EX-10.118






EXHIBIT 10.118



AGREEMENT AND PLAN OF MERGER



This AGREEMENT AND PLAN OF MERGER, dated as of March 14 2006 (this “Agreement”), is entered
into by and among Warp Technology Holdings, Inc., operating under the name Halo Technology
Holdings, a Nevada corporation (“Parent”), UCA Merger Sub, Inc., a Delaware corporation and
wholly-owned subsidiary of Parent (“Merger Sub”) and Unify Corporation, a Delaware corporation (the
“Company”). Parent, Merger Sub and the Company are collectively referred to herein as the
“Parties.”




	 	A.	 	The respective Boards of Directors of Parent, Merger Sub and the Company
(i) have approved and have declared advisable the merger of Merger Sub with and into
the Company (the “Merger”), upon the terms and subject to the conditions set forth
herein and (ii) have determined that the Merger and the other transactions contemplated
hereby are consistent with, and in furtherance of, their respective business strategies
and goals.






	 	B.	 	The Parties desire to make certain representations, warranties, covenants and
agreements in connection with the Merger and also to set forth various conditions to
the Merger.






	 	C.	 	For federal income tax purposes, it is intended that the Merger will qualify as
a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of
1986, as amended (the “Code” or “IRC”), and the Parties to this Agreement intend to
adopt this Agreement as a “plan of reorganization” within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations; and





NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and
agreements contained herein, and intending to be legally bound hereby, the Parties agree as
follows:



ARTICLE I




THE MERGER





1.1 The Merger.



Upon the terms and subject to the conditions set forth in this Agreement, and in accordance
with the Delaware General Corporation Law (the “DGCL”), Merger Sub shall be merged with and into
the Company at the Effective Time. Following the Effective Time, the separate corporate existence
of Merger Sub shall cease and the Company shall be the surviving corporation (the “Surviving
Corporation”), shall succeed to and assume all the rights and obligations of Merger Sub in
accordance with the DGCL and shall become a wholly-owned subsidiary of Parent.




1.2 Closing.



The closing of the Merger (the “Closing”) will take place at 10:00 a.m. on a date to be
specified by the Parties (the “Closing Date”), which shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in Article VII (other than those
conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction
or waiver of those conditions), unless another time or date is agreed to by the Parties hereto.
The Closing will be held at the offices of the Parent at 200 Railroad Avenue, Third Floor,
Greenwich, Connecticut 06830 or such other location as the parties may agree.




1.3 Effective Time.



Subject to the provisions of this Agreement, on the Closing Date, the Parties shall file a
certificate of merger (the “Certificate of Merger”) executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required under the DGCL. The
Merger shall become effective at such time (the “Effective Time”) as the Certificate of Merger is
filed with the Secretary of State of the State of Delaware, or at such subsequent date or time as
Parent and the Company shall agree and specify in the Certificate of Merger.




1.4 Effects of the Merger.



	 	 	 
	The Merger shall have the effects set forth in Section 259 of the DGCL.

	 
	 	 
	1.5

	 	Certificate of Incorporation and Bylaws.






At the Effective Time, subject to the provisions of Section 6.10, the certificate of
incorporation of the Company shall be amended and restated to be the same in substance as the
certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time
(except that the name of the Company will remain unchanged), and said amended and restated
certificate of incorporation shall be the certificate of incorporation of the Surviving
Corporation. At the Effective Time, subject to the provisions of Section 6.10, the bylaws of the
Company shall be amended and restated to be the same in substance as the bylaws of Merger Sub as in
effect immediately prior to the Effective Time, and such amended and restated bylaws shall be the
bylaws of the Surviving Corporation until thereafter amended.




1.6 Directors and Officers.



The directors of Merger Sub immediately prior to the Effective Time shall be the directors of
the Surviving Corporation until the next annual meeting of stockholders of the Surviving
Corporation (or their earlier resignation or removal) and until their respective successors are
duly elected and qualified, as the case may be. The officers of Merger Sub immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, until their successors have
been duly elected or appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation’s certificate of incorporation and bylaws.




1.7 Plan of Reorganization.



For federal income tax purposes, the Merger is intended to constitute a reorganization within
the meaning of Section 368 of the Code. The Parties to this Agreement hereby adopt this Agreement
as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
Income Tax Regulations.



ARTICLE II




EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES





2.1 Effect on Stock.



As of the Effective Time, by virtue of the Merger and without any action on the part of Merger
Sub, the Company or the holders of any securities of the Company or Merger Sub:



(a) Cancellation of Company Common Stock. Each share of Company Common Stock that
is owned directly by the Company or by Parent or any of their wholly-owned Subsidiaries, if any,
shall automatically be cancelled and retired and shall cease to exist, and no consideration shall
be delivered in exchange therefor.



(b) Conversion of Company Common Stock. Subject to Sections 2.1(e) and 2.2(e), each
issued and outstanding share of Company Common Stock (other than shares to be cancelled in
accordance with Section 2.1(a) and shares exercising appraisal rights in accordance with Section
2.1(f)) at the Effective Time shall be converted into the right to receive 0.437 of one share of
Parent Common Stock (the “Exchange Ratio”). The shares of Parent Common Stock issued in exchange
for Company Common Stock, together with the Substitute Options and the Substitute Warrants,
constitutes the “Merger Consideration.” As of the Effective Time and without any action on the
part of the holders thereof, all such shares of Company Common Stock shall no longer be outstanding
and shall automatically be cancelled and retired and shall cease to exist, and each holder of a
certificate or certificates that immediately prior to the Effective Time represented outstanding
shares of Company Common Stock (the “Certificates”) shall cease to have any rights with respect
thereto, except the right to receive (i) the Merger Consideration and (ii) certain dividends and
other distributions in accordance with Section 2.2(c).



(c) Conversion of Common Stock of Merger Sub. Each issued and outstanding share of
common stock, no par value per share, of Merger Sub shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock of the Surviving Corporation.



(d) Common Stock Options and Warrants.



(i) Prior to the Effective Time, each outstanding Company Stock Option that (1) has
an exercise price of less than $1.00 per share, and (2) is unexercised as of the Effective Date
shall become and represent an option to purchase (a “Substitute Option”) the number of shares of
Parent Common Stock (rounded down to the nearest full share) determined by multiplying (X) the
number of shares of Company Common Stock subject to such Company Stock Option immediately prior to
the Effective Time by (Y) the Exchange Ratio, at an exercise price per share of Parent Common Stock
equal to the result of dividing (A) the exercise price of such Company Stock Option by (B) the
Exchange Ratio and rounding the result up to the nearest tenth of one cent. All other outstanding
options to purchase Company Common Stock shall be cancelled at the Effective Time. All Substitute
Options shall contain substantially the same terms and conditions as the applicable Company Stock
Option.



(ii)  Prior to the Effective Time, each outstanding and unexercised warrant to
purchase shares of Company Common Stock (each, a “Company Warrant”) shall become and represent a
warrant to purchase (a “Substitute Warrant”) the number of shares of Parent Common Stock (rounded
down to the nearest full share) determined by multiplying (X) the number of shares of Company
Common Stock subject to such Company Warrant immediately prior to the Effective Time by (Y) the
Exchange Ratio, on such other terms and subject to such other conditions as are set forth in the
form of Substitute Warrant attached hereto as Exhibit B.



(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to reflect
appropriately the effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into or exercisable or exchangeable for Parent
Common Stock or Company Common Stock), extraordinary dividend, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with respect to Parent
Common Stock or Company Common Stock occurring or having a record date on or after the date hereof
and prior to the Effective Time.



(f) Appraisal Rights. Notwithstanding any provision of this Agreement to the
contrary, shares of Company Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by a holder who has not voted such shares in favor of the Merger
and who has or may properly demand appraisal rights in the manner provided by Section 262 of the
DGCL (“Dissenting Shares”) shall not be converted into a right to receive a portion of the Merger
Consideration unless and until the holder of such shares becomes ineligible for such appraisal
rights. The holders thereof shall be entitled only to such rights as are granted by Section 262 of
the DGCL. Each holder of Dissenting Shares who becomes entitled to payment for such shares
pursuant to Section 262 of the DGCL shall receive payment therefor from the Parent in accordance
with the DGCL; provided, however, that (a) if any such holder of Dissenting Shares
shall have failed to establish entitlement to appraisal rights as provided in Section 262 of the
DGCL, (b) if any such holder of Dissenting Shares shall have effectively withdrawn demand for
appraisal of such shares or lost the right to appraisal and payment for shares under Section 262 of
the DGCL or (c) if neither any holder of Dissenting Shares nor the Surviving Corporation shall have
filed a petition demanding a determination of the value of all Dissenting Shares within the time
provided in Section 262 of the DGCL, such holder shall forfeit the right to appraisal of such
shares and each such share shall be treated as if it had been, as of the Effective Time, converted
into a right to receive the applicable portion of the Merger Consideration, without interest
thereon, as provided in Section 2.1(b) of this Agreement. The Company shall give Parent prompt
notice of any demands received by the Company for appraisal of any shares of Company Common Stock,
and Parent shall have the right to direct all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Parent, make any payment
with respect to, or settle or offer to settle, any such demands with respect to any holder of
Dissenting Shares before the Effective Time.




2.2 Exchange of Certificates.



(a) Exchange Agent. Prior to the Closing Date, Parent shall enter into an agreement
with such bank or trust company as may be designated by Parent and as shall be reasonably
satisfactory to the Company to act as exchange agent for the purpose of exchanging Certificates for
the Merger Consideration (the “Exchange Agent”). At or prior to the Effective Time, Parent shall
deposit with the Exchange Agent, for the benefit of the holders of shares of Company Common Stock,
for exchange in accordance with this Article II, through the Exchange Agent, the Parent Common
Stock issuable pursuant to Section 2.1 in exchange for outstanding shares of Company Common Stock.
Parent shall issue the Substitute Options and Substitute Warrants directly to the holders of
outstanding Company Stock Options and Company Warrants. Parent shall also make available to the
Exchange Agent, from time to time as required after the Effective Time, cash necessary to pay
dividends and distributions in accordance with Section 2.2(c) and to make payments in lieu of any
fractional shares in accordance with Section 2.2(e). Any certificates of Parent Common Stock and
cash deposited with the Exchange Agent as provided above shall hereinafter be referred to as the
“Exchange Fund.”



(b) Exchange Procedures. As soon as reasonably practicable after the Effective
Time, but no later than two days thereafter, the Exchange Agent shall mail to each holder of record
of a Certificate whose shares were converted into the Merger Consideration pursuant to Section 2.1
of this Agreement, (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other provisions as
Parent and the Company may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the Exchange Agent, the holder
of such Certificate shall be entitled to receive in exchange therefor a Parent certificate
representing that number of whole shares of Parent Common Stock issuable to such holder pursuant to
the Merger, certain dividends or other distributions in accordance with Section 2.2(c) and cash in
lieu of any fractional share in accordance with Section 2.2(e) that such holder has the right to
receive pursuant to the provisions of this Article II, and the Certificate so surrendered shall
forthwith be cancelled. Any other cash distributions made in accordance with Section 2.2(c) and
2.2(e) shall be paid by check or wire transfer. In the event of a transfer of ownership of Company
Common Stock that is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued to a Person other
than the Person in whose name the Certificate so surrendered is registered if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting
such issuance shall pay any transfer or other non-income taxes required by reason of the issuance
of shares of Parent Common Stock to a Person other than the registered holder of such Certificate
or establish to the satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender the Merger
Consideration that the holder thereof has the right to receive pursuant to the provisions of this
Article II, and, if applicable, certain dividends or other distributions in accordance with
Section 2.2(c). No interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.



(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common
Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.2(e), and all such dividends, other distributions and cash in
lieu of fractional shares of Parent Common Stock shall be paid by Parent to the Exchange Agent and
shall be included in the Exchange Fund, in each case until the surrender of such Certificate in
accordance with this Article II. Subject to the effect of applicable escheat or similar laws,
following surrender of any such Certificate, there shall be paid to the holder of the certificate
representing whole shares of Parent Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares of Parent Common
Stock, and the amount of any cash payable in lieu of a fractional share of Parent Common Stock to
which such holder is entitled pursuant to Section 2.2(e) and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the Effective Time but
prior to such surrender and with a payment date subsequent to such surrender payable with respect
to such whole shares of Parent Common Stock. Parent shall make available to the Exchange Agent
cash for these purposes.



(d) No Further Ownership Rights in Company Common Stock. All shares of Parent
Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms of
this Article II shall be deemed to have been issued in full satisfaction of all rights pertaining
to the shares of Company Common Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation’s obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time that may have been authorized or made
by the Company on such shares of Company Common Stock that remain unpaid at the Effective Time, and
there shall be no further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be cancelled and exchanged as provided
in this Article II, except as otherwise provided by law.



(e) No Fractional Shares.



(i) No certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or distribution of
Parent shall relate to such fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of Parent.



(ii) As promptly as practicable following the Effective Time, Parent shall pay to
each former holder of Company Common Stock an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such former holder (after taking into
account all shares of Company Common Stock held at the Effective Time by such holder) would
otherwise be entitled by (B) Parent’s Conversion Price.



(iii) As soon as practicable after the determination of the amount of cash, if any,
to be paid to holders of Company Common Stock with respect to any fractional share interests, the
Exchange Agent will make available such amounts to such holders of Company Common Stock subject to
and in accordance with the terms of Section 2.2(c).



(f) Termination of Exchange Fund. Any portion of the Exchange Fund that remains
undistributed to the holders of the Certificates for twelve (12) months after the Effective Time
shall be delivered to Parent, upon demand, and any holders of the Certificates who have not
theretofore complied with this Article II shall thereafter look only to Parent for payment of their
claim for Merger Consideration and any dividends or distributions with respect to Parent Common
Stock.



(g) No Liability. None of Parent, the Company, Merger Sub, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of any shares of Parent
Common Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund in
each case properly delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificate shall not have been surrendered prior to seven years
after the Effective Time, and shall not previously have been required to be escheated to or become
the property of any Governmental Entity, any such Merger Consideration or cash, dividends or
distributions in respect of such Certificate shall, to the extent permitted by applicable law,
become the property of Parent, free and clear of all claims or interest of any Person previously
entitled thereto.



(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash included
in the Exchange Fund, as directed by Parent, on a daily basis. Any interest and other income
resulting from such investments shall be paid to Parent upon termination of the Exchange Fund.



(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration and unpaid dividends and distributions on shares of
Parent Common Stock deliverable in respect thereof, in each case pursuant to this Agreement.



(j) Withholding Rights. Each of the Surviving Corporation, Parent and Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of shares of Company Common Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code and the rules and
regulations promulgated thereunder, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by the Surviving Corporation, Parent or the Exchange Agent, as
the case may be, and delivered to the relevant taxing authority, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made by the Surviving
Corporation, Parent or the Exchange Agent, as the case may be.




2.3 Further Assurances.



At and after the Effective Time, the officers and directors of the Surviving Corporation shall
be authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of
the Company or Merger Sub, any other actions and things reasonably necessary to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right, title and interest
in, to and under any of the rights, properties or assets acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger.



