exv10w1



 





Exhibit 10.1   




Agreement and Plan of Merger




by and among




Art Technology Group, Inc.,




Einstein Acquisition Corp.,




eShopperTools.com, Inc.,




Scott Anderson, as Stockholder Representative, and 




the Principal Stockholders Identified on Schedule I





 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	Article 1 The Merger	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 

	 	1.1
	 	The Merger
	 	 	1	 
	 

	 	1.2
	 	Effective Time; Closing.
	 	 	1	 
	 

	 	1.3
	 	Effect of the Merger
	 	 	2	 
	 

	 	1.4
	 	Articles of Incorporation; Bylaws.
	 	 	2	 
	 

	 	1.5
	 	Directors and Officers
	 	 	2	 
	 

	 	1.6
	 	Effect on Capital Stock
	 	 	2	 
	 

	 	1.7
	 	Adjustments to Base Consideration Based on Company Balance Sheet
	 	 	5	 
	 

	 	1.8
	 	Adjusted Working Capital; Determination
	 	 	5	 
	 

	 	1.9
	 	Determination of Adjusted Working Capital.
	 	 	6	 
	 

	 	1.10
	 	Escrow Agreement
	 	 	8	 
	 

	 	1.11
	 	Stockholder Representative.
	 	 	10	 
	 

	 	1.12
	 	Delivery of Merger Consideration.
	 	 	13	 
	 

	 	1.13
	 	No Further Ownership Rights in Company Capital Stock
	 	 	14	 
	 

	 	1.14
	 	Taking of Necessary Action; Further Action
	 	 	14	 
	 

	 	1.15
	 	Dissenters’ Rights.
	 	 	14	 
	 

	 	1.16
	 	Certain Definitions
	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	Article 2 Representations and Warranties of the Company	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	 

	 	2.1
	 	Organization; Subsidiaries.
	 	 	19	 
	 

	 	2.2
	 	Company Capitalization.
	 	 	20	 
	 

	 	2.3
	 	Obligations With Respect to Capital Stock
	 	 	21	 
	 

	 	2.4
	 	Authority; Non-Contravention.
	 	 	21	 
	 

	 	2.5
	 	Financial Statements.
	 	 	22	 
	 

	 	2.6
	 	No Undisclosed Liabilities
	 	 	23	 
	 

	 	2.7
	 	Absence of Certain Changes or Events.
	 	 	23	 
	 

	 	2.8
	 	Taxes.
	 	 	24	 
	 

	 	2.9
	 	Title to Properties.
	 	 	26	 
	 

	 	2.10
	 	Intellectual Property.
	 	 	27	 
	 

	 	2.11
	 	Compliance with Laws.
	 	 	33	 
	 

	 	2.12
	 	Litigation
	 	 	33	 
	 

	 	2.13
	 	Employee Benefit Plans.
	 	 	34	 
	 

	 	2.14
	 	Employment Matters.
	 	 	35	 
	 

	 	2.15
	 	Environmental Matters.
	 	 	36	 
	 

	 	2.16
	 	Certain Contracts
	 	 	37	 
	 

	 	2.17
	 	Related-Party Matters
	 	 	39	 
	 

	 	2.18
	 	Brokers’ and Finders’ Fees
	 	 	39	 
	 

	 	2.19
	 	Insurance
	 	 	39	 
	 

	 	2.20
	 	Customers; Accounts Receivable.
	 	 	39	 
	 

	 	2.21
	 	Board Approval
	 	 	40	 
	 

	 	2.22
	 	Minutes and Stock Records
	 	 	40	 
	 

	 	2.23
	 	Accounting System
	 	 	40	 
	 

	 	2.24
	 	Corrupt Practices
	 	 	40	 






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	 	2.25
	 	Disclosure
	 	 	41	 
	 
	 	 	 	 	 	 	 	 
	Article 3 Representations and Warranties of Principal Stockholders	 	 	41	 
	 
	 	 	 	 	 	 	 	 
	 

	 	3.1
	 	Organization
	 	 	41	 
	 

	 	3.2
	 	Authority; Non-Contravention.
	 	 	41	 
	 

	 	3.3
	 	Title to Company Stock; Status as Company Stockholder
	 	 	42	 
	 

	 	3.4
	 	Waiver of Appraisal Rights
	 	 	42	 
	 

	 	3.5
	 	Agreements with the Company
	 	 	42	 
	 

	 	3.6
	 	Brokers’ and Finders’ Fees
	 	 	43	 
	 
	 	 	 	 	 	 	 	 
	Article 4 Representations and Warranties of Parent and Merger Sub	 	 	43	 
	 
	 	 	 	 	 	 	 	 
	 

	 	4.1
	 	Organization of Parent and Merger Sub
	 	 	43	 
	 

	 	4.2
	 	Authority; Non-Contravention.
	 	 	43	 
	 

	 	4.3
	 	Litigation
	 	 	44	 
	 

	 	4.4
	 	Board Approval
	 	 	44	 
	 

	 	4.5
	 	Disclosure
	 	 	44	 
	 
	 	 	 	 	 	 	 	 
	Article 5 Conduct Prior to the Effective Time	 	 	44	 
	 
	 	 	 	 	 	 	 	 
	 

	 	5.1
	 	Conduct of Business by the Company
	 	 	44	 
	 

	 	5.2
	 	Covenant of Parent
	 	 	47	 
	 
	 	 	 	 	 	 	 	 
	Article 6 Additional Agreements	 	 	47	 
	 
	 	 	 	 	 	 	 	 
	 

	 	6.1
	 	Antitrust and Other Filings.
	 	 	47	 
	 

	 	6.2
	 	Information Statement; Company Stockholder Meeting.
	 	 	48	 
	 

	 	6.3
	 	Tax Matters.
	 	 	48	 
	 

	 	6.4
	 	Confidentiality
	 	 	50	 
	 

	 	6.5
	 	Access to Information
	 	 	50	 
	 

	 	6.6
	 	No Solicitation.
	 	 	51	 
	 

	 	6.7
	 	Public Disclosure
	 	 	51	 
	 

	 	6.8
	 	Reasonable Efforts; Notification.
	 	 	52	 
	 

	 	6.9
	 	Third Party Consents
	 	 	53	 
	 

	 	6.10
	 	Certain Employee Benefits
	 	 	53	 
	 
	 	 	 	 	 	 	 	 
	Article 7 Survival of Representations; Indemnification	 	 	54	 
	 
	 	 	 	 	 	 	 	 
	 

	 	7.1
	 	Indemnification by Company Stockholders
	 	 	54	 
	 

	 	7.2
	 	Indemnification by Parent and Merger Subs
	 	 	54	 
	 

	 	7.3
	 	Survival of Representations
	 	 	55	 
	 

	 	7.4
	 	Process of Indemnification for Parent Claims and Stockholder Claims.
	 	 	55	 
	 
	 	 	 	 	 	 	 	 
	Article 8 Conditions to the Merger	 	 	59	 
	 
	 	 	 	 	 	 	 	 
	 

	 	8.1
	 	Conditions to Obligations of Each Party to Effect the Merger
	 	 	59	 
	 

	 	8.2
	 	Additional Conditions to Obligations of the Company
	 	 	60	 
	 

	 	8.3
	 	Additional Conditions to the Obligations of Parent and Merger Sub
	 	 	60	 
	 
	 	 	 	 	 	 	 	 
	Article 9 Termination, Amendment and Waiver	 	 	62	 
	 
	 	 	 	 	 	 	 	 
	 

	 	9.1
	 	Termination
	 	 	62	 






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	 	9.2
	 	Notice of Termination; Effect of Termination
	 	 	63	 
	 

	 	9.3
	 	Fees and Expenses.
	 	 	63	 
	 

	 	9.4
	 	Amendment
	 	 	64	 
	 

	 	9.5
	 	Extension; Waiver
	 	 	64	 
	 
	 	 	 	 	 	 	 	 
	Article 10 General Provisions	 	 	64	 
	 
	 	 	 	 	 	 	 	 
	 

	 	10.1
	 	Notices
	 	 	64	 
	 

	 	10.2
	 	Interpretation
	 	 	65	 
	 

	 	10.3
	 	Counterparts; Facsimile
	 	 	65	 
	 

	 	10.4
	 	Entire Agreement; Third Party Beneficiaries
	 	 	66	 
	 

	 	10.5
	 	Severability
	 	 	66	 
	 

	 	10.6
	 	Other Remedies; Specific Performance; Fees.
	 	 	66	 
	 

	 	10.7
	 	Governing Law
	 	 	66	 
	 

	 	10.8
	 	Rules of Construction
	 	 	66	 
	 

	 	10.9
	 	Assignment
	 	 	67	 
	 

	 	10.10
	 	Waiver of Jury Trial
	 	 	67	 







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Agreement and Plan of Merger




     This Agreement and Plan of Merger (this “Agreement”) is made and entered into as of
January 19, 2008, among Art Technology Group, Inc., a Delaware corporation (“Parent”), Einstein
Acquisition Corp., an Oregon corporation and a wholly owned subsidiary of Parent (“Merger Sub”),
eShopperTools.com, Inc., an Oregon corporation (the “Company”), Scott Anderson, as the
representative of the company stockholders (together with his replacement, the “Stockholder
Representative”), and the company stockholders listed on Schedule I hereto (the “Principal
Stockholders”).



Recitals




     A.      The respective Boards of Directors of Parent, Merger Sub and the Company have approved this
Agreement, and declared advisable the merger of Merger Sub with and into the Company (the “Merger”)
upon the terms and subject to the conditions of this Agreement and in accordance with the Oregon
Business Corporation Act (the “BCA”), and the other transactions contemplated by this Agreement.



     B.      For the avoidance of doubt, the parties agree that it is intended that for federal income
tax purposes, the Merger shall constitute a taxable transaction and shall not constitute a
reorganization under the provisions of Section 368 of the Internal Revenue Code of 1986, as amended
(the “Code”).



     C.      Concurrently with the execution of this Agreement, and as a condition and inducement to
Parent’s willingness to enter into this Agreement, the Principal Stockholders are entering into
Voting Agreements with Parent in the form of Exhibit A (the “Voting Agreements”).



     In consideration of the foregoing and the representations, warranties, covenants and
agreements set forth in this Agreement, the parties agree as follows:



Article 1

The Merger




     1.1     The Merger. Upon the terms and subject to the conditions of this Agreement and the applicable
provisions of the BCA, at the Effective Time (as defined below), Merger Sub shall be merged with
and into the Company, the separate corporate existence of Merger Sub shall cease, and the Company
shall continue as the surviving corporation of the Merger (the “Surviving Corporation”).



     1.2      Effective Time; Closing. (a) Subject to the provisions of this Agreement, the parties hereto
shall cause the Merger to be consummated by filing articles of merger consistent with this
Agreement with the Secretary of State of the State of Oregon in accordance with the relevant
provisions of the BCA (the “Articles of Merger”) (the time of such filing (or such later time as
may be agreed in writing by the Company and Parent and specified in the Articles of Merger) being
the “Effective Time”) as soon as practicable on or after the Closing Date (as defined below).



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               (b)      The closing of the Merger (the “Closing”) shall take place at the offices of Foley Hoag
llp, Seaport World Trade Center West, 155 Seaport Boulevard, Boston, Massachusetts, at a
time and date to be specified by the parties, which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Article 8 (other than those that by
their nature will be satisfied at the Closing) or at such other time, date and location as the
parties hereto agree in writing (the “Closing Date”).



     1.3      Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in
this Agreement and the applicable provisions of the BCA. Without limiting the generality of the
foregoing, at the Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.



     1.4      Articles of Incorporation; Bylaws.



               (a)      The Articles of Merger shall provide that, at the Effective Time, the articles of
incorporation of the Surviving Corporation shall be in the form of the articles of incorporation of
the Merger Sub as in effect immediately prior to the Effective Time.



               (b)      At the Effective Time, the Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall become the Bylaws of the Surviving Corporation until thereafter amended.



     1.5      Directors and Officers. At the Effective Time, the directors of Merger Sub, serving in such
capacity immediately prior to the Effective Time, shall be the directors of the Surviving
Corporation, until their respective successors are duly elected or appointed and qualified. At the
Effective Time, the officers of the Company, holding office immediately prior to the Effective
Time, shall be the officers of the Surviving Corporation, and shall serve at the pleasure of the
board of directors of the Surviving Corporation.



     1.6      Effect on Capital Stock. Subject to the terms and conditions of this Agreement, at the Effective
Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the Company Capital Stock (as defined below):



               (a)      Conversion of Company Capital Stock. Each share of Company Capital Stock issued and
outstanding immediately prior to the Effective Time, other than any shares of Company Capital Stock
to be canceled pursuant to Section 1.6(c), any Dissenting Shares (as defined, and to the extent
provided in Section 1.15(a)), and any shares of Series A Preferred Stock that are not converted to
Company Common Stock immediately prior to the Effective Time, and in lieu thereof are paid a
liquidation preference amount in accordance with the terms of the Company’s Articles of
Incorporation, as amended, will be canceled and extinguished and automatically converted into the
right to receive the applicable Per Share Merger Consideration (as defined in Section 1.6(b) below)
upon surrender by the holder thereof of the certificate representing such share of Company Capital
Stock in the manner provided in Section 1.12.



               (b)      For purposes of this Agreement:



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                    (i)      The “Adjusted Base Consideration” shall consist of an amount in cash equal to
$9,992,500 (the “Base Consideration”), such amount to be (A) decreased by the amount of any
indebtedness of the Company for borrowed money outstanding immediately prior to the
Effective Time (including, without limitation, (y) the redemption amount, including unpaid
principal of and accrued interest and redemption premium, of any outstanding Convertible
Promissory Notes that have not been converted to Company Capital Stock as of such time) and
(z) amounts payable in liquidation of Series A Preferred Stock in accordance with the terms
of the Company’s Articles of Incorporation, as amended, to holders of shares of Series A
Preferred Stock failing to elect to convert such shares of Series A Preferred Stock to
Company Common Stock prior to the Effective Time, and (B) increased by the amount of any
Base Consideration Increment or (C) decreased by the amount of any Base Consideration
Decrement, as the case may be, as each such term is defined in Section 1.7 below.




