, transfer, or licensing thereof
by the Company or any Subsidiary, or which may affect the validity, use or
enforceability of any such Company-Owned Intellectual Property.
 
(o)           Neither the Company nor any Subsidiary has received any written
opinion of counsel that any Company Product or the operation of the Business
does or does not infringe, misappropriate, or violate any Intellectual Property
Right of a third party or that any Intellectual Property Right of a third party
is invalid or unenforceable.
 
 
26

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

 
 
(p)           All consultants, employees and independent contractors and any
other Person who independently or jointly contributed to or participated in the
conception, reduction to practice, creation or development of any Intellectual
Property for the Company or any Subsidiary (each, a  “Company Author”) either
(i) assigned to Company or any Subsidiary unencumbered and unrestricted
exclusive ownership of all of each such Company Author’s Intellectual Property
Rights in such contribution, or (ii) did so within the scope of his or her
employment and all such Intellectual Property arising therefrom became the
exclusive property of the Company or any Subsidiary from the moment of its
creation.  No such Company Author has expressly retained any rights, licenses,
claims or interest with respect to any Intellectual Property developed by such
Company Author or the Company or any Subsidiary.
 
(q)           To the knowledge of the Company, no current or former employee,
consultant or independent contractor of the Company or any Subsidiary:  (i) is
in violation of any term or covenant of any Contract relating to employment,
invention disclosure (including patent disclosure), invention assignment,
non-disclosure or any other Contract with any other party by virtue of such
employee’s, consultant’s or independent contractor’s being employed by, or
performing services for, the Company or any Subsidiary or using trade secrets or
proprietary information of others without permission; or (ii) has developed any
technology, software or other copyrightable, patentable or otherwise proprietary
work for the Company or any Subsidiary that is subject to any agreement under
which such employee, consultant or independent contractor has assigned or
otherwise granted to any third party any rights (including Intellectual Property
Rights) in or to such technology, software or other copyrightable, patentable or
otherwise proprietary work.
 
(r)            The Company and its Subsidiaries have taken commercially
reasonable steps to protect and preserve the confidentiality of all confidential
or non-public information of the Company or provided by any third party to the
Company that derives independent economic value from not being generally known
or readily ascertainable by others (“Company Confidential Information”).  All
current and former employees and contractors of the Company and its Subsidiaries
and any third party having access to Company Confidential Information have
executed and delivered to the Company a written, legally binding agreement
imposing on such employees and contractors obligations regarding the protection
of such Company Confidential Information (“CCI Agreement”).  The Company has not
breached any confidentiality obligations that the Company has with any customer,
with respect to Company Confidential Information received by the Company from
such customer.
 
(s)           Reserved.
 
(t)             To the knowledge of the Company, neither the Company nor any
Subsidiary has (i) incorporated Open Source Materials (as defined below) into,
or combined Open Source Materials with, the Company Intellectual Property or
Company Products; (ii) distributed Open Source Materials in conjunction with any
Company Intellectual Property or Company Products; or (iii) used Open Source
Materials, in such a way that, with respect to (i), (ii), or (iii), creates, or
purports to create obligations for the Company or such Subsidiary with respect
to any Company Intellectual Property or grant, or purport to grant, to any third
party, any rights or immunities under any Company 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) disclosed or distributed in source code form, (B) be
licensed for the purpose of making derivative works, or (C) be redistributable
at no charge).
 
 
27

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

 
 
(u)           All Company Products (including services) sold, licensed, leased
or delivered by the Company or any Subsidiary to customers on or prior to the
Closing Date conform to applicable contractual commitments, and express and
implied warranties (to the extent not subject to legally effective express
exclusions thereof).  Neither the Company nor any Subsidiary has any Liability
(and, to the knowledge of the Company and any Subsidiary, there is no legitimate
basis for any present or future Legal Proceeding against the Company or any
Subsidiary giving rise to any material Liability relating to the foregoing
Contracts) for replacement or repair of such Company Products (including
re-performance thereof where such Company Products are services) or other
damages in connection therewith in excess of any reserves therefor reflected on
the Company Balance Sheet.
 
(v)           Except as otherwise set forth on Schedule 2.10(v) of the Company
Disclosure Letter, neither the Company, any Subsidiary, nor any other Person
then acting on their behalf has disclosed, delivered or licensed to any third
party, agreed or obligated itself to disclose, deliver or license to any third
party, or permitted the disclosure or delivery to any escrow agent or other
third party of, any Company Source Code.
 
(w)           No event has occurred, and, to the knowledge of the Company, no
circumstance or condition exists, that (with or without notice or lapse of time,
or both) will result in the disclosure, delivery or license by the Company or
any Subsidiary or any Person then acting on their behalf to any third party of
any Company Source Code.  Without limiting the foregoing, neither the execution
of this Agreement nor any of the transactions contemplated by this Agreement
will result in release from escrow or other delivery to a third party of any
Company Source Code other than independent contractors and consultants in
connection with performing services on behalf of the Company and its
Subsidiaries pursuant to CCI Agreements.
 
(x)            Neither the Company nor any Subsidiary has a present obligation
to grant or offer to any third party any license or right to any Company-Owned
Intellectual Property by virtue of Company’s or any other Person’s membership
in, promotion of, or contributions to any industry standards body or any similar
organization.
 
(y)           Neither the Company nor any Subsidiary has experienced any breach
of security or otherwise unauthorized access by third parties to Company
Confidential Information, including personally identifiable information in the
Company’s or any Subsidiary’s possession, custody or control, except for any
breach or unauthorized access which would not reasonably be expected to have a
Material Adverse Effect.
 
(z)           The Company and each Subsidiary have complied with all applicable
Legal Requirements and their respective publicly available privacy policies
relating to (a) the privacy of users of the Company Products (including
services) and all Internet websites owned, maintained or operated by Company or
any Subsidiary (the “Company Websites”) and (ii) the use, collection, storage,
disclosure and transfer of any personally identifiable information collected by
or provided to the Company or any Subsidiary or by third parties having
authorized access to the records, databases and Company Websites of the Company
or any Subsidiary.  Each of the Company Websites, the Company Products and all
other materials distributed or marketed by the Company or any of its
Subsidiaries have at all times made all disclosures to users or customers
required by applicable Legal Requirements in effect as of the applicable dates
and none of such disclosures made or contained in any Company Website, any
Company Product or in any such materials have been materially inaccurate or
misleading or deceptive or in violation of any applicable Legal
Requirement.  The Company and its Subsidiaries’ privacy practices conform, and
at all times have conformed, in all respects to their respective publicly
available privacy policies. No written claims have been asserted or, to the
knowledge of the Company and its Subsidiaries, are threatened against the
Company or any of its Subsidiaries by any Person or entity alleging a violation
of such Person’s or entity’s privacy, personal or confidentiality rights under
the privacy policies of the Company or its Subsidiaries. With respect to all
personal and user information described in this Section 2.10(z), the Company and
its Subsidiaries have at all times taken steps reasonably necessary (including,
without limitation, implementing and monitoring compliance with adequate
measures with respect to technical and physical security) to ensure that the
information is protected against loss and against unauthorized access, use,
modification, disclosure or other misuse.  To the knowledge of the Company or
any of its Subsidiaries, there has been no unauthorized access to or other
misuse of that information. The execution, delivery and performance of this
Agreement, will comply with all applicable Legal Requirements relating to
privacy and with the Company’s and each Subsidiary’s publicly available privacy
policies.  Neither the Company nor any Subsidiary has received a complaint
regarding the Company’s collection, use or disclosure of personally identifiable
information.
 
 
28

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

 
 
(aa)          Schedule 2.10(aa) of the Company Disclosure Letter contains a
complete list of all material third party software development tools used by the
Company or any of its Subsidiaries in the Business (the “Third PartyDevelopment
Tools”).  The Company or any Subsidiary has sufficient right, title and interest
in and to the Third Party Development Tools for the conduct of the Business.
 
(bb)         None of the Company Products: (i) contains hidden files, viruses,
time bombs, Trojan horses, or other malicious code or files designed to
interrupt, destroy, or limit the functionality of any computer software or
hardware, (ii) contains back doors, trap doors or other similar code designed to
allow access into any computer software or hardware without going through normal
built-in security checks and logs, or (iii) contains or, to the knowledge of the
Company, are susceptible to any vulnerability described by any
industry-recognized security vulnerability or notification service, including
without limitation the United States Computer Emergency Response Team and
Symantec Bugtraq.
 
(cc)          Without limiting or qualifying Section 2.10(p) in any way,
Schedule 2.10(cc) of the Company Disclosure Letter sets forth a complete list of
(i) all Company-Owned Intellectual Property, including software, that has been
developed, in whole or in part, by any Person outside of the United States (or
with the assistance of a Person located outside of the United States), (ii) a
description of such Company-Owned Intellectual Property, including how it is
used by the Company and/or its Subsidiaries, (iii) the name of the Person
located outside of the United States who developed or contributed to the
development of such Company-Owned Intellectual Property, (iv) the jurisdiction
outside of the United States where such Person who developed or contributed to
the development of such Company-Owned Intellectual Property was located at the
time such Person developed or contributed to the development of such
Company-Owned Intellectual Property, and (v) the agreement pursuant to which
such Company-Owned Intellectual Property was developed.
 
(dd)          The Company and its Subsidiaries have in place written security
and disaster recovery plans which the Company and its Subsidiaries have complied
with in all material respects, including by implementing both security
arrangements to protect the Company’s and its Subsidiaries business systems from
unauthorized access, and by implementing backups to ensure the continued
operation of the Company’s and its Subsidiaries’ business (including the
continued availability of the Company Products) in the event of a disaster or
business interruption.  Neither the Company nor any Subsidiary has experienced
any material business interruption that has not been remedied in all material
respects or has received notice of any actual or threatened customer claims
relating thereto.
 
2.11         Environmental Matters.
 
(a)           As used in this Agreement, the following terms shall have the
meanings indicated below:
 
 
29

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

 
 
(i)           “Environmental and Safety Laws” shall mean any federal, national,
foreign, state or local laws, ordinances, codes, regulations, rules, policies
and orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous or
toxic substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
 
(ii)          “Hazardous Materials” shall mean any toxic or hazardous substance,
material or waste or any pollutant or contaminant, or infectious or radioactive
substance, material or waste defined in or regulated under any Environmental and
Safety Laws, but excludes office and janitorial supplies properly and safely
maintained.
 
(iii)         “Property” shall mean all real property leased or owned by the
Company or any Subsidiary either currently or in the past.
 
(iv)         “Facilities” shall mean all buildings and improvements on the
Property.
 
(b)           (i) All Hazardous Materials and wastes of the Company or any
Subsidiary have been disposed of in accordance in all material respects with all
Environmental and Safety Laws; (ii) neither the Company nor any Subsidiary has
received any written notice of any noncompliance of the Facilities or its past
or present operations with Environmental and Safety Laws; (iii) no notices or
Legal Proceedings are pending or threatened relating to an actual or alleged
violation of any applicable Environmental and Safety Laws by the Company or any
Subsidiary; (iv) neither the Company nor any Subsidiary is a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or any analogous state,
local or foreign laws arising out of events occurring prior to the Closing Date;
(v) to the Company’s knowledge, there have not been in the past, and are not
now, any Hazardous Materials on, under or migrating to or from any of the
Facilities or any Property; and (vi) the Facilities and the Company’s and each
Subsidiary’s uses and activities therein have at all times materially complied
with all Environmental and Safety Laws.
 
2.12         Taxes.
 
(a)           The Company and each Subsidiary, and any consolidated, combined,
unitary or aggregate group for Tax purposes of which the Company or any
Subsidiary is or has been a member, have properly completed and timely filed all
Tax Returns required to be filed by them and have timely paid all Taxes whether
or not shown on any Tax Return.  All Tax Returns were complete and accurate in
all material respects.  The Company has made available to Acquirer correct and
complete copies of all Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries.
 
(b)           The Company Balance Sheet reflects all Liabilities for unpaid
Taxes of the Company and/or any Subsidiary for periods (or portions of periods)
through the Company Balance Sheet Date.  Neither the Company nor any Subsidiary
has any Liability for unpaid Taxes accruing after the Company Balance Sheet Date
except for Taxes arising in the ordinary course of business subsequent to the
Company Balance Sheet Date.  The Company has no Liability for unpaid Taxes for
any period (or portions of any period) prior to, or through the Closing Date
that are not included in the calculation of Company Net Working Capital.
 
 
30

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

 
 
(c)           There is (i) no claim for Taxes being asserted against the Company
or any Subsidiary that has resulted in a lien against the property of the
Company or any Subsidiary other than liens for Taxes not yet due and payable,
(ii) no audit or, to the knowledge of the Company, pending audit of, or Tax
controversy associated with, any Tax Return of the Company or any Subsidiary
being conducted by a Tax Authority, (iii) no extension of any statute of
limitations on the assessment of any Taxes granted by the Company or any
Subsidiary currently in effect, and (iv) no agreement to any extension of time
for filing any Tax Return which has not been filed.  No claim has ever been made
in writing by any Governmental Entity in a jurisdiction where the Company or any
Subsidiary does not file Tax Returns that the Company or any Subsidiary is or
may be subject to taxation by that jurisdiction. The Company does not have a
“permanent establishment” in any foreign country, as such term is defined in any
applicable tax treaty or convention between the United States and such foreign
country.
 
(d)           Neither the Company nor any Subsidiary has been or will be
required to include any adjustment in Taxable income for any Tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state, local or foreign Tax laws as a result of transactions,
events or accounting methods employed prior to the Mergers.
 
(e)           Neither the Company nor any Subsidiary is a party to or bound by
any Tax sharing, Tax indemnity, or Tax allocation agreement nor does the Company
or any Subsidiary have any Liability or potential Liability to another party
under any such agreement.
 
(f)            Each of the Company and each Subsidiary has disclosed on its Tax
Returns any Tax reporting position taken in any Tax Return which could result in
the imposition of penalties under Section 6662 of the Code or any comparable
provisions of state, local or foreign law.
 
(g)           Neither the Company nor any Subsidiary has participated in, nor
are any of them currently participating in, a “Listed Transaction” or a
“Reportable Transaction” within the meaning of Section 6707A(c) of the Code or
Treasury Regulation Section 1.6011-4(b), or any transaction requiring disclosure
under a corresponding or similar provision of state, local, or foreign law.
 
(h)           Neither the Company nor any Subsidiary or any predecessor of the
Company or any Subsidiary has ever been a member of a consolidated, combined,
unitary or aggregate group of which the Company or any predecessor of the
Company was not the ultimate parent corporation.
 
(i)            Neither the Company nor any Subsidiary has any Liability for the
Taxes of any Person (other than the Company or any Subsidiary) under Section
1.1502-6 of the Treasury Regulations (or any similar provision of state, local
or foreign law) as a transferee or successor, by Contract or otherwise, other
than pursuant to any commercial agreement entered into in the ordinary course of
business the principal purpose of which is unrelated to Taxes, such as a
customary credit agreement or similar contract.
 
(j)            The Company for itself and for each Subsidiary has disclosed in
Schedule 2.12(j) of the Company Disclosure Letter the amount of any deferred
gain or loss arising out of any intercompany transaction within the meaning of
Section 1.1502-13 of the Treasury Regulations.
 
(k)            Neither the Company nor any Subsidiary will be required to
include in income, 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” described in Section 7121 of the
Code (or any corresponding or similar provision of state, local, or foreign Tax
law); (iii) intercompany transactions or any excess loss account described in
Treasury Regulations under Section 1502 of the Code (or any corresponding or
similar provision of state, local, or foreign 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.
 
 
31

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

 
 
(l)            The Company has provided to Acquirer all written analyses
prepared by or on behalf of the Company in respect of the application of Section
382 of the Code to the net operating loss carryforwards of the Company.
 
(m)           To the knowledge of the Company, neither the Company nor any
Subsidiary is the beneficiary of any Tax holidays or incentives.
 
(n)           Neither the Company nor any Subsidiary is nor have any of them
ever been a “United States real property holding corporation” within the meaning
of Section 897 of the Code, and the Company and each Subsidiary has filed with
the Internal Revenue Service all statements, if any, which are required under
Section 1.897-2(h) of the Treasury Regulations.
 
(o)           Neither the Company nor any Subsidiary has constituted either a
“distributing corporation” or a “controlled corporation” in a distribution of
stock qualifying for Tax-free treatment under Section 355 of the Code (i) in the
two (2) years prior to the date of this Agreement or (ii) in a distribution that
could otherwise constitute part of a “plan” or “series of related transactions”
(within the meaning of Section 355(e) of the Code) in conjunction with the
Mergers.
 
(p)           Each of the Company and each Subsidiary has substantially complied
(and until the Closing will comply) with all applicable Legal Requirements
relating to the payment, reporting and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code
or similar provisions under any foreign law) and has, within the time and in the
manner prescribed by law, withheld from employee wages or consulting
compensation and paid over to the proper governmental authorities (or is
properly holding for such timely payment) all amounts required to be so withheld
and paid over, including federal and state income Taxes, Federal Insurance
Contribution Act, Medicare, Federal Unemployment Tax Act, relevant state income
and employment Tax withholding laws, and has timely filed all withholding Tax
Returns, for all periods through and including the Closing Date.
 
(q)           There is no agreement, plan, arrangement or other Contract
covering any current or former employee or other service provider of the Company
or any Subsidiary or ERISA Affiliate (as defined below) to which the Company
and/or any Subsidiary is a party or by which the Company and/or any Subsidiary
is bound that, considered individually or considered collectively with any other
such agreements, plans, arrangements or other Contracts, will, or would
reasonably be expected to, as a result of the transactions contemplated hereby
(whether alone or upon the occurrence of any additional or subsequent events),
give rise directly or indirectly to the payment of any amount that would
reasonably be expected to characterized as a “parachute payment” within the
meaning of Section 280G of the Code (or any corresponding or similar provision
of state, local or foreign Tax law).  Schedule 2.12(q) of the Company Disclosure
Letter lists each Person (whether U.S. or foreign) who the Company reasonably
believes is, with respect to the Company and/or any Subsidiary, a “disqualified
individual” (within the meaning of Section 280G of the Code and the regulations
promulgated thereunder), as determined as of the Agreement Date.  No stock of
the Company or any Company Securityholder is readily tradeable on an established
securities market or otherwise (within the meaning of Section 280G and the
regulations promulgated thereunder), such that the Company is ineligible to seek
shareholder approval in a manner that complies with Section 280G(b)(5) of the
Code.
 
(r)            Each “nonqualified deferred compensation plan” (within the
meaning of Section 409A of the Code) to which the Company or its Subsidiaries is
a party, complies with the requirements of Section 409A(a) of the Code and the
Regulations thereunder by its terms and has been operated in accordance with
such requirements.
 
 
32

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

 
 
(s)           The exercise price of all Company Options that became exercisable
after December 31, 2004 is at least equal to the fair market value of the
Company Common Stock on the date such Company Options were granted. No such
Company Options have been materially modified since their date of grant within
the meaning of Section 409A of the Code and the regulations thereunder, and
neither the Company nor the Acquirer has incurred or will incur any liability or
obligation to withhold taxes under Section 409A of the Code upon the vesting of
any Company Options.
 
(t)           The Company has made available to Acquirer correct and complete
copies of all election statements under Section 83(b) of the Code, together with
evidence of timely filing of such election statements with the appropriate
Internal Revenue Service Center with respect to any unvested Company Common
Stock or other property issued by the Company to any of its employees,
non-employee directors, consultants or other service providers.
 
2.13         Employee Benefit Plans and Employee Matters.
 
(a)           Schedule 2.13(a) of the Company Disclosure Letter lists, with
respect to the Company or its Subsidiaries and any trade or business (whether or
not incorporated) which is treated as a single employer with the Company (an
“ERISA Affiliate”) within the meaning of Section 414(b), (c), (m) or (o) of the
Code, (i) all “employee benefit plans” within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) each
loan to an employee, (iii) other than the Company Option Plans, all stock
option, restricted stock unit, equity incentive, stock purchase, phantom stock,
stock appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, training, tuition
assistance, cafeteria benefit (Section 125 of the Code), dependent care (Section
129 of the Code), life insurance or accident insurance plans, programs or
arrangements, (iv) all bonus, pension, profit sharing, savings, severance,
retirement, deferred compensation or incentive plans, programs or arrangements,
(v) all other fringe or employee benefit plans, programs or arrangements that
apply to senior management and that do not generally apply to all employees, and
(vi) all employment or executive compensation or severance agreements, written
or otherwise, as to which unsatisfied obligations of the Company or any of its
Subsidiaries of greater than $1,000 remain for the benefit of, or relating to,
any present or former employee, consultant or non-employee director of the
Company or such Subsidiary (all of the foregoing described in clauses (i)
through (vi), collectively, the “Company Employee Plans”).  Correct and complete
copies of all material documentation relating to the Company Employee Plans have
been made available to Acquirer or Acquirer’s counsel prior to the Agreement
Date.
 
(b)           The Company has made available to Acquirer’s counsel a true,
correct and complete copy of each of the Company Employee Plans and related plan
documents (including trust documents, insurance policies or Contracts, employee
booklets, summary plan descriptions and other authorizing documents, and any
material employee communications relating there) and has, with respect to each
Company Employee Plan which is subject to ERISA reporting requirements, made
available to Acquirer’s counsel true, correct and complete copies of the Form
5500 reports filed for the last three plan years.  Any Company Employee Plan
intended to be qualified under Section 401(a) of the Code has either obtained
from the Internal Revenue Service a favorable determination letter as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has applied (or has
time remaining in which to apply) to the Internal Revenue Service for such a
determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination or has been established under a
standardized prototype plan for which an Internal Revenue Service opinion letter
has been obtained by the plan sponsor and is valid as to the adopting
employer.  The Company has also made available to Acquirer a true, correct and
complete copy of the most recent Internal Revenue Service determination or
opinion letter issued with respect to each such Company Employee Plan, and, to
the knowledge of the Company, nothing has occurred since the issuance of each
such letter which would reasonably be expected to cause the loss of the Tax
qualified status of any Company Employee Plan subject to Section 401(a) of the
Code.  Neither the Company nor any Subsidiary sponsors or maintains material any
self-funded Company Employee Plan, including any plan that includes stop-loss
coverage.
 
 
33

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

 
 
(c)            None of the Company Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any Person other than as required
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”) or similar state law and the Company has complied with the
requirements of COBRA.  There has been no “prohibited transaction” (within the
meaning of Section 406 of ERISA and Section 4975 of the Code and not exempt
under Section 408 of ERISA and regulatory guidance thereunder) with respect to
any Company Employee Plan.  Each Company Employee Plan has been administered, in
all material respects, in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code) and the Company and each ERISA Affiliate has
performed in all material respects all obligations required to be performed by
it under, is not in default under or in violation of, and has no knowledge of
any default or violation by any other party to, any of the Company Employee
Plans.  Neither the Company nor any Subsidiary or ERISA Affiliate is subject to
any Liability or penalty under Sections 4976 through 4980 of the Code or Title I
of ERISA with respect to any of the Company Employee Plans.  All contributions
required to be made by the Company, any Subsidiary or any ERISA Affiliate to any
Company Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Company Employee
Plan for the current plan years.  In addition, with respect to each Company
Employee Plan intended to include a Code Section 401(k) arrangement, the
Company, its Subsidiaries and ERISA Affiliates have at all times made timely
deposits of employee salary reduction contributions and participant loan
repayments, as determined pursuant to regulations issued by the United States
Department of Labor.  No Company Employee Plan is covered by, and neither the
Company nor ERISA Affiliate has incurred or expects to incur any Liability under
Title IV of ERISA or Section 412 of the Code.  Each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without Liability to Acquirer (other than ordinary
administrative expenses typically incurred in a termination event).  With
respect to each Company Employee Plan subject to ERISA as either an employee
pension benefit plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section 3(1) of ERISA, the Company
has prepared in good faith and timely filed all requisite governmental reports
(which were true, correct and complete as of the date filed), including any
required audit reports, and has properly and timely filed and distributed or
posted all notices and reports to employees required to be filed, distributed or
posted with respect to each such Company Employee Plan.  No suit, administrative
proceeding, action, litigation or claim has been brought, or to the knowledge of
the Company, is threatened, against or with respect to any such Company Employee
Plan, including any audit or inquiry by the Internal Revenue Service or United
States Department of Labor.
 
(d)           With respect to each Company Employee Plan, each of the Company
and each United States Subsidiary has complied in all material respects with (i)
the applicable health care continuation and notice provisions of COBRA and the
regulations (including proposed regulations) thereunder, (ii) the applicable
requirements of the Family Medical and Leave Act of 1993 and the regulations
(including proposed regulations) thereunder, (iii) the applicable requirements
of the Health Insurance Portability and Accountability Act of 1996 and the
regulations (including proposed regulations) thereunder, (iv) the applicable
requirements of the Americans with Disabilities Act of 1990, as amended and the
regulations (including proposed regulations) thereunder, (v) the Age
Discrimination in Employment Act of 1967, as amended, and (vi) the applicable
requirements of the Women’s Health and Cancer Rights Act of 1998 and the
regulations (including proposed regulations) thereunder.
 
 
34

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

 
 
(e)           There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company, any Subsidiary or other
ERISA Affiliate relating to, or change in participation or coverage under, any
Company Employee Plan which would materially increase the expense of maintaining
such Company Employee Plan above the level of expense incurred with respect to
such Company Employee Plan for the most recent fiscal year included in the
Financial Statements.  No Company Employee Plan will be subject to any surrender
fees or service fees upon termination other than the normal and reasonable
administrative fees associated with the termination of benefit plans.
 