ARTICLE III




REPRESENTATIONS AND WARRANTIES OF THE COMPANY




The Company hereby makes the following representations and warranties to Parent and Merger Sub
as set forth in this Article III, subject to the exceptions disclosed in writing in the disclosure
schedules of the Company delivered herewith (the “Company Disclosure Schedule”), each of which
representations and warranties are being relied upon by Parent and Merger Sub as an inducement to
enter into and perform this Agreement. For purposes of the Company’s representations and
warranties, references to “Company” include “Company and its Subsidiaries.” It is acknowledged and
agreed by Parent and Merger Sub that any matter set forth in any schedule, section or subsection of
the Company Disclosure Schedule shall expressly not be deemed to constitute an admission by the
Company, or otherwise imply, that any such matter rises to the level of a Material Adverse Effect
or is otherwise material for purposes of this Agreement or the Company Disclosure Schedule.




3.1 Corporate Organization.



The Company is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each Subsidiary of the Company is duly organized, validly existing
and in good standing under the laws of its jurisdiction of formation. The Company and each
Subsidiary has the corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of any business conducted by it or the character
or location of any properties or assets owned or leased by it makes such licensing or qualification
necessary, except where the failure to so qualify or to be in good standing has not had and would
not likely have a Material Adverse Effect. The certificate of incorporation and bylaws of the
Company and corresponding organizational documents of each Subsidiary, copies of which are attached
at Section 3.1 of the Company Disclosure Schedule, are true, correct and complete copies of such
documents as in effect as of the date of this Agreement. Section 3.1 of the Company Disclosure
Schedule includes a listing of all Subsidiaries of the Company and all jurisdictions in which the
Company or any Subsidiary is qualified to do business or has assets and/or conducts operations.




3.2 Capitalization.



The authorized capital stock of the Company consists of 45,000,000 shares of Company capital
stock, of which 40,000,000 are designated as Company common stock (“Company Common Stock”), par
value $.001 per share and of which 5,000,000 are designated as preferred shares, par value $.001
per share (“Company Preferred Shares”). As of the date hereof, there are (i) 29,376,201 shares of
Company Common Stock issued and outstanding and 56,960 shares of Company Common Stock held in the
Company’s treasury, (ii) 1,573,011 shares of Company Common Stock reserved for issuance upon
exercise of Company Stock Options, (iii) 2,272,715 shares of Company Common Stock reserved for
issuance upon exercise of Company Warrants and (iv) no Company Preferred Shares issued and
outstanding, held in the Company’s treasury or reserved for issuance. All of the issued and
outstanding shares of Company Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to
the ownership thereof. Other than as referenced above or disclosed in the Company SEC Reports, the
Company does not have and is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance of any Company
Common Stock or Company Preferred Shares or any other equity security of the Company or any
securities representing the right to purchase or otherwise receive any Company Common Stock or any
other equity security of the Company. Except as disclosed in the Company SEC Reports, the Company
owns 100% of the outstanding equity interests in each Subsidiary. Except for the Stockholder
Agreement and except as disclosed in the Company SEC Reports, there are not as of the date hereof
and there will not be at the Effective Time any stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or to which it is bound relating to
the voting of any shares of the capital stock of the Company. Except as disclosed in the Company
SEC Reports, there are no existing rights with respect to the registration of Company Common Stock
under the Securities Act, including, but not limited to, demand rights or piggy-back registration
rights. Except as disclosed in the Company SEC Reports or as set forth in Section 3.2 of the
Company Disclosure Schedule, since October 31, 2005 through the date hereof no options or warrants
have been issued or accelerated or had their terms modified.




3.3 Authority; No Violation.



(a) The Company has full corporate power and authority to execute and deliver this
Agreement and, subject to receipt of stockholder approval, to consummate the transactions
contemplated hereby. The Board of Directors of the Company has directed that this Agreement and
the transactions contemplated hereby be submitted to the Company’s stockholders for approval at the
Company Stockholders Meeting. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly approved by the Board of Directors
of the Company. Other than the Company Stockholders Meeting, no other corporate proceedings on the
part of the Company are necessary to approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and delivered by the
Company and (assuming due authorization, execution and delivery by Parent and Merger Sub of this
Agreement) will constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with its terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors’ rights and remedies generally.



(b) Neither the execution and delivery of this Agreement by the Company, nor the
consummation by the Company, of the transactions contemplated hereby, nor compliance by the Company
with any of the terms or provisions hereof, will (i) violate any provision of the certificate of
incorporation or bylaws of the Company or (ii) assuming that the consents and approvals referred to
in Section 3.4 hereof are duly obtained, (x) violate any Laws applicable to the Company, or any of
its properties or assets, or (y) violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance upon any of the
properties or assets of the Company under any of the terms, conditions or provisions of any Company
Contract, or by which they or any of their respective properties or assets may be bound or
affected, except that in each case for such violations, breaches, defaults, or terminations as
would not likely have, either individually or in the aggregate, a Material Adverse Effect on the
Company.



(c) The Company is not: (i) in violation of its certificate of incorporation or bylaws or
similar documents; (ii) in default in the performance of any obligation, agreement or condition of
any debt instrument which (with or without the passage of time or the giving of notice, or both)
affords to any Person the right to accelerate any indebtedness or terminate any right; (iii) in
default under or breach of (with or without the passage of time or the giving of notice) any other
contract to which it is a party or by which it or its assets are bound; or (iv) in violation of any
law, regulation, administrative order or judicial order, decree or judgment (domestic or foreign)
applicable to it or its business or assets, except where any violation, default or breach under
items (ii), (iii), or (iv) could not reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect on the Company.




3.4 Consents and Approvals.



(a) Except for (i) the approval of this Agreement by the requisite vote of the
stockholders of the Company, (ii) any required filings with the SEC and state securities
authorities, (iii) the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware pursuant to the DGCL, and (iv) such other filings, authorizations, consents, notices or
approvals as may be set forth in Section 3.4(a) of the Company Disclosure Schedule, no consents or
approvals of or filings or registrations with any court, administrative agency or commission or
other governmental authority or instrumentality (each a “Governmental Entity”), or with any third
party are necessary in connection with (x) the execution and delivery by the Company of this
Agreement and (y) the consummation by the Company of the Merger and the other transactions
contemplated hereby, except in each case for such consents, approvals or filings the failure of
which to be obtained would not likely have a Material Adverse Effect on the Company.



(b) The Company has no Knowledge of any reason why approval or effectiveness of any
of the applications, notices, filings or waivers thereof referred to in Section 3.4(a)  cannot be
obtained or granted on a timely basis.




3.5 Reports and Financial Statements.



(a) The Company has previously made available to Parent (including through the SEC’s EDGAR
system) true and complete copies of: (a) the Company’s Annual Report on Form 10-K filed with the
SEC for each of the years ended April 30, 2003 through 2005; (b) the Company’s Quarterly Report on
Form 10-Q filed with the SEC for the quarters ended July 31, 2005 and October 31, 2005; (c) each
definitive proxy statement filed by the Company with the SEC since April 30, 2003; (d) all Current
Reports on Form 8-K filed by the Company with the SEC since April 30, 2003; and (e) each
registration statement, prospectus and any amendments or supplements thereto filed by the Company
with the SEC since April 30, 2003. As of their respective dates (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing), such reports, proxy
statements, registration statements, prospectuses, amendments and supplements (individually a
“Company SEC Report” and collectively, the “Company SEC Reports”) (a) complied as to form in all
material respects with the applicable requirements of the Securities Act, the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder
and (b) did not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited consolidated financial
statements and unaudited consolidated interim financial statements included in the Company SEC
Reports (including any related notes and schedules) complied as to form, as of their respective
dates of filing with the SEC, in all material respects with all applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP consistently applied during the periods involved (except as otherwise
disclosed in the notes thereto, and except that unaudited statements do not contain footnotes in
substance or form required by GAAP, as is permitted by Form 10-Q of the Exchange Act) and fairly
presented the financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods or as of the dates then ended (subject, where
appropriate, to normal year-end adjustments). Since December 31, 2002, the Company has timely
filed all reports and other filings required to be filed by it with the SEC under the rules and
regulations of the SEC.



(b) Since October 31, 2005, there has not been any material change by the Company in
accounting principles, methods or policies for financial accounting purposes, except as required by
concurrent changes in generally accepted accounting principles. There are no material amendments
or modifications to agreements, documents or other instruments which previously had been filed by
the Company with the SEC pursuant to the Securities Act or the Exchange Act, which have not been
filed with the SEC but which are required to be filed. The Company maintains a reasonable process
or procedure under which management of the Company is aware of or authorizes material transactions
of the Company such that such transactions may be recorded on the quarterly and annual financial
reports of the Company in accordance with GAAP. The Company currently conducts its business in
compliance in all material respects with all laws and regulations as currently applicable to the
conduct of its business, including applicable provisions of the Sarbanes-Oxley Act of 2002.



(c) The Company has no material indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become due or asserted or
unasserted), and, to the Knowledge of the Company, there is no reasonable basis for the assertion
of any material claim or liability of any nature against the Company, except for liabilities (i)
which are fully reflected in, reserved against or otherwise described in the Company’s Quarterly
Report on Form 10-Q filed with the SEC for the quarter ended October 31, 2005, (ii) which have been
incurred after the most recent Company SEC Reports in the ordinary course of business, consistent
with past practice, or (iii) which are obligations to perform under executory contracts in the
ordinary course of business (none of which is a liability resulting from a breach of contract or
warranty, tort, infringement or legal action).




3.6 Broker’s Fees.



Neither the Company nor any of its respective officers or directors has employed any broker or
finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection
with any of the transactions contemplated by this Agreement.




3.7 Absence of Certain Changes or Events.



(a) Except as disclosed in the Company SEC Reports (i) neither the Company nor any
of its Subsidiaries has incurred any material liability, except as contemplated by the Agreement or
in the ordinary course of their business consistent with their past practices, and (ii) no event
has occurred which has had, or is likely to have, individually or in the aggregate, a Material
Adverse Effect on the Company.



(b) The Company and its Subsidiaries have carried on their respective businesses in
the ordinary and usual course consistent with their past practices.




3.8 Legal Proceedings.



(a) Except as disclosed in the Company SEC Reports, the Company is not a party to
any, and there are no pending or to the Knowledge of the Company, threatened, legal,
administrative, arbitration or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against the Company in which, to the Knowledge of the Company, there
is a reasonable probability of any material recovery against or other material effect upon the
Company or which challenge the validity or propriety of the transactions contemplated by this
Agreement.



(b) Except as disclosed in the Company SEC Reports, there is no injunction, order,
judgment, decree, or regulatory restriction imposed upon the Company or its assets.




3.9 Taxes and Tax Returns.



(a) The Company has duly filed all Tax Returns required to be filed by it on or prior to the
date hereof (all such returns being accurate and complete in all material respects), except for
such failures to file, taken together, as would not likely have a Material Adverse Effect on
Company, and has duly paid or made provision on the financial statements for the periods ended
April 30, 2005, July 31, 2005 and October 31, 2005 included in the Company SEC Reports as referred
to in Section 3.5 hereof in accordance with GAAP for the payment of all material Taxes which have
been incurred or are due or claimed to be due from it by Taxing Authorities on or prior to the date
hereof other than Taxes (a) that (x) are not yet delinquent or (y) are being contested in good
faith and set forth in Section 3.9 of the Company Disclosure Schedule, (b) that have not been
finally determined, and (c) the failure to pay, taken together, would not likely have a Material
Adverse Effect on the



Company. The Internal Revenue Service (“IRS”) has not notified the Company of, or to the
Knowledge of the Company otherwise asserted, that there are any material deficiencies with respect
to the federal income Tax Returns of the Company. There are no material disputes pending, or to
the Knowledge of the Company claims asserted for, Taxes or assessments upon the Company. In
addition, Tax Returns which are accurate and complete in all material respects have been filed by
the Company for all periods for which returns were due with respect to income tax withholding,
Social Security and unemployment taxes and the amounts shown on such Tax Returns to be due and
payable have been paid in full or adequate provision therefor in accordance with GAAP has been
included by the Company in the financial statements for the periods ended April 30, 2005, July 31,
2005 and October 31, 2005 and as referred to in Sections 3.5 and 6.6 hereto. The unpaid Taxes of
the Company (i) did not, as of the date of any financial statement referred to in its annual
reports filed on Form 10-K or in Section 6.6 hereto, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of such financial statements (other than the notes thereto) and
(ii) will not as of the Closing Date exceed such reserve as adjusted for the passage of time though
the Closing Date in accordance with past custom and practice of the Company in filing its Tax
Returns. The Company has not been asked to consent to, and has not consented to, any currently
effective waiver or extension of any statute of limitations with respect to any Tax. The Company
has not made an election under Section 341(f) of the Code. The Company has provided or made
available to Parent complete and correct copies of its Tax Returns and all material correspondence
and documents, if any, relating directly or indirectly to taxes for the Company’s fiscal years 2004
and 2005. For this purpose, “correspondence and documents” include, without limitation, amended
Tax Returns, claims for refunds, notices from Taxing Authorities of proposed changes or adjustments
to Taxes or Tax Returns, consents to assessment or collection of Taxes, acceptances of proposed
adjustments, closing agreements, rulings and determination letters and requests therefor, and all
other written communications to or from Taxing Authorities relating to any material Tax liability
of the Company. The Company is not a “foreign person” as that term is used in § 1.1445-2 of the
Treasury Regulations promulgated under the IRC. The Company is not a “United States real property
holding corporation” within meaning of § 897 of the IRC and was not a “United States real property
holding corporation” on any “determination date” (as defined in § 1.897-2(c) of such Regulations)
that occurred during any relevant period.



(b) For purposes of this Agreement:



“Tax or Taxes” means any tax (including any income tax, capital gains tax, payroll, employment
or withholding tax, value-added tax, franchise tax, sales or use tax, property tax, net worth tax,
gift tax, or estate tax), levy, assessment, tariff, duty (including any customs duty), deficiency,
or other fee, and any related charge or amount (including any fine, penalty, interest, or addition
to tax), imposed, assessed, or collected by or under the authority of any Taxing Authority or
payable pursuant to any tax-sharing agreement or any other contract relating to the sharing or
payment of any such tax, levy, assessment, tariff, duty, deficiency, or fee.



“Tax Return” means any return (including any information return), report, statement, schedule,
notice, form, or other document or information filed with or submitted to, or required to be filed
with or submitted to, any Taxing Authority 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 law, regulation or other legal requirement relating to any
Tax.



“Taxing Authority” means any:



(i) nation, state, county, city, town, village, district, or other jurisdiction of
any nature;



(ii) federal, state, local, municipal, foreign, or other government;



(iii) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or other tribunal);



(iv) multi-national organization or body; or



(v) body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any nature.