                    (ii)     The “Per Share Merger Consideration” payable in respect of each share of Company
Capital Stock (other than shares of Series A Preferred Stock that are not converted to
Company Common Stock immediately prior to the Effective Time) outstanding immediately prior
to the Effective Time shall be an amount in cash equal to the Adjusted Base Consideration
divided by the number of Common Share Equivalents outstanding at such time, and the “Merger
Consideration” paid or payable to any holder of Company Capital Stock by reason of the
Merger shall mean an amount in cash equal to the product of the Per Share Merger
Consideration payable in respect of such class of Company Capital Stock multiplied by the
number of shares of such class of outstanding Company Capital Stock held of record by such
holder immediately prior to the Effective Time.




                    (iii)    The “Company Common Stock” shall consist of the Company’s common stock, par value
$.01, and the “Company Capital Stock” shall consist of all outstanding capital stock of the
Company, including the Common Stock, and the Series A Convertible Preferred Stock, par value
$.01 (the “Series A Preferred Stock”).




                    (iv)     The “Company Convertible Securities” shall consist of each outstanding share of
Series A Preferred Stock and each stock option, warrant, or other convertible security to
acquire shares of Common Stock.




                    (v)      “Common Share Equivalent” shall mean each share of Common Stock (i) outstanding
immediately prior to the Effective Time or (ii) into or for which any Company Convertible
Securities outstanding immediately prior to the Effective Time are convertible or
exercisable as of the Effective Time without regard to the vesting provisions of any such
Company Convertible Securities, and assuming (A) the conversion to Common Stock of the
Series A Preferred Stock, excluding any shares of Series A Preferred Stock which are not
converted to Company Common Stock in accordance with the terms of the Company’s Articles of
Incorporation, as amended, as of the Effective Time, (ii) the conversion to Common Stock of
any Convertible Promissory Notes that are then so convertible, (iii) the exercise on a cash
basis of all outstanding options to purchase Company common stock, and (iv) the exercise on
a net exercise basis of all outstanding warrants to purchase Company common stock. The
number of



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Common Share Equivalents shall be determined in accordance with the Articles of
Incorporation of the Company as in effect as of the Effective Time, and, as of the date of
this Agreement, is as on Schedule II attached hereto. Between the date hereof and
the Effective Time, Schedule II may be updated by the Company as necessary to
reflect the conversion of any Company Convertible Securities, the impact of the failure of
any holder of Series A Preferred Stock to convert such shares into Company Common Stock, or
the exercise or cancellation of any Company Option or Company Warrant that is outstanding on
the date of this Agreement, provided, that any such update shall be consistent with the
Articles of Incorporation of the Company and with the terms of this Agreement and of the
relevant security (in accordance with its terms as then in effect, giving effect to any
amendment or modification thereto that is permitted or contemplated by this Agreement) and
shall be delivered by the Company to Parent prior to the Effective Time.




                    (vi)     The “Company Stockholders” shall consist of the holders of outstanding shares of
Company Capital Stock and the holders of outstanding Company Convertible Securities, and the
“Company Option Holders” shall consist of each holder of an outstanding Company Option, in
each case immediately prior to the Effective Time.




                    (vii)    The “Convertible Promissory Notes” shall mean any of those convertible promissory
notes of the Company described in Part 2.2 of the Company Disclosure Schedule.



               (c)      Cancellation of Company-Owned and Parent-Owned Stock. Each share of Common Stock held by
the Company or owned by Merger Sub, Parent or any direct or indirect wholly owned subsidiary of the
Company or of Parent immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.



               (d)      Effect of Merger on Stock Options and Warrants.




                    (i)      At the Effective Time, all options to purchase Common Stock then outstanding,
whether under the Company’s 2000 Stock Incentive Plan or 2004 Stock Incentive Plan
(collectively, the “Company Option Plans”) or pursuant to another Company compensatory plan
or otherwise (each a “Company Option”) will be accelerated so as to be exercisable in full
and will be cashed out as soon as practicable after the Effective Time by payment to or for
the account of the holder thereof, through the Company’s ordinary payroll process, of an
amount, in cash, equal to the sum of (a) the product of (i) the Per Share Consideration
payable in respect of the Company Common Stock, multiplied by (ii) the number of shares of
Company Common Stock subject to such option, less (b) the aggregate exercise price of
such shares, as set forth in the option, and less (c) any applicable tax withholding. The
aggregate amount of such payments (the “Option Cash-out Amount”) will be made available by
Parent to the Company following the Effective Time as necessary to enable the Company to
make such payments. Of the Option Cash-Out Amount payable to each holder of a Company
Option, a portion shall be delivered to the Escrow Agent to be held and disbursed pursuant
to the Escrow Agreement referred to in Section 1.10 below.



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                    (ii)     The Company shall take all necessary action such that each outstanding warrant to
acquire Company Capital Stock (the “Company Warrants”) shall, immediately prior to the
Effective Time, become vested and exercisable in full and shall, to the extent not exercised
prior to the Effective Time, be terminated at the Effective Time.



               (e)      Capital Stock of Merger Sub. Each share of common stock, par value $0.01 per share, of
Merger Sub (“Merger Sub Common Stock”), issued and outstanding immediately prior to the Effective
Time shall be converted into one validly issued, fully paid and nonassessable share of common
stock, $0.01 par value per share, of the Surviving Corporation.



     1.7      Adjustments to Base Consideration Based on Company Balance Sheet. If as of the Closing Date, the
Company’s Adjusted Working Capital is greater or less than $50,000, then the amount of the Base
Consideration shall be increased or decreased, as follows.



               (a)      If the Adjusted Working Capital exceeds $50,000, then the Base Consideration shall be
increased by the amount of such excess (a “Base Consideration Increment”).



               (b)      If the Adjusted Working Capital is less than $50,000, then the Base Consideration shall be
decreased by the amount of such deficiency (a “Base Consideration Decrement”).



     1.8      Adjusted Working Capital; Determination. For purposes of Section 1.7, the following terms shall
have the meanings set forth below:



               (a)      “Adjusted Working Capital” shall mean an amount equal to the sum of (i) the current assets
of the Company, reduced by (I) any deferred tax asset and (II) any amounts received by the Company
as the exercise price of options or warrants exercised between December 31, 2007 and the Closing),
minus (ii) the current liabilities of the Company, (A) including an accrual for (I) any accrued and
unpaid salary, wages, vacation and sick pay and other deferred compensation, (II) any Transaction
Expenses incurred or to be incurred in connection with the transactions contemplated by this
Agreement, and (III) any and all Taxes due as of the Effective Time and (B) excluding the amount of
any current indebtedness for borrowed money, including accrued interest and any redemption premium
thereon, that is outstanding immediately prior to the Effective Time and that has been deducted
from the Base Consideration pursuant to Section 1.6(b)(i)(A) above, each such amount to be
determined as of the Closing Date in accordance with GAAP, in a manner consistent with past
practices of the Company; plus or minus (iii) any other adjustments agreed upon on in writing by
Parent and the Company; provided that in no event shall any Excluded Adjustment be taken into
account for purposes of determining the Adjusted Working Capital.



               (b)      “Excluded Adjustment” shall mean any change in a current asset or a current liability as
compared with its amount at December 31, 2007 that is:




                    (i)      the result of a change in estimate by the Company (whether effected by way of
reversal or omission of a previously accrued liability or in any other manner) which change
in estimate is not made in response to any of the following



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occurring after December 31, 2007: (A) a bona fide transaction entered into by the
Company, (B) a payment made or received by the Company (C) action of an unaffiliated third
party or (D) an event or change of circumstances external to the Company, or




                    (ii)     the result of any transaction or action by the Company that would constitute a
breach of the Company’s obligations under Section 5.1 below.



               (c)      “Transaction Expense” shall mean any expense directly attributable to the negotiation and
consummation of the transactions contemplated by this Agreement, including, but not limited to,
severance payments, bonus payments and retention payments that become due by reason of the
consummation of the Merger, fees and disbursements of Davis, Wright & Tremaine LLP, counsel to the
Company, fees and disbursements of counsel employed by the Company to defend any claim, suit,
action or proceeding commenced or threatened against the Company that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement, fees and disbursements of
Acumen Financial Services Group, PC, the Company’s independent public accountants (the “Company
Auditors”), and amounts payable to the Company’s financial advisor, if any, or to the Stockholder
Representative.



     1.9      Determination of Adjusted Working Capital.



               (a)      On or before the fifth business day preceding the date fixed for the Closing (as defined
in Section 1.2), the Company shall deliver to Parent a certificate, in reasonable detail and
otherwise reasonably satisfactory to Parent, setting forth its good faith estimate of the Adjusted
Working Capital of the Company as of the Closing Date determined in accordance with Section 1.8
(the “Preliminary Working Capital Certificate”). At the Closing, the Company shall deliver to
Parent a certificate in reasonable detail setting forth its determination of the Adjusted Working
Capital as of the Closing Date determined in accordance with Section 1.8 (the “Closing Working
Capital Certificate”).



               (b)      On or before the 45th day following the Closing, Parent shall notify the Stockholder
Representative in writing whether it accepts or disputes the accuracy of the Company’s
determination of the Adjusted Working Capital as set forth on the Closing Working Capital
Certificate.




                    (i)      If Parent accepts the Company’s determination of the Adjusted Working Capital, or
if it fails within such 45-day period to notify the Company in writing of any dispute with
respect thereto, then the Closing Working Capital Certificate shall be deemed final and
conclusive and binding upon all parties.




                    (ii)     If Parent disputes the accuracy of the Closing Working Capital Certificate and the
Company’s determination of the Adjusted Working Capital, Parent shall within the 45-day
period referred to above provide written notice to the Stockholder Representative (the
“Dispute Notice”), setting forth in reasonable detail those items that Parent disputes, the
amounts of any adjustments that are necessary in its judgment for the computation of the
Adjusted Working Capital to conform to the requirements of this Agreement, and the basis for
its suggested adjustments. During the 30-day period following delivery of a Dispute Notice,
Parent and the Stockholder Representative will



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meet and negotiate in good faith with a view to resolving their disagreements over the
disputed items. During such 30-day period and until the final determination of the Working
Capital Adjustment, if any, the Stockholder Representative will be provided with such access
to the financial books and records of the Business and, subject to access procedures
acceptable to Parent’s independent public accounts (the “Parent Auditors”), the workpapers
of the Parent Auditors, as it may reasonably request to enable it to respond to any Dispute
Notice. If the parties resolve their differences over the disputed items in accordance with
the foregoing procedure, the Working Capital Adjustment shall be the amount agreed upon by
them.




                    (iii)    If the parties fail to resolve their differences over the disputed items with
such 30-day period, then Parent and the Stockholder Representative shall forthwith jointly
request that the Accounting Arbitrator make a binding determination as to the disputed items
in accordance with this Agreement. The “Accounting Arbitrator” shall mean such national or
regional firm of independent accountants as may be agreed upon by Parent and the Stockholder
Representative. Within 10 days following the delivery of a Dispute Notice, each of Parent
and the Stockholder Representative shall propose to the other in writing at least two such
firms acceptable to it to act as Accounting Arbitrator. Any firm currently engaged as the
independent public accounting firm for any party to this Agreement shall be ineligible to be
proposed by such party serve as an arbitrator without the consent of Parent and the
Stockholder Representative. If the parties have not, by the end of the 30-day period
referred to above, agreed upon an Accounting Arbitrator, then the Accounting Arbitrator
shall be selected by one party, drawn by lot, from the list of firms proposed by the other
party.




                    (iv)     The Accounting Arbitrator will under the terms of its engagement have no more than
75 days from the date of referral and no more than 15 days from the final submission of
information and testimony by the Parent and the Stockholder Representative within which to
render its written decision with respect to the disputed items, which decision shall be
final and binding upon the parties and enforceable by any court of competent jurisdiction.
The Accounting Arbitrator shall review such submissions and base its determination solely on
such submissions. In resolving any disputed item, the Accounting Arbitrator may not assign
a value to any item greater than the greatest value for such item claimed by either party or
less than the smallest value for such item claimed by either party. Parent and the Company
Stockholders (by way of the General Indemnity Escrow) shall each bear the costs and expenses
of the Accounting Arbitrator based on the percentage which the portion of the contested
adjustment amount not awarded to each party bears to the amount actually contested by such
party (e.g., if Parent makes an adjustment claim for $1,000,000 and the Stockholder
Representative only contests $500,000 of the amount claimed by Parent, and if the Accounting
Arbitrator resolves the dispute by awarding Parent $300,000 of the $500,000 contested, then
the Accounting Arbitrator’s costs and expenses will be allocated 60% to the Company
Stockholders and 40% to Parent).




                    (v)      If the Adjusted Working Capital, determined as set forth above, is greater than
$50,000, then the amount of Base Consideration shall be increased as set forth in Section
1.7(a) above, and Parent shall promptly, and in any event within five



-7-









 







business days after such determination, (i) deliver to each Company Stockholder such
portion of the Base Consideration Increment, as would have been deliverable to such Company
Stockholder if the final determination of the Adjusted Working Capital had been made
immediately prior to the Effective Time, and (ii) direct the Escrow Agent (as defined below)
to release to the Company Stockholders, as their interests may appear, any property then
held for their accounts in the Working Capital Escrow (as defined below).




                    (vi)     If the Adjusted Working Capital, determined as set forth above, is less than
$50,000, then the amount of Base Consideration shall be reduced by an amount as set forth in
Section 1.7(b) above, and Parent shall be entitled to direct that the Escrow Agent deliver
to Parent from the Working Capital Escrow (and, in the event that the Working Capital Escrow
is insufficient, from the General Indemnity Escrow, as defined below)), for the account of
each Company Stockholder, that portion of the Base Consideration delivered to the Escrow
Agent for the account of each Company Stockholder as would not have been payable to such
Company Stockholder if the final determination of the Adjusted Working Capital had been made
immediately prior to the Effective Time. If, after such delivery to Parent, any property
shall remain in the Working Capital Escrow, Parent will promptly instruct the Escrow Agent
to release the balance of such property to the Company Stockholders, as their interests may
appear.