(f)            Neither the Company nor current or former ERISA Affiliate
currently maintains, sponsors, participates in or contributes to, or has ever
maintained, established, sponsored, participated in, or contributed to, any
pension plan (within the meaning of Section 3(2) of ERISA) which is subject to
Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of
the Code.
 
(g)           Neither the Company nor ERISA Affiliate is a party to, or has any
obligation under, any “multiemployer plan” as such term is defined in Section
3(37) of ERISA or any “multiple employer plan” as such term is defined in
Section 413(c) of the Code.
 
(h)           The Company does not have any Company Employee Plans sponsored,
maintained or contributed to under the law or applicable custom or rule of the
relevant jurisdiction outside of the United States.
 
(i)            Schedule 2.13(i) of the Company Disclosure Letter lists as of the
Agreement Date each employee of the Company or any Subsidiary who is not fully
available to perform work because of disability or other leave and also lists,
with respect to each such employee, the basis of such disability or leave and
the anticipated date of return to full service.
 
(j)            Each of the Company and its Subsidiaries is in material
compliance with all currently applicable Legal Requirements respecting
employment, discrimination in employment, terms and conditions of employment,
worker classification (including the proper classification of workers as
independent contractors and consultants), wages, hours and occupational safety
and health and employment practices, including the Immigration Reform and
Control Act, and is not engaged in any unfair labor practice in violation of the
National Labor Relations Act.  Each of the Company and its Subsidiaries has
withheld all amounts required by law or by agreement to be withheld from the
wages, salaries, and other payments to employees; and is not liable for any
arrears of wages, compensation, Taxes, penalties or other sums for failure to
comply with any of the foregoing.  The Company and each Subsidiary has paid in
full to all employees, independent contractors and consultants all wages,
salaries, commissions, bonuses, benefits and other compensation due to or on
behalf of such employees, independent contractors and consultants.  Each of the
Company and its Subsidiaries has maintained adequate up-to-date records
regarding the service of its employees and has paid in full to all employees,
independent contractors and consultants all wages, salaries, commissions,
bonuses, benefits and other compensation due to or on behalf of such employees,
independent contractors and consultants.  Neither the Company nor any of its
Subsidiaries is liable for any payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation benefits, social
security or other benefits or obligations for employees (other than routine
payments to be made in the normal course of business and consistently with past
practice).  There are no pending claims against the Company and/or any
Subsidiary under any workers compensation plan or policy or for long term
disability.  Neither the Company nor any Subsidiary has any obligations under
COBRA with respect to any former employees or qualifying beneficiaries
thereunder, except for obligations that are not material in amount.  There is no
litigation or controversies pending or, to the knowledge of the Company,
threatened in writing or otherwise, between the Company or any of its
Subsidiaries and any of their respective employees or any trade union or other
organization formed for a similar purpose or any other employee
representative(s), which controversies have or would reasonably be expected to
result in an action, suit, proceeding, claim, arbitration or governmental
investigation and, to the knowledge of the Company, there are no circumstances
which are likely to give rise to such litigation or controversies.
 
 
35

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

 
 
(k)           Schedule 2.13(k) of the Company Disclosure Letter sets forth a
true, correct and complete list as of the Agreement Date of all severance
Contracts and employment Contracts to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound.  Neither the Company nor any of its Subsidiaries has any obligation to
pay any amount or provide any benefit to any former employee or officer, other
than obligations (i) for which Company has established a reserve for such amount
on the Company Balance Sheet and (ii) pursuant to Contracts entered into after
the Company Balance Sheet Date and disclosed on Schedule 2.13(k) of the Company
Disclosure Letter.  Neither the Company nor any of its Subsidiaries is a party
to or bound by any collective bargaining agreement or other labor union
Contract, no collective bargaining agreement is being negotiated by the Company
or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries
has any duty to bargain with any labor organization.  There is no pending demand
for recognition or any other request or demand from a labor organization for
representative status with respect to any Person employed by the Company or any
of its Subsidiaries.  Neither the Company nor any of its Subsidiaries has
knowledge of any activities or proceedings of any labor union or to organize
their respective employees.  There is no labor dispute, strike or work stoppage
against the Company or any of its Subsidiaries pending or, to the knowledge of
the Company, threatened which may interfere with the respective business
activities of the Company or any of its Subsidiaries.  Neither the Company, any
Subsidiary of the Company, nor to the knowledge of the Company any of their
respective representatives or employees, has committed any unfair labor practice
in violation of the National Labor Relations Act in connection with the
operation of the Business, and there is no charge or complaint against the
Company by the National Labor Relations Board or any comparable Governmental
Entity pending or to the knowledge of the Company, threatened in writing.  No
employee of the Company or any Subsidiary has been dismissed in the last 12
month period.
 
(l)            To the knowledge of the Company, no employee of the Company or
any of its Subsidiaries has been alleged in a judicial complaint to be in
violation of any term of any employment agreement, non-competition agreement, or
any restrictive covenant to a former employer relating to the right of any such
employee to be employed by the Company because of the nature of the Business or
to the use of trade secrets or proprietary information of others.   Except as
set forth on Schedule 2.13(l) of the Company Disclosure Letter, no employee of
the Company or any of its Subsidiaries has given notice to the Company or such
Subsidiary or is under a notice of dismissal, nor does the Company or such
Subsidiary otherwise have knowledge, that any such employee intends to terminate
his or her employment with the Company or such Subsidiary,  The employment of
the employees of the Company or any of its Subsidiaries is “at will” (except for
non-U.S. employees of the Company or any Subsidiary located in a jurisdiction
that does not recognize the “at will” employment concept) and neither the
Company nor any of its Subsidiaries has any obligation to provide any particular
form or period of notice prior to terminating the employment of any of their
respective employees, except as set forth on Schedule 2.13(l) of the Company
Disclosure Letter.  As of the date hereof, neither the Company nor any of its
Subsidiaries has (i) entered into any Contract that obligates or purports to
obligate Acquirer to make an offer of employment to any present or former
employee or consultant of the Company or such Subsidiary and/or (ii) promised to
any present or former employee or consultant of the Company or such Subsidiary
of any terms or conditions of employment with Acquirer following the Closing
Date.
 
(m)           Schedule 2.13(m) of the Company Disclosure Letter sets forth a
true, correct and complete list of the names, positions and rates of
compensation of all officers, directors, and employees of the Company, showing
each such person’s name, position, annual base salary, target bonus and target
commissions, status as exempt/non-exempt.
 
 
36

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

 
 
(n)           The Company has made available to Acquirer a true, correct and
complete list of all of its and its Subsidiaries’ consultants, advisory board
members and independent contractors and for each the initial date of the
engagement and whether the engagement has been terminated by written notice by
either party.
 
(o)           The Company has made available  to Acquirer’s counsel true copies
of each of the following: standard forms of offer letters; standard forms of
employment agreements and severance agreements; standard forms of services
agreements and agreements with current and former consultants and/or advisory
board members; all standard forms of confidentiality, non-competition or
inventions agreements between current and former employees/consultants and the
Company and its Subsidiaries (and a true list of employees, consultants and/or
others not subject thereto); the most current management organization chart(s);
all agreements and/or insurance binders, which insurance binders shall provide a
complete and correct summary of the underlying insurance policies, providing for
the indemnification of any officers or directors of the Company and its
Subsidiaries; a summary of Liability for termination payments to current and
former directors, officers and employees of the Company and its Subsidiaries;
and a schedule of bonus commitments made to employees of the Company and its
Subsidiaries.
 
(p)           The Company has delivered to Acquirer true and complete copies of
all election statements under Section 83(b) of the Code, if any, that are in the
Company’s possession with respect to any unvested securities or other property
issued by the Company or any ERISA Affiliate to any of their respective
employees, non-employee directors, consultants and other service providers.
 
(q)           The Company and each Subsidiary is in compliance in all material
respects with the Worker Adjustment Retraining Notification Act of 1988, as
amended (“WARN Act”), or any similar state or local law.  In the past two (2)
years, (i) the Company has not effectuated a “plant closing” (as defined in the
WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of its business; (ii)
there has not occurred a “mass layoff” (as defined in the WARN Act) affecting
any site of employment or facility of the Company; and (iii) the Company has not
been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state,
local or foreign law or regulation.  The Company has not caused any of its
employees to suffer an “employment loss” (as defined in the WARN Act) during the
90 day period prior to the Agreement Date.
 
(r)            Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement or any
termination of employment or service or any other event in connection therewith
or subsequent thereto will, individually or together or with the occurrence of
some other event, (whether contingent or otherwise), (i) result in any material
payment or benefit (including severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due or payable, or required to be
provided, to any current or former employee, director, independent contractor or
consultant, (ii) materially increase the amount or value of any benefit or
compensation otherwise payable or required to be provided to any current or
former employee, director, independent contractor or consultant, (iii) result in
the acceleration of the time of payment, vesting or funding of any such benefit
or compensation, (iv) increase the amount of compensation due to any Person, or
(v) result in the forgiveness in whole or in part of any outstanding loans made
by the Company to any Person.
 
2.14         Interested Party Transactions.  None of the officers and directors
of the Company or any Subsidiary and, to the knowledge of the Company, none of
the employees or stockholders of the Company or any Subsidiary, nor any
immediate family member of an officer, director, employee or stockholder of the
Company or any Subsidiary, has any direct or indirect ownership, participation,
royalty or other interest in, or is an officer, director, employee of or
consultant or contractor for any firm, partnership, entity or corporation that
competes with, or does business with, or has any contractual arrangement with,
the Company or any of its Subsidiaries (except with respect to any interest in
less than 5% of the stock of any corporation whose stock is publicly
traded).  None of said officers, directors, employees or stockholders or any
member of their immediate families, is a party to, or to the knowledge of the
Company, otherwise directly or indirectly interested in, any Contract to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or any of their respective assets or properties may be bound
or affected, except for normal compensation for services as an officer, director
or employee thereof.  To the knowledge of the Company, none of said officers,
directors, employees, stockholders or immediate family members has any interest
in any property, real or personal, tangible or intangible (including any
Intellectual Property) that is used in, or that relates to, the Business, except
for the rights of stockholders under applicable Legal Requirements.
 
 
37

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

 
 
2.15         Insurance.  The Company and its Subsidiaries maintain the policies
of insurance and bonds set forth in Schedule 2.15 of the Company Disclosure
Letter, including all legally required workers’ compensation insurance and
errors and omissions, casualty, fire and general liability insurance.  Schedule
2.15 of the Company Disclosure Letter sets forth the name of the insurer under
each such policy and bond, the type of policy or bond, the coverage amount and
any applicable deductible as well all material claims made under such policies
and bonds during the last three fiscal years.  There is no 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 and bonds have been timely paid and the Company
and each Subsidiary is otherwise in compliance with the terms of such policies
and bonds.  All such policies and bonds remain in full force and effect, and the
Company has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
 
2.16         Books and Records.  The Company has delivered or made available to
Acquirer or its legal counsel the minute books containing all records of all
proceedings, consents, actions and meetings of board of directors and/or any
committees thereof or stockholders of Company and its Subsidiaries.  The minute
books of Company and its Subsidiaries made available to Acquirer contain a
complete and accurate summary of all meetings of directors and stockholders or
actions by written consent of Company and its Subsidiaries that have occurred
since inception.  All actions that require approval of the board of directors
and/or committees thereof or stockholders of Company and its Subsidiaries have
been duly approved, as necessary, by the boards of directors and/or committees
thereof and stockholders of Company and its Subsidiaries in accordance with
Delaware Law and other applicable corporate law.
 
2.17         Material Contracts.
 
(a)           Except for this Agreement and the Contracts specifically
identified in Schedule 2.17 of the Company Disclosure Letter (with each of such
Contracts specifically identified under subsection(s) of such Schedule 2.17 that
correspond to the Subsection or Subsections of this Section 2.17(a) applicable
to such Contract), neither the Company nor any Subsidiary is a party to or bound
by any of the following Contracts (each a “Material Contract”):
 
(i)          any distributor, subscriber, original equipment manufacturer,
reseller, value added reseller, sales, agency or manufacturer’s representative
Contract pursuant to which any Person has a right to market, resell or
distribute any Company Products (each a “Reseller Agreement”);
 
(ii)         any continuing Contract for the purchase, sale or license of
materials, supplies, equipment, services, software, Intellectual Property or
other assets, other than Standard Inbound IP Agreements, Standard Outbound IP
Agreements and Contracts listed in Schedule 2.17(a)(ix) or (x) of the Company
Disclosure Letter;
 
 
38

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

 
 
(iii)        any Contract that expires or may be renewed at the option of any
Person other than the Company or any Subsidiary so as to expire more than one
year after the date of this Agreement other than a Contract which is terminable
for any reason by the Company or any Subsidiary within one year after the date
of this Agreement and other than Standard Inbound IP Agreements, Standard
Outbound IP Agreements and Contracts listed in Schedule 2.17(a)(ix) or (x) of
the Company Disclosure Letter and standard “click-through” customer contracts in
the ordinary course of business;
 
(iv)        any mortgage, promissory note, loan agreement or other Contract for
the borrowing of money, any currency exchange, commodities or other hedging,
forward, swap or other derivative arrangement, or any leasing transaction of the
type required to be capitalized in accordance with GAAP;
 
(v)         any Contract providing for capital expenditures in excess of
$100,000 in the aggregate;
 
(vi)        any Contract limiting the freedom of the Company or any Subsidiary
to engage or participate, or compete with any other Person, in any line of
business, market or geographic area, or to make use of any Intellectual
Property, or any Contract granting most favored nation pricing, exclusive sales,
distribution, marketing or other exclusive rights, rights of refusal, rights of
first negotiation or similar rights and/or terms to any Person, or any Contract
otherwise limiting the right of the Company or any of its Subsidiaries to sell,
distribute or manufacture any products or services or to purchase or otherwise
obtain any software, components, parts, subassemblies or services;
 
(vii)       any Contract pursuant to which the Company or any Subsidiary is a
lessor or lessee of any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property involving in excess of $50,000 per annum;
 
(viii)      any Contract of guarantee, indemnification, assumption or any
similar commitment with respect to, the Liabilities or indebtedness of any other
Person other than Intellectual Property Rights and other indemnities granted by
the Company or any Subsidiary under Standard Inbound IP Agreements and Standard
Outbound IP Agreements;
 
(ix)        other than Standard Outbound IP Agreements, all licenses,
sublicenses and other Contracts pursuant to which any Person is granted any
rights to Company Intellectual Property or pursuant to which the Company or any
Subsidiary has agreed to any restriction on the right of the Company or any
Subsidiary to use or enforce any Company-Owned Intellectual Property Rights or
pursuant to which the Company or any Subsidiary agrees to encumber, transfer or
sell rights in or with respect to any Company-Owned Intellectual Property;
 
(x)         other than Standard Inbound IP Agreements, all licenses, sublicenses
and other Contracts pursuant to which the Company or any Subsidiary acquired or
is granted any rights to Third Party Intellectual Property or pursuant to which
the Company or any Subsidiary is granted the right to market, resell or
distribute any products, technology or services of any Person;
 
(xi)        any Contract providing for the development of any software, content,
technology or Intellectual Property, independently or jointly, by or for the
Company or any Subsidiary, other than employee invention assignment agreements
and consulting agreements with Authors on the Company’s standard form of
agreement, copies of which have been made available Acquirer’s counsel;
 
 
39

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

 
 
(xii)       any Contracts relating to the membership of, or participation by,
the Company or any Subsidiary in, or the affiliation of the Company or any
Subsidiary with, any industry standards group or association;
 
(xiii)      (A) any joint venture Contract, (B) other than Reseller Agreements,
any Contract that involves a sharing of revenues, profits, cash flows, expenses
or losses with other Persons or (C) any Contract that involves the payment of
royalties to any other Person in excess of $50,000 per annum;
 
(xiv)      any Company Product warranty, other than standard warranties of
Company or any Subsidiary included in the packaging of Company Products and
warranties granted under Standard Outbound IP Agreements and Contracts listed in
Schedule 2.17(a)(ix) of the Company Disclosure Letter;
 
(xv)       any Contract under which the Company or any Subsidiary provides any
advice or services, consulting, professional services, software implementation,
deployment or development services, or support services to any third party
involving payments to the Company in excess of $50,000, other than standard
technical support services for Company Products;
 
(xvi)      any Contract with any investment banker, broker, advisor or similar
party retained by the Company, in connection with this Agreement and the
transactions contemplated hereby;
 
(xvii)     any Contract pursuant to which the Company or any Subsidiary has
acquired a business or entity, or material assets of a business or entity,
whether by way of merger, consolidation, purchase of stock, purchase of assets,
license or otherwise;
 
(xviii)    any Contract with any Governmental Entity, any Company Authorization,
or any Contract with a government prime contractor, or higher-tier government
subcontractor (each a “Government Contract”);
 
(xix)       any confidentiality, secrecy or non-disclosure Contract other than
any such Contract entered into by the Company or a Subsidiary in the ordinary
course of business consistent with past practice;
 
(xx)        any settlement agreement;
 
(xxi)       any Contract with any labor union or any collective bargaining
agreement or similar agreement with its employees; any Contract (A) with any of
its officers, directors, employees or stockholders or any member of their
immediate families or (B) with any Person with whom the Company or any
Subsidiary does not deal at arm’s length;
 
(xxii)      any Contract to license or authorize any third party to manufacture
or reproduce any of the Company Products or Intellectual Property of the Company
or any Subsidiary;
 
(xxiii)     any Contract for the employment of any director, officer, employee
or consultant of the Company or any other type of Contract with any officer,
employee or consultant of the Company or any Subsidiary that is not immediately
terminable by the Company or such Subsidiary without cost or Liability,
including any Contract requiring it to make a payment to any director, officer,
employee or consultant on account of the Merger, any transaction contemplated by
this Agreement or any Contract that is entered into in connection with this
Agreement;
 
 
40

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

 
 
(xxiv)     any Contract or plan (including any stock option, merger and/or stock
bonus plan) relating to the sale, issuance, grant, exercise, award, purchase,
repurchase or redemption of any shares of Company Capital Stock or any other
securities of the Company or any of its Subsidiaries or any options, warrants,
convertible notes or other rights to purchase or otherwise acquire any such
shares of stock, other securities or options, warrants or other rights therefor,
except for the repurchase rights disclosed on Schedules 2.2(b)-1, 2.2(b)-2 and
2.2(b)-3 of the Company Disclosure Letter;
 
(xxv)     any Contract pursuant to which rights of any third party are triggered
or become exercisable, or under which any other consequence, result or effect
arises, in connection with or as a result of the execution of this Agreement or
the consummation of the Mergers or other transactions contemplated hereunder,
either alone or in combination with any other event; or
 
(xxvi)    any other Contract or obligation not listed in clauses (i) through
(xxv) that (A) is otherwise material to the Company or its Subsidiaries or their
respective businesses, operations, financial condition, properties or assets,
(B) involves the payment to or from the Company or any of its Subsidiaries of an
individual amount of $50,000 or more or $100,000 or more in the aggregate and is
not cancellable without penalty within thirty (30) days, (C) involves minimum
purchase commitments by the Company or any of its Subsidiaries, (D) involves
ongoing service or support obligations that are not cancellable without penalty
within thirty (30) days, or (E) involves the development or delivery of any
customer specified product enhancement or upgrades.
 
(b)           All Material Contracts are in written form.  The Company or the
applicable Subsidiary has performed all of the obligations required to be
performed by it and is entitled to all benefits under, and to the Company’s
knowledge is not alleged to be in default in respect of, any Material
Contract.  Each of the Material Contracts is in full force and effect, subject
only to the effect, if any, of applicable bankruptcy and other similar laws
affecting the rights of creditors generally and rules of law governing specific
performance, injunctive relief and other equitable remedies.  There exists no
default or event of default or event, occurrence, condition or act, with respect
to the Company or any Subsidiary or to the Company’s knowledge, with respect to
any other contracting party, which, with the giving of notice, the lapse of time
or the happening of any other event or condition, would reasonably be expected
to (i) become a default or event of default under any Material Contract or (ii)
give any third party (A) the right to declare a default or exercise any remedy
under any Material Contract, (B) the right to a rebate, chargeback, refund,
credit, penalty, termination fee, or change in delivery schedule under any
Material Contract, (C) the right to accelerate the maturity or performance of
any obligation of the Company or any of its Subsidiaries under any Material
Contract, or (D) the right to cancel, terminate or modify any Material
Contract.  Neither the Company nor any of its Subsidiaries has received any
written notice or other written communication regarding any actual or possible
violation or breach of, default under, or intention to cancel or modify any
Material Contract.  Neither the Company nor any of its Subsidiaries has any
Liability for renegotiation of government Contracts.  Correct and complete
copies of all Material Contracts (including all amendments thereto) have been
made available to Acquirer prior to the Agreement Date.
 
2.18         Transaction Fees.  Neither the Company nor any Affiliate of the
Company is obligated for the payment of any fees or expenses of any investment
banker, broker, advisor, finder or similar party in connection with the origin,
negotiation or execution of this Agreement or in connection with the Mergers or
any other transaction contemplated by this Agreement.
 
2.19        Export Control Laws.  The Company and each Subsidiary has conducted
its export transactions in accordance in all respects with applicable provisions
of United States export control laws and regulations, including but not limited
to the Export Administration Act and implementing Export Administration
Regulations.  Without limiting the foregoing:
 
 
41

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

 
 
(a)           the Company and each Subsidiary has obtained all export licenses
and other approvals required for its exports of products, software and
technologies from the United States;
 
(b)           the Company and each Subsidiary is in compliance with the terms of
all applicable export licenses or other approvals;
 
(c)           there are no pending or, to the knowledge of the Company,
threatened claims against the Company or any Subsidiary with respect to such
export licenses or other approvals;
 
(d)           there are no actions, conditions or circumstances pertaining to
the Company’s or any Subsidiary’s export transactions that would reasonably be
expected to give rise to any future claims; and
 
(e)           no consents or approvals for the transfer of export licenses to
Acquirer are required, except for such consents and approvals that can be
obtained expeditiously without material cost.
 
2.20         Customers and Suppliers.
 
(a)           Neither the Company nor any Subsidiary has any outstanding
material disputes concerning its products and/or services with any customer or
distributor who, in the year ended December 31, 2011 or the 12-month period
ended December 31, 2011, was one of the twenty (20) largest sources of revenues
for the Company and its Subsidiaries, based on amounts paid or payable (each, a
“Significant Customer”), and the Company has no knowledge of any material
dissatisfaction on the part of any Significant Customer.  Each Significant
Customer is listed on Schedule 2.20(a) of the Company Disclosure
Letter.  Neither the Company nor any of its Subsidiaries has received any
written information from any Significant Customer that such customer shall not
continue as a customer of the Company or such Subsidiary (or the Final Surviving
LLC or Acquirer) after the Closing or that such customer intends to terminate or
materially modify existing Contracts with the Company or such Subsidiary (or the
Final Surviving LLC or Acquirer).  The Company has not had any of its products
returned by a purchaser thereof except for normal warranty returns consistent
with past history and those returns that would not result in a reversal of any
revenue by the Company.
 
(b)           Neither the Company nor any Subsidiary has any outstanding
material dispute concerning products and/or services provided by any supplier
who, in the year ended December 31, 2011 or the 12-month period ended December
31, 2011, was one of the twenty (20) largest suppliers of products and/or
services to the Company and its Subsidiaries, based on amounts paid or payable
(each, a “Significant Supplier”), and the Company has no knowledge of any
material dissatisfaction on the part of any Significant Supplier.  Each
Significant Supplier is listed on Schedule 2.20(b) of the Company Disclosure
Letter.  Neither the Company nor any of its Subsidiaries has received any
written information from any Significant Supplier that such supplier shall not
continue as a supplier to the Company or such Subsidiary (or the Final Surviving
LLC or Acquirer) after the Closing or that such supplier intends to terminate or
materially modify existing Contracts with the Company or such Subsidiary (or the
Final Surviving LLC or Acquirer).  The Company and its Subsidiaries have access,
on commercially reasonable terms, to all products and services reasonably
necessary to carry on their respective businesses, and the Company has no
knowledge of any reason why they will not continue to have such access on
commercially reasonable terms.
 
 
42

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

 
 
2.21         Accounts Receivable.  The accounts receivable as reflected on the
Company Balance Sheet and as will be reflected in the Company Net Working
Capital Certificate arose in the ordinary course of business, consistent with
past practices, represented bona fide claims against debtors for sales and other
charges.  Allowances for doubtful accounts and warranty returns have been
prepared in accordance with GAAP consistently applied and in accordance with the
Company’s and its Subsidiaries’ past practices.  The accounts receivable of the
Company and its Subsidiaries arising after the Balance Sheet Date and before the
Closing Date arose or shall arise in the ordinary course of business, consistent
with past practices, represented or shall represent bona fide claims against
debtors for sales and other charges, less allowances for doubtful accounts and
warranty returns determined in accordance with GAAP consistently applied.  No
material amount of accounts receivable is contingent upon the performance by the
Company or any Subsidiary of any obligation or Contract other than normal
warranty repair and replacement.  No Person has any lien on any of such accounts
receivable, and no agreement for deduction or discount has been made with
respect to any of such accounts receivable.  Schedule 2.21 of the Company
Disclosure Letter sets forth an aging of the Company’s and its Subsidiaries’
accounts receivable in the aggregate and by customer, and indicates the amounts
of allowances for doubtful accounts and warranty returns.  Schedule 2.21 of the
Company Disclosure Letter sets forth such amounts of accounts receivable of the
Company and its Subsidiaries which are subject to asserted warranty claims by
customers and reasonably detailed information regarding asserted warranty claims
made within the last year, including the type and amounts of such claims.
 