3.10 Employee Plans.



(a) For purposes of this Section 3.10, references to the Company shall include the
Company and any other entity which together with the Company would be deemed a “single employer”
within the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”) or Code Section 414(b), (c) or (m). Section 3.10(a) of the Company Disclosure
Schedule sets forth a true and complete list of each employee benefit plan (within the meaning of
Section 3(3) of ERISA), and each other plan, arrangement or agreement relating to deferred
compensation, fringe benefits, flexible spending or other benefits of any current or former
employee, that is maintained or contributed to as of the date of this Agreement by the Company or
under which the Company has any material liability (collectively, the “Company Plans”).



(b) The Company has heretofore delivered or made available to Parent true, correct
and complete copies of each of the Company Plans currently in effect and all related documents,
including but not limited to (i) the most recent determination letter from the IRS (if applicable)
for such Company Plan, (ii) the current summary plan description and any summaries of material
modification, (iii) all annual reports (Form 5500 series) for each Company Plan filed for the
preceding two plan years, and (iv) all substantive correspondence relating to any such Company Plan
addressed to or received from the IRS, the Department of Labor, the Pension Benefit Guaranty
Corporation or any other governmental agency.



(c) (i) Each of the Company Plans has been operated and administered in all material
respects in compliance with its terms and applicable Laws, including but not limited to ERISA and
the Code, (ii) each of the Company Plans intended to be “qualified” within the meaning of
Section 401(a) of the Code is designed to be so qualified, any trust created pursuant to any such
Company Plan is designed to be exempt from federal income tax under Section 501(a) of the Code,
each such Company Plan has either received from the IRS a favorable determination letter to such
effect upon which the Company is entitled to rely as to such matters and which is currently
applicable or may rely on a favorable opinion letter from the IRS as to such matters, and the
Company is not aware of any circumstance or event which could reasonably be expected to jeopardize
the tax-qualified status of any such Company Plan or the tax-exempt status of any related trust, or
which could reasonable be expected to cause the imposition of any liability, penalty or tax under
ERISA or the Code with respect to any Company Plan, (iii) no Company Plan is subject to Title IV of
ERISA, (iv) no Company Plan provides benefits, including, without limitation, death or medical
benefits (whether or not insured), with respect to current or former employees of the Company
beyond their retirement or other termination of service, other than (w) coverage mandated by
applicable Law, (x) death benefits or retirement benefits under a Company Plan that is an “employee
pension plan,” as that term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits
under a Company Plan that are accrued as liabilities on the books of the Company, or (z) benefits
the full cost of which is borne by the current or former employee (or his beneficiary), (vi) no
Company Plan is a “multiemployer pension plan,” as such term is defined in Section 3(37) of ERISA,
(vii) all contributions or other amounts payable by the Company as of the Effective Time with
respect to each Company Plan and all other liabilities of each such entity with respect to each
Company Plan, in respect of current or prior plan years have been paid or accrued in accordance
with generally accepted accounting practices and Section 412 of the Code, (viii) the Company is not
aware that it has engaged in a transaction in connection with which the Company could be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed
pursuant to Section 4975 or 4976 of the Code, (ix) there are no pending, or to the Knowledge of the
Company, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of
or against any of the Company Plans or any trusts related thereto by any current or former employee
of the Company, and (x) no Company Plan, program, agreement or other arrangement, either
individually or collectively, provides for any payment by the Company that would not be deductible
under Code Sections 162(a)(1), 162(m) or 404 or that would constitute a “parachute payment” within
the meaning of Code Section 280G after giving effect to the transactions contemplated by this
Agreement nor would the transactions contemplated by this Agreement accelerate the time of payment
or vesting, or increase the amount of compensation due to any employee.



(d) (A) None of the employees of the Company is represented in his or her capacity
as an employee of such company by any labor organization; (B) the Company has not recognized any
labor organization nor has any labor organization been elected as the collective bargaining agent
of any of their employees, nor has the Company signed any collective bargaining agreement or union
contract recognizing any labor organization as the bargaining agent of any of its employees; and
(C) to the Knowledge of the Company, there is no active or current union organization activity
involving the employees of the Company, nor has there ever been union representation involving
employees of the Company.



(e) The Company has provided to Parent a description of all written employment
policies under which the Company is operating.



(f) The Company is in compliance with all Federal, foreign (as applicable), and
state laws regarding employment practices, including laws relating to workers’ safety, sexual
harassment or discrimination, except where the failure to so be in compliance, individually or in
the aggregate, would not have a Material Adverse Effect on the Company.



(g) To the Knowledge of the Company, as of the date hereof, no executive, key
employee or group of employees has any plans to terminate his or her employment with the Company.




3.11 Contracts.



(a) Except as disclosed in the Company SEC Reports, the Company is not a party to or
bound by any contract, arrangement or commitment (i) with respect to the employment of any
directors, officers, employees or consultants, (ii) which, upon the consummation of the
transactions contemplated by this Agreement will (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of severance pay or otherwise) becoming
due from Parent, Merger Sub, the Company, or any of their respective Subsidiaries to any director,
officer or employee thereof, (iii) which materially restricts the conduct of any line of business
by the Company, (iv) with or to a labor union or guild (including any collective bargaining
agreement), or (v) any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated by the occurrence of any of the transactions contemplated by this
Agreement, or the value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement (including as to this clause (v), any stock option
plan, stock appreciation rights plan, restricted stock plan or stock purchase plan). Except as
disclosed in the Company SEC Reports or in Section 3.11(a) of the Company Disclosure Schedule,
there are no employment, consulting and deferred compensation agreements to which the Company is a
party. Section 3.11(a) of the Company Disclosure Schedule sets forth a list of all material
contracts (as defined in Item 601(b)(10) of Regulation S-K or otherwise in an amount greater than
$300,000 per annum) of the Company. Each contract, arrangement or commitment of the type described
in this Section 3.11(a), whether or not set forth in Section 3.11(a) of the Company Disclosure
Schedule, is referred to herein as a “Company Contract,” and the Company has not received notice
of, nor do any executive officers of such entities know of, any violation of any Company Contract.



(b) (i) Each Company Contract is valid and binding and in full force and effect,
(ii) the Company has in all material respects performed all obligations required to be performed by
it to date under each Company Contract, and (iii) no event or condition exists which constitutes
or, after notice or lapse of time or both, would constitute, a default on the part of the Company
under any such Company Contract, except where such default would not be likely to have, either
individually or in the aggregate, a Material Adverse Effect on Company.




3.12 Environmental Matters.



The Company is in material compliance with all Environmental Laws, except as would not likely
have, either individually or in the aggregate, a Material Adverse Effect on Company. For purposes
of this Section 3.12, the term “Environmental Law” means any applicable Law relating to the
protection of human health and the environment.




3.13 Properties and Assets.



Section 3.13 of the Company Disclosure Schedule lists (i) all real property owned by the
Company; (ii) each real property lease, sublease or installment purchase arrangement to which the
Company is a party; (iii) a description of each contract for the purchase, sale, or development of
real estate to which the Company is a party; and (iv) all items of the Company’s tangible personal
property and equipment with a book value of $50,000 or more or having any annual lease payment of
$50,000 or more. Except for (a) items reflected in the Company’s consolidated financial statements
as of April 30, 2005, as filed in the Company’s Annual Report on Form 10-K for the fiscal year
ended April 30, 2005, (b) exceptions to title that do not interfere materially with the Company’s
use and enjoyment of owned or leased real property, (c) liens for current real estate taxes not yet
delinquent, or being contested in good faith, properly reserved against (and reflected on the
financial statements referred to in the Company’s Annual Report on Form 10-K for the fiscal year
ended April 30, 2005), and (d) items listed in Section 3.13 of the Company Disclosure Schedule, the
Company has good and, as to owned real property, marketable and insurable title to all their
properties and assets, free and clear of all liens, claims, charges and other encumbrances. The
Company, as lessee, has the right under valid and subsisting leases to occupy, use and possess all
property leased by them, and the Company has not experienced any material uninsured damage or
destruction with respect to such properties since April 30, 2005. All properties and assets used
by the Company are in good operating condition and repair suitable for the purposes for which they
are currently utilized and, to the Knowledge of the Company, comply in all material respects with
all Laws relating thereto now in effect or scheduled to come into effect. The Company enjoys
peaceful and undisturbed possession under all leases for the use of all property under which it is
the lessee, and all leases to which the Company is a party are valid and binding obligations in
accordance with the terms thereof. The Company is not in default with respect to any such lease,
and there has occurred no default by the Company or event which with the lapse of time or the
giving of notice, or both, would constitute a default under any such lease, except where such
default is not likely to have, either individually or in the aggregate, a Material Adverse Effect.
To the Knowledge of the Company, there are no Laws, conditions of record, or other impediments
which interfere materially with the intended use by the Company of any of the property owned,
leased, or occupied by it.




3.14 Insurance.



Section 3.14 of the Company Disclosure Schedule contains a true, correct and complete list of
all insurance policies and bonds maintained by the Company, including the name of the insurer, the
policy number, the type of policy and any applicable deductibles, and all such insurance policies
and bonds or other insurance policies and bonds that have, from time to time, in respect of the
nature of the risks insured against and amount of coverage provided are in full force and effect
and have been in full force and effect since their respective dates of inception. As of the date
hereof, the Company has not received any notice of cancellation or amendment of any such policy or
bond, and is not in default under any such policy or bond, and no coverage thereunder is being
disputed and all material claims thereunder have been filed in a timely fashion. True, correct and
complete copies of all such policies and bonds reflected at Section 3.14 of the Company Disclosure
Schedule, as in effect on the date hereof, have been made available to Parent.




3.15 Compliance with Applicable Laws.



The Company has complied in all material respects with all Laws applicable to it or to the
operation of its business, except where such noncompliance is not likely to have, either
individually or in the aggregate, a Material Adverse Effect. To the Knowledge of the Company, the
Company has not received any notice of any material alleged or threatened claim, violation, or
liability under any such Laws that has not heretofore been cured and for which there is no
remaining liability.




3.16 Affiliates.



Each director, executive officer and other person who is an “affiliate” (for purposes of Rule
145 under the Securities Act of 1933, as amended (the “Securities Act”)) of the Company is listed
at Section 3.16 of the Company Disclosure Schedule. Except as set forth in the Company SEC
Reports filed prior to the date of this Agreement, since the date of Company’s last proxy statement
to its stockholders, no event has occurred that would be required to be reported by the Company as
a Certain Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K promulgated
by the SEC.




3.17 Ownership of Parent Common Stock.



Neither the Company nor any of its directors, executive officers, or affiliates (as used above
in Section 3.16) (i) beneficially own, directly or indirectly through an affiliate, or (ii) is a
party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of, in each case, any shares of outstanding capital stock of Parent (other than those
agreements, arrangements or understandings specifically contemplated hereby).




3.18 Fairness Opinion.



The Company has received an opinion from Douglas Curtis & Allyn LLC to the effect that, in its
opinion, the consideration to be paid to stockholders of the Company hereunder is fair to such
stockholders from a financial point of view.




3.19 Intellectual Property.



(a) Section 3.19 of the Company Disclosure Schedule contains a correct and complete
list of all Company Registered Intellectual Property and all material unregistered copyrights,
trademarks and service marks of the Company.



(b) To the Company’s Knowledge, no Intellectual Property owned by the Company and no
Company Proprietary Software is subject to any proceeding or outstanding consent, decree, order or
judgment (i) restricting in any manner the use thereof by the Company or (ii) that may affect the
validity or enforceability thereof. To the Company’s Knowledge, no Intellectual Property licensed
to the Company and no Company Licensed Software, either of which is material to the operations of
the Company, is subject to any proceeding or outstanding consent, decree, order or judgment
(i) restricting in any manner the use thereof by the Company or (ii) that may affect the validity
or enforceability thereof.



(c) Each item of Company Registered Intellectual Property is subsisting and in full
force in all material respects in accordance with its terms. All necessary registration,
maintenance and renewal fees currently due and owing in connection with Company Registered
Intellectual Property have been paid and all necessary documents, recordations and certifications
in connection with the Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Company Registered Intellectual Property and
recording ownership by the Company or any of its Subsidiaries of such Company Registered
Intellectual Property.



(d) To the Knowledge of the Company, the Company is the sole and exclusive owner of
each item of Intellectual Property used by the Company, other than Intellectual Property that is
licensed to the Company, free and clear of any lien, except Permitted Liens.



(e) Section 3.19 of the Company Disclosure Schedule sets forth a correct and
complete list of (i) the Company Proprietary Software, and (ii) the Company Licensed Software.



(f) To the Knowledge of the Company, the operations of the Company as currently
conducted, including the Company’s design, development, manufacture, use, reproduction, display,
marketing and sale of the products or services (including Software) of the Company do not infringe
or misappropriate the Intellectual Property of any third party.



(g) The Company has no Knowledge and has not received during the past six years
written notice from any third party that the operations of the Company as currently conducted, or
any current product or service of the Company infringes or misappropriates the Intellectual
Property of any third party.



(h) To the Knowledge of the Company, no Person is infringing or misappropriating any
Company Intellectual Property that is owned by or exclusively licensed to the Company.



(i) The Company has taken commercially reasonable steps to protect the rights of the
Company in the Confidential Information and any trade secret or confidential information of third
parties used by the Company.



(j) The Company maintains in place and has taken commercially reasonable steps to
enforce appropriate policies designed to ensure that all Intellectual Property owned by the Company
and developed by employees of the Company is developed by such employees while working within the
scope of their employment at the time of such development. Where appropriate, the Company has
taken commercially reasonable steps to require its agents, consultants, contractors or other
Persons to execute appropriate instruments of assignment in favor of the Company as assignee to
convey to the Company ownership of Intellectual Property developed by such agents, consultants,
contractors or other Persons on behalf of the Company.




3.20 Company Information.



This Agreement does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements regarding the Company herein, in light of the
circumstances in which they are made, not misleading. The Company notice of the Company
Stockholders Meeting (except for the portions thereof relating solely to Parent or any of its
Subsidiaries, as to which the Company makes no representation or warranty) will comply in all
material respects with the provisions of the DGCL.




3.21 Proxy Materials; Registration Statement; Other Information.



None of the information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Registration Statement on Form S-4 relating to the registration
of the Parent Common Stock to be issued in exchange for Company Common Stock and issuable upon
exercise of the Substitute Options and the Substitute Warrants (the “Registration Statement”) or
the letter to stockholders, notice of meeting, proxy statement and form of proxy to be distributed
to Company stockholders in connection with the Merger and any schedules required to be filed with
the SEC in connection therewith (collectively, the “Proxy Materials”) will (i) in the case of the
Registration Statement, at the time it becomes effective or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading, or (ii) in the case of
the Proxy Materials, at the time of the mailing of any of the Proxy Materials and at the time of
the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Company, its officers and directors
should occur which is required to be described in an amendment of, or a supplement to, the Proxy
Materials or the Registration Statement, the Company shall promptly inform Parent, such event shall
be so described, and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company and Parent. The Registration
Statement will (with respect to the Company) comply as to form in all material respects with the
requirements of the Securities Act and the rules and regulations promulgated thereunder. The Proxy
Materials will (with respect to the Company) comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated thereunder.
Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any
information supplied by Parent or Merger Sub which is contained in any of the foregoing documents.




