EXHIBIT 10.1

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (“Agreement”) is made and entered into as of
May 31, 2005, by and among: QUEST SOFTWARE, INC., a California corporation
(“Parent”); VELOCITY MERGER CORP., a Utah corporation and a wholly owned
subsidiary of Parent (“Merger Sub”); VINTELA, INC., a Utah corporation (the
“Company”); the stockholders of the Company identified on Schedule I
(collectively, the “Key Stockholders”); and THE CANOPY GROUP, INC., a Utah
corporation, as the Stockholders’ Representative (the “Stockholders’
Representative”). Certain capitalized terms used in this Agreement are defined
in Exhibit A.

 

RECITALS

 

A. Parent, Merger Sub and the Company intend to effect a merger of Merger Sub
into the Company (the “Merger”) in accordance with this Agreement and the Utah
Revised Business Corporation Act (“UBCA”). Upon consummation of the Merger,
Merger Sub will cease to exist, and the Company will become a wholly owned
subsidiary of Parent.

 

B. This Agreement has been approved by the respective boards of directors of
Parent, Merger Sub and the Company.

 

C. Concurrently with the execution of this Agreement, and as a condition and
inducement to Parent’s willingness to enter into this Agreement, certain
employees of the Company are entering into Noncompetition Agreements in favor of
Parent (the “Noncompetition Agreements”).

 

AGREEMENT

 

The parties to this Agreement, intending to be legally bound, agree as follows:

 

SECTION 1. DESCRIPTION OF TRANSACTION

 

1.1 Merger of Merger Sub into the Company. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the “Surviving Corporation”).

 

1.2 Effect of the Merger. The Merger shall have the effects set forth in this
Agreement and in the applicable provisions of the UBCA.

 

1.3 Closing; Effective Time. Subject to the provisions of Section 9.1, the
consummation of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Cooley Godward LLP, 3175 Hanover Street, Palo
Alto, California, on a date to be designated by Parent, (of which Parent shall
provide no less than two days’ prior

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

written notice to the other parties hereto), which shall be as soon as
reasonably practicable after the satisfaction or waiver of the last to be
satisfied or waived of the conditions set forth in Sections 7 and 8 (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of each of such conditions). The date on
which the Closing actually takes place is referred to in this Agreement as the
“Closing Date.” Subject to the provisions of this Agreement, articles of merger
satisfying the applicable requirements of the UBCA and otherwise satisfactory in
form and substance to Parent and the Company (the “Articles of Merger”) shall be
duly executed by the Company and Merger Sub at or prior to the Closing and,
concurrently with or as soon as practicable following the Closing, the Articles
of Merger shall be filed with the Utah Division of Corporations and Commercial
Code. The Merger shall become effective at the time of the filing of the
Articles of Merger with the Utah Division of Corporations and Commercial Code or
at such later time as may be specified in the Articles of Merger with the mutual
consent of Parent and the Company prior to the Closing (the time as of which the
Merger becomes effective being referred to as the “Effective Time”).

 

1.4 Articles of Incorporation and Bylaws; Directors and Officers. Unless
otherwise determined by Parent prior to the Effective Time, at the Effective
Time: (a) the Articles of Incorporation of the Surviving Corporation shall be
amended and restated as of the Effective Time in a form acceptable to Parent;
(b) the Bylaws of the Surviving Corporation shall be amended and restated as of
the Effective Time in a form acceptable to Parent; and (c) the directors and
officers of the Surviving Corporation immediately after the Effective Time shall
be those individuals designated by Parent in its sole discretion.

 

1.5 Conversion of Shares.

 

(a) Subject to Sections 1.5(c), 1.5(d), 1.5(f), 1.9 and 10, at the Effective
Time, by virtue of the Merger and without any further action on the part of
Parent, Merger Sub, the Company or any stockholder of the Company:

 

(i) each share of Company Series A Preferred Stock outstanding immediately prior
to the Effective Time shall be converted into the right to receive an amount in
cash equal to the Preferred Stock Per Share Closing Amount (as defined in
Section 1.5(b));

 

(ii) each share of Company Series B Preferred Stock outstanding immediately
prior to the Effective Time shall be converted into the right to receive an
amount in cash equal to the Preferred Stock Per Share Closing Amount (as defined
in Section 1.5(b));

 

(iii) each share of Company Common Stock outstanding immediately prior to the
Effective Time shall be converted into the right to receive an amount in cash
equal to the Common Stock Per Share Closing Amount (as defined in Section
1.5(b)); and

 

(iv) each share of the common stock, no par value, of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.

 

2.

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

The amount of cash that each Non-Dissenting Stockholder is entitled to receive
for such Non-Dissenting Stockholder’s shares of Company Capital Stock in the
Merger shall be rounded to the nearest whole cent.

 

(b) For purposes of this Agreement:

 

(i) The “Aggregate Exercise Amount” shall be the sum, without duplication, of
(A) the aggregate dollar amount actually received by the Company as purchase
price for the exercise of Company Options between the date of this Agreement and
the Closing Date, plus (B) the aggregate dollar amount payable to the Company as
purchase price for the exercise of all vested or unvested unexercised Company
Options that are outstanding immediately prior to the Effective Time.

 

(ii) The “Aggregate Transaction Value” shall be (A) $75,000,000, plus (B) the
Closing Cash Amount, minus (C) any portion of the Aggregate Transaction Expense
Amount that remains unpaid immediately prior to the Closing.

 

(iii) The “Closing Cash Amount” shall be an amount equal to the amount by which
(A) the balance of the Company’s cash and cash equivalents immediately prior to
the Closing (excluding the portion of such cash and cash equivalents that the
Company would not hold but for any acceleration or factoring of receivables or
other transaction outside the ordinary course of business consistent with past
practice, whether or not permitted by this Agreement) but not less than zero
exceeds (B) the sum of (x) the aggregate dollar amount actually received by the
Company as purchase price for the exercise of Company Options between the date
of this Agreement and the Closing Date, plus (y) any cash proceeds from any
divestiture, sale, disposition or other action described in the last sentence of
Section 6.1.

 

(iv) The “Common Stock Per Share Closing Amount” shall be determined by dividing
(A) the remainder of (1) the sum of the Aggregate Transaction Value plus the
Aggregate Exercise Amount minus (2) the Preferred Stock Preference Amount by (B)
the Fully Diluted Company Share Number.

 

(v) The “Fully Diluted Company Share Number” shall be the sum, without
duplication, of (A) the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (including any such shares
that are subject to a repurchase option or risk of forfeiture under any
restricted stock purchase agreement or other Contract and including any such
shares subject to issuance pursuant to Company Options exercised prior to the
Effective Time), (B) the aggregate number of shares of Company Common Stock
purchasable under or otherwise subject to Company Options that are outstanding
immediately prior to the Effective Time and which have not been exercised prior
to the Effective Time, (C) the aggregate number of shares of Company Common
Stock purchasable under or otherwise subject to warrants and other rights (other
than Company Options) to acquire shares of Company Common Stock (whether or not
immediately exercisable) outstanding immediately prior to the Effective Time,
(D) the aggregate number of shares of Company Common Stock issuable upon the
conversion of Company Preferred Stock outstanding immediately prior to the
Effective Time, (E) the aggregate number of shares of Company Common Stock
issuable upon

 

3.

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

the conversion of Company Preferred Stock purchasable under or otherwise subject
to warrants and other rights to acquire shares of Company Preferred Stock
(whether or not immediately exercisable) outstanding immediately prior to the
Effective Time and (F) the aggregate number of shares of Company Common Stock
issuable upon the conversion of any convertible securities of the Company (other
than shares of Company Preferred Stock or other securities described above in
this definition of Fully Diluted Company Share Number) outstanding immediately
prior to the Effective Time.

 

(vi) The “Merger Consideration” shall be the consideration that a Non-Dissenting
Stockholder of the Company is entitled to receive pursuant to this Section 1.5
in exchange for such Non-Dissenting Stockholder’s shares of Company Capital
Stock.

 

(vii) The “Preferred Stock Per Share Closing Amount” shall be equal to the sum
of (A) $0.25 (subject to adjustment as appropriate to reflect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction effected by the Company prior to the Effective Time) plus (B) the
Common Stock Per Share Closing Amount.

 

(viii) The “Preferred Stock Preference Amount” shall be equal to the product of
(A) $0.25 (subject to adjustment as appropriate to reflect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction effected by the Company prior to the Effective Time) multiplied by
(B) the aggregate number of shares of Company Preferred Stock outstanding
immediately prior to the Effective Time.

 

(c) At the Effective Time, Parent shall withhold from the Merger Consideration
otherwise payable to each Non-Dissenting Stockholder pursuant to Section 1.5(a)
an amount equal to the product of (1) the Escrow Percentage of each such
Non-Dissenting Stockholder multiplied by (2) $10,000,000 and shall deliver such
amount to the Escrow Agent as a contribution to the Escrow Fund on behalf of
such Non-Dissenting Stockholder. The Escrow Fund (1) shall be held by the Escrow
Agent in accordance with the terms of this Agreement and the terms of the Escrow
Agreement, (2) shall be held as a trust fund and shall not be subject to any
lien, attachment, trustee process or other judicial process of any creditor of
any Person, and (3) shall be held and disbursed solely for the purposes and in
accordance with the terms of this Agreement and the Escrow Agreement.

 

(d) If any shares of Company Capital Stock outstanding immediately prior to the
Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other Contract under which the Company has any rights, then the
Merger Consideration delivered in exchange for such shares of Company Capital
Stock will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and need not be paid or otherwise delivered to
the former holder of such shares of Company Capital Stock until such time as
such repurchase option, risk of forfeiture or other condition lapses or
otherwise terminates. The Company shall, prior to the Effective Time, take all
action that may be reasonably necessary to ensure that (and Parent shall have
the right, from and after the Effective Time, to take all action that may be
necessary to ensure that): (1) such Merger Consideration shall remain so
unvested and subject to such repurchase option, risk of forfeiture or other
condition; (2) such Merger Consideration need

 

4.

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

not be paid or otherwise delivered until such time as such repurchase option,
risk of forfeiture or other condition lapses or otherwise terminates; and (3)
Parent is entitled to exercise any such repurchase option or other right set
forth in any such restricted stock purchase agreement or other Contract.

 

(e) In the event the Company at any time or from time to time between the date
of this Agreement and the Effective Time declares or pays any dividend on
Company Capital Stock payable in Company Capital Stock or in any right to
acquire Company Capital Stock, or effects a subdivision of the outstanding
shares of Company Capital Stock into a greater number of shares of Company
Capital Stock, or in the event the outstanding shares of Company Capital Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Company Capital Stock, then the amounts payable in
respect of shares of Company Capital Stock pursuant to Section 1.5(a) shall be
appropriately adjusted.

 

1.6 Employee Stock Options.

 

(a) At the Effective Time, all outstanding unexercised Company Options, whether
vested or unvested, shall be assumed by Parent in accordance with the terms of
the Company Option Plan and in accordance with the terms of the stock option
agreements by which such Company Options are evidenced. All rights with respect
to Company Common Stock under Company Options assumed by Parent shall thereupon
be converted into rights with respect to Parent Common Stock; and, from and
after the Effective Time:

 

(i) each assumed Company Option may be exercised solely for shares of Parent
Common Stock;

 

(ii) the number of shares of Parent Common Stock subject to each such assumed
Company Option shall be determined by multiplying the number of shares of
Company Common Stock that were subject to such Company Option immediately prior
to the Effective Time by the Option Exchange Ratio (as defined below), and
rounding to the nearest whole number of shares of Parent Common Stock;

 

(iii) the per share exercise price for the Parent Common Stock issuable upon
exercise of each assumed Company Option shall be the amount determined by
dividing the exercise price per share of Company Common Stock subject to such
Company Option, as in effect immediately prior to the Effective Time, by the
Option Exchange Ratio, and rounding the resulting exercise price to the nearest
whole cent, and

 

(iv) all restrictions on the exercise of each such Company Option shall continue
in full force and effect, and the term, exercisability, vesting schedule and
other provisions of each assumed Company Option shall otherwise remain
unchanged; provided, however, that each assumed Company Option shall, in
accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, reverse stock split, stock dividend, recapitalization
or other similar transaction effected by Parent after the Effective Time.

 

5.

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

For purposes of this Agreement, (I) each Company Option assumed by Parent in
accordance with this Section 1.6(a) shall be referred to as an “Assumed Option,”
and (II) the “Option Exchange Ratio” shall be the fraction having a numerator
equal to the Common Stock Per Share Closing Amount and having a denominator
equal to the volume weighted average trading price of a share of Parent Common
Stock as reported on the Nasdaq National Market for the 10 trading days
immediately prior to the Closing Date (the “Parent Closing Date Stock Price”).

 

(b) After the Effective Time, Parent will send to each holder of an Assumed
Option a written notice setting forth (i) the number of shares of Parent Common
Stock subject to such Assumed Option and (ii) the exercise price per share
payable to Parent upon the exercise of such Assumed Option. Parent shall file
with the SEC, as soon as reasonably practicable after the Closing Date (and in
any event within 30 days after the Closing Date), a registration statement on
Form S-8 registering the Parent Common Stock underlying the Assumed Options.

 

(c) The Company shall take all actions that may be necessary, or that Parent
considers appropriate (as disclosed to the Company by Parent in writing prior to
the Closing), under the Company Option Plan and otherwise, in each case prior to
the Closing, to effectuate the provisions of this Section 1.6 and to ensure
that, from and after the Effective Time, holders of Company Options have no
rights with respect to such Company Options other than those specifically
provided in this Section 1.6.

 

1.7 Closing of the Company’s Transfer Books. At the Effective Time: (a) all
shares of Company Capital Stock outstanding immediately prior to the Effective
Time shall automatically be canceled and retired and shall cease to exist, and
all holders of certificates representing shares of Company Capital Stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as stockholders of the Company; and (b) the stock transfer books of the
Company shall be closed with respect to all shares of Company Capital Stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of Company Capital Stock shall be made on such stock transfer books
after the Effective Time. If, after the Effective Time, a valid certificate
previously representing any shares of Company Capital Stock outstanding
immediately prior to the Effective Time (a “Company Stock Certificate”) is
presented to the Surviving Corporation or Parent, such Company Stock Certificate
shall be canceled and shall be exchanged as provided in Section 1.8.

 

1.8 Surrender of Certificates.

 

(a) At or prior to the Closing, Parent will deliver to the holders of Company
Stock Certificates (i) a letter of transmittal in customary form and containing
such provisions as Parent may reasonably specify (a “Letter of Transmittal”),
and (ii) instructions for use in effecting the surrender of Company Stock
Certificates in exchange for Merger Consideration. Upon surrender of a Company
Stock Certificate to Parent for exchange, together with a duly executed Letter
of Transmittal and such other documents as may be reasonably required by Parent,
the holder of such Company Stock Certificate shall be entitled to receive in
exchange therefor the Merger Consideration that such holder has the right to
receive pursuant to the provisions of this Section 1, and the Company Stock
Certificate so surrendered shall be canceled. The parties hereto acknowledge and
agree that if any Non-Dissenting Stockholder delivers to

 

6.

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

Parent at the Closing one or more Company Stock Certificates with duly executed
Letters of Transmittal and such other documents as may be reasonably required by
Parent, then Parent shall use commercially reasonable efforts to deliver the
Merger Consideration with respect to such Company Stock Certificate to such
Non-Dissenting Stockholder at the Closing or within two business days after the
Closing Date. Until surrendered as contemplated by this Section 1.8, each
Company Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive upon such surrender Merger Consideration as
contemplated by this Section 1. If any Company Stock Certificate shall have been
lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the delivery of any Merger Consideration, require the owner of such
lost, stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against Parent or the Surviving
Corporation with respect to such Company Stock Certificate.

 

(b) Parent and the Surviving Corporation shall be entitled to deduct and
withhold from any Merger Consideration payable or otherwise deliverable to any
holder or former holder of Company Capital Stock pursuant to this Agreement such
amounts as Parent or the Surviving Corporation determines in good faith are
required to be deducted or withheld therefrom under the Code or under any other
Legal Requirement relating to Taxes. To the extent such amounts are so deducted
or withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the Person to whom such amounts would otherwise have been
paid.

 

(c) Neither Parent nor the Surviving Corporation shall be liable to any holder
or former holder of Company Capital Stock or any other person with respect to
any Merger Consideration delivered to any public official in good faith pursuant
to any applicable abandoned property law, escheat law or similar Legal
Requirement.

 

1.9 Dissenting Shares.

 

(a) Notwithstanding anything to the contrary contained in this Agreement, shares
of Company Capital Stock held by a holder who has made a demand for payment of
the fair value of such shares in accordance with Part 13 of the UBCA (any such
shares being referred to as “Dissenting Shares” until such time as such holder
fails to perfect or otherwise loses such holder’s dissenters’ rights under Part
13 of the UBCA with respect to such shares) shall not be converted into or
represent the right to receive Merger Consideration in accordance with Section
1.5, but shall be entitled only to such rights as are granted by the UBCA to a
holder of Dissenting Shares.

 

(b) Subject to Section 1.5(c), if any Dissenting Shares shall lose their status
as such (through failure to perfect or otherwise), then, as of the later of the
Effective Time or the date of loss of such status, such shares shall
automatically be converted into and shall represent only the right to receive
Merger Consideration in accordance with Section 1.5, without interest thereon,
upon surrender of the Company Stock Certificate representing such shares.

 

7.

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

(c) The Company shall give Parent (i) prompt written notice of any written
demand for payment received by the Company prior to the Effective Time pursuant
to the dissenters’ rights provisions of the UBCA, any withdrawal of any such
demand and any other demand, notice or instrument delivered to the Company prior
to the Effective Time pursuant to the UBCA, and (ii) the opportunity to
participate in all negotiations and proceedings with respect to any such demand,
notice or instrument. The Company shall not make any payment or settlement offer
prior to the Effective Time with respect to any such demand, notice or
instrument unless Parent shall have given its written consent to such payment or
settlement offer.

 

(d) To the fullest extent permitted by applicable Legal Requirements, each Key
Stockholder hereby irrevocably and unconditionally waives, and agrees not to
assert, any dissenters’ rights, right of appraisal or any similar right relating
to the Merger that such Key Stockholder may have by virtue of, or with respect
to, any shares of Company Capital Stock or other securities of the Company owned
by such Key Stockholder.

 

1.10 Further Action. If, at any time after the Effective Time, any further
action is reasonably determined by Parent to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation or
Parent with full right, title and possession of and to all rights and property
of Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.

 

SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as otherwise set forth on the numbered or lettered Part of the Disclosure
Schedule corresponding to each representation or warranty below, or as otherwise
set forth elsewhere in the Disclosure Schedule where it is readily apparent from
such disclosure that such information is applicable to such representation or
warranty below, the Company represents and warrants, to and for the benefit of
the Indemnitees, as follows:

 

2.1 Subsidiaries; Due Organization; Etc.

 

(a) The Company has no Subsidiaries, except for the corporations identified in
Part 2.1(a) of the Disclosure Schedule; and neither the Company nor any of the
other corporations identified in Part 2.1(a) of the Disclosure Schedule owns any
capital stock of, or any equity interest of any nature in, any other Entity,
other than the Entities identified in Part 2.1(a) of the Disclosure Schedule.
None of the Acquired Corporations has agreed or is obligated to make, or is
bound by any Contract under which it may become obligated to make, any future
investment in or capital contribution to any other Entity. None of the Acquired
Corporations has, at any time, been a general partner of, or has otherwise been
liable for any of the debts or other obligations of, any general partnership,
limited partnership or other Entity.

 

(b) Each of the Acquired Corporations is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation (which jurisdiction is set forth in Part 2.1(b) of the Disclosure
Schedule) and has all necessary power and authority: (i) to conduct its business
in the manner in which its business is currently being conducted; (ii) to own
and use its assets in the manner in which its assets are currently owned and
used; and (iii) to perform its obligations under all Contracts by which it is
bound.

 

8.

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

(c) As of the date of this Agreement, none of the Acquired Corporations is
required to be qualified, authorized, registered or licensed to do business as a
foreign corporation in any jurisdiction other than the jurisdictions identified
in Part 2.1(c) of the Disclosure Schedule. The Acquired Corporations are in good
standing as foreign corporations in each jurisdiction in which such
qualification, authorization, registration or licensing is necessary, except
where the failure to be so qualified, authorized, registered or licensed would
not result in a Material Adverse Effect.

 

(d) The Company has not, and none of the other Acquired Corporations has since
the date it was acquired or formed by the Company conducted any business under
or otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name, other than the name “Vintela, Inc.” and
the names set forth in Part 2.1(a) of the Disclosure Schedule.

 

(e) Part 2.1(e) of the Disclosure Schedule accurately sets forth, as of the date
of this Agreement: (i) the names of the members of the board of directors of
each of the Acquired Corporations; and (ii) the names and titles of the officers
of each of the Acquired Corporations.

 

2.2 Articles of Incorporation and Bylaws; Records. The Company has delivered to
Parent accurate and complete copies of: (a) the articles of incorporation,
bylaws and other charter and organizational documents of each Acquired
Corporation, including all amendments thereto; (b) the stock records of each
Acquired Corporation from its inception through the date of this Agreement; and
(c) the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a meeting)
of the stockholders of each Acquired Corporation, the board of directors of each
Acquired Corporation and all committees of the board of directors of each
Acquired Corporation, each from such Acquired Corporation’s inception through
the date of this Agreement. The books of account, stock records, minute books
and other records of the Acquired Corporations are accurate, up-to-date and
complete in all material respects.

 

2.3 Capitalization, Etc.

 

(a) The authorized capital stock of the Company consists of 39,016,926 shares of
Company Common Stock, of which 135,240 shares have been issued and are
outstanding as of the date of this Agreement, 15,689,299 shares of Company
Series A Preferred Stock, of which 15,689,298 shares have been issued and are
outstanding as of the date of this Agreement and 12,000,000 shares of Company
Series B Preferred Stock, of which no shares have been issued or are outstanding
as of the date of this Agreement. Part 2.3(a) of the Disclosure Schedule sets
forth, with respect to each Person who is a holder of shares of Company Common
Stock or Company Series A Preferred Stock, or is a holder of any securities,
instruments or obligations that are or may be convertible into shares of Company
Common Stock, Company Series A Preferred Stock or Company Series B Preferred
Stock, accurate and complete information

 

9.

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

regarding the number of such shares, or the principal amount of the obligations
convertible into such shares (and the number of shares into which such
convertible obligations are convertible), held by such Person as of the date of
this Agreement (excluding Company Options). All of the outstanding shares of
Company Capital Stock have been duly authorized and validly issued, and are
fully paid and nonassessable. Except as set forth in Part 2.3(a) of the
Disclosure Schedule: (i) none of the outstanding shares of Company Capital Stock
is entitled or subject to any preemptive right, right of participation, right of
maintenance or any similar right; (ii) none of the outstanding shares of Company
Capital Stock is subject to any right of first refusal or similar right in favor
of the Company or any other Person; and (iii) there is no Company Contract
relating to the voting or registration of, or restricting any Person from
purchasing, selling, pledging or otherwise disposing of (or granting any option
or similar right with respect to), any shares of Company Capital Stock. None of
the Acquired Corporations is under any obligation, or is bound by any Contract
pursuant to which it may become obligated, to repurchase, redeem or otherwise
acquire any outstanding shares of Company Capital Stock or any other securities.
Part 2.3(a) of the Disclosure Schedule provides an accurate and complete
description of the terms of each repurchase option which is held by the Company
and to which any of the shares of Company Capital Stock is subject.

 

(b) As of the date of this Agreement, 11,192,380 shares of Company Common Stock
are subject to issuance pursuant to outstanding Company Options. Part 2.3(b) of
the Disclosure Schedule sets forth accurate and complete information with
respect to the holder, the vesting, the exercise price, the expiration date, the
shares underlying and the tax status of each Company Option outstanding as of
the date of this Agreement. All outstanding Company Options were granted
pursuant to the terms of the Company Option Plan. The Company has delivered to
Parent accurate and complete copies of all stock option plans pursuant to which
any of the Acquired Corporations has ever granted stock options from each such
Acquired Corporation’s inception through the date of this Agreement, and the
forms of all stock option agreements evidencing such options. The Company Option
Plan is binding upon and enforceable by the Company against all holders of
Company Options.

 

(c) Except as set forth in Part 2.3(b) of the Disclosure Schedule, there is no:
(i) outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire any shares of the capital stock or other
securities of any of the Acquired Corporations; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of any of the Acquired
Corporations; (iii) Contract under which any of the Acquired Corporations is or
may become obligated to sell or otherwise issue any shares of its capital stock
or any other securities; or (iv) condition or circumstance that may give rise to
or provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive (A) any shares of capital stock or
other securities of any of the Acquired Corporations, or (B) any portion of any
Merger Consideration payable in connection with the Merger.

 

(d) All outstanding shares of capital stock, options, warrants and other
securities of the Acquired Corporations have been issued and granted in
compliance in all material respects with (i) all applicable securities laws and
other applicable Legal Requirements, and (ii) all requirements set forth in the
applicable Contracts relating to such issuance or grant.

 

10.

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

(e) All of the outstanding shares of capital stock of each of the Company’s
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and free of preemptive rights, and are owned beneficially and of
record by the Company, free and clear of any Encumbrances, other than
restrictions imposed by applicable federal and state securities laws.