     1.10    Escrow Agreement. At the Closing, Parent will deduct from the Merger Consideration and Option
Cash-Out Payments and deliver to Computershare Trust Company, Inc., as escrow agent (the “Escrow
Agent”), for the account of the Company Stockholders and the Company Option Holders, pursuant to an
escrow agreement (the “Escrow Agreement”) in substantially the form attached as Exhibit B
hereto, the following amounts:



               (a)      cash in an amount equal to $1,100,000 (the “General Indemnity Escrow”);



               (b)      cash in an amount equal to $1,100,000 (the “Special Indemnity Escrow”);



               (c)      cash in an amount equal to $550,000 (the “Working Capital Escrow”); and



               (d)      cash in the amount of $10,000 (the “Stockholders Representative Escrow”), to fund the
out-of-pocket expenses of the Stockholders Representative pursuant to Section 1.11 below.



     The amount deposited for the account of each Company Stockholder and Company Option Holder in
the General Indemnity Escrow, Special Indemnity Escrow, Working Capital Escrow and Stockholders
Representative Escrow shall be proportionate to the Merger Consideration received by each (and, in
the case of Company Option Holders, the Option Cash-out Amount received by each), as more fully set
forth on Schedule II.



     The Escrow Agreement will provide, among other things, for the establishment of subaccounts
whereby the amounts delivered to and disbursed by the Escrow Agent for the



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account of each Company Stockholder and Company Option Holder shall be separately accounted
for.



     In the event that there is a dispute concerning the Adjusted Working Capital that is not
resolved prior to the Effective Time of the Merger, and if the final determination of the Adjusted
Working Capital results in a downward adjustment to the Base Consideration pursuant to Section 1.7
above of a magnitude such that it would, had it been given effect immediately prior to the
Effective Time of the Merger, have resulted in an adjustment to the conversion ratio of the
Company’s Series A Stock under the terms of the Company’s Articles of Incorporation, then in such
event the parties agree that the allocation of Merger Consideration among the Company Stockholders
and Company Option Holders, as set forth on Schedule II, will be modified in a manner
mutually acceptable to Parent and the Stockholder Representative so as to equitably reflect the
impact of such adjustment to the Series A Stock conversion ratio. The Escrow Agreement will provide
for a mechanism whereby the respective interests of the Company Stockholders and Company Option
Holders in the General Indemnity Escrow, Special Indemnity Escrow, Working Capital Escrow and
Stockholders Representative Escrow will be adjusted to reflect an allocation of the amounts held
for the accounts of the participants that gives effect to the allocation of Merger Consideration
consistent with Schedule II as so modified.



     The Escrow Agreement will also provide that:



     (i) twelve months after the Closing the General Indemnity Escrow (less the amount of any
claims paid and pending claims asserted by Parent in good faith of which the Escrow Agent has
received notice) will be released from the escrow account and distributed to the Company
Stockholders and (in the case of the Company Option Holders) to the Company, for distribution to
the Company Option Holders, net of any required tax withholding;



     (ii) twelve months after the Closing, the Special Indemnity Escrow (less the amount of any
claims paid and pending claims asserted by Parent in good faith of which the Escrow Agent has
received notice) will be released from the escrow account and distributed to the Company
Stockholders and (in the case of the Company Option Holders) to the Company, for distribution to
the Company Option Holders, net of any required tax withholding; and



     (iii) six months after the Closing Date (or such lesser period as is necessary to finally
determine the Adjusted Working Capital under Section 1.9(b) above) the Working Capital Escrow (less
the amount of any claims paid and pending claims asserted by Parent in good faith of which the
Escrow Agent has received written notice) will be released from the escrow account and distributed
to the Company Stockholders and (in the case of the Company Option Holders) to the Company, for
distribution to the Company Option Holders, net of any required tax withholding.



     Parent and the Company Stockholders (including the Company Option Holders) shall each be
responsible for 50% of the costs relating the establishment and administration of the Escrow
Agreement, including the fees and expenses of the Escrow Agent. Such escrow-related costs will be
paid initially by Parent, and the Escrow Agreement will provide for the reimbursement of Parent out
of the Working Capital Escrow or, if the Working Capital Escrow has been exhausted or distributed,
out of the General Indemnity Escrow, for the Company



-9-









 







Stockholders’ share of such costs, promptly upon submission to the Escrow Agreement and the
Stockholder Representative of an invoice therefor.



     1.11    Stockholder Representative.



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



-10-









 




Notwithstanding the foregoing, notices which are to be given under this Agreement to the
Company Stockholders shall only be effective if given to each Company Stockholder, in accordance
with Section 10.1 hereof.




               (b)      In the event that the Stockholder Representative dies, becomes unable to perform his
responsibilities hereunder or resigns from such position, the remaining Company Stockholders shall,
by election of the Company Stockholders (or, if applicable, their respective heirs, legal
representatives, successors and assigns) who held a majority of the shares of Common Share
Equivalents issued and outstanding immediately prior to the Effective Time, select another
representative to fill such vacancy and such substituted representative shall be deemed to be the
Stockholder Representative for all purposes of this Agreement.



               (c)      In the performance of his duties hereunder, the Stockholder Representative shall be
entitled to rely upon any document or instrument reasonably believed by him to be genuine and
accurate. The Stockholder Representative may assume that any person purporting to give any notice
in accordance with the provisions hereof has been duly authorized to do so. In the absence of
proven gross negligence or willful misconduct, (i) the Stockholder Representative shall not be
liable to the Company Stockholders with respect to his performance of the functions specified in
this Agreement, and (ii) no Company Stockholder shall commence, prosecute or maintain any actions
or proceedings against the Stockholder Representative with respect to his performance of the
functions specified in this Agreement, except in cases of gross negligence or willful misconduct.
In determining the occurrence of any fact, event or contingency, the Stockholder Representative may
request from any of the Company Stockholders or any other person such reasonable additional
evidence as the Stockholder Representative in his sole discretion may deem necessary, and may at
any time inquire of and consult with others, including any of the Company Stockholders, and shall
not be liable to any Company Stockholder for any damages resulting from any delay in acting
hereunder pending receipt and examination of additional evidence requested. The Stockholder
Representative shall be entitled to be indemnified and held harmless by each Company Stockholder
against any damages incurred without gross negligence or willful misconduct on the part of the
Stockholder Representative and arising out of or in connection with the acceptance or
administration of his duties hereunder with each Company Stockholder being, severally and not
jointly, liable for such Company Stockholder’s pro rata share (based on their respective interests
in the Adjusted Base Consideration), of any such claim for indemnification by the Stockholder
Representative.



               (d)      By their execution of this Agreement, the Principal Stockholders agree and by operation of
the merger each other Company Stockholder shall be deemed to have agreed, that:




                    (i)      Parent and Merger Sub shall be able to rely conclusively on the instructions and
decisions of the Stockholder Representative as to the determination and payment of the
Adjusted Working Capital and the defense and/or settlement of any Claims for which the
Company Stockholders may be required to indemnify Parent pursuant to Article 7 hereof, and
no party hereunder shall have any cause of action against Parent or Merger Sub for any
action taken in reliance upon the instructions or decisions of the Stockholder
Representative;



-11-









 






                    (ii)     all actions, decisions and instructions of the Stockholder Representative shall be
conclusive and binding upon all of the Company Stockholders and no Company Stockholder shall
have any cause of action against the Stockholder Representative for any action taken or not
taken, decision made or instruction given by the Stockholder Representative under this
Agreement, except for fraud or willful breach of this Agreement by the Stockholder
Representative;




                    (iii)    the provisions of this Section 1.11 are independent and severable, are
irrevocable and coupled with an interest and shall be enforceable notwithstanding any rights
or remedies that any Company Stockholder may have in connection with the transactions
contemplated by this Agreement; and




                    (iv)     the provisions of this Section 1.11 shall be binding upon the heirs, legal
representatives, successors and assigns of each Company Stockholder, and any references in
this Agreement to a Company Stockholder or the Company Stockholders shall mean and include
the successors to the Company Stockholder rights hereunder, whether pursuant to testamentary
disposition, the laws of descent and distribution or otherwise.



               (e)      Following the Closing and subject to the terms of Sections 6.4 and 6.7 hereof, Parent
shall provide the Stockholder Representative with reasonable access to such information about the
Company as the Stockholder Representative may reasonably request for purposes of performing his
duties and exercising the rights of the Company Stockholders hereunder.



               (f)      Any fees and expenses incurred by the Stockholder Representative in connection with
actions taken pursuant to the terms of this Agreement, including reasonable, actual expenses
incurred or paid to counsel or other third parties in investigating, negotiating, arbitrating or
settling any claim hereunder will be paid by the Company Stockholders in proportion to their
respective pro rata interest in the Adjusted Base Consideration and may, on request of the
Stockholder Representative, be paid from amounts deposited in the Working Capital Escrow or General
Indemnity Escrow that are released from escrow and distributable to the Company Stockholders as
provided in the Escrow Agreement. At any time prior to the General Indemnity Escrow Termination
Date, the Stockholder Representative may by written notice to the Escrow Agent make a claim for
reimbursement of Transaction Expenses incurred through the date of such notice as well as an
additional amount for future Transaction Expenses to the extent reasonably budgeted in good faith
by the Stockholder Representative for resolution of any disputes between members of the Parent
Group and the Company Stockholders under this Agreement or any Transaction Document as provided in
this Section 1.11. Such amounts shall be paid by the Escrow Agent from the Stockholder
Representative Escrow. If the Stockholders Representative Escrow shall have been exhausted, upon
the release of the Working Capital Escrow or the General Indemnity Escrow to the Company
Stockholders, the Escrow Agent shall pay to the Stockholder Representative, out of amounts
otherwise payable to the Company Stockholders from either the Working Capital Escrow or the General
Indemnity Escrow, any unpaid Expense Claims (as defined in, and in accordance with the terms of,
the Escrow Agreement). Any amounts held by the Stockholder Representative for the payment of
Transaction Expenses shall be released to the Company Stockholders on the earlier of (i) such



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date when the Stockholder Representative determines in good faith that no additional
Transaction Expenses will be incurred, and (ii) the second anniversary of the General Indemnity
Escrow Release Date.



     1.12    Delivery of Merger Consideration.



               (a)      At the Closing or as soon as practicable thereafter, each Company Stockholder shall
deliver to Parent (i) all certificates which immediately prior to the Effective Time represented
issued and outstanding shares of Company Capital Stock (each individually, a “Certificate” and
collectively, the “Certificates”) or an affidavit of lost certificate and, if requested by Parent,
an indemnity with respect to such lost certificate in form and substance reasonably satisfactory to
Parent (the “Affidavit”) and (ii) an executed Letter of Transmittal and Certificate, including a
Form W-9, in the form of Exhibit C hereto (the “Transmittal Certificate”). Each Company
Stockholder shall be entitled to receive in exchange therefor the applicable Merger Consideration
allocable to such Company Stockholder (including the General Indemnity Escrow, the Special
Indemnity Escrow and the Working Capital Escrow if, as and when distributable to such Company
Stockholder in accordance with the Escrow Agreement). Company Option Holders shall not be required
to exercise Company Options or tender exercise notices in order to receive the Option Cash-out
Amount, it being understood that such holders shall receive their proportionate amount of the
Merger Consideration solely by virtue of application of Section 1.6(d) of this Agreement, without
additional action of such holder. The total amount of Merger Consideration issuable to each
Company Stockholder in exchange for his or its shares shall be listed on Schedule II
hereto, as updated as of the Effective Time by the Company and delivered to Parent at the Closing.



               (b)      Until surrendered, each Certificate shall, after the Effective Time, represent only the
right to receive the Merger Consideration into which the shares of Company Capital Stock formerly
represented thereby shall have been converted pursuant to Section 1.6 hereof. At and after the
Effective Time, the holders of any Company Capital Stock shall cease to have any rights as Company
Stockholders, except for the right to surrender Certificates pursuant to Section 1.12(a). As of the
Closing, the stock transfer books of the Company shall be closed, and after the Closing there shall
be no transfers on such stock transfer books.



               (c)      Required Withholding. Each of Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable pursuant to this
Agreement to any holder or former holder of Company Capital Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of state, local or
foreign tax law or under any other applicable Legal Requirement. To the extent such amounts are so
deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having
been paid to the person to whom such amounts would otherwise have been paid.



               (d)      No Liability. Notwithstanding anything to the contrary in this Section 1.12, neither
Parent, the Surviving Corporation nor any other party hereto shall be liable to a holder of shares
of Parent Common Stock or Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.



-13-









 





     1.13    No Further Ownership Rights in Company Capital Stock. All Merger Consideration issued in
accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares of Company Capital
Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article 1.



     1.14    Taking of Necessary Action; Further Action. If, at any time after the Effective Time, any further
action is reasonably necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Company, the officers and directors of the Company and
Merger Sub will take all such lawful and necessary action. Parent shall cause Merger Sub to
perform all of its obligations relating to this Agreement and the transactions contemplated hereby.



     1.15    Dissenters’ Rights.



               (a)      Notwithstanding any provision of this Agreement to the contrary other than Section
1.15(b), any shares of Company Capital Stock held by a holder who has demanded and perfected
appraisal or dissenter’s rights for such shares in accordance with Section 60.554 of the BCA and
who, as of the Effective Time, has not effectively withdrawn or lost such appraisal or dissenters’
rights (“Dissenting Shares”), shall not be converted into or represent a right to receive Merger
Consideration pursuant to Section 1.6, but instead shall be converted into the right to receive
only such consideration as may be determined to be due with respect to such Dissenting Shares under
the BCA. From and after the Effective Time, a holder of Dissenting Shares shall not be entitled to
exercise any of the voting rights or other rights of a shareholder of the Surviving Corporation.



               (b)      Notwithstanding the provisions of Section 1.6(a), if any holder of shares of Company
Capital Stock who demands appraisal of such shares under the BCA shall effectively withdraw or lose
(through failure to perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder’s shares shall no longer be Dissenting
Shares and shall automatically be converted into and represent only the right to receive Merger
Consideration as provided in Section 1.6(a) without interest thereon, upon surrender of the
certificate representing such shares pursuant to Section 1.12.