3.22 Unlawful Payments and Contributions.



To the Knowledge of the Company, neither the Company nor any of its respective directors,
officers, employees or agents has, with respect to the businesses of the Company, (i) used any
funds for any unlawful contribution, endorsement, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any Person or entity.




3.23 Listings.



Except as set forth in Section 3.23 to the Company Disclosure Schedule, the Company’s
securities are not listed, or quoted, for trading on any U.S. domestic or foreign securities
exchange.




3.24 Permits.



The Company holds all licenses, permits, registrations, orders, authorizations, approvals and
franchises which are required to permit it to conduct its business as presently conducted, except
where the failure to hold such licenses, permits, registrations, orders, authorizations, approvals
or franchises could not reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect on the Company. All such licenses, permits, registrations, orders,
authorizations, approvals and franchises are now, and will be after the Closing, valid and in full
force and effect, and Surviving Corporation shall have full benefit of the same, except where the
failure to be valid and in full force and effect or to have the benefit of any such license,
permit, registration, order, authorization, approval or franchise could not reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect on the Company or Surviving
Corporation. The Company has not received any notification of any asserted present failure (or
past and unremedied failure) by it to have obtained any such license, permit, registration, order,
authorization, approval or franchise, except where such failure could not reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect on the Company or Surviving
Corporation.



ARTICLE IV




REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB




Parent and Merger Sub hereby make the following representations and warranties to Company as
set forth in this Article IV, subject to the exceptions disclosed in writing in the disclosure
schedules of the Parent and Merger Sub delivered herewith (the “Parent and Merger Sub Disclosure
Schedule”), each of which representations and warranties are being relied upon by Company as an
inducement to enter into and perform this Agreement. It is acknowledged and agreed by Company that
any matter set forth in any schedule, section or subsection of the Parent and Merger Sub Disclosure
Schedule shall expressly not be deemed to constitute an admission by the Parent and/or Merger Sub,
as the case may be, or otherwise imply, that any such matter rises to the level of a Material
Adverse Effect or is otherwise material for purposes of this Agreement or the Parent and Merger Sub
Disclosure Schedule.




4.1 Corporate Organization.



Each of Parent, Merger Sub and Parent’s other Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of their state or incorporation of
organization. Each of Parent, Merger Sub and Parent’s other Subsidiaries has the corporate power
and authority to own or lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in
which the nature of any business conducted by it or the character or location of any properties or
assets owned or leased by it makes such licensing or qualification necessary, except where the
failure to so qualify or to be in good standing has not had and would not likely have a Material
Adverse Effect on Parent. Gupta Technologies, LLC, a Delaware limited liability company, David
Corporation, a California corporation, Foresight Software, Inc., a Delaware corporation, Process
Software, LLC, a Delaware limited liability company, Profitkey International, LLC, a Delaware
limited liability company, and Empagio, Inc., a Delaware corporation, a Delaware limited liability
company are the only Subsidiaries of Parent, that qualify as a “Significant Subsidiary” as such
term is defined in Regulation S-X promulgated by the Securities and Exchange Commission (the
“SEC”). Section 4.1 of the Parent and Merger Sub Disclosure Schedule includes a listing of all
subsidiaries of Parent and all jurisdictions in which Parent or any Subsidiary of Parent is
qualified to do business or has assets and/or conducts operations.




4.2 Capitalization.



(a) The authorized capital stock of Parent consists of 150,000,000 shares of common
stock (“Parent Common Stock”), par value $0.00001 per share and 50,000,000 shares of preferred
stock, par value $0.00001 per share (“Parent Preferred Shares”), of which 16,000,000 shares of
Series C Preferred Stock have been designated and 8,863,636 shares of Series D Preferred Stock have
been designated. As of the date hereof, there are (i) 7,810,840 shares of Parent Common Stock
issued and outstanding and 0 shares of Parent Common Stock held in Parent’s treasury, (ii)
56,094,178 shares of Parent Common Stock reserved for issuance upon exercise of outstanding stock
options or otherwise, (iii) 13,362,688 shares of Series C Preferred Stock issued and outstanding
and (iv) 7,045,545 shares of Series D Preferred Stock issued and outstanding. There no issued and
outstanding shares of Parent’s Series A Preferred Stock or Series B Preferred Stock. All of the
issued and outstanding Parent Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to
the ownership thereof. Except as disclosed in the Parent SEC Reports, Parent does not have and is
not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of
any character calling for the purchase or issuance of any Parent Common Stock or Parent Preferred
Shares or any other equity security of Parent or any securities representing the right to purchase
or otherwise receive any Parent Common Stock or any other equity security of Parent. Except as
disclosed in the Parent SEC Reports, there are not as of the date hereof and there will not be at
the Effective Time any stockholder agreements, voting trusts or other agreements or understandings
to which Parent is a party or to which it is bound relating to the voting of any shares of the
capital stock of Parent. Except as disclosed in the Parent SEC Reports, there are no existing
rights with respect to the registration of Parent Common Stock under the Securities Act, including,
but not limited to, demand rights or piggy-back registration rights. Except as disclosed in the
Parent SEC Reports since December 31, 2005 through the date hereof no options or warrants have been
issued or accelerated or had their terms modified.



(b) Except as disclosed in the Parent SEC Reports, Parent owns, directly or
indirectly, all of the issued and outstanding shares of capital stock of each of its Subsidiaries,
free and clear of all liens, charges, encumbrances and security interests whatsoever, and all of
such shares are duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership thereof. No Subsidiary
has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares of capital stock or
any other equity security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.




4.3 Authority; No Violation.



(a) Each of Parent and Merger Sub has full corporate power and authority to execute
and deliver this Agreement and, subject to the required regulatory approvals specified herein, to
consummate the transactions contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly and validly approved by the
Boards of Directors of Parent and Merger Sub, and no other corporate proceedings on the part of
Parent and Merger Sub are necessary to approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and delivered by each of
Parent and Merger Sub and (assuming due authorization, execution and delivery by Company of this
Agreement) will constitute valid and binding obligations of each of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting creditors’ rights and
remedies generally.



(b) Neither the execution and delivery of this Agreement by Parent and Merger Sub,
nor the consummation by Parent and Merger Sub, of the transactions contemplated hereby, nor
compliance by Parent and Merger Sub with any of the terms or provisions hereof, will (i) violate
any provision of the certificate of incorporation or bylaws of Parent, Merger Sub and each of its
Subsidiaries or (ii) assuming that the consents and approvals referred to in Section 4.4 hereof are
duly obtained, (x) violate any Laws applicable to Parent, Merger Sub and each of Parent’s other
Subsidiaries, or any of their respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of Parent, Merger Sub and each of
Parent’s other Subsidiaries under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to
which Parent, Merger Sub and each of Parent’s other Subsidiaries is a party, or by which they or
any of their respective properties or assets may be bound or affected, except in each case for such
violations, breaches, defaults, or terminations as would not likely have, either individually or in
the aggregate, a Material Adverse Effect on Parent.



(c) Parent is not: (i) in violation of its certificate of incorporation or bylaws or
similar documents; (ii) in default in the performance of any obligation, agreement or condition of
any debt instrument which (with or without the passage of time or the giving of notice, or both)
affords to any Person the right to accelerate any indebtedness or terminate any right; (iii) in
default under or breach of (with or without the passage of time or the giving of notice) any other
contract to which it is a party or by which it or its assets are bound; or (iv) in violation of any
law, regulation, administrative order or judicial order, decree or judgment (domestic or foreign)
applicable to it or its business or assets, except where any violation, default or breach under
items (ii), (iii), or (iv) could not reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect on Parent.




4.4 Consents and Approvals.



(a) Except for (i) any required filings with the SEC and state securities
authorities, (ii) the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware pursuant to the DGCL, (iii) such other filings, authorizations, consents, notices or
approvals as may be set forth in Section 4.4(a) of the Parent and Merger Sub Disclosure Schedule,
no consents or approvals of or filings or registrations with any Governmental Entity, or with any
third party are necessary in connection with (x) the execution and delivery by Parent or Merger Sub
of this Agreement and (y) the consummation by Parent or Merger Sub of the Merger and the other
transactions contemplated hereby, except in each case for such consents, approvals or filings the
failure of which to be obtained would not likely have a Material Adverse Effect on Parent or Merger
Sub. The approval of the stockholders of Parent is not required in connection with the execution
and delivery by Parent or Merger Sub of this Agreement and the consummation by Parent or Merger Sub
of the Merger and the other transaction contemplated hereby.



(b) Parent and Merger Sub have no Knowledge of any reason why approval or
effectiveness of any of the applications, notices or filings referred to in Section 4.4(a) cannot
be obtained or granted on a timely basis.




4.5 Adequate Resources.



Parent has or will have at the Effective Time cash on hand or borrowing availability under
financing arrangements from financially responsible third Parties, or a combination thereof, in an
aggregate amount sufficient to enable Parent to pay in full all fees and expenses payable by Parent
in connection with this Agreement and the transactions contemplated hereby.




4.6 Legal Proceedings.



(a) Except as disclosed in the Parent SEC Reports, Parent and Merger Sub are not
party to any, and there are no pending or to the Knowledge of Parent or Merger Sub, threatened,
legal, administrative, arbitration or other proceedings, claims, actions or governmental or
regulatory investigations of any nature against Parent or Merger Sub in which, to the Knowledge of
Parent or Merger Sub, there is a reasonable probability of any material recovery against or other
material effect upon Parent or which challenge the validity or propriety of the transactions
contemplated by this Agreement.



(b) There is no injunction, order, judgment, decree, or regulatory restriction
imposed upon Parent, Merger Sub, or their respective assets.




4.7 Broker’s Fees.



Neither Parent nor any Subsidiary nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any broker’s fees, commissions or
finder’s fees in connection with any of the transactions contemplated by this Agreement.




4.8 Reports and Financial Statements.



(a) Parent has previously made available to the Company (including through the SEC’s
EDGAR system) true and complete copies of (a) Parent’s Annual Reports on Form 10-KSB filed with the
SEC for each of the years ended June 30, 2003 through 2005; (b) Parent’s Quarterly Reports on Form
10-QSB filed with the SEC for the quarters ended September 30, 2005 and December 31, 2005; (c) each
definitive proxy statement filed by Parent with the SEC since December 31, 2003; (d) each
registration statement, prospectus and any amendments or supplements thereto filed by Parent with
the SEC since December 31, 2003; and (e) all Current Reports on Form 8-K filed by Parent with the
SEC since December 31, 2003. As of their respective dates (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing), such reports, proxy
statements, registration statements, prospectuses, supplements and amendments (individually a
“Parent SEC Report” and, collectively, “Parent SEC Reports”) (a) complied as to form in all
material respects with the applicable requirements of the Securities Act, the Exchange Act, and the
rules and regulations promulgated thereunder and (b) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading.
The audited consolidated financial statements and unaudited consolidated interim financial
statements included in the Parent SEC Reports (including any related notes and schedules) complied
as to form, as of their respective dates of filing with the SEC, in all material respects with all
applicable accounting requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with past practice and GAAP consistently applied during the
periods involved (except as otherwise disclosed in the notes thereto) and fairly presented the
financial position of Parent and its consolidated Subsidiaries as of the dates thereof and the
results of their operations and their cash flows for the periods or as of the dates then ended
(subject, where appropriate, to normal year-end adjustments). Since June 30, 2003, Parent has
timely filed all material reports and other filings required to be filed by it with the SEC under
the rules and regulations of the SEC.



(b) Since December 31, 2005, there has not been any material change by Parent in
accounting principles, methods or policies for financial accounting purposes, except as required by
concurrent changes in generally accepted accounting principles. There are no material amendments
or modifications to agreements, documents or other instruments which previously had been filed by
Parent with the SEC pursuant to the Securities Act or the Exchange Act, which have not been filed
with the SEC but which are required to be filed. Parent maintains a reasonable process or
procedure under which management of Parent is aware of or authorizes material transactions of
Parent such that such transactions may be recorded on the quarterly and annual financial reports of
Parent in accordance with GAAP. Parent currently conducts its business in compliance in all
material respects with all laws and regulations as currently applicable to the conduct of its
business, including the Sarbanes-Oxley Act of 2002.



(c) Parent has no material indebtedness, obligations or liabilities of any kind
(whether accrued, absolute, contingent or otherwise, and whether due or to become due or asserted
or unasserted), and, to the Knowledge of Parent, there is no reasonable basis for the assertion of
any material claim or liability of any nature against Parent, except for liabilities (i) which are
fully reflected in, reserved against or otherwise described in the Parent’s Quarterly Report on
Form 10-QSB filed with the SEC for the quarter ended December 31, 2005 or in Parent SEC Reports
filed after such Quarterly Report, (ii) which have been incurred after the most recent Parent SEC
Reports in the ordinary course of business, consistent with past practice, or (iii) which are
obligations to perform under executory contracts in the ordinary course of business (none of which
is a liability resulting from a breach of contract or warranty, tort, infringement or legal
action).




4.9 Absence of Certain Changes or Events.



(a) Except as disclosed in the Parent SEC Reports (i) neither Parent nor any of its
Subsidiaries has incurred any material liability, except as contemplated by the Agreement or in the
ordinary course of their business consistent with their past practices, and (ii) no event has
occurred which has had, or is likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent.



(b) Subject to the acquisitions and financing described in the Parent SEC Reports,
since June 30, 2005, Parent and its Subsidiaries have carried on their respective businesses in the
ordinary and usual course consistent with their past practices.