 

(f) None of the Acquired Corporations has ever repurchased, redeemed or
otherwise reacquired any shares of Company Capital Stock or securities of any
Acquired Corporation, other than Company Options forfeited by Company Employees
in connection with the termination of a Company Employee’s employment with an
Acquired Corporation. All securities so reacquired by the Company or any other
Acquired Corporation were reacquired in compliance in all material respects with
(i) all applicable Legal Requirements, and (ii) all requirements set forth in
applicable restricted stock purchase agreements and other applicable Contracts
relating to such acquisition.

 

2.4 Financial Statements; Financial Controls.

 

(a) The Company has delivered to Parent the following financial statements and
notes (collectively, the “Company Financial Statements”): (i) the unaudited
consolidated balance sheets of the Company and its consolidated Subsidiaries as
of December 31, 2003 and 2004 and the related unaudited consolidated statements
of income, statements of stockholders’ equity and statements of cash flows of
the Company and its consolidated Subsidiaries for the four months then ended in
the case of fiscal year ended December 31, 2003, and the year then ended in the
case of fiscal year ended December 31, 2004, together with the notes thereto;
and (ii) the unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as of March 31, 2005 (the “Interim Balance Sheet”),
and the related unaudited consolidated statement of income, statement of
stockholders’ equity and statement of cash flows of the Company and its
consolidated Subsidiaries for the two-month period then ended.

 

(b) The Company Financial Statements fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of the
respective dates thereof and the results of operations and cash flows of the
Company and its consolidated Subsidiaries for the periods covered thereby. The
Company Financial Statements have been prepared from and in a manner consistent
with and that accurately reflect the books and records of the Company throughout
the periods covered.

 

(c) The financial statements to be delivered pursuant to Section 5.1 (i) will be
accurate and complete in all material respects and (ii) will fairly present in
all material respects the financial position of the Company and its consolidated
Subsidiaries as of the respective dates thereof and the results of operations
and cash flows of the Company and its consolidated Subsidiaries for the periods
covered thereby.

 

(d) None of the Acquired Corporations is a party to any securitization
transaction or “off-balance sheet arrangement” (as defined in Item 303(c) of
Regulation S-K of the SEC).

 

11.

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

(e) Each of the Acquired Corporations maintains accurate books and records
reflecting its assets and liabilities and maintains proper and adequate internal
accounting controls which provide reasonable assurance that: (i) transactions
are executed with management’s authorization; (ii) transactions are recorded as
necessary to permit preparation of the consolidated financial statements of the
Company and its consolidated Subsidiaries and to maintain accountability for the
assets of the Acquired Corporations; (iii) access to the assets of the Acquired
Corporations is permitted only in accordance with management’s authorization;
(iv) the reporting of the assets of the Acquired Corporations is compared with
existing assets at regular intervals; and (v) accounts, notes and other
receivables are recorded accurately, and proper and adequate procedures are
implemented to effect the collection thereof on a current and timely basis.

 

2.5 Absence of Changes. Except as set forth in Part 2.5 of the Disclosure
Schedule, and except for actions expressly set forth on Schedule 5.2, since
March 31, 2005: (a) there has not been any Material Adverse Effect, and no event
has occurred or circumstance has arisen that, in combination with any other
events or circumstances, could reasonably be expected to have or result in a
Material Adverse Effect; (b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of the material
assets of any of the Acquired Corporations (whether or not covered by
insurance); (c) none of the Acquired Corporations has made any capital
expenditure which, when added to all other capital expenditures made on behalf
of the Acquired Corporations since March 31, 2005, exceeds $100,000 in the
aggregate; (d) none of the Acquired Corporations has written off as
uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness; (e) none of the Acquired Corporations
has entered into any material transaction or taken any other material action
outside the ordinary course of business or inconsistent with past practices
(including any acceleration of the collection of receivables or any delay in the
payment of payables); (f) none of the Acquired Corporations has taken any action
of the type referred to in Section 5.2(b); and (g) none of the Acquired
Corporations has agreed or committed to take any of the actions referred to in
clauses “(c)” through “(f)” of this sentence.

 

2.6 Title to Assets. The Acquired Corporations own, and have good, valid and
marketable title to, all assets purported to be owned by them, including: (a)
all assets reflected on the Interim Balance Sheet; (b) all assets referred to in
Parts 2.1(a) and 2.9 of the Disclosure Schedule and all of the Company’s rights
under the Material Contracts; and (c) all other assets reflected in the books
and records of the Acquired Corporations as being owned by the Acquired
Corporations. All of said assets are owned by the Acquired Corporations free and
clear of any Encumbrances, except for (i) any lien for current taxes not yet due
and payable, (ii) liens that have arisen in the ordinary course of business and
that do not (in any case or in the aggregate) materially detract from the value
of the assets subject thereto or materially impair the operations of any
Acquired Corporation, and (iii) liens described in Part 2.6 of the Disclosure
Schedule.

 

2.7 Bank Accounts; Receivables; Customers.

 

(a) Part 2.7(a) of the Disclosure Schedule provides an accurate list as of the
date of this Agreement of each account maintained by or for the benefit of the
Acquired Corporations at any bank or other financial institution.

 

12.

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

(b) All existing accounts receivable of the Acquired Corporations (including
those accounts receivable reflected on the Interim Balance Sheet that have not
yet been collected and those accounts receivable that have arisen since March
31, 2005 and have not yet been collected) (i) represent valid obligations of
customers of the Acquired Corporations arising from bona fide transactions
entered into in the ordinary course of business, and (ii) are current and, to
the Knowledge of the Company, will be collected in full when due, without any
counterclaim or set off (net of an allowance for doubtful accounts not to exceed
$10,000 in the aggregate).

 

(c) Part 2.7(c) of the Disclosure Schedule contains an accurate and complete
list as of the date of this Agreement of all loans and advances made by any of
the Acquired Corporations to any employee, director, consultant or independent
contractor, other than routine travel advances made to employees in the ordinary
course of business.

 

(d) The Company has not received any written notice or (to the Knowledge of the
Company) other communication indicating that any customer or development partner
intends to cease dealing with any of the Acquired Corporations or otherwise
intends to reduce the volume of business transacted by such Person with any of
the Acquired Corporations below historical levels in any material respect.

 

2.8 Equipment; Leasehold. All material items of equipment and other tangible
assets owned by or leased to the Acquired Corporations are adequate in all
material respects for the uses to which they are being put, are in good
condition and repair (ordinary wear and tear excepted) and are adequate for the
conduct of the business of the Acquired Corporations in the manner in which such
business is currently being conducted. No Acquired Corporation owns any real
property or any interest in real property, except for the leaseholds created
under the real property leases identified in Part 2.8 of the Disclosure
Schedule.

 

2.9 Intellectual Property.

 

(a) Part 2.9(a) of the Disclosure Schedule accurately identifies or describes:

 

(i) each Company Product currently being developed, manufactured, marketed,
distributed, licensed, sold or made available (as part of service bureau,
time-sharing, application service provided or similar arrangement or otherwise)
by any of the Acquired Corporations;

 

(ii) (A) each item of Registered IP in which any of the Acquired Corporations
has or purports to have an ownership interest of any nature (whether
exclusively, jointly with another Person or otherwise); (B) the jurisdiction in
which such item of Registered IP has been registered or filed and the applicable
registration or serial number; and (C) any other Person that has an ownership
interest in such item of Registered IP and the nature of such ownership
interest;

 

(iii) (A) all Intellectual Property Rights or Intellectual Property licensed to
each of the Acquired Corporations (other than any non-customized software that:
(1) is so licensed solely in executable or object code form pursuant to a
nonexclusive, internal use

 

13.

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

software license, (2) is not incorporated into any Company Product or used by
any Acquired Corporation in the development or compilation from source code into
object or executable code of, any Company Product, and (3) is generally
available on standard terms for less than $15,000), (B) the corresponding
Contract or Contracts pursuant to which such Intellectual Property Rights or
Intellectual Property is licensed to such Acquired Corporation and (C) whether
the license or licenses so granted to the Acquired Corporations are exclusive or
nonexclusive;

 

(iv) (A) each Contract pursuant to which any Person has been granted any license
under, or otherwise has received or acquired any right (whether or not currently
exercisable) or interest in, any Company IP (other than End User Licenses in the
Company’s or the Acquired Corporation’s standard form thereof at the time of
licensing), and (B) whether the licenses or rights so granted are exclusive or
nonexclusive; and

 

(v) all Third Party Software.

 

(b) The Company has provided to Parent a complete and accurate copy of each
standard form of Company IP Contract used by any of the Acquired Corporations
(and, solely for purposes of this subparagraph (b), Center 7, Inc., and solely
for the purposes of subparagraph (b)(i), The SCO Group, Inc.) at any time,
including each standard form of: (i) end user license agreement or terms; (ii)
development agreement; (iii) distributor, reseller or sales representative
agreement; (iv) maintenance or support agreement or terms; (v) employee
agreement containing any assignment or license of Intellectual Property or
Intellectual Property Rights or any confidentiality provision; (vi) consulting,
independent contractor or professional services agreement; or (vii)
confidentiality or nondisclosure agreement. Part 2.9 of the Disclosure Schedule
accurately identifies each Company IP Contract that deviates in any material
respect from the corresponding standard form agreement provided to Parent.

 

(c) The Acquired Corporations exclusively own all right, title and interest to
and in all Company IP free and clear of any Encumbrances (other than licenses,
rights and Encumbrances granted pursuant to the Contracts listed in Part 2.9(a)
of the Disclosure Schedule and other than End User Licenses in the Company’s or
Acquired Corporation’s standard form thereof at the time of licensing), it being
understood that this representation and warranty is not intended to be, and
shall not be construed as, a representation or warranty of non-infringement of
patents nor a representation or warranty that the Acquired Corporations
exclusively own any patent rights (including any patent application or patent)
that is owned by any Person who is not a current or former employee, officer or
director of any Acquired Corporation and that is not identified (or required to
be identified) in Part 2.9 of the Disclosure Schedule as owned by an Acquired
Corporation. Without limiting the generality of the foregoing:

 

(i) all Intellectual Property Rights (including patent rights) in the Company
Products that were at any time owned or controlled by The Canopy Group, Inc.,
Angel Partners, Center 7, Inc., The SCO Group, Inc. or Volution Technology, Inc.
have been unconditionally and irrevocably assigned to the Acquired Corporations
and none of the Acquired Corporations has or will have any obligation of any
nature (whether fixed, contingent or otherwise) to make any payment or provide
any other consideration for such assignments (other than obligations that have
been fully discharged, performed and satisfied prior to the date of this
Agreement);

 

14.

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

(ii) all documents and instruments necessary to establish, secure and perfect
the rights of the Acquired Corporations in their Registered IP have been validly
executed, delivered and filed in a timely manner with the appropriate
Governmental Body;

 

(iii) each Person who is or was an employee or independent contractor of any of
the Acquired Corporations (or any Predecessor Corporation) and who is or was
involved in the creation or development of any Company Product or any Company IP
has signed a valid and enforceable agreement containing an irrevocable
assignment of Intellectual Property Rights to the Acquired Corporation (or any
Predecessor Corporation) for which such Person is or was an employee or
independent contractor and confidentiality provisions protecting the Company IP;

 

(iv) no Company Employee has any claim, right (whether or not currently
exercisable) or interest to or in any Company IP;

 

(v) no employee or independent contractor of any of the Acquired Corporations
is: (A) bound by or otherwise subject to any Contract restricting him or her
from performing his or her duties for such Acquired Corporation; or (B) to the
Knowledge of the Company, in breach of any Contract with any former employer or
other Person concerning Intellectual Property Rights or confidentiality as a
result of his or her employment or activities with such Acquired Corporation;

 

(vi) no funding, facilities or personnel of any Governmental Body or college,
university or other education institution were used, directly or indirectly, to
develop or create, in whole or in part, any Company Product or any Company IP;

 

(vii) each of the Acquired Corporations has taken all customary (for a company
of the size and nature of the Company) and commercially reasonable steps
required to protect the Acquired Corporations’ source code and confidential
information (including the Acquired Corporations’ rights in the source code for
the Company Products and any other Company IP that any Acquired Corporation
holds, or purports to hold, as a trade secret) and to prevent unauthorized use
thereof by any other Person, and Part 2.9(c) of the Disclosure Schedule
describes the protection procedures followed and other measures taken by the
Acquired Corporations since the formation of the Company to protect such source
code and confidential information;

 

(viii) none of the Acquired Corporations has assigned or otherwise transferred
ownership of, or agreed to assign or otherwise transfer ownership of, any
Intellectual Property Right to any other Person;

 

(ix) none of the Acquired Corporations is bound by, and no Company IP is subject
to, any Contract to which an Acquired Corporation is a party or of which an
Acquired Corporation has Knowledge, containing any covenant or other provision
that in any way limits or restricts the ability of any of the Acquired
Corporations to use, exploit, assert, or enforce any Company IP anywhere in the
world; and

 

15.

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

(x) the Acquired Corporations own or otherwise have (by license or otherwise),
and immediately after the Closing the Surviving Corporation will continue to
have (by ownership, license or otherwise), all Intellectual Property Rights
(other than patent rights and trademark, service mark and trade name rights)
needed to conduct the business of the Acquired Corporations as currently
conducted and currently planned by the Company to be conducted, and to the
Knowledge of the Company, the Acquired Corporations own or otherwise have (by
license or otherwise), and immediately after the Closing the Surviving
Corporation will continue to have (by ownership, license or otherwise), all
patent rights and trademark, service mark and trade name rights needed to
conduct the business of the Acquired Corporations as currently conducted and
currently planned by the Company to be conducted.

 

(d) All Company IP is valid and enforceable (except that no representation or
warranty is made in this sentence concerning the validity or enforceability of
any pending applications for patents or for other Registered IP). Without
limiting the generality of the foregoing:

 

(i) to the Knowledge of the Company, no trademark (whether registered or
unregistered) or trade name owned, used, or applied for by any of the Acquired
Corporations conflicts or interferes with any trademark (whether registered or
unregistered) or trade name owned, used or applied for by any other Person;

 

(ii) to the Knowledge of the Company, no event or circumstance (including a
failure to exercise adequate quality controls and an assignment in gross without
the accompanying goodwill) has occurred or exists that has resulted in, or could
reasonably be expected to result in, the abandonment of any trademark (whether
registered or unregistered) of any Acquired Corporation;

 

(iii) each item of an Acquired Corporation’s Registered IP is and at all times
has been in compliance with all Legal Requirements, and all filings, payments
and other actions required to be made or taken to maintain each such item of
Registered IP in full force and effect have been made by the applicable
deadline;

 

(iv) Part 2.9(d) of the Disclosure Schedule accurately identifies or describes
each filing, payment, and action that must be made or taken on or before the
date that is 120 days after the date of this Agreement in order to maintain each
item of Company IP that is Registered IP in full force and effect;

 

(v) the Company has provided to Parent complete and accurate copies of all
applications, correspondence to, with or from a Governmental Body, and other
material documents written or received by an Acquired Corporation or its
Representative (other than documents constituting attorney-client privileged
communications) related to each such item of Registered IP;

 

16.

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

(vi) to the Knowledge of the Company and to the knowledge of any employee or
attorney of any Acquired Corporation, no interference, opposition, reissue,
reexamination or other Proceeding of any nature is or has been pending or, to
the Knowledge of the Company and to the knowledge of any employee or attorney of
any Acquired Corporation, threatened, in which the scope, validity or
enforceability of any Company IP is being, has been or could reasonably be
expected to be contested or challenged;

 

(vii) none of the Acquired Corporations has engaged in patent or copyright
misuse or inequitable conduct with respect to any Company IP; and

 

(viii) to the Knowledge of the Company, no other facts or circumstances exist
that could reasonably be expected to render any Company IP invalid or
unenforceable.

 

(e) Neither the execution, delivery or performance of this Agreement or any of
the agreements referred to in this Agreement nor the consummation of any of the
transactions contemplated herein or therein will, with or without notice or the
lapse of time, result in or give any other Person the right or option to cause
or declare: (i) a loss of, or Encumbrance on, any Company IP; (ii) the release,
disclosure or delivery of any Company IP by or to any escrow agent or other
Person; or (iii) the grant, assignment or transfer to any other Person of any
license or other right or interest under, to or in any of the Company IP.

 

(f) To the Knowledge of the Company, no Person has infringed, misappropriated,
or otherwise violated, and no Person is currently infringing, misappropriating
or otherwise violating, any Company IP. Part 2.9(f) of the Disclosure Schedule
accurately identifies (and the Company has provided to Parent a complete and
accurate copy of) each letter or other written or electronic communication or
correspondence that has been sent or otherwise delivered by or to any of the
Acquired Corporations or any Representative of any of the Acquired Corporations
regarding any actual, alleged or suspected infringement or misappropriation of
any Company IP and provides a brief description of the current status of the
matter referred to in such letter, communication or correspondence.

 

(g) None of the Acquired Corporations has ever infringed (directly,
contributorily, by inducement or otherwise), misappropriated or otherwise
violated any Intellectual Property Right (other than patent, trademark, service
mark and trade name rights) of any other Person, and to the Knowledge of the
Company none of the Acquired Corporations have ever infringed (directly,
contributorily, by inducement or otherwise) or otherwise violated any patent,
trademark, service mark, or trade name right of any other Person; in each case
excluding any infringement, misappropriation or violation of Intellectual
Property Rights (including patent rights) to the extent attributable to
Third-Party Software unless and only to the extent that the Company has
Knowledge of such infringement, misappropriation or violation. Without limiting
the generality of the foregoing:

 

(i) no Company Product, no Company Software and no Company IP ever owned, used
or developed by any of the Acquired Corporations has ever infringed,
misappropriated or otherwise violated any Intellectual Property Right (other
than patent, trademark, service mark and trade name rights) of any other Person,
and to the Knowledge of the

 

17.

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

Company, no Company Product, no Company Software and no Company IP ever owned,
used or developed by any of the Acquired Corporations has ever infringed or
otherwise violated any patent right of any other Person;

 

(ii) to the Knowledge of the Company and to the knowledge of any employee or
attorney of any Acquired Corporation, no infringement, misappropriation or
similar claim or Proceeding is pending or has been threatened against any of the
Acquired Corporations or against any other Person who may be entitled to be
indemnified, defended, held harmless or reimbursed by the Company with respect
to such claim or Proceeding;

 

(iii) none of the Acquired Corporations (and to the Knowledge of the Company, no
Predecessor Corporations) has ever received any written notice or other
communication relating to any actual, alleged or suspected infringement,
misappropriation or violation by any Acquired Corporation, Company Employee,
Company Product or Company Software of any Intellectual Property Right of
another Person;

 

(iv) none of the Acquired Corporations is bound by any Contract to indemnify,
defend, hold harmless or reimburse any other Person with respect to any
intellectual property infringement, misappropriation or similar claim (other
than pursuant to the standard forms of Company IP Contracts described in Section
2.9(b));

 

(v) none of the Acquired Corporations has ever assumed, or agreed to discharge
or otherwise take responsibility for, any existing or potential liability of
another Person for infringement, misappropriation or violation of any
Intellectual Property Right (other than pursuant to the standard forms of
Company IP Contracts described in Section 2.9(b)); and

 

(vi) to the Knowledge of the Company and to the knowledge of any employee or
attorney of any Acquired Corporation, no claim or Proceeding involving any
Intellectual Property or Intellectual Property Right licensed to any of the
Acquired Corporations is pending or has been threatened, except for any such
claim or Proceeding that, if adversely determined, would not adversely affect:
(A) the use or exploitation of such Intellectual Property or Intellectual
Property Right by any of the Acquired Corporations; or (B) the development,
manufacturing, distribution, support, provision or sale of any Company Product.

 

(h) None of the Company Products contains any programming defect, error or bug
that is outside the scope of programming defects, errors and bugs typically
corrected in the normal course of the Acquired Corporation’s software
maintenance procedures and programs and that, if such defect, error or bug were
not corrected, would have a material adverse effect on the Acquired
Corporations’ ability to continue marketing and selling (or licensing) the
Company Product in question with the same level of success that the Acquired
Corporations have previously marketed and sold (or licensed) such Company
Product. The Company maintains a list to which developers report all discovered
programming defects, errors and bugs for the latest version of the Company
Products and this list is maintained on a continuous basis. The Company has
provided to Parent a complete and accurate copy of this list as of May 25, 2005.

 

18.

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

(i) None of the Company Products contains any Harmful Code. To the Knowledge of
Company and to the knowledge of Company’s IT Manager, Ben Bush, no Third Party
Software or any software distributed or used by an Acquired Corporation contains
any Harmful Code. The Company has taken commercially reasonable efforts to scan
the Company Products, Third Party Software and such other software (other than
non-proprietary or open source software made available to others at no charge
from Company’s Resource Central web site) for Harmful Code using commercially
available virus scanning software.

 

(j) None of the Company Products is subject to any “copyleft” or other
obligation or condition (including any obligation or condition under any “open
source” license such as the GNU Public License, Lesser GNU Public License or
Mozilla Public License) that: (i) could or does require, or could or does
condition the use or distribution of such Company Product on, the disclosure,
licensing or distribution of any source code for any portion of such Company
Product; or (ii) could or does otherwise impose any limitation, restriction or
condition on the right or ability of the Company to use or distribute any
Company Product.

 

(k) No source code for any Company Product has been delivered, licensed or made
available to any escrow agent or other Person who is not, as of the date of this
Agreement, an employee of one of the Acquired Corporations. None of the Acquired
Corporations has any duty or obligation (whether present, contingent or
otherwise) to deliver, license or make available the source code for any Company
Product to any escrow agent or other Person. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to, result in the delivery, license or
disclosure of any source code for any Company Product to any other Person.

 

2.10 Contracts.

 

(a) Part 2.10(a) of the Disclosure Schedule identifies each “Material Contract”
(other than End User Licenses) of the Acquired Corporations as of the date of
this Agreement. For purposes of this Agreement, each of the following shall be
deemed to constitute a “Material Contract” of the Acquired Corporations:

 

(i) any Contract (A) relating to the employment of, or the performance of
services by, any employee, consultant or independent contractor, (B) pursuant to
which any of the Acquired Corporations is or may become obligated to make any
severance, termination or similar payment to any current or former employee or
director, or (C) pursuant to which any of the Acquired Corporations is or may
become obligated to make any bonus or similar payment (other than payments
constituting base salary) in excess of $25,000 to any current or former employee
or director;

 

(ii) any Company IP Contract (including End User Licenses) and any other
Contract relating to the acquisition, sale, transfer or development of any
Intellectual Property or Intellectual Property Right, other than any Contract
pursuant to which any such Intellectual Property or Intellectual Property Rights
are licensed to the Acquired Corporations under any third party “shrink-wrap,”
“click through” or other “off-the-shelf” software license generally available to
the public;

 

19.

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

(iii) any Contract relating to the acquisition, sale, spinoff or outsourcing of
any business unit or material operation or product line;

 

(iv) any Contract that provides for indemnification of any officer, director,
employee or agent;

 

(v) any Contract imposing any restriction on the right or ability of any
Acquired Corporation (A) to compete with, or solicit any customer of, any other
Person, (B) to acquire any product or other asset or any services from any other
Person, (C) to solicit, hire or retain any Person as an employee, consultant or
independent contractor, (D) to develop, sell, supply, distribute, offer, support
or service any product or any technology or other asset to or for any other
Person, (E) to perform services for any other Person, or (F) to transact
business or deal in any other manner with any other Person;

 

(vi) any Contract that provides for aggregate payments over the course of the
Contract of more than $50,000 creating or involving any agency relationship
(including sales representative agreements), distribution or reseller
arrangement or franchise relationship;

 

(vii) any Contract (other than Contracts evidencing Company Options) (A)
relating to the acquisition, issuance, voting, registration, sale or transfer of
any securities, (B) providing any Person with any preemptive right, right of
participation, right of maintenance or similar right with respect to any
securities, or (C) providing any of the Acquired Corporations with any right of
first refusal with respect to, or right to repurchase or redeem, any securities;

 

(viii) any Contract relating to the creation of any Encumbrance with respect to
any material asset of any of the Acquired Corporations;

 

(ix) any Contract incorporating or relating to any guaranty, any warranty, any
pledge, any performance or completion bond or any indemnity or similar
obligation, except for Contracts substantially identical to the standard forms
of end-user licenses previously delivered by the Company to Parent;

 

(x) any Contract relating to any currency hedging;

 

(xi) any Contract creating or relating to any partnership or joint venture
identified as such in such Contract or any sharing of revenues, profits, losses,
costs or liabilities;

 

(xii) any real estate lease;

 

(xiii) any Government Contract or Government Bid that provides for or
contemplates aggregate payments over the course of the Contract of more than
$50,000;

 

(xiv) any Contract (A) imposing any confidentiality obligation on any of the
Acquired Corporations or on any other Person (other than routine nondisclosure
agreements entered into by an Acquired Corporation in the ordinary course of
business), (B) containing “standstill” or similar provisions, or (C) providing
any right of first negotiation, right of first refusal or similar right to any
Person;

 

20.