2.22         Compliance with Regulation D; Shareholders.  The Company and each
Company Securityholder is aware that the Acquirer Common Stock to be issued
pursuant to the Mergers, if issued pursuant to a Private Placement, will
constitute “restricted securities” within the meaning of Securities Act.  At no
time was any Company Securityholder solicited by means of general advertising or
general solicitation in connection with this Agreement or the transactions
contemplated hereby.
 
2.23         Representations Complete.  To knowledge of the Company, none of the
representations or warranties made by the Company herein or in any exhibit or
schedule hereto, including the Company Disclosure Letter, or in any certificate
furnished by the Company pursuant to this Agreement, when all such documents are
read together in their entirety, contains any untrue statement of a material
fact, or omits to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
 
ARTICLE 3
Representations and Warranties of Acquirer
 
Subject to the disclosures set forth in the disclosure letter of the Acquirer
delivered to the Company concurrently with the parties’ execution of this
Agreement (the “Acquirer Disclosure Letter”) (each of which disclosures, in
order to be effective, shall clearly indicate the Section and, if applicable,
the Subsection of this Article 3 to which it relates (unless and only to the
extent the relevance to other representations and warranties is reasonably
apparent from the actual text of the disclosures), and each of which disclosures
shall also be deemed to be representations and warranties made by the Acquirer
to the Company under this Article 3), and except as set forth in the Acquirer
SEC Reports (as defined below), the Acquirer represents and warrants to the
Company, as of the date hereof and as of the Closing Date, as follows:
 
3.1           Organization and Standing.  Each of Acquirer and Sub I are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware.  Neither Acquirer nor either of the Merger Sub is
in violation of any of the provisions of its Restated Certificate of
Incorporation or Bylaws.   Sub II is a limited liability company duly organized
and in good standing under the laws of the State of Delaware.  Sub II is not in
violation of any of the provisions of its Certificate of Formation or Limited
Liability Company Agreement.
 
 
43

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

 
 
3.2           Authority; Noncontravention.
 
(a)           Each of Acquirer and the Merger Subs has all requisite corporate
and limited liability company power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.  The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate and limited
liability company action on the part of Acquirer and the Merger Subs.  This
Agreement has been duly executed and delivered by each of Acquirer and the
Merger Subs and constitutes the valid and binding obligation of Acquirer and the
Merger Subs enforceable against each Acquirer and the Merger Subs in accordance
with its terms, subject only to the effect, if any, of (i) applicable bankruptcy
and other similar laws affecting the rights of creditors generally and (ii)
rules of law governing specific performance, injunctive relief and other
equitable remedies.
 
(b)           The execution and delivery of this Agreement by Acquirer and the
Merger Subs do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a benefit
under, or require any consent, approval or waiver from any Person pursuant to,
(i) any provision of the Restated Certificate of Incorporation or Bylaws of
Acquirer, in each case as amended to date, or (ii) any applicable Legal
Requirement, except where such conflict, violation, default, termination,
cancellation or acceleration, individually or in the aggregate, would not be
material to Acquirer’s or either Merger Subs’ ability to consummate the Mergers
or to perform their respective obligations under this Agreement.
 
(c)           No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with
respect to Acquirer in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger and the Second Certificate of
Merger with the Secretary of State of the State of Delaware, as provided in
Section 1.4, and (ii) such consents, authorizations, filings, approvals, notices
and registrations which, if not obtained or made, would not be material to
Acquirer’s or Merger Subs’ ability to consummate the Mergers or to perform their
respective obligations under this Agreement and would not prevent, materially
alter or delay any of the transactions contemplated by this Agreement.
 
3.3           Capitalization.  The authorized capital stock of Acquirer consists
of 500,000,000 shares of Common Stock, par value $0.001 per share, of which
48,167,574 were issued and outstanding as of January 27, 2012, and 5,000,000
shares of Preferred Stock, par value $0.001 per share, none of which were issued
and outstanding as of January 30, 2012.
 
3.4           Issuance of Total Stock Consideration. The Total Stock
Consideration to be issued by Acquirer to the Effective Time Holders pursuant to
the terms of this Agreement and the transactions contemplated by this Agreement
have been duly authorized by Acquirer and, when issued and delivered, will be
duly and validly issued, fully paid and nonassessable.
 
3.5           SEC Filings; Financial Statements.
 
(a)           Acquirer has filed all forms, reports and documents required to be
filed by Acquirer with the SEC since the date of this Agreement and has made
available to Company such forms, reports and documents in the form filed with
the SEC.  All such required forms, reports and documents (including those that
Acquirer may file subsequent to the Agreement Date) are referred to herein as
the “Acquirer SEC Reports.”  As of their respective dates, the Acquirer SEC
Reports (i) were prepared in accordance with the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and regulations of the SEC
thereunder applicable to such Acquirer SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected by a subsequently filed
Acquirer SEC Report that was filed prior to the Agreement Date.
 
 
44

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

 
 
(b)           Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Acquirer SEC Reports:  (i)
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto; (ii) was prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto); and (iii) fairly presented in all
material respects the consolidated financial position of Acquirer and its
Subsidiaries as at the respective dates thereof and the consolidated results of
Acquirer’s operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were or are
subject to normal and recurring year-end adjustments.
 
3.6           Litigation.  There is no private or governmental action, suit,
proceeding, claim, mediation, arbitration or investigation pending against the
Acquirer or any of its subsidiaries before any Governmental Entity, or, to the
knowledge of the Acquirer, threatened against the Acquirer or any of its
subsidiaries or any of their respective assets or properties or any of their
respective directors, officers or employees (in their capacities as such or
relating to their employment, services or relationship with the Acquirer or any
of its subsidiaries), except where any such action, suit, proceeding, claim,
mediation, arbitration or investigation if adversely determined would not
reasonably be expected to have a Material Adverse Effect on Acquirer or its
Subsidiaries taken as a whole.  There is no judgment, decree, injunction or
order against the Acquirer or any of its subsidiaries, any of their respective
assets or properties, or, to the knowledge of the Company, any of their
respective directors, officers or employees (in their capacities as such or
relating to their employment, services or relationship with the Acquirer or any
of its subsidiaries), except where any such judgment, decree, injunction or
order would not reasonably be expected to have a Material Adverse Effect on
Acquirer or its Subsidiaries taken as a whole.
 
3.7           No Prior Operations of Merger Subs.  Each of the Merger Subs was
formed solely for the purpose of effecting the Merger and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated hereby and are direct wholly owned subsidiaries of
Acquirer.  Sub II is and will remain a disregarded entity for U.S. federal
income tax purposes.
 
3.8           No Undisclosed Liabilities.  Neither Acquirer nor any of its
Subsidiaries has any outstanding Liabilities, other than Liabilities (a) that
were incurred after September 30, 2011 in the ordinary course of business
consistent with past practice, (b) that were incurred under this Agreement or in
connection with the transactions contemplated hereby, (c) that were disclosed or
reserved against in the most recent the consolidated financial statements
(including the notes thereto) included in the Acquirer SEC Reports filed prior
to the date of this Agreement, or (d) that would not result in a Material
Adverse Effect with respect to Acquirer or its Subsidiaries taken as a whole.
 
3.9           Absence of Certain Changes.  Since September 30, 2011, there has
not been a Material Adverse Effect on Acquirer or its Subsidiaries taken as a
whole.
 
 
45

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

 
 
ARTICLE 4
Conduct Prior to the Closing Date
 
4.1           Conduct of Business of the Company and its Subsidiaries.  During
the period from the Agreement Date and continuing until the earlier of the
termination of this Agreement and the Effective Time:
 
(a)           the Company shall, and shall cause each Subsidiary of the Company
to, conduct its business solely in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted (except to the extent
expressly provided otherwise in this Agreement or as consented to in writing by
Acquirer) and in compliance with all applicable Legal Requirements;
 
(b)           the Company shall, and shall cause each Subsidiary to, (A) pay all
of its debts and Taxes when due, subject to good faith disputes over such debts
or Taxes, (B) pay or perform its other obligations when due, (C) use
commercially reasonable efforts consistent with past practice and policies to
collect accounts receivable when due and not extend credit outside of the
ordinary course of business consistent with past practices, (D) sell products
consistent with past practices as to license, service and maintenance terms,
incentive programs, and in accordance with GAAP requirements as to revenue
recognition and (E) use its commercially reasonable efforts consistent with past
practice and policies to preserve intact its present business organizations,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, to the end that its
goodwill and ongoing businesses shall be unimpaired at the Closing;
 
(c)           each party shall promptly notify the other party of any change,
occurrence or event not in the ordinary course of its or any their respective
subsidiary’s business, or of any change, occurrence or event which, individually
or in the aggregate with any other changes, occurrences and events, would
reasonably be expected to cause any of the conditions to closing set forth in
Article 6 not to be satisfied;
 
(d)           the Company shall, and shall cause each Subsidiary to, assure that
each of its Contracts (other than with Acquirer) entered into after the
Agreement Date will not require the procurement of any consent, waiver or
novation or provide for any change in the obligations of any party in connection
with, or terminate as a result of the consummation of, the Mergers, and shall
give reasonable advance notice to Acquirer prior to allowing any material
Contract to lapse or terminate by its terms;
 
(e)           the Company shall, and shall cause each Subsidiaries to, maintain
each of its leased premises in accordance with the terms of the applicable
lease; and
 
(f)            the Company shall use its reasonable best efforts to obtain a
certificate from the Secretaries of State of the States of Delaware, New York
and Illinois and each other State or other jurisdiction in which the Company or
any Subsidiary is qualified to do business as a foreign corporation, dated
within three (3) days prior to the Closing Date, certifying that all applicable
franchise Taxes (or other Taxes, if any, required as a condition precedent to
effect the Mergers) and fees of the Company through and including the Closing
Date have been paid.
 
4.2           Restrictions on Conduct of Business of the Company and
Subsidiaries.  Without limiting the generality or effect of the provisions of
Section 4.1, during the period from the Agreement Date and continuing until the
earlier of the termination of this Agreement and the Effective Time, the Company
shall not, and shall cause each Subsidiary not to, do, cause or permit any of
the following (except to the extent expressly provided otherwise in this
Agreement or as consented to in writing by Acquirer, which consent shall not be
unreasonably withheld, conditioned or delayed in the case of subsections (c),
(e), (j), (k), (l) and (r) of this Section 4.2):
 
 
46

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

 
 
(a)           Charter Documents.  Cause or permit any amendments to its
certificate of incorporation or Bylaws or equivalent organizational or governing
documents;
 
(b)           Dividends.  Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or repurchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, non-employee directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service;
 
(c)           Material Contracts.  Enter into any Contract that would constitute
a Material Contract or other Contract requiring a novation or consent in
connection with the Merger or violate, terminate, amend, or otherwise modify
(including by entering into a new Contract with such party or otherwise) or
waive any of the terms of any of its Material Contracts; provided, however, that
this provision shall not require the Company to seek or obtain Acquirer’s
consent in order to set or change the prices at which the Company sells products
or provides services to current customers in the ordinary course of business;
 
(d)           Issuance of Securities.  Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any Company Voting Debt or any Company Capital Stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
other Contracts of any character obligating it to issue any such shares or other
convertible securities, other than:  (i) the issuance of shares of Company
Capital Stock pursuant to the exercise of Company Options that are outstanding
as of the Agreement Date; (ii) the issuance of shares of Company Capital Stock
pursuant to the exercise of Company Warrants that are outstanding as of the
Agreement Date and (iii) the repurchase of any shares of Company Common Stock
from former employees, non-employee directors and consultants in accordance with
Contracts providing for the repurchase of shares in connection with any
termination of service;
 
(e)           Employees; Consultants; Independent Contractors.  (i) Hire any
additional officers or other employees, or any consultants or independent
contractors, other than open positions set forth as of the date hereof on
Schedule 4.2 of the Company Disclosure Letter or the hiring of up to five (5)
non-officer hires to fill open positions following the Agreement Date after
consultation with Acquirer, (ii) terminate the employment, change the title,
office or position, or materially reduce the responsibilities of any management,
supervisory or other key personnel of the Company or any Subsidiary, (iii) enter
into, amend or extend the term of any employment or consulting agreement with
any officer, employee, consultant or independent contractor, other than
customary compensation increases consistent with past practice in the first half
of each calendar year if the Closing does not occur by March 31, 2012 and
disclosed in Section 4.2(e) of the Company Disclosure Letter or (iv) enter into
any Contract with a labor union or collective bargaining agreement (unless
required by applicable Legal Requirements);
 
(f)            Loans and Investments.  (A) Make any loans or advances (other
than routine expense advances to employees of the Company or any Subsidiary
consistent with past practice) to, or any investments in or capital
contributions to, any Person (other than ordinary course funding to its existing
Subsidiaries in order to fund operations in amounts consistent with past
practice), or forgive or discharge in whole or in part any outstanding loans or
advances, or prepay any indebtedness for borrowed money, or (B) incur any
indebtedness for borrowed money or guarantee any such indebtedness;
 
 
47

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

 
 
(g)           Intellectual Property.  Transfer or license from any Person any
rights to any Intellectual Property, or transfer or license to any Person any
rights to any Company IP Rights (other than under Standard Inbound IP
Agreements, Standard Outbound IP Agreements or otherwise in the ordinary course
of business consistent with past practices), or transfer or provide a copy of
any Company Source Code to any Person (including any current or former employee
or consultant of the Company or any contractor or commercial partner of the
Company) (other than providing access to Company Source Code to current
employees and consultants of the Company or its Subsidiaries involved in the
development of the Company Products on a need to know basis, consistent with
past practices, or otherwise in the ordinary course of business consistent with
past practices);
 
(h)           Exclusive Rights and Most Favored Party Provisions.  Enter into or
amend any agreement pursuant to which any other party is granted exclusive
rights or “most favored party” rights of any type or scope with respect to any
of its products, technology, Intellectual Property or business, or containing
any non-competition covenants or other restrictions relating to its or
Acquirer’s business activities;
 
(i)            Dispositions; Acquisitions.  (A) Sell, lease, license or
otherwise dispose of any of its properties or assets, other than sales and
nonexclusive licenses of Company Products in the ordinary course of business
consistent with its past practice, or enter into any Contract with respect to
the foregoing, or (B) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to its
and its Subsidiaries’ business, or enter into any Contract with respect to a
joint venture, strategic alliance or partnership;
 
(j)            Leases.  Enter into any operating lease or similar transaction
other than in the ordinary course of business in amounts not in excess of
$50,000 individually or $100,000 in the aggregate;
 
(k)           Payment of Obligations.  Pay, discharge or satisfy any claim or
Liability arising otherwise than in the ordinary course of business, other than
the payment, discharge or satisfaction of Liabilities reflected or reserved
against in the Financial Statements and Transaction Expenses, or defer payment
of any accounts payable other than in the ordinary course of business consistent
with past practice;
 
(l)            Capital Expenditures.  Make any capital expenditures, capital
additions or capital improvements in excess of $50,000 individually or $100,000
in the aggregate;
 
(m)           Insurance.  Materially change the amount of any insurance
coverage;
 
(n)           Termination or Waiver.  Cancel, release or waive any material
claims or rights held by it;
 
 
48

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

 
 
(o)           Employee Benefit Plans; Pay Increases.  Adopt or amend any
employee or compensation benefit plan, including any stock issuance or stock
option plan (other than the Company’s Option Plans), or amend any compensation,
benefit, entitlement, grant or award provided or made under any such plan,
except in each case as required under ERISA, applicable Legal Requirements or as
necessary to maintain the qualified status of such plan under the Code,
materially amend any deferred compensation plan within the meaning of Section
409A of the Code and the regulations thereunder except to the extent necessary
to meet the requirements of such Section or Notice, pay any special bonus or
special remuneration to any employee or non-employee director or consultant or
increase the salaries, wage rates or fees of its employees or consultants (other
than customary annual compensation increases consistent with past practice paid
in the first half of each year and as disclosed in Section 4.2(o) of the Company
Disclosure Letter or pursuant to preexisting plans, policies or Contracts which
have been disclosed to Acquirer and are set forth on Schedule 4.2(o) of the
Company Disclosure Letter), or add any new members to the Company Board or to
the board of directors of any Subsidiary;
 
(p)           Severance Arrangements.  Grant or pay, or enter into any Contract
providing for the granting of any severance, retention or termination pay, or
the acceleration of vesting or other benefits, to any Person (other than
payments or acceleration made pursuant to preexisting plans, policies or
Contracts which have been disclosed to Acquirer and are set forth on Schedule
4.2(p) of the Company Disclosure Letter);
 
(q)           Lawsuits; Settlements.  (i) Commence a lawsuit other than for the
routine collection of bills or for a breach of this Agreement, or (ii) settle or
agree to settle any pending or threatened lawsuit or other dispute;
 
(r)            Accounting; Taxes.  (A) change accounting methods or practices
(including any change in depreciation or amortization policies) or revalue any
of its assets (including writing down the value of inventory or writing off
notes or accounts receivable otherwise than in the ordinary course of business),
except in each case as required by changes in GAAP as concurred with its
independent accountants and after notice to Acquirer, or (B) make or change any
election in respect of Taxes, file any federal, state, or foreign income Tax
Return or any other material Tax Return, file any amendment to a federal, state,
or foreign income Tax Return or any other material Tax Return, adopt or change
any accounting method in respect of Taxes, enter into any Tax sharing or similar
agreement or closing agreement, settle any claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period applicable
to any claim or assessment in respect of Taxes, or enter into intercompany
transactions giving rise to deferred gain or loss of any kind;
 
(s)           Real Property; Encumbrances.  Enter into any agreement for the
purchase, sale or lease of any real property, or place or allow the creation of
any Encumbrance (other than Permitted Encumbrances) on any of its properties;
 
(t)            Warranties, Discounts.  Materially change the manner in which it
provides warranties, discounts or credits to customers, or give any discount,
accommodation or other concession other than in the ordinary course of business
consistent with past practice;
 
(u)           Interested Party Transactions.  Enter into any Contract in which
any officer, director, employee, agent or stockholder of the Company (or any
member of their immediate families) has an interest under circumstances that, if
entered immediately prior to the Agreement Date, would require that such
Contract be listed on Schedule 2.14 of the Company Disclosure Letter; and
 
(v)           Other.  Take or agree in writing or otherwise to take, any of the
actions described in clauses (a) through (u) in this Section 4.2, or any action
which would reasonably be expected to make any of the Company’s representations
or warranties contained in this Agreement materially untrue or materially
incorrect (such that the condition set forth in the first sentence of Section
6.3(a) would not be satisfied) or prevent the Company from performing or cause
the Company not to perform one or more covenants required hereunder to be
performed by the Company (such that the condition set forth in the second
sentence of Section 6.3(a) would not be satisfied).
 
 
49

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

 
 
ARTICLE 5
Additional Agreements
 
5.1           Stockholder Approval and Board Recommendation.
 
(a)           The Company shall use commercially reasonable efforts in
accordance with this Agreement, Delaware Law, its certificate of incorporation
and its Bylaws to secure the Company Stockholder Approval.  The Company’s
obligation to secure the Company Stockholder Approval in accordance with this
Section 5.1(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Company of any
Acquisition Proposal or in the event that the Company Board withholds,
withdraws, amends or modifies its recommendation to the Company Stockholders in
favor of the Company Stockholder Approval.  The Company shall obtain an executed
Company Stockholder Consent and Stockholder Agreement from each Company
Stockholder listed on Exhibit B-1 promptly, and in any event within forty-eight
(48) hours following the execution and delivery of this Agreement by the
Company, and shall exercise commercially reasonable efforts to obtain an
executed Company Stockholder Agreement from each Company Stockholder not listed
on Exhibit B-1 as soon as commercially practicable after the Agreement Date and
prior to the Closing.  Promptly upon receipt of the executed Company Stockholder
Consent from sufficient Company Stockholders to secure the Company Stockholder
Approval, the Company shall deliver copies thereof to Acquirer.  The Company
shall exercise commercially reasonable efforts to obtain an executed Joinder
Agreement from each Company Securityholder not listed in Exhibit B-1.
 
(b)           (i) The Company’s Board of Directors shall unanimously recommend
that the Company’s stockholders vote in favor of the approval of the Mergers and
adoption of this Agreement pursuant to the Company Stockholder Consent; (ii) any
information statement or other disclosure document distributed to the Company’s
stockholders in connection with this transaction shall include a statement to
the effect that the Company’s Board of Directors has unanimously recommended
that the Company’s stockholders vote in favor of the approval of the Mergers and
adoption of this Agreement pursuant to the Company Stockholder Consent (such
document, the “Information Statement”); and (iii) neither the Company’s Board of
Directors nor any committee thereof shall withhold, withdraw, amend or modify,
or propose or resolve to withhold, withdraw, amend or modify in a manner adverse
to Acquirer, the unanimous recommendation of the Company’s Board of Directors
that the Company Stockholders vote in favor of the approval of the Mergers and
adoption of this Agreement.
 
5.2           No Solicitation.
 
(a)           From and after the date of this Agreement until the Closing or
termination of this Agreement pursuant to Article 7, neither the Company nor any
of its Subsidiaries will, nor will any of them authorize or permit any of their
respective officers, directors, affiliates, stockholders or employees or any
investment banker, attorney or other advisor or representative retained by any
of them (all of the foregoing collectively being the “Company Representatives”)
to, directly or indirectly, (i) solicit, initiate, seek, entertain, encourage,
facilitate, support or induce the making, submission or announcement of any
inquiry, expression of interest, proposal or offer that constitutes, or could
reasonably be expected to lead to, an Acquisition Proposal (as hereinafter
defined), (ii) enter into, participate in, maintain or continue any
communications (except solely to provide written notice as to the existence of
these provisions) or negotiations regarding, or deliver or make available to any
Person any non-public information with respect to, or take any other action
regarding, any inquiry, expression of interest, proposal or offer that
constitutes, or could reasonably be expected to lead to, an Acquisition
Proposal, (iii) agree to, accept, approve, endorse or recommend (or publicly
propose or announce any intention or desire to agree to, accept, approve,
endorse or recommend) any Acquisition Proposal, (iv) enter into any letter of
intent or any other Contract contemplating or otherwise relating to any
Acquisition Proposal, or (v) enter into any other transaction or series of
transactions not in the ordinary course of the Company’s business, the
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the Mergers.  Each of the Company and its
Subsidiaries will promptly cease and cause to be terminated any and all existing
activities, discussions or negotiations with any Persons conducted prior to or
on the Agreement Date with respect to any Acquisition Proposal.  If any Company
Representative, whether in his or her capacity as such or in any other capacity,
takes any action that the Company is obligated pursuant to this Section 5.2 not
to authorize or permit such Company Representative to take, then the Company
shall be deemed for all purposes of this Agreement to have breached this Section
5.2.
 
 
50

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

 
 
“Acquisition Proposal” shall mean, with respect to the Company, any agreement,
offer, proposal or bona fide indication of interest (other than this Agreement
or any other offer, proposal or indication of interest by Acquirer), or any
public announcement of intention to enter into any such agreement or of (or
intention to make) any offer, proposal or bona fide indication of interest,
relating to, or involving: (A) any acquisition or purchase from the Company or
any of its Subsidiaries, or from the Company Stockholders, by any Person or
Group (as hereinafter defined) of more than a 10% interest in the total
outstanding voting securities of Company or any of its Subsidiaries or any
tender offer or exchange offer that if consummated would result in any Person or
Group beneficially owning 10% or more of the total outstanding voting securities
of the Company or any of its Subsidiaries or any merger, consolidation, business
combination or similar transaction involving the Company or any of its
Subsidiaries; (B) any sale, lease, mortgage, pledge, exchange, transfer, license
(other than in the ordinary course of business), acquisition, or disposition of
more than 10% of the assets of the Company and its Subsidiaries in any single
transaction or series of related transactions; or (C) any liquidation,
dissolution, recapitalization or other significant corporate reorganization of
the Company or any of its Subsidiaries, or any extraordinary dividend, whether
of cash or other property.
 
“Group” shall have the definition ascribed to such term under Section 13(d) of
the Exchange Act, the rules and regulations thereunder and related case law.
 
(b)           The Company shall promptly notify Acquirer orally and in writing
after receipt by the Company and/or any Subsidiary (or, to the knowledge of the
Company, by any of the Company Representatives), of (i) any Acquisition
Proposal, (ii) any inquiry, expression of interest, proposal or offer that
constitutes, or would reasonably be expected to lead to, an Acquisition
Proposal, (iii) any other notice that any Person is considering making an
Acquisition Proposal, or (iv) any request for nonpublic information relating to
the Company or any Subsidiary or for access to any of the properties, books or
records of the Company or any Subsidiary by any Person or Persons other than
Acquirer.  Such notice shall describe (1) the material terms and conditions of
such Acquisition Proposal, inquiry, expression of interest, proposal, offer,
notice or request, and (2) the identity of the Person or Group making any such
Acquisition Proposal, inquiry, expression of interest, proposal, offer, notice
or request.  The Company shall keep Acquirer informed of the status and details
of, and any modification to, any such inquiry, expression of interest, proposal
or offer and shall provide to Acquirer a true, correct and complete copy of such
inquiry, expression of interest, proposal or offer and any amendments thereto,
if it is in writing, or a reasonable written summary thereof, if it is not in
writing.
 