4.10 Taxes and Tax Returns.



(a) Parent and its Subsidiaries have duly filed all Tax Returns required to be filed
by it on or prior to the date hereof (all such returns being accurate and complete in all material
respects), except that all such failures to file, taken together, as would not likely have a
Material Adverse Effect on Parent, and has duly paid or made provision on the financial statements
for the periods ended December 31, 2004, March 31, 2005, June 30, 2005, September 30, 2005 and
December 31, 2005, and as referred to in Section 4.8 hereof, in accordance with GAAP for the
payment of all material Taxes which have been incurred or are due or claimed to be due from it by
Taxing Authorities on or prior to the date hereof other than Taxes (a) that (x) are not yet
delinquent or (y) are being contested in good faith and set forth in Section 4.10 of the Parent and
Merger Sub Disclosure Schedule (b) that have not been finally determined, and (c) the failure to
pay, taken together, would not likely have a Material Adverse Effect on Parent. The IRS has not
notified Parent of, or to the Knowledge of Parent otherwise asserted, that there are any material
deficiencies with respect to the federal income Tax Returns of Parent. There are no material
disputes pending, or to the Knowledge of Parent claims asserted for, Taxes or assessments upon
Parent or any of its Subsidiaries. In addition, Tax Returns which are accurate and complete in all
material respects have been filed by Parent and its Subsidiaries for all periods for which returns
were due with respect to income tax withholding, Social Security and unemployment taxes and the
amounts shown on such Tax Returns to be due and payable have been paid in full or adequate
provision therefor in accordance with GAAP has been included by Parent in the financial statements
for the periods ended December 31, 2004, March 31, 2005, June 30, 2005, September 30, 2005 and
December 31, 2005, and as referred to in Section 4.8 hereof. The unpaid Taxes of Parent (i) did
not, as of the date of any financial statement referred to in Parent’s Annual Reports on Form
10-KSB exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) set forth on the face of such financial
statements (other than the notes thereto) and (ii) will not as of the Closing Date exceed such
reserve as adjusted for the passage of time though the Closing Date in accordance with past custom
and practice of Parent in filing its Tax Returns. Neither Parent nor any of its Subsidiaries has
been asked to consent to, and has not consented to, any currently effective waiver or extension of
any statute of limitations with respect to any Tax. Neither Parent nor any Subsidiary has made an
election under Section 341(f) of the Code. Parent has provided or made available to Company
complete and correct copies of its Tax Returns and all material correspondence and documents, if
any, relating directly or indirectly to taxes for Parent’s fiscal years 2003 and 2004. For this
purpose, “correspondence and documents” include, without limitation, amended Tax Returns, claims
for refunds, notices from Taxing Authorities of proposed changes or adjustments to Taxes or Tax
Returns, consents to assessment or collection of Taxes, acceptances of proposed adjustments,
closing agreements, rulings and determination letters and requests therefor, and all other written
communications to or from Taxing Authorities relating to any material Tax liability of Parent or
any Subsidiary.




4.11 Employee Plans.



(a) For purposes of this Section 4.11, references to Parent shall include Parent and
any other entity which together with Parent would be deemed a “single employer” within the meaning
of Section 4001 of ERISA or Code Section 414(b), (c) or (m). Section 4.11(a) of the Parent
Disclosure Schedule sets forth a true and complete list of each employee benefit plan (within the
meaning of Section 3(3) of ERISA), and each other plan, arrangement or agreement relating to
deferred compensation, fringe benefits, flexible spending or other benefits of any current or
former employee, that is maintained or contributed to as of the date of this Agreement by Parent or
under which Parent has any material liability (collectively, the “Parent Plans”) and that is not
otherwise disclosed in the Parent SEC Reports.



(b) Parent has heretofore delivered or made available to the Company true, correct
and complete copies of each of the Parent Plans and all related documents, including but not
limited to (i) the most recent determination letter from the IRS (if applicable) for such Parent
Plan, (ii) the current summary plan description and any summaries of material modification,
(iii) all annual reports (Form 5500 series) for each Parent Plan filed for the preceding two plan
years, and (iv) all substantive correspondence relating to any such Parent Plan addressed to or
received from the IRS, the Department of Labor, the Pension Benefit Guaranty Corporation or any
other governmental agency.



(c) (i) Each of the Parent Plans has been operated and administered in all material
respects in compliance with its terms and applicable Laws, including but not limited to ERISA and
the Code, (ii) each of the Parent Plans intended to be “qualified” within the meaning of
Section 401(a) of the Code is designed to be so qualified, any trust created pursuant to any such
Parent Plan is designed to be exempt from federal income tax under Section 501(a) of the Code, each
such Parent Plan has either received from the IRS a favorable determination letter to such effect
upon which Parent is entitled to rely as to such matters and which is currently applicable or may
rely on a favorable opinion letter from the IRS as to such matters, and Parent is not aware of any
circumstance or event which could reasonably be expected to jeopardize the tax-qualified status of
any such Parent Plan or the tax-exempt status of any related trust, or which could reasonably be
expected to cause the imposition of any liability, penalty or tax under ERISA or the Code with
respect to any Parent Plan, (iii) no Parent Plan is subject to Title IV of ERISA, (iv) no Parent
Plan provides benefits, including, without limitation, death or medical benefits (whether or not
insured), with respect to current or former employees of Parent beyond their retirement or other
termination of service, other than (w) coverage mandated by applicable Law, (x) death benefits or
retirement benefits under a Parent Plan that is an “employee pension plan,” as that term is defined
in Section 3(2) of ERISA, (y) deferred compensation benefits under a Parent Plan that are accrued
as liabilities on the books of Parent, or (z) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (vi) no Parent Plan is a “multiemployer pension
plan,” as such term is defined in Section 3(37) of ERISA, (vii) all contributions or other amounts
payable by Parent as of the Effective Time with respect to each Parent Plan and all other
liabilities of each such entity with respect to each Parent Plan, in respect of current or prior
plan years have been paid or accrued in accordance with generally accepted accounting practices and
Section 412 of the Code, (viii) Parent is not aware that it has engaged in a transaction in
connection with which Parent could be subject to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code,
(ix) there are no pending, or to the Knowledge of Parent, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the Parent Plans or any trusts
related thereto by any current or former employee of Parent, and (x) no Parent Plan, program,
agreement or other arrangement, either individually or collectively, provides for any payment by
Parent that would not be deductible under Code Sections 162(a)(1), 162(m) or 404 or that would
constitute a “parachute payment” within the meaning of Code Section 280G after giving effect to the
transactions contemplated by this Agreement nor would the transactions contemplated by this
Agreement accelerate the time of payment or vesting, or increase the amount of compensation due to
any employee.



(d) (A) None of the employees of Parent is represented in his or her capacity as an
employee of such company by any labor organization; (B) Parent has not recognized any labor
organization nor has any labor organization been elected as the collective bargaining agent of any
of their employees, nor has Parent signed any collective bargaining agreement or union contract
recognizing any labor organization as the bargaining agent of any of its employees; and (C) to the
Knowledge of Parent, there is no active or current union organization activity involving the
employees of Parent, nor has there ever been union representation involving employees of Parent.



(e) Parent has provided or made available to the Company a description of all
written employment policies under which Parent is operating.



(f) Parent is in compliance with all Federal, foreign (as applicable), and state
laws regarding employment practices, including laws relating to workers’ safety, sexual harassment
or discrimination, except where the failure to so be in compliance, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.



(g) To the Knowledge of Parent, as of the date hereof, no executive, key employee or
group of employees has any plans to terminate his or her employment with Parent.




4.12 Compliance with Applicable Laws.



Parent and each of its Subsidiaries has complied in all material respects with all Laws
applicable to it or to the operation of its business, except where such noncompliance would not
likely have, either individually or in the aggregate, a Material Adverse Effect on Parent. To the
Knowledge of Parent, neither Parent nor any of its Subsidiaries has received any notice of any
material alleged or threatened claim, violation, or liability under any such Laws that has not
heretofore been cured and for which there is no remaining liability.




4.13 Affiliates.



Each director, executive officer and other person who is an “affiliate” (for purposes of Rule
145 under the Securities Act of 1933, as amended (the “Securities Act”)) of Parent is listed at
Section 4.13 of the Parent Disclosure Schedule. Except as set forth in the Parent SEC Reports
filed prior to the date of this Agreement, since the date of Parent’s last proxy statement to its
stockholders, no event has occurred that would be required to be reported by Parent as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.



4.14 Proxy Materials; Registration Statement; Other Information.



None of the information supplied or to be supplied by Parent for inclusion or incorporation by
reference in the Registration Statement or the Proxy Materials will (i) in the case of the
Registration Statement, at the time it becomes effective or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading, or (ii) in the case of
the Proxy Materials, at the time of the mailing of any of the Proxy Materials and at the time of
the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to Parent, its officers and directors should
occur which is required to be described in an amendment of, or a supplement to, the Proxy Materials
or the Registration Statement, Parent shall promptly inform the Company, such event shall be so
described, and such amendment or supplement shall be promptly filed with the SEC and, as required
by law, disseminated to the stockholders of the Company and Parent. The Registration Statement
will (with respect to Parent) comply as to form in all material respects with the requirements of
the Securities Act and the rules and regulations promulgated thereunder. The Proxy Materials will
(with respect to Parent) comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder. Notwithstanding the foregoing,
Parent makes no representation or warranty with respect to any information supplied by the Company
which is contained in any of the foregoing documents.




4.15 Ownership of Company Common Stock.



Except as disclosed on the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries, directors, executive officers, or affiliates (as such term is described above in
Section 3.16) (i) beneficially own, directly or indirectly through an affiliate, or (ii) is a party
to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, any shares of outstanding capital stock of Company (other than those
agreements, arrangements or understandings specifically contemplated hereby).




4.16 Takeover Statutes.



The Board of Directors of Parent has approved the terms of this Agreement and to the knowledge
of Parent no state takeover statute or similar statute or regulation applies or purports to apply
to this Agreement, the Merger or any of the other transaction documents contemplated by this
Agreement.




4.17 Unlawful Payments and Contributions.



To the Knowledge of Parent, neither Parent nor any of its respective directors, officers,
employees or agents has, with respect to the businesses of Parent, (i) used any funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any Person or entity.




4.18 Listings.



Parent’s securities are not listed, or quoted, for trading on any U.S. domestic or foreign
securities exchange.




4.19 Permits.



Parent holds all licenses, permits, registrations, orders, authorizations, approvals and
franchises which are required to permit it to conduct its business as presently conducted, except
where the failure to hold such licenses, permits, registrations, orders, authorizations, approvals
or franchises could not reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect on Parent. All such licenses, permits, registrations, orders,
authorizations, approvals and franchises are now, and will be after the Closing, valid and in full
force and effect, and Surviving Corporation shall have full benefit of the same, except where the
failure to be valid and in full force and effect or to have the benefit of any such license,
permit, registration, order, authorization, approval or franchise could not reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect on Parent or Surviving
Corporation. Parent has not received any notification of any asserted present failure (or past and
unremedied failure) by it to have obtained any such license, permit, registration, order,
authorization, approval or franchise, except where such failure could not reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect on Parent.




4.20 Parent Information.



This Agreement does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements regarding Parent herein, in light of the
circumstances in which they are made, not misleading.



ARTICLE V




COVENANTS RELATING TO CONDUCT OF BUSINESS





5.1 Covenants of the Company.



During the period from the date of this Agreement and continuing until the Effective Time,
except as expressly contemplated or permitted by this Agreement, or with the prior written consent
of Parent, the Company shall carry on its business in the ordinary course consistent with past
practices. The Company will use its commercially reasonable efforts, consistent with past
practices, to (x) preserve its business organization intact, (y) keep available to itself and
Parent the present services of the employees of the Company and (z) preserve for itself and Parent
the goodwill of the customers of the Company and others with whom business relationships exist.
Without limiting the generality of the foregoing, and except as set forth in Section 5.1(c) of the
Company Disclosure Schedule or as otherwise contemplated by this Agreement or consented to by
Parent in writing, which consent shall not be unreasonably withheld, conditioned or delayed, the
Company shall not:



(a) declare or pay any dividends on, or make other distributions in respect of, any
of its capital stock;



(b) (i) split, combine or reclassify any shares of its capital stock or issue,
authorize or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (ii) repurchase, redeem or otherwise acquire, any
shares of the capital stock of the Company, or any securities convertible into or exercisable for
any shares of the capital stock of the Company;



(c) issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares, or enter into any agreement with respect
to any of the foregoing, other than issuances, deliveries or sales in the ordinary course
consistent with past practices;



(d) amend its certificate of incorporation, bylaws or other similar governing
documents;



(e) make individual capital expenditures of $50,000 in the aggregate;



(f) enter into any new line of business or any material partnership arrangements,
joint development agreements or strategic alliances;



(g) acquire or agree to acquire, by merging or consolidating with, or by purchasing
an equity interest in or the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof;



(h) take any action that is intended or may reasonably be expected to result in any
of the conditions to the Merger set forth in Article VII not being satisfied, or in a violation of
any provision of this Agreement, except, in every case, as may be required by applicable law;



(i) change its methods of accounting in effect at April 30, 2005, except for changes
effected to comply with Statement of Financial Accounting Standards No. 86, and except as required
by changes in GAAP or regulatory accounting principles;



(j) (i) except as required by applicable law or this Agreement or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any Company Plan or any
agreement, arrangement, plan or policy between the Company and one or more of its current or former
directors or officers, (ii) increase in any manner the compensation of any director, executive
officer or other employee who is a party to a contract relating to employment or severance
referenced in Section 3.11 of this Agreement, or pay any benefit not required by any plan or
agreement as in effect as of the date hereof (except for the granting of stock options, stock
appreciation rights, restricted shares, restricted share units or performance units or shares
granted in the ordinary course consistent with past practices), (iii) enter into, modify or renew
any contract, agreement, commitment or arrangement providing for the payment of compensation or
benefits to any director, executive officer or employee who is a party to a contract relating to
employment or severance referenced in Section 3.11 of this Agreement, (iv) enter into, modify or
renew any contract, agreement, commitment or arrangement providing for the payment of compensation
or benefits to any employee who is not a director or executive officer or who is not a party to a
contract relating to employment or severance referenced in Section 3.11 of this Agreement, other
than normal annual cash increases in pay, consistent with past practice and not exceeding five
percent on average of all employees’ base salary or wage, and ordinary course offer letters and
stock option agreements to new hires permitted under the immediately following clause, (v) hire any
new employee at an annual compensation in excess of $100,000, or (vi) promote any employee to a
rank of senior vice president or more senior rank;



(k) incur any material indebtedness for borrowed money, assume, guarantee, endorse
or otherwise as an accommodation become responsible for the material obligations of any other
individual, corporation or other entity, except for draw downs from the Company’s existing line of
credit in the ordinary course of business consistent with past practice;



(l) sell, lease, license, encumber or otherwise dispose of any of the Company’s
material properties or assets, except in the ordinary course of business consistent with past
practice, or enter into a material lease, relocate, open or close any office;



(m) propose or enter into any contract, agreement or commitment relating to the
settlement of any legal, administrative, arbitration or other proceeding, claim, action or
governmental or regulatory investigation of any nature against the Company in excess of $50,000;



(n) Transfer or license to any person or entity or otherwise extend, amend or modify
any material rights to the Company Intellectual Property (including rights to resell or relicense
the Company Intellectual Property) or enter into grants to future patent rights, other than
transactions entered into in the ordinary course of business consistent with past practices;



(o) Commence any material litigation other than (i) for the routine collection of
bills, (ii) for software piracy, or (iii) in such cases where the Company in good faith determines
that failure to commence suit would result in the material impairment of a valuable aspect of the
Company’s business, provided that the Company consults with the Parent prior to the filing of such
a suit (except that the Company shall not require the approval of, and shall not be required to
consult with, Parent with respect to any claim, suit or proceeding by the Company against Parent or
any of its affiliates; and



(p) agree or commit to do any of the actions set forth in (a) - (o) above or take
any action that would result in any of the conditions to the Merger set forth in Article VII not
being satisfied, or, except as otherwise allowed hereunder, that could reasonably be expected to
prevent, impede, interfere with or significantly delay the transactions contemplated hereby..



The consent of Parent to any action by the Company that is not permitted by any of the
preceding paragraphs shall be evidenced by a writing signed by an officer of Parent.