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

(xv) any Contract relating to the purchase or sale of any product or other asset
by or to, or the performance of any services by or for, any Related Party (as
defined in Section 2.18);

 

(xvi) any Contract that provides for aggregate payments over the course of the
Contract of more than $50,000 and that has a term of more than 90 days and that
may not be terminated by an Acquired Corporation (without penalty) within 90
days after the delivery of a termination notice by such Acquired Corporation
(other than routine nondisclosure agreements entered into by an Acquired
Corporation in the ordinary course of business and other than End User
Licenses);

 

(xvii) any Contract under which the Merger or any of the other Contemplated
Transactions would give rise to or expand any rights in favor of, or any
obligations on the part of, any Acquired Corporation or any other Person;

 

(xviii) any Contract that contemplates or involves the payment or delivery of
cash or other consideration in an amount or having a value in excess of $50,000
in the aggregate, or contemplates or involves the performance of services having
a value in excess of $50,000 in the aggregate;

 

(xix) any Contract that could reasonably be expected to have or result in a
material effect on (A) the business, condition, capitalization, assets,
Intellectual Property, liabilities, results of operations or financial
performance of any of the Acquired Corporations or (B) the ability of the
Company to perform any of its obligations under this Agreement or to consummate
any of the Contemplated Transactions; and

 

(xx) any other Contract, if a breach of such Contract or the termination of such
Contract could reasonably be expected to have or result in a Material Adverse
Effect.

 

The Company has delivered to Parent an accurate and complete copy of each
Material Contract, including all amendments thereto.

 

(b) Each Material Contract is valid and in full force and effect, and is
enforceable in accordance with its terms against the applicable Acquired
Corporation, subject to (i) laws of general application relating to bankruptcy,
insolvency, reorganization, moratorium and the enforcement of creditors’ rights
generally, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.

 

(c) Except as set forth in Part 2.10 of the Disclosure Schedule: (i) none of the
Acquired Corporations has violated or breached, or committed any default under,
any Material Contract in any material respect, and, to the Knowledge of the
Company, no other Person has violated or breached, or committed any default
under, any Material Contract in any material respect; (ii) to the Knowledge of
the Company, no event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time) could reasonably be expected to
(A) result in a violation or breach by the applicable Acquired Corporation of
any of the provisions of any Material Contract in any material respect, (B) give
any Person the right to

 

21.

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

declare a default or exercise any remedy under any Material Contract, (C) give
any Person the right to receive or require a rebate, chargeback, penalty or
change in delivery schedule under any Material Contract, (D) give any Person the
right to accelerate the maturity or performance of any Material Contract, (E)
result in the disclosure, release or delivery of any source code for any Company
Software or (F) give any Person the right to cancel, terminate or modify any
Material Contract; (iii) none of the Acquired Corporations has received any
written notice or (to the Knowledge of the Company) other communication
regarding any actual or alleged violation or breach of, or default under, any
Material Contract in any material respect; and (iv) none of the Acquired
Corporations has waived any of its material rights under any Material Contract.

 

(d) The Material Contracts collectively constitute all of the Contracts
necessary to enable the Acquired Corporations to conduct their respective
businesses in the manner in which such businesses are currently being conducted.

 

2.11 Liabilities. None of the Acquired Corporations has any accrued, contingent
or other liabilities of any nature, either matured or unmatured (whether or not
required to be reflected in financial statements in accordance with GAAP, and
whether due or to become due), except for: (a) liabilities identified as such in
the “liabilities” column of the Interim Balance Sheet; (b) normal and recurring
current liabilities that have been incurred by the Acquired Corporations since
March 31, 2005 in the ordinary course of business and consistent with past
practices; (c) liabilities under the Material Contracts, to the extent the
nature and magnitude of such liabilities can be specifically ascertained by
reference to the text of such Material Contracts; (d) liabilities of a routine
nature under any Company Contracts that do not constitute Material Contracts and
that are not in the aggregate material and (e) liabilities described in Part
2.11 of the Disclosure Schedule. To the Knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that has resulted in, or that
will or could reasonably be expected to result in, any claim for indemnification
or reimbursement by any Company Employee (other than a claim for reimbursement
by an Acquired Corporation, in the ordinary course of business, of travel
expenses, accrued vacation or other out-of-pocket expenses of a routine nature
incurred by a Company Employee in the course of performing such Company
Employee’s duties for the applicable Acquired Corporation) pursuant to (i) the
terms of any Acquired Corporation’s articles of incorporation, bylaws or other
charter documents, (ii) any indemnification agreement or other Contract between
any Acquired Corporation and any such Company Employee, or (iii) any applicable
Legal Requirement

 

2.12 Compliance with Legal Requirements; Governmental Authorizations.

 

(a) Each of the Acquired Corporations is, and each of the Acquired Corporations
and (with respect to any business or assets transferred directly or indirectly
to any of the Acquired Corporations) Predecessor Corporations has at all times
been, in compliance in all material respects with all applicable Legal
Requirements. Except as set forth in Part 2.12(a) of the Disclosure Schedule,
none of the Acquired Corporations or (with respect to any business or assets
transferred directly or indirectly to any of the Acquired Corporations)
Predecessor Corporations has received any written notice or (to the Knowledge of
the Company) other communication from any Governmental Body or other Person
regarding any actual or alleged violation of, or failure to comply with, any
Legal Requirement.

 

22.

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

(b) Part 2.12(b) of the Disclosure Schedule identifies each material
Governmental Authorization held by any of the Acquired Corporations as of the
date of this Agreement, and the Company has delivered to Parent accurate and
complete copies of all such Governmental Authorizations. The Governmental
Authorizations identified in Part 2.12(b) of the Disclosure Schedule are valid
and in full force and effect, and collectively constitute all Governmental
Authorizations necessary to enable the Acquired Corporations to conduct their
respective businesses in the manner in which such businesses are currently being
conducted. Each Acquired Corporation is, and each Acquired Corporation and (with
respect to any business or assets transferred directly or indirectly to any of
the Acquired Corporations) Predecessor Corporation at all times has been, in
substantial compliance with the terms and requirements of the Governmental
Authorizations identified in Part 2.12(b) of the Disclosure Schedule. None of
the Acquired Corporations or, to the Knowledge of the Company (with respect to
any business or assets transferred directly or indirectly to any of the Acquired
Corporations), Predecessor Corporations, has received any written notice or (to
the Knowledge of the Company) other communication from any Governmental Body
regarding (a) any actual or alleged violation of or failure to comply with any
term or requirement of any material Governmental Authorization, or (b) any
actual or alleged revocation, withdrawal, suspension, cancellation, termination
or modification of any material Governmental Authorization. No Governmental Body
has at any time challenged in writing the right of any of the Acquired
Corporations to design, manufacture, license, offer or sell any of its products
or services.

 

(c) Except as set forth in Part 2.12(c) of the Disclosure Schedule, each of the
Acquired Corporations is, and each of the Acquired Corporations and (with
respect to any business or assets transferred directly or indirectly to any of
the Acquired Corporations) Predecessor Corporations has at all times been, in
compliance in all material respects with all Legal Requirements relating to the
export, re-export, import and transfer of products, commodities, services and
technology from the jurisdiction of one Governmental Body to another.

 

2.13 Certain Business Practices. None of the Acquired Corporations and (to the
Knowledge of the Company) no director, officer, agent or employee of any of the
Acquired Corporations, has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, or (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

2.14 Tax Matters.

 

(a) Each of the Tax Returns required to be filed by or on behalf of the
respective Acquired Corporations with any Governmental Body with respect to any
taxable period ending on or before the Closing Date (the “Company Returns”) (i)
has been or will be filed on or before the applicable due date (including any
extensions of such due date), and (ii) was, or will be when filed, complete and
accurate and prepared in all material respects in compliance with all applicable
Legal Requirements. Each of the Acquired Corporations (A) has timely withheld
proper and accurate amounts from its employees, independent contractors,
customers, stockholders and other Persons from whom it is or was required to
withhold Taxes in

 

23.

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

compliance with all applicable Legal Requirements, and (B) has timely paid all
amounts so withheld to the appropriate Governmental Bodies. All Tax amounts due
on or before the Closing Date have been or will be paid on or before the Closing
Date (whether or not shown on an Company Return). The Company has delivered to
Parent accurate and complete copies of all Company Returns.

 

(b) The Company Financial Statements fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof in
accordance with GAAP. Each Acquired Corporation will establish, in the ordinary
course of business and consistent with its past practices, reserves adequate for
the payment of all Taxes for the period from March 31, 2005 through the Closing
Date. For the period from March 31, 2005 through the Closing Date, none of the
Acquired Corporations has incurred or will incur any liability arising from
extraordinary gains or losses (as that term is used in GAAP) outside the
ordinary course of business or inconsistent with past practice.

 

(c) No Company Return has ever been examined or audited by any Governmental
Body. Except as set forth in Part 2.14(c) of the Disclosure Schedule, no
extension or waiver of the limitation period applicable to any of the Company
Returns has been granted (by the Company or any other Person), and no such
extension or waiver has been requested from any Acquired Corporation.

 

(d) Except as set forth in Part 2.14(d) of the Disclosure Schedule, no claim or
Legal Proceeding is pending or, to the Knowledge of the Company, has been
threatened against or with respect to any Acquired Corporation in respect of any
Tax, nor has any of the Acquired Corporations received from any Governmental
Body in any jurisdiction (including jurisdictions where the Acquired Companies
have not filed Tax Returns) any (i) notice indicating an intent to open an audit
or other review, (ii) request for information related to Tax matters, or (iii)
notice of deficiency or proposed adjustment for any amount of Tax proposed,
asserted or assessed by any taxing authority or other Governmental Body against
any Acquired Corporation. There are no unsatisfied liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to any notice of deficiency or similar document
received by any Acquired Corporation with respect to any Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by the Acquired Corporations
and with respect to which adequate reserves for payment have been established on
the Interim Balance Sheet). There are no liens for Taxes upon any of the assets
of any of the Acquired Corporations except liens for current Taxes not yet due
and payable. None of the Acquired Corporations 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 Legal
Requirement) as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing. None of the Acquired Corporations has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. None of the Acquired Corporations has made any
distribution of stock of any controlled corporation, as that term is defined in
Section 355(a)(1) of the Code or had its stock distributed by another Person, in
a transaction that was purported or intended to be governed in whole or in part
by Sections 355 and 361 of the Code. The Acquired Corporations (i) have been

 

24.

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

members of an affiliated group within the meaning of Section 1504 of the Code
and (ii) have filed or been included in a combined, consolidated or unitary
income Tax Return. Except with respect to such affiliated group, none of the
Acquired Corporations has any liability for the Taxes of any Person under
Section 1.1502-6 of the Treasury Regulations under the Code (or any similar
Legal Requirement) as a transferee or successor, by Contract or otherwise.

 

(e) None of the Acquired Corporations will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any (i)
change in method of accounting for a taxable period ending on or prior to the
Closing Date, (ii) “closing agreement” as described in Section 7121 of the Code
(or any corresponding or similar Legal Requirement) executed on or prior to the
Closing Date, (iii) intercompany transaction or excess loss account described in
the Treasury Regulations under Section 1502 of the Code (or any corresponding or
similar Legal Requirement), (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.

 

(f) Each of the Acquired Corporations has disclosed in its Company Returns any
Tax reporting position taken in any Company Return which could result in the
imposition of penalties under Section 6662 of the Code or any comparable Legal
Requirement.

 

(g) None of the Acquired Corporations has consummated or participated in, or is
currently participating in, any transaction that was or is a “Tax shelter”
transaction as defined in Section 6662, 6011, 6012 or 6111 of the Code or the
Treasury Regulations promulgated thereunder.

 

(h) Part 2.14(h) of the Disclosure Schedule identifies the amount of any
deferred gain or loss of any Acquired Corporation arising out of any
intercompany transaction.

 

(i) The Company has provided Parent with accurate and complete copies of all
documentation relating to any Tax holidays or incentives relating or available
to any Acquired Corporation. Neither the Merger nor any of the other
Contemplated Transactions will have an adverse effect on the availability of any
such Tax holiday or incentive.

 

(j) Except as set forth in Part 2.14(j) of the Disclosure Schedule, none of the
Acquired Corporations is involved in or subject to any joint venture,
partnership or other Contract which is treated as a partnership for federal,
state, local or foreign income Tax purposes.

 

(k) Part 2.14(k) of the Disclosure Schedule accurately describes all material
elections with respect to Taxes affecting any of the Acquired Corporations.

 

(l) Except as set forth in Part 2.14(l) of the Disclosure Schedule, there is no
Contract covering any Company Employee that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162(m) of the
Code (or any comparable Legal Requirement). None of

 

25.

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

the Acquired Corporations is, or has ever been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract other than the Tax Allocation Agreement, of even date herewith, between
the Company and The Canopy Group, Inc. (the “Tax Allocation Agreement”).

 

2.15 Employee and Labor Matters; Benefit Plans.

 

(a) Part 2.15(a) of the Disclosure Schedule sets forth, with respect to each
employee of each of the Acquired Corporations (including any such employee who
is on a leave of absence) as of the date of this Agreement:

 

(i) the name of such employee, the Acquired Corporation by which such employee
is employed and the date as of which such employee was originally hired by such
Acquired Corporation;

 

(ii) such employee’s title;

 

(iii) the aggregate dollar amount of the compensation (including wages, salary,
commissions, director’s fees, fringe benefits, bonuses, profit-sharing payments
and other payments or benefits of any type) received by or payable to such
employee with respect to services performed in 2004;

 

(iv) such employee’s annualized compensation as of the date of this Agreement;
and

 

(v) any Governmental Authorization that is held by such employee and that is
necessary for the operation of the business of any of the Acquired Corporations.

 

(b) Part 2.15(b) of the Disclosure Schedule accurately identifies as of the date
of this Agreement each former employee of any of the Acquired Corporations who
is receiving or is scheduled to receive (or whose spouse or other dependent is
receiving or is scheduled to receive) any benefits (whether from any of the
Acquired Corporations or otherwise) relating to such former employee’s
employment with any of the Acquired Corporations; and Part 2.15(b) of the
Disclosure Schedule accurately describes such benefits.

 

(c) Except as set forth in Part 2.15(c) of the Disclosure Schedule, the
employment of each of the Acquired Corporations’ employees is terminable by the
applicable Acquired Corporation at will, without payment of severance or other
termination benefits. The Company has delivered to Parent accurate and complete
copies of all employee manuals and handbooks, disclosure materials, policy
statements and other materials relating to the employment of the current and
former employees of each of the Acquired Corporations.

 

(d) To the Knowledge of the Company as of the date of this Agreement: (i) no
employee of any of the Acquired Corporations intends to terminate his employment
with the Company prior to the Closing Date or as a result of the Merger; (ii) no
employee of any of the Acquired Corporations has received an offer to join a
business that may be competitive with the

 

26.

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

business of any Acquired Corporation; and (iii) no employee of any of the
Acquired Corporations is a party to or is bound by any confidentiality
agreement, noncompetition agreement or other Contract (with any Person) that may
have a material adverse effect on: (A) the performance by such employee of any
of his duties or responsibilities as an employee of such Acquired Corporation;
or (B) the business or operations of any Acquired Corporation.

 

(e) Part 2.15(e) of the Disclosure Schedule accurately sets forth, with respect
to each independent contractor of any of the Acquired Corporations as of the
date of this Agreement:

 

(i) the name of such independent contractor and the date as of which such
independent contractor was originally hired by the applicable Acquired
Corporation;

 

(ii) a description of such independent contractor’s duties and responsibilities;

 

(iii) the aggregate dollar amount of the compensation (including all payments or
benefits of any type) received by such independent contractor from the
applicable Acquired Corporation with respect to services performed in 2004;

 

(iv) the terms of compensation of such independent contractor; and

 

(v) any Governmental Authorization that is held by such independent contractor
and that is necessary for the operation of the business of any Acquired
Corporation.

 

None of the current or former independent contractors of any of the Acquired
Corporations could be reclassified as an employee. No independent contractors of
any Acquired Corporation have provided services to any of the Acquired
Corporations or any Company Affiliate for a period of six consecutive months or
longer. None of the Acquired Corporations has ever had any temporary or leased
employees. No independent contractor of any Acquired Corporation is eligible to
participate in any Company Employee Plan.

 

(f) Except as set forth in Part 2.15(f) of the Disclosure Schedule, none of the
Acquired Corporations is a party to or bound by, and none of the Acquired
Corporations has ever been a party to or bound by, any employment agreement
(other than any such agreement relating to at-will employment) or any union
contract, collective bargaining agreement or similar Contract.

 

(g) None of the Acquired Corporations is and none of the Acquired Corporations
has ever been engaged, in any unfair labor practice of any nature. There has
never been any slowdown, work stoppage, labor dispute or union organizing
activity, or any similar activity or dispute, affecting any of the Acquired
Corporations or any of their employees. There is not now pending, and to the
Knowledge of the Company no Person has threatened to commence, any such
slowdown, work stoppage, labor dispute or union organizing activity or any
similar activity or dispute. To the Knowledge of the Company, no event has
occurred, and no condition or circumstance exists, that might directly or
indirectly give rise to or provide a basis

 

27.

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

for the commencement of any such slowdown, work stoppage, labor dispute or union
organizing activity or any similar activity or dispute. There are no actions,
suits, claims, labor disputes or grievances pending or, to the Knowledge of the
Company, threatened relating to any labor, safety or discrimination matters
involving any Company Employee, including charges of unfair labor practices or
discrimination complaints.

 

(h) Part 2.15(h) of the Disclosure Schedule contains an accurate and complete
list as of the date hereof of each Company Employee Plan and each Company
Employee Agreement. None of the Acquired Corporations intends or has agreed or
committed to (i) establish or enter into any new Company Employee Plan or
Company Employee Agreement, or (ii) to modify any Company Employee Plan or
Company Employee Agreement (except to conform any such Company Employee Plan or
Company Employee Agreement to the requirements of any applicable Legal
Requirements, in each case as previously disclosed to Parent in writing).

 

(i) The Company has delivered to Parent accurate and complete copies of: (i) all
documents setting forth the terms of each Company Employee Plan and each Company
Employee Agreement, including all amendments thereto and all related trust
documents; (ii) the three most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA, the Code or any other applicable Legal Requirement in connection with
each Company Employee Plan; (iii) for each Company Employee Plan that is subject
to the minimum funding standards of Section 302 of ERISA, the most recent annual
and periodic accounting of Company Employee Plan assets; (iv) the most recent
summary plan description together with the summaries of material modifications
thereto, if any, required under ERISA with respect to each Company Employee
Plan; (v) all material written Contracts relating to each Company Employee Plan,
including administrative service agreements and group insurance contracts; (vi)
all written materials provided to any Company Employee relating to any Company
Employee Plan and any proposed Company Employee Plan, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events that
would result in any liability to any of the Acquired Corporations or any Company
Affiliate; (vii) all written correspondence to or from any Governmental Body
relating to any Company Employee Plan; (viii) all COBRA forms and related
notices; (ix) all insurance policies in the possession of any of the Acquired
Corporations or any Company Affiliate pertaining to fiduciary liability
insurance covering the fiduciaries for each Company Employee Plan; (x) all
discrimination tests required under the Code for each Company Employee Plan
intended to be qualified under Section 401(a) of the Code for the three most
recent plan years; and (xi) the most recent IRS determination or opinion letter
issued with respect to each Company Employee Plan intended to be qualified under
Section 401(a) of the Code.

 

(j) Each of the Acquired Corporations and Company Affiliates has performed in
all material respects all material obligations required to be performed by it
under each Company Employee Plan. No Acquired Corporation or Company Affiliate
is in default or violation of in any material respect, and the Company has no
Knowledge of any default or violation in any material respect by any other party
to, the terms of any Company Employee Plan. Except as set forth in Part 2.15(j)
of the Disclosure Schedule, each Company Employee

 

28.

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

Plan has been established and maintained substantially in accordance with its
terms and in substantial compliance with all applicable Legal Requirements,
including ERISA and the Code. Except as set forth in Part 2.15(j) of the
Disclosure Schedule, any Company Employee Plan intended to be qualified under
Section 401(a) of the Code has obtained a favorable determination letter (or
opinion letter, if applicable) as to its qualified status under the Code. No
“prohibited transaction,” within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, that is not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Company Employee Plan. There are no
claims or Legal Proceedings pending, or, to the Knowledge of the Company,
threatened (other than routine claims for benefits), against any Company
Employee Plan or against the assets of any Company Employee Plan. Each Company
Employee Plan (other than any Company Employee Plan to be terminated prior to
the Closing in accordance with this Agreement) can be amended, terminated or
otherwise discontinued after the Closing in accordance with its terms, without
liability to Parent, any of the Acquired Corporations or any Company Affiliate
(other than ordinary administration expenses and any obligations arising from
prior operation of such plan), subject to applicable Legal Requirements. There
are no audits, inquiries or Legal Proceedings pending or, to the Knowledge of
the Company, threatened by the IRS, the DOL, or any other Governmental Body with
respect to any Company Employee Plan. No Acquired Corporation, and no Company
Affiliate, has ever incurred any penalty or tax with respect to any Company
Employee Plan under Section 502(i) of ERISA, under Sections 4975 through 4980 of
the Code or under any other applicable Legal Requirement. Each of the Acquired
Corporations and Company Affiliates have timely made all contributions and other
payments required by and due under the terms of each Company Employee Plan.
Except as set forth in Part 2.15(j) of the Disclosure Schedule, no Company
Employee Agreement and no Company Employee Plan can reasonably be expected to
result in gross income inclusion pursuant to Section 409A(a)(1)(A) of the Code
after the Effective Time.

 

(k) No Acquired Corporation, and no Company Affiliate, has ever maintained,
established, sponsored, participated in, or contributed to any: (i) Company
Pension Plan subject to Title IV of ERISA; (ii) “multiemployer plan” within the
meaning of Section (3)(37) of ERISA; or (iii) Company Pension Plan in which
stock of any of the Acquired Corporations or any Company Affiliate is or was
held as a plan asset. The fair market value of the assets of each funded Foreign
Plan, the liability of each insurer for any Foreign Plan funded through
insurance, or the book reserve established for any Foreign Plan, together with
any accrued contributions, is sufficient to procure or provide in full for the
accrued benefit obligations with respect to all current and former participants
in such Foreign Plan according to the actuarial assumptions and valuations most
recently used to determine employer contributions to and obligations under such
Foreign Plan, and no Contemplated Transaction shall cause any such assets or
insurance obligations to be less than such benefit obligations.

 

(l) No Company Employee Plan provides (except at no cost to the Acquired
Corporations or any Company Affiliate), or reflects or represents any liability
of any of the Acquired Corporations or any Company Affiliate to provide, retiree
life insurance, retiree health benefits or other retiree employee welfare
benefits to any Person for any reason, except as may be required by COBRA or
other applicable Legal Requirements. Other than commitments made that involve no
future costs to any of the Acquired Corporations or any Company Affiliate, no

 

29.

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

Acquired Corporation, and no Company Affiliate, has ever represented, promised
or contracted (whether in oral or written form) to any Company Employee (either
individually or to Company Employees as a group) or any other Person that any
such Company Employee or other Person would be provided with retiree life
insurance, retiree health benefits or other retiree employee welfare benefits,
except to the extent required by applicable Legal Requirements.

 

(m) Except as set forth in Part 2.15(m) of the Disclosure Schedule, and except
as expressly required or provided by this Agreement, neither the execution or
delivery of this Agreement nor the consummation of any of the Contemplated
Transactions will (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any Company Employee Plan, Company
Employee Agreement, trust or loan that will or may result (either alone or in
connection with any other circumstance or event) in any payment (whether of
severance pay or otherwise), acceleration of any right, obligation or benefit,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Company Employee.

 

(n) Except as set forth in Part 2.15(n) of the Disclosure Schedule, no Acquired
Corporation, and no Company Affiliate: (i) has violated or otherwise failed to
comply in any material respect with any Legal Requirement respecting employment,
employment practices, terms and conditions of employment or wages and hours,
including the health care continuation requirements of COBRA, the requirements
of FMLA, the requirements of HIPAA and the provisions of any similar Legal
Requirement; (ii) has failed to withhold or report any amounts required by
applicable Legal Requirements or by Contract to be withheld or reported with
respect to wages, salaries and other payments to Company Employees; (iii) is
liable for any arrears of wages or any taxes or any penalty for failure to
comply with the Legal Requirements applicable to any of the foregoing; and (iv)
is liable for any payment to any trust or other fund governed by or maintained
by or on behalf of any Governmental Body with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Company Employees (other than routine payments to be made in the normal course
of business and consistent with past practice). There are no pending or, to the
Knowledge of the Company, threatened or reasonably anticipated claims or Legal
Proceedings against any of the Acquired Corporations or any Company Affiliate
under any worker’s compensation policy or long-term disability policy.

 

2.16 Environmental Matters. Each of the Acquired Corporations possesses all
permits and other Governmental Authorizations required under applicable
Environmental Laws, and is in material compliance with the terms and conditions
thereof. None of the Acquired Corporations has received any written notice or
(to the Knowledge of the Company) other communication, whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that any
of the Acquired Corporations is not in compliance with any Environmental Law. To
the Knowledge of the Company, (a) all property that is leased to, controlled by
or used by any of the Acquired Corporations, and all surface water, groundwater
and soil associated with or adjacent to such property, is free of any material
environmental contamination of any nature, (b) none of the real property leased
to, controlled by or used by any of the Acquired Corporations contains any
underground storage tanks, asbestos, equipment using PCBs, underground injection
wells, and (c) none of the property leased to, controlled by or used by any of
the Acquired

 

30.

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

Corporations contains any septic tanks in which process wastewater or any
Materials of Environmental Concern have been disposed of. No Acquired
Corporation has ever sent or transported, or arranged to send or transport, any
Materials of Environmental Concern to a site that, pursuant to any applicable
Environmental Law, (i) has been placed on the “National Priorities List” of
hazardous waste sites or any similar state list, (ii) is otherwise designated or
identified as a potential site for remediation, cleanup, closure or other
environmental remedial activity, or (iii) is subject to a Legal Requirement to
take “removal” or “remedial” action as detailed in any applicable Environmental
Law or to make payment for the cost of cleaning up any site.