               (c)      The Company shall give Parent (i) prompt notice of any written demands for appraisal of
any shares of Company Capital Stock, withdrawals of such demands, and any other instruments served
pursuant to the BCA and received by the Company which relate to any such demand for appraisal and
(ii) the opportunity to participate in all negotiations and proceedings which take place prior to
the Effective Time with respect to demands for appraisal under the BCA. The Company shall not,
except with the prior written consent of Parent, voluntarily make any payment with respect to any
demands for appraisal of Common Stock or offer to settle or settle any such demands.



-14-









 





     1.16    Certain Definitions. As used herein, the following terms shall have the following meanings:



               (a)      “Acquisition Proposal” shall mean any offer or proposal (other than an offer or proposal
by Parent or Merger Sub) relating to or involving: (i) any acquisition or purchase by any Person
or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than
15% of the total number of outstanding voting securities of any Target Company, as defined below;
(ii) any tender offer or exchange offer that if consummated would result in any Person or “group”
(as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder)
having beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 15% of
the total number of outstanding voting securities of any Target Company, as defined below; (iii)
any merger, consolidation, business combination or similar transaction involving any Target Company
pursuant to which the stockholders of the Company or such Subsidiary immediately preceding such
transaction hold less than 85% of the equity interests in the surviving or resulting entity of such
transaction; (iv) any sale, lease, exchange, transfer, license (other than in the ordinary course
of business), acquisition, or disposition of any material assets of any Target Company; or (v) any
liquidation or dissolution of any Target Company. “Affiliate” of a specified Person shall mean each
other Person who controls, is controlled by, or is under common control with the specified Person.



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



               (c)      “Commercially Available Software” shall mean any commercially available third-party
“off-the-shelf” software licensed to the Company on a non-exclusive basis.



               (d)      “Company Employee Plan” shall mean any program, policy, practice, trust, Contract or other
plan providing for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other benefits or remuneration of any kind, whether
written or unwritten, funded or unfunded, which is or has been maintained, contributed to, or
required to be contributed to, by the Company for the benefit of any Employee or any relative or
dependent of any Employee, including (i) each “employee benefit plan” within the meaning of Section
3(3) of ERISA, (ii) any stock, stock option, stock appreciation right, stock purchase, bonus,
deferred compensation, pension, profit-sharing, commission, retirement, severance, retention,
change of control, or similar plan or Contract, and (iii) any provision in any staff handbook or
written employment policies for any Target Company.



               (e)      “Company Material Adverse Effect” means any change, event, circumstance or effect (whether
or not such change, event, circumstance or effect constitutes a breach of a representation,
warranty or covenant regarding the Company in this Agreement) that is, or is reasonably likely to
be, materially adverse to the business, assets (including intangible assets), capitalization,
financial condition, operations or results of operations or prospects of the Company, taken as a
whole, exclusive of any effect arising from or related to: (i) any general condition affecting the
industry in which the Company is engaged and that does not affect the Company disproportionately,
as compared to other companies in such industry; (ii) the



-15-









 







announcement or pendency of this Agreement or any of the transactions contemplated hereby, or
the disclosure of the identity of Parent as the acquiror of the Company; (iii) acts of war or
terrorism; or (iv) general economic, political and financial market changes that do not affect the
Company disproportionately.



               (f)      “Company Option” shall mean each outstanding unexercised option to purchase Company Stock,
whether or not vested or exercisable, granted under any Company Option Plan.



               (g)      “Confidential Information” shall mean any information concerning the business and affairs
of Parent and its Subsidiaries or the Company, as the case may be, that is not already generally
available to the public, other than (i) information which becomes generally available to the public
other than as a result of a disclosure in violation of this Agreement, and (ii) information which
becomes available to the applicable Party on a non-confidential basis from a Person who is not
known or reasonably suspected (in each case after reasonable inquiry) by such Party to be bound not
to disclose the information. All information concerning the business and affairs of Parent and its
Subsidiaries and the Company (including the information contained in the Company Disclosure
Schedule) shall be presumed to be Confidential Information, and the applicable Party who receives
such Confidential Information shall have the burden of proving that any such information is not
Confidential Information.



               (h)      “Contract” shall mean any contract, agreement, instrument, license, lease, mortgage, note,
bond, debenture, indenture, guarantee, permit, franchise, concession, plan, option, warranty,
purchase order, insurance policy, obligation, covenant, undertaking, arrangement or other legally
binding commitment or of any nature, whether written or oral.



               (i)      “Employee” shall mean any current, former or retired employee, officer, director of the
Company or any ERISA Affiliate.



               (j)      “Employee Agreement” shall mean each management, employment, retention, severance,
change-of-control, consulting, indemnification, relocation, repatriation, expatriation, visa, work
permit or similar Contract between the Company or any ERISA Affiliate and any Employee or
consultant, including any offer letter.



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



               (l)      “Environmental Claim” shall mean any written notice alleging potential liability
(including potential liability for investigatory costs, cleanup costs, response or remediation
costs, natural resources damages, property damages, personal injuries, fines or penalties) arising
out of, based on or resulting from (a) the presence, or release of any



-16-









 







Environmental Material at any location, whether or not owned by that party or any of its
Affiliates or (b) circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law and which could reasonably be expected to have a Company Material Adverse Effect.



               (m)      “Environmental Laws” shall mean any and all statutes, regulations and ordinances relating
to the protection of public health, safety or the environment.



               (n)      “Environmental Material” shall mean PCBs, asbestos, petroleum and its by-products, any
substance that has been designated by any Governmental Entity or by applicable law to be
radioactive, toxic, hazardous or otherwise a danger to public health or the environment, and all
other substances or constituents that are regulated by, or form the basis of liability under, any
Environmental Law.



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



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



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



               (r)      “Family Member” shall mean any spouse, parent, grandparent, child, grandchild or sibling
or any other person sharing the same household.



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



               (t)      “Governmental Entity” shall mean any court or any administrative, regulatory or
governmental body, agency, commission, panel, authority, organization or instrumentality, whether
domestic, foreign or international.



               (u)      “IRS” shall mean the Internal Revenue Service.



               (v)      “Knowledge” with respect to the Company and a particular fact or matter, shall mean: (i)
the actual awareness of such fact or matter by any of Todd Humphrey, Bruce D’Ambrosio or Jane
Jorgensen, (ii) the awareness that any of the foregoing persons would be reasonably likely to
obtain in the course of conducting a reasonably comprehensive investigation of matters within the
scope of such person’s responsibilities concerning the existence of such fact or matter, and (iii)
any information contained in the Company’s books and records that any of the foregoing persons
would be expected to obtain in the course of such person’s recent review of such books and records,
and “Known” shall have the corresponding meaning.



               (w)      “Legal Requirement” shall mean any federal, state, local, municipal, provincial, foreign,
international or other law, statute, constitution, treaty, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,



-17-









 







enacted, adopted, promulgated, implemented or otherwise put into effect by or under the
authority of any Governmental Entity.



               (x)      “Multiemployer Plan” shall mean any Pension Plan (as defined below) which is a
“multiemployer plan,” as defined in Section 3(37) of ERISA.



               (y)      “Pension Plan” shall mean each Company Employee Plan which is an “employee pension benefit
plan,” within the meaning of Section 3(2) of ERISA.



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



               (aa)    “Required Stockholder Vote” shall mean the affirmative vote, at a meeting of the
stockholders of the Company duly called in accordance with the Company Charter Documents and
Section 60.487 of the BCA, of a majority of all the votes entitled to be cast by the holders of the
Company’s outstanding Common Stock and Series A Preferred Stock, voting together as a single class.



               (bb)    “Subsidiary” of a specified entity shall mean any corporation, partnership, limited
liability company, joint stock company, joint venture or other legal entity of which the specified
entity (either alone or through or together with any other Subsidiary) owns, directly or
indirectly, 50% or more of the stock or other equity, partnership or other ownership interests the
holders of which are generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation or other legal entity.



               (cc)    “Target Company” shall mean the Company and any of its Subsidiaries.



               (dd)    “Tax” or “Taxes” shall mean any federal, state, local, municipal, provincial, foreign or
international income, gross receipts, business, license, payroll, telecommunications, employment,
excise, severance, stamp, stamp duty, stamp duty land transaction tax, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value-added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not and including any obligations to indemnify or otherwise
assume or succeed to the Tax liability of any other Person.



               (ee)    “Tax Return” shall mean any return (including any land transaction return), declaration,
report, claim for refund, notice, assessment, election or information return or statement relating
to Taxes, including any schedule or attachment thereto, and including any amendment thereof.



               (ff)    “Transaction Documents” shall mean this Agreement, the Voting Agreements, the Escrow
Agreement, the Note and Warrant Amendment and Exercise



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Agreements and each of the other agreements and instruments to be executed and delivered by
any party in connection with the consummation of the transactions contemplated hereby.



Article 2

Representations and Warranties of the Company




     As of the date of this Agreement and as of the Closing Date, the Company represents and
warrants to Parent and the Merger Sub as set forth in this Article 2, subject to any exceptions
expressly stated in the disclosure schedule delivered by the Company to Parent dated as of the date
hereof and certified on behalf of the Company by a duly authorized officer of the Company (the
“Company Disclosure Schedule”). Exceptions on the Company Disclosure Schedule shall specifically
identify the representation to which they relate; provided, however, that any matter disclosed
pursuant to one section or subsection of the Company Disclosure Schedule is deemed disclosed for
such other sections or subsections of the Company Disclosure Schedule as, and only to the extent
that, it is readily apparent that such matter relates to such other section or subsection of the
Company Disclosure Schedule and the level of particularity and manner of disclosure of the matter
expressly disclosed in one section or subsection of the Company Disclosure Schedule would make a
reasonable person aware that such disclosure is relevant to such other sections or subsections.



     2.1      Organization; Subsidiaries.



               (a)      Each Target Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite
corporate or other power and authority to own, lease and operate its assets and properties and to
carry on its business as now being conducted; and (iii) is duly qualified or licensed to do
business in each jurisdiction where the character of the properties owned, leased or operated by it
or the nature of its activities makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not have a Company Material Adverse Effect. Part
2.1(a) of the Company Disclosure Schedule lists each Subsidiary of the Company and each
jurisdiction where any Target Company is qualified or licensed to do business. Part 2.1(a) of the
Company Disclosure Schedule indicates the jurisdiction of organization of each entity listed
therein, the capitalization of each such entity (other than the Company), and the ownership of all
securities of such entity, including the direct or indirect equity interest of each Target Company
therein (all of which are held free and clear of all Encumbrances).



               (b)      Other than the Subsidiaries identified in Part 2.1(a) of the Company Disclosure Schedule,
no Target Company owns any capital stock of, or any equity interest of any nature in, any Person.
No Target Company has agreed or is obligated to make, or is bound by any written or oral Contract
as in effect as of the date hereof or as may hereinafter be in effect under which it may become
obligated to make any future investment in or capital contribution to any other Person. No Target
Company has at any time been a general partner of any general partnership, limited partnership or
other Person.



               (c)      The Company has delivered or made available to Parent true and correct copies of the
Articles of Incorporation and Bylaws of the Company and similar governing



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instruments of each of its Subsidiaries, each as amended to date (collectively, the “Company
Charter Documents”), and each such instrument is in full force and effect. No Target Company is in
violation of any of the provisions of the Company Charter Documents. The Company has delivered or
made available to Parent all proposed or considered amendments to the Company Charter Documents
that the Company intends to adopt on or prior to the Closing Date.



               (d)      Part 2.1(d) of the Company Disclosure Schedule lists all of the current directors and
officers (or equivalent) of each Target Company.



     2.2      Company Capitalization.



               (a)      The authorized capital stock of the Company consists solely of (i) 15,000,000 shares of
Common Stock, of which 1,211,528 shares are issued and outstanding on the date of this Agreement
and (ii) 5,000,000 shares of Series A Preferred Stock, of which 957,200 shares are issued and
outstanding on the date of this Agreement. Except as aforesaid, there are no other authorized,
issued or outstanding shares of capital stock of the Company. The outstanding shares of Common
Stock and Series A Preferred Stock and the Company Convertible Securities, including the
Convertible Promissory Notes, are held of record by the Persons named in Part 2.2(a) of the Company
Disclosure Schedule in the amounts set forth opposite their respective names. All outstanding
shares of Company Capital Stock are duly authorized, validly issued, fully paid and nonassessable
and are not subject to preemptive rights created by statute, the Articles of Incorporation or
Bylaws of the Company or any Contract to which any Target Company is a party or by which it is
bound. There are no shares of Company Capital Stock held in treasury by the Company.



               (b)      The Company Option Plans are the only equity plans of any Target Company. Part 2.2(b) of
the Company Disclosure Schedule sets forth the following information with respect to each Company
Option and Company Warrant outstanding on the date of this Agreement: (i) the name of the optionee
or holder; (ii) the number and type of shares of Company Stock subject to such Company Option or
Company Warrant; (iii) the exercise price of such Company Option or Company Warrant; (iv) the date
on which such Company Option was granted; (v) the date on which such Company Option expires, (vi)
if applicable, the Company Option Plan pursuant to which such Company Option was granted, and (vii)
whether the exercisability of such Company Option will be accelerated in any way by the
transactions contemplated by this Agreement, indicating the extent of any such acceleration. The
Company has made available to Parent accurate and complete copies of each Company Option Plan, each
Company Warrant and each form of Contract evidencing any Company Options, and each Convertible
Promissory Note. Except as set forth in Part 2.2(b) of the Company Disclosure Schedule, there are
no Contracts or arrangements of any character to which any Target Company is bound obligating any
Target Company to accelerate the vesting of any Company Option as a result of any of the
transactions contemplated hereby. The Company Options and Company Warrants may be treated in the
manner described in Section 1.6(d).



               (c)      All securities of each Target Company have been issued and granted in compliance in all
material respects with (i) all applicable securities laws and other applicable Legal Requirements
and (ii) all requirements set forth in applicable Contracts.



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               (d)      Schedule II accurately sets forth as of the date of this Agreement, and any
updated Schedule II delivered by the Company to Parent at the Closing will accurately set
forth as of the Effective Time, the amount of the Merger Consideration, including the Escrow Fund
required to be allocated to each Company Stockholder under the terms of the Articles of
Incorporation of the Company and this Agreement.