5.2 Covenants of Parent



During the period from the date of this Agreement and continuing until the Effective Time,
except as expressly contemplated or permitted by this Agreement, or with the prior written consent
of the Company, Parent shall carry on its business in the ordinary course consistent with past
practices. Without limiting the generality of the foregoing, and except as set forth in the Parent
and Merger Sub Disclosure Schedule or as otherwise contemplated by this Agreement or consented to
by the Company in writing, which consent shall not be unreasonably withheld, conditioned or
delayed, Parent:



(a) shall notify the Company of any emergency or other change in the normal course
of its or its Subsidiaries’ respective businesses or in the operation of its or its Subsidiaries’
respective properties and of any complaints, investigations or hearings (or communications
indicating that the same may be contemplated) of any Governmental Entity if such emergency, change,
complaint, investigation or hearing would likely have a Material Adverse Effect on Parent;



(b) shall notify the Company of any material transaction;



(c) shall not declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock (other than dividends on the Series C Preferred Stock and the
Series D Preferred Stock);



(d) shall not (i) split, combine or reclassify any shares of its capital stock or
issue, authorize or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (ii) repurchase, redeem or otherwise acquire, any
shares of the capital stock of Parent, or any securities convertible into or exercisable for any
shares of the capital stock of Parent;



(e) amend its certificate of incorporation, bylaws or other similar governing
documents (other than an amendment to change the name of the Parent to “Halo Technology Holdings,
Inc.”);



(f) shall not modify its operating model in any material respect;



(g) shall not acquire or agree to acquire any business or entity if the acquisition
or announcement of the agreement for an acquisition would adversely affect the timing of the Merger
or the preparation and distribution of the Proxy Materials and Registration Statement;



(h) shall not take any action that is intended or may reasonably be expected to
result in any of the conditions to the Merger set forth in Article VII not being satisfied, or in a
violation of any provision of this Agreement, except, in every case, as may be required by
applicable law;



(i) shall not change its methods of accounting in effect at June 30, 2005, except
for changes effected to comply with Statement of Financial Accounting Standards No. 86, and except
as required by changes in GAAP or regulatory accounting principles;



(j) shall not sell, lease, license, encumber or otherwise dispose of any of Parents
or any of Parent’s Subsidiaries’ material properties or assets, except in the ordinary course of
business consistent with past practice; and



(k) shall not agree or commit to do any of the actions set forth in (a) - (j) above
or take any action that would result in any of the conditions to the Merger set forth in Article
VII not being satisfied, or, except as otherwise allowed hereunder, that could reasonably be
expected to prevent, impede, interfere with or significantly delay the transactions contemplated
hereby.



The consent of the Company to any action by Parent that is not permitted by any of the
preceding paragraphs shall be evidenced by a writing signed by an officer of the Company.




5.3 Compliance with Antitrust Laws.



Each of Parent and the Company shall use its reasonable best efforts to resolve objections, if
any, which may be asserted with respect to the Merger under antitrust laws, including, without
limitation, the HSR Act. In the event a suit is threatened or instituted challenging the Merger as
violative of antitrust laws, each of Parent and the Company shall use its reasonable best efforts
to avoid the filing of, or resist or resolve such suit. Parent and the Company shall use their
reasonable best efforts to take such action as may be required: (a) by the Antitrust Division of
the Department of Justice or the Federal Trade Commission in order to resolve such objections as
either of them may have to the Merger under antitrust laws, or (b) by any federal or state court of
the United States, in any suit brought by a private party or Governmental Entity challenging the
Merger as violative of antitrust laws, in order to avoid the entry of, or to effect the dissolution
of, any injunction, temporary restraining order, or other order which has the effect of preventing
the consummation of the Merger. Reasonable best efforts shall not include, among other things and
to the extent Parent so desires, the willingness of Parent to accept an order agreeing to the
divestiture, or the holding separate, of any assets of Parent or the Company.




5.4 No Solicitation.



(a) From and after the date of this Agreement until the Effective Time or the
earlier termination of this Agreement in accordance with its terms, the Company will not, and will
not permit its directors, officers, investment bankers, affiliates, representatives and agents to,
(i) solicit, initiate, or encourage (including by way of furnishing information), or take any other
action to facilitate, any inquiries or proposals that constitute, or could reasonably be expected
to lead to, any Company Acquisition Proposal, or (ii) engage in, or enter into, any negotiations or
discussions concerning any Company Acquisition Proposal. Notwithstanding the foregoing, in the
event that, notwithstanding compliance with the preceding sentence, the Company receives a Company
Superior Proposal the Company may, to the extent that the Board of Directors of the Company
determines in good faith (in consultation with outside counsel) that such action would be required
by its fiduciary duties, participate in discussions regarding any Company Superior Proposal in
order to be informed and make a determination with respect thereto. In such event, the Company
shall, (i) no less than twenty four (24) hours prior to participating in any such discussions,
inform Parent of the material terms and conditions of such Company Superior Proposal, including the
identity of the Person making such Company Superior Proposal. and (ii) promptly keep Parent
informed of the status including any material change to the terms of any such Company Superior
Proposal. The Company will immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the foregoing.



(b) For Purposes of this Agreement:



“Company Acquisition Proposal” means any bona fide inquiry, proposal or offer relating to any
(i) merger, consolidation, business combination, or similar transaction involving the Company,
(ii) sale, lease or other disposition, directly or indirectly, by merger, consolidation, share
exchange or otherwise, of any assets of the Company in one or more transactions, (iii) issuance,
sale, or other disposition of (including by way of merger, consolidation, share exchange or any
similar transaction) securities (or options, rights or warrants to purchase such securities, or
securities convertible into such securities) of the Company, (iv) liquidation, dissolution,
recapitalization or other similar type of transaction with respect to the Company, (v) tender offer
or exchange offer for Company securities; in the case of (i), (ii), (iii), (iv) or (v) above, which
transaction would result in a third party (or its shareholders) acquiring more than twenty percent
(20%) of the voting power of the Company or the assets representing more than twenty percent (20%)
of the net income, net revenue or assets of the Company on a consolidated basis, (vi) transaction
which is similar in form, substance or purpose to any of the foregoing transactions, or (vii)
public announcement of an agreement, proposal, plan or intention to do any of the foregoing,
provided, however, that the term “Company Acquisition Proposal” shall not include
the Merger and the transactions contemplated thereby.



“Company Superior Proposal” means any offer not solicited by the Company, or by other persons
in violation of the first sentence of Section 5.4(a), and made by a third party to consummate a
tender offer, exchange offer, merger, consolidation or similar transaction which would result in
such third party (or its shareholders) owning, directly or indirectly, more than fifty percent
(50%) of the Company Shares then outstanding (or of the surviving entity in a merger) or all or
substantially all of the assets of Company, and otherwise on terms which the Board of Directors of
the Company determines in good faith (based on its consultation with a financial advisor and other
such matters that it deems relevant) would, if consummated, result in a transaction more favorable
to the Company’s stockholders than the Merger and, in the reasonable good faith judgment of the
Board of Directors of the Company after consultation with its financial advisor, the persons or
entity making such Company Superior Proposal has the financial means to conclude such transaction.



(c) Neither the Board of Directors of the Company nor any committee thereof shall,
except as required by their fiduciary duties as determined in good faith in consultation with
outside counsel, (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent or Merger Sub, the approval or recommendation by the Board of Directors of the Company or
such committee of this Agreement or the Merger, (ii) approve, recommend, or otherwise support or
endorse any Company Acquisition Proposal, or (iii) cause the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or similar agreement with respect to any
Company Acquisition Proposal. Nothing contained in this Section 5.4 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or 14e-2
promulgated under the Exchange Act or from making any disclosure to the Company’s stockholders if,
in the good faith judgment of the Board of Directors of the Company, in consultation with outside
counsel, such disclosure is necessary for the Board of Directors to comply with its fiduciary
duties under applicable law.



(d) In addition to the obligations of the Company set forth in paragraphs (a) and
(c) of this Section 5.4, the Company will promptly (and in any event within twenty-four (24) hours)
advise Parent, orally and in writing, if any Company Acquisition Proposal is made or proposed to be
made or any information or access to properties, books or records of the Company is requested in
connection with a Company Acquisition Proposal, the principal terms and conditions of any such
Company Acquisition Proposal or potential Company Acquisition Proposal or inquiry and the identity
of the party making such Company Acquisition Proposal, potential Company Acquisition Proposal or
inquiry. . The Company will keep Parent advised of the status and details (including amendments
and proposed amendments) of any such request or Company Acquisition Proposal.



ARTICLE VI




ADDITIONAL AGREEMENTS





6.1 Cooperation.



(a) The Company and Parent shall together, or pursuant to an allocation of
responsibility to be agreed upon between them:



(i) prepare and file with the SEC as soon as is practicable the Proxy Materials and
the Registration Statement registering the Parent Common Stock be issued in exchange for Company
Common Stock and issuable upon exercise of the Substitute Options and the Substitute Warrants, and
shall use all reasonable best efforts to cause the Proxy Materials and the Registration Statement
to comply with the rules and regulations promulgated by the SEC, to cause the Registration
Statement to qualify as a resale registration statement with respect to shares of Parent Common
Stock of Persons who are “affiliates” within the meaning of Rule 145 under the Securities Act, to
respond promptly to any comments of the SEC or its staff, and to have the Proxy Materials cleared
by the SEC under the Exchange Act and the Registration Statement declared effective by the SEC
under the Securities Act as promptly as practicable after it is filed;



(ii) as soon as reasonably practicable take all such action as may be required under
state blue sky or securities laws of every jurisdiction of the United States in which any
registered holder of Company Common Stock has an address of record on the record date for
determining the stockholders entitled to notice of and to vote and the Company Stockholders
Meeting; provided, however, that Parent shall not be required (A) to qualify to do
business as a foreign corporation in any jurisdiction in which it is not now qualified or (B) to
file a general consent to service of process in any jurisdiction.;



(iii) cooperate with one another in order to lift any injunctions or remove any
other impediment to the consummation of the transactions contemplated herein; and



(iv) cooperate with one another in obtaining opinions of DLA Piper Rudnick Gray Cary
US LLP, counsel to the Company, and Day, Berry and Howard, tax counsel to Parent, dated as of the
date the Registration Statement is declared effective satisfying the requirements of Item 601 of
Regulation S-K promulgated under the Securities Act and opinions of DLA Piper Rudnick Gray Cary US
LLP and Day, Berry and Howard, dated as of the Effective Time, to the effect that the Merger
qualifies as a reorganization under the provisions of Section 368(a) of the Code. In connection
therewith, each of the Company and Parent shall deliver to DLA Piper Rudnick Gray Cary US LLP and
Day, Berry and Howard representation letters dated as of the date of such opinions in form and
substance satisfactory to such counsel.



(b) Subject to the limitations contained in Section 6.2, the Company and Parent
shall each furnish to one another and to one another’s counsel all such information as may be
required in order to effect the foregoing actions and each represents and warrants to the other
that no information furnished by it in connection with such actions or otherwise in connection with
the consummation of the transactions contemplated by this Agreement will contain any untrue
statement of a material fact or omit to state a material fact required to be stated in order to
make any information so furnished, in light of the circumstances under which it is so furnished,
not misleading.



(c) No party to this Agreement knows of any fact or has taken, or will take, any
action that could reasonably be expected to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.



(d) The Company will use all reasonable best efforts to cause the Proxy Materials to
be mailed to the Company’s stockholders as promptly as practicable after the Registration Statement
is declared effective under the Securities Act. The Company shall promptly furnish to Parent all
information concerning the Company, its Subsidiaries and the Company’s stockholders that may be
required or reasonably requested in connection with any action contemplated by this Section 6.1.
If any event relating to the Company occurs that is required to be disclosed in an amendment or
supplement to the Registration Statement or the Proxy Materials, or if the Company becomes aware of
any information that is required to be disclosed in an amendment or supplement to the Registration
Statement or the Proxy Materials, then the Company shall promptly inform Parent thereof and shall
cooperate with Parent in filing such amendment or supplement with the SEC and, if appropriate, in
mailing such amendment or supplement to the stockholders of the Company. If any event relating to
Parent or any of its Subsidiaries occurs that is required to be disclosed in an amendment or
supplement to the Registration Statement or the Proxy Materials, or if Parent becomes aware of any
information that is required to be disclosed in an amendment or supplement to the Registration
Statement or the Proxy Materials, then Parent shall promptly inform the Company thereof and shall
cooperate with the Company in filing such amendment or supplement with the SEC.



(e) The Company and Parent will cooperate with one another in preparing and filing
all necessary documentation to effect any other applications, notices, petitions and filings, and
to obtain as promptly as practicable, all permits, consents, approvals and authorizations of all
other third Parties and Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement. The Company and Parent shall have the right to review
in advance, and to the extent practicable each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the information relating to the
Company or Parent, as the case may be, which appears in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement; provided, however, that nothing contained herein
shall be deemed to provide either party with a right to review any information provided by the
other party to any Governmental Entity on a confidential basis in connection with the transactions
contemplated hereby. In exercising the foregoing right, each of the Parties shall act reasonably
and as promptly as practicable. The Parties agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and authorizations of all third
Parties and Governmental Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each of the Parties will keep the other apprised of the status
of matters relating to contemplation of the transactions contemplated herein.



(i) The Company shall, upon request, furnish Parent with all information concerning
the Company and its directors, officers and stockholders and such other matters as may be
reasonably necessary in connection with any statement, filing, notice or application made by or on
behalf of Parent to any Governmental Entity in connection with the Merger or the other transactions
contemplated by this Agreement



(ii) Parent, Merger Sub and the Company shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or approval is required for
consummation of the transactions contemplated by this Agreement.




6.2 Access to Information.



(a) Upon reasonable notice and subject to applicable Laws relating to the exchange
of information, the Company and Parent shall accord to the officers, employees, accountants,
counsel and other representatives of the other party, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts, commitments and
records.



(b) No investigation by either of the Parties or their respective representatives shall affect
the representations and warranties of the other set forth herein.




6.3 Stockholder Meeting



The Company shall take all reasonable steps necessary to duly call, give notice of, convene
and hold a meeting of its stockholders promptly after the date of this Agreement for the purpose of
voting upon the approval of this Agreement and the Merger (the “Company Stockholders Meeting”).
Management and the Board of Directors of the Company shall recommend to the Company’s stockholders
approval of this Agreement, including the Merger, and the transactions contemplated hereby,
together with any matters incident thereto, and shall oppose any third party proposal or other
action that is inconsistent with this Agreement or the consummation of the transactions
contemplated hereby; provided, however, that the Company shall not be obligated to
recommend or oppose, as the case may be, if the Board of Directors of the Company determines in
good faith, after consultation with counsel, that such recommendation or opposition, as the case
may be, would result in a breach of its fiduciary duties under applicable Delaware law.




6.4 Legal Conditions to Merger.



Each of Parent and the Company shall use their reasonable best efforts (a) to take, or cause
to be taken, all actions necessary, proper or advisable to comply promptly with all legal
requirements which may be imposed on such party with respect to the Merger and, subject to the
conditions set forth in Article VII hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental Entity and any other
third party which is required to be obtained by the Company or Parent in connection with the Merger
and the other transactions contemplated by this Agreement.