5.3           Confidentiality; Public Disclosure.
 
(a)           The parties hereto acknowledge that Acquirer and the Company have
previously executed a mutual confidentiality agreement dated September 30, 2011
(the “Confidentiality Agreement”) which shall continue in full force and effect
in accordance with its terms.  The Effective Time Holders’ Agent hereby agrees
to be bound by the terms and conditions of the Confidentiality Agreement to the
same extent as though the Effective Time Holders’ Agent were a party
thereto.  With respect to the Effective Time Holders’ Agent, as used in the
Confidentiality Agreement the term “Information” shall include information
relating to the Merger or this Agreement received by the Effective Time Holders’
Agent after the Closing or relating to the period after the Closing.
 
 
51

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

 
 
(b)           The Company shall not, and the Company shall cause each Subsidiary
and each Company Representative not to, directly or indirectly, issue any press
release or other public statement relating to the terms of this Agreement or the
transactions contemplated hereby without the prior written approval of Acquirer,
unless required by law (in which event a satisfactory opinion of counsel to that
effect shall be first delivered to Acquirer prior to any such disclosure) and
except as reasonably necessary for the Company to obtain the consents and
approvals of the Company Stockholders and other third parties contemplated by
this Agreement.  Notwithstanding anything herein or in the Confidentiality
Agreement, Acquirer and the Company shall mutually agree on the content of the
joint press release announcing the Mergers and thereafter Acquirer may make such
other public statements regarding this Agreement or the transactions
contemplated hereby as Acquirer may determine is reasonably appropriate.
 
5.4           Reasonable Efforts.  Each of the parties hereto agrees to use its
commercially reasonable efforts, and to cooperate with each other party hereto,
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, appropriate or desirable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated hereby, including the satisfaction of the respective conditions set
forth in Article 6, and including to execute and deliver such other instruments
and do and perform such other acts and things as may be necessary or reasonably
desirable for effecting completely the consummation of the Merger and the other
transactions contemplated hereby.
 
5.5           Third Party Consents; Notices.
 
(a)           The Company shall use reasonable efforts to obtain prior to the
Closing, and deliver to Acquirer at or prior to the Closing, all consents,
waivers and approvals under each Contract listed or described on Exhibit I-1 of
the Company Disclosure Letter (and any Contract entered into after the Agreement
Date that would have been required to be listed or described on Exhibit I-1 of
the Company Disclosure Letter if entered into prior to the Agreement Date).  The
Company shall terminate prior to the Closing, and deliver evidence of such
termination to Acquirer at or prior to the Closing, all of the Contracts listed
or described on Exhibit I-2 hereto and to amend prior to the Closing, and
deliver evidence of such amendment to Acquirer at or prior to the Closing, all
of the Contracts listed or described on Exhibit I-3 hereto.
 
(b)           The Company shall give all notices and other information required
to be given to the employees of the Company or any Subsidiary, any collective
bargaining unit representing any group of employees of the Company or any
Subsidiary, and any applicable government authority under the WARN Act, the
National Labor Relations Act, as amended, the Code, COBRA and other applicable
Legal Requirements in connection with the transactions contemplated by this
Agreement.
 
5.6           Litigation. Each party will (i) notify the other party in writing
promptly after learning of any Legal Proceeding initiated by or against it or
any of its subsidiaries, or known by the such to be threatened against such
party, any of its subsidiaries or any of their respective directors, officers,
employees or stockholders in their capacity as such (a “New Litigation Claim”),
and (ii) notify the other party of ongoing material developments in any New
Litigation Claim.  The Company will consult in good faith with Acquirer
regarding the conduct of the defense of any New Litigation Claim.
 
 
52

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

 
 
5.7           Access to Information.  During the period commencing on the date
hereof and continuing until the earlier of the termination of this Agreement and
the Closing, the Company shall afford Acquirer and its accountants, counsel and
other representatives, reasonable access during business hours to (a) all of the
Company’s and each of its Subsidiaries’ properties, books, Contracts and records
(b) all other information concerning the business, properties and personnel of
the Company or any of its Subsidiaries as Acquirer may reasonably request and
(c) to the Company’s auditors in connection with the review of the Audited 2011
Financial Statements and access to such Audited 2011 Financial Statements in
draft form.  No information or knowledge obtained by Acquirer during the
pendency of the transactions contemplated by this Agreement in any investigation
pursuant to this Section 5.7 shall affect or be deemed to modify any
representation, warranty, covenant, condition or obligation under this
Agreement.
 
5.8           Expenses.  Whether or not the Mergers are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including Transaction Expenses) shall be paid by the party
incurring such expense; provided, however, that all direct filing fees (and not
legal, advisory or other costs) incurred in securing the regulatory approval
described in Section 5.18 (the “HSR Expenses”) shall be borne by the
Acquirer.  Notwithstanding the foregoing, (i) the Company shall obtain, as soon
as reasonably practicable after the date of this Agreement, an estimate of the
costs and expenses through completion of the audit of the Company’s financial
statements for the fiscal year ended December 31, 2011 (the “Audit Expenses”),
(ii) all Audit Expenses incurred by the Company (whether before or after the
Closing) up to $175,000 (the “Audit Threshold”) shall be borne by the Company,
shall be considered Transaction Expenses under this Agreement and shall be
included in the Company Closing Financial Certificate, and (v) any Audit
Expenses in excess of the Audit Threshold shall be borne by the Acquirer (though
with no obligation on the part of Acquirer to make any such payments prior to
the Closing).
 
5.9           Employees and Contractors.
 
(a)           With respect to any Offered Employees, the Company shall use best
efforts to assist Acquirer with its efforts to enter into Employment Documents
with such employee as soon as practicable after the date hereof and in any event
prior to the Closing Date.  Notwithstanding any of the foregoing, neither
Acquirer, Sub I nor Sub II (including the First Step Surviving Corporation and
the Final Surviving LLC) shall have any obligation to make an offer of
employment to any employee of the Company (other than the Employment Documents
previously extended to and executed by the Named Executives and the Key
Employees on the Agreement Date).  With respect to matters described in this
Section 5.9, the Company will not, and shall cause each of its Subsidiaries not
to, send any notices or other communication materials to any of their respective
employees that may adversely affect Acquirer’s attempt to hire or retain such
employees without Acquirer’s prior written consent.  Effective no later than
immediately prior to the Closing, the Company shall, and shall cause its
Subsidiaries to, terminate the employment of each of those Company and
Subsidiary employees who (i) have not received an offer of continued employment
with the First Step Surviving Corporation, the Final Surviving LLC or Acquirer
prior to the Closing Date and (ii) have declined an offer of continued
employment with the First Step Surviving Corporation, the Final Surviving LLC or
Acquirer prior to the Closing Date (the “Designated Employees”).
 
(b)           The Company shall use commercially reasonable efforts to retain
each Person specified on Schedule 5.9(b) and to cause such Persons to enter into
an employment agreements with Acquirer (or its designee) prior to the Closing.
 
5.10           Confirmatory Intellectual Property Assignments. The Company shall
obtain confirmatory assignments of Intellectual Property from all of its current
and former employees and independent contractors and consultants identified on
Schedule 5.10 in each case in a form that is reasonably acceptable to Acquirer.
 
 
53

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

 
 
5.11         Termination of Benefit Plans.  Effective as of the day immediately
preceding the Closing Date, the Company shall adopt resolutions of the its Board
of Directors terminating the Company 401(k) Plan (unless Acquirer provides
written notice to the Company no later than three Business Days prior to the
Closing Date that such plan shall not be terminated).  Unless Acquirer provides
such written notice to the Company, no later than three (3) Business Days prior
to the Closing Date, the Company shall provide Acquirer with evidence of such
resolutions of the Company’s Board of Directors.  The form and substance of such
resolutions shall be subject to review and approval of Acquirer.
 
5.12        Section 280G Stockholder Approval.  The Company shall submit to
Company Stockholders for approval by such number of Company Stockholders as is
required by the terms of Section 280G(b)(5)(B) so as to render the parachute
payment provisions of Section 280G of the Code inapplicable to any and all
accelerated vesting payments, benefits, options and/or stock provided pursuant
to agreements, contracts or arrangements that might otherwise result, separately
or in the aggregate, in the payment of any amount and/or the provision of any
benefit that would not be deductible by reason of Section 280G of the Code, with
such stockholder vote to be sought in a manner which satisfies all applicable
requirements of Section 280G(b)(5)(B) of the Code and the regulations
promulgated thereunder.
 
5.13        Parachute Payment Waivers.  The Company shall use best efforts to
obtain and deliver to Acquirer, prior to the initiation of the requisite
stockholder approval procedure under Section 5.12, a Parachute Payment Waiver in
substantially the form attached hereto as Exhibit H from each Person who the
Company reasonably believes is, with respect to the Company, any Subsidiary
and/or any ERISA Affiliate, a “disqualified individual” (within the meaning of
Section 280G of the Code and the regulations promulgated thereunder), as
determined immediately prior to the initiation of the requisite stockholder
approval procedure under Section 5.12, and who might otherwise have, receive or
have the right or entitlement to receive a parachute payment under Section 280G
of the Code.
 
5.14        Termination of Financing Statements.  The Company shall take all
actions necessary such that (i) UCC-2 or UCC-3 termination statements, as
applicable, have been filed with respect to each of the UCC-1 financing
statements filed in order to perfect security interests in assets of the Company
that have not yet expired and (ii) all Encumbrances (other than Permitted
Encumbrances) on assets of the Company shall be released prior to or
simultaneously with the Closing.
 
5.15        Insurance.  Prior to the Closing, the Company may obtain up to a six
year prepaid “tail policy” for its current and former directors and officers
(“Indemnified D&Os”) with coverage amounts as the Company may determine in its
sole discretion prior to the Closing; provided, however, that the fees and
expenses associated with such “tail policy” for the term of such “tail policy”
up to $60,000 shall be borne by Acquirer at the Closing and that the fees and
expenses associated with such “tail policy” for the term of such “tail policy”
in excess of $60,000, shall be included as a liability in the calculation of the
Company Net Working Capital and shall be reflected in the Company Net Working
Capital Certificate.  Acquirer shall cause the Final Surviving LLC to cause to
be maintained in effect such “tail policy” during such six year
period.  Acquirer will not, or will cause the Company not to, cancel or change
such insurance policies in any respect.  This Section 5.15 is intended to be for
the benefit of, and shall be enforceable by, the Indemnified D&Os, their heirs
and personal representatives, and shall survive the consummation of the Mergers
from and after the Effective Time, to benefit the Indemnified D&Os.  In the
event Acquirer or the Final Surviving LLC or any of their respective successors
or assigns (i) consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary,
Acquirer and the Final Surviving LLC shall use their best efforts to ensure
proper provision shall be made so that the successors and assigns of Acquirer or
the Final Surviving LLC, as the case may be, assume the obligations set forth in
this Section 5.15.
 
 
54

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

 
 
5.16        Director and Officer Indemnification.  For a period of six years
following the Effective Time, Acquirer shall, or shall cause the Company to,
fulfill the obligations of the Company to indemnify each Person who is or was a
director or officer of the Company against any losses such Person may incur
based upon matters existing or occurring prior to the Closing pursuant to any
applicable indemnification agreement as in effect on the Agreement Date and
pursuant to the terms of the Company’s certificate of incorporation, bylaws and
other organizational documents as in effect on the date this Agreement.
 
5.17         Tax Matters.
 
The following provisions shall govern the allocation of responsibility and
payment of Taxes as between Acquirer, the Company and the Effective Time
Holders’ Agent (on behalf of the Effective Time Holders) for certain Tax matters
prior to and following the Closing Date:
 
(a)           Between the date of this Agreement and the Closing Date, the
Company and its Subsidiaries shall  prepare and file, on a timely basis, all Tax
Returns that are required to be filed (taking account of extensions) prior to
the Closing Date and shall pay all Taxes with respect thereto (and shall provide
copies of such Tax Returns to the Effective Time Holders’ Agent); provided that
all such tax returns will be prepared in a manner consistent with past practice,
unless required by applicable law, and Company shall provide Tax Returns to
Acquirer for its review and comment at least fifteen (15) days prior to the date
on which such Tax Return is to be filed and no such Tax Return shall be filed
without consent of Acquirer, which consent shall not be unreasonably withheld or
delayed.
 
(b)           Acquirer shall prepare or cause to be prepared and file or cause
to be filed all Tax Returns for the Company and its Subsidiaries for all Tax
periods ending on or prior to the Closing Date that are required to be filed
after the Closing Date; provided that, Acquirer shall provide each such Tax
Return to the Effective Time Holders’ Agent for its review and comment at least
fifteen (15) days prior to the date on which such Tax Return is to be filed.
 
(c)           Acquirer shall prepare or cause to be prepared and file or cause
to be filed any Tax Returns of the Company and its Subsidiaries for Straddle
Periods; provided that, Acquirer shall provide each such Tax Return to the
Effective Time Holders’ Agent for its review and comment at least fifteen (15)
days prior to the date on which such Tax Return is to be filed.
 
(d)           All Tax Returns required to be prepared and filed by Acquirer
under paragraphs (b) and (c) shall be prepared consistent with past practices
unless otherwise required by applicable law.
 
(e)           The filing of any amended Return of the Company or any Subsidiary
of the Company covering any period prior to the Closing Date, the Straddle
Period or any post-Closing period will not in itself be the basis of any
indemnification claim.
 
(f)            If, subsequent to the Closing Date, Acquirer, Company or any
Subsidiary or Affiliate thereof shall receive written notice of an audit,
examination, claim, or other administrative or judicial proceeding, contest,
assessment, notice of deficiency, proposed adjustment, dispute or controversy
relating to Taxes (each, a “Tax Contest”) with respect to Taxes the payment of
which is the responsibility of the Effective Time Holders or for which the
Effective Time Holders would have an indemnification obligation, Acquirer shall
promptly notify the Effective Time Holders’ Agent in writing of such Tax
Contest, provided that the failure of Acquirer to give such notice shall not
relieve the Effective Time Holders of their indemnification obligations, except
to the extent that the Effective Time Holders’ Agent can demonstrate actual loss
and prejudice as a result of such failure.
 
 
55

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

 
 
(g)           Each of Effective Time Holders’ Agent, on the one hand, and
Acquirer, the Company and any Subsidiary or Affiliate of Acquirer or the
Company, on the other hand, shall: (a) provide assistance to the other party as
reasonably requested in preparing and filing Tax Returns; (b) make available to
the other party as reasonably requested all information, records, and documents
relating to Taxes concerning the Company and its Subsidiaries for Pre-Closing
Periods and Straddle Periods; and (c) retain any books and records that could
reasonably be expected to be necessary or useful in connection with any
preparation by the other party of any Tax Return. Each of Effective Time
Holders’ Agent, Acquirer, the Company and any Subsidiary or Affiliate of
Acquirer or the Company shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with any Tax Contest. Such
cooperation shall include, upon a party’s reasonable request, providing records
and information that are reasonably relevant to any Tax Contest, making
employees available on a mutually convenient basis to provide additional
information, and explaining any materials provided pursuant.
 
(h)           For the portion of the calendar day after Effective Time, other
than transactions expressly contemplated hereby, Acquirer shall cause the
Company and its Subsidiaries to carry on their business only in the ordinary
course in the same manner as heretofore conducted (and, for the avoidance of
doubt, none of Acquirer, the Company or their Affiliates shall be permitted to
make an election pursuant to Section 338 of the Code with respect to the Company
or any Subsidiary for any Pre-Closing Period or Straddle Period).
 
5.1          Regulatory Approvals.
 
(a)           Acquirer shall promptly execute and file, or join in the execution
and filing of, any application, notification (including any notification or
provision of information, if any, that may be required under the HSR Act or
other applicable federal, state or foreign antitrust law) or other document that
may be necessary in order to obtain the expiration or termination of any
applicable waiting period or the authorization, approval or consent of any
Governmental Entity, whether federal, state, local or foreign, which may be
reasonably required, or which the Company may reasonably request, in connection
with the consummation of the Mergers and the other transactions contemplated by
this Agreement.  Acquirer shall use commercially reasonable efforts to obtain,
and to cooperate with the Company to promptly obtain, all such authorizations,
approvals and consents and shall pay any associated filing fees payable by
Acquirer, the Final Surviving LLC or the Company with respect to such
authorizations, approvals and consents.  Acquirer shall promptly inform the
Company of any material communication between Acquirer and any Governmental
Entity regarding the Mergers or any other transaction contemplated by this
Agreement.  If Acquirer or any of its Affiliates receives any formal or informal
request for information or documentary material from any Governmental Entity
with respect to the transactions contemplated by this Agreement, then Acquirer
shall make, or cause to be made, as soon as reasonably practicable, a response
in compliance with such request.  Acquirer shall direct, in its sole discretion,
the making of such response, but shall consider in good faith the views of the
Company.
 
(b)           The Company shall promptly execute and file, or join in the
execution and filing of, any application, notification (including any
notification or provision of information, if any, that may be required under the
HSR Act or other applicable federal, state or foreign antitrust law) or other
document that may be necessary in order to obtain the expiration or termination
of any applicable waiting period or the authorization, approval or consent of
any Governmental Entity, whether federal, state, local or foreign, which may be
reasonably required, or which Acquirer may reasonably request, in connection
with the consummation of the Mergers and the other transactions contemplated by
this Agreement.  The Company shall use commercially reasonable efforts to
cooperate with Acquirer to promptly obtain, all such authorizations, approvals
and consents and shall pay, subject to the provisions of Section 5.8, any
associated filing fees payable by the Company with respect to such
authorizations, approvals and consents.  The Company shall promptly inform
Acquirer of any material communication between the Company and any Governmental
Entity regarding the Mergers or any other transaction contemplated by this
Agreement.  If the Company or any of its Affiliates receives any formal or
informal request for information or documentary material from any Governmental
Entity with respect to the transactions contemplated by this Agreement, then the
Company shall make, or cause to be made, as soon as reasonably practicable, a
response in compliance with such request.  The Company shall direct, in its sole
discretion, the making of such response, but shall consider in good faith the
views of Acquirer.
 
 
56

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

 
 
(c)           Notwithstanding anything to the contrary contained in this
Agreement, if any administrative or judicial action or proceeding is instituted
(or threatened to be instituted) challenging any transaction contemplated by
this Agreement as in violation of any federal, state or foreign laws that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, “Antitrust Laws”), it is
expressly understood and agreed that:  (i) Acquirer shall not have any
obligation to litigate or contest or remove any administrative or judicial
action or proceeding or any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent; and (ii) Acquirer shall be under no
obligation to make proposals, execute or carry out agreements or submit to
orders providing for (A) the sale, license or other disposition or holding
separate (through the establishment of a trust or otherwise) of any assets or
categories of assets of Acquirer, the Company or any of their respective
Subsidiaries or Affiliates, (B) the imposition of any limitation or regulation
on the ability of Acquirer or any of its Affiliates to freely conduct their
business or own or exercise control of such assets, (C) the holding separate of
the shares of Company Capital Stock or any limitation or regulation on the
ability of Acquirer or any of its Affiliates to exercise full rights of
ownership of the shares of Company Capital Stock, or (D) any other limitation on
the complete and absolute authority of Acquirer to cause the Final Surviving LLC
and each of its subsidiaries to operate its business and conduct its affairs as
determined in Acquirer’s sole and absolute discretion (each of the restraints or
limitations referred to in clauses “(A)” through “(D)” above being referred to
herein as, an “Antitrust Restraint”).  Nothing in this Section 5.18 shall limit
Acquirer’s or the Company’s right to terminate this Agreement pursuant to
Section 7.1(b) if Acquirer or the Company, as applicable, has, until such date,
complied in all material respects with its obligations under this Section 5.18.
 
5.19        Revenue Earnout Payment.
 
(a)           Revenue Earnout Payment.
 
(i)           2012 Revenue Earnout Amount.  Subject to the terms and conditions
of this Agreement, Acquirer shall deliver (or cause to be delivered) to each
Effective Time Holder (in each case, subject to such Effective Time Holder’s
compliance with the requirements set forth in Section 1.9), as soon as
reasonably practicable after the expiration of the Earnout Measurement Period
(in each case, subject to the final resolution of any dispute in accordance with
Section 5.19(b) below, and in the absence of any dispute, within seventy-five
(75) calendar days after the expiration of the Earnout Measurement Period),
through such reasonable procedures as Acquirer may adopt in consultation with
the Effective Time Holders’ Agent, cash by wire transfer of immediately
available funds, such Effective Time Holder’s Pro Rata Share of the 2012 Revenue
Earnout Amount, if any.
 
(ii)           2013 Revenue Earnout Amount.  If any 2013 Revenue Earnout Amount
shall be payable by Acquirer under this Agreement, Acquirer shall deliver (or
cause to be delivered) to each Effective Time Holder (in each case, subject to
such Effective Time Holder’s compliance with the requirements set forth in
Section 1.9), by no later than January 7, 2014, through such reasonable
procedures as Acquirer may adopt in consultation with the Effective Time
Holders’ Agent, cash by wire transfer of immediately available funds, such
Effective Time Holder’s Pro Rata Share of the 2013 Revenue Earnout Amount, if
any.
 
 
57

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

 
 
(b)           Calculation of 2012 Revenue Earnout Amount and 2013 Revenue
Earnout Amount; Dispute Resolution.  After the expiration of the Earnout
Measurement Period, within sixty (60) calendar days after the expiration of the
Earnout Measurement Period, Acquirer shall prepare and deliver to the Effective
Time Holders’ Agent a statement setting forth in reasonable detail Acquirer’s
good faith calculation of the 2012 Revenue Earnout Amount (the “2012 Revenue
Earnout Amount Calculation Statement”) and the 2013 Revenue Earnout Amount (the
“2013 Revenue Earnout Amount Calculation Statement”, and together with the 2012
Revenue Earnout Amount Calculation Statement, the “Revenue Earnout Amount
Calculation Statements”), as applicable.  Acquirer shall afford to the Effective
Time Holders’ Agent reasonable access during normal business hours (subject to
the Effective Time Holders’ Agent agreeing to be bound by the terms and
conditions of the Confidentiality Agreement to the same extent as though the
Effective Time Holders’ Agent were a party thereto), and upon reasonable notice
after delivery of each Revenue Earnout Amount Calculation Statement by Acquirer
to the Effective Time Holders’ Agent, to the books of account and records used
by Acquirer to prepare such Revenue Earnout Amount Calculation Statement for
purposes of the Effective Time Holders’ Agent verifying the calculation of the
2012 Revenue Earnout Amount or the 2013 Revenue Earnout Amount, as applicable
(which shall be provided to the Effective Time Holders’ Agent in electronic
format to the extent reasonably available).  The Effective Time Holders’ Agent
shall notify Acquirer in writing within thirty (30) Business Days of receipt of
a Revenue Earnout Amount Calculation Statement as to whether the Effective Time
Holders’ Agent disputes the determination of the Revenue Earnout Amount, setting
forth in reasonable detail the specific items in dispute and the basis for the
dispute (an “Earnout Payment Dispute Notice”).  If the Effective Time Holders’
Agent does not deliver an Earnout Payment Dispute Notice within thirty (30)
Business Days of receipt of a Revenue Earnout Amount Calculation Statement, or
if the Effective Time Holders’ Agent accepts the amounts set forth in a Revenue
Earnout Amount Calculation Statement in writing, the 2012 Revenue Earnout Amount
or 2013 Revenue Earnout Amount calculations (as applicable) as contained in such
Revenue Earnout Amount Calculation Statement shall be deemed final and
binding.  In the event an Earnout Payment Dispute Notice is delivered, Acquirer
and the Effective Time Holders’ Agent (or the designated representative of the
Effective Time Holders’ Agent) shall meet within twenty (20) Business Days of
the delivery of such Earnout Payment Dispute Notice to attempt to resolve such
dispute in good faith.  If a final resolution of such dispute is reached as
reflected in an agreement in writing, the agreed upon 2012 Revenue Earnout
Amount or 2013 Revenue Earnout (as applicable) shall be deemed final and
binding.  If no final resolution is reached within thirty (30) Business Days of
the delivery of such Earnout Payment Dispute Notice after good faith
negotiation, either party may require that the dispute (other than a dispute as
to the calculation of any aspect of the applicable Revenue Earnout Amount
Calculation Statement) be resolved in accordance with the dispute resolution
mechanism set forth in Section 9.9; provided, however, that if the dispute
relates to the method of calculation of any aspect of the applicable Revenue
Earnout Amount Calculation Statement, the parties shall engage an auditing firm
mutually acceptable to Acquirer and the Effective Time Holders’ Agent (the
“Reviewing Accountant”) and the parties shall submit the dispute to the
Reviewing Accountant for final resolution.  The Reviewing Accountants shall be
authorized only to arbitrate the calculation of 2012 Revenue Earnout Amount or
2013 Revenue Earnout Amount (as applicable) and the underlying accounting basis,
but shall not have any authority to arbitrate any other dispute relating to the
matters addressed in this Section 5.19.  The Reviewing Accountants shall be
instructed to review the applicable Revenue Earnout Amount Calculation
Statement, the Earnout Payment Dispute Notice and all work papers related
thereto to determine the 2012 Revenue Earnout Amount or 2013 Revenue Earnout
Amount (as applicable) and use every reasonable effort to determine such amounts
within sixty (60) days after the submission of such dispute to it, and in any
event, as soon as practicable.  The Reviewing Accountant shall not undertake any
review of any matters not specifically identified by the Effective Time Holders’
Agent as being in dispute in the Earnout Payment Dispute Notice and shall only
decide the specific items under dispute by the parties and solely in accordance
with the terms of this Agreement.  The Reviewing Accountants’ determination
shall be based solely on presentations by Acquirer and the Effective Time
Holders’ Agent and an independent review by the Reviewing Accountants of the
books and records of Acquirer and on the definitions and other terms included
herein.  The Reviewing Accountants shall set out the resolution of the dispute
in writing, which shall be conclusive and binding upon the parties.  The costs
and expenses of the Reviewing Accountants shall be borne (i) by Acquirer if the
difference between the 2012 Revenue Earnout Amount or 2013 Revenue Earnout
Amount (as applicable) as determined by Acquirer and as determined by the
Reviewing Accountants is greater than the difference between the 2012 Revenue
Earnout Amount or 2013 Revenue Earnout Amount (as applicable) as determined by
the Effective Time Holders’ Agent and as determined by the Reviewing Accountants
or (ii) by the Effective Time Holders’ Agent (on behalf of the Effective Time
Holders (to be allocated among them on the basis of each Effective Time Holder’s
Pro Rata Share of the merger consideration received by all of the Effective Time
Holders under this Agreement)) if the difference between the 2012 Revenue
Earnout Amount or 2013 Revenue Earnout Amount (as applicable) as determined by
Acquirer and as determined by the Reviewing Accountants is lower than the
difference between the 2012 Revenue Earnout Amount or 2013 Revenue Earnout
Amount (as applicable) as determined by the Effective Time Holders’ Agent and as
determined by the Reviewing Accountants, or (iii) 50% by the Acquirer and 50% by
the Effective Time Holders (to be allocated among them on the basis of each
Effective Time Holder’s Pro Rata Share of the merger consideration received by
all of the Effective Time Holders under this Agreement), in any other case.
 