     2.3      Obligations With Respect to Capital Stock. Except as set forth in Parts 2.2(b) and 2.3 of the
Company Disclosure Schedule, there are no equity securities, partnership interests or other
ownership interests of any class, or any securities exchangeable or convertible into or exercisable
for any of the foregoing, issued, reserved for issuance or outstanding with respect to the Company
or, except as set forth in Part 2.1(a) of the Company Disclosure Schedule, with respect to any
other Target Company. Except as set forth in Part 2.2(b) or Part 2.3 of the Company Disclosure
Schedule, there are no subscriptions, options, warrants, equity securities, convertible debt,
partnership interests or other ownership interests, calls, rights (including preemptive rights) or
Contracts of any character to which any Target Company is a party or by which it is bound
obligating any Target Company to issue, deliver or sell, or repurchase, redeem or otherwise
acquire, any equity securities, partnership interests or other ownership interests of any Target
Company or obligating any Target Company to grant, extend, accelerate the vesting of or enter into
any such subscription, option, warrant, equity security, call, right or Contract. There are no
registration rights, and there is no voting trust, proxy, rights agreement, “poison pill”
anti-takeover plan or other Contract to which any Target Company is a party or by which it is bound
with respect to any equity security of any class of the Company or any equity security, partnership
interest or other ownership interest of any class of any other Target Company.



     2.4      Authority; Non-Contravention.



               (a)      The Company has all requisite corporate power and authority to enter into this Agreement
and the Escrow Agreement and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by the Company of this Agreement and the Escrow Agreement and the
consummation by the Company of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company, subject only to obtaining
the Required Stockholder Vote for the adoption and approval of this Agreement and the Merger, and
the filing of the Articles of Merger pursuant to the BCA. The Required Stockholder Vote is
sufficient for the Company’s stockholders to approve and adopt this Agreement and approve the
Merger, and no other approval of any holder of any securities of the Company is required in
connection with the consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by Parent, Merger Sub, the Company Stockholders and the Company
Stockholder Representative, constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws affecting the rights of creditors generally and
general principles of equity. Assuming the due authorization, execution and delivery of the Escrow
Agreement by Parent, Merger Sub, the Escrow Agent and the Company Stockholder Representative, the
Escrow Agreement, when executed and delivered by the Company, will constitute the valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms,



-21-









 







except as enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally and general principles of equity.



               (b)      The execution and delivery by the Company of this Agreement and the Escrow Agreement do
not, and the performance by the Company of this Agreement and the Escrow Agreement will not, (i)
conflict with or violate the Company Charter Documents, (ii) subject to compliance with the
requirements set forth in Section 2.4(c), conflict with or violate any Legal Requirement applicable
to any Target Company or by which any Target Company or any of its material properties or assets is
bound or affected, or (iii) except as set forth in Part 2.4(b) of the Company Disclosure Schedule,
result in any material breach of or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or materially impair a Target
Company’s rights or alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in the creation of an
Encumbrance on any of the properties or assets of any Target Company pursuant to, any material
Contract to which any Target Company is a party or by which any Target Company or its properties or
assets are bound or affected, except as set forth in Part 2.4(b) of the Company Disclosure
Schedule. No consent, waiver or approval of any Person, nor any notice to any Person, is required
to be obtained or made under any Contract to which any Target Company is a party or by which any
Target Company or any of its properties or assets is bound or affected in connection with the
execution and delivery by the Company of this Agreement or the performance of this Agreement by the
Company, except for such consents, waivers, approvals and notices as have duly been obtained.



               (c)      No consent, approval, order or authorization of, or registration, declaration or filing
with any Governmental Entity or other Person, is required to be obtained or made by the Company in
connection with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for the filing of the Articles of Merger with the
Secretary of State of the State of Oregon and appropriate documents with the relevant authorities
of other states in which the Company is qualified or licensed to do business.



     2.5      Financial Statements.



               (a)      Part 2.5 of the Company Disclosure Schedule includes complete and correct copies of (i)
the unaudited consolidated balance sheet and statement of income of the Company as of December 31,
2007 and for the six months ended December 31, 2007 and (ii) the consolidated balance sheets and
statements of income, stockholders’ equity and cash flows of the Company as of June 30, 2006 and
2007 and for the fiscal years ended 2006 and 2007, together with the unqualified audit report
thereon of the Company Auditors. Collectively, the financial statements referred to in the
immediately preceding sentence are sometimes referred to herein as the “Company Financial
Statements” and the balance sheet of the Company as of December 31, 2007 is sometimes referred to
herein as the “Company Balance Sheet.” Each of the Company Financial Statements (x) was prepared
in accordance with GAAP, applied on a consistent basis throughout the periods involved, and (y)
fairly presents the consolidated financial position of the Target Companies as at the respective
dates thereof and the consolidated results of the Target Companies’ operations and cash flows for
the periods indicated, except that the unaudited Company Financial Statements may not contain all
the footnotes required by GAAP, and were or



-22-









 







are subject to normal and recurring year-end adjustments that the Company does not reasonably
expect to be material, individually or in the aggregate.



               (b)      The Company has not been notified by any accountant that such accountant has formed the
conclusion that any of the Company Financial Statements should be restated, that the Company should
modify its accounting for any period, or that the Company has any material weakness or significant
deficiency in its internal control over financial reporting.



     2.6      No Undisclosed Liabilities. No Target Company has any liabilities (absolute, accrued, contingent
or otherwise), except for (a) liabilities and obligations shown on the Company Balance Sheet, (b)
liabilities and obligations incurred since the date of the Company Balance Sheet in the ordinary
course of business consistent with past practice and not material in the aggregate, (c) liabilities
and obligations disclosed in this Agreement or the Company Disclosure Schedule, and (d) contingent
liabilities not required under GAAP to be reflected on the Company Balance Sheet and not material
in the aggregate. Except as set forth in Part 2.6 of the Company Disclosure Schedule, the Target
Companies do not have any material off-balance sheet arrangements as defined in Item 303(a)(4)(ii)
of Regulation S-K promulgated by the United States Securities and Exchange Commission.



     2.7      Absence of Certain Changes or Events.



               (a)      Since the date of the Company Balance Sheet, there has not been: (i) any occurrence that
has had, or that may reasonably be expected to have, a Company Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution (whether in cash,
stock or property) in respect of, any of any Target Company’s capital stock, or any purchase,
redemption or other acquisition by any Target Company of any Target Company’s capital stock or any
other securities of any Target Company or any grant or issuance of any options, warrants, calls or
rights to acquire any such shares or other securities, (iii) any split, combination or
reclassification of any Target Company’s capital stock, (iv) any granting by any Target Company of
any increase in compensation or fringe benefits to any directors, officers, employees or
consultants of any Target Company, or any payment by any Target Company of any bonus to any
directors, officers, employees or consultants of any Target Company, (v) any acquisition, sale or
transfer of any material asset by any Target Company other than software licenses granted by the
Company to customers in the ordinary course of business and consistent with past practice, (vi) any
change by any Target Company in its accounting methods, principles or practices, except as required
by concurrent changes in GAAP, (vii) any material revaluation by any Target Company of any of its
assets, including writing off notes or accounts receivable, (viii) any granting by any Target
Company of any increase in severance or termination pay, (ix) any cancellation or termination of
any development, licensing, distribution, sales, services or other similar Contract with respect to
any Intellectual Property Rights (as defined in Section 2.10), except by the Company in the
ordinary course of business consistent with past practice, (x) any cancellation, compromise, waiver
or release of any right or claim (or series of rights or claims) involving more than $20,000, (xi)
any material damage, destruction or loss (whether or not covered by insurance) to any property or
assets material to the conduct of the business of any Target Company; (xii) any creation of any
Encumbrance on any of the property or assets of any Target Company, (xiii) any capital expenditure
in excess of $10,000, (xiv) any creation of any indebtedness for borrowed money in excess of
$10,000, other



-23-









 







than bridge financing permitted by Section 6.6(b), (xv) any entering into, amendment,
modification, cancellation or termination of any material Contract other than in the ordinary
course of business consistent with past practice or (xvi) entering into any Contract to do any of
the foregoing.



     2.8      Taxes.



               (a)      Each Target Company has filed all Tax Returns that it was required to file under
applicable Legal Requirements. All such Tax Returns were correct and complete in all material
respects and were prepared in substantial compliance with all applicable Legal Requirements. All
Taxes due and owing by any Target Company (whether or not shown on any Tax Return) have been paid.
No Target Company is currently the beneficiary of any extension of time within which to file any
Tax Return. No claim has ever been made by a Governmental Entity in a jurisdiction where a Target
Company does not file Tax Returns that such Target Company is or may be subject to taxation by that
jurisdiction. There are no liens for Taxes (other than Taxes not yet due and payable) upon any of
the assets of any Target Company.



               (b)      Each Target Company has withheld and paid all Taxes required to have been withheld and
paid in connection with any amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.



               (c)      No foreign, federal, state, or local tax audits or administrative or judicial Tax
proceedings are pending or, to the Company’s Knowledge, being contemplated with respect to any
Target Company. No Target Company has received from any foreign, federal, state, or local
Governmental Entity (including jurisdictions where such Target Company has not filed Tax Returns)
any (i) written notice indicating an intent to open an audit or other review, (ii) request for
information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any
amount of Tax proposed, asserted, or assessed by any Governmental Entity against any Target
Company. Part 2.8(c) of the Company Disclosure Schedule lists all foreign, federal, state and
local income Tax Returns filed with respect to any Target Company for taxable periods ended on or
after June 30, 2002, indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of an audit. The Company has delivered to Parent correct
and complete copies of all such Tax Returns and all examination reports, and statements of
deficiencies assessed against or agreed to by any Target Company since July 1, 2002.



               (d)      No Target Company has waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency.



               (e)      Except as set forth in Part 2.8(e) of the Company Disclosure Schedule, no Target Company
is a party to any contract or plan that would result, separately or in the aggregate, in the
payment of (a) any “excess parachute payment” within the meaning of Code Section 280G (or any
corresponding provision of state, local or foreign Tax law) or (a) an amount that would not be
deductible pursuant to Code Section 162(m).



               (f)      No Target Company has been a United States real property holding corporation within the
meaning of Code Section 897(c)(2) during the applicable period specified



-24-









 







in Code Section 897(c)(1)(A)(ii). Each Target Company has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Code Section 6662. No Target Company is a party to or bound by
any Tax allocation or sharing Contract. No Target Company (A) has been a member of an affiliated
group filing a consolidated federal income Tax Return (other than a group the common parent of
which was the Company) or (B) has any liability for the Taxes of any Person (other than any Target
Company) under Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), as
a transferee or successor, by contract, or otherwise.



               (g)      To the Company’s knowledge, Part 2.8(g) of the Company Disclosure Schedule sets forth the
following information with respect to each Target Company (or, in the case of clause (B) below,
with respect to each of the Company’s Subsidiaries) as of the most recent practicable date (but not
earlier than June 30, 2007) (as well as on an estimated pro forma basis as of the Closing giving
effect to the consummation of the transactions contemplated hereby): (A) the basis of the Target
Company in its assets; (B) the basis of the Company in the stock of each Subsidiary (or the amount
of any excess loss account); (C) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable contribution allocable to each
Target Company; and (D) the amount of any deferred gain or loss allocable to each Target Company
arising out of any intercompany transaction.



               (h)      The unpaid Taxes of the Target Companies (A) did not, as of the date of the Company
Balance Sheet, exceed the reserve for Tax liability (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth on the face of the
Company Balance Sheet (rather than in any notes thereto) and (B) will not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the past custom and
practice of the Target Companies in filing their Tax Returns. Since the date of the Company
Balance Sheet, no Target Company has incurred any liability for Taxes other than in the ordinary
course of business consistent with past practice.



               (i)      No Target Company will be required to include any item of income in, or exclude any item
of deduction from, taxable income for any taxable period (or portion thereof) ending after the
Closing Date as a result of any:




                    (i)      change in method of accounting for a taxable period ending on or prior to the
Closing Date;




                    (ii)     “closing agreement” as described in Code Section 7121 (or any corresponding or
similar provision of state, local or foreign income Tax law) executed on or prior to the
Closing Date;




                    (iii)    intercompany transaction or excess loss account described in Treasury Regulations
under Code Section 1502 (or any corresponding or similar provision of state, local or
foreign income Tax law);




                    (iv)     installment sale or open transaction disposition made on or prior to the Closing
Date; or




                    (v)      prepaid amount received on or prior to the Closing Date.



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               (j)      No Target Company has distributed stock of another Person, or has had its stock
distributed by another Person, in a transaction that was purported or intended to be governed in
whole or in part by Code Section 355 or Code Section 361.



               (k)      No Target Company has engaged in any transaction that constitutes a “listed transaction,”
“reportable transaction” or substantially similar transaction as described under Section 6011 of
the Code and Treasury regulations promulgated thereunder.



               (l)      No Target Company is party to or has any obligation under any Tax sharing, Tax
indemnity or Tax allocation agreement or any similar contract or arrangement, whether or not
written.



               (m)      No Target Company owns any interest in an entity characterized as a partnership for
federal income Tax purposes.



               (n)      No Target Company is or ever has been a party to a transaction or contract that is in
conflict with the Tax rules on transfer pricing in any relevant jurisdiction.



               (o)      None of the assets of any Target Company (a) is “tax-exempt use property” within the
meaning of Code Section 168(h), (b) directly or indirectly secures any debt the interest on which
is Tax exempt under Code Section 103(a) or (c) is subject to a lease under Code Section 7701(h) or
under any predecessor section.



     2.9      Title to Properties.



               (a)      No Target Company holds any interest in real property, other than the leaseholds described
in Part 2.9 of the Company Disclosure Schedule (such property being the “Leased Real Property”).
Part 2.9 of the Company Disclosure Schedule lists all real property leases (including underleases,
serviced office Contracts and any licenses, consents and approvals required from the landlords and
any superior landlords with respect to any such lease) to which any Target Company is a party and
each amendment thereto. All such current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under any of such leases,
any existing default or event of default (or event which with notice or lapse of time, or both,
would constitute a default) that would give rise to a claim against any Target Company in excess of
$10,000. Such leases permit the current occupation and use of such real property by the Target
Companies. The Leased Real Property comprises all the real property occupied or otherwise used by
the Target Companies.