6.5 Employees.



(a) To the extent permissible under the applicable provisions of the Code and ERISA,
for purposes of crediting periods of service for eligibility to participate and vesting, but not
for benefit accrual purposes, under the Section 401(k) plan maintained by Parent, as applicable,
individuals who are employees of the Company at the Effective Time and who become eligible to
participate in such plans will be credited with periods of service with the Company before the
Effective Time as if such service had been with Parent, as applicable.



(b) If required by Parent in writing delivered to the Company not less than five
business days before the Closing Date, the Company shall, on the Closing Date or effective one day
prior to the Closing Date contingent on the Closing occurring, (i) terminate any Company Plan that
includes a qualified cash or deferred arrangement within the meaning of Code Section 401(k)
(collectively, the “401(k) Plans”) and no further contributions shall be made to any 401(k) Plan
after such termination, or (ii) freeze the 401(k) Plans and no further contributions shall be made
to any 401(k) Plan after such freeze, or (iii) cause the 401(k) Plans to be merged in to the Parent
401(k) Plan as soon as administratively possible after the Closing Date and the participants of the
401(k) Plans shall be governed by the Parent 401(k) Plan. The Company shall provide to Parent
(i) certified copies of resolutions adopted by the Board of Directors of the Company, as
applicable, authorizing such termination and (ii) an executed amendment to each 401(k) Plan in form
and substance reasonably satisfactory to Parent to conform the plan document for such 401(k) Plan
with all applicable requirements of the Code and regulations thereunder relating to the
tax-qualified status of such 401(k) Plan. To the extent the applicable 401(k) Plan has been
amended pursuant to this section, Parent will not be obligated to make any matching or other
employer contributions to any 401(k) Plan after the Merger.



(c) After the Effective Time, except to the extent that Parent or its Subsidiaries
continues Company Plans in effect, employees of the Company who become employed by Parent or any of
its Subsidiaries will be eligible for employee benefits that Parent or such Subsidiary, as the case
may be, provides to its employees generally and, except as otherwise required by this Agreement, on
substantially the same basis as is applicable to such employees, provided that
nothing in this Agreement shall require any duplication of benefits. Parent will or will cause its
Subsidiaries to give credit to employees of the Company, with respect to the satisfaction of the
limitations as to pre-existing condition exclusions and waiting periods for participation and
coverage that are applicable under the employee welfare benefit plans (within the meaning of
Section 3(1) of ERISA) of Parent and credit employees of the Company with an amount equal to the
credit that any such employee had received as of the Effective Time towards the satisfaction of any
co-insurance, co-payment, deductible or out-of-pocket limit under the comparable employee welfare
benefit plans of the Company.




6.6 Subsequent Financial Statements.



As soon as reasonably available, but in no event more than thirty (30) days after the end of
each month, the Company and Parent will deliver the unaudited financial statements of such party as
of the end of each such month to the other party.




6.7 Additional Agreements.



In case at any time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, or to vest the Surviving Corporation with full title to
all properties, assets, rights, approvals, immunities and franchises of any of the Parties to the
Merger, the proper officers and directors of each of Parent and the Company shall take all such
necessary action as may be reasonably requested by Parent.




6.8 Advice of Changes.



Parent and the Company shall promptly advise each other of any change or event that,
individually or in the aggregate, has or would likely have a Material Adverse Effect on it or to
cause or constitute a material breach of any of its representations, warranties or covenants
contained herein. From time to time prior to the Effective Time, each party will promptly
supplement or amend its disclosure schedule delivered in connection with the execution of this
Agreement to reflect any matter which, if existing, occurring or known at the date of this
Agreement, would have been required to be set forth or described in such disclosure schedule or
which is necessary to correct any information in such disclosure schedule which has been rendered
inaccurate thereby. No supplement or amendment to such disclosure schedule shall have any effect
for the purpose of determining satisfaction of the conditions set forth in Sections 7.2(a) or
7.3(a) hereof, as the case may be.




6.9 Current Information.



During the period from the date of this Agreement to the Effective Time, each of Parent and
the Company will cause one or more of its designated representatives to confer on a regular and
frequent basis (not less than semi-monthly) with representatives of the other Party and to report
the general status of their respective ongoing operations. Parent and the Company will promptly
notify each other of any material change in the normal course of business or in the operation of
their properties and of any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat of litigation
involving Parent and the Company, and will keep each other fully informed of such events.




6.10 Execution of the Certificate of Merger.



Prior to the Effective Time, Parent, Merger Sub and the Company each shall execute and deliver
the Certificate of Merger in a form reasonably satisfactory to the Parties.




6.11 Indemnification and Insurance.



(a) In the event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, in which any person who is now, or has
been at any time prior to the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer or employee of the Company (the “Indemnified Parties”) is, or is threatened to
be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining
to (i) the fact that he is or was a director, officer or employee of the Company or any of its
predecessors or (ii) this Agreement or any of the transactions contemplated hereby, whether in any
case asserted or arising before or after the Effective Time, the Parties agree to cooperate and
defend against and respond thereto to the extent permitted by applicable law and the certificate of
incorporation and bylaws of the Company. It is understood and agreed that after the Effective
Time, Parent and Surviving Corporation shall indemnify and hold harmless, as and to the fullest
extent permitted by applicable law and the certificate of incorporation and bylaws of the Company
as in effect immediately prior to the Effective Time, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable attorney’s fees and
expenses in advance of the final disposition of any claim, suit, proceeding or investigation to
each Indemnified Party to the fullest extent permitted by law upon receipt of any undertaking
required by applicable law), judgments, fines and amounts paid in settlement (“Damages”) in
connection with any such threatened or actual claim, action, suit, proceeding or investigation, and
in the event of any such threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time), the Indemnified Parties may
retain counsel reasonably satisfactory to Parent; provided, however, that
(1) Parent shall have the right to assume the defense thereof and upon such assumption Parent shall
not be liable to any Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by any Indemnified Party in connection with the defense thereof,
except that if Parent elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are issues which raise conflicts of interest
between Parent and the Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to Parent, and Parent shall pay the reasonable fees and expenses of such counsel for
the Indemnified Parties, (2) Parent shall be obligated pursuant to this paragraph to pay for only
one counsel for each Indemnified Party, (3) Parent shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably withheld or delayed),
and (4) Parent shall not be obligated pursuant to this paragraph to the extent that a final
judgment determines that any Damages are as a result of the gross negligence or willful misconduct
or result from a decision made by the Indemnified Party when the Indemnified Party had no good
faith belief that he or she was acting in the best interests of the Company. Any Indemnified Party
wishing to claim indemnification under this Section 6.11, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify Parent thereof; provided, however,
that the failure to so notify shall not affect the obligations of Parent under this Section 6.11
except to the extent such failure to notify materially prejudices Parent. Parent’s obligations
under this Section 6.11 continue in full force and effect for a period of five years from the
Effective Time; provided, however, that all rights to indemnification in respect of
any claim asserted or made within such period shall continue until the final disposition of such
claim.



If Parent or any of its successors or assigns shall consolidate with or merge into any other
entity and shall not be the continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its assets to any entity, then and in each case, the
successors and assigns of Parent shall assume the obligations set forth in this Section 6.11.



Parent shall ensure than any officer or director of the Company who becomes an executive
officer or director of Parent on or after the Effective Time shall, at the time such person becomes
an executive officer or director of Parent, be named as an insured under Parent’s directors and
officers liability policy to the same extent as other executive officers and directors of Parent.



(b) Company shall purchase for the benefit of the persons serving as executive
officers and directors of the Company immediately prior to the Effective Time, directors’ and
officers’ liability insurance coverage for five years after the Effective Time, under either
Company’s policy in existence on the date hereof, or under a policy of similar coverage and amounts
containing terms and conditions which are generally not less advantageous than the Company’s
current policy, and in either case, with respect to acts or omissions occurring prior to the
Effective Time which were committed by such executive officers and directors in their capacity as
such (“Tail Insurance”). Company shall not purchase Tail Insurance with a premium of more than
$200,000.




6.12 Takeover Statute.



If any “fair price,” “moratorium,” “control share acquisition” or other form of antitakeover
statute or regulation shall become applicable to the transactions contemplated hereby, each of the
Company and Parent and the members of their respective Boards of Directors shall grant such
approvals and take such actions as are reasonably necessary so that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise
act to eliminate or minimize the effects of such statute or regulation on the transactions
contemplated hereby.




6.13 Accountants’ “Comfort” Letters.



The Company and Parent will each use reasonable best efforts to cause to be delivered to each
other letters from their respective independent accountants, dated a date within two business days
before the date of the Registration Statement, in form reasonably satisfactory to the recipient and
customary in scope for comfort letters delivered by independent accountants in connection with
registration statements on Form S-4 under the Securities Act.




6.14 Additional Reports.



The Company and Parent shall each furnish to the other copies of any reports of the type
referred to in Sections 3.5 and 4.8 that it files with the SEC on or after the date hereof, and
each of the Company and Parent, as the case may be, represents and warrants that as of the
respective dates thereof, such reports will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading. Any unaudited
consolidated interim financial statements included in such reports (including any related notes and
schedules) will fairly present the financial position of the Company or Parent and its consolidated
Subsidiaries, as the case may be, as of the dates thereof and the results of operations and changes
in financial position or other information included therein for the periods or as of the date then
ended (subject, where appropriate, to normal year-end adjustments), in each case in accordance with
past practice and GAAP consistently applied during the periods involved (except as otherwise
disclosed in the notes thereto).




6.15 Termination of Employee Stock Purchase Plan



On or before the Closing Date, the Company shall terminate it’s Employee Stock Purchase Plan
(the “ESPP”). On the earlier of March 31, 2006, or the date the ESPP expires by its own terms, the
Company shall suspend contributions to the ESPP.




6.16 Stockholders Agreement.



Concurrently with the execution and delivery of this Agreement, each of Special Situations
Funds, AWM Investment Company, Inc. and Diker Management LLC and any entity owed or controlled by
any of them shall execute and deliver the Stockholder Agreement.



ARTICLE VII




CONDITIONS PRECEDENT





7.1 Conditions to Each Party’s Obligation To Effect the Merger.



The respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:



(a) Stockholder Approvals. This Agreement and the Merger shall have been approved
and adopted by the affirmative vote of the holders of at least a majority of the outstanding shares
of the Company Common Stock entitled to vote thereon.



(b) No Injunctions or Restraints; Illegality. No order, injunction or decree issued
by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other transactions contemplated by this Agreement
shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which prohibits, restricts or
makes illegal consummation of the Merger.



(c) Registration Statement. The Registration Statement shall have been declared
effective in accordance with the provisions of the Securities Act and no stop order suspending such
effectiveness shall have been issued and remain in effect.



(d) Employment Agreements. Parent and Todd Wille shall have entered into a
mutually acceptable employment agreement in substantially the form attached hereto as Exhibit C.




7.2 Conditions to Obligations of Parent.



The obligation of Parent and Merger Sub to effect the Merger is also subject to the
satisfaction or waiver by Parent at or prior to the Effective Time of the following conditions:



(a) Representations and Warranties. The representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality or words of similar import
shall be true and correct in all respects, and those not so qualified shall be true and correct in
all material respects, as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing Date as though made
on and as of the Closing Date; provided, however, that for purposes of this
paragraph, all such representations and warranties shall be deemed to be true and correct unless
the failure or failures of such representations and warranties to be so true and correct in all
material respects or true and correct in all respects, as the case may be, either individually or
in the aggregate, will likely have a Material Adverse Effect on the Company. Parent shall have
received a certificate signed on behalf of the Company by each of the Chief Executive Officer and
the Chief Financial Officer of the Company to the foregoing effect.



(b) Performance of Covenants and Agreements of the Company. The Company shall have
performed in all material respects all covenants and agreements required to be performed by it
under this Agreement at or prior to the Closing Date, except where failure to perform would not
likely have a Material Adverse Effect on Company. Parent shall have received a certificate signed
on behalf of the Company by each of the Chief Executive Officer and the Chief Financial Officer of
the Company to such effect.



(c) Consents under Agreements. The consent, approval or waiver of each person whose
consent or approval shall be required in order to permit the succession by the Surviving
Corporation pursuant to the Merger to any obligation, right or interest of the Company under any
Company Contract shall have been obtained except for those, the failure of which to obtain, will
not likely have a Material Adverse Effect on the Company or the Surviving Corporation.



(d) No Material Adverse Change. There shall have been no changes in the business,
operations, condition (financial or otherwise), assets or liabilities of the Company regardless of
whether or not such events or changes are inconsistent with the representations and warranties
given herein) that individually or in the aggregate has had or would likely have a Material Adverse
Effect on Parent.



(e) Stockholder Agreements. Each Stockholder Agreement shall remain in full force
and effect.



(f) Dissenter’s or Appraisal Rights. To the extent available to the holders of the
Company Common Stock in connection with the Merger, holders of not more than ten (10%) of the
Company Common Stock shall have exercised and not withdrawn prior to the Effective Time dissenter’s
or appraisal rights.




7.3 Conditions to Obligations of the Company.



The obligation of the Company to effect the Merger is also subject to the satisfaction or
waiver by the Company at or prior to the Effective Time of the following conditions:



(a) Representations and Warranties. The representations and warranties of Parent
and Merger Sub set forth in this Agreement that are qualified as to materiality or words of similar
import shall be true and correct in all respects, and those not so qualified shall be true and
correct in all material respects, as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing Date as though made
on and as of the Closing Date; provided, however, that for purposes of this
paragraph, such representations and warranties shall be deemed to be true and correct unless the
failure or failures of such representations and warranties to be so true and correct in all
material respects or true and correct in all respects, as the case may be, either individually or
in the aggregate, will likely have a Material Adverse Effect on Parent. The Company shall have
received a certificate signed on behalf of both Parent and Merger Sub by each of the President or
any Executive Vice President and the Chief Financial Officer or Treasurer of Parent to the
foregoing effect.



(b) Performance of Covenants and Agreements of Parent. Parent shall have performed
in all material respects all covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date, except where failure to perform would not likely have a
Material Adverse Effect on Parent. The Company shall have received a certificate signed on behalf
of both Parent by each of the President or any Executive Vice President and the Chief Financial
Officer or Treasurer of Parent to such effect.



(c) Consents under Agreements. The consent or approval or waiver of each person
(other than the Governmental Entities referred to in Section 7.1(b)) whose consent or approval
shall be required in connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or instrument to which
Parent is a party or is otherwise bound shall have been obtained, except where failure to obtain
such consent, approval or waiver would not likely have a Material Adverse Effect on Parent.



(d) No Material Adverse Change. There shall have been no changes in the business,
operations, condition (financial or otherwise), assets or liabilities of the Parent regardless of
whether or not such events or changes are inconsistent with the representations and warranties
given herein) that individually or in the aggregate has had or would likely have a Material Adverse
Effect on Parent.