 
58

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

 
 
(c)           Operating Covenants During the Revenue Earnout Periods.  Following
the Closing, any and all decisions with respect to any aspect of the operation
of the business of Acquirer and its Subsidiaries, including the First Step
Surviving Corporation or the Final Surviving LLC or any of its Subsidiaries and
including matters directly or indirectly related to the 2012 Revenue Earnout
Amount or the 2013 Revenue Earnout Amount, shall be made by  Acquirer in its
sole discretion without any express or implied obligation.  Notwithstanding the
foregoing, unless Acquirer and the Effective Time Holders’ Agent otherwise agree
in writing and except as contemplated by this Agreement, from and after the
Effective Time until such time as the Earnout Measurement Period has expired:
 
(i)           Acquirer shall not take any action, not otherwise justified for
good faith business reasons which Acquirer has consulted with the Effective Time
Holders’ Agent prior to implementing, which has the effect of reducing the
earning or payment of the Earnout Payments;
 
(ii)          Acquirer shall cause the Business Unit to operate and function as
a single division of Acquirer;
 
(iii)         Acquirer shall cause the Business Unit to be operated
substantially in accordance with the business plan set forth on Schedule
5.18(c)(iii) hereto (the “Business Plan”) and any deviation by Acquirer from the
Business Plan during the Earnout Period,  other than commercially reasonable
variations in Funding Resources, not material individually or in the aggregate,
based on timing and the reasonable judgment of the Business Unit management team
and Acquirer’s CEO, shall require the consent of the Effective Time Holders’
Agent (which consent shall not be unreasonably withheld, conditioned or
delayed);
 
(iv)        Acquirer shall allot or allocate funding resources to the operation
of the Business Unit in accordance with the budget set forth on Schedule
5.18(c)(iv) hereto (the “Budget”) and any decrease by Acquirer in the funding
resources set forth in the Budget from the Business Unit (the “Funding
Resources”), other than commercially reasonable variations in Funding Resources,
not material individually or in the aggregate, based on timing and the
reasonable judgment of the Business Unit management team and Acquirer’s CEO,
shall require the consent of the Effective Time Holders’ Agent (which consent
shall not be unreasonably withheld, conditioned or delayed); and
 
 
59

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

 
 
(v)         Acquirer may allot or allocate additional resources to the operation
of the Business Unit in accordance with joint plans developed between Business
Unit management team and management of the Acquirer prior to or following the
Closing for the purposes exploiting revenue growth opportunities that may result
from the combination of Company assets with Acquirer assets (the
“Synergies”).  Revenues generated from Synergies related to the Company’s hosted
business will be included in the 2012 Revenue (for purposes of calculating the
2012 Earnout Amount and 2013 Earnout Amount), and resources committed in pursuit
of Synergies will be considered incremental to the Business Plan and Budget and
not be accounted for as Funding Resources; and
 
(vi)        Each party hereto agrees that, from the Closing until the end of the
Earnout Measurement Period, it shall, with respect to all matters related to
this Agreement, act in good faith and the spirit of fair dealing such that the
intent of this Agreement is carried out to the fullest extent practicable.
 
Notwithstanding the foregoing, the parties acknowledge and agree that it shall
not, under any circumstance, be a breach of the operating covenants of Acquirer
contained in this Section 5.19(c) if as a result of a Legal Proceeding or other
demand requiring, or purporting to require, Acquirer to license any Third Party
Intellectual Property or claiming infringement thereof, (a) Acquirer experiences
a delay in or diminishment of its ability to sell Company Products during the
Earnout Measurement Period or (b) Acquirer in its sole reasonable discretion
determines, after consulting with the Effective Time Holders’ Agent, to revise
the Business Plan in good faith to take into account such Legal Proceeding or
other demand and its effect on the Business Unit.
 
(d)           Acceleration of Payment of the Earnout Amount.  In the event an
Acceleration Event (as defined below) occurs prior to the end of the Earnout
Measurement Period, Acquirer shall promptly pay to each Effective Time Holder
through such reasonable procedures as Acquirer may adopt, cash by wire transfer
of immediately available funds, such Effective Time Holder’s Pro Rata Share of
the (i) maximum 2012 Revenue Earnout Amount and (ii) maximum 2013 Revenue
Earnout Amount.   For purposes of this Agreement, an “Acceleration Event” shall
mean (x) (a) a sale, lease, conveyance or other disposition of all or
substantially all of the property or business of Acquirer (directly or through a
subsidiary), (b) a merger or consolidation with or into any other entity, unless
the stockholders of the Acquirer immediately before the transaction own 50% or
more of the voting stock of the acquiring or surviving corporation following the
transaction (taking into account, in the numerator, only stock of the Acquirer
held by such stockholders before the transaction and stock issued in respect of
such prior-held stock of the Acquirer), or (c) any other transaction which
results in (assuming an immediate and maximum exercise/conversion of all
derivative securities issued in the transaction) the holders of the Acquirer’s
capital stock as of immediately before the transaction owning less than 50% of
the voting power of the Acquirer’s capital stock as of immediately after the
transaction, or (y) a willful and material breach by Acquirer of Sections
5.18(c)(i)-(v) (provided however that the Parties acknowledge and agree that the
timing of the Earnout Payments, as described in Sections 5.19(a) and 5.19(b)
above, shall not be affected in any way by the terms of this clause (y) of this
Section 5.19(d)).
 
(e)           The Acquirer, the Company, and the Effective Time Holders agree
for all tax purposes that the right of the Company Stockholders to the Earnout
Amount shall be treated as deferred contingent purchase price that is, with
respect to the sale of Company Capital Stock, eligible for installment sale
treatment under Section 453 of the Code and any corresponding provision of
foreign, state or local law, as appropriate.  A portion of the Earnout Amount
shall be treated as imputed interest to the extent required by the Code and
regulations thereunder.
 
 
60

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

 
 
5.20        Financing.  Acquirer shall use commercially reasonable efforts to
obtain financing, on terms acceptable to Acquirer in Acquirer’s sole discretion,
as is necessary for Acquirer to have available sufficient funds to pay the Total
Adjusted Cash Consideration (the “Debt Financing”).  The Company shall use
commercially reasonable efforts to cooperate, and to cause its Subsidiaries and
Representatives to cooperate, with Acquirer and Representatives of Acquirer in
connection with the Debt Financing.  The Acquirer will update the Company with
respect to the status of the Debt Financing from time to time.
 
5.21        Geckotech Amendment.
 
(a)           As soon as reasonably practicable following the date hereof, the
Company shall finalize and enter into an amendment (the “Geckotech Amendment”)
to that certain Asset Purchase Agreement, by and among the Company, M5
Acquisition Corp. and Geckotech, LLC (the “Geckotech”), dated as of November 1,
2010 (the “Geckotech Agreement”), in form and substance satisfactory to Acquirer
in its sole discretion, providing that (i) neither the consummation of the
Mergers nor the consummation of any of the other transactions contemplated by
this Agreement will result in or give rise to any acceleration of any payment
(including but not limited to the Second Anniversary Additional Purchase Price
and/or Second Earn-In, each such term as defined in the Geckotech Agreement) or
other right or obligation of any party other than the Company under the
Geckotech Agreement; (ii) after the consummation of the Merger, the Second
Earn-In will be payable in cash (and not in shares of Company Capital Stock or
other Company Securities); and (iii) the total maximum amount of cash payable to
the Seller (as defined in the Geckotech Agreement) in respect of the Second
Earn-In will not exceed $1.25 million (such amount of cash payable to Geckotech,
the “Geckotech Payment”), subject to the other terms and conditions of the
Geckotech Agreement.
 
(b)           The Parties acknowledge and agree that, in the event that the
Company enters into, prior to the Closing, a Geckotech Amendment that provides
for the payment of the Geckotech Payment to Geckotech, out of the consideration
otherwise payable to the Company Securityholders hereunder, at the Closing, such
Geckotech Amendment shall be deemed to have satisfied this Section 5.21.
 
5.22        Pay-off Letters; Releases.  Prior to the Closing the Company shall
use its commercially reasonable efforts to obtain executed pay-off and lien
release letters (the “Pay-off Letters”) in a form reasonably satisfactory to
Acquirer from Square 1 Bank (“Square 1”),  which Pay-off Letters shall include:
(i) the balance required to pay-off the loans made pursuant to the Amended and
Restated Loan and Security Agreement, by and among the Company and Square 1,
dated as of September 27, 2010, as amended (collectively, the “Loans”) in full
at Closing (including any prepayment penalties); (ii) the per-diem interest
amount; (iii) a statement that upon pay-off of the Loans any related security
interests in the Company’s assets shall immediately be released; (iv) attached
draft UCC-3 termination statements; (v) wiring instructions; and (vi) consent to
consummation of the Merger.  Except as otherwise contemplated by the Pay-off
Letters, the Company shall take all actions necessary such that all Encumbrances
on assets of the Company shall be released prior to or simultaneously with the
Closing.
 
5.23        Spreadsheet; Company Closing Financial Certificate.  The Company
shall prepare and deliver to Acquirer, not later than three (3) Business Days
prior to the expected Closing Date, a draft of (i) the Company Closing Financial
Certificate (which certificate shall be accompanied by such supporting
documentation, information and calculations as are necessary for Acquirer to
verify and determine the amounts set forth therein) and (ii) the
Spreadsheet.  The draft of the Company Closing Financial Certificate shall set
forth the Company’s good faith estimate, as of three (3) Business Days prior to
the expected Closing Date, of items (i) through (iv) set forth in the definition
of “Company Closing Financial Certificate” on Exhibit A hereto.
 
 
61

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

 
 
5.24         Audited Financial Statements.  The Company shall use commercially
reasonable efforts, to begin as soon as reasonably practicable after the date of
this Agreement (and in any event by no later than February 10, 2012), and
complete by the Closing Date (to the extent practicable), an audit of its
consolidated financial statements for the year ended December 31, 2011
(including, balance sheets, statements of operations and statements of cash
flows) (the “Audited 2011 Financial Statements”).  The Audited 2011 Financial
Statements shall be prepared in a form that can be filed by Acquirer with the
SEC with corresponding audit reports and consents required for filing with the
SEC from the Company’s independent accountants with respect to such financial
statements.  Acquirer shall be provided with regular updates as to the status of
the Audited 2011 Financial Statements.
 
5.25         Termination of Company Options.  The Company shall have taken all
action necessary (under the Company Option Plans or otherwise) to effectuate the
cancellation of each Company Option as contemplated pursuant to Section
1.8(a)(iv) and to ensure that, from and after the Effective Time, each holder of
a Company Option outstanding as of the date of this Agreement and as of
immediately prior to the Effective Time shall cease to have any rights with
respect thereto (other than the rights to receive the consideration described in
Section 1.8(a)(iv), subject to the terms and conditions of this Agreement) prior
to or as of the Effective Time.
 
5.26         Termination of Company Warrants.  The Company shall have taken all
commercially reasonable efforts to effectuate the cancellation of each Company
Warrant as contemplated pursuant to Section 1.8(a)(v) and to ensure that, from
and after the Effective Time, each holder of a Company Warrant outstanding as of
the date of this Agreement and as of immediately prior to the Effective Time
shall cease to have any rights with respect thereto (other than the rights to
receive the consideration described in Section 1.8(a)(v), subject to the terms
and conditions of this Agreement) prior to or as of the Effective Time.
 
5.27        SEC Reporting/Registration Statement.  Following the Closing,
Acquirer shall file all forms, reports and documents required to be filed by
Acquirer with the SEC pursuant to the Exchange Act, and comply in all material
respects with all other state, federal and SEC rules and regulations to enable
the recipients of Acquirer Common Stock to sell such shares of Acquirer Common
Stock on the NASDAQ Stock Market in accordance with the terms of the Rule 144
under the Securities Act and the Investment Representation Letter and Lock-Up
Agreement.   In the event a recipient of Acquirer Common Stock is unable to sell
such shares in accordance with Rule 144 following the lock-up period set forth
in the Investment Representation Letter and Lock-Up Agreement due to the
Acquirer’s noncompliance with the Exchange Act or other applicable requirements,
the holders of a majority of the Acquirer’s Common Stock hereunder may require
that Acquirer prepare and file, at its sole expense, a registration statement
registering all or a portion of Acquirer’s Common Stock issued hereunder.  In
the event such registration statement is needed, Acquirer and the Effective Time
Holder’s Agent shall use commercially reasonable efforts to cooperate in good
faith to coordinate the preparation and filing of a registration statement for
such shares of Acquirer Common Stock in a timely manner, not to exceed sixty
(60) days from such request.
 
5.28        Open Source.  As soon as practicable following the date of the this
Agreement, the Company shall provide on a schedule to the Acquirer all software
or other material that is distributed as “free software”, “open source software”
or under similar licensing or distribution terms (including but not limited to
the GNU General Public License (GPL), GNU Lesser 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), the Apache License, and any license identified as an
open source license by the Open Source Initiative (www.opensource.org)) (“Open
Source Materials”) and that is used by the Company or any Subsidiary, and
identifies for each item of Open Source Materials (i) the source from which the
item was obtained, including any applicable URLs; (ii) the applicable open
source license; (iii) whether the item is incorporated into or distributed with
any Company Products, and if so, the applicable Company Products; (iv) and
whether or not the item was modified by the Company or any Subsidiary. The
Company is in compliance with the terms and conditions of all licenses for the
Open Source Materials.
 
 
62

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

 
 
5.29        Employee Promissory Notes.  As soon as practicable following the
date of the this Agreement, the Company shall take action to ensure that all
promissory notes due and owing from Company employees to the Company shall have
be repaid in full or amended to account for a set-off from the net amounts
payable to such employees for their Company Securities.
 
5.30        Company Bonus Plan.  The Company shall pay the proceeds from the
Company Bonus Plan to the participants thereunder (the “Plan Participants”) at
the Closing, unless an alternative arrangement regarding payment of the Company
Bonus Plan Amount to the Plan Participants is agreed to by the parties following
the date hereof and prior to the Closing.
 
ARTICLE 6
Conditions to the Mergers
 
6.1           Conditions to Obligations of Each Party to Effect the
Mergers.  The respective obligations of each party hereto to consummate the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions:
 
(a)           Company Stockholder Approval.  The Mergers shall have been duly
and validly approved and this Agreement shall have been duly and validly
adopted, as required by Delaware Law and the Company’s certificate of
incorporation and Bylaws, each as in effect on the date of such approval and
adoption, by the requisite written consent of the Company Stockholders.
 
(b)           No Order; Illegality.  No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition shall be in
effect which (i) prevents the consummation of the Mergers (ii) prohibits
Acquirer’s ownership or operation of any portion of the business of the Company
or any of its Subsidiaries, (iii) compels Acquirer or the Company to dispose of
or hold separate all or any material portion of the business or assets of
Acquirer, the Company or any of their respective Subsidiaries or Affiliates as a
result of the Mergers or (iv) imposes any other Antitrust Restraint.  No any
action shall have been taken or threatened by any Governmental Entity seeking
any of the foregoing restraints or limitations referred to in clauses (i)
through (iv) above, and no statute, rule, regulation or order shall have been
enacted, entered, enforced or deemed applicable to the Mergers, which would
result in any of the foregoing restraints or limitations referred to in clauses
(i) through (iv) above.
 
(c)           HSR Act.  All applicable waiting periods (and any extension
thereof) under the HSR Act shall have expired or otherwise been terminated.
 
(d)           Governmental Approvals.  Acquirer and the Company shall have
timely obtained from each Governmental Entity all approvals, waivers and
consents, if any, necessary for consummation of, or in connection with, the
Mergers and the other transactions contemplated hereby.
 
6.2           Additional Conditions to Obligations of the Company.  The
obligations of the Company to consummate the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Closing of each of the
following conditions (it being understood that each such condition is solely for
the benefit of the Company and may be waived by the Company in writing in its
sole discretion without notice or Liability to any Person):
 
 
63

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

 
 
(a)           Representations, Warranties and Covenants.  The representations
and warranties of Acquirer in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality or Material Adverse
Effect, which representations and warranties as so qualified shall be true and
correct in all respects) on and as of the date hereof and on and as of the
Closing Date as though such representations and warranties were made on and as
of such date (except for representations and warranties which address matters
only as to a specified date, which representations and warranties shall be true
and correct with respect to such specified date).  Acquirer shall have performed
and complied in all material respects with all covenants and obligations of this
Agreement required to be performed and complied with by it at or prior to the
Closing.
 
(b)           No Material Adverse Effect.   No Material Adverse Effect shall
have occurred with respect to Acquirer and its Subsidiaries, taken as a whole,
since the Agreement Date.
 
(c)           Receipt of Closing Deliveries.  The Company shall have received
each of the agreements, instruments and other documents set forth in Section
1.3(a).
 
6.3           Additional Conditions to the Obligations of Acquirer.  The
obligations of Acquirer to consummate the transactions contemplated hereby shall
be subject to the satisfaction at or prior to the Closing of each of the
following conditions (it being understood that each such condition is solely for
the benefit of Acquirer and may be waived by Acquirer in writing in its sole
discretion without notice or Liability to any Person):
 
(a)            Representations, Warranties and Covenants.  The representations
and warranties of the Company in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality or Material Adverse
Effect and the representations and warranties contained in Section 2.2, which
representations and warranties shall be true and correct in all respects) on and
as of the date hereof and on and as of the Closing Date as though such
representations and warranties were made on and as of such date (except for
representations and warranties which address matters only as to a specified
date, which representations and warranties shall be true and correct with
respect to such specified date).  The Company shall have performed and complied
in all material respects with all covenants and obligations of this Agreement
required to be performed and complied with by the Company at or prior to the
Closing.
 
(b)           Receipt of Closing Deliveries.  Acquirer shall have received each
of the agreements, instruments and other documents set forth in Section 1.3(b).
 
(c)            Employment Documents; Non-Competition Agreements.  (i) Each of
the Key Employees shall have executed and delivered each of the Employment
Documents required to be signed by such Key Employees, and such Employment
Documents shall continue to be in full force and effect and no action shall have
been taken by any such individual to rescind such Employment Documents;  (ii) no
less than 85% of the Offered Employees shall have executed and delivered each of
the Employment Documents required to be signed by such Offered Employees, and
such Employment Documents shall continue to be in full force and effect and no
action shall have been taken by any such individual to rescind such Employment
Documents; and (iii) each of the two contractors of the Company located in
Australia shall have executed and delivered each of the Employment Documents
required to be signed by such Offered Employees.
 
(d)            Investment Representation Letter and Lock-Up Agreements.  Each of
the Company Qualified Stockholders shall have executed and delivered an
Investment Representation Letter and Lock-Up Agreement, and such Investment
Representation Letter and Lock-Up Agreements shall continue to be in full force
and effect and no action shall have been taken by any such individual to rescind
such Investment Representation Letter and Lock-Up Agreements.
 
 
64

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

 
 
(e)            Financing.  Acquirer shall have obtained the Debt Financing on
terms acceptable to Acquirer in Acquirer’s sole discretion.
 
(f)            Appraisal Rights.  Company Stockholders representing ninety
percent (90%) or more of the aggregate number of issued and outstanding shares
of Company Capital Stock (on an as-converted to Company Common Stock basis)
entitled to demand appraisal rights under Section 262 of the Delaware Law shall
have executed the Company Stockholder Consent or shall have waived, or no longer
be entitled to exercise, appraisal rights under Delaware Law.
 
(g)           No Material Adverse Effect.   No Material Adverse Effect shall
have occurred with respect to the Company and its Subsidiaries, taken as a
whole, since the Agreement Date.
 
(h)           Termination of Company Warrants.  All Company Warrants shall have
been exercised in full, cancelled or terminated and there shall be no further
obligation as of the Effective Time on the part of Acquirer, the First Step
Surviving Corporation, the Final Surviving LLC or any other Person with respect
to any such Company Warrants.
 
(i)            No Outstanding Securities.  Other than the shares of Company
Preferred Stock, shares of Company Common Stock, Company Options and Company
Warrants issued and outstanding as of immediately prior to the Effective Time,
which are being canceled and converted into the right to receive, in the case of
each share of Company Capital Stock held by a Company Qualified Stockholder as
of immediately prior to the Effective Time, the cash and shares of Acquirer
Common Stock as set forth in Section 1.8(a)(ii), and in the case of shares of
Company Common Stock held by Company Non-Qualified Stockholders, Company Options
and Company Warrants, the cash as set forth in Sections 1.8(a)(iii), 1.8(a)(iv)
and 1.8(a)(v), subject in each case to the terms of this Agreement, there shall
be no outstanding securities, warrants, options, commitments, agreements of the
Company or other Company Rights immediately prior to the Effective Time that
purport to obligate the Company to issue any shares of Company Capital Stock,
Company Options, Company Warrants or any other securities of the Company or
Company Rights under any circumstances.
 
(j)             Accredited Investors.   No greater than twenty (20) of the
Company Securityholders who receive Acquirer Common Stock in the Merger shall be
non-accredited investors (as set forth in each such Company Securityholder’s
respective Investment Representation Letter and Lock-Up Agreement).
 
(k)            Geckotech Amendment.  The Company shall have entered into the
Geckotech Amendment on terms and conditions satisfactory to Acquirer in its sole
discretion, subject to the last sentence of Section 5.20 hereof.
 
ARTICLE 7
Termination, Amendment and Waiver
 
7.1           Termination.  At any time prior to the Closing, this Agreement may
be terminated:
 
(a)           by mutual written consent duly authorized by the Company and
Acquirer;
 
 
65

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

 
 
(b)           by either Acquirer or the Company, if the Closing shall not have
occurred on or before May 31, 2012 or such other date that Acquirer and the
Company may agree upon in writing (the “Termination Date”); and provided,
further, that the right to terminate this Agreement under this clause (b) of
Section 7.1 shall not be available to any party whose breach of any covenant or
agreement hereunder will have been the principal cause of, or will have directly
resulted in, the failure of the Closing to occur on or before the Termination
Date;
 
(c)           by either Acquirer or the Company, if (i) there shall be any
applicable Legal Requirements that makes consummation of the Mergers illegal or
otherwise prohibited or (ii) any permanent injunction or other order of a
Governmental Entity of competent authority preventing the consummation of the
Mergers shall have become final and nonappealable;
 
(d)           by Acquirer, if (i) the Company shall have breached any
representation, warranty, covenant or agreement contained herein and such breach
shall not have been cured within five (5) Business Days after receipt by the
Company of written notice of such breach (provided, however, that no such cure
period shall be available or applicable to any such breach which by its nature
cannot be cured) and if not cured within the timeframe above and at or prior to
the Closing, such breach would result in the failure of any of the conditions
set forth in Section 6.1 or Section 6.3 to be satisfied, (ii) there shall have
been a Material Adverse Effect with respect to the Company or (iii) if the
Company Stockholder Approval is not obtained within forty-eight (48) hours
following the execution of this Agreement by the parties hereto; or
 
(e)           by the Company, if Acquirer shall have breached any
representation, warranty, covenant or agreement contained herein and such breach
shall not have been cured within five (5) Business Days after receipt by
Acquirer of written notice of such breach (provided, however, that no such cure
period shall be available or applicable to any such breach which by its nature
cannot be cured) and if not cured within the timeframe above and at or prior to
the Closing, such breach would result in the failure of any of the conditions
set forth in Section 6.1 or Section 6.2 to be satisfied or (ii) there shall have
been a Material Adverse Effect with respect to the Acquirer.
 