               (b)      Each Target Company has good and marketable title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of any Encumbrances except
for liens for Taxes not yet due and payable and such Encumbrances, if any, which are not,
individually or in the aggregate, material in character, amount or extent. The Leased Real
Property is free of any tenancy, sub-tenancy, license or other Contract entitling a person other
than the Target Companies to occupy the whole or any part. There are no outstanding actions,
disputes, claims or demands between any Target Company and any third party affecting the Leased
Real Property or any neighboring property or any boundary walls and fences, or with respect to any
easement, right or means of access to the Leased Real Property.



-26-









 




To the Knowledge of the Company, there is no resolution, proposal, scheme or order, whether or
not formally adopted, that would materially interfere with the use or occupation of, or access to,
the Leased Real Property by the Target Companies.




               (c)      All of the tangible properties and assets of the Target Companies are in adequate
operating condition to conduct the operations of the Target Companies in substantially the same
manner as currently conducted.



               (d)      Except as set forth in the leases set forth in Part 2.9 of the Company Disclosure
Schedule, no Target Company has any material liability, actual or contingent, arising directly or
indirectly out of any Contract, underlease, tenancy, conveyance, transfer or any other deed or
document relating to real property or to any estate or interest in real property entered into by
any Target Company including any actual or contingent liability arising directly or indirectly out
of (i) any estate or interest held by any Target Company as original lessee or underlessee; (ii)
any guarantee given by any Target Company in relation to a lease or underlease; or (iii) any other
covenant made by any Target Company in favor of any lessor or head lessor.



     2.10    Intellectual Property.



               (a)      For purposes of this Agreement, “Intellectual Property Rights” shall mean all intellectual
property rights anywhere in the world held or used (whether or not owned) by any Target Company in
the conduct of its business, including: (i) all trademarks, service marks, trade names, Internet
domain names, trade dress, and the goodwill associated therewith, and all registrations or
applications for registration thereof (collectively, the “Company Marks”); (ii) all patents, patent
applications and continuations, industrial design registrations and applications therefor
(collectively, the “Company Patents”); (iii) all copyrights, database rights and moral rights in
both published works and unpublished works, including all such rights in software, user and
training manuals, marketing and promotional materials, websites, internal reports, business plans
and any other expressions, mask works, firmware and videos, whether registered or unregistered, and
all registrations or applications for registration thereof (collectively, the “Company
Copyrights”); and (iv) trade secret and confidential information, including such rights in
inventions (whether or not reduced to practice), know-how, customer lists, technical information,
proprietary information, technologies, processes, formulae, software, data, plans, drawings and
blue prints, whether tangible or intangible and whether stored, compiled, or memorialized
physically, electronically, photographically or otherwise (collectively, the “Company Secret
Information”). For purposes of this Section 2.10, “software” shall mean any and all: (w) computer
programs and applications, including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (x) databases and compilations, including any
and all data and collections of data, whether machine readable or otherwise, (y) descriptions,
flow-charts, library functions, algorithms, architecture, structure, display screens and
development tools, and other information, work product or tools used to design, plan, organize or
develop any of the foregoing and (z) all documentation, including user manuals and training
materials, relating to any of the foregoing. For purposes of this Section 2.10, “exclusively
licensed” shall mean licensed or entitled to use pursuant to a Contract that imposes any
restriction (whether by territory, field, market, period of time or other criterion) on the
licensor’s right to use, or grant licenses to third parties with respect to, any Intellectual
Property Right in connection with the Contract.



-27-









 





               (b)      Part 2.10 (b) of the Company Disclosure Schedule contains a true, complete and correct
list of: (i) all the software that any Target Company licenses or has licensed or otherwise makes
or has made available to customers, including all modules, components, add-ons and other options,
(ii) each item of third-party software that constitutes or has constituted an element of any of the
software that any Target Company licenses or has licensed or otherwise makes or has made available
to customers, including all modules, components, add-ons and other options (iii) each license or
other Contract with respect to each such item of third-party software, and (iv) all other
third-party software used by any Target Company (including Commercially Available Software) and
indicates each license or other Contract with respect to such third-party software (other than
Commercially Available Software). For purposes of this Section 2.10, “third party software” means
any software in which all Intellectual Property Rights are not owned by the Company or another
Target Company.



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



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infringes, violates, passes off on or otherwise misuses or has infringed, violated, passed off
on or otherwise misused any intellectual property rights of any third party. Except as set forth
in Parts 2.10(c) or 2.10(n) of the Company Disclosure Schedule, no Target Company requires or has
required any copyrights, patents, trade secrets, trademarks, service marks or other intellectual
property rights of any third party in order to develop, use, sell, offer for sale or license its
products or services or in relation to the processes employed by the Target Companies in connection
with the operation of their respective businesses substantially as conducted to date, other than
commercially available intellectual property rights that are not material in amount or expense.



               (d)      All the issued Company Patents owned by or exclusively licensed to any Target Company are
subsisting and the Company has no Knowledge of any facts that could form a reasonable basis to
conclude that any such Company Patents are not valid. To the Company’s Knowledge, (i) all the
material issued Company Patents not owned by or exclusively licensed to any Target Company are
valid and subsisting, (ii) if and when the Company Patents owned by any Target Company that have
not been issued are so issued, such Company Patents will be valid and subsisting, (iii) none of the
issued Company Patents owned by or exclusively licensed to any Target Company is being or has been
infringed, (iv) none of the material issued Company Patents not owned by or exclusively licensed to
any Target Company is being or has been infringed, (v) none of the Company Patents owned by or
exclusively licensed to any Target Company that have not been issued would have been infringed had
they been issued, and (vi) neither the validity nor the enforceability of any of the foregoing has
been challenged by any Person.



               (e)      All the Company Marks owned by or exclusively licensed to any Target Company are
subsisting and are valid. To the Company’s Knowledge, (i) all of the material Company Marks not
owned by or exclusively licensed to any Target Company are valid and subsisting, (ii) none of the
Company Marks owned by or exclusively licensed to any Target Company is being or has been
infringed, violated, passed off on or otherwise misused or diluted, (iii) none of the material
Company Marks not owned by or exclusively licensed to any Target Company is being or has been
infringed, violated, passed off on or otherwise misused or diluted, (iv) none of the Company Marks
is being or has been opposed or challenged, and (v) no proceeding has been commenced or threatened
or is reasonably anticipated that would seek to prevent the use by any Target Company of any such
Company Mark.



               (f)      All the Company Copyrights, whether or not registered, owned by or exclusively licensed to
any Target Company are valid and, once registered, enforceable. To the Company’s Knowledge, (i)
all the material Company Copyrights, whether or not registered, not owned by or exclusively
licensed to any Target Company, are valid and, once registered, enforceable, (ii) none of the
Company Copyrights owned by or exclusively licensed to any Target Company is being or has been
infringed, and the validity of such Company Copyrights is not being and has not been challenged or
threatened in any way, (iii) none of the material Company Copyrights not owned by or exclusively
licensed to any Target Company is being or has been infringed, and the validity of such Company
Copyrights is not being and has not been challenged or threatened in any way, and (iv) no
proceeding has been commenced or threatened or is reasonably anticipated that would seek to prevent
the use by any Target Company of any



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such Company Copyright. No Person has any moral rights in any of the Intellectual Property
Rights owned by any Target Company.



               (g)      The Target Companies have taken commercially reasonable measures to protect the secrecy,
confidentiality and value of the Company Secret Information, consistent with prevailing practices
in the software industry sector in which the Target Companies operate. To the Company’s Knowledge,
no Company Secret Information has been: (i) used by any third party, or divulged to any third
party, except in the ordinary course of business of Target Companies pursuant to written and
binding provisions designed to protect the confidentiality of the Company Secret Information; or
(ii) used, divulged or appropriated for the benefit of any Person (other than any Target Company)
or otherwise misappropriated.



               (h)      No Intellectual Property Right is subject to any outstanding order, proceeding (other than
pending proceedings pertaining to uncontested applications for patent, trademark or copyright
registration) or stipulation that restricts in any manner the licensing thereof by any Target
Company; provided that, in the case of Intellectual Property Rights licensed to the Company, such
representation is made to the Company’s Knowledge.



               (i)      To the Company’s Knowledge, none of the present or former employees or consultants engaged
in the development of Intellectual Property Rights (including software) or in performing sales and
marketing functions on behalf of any Target Company is or was obligated under any Contract with any
third party which conflicts or did conflict with such employee’s or consultant’s rights to develop
Intellectual Property Rights (including software) or engage in such sales and marketing functions
on behalf of any Target Company.



               (j)      Except as set forth in Part 2.10(j) of the Company Disclosure Schedule, all present and
former contractors, agents and consultants of each Target Company who are or were involved in the
creation of any of the Intellectual Property Rights on behalf of a Target Company, and all present
and former employees of each Target Company, have executed an assignment of inventions agreement to
vest in the Company or its Subsidiary, as appropriate, exclusive ownership of the Intellectual
Property Rights so created by them, and such assignment includes a complete, perpetual and
irrevocable waiver of moral rights by all authors of any applicable Company Copyrights, to the
extent allowed by applicable law. Without limiting the generality of the foregoing, Bruce
D’Ambrosio has assigned to the Company each of the patents identified in Part 2.10(j) of the
Company Disclosure Schedule, and each such assignment has been recorded at the United States Patent
and Trademark Office and in each other location necessary so as to vest in the Company exclusive
ownership of such patents. All present and former contractors, agents and consultants of each
Target Company who have or have had access to Company Secret Information, and all present and
former employees of any Target Company, have executed nondisclosure agreements to protect the
confidentiality of Company Secret Information.



               (k)      Without limiting the generality of the foregoing, all the software that any Target Company
licenses or licensed or otherwise makes or made available to customers was: (i) developed by
employees of a Target Company within the scope of their employment and subject to their obligation
to assign inventions and patents therein; or (ii) developed by independent contractors or
consultants who assigned all of their right, title and interest in and to



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that software to the Company; or (iii) otherwise acquired or licensed by the Company from a third party by a
Contract that is disclosed in Part 2.10(c) of the Company Disclosure Schedule or under an Open
Source license listed in Part 2.10(n) of the Company Disclosure Schedule, and in each case under
clauses (i) and (ii) complete, perpetual and irrevocable waivers of moral rights were obtained from
all authors of such software, to the extent allowed by applicable law.



               (l)      No funding or grant provided to any Target Company by any Government Entity or other third
party has affected or will affect, in any manner, the Intellectual Property Rights, and no such
Government Entity or other third party has any right, title or interest in the Intellectual
Property Rights.



               (m)      All material Contracts relating to the Intellectual Property Rights to which a Target
Company is a party are in full force and effect, except such as have expired naturally at the end
of their terms and are not material to the Company and are enforceable by the Target Company party
to such Contract. The consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or suspension of any
such Contract. Each Target Company is in material compliance with, and has not materially breached
any term of any of such Contracts, and, to the Company’s Knowledge, all other parties to such
Contracts are in compliance in all material respects with, and have not materially breached any
term of, such Contracts. Following the Closing Date, the Surviving Corporation and its
Subsidiaries will be permitted to exercise all of the rights of the Target Companies under such
Contracts to the same extent the Target Companies would have been able to had the transactions
contemplated by this Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Target Companies would
otherwise have been required to pay.



               (n)      Part 2.10(n) of the Company Disclosure Schedule lists all Open Source Materials (as
defined below) used by any Target Company in any way, and describes the manner in which such Open
Source Materials have been or are currently used. Such description includes whether (and, if so,
how) the Open Source Materials were embedded, linked (including dynamic linking), modified and/or
distributed by any Target Company and whether and the extent to which each of the Open Source
Materials was used to develop, distribute or design any Target Company products to link with
(including dynamic linking at runtime) or access in any way (whether by calls, execution branching,
interprocess control or other technique of any kind whatsoever) any Open Source Materials. Except
as set forth in Part 2.10(n) of the Company Disclosure Schedule, the Target Companies have not (i)
incorporated Open Source Materials into, or combined Open Source Materials with, any Intellectual
Property Rights or any Target Company products, (ii) distributed Open Source Materials in
conjunction with any Intellectual Property Rights or any Target Company products or (iii) used Open
Source Materials that create, or purport to create, obligations for any Target Company with respect
to Intellectual Property Rights or any Target Company products or grant, or purport to grant, to
any third party, any rights or immunities under Intellectual Property Rights (including using any
Open Source Materials that require, as a condition of use, modification and/or distribution of such
Open Source Materials that other software incorporated into, derived from or distributed with such
Open Source Materials be (A) made available or distributed in source code form; (B) licensed for
the purpose of making derivative works; (C) licensed under terms that allow reverse engineering,
reverse assembly or disassembly of any kind; or (D) redistributable at no charge). No



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Intellectual Property Right or Company product is subject to the terms of license of any such
Open Source Materials. Except as set forth in Part 2.10(n) of the Company Disclosure Schedule, no
Target Company has used Program Code (as defined below) that includes the Linux kernel version 2.4
or any later version. “Open Source Materials” means any software, library, utility, tool or other
computer or program code (collectively, “Program Code”) that is licensed or distributed as “free
software”, “freeware”, “open source software” or under any terms or conditions that impose any
requirement that any software using, linked with, incorporating, distributed with, based on,
derived from or accessing Program Code: (i) be made available or distributed in source code form;
(ii) be licensed for the purpose of making derivative works; (iii) be licensed under terms that
allow reverse engineering, reverse assembly or disassembly of any kind; or (iv) be redistributable
at no charge. Open Source Materials shall include any Program Code licensed or distributed under
any of the following licenses or distribution models or similar licenses or distribution models:
the GNU General Public License (GPL), GNU Lesser General Public License or GNU Library General
Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic License, the
Netscape Public License, the Sun Community Source License, (SCSL), the Sun Industry Standards
License (SISL) and the Apache License. The Target Companies have fully complied with the terms on
which Open Source Materials have been licensed to the Target Companies. No Target Company has used
or distributed Open Source Materials, or incorporated Open Source Materials into any Target Company
proprietary software products, in such a manner that would require that any Target Company
proprietary software products be (A) made available or distributed in source code form; (B)
licensed for the purpose of making derivative works; (C) licensed under terms that allow reverse
engineering, reverse assembly or disassembly of any kind; or (D) redistributed or redistributable
at no charge.