 

2.17 Insurance. Part 2.17 of the Disclosure Schedule identifies each insurance
policy maintained by, at the expense of or for the benefit of any of the
Acquired Corporations and identifies any material claims (including any workers’
compensation claims) made with respect to any of the Acquired Corporations
thereunder, and the Company has delivered to Parent accurate and complete copies
of the insurance policies identified in Part 2.17 of the Disclosure Schedule.
Each of the insurance policies identified in Part 2.17 of the Disclosure
Schedule is in full force and effect. None of the Acquired Corporations has
received any written notice or (to the Knowledge of the Company) other
communication regarding any actual or possible (a) cancellation or invalidation
of any insurance policy identified or required to be identified in Part 2.17 of
the Disclosure Schedule, (b) refusal of any coverage or rejection of any claim
under any insurance policy identified or required to be identified in Part 2.17
of the Disclosure Schedule, or (c) material adjustment in the amount of the
premiums payable with respect to any insurance policy identified or required to
be identified in Part 2.17 of the Disclosure Schedule.

 

2.18 Related Party Transactions. Except as set forth in Part 2.18 of the
Disclosure Schedule: (a) no Related Party has, and to the Knowledge of the
Company no Related Party has had since January 1, 2002, any direct or indirect
interest in any material asset currently used in or otherwise relating to the
business of any of the Acquired Corporations; (b) no Related Party is, or to the
Knowledge of the Company has been since January 1, 2002, indebted to any of the
Acquired Corporations; (c) no Related Party is a party to, and to the Knowledge
of the Company no Related Party has entered into or has had since January 1,
2002 any direct or indirect financial interest in, any material Contract,
transaction or business dealing involving any of the Acquired Corporations; (d)
no Related Party is competing, or to the Knowledge of the Company has competed
since January 1, 2002, directly or indirectly, with any of the Acquired
Corporations; and (e) no Related Party has any claim or right against any of the
Acquired Corporations (other than rights as a stockholder of the Company, rights
under Company Options and rights to receive compensation for services performed
as an employee of the Company). (For purposes of this Agreement, each of the
following shall be deemed to be a “Related Party”: (i) each of the Key
Stockholders; (ii) each individual who is, or who has at any time been, an
officer or director of any of the Acquired Corporations; (iii) each member of
the immediate family of each of the Person referred to in clauses “(i)” and
“(ii)” above; and (iv) any trust or other Entity (other than the Company) in
which any one of the Persons referred to in clauses “(i)”, “(ii)” and “(iii)”
above holds (or in which more than one of such individuals collectively hold),
beneficially or otherwise, at least 20% of the voting, proprietary or equity
interests.)

 

31.

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

2.19 Legal Proceedings; Orders.

 

(a) There is no pending Legal Proceeding, and, to the Knowledge of the Company,
no Person has threatened to commence any Legal Proceeding: (i) that involves any
of the Acquired Corporations, any Related Party by reason of an act or omission
involving any of the Acquired Corporations or by reason of the fact that such
Related Party is or was an agent of an Acquired Corporation, or any of the
material assets owned or used by any of the Acquired Corporations; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other Contemplated
Transactions.

 

(b) There is no Order to which any of the Acquired Corporations, or any of the
material assets owned or used by any of the Acquired Corporations, is subject.
To the Knowledge of the Company, no officer or key employee of any of the
Acquired Corporations is subject to any Order that prohibits such officer or
other employee from engaging in or continuing any conduct, activity or practice
relating to the business of any of the Acquired Corporations.

 

2.20 Authority; Binding Nature of Agreement. The Company has the corporate power
and authority to enter into and to perform its obligations under this Agreement
and each other Contract expressly contemplated by this Agreement to be entered
into by the Company in connection with the Merger. The board of directors of the
Company has (a) unanimously determined that the Merger is advisable and fair and
in the best interests of the Company and its stockholders, (b) unanimously
authorized and approved the execution, delivery and performance of this
Agreement by the Company and unanimously approved the Merger, and (c)
unanimously recommended the approval of this Agreement by the holders of Company
Capital Stock and directed that this Agreement and the Merger be submitted for
consideration by the Company’s stockholders. This Agreement constitutes the
legal, valid and binding obligation of the Company, and such other Contracts,
when executed and delivered by the Company will constitute the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, reorganization, moratorium and the enforcement of
creditors’ rights generally, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.

 

2.21 Non-Contravention; Consents. Except as set forth in Part 2.21 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other Contracts contemplated by this Agreement to be
executed by the Company in connection with the Merger, nor (2) the consummation
of the Merger or any of the other Contemplated Transactions will directly or
indirectly (with or without notice or lapse of time):

 

(a) contravene, conflict with or result in a violation of (i) any of the
provisions of the articles of incorporation, bylaws or other charter or
organizational documents of any of the Acquired Corporations, or (ii) any
resolution adopted by the stockholders, the board of directors or any committee
of the board of directors of any of the Acquired Corporations;

 

(b) contravene, conflict with or result in a material violation of, or give any
Governmental Body or other Person the right to challenge the Merger or any of
the other

 

32.

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

Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any of the Acquired Corporations, or
any of the material assets owned or used by any of the Acquired Corporations, is
subject;

 

(c) contravene, conflict with or result in a material violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by any of the Acquired Corporations;

 

(d) contravene, conflict with or result in a material violation or breach of, or
result in a material default under, any provision of any Material Contract, or
give any Person the right to (i) declare a default or exercise any remedy under
any such Material Contract, (ii) a rebate, chargeback, penalty or change in
delivery schedule under any Material Contract, (iii) accelerate the maturity or
performance of any obligation under any Material Contract, or (iv) cancel,
terminate or modify any material term of any Material Contract;

 

(e) result in the imposition or creation of any Encumbrance upon or with respect
to any material asset owned or used by any of the Acquired Corporations (except
for liens that will not, in any case or in the aggregate, materially detract
from the value of the assets subject thereto or materially impair the operations
of any of the Acquired Corporations); or

 

(f) result in, or increase the likelihood of, the disclosure or delivery to any
escrowholder or other Person of any source code for any Company Software, or the
transfer of any material asset of any of the Acquired Corporations to any
Person.

 

Except as may be required by the UBCA or the HSR Act, and except as set forth in
Part 2.21 of the Disclosure Schedule, none of the Acquired Corporations is or
will be required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement by the Company or any of the other Contemplated
Transactions, or (y) the consummation by the Company of the Merger or any of the
other Contemplated Transactions. (For purposes of this Agreement, an Acquired
Corporation will be deemed to be “required” to obtain a Consent if the failure
to obtain such Consent (i) could reasonably be expected to result in the
imposition of any material liability or obligation on, or the material expansion
of any liability or obligation of, any of the Acquired Corporations, (ii) could
reasonably be expected to result in the termination, modification or limitation
of any contractual or other right of any of the Acquired Corporations, or (iii)
could reasonably be expected to result in a Material Adverse Effect.)

 

2.22 Vote Required.

 

(a) The affirmative votes of the holders of (i) a majority of the outstanding
shares of Company Common Stock and Company Preferred Stock, voting together as a
single class, and (ii) eighty percent (80%) of the outstanding shares of Company
Preferred Stock (the votes referred to in clauses “(i)” and “(ii)” of this
sentence being referred to collectively as the “Required Company Stockholder
Vote”) are the only votes of the holders of any class or series of the Company’s
capital stock necessary to adopt this Agreement and approve the Merger and the
other Contemplated Transactions.

 

33.

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

(b) The Key Stockholders collectively own of record (and will continue to own of
record through the Closing) a sufficient number of shares of Company Capital
Stock to obtain the Required Company Stockholder Vote.

 

2.23 Financial Advisor. No broker, finder or investment banker is entitled to
any brokerage, finder’s or other fee or commission in connection with the Merger
or any of the other Contemplated Transactions based upon arrangements made by or
on behalf of any of the Acquired Corporations.

 

2.24 Full Disclosure. This Agreement (including the Disclosure Schedule) does
not, and none of the certificates referred to in Section 7 or the other
Contracts delivered to Parent in connection with the Contemplated Transactions
will, (i) contain any representation, warranty or information that is false or
misleading with respect to any material fact, or (ii) omit to state any material
fact necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.

 

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE KEY STOCKHOLDERS

 

Except as otherwise set forth on the numbered or lettered Part of the Disclosure
Schedule corresponding to each representation or warranty below, or as otherwise
set forth elsewhere in the Disclosure Schedule where it is readily apparent from
such disclosure that such information is applicable to such representation or
warranty below, each Key Stockholder (as to such Key Stockholder but not as to
any other Key Stockholder or other Person) represents and warrants, to and for
the benefit of the Indemnitees, as follows:

 

3.1 Power and Capacity, etc. Such Key Stockholder has all necessary power,
capacity and authority to execute and deliver this Agreement and each of the Key
Stockholder Transaction Agreements, and to perform such Key Stockholder’s
obligations hereunder and thereunder. This Agreement has been duly authorized
and duly executed and delivered by such Key Stockholder and constitutes the
legal, valid and binding obligation of such Key Stockholder, enforceable against
such Key Stockholder in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency, reorganization,
moratorium and the enforcement of creditors’ rights generally, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies. The other Key Stockholder Transaction Agreements, when executed and
delivered by such Key Stockholder, will constitute the legal, valid and binding
obligations of such Key Stockholder, enforceable against such Key Stockholder in
accordance with their terms, subject to (i) laws of general application relating
to bankruptcy, insolvency, reorganization, moratorium and the enforcement of
creditors’ rights generally, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.

 

34.

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

3.2 No Conflicts or Consents. The execution and delivery of this Agreement and
each of the Key Stockholder Transaction Agreements by such Key Stockholder does
not and will not, and the performance of this Agreement and each of the Key
Stockholder Transaction Agreements by such Key Stockholder will not: (i)
conflict with or violate any Legal Requirement or Order applicable to such Key
Stockholder or by which such Key Stockholder is or may become bound or affected;
or (ii) result in or constitute (with or without notice or lapse of time) any
breach of or default under, or result (with or without notice or lapse of time)
in the creation of any Encumbrance on any of the shares of Company Capital Stock
or other securities of the Company held by such Key Stockholder pursuant to, any
Contract to which such Key Stockholder is a party or by which such Key
Stockholder is or may become bound or affected. The execution and delivery of
this Agreement and each of the Key Stockholder Transaction Agreements by such
Key Stockholder does not and will not, and the performance of this Agreement and
each of the Key Stockholder Transaction Agreements by such Key Stockholder will
not, require any Consent of any Person.

 

3.3 Due Organization, Etc. If such Key Stockholder is an Entity: (a) such Key
Stockholder is duly organized, validly existing and in good standing under the
laws of the jurisdiction under which it is organized; (b) the execution and
delivery of this Agreement and each of the Key Stockholder Transaction
Agreements by such Key Stockholder have been duly authorized by all necessary
action on the part of the board of directors or other applicable management
group of such Key Stockholder or other Persons performing similar functions; and
(c) the execution and delivery of this Agreement and each of the Key Stockholder
Transaction Agreements by such Key Stockholder does not and will not, and the
performance of this Agreement and each of the Key Stockholder Transaction
Agreements by such Key Stockholder will not, (i) result in or constitute any
breach of or default under the partnership agreement or other organizational
documents of such Key Stockholder, or (ii) require the approval of holders of
voting or equity interests in such Key Stockholder, other than approvals that
have been or will be obtained prior to the Closing.

 

3.4 Title to Securities. Such Key Stockholder owns beneficially and of record,
and has good and valid title (free and clear of any Encumbrances) to, the shares
of Company Capital Stock described opposite such Key Stockholder’s name in Part
3.4 of the Disclosure Schedule, and such Key Stockholder does not directly or
indirectly own any shares of capital stock or other securities of any of the
Acquired Corporations, or any option, warrant or other right to acquire (by
purchase, conversion or otherwise) any shares of capital stock or other
securities of any of the Acquired Corporations, other than the shares described
opposite such Key Stockholder’s name in Part 3.4 of the Disclosure Schedule.

 

3.5 Capacity; Legal Proceedings.

 

(a) Such Key Stockholder has the capacity to comply with and perform all of such
Key Stockholder’s covenants and obligations under this Agreement and each of the
Key Stockholder Transaction Agreements.

 

35.

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

(b) Such Key Stockholder (and if such Key Stockholder is a partnership, such Key
Stockholder’s general partner):

 

(i) has not, at any time, (A) made a general assignment for the benefit of
creditors, (B) filed, or had filed against him or it, any bankruptcy petition or
similar filing,

(C) suffered the attachment or other judicial seizure of all or a substantial
portion of his or its assets, (D) admitted in writing his or its inability to
pay his or its debts as they become due, (E) been convicted of, or pleaded
guilty to, any felony, or (F) taken or been the subject of any action that may
have an adverse effect on such Key Stockholder’s ability to comply with or
perform any of such Key Stockholder’s covenants or obligations under this
Agreement or any of the Key Stockholder Transaction Agreements; and

 

(ii) is not subject to any Legal Requirement or Order that may have an adverse
effect on his, her or its ability to comply with or perform any of his, her or
its covenants or obligations under this Agreement or any of the Key Stockholder
Transaction Agreements.

 

(c) There is no Legal Proceeding pending, and, to such Key Stockholder’s
Knowledge, no Person has threatened to commence any Legal Proceeding, that (i)
involves such Key Stockholders by reason of an act or omission involving any of
the Acquired Corporations or by reason of the fact that such Key Stockholder is
or was an agent or stockholder of an Acquired Corporation, or any of the assets
owned or used by any of the Acquired Corporations, or (ii) may have or result in
an adverse effect on the ability of such Key Stockholder to comply with or
perform any of such Key Stockholder’s covenants or obligations under this
Agreement or the Key Stockholder Transaction Agreements.

 

SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

Parent and Merger Sub represent and warrant to the Company as follows:

 

4.1 Authority; Binding Nature of Agreement. Each of Parent and Merger Sub has
the corporate power and authority to enter into and to perform its obligations
under this Agreement and each other Contract contemplated by this Agreement to
be entered into by Parent or Merger Sub in connection with the Merger; and the
execution, delivery and performance by Parent and Merger Sub of this Agreement
have been duly authorized by all necessary action on the part of Parent and
Merger Sub and their respective boards of directors. This Agreement constitutes
the legal, valid and binding obligation of Parent and Merger Sub, and such other
Contracts, when executed and delivered by Parent or Merger Sub will constitute
the legal, valid and binding obligation of Parent and Merger Sub, enforceable
against them in accordance with their respective terms, subject to (i) laws of
general application relating to bankruptcy, insolvency, reorganization,
moratorium and the enforcement of creditors’ rights generally, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.

 

4.2 Valid Existence. Each of Parent and Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.

 

4.3 Non-Contravention; Consents. Neither (1) the execution, delivery or
performance of this Agreement or any of the other Contracts contemplated by this
Agreement to

 

36.

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

be executed by Parent or Merger Sub in connection with the Merger, nor (2) the
consummation of the Merger or any of the other Contemplated Transactions will
directly or indirectly (with or without notice or lapse of time):

 

(a) contravene, conflict with or result in a violation of (i) any of the
provisions of the certificate of incorporation, bylaws or other charter or
organizational documents of Parent or Merger Sub, or (ii) any resolution adopted
by the stockholders, the board of directors or any committee of the board of
directors of Parent or Merger Sub; or

 

(b) give any Governmental Body or other Person the right to challenge the Merger
or any of the other Contemplated Transactions under any Legal Requirement or any
Order to which Parent or Merger Sub are subject.

 

Except as may be required by the UBCA or the HSR Act, neither Parent nor Merger
Sub will be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement by Parent or Merger Sub or any of the other
Contemplated Transactions, or (y) the consummation by Parent or Merger Sub of
the Merger or any of the other Contemplated Transactions.

 

4.4 Financing. Parent has on the date of this Agreement, and as of the Effective
Time will have, sufficient cash, available lines of credit or other sources of
readily available funds to enable it to pay all amounts required to be paid
pursuant to Section 1 and to effect the Merger and the other Contemplated
Transactions.

 

SECTION 5. CERTAIN COVENANTS OF THE COMPANY AND THE KEY STOCKHOLDERS

 

The Company (as to the Acquired Corporations but not as to any other Person) and
each Key Stockholder (as to such Key Stockholder but not as to any other Key
Stockholder or other Person) hereby covenant as follows:

 

5.1 Access and Investigation. During the Pre-Closing Period, the Company shall,
and shall cause the Representatives of each of the Acquired Corporations to: (a)
provide Parent and Parent’s Representatives with reasonable access to the
Representatives, personnel and assets of the Acquired Corporations and to all
existing books, records, Tax Returns, work papers, Company Contracts and other
documents and information relating to the Acquired Corporations; and (b) provide
Parent and Parent’s Representatives with copies of such existing books, records,
Tax Returns, work papers, Company Contracts and other documents and information
relating to the Acquired Corporations, and with such additional financial,
operating and other data and information regarding the Acquired Corporations, as
Parent may reasonably request. Without limiting the generality of the previous
sentence, (i) within 15 days after the end of each calendar month during the
Pre-Closing Period, the Company shall deliver to Parent (A) a consolidated
balance sheet of the Company as of the last day of such calendar month, (B) a
statement of income for such calendar month and for the period from December 31,
2004 through the end of such calendar month, and (C) a certificate executed by
the Company’s Chief Executive Officer and Chief Financial Officer confirming
that such financial statements fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of

 

37.

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

the date thereof and the results of operations and cash flows of the Company and
its consolidated Subsidiaries for the periods covered thereby, and have been
prepared from and in a manner consistent with and that accurately reflect the
books and records of the Company throughout the periods covered and on a basis
consistent with the basis on which the Company Financial Statements were
prepared, and (ii) during the Pre-Closing Period, the Company shall, and shall
cause the Representatives of each of the Acquired Corporations to, permit
Parent’s senior officers to meet with the controller and other officers of the
Acquired Corporations responsible for the Company’s financial statements, the
internal controls of the Acquired Corporations and the disclosure controls and
procedures of the Acquired Corporations to discuss such matters as Parent may
deem necessary or appropriate for Parent to satisfy its obligations under the
Sarbanes-Oxley Act of 2002 and the rules and regulations relating thereto.
Notwithstanding anything contained in this Section 5.1 to the contrary, Parent
and Parent’s Representatives shall perform the activities referred to in this
Section 5 in such a manner intended not to interfere unreasonably with the
operation of the businesses of the Acquired Corporations.

 

5.2 Operation of the Company’s Business.

 

(a) During the Pre-Closing Period, except as set forth in Schedule 5.2: (i) the
Company shall ensure that each of the Acquired Corporations conducts its
business and operations (A) in the ordinary course and in accordance with past
practices (including not accelerating the collection of receivables or delaying
the payment of payables), and (B) in compliance with all applicable Legal
Requirements and the requirements of each Material Contract; (ii) the Company
shall use commercially reasonable efforts to ensure that each of the Acquired
Corporations preserves intact its current business organization, keeps available
the services of its current officers and key employees and maintains its
relations and goodwill with its material suppliers, customers, development
partners, landlords, creditors, licensors, licensees, key employees and other
Persons having material business relationships with the respective Acquired
Corporations; (iii) the Company shall use commercially reasonable efforts to
keep in full force all insurance policies referred to in Section 2.17 and, if
any such insurance policy is scheduled to expire during the Pre-Closing Period,
the Company shall use commercially reasonable efforts to cause such insurance
policy to be renewed or replaced (on terms and with coverage substantially
equivalent to the terms and coverage of the expiring insurance policy) on or
prior to the date of expiration of such insurance policy; (iv) the Company shall
cause to be provided all notices and support required by any Company Contract
relating to any Intellectual Property or Intellectual Property Right in order to
ensure that no condition under such Company Contract occurs that could result
in, or could increase the likelihood of, (A) any transfer or disclosure by any
Acquired Corporation of the source code for any portion of the Company Software,
or (B) a release from any escrow of any source code for any Company Software
that has been deposited or is required to be deposited in escrow under the terms
of such Company Contract; (v) the Company shall promptly notify Parent of (A)
any written notice or (to the Knowledge of the Company) other communication from
any Person alleging that the Consent of such Person is or may be required in
connection with any of the Contemplated Transactions, and (B) any Legal
Proceeding commenced, or, to the Knowledge of the Company, threatened against,
relating to or involving or otherwise affecting any of the Acquired
Corporations; and (vi) the Company shall (to the extent requested by Parent)
cause its officers and the officers of its Subsidiaries to report to Parent with
reasonable frequency concerning the status of the business of each Acquired
Corporation.

 

38.

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

(b) During the Pre-Closing Period, without the prior written consent of Parent
(which consent shall be deemed to have been provided with respect to each matter
set forth on Schedule 5.2), the Company shall not, and shall not permit any of
the other Acquired Corporations to:

 

(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase, redeem or
otherwise reacquire any shares of capital stock or other securities;

 

(ii) sell, issue, grant or authorize the sale, issuance or grant of (A) any
capital stock or other security, (B) any option or right to acquire any capital
stock or other security, or (C) any instrument convertible into or exchangeable
for any capital stock or other security (except that the Company shall be
permitted to issue Company Common Stock upon the exercise of outstanding Company
Options or upon the conversion of outstanding Company Preferred Stock or upon
the exercise of other outstanding warrants or other securities disclosed to
Parent in writing in Part 2.3 of the Disclosure Schedule);

 

(iii) amend or waive any of its rights under, or accelerate the vesting under,
any provision of any of the Company’s stock option plans, any provision of any
Contract evidencing any outstanding stock option or any restricted stock
purchase agreement, or otherwise modify any of the terms of any outstanding
option, warrant or other security or any related Contract, or fail to exercise
any repurchase right with respect to any shares of Company Capital Stock (unless
Parent consents in writing to the Company failing to exercise any such
repurchase right);

 

(iv) amend or permit the adoption of any amendment to its certificate of
incorporation or bylaws or other charter or organizational documents, or effect
or become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;

 

(v) form any subsidiary or acquire any equity interest or other interest in any
other Entity;

 

(vi) make any capital expenditure (except that the Acquired Corporations may
make capital expenditures that, when added to all other capital expenditures
made on behalf of the Acquired Corporations during the Pre-Closing Period, do
not exceed $30,000 per month);

 

(vii) prepay or accelerate the payment of any obligation or expense (except in
the ordinary course of business);

 

(viii) enter into or become bound by, or permit any of the assets owned or used
by it to become bound by, any Material Contract, or amend or terminate, or waive
or

 

39.

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

exercise any material right or remedy under, any Material Contract (except for
license agreements and other Contracts related to Company Intellectual Property
or Intellectual Property Rights entered in to in the ordinary course of
business);

 

(ix) acquire, lease or license any right or other material asset from any other
Person, or sell or otherwise dispose of, or lease or license, any right or other
material asset to any other Person (except in each case for (A) immaterial
assets acquired, leased, licensed or disposed of by the Company in the ordinary
course of business and consistent with past practices, and (B) licenses granted
by an Acquired Corporation in the ordinary course of business and consistent
with past practices and without significant deviation from the terms set forth
in the Company’s standard form end user license agreement referred to in Section
2.9(b)), or waive or relinquish any material right;

 

(x) lend money to any Person (except that the Company may make routine travel
advances to employees in the ordinary course of business and consistent with
past practices not in excess of $10,000 in the aggregate), or incur or guarantee
any indebtedness for borrowed money);

 

(xi) establish, adopt or amend any employee benefit plan, pay any bonus or make
any profit-sharing or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees;

 

(xii) hire any employee at the level of Vice President or above or with an
annual base salary in excess of $75,000, or promote any employee except in order
to fill a position vacated after the date of this Agreement;

 

(xiii) change in any material respect any of its sales contract terms and
conditions, pricing or discounting policies or practices, product return
policies, product maintenance policies, service policies, product modification
or upgrade policies, personnel policies or other business policies, or any of
its methods of accounting or accounting practices in any respect;

 

(xiv) make any Tax election;

 

(xv) commence or settle any Legal Proceeding;

 

(xvi) enter into any material transaction or take any other material action
outside the ordinary course of business or inconsistent with past practices; or

 

(xvii) agree or commit to take any of the actions described in clauses ”(i)”
through “(xvi)” of this Section 5.2(b).

 

5.3 Notification; Updates to Disclosure Schedule.

 

(a) During the Pre-Closing Period, the Company shall promptly notify Parent in
writing of: (i) the discovery by the Company of any event, condition, fact or
circumstance that

 

40.

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

occurred or existed on or prior to the date of this Agreement and that caused or
constitutes an inaccuracy in or breach of any representation or warranty
contained in Section 2 (such an event, condition, fact or circumstance, a
“Pre-Signing Company Matter”); (ii) any event, condition, fact or circumstance
that first occurs, arises or exists after the date of this Agreement and that
does not also constitute a Pre-Signing Company Matter and that would cause or
constitute an inaccuracy in or breach of any representation or warranty
contained in Section 2 if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement (such an
event, condition, fact or circumstance, a “Post-Signing Company Matter”); (iii)
any breach of any covenant or obligation of the Company; and (iv) any event,
condition, fact or circumstance that would make the timely satisfaction of any
of the conditions set forth in Section 7 or Section 8 impossible or unlikely or
that has had or could reasonably be expected to have or result in a Material
Adverse Effect.