Any termination of this Agreement under clauses (b) through (e) of this Section
7.1 will be effective by the delivery of a written notice of the terminating
party to the other party hereto.
 
7.2           Effect of Termination.  In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquirer, Merger
Subs, the Company or their respective officers, directors, stockholders or
affiliates; provided, however, that (a) the provisions of Section 5.2
(Confidentiality; Public Disclosure), this Section 7.2 (Effect of Termination),
Article 9 (General Provisions) and the Confidentiality Agreement shall remain in
full force and effect and survive any termination of this Agreement and (b)
nothing herein shall relieve any party hereto from liability in connection with
any willful breach of such party’s representations, warranties or covenants
contained herein.  Notwithstanding the foregoing, in the event that all of the
conditions to the Mergers set forth in Section 6.1 and Section 6.3 (other than
Section 6.3(e) (Financing)) have been satisfied, then following the termination
of this Agreement in accordance with the terms of this Article 7, Acquirer
shall, promptly (in any event within three (3) Business Days) following receipt
of an invoice therefor by Acquirer, pay up to $800,000 of the Company’s
reasonable and documented out-of-pocket legal and accounting fees and expenses
incurred by the Company in connection with the transactions contemplated by this
Agreement on or prior to the termination of this Agreement (the “Company
Expenses”), by wire transfer of same day funds to one or more accounts
designated by Company.  If Acquirer becomes obligated to pay the Company
Expenses pursuant to this Section 7.2, the Company agrees that its right to
receive the Company Expenses from Acquirer shall be its sole and exclusive
remedy against Acquirer and its affiliates (including the Merger Subs), and upon
payment thereof, neither Acquirer nor any of its affiliates (including Merger
Subs) shall have any further liability or obligation to the Company relating to
or arising out of this Agreement or the transactions contemplated hereby.
 
 
66

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

 
 
7.3           Amendment.  The parties hereto may amend this Agreement at any
time prior to the Closing Date pursuant to an instrument in writing signed on
behalf of each of the parties hereto, and the Effective Time Holders’ Agent may
cause this Agreement to be amended at any time after the Closing by execution of
an instrument in writing signed on behalf of Acquirer and the Effective Time
Holders’ Agent.
 
7.4           Extension; Waiver.  At any time at or prior to the Closing, any
party hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein.  At any time after the Closing, the Effective Time
Holders’ Agent and Acquirer may (i) extend the time for the performance of any
of the obligations or other acts of the other, (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 Person contained herein.  Any
agreement on the part of a party hereto or the Effective Time Holders’ Agent to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.  No delay in exercising any right
under this Agreement shall constitute a waiver of such right, and no waiver of
any breach or default shall be deemed a waiver of any other breach or default of
the same or any other provision in this Agreement.
 
ARTICLE 8
Escrow Fund and Indemnification
 
8.1           Escrow Fund.
 
(a)           As soon as reasonably practicable after the Closing Date (and in
any event within three (3) Business Days after the Closing Date), the Escrow
Cash and the Escrow Shares shall be deposited with the Escrow Agent, such
deposit, together with any interest that may be earned thereof, to constitute
the General Escrow Fund and the Special Escrow Fund (collectively, the “Escrow
Funds”) and to be governed by the provisions set forth herein and in the Escrow
Agreement.  Following the Effective Time, the Escrow Funds shall be available to
compensate Acquirer (on behalf of itself or any other Indemnified Person (as
such term is defined in Section 8.2 below)) for Indemnifiable Damages (as such
term is defined in Section 8.2 below) pursuant to the indemnification
obligations of the Effective Time Holders until 11:59 p.m. California time on
the date that is twelve (12) months after the Closing Date (such date, the
“Escrow Release Date”).  No portion (nor all) of the Escrow Funds, nor any
beneficial interest therein, may be pledged, subjected to any Encumbrance, sold,
assigned or transferred, by any Effective Time Holder, or be taken or reached by
any legal or equitable process in satisfaction of any debt or other Liability of
any Effective Time Holder, in each case prior to the disbursement of the Escrow
Fund to any Effective Time Holder in accordance with Section 8.1(b) below.
 
(b)           Within ten (10) Business Days following the Escrow Release Date,
Acquirer and the Effective Time Holders’ Agent will instruct the Escrow Agent to
disburse to the Exchange Agent (on behalf of each Effective Time Holder) such
Effective Time Holder’s Pro Rata Share of the Escrow Funds less (i) those
portions of the Escrow Funds previously paid to Acquirer in satisfaction of
claims for indemnification in accordance with Article 8 of this Agreement and
(ii) those portions of the Escrow Funds that are determined, in the reasonable
judgment of Acquirer, to be necessary to satisfy all unsatisfied or disputed
claims for indemnification specified in any Claim Certificate (as defined in
Section 8.5 below) delivered to the Effective Time Holders’ Agent prior to the
Escrow Release Date.  Any portions of the Escrow Funds held following the Escrow
Release Date with respect to pending but unresolved claims for indemnification
that are not awarded to Acquirer upon the resolution of such claims shall be
disbursed to the Effective Time Holders within ten (10) Business Days following
resolution of such claims.  For the avoidance of doubt, only Company Qualified
Stockholders shall receive any Escrow Shares.
 
 
67

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

 
 
(c)           For purposes of claims against the Escrow Shares, such Escrow
Shares shall be valued at the Claim Stock Value.  Claims made against the Escrow
Fund shall be made against both the Escrow Cash and Escrow Shares on a
proportional basis (with the Escrow Stock valued at the Claim Stock Value);
provided, however, that additional Escrow Cash and fewer Escrow Shares shall be
delivered as necessary (though in all cases in such manner as to account for
each such Effective Time Holders’ respective Pro Rata Share) to be consistent
with the intended treatment of the Mergers as a tax-free reorganization.
 
(d)           Acquirer, the Company, and the Effective Time Holders agree for
all tax purposes that: (i) the right of the Effective Time Holders to the Escrow
Funds shall be treated as deferred contingent purchase price that is, with
respect to the sale of Company Capital Stock, eligible for installment sale
treatment under Section 453 of the Code and any corresponding provision of
foreign, state or local law, as appropriate; (ii) if and to the extent any
amount of the Escrow Funds is actually distributed to the Effective Time
Holders, interest may be imputed on such amount, as required by Section 483 or
1274 of the Code; (iii) Acquirer shall be treated as the owner of the Escrow
Cash, and all interest and earnings earned from the investment and reinvestment
of the Escrow Cash, or any portion thereof, shall be allocable to Acquirer; and
(iv) for purposes of calculating the maximum amount of deferred contingent
purchase price under the installment sale rules of Code Section 453, if the
imputed interest amount is less than the amount of interest and earnings on the
Escrow Funds paid to the Effective Time Holders, then an amount equal to the
difference shall be treated as additional interest paid to the Effective Time
Holders.
 
8.2           Indemnification.  Subject to the limitations set forth in this
Article 8, each Effective Time Holder shall severally and not jointly, based on
each such Effective Time Holders’ respective Pro Rata Share, indemnify and hold
harmless Acquirer and its officers, directors, agents and employees, and each
person, if any, who controls or may control Acquirer within the meaning of the
Securities Act (each of the foregoing being referred to individually as an
“Indemnified Person” and collectively as “Indemnified Persons”) from and against
any and all losses, Liabilities, damages (which with respect to punitive
damages, shall only include amounts actually paid to a third party), fees,
interest, costs and expenses, including costs of investigation and defense and
reasonable fees and expenses of lawyers, experts and other professionals, and
re-engineering costs, directly or indirectly, whether or not due to a
third-party claim (collectively, “Indemnifiable Damages”), arising out of,
resulting from or in connection with (i) any failure of any representation or
warranty made by the Company in this Agreement or the Company Disclosure Letter
(including any exhibit or schedule to the Company Disclosure Letter) to be true
and correct as of the Agreement Date and as of the Closing Date as though such
representation or warranty were made as of the Closing Date (except in the case
of representations and warranties which by their terms speak only as of a
specific date or dates, which representations and warranties shall be true and
correct as of such date), (ii) any breach of or default in connection with any
of the covenants or agreements made by the Company in this Agreement, (iii) any
inaccuracies in the Spreadsheet or the Company Closing Financial Certificate
(including, for the avoidance of doubt, any inaccuracy in or failure to
calculate properly the Company Net Working Capital, Transaction Expenses,
Company Capital Leases Liability Adjustment Amount, Company Past Acquisition
Liability Adjustment Amount, Company Bonus Expenses, or Company Debt),
 
 
68

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

 
 
 (iv) any payments paid with respect to Dissenting Shares to the extent that
such payments, in the aggregate, exceed the value of the amounts that otherwise
would have been payable pursuant to Section 1.8(a) upon the exchange of such
Dissenting Shares, and any interest, costs, expenses and fees incurred by any
Indemnified Person in connection with the exercise of any dissenters’ rights;
(v) any claim asserted or held by any current, former or alleged securityholder
of the Company alleging any ownership of, interest in or right to acquire any
shares or other securities of the Company or otherwise disputing the treatment
of securityholders of the Company in connection with the Merger; (vi) any claim
or right asserted or held by any person who is or at any time was an officer,
director, employee or agent of the Company involving a right or entitlement or
an alleged right or entitlement to indemnification, reimbursement of expenses or
any other relief or remedy (under the charter documents or under any
indemnification agreement or similar Contract, under any Legal Requirement or
otherwise) with respect to any act or omission on the part of such person or any
event or other circumstance that arose, occurred or existed at or prior to the
Effective Time; (vii) the matters set forth on Schedule 8.2(vii) of the Company
Disclosure Letter (the “Special Matters”); (viii) any claim or right asserted by
any Company Warrantholder that does not execute a Company Warrant Termination
Agreement which claim or right is related to the Company Warrants held by such
Company Warrantholder; (ix) any claim related to the Company’s failure to
execute the Geckotech Amendment; (x) the use or distribution by the Company or
any Subsidiary of any Open Source Materials, or the inclusion or combination of
any Open Source Materials in or with the Company Intellectual Property or
Company Products (regardless of the disclosure of any matter set forth in the
open source schedule to be provided by the Company pursuant to Section 5.28);
(xi) any failure of any representation or warranty made by the Company in this
Agreement or the Company Disclosure Letter (including any exhibit or schedule to
the Company Disclosure Letter) with respect to Section 2.12 (Taxes) (the “Tax
Matters”) to be true and correct as of the Agreement Date and as of the Closing
Date as though such representation or warranty were made as of the Closing Date
(except in the case of representations and warranties which by their terms speak
only as of a specific date or dates, which representations and warranties shall
be true and correct as of such date), or (xii) the matter referred to on
Schedule 8.2(xii) of the Company Disclosure Letter.  Materiality standards or
qualifications, and qualifications by reference to the defined term “Material
Adverse Effect” in any representation, warranty or covenant shall only be taken
into account in determining whether a breach of or default in connection with
such representation, warranty or covenant (or failure of any representation or
warranty to be true and correct) exists, and shall not be taken into account in
determining the amount of any Indemnifiable Damages with respect to such breach,
default or failure to be true and correct.
 
8.3           Threshold; Other Limitations.
 
(a)           Notwithstanding anything contained herein to the contrary, no
Indemnified Person may make a claim against the General Escrow Fund in respect
of any claim for indemnification that is made pursuant to clause (i) of the
first sentence of Section 8.2 (and that does not involve fraud or willful breach
or any failure of any of the Fundamental Representations and Warranties (as
defined below)), unless and until a Claim Certificate (as defined below)
describing Indemnifiable Damages in an aggregate amount greater than $750,000
(the “Threshold”) has been delivered, in which case the Indemnified Person may
make claims for indemnification for all Indemnifiable Damages (including the
amount of the Threshold).
 
(b)           If the Merger is consummated, recovery from the General Escrow
Fund shall constitute the sole and exclusive remedy for the indemnification
obligations under this Agreement for the matters listed in clauses (i), (ii)
(other than in the case of a willful breach of covenant or agreement by the
Company in this Agreement), (iv), (x) and (xii) of the first sentence of Section
8.2 (in the case of clause (xii), subject to Section 8.3(i) below), except in
the case of (A) fraud by the Company or any Company Securityholder; (B) any
failure of any representation or warranty made by the Company in this Agreement
or the Company Disclosure Letter with respect to Section 2.1 (Organization,
Standing, Power, and Subsidiaries), Section 2.2 (Capital Structure), Section
2.3(a) (Authority), and Section 2.19 (Transaction Expenses) (such
representations and warranties set forth in (B) above collectively referred to
herein as the “Fundamental Representations and Warranties” and the matters set
forth on (A) and (B) above collectively referred to as “Fundamental Matters”),
(C) any willful breach of any of the covenants or agreements by the Company in
this Agreement, (D) for the matters listed in clauses (iii), (v), (vi), (viii)
and (ix) of the first sentence of Section 8.2 ((C) and (D) collectively referred
to herein as “Select Matters”) and (E) the Tax Matters.
 
 
69

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

 
 
(c)           In the case of Fundamental Matters, after Indemnified Persons have
exhausted or made claims upon the General Escrow Fund (after taking into account
all other claims for indemnification from the Escrow Fund made by Indemnified
Persons), each Effective Time Holder shall be liable, severally and not jointly,
based on each such Effective Time Holders’ respective Pro Rata Share, for any
such Indemnifiable Damages resulting therefrom not to exceed the total amount
payable to such Effective Time Holder hereunder (including any interest in the
Earnout).
 
(d)           In the case of Select Matters and Tax Matters, after Indemnified
Persons have exhausted or made claims upon the General Escrow Fund (after taking
into account all other claims for indemnification from the Escrow Fund made by
Indemnified Persons), each Effective Time Holder shall be liable, severally and
not jointly, based on each such Effective Time Holders’ respective Pro Rata
Share, for any such Indemnifiable Damages resulting therefrom not to exceed
forty percent (40%) of the total amount payable to such Effective Time Holder
hereunder (including any interest in the Earnout).
 
(e)           If the Merger is consummated, the Special Escrow Fund shall be
available to compensate Acquirer (on behalf of itself or any other Indemnified
Person) for Indemnifiable Damages solely arising out of, solely resulting from
or solely in connection with the Special Matters.  For the avoidance of doubt,
Acquirer (on behalf of itself or any other Indemnified Person) shall be entitled
to then seek recourse against the Special Escrow Fund first and then the General
Escrow Fund second (only, in the later case, if the Special Escrow Fund is not
sufficient to cover the Indemnifiable Damages solely related to the Special
Matters).  Subject to Section 8.2(g) below, recovery from the Special Escrow
Fund first and the General Escrow Fund second shall be the sole remedy of the
Indemnified Persons with respect to the Special Matters.
 
(f)            No Indemnified Person may recover any Indemnifiable Damages for
the value, condition or diminution of any Tax attribute (e.g. net operating loss
carryforward or tax credit carryforward).  For purposes of this Article 8,
Indemnifiable Damages shall be calculated net of actual recoveries under
insurance policies (with the amount of such recoveries calculated after
deduction of collection costs and premium increases, if any); provided, however,
that no Indemnified Person shall be under any obligation to acquire any
insurance policy or pursue or seek any recovery under any insurance policy.
 
(g)           Notwithstanding anything to the contrary herein, nothing in this
Agreement shall limit an Effective Time Holder’s liability in the case of fraud
if such Effective Time Holder committed such fraud or had actual knowledge of
fraud committed by the Company at the time such fraud occurred or was committed.
 
(h)           If the Merger is consummated, Acquirer (on behalf of itself or any
other Indemnified Person) shall be entitled to collect Indemnifiable Damages
with respect to Tax liabilities reflected in the calculation of Company Net
Working Capital only to the extent that the amount of such Indemnifiable Damages
exceeds such Tax liabilities as reflected in the Company Closing Financial
Certificate.
 
 
70

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

 
 
(i)            In no event shall the Effective Time Holders be responsible for
Indemnifiable Damages with respect to the matters reflected in clause (xii) of
the first sentence of Section 8.2 in excess of $50,000 in the aggregate.
 
8.4           Period for Claims Against Escrow Funds.  Except with respect to
Fundamental Matters, Select Matters and Tax Matters, the period during which
claims for Indemnifiable Damages may be made (the “Claims Period”) against the
General Escrow Fund and/or Special Escrow Fund for Indemnifiable Damages shall
commence at the Closing and terminate at 11:59 p.m. California time on the date
that is twelve (12) months after the Closing Date (the “Escrow Period”).  The
Claims Period for Indemnifiable Damages arising out of, resulting from or in
connection with Fundamental Matters and Tax Matters shall commence at the
Closing and terminate upon the expiration of the applicable statute of
limitations with respect to such matter.  The Claims Period for Indemnifiable
Damages arising out of, resulting from or in connection with Select Matters
shall commence at the Closing and terminate upon the two (2) year anniversary of
the Closing Date.  The availability of the Escrow Funds to indemnify the
Indemnified Persons will be determined without regard to any right to
indemnification which any Effective Time Holder may have in his or her capacity
as an officer, director, employee, or agent of the Company or any of the
Subsidiaries and no such Effective Time Holder will be entitled to any
indemnification from the Company or the Final Surviving LLC for amounts paid for
indemnification under this Article 8.
 
8.5           Claims.
 
(a)           With respect to claims for Indemnifiable Damages against the
Escrow Funds, on or before the last day of the applicable Claims Period,
Acquirer may deliver to the Effective Time Holders’ Agent a certificate signed
by any officer of Acquirer (an “Claim Certificate”):
 
(i)          stating that an Indemnified Person has incurred, paid, reserved or
accrued, or that it reasonably believes it will incur, pay, reserve or accrue,
Indemnifiable Damages;
 
(ii)         stating the amount of such Indemnifiable Damages (which, in the
case of Indemnifiable Damages not yet incurred, paid, reserved or accrued, may
be the maximum amount reasonably believed by Acquirer to be incurred, paid,
reserved, accrued or demanded by a third party); and
 
(iii)        specifying in reasonable detail (based upon the information then
possessed by Acquirer) the individual items of such Indemnifiable Damages
included in the amount so stated and the nature of the claim to which such
Indemnifiable Damages are related.
 
(iv)        if applicable, the portion of the amount of Indemnifiable Damages
for which Acquirer seeks recovery from the General Escrow Fund and the portion
of the amount of Indemnifiable Damages for which Acquirer seeks recovery from
the Special Escrow Funds; and
 
(v)         the applicable Claim Stock Value determined in accordance with the
terms of the Merger Agreement.
 
No delay in providing such Claim Certificate within the applicable Claims Period
shall affect an Indemnified Person’s rights hereunder, unless (and then only to
the extent that) the Effective Time Holders’ Agent or the Effective Time Holders
are materially prejudiced thereby.  At the time of delivery of any Claim
Certificate to the Effective Time Holders’ Agent, if such delivery is on or
before the Escrow Release Date, a duplicate copy of such Claim Certificate shall
be delivered to the Escrow Agent by or on behalf of Acquirer (on behalf of
itself or any other Indemnified Person).  
 
 
71

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

 
 
8.6           Resolution of Objections to Claims.
 
(a)           If the Effective Time Holders’ Agent does not contest, by written
notice to Acquirer, any claim or claims by Acquirer made in any Claim
Certificate within twenty (20) Business Days after any such Claim Certificate is
received by the Effective Time Holders’ Agent, then the Effective Time Holders’
Agent will be conclusively deemed to have consented, on behalf of all Effective
Time Holders, to the recovery by the Indemnified Person of the full amount of
Indemnifiable Damages specified in the Claim Certificate, including the
forfeiture of such amount from the Escrow Funds (subject to the terms and
conditions set forth in Section 8.3 above) having a value sufficient to satisfy
such Indemnifiable Damages and, without further notice, to have stipulated to
the entry of a final judgment for Indemnifiable Damages against the Effective
Time Holders for such amount in any court having jurisdiction over the matter
where venue is proper.
 
(b)           If the Effective Time Holders’ Agent objects in writing to any
claim or claims by Acquirer made in any Claim Certificate within such twenty
(20) Business Day period, Acquirer and the Effective Time Holders’ Agent shall
attempt in good faith for thirty (30) Business Days after Acquirer’s receipt of
such written objection to resolve such objection.  If Acquirer and the Effective
Time Holders’ Agent shall so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties.  The Escrow Agent shall be
entitled to conclusively rely on any such memorandum and the Escrow Agent shall
distribute such amount from the Escrow Funds in accordance with the terms of
such memorandum.
 
(c)           If no such agreement can be reached during the thirty (30)
Business Day period for good faith negotiation, but in any event upon the
expiration of such thirty (30) Business Day period, either Acquirer or the
Effective Time Holders’ Agent may proceed in accordance with the terms set forth
in Section 9.9 of this Agreement to resolve the matter.  The decision of the
J.A.M.S. arbitrator as to the validity and amount of any claim in such Claim
Certificate shall be nonappealable, binding and conclusive upon the parties to
this Agreement and the Escrow Agent shall be entitled to conclusively rely and
to act in accordance with such decision and the Escrow Agent shall distribute
such amount from the Escrow Funds in accordance therewith.
 
(d)          Judgment upon any award rendered by the trial court may be entered
in any court having jurisdiction.  For purposes of this Section 8.6(d), in any
suit hereunder in which any claim or the amount thereof stated in the Claim
Certificate is at issue, Acquirer shall be deemed to be the non-prevailing party
unless the trial court awards Acquirer more than one-half of the amount in
dispute, in which case the Effective Time Holders shall be deemed to be the
non-prevailing party.  The non-prevailing party to a suit shall pay its own
expenses and the expenses and the fees and expenses of the prevailing party,
including attorneys’ fees and costs, reasonably incurred in connection with such
suit.
 
8.7           Effective Time Holders’ Agent.
 
(a)           At the Closing, Fortis Advisors LLC, a Delaware limited liability
company, shall be constituted and appointed as the Effective Time Holders’
Agent.  For purposes of this Agreement, the term “Effective Time Holders’ Agent”
shall mean the agent for and on behalf of the Effective Time Holders to: (i)
execute, as Effective Time Holders’ Agent, this Agreement and any agreement or
instrument entered into or delivered in connection with the transactions
contemplated hereby; (ii) give and receive notices, instructions, and
communications permitted or required under this Agreement, or any other
agreement, document or instrument entered into or executed in connection
herewith, for and on behalf of any Effective Time Holder, to or from Acquirer
(on behalf of itself or any other Indemnified Person) relating to this Agreement
or any of the transactions and other matters contemplated hereby or thereby
(except to the extent that this Agreement expressly contemplates that any such
notice or communication shall be given or received by each Company
Securityholder individually and not by the Effective Time Holders’ Agent);
 
 
72

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

 
 
(ii) review, negotiate and agree to and authorize deliveries to Acquirer of cash
from the Escrow Fund in satisfaction of claims asserted by Acquirer (on behalf
of itself or any other Indemnified Person, including by not objecting to such
claims) pursuant to this Article 8; (iii) object to such claims pursuant to
Section 8.5; (iv) consent or agree to, negotiate, enter into, or, if applicable,
contest, prosecute or defend, settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to, such claims, resolve any such claims, take any actions in connection
with the resolution of any dispute relating hereto or to the transactions
contemplated hereby by arbitration, settlement or otherwise, and take or forego
any or all actions permitted or required of any Effective Time Holder or
necessary in the judgment of the Effective Time Holders’ Agent for the
accomplishment of the foregoing and all of the other terms, conditions and
limitations of this Agreement; (v) consult with legal counsel, independent
public accountants and other experts selected by it, solely at the cost and
expense of the Effective Time Holders; (vi) consent or agree to any amendment to
this Agreement or to waive any terms and conditions of this Agreement providing
rights or benefits to the Effective Time Holders (other than with respect to the
issuance of the Common Qualified Total Consideration and Common Non-Qualified
Total Consideration less the Escrow Fund) in accordance with the terms hereof
and in the manner provided herein; (vii) negotiate matters concerning 2012
Revenue, the 2012 Revenue Earnout Amount and the 2013 Revenue Earnout Amount and
the calculation thereof with Acquirer; (viii) review and determine 2012 Revenue,
the 2012 Revenue Earnout Amount and the 2013 Revenue Earnout Amount and
cooperate and work with Acquirer regarding such review and determination; (ix)
enter into agreements, settlements and compromises regarding the calculation and
determination of 2012 Revenue, the 2012 Revenue Earnout Amount and the 2013
Revenue Earnout Amount; and (x) take all actions necessary or appropriate in the
judgment of the Effective Time Holders’ Agent for the accomplishment of the
foregoing, in each case without having to seek or obtain the consent of any
Person under any circumstance.  Effective Time Holders’ Agent Effective Time
HoldersEffective Time HoldersEffective Time Holder  Acquirer, Merger Subs and
their respective Affiliates (including without limitation, after the Closing
Date, the Final Surviving LLC) shall be entitled to rely on the appointment of
Fortis Advisors LLC, a Delaware limited liability company, as the Effective Time
Holders’ Agent and treat such Effective Time Holders’ Agent as the duly
appointed attorney-in-fact of each Effective Time Holder and has having the
duties, power and authority provided for in this Section 8.7.  The Effective
Time Holders shall be bound by all actions taken and documents executed by the
Effective Time Holders’ Agent in connection with this Article 8, and Acquirer
and other Indemnified Persons shall be entitled to rely exclusively on any
action or decision of the Effective Time Holders’ Agent.
 