               (o)      Part 2.10(o) of the Company Disclosure Schedule lists each item of Commercially Available
Software used by the Company for which the aggregate fees have exceeded, or are reasonably expected
to exceed, $2,500 per year or $10,000 for a perpetual license (regardless of the number of sites,
users, seats, installed CPUs or other measurement criteria).



               (p)      Part 2.10(p) of the Company Disclosure Schedule lists all Government Contracts in
connection with which Intellectual Property Rights have or may have been developed, conceived or
reduced to practice by any Target Company while performing any services for the United States
Government or any governmental authority, including, without limitation, the National Institutes of
Health, the National Science Foundation or the Department of Defense (“Government-Supported IP”),
and identifies as such any Government-Supported IP that is used or included in or is material to
the use of the Company’s recommendation engine or its hosted recommendation services CleverSet
recommendation engine or its hosted recommendation services (including its CleverSet Modeler
software and CleverSet Tracker software, as identified in Part 2.10(b) of the Company Disclosure
Schedule) (“Critical Government-Supported IP”). Except as provided in Part 2.10(p) of the Company
Disclosure Schedule, all Target Companies have elected to take title to any Company Patents within
the Government-Supported IP in accordance with the requirements of all applicable contracts,
regulations and laws, and have made all required disclosures and filings in connection therewith in
order to maintain and protect the Target Company’s ownership of all right, title and interest in
and to the Company Patents within the Government-Supported IP. All Target Companies have taken all
reasonable steps to limit the disclosure by the United States Government or any



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governmental authority of any Company Secret Information within the Government-Supported IP to
the maximum extent possible under applicable contracts, regulations and law, including without
limitation by marking all such Company Secret Information with restrictive legends. All Target
Companies have taken reasonable steps to limit the disclosure by the United States Government or
any governmental authority of any Company software or technical data within the
Government-Supported IP to the maximum extent possible under applicable contracts, regulations and
law, including without limitation by asserting appropriate restrictions and marking all such
Company software and technical data with restrictive legends, and any rights retained by the United
States Government or any governmental authority to disclose or license to others any such Company
software or technical data are not such as could reasonably be expected to have a Company Material
Adverse Effect.



     2.11    Compliance with Laws.



               (a)      Since January 1, 2003, no Target Company has been in conflict with, or in default or
violation of (i) any material Legal Requirement applicable to such Target Company or by which such
Target Company or any of its properties or assets was or is bound or affected, or (ii) any material
Contract to which such Target Company was or is a party or by which such Target Company or any of
its properties or assets was or is bound or affected. No investigation or review by any
Governmental Entity is pending or, to the Company’s Knowledge, has been threatened or is reasonably
anticipated against any Target Company, nor, to the Company’s Knowledge, has any Governmental
Entity indicated an intention to conduct an investigation of any Target Company. There is no
Contract, judgment, injunction, order or decree binding upon any Target Company which has or could
reasonably be expected to have the effect of prohibiting or materially impairing any business
practice of any Target Company, any acquisition of material property by any Target Company or the
conduct of business by any Target Company as currently conducted.



               (b)      The Target Companies hold all permits, licenses, variances, exemptions, orders and
approvals from Governmental Entities that are material to or required for the operation of the
business of the Target Companies as currently conducted (collectively, the “Company Permits”). The
Target Companies are in compliance, in all material respects, with the terms of the Company
Permits. Without limiting the generality of the foregoing, each Target Company possesses all
facility and personnel security clearances required by any Government Entity for the performance of
any contract between the Target Company and such Government Entity, and the consummation of the
Merger and of the other transactions contemplated hereby will not constitute a breach or default
under or otherwise adversely affect any such security clearance.



     2.12    Litigation. Except as disclosed in Part 2.12 of the Company Disclosure Schedule, there are no
claims, suits, actions or proceedings pending or, to the Company’s Knowledge, threatened against,
relating to or affecting any Target Company, before any Governmental Entity or any arbitrator. No
Governmental Entity has at any time challenged or questioned in a writing delivered to any Target
Company the legal right of any Target Company to design, offer or sell any of its products or
services in the present manner or style thereof or otherwise to conduct its business as currently
conducted or that otherwise has had or is reasonably likely to have a Company Material Adverse
Effect. To the Company’s Knowledge,



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no event has occurred, and no claim, dispute or other condition or circumstance exists, that will,
or that would reasonably be expected to, cause or provide a bona fide basis for a director or
executive officer of any Target Company to seek indemnification from any Target Company.



     2.13    Employee Benefit Plans.



               (a)      Part 2.13(a) of the Company Disclosure Schedule contains an accurate and complete list of
each Company Employee Plan and each Employee Agreement, including a list of each document
comprising or embodying any material part thereof or relating thereto, and each staff handbook or
written employment policies for each Target Company. Except as disclosed in Part 2.13(a) of the
Company Disclosure Schedule, no Target Company is paying compensation or other payment to any
former Employee (or relative or dependent) or former consultant.



               (b)      The Company has made available to Parent accurate and complete copies of the plan
documents and summary plan descriptions, the most recent determination letter received from the
IRS, the most recent annual report (Form 5500, with all applicable attachments), and all related
trust, insurance and other funding Contracts that implement each Company Employee Plan (to the
extent applicable), and all documents embodying each Employee Agreement.



               (c)      Each of the Company and its ERISA Affiliates has performed in all material respects all
obligations required to be performed by it under, is not in default or violation of, and the
Company has no Knowledge of any default or violation by any other party to, each Company Employee
Plan or Employee Agreement, and each Company Employee Plan has been maintained, funded and
administered in all material respects in accordance with its terms and in compliance in form and in
operation with all applicable Legal Requirements (including ERISA and the Code), including the
maintenance of reasonably accurate records. Each Company Employee Plan that is intended to meet
the requirements of a “qualified plan” under Section 401(a) of the Code has received a written
determination, advisory or opinion letter from the IRS that such Company Employee Plan is so
qualified, and nothing has occurred since the date of such determination or letter that could
reasonably be expected to adversely affect the qualified status of such plan. No “prohibited
transaction,” within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and
not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Company Employee
Plan. There are no actions, suits, claims, proceedings or investigations pending, or, to the
Company’s Knowledge, threatened or reasonably anticipated (other than routine claims for benefits)
against any Company Employee Plan and, to the Knowledge of the Company, there are no facts or
circumstances which may give rise to any such action, suit, claim, proceeding or investigation.
Each Company Employee Plan can be amended, terminated or otherwise discontinued either before or
after the Effective Time in accordance with its terms, without liability to Parent, the Surviving
Corporation, the Company or any of their ERISA Affiliates (other than ordinary administration
expenses typically incurred in a termination event and payment of benefits pursuant to such Company
Employee Plan). Except as set forth in Part 2.13(c) of the Company Disclosure Schedule, all
contributions due from the Company or any ERISA Affiliate with respect to any of the Company
Employee Plans have been made as required under ERISA or have been accrued on the Company Balance
Sheet and no further contributions will be due or will have accrued thereunder as of the Closing
Date.



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               (d)      Neither any Target Company nor any ERISA Affiliate contributes to, has any obligation to
contribute to, or has any liability under or with respect to any Pension Plan which is subject to
Title IV of ERISA or Section 412 of the Code.



               (e)      Neither any Target Company nor any ERISA Affiliate contributes to, has any obligation to
contribute to, or has any liability (including withdrawal liability as defined in ERISA Section
4201) under or with respect to any Multiemployer Plan.



               (f)      No Company Employee Plan or Employee Agreement provides, or has any liability to provide,
retiree life insurance, retiree health or other retiree employee welfare benefits to any Person for
any reason, except as may be required by COBRA, Part 6 of Title I of ERISA or other applicable
statute.



               (g)      Neither the Company nor any ERISA Affiliate has in any material respect violated any of
the health care continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of law applicable to any Employees.



               (h)      The execution of this Agreement and the consummation of the transactions contemplated
hereby will not (either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, loss of rights, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.



               (i)      Each Company Employee Plan required to be listed in Part 2.13(a) of the Company Disclosure
Schedule that is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of
the Code) and was in existence prior to October 3, 2004, has not been “materially modified” (within
the meaning of Section 885(d)(2)(B) of the American Jobs Creation Act of 2004 and any applicable
guidance issued thereunder) since October 3, 2004, in a manner which would cause amounts deferred
in taxable years beginning before January 1, 2005, under such plan to be subject to Section 409A of
the Code. Each Company Employee Plan required to be listed in Part 2.13(a) of the Company
Disclosure Schedule that is a “nonqualified deferred compensation plan” (as defined in Section
409A(d)(1) of the Internal Revenue Code) and which has not been terminated has been operated since
January 1, 2005 in good faith compliance with the provisions of Section 409A of the Code, Notice
2005-1 and the proposed regulations issued under Section 409A.



     2.14    Employment Matters.



               (a)      Each Target Company: (i) is in compliance in all material respects with all applicable
Legal Requirements respecting employment, employment practices, immigration, terms and conditions
of employment and wages and hours; (ii) has withheld all amounts required by any Legal Requirement
or by Contract to be withheld from the wages, salaries and other payments to Employees; (iii) has
properly classified independent contractors for purposes of all applicable Legal Requirements; (iv)
is not liable for any arrears of wages or any Taxes (other than wages (and Taxes thereon) which
have accrued in the ordinary course of business but which are not yet payable) or any penalty for
failure to comply with any of the foregoing; and (v) is not



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liable for any payment to any trust or other fund or to any Governmental Entity, with respect
to unemployment compensation benefits, social security, withholdings or remittances applicable to
employee wages, or other benefits or obligations for Employees (other than routine payments to be
made in the normal course of business and consistent with past practice). There are no pending,
or, to the Company’s Knowledge, threatened actions, suits, claims or proceedings against any Target
Company under any workers’ compensation policy or long-term disability policy. To the Company’s
Knowledge, no Employee or consultant of any Target Company has violated any employment, consulting,
non-disclosure, non-competition, non-solicitation or other Contract by which such Employee is bound
(nor any Legal Requirement relating to unfair competition, trade secrets or proprietary
information) as a result of providing services to any Target Company or disclosing or using any
information in connection with such services. There are no controversies pending or, to the
Company’s Knowledge, threatened between any Target Company and any Employee that would be
reasonably likely to be material to any Target Company. Except as set forth on Part 2.14(a) of the
Company Disclosure Schedule, no Target Company has any Employee Agreement currently in effect that
is not terminable at will by a Target Company without any payment pursuant thereto or in connection
therewith (other than agreements for the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions). No Target Company will have any liability to
any Employee or to any other Person as a result of the termination of any employee leasing
Contract.



               (b)      No work stoppage, labor strike, slowdown, lockout or other labor dispute against any
Target Company is pending or, to the Company’s Knowledge, threatened. No Employee of any Target
Company is represented by any union or other labor organization. The Company has no Knowledge of
any activities or proceedings of any labor union to organize any Employees. There are no actions,
suits, claims, labor disputes or grievances pending, or, to the Company’s Knowledge, threatened
relating to any labor, safety or discrimination matters involving any Employee, including charges
of unfair labor practices or discrimination complaints. No Target Company has engaged in any
unfair labor practices within the meaning of the National Labor Relations Act. No Target Company
is or has been a party to, or bound by, any collective bargaining or union Contract with respect to
Employees, and no collective bargaining or union Contract is being negotiated by any Target
Company.



               (c)      No Target Company has taken any action that could constitute a mass layoff, group
termination, mass termination, or plant closing which may trigger notice requirements or liability
under any Legal Requirement, including collective dismissal laws.



     2.15    Environmental Matters.



               (a)      Each Target Company is in compliance in all material respects with all applicable
Environmental Laws. No Target Company has received any written communication that alleges that any
Target Company is not in compliance with applicable Environmental Laws. To the Knowledge of the
Company, there are no circumstances that may prevent or interfere with compliance by any Target
Company with all applicable Environmental Laws. All Company Permits and other governmental
authorizations currently held by any Target Company pursuant to any Environmental Law are in full
force and effect, the Target Companies are in compliance in all material respects with all of the
terms of such Company Permits and authorizations, and no other Company Permits or authorizations
are required by any Target Company for the conduct of



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their respective businesses. The management, handling, storage, transportation, treatment and
disposal by the Target Companies of all Environmental Materials have been in compliance in all
material respects with all applicable Environmental Laws.



               (b)      There is no Environmental Claim pending or, to the Company’s Knowledge, threatened or
reasonably anticipated against or involving any Target Company or, to the Company’s Knowledge,
against any Person whose liability for any Environmental Claim any Target Company has or may have
retained or assumed either contractually or by operation of law, nor, to the Company’s Knowledge,
is there any circumstance that might form the basis for any Environmental Claim.