(e) Additional Investment. Parent shall have received at least $2,000,000 in new
money equity investment between the date hereof and the Effective Time.



(f) Capitalization. On or prior to the Effective Time (i) the holders of
outstanding shares of the Parent’s Preferred Stock shall have converted such shares of preferred
stock into common stock of Parent and (ii) the holders of convertible promissory notes of Parent
listed on Schedule 7.3(f) shall have converted such promissory notes into shares of Common Stock of
Parent.



ARTICLE VIII




TERMINATION AND AMENDMENT





8.1 Termination.



This Agreement may be terminated at any time prior to the Effective Time, whether before or
after approval by the stockholders of the Company of the matters presented in connection with the
Merger:



(a) by mutual consent of Parent and the Company in a written instrument, if the
Board of Directors of each so determines by a vote of a majority of the members of its entire
Board;



(b) by either Parent or the Company upon written notice to the other party (i) 30
days after the date on which any request or application for a regulatory approval shall have been
denied or withdrawn at the request or recommendation of the Governmental Entity which must grant
such regulatory approval, unless within the 30-day period following such denial or withdrawal the
Parties agree to file, and have filed with the applicable Governmental Entity, a petition for
rehearing or an amended application; provided, however, that no party shall have
the right to terminate this Agreement pursuant to this Section 8.1(b), if such denial or request or
recommendation for withdrawal shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set forth herein;



(c) by either Parent or the Company if the Merger shall not have been consummated on
or before September 30, 2006, unless the failure of the Closing to occur by such date shall be due
to the failure of the party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein;



(d) by either Parent or the Company (provided that the terminating party is
not in breach of its obligations under Section 6.3 hereof) if the approval of the stockholders of
the Company hereto required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the required vote at a duly held Company Stockholders Meeting or at
any adjournment or postponement thereof;



(e) by either Parent or the Company if there shall have been a breach of any of the
representations or warranties set forth in this Agreement on the part of the other party, if such
breach, individually or in the aggregate, has had or is likely to have a Material Adverse Effect on
the breaching party, and such breach shall not have been cured within 30 days following receipt by
the breaching party of written notice of such breach from the other party hereto or such breach, by
its nature, cannot be cured prior to the Closing;



(f) by either Parent or the Company if there shall have been a breach of any of the
covenants or agreements set forth in this Agreement on the part of the other party, if such breach,
individually or in the aggregate, has had or is likely to have a Material Adverse Effect on the
breaching party, and such breach shall not have been cured within 30 days following receipt by the
breaching party of written notice of such breach from the other party hereto or such breach, by its
nature, cannot be cured prior to the Closing;



(g) by Parent, if the management of the Company or its Board of Directors, for any
reason, (i) fails to call and hold a Company Stockholders Meeting to consider and approve this
Agreement and the transactions contemplated hereby, (ii) fails to recommend to stockholders the
approval of this Agreement and the transactions contemplated hereby, (iii) fails to oppose any
third party proposal that is inconsistent with the transactions contemplated by this Agreement
other than as expressly permitted by Section 5.4 of this Agreement, or (iv) violates Section 5.4 of
this Agreement;



(h) by Parent or the Company if the Company has complied with Section 5.4 above, and
has given written notice to Parent that the Company has agreed to enter into a Company Superior
Proposal; provided, however, that such termination under this Section 8.1(h) shall
not be effective unless and until the Company shall have complied with breakup fee provisions of
Section 8.2 below.




8.2 Effect of Termination; Termination Fee.



(a) Except as set forth in this Section 8.2, in the event of termination of this
Agreement by either Parent or the Company as provided in this Article VIII, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part of the Parties or
their respective affiliates, officers, directors or stockholders except (x) with respect to the
treatment of confidential information, the payment of expenses pursuant to Section 9.2, and
Article IX generally, (y) to the extent that such termination results from the willful breach of a
Party of any of its representations or warranties, or any of its covenants or agreements or (z)
intentional or knowing misrepresentation in connection with this Agreement or the transactions
contemplated hereby.



(b) In the event that (i)(1) a Company Acquisition Proposal or the intention to make
a Company Acquisition Proposal shall have been made directly to the stockholders of the Company
generally or otherwise publicly announced by the Company or the Person making such Company
Acquisition Proposal, (2) such Company Acquisition Proposal or intention is not irrevocably and
publicly withdrawn prior to the vote of the Company stockholders at the duly held Company
Stockholders Meeting, and (3) this Agreement is terminated by either the Company or Parent (x)
pursuant to Section 8.1(c) due to the Company Stockholders Meeting not occurring as a result of
such Company Acquisition Proposal or (y) Section 8.1(d), (ii) this Agreement is terminated by
Parent pursuant to Section 8.1(g) or (iii) this Agreement is terminated by either the Company or
Parent pursuant to Section 8.1(h), then the Company shall promptly, but in no event later than the
date of such termination, pay Parent a fee equal to $600,000 (the “Company Termination Fee”),
payable by wire transfer of same day funds. The Company acknowledges that the agreements contained
in this Section 8.2(b) are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, Parent would not enter into this Agreement, and accordingly, if the
Company fails promptly to pay the amount due pursuant to this Section 8.2(b), and, in order to
obtain such payment, Parent commences a suit which results in a judgment against the Company for
the fee set forth in this Section 8.2(b), the Company shall pay to Parent its costs and expenses
(including reasonable attorneys’ fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made.



(c) If this Agreement is terminated under circumstances in which the Parent is
entitled to receive a Company Termination Fee, the payment of such Company Termination Fee shall be
the sole and exclusive remedy available to such party, except in the event of (x) a willful breach
by the other party of any provision of this Agreement or (y) the intentional or knowing
misrepresentation in connection with this Agreement or the transactions contemplated hereby, in
which event the non-breaching Party shall have all rights, powers and remedies against the
breaching Party which may be available at law or in equity. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any such right, power or remedy by any Party
shall not preclude the simultaneous or later exercise of any other such right, power or remedy by
such Party.




8.3 Amendment.



Subject to compliance with applicable law, this Agreement may be amended by the Parties, by
action taken or authorized by their respective Board of Directors, at any time before or after
approval of the matters presented in connection with the Merger by the stockholders of the Company;
provided, however, that after any approval of the transactions contemplated by this
Agreement by the Company’s stockholders, there may not be, without further approval of such
stockholders, any amendment of this Agreement which reduces the amount or changes the form of the
consideration to be delivered to the Company stockholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the Parties.




8.4 Extension; Waiver.



At any time prior to the Effective Time, the Parties, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other Parties, (b) waive any
inaccuracies in the representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in a written instrument signed on behalf of such Party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.



ARTICLE IX




GENERAL PROVISIONS





9.1 Nonsurvival of Representations, Warranties and Agreements.



The respective representations and warranties made by the Company, Parent and Merger Sub in
this Agreement or in any instrument delivered pursuant to this Agreement shall not survive the
Effective Time and no Person shall have any liability or obligation in connection with any such
representation or warranty following the Effective Time.




9.2 Expenses.



All costs and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense. The Registration Statement
filing fee shall be borne by Parent and the cost of printing the Registration Statement and the
Proxy Materials shall be borne one-half by Parent and one-half by the Company.




9.3 Notices.



All notices and other communications hereunder shall be in writing and shall be deemed given
if delivered personally, mailed by registered or certified mail (return receipt requested), or if
sent by facsimile or delivered by an express courier (with confirmation) to the Parties at the
following addresses (or at such other address for a party as shall be specified by like notice):



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



Halo Technology Holdings


200 Railroad Avenue, Third Floor


Greenwich, Connecticut 06830


Attn: Ernest (JR) Mysogland


Tel: (203) 422-2950


Fax: (203) 422-5329



(b) if to Company, to:



Unify Corporation


2101 Arena Blvd., Suite 100


Sacramento, California 95834


Attn: Todd E. Wille



Tel: (916) 928-6387



Fax: (916) 928-6408



with a copy (which shall not constitute notice) to:



DLA Piper Rudnick Gray Cary US LLP


400 Capitol Mall, Suite 2400


Sacramento, CA 95814


Attn: Kevin A. Coyle


Tel: (916) 930-3200Fax: (916) 930-3201




9.4 Interpretation.



When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference
shall be to a Section of or an Exhibit or Schedule to this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words
“include”, “includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation”.




9.5 Counterparts.



This Agreement may be executed in counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by each of the Parties
and delivered to the other Parties, it being understood that all Parties need not sign the same
counterpart. A facsimile or electronic transmission of a signed counterpart of this Agreement
shall be sufficient to bind the party or Parties whose signature(s) appear thereon.




9.6 Entire Agreement.



This Agreement (including the disclosure schedules, documents and the instruments referred to
herein) constitutes the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the Parties with respect to the subject matter hereof, other than the
Confidentiality Agreement by and among Parent and the Company, dated as of October 2, 2005 (which
shall survive the execution and termination of this Agreement).




9.7 Governing Law.



This Agreement shall be governed and construed in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law rules.




9.8 Enforcement of Agreement.



The Parties agree that irreparable damage would occur in the event that the provisions of this
Agreement were not performed in accordance with its specific terms or were otherwise breached. It
is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions thereof in any
court of the United States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.




9.9 Severability.



Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.




9.10 Publicity.



Except as otherwise required by law or the rules of any exchange on which the Company Common
Stock or the Parent Common Stock is or may become listed, so long as this Agreement is in effect,
neither Parent nor the Company shall, or shall permit any of Parent’s Subsidiaries to, issue or
cause the publication of any press release or other public announcement with respect to, or
otherwise make any public statement concerning, the transactions contemplated by this Agreement,
without the consent of the other party, which consent shall not be unreasonably withheld or
delayed.




9.11 Assignment; Limitation of Benefits.



Neither this Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the Parties (whether by operation of law or otherwise) without the prior written
consent of the other Parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the Parties and their respective successors and
assigns. Except for Section 6.11, this Agreement (including the documents and instruments referred
to herein) is not intended to confer upon any person other than the Parties any rights or remedies
hereunder, and the covenants, undertakings and agreements set out herein shall be solely for the
benefit of, and shall be enforceable only by, the Parties hereto and their permitted assigns.




9.12 Additional Definitions.



In addition to any other definitions contained in this Agreement, the following words, terms
and phrases shall have the following meanings when used in this Agreement.



“Company Intellectual Property” means any Intellectual Property that is owned by or licensed
to the Company, including the Company Software.



“Company Licensed Software” means all third party Software used by the Company except for “off
the shelf” or other software widely available through regular commercial distribution channels on
standard terms and conditions.



“Company Proprietary Software” means all Software owned by the Company.



“Company Registered Intellectual Property” means all of the Registered Intellectual Property
owned by or filed in the name of the Company.



“Company Software” means the Company Licensed Software and the Company Proprietary Software.



“Company Stock Option” means options granted to Company employees, officers, directors or
consultants to acquire Company Common Stock, including without limitation options granted pursuant
to the Company’s 2001 Stock Option Plan and the Company’s 1991 Stock Option Plan.



“Confidential Information” means any data or information of the Company (including trade
secrets) that is valuable to the operation of the Company’s business and not generally known to the
public or competitors.



“GAAP” means generally accepted accounting principles as applied in the United States of
America.



“HSR Act” means the United States Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.



“Intellectual Property” means all intellectual property rights, including: (a) all United
States and foreign patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals and continuations thereof; (b) all inventions (whether patentable or not),
invention disclosures, improvements, mask works, trade secrets, manufacturing processes, test and
qualification processes, designs, schematics, proprietary information, know-how, technology,
technical data and customer lists; (c) all works of authorship (whether copyrightable or not),
copyrights, copyright registrations and applications therefor throughout the world; (d) all
industrial designs and any registrations and applications therefor throughout the world; (e) all
Software; and (f) all internet uniform resource locators, domain names, trade names, logos,
slogans, designs, trade dress, common law trademarks and service marks, and trademark and service
mark and trade dress registrations and applications therefor throughout the world.



“Knowledge” with respect to any entity, refers to the knowledge of such entity’s directors and
officers in the ordinary course of their duties in such positions without inquiry.



“Laws” means any and all statutes, laws, ordinances, rules, regulations, orders, permits,
judgments, injunctions, decrees, case law and other rules of law enacted, promulgated or issued by
any Governmental Entity.



“Material Adverse Effect” means with respect to Parent, Merger Sub or the Company, as the case
may be, a condition, event, change or occurrence that is reasonably likely to have a material
adverse effect upon (A) the financial condition, results of operations, business or properties of
Parent, Merger Sub or the Company, as the case may be, and its Subsidiaries taken as a whole
(other than as a result of (i) any change, effect, event or occurrence relating to the United
States economy or financial or securities markets in general, (ii) any change, effect, event or
occurrence relating to the software applications industry to the extent not affecting such party to
a materially greater extent than it affects other Persons in the software applications industry,
(iii) any change, effect, event or occurrence relating to the announcement or performance of this
Agreement and the transactions contemplated hereby, (iv) with respect to the Company or Parent, any
change, effect, event or occurrence resulting from any action or omission taken with the prior
consent of the other Party, and (v)  effects arising from war or terrorism), or (B) the ability of
Parent, Merger Sub or the Company to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement.



“Permitted Liens” means in the case of Intellectual Property, license agreements entered into
in the ordinary course.



“Person” means any natural person, corporation, business trust, joint venture, association,
company, firm, partnership or other entity or government or Governmental Entity.



“Registered Intellectual Property” means all United States and foreign: (a) patents and patent
applications (including provisional applications); (b) registered trademarks, service marks and
trade dress, and applications to register trademarks, service marks and trade dress; (c) registered
copyrights and applications to register copyrights; and (d) domain name registrations.



“Software” means all computer software programs, together with any error corrections, updates,
modifications, or enhancements thereto, in both machine-readable form and human-readable form.



"Special Situations Funds” means Special Situations Fund III, L.P., Special Situations Cayman
Fund, L.P., Special Situations Private Equity Fund, L.P., Special Situations Technology Fund, L.P.,
and Special Situations Technology Fund II, L.P.



“Stockholder Agreement” means the Stockholder Agreements in the form of Exhibit A attached
hereto between the Parent and each of Special Situations Funds, AWM Investment Company, Inc. and
Diker Management LLC and any entity owed or controlled by any of them.



“Subsidiary” with respect to any party means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes.



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



WARP TECHNOLOGY HOLDINGS, INC.,



operating under the name



HALO TECHNOLOGY HOLDINGS



	 	 	 	 	 
	By:

	 	 	 	Ernest (JR) Mysogland
	
 
	 	 
	 	 
	
 
	 	Name:
	 	Ernest (JR) Mysogland






Title: Executive Vice President



UCA MERGER SUB, INC.



	 	 	 
	By:

	 	Ernest (JR) Mysogland
	
 
	 	 
	
 
	 	Name: Ernest (JR) Mysogland

Title: President and Sole Director






UNIFY CORPORATION



	 	 	 	 	 
	By:

	 	 	 	Todd E. Wille
	
 
	 	 
	 	 
	
 
	 	Name:
	 	Todd E. Wille






Title: Chief Executive Officer