(b)           The Effective Time Holders’ Agent shall not be liable to any
Company Securityholder for any act done or omitted hereunder as the Effective
Time Holders’ Agent while acting in good faith (and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith) and without gross negligence or willful misconduct.  In addition, certain
Company Securityholders (the “Advisory Group”) have concurrently herewith
entered into a letter agreement with the Effective Time Holders’ Agent
providing, among other things, that the Advisory Group shall have the authority
to direct the Effective Time Holders’ Agent on matters of material interest to
the Effective Time Holders.  The Effective Time Holders acknowledge the
authority of the Advisory Group and agree that the Advisory Group shall not be
liable to the Effective Time Holders for any liability incurred by the members
of the Advisory Group while acting in good faith and arising out of or in
connection with the exercise of their authority (it being understood that any
act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith), even if such act or omission constitutes
negligence on the part of the Advisory Group or one of its members.  Without
limiting the generality of the foregoing, the Effective Time Holders’ Agent (i)
shall not be subject to any implied duties, and (ii) shall not be required to
take any action that, in the opinion of its counsel, reasonably could be
expected to expose the Effective Time Holders’ Agent to liability or that is
contrary to law.
 
 
73

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

 
 
All expenses of Effective Time Holders’ Agent in excess of amounts available to
the Effective Time Holders’ Agent to cover Effective Time Holders’ Agent
Expenses (as defined below) shall be borne by the Effective Time Holders.  The
Effective Time Holders shall severally indemnify the Effective Time Holders’
Agent and hold it harmless against any loss, liability or expense incurred
without gross negligence, willful misconduct or bad faith on the part of the
Effective Time Holders’ Agent and arising out of or in connection with the
acceptance or administration of his duties hereunder, including all reasonable
out-of-pocket costs and expenses and legal fees and other legal costs reasonably
incurred by the Effective Time Holders’ Agent (collectively, the “Effective Time
Holders’ Agent Expenses”).  At the Effective Time, Acquirer will deposit
$400,000 with the Escrow Agent (the “Agent Expense Amount”) and to be governed
by the provisions set forth herein and in the Escrow Agreement.  The Agent
Expense Amount will be available to indemnify the Effective Time Holders’ Agent
against any liability, loss, damage, penalty, fine, cost or expense incurred by
the Effective Time Holders’ Agent without gross negligence or bad faith on the
part of the Effective Time Holders’ Agent and arising out of or in connection
with the acceptance or administration of his duties under this Agreement.  For
tax purposes the parties shall treat the Agent Expense Amount as having been
received by the Effective Time Holders at the Effective Time.  To the extent
such Effective Time Holders are employees or former employees of the Company for
which employment tax withholding is required for their portion of the Total
Consideration, Acquirer shall be entitled at the Effective Time to withhold such
amounts as if Acquirer had directly paid the Agent Expense Amount to the
relevant recipient, and shall satisfy its tax reporting requirements in
accordance with such treatment, provided that, in order to ensure that the full
Agent Expense Amount has been deposited without reduction, Acquirer (with the
concurrence of the Effective Time Holders’ Agent) is entitled to reduce such
other payments to these recipients made under this Agreement by the proper
amount of withholding in respect of the Agent Expense Amount attributable to
such recipient.  The Effective Time Holders shall be treated as the owners of
the Agent Expense Amount and shall report any income earned on the Agent Expense
Amount.
 
(c)           The Effective Time Holders’ Agent will be entitled to recover
Effective Time Holders’ Agent Expenses from the Escrow Agent out of the Agent
Expense Amount, without the requirement of any consent or approval by Acquirer,
upon delivery to the Escrow Agent, from time to time, of an itemized list of
expenses incurred by the Effective Time Holders’ Agent in connection with the
Effective Time Holders’ Agent duties under this Agreement.  The Escrow Agent
shall reimburse the Effective Time Holders’ Agent for Effective Time Holders’
Agent Expenses, upon the request of the Effective Time Holders’ Agent, from the
Agent Expense Amount or from any interest accruing on the Agent Expense Amount
or from any Escrow Funds available for distribution to the Effective Time
Holders at the time such amounts, if any, otherwise would be distributed to the
Effective Time Holders after the Escrow Release Date (and after final resolution
of any pending but unresolved claims for indemnification that are not awarded to
Acquirer upon the resolution of such claims in accordance with this Article 8)
(collectively, the “Agent Expense Funds”).  In addition to reimbursement for
Agent Effective Time Holders’ Agent Expenses then incurred to date, the
Effective Time Holders’ Agent may request that the Escrow Agent reserve from
time to time out of the Agent Expense Funds an amount reasonably calculated by
the Effective Time Holders’ Agent to cover reasonably anticipated Effective Time
Holders’ Agent Expenses.  The Agent Expense Funds shall not be available to
Acquirer to cover Indemnifiable Damages and no portion of the Agent Expense
Amount shall constitute part of the Escrow Funds.  Any interest on the Agent
Expense Amount shall, subject to this Section 8.5, be paid to the Effective Time
Holders as provided for in Sections 1.9 and 8.1(b).
 
 
74

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

 
 
(d)           Any notice or communication given or received by, and any
decision, action, failure to act within a designated period of time, agreement,
consent, settlement, resolution or instruction of, the Effective Time Holders’
Agent that is within the scope of the Effective Time Holders’ Agent’s authority
under Section 8.7(a) shall constitute a notice or communication to or by, or a
decision, action, failure to act within a designated period of time, agreement,
consent, settlement, resolution or instruction of all the Effective Time Holders
and shall be final, binding and conclusive upon each such Effective Time Holder;
and each Indemnified Person shall be entitled to rely exclusively upon any such
notice, communication, decision, action, failure to act within a designated
period of time, agreement, consent, settlement, resolution or instruction as
being a notice or communication to or by, or a decision, action, failure to act
within a designated period of time, agreement, consent, settlement, resolution
or instruction of, each and every such Effective  Time Holder. Acquirer, the
other Indemnified Persons are hereby relieved from any Liability to any Person
for any acts done by them in accordance with such notice, communication,
decision, action, failure to act within a designated period of time, agreement,
consent, settlement, resolution or instruction of the Effective Time Holders’
Agent.  All of the indemnification obligations of the Effective Time Holders
under this Section 8.7 shall survive the termination of this Agreement or the
Escrow Agreement.
 
8.8           Third-Party Claims.  In the event Acquirer becomes aware of a
third-party claim which Acquirer in good faith believes may result in a claim
for indemnification under this Article 8 by or on behalf of an Indemnified
Person, Acquirer shall have the right to conduct the defense of and to settle or
resolve any such claim (and the costs and expenses incurred by Acquirer in
connection with such defense, settlement or resolution (including reasonable
attorneys’ fees, other professionals’ and experts’ fees and court or arbitration
costs) shall be included in the Indemnifiable Damages for which Acquirer may
seek indemnification pursuant to a claim made hereunder).  The Effective Time
Holders’ Agent shall have the right to receive copies of all pleadings, notices
and communications with respect to the third-party claim to the extent that
receipt of such documents does not affect any privilege relating to any
Indemnified Person and shall be entitled, at its expense, to participate in, but
not to determine or conduct, any defense of the third-party claim or settlement
negotiations with respect to the third-party claim.  However, except with the
consent of the Effective Time Holders’ Agent, which consent shall not be
unreasonably withheld, conditioned or delayed and which shall be deemed to have
been given unless the Effective Time Holders’ Agent shall have objected within
fifteen (15) Business Days after a written request for such consent by Acquirer,
no settlement or resolution by Acquirer of any claim that gives rise to a claim
against the Escrow Fund by or on behalf of an Indemnified Person shall be
determinative of the existence of or amount of Indemnifiable Damages relating to
such matter.  In the event that the Effective Time Holders’ Agent has consented
to any such settlement or resolution, neither the Effective Time Holders’ Agent
nor any Effective Time Holder shall have any power or authority to object under
Section 8.5 or any other provision of this Article 8 to the amount of any claim
by or on behalf of any Indemnified Person against the Escrow Fund or otherwise
for indemnity with respect to such settlement or resolution.
 
8.9           Exclusive Remedy.  The parties hereto acknowledge and agree that,
in the event that the Closing occurs, the remedies provided for in this Article
8 shall be the Indemnified Persons’ sole and exclusive remedy for any breach of
the representations and warranties or covenants contained in this Agreement or
any claims relating to this Agreement or any other document, certificate or
agreement delivered pursuant hereto, except in connection with (a) pursuing
remedies under applicable Legal Requirements for fraud or intentional
misrepresentation, (b) any noncompete agreement, nonsolicitation or employment
agreement contemplated by this Agreement, or (c) bringing an action for specific
performance or other equitable relief.
 
ARTICLE 9
General Provisions
 
9.1           Survival of Representations and Warranties and Covenants.  If the
Merger is consummated, the representations and warranties of the Company
contained in this Agreement, the Company Disclosure Letter (including any
exhibit or schedule to the Company Disclosure Letter), and the other
certificates contemplated hereby shall survive the Closing and remain in full
force and effect, regardless of any investigation or disclosure made by or on
behalf of any of the parties to this Agreement, until 11:59 p.m.
 
 
75

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

 
 
 California time on the date that is twelve (12) months after the Closing Date,
or (a) in the case of the Fundamental Representations and Warranties or Tax
Matters, until the expiration of the applicable statute of limitations with
respect to such Fundamental Representations and Warranties and Tax Matters and
(b) in the case of the Select Matters, until the two (2) year anniversary of the
Closing Date; provided, however, that no right to indemnification pursuant to
Article 8 in respect of any claim based upon an inaccuracy or breach of a
representation or warranty that is set forth in an Claim Certificate delivered
to the Effective Time Holders’ Agent prior to the applicable expiration date of
such representation or warranty shall be affected by the expiration of such
representation or warranty; and provided, further, that such expiration shall
not affect the rights of any Indemnified Person under Article 8 or otherwise to
seek recovery of Indemnifiable Damages arising out of any fraud by the Company
or any Subsidiary until the expiration of the applicable statute of
limitations.  The representations, warranties and covenants of Acquirer
contained in this Agreement and the other agreements, certificates and documents
contemplated hereby shall survive the Closing and remain in full force and
effect, regardless of any investigation or disclosure made by or on behalf of
any of the parties to this Agreement, until 11:59 p.m. California time on the
date that is twelve (12) months after the Closing Date; provided, however, that
any covenants of the Acquirer or its subsidiaries that require performance
beyond such expiration date shall continue to survive.  If the Merger is
consummated, all covenants of the parties (including the covenants set forth in
Article 4 and Article 5) shall expire and be of no further force or effect as of
the Closing, except to the extent such covenants provide that they are to be
performed after the Closing.
 
9.2           Notices.  All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
hereto at the following address (or at such other address for a party as shall
be specified by like notice):
 
(i)           if to Acquirer or Sub, to:
 

 
ShoreTel, Inc.
    960 Stewart Dr.     Sunnyvale, CA 94085     Attention:  General Counsel    
Facsimile No.:  (408) 331-3333     Telephone No.:  (408) 331-3300           with
a copy (which shall not constitute notice) to:           Fenwick & West LLP    
Silicon Valley Center     801 California Street     Mountain View, CA 94041    
Attention: Jeffrey R. Vetter, Esq.     Kris S. Withrow, Esq.     Facsimile No.:
(650) 938-5200    
Telephone No.: (650) 988-8500
 

      
 
76

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

 
 
(ii)          if to the Company, to:
 

 
M5 Networks, Inc.
   
245 West 17th Street, 9th Floor
    New York, NY 10011-5383     Attention:  Daniel Hoffman     Facsimile
No.:  (646) 230-5001     Telephone No.: (646) 230-5000           with a copy
(which shall not constitute notice) to:           Goodwin Procter LLP     The
New York Times Building     620 Eighth Avenue     New York, NY 10018    
Attention:  Stephen M. Davis     Facsimile:   (212) 355-3333    
Telephone:  (212) 813-8804     E-mail:  sdavis@goodwinprocter.com  

 
(iii)         If to the Effective Time Holders’ Agent, to:
 

 
Fortis Advisors LLC
   
4225 Executive Square, Suite 1040
   
La Jolla, CA 92037
   
Attention:  Notice Department
   
Facsimile No.:  (858) 408-1843
   
Telephone No.:  (858) 227-9210
 

 
9.3           Interpretation.  When a reference is made in this Agreement to
Articles, Sections or Exhibits, such reference shall be to an Article or Section
of, or an Exhibit to this Agreement unless otherwise indicated.  The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.  The words
“include,” “includes” and “including” when used herein shall be deemed in each
case to be followed by the words “without limitation.”  The phrases “provided
to,” “furnished to,” and phrases of similar import when used herein, unless the
context otherwise requires, shall mean that a true, correct and complete paper
copy of the information or material referred to has been provided to the party
to whom such information or material is to be provided.  Unless the context of
this Agreement otherwise requires: (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; and (iii) the terms “hereof,” “herein,”
“hereunder” and derivative or similar words refer to this entire Agreement.
 
9.4           Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties hereto; it being
understood that all parties hereto need not sign the same counterpart.
 
9.5           Entire Agreement; Nonassignability; Parties in Interest.  This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including all the exhibits
attached hereto, the Schedules, including the Company Disclosure Letter, (a)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties hereto with respect to the subject
matter hereof, except for the Confidentiality Agreement, which shall continue in
full force and effect, and shall survive any termination of this Agreement, in
accordance with its terms, (b) are not intended to confer, and shall not be
construed as conferring, upon any Person other than the parties hereto any
rights or remedies hereunder (except that Article 8 is intended to benefit
Indemnified Persons) and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided herein.
 
 
77

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

 
 
9.6           Assignment.  Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties hereto, and any such
assignment without such prior written consent shall be null and void, except
that Acquirer may, without the prior written consent of the other parties
hereto, assign this Agreement to any direct or indirect wholly owned subsidiary
of Acquirer or in connection with any merger, consolidation or sale of all or a
significant portion of its assets or in connection with any similar
transaction.  Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties hereto and
their respective successors and assigns.  Any assignment in violation of this
Section 9.6 will be void.
 
9.7           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 shall continue in full force and effect and shall be interpreted so as
reasonably necessary to effect the intent of the parties hereto.  The parties
hereto shall use all reasonable efforts to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that shall
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
 
9.8           Remedies Cumulative.  Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party hereto shall 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 hereto of any one
remedy shall not preclude the exercise of any other remedy and nothing in this
Agreement shall be deemed a waiver by any party of any right to specific
performance or injunctive relief.  It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity, and the parties hereby waive the requirement of any posting of a bond in
connection with the remedies described herein.
 
9.9           Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of
law.  Any dispute, claim or controversy arising out of or relating to this
Agreement or the breach, termination, enforcement, interpretation or validity
thereof, including the determination of the scope or applicability of this
agreement to arbitrate, shall be determined by arbitration in Santa Clara
County, California before one arbitrator. The arbitration shall be administered
by J.A.M.S./ENDISPUTE or its successor (“J.A.M.S.”) pursuant to J.A.M.S.’
Streamlined Arbitration Rules and Procedures. Judgment on the Award may be
entered in any court having jurisdiction. This clause shall not preclude parties
from seeking provisional remedies in aid of arbitration from a court of
appropriate jurisdiction.  The parties agree that any dispute and arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C., Section 1 et
seq.  Either Acquirer or the Effective Time Holders’ Agent may commence the
arbitration process called for by this Agreement by filing a written demand for
arbitration with J.A.M.S. and giving a copy of such demand to each of the other
parties to this Agreement.  The single arbitrator shall be mutually agreed on by
Acquirer and the Effective Time Holders’ Agent and selected from J.A.M.S.’s
panel of neutrals.  If the parties cannot mutually agree within thirty (30) days
of the filing of an arbitration demand, the parties agree that an arbitrator may
be appointed in accord with the applicable J.A.M.S. rules and procedures then in
place relating to the appointment of an arbitrator by J.A.M.S.  The parties will
cooperate with J.A.M.S. and with each other in promptly selecting the arbitrator
from J.A.M.S.’s panel of neutrals, and in scheduling the arbitration proceedings
in order to fulfill the provisions, purposes and intent of this Agreement.
 
 
78

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

 
 
  The parties covenant that they will participate in the arbitration in good
faith, and that the parties to the arbitration will bear the expense of deposits
and advances required by the arbitrator in equal proportions.  The provisions of
this Section 9.9 may be enforced by any court of competent jurisdiction, and the
party seeking enforcement will be entitled to an award of all costs, fees and
expenses, including attorneys’ fees, to be paid by the party against whom
enforcement is ordered.  Judgment upon the award rendered by the arbitrator may
be entered in any court having competent jurisdiction.  If for any reason
J.A.M.S. or its successor no longer is in business, then the arbitration shall
be conducted in accordance with the commercial arbitration rules of the American
Arbitration Association.  Upon the conclusion of any arbitration proceedings
hereunder, the arbitrator will render findings of fact and conclusions of law
and a final written arbitration award setting forth the basis and reasons for
any decision reached (the “Final Award”) and will promptly deliver such
documents to Escrow Agent, the Effective Time Holders’ Agent and Acquirer,
together with a copy of the Final Award signed by the arbitrator.
 
9.10         WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEROF.
 
9.11         Rules of Construction.  The parties hereto have been represented by
counsel during the negotiation, preparation and execution of this Agreement and,
therefore, hereby waive, with respect to this Agreement, each Schedule and each
Exhibit attached hereto, the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
shall be construed against the party drafting such agreement or document.
 

[Signature Page(s) Follow]
 
 
79

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

 
 
IN WITNESS WHEREOF, Acquirer, Sub I, Sub II, the Company, and the Effective Time
Holders’ Agent have caused this Agreement to be executed and delivered, all as
of the date first written above.
 
 

 
Shortel, Inc.
       
 
By:
    Name:     Title:  

 
 

 
Mets Acquisition CORP
       
 
By:
    Name:     Title:

 
 

 
Mets Acquisition II LLC
       
 
By:
    Name:     Title:

 
 

 
M5 Networks, Inc.
       
 
By:
    Name:     Title:

 

 
Fortis Advisors LLC
       
 
By:
    Name:     Title:

                                                 
 
 

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

 

EXHIBIT A

DEFINITIONS
 
As used in this Agreement, the following terms shall have the meanings indicated
below.  Unless indicated otherwise, all mathematical calculations contemplated
hereby shall be rounded to the tenth decimal place.
 
All references to dollar amounts or figures used in this Agreement means such
dollar amount or such figure in terms of U.S. dollars.
 
“2012 Revenue” shall mean the revenue of the Business Unit recognized by
Acquirer during the Earnout Measurement Period in accordance with GAAP.
 
 “2012 Revenue Earnout Amount” means (i) $0.00 in the event that the 2012
Revenue is less than or equal to $55,899,999.99, (ii) $2,000,000 in the event
that the 2012 Revenue is equal to or greater than $55,900,000.00 and less than
or equal to $55,909,999.99, (iii) $4,000,000 in the event that the 2012 Revenue
is equal to or greater than $55,910,000.00 and less than or equal to
$57,209,999.99, (iv) $6,000,000 in the event that the 2012 Revenue is equal to
or greater than $57,210,000.00 and less than or equal to $59,999,999.99, and (v)
$10,000,000 in the event that the 2012 Revenue is greater than or equal to
$60,000,000.00.  For the avoidance of doubt, the amounts set forth in (i)
through (v) above shall not be additive.
 
“2013 Revenue Earnout Amount” means (i) $0.00 in the event that the 2012 Revenue
is less than or equal to $55,899,999.99, (ii) $737,500.00 in the event that the
2012 Revenue is equal to or greater than $55,900,000.00 and less than or equal
to $55,909,999.99, (iii) $1,475,000.00 in the event that the 2012 Revenue is
equal to or greater than $55,910,000.00 and less than or equal to
$57,209,999.99, (iv) $2,212,500.00 in the event that the 2012 Revenue is equal
to or greater than $57,210,000.00 and less than or equal to $59,999,999.99, and
(v) $3,687,500.00 in the event that the 2012 Revenue is greater than or equal to
$60,000,000.00.  For the avoidance of doubt, the amounts set forth in (i)
through (v) above shall not be additive to other items of the 2013 Revenue
Earnout Amount but shall be additive to the applicable 2012 Revenue Earnout
Amount.
 
“accredited investor” shall have the meaning set forth in Rule 501(a) of
Regulation D promulgated under the Securities Act.
 
“Acquirer Business” means the business of the Acquirer and its subsidiaries as
currently conducted and as currently proposed to be conducted by the Acquirer or
any of its subsidiaries.
 
“Acquirer Common Stock” means the Common Stock, par value $0.001 per share, of
Acquirer.
 
“Acquirer Stock Value” means $6.55 per share of Acquirer Common Stock.
 
“Affiliate” has the meaning set forth in Rule 144 promulgated under the
Securities Act.
 
“Aggregate Company Option Exercise Prices” means the aggregate exercise prices
of all vested Company Options that remain outstanding as of immediately prior to
the Effective Time (for the avoidance of doubt, excluding Company Options net
exercised, if any).
 
 
i

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

 
 
“Aggregate Company Warrant Exercise Prices” means the aggregate exercise prices
of all Company Warrants that remain outstanding as of immediately prior to the
Effective Time (for the avoidance of doubt, excluding Company Warrants net
exercised, if any).
 
“Business” means the business of the Company and its Subsidiaries as currently
conducted and as currently proposed to be conducted by the Company or any of its
Subsidiaries.
 
“Business Day” means a day, other than Saturday or Sunday, on which commercial
banks are open for business in San Francisco, California.
 
“Business Unit” shall mean the Final Surviving LLC.

“Claim Stock Value” means the average of the closing prices of Acquirer Common
Stock as quoted on the NASDAQ Stock Market for the twenty (20) consecutive
trading days ending with the date of the Claim Certificate.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Common Amount Per Share” means the quotient obtained by dividing (i) the Total
Adjusted Purchase Price, by (ii) the Fully-Diluted Company Common Stock.
 
“Common Non-Qualified Amount Per Share” means the quotient obtained by dividing
(i) the Common Non-Qualified Total Consideration by (ii) the Fully-Diluted
Company Non-Qualified Common Stock.
 
“Common Non-Qualified Closing Amount Per Share” means (i) the Common
Non-Qualified Amount Per Share minus (ii) the Common Non-Qualified General
Escrow Amount Per Share minus (iii) the Common Non-Qualified Special Escrow
Amount Per Share.
 
“Common Non-Qualified General Escrow Amount Per Share” means the product
obtained by multiplying (i) the General Escrow Percentage by (ii) the Common
Non-Qualified Amount Per Share.
 
“Common Non-Qualified Special Escrow Amount Per Share” means the product
obtained by multiplying (i) the Special Escrow Percentage by (ii) the Common
Non-Qualified Amount Per Share.
 
“Common Non-Qualified Total Consideration” means (i) the Total Adjusted Cash
Consideration, minus (ii) the Common Qualified Total Cash Consideration.
 
“Common Qualified Cash Amount Per Share” means (i) the Common Amount Per Share,
minus (ii) the product obtained by multiplying (X) the Common Qualified Stock
Amount Per Share by (Y) the Acquirer Stock Value.
 
“Common Qualified Closing Cash Amount Per Share” means (i) the Common Qualified
Cash Amount Per Share minus (ii) the Common Qualified General Escrow Cash Amount
Per Share minus (iii) the Common Qualified Special Escrow Cash Amount Per Share.
 
“Common Qualified Closing Stock Amount Per Share” means (i) the Common Qualified
Stock Amount Per Share minus (ii) the Common Qualified General Escrow Stock
Amount Per Share minus (iii) the Common Qualified Special Escrow Stock Amount
Per Share.
 
 
ii

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

 
 
“Common Qualified General Escrow Cash Amount Per Share” means the product
obtained by multiplying (i) the General Escrow Percentage by (ii) the Common
Qualified Cash Amount Per Share.
 
“Common Qualified General Escrow Stock Amount Per Share” means the product
obtained by multiplying (i) the General Escrow Percentage by (ii) the Common
Qualified Stock Amount Per Share.
 
“Common Qualified Special Escrow Cash Amount Per Share” means the product
obtained by multiplying (i) the Special Escrow Percentage by (ii) the Common
Qualified Cash Amount Per Share.
 
“Common Qualified Special Escrow Stock Amount Per Share” means the product
obtained by multiplying (i) the Special Escrow Percentage by (ii) the Common
Qualified Stock Amount Per Share.
 
“Common Qualified Stock Amount Per Share” means the quotient obtained by
dividing (i) the Total Stock Consideration, by (ii) the Fully-Diluted Company
Qualified Common Stock.
 
“Common Qualified Total Cash Consideration” means the product obtained by
multiplying (i) the Fully-Diluted Company Qualified Common Stock by (ii) the
Common Qualified Cash Amount Per Share.
 
“Company Bonus Expenses” means all short and long term liabilities of the
Company to directors, employees and/or consultants for cash payments that are
payable by the Company or its successors or assigns in connection with the First
Merger or otherwise outside the ordinary course of business consistent with past
practice, including without limitation any bonus, severance, notice pay or other
payments due upon consummation of the First Merger or upon termination of
employment or service or any other event, before, upon or following the First
Merger.
 
“Company Bonus Plan” means a bonus plan established by the Company and approved
by the Company Stockholders to pay certain Company Securityholders and employees
at the Closing, subject to Section 5.30 hereof.
 
“Company Bonus Plan Amount” means the aggregate amount, if any, payable under
the Company Bonus Plan, which amount shall not exceed $2,900,000 in the
aggregate.
 