     2.16    Certain Contracts. Except as otherwise set forth in the applicable lettered subsection of Part
2.16 of the Company Disclosure Schedule, no Target Company is a party to or is bound by any:



               (a)      Contract any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;



               (b)      Contract of indemnification (other than indemnification against infringement of
intellectual property rights of third parties on terms consistent with industry practice that is
included in the ordinary course of business in contracts with the Company’s customers), any
guaranty by a Target Company or any instrument evidencing indebtedness by way of direct loan, sale
of debt securities, purchase money obligation, conditional sale, or otherwise;



               (c)      Contract containing covenants purporting to limit or which effectively limit any Target
Company’s freedom to compete in any line of business or in any geographic area or which would so
limit Parent, the Company or the Surviving Corporation or any of their respective Subsidiaries
after the Effective Time or granting any exclusive distribution or other exclusive rights;



               (d)      Contract relating to the disposition or acquisition by any Target Company of assets not in
the ordinary course of business, including by means of any merger, consolidation or the like;



               (e)      Contract with any customer with continuing obligations, including, without limitation, any
requirements to provide professional services or to do customization or provide platform transfer
rights, involving more than $10,000 in any twelve-month period in any individual case;



               (f)      development, licensing, distribution, resale or other Contract with regard to the
development, acquisition, licensing, distribution or resale of any Intellectual Property Rights,
other than (i) licenses to customers of any Target Company required to be disclosed (or
specifically exempted from disclosure) pursuant to Section 2.16(e), (ii) Contracts required to be
disclosed pursuant to Section 2.10, and (iii) Contracts under which a Target Company licenses
Commercially Available Software from a third party;



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               (g)      Contract to forgive any indebtedness of any Person to any Target Company;



               (h)      loan Contract, promissory note or other evidence of indebtedness for borrowed money;



               (i)      Contract (other than Contracts disclosed pursuant to Section 2.10) pursuant to which any
Target Company (A) uses any intellectual property of any third party that is material to the
operation of its business (including Commercially Available Software), (B) incorporates any
third-party intellectual property in any of its products; or (C) has granted to any third party an
exclusive license of any Intellectual Property Rights owned by any Target Company or any license of
source code (including customary source code escrow Contracts entered into in the ordinary course
of business);



               (j)      Contract (other than Contracts disclosed pursuant to Section 2.10) which may obligate any
Target Company to make aggregate payments in excess of $15,000 to any third party during the period
from the date of this Agreement to December 31, 2008;



               (k)      Contract (other than Contracts disclosed pursuant to Section 2.10) pursuant to which any
Target Company (A) reasonably expects to receive aggregate payments in excess of $50,000 during the
period from the date of this Agreement to December 31, 2008 or (B) reasonably expects to recognize
revenue in such aggregate amount during such period;



               (l)      Contract currently in force providing for capital expenditures by any Target Company in
excess of $10,000;



               (m)      power of attorney or agency Contract;



               (n)      other Contract that cannot be terminated by the Target Company party thereto within 30
days without any liability or obligation in excess of $15,000;



               (o)      Contract with any Governmental Entity;



               (p)      other Contract entered into outside the ordinary course of business or at other than arm’s
length; or



               (q)      other Contract currently in effect that is material to any Target Company’s business as
presently conducted or proposed to be conducted.



     Each Contract that is required to be disclosed in the Company Disclosure Schedule pursuant to
this Section 2.16 or otherwise shall be referred to herein as a “Company Contract.” Each Company
Contract is valid and in full force and effect in accordance with its terms. No Target Company,
nor to the Company’s Knowledge, any other party thereto, is in breach, violation or default under,
and no Target Company has received written notice alleging that it has breached, violated or
defaulted under, any of the terms or conditions of any Company Contract in such a manner as would
permit any other party thereto to cancel or terminate any such Company Contract, or would permit
any other party to seek material damages or other remedies for any or all such alleged breaches,
violations, or defaults.



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     2.17    Related-Party Matters. No stockholder, director, officer or employee of any Target Company (nor,
to the Knowledge of the Company, any Person affiliated or associated with any of the foregoing or
in which any of the foregoing has any interest, nor any Family Member of any of the foregoing) (i)
has any interest, direct or indirect, in (A) any customer, supplier or competitor of any Target
Company, (B) any other Person with whom any Target Company has a material business relationship
(other than any interest arising solely from the ownership of less than 1% of the publicly traded
securities of any Person), or (C) any Intellectual Property Rights or any other assets or property,
real or personal, tangible or intangible, used in or pertaining to the business of the Target
Companies (other than any interest arising solely through the ownership of any Company Stock) or
(ii) is or was a party to or has or had any interest, direct or indirect, in any Contract or other
transaction with any Target Company (other than (W) compensation paid to any employee who is not a
director or officer of any Target Company, (X) benefits available generally on the same terms to
all employees of the Target Companies, (Y) grants of options disclosed in Part 2.2(b) of the
Company Disclosure Schedule, and (Z) reimbursement for reasonable expenses incurred on behalf of
any Target Company).



     2.18    Brokers’ and Finders’ Fees. Other than as set forth in Part 2.18 of the Company Disclosure
Schedule, the Company has not incurred and will not incur any Transaction Expenses and no Target
Company has incurred, nor will any of them incur, directly or indirectly, any liability for
brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.



     2.19    Insurance. Part 2.19 of the Company Disclosure Schedule sets forth a description of each insurance
policy or bond which provides coverage for any Target Company. Each Target Company has provided
notice to its insurers in accordance with the applicable insurance policies or bonds of all
potential claims of which such Target Company has Knowledge, and there is no material claim pending
under any of such policies or bonds as to which coverage has been questioned, denied or disputed by
the underwriters of such policies or bonds. All premiums due and payable under all such policies
have been paid, and each Target Company is otherwise in compliance in all material respects with
the terms of such policies and bonds. To the Knowledge of the Company, there has been no
threatened or reasonably anticipated termination of, or material premium increase with respect to,
any of such policies. No Target Company has incurred any material uninsured loss or casualty, nor
does the Company have Knowledge of any circumstance or occurrence that could result in a material
uninsured loss or casualty for any Target Company. No Target Company has made any knowing or
intentional misrepresentation of, or knowingly or intentionally omitted to disclose, any material
fact to any of its insurers that might justify denial by such insurer of any coverage under any
such policy or bond.



     2.20    Customers; Accounts Receivable.



               (a)      Part 2.20 of the Company Disclosure Schedule separately lists each customer of each Target
Company from which the Company (i) derived revenue in excess of $100.00 in any twelve month period
since July 1, 2004, or (ii) received payments aggregating $10,000 or more in the year ended
December 31, 2007. No current customer has indicated to any Target Company that it will or may
stop buying, discontinue services, or materially decrease



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the rate of buying services or products of any Target Company in comparison with that
contained in its current agreement with the Company.



               (b)      The receivables shown on the Company Balance Sheet arose in the ordinary course of
business, consistent with past practice, and have been collected or are collectible in the book
amounts thereof, less the allowance for doubtful accounts provided for on the Company Balance
Sheet. The Company’s allowances for doubtful accounts and warranty returns are reasonable and have
been prepared in accordance with GAAP consistently applied and in accordance with the Company’s
past practices. The Target Companies’ receivables arising after the date of the Company Balance
Sheet and prior to the Closing Date arose in the ordinary course of business. To the Company’s
Knowledge, none of the Target Companies’ receivables is subject to any material claim of setoff,
recoupment or counterclaim, and it has no Knowledge of any specific facts or circumstances (whether
asserted or unasserted) that could give rise to any such claim. No receivables are contingent upon
the performance by any Target Company of any obligation that has not fully been performed on such
Target Company. No Person has any Encumbrance on any of such receivables, and no Contract for
deduction or discount has been made with respect to any of such receivables.



     2.21    Board Approval. The Board of Directors of the Company has unanimously approved this Agreement and
recommended that the stockholders of the Company approve and adopt this Agreement and approve the
Merger. Section 60.825 of the BCA applicable to a “business combination” (as defined therein) will
not apply to the execution, delivery or performance of this Agreement or the consummation of the
Merger or the other transactions contemplated by this Agreement.



     2.22    Minutes and Stock Records. The minute books of each Target Company contain records that are
accurate in all material respects of all meetings and consents in lieu of meetings of its Board of
Directors (or equivalent) and any committees thereof (whether permanent or temporary), and of its
stockholders (or equivalent) since inception, and such records accurately reflect all transactions
referred to in such minutes and consents. The stock books (or equivalent) of each Target Company
accurately reflect the ownership of the capital stock (or equivalent) of such Target Company. The
Company has made available to Parent true, correct and complete copies of the minutes, consents and
stock books (and equivalents) of each Target Company.



     2.23    Accounting System. The books of account of the Company are adequate to enable the Company to
prepare its Financial Statements in accordance with GAAP. The books and records of the Company
accurately reflect, in all material respects, its income, expenses, assets and liabilities and the
Company maintains internal accounting controls which provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with GAAP.



     2.24    Corrupt Practices. No Target Company has taken any action which would cause it to be in violation
of the Foreign Corrupt Practices Act of 1977, as amended, or any rules and regulations thereunder.
No Target Company has paid any commission or made any payment whether to secure business or
otherwise to any Person which in the hands of such Person would in accordance with the relevant
Legal Requirement be regarded as illegal or improper. No



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director, officer, employee, agent or other Person acting on behalf of any Target Company has been
a party to the use of any assets of any Target Company for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to any activity, including any political
activity, or to the establishment or maintenance of any unlawful or unrecorded fund of monies or
other assets, or to the making of any false or fictitious entries in the books or records of any
Target Company, or to the making of any unlawful payment.



     2.25    Disclosure. No representation or warranty of the Company or of any Principal Stockholder in this
Agreement, as modified by the Company Disclosure Schedule, or in any other Transaction Document
contains any untrue statement of a material fact, or omits or omits to state any material fact
required to be stated in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. There is no fact Known to the Company and
not disclosed to Parent in writing that is reasonably likely to give rise to a Company Material
Adverse Effect or to have the effect of preventing, materially delaying, making illegal or
otherwise interfering with the Merger and the other transactions contemplated by this Agreement.



Article 3

Representations and Warranties of Principal Stockholders




     Each Principal Stockholder, severally and not jointly, represents and warrants to Parent and
Merger Sub as set forth in this Article 3.



     3.1      Organization. The Principal Stockholder (if not a natural person) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is organized.



     3.2      Authority; Non-Contravention.



               (a)      The Principal Stockholder has all requisite power and authority (including all requisite
power and authority as a corporation or other entity) to enter into this Agreement and the Escrow
Agreement and to consummate the transactions contemplated hereby and thereby. If the Principal
Stockholder is not a natural person, the execution and delivery of this Agreement and the Escrow
Agreement and the consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Principal Stockholder (including
authorization by the board of directors or other managing body and by the stockholders or other
securityholders of the Principal Stockholder). This Agreement has been duly executed and delivered
by the Principal Stockholder and, assuming the due authorization, execution and delivery of this
Agreement by Parent, Merger Sub, the Company, the Stockholder Representative and the other
Principal Stockholders, constitutes the valid and binding obligation of the Principal Stockholder,
enforceable against the Principal Stockholder in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting the rights of
creditors generally and general principles of equity. Assuming the due authorization, execution
and delivery of the Escrow Agreement by Parent, Merger Sub, the Stockholder Representative and the
Escrow Agent, the Escrow Agreement, when executed and delivered by the Stockholder Representative
on behalf of the Principal Stockholder, will constitute the valid and binding obligation of the
Principal Stockholder,



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enforceable against the Principal Stockholder in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting the rights of
creditors generally and general principles of equity.



               (b)      The execution and delivery of this Agreement and the Escrow Agreement by or on behalf of
the Principal Stockholder does not, and the performance of this Agreement and the Escrow Agreement
by or on behalf of the Principal Stockholder will not, (i) if the Principal Stockholder is not a
natural person, conflict with or violate the certificate of incorporation, by-laws or other
organizational documents of the Principal Stockholder, (ii) conflict with or violate any Legal
Requirement applicable to the Principal Stockholder or by which the Principal Stockholder or any of
its properties or assets is bound or affected, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a default) under, or
result in the creation of an Encumbrance on any of the securities of any Target Company pursuant
to, any Contract to which the Principal Stockholder is a party or by which the Principal
Stockholder or any of its properties or assets is bound or affected. No consent, waiver or
approval of any Person, nor any notice to any Person, is required to be obtained or made under any
Contract to which the Principal Stockholder is a party or by which the Principal Stockholder or any
of its properties or assets is bound or affected in connection with the execution and delivery by
or on behalf of the Principal Stockholder of this Agreement or the Escrow Agreement or the
performance of this Agreement or the Escrow Agreement by or on behalf of the Principal Stockholder.



               (c)      No consent, approval, order or authorization of, or registration, declaration or filing
with any Governmental Entity or other Person, is required to be obtained or made by the Principal
Stockholder in connection with the execution and delivery by or on behalf of the Principal
Stockholder of this Agreement or the Escrow Agreement or the performance of this Agreement or the
Escrow Agreement by or on behalf of the Principal Stockholder.



     3.3      Title to Company Stock; Status as Company Stockholder. The Principal Stockholder holds of record
and owns the number of shares of Company Capital Stock set forth next to the name of the Principal
Stockholder on Part 2.2(a) of the Company Disclosure Schedule, free and clear of any Encumbrances.
The Principal Stockholder agrees to be bound be all provisions of this Agreement and to be subject
to all obligations imposed on the Principal Stockholder as a Company Stockholder hereunder.



     3.4      Waiver of Appraisal Rights. The Principal Stockholder acknowledges that he, she or it (a) has
received a copy of Section 60.554 of the BCA and the notice provided for by Section 60.657 of the
BCA, and (b) will not exercise any right pursuant to Section 60.554 of the BCA (or otherwise) to
dissent from the Merger or to demand an appraisal of the fair value of the shares of Company
Capital Stock held by the Principal Stockholder.



     3.5      Agreements with the Company. Except to the extent the Company Disclosure Schedule specifically
names the Principal Stockholder as a party thereto, neither the Principal Stockholder nor any of
its properties or assets is a party or otherwise subject to any Contract to which any Target
Company is a party or by which any Target Company or any of its properties or assets is bound or
affected.



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     3.6      Brokers’ and Finders’ Fees. The Principal Stockholder has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any
similar charges in connection with this Agreement or any transaction contemplated hereby.



Article 4

Representations and Warranties of Parent and Merger Sub




     As of the date of this Agreement and as of the Closing Date, Parent and Merger Sub, jointly
and severally, represent and warrant to the Company and the Company Stockholders as set forth in
this Article 4, subject to any exceptions expressly stated in the disclosure schedule delivered by
Parent to the Company dated as of the date hereof and certified by a duly authorized officer of
Parent (the “Parent Disclosure Schedule”). Exceptions on the Parent Disclosure Schedule shall
specifically identify the representation to which they relate; provided, however, that any matter
disclosed pursuant to one section or subsection of the Parent Disclosure Schedule is deemed
disclosed for such other sections or subsections of the Parent Disclosure Schedule as, and only to
the extent that, it is reasonably apparent that such matter relates to such other section or
subsection of the Parent Disclosure Schedule and the level of particularity and manner of
disclosure of the matter expressly disclosed in one section or subsection of