 

(b) During the Pre-Closing Period, each Key Stockholder (as to such Key
Stockholder but not as to any other Key Stockholder or other Person) shall
promptly notify Parent in writing of: (i) the discovery by such Key Stockholder
of any event, condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or constitutes an inaccuracy
in or breach of any representation or warranty of such Key Stockholder contained
in Section 3 (such an event, condition, fact or circumstance, a “Pre-Signing Key
Stockholder Matter”); (ii) any event, condition, fact or circumstance that first
occurs, arises or exists after the date of this Agreement and that does not also
constitute a Pre-Signing Key Stockholder Matter and that would cause or
constitute an inaccuracy in or breach of any representation or warranty of such
Key Stockholder contained in Section 3 if (A) such representation or warranty
had been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement (such an event, condition, fact or circumstance, a “Post-Signing Key
Stockholder Matter”); (iii) any breach of any covenant or obligation of such Key
Stockholders; and (iv) any event, condition, fact or circumstance that would
make the satisfaction of any of the conditions set forth in Section 7 or Section
8 impossible or unlikely or that has had or could reasonably be expected to have
or result in a Material Adverse Effect.

 

(c) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 5.3(a) or Section 5.3(b) requires any change in
the Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming the Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then the Company shall promptly deliver to Parent an
update to the Disclosure Schedule (“Disclosure Schedule Update”) specifying such
change. No Disclosure Schedule Update shall be deemed to supplement or amend the
Disclosure Schedule for the purpose of (i) determining the accuracy of any of
the representations and warranties made by the Company or the Key Stockholders
in this Agreement or in any certificate or other Contract referred to in this
Agreement (unless such Disclosure Schedule Update is the subject of a valid
Notice of Termination Right (as defined below)), or

 

41.

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

(ii) determining whether any condition set forth in Section 7 has been
satisfied. Notwithstanding the foregoing, in the event that (A) the Company
delivers to Parent a Disclosure Schedule Update describing a Post-Signing
Company Matter or a Post-Signing Key Stockholder Matter, and (B) such Disclosure
Schedule Update is accompanied by a written notice from the Company (a “Notice
of Termination Right”) that Parent is entitled to terminate this Agreement by
reason of such Post-Signing Company Matter or Post-Signing Key Stockholder
Matter, then (x) as more fully provided in Section 9.1(i), Parent shall be
entitled to terminate this Agreement on the basis of such Post-Signing Company
Matter or Post-Signing Key Stockholder Matter (as the case may be), and (y)
except as Parent and the Company may otherwise agree in writing (prior to the
Closing), or as Parent and the Stockholders’ Representative may otherwise agree
in writing (following the Closing), Parent shall not be entitled to be
indemnified following the Closing (1) by the Non-Dissenting Stockholders under
Section 10.2(a)(ii), Section 10.2(a)(iii) or Section 10.2(a)(ix) (as it relates
to Legal Proceedings that give rise to indemnification claims by Parent under
Sections 10.2(a)(ii) and 10.2(a)(iii)) with respect to any such Post-Signing
Company Matter, or (2) by the applicable Key Stockholders under Section
10.2(b)(ii), Section 10.2(b)(iii) or Section 10.2(b)(v) (as it relates to Legal
Proceedings that give rise to indemnification claims by Parent under Sections
10.2(b)(ii) and 10.2(b)(iii)) with respect to any such Post-Signing Key
Stockholder Matter.

 

5.4 No Negotiation. During the Pre-Closing Period, neither the Company nor any
of the Key Stockholders shall (and the Company shall ensure that none of the
Acquired Corporations nor any of the Representatives of any of the Acquired
Corporations shall), directly or indirectly: (a) solicit, knowingly facilitate
or encourage the initiation of any inquiry, proposal or offer from any Person
(other than Parent) relating to a possible Acquisition Transaction; (b)
participate in any discussions or negotiations or enter into any agreement with,
or provide any non-public information to, any Person (other than Parent)
relating to or in connection with a possible Acquisition Transaction; or (c)
consider, entertain or accept any proposal or offer from any Person (other than
Parent) relating to a possible Acquisition Transaction. The Company shall
promptly notify Parent in writing of any inquiry, proposal or offer relating to
a possible Acquisition Transaction (including the identity of the Person making
or submitting such inquiry, proposal or offer, and the terms thereof) that is
received by or on behalf of the Company, any other Acquired Corporation or any
of the Key Stockholders during the Pre-Closing Period. (For purposes of this
Agreement, “participate” shall not include (i) actions performed in a purely
ministerial capacity which are not performed to circumvent the above
restrictions or (ii) responses to unsolicited contacts by third parties that
such persons are not permitted to discuss the matter.)

 

5.5 Restriction on Transfer. Each Key Stockholder agrees that, during the
Pre-Closing Period, such Key Stockholder shall not directly or indirectly sell
or otherwise transfer or dispose of, or pledge or otherwise permit to be subject
to any Encumbrance, any shares of Company Capital Stock or any option, warrant
or other right to acquire any other security of the Company, or any direct or
indirect beneficial interest therein; provided, however, that shares of Company
Capital Stock may be transferred to a controlled affiliate or immediate family
member of such Key Stockholder so long as (a) the transferor notifies Parent in
writing of the intended transfer in writing at least 10 days prior to the
transfer, including the number of shares of

 

42.

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

Company Capital Stock to be transferred, (b) the transferee agrees in writing to
be bound by the terms of this Agreement, and (c) the transferor agrees in
writing to remain liable for any breach by the transferee of this Agreement.

 

SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES

 

Parent (as to Merger Sub and itself but not as to any other Person), the Company
(as to the Acquired Corporations but not as to any other Person) and each Key
Stockholder (as to such Key Stockholder but not as to any other Key Stockholder
or other Person) hereby covenant as follows:

 

6.1 Regulatory Approvals. Each party shall use commercially reasonable efforts
to file, as soon as practicable after the date of this Agreement, all notices,
reports and other documents required to be filed by such party with any
Governmental Body with respect to the Merger and the other Contemplated
Transactions, and to submit promptly any additional information requested by any
such Governmental Body. Without limiting the generality of the foregoing, the
Company and Parent shall, promptly after the date of this Agreement, prepare and
file the notifications required under the HSR Act and any applicable foreign
antitrust laws or regulations (collectively, the “Antitrust Laws”) in connection
with the Merger. Subject to Section 6.4(b), the Company and Parent shall (a)
respond as promptly as practicable to (i) any inquiries or requests received
from the Federal Trade Commission or the Department of Justice for additional
information or documentation, and (ii) any inquiries or requests received from
any state attorney general, foreign antitrust authority or other Governmental
Body in connection with antitrust or related matters, (b) use commercially
reasonable efforts to take all other actions necessary to cause the expiration
or termination of the applicable waiting periods under the Antitrust Laws as
soon as practicable, and (c) use commercially reasonable efforts to resolve any
objections which may be asserted by any Governmental Body with respect to the
Merger under the Antitrust Laws. Parent and the Company shall cooperate with
respect to any proceedings or negotiations with any Governmental Body relating
to any of the foregoing. At the request of Parent, the Company shall use
commercially reasonable efforts to divest, sell, dispose of, hold separate or
otherwise take or commit to take any reasonable action relating to the business,
product lines or assets of any Acquired Corporation, provided that any such
action is (I) determined by Parent in good faith to facilitate compliance with
any Legal Requirement or any request by any Governmental Body, and (II)
conditioned upon the consummation of the Merger without any reduction in the
Aggregate Transaction Value or the Merger Consideration to be received by any
Non-Dissenting Stockholder.

 

6.2 Written Consents; Information Statement. Immediately following the execution
of this Agreement, each Key Stockholder shall execute and deliver to the Company
a written consent approving the Merger and adopting this Agreement (a “Written
Consent”), and each Key Stockholder agrees not to revoke or withdraw such Key
Stockholder’s Written Consent and not to take any other action that is
inconsistent with such Written Consent or that may have the effect of delaying
or interfering with the Merger. As promptly as practicable following the date of
this Agreement, the Company shall prepare an information statement accurately
describing this Agreement, the Merger, the other Contemplated Transactions and
the provisions of Part 13 of the UBCA (the “Information Statement”), and shall
deliver the Information

 

43.

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

Statement to those of its stockholders who did not execute Written Consents for
the purpose of (a) informing them of the approval of the Merger and the adoption
of this Agreement by the Key Stockholders and (b) soliciting additional Written
Consents approving the Merger and adopting this Agreement. The Information
Statement shall include a statement to the effect that the board of directors of
the Company unanimously recommends that the Company’s stockholders execute
Written Consents approving the Merger and adopting this Agreement. The unanimous
recommendation of the Company’s board of directors that the stockholders of the
Company approve the Merger and adopt this Agreement shall not be withdrawn or
modified in a manner adverse to Parent, and no resolution by the board of
directors of the Company or any committee thereof to withdraw or modify such
recommendation in a manner adverse to Parent shall be adopted or proposed.

 

6.3 Public Announcements. During the Pre-Closing Period, neither the Company nor
any of the Key Stockholders shall (and the Company shall not permit any of the
Acquired Corporations or any Representative of any of the Acquired Corporations
to) issue any press release or make any public statement regarding this
Agreement or the Merger, or regarding any of the other Contemplated
Transactions, without Parent’s prior written consent.

 

6.4 Additional Agreements.

 

(a) Subject to Section 6.4(b), Parent, Merger Sub and the Company shall use
commercially reasonable efforts to take, or cause to be taken, all actions
necessary to consummate the Merger and make effective the other Contemplated
Transactions. Without limiting the generality of the foregoing, but subject to
Section 6.4(b), each of Parent, Merger Sub and the Company (i) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the Merger and the other Contemplated
Transactions, and (ii) shall use commercially reasonable efforts to obtain each
Consent (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger or any of the other Contemplated Transactions. Each of Parent and the
Company shall promptly deliver to the other a copy of each such filing made,
each such notice given and each such Consent obtained by such party during the
Pre-Closing Period.

 

(b) Notwithstanding anything to the contrary contained in this Agreement, Parent
shall not have any obligation under this Agreement or otherwise: (i) to dispose
of or transfer or cause any of its Subsidiaries to dispose of or transfer any
assets, or to commit to cause any of the Acquired Corporations to dispose of or
transfer any assets; (ii) to discontinue or cause any of its Subsidiaries to
discontinue offering any product or service, or to commit to cause any of the
Acquired Corporations to discontinue offering any product or service; (iii) to
license or otherwise make available, or cause any of its Subsidiaries to license
or otherwise make available, to any Person, any technology, software or other
Intellectual Property or Intellectual Property Right, or to commit to cause any
of the Acquired Corporations to license or otherwise make available to any
Person any technology, software or other Intellectual Property or Intellectual
Property Right; (iv) to hold separate or cause any of its Subsidiaries to hold
separate any assets or operations (either before or after the Closing Date), or
to commit to cause any of the Acquired Corporations to hold separate any assets
or operations; (v) to make or cause any of its

 

44.

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

Subsidiaries to make any commitment (to any Governmental Body or otherwise)
regarding its future operations or the future operations of any of the Acquired
Corporations; or (vi) to contest any Legal Proceeding relating to the Merger if
Parent determines in good faith that contesting such Legal Proceeding is not
advisable.

 

6.5 Commercially Reasonable Efforts. During the Pre-Closing Period, (a) the
Company shall use commercially reasonable efforts to cause the conditions set
forth in Section 7 to be satisfied on a timely basis, and (b) subject to Section
6.4(b), Parent and Merger Sub shall use commercially reasonable efforts to cause
the conditions set forth in Section 8 to be satisfied on a timely basis.

 

6.6 Ancillary Agreements and Documents. At or prior to the Closing, each Key
Stockholder shall execute and deliver to Parent each agreement and document
referenced in Section 7 to be executed by such Key Stockholder.

 

6.7 Termination of Agreements. To the extent requested by Parent, the Company
shall use commercially reasonable efforts to cause the Company Contracts
identified on Schedule 6.7 to be terminated prior to the Effective Time and to
cause all warrants to purchase shares of Company Preferred Stock to be exercised
or terminated prior to the Effective Time in accordance with all of the terms of
such warrants and all agreements relating thereto.

 

6.8 FIRPTA Matters. At the Closing, the Company shall deliver to Parent a
statement in the form attached hereto as Exhibit B that the Company is not a
“United States Real Property Holding Corporation” as defined in Section 897 of
the Code (the “FIRPTA Certificate”).

 

6.9 Termination of Benefit Plan. In connection with the Closing, the Company
shall adopt a resolution terminating its Vintela, Inc. 401(k) Plan effective
immediately prior to the Effective Time, unless Parent shall have delivered a
written notice to the Company at or prior to the Closing requesting that such
plan not be terminated.

 

6.10 Resignation of Officers and Directors. The Company shall use commercially
reasonable efforts to obtain and deliver to Parent at or prior to the Closing
the resignation of each officer and director of each of the Acquired
Corporations.

 

6.11 Employee Benefits. Parent agrees that (a) all employees of the Acquired
Corporations who continue employment with Parent, the Surviving Corporation or
any Subsidiary of Parent or the Surviving Corporation after the Effective Time
(“Continuing Employees”) shall, subject to any necessary transition period and
subject to any applicable plan provisions, contractual requirements and Legal
Requirements, be eligible to participate in Parent’s health, vacation, severance
and 401(k) plans, to substantially the same extent as similarly situated
employees of Parent, and (b) for purposes of determining a Continuing Employee’s
eligibility to participate in such plans, such Continuing Employee shall receive
credit under such plans for his or her years of service with the Acquired
Corporations prior to the Effective Time. Notwithstanding the foregoing, nothing
herein shall obligate Parent to make an offer of continuing employment to any
particular employee of the Acquired Corporations. The employment by Parent or
the Surviving Corporation of all Continuing Employees shall be solely on at
“at-will” basis.

 

45.

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

6.12 Indemnification of Officers and Directors; Insurance.

 

(a) Parent and Merger Sub agree that all rights to indemnification for acts or
omissions occurring prior to the Effective Time existing as of the date of this
Agreement in favor of the current directors and officers of the Company as
provided in the Company’s articles of incorporation and bylaws or
indemnification agreements shall survive the Merger and shall continue in full
force and effect in accordance with their terms for a period of six years
following the Effective Time, and Parent shall cause the Surviving Corporation
to fulfill and honor such obligations to the maximum extent permitted by
applicable Legal Requirements.

 

(b) From and after the date that is the later of (i) the date 30 days after
Parent receives written notice from The Canopy Group, Inc. that The Canopy
Group, Inc. has terminated or is terminating its current directors’ and
officers’ liability insurance policy (if such termination occurs prior to the
sixth anniversary of the Closing Date) or (ii) the effective date of such
termination as set forth in such written notice, and continuing until the sixth
anniversary of the Closing Date, Parent shall maintain in effect, for events
that shall have occurred at or prior to the Effective Time, the existing level
and scope of directors’ and officers’ liability insurance in effect as of the
date of this Agreement covering the individuals who are or have been officers or
directors of the Acquired Corporations with respect to their acts and omissions
as officers and directors of the Company occurring prior to the Effective Time;
provided, however, that Parent shall not be required to pay annual premiums for
such insurance that exceed, in the aggregate, $15,000 (the “Maximum Premium”).
In the event any future annual premiums for such directors’ and officers’
liability insurance exceed the Maximum Premium, Parent shall be entitled to
reduce the amount of coverage to as much coverage as can be obtained for a
premium equal to the Maximum Premium.

 

SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB

 

The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the Contemplated Transactions are subject to the satisfaction or
waiver, at or prior to the Closing, of each of the following conditions:

 

7.1 Accuracy of Representations. Each of the representations and warranties set
forth in Sections 2 and 3 and each of the representations and warranties set
forth in each of the other Contracts delivered to Parent in connection with the
Contemplated Transactions shall have been accurate in all material respects as
of the date of this Agreement (without giving effect to any materiality
qualifications or similar qualifications contained or incorporated directly or
indirectly in such representations and warranties), and shall be accurate in all
material respects as of the Closing Date as if made on the Closing Date (without
giving effect to any Disclosure Schedule Update, and without giving effect to
any materiality qualifications or similar qualifications contained or
incorporated directly or indirectly in such representations and warranties).

 

46.

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

7.2 Performance of Covenants. Each of the covenants and obligations that the
Company and the Key Stockholders are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all material
respects.

 

7.3 Stockholder Approval. The Merger shall have been duly approved and this
Agreement shall have been duly adopted by the Required Company Stockholder Vote.
The number of shares of Company Common Stock that are Dissenting Shares shall be
less than 2% of the number of shares of Company Common Stock outstanding
immediately prior to the Closing and no shares of Company Preferred Stock shall
be Dissenting Shares. All of the Key Stockholders, in their capacities as
stockholders of the Company, shall have executed Written Consents.

 

7.4 Antitrust. (a) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and there shall
not be in effect any voluntary agreement between Parent and the Federal Trade
Commission or the Department of Justice pursuant to which Parent has agreed not
to consummate the Merger for any period of time; (b) any similar waiting period
under any applicable foreign antitrust law or regulation or other Legal
Requirement shall have expired or been terminated; and (c) any Consent required
under any applicable foreign antitrust law or regulation or other Legal
Requirement shall have been obtained.

 

7.5 Consents. All Consents identified in Part 2.21 of the Disclosure Schedule
and other Consents the failure to obtain which could reasonably be expected to
have or result in a Material Adverse Effect shall have been obtained and shall
be in full force and effect.

 

7.6 No Material Adverse Effect. Since the date of this Agreement, there shall
not have occurred any Material Adverse Effect, and no event shall have occurred
or circumstance shall exist that, in combination with any other events or
circumstances, could reasonably be expected to have or result in a Material
Adverse Effect.

 

7.7 Agreements and Documents. Parent and the Company shall have received the
following agreements and documents, each of which shall be in full force and
effect:

 

(a) the Escrow Agreement, executed by the Key Stockholders, the Stockholders’
Representative and the Escrow Agent;

 

(b) an offer letter with respect to continuing employment with the Company,
executed by each individual identified on Schedule 7.7(b);

 

(c) the Noncompetition Agreements;

 

(d) the Tax Allocation Agreement;

 

(e) a Release in the form of Exhibit D (“Release”), dated as of the Closing
Date, executed by each Key Stockholder and the other stockholders of the Company
identified on Schedule 7.7(e) and each officer and director of each of the
Acquired Corporations;

 

47.

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

(f) agreements, satisfactory in form and substance to Parent, terminating the
Company Contracts identified on Schedule 6.7;

 

(g) the FIRPTA Certificate;

 

(h) a legal opinion of Durham, Jones & Pinegar, P.C., counsel to the Company,
dated as of the Closing Date and addressed to Parent and the Company, in the
form of Exhibit E, and a legal opinion of Ballard Spahr Andrews & Ingersoll,
LLP, counsel to the Stockholders’ Representative, dated as of the Closing Date
and addressed to Parent and the Company, in the form of Exhibit F, and;

 

(i) a certificate executed on behalf of the Company by the Chief Executive
Officer and the Chief Financial Officer of the Company:

 

(i) setting forth the Aggregate Transaction Expense Amount, accompanied by
reasonable supporting documentation (including written confirmation from Durham,
Jones & Pinegar, P.C. as to all amounts owed and to be owed by each Acquired
Corporation with respect to services performed by Durham, Jones & Pinegar, P.C.
through the Closing Date);

 

(ii) setting forth the Closing Cash Amount, accompanied by reasonable supporting
documentation;

 

(iii) identifying each Person that is a holder of Company Common Stock, Company
Series A Preferred Stock or Company Series B Preferred Stock immediately prior
to the Effective Time (after giving effect to any exercises of Company Options
prior to the Effective Time) and setting forth (A) the number of shares of
Company Common Stock, the number of shares of Company Series A Preferred Stock
and the number of shares of Company Series B Preferred Stock held by such Person
immediately prior to the Effective Time, (B) the Merger Consideration that such
Person is entitled to receive pursuant to Section 1.5(a), and (C) the dollar
amount to be contributed to the Escrow Fund on behalf of such Person pursuant to
Section 1.5(c) and such Person’s Escrow Percentage;

 

(iv) setting forth the following information with respect to each Company Option
outstanding as of the Effective Time: (A) the holder of such Company Option; (B)
the number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time (indicating the number of such shares
subject to such Company Option which are then vested and the number of shares
which are then unvested), and the applicable exercise price per share of Company
Common Stock; (C) the number of shares of Parent Common Stock that will be
subject to such Company Option immediately after its assumption by Parent at the
Effective Time, and the applicable exercise price per share; (D) the vesting
schedule applicable to such Company Option; and (E) the expiration date of such
Company Option; and

 

48.

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

(v) containing the representation and warranty of the Company that all dollar
amounts and other information contained in such certificate are accurate and
complete in all respects;

 

(j) a certificate, executed on behalf of the Company by an officer of the
Company, certifying on behalf of the Company that the conditions set forth in
Sections 7.1 (as it relates to the representations and warranties of the
Company), 7.2 (as it relates to the covenants and obligations of the Company),
7.3, 7.5, 7.6, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13 and 7.14 have been duly
satisfied;

 

(k) a certificate, executed by each Key Stockholder, certifying on behalf of
such Key Stockholder that the conditions set forth in Sections 7.1 (as it
relates to the representations and warranties of such Key Stockholder) and 7.2
(as it relates to the covenants and obligations of such Key Stockholder) have
been duly satisfied (the “Key Stockholder Certificate”);

 

(l) written resignations of all officers and directors of the Acquired
Corporations, effective as of the Effective Time;

 

(m) the Articles of Merger, executed by the Company; and

 

(n) all balance sheets and other financial statements of the Company that Parent
reasonably determines are required to be filed with the Securities and Exchange
Commission on Form 8-K in connection with the transactions contemplated by this
Agreement.

 

7.8 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other Order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.

 

7.9 No Legal Proceedings. No Person shall have commenced or overtly threatened
to commence any Legal Proceeding: (a) challenging the Merger or seeking the
recovery of a material amount of damages in connection with the Merger; (b)
seeking to prohibit or limit the exercise by Parent of any material right
pertaining to its ownership of stock of Merger Sub or the Surviving Corporation;
(c) that involves any of the Acquired Corporations or any of the material assets
owned by any of the Acquired Corporations, or that involves any Person whose
liability any of the Acquired Corporations has or may have retained or assumed,
either contractually or by operation of law, and seeking the recovery of a
material amount of damages; (d) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other Contemplated Transactions; or (e) seeking to compel any of
the Acquired Corporations, Parent or any Subsidiary of Parent to dispose of or
hold separate any material assets as a result of the Merger or any of the other
Contemplated Transactions.

 

49.

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

7.10 Employees. None of the individuals identified in Schedule 7.10, and no more
than 20 of the individuals identified in Part 2.15 of the Disclosure Schedule,
shall have (a) ceased to be employed by, or expressed in writing (or orally to
an executive officer or director of Parent or the Company) an intention to
terminate employment with, any of the Acquired Corporations, or (b) expressed in
writing (or orally to an executive officer or director of Parent or the Company)
an intention to decline to accept employment with Parent or any Subsidiary of
Parent.

 

7.11 Termination of Employee Plan. If required by Section 6.9, the Company shall
have provided Parent with evidence satisfactory to Parent of the adoption of the
resolution terminating the benefit plan referred to in Section 6.9.

 

7.12 No Warrants. The Company shall have provided Parent with evidence,
reasonably satisfactory to Parent, as to the exercise or termination of all
warrants and other rights to purchase shares of Company Capital Stock (other
than Company Options).

 

7.13 Satisfaction of Certain Obligations. The Obligations shall have been
satisfied in full, and no Default shall have occurred and be continuing under
the Note or the Note Purchase Agreement.

 

7.14 Maximum Number of Common Shares. There shall not be outstanding more than
500,000 shares of Company Common Stock.

 

7.15 Date Precedent. The date July 1, 2005, shall have occurred.

 

SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE KEY
STOCKHOLDERS

 

The obligations of the Company and the Key Stockholders to effect the Merger and
otherwise consummate the Contemplated Transactions is subject to the
satisfaction or waiver, at or prior to the Closing, of the following conditions:

 

8.1 Accuracy of Representations. Each of the representations and warranties made
by Parent and Merger Sub in this Agreement shall have been accurate in all
respects as of the date of this Agreement, and shall be accurate in all respects
as of the Closing Date as if made on the Closing Date; provided, however, that
the condition set forth in this Section 8.1 shall be deemed to have been
satisfied notwithstanding the existence of inaccuracies in such representations
and warranties if the circumstances rendering such representations and
warranties inaccurate have not had and would not reasonably be expected to have
or result in a material adverse effect on Parent’s ability to consummate the
Merger.

 

8.2 Performance of Covenants. Each of the covenants and obligations that Parent
and Merger Sub are required to comply with or to perform at or prior to the
Closing shall have been complied with and performed in all material respects.

 

8.3 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other Order preventing the consummation of the Merger shall have
been issued

 

50.

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

against the Company by any court of competent jurisdiction and remain in effect,
and there shall not be any Legal Requirement enacted or deemed applicable to the
Company and the Merger that makes consummation of the Merger by the Company
illegal.