“Company Capital Leases Liability” means short and long term liabilities for all
capitalized leases of the Company or any of its Subsidiaries as of the Closing
Date; provided, however, that, notwithstanding anything to the contrary herein,
“Company Capital Leases Liability” shall not include any equipment leases of the
Company and any of its Subsidiaries.
 
“Company Capital Leases Liability Adjustment Amount” means the amount, if any,
by which the Company Capital Leases Liability is greater than $3,000,000 as of
the Closing Date.
 
“Company Capital Stock” means the capital stock of the Company.
 
 
iii

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

 
 
“Company Closing Financial Certificate” means a certificate (which certificate
shall be accompanied by such supporting documentation, information and
calculations as are necessary for Acquirer to verify and determine the amounts
of items (i) through (iv) below) executed by the Chief Executive Officer and
Chief Financial Officer of the Company dated as of the Closing Date, certifying
(i) the amount of Company Net Working Capital (including (A) the Company’s
balance sheet as of the Closing Date prepared on a consistent basis with the
Company Balance Sheet (as defined in Section 2.4(b)), (B) an itemized list of
each element of the Company’s consolidated current assets (as defined in the
definition of Company Net Working Capital), and (C) an itemized list of each
element of the Company’s consolidated total current and long term liabilities
(as defined in the definition of Company Net Working Capital)); (ii) the
Transaction Expenses that remain unpaid as of the Closing; (iii) the amount of
Company Debt (including a list of each Company Debt item with a description of
the nature of such Company Debt, the Person to whom such Company Debt is owed
and details of any prepayment or termination penalty under the terms of the
Contracts governing such Company Debt that remains outstanding and unpaid as of
the Closing Date); (iv) Company Bonus Expenses that remain unpaid as of the
Closing, (v) the Company Capital Leases Liability Adjustment Amount, if any, and
(vi) the Company Capital Leases Liability Adjustment Amount, if any.
 
“Company Common Stock” means the Common Stock of the Company, par value of
$0.0001 per share.
 
“Company Debt” means, without duplication, (i) all obligations and liabilities
of Company or any of its Subsidiaries for borrowed money; (ii) all obligations
and liabilities of Company or any of its Subsidiaries evidenced by bonds,
debentures, notes or similar instruments; (c) all obligations of others for
borrowed money secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by) any Encumbrance on
property owned or acquired by Company, whether or not the obligation secured
thereby has been assumed by Company or any of its Subsidiaries; (d) all
guarantees by Company or any of its Subsidiaries of obligations of others for
borrowed money; (e) all obligations and liabilities, contingent or otherwise, of
the Company or any of its Subsidiaries as an account party in respect of letters
of credit and letters of guaranty; and (f) all obligations and liabilities,
contingent or otherwise, related to any equipment leases of the Company or any
of its Subsidiaries; provided however, that Company Capital Leases shall not
constitute Company Debt.
 
“Company Net Working Capital” means (i) the Company’s consolidated total current
assets as of the Closing Date (as defined by and determined in accordance with
GAAP) less (ii) the Company’s consolidated total current and long term
liabilities as of the Closing Date (as defined by and determined in accordance
with GAAP).  For purposes of calculating Company Net Working Capital, (X) the
Company’s current and long term liabilities (1) shall exclude Company Debt,
Company Bonus Expenses, Transaction Expenses, any Company Capital Leases
Liability and any Company Past Acquisition Contingent Liability, and (2) shall
include all liabilities for Taxes as of the Closing Date (including but not
limited to sales, income, property, telecommunications and transaction-related
Taxes such as the employer portion of payroll Taxes or other withholding
obligations (such as social security and Medicare Taxes) with respect to
payments made or to be made in connection with the cash-out or exercise of
Company Options or for Company Bonus Expenses), whether or not such liabilities
for Taxes would be then due and payable and whether or not they would be treated
as a current liability under GAAP,  and (Y) the Company’s current assets (1)
shall not include any deferred Tax assets and (2) shall exclude accounts
receivable that are outstanding for more than ninety (90) days or that are
otherwise doubtful.
 
“Company Non-Qualified Stockholder” means a Company Stockholder other than a
Company Qualified Stockholder.
 
“Company Option Plans” means each stock option plan, program or arrangement of
the Company, collectively, including the Company’s 2001 Equity Incentive Plan
and the Company’s 2010 Stock Option and Grant Plan.
 
 
iv

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

 
 
“Company Options” means options to purchase shares of Company Common Stock.
 
“Company Optionholders” means the holders of Company Options.
 
“Company Past Acquisition Liability” means Liabilities for purchase price
consideration (including earnouts or deferred stock or cash payments) due and
owing by the Company relating to the acquisition of Callfinity, Inc. and/or
Geckotech, Inc.
 
“Company Past Acquisition Liability Adjustment Amount” means the amount, if any,
by which the Company Past Acquisition Liability is greater than $5,060,000.
 
“Company Preferred Stock” means the Company Series A Preferred Stock, the
Company Series B Preferred Stock, and the Company Series C Preferred Stock.
 
“Company Qualified Stockholder” means each (a) Company Key Stockholder and (b)
of Company Stockholders set forth set forth on Exhibit C-3 hereto, each of whom
(i) will hold, as of immediately prior to the Effective Time, 30,000 or more
shares of Company Common Stock (which, for the avoidance of doubt, (x) includes
each share of Company Common Stock deemed to have been issued upon conversation
of all shares of Company Preferred Stock and (y) excludes any shares of Company
Capital Stock subject to Company Options and/or Company Warrants except to the
extent that such Company Options and/or Company Warrants have been affirmatively
exercised prior to or as of immediately prior to the Effective Time), and (ii)
shall, have executed and delivered an Investment Representation Letter and
Lock-Up Agreement in substantially the form attached hereto as Exhibit C-2 by no
later than three (3) days prior to the Closing, have the right to receive the
cash and shares of Acquirer Common Stock payable and issuable, respectively, to
the Company Qualified Stockholders pursuant to Section 1.8(ii) in exchange for
such shares of Company Common Stock held by such Company Stockholder as of
immediately prior to the Effective Time, subject to the terms and conditions of
this Agreement.
 
“Company Rights” means all stock appreciation rights, options, warrants,
restricted stock, calls, rights, commitments, conversion privileges or
preemptive or other rights or agreements outstanding to purchase or otherwise
acquire any shares of Company Capital Stock or any securities or debt
convertible into or exchangeable for shares of Company Capital Stock or
obligating Company to grant, extend or enter into any such option, warrant,
call, right, commitment, conversion privilege or preemptive or other right or
agreement.
 
“Company Securities” means Company Series A Preferred Stock, Company Series B
Preferred Stock, Company Series C Preferred Stock, Company Common Stock, Company
Warrants and Company Options.
 
“Company Securityholders” means the Company Stockholders, the Company
Optionholders and Company Warrantholders.
 
“Company Series A Preferred Stock” means the Series A Convertible Preferred
Stock, par value $0.0001 per share, of the Company.
 
“Company Series B Preferred Stock” means the Series B Convertible Preferred
Stock, par value $0.0001 per share, of the Company.
 
“Company Series C Preferred Stock” means the Series C Convertible Preferred
Stock, par value $0.0001 per share, of the Company.
 
 
v

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

 
 
“Company Stockholders” means the record holders of issued and outstanding shares
of Company Capital Stock.
 
“Company Warrant Termination Agreement” means an agreement, in form and
substance reasonably satisfactory to Acquirer, providing (a) for the
cancellation of the Company Warrants as contemplated by Section 1.8(a)(v) and
(b) that, from and after the Effective Time, each holder such Company Warrant
shall cease to have any rights (other than the rights to receive the
consideration described in Section 1.8(a)(v), subject to the terms and
conditions of this Agreement) with respect thereto or the shares of Company
Capital Stock issuable thereunder prior to or as of the Effective Time.
 
“Company Warrants” means any warrants to purchase shares of Company Capital
Stock.
 
“Company Warrantholders” means the record holders of issued and outstanding
Company Warrants.
 
“Continuing Employees” means the employees of the Company as set forth on
Exhibit D hereto and the Offered Employees who execute the Employment Documents
and remain employees of the First Step Surviving Corporation or its Subsidiaries
following the Effective Time, of the Final Surviving LLC following the Second
Effective Time or of the Acquirer as of the Effective Time.
 
“Contract” means any written or oral legally binding contract, agreement,
instrument, commitment or undertaking of any nature (including leases, licenses,
mortgages, notes, guarantees, sublicenses, subcontracts, letters of intent and
purchase orders).
 
“Delaware Law” means the General Corporation Law of the State of Delaware or the
Delaware Limited Liability Company Act, as applicable.
 
“Dissenting Shares” means any shares of Company Capital Stock that are
outstanding immediately prior to the Effective Time that have not been voted for
approval of this Agreement and with respect to which dissenters’ rights or
appraisal rights are properly asserted in accordance with Delaware Law in
connection with the Merger.
 
“Earnout Measurement Period” means the period beginning on and including January
1, 2012 and ending on and including December 31, 2012, provided however, that if
the Closing occurs on or after April 1, 2012, then the Earnout Measurement
Period shall mean the period beginning on April 1, 2012 and ending on and
including March 31, 2013.
 
“Earnout Payment” shall refer to any payment made to the Effective Time Holders
in accordance with Section 5.20 above (the aggregate of such payments being
referred to as the “Earnout Payments”).

“Effective Time Holder” means a Company Stockholder, Company Optionholder or
Company Warrantholder as of immediately prior to the Effective Time (other than
a holder of solely shares of Company Capital Stock which constitute and remain
Dissenting Shares).
 
“Encumbrance” means, with respect to any asset, any mortgage, deed of trust,
lien, pledge, charge, security interest, title retention device, conditional
sale or other security arrangement, collateral assignment, claim, charge,
adverse claim of title, ownership or right to use, restriction or other
encumbrance of any kind in respect of such asset (including any restriction on
(i) the voting of any security or the transfer of any security or other asset,
(ii) the receipt of any income derived from any asset, (iii) the use of any
asset, and (iv) the possession, exercise or transfer of any other attribute of
ownership of any asset).
 
 
vi

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

 
 
“Escrow Cash” means the General Escrow Cash and the Special Escrow Cash,
collectively.
 
“Escrow Shares” means the General Escrow Shares and the Special Escrow Shares,
collectively.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Fully-Diluted Company Common Stock” means the sum, without duplication, of the
aggregate number of shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time, or issuable upon the
conversion of Company Series A Preferred Stock, Company Series B Preferred
Stock, Company Series C Preferred Stock or the exercise of Company Options,
Company Warrants or other Company Rights that are issued and outstanding
immediately prior to the Effective Time.
 
“Fully-Diluted Company Qualified Common Stock” means the sum, without
duplication, of the aggregate number of shares of Company Common Stock that are
(i) issued and outstanding immediately prior to the Effective Time, or issuable
upon the conversion of Company Series A Preferred Stock, Company Series B
Preferred Stock, Company Series C Preferred Stock or the exercise of Company
Options, Company Warrants or other Company Rights that are issued and
outstanding immediately prior to the Effective Time and (ii) held by Company
Qualified Stockholders.
 
“Fully-Diluted Company Non-Qualified Common Stock” means the sum, without
duplication, of the aggregate number of shares of Company Common Stock that are
(i) issued and outstanding immediately prior to the Effective Time, or issuable
upon the conversion of Company Series A Preferred Stock, Company Series B
Preferred Stock, Company Series C Preferred Stock or the exercise of Company
Options, Company Warrants or other Company Rights that are issued and
outstanding immediately prior to the Effective Time and (ii) held by Company
Non-Qualified Stockholders.
 
“GAAP” means United States generally accepted accounting principles that are
applicable to the circumstances of the date of determination, consistently
applied.
 
“General Escrow Cash” means an amount of cash equal to the product obtained by
multiplying (i) the General Escrow Percentage by (ii) the Total Adjusted Cash
Consideration.
 
“General Escrow Fund” means the General Escrow Cash and the General Escrow
Shares, collectively.
 
“General Escrow Percentage” means fifteen percent (15%).
 
“General Escrow Shares” means an aggregate number of shares of Acquirer Common
Stock (rounded up to the nearest whole share) equal to the product obtained by
multiplying (i) the General Escrow Percentage by (ii) the Total Stock
Consideration.
 
“Governmental Entity” means any supranational, national, state, municipal, local
or foreign government, any court, tribunal, arbitrator, administrative agency,
commission or other governmental official, authority or instrumentality, in each
case whether domestic or foreign, any stock exchange or similar self-regulatory
organization or any quasi-governmental or private body exercising any
regulatory, Taxing or other governmental or quasi-governmental authority
(including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or entity and any court or
other tribunal).
 
 
vii

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

 
 
“Indemnified Person,” or “Indemnified Persons” has the meaning set forth in
Section 8.2 hereto.
 
“knowledge” means, with respect to any fact, circumstance, event or other matter
in question, the knowledge of such fact, circumstance, event or other matter
after reasonable inquiry of (i) an individual, if used in reference to an
individual or (ii) with respect to the Company, the officers and directors of
the Company, referred to herein as the “Company Representatives.”  Any such
individual or Company Representative will be deemed to have knowledge of a
particular fact, circumstance, event or other matter if such knowledge could be
obtained from reasonable inquiry of the persons employed by such Person charged
with administrative or operational responsibility for such matters for such
Person.
 
“Legal Requirements” means any national, federal, state, foreign, local,
municipal or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity and any orders,
writs, injunctions, awards, judgments and decrees applicable to the Company or
any Subsidiary or to any of their respective assets, properties or businesses.
 
“Liabilities” means all outstanding debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, determined or determinable, asserted
or unasserted, known or unknown, including those arising under any law, action
or governmental order and those arising under any Contract, regardless of
whether such debt, liability or obligation would be required to be disclosed on
a balance sheet prepared in accordance with GAAP.
 
“made available,” “delivered,” “provided” and words or similar meaning or import
shall mean, with respect to any statement in Article 2 of this Agreement to the
effect that any information, document or other material has been “made
available,” “delivered” or “provided” to Acquirer or its representatives, that
such information, document, or material was (a) made available for review (on a
continuous basis and without subsequent modification) by Acquirer or its
representatives in the virtual data room found at www.intralinks.com at least
two (2) Business Days prior to the Agreement Date or (b) actually delivered
(whether by physical or electronic delivery) upon request to Acquirer or its
representatives at least two (2) Business Days prior to the Agreement Date.
 
“Material Adverse Effect” with respect to any entity means any change, event,
violation, inaccuracy, circumstance or effect (each, an “Effect”) that,
individually or taken together with all other Effects, and regardless of whether
or not such Effect constitutes a breach of the representations or warranties
made by such entity in this Agreement, is, or would reasonably likely to, be or
become materially adverse in relation to the condition (financial or otherwise),
business, operations, assets (including intangible assets), liabilities, or
results of operations of such entity and its subsidiaries, taken as a whole, or
(ii) materially impede or delay such entity’s ability to consummate the
transactions contemplated by this Agreement in accordance with its terms and
applicable Legal Requirement, except to the extent that any such Effect directly
results from:  (A) changes in general economic conditions (provided that such
changes do not affect such entity disproportionately as compared to such
entity’s competitors); (B) changes affecting the industry generally in which
such entity operates (provided that such changes do not affect such entity
disproportionately as compared to such entity’s competitors); (C) changes in
applicable laws or accounting rules, including GAAP after the Agreement Date
(provided that such changes do not affect such entity disproportionately as
compared to such entity’s competitors); (D) the effect of any change arising in
connection with earthquakes, hostilities, acts of war, sabotage or terrorism or
military actions or any escalation or material worsening of any such
hostilities, acts of war, sabotage, or terrorism or military actions existing or
underway as of the date hereof, (E) any action taken at the written request of
the Parent or a Merger Sub, or (F) any failure of the Company to meet any
projection or forecast prior to the Closing.
 
 
viii

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

 
 
“Offered Employees” means the employees of the Company and its Subsidiaries
other than the Named Executives and Key Employees that Acquirer has made a
written offer of employment at least five (5) Business Days prior to the
Closing.
 
“Option Cash-Out Closing Amount Per Share” means, for any Company Option, (i)
the Common Non-Qualified Amount Per Share minus (ii) the exercise price per
share of Company Common Stock subject to such Cash-Out Option minus (iii) the
Option Cash-Out General Escrow Amount Per Share minus (ii) the Option Cash-Out
Special Escrow Amount Per Share.
 
“Option Cash-Out General Escrow Amount Per Share” means, for any Company Option,
the product obtained by multiplying (i) the General Escrow Percentage by (ii)
the Common Non-Qualified Amount Per Share.
 
“Option Cash-Out Special Escrow Amount Per Share” means, for any Company Option,
the product obtained by multiplying (i) the Special Escrow Percentage by (ii)
the Common Non-Qualified Amount Per Share.
 
“Permitted Encumbrances” means:  (i) statutory liens for Taxes that are not yet
due and payable or liens for Taxes being contested in good faith by any
appropriate proceedings for which adequate reserves have been established; (ii)
statutory liens to secure obligations to landlords, lessors or renters under
leases or rental agreements; (iii) deposits or pledges made in connection with,
or to secure payment of, workers’ compensation, unemployment insurance or
similar programs mandated by applicable law; and (iv) statutory liens in favor
of carriers, warehousemen, mechanics and materialmen, to secure claims for
labor, materials or supplies and other like liens.
 
“Person” means any natural person, company, corporation, limited liability
company, general partnership, limited partnership, limited liability
partnership, trust, estate, proprietorship, joint venture, business organization
or Governmental Entity.
 
“Pre-Closing Period” means any taxable year or period that ends on or before the
Closing Date and, with respect to any Straddle Period, the portion of such
Straddle Period ending on and including the Closing Date.
 
“Pro Rata Share” means with respect to each Effective Time Holder, the total
consideration such Effective Time Holder is entitled to receive as of the
Effective Time pursuant to Section 1.8(a) with respect to the Company Securities
held by such Effective Time Holder (including any Escrow Cash and Escrow Shares
such Effective Time Holder has a right to receive but excluding any Dissenting
Shares) relative to the total consideration all Effective Time Holders are
entitled to receive as of the Effective Time pursuant to Section 1.8(a) with
respect to their Company Securities (including the Escrow Cash and Escrow Shares
but excluding any Dissenting Shares).  For purposes of this definition of “Pro
Rata Share,” each share of Acquirer Common Stock shall be deemed to have a value
equal to the Acquirer Stock Value (as adjusted to appropriately reflect any
stock split, reverse stock split, stock dividend, reorganization,
reclassification, combination, recapitalization or other like change with
respect to Acquirer Common Stock occurring after the Effective Time).
 
 
ix

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

 
 
“SEC” means the United States Securities and Exchange Commission.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Special Escrow Fund” means the Special Escrow Cash and the Special Escrow
Shares, collectively.
 
“Special Escrow Cash” means an amount of cash equal to the product obtained by
multiplying (i) the Special Escrow Percentage by (ii) the Total Adjusted Cash
Consideration.
 
“Special Escrow Percentage” means five percent (5%).
 
“Special Escrow Shares” means an aggregate number of shares of Acquirer Common
Stock (rounded up to the nearest whole share) equal to the product obtained by
multiplying (i) the Special Escrow Percentage by (ii) the Total Stock
Consideration.
 
“Spreadsheet” means a spreadsheet, in form acceptable to Acquirer and the
Exchange Agent, which Spreadsheet will be dated as of the Closing Date and will
set forth, as of the Closing Date and immediately prior to the Effective Time
(in addition to the other required data and information specified therein):  (i)
the name and address of each Company Stockholder, each Company Optionholder and
each Company Warrantholder; (ii) the number of shares of Company Common Stock
held by such Company Stockholder and the respective stock certificate numbers,
the number of Company Options held by Company Optionholder and the number of
Company Warrants held by such Company Warrantholder; (iii) the amount of cash
payable to each Company Securityholder pursuant to Sections 1.8(a)(ii)-(v); (iv)
the amount of cash and the number of shares of Acquirer Common Stock to be
placed in the Escrow Fund on behalf of each Effective Time Holder; (v) each
Effective Time Holder’s Pro Rata Share; and (vi) the calculation of the
aggregate consideration under the Mergers, Total Stock Consideration, Total
Adjusted Cash Consideration, Common Qualified Closing Cash Amount Per Share,
Common Qualified Closing Stock Amount Per Share, Common Qualified General Escrow
Cash Amount Per Share, Common Qualified Special Escrow Cash Amount Per Share,
Common Qualified General Escrow Stock Amount Per Share, Common Qualified Special
Escrow Stock Amount Per Share, Common Non-Qualified Closing Amount Per Share,
Common Non-Qualified General Escrow Amount Per Share and Common Non-Qualified
Special Escrow Amount Per Share.
 
“Straddle Period” means any taxable year or period that begins on or before and
ends after the Closing Date.
 
“Subsidiary” means any corporation, partnership, limited liability company or
other Person of which the Company, either alone or together with one or more
Subsidiaries or by one or more other Subsidiaries (i) directly or indirectly
owns or purports to own, beneficially or of record securities or other interests
representing more than 50% of the outstanding equity, voting power, or financial
interests of such Person, or (ii) is entitled, by Contract or otherwise, to
elect, appoint or designate directors constituting a majority of the members of
such Person’s board of directors or other governing body.
 
“Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means any net
income, alternative or add-on minimum tax, gross income, estimated, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, fringe
benefit, capital stock, profits, license, registration, withholding, payroll,
social security (or equivalent), employment, unemployment, disability, excise,
telecommunications or utility excise, federal or state regulatory fee and
assessment, 911 or E911 fee, severance, stamp, occupation, premium, property
(real, tangible or intangible), Code Section 59A environmental or windfall
profit tax, custom duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount (whether disputed or not) imposed by any
Governmental Entity responsible for the imposition of any such tax (domestic or
foreign) (each, a “Tax Authority”), (ii) any Liability for the payment of any
amounts of the type described in clause (i) of this sentence as a result of
being a member of an affiliated, consolidated, combined, unitary or aggregate
group for any Taxable period, and (iii) any Liability for the payment of any
amounts of the type described in clause (i) or (ii) of this sentence as a result
of being a transferee of or successor to any Person or as a result of any
express or implied obligation to assume such Taxes or to indemnify any other
Person.
 
 
x

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

 
 
“Tax Return” means any return, statement, report or form (including estimated
Tax returns and reports, withholding Tax returns and reports, any schedule or
attachment, and information returns and reports) required to be filed with
respect to Taxes.
 
“Total Adjusted Cash Consideration” means the Total Initial Cash Consideration
less (i) all Transaction Expenses that remain unpaid as of immediately prior to
the Effective Time, less (ii) all Company Debt that remains unpaid as of
immediately prior to the Effective Time, less (iii) all Company Bonus Expenses
that remain unpaid as of immediately prior to the Effective Time, less (iv) the
Capital Leases Adjustment Amount, if any, less (v) the Company Past Acquisition
Liability Adjustment Amount, if any, less (vi) the amount, if any, by which the
Company Net Working Capital is negative (i.e., less than $0), less (vii) the
Agent Expense Amount, less (viii) the Geckotech Payment (if the Geckotech
Amendment is entered into prior to the Closing as contemplated by Section
5.21(b)), less (ix) the Company Bonus Plan Amount, plus (x) the Aggregate
Company Option Exercise Prices, plus (xi) the Aggregate Company Warrant Exercise
Prices.
 
“Total Adjusted Purchase Price” means the sum of (i) the product obtained by
multiplying (A) the Total Stock Consideration by (B) the Acquirer Stock Value,
and (ii) the Total Adjusted Cash Consideration.
 
“Total Initial Cash Consideration” means cash in an aggregate amount equal to
$84,087,500.
 
 “Total Stock Consideration” means 9,500,000 shares of Acquirer Common Stock.
 
“Transaction Expenses” means all third party fees, costs, expenses, payments and
expenditures incurred by Company with respect to this Agreement, the Mergers and
the transactions contemplated hereby, whether or not billed or accrued,
including the expenses and fees of Company’s own accountants, attorneys,
investment bankers and other professionals, and any such fees, costs, expenses,
payment and expenditures incurred by any Company Securityholders or Company’s
employees, directors, officers, consultants and/or advisors paid for or to be
paid for by the Company; provided, however, that HSR Expenses shall not be
considered Transaction Expenses hereunder.
 
“Warrant Cash-Out Closing Amount Per Share” means, for any Company Warrant, (i)
the Common Non-Qualified Amount Per Share minus (ii) the exercise price per
share of Company Capital Stock subject to such Cash-Out Warrant minus (iii) the
Warrant Cash-Out General Escrow Amount Per Share minus (ii) the Warrant Cash-Out
Special Escrow Amount Per Share.
 
“Warrant Cash-Out General Escrow Amount Per Share” means, for any Company
Warrant, the product obtained by multiplying (i) the General Escrow Percentage
by (ii) the Common Non-Qualified Amount Per Share.
 
 
xi

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

 
 
“Warrant Cash-Out Special Escrow Amount Per Share” means, for any Company
Warrant, the product obtained by multiplying (i) the Special Escrow Percentage
by (ii) the Common Non-Qualified Amount Per Share.
 
Other capitalized terms defined elsewhere in this Agreement and not defined in
this Exhibit A shall have the meanings assigned to such terms in this Agreement.

[Exhibits B-1, B-2, B-3, C-1, C-2, C-3, D, E, F-1, F-2,
G, H, I-1, I-2, I-3, J-1, J-2 and K have been omitted]
 
 
 xii

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