 

8.4 Agreements and Documents. The Company shall have received the following
agreements and documents, each of which shall be in full force and effect:

 

(a) the Escrow Agreement, executed by Parent and the Escrow Agent;

 

(b) an offer letter with respect to continuing employment with the Company,
executed on behalf of the Company with respect to each individual identified on
Schedule 7.7(b);

 

(c) a certificate, executed on behalf of Parent by an officer of Parent,
certifying on behalf of Parent that the conditions set forth in Sections 8.1,
8.2 and 8.3 have been duly satisfied; and

 

(d) the Articles of Merger, executed by Merger Sub.

 

8.5 Stockholder Approval. The Merger shall have been duly approved and this
Agreement shall have been duly adopted by the Required Company Stockholder Vote.

 

8.6 Antitrust. The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.

 

SECTION 9. TERMINATION

 

9.1 Termination Events. This Agreement may be terminated prior to the Closing:

 

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

 

(b) by Parent if the Closing has not taken place on or before July 15, 2005
(such date, as it may be extended by Parent pursuant to this Section 9.1(b),
being referred to as the “End Date”) other than as a result of any failure on
the part of Parent to comply with or perform any covenant or obligation of
Parent set forth in this Agreement; provided, however, that if on July 15, 2005
any of the conditions set forth in Section 7.4 or Section 7.9 shall not have
been satisfied or waived, then Parent may extend the End Date by up to 90 days;

 

(c) by the Company if the Closing has not taken place on or before the End Date
(other than as a result of the failure on the part of the Company or any of the
Key Stockholders to comply with or perform any covenant or obligation of the
Company or any of the Key Stockholders set forth in this Agreement or in any
other agreement or instrument delivered to Parent);

 

(d) by Parent if (i) any representation or warranty of the Company or any Key
Stockholder contained in this Agreement shall be inaccurate or shall have been
breached in any material respect as of the date of this Agreement, or shall have
become inaccurate or shall be breached in any material respect as of a date
subsequent to the date of this Agreement (as if made

 

51.

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

on such subsequent date) (it being understood that (A) for purposes of
determining the accuracy of such representations and warranties as of the date
of this Agreement or as of any subsequent date, all materiality qualifications
and similar qualifications contained or incorporated directly or indirectly in
such representations and warranties shall be disregarded, (B) for purposes of
determining the accuracy of such representations and warranties as of the date
of this Agreement, any Disclosure Schedule Update shall be disregarded and (C)
for purposes of determining the accuracy of such representations and warranties
as of any subsequent date, any Disclosure Schedule Update shall be disregarded
except to the extent of any matter set forth therein that was the subject of a
valid Notice of Termination Right), or (ii) any of the covenants or obligations
of the Company or any Key Stockholder contained in this Agreement shall have
been breached in any material respect; provided, however, that if an inaccuracy
in or breach of any representation or warranty of the Company or any Key
Stockholder as of a date subsequent to the date of this Agreement or a breach of
a covenant or obligation by the Company or any Key Stockholder is curable by the
Company or such Key Stockholder through the use of commercially reasonable
efforts during the 20-day period after Parent notifies the Company in writing of
the existence of such inaccuracy or breach describing in reasonable detail the
provision of this Agreement alleged to be inaccurate or breached and the facts
constituting such alleged inaccuracy or breach (the “Company Cure Period”), then
Parent may not terminate this Agreement under this Section 9.1(d) as a result of
such inaccuracy or breach prior to the expiration of the Company Cure Period,
provided the Company or such Key Stockholder, during the Company Cure Period,
continues to exercise commercially reasonable efforts to cure such inaccuracy or
breach;

 

(e) by the Company if (i) any representation or warranty of Parent contained in
this Agreement shall be inaccurate or shall have been breached in any material
respect as of the date of this Agreement, or shall have become inaccurate or
shall be breached in any material respect as of a date subsequent to the date of
this Agreement (as if made on such subsequent date) (it being understood that,
for purposes of determining the accuracy of such representations and warranties
as of the date of this Agreement or as of any subsequent date, all materiality
qualifications and similar qualifications contained or incorporated directly or
indirectly in such representations and warranties shall be disregarded), or (ii)
if any of Parent’s covenants or obligations contained in this Agreement shall
have been breached in any material respect; provided, however, that if an
inaccuracy in or breach of any representation or warranty of Parent as of a date
subsequent to the date of this Agreement or a breach of a covenant or obligation
by Parent is curable by Parent through the use of commercially reasonable
efforts during the 20-day period after the Company notifies Parent in writing of
the existence of such inaccuracy or breach describing in reasonable detail the
provision of this Agreement alleged to be inaccurate or breached and the facts
constituting such alleged inaccuracy or breach (the “Parent Cure Period”), then
the Company may not terminate this Agreement under this Section 9.1(e) as a
result of such inaccuracy or breach prior to the expiration of the Parent Cure
Period, provided Parent, during the Parent Cure Period, continues to exercise
commercially reasonable efforts to cure such inaccuracy or breach;

 

(f) by Parent if (i) there shall have occurred any Material Adverse Effect, or
(ii) any event shall have occurred or circumstance shall exist that, in
combination with any other events or circumstances, could reasonably be expected
to have or result in a Material Adverse Effect;

 

52.

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

(g) by either Parent or the Company if a court of competent jurisdiction or
other Governmental Body shall have issued a final and nonappealable Order, or
shall have taken any other action, having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger;

 

(h) by Parent if the Required Company Stockholder Vote is not obtained within
seven days after the date of this Agreement; or

 

(i) by Parent at any time after Parent shall have received a Disclosure Schedule
Update from the Company accompanied by a Notice of Termination Right.

 

9.2 Termination Procedures. If a party wishes to terminate this Agreement
pursuant to Section 9.1, then such party shall deliver to the other parties to
this Agreement a written notice stating that such party is terminating this
Agreement and setting forth a description of the basis on which such party is
terminating this Agreement.

 

9.3 Effect of Termination. If this Agreement is terminated pursuant to Section
9.1, all liabilities and further obligations of the parties under this Agreement
shall terminate; provided, however, that: (a) none of the Company, the Key
Stockholders or Parent shall be relieved of any obligation or liability arising
from any willful breach by such party of any representation, warranty, covenant,
or obligation contained in this Agreement; and (b) the parties shall, in all
events, remain bound by and continue to be subject to the provisions set forth
in Section 6.3 and Section 11.

 

SECTION 10. INDEMNIFICATION, ETC.

 

10.1 Survival of Representations, Etc.

 

(a) The representations, warranties, covenants and obligations of the Company
and the Key Stockholders (including the representations and warranties set forth
in Sections 2 and 3 and the representations and warranties set forth in the
certificates referred to in Section 7) shall survive the Closing as provided in
this Section 10.1.

 

(b) All representations and warranties of the Company and the Key Stockholders
set forth in Section 2 and Section 3 and in the certificates referred to in
Sections 7.7(i), 7.7(j) and 7.7(k), and all covenants and obligations of the
Company and the Key Stockholders set forth in Sections 5 and 6, shall expire on
the Expiration Date; provided, however, that if, at any time on or prior to the
Expiration Date, any Indemnitee (acting in good faith) delivers to the
Stockholders’ Representative a Notice of Indemnification Claim (as defined in
Section 10.9(a)) with respect to any of the foregoing representations,
warranties, covenants or obligations, then the claim asserted in such Notice of
Indemnification Claim shall survive until the earlier of (a) such time as such
claim is fully and finally resolved. or (b) the Expiration Date if the
cumulative pending and resolved Notices of Indemnification do not aggregate a
claim for Damages in excess of $500,000.

 

53.

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

(c) All representations and warranties of Parent and Merger Sub, and covenants
and obligations of Parent and Merger Sub to be performed at or prior to the
Effective Time, shall terminate and expire as of the Effective Time, and any
liability of Parent or Merger Sub with respect to such representations,
warranties, covenants and obligations shall thereupon cease.

 

(d) The representations, warranties, covenants and obligations of the Company
and the Key Stockholders, and the rights and remedies that may be exercised by
the Indemnitees, shall not be limited or otherwise affected by or as a result of
any information furnished to, or any investigation made by or knowledge of, any
of the Indemnitees or any of their Representatives.

 

(e) For purposes of this Agreement, each statement or other item of information
set forth in the Disclosure Schedule or in any Disclosure Schedule Update shall
be deemed to be a representation and warranty made by the Company or a Key
Stockholder, as the case may be, in this Agreement.

 

(f) Claims for indemnification, compensation and reimbursement brought in
accordance with and subject to this Section 10 shall be the sole and exclusive
remedy of any Indemnitee for monetary damages from and after the Closing with
respect to breaches of this Agreement by the Company or any Key Stockholder.
Without limiting the generality of the foregoing, nothing contained in this
Agreement shall limit the rights of any Indemnitee to seek or obtain injunctive
relief or any other equitable remedy to which such Indemnitee is otherwise
entitled.

 

10.2 Indemnification.

 

(a) Without limiting the rights of any Indemnitee under Section 10.2(b), from
and after the Effective Time (but subject to Section 10.1(a) and Section 10.3),
the Non-Dissenting Stockholders shall hold harmless and indemnify each of the
Indemnitees from and against, and shall compensate and reimburse each of the
Indemnitees (without duplication) for, any Damages which are suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to
any third-party claim) and which arise from or as a result of, or are connected
with:

 

(i) any inaccuracy in or breach of any representation or warranty set forth in
Section 2 as of the date of this Agreement (without giving effect to any
Disclosure Schedule Update made or purported to have been made on or after the
date of this Agreement);

 

(ii) any inaccuracy in or breach of any representation or warranty set forth in
Section 2 as if such representation and warranty had been made on and as of the
Closing Date (without giving effect to any Disclosure Schedule Update made or
purported to have been made on or after the date of this Agreement except to the
extent of any matter set forth in such Disclosure Schedule Update that is the
subject of a valid Notice of Termination Right);

 

54.

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

(iii) any inaccuracy in or breach of any representation or warranty set forth in
any of the certificates referred to in Sections 7.7(i), 7.7(j) and 7.7(k)
(without giving effect to any Disclosure Schedule Update made or purported to
have been made on or after the date of this Agreement except to the extent of
any matter set forth in such Disclosure Schedule Update that is the subject of a
valid Notice of Termination Right);

 

(iv) any breach of any covenant or obligation of the Company set forth in this
Agreement;

 

(v) any claim asserted by any Person who is or was, or who claims to be or to
have been, the holder of, or entitled to acquire or receive, any stock, option
or other security of any of the Acquired Corporations;

 

(vi) the exercise by any stockholder of the Company of such stockholder’s
dissenters’ rights under the UBCA, including the excess, if any, of (A) the
amount per share ultimately awarded to a holder of Dissenting Shares in any
dissenters’ rights proceeding over (B) the Common Stock Per Share Closing
Amount;

 

(vii) any Transaction Expenses, if not otherwise taken into account in
determining the Common Stock Per Share Closing Amount under Section 1.5;

 

(viii) any Tax liability for which the Company is entitled to indemnification
under the terms of the Tax Allocation Agreement, to the extent not paid by The
Canopy Group, Inc. (and in the event that any Indemnitee actually receives any
indemnification payment on account of this clause “(viii),” the Non-Dissenting
Stockholders (other than The Canopy Group, Inc) who have made such payment or
otherwise borne such obligation shall to such extent, and to the extent
otherwise permitted by law and provided that The Canopy Group, Inc.’s
obligations to the Company shall first have been fully satisfied, be thereafter
subrogated to the Company’s indemnification rights against The Canopy Group,
Inc. under the Tax Allocation Agreement); or

 

(ix) any Legal Proceeding relating to any inaccuracy, breach, claim, dissenters’
rights, expense or fee of the type referred to in clause “(i),” clause “(ii),”
clause “(iii),” clause “(iv),” clause “(v),” clause “(vi),” clause “(vii)” or
clause “(viii)” above (including any Legal Proceeding commenced by any
Indemnitee for the purpose of enforcing any of its rights under this Section
10.2(a)).

 

(b) Without limiting the rights of any Indemnitee under Section 10.2(a), from
and after the Effective Time, each Key Stockholder shall hold harmless and
indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any Damages that are directly or
indirectly suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject (regardless of whether or not

 

55.

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

such Damages relate to any third-party claim) and that arise from or as a result
of, or are directly or indirectly connected with:

 

(i) any inaccuracy in or breach of any representation or warranty of such Key
Stockholder set forth in Section 3 as of the date of this Agreement (without
giving effect to any Disclosure Schedule Update made or purported to have been
made on or after the date of this Agreement);

 

(ii) any inaccuracy in or breach of any representation or warranty of such Key
Stockholder set forth in Section 3 as if such representation and warranty had
been made on and as of the Closing Date (without giving effect to any Disclosure
Schedule Update made or purported to have been made on or after the date of this
Agreement except to the extent of any matter set forth in such Disclosure
Schedule Update that is the subject of a valid Notice of Termination Right);

 

(iii) any inaccuracy in or breach of any representation or warranty of such Key
Stockholder set forth in the Key Stockholder Certificate (without giving effect
to any Disclosure Schedule Update made or purported to have been made on or
after the date of this Agreement except to the extent of any matter set forth in
such Disclosure Schedule Update that is the subject of a valid Notice of
Termination Right);

 

(iv) any breach of any covenant or obligation of such Key Stockholder set forth
in this Agreement; or

 

(v) any Legal Proceeding relating to any inaccuracy or breach of the type
referred to in clause “(i),” clause “(ii),” clause “(iii)” or clause “(iv)”
above (including any Legal Proceeding commenced by any Indemnitee for the
purpose of enforcing any of its rights under this Section 10.2(b)).

 

(c) The parties acknowledge and agree that, if the Surviving Corporation
suffers, incurs or otherwise becomes subject to any Damages as a result of or in
connection with any inaccuracy in or breach of any representation, warranty,
covenant or obligation, then (without limiting any of the rights of the
Surviving Corporation as an Indemnitee) Parent shall also be deemed, by virtue
of its ownership of the stock of the Surviving Corporation, to have incurred
Damages as a result of and in connection with such inaccuracy or breach (it
being understood that any Damages suffered or incurred by the Surviving
Corporation shall be recoverable under this Section 10 by either Parent or the
Surviving Corporation, but not both of them).

 

10.3 Certain Limitations.

 

(a) Subject to Section 10.3(c), the Indemnitees shall not be entitled to recover
any Damages pursuant to Section 10.2(a)(i), Section 10.2(a)(ii), Section
10.2(a)(iii) or 10.2(a)(ix) (as it relates to Legal Proceedings that give rise
to indemnification claims by Parent under Sections 10.2(a)(i), 10.2(a)(ii) and
10.2(a)(iii)) for any inaccuracy in or breach of any representation or warranty
of the Company (other than the representations in the certificate

 

56.

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

described in Section 7.7(h) with respect to the Aggregate Transaction Expense
Amount and the Closing Cash Amount) until such time as the cumulative amount of
all Damages (including the Damages arising from such inaccuracy or breach and
all other Damages) that have been directly or indirectly suffered or incurred by
any one or more of the Indemnitees, or to which any one or more of the
Indemnitees has or have otherwise become subject, exceeds $500,000 in the
aggregate. At such time as the cumulative amount of such Damages exceeds
$500,000 in the aggregate, the Indemnitees shall be entitled to recover the
amount of such Damages in excess of $200,000.

 

(b) Subject to Section 10.3(c), recourse to the Escrow Fund shall be the
Indemnitees’ sole and exclusive remedy for monetary Damages resulting from the
matters referred to in Section 10.2(a).

 

(c) The limitations set forth in Sections 10.3(a) and 10.3(b) shall not apply
(i) in the case of fraudulent or intentional misrepresentation or (ii) subject
to Sections 10.3(d) and 10.3(e), to any Damages arising or resulting from or
connected with any inaccuracy in or breach of any of the Specified
Representations.

 

(d) Notwithstanding anything to the contrary contained in this Agreement, except
in the case of fraudulent or intentional misrepresentation, the Indemnitees
shall not be entitled to recover directly from any Non-Dissenting Stockholder
any Damages pursuant to Section 10.2(a)(i), Section 10.2(a)(ii), Section
10.2(a)(iii) or 10.2(a)(ix) (as it relates to Legal Proceedings that give rise
to indemnification claims by Parent under Sections 10.2(a)(i), 10.2(a)(ii) and
10.2(a)(iii)) for any inaccuracy in or breach of any of the Specified
Representations until such time as the cumulative amount of all Damages that
have been directly or indirectly suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, as a result of any inaccuracy in or breach of any of
the Specified Representations, exceeds the aggregate Net Value of all Forfeited
Options that shall have been forfeited or cancelled prior to such time. If the
cumulative amount of such Damages exceeds the aggregate Net Value of all
Forfeited Options that shall have been forfeited or cancelled prior to the date
such claim for Damages is finally resolved, then the Indemnitees shall be
entitled to be recover directly from Non-Dissenting Stockholders the amount of
such Damages in excess of the aggregate Net Value of all Forfeited Options that
shall have been forfeited or cancelled prior to such date. The provisions of
this Section 10.3(d) shall not apply to any claim by an Indemnitee against the
Escrow Fund with respect to any matter described in this Section 10.3(d).

 

(e) Notwithstanding anything to the contrary contained in this Agreement, except
in the case of fraudulent or intentional misrepresentation, the maximum amount
that the Indemnitees are entitled to recover directly from any Non-Dissenting
Stockholder under Section 10.2 with respect to any Damages shall be the lesser
of (i) the product of (A) the percentage derived by deducting the Applicable
Percentage (as defined in clause “(g)” below) from 50%, multiplied by (B) the
amount of cash that such Non-Dissenting Stockholder actually receives pursuant
to this Agreement, or (ii) the product of (x) such Non-Dissenting Stockholder’s
Escrow Percentage multiplied by (y) the amount of such Damages (it being
understood that (1) recovery by an Indemnitee from the Escrow Fund of amounts
held on behalf of such Non-Dissenting

 

57.

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

Stockholder in the Escrow Fund shall not be included in calculating such maximum
amount and amounts held on behalf of such Non-Dissenting Stockholder in the
Escrow Fund shall not be deemed to have been “actually received” for purposes of
this Section 10.3(e) and (2) recovery by an Indemnitee of any amount pursuant to
any right of setoff against any cash otherwise payable or distributable to a
Non-Dissenting Stockholder shall not be included in calculating such maximum
amount and such setoff amounts shall not be deemed to have been “actually
received” for purposes of this Section 10.3(e)). The provisions of this Section
10.3(e) shall not apply to any claim by an Indemnitee against the Escrow Fund.

 

(f) Nothing in this Agreement shall limit the rights or remedies of any
Indemnitee against any particular Non-Dissenting Stockholder, or the Liability
of any particular Non-Dissenting Stockholder, for a breach by such particular
Non-Dissenting Stockholder of any provision of any agreement (other than this
Agreement) executed and delivered by such Non-Dissenting Stockholder in
connection with the transactions contemplated by this Agreement.

 

(g) For purposes of this Agreement, “Applicable Percentage” shall mean the
percentage corresponding to a fraction having (1) a numerator equal to
$10,000,000 and (2) a denominator equal to the aggregate amount of Merger
Consideration to be received by all Non-Dissenting Stockholders in exchange for
all such Non-Dissenting Stockholders’ shares of Company Capital Stock in the
Merger.

 

10.4 No Contribution. Without limiting the provisions of Section 6.12, each
Non-Dissenting Stockholder waives, and acknowledges and agrees that such
Non-Dissenting Stockholder shall not have and shall not exercise or assert (or
attempt to exercise or assert), any right of contribution, right of indemnity or
other right or remedy against Parent or against the Surviving Corporation or any
of the other Acquired Corporations in connection with any indemnification
obligation or any other liability to which such Non-Dissenting Stockholder may
become subject under or in connection with this Agreement.

 

10.5 Insurance Proceeds. To the extent that any Indemnification Claim is covered
by insurance held by Parent, the Surviving Corporation or the Indemnitee, or for
which Parent, the Surviving Corporation or the Indemnitee is the beneficiary,
such Indemnitee shall be entitled to indemnification pursuant to this Section 10
only with respect to the amount of Damages that are in excess of the proceeds
actually received by Parent, the Surviving Corporation or such Indemnitee
pursuant to such insurance with respect to the matter for which such Indemnitee
was seeking indemnification hereunder (net of any increased or retrospective
premium or other costs or expenses incurred by such Indemnitee in connection
with or resulting from such insurance claim). If an Indemnitee actually receives
such insurance proceeds with respect to any Indemnification Claim after such
Indemnification Claim has been fully paid to such Indemnitee out of the Escrow
Fund or by one or more Non-Dissenting Stockholders, and such Indemnitee
submitted a claim for such insurance coverage to the applicable insurance
company on or prior to the Expiration Date, then upon receipt by such Indemnitee
of such insurance proceeds, such Indemnitee shall repay to the Escrow Fund or to
the applicable Non-Dissenting Stockholder(s) who paid such Indemnification Claim
an amount equal to the lesser of (a) the amount of such Indemnification Claim
actually received by such Indemnitee out of the Escrow Fund or from such
Non-Dissenting Stockholder(s), or (b) the proceeds actually received by such
Indemnitee

 

58.

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

pursuant to such insurance with respect to the matter for such Indemnitee
received such indemnification payment (net of any increased or retrospective
premium or other costs or expenses incurred by such Indemnitee in connection
with or resulting from such insurance claim). If the Indemnification Claim is
covered by insurance held by Parent, the Surviving Corporation or the
Indemnitee, then the party holding such insurance shall use commercially
reasonable efforts to submit a claim for such insurance coverage as soon as
practicable after the discovery of such claim.

 

10.6 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Surviving Corporation, against Parent or against any other Person) with respect
to which any Indemnitee may be entitled to be held harmless, indemnified,
compensated or reimbursed pursuant to this Section 10, (a) Parent shall notify
the Stockholders’ Representative promptly after Parent receives written notice
of such claim or Legal Proceeding (it being understood that any failure by
Parent to so notify the Stockholders’ Representative shall have no effect on an
Indemnitee’s ability to recover Damages pursuant to this Section 10), and (b)
Parent shall have the right, at its election, to proceed with the defense of
such claim or Legal Proceeding on its own with counsel reasonably acceptable to
the Stockholders’ Representative. If Parent so proceeds with the defense of any
such claim or Legal Proceeding: (i) all reasonable expenses relating to the
defense of such claim or Legal Proceeding shall be borne and paid from the
Escrow Fund or, if such claim or Legal Proceeding relates to any matter referred
to in Section 10.2(b), by the Key Stockholder or Key Stockholders obligated to
hold harmless, indemnify, compensate and reimburse such Indemnitee; (ii) the
Stockholders’ Representative and each Key Stockholder shall make available to
Parent any documents and materials that Parent determines in good faith may be
necessary to the defense of such claim or Legal Proceeding; and (iii) Parent
shall have the right to settle, adjust or compromise such claim or Legal
Proceeding; provided, however, that if Parent settles, adjusts or compromises
any such claim or Legal Proceeding without the consent of the Stockholders’
Representative, such settlement, adjustment or compromise shall not be
conclusive evidence of the amount of Damages incurred by the Indemnitee in
connection with such claim or Legal Proceeding (it being understood that if
Parent requests that the Stockholders’ Representative consent to a settlement,
adjustment or compromise, the Stockholders’ Representative shall not
unreasonably withhold or delay such consent). If Parent does not elect to
proceed with the defense of any such claim or Legal Proceeding, the
Stockholders’ Representative shall (at the sole expense of the Non-Dissenting
Stockholders or, if such claim or Legal Proceeding relates to any matter
referred to in Section 10.2(b), by the Key Stockholder or Key Stockholders
obligated to hold harmless, indemnify, compensate and reimburse such Indemnitee)
proceed with the defense of such claim or Legal Proceeding with counsel
reasonably acceptable to Parent; provided, however, that the Stockholders’
Representative may not settle, adjust or compromise any such claim or Legal
Proceeding without the prior written consent of Parent (which consent shall not
be unreasonably withheld or delayed).

 

10.7 Setoff. Nothing in this Section 10 shall limit any rights of setoff or
other similar rights that Parent or any of the other Indemnitees may have at
common law or otherwise.

 

10.8 Exercise of Remedies by Indemnitees Other Than Parent. No Indemnitee (other
than Parent or any successor thereto or assign thereof) shall be permitted to
assert any

 

59.

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

indemnification claim or exercise any other remedy under this Agreement unless
Parent (or any successor thereto or assign thereof) shall have consented to the
assertion of such indemnification claim or the exercise of such other remedy.

 

10.9 Indemnification Claims; Escrow Arrangements.

 

(a) If any Indemnitee has incurred or suffered or expects in good faith that it
could reasonably be expected incur or suffer, Damages for which it is or would
be entitled to be held harmless, indemnified, compensated or reimbursed under
this Section 10, such Indemnitee may deliver a notice to the Stockholders’
Representative (any such notice being referred to as a “Notice of
Indemnification Claim,” and the claim for indemnification, compensation and
reimbursement described in such Notice of Indemnification Claim being referred
to as an “indemnification claim”), which shall (i) state that such Indemnitee
believes that that there is or has been an inaccuracy in or breach of a
representation, warranty, covenant or obligation contained in this Agreement or
that such Indemnitee is otherwise entitled to be held harmless, indemnified,
compensated or reimbursed under this Section 10, (ii) contain a reasonably
detailed description of the circumstances supporting such Indemnitee’s belief
that there is or has been such an inaccuracy or breach or that such Indemnitee
is otherwise entitled to be held harmless, indemnified, compensated or
reimbursed, including a reference to the section of this Agreement that such
Indemnitee then believes provides a basis for such claim, (iii) contain a good
faith, non-binding, preliminary estimate of the aggregate dollar amount of the
Damages that have arisen or that such Indemnitee expects in good faith to arise
as a result of the inaccuracy, breach or other matter referred to in such notice
(the aggregate amount of such estimate, as it may be modified by such Indemnitee
in good faith from time to time, being referred to as the “Claimed Amount”), and
(iv) specify whether the indemnification claim described in such notice is being
made by such Indemnitee (A) pursuant to Section 10.2(a) other than as the result
of a breach of a Specified Representation (a “General Indemnity Claim”), (B)
pursuant to Section 10.2(a) as a result of a breach of a Specified
Representation (a “Specified Indemnity Claim”) or (C) against a particular Key
Stockholder pursuant to Section 10.2(b) (a “Key Stockholder Claim”).

 

(b) During the 30-day period commencing upon the delivery by an Indemnitee to
the Stockholders’ Representative of a Notice of Indemnification Claim (the
“Dispute Period”), the Stockholders’ Representative shall deliver to the
Indemnitee a written response (the “Response Notice”) in which the Stockholders’
Representative: (i) agrees that the full Claimed Amount is owed to the
Indemnitee; (ii) agrees that part (but not all) of the Claimed Amount (the
“Agreed Amount”) is owed to the Indemnitee; or (iii) asserts that no part of the
Claimed Amount is owed to the Indemnitee. Any part of the Claimed Amount that is
not agreed by the Stockholders’ Representative to be owed to the Indemnitee
pursuant to the Response Notice (or the entire Claimed Amount, if the
Stockholders’ Representative asserts in the Response Notice that no part of the
Claimed Amount is owed to the Indemnitee) shall be referred to as the “Contested
Amount” (it being understood that the Contested Amount shall be modified from
time to time to reflect any good faith modifications by the Indemnitee to the
Claimed Amount). If a Response Notice is not received by the Indemnitee prior to
the expiration of the Dispute Period, then the Stockholders’ Representative
shall be conclusively and irrevocably deemed to have agreed that the full
Claimed Amount is owed to the Indemnitee.

 

60.

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

(c) If the Stockholders’ Representative delivers a Response Notice to the
Indemnitee agreeing that the full Claimed Amount is owed to the Indemnitee, or
if the Stockholders’ Representative does not deliver a Response Notice to the
Indemnitee during the Dispute Period, then, within three days following the
earlier of the delivery of such Response Notice to the Indemnitee or the
expiration of the Dispute Period:

 

(i) if the indemnification claim is a General Indemnity Claim or a Specified
Indemnity Claim, then upon the written request of Parent, Parent and the
Stockholders’ Representative shall jointly execute and deliver to the Escrow
Agent a written notice instructing the Escrow Agent to disburse to the
Indemnitee from the Escrow Fund an amount equal to the lesser of (A) the full
Claimed Amount or (B) the entire amount of any cash remaining in the Escrow
Fund;

 

(ii) if the indemnification claim is a Specified Indemnity Claim, then subject
to the provisions of Section 10.3(d), upon the written request of Parent, the
Non-Dissenting Stockholders shall pay to the Indemnitee, in cash, an amount
equal to the excess (if any) of (A) the full Claimed Amount over (B) the amount
paid to the Indemnitee out of the Escrow Fund pursuant to Section 10.9(c)(i)
with respect to such Specified Indemnity Claim; and

 

(iii) if the indemnification claim is a Key Stockholder Claim, the particular
Key Stockholder that is responsible for satisfying such indemnification claim
shall pay the full Claimed Amount to the Indemnitee in cash.

 

(d) If the Stockholders’ Representative delivers a Response Notice during the
Dispute Period to the Indemnitee agreeing that less than the full Claimed Amount
is owed to the Indemnitee (such amount as is agreed to be owed the “Agreed
Amount”), then, within three days following the delivery of such Response Notice
to the Indemnitee:

 

(i) if the indemnification claim is a General Indemnity Claim or a Specified
Indemnity Claim, then upon the written request of Parent, Parent and the
Stockholders’ Representative shall jointly execute and deliver to the Escrow
Agent a written notice instructing the Escrow Agent to disburse to the
Indemnitee from the Escrow Fund an amount equal to the lesser of (A) the Agreed
Amount or (B) the entire amount of any cash remaining in the Escrow Fund;

 

(ii) if the indemnification claim is a Specified Indemnity Claim, then subject
to the provisions of Section 10.3(d), upon the written request of Parent, the
Non-Dissenting Stockholders shall pay to the Indemnitee, in cash, an amount
equal to the excess (if any) of (A) the Agreed Amount over (B) the amount paid
to the Indemnitee out of the Escrow Fund pursuant to Section 10.9(d)(i) with
respect to such Specified Indemnity Claim; and

 

(iii) if the indemnification claim is a Key Stockholder Claim, the particular
Key Stockholder that is responsible for satisfying such indemnification claim
shall pay the Agreed Amount to the Indemnitee in cash.

 

61.

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

(e) If the Stockholders’ Representative delivers a Response Notice to the
Indemnitee during the Dispute Period indicating that there is a Contested
Amount, the Stockholders’ Representative and the Indemnitee shall attempt in
good faith to resolve the dispute related to the Contested Amount in a mutually
convenient location. One individual who is not an attorney and who has full
settlement authority shall represent each side. That person may have an
assistant who is not an attorney. If the Indemnitee and the Stockholders’
Representative resolve such dispute in writing, then their resolution of such
dispute shall be binding on the Stockholders’ Representative, the Key
Stockholders, the other Non-Dissenting Stockholders and the Indemnitee and a
settlement agreement stipulating the amount owed to the Indemnitee (the
“Stipulated Amount”) shall be signed by the Indemnitee and the Stockholders’
Representative. Within three days after the execution of such settlement
agreement:

 

(i) if the indemnification claim is a General Indemnity Claim or a Specified
Indemnity Claim, then upon the written request of Parent, Parent and the
Stockholders’ Representative shall jointly execute and deliver to the Escrow
Agent a written notice instructing the Escrow Agent to disburse to the
Indemnitee from the Escrow Fund an amount equal to the lesser of (A) the
Stipulated Amount or (B) the entire amount of any cash remaining in the Escrow
Fund;

 

(ii) if the indemnification claim is a Specified Indemnity Claim, then subject
to the provisions of Section 10.3(d), upon the written request of Parent, the
Non-Dissenting Stockholders shall pay to the Indemnitee, in cash, an amount
equal to the excess (if any) of (A) the Stipulated Amount over (B) the amount
paid to the Indemnitee out of the Escrow Fund pursuant to Section 10.9(e)(i)
with respect to such Specified Indemnity Claim; and

 

(iii) if the indemnification claim is a Key Stockholder Claim, the particular
Key Stockholder that is responsible for satisfying such indemnification claim
shall pay the Stipulated Amount to the Indemnitee in cash.

 

(f) If the Stockholders’ Representative and the Indemnitee are unable to resolve
the dispute relating to any Contested Amount during the 30-day period commencing
upon the delivery of the Response Notice (the “Initial Resolution Period”),
either party may request non-binding mediation with the assistance of a neutral
mediator from a recognized mediation service. The party requesting the mediation
shall arrange for the mediation services, subject to the approval of the other
party, which the other party shall not withhold or delay unreasonably. Mediation
shall take place in a neutral, mutually convenient location. Mediation may be
scheduled to begin any time after expiration of the Initial Resolution Period,
but with at least 20 days’ notice to all parties. The persons attending the
mediation shall have the authority to accept a settlement. The party requesting
the mediation shall bear the cost of mediation except as provided elsewhere in
this Agreement.

 

(g) If the Stockholders’ Representative and the Indemnitee are unable to resolve
the dispute relating to any Contested Amount during the Initial Resolution
Period, and neither party requests mediation, then either the Indemnitee or the
Stockholders’ Representative may submit the contested portion of the
indemnification claim to binding arbitration in Orange County, California or
Salt Lake City, Utah in accordance with the JAMS Streamlined Arbitration

 

62.

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

Rules then in effect if the amount in controversy is less than $250,000, or the
JAMS Comprehensive Arbitration Rules and Procedures then in effect if the amount
in controversy is $250,000 or more. Arbitration will be conducted by one
arbitrator (or three arbitrators if the amount in controversy exceeds $250,000),
who shall be independent from all of the parties to such controversy and shall
be mutually selected by Parent and the Stockholders’ Representative; provided,
however, that if Parent and the Stockholders’ Representative fail to mutually
select an arbitrator within 15 business days after the contested portion of the
indemnification claim is submitted to arbitration, then the arbitrator shall be
selected by JAMS in accordance with its Streamlined Arbitration Rules then in
effect if the amount in controversy is less than $250,000, or its Comprehensive
Arbitration Rules and Procedures then in effect if the amount in controversy is
$250,000 or more. The parties agree to use commercially reasonable efforts to
cause the arbitration hearing to be conducted within 75 days after the
appointment of the arbitrator, and to use commercially reasonable efforts to
cause the decision of the arbitrator to be furnished within 15 days after the
conclusion of the arbitration hearing. The parties shall be entitled to only
limited discovery at the discretion of the arbitrator, and agree that any
discovery shall be completed at least 10 days prior to the commencement of the
arbitration hearing. The decision of the arbitrator shall relate solely: (i) to
whether the Indemnitee is entitled to recover the Contested Amount (or a portion
thereof), and the portion of such Contested Amount the Indemnitee is entitled to
recover; and (ii) to the determination of whether the Indemnitee is the
prevailing party as provided below. The final decision of the arbitrator shall
be furnished to the Stockholders’ Representative, the Indemnitee and the Escrow
Agent in writing, shall constitute a conclusive determination of the issues in
question, binding upon the Stockholders’ Representative, the Key Stockholders,
the other Non-Dissenting Stockholders and the Indemnitee and shall not be
contested by any of them. If the Indemnitee is determined by the arbitrator to
be the prevailing party, then the aggregate dollar amount of the arbitrator’s
award to the Indemnitee shall be increased by the amount of the reasonable
expenses (including reasonable attorneys’ fees) of the Indemnitee, and the fees
and expenses associated with the arbitration (including the arbitrator’s fees
and expenses). If the Indemnitee is determined by the arbitrator not to be the
prevailing party and the arbitrator determines that the Stockholders’
Representative is the prevailing party, then any amount awarded by the
arbitrator to the Indemnitee shall be reduced by the amount of the reasonable
expenses (including reasonable attorneys’ fees) of the Stockholders’
Representative, and the fees and expenses associated with the arbitration
(including the arbitrator’s fees and expenses), and if no amount is awarded to
the Indemnitee, the Indemnitee shall reimburse the Stockholders’ Representative
for its reasonable expenses (including reasonable attorneys’ fees) and pay the
fees and expenses associated with the arbitration (including the arbitrator’s
fees and expenses). For purposes of this Agreement, an Indemnitee shall be
deemed to be the prevailing party only if such Indemnitee is awarded an amount
in excess of the maximum amount offered by the Stockholder Representative after
delivery of the applicable Response Notice, and the Non-Dissenting Stockholders
shall be deemed to be the prevailing party only if he or she obtains a defense
verdict or has entered against him or her an award less than the maximum amount
offered by the Stockholder Representative at any time after the delivery of the
applicable Response Notice. If the arbitrator determines that the actions of a
party or its counsel have unreasonably or unnecessarily delayed the resolution
of the matter, the arbitrator may in its discretion require such party to pay
all or part of cost of the mediation and arbitration proceedings payable by the
other party and may

 

63.

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

require such party to pay all or part of the attorneys’ fees of the other party,
regardless of which party is the prevailing party. Within three days following
the receipt of the final award of the arbitrator setting forth the aggregate
amount owed to the Indemnitee (the “Award Amount”):

 

(i) if the indemnification claim is a General Indemnity Claim or a Specified
Indemnity Claim, then upon the written request of Parent, Parent and the
Stockholders’ Representative shall jointly execute and deliver to the Escrow
Agent a written notice instructing the Escrow Agent to disburse to the
Indemnitee from the Escrow Fund an amount equal to the lesser of (A) the Award
Amount or (B) the entire amount of any cash remaining in the Escrow Fund;

 

(ii) if the indemnification claim is a Specified Indemnity Claim, then subject
to the provisions of Section 10.3(d), upon the written request of Parent, the
Non-Dissenting Stockholders shall pay to the Indemnitee, in cash, an amount
equal to the excess (if any) of (A) the Award Amount over (B) the amount paid to
the Indemnitee out of the Escrow Fund pursuant to Section 10.9(g)(i) with
respect to such Specified Indemnity Claim; and

 

(iii) if the indemnification claim is a Key Stockholder Claim, the particular
Key Stockholder that is responsible for satisfying such indemnification claim
shall pay the Award Amount to the Indemnitee in cash.

 

(h) Within 10 days after the Expiration Date, if the amount of cash remaining in
the Escrow Fund (the “Escrow Balance”) exceeds the aggregate amount of Damages
for which indemnification is being sought under Section 10.2 pursuant to all
Notices of Indemnification Claims delivered prior to the Expiration Date that
have not been finally resolved and paid prior to the Expiration Date in
accordance with this Section 10.9 (each, an “Unresolved Escrow Claim”), Parent
and the Stockholders’ Representative shall jointly execute and deliver to the
Escrow Agent a written notice instructing the Escrow Agent to disburse to each
Non-Dissenting Stockholder from the Escrow Fund, subject to the provisions of
Section 3.2 of the Escrow Agreement, an amount equal to the product of (i) such
Non-Dissenting Stockholder’s Escrow Percentage and (ii) the amount by which the
Escrow Balance exceeds the aggregate amount of such Damages claimed in such
Notices of Indemnification Claims.

 

(i) Following the Expiration Date, if an Unresolved Escrow Claim is finally
resolved, Parent and the Stockholders’ Representative shall jointly execute and
deliver to the Escrow Agent, within three days after the final resolution of
such Unresolved Escrow Claim and the payment to the Indemnitee of all amounts
payable to the Indemnitee from the Escrow Fund, a written notice instructing the
Escrow Agent to disburse to each Non-Dissenting Stockholder from the Escrow
Fund, subject to the provisions of Section 3.2 of the Escrow Agreement, an
amount equal to the product of (i) such Non-Dissenting Stockholder’s Escrow
Percentage and (ii) the amount by which the Escrow Balance exceeds the aggregate
amount of Damages claimed in Notices of Indemnification Claims with respect to
all remaining Unresolved Escrow Claims.

 

(j) Notwithstanding anything contained in this Agreement or the Escrow Agreement
to the contrary, in the event that there is a pending General Indemnity Claim or
a pending Key Stockholder Claim brought by Parent directly against any
Non-Dissenting

 

64.

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

Stockholder that has not been finally resolved and paid in accordance with this
Section 10.9 at the time that any distribution to such Non-Dissenting
Stockholder is to be made from the Escrow Fund in accordance with Section
10.9(h) or 10.9(i), Parent may, in its sole discretion, elect to require the
Escrow Agent to deduct from the amount that would otherwise be distributed to
such Non-Dissenting Stockholder, and to retain in the Escrow Fund, the aggregate
amount claimed by the Indemnitee to be owed by such Non-Dissenting Stockholder
pending final resolution and payment of the Indemnitee’s indemnification claim
against such Non-Dissenting Stockholder.

 

(k) The parties agree that any amount paid to any Indemnitee pursuant to this
Section 10 shall be treated as a reduction in the Aggregate Transaction Value
for federal income tax purposes.

 

SECTION 11. MISCELLANEOUS PROVISIONS

 

11.1 Stockholders’ Representative.

 

(a) The Key Stockholders (by virtue of their execution of this Agreement) and
the other Non-Dissenting Stockholders (by virtue of the approval of the Merger
and the adoption of this Agreement) hereby irrevocably nominate, constitute and
appoint The Canopy Group, Inc. as the Stockholders’ Representative and the agent
and true and lawful attorney-in-fact of the Non-Dissenting Stockholders, with
full power of substitution, to act in the name, place and stead of the
Non-Dissenting Stockholders for purposes of executing any documents and taking
any actions that the Stockholders’ Representative may, in its sole discretion,
determine to be necessary, desirable or appropriate in all matters relating to
or arising out of this Agreement, including in connection with any claim for
indemnification, compensation or reimbursement under Section 10 or under the
Escrow Agreement. The Canopy Group, Inc. hereby accepts its appointment as the
Stockholders’ Representative.

 

(b) The Non-Dissenting Stockholders (by virtue of the approval of the Merger and
the adoption of this Agreement) grant to the Stockholders’ Representative full
authority to execute, deliver, acknowledge, certify and file on behalf of the
Non-Dissenting Stockholders (in the name of any or all of the Non-Dissenting
Stockholders or otherwise) any and all documents that the Stockholders’
Representative may, in its sole discretion, determine to be necessary, desirable
or appropriate, in such forms and containing such provisions as the
Stockholders’ Representative may, in its sole discretion, determine to be
appropriate, in performing its duties as contemplated by Section 11.1(a).
Notwithstanding anything to the contrary contained in this Agreement or in any
other Contract executed in connection with the Contemplated Transactions, each
Indemnitee shall be entitled to deal exclusively with the Stockholders’
Representative on all matters relating to Section 10 and the Escrow Agreement,
and shall be entitled to rely conclusively (without further evidence of any kind
whatsoever) on any document executed or purported to be executed on behalf of
any Non-Dissenting Stockholder by the Stockholders’ Representative with respect
to matters relating to Section 10 or the Escrow Agreement, and on any other
action taken or purported to be taken on behalf of any Non-Dissenting
Stockholder by the Stockholders’ Representative with respect to matters relating
to Section 10 or the Escrow Agreement, as fully binding upon such Non-Dissenting
Stockholder. Notwithstanding anything to the contrary contained in this Section
11.1, the Stockholders’ Representative shall not have the

 

65.

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

authority to execute, deliver, acknowledge, certify, file or take any other
action (other than actions ministerial in nature) without the prior written
consent of Allen & Buckeridge Asset Management Limited, as Trustee for Allen &
Buckeridge III.

 

(c) The power of attorney granted in Section 11.1(a): (i) is coupled with an
interest and is irrevocable; (ii) may be delegated by the Stockholders’
Representative; and (iii) shall survive the dissolution, death or incapacity of
each of the Non-Dissenting Stockholders.

 

(d) If the Stockholders’ Representative shall die, become disabled or otherwise
be unable to fulfill his responsibilities as agent of the Non-Dissenting
Stockholders, then the Key Stockholders shall, within 10 days after such death
or disability, appoint a successor agent for the Non-Dissenting Stockholders
and, promptly thereafter, shall notify Parent of the identity of such successor.
Any such successor shall become the “Stockholders’ Representative” for purposes
of this Agreement. If for any reason there is no Stockholders’ Representative at
any time, all references herein to the Stockholders’ Representative shall be
deemed to refer to the Key Stockholders.

 

(e) All expenses incurred by the Stockholders’ Representative in connection with
the performance of its duties as Stockholders’ Representative shall be borne and
paid exclusively by the Key Stockholders. All of the indemnities, immunities and
powers granted to the Stockholders’ Representative under this Agreement shall
survive the termination of this Agreement.

 

(f) The Stockholders’ Representative shall not be liable to any of the
Non-Dissenting Stockholders for any act done or omitted hereunder as
Stockholders’ Representative while acting in good faith and in the exercise of
reasonable judgment. The Non-Dissenting Stockholders shall indemnify the
Stockholders’ Representative and hold the Stockholders’ Representative harmless
against any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Stockholders’ Representative and arising out of or in
connection with the acceptance or administration of the Stockholders’
Representative’s duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Stockholders’ Representative.

 

11.2 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the Contemplated Transactions.

 

11.3 Attorneys’ Fees. If any Legal Proceeding relating to this Agreement or the
enforcement of any provision of this Agreement is brought against any party
hereto, the prevailing party shall be entitled to recover reasonable attorneys’
fees, costs and disbursements (in addition to any other relief to which the
prevailing party may be entitled). For purposes of this Agreement, any party
bringing an action against another party shall be deemed to be the prevailing
party only if such party is awarded an amount in excess of the maximum amount
offered by the opposing party after the filing of the complaint in such action,
and the defending party shall be deemed to be the prevailing party only such
party obtains a defense verdict or has entered against such party an award less
than the maximum amount offered by such party at any time after the filing of
the complaint in such action.

 

66.

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

11.4 Fees and Expenses. Except as otherwise provided in this Agreement, each
party to this Agreement shall bear and pay all fees, costs and expenses
(including legal fees, accounting fees and investment banking fees) that have
been incurred or that are incurred by or on behalf of such party in connection
with the Contemplated Transactions; provided, however, that Parent shall pay all
filing fees in connection with the filing by the parties of the premerger
notification and report forms relating to the Merger under the HSR Act and the
filing of any notice or other document under any other Antitrust Law.

 

11.5 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):

 

if to Parent:

 

Quest Software, Inc.

8001 Irvine Center Drive

Irvine, CA 92618

Attention: General Counsel

Facsimile: (949) 754-8999

 

with a copy to:

 

Cooley Godward LLP.

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306

Attention: David A. Lipkin

Facsimile: (650) 849-7400

 

if to the Company:

 

Vintela, Inc.

333 South 520 West, Suite 100

Lindon, Utah 84042

Attention: Chris Skillings

Facsimile: (801) 655-2525

 

with a copy to:

 

Durham Jones & Pinegar, P.C.

111 E. Broadway, Suite 900

Salt Lake City, UT 84111

Attention: Russell K. Smith, Esq.

Facsimile: (801) 415-3500

 

67.

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

if to any Key Stockholder: to the respective addresses and facsimile numbers set
forth beneath the names of the Key Stockholders on the signature pages of this
Agreement

 

with a copy to:

 

Ballard Spahr Andrews & Ingersoll, LLP

201 South Main Street, Suite 600

Salt Lake City, Utah 84111

Attention: David Rudd

Facsimile: (801) 531-3001

 

and a copy to:

 

Enterprise Law Group, Inc.

Menlo Oaks Corporate Center

4400 Bohannon Drive, Suite 280

Menlo Park, California 94025-1041

Attention: Wayland M. Brill, Esq. and

       Nelson D. Crandall, Esq.

Facsimile: (650) 462-4747

 

if to the Stockholders’ Representative:

 

The Canopy Group, Inc.

333 South 520 West, Suite 300

Attention: Bill Mustard

Facsimile: (801) 229-2458

 

with a copy to:

 

Ballard Spahr Andrews & Ingersoll, LLP

201 South Main Street, Suite 600

Salt Lake City, Utah 84111

Attention: David Rudd

Facsimile: (801) 531-3001

 

68.

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

and a copy to:

 

Enterprise Law Group, Inc.

Menlo Oaks Corporate Center

4400 Bohannon Drive, Suite 280

Menlo Park, California 94025-1041

Attn.: Wayland M. Brill, Esq. and

     Nelson D. Crandall, Esq.

Facsimile: (650) 462-4747

 

11.6 Confidentiality. Without limiting the generality of anything contained in
Section 6.3, each Key Stockholder shall keep confidential, and shall not use or
disclose to any other Person, any non-public document or other non-public
information in such Key Stockholder’s possession that relates to the business of
any Acquired Corporation or Parent.

 

11.7 Time of the Essence. Time is of the essence of this Agreement.

 

11.8 Headings. The headings contained in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall not
be referred to in connection with the construction or interpretation of this
Agreement.

 

11.9 Counterparts and Exchanges by Facsimile Transmission. This Agreement may be
executed in several counterparts, each of which shall constitute an original and
all of which, when taken together, shall constitute one agreement. The exchange
of a fully executed Agreement (in counterparts or otherwise) by facsimile
transmission shall be sufficient to bind the parties to the terms and conditions
of this Agreement.

 

11.10 Governing Law; Venue.

 

(a) All questions with respect to the effects of the Merger shall be construed
in accordance with, and governed in all respects by, the UBCA. All other
questions convergent the construction, validity and interpretation of this
Agreement shall be construed in accordance with, and governed in all respects
by, the internal laws of the State of Delaware (without giving effect to
principles of conflicts of laws).

 

(b) Except as otherwise provided in Section 10.9 or in the Escrow Agreement, any
Legal Proceeding relating to this Agreement or the enforcement of any provision
of this Agreement may be brought or otherwise commenced only in any state or
federal court located in Orange County, California. Each party to this
Agreement: (i) irrevocably and unconditionally consents and submits to the
exclusive jurisdiction and venue of the state and federal courts located in
Orange County, California; (ii) agrees that each state and federal court located
in the State of California shall be deemed to be a convenient forum; and (iii)
agrees not to assert (by way of motion, as a defense or otherwise), in any such
Legal Proceeding commenced in any state or federal court located in Orange
County, California, any claim that such party is not subject personally to the
jurisdiction of such court, that such Legal Proceeding has been brought in an
inconvenient forum, that the venue of such Legal Proceeding is improper or that
this Agreement or the subject matter of this Agreement may not be enforced in or
by such court.

 

69.

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

(c) Each Key Stockholder irrevocably constitutes and appoints the Stockholders’
Representative as his or her agent to receive service of process in connection
with any Legal Proceeding relating to this Agreement or the enforcement of any
provision of this Agreement.

 

11.11 Successors and Assigns. This Agreement shall be binding upon: the Company
and its successors and assigns (if any); the Key Stockholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); Parent and its successors and assigns (if any);
Merger Sub and its successors and assigns (if any); and the Stockholders’
Representative and his personal representatives, executors, administrators,
estates, heirs, successors and assigns (if any). This Agreement shall inure to
the benefit of: the Company; Parent; Merger Sub; the other Indemnitees (subject
to Section 10.7); the Key Stockholders; the Stockholders’ Representative;
current and former officers and directors of the Company to the extent set forth
in Section 6.12; and the respective successors and assigns (if any) of the
foregoing. Parent may freely assign any or all of its rights under this
Agreement (including its indemnification rights under Section 10), in whole or
in part, to any other Person without obtaining the consent or approval of any
other party hereto or of any other Person.

 

11.12 Remedies Cumulative; Specific Performance. Except as otherwise set forth
in this Agreement, the rights and remedies of the parties hereto shall be
cumulative (and not alternative). The parties to this Agreement agree that, in
the event of any breach or threatened breach by any party to this Agreement of
any covenant, obligation or other provision set forth in this Agreement for the
benefit of any other party to this Agreement, such other party shall be entitled
(in addition to any other remedy that may be available to it) to (a) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision, and (b) an
injunction restraining such breach or threatened breach.

 

11.13 Waiver.

 

(a) No failure on the part of any Person to exercise any power, right, privilege
or remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.

 

(b) No Person shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.

 

11.14 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives
any and all right to trial by jury in any Legal Proceeding arising out of or
related to this Agreement or the transactions contemplated hereby.

 

70.

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

11.15 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto; provided, however, that no
amendment shall adversely affect the rights of any current or former director or
officer of the Company under Section 6.12 without the written consent of such
director or officer.

 

11.16 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.

 

11.17 Parties in Interest. Except for the provisions of Sections 6.12 and 10,
none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns (if any).

 

11.18 Entire Agreement. This Agreement and the other agreements referred to
herein set forth the entire understanding of the parties hereto relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.

 

11.19 Construction.

 

(a) For purposes of this Agreement, whenever the context requires: the singular
number shall include the plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; the feminine gender shall include the
masculine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.

 

(b) The parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.

 

(c) As used in this Agreement and Exhibit A and the Schedules to this Agreement,
the words “include” and “including,” and variations thereof, shall not be deemed
to be terms of limitation, but rather shall be deemed to be followed by the
words “without limitation.”

 

71.

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

(d) Except as otherwise indicated, all references in this Agreement to
“Sections,” “Exhibits” and “Schedules” are intended to refer to Sections of this
Agreement and Exhibits and Schedules to this Agreement.

 

[Remainder of page intentionally left blank]

 

72.

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

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered as of the date first set forth above.

 

QUEST SOFTWARE, INC.,

  a California corporation

By:

 

/s/ M. Brinkley Morse

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

Name:

 

M. Brinkley Morse

Title:

 

SVP, Corporate Development

VELOCITY MERGER CORP.,

  a Utah corporation

By:

 

/s/ M. Brinkley Morse

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

Name:

 

M. Brinkley Morse

Title:

 

SVP, Corporate Development

VINTELA, INC.,

  a Utah corporation

By:

 

/s/ Chris Skillings

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

Name:

 

Chris Skillings

Title:

 

CEO

By:

 

/s/ D.R. Wilson

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

Name:

 

D.R. Wilson

Title:

 

President

THE CANOPY GROUP, INC.,

  a Utah corporation,

  as a Key Stockholder

By:

 

/s/ William Mustard

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

Name:

 

William Mustard

Title:

 

President & CEO

Address:    

 

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

 

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

Facsimile:  

 

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

 

Merger Agreement Signature Page

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

ALLEN & BUCKERIDGE ASSET

MANAGEMENT LIMITED, AS TRUSTEE FOR

ALLEN & BUCKERIDGE III,

as a Key Stockholder

By:

 

/s/ Roger G. Buckeridge

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

Name:

 

Roger G. Buckeridge

Title:

 

Director

Address:

   

 

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

 

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

Facsimile:

 

 

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

THE CANOPY GROUP, INC.,

a Utah corporation,

as Stockholders’ Representative

By:

 

/s/ William Mustard

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

Name:

 

William Mustard

Title:

 

President & CEO

 

Merger Agreement Signature Page

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

EXHIBIT A

 

CERTAIN DEFINITIONS

 

For purposes of the Agreement (including this Exhibit A and the Disclosure
Schedule):

 

Acquired Corporations. “Acquired Corporations” shall mean the Company and each
Subsidiary of the Company.

 

Acquisition Transaction. “Acquisition Transaction” shall mean any transaction
involving: (a) the sale, license, disposition or acquisition of all or a
substantial portion of the business or assets of any Acquired Corporation; (b)
the issuance, disposition or acquisition of (i) capital stock or other equity
securities of an Acquired Corporation constituting at least 25% of the voting
power of all of the capital stock of such Acquired Corporation (other than
Company Common Stock issued to employees of the Company upon exercise of Company
Options in routine transactions in accordance with the Company’s past
practices), (ii) any option, call, warrant or right (whether or not immediately
exercisable) to acquire capital stock or other equity securities of an Acquired
Corporation constituting at least 25% of the voting power of all of the capital
stock of such Acquired Corporation, or (iii) any security, instrument or
obligation that is or may become convertible into or exchangeable for capital
stock or other equity securities of an Acquired Corporation constituting at
least 25% of the voting power of all of the capital stock of such Acquired
Corporation; or (c) any merger, consolidation, share exchange, business
combination, reorganization, recapitalization or similar transaction involving
an Acquired Corporation.

 

Aggregate Transaction Expense Amount. “Aggregate Transaction Expense Amount”
shall mean the aggregate dollar amount of (a) all Transaction Expenses
(including legal fees and expenses, accounting fees and expenses and financial
advisory fees and expenses) that are or have been paid or incurred by or on
behalf of the respective Acquired Corporations at or prior to the Effective Time
relating directly or indirectly to the consummation of the Merger or any of the
other Contemplated Transactions, and (b) all Transaction Expenses that are
payable or are expected to become payable or to be incurred by or on behalf of
the respective Acquired Corporations at or after the Effective Time relating
directly or indirectly to the consummation of the Merger or any of the other
Contemplated Transactions.

 

Agreement. “Agreement” shall mean the Agreement and Plan of Merger to which this
Exhibit A is attached (including the Disclosure Schedule), as it may be amended
from time to time.

 

COBRA. “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.

 

Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

Company Affiliate. “Company Affiliate” shall mean any Person under common
control with an Acquired Corporation within the meaning of Sections 414(b), (c),
(m) and (o) of the Code, and the regulations issued thereunder.

 

A-1

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

Company Capital Stock. “Company Capital Stock” shall mean Company Common Stock
and Company Preferred Stock.

 

Company Common Stock. “Company Common Stock” shall mean the common stock, no par
value, of the Company.

 

Company Contract. “Company Contract” shall mean any Contract: (a) to which an
Acquired Corporation is a party; (b) by which an Acquired Corporation or any of
its assets is or may become bound or under which an Acquired Corporation has, or
may become subject to, any obligation; or (c) under which an Acquired
Corporation has or may acquire any right or interest.

 

Company Employee. “Company Employee” shall mean any current or former employee,
consultant, independent contractor or director of an Acquired Corporation.

 

Company Employee Agreement. “Company Employee Agreement” shall mean any
management, employment, severance, change in control, transaction bonus,
consulting, relocation, repatriation or expatriation agreement or other Contract
between an Acquired Corporation or a Company Affiliate and any Company Employee,
other than any such Contract that is terminable “at will” and without any
obligation on the part of an Acquired Corporation or any Company Affiliate to
make any payments or provide any benefits in connection with termination of such
Contract.

 

Company Employee Plan. “Company Employee Plan” shall mean any plan, program,
policy, practice, Contract or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written, unwritten or otherwise, and whether funded or
unfunded, including each “employee benefit plan,” within the meaning of Section
3(3) of ERISA (whether or not ERISA is applicable to such plan), that is or has
been maintained, contributed to or required to be contributed to by an Acquired
Corporation for the benefit of any Company Employee, or with respect to which an
Acquired Corporation has or may now or in the future have any liability or
obligation; provided, however, that a Company Employee Agreement shall not be
considered an “Company Employee Plan.”

 

Company IP. “Company IP” shall mean (a) all Intellectual Property Rights in the
Company Products and Company Software (other than Intellectual Property Rights
or Intellectual Property licensed to the Company, as identified in Part 2.9(a)
of the Disclosure Schedule) and (b) all Intellectual Property Rights in which an
Acquired Corporation has (or purports to have) an ownership interest or an
exclusive license or similar exclusive right. However, “Company IP” does not
include any patent application or patent that is owned by any Person who is not
a current or former employee, officer or director of any Acquired Corporation
and that is not identified (or required to be identified) in Part 2.9 of the
Disclosure Schedule as owned by an Acquired Corporation.

 

Company IP Contract. “Company IP Contract” shall mean any Company Contract that
contains any assignment or license of, or any covenant not to assert or enforce,
any Intellectual Property Right or that otherwise relates to any Company IP or
any Intellectual Property developed by, with or for an Acquired Corporation,
including any source code escrow agreement.

 

A-2

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

Company Option. “Company Option” shall mean an option to acquire shares of
Company Common Stock from the Company, whether vested or unvested.

 

Company Option Plan. “Company Option Plan” shall mean the Vintela, Inc. 2003
Stock Option Plan.

 

Company Pension Plan. “Company Pension Plan” shall mean any (a) Company Employee
Plan that is an “employee pension benefit plan,” within the meaning of Section
3(2) of ERISA, or (b) other occupational pension plan, including any final
salary or money purchase plan.

 

Company Preferred Stock. “Company Preferred Stock” shall mean Company Series A
Preferred Stock and Company Series B Preferred Stock.

 

Company Product. “Company Product” shall mean any software product or other
product that both (a) is currently being or at any time has been developed by or
on behalf of any Acquired Corporation or any predecessor of an Acquired
Corporation and (b) is currently being or at any time has been manufactured,
marketed, distributed, licensed, sold or made available (as part of a service
bureau, time-sharing, application service provider or similar arrangement or
otherwise) by any of the Acquired Corporations.

 

Company Series A Preferred Stock. “Company Series A Preferred Stock” shall mean
the Preferred Stock, Series A, no par value, of the Company.

 

Company Series B Preferred Stock. “Company Series B Preferred Stock” shall mean
the Preferred Stock, Series B, no par value, of the Company.

 

Company Software. “Company Software” shall mean any software (including software
development tools and software embedded in hardware devices, and all updates,
upgrades, releases, enhancements and bug fixes) that has been developed (or is
currently being developed) by or on behalf of an Acquired Corporation at any
time.

 

Consent. “Consent” shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).

 

Contemplated Transactions. “Contemplated Transactions” shall mean the
transactions and other matters contemplated by the Agreement, including the
Merger and the solicitation and obtaining of Written Consents.

 

Contract. “Contract” shall mean any written, oral or other agreement, contract,
subcontract, lease, understanding, instrument, note, certificate, warranty,
proxy, insurance policy, benefit plan or legally binding commitment, arrangement
or undertaking of any nature.

 

A-3

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

Damages. “Damages” shall include any loss, damage (including consequential,
indirect and special damages), injury, decline in value, lost profits,
liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee
(including reasonable attorneys’ fees), charge, cost (including costs of
investigation) or expense of any nature.

 

Default. “Default” shall have the meaning specified in the Note.

 

Disclosure Schedule. “Disclosure Schedule” shall mean the schedule (dated as of
the date of the Agreement) delivered to Parent on behalf of the Company and the
Key Stockholders.

 

DOL. “DOL” shall mean the United States Department of Labor.

 

Encumbrance. “Encumbrance” shall mean any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).

 

End User License. “End User License” shall mean an end user license to one or
more Company Products granted by an Acquired Corporation in the ordinary course
of business and consistent with past practice.

 

Entity. “Entity” shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.

 

Environmental Law. “Environmental Law” shall mean any federal, state, local or
foreign Legal Requirement relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any Legal Requirement relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.

 

ERISA. “ERISA” shall mean the Employee Retirement Income Security Act of 1974,
as amended.

 

Escrow Agent. “Escrow Agent” shall mean U.S. Bank National Association/U.S. Bank
Corporate Escrow Services.

 

Escrow Agreement. “Escrow Agreement” shall mean the escrow agreement to be
entered into among Parent, the Stockholders’ Representative and the Escrow Agent
on the Closing Date, substantially in the form of Exhibit C to the Agreement.

 

A-4

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

Escrow Fund. “Escrow Fund” shall mean the escrow fund established pursuant to
the Escrow Agreement.

 

Escrow Percentage. “Escrow Percentage” shall mean, with respect to each
Non-Dissenting Stockholder, the percentage corresponding to a fraction having
(1) a numerator equal to the aggregate amount of Merger Consideration to be
received by such Non-Dissenting Stockholder in exchange for such Non-Dissenting
Stockholder’s shares of Company Capital Stock in the Merger and (2) a
denominator equal to the aggregate amount of Merger Consideration to be received
by all Non-Dissenting Stockholders in exchange for all such Non-Dissenting
Stockholders’ shares of Company Capital Stock in the Merger.

 

Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.

 

Expiration Date. “Expiration Date” shall mean the date that is 18 months after
the Closing Date.

 

FMLA. “FMLA” shall mean the Family Medical Leave Act of 1993, as amended.

 

Foreign Plan. “Foreign Plan” shall mean: (a) any plan, program, policy,
practice, Contract or other arrangement mandated by a Governmental Body outside
the United States to which any Acquired Corporation is subject; (b) any Company
Employee Plan that is subject to any of the Legal Requirements of any
jurisdiction outside the United States; and (c) any Company Employee Plan that
covers or has covered any Company Employee whose services are or have been
performed primarily outside of the United States.

 

Forfeited Option. “Forfeited Option” shall mean an Assumed Option that shall
have been forfeited or cancelled (without ever having been exercised) prior to
the scheduled expiration date of such Assumed Option during the period between
the Effective Time and the Expiration Date (it being understood that such
scheduled expiration date shall be determined without regard to any earlier
termination of such Assumed Option by reason of a termination of the holder’s
employment).

 

GAAP. “GAAP” shall mean generally accepted accounting principles in the United
States.

 

Governmental Authorization. “Governmental Authorization” shall mean any: (a)
permit, license, certificate, franchise, permission, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or (b) right under any Contract with any Governmental Body.

 

Governmental Body. “Governmental Body” shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; (c) governmental or quasi-governmental authority of any nature
(including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal); or (d) self-regulatory organization (including the NASD).

 

A-5

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

Government Bid. “Government Bid” shall mean any quotation, bid or proposal
submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.

 

Government Contract. “Government Contract” shall mean any prime contract,
subcontract, letter contract, purchase order or delivery order executed or
submitted to or on behalf of any Governmental Body or any prime contractor or
higher-tier subcontractor, or under which any Governmental Body or any such
prime contractor or subcontractor otherwise has or may acquire any right or
interest.

 

Harmful Code. “Harmful Code” shall mean any “back door,” “drop dead device,”
“time bomb,” “Trojan horse,” “virus,” or “worm” (as such terms are commonly
understood in the software industry) or any other software code designed or
intended to have any of the following functions: (i) disrupting, disabling,
harming or otherwise impeding in any manner the operation of, or providing
unauthorized access to, a computer system or network or other device on which
such code is stored or installed; or (ii) damaging or destroying any data or
file without the user’s consent.

 

HIPAA. “HIPAA” shall mean the Health Insurance Portability and Accountability
Act of 1996, as amended.

 

HSR Act. “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.

 

Indemnitees. “Indemnitees” shall mean the following Persons: (a) Parent; (b)
Parent’s current and future affiliates (including the Surviving Corporation);
(c) the respective Representatives of the Persons referred to in clauses “(a)”
and “(b)” above; and (d) the respective successors and assigns of the Persons
referred to in clauses “(a)”, “(b)” and “(c)” above; provided, however, that the
stockholders of the Company shall not be deemed to be “Indemnitees.”

 

Intellectual Property. “Intellectual Property” shall mean algorithms, APIs,
apparatus, databases, data collections, development tools, diagrams, formulae,
inventions (whether or not patentable), know-how, logos, marks (including brand
names, product names, logos, and slogans), methods, network configurations and
architectures, processes, proprietary information, protocols, schematics,
specifications, software, software code (in any form, including source code and
executable or object code), subroutines, techniques, user interfaces, URLs, web
sites, works of authorship and other forms of technology (whether or not
embodied in any tangible form and including all tangible embodiments of the
foregoing, such as instruction manuals, laboratory notebooks, prototypes,
samples, studies and summaries).

 

Intellectual Property Rights. “Intellectual Property Rights” shall mean all
rights of the following types, which may exist or be created under the laws of
any jurisdiction in the world: (a) rights associated with works of authorship,
including exclusive exploitation rights,

 

A-6

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

copyrights, moral rights and mask works; (b) trademark and trade name rights and
similar rights; (c) trade secret rights; (d) patent and industrial property
rights; (e) other proprietary rights in Intellectual Property; and (f) rights in
or relating to registrations, renewals, extensions, continuations, divisions,
and reissues of, and applications for, any of the rights referred to in clauses
“(a)” through “(e)” above.

 

IRS. “IRS” shall mean the United States Internal Revenue Service.

 

Key Stockholder Transaction Agreements. “Key Stockholder Transaction Agreements”
shall mean, with respect to any Key Stockholder, the Release to which such Key
Stockholder will become a party and the Key Stockholders Certificate executed by
such Key Stockholder.

 

Knowledge. An individual shall be deemed to have “Knowledge” of a particular
fact or other matter if: (a) such individual has actual knowledge of such fact
or other matter or (b) an ordinary and prudent business person employed in the
same capacity in the same type and size of business as such individual would
reasonably be expected to have actual knowledge of such fact or other matter.
The Company shall be deemed to have “Knowledge” of a particular fact or other
matter if any of the individuals identified on Schedule II to the Agreement has
Knowledge of such fact or other matter; provided, however, that (i) with respect
to the representations and warranties qualified as to “Knowledge” set forth in
the first sentence of Section 2.9(g) and in Section 2.9(g)(i), the Company shall
also be deemed to have “Knowledge” of any patents or patent applications that
any employee, agent or representative (including attorneys) of any Acquired
Corporation (or any predecessor to an Acquired Corporation) discovered in the
course of preparing, filing and prosecuting the Acquired Corporations’ patent
applications, and (ii) ”Knowledge” as it relates to Intellectual Property
matters shall not assume or require any patent searches, trademark, service mark
or trade name searches, or other intellectual property due diligence on the part
of the Company or any individual identified on Schedule II to the Agreement.

 

Legal Proceeding. “Legal Proceeding” shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.

 

Legal Requirement. “Legal Requirement” shall mean any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, order, award,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Body.

 

Material Adverse Effect. “Material Adverse Effect” shall mean any change, event,
effect, claim, circumstance or matter that (considered together with all other
changes, events, effects, claims, circumstances or matters) is, or could
reasonably be expected to be or to become, materially adverse to (a) the
business, condition, assets, capitalization, Intellectual Property, liabilities,
results of operations, financial performance or contractual relationships of the

 

A-7

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

Acquired Corporations taken as a whole, (b) Parent’s right to own the stock of
the Surviving Corporation or (c) the ability of the Company or any of the Key
Stockholders to perform any of its, her or his covenants or obligations under
the Agreement or under any other Contract contemplated by the Agreement to be
entered into by such Persons.

 

Materials of Environmental Concern. “Materials of Environmental Concern” include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or hereafter regulated by
any Environmental Law or that is otherwise a danger to health, reproduction or
the environment.Net Value. “Net Value” shall mean, with respect to each
Forfeited Option, the dollar amount determined by multiplying (A) the amount by
which the Parent Closing Date Stock Price exceeds the exercise price per share
of Parent Common Stock that was subject to such Forfeited Option at the time of
its forfeiture or cancellation by (B) the number of shares of Parent Common
Stock that were subject to such Forfeited Option at the time of its forfeiture
or cancellation.

 

Non-Dissenting Stockholder. “Non-Dissenting Stockholder” shall mean each
stockholder of the Company that does not perfect such stockholder’s dissenters’
rights under the UBCA and is otherwise entitled to receive Merger Consideration
pursuant to Section 1.5.

 

Note. “Note” shall mean the Initial Note issued pursuant to the terms of the
Note Purchase Agreement.

 

Note Purchase Agreement. “Note Purchase Agreement” shall mean the Senior Secured
Convertible Note Purchase Agreement, dated as of November 15, 2004, between the
Company and Microsoft Capital Corporation.

 

Obligations. “Obligations” shall have the meaning specified in the Note Purchase
Agreement.

 

Order. “Order” shall mean any order, writ, injunction, judgment or decree.

 

Parent Common Stock. “Parent Common Stock” shall mean the common stock, no par
value, of Parent.

 

PBGC. “PBGC” shall mean the United States Pension Benefit Guaranty Corporation.

 

Person. “Person” shall mean any individual, Entity or Governmental Body.

 

Pre-Closing Period. “Pre-Closing Period” shall mean the period from the date of
the Agreement through the Effective Time.

 

Predecessor Corporation. “Predecessor Corporation” shall mean each corporation
or other Entity that has been merged into any of the Acquired Corporations, or
that has directly or indirectly transferred or conveyed any material assets to
any of the Acquired Corporations.

 

Registered IP. “Registered IP” shall mean all Intellectual Property Rights that
are registered, filed or formally issued (such as the issuance of a patent)
under the authority of, with or by any Governmental Body, including all patents,
registered copyrights, registered mask works and registered trademarks and all
applications for any of the foregoing.

 

A-8

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

Representatives. “Representatives” shall mean officers, directors, employees,
partners, agents, attorneys, accountants, advisors and representatives.

 

SEC. “SEC” shall mean the United States Securities and Exchange Commission.

 

Specified Representations. “Specified Representations” shall mean: (a) the
representations and warranties set forth in Sections 2.3 and 2.9(c)(i); (b) the
representations and warranties set forth in the certificate referred to in
Section 7.7(h), to the extent such representations and warranties relate to any
of the matters addressed in any of the representations and warranties specified
in clause “(a)” of this sentence, and (c) the representations and warranties set
forth in any other certificate delivered to Parent pursuant to the Agreement, to
the extent such representations and warranties relate to any of the matters
addressed in any of the representations and warranties specified in clause “(a)”
of this sentence.

 

Subsidiary. An Entity shall be deemed to be a “Subsidiary” of another Person if
such Person directly or indirectly owns or purports to own, beneficially or of
record, (a) an amount of voting securities of other interests in such Entity
that is sufficient to enable such Person to elect at least a majority of the
members of such Entity’s board of directors or other governing body, or (b) at
least 50% of the outstanding equity or financial interests of such Entity.

 

Tax. “Tax” shall mean any federal, state, local, foreign or other tax (including
any income tax, franchise tax, capital gains tax, gross receipts tax,
value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax,
sales tax, use tax, property tax, business tax, withholding tax or payroll tax),
levy, assessment, tariff, duty (including any customs duty), deficiency or fee,
and any related charge or amount (including any fine, penalty or interest),
imposed, assessed or collected by or under the authority of any Governmental
Body.

 

Tax Return. “Tax Return” shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information, and
any amendment to any of the foregoing, filed with or submitted to, or required
to be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.

 

Third Party Software. “Third Party Software” shall mean all software (and
associated documentation) that (a) was not developed by or on behalf of any
Acquired Corporation or its predecessor, (b) is licensed to any Acquired
Corporation by a third party on a nonexclusive basis (including “open source”
licenses), and (c) is not incorporated into or part of any Company Product, but
rather is distributed with or without modification by the Acquired Corporations
with or independent of one or more Company Products, provided that in the event
of modification, the modifications by or on behalf of an Acquired Corporation
are not Third Party Software, but only the original is Third Party Software.

 

A-9

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

Transaction Expense. “Transaction Expense” shall mean any fee, cost, expense,
payment, expenditure or liability of the Company or any other Acquired
Corporation (including legal fees and expenses, accounting fees and expenses and
financial advisory fees and expenses), whether incurred prior to the date of the
Agreement, during the Pre-Closing Period or at or after the Effective Time,
that:

 

(a) relates directly or indirectly to (i) the investigation and review conducted
by Parent and its Representatives with respect to the business of the Acquired
Corporations (and the furnishing of information to Parent and its
Representatives in connection with such investigation and review), (ii) the
negotiation, preparation, review, execution, delivery or performance of the
Agreement (including the Disclosure Schedule), the Information Statement or any
certificate, opinion, Contract or other instrument or document delivered or to
be delivered in connection with any of the Contemplated Transactions, (iii) the
preparation and submission of any filing or notice required to be made or given
in connection with any of the Contemplated Transactions, and the obtaining of
any Consent required to be obtained in connection with any of the Contemplated
Transactions, (iv) the participation by the Company in any proceedings or
negotiations of the type referred to in Section 6.1 of the Agreement, or (v) the
consummation of the Merger or any of the other Contemplated Transactions; or

 

(b) arises or is expected to arise, is triggered or becomes due or payable, in
whole or in part, as a direct or indirect result of the consummation (whether
alone or in combination with any other event or circumstance) of the Merger or
any of the other Contemplated Transactions.

 

A-10

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

SCHEDULE I

Key Stockholders

 

The Canopy Group, Inc.

Allen & Buckeridge III

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

SCHEDULE II

“Knowledge”

 

Chris Skillings

 

Dave Wilson

 

Brad Angus

 

Joe Grettenberger

 

Matt Peterson

 

Glen Lewis

 

Jonathan Nassar

 

Dean Povey

 

Bill Mustard

 

John Scull

 

Mark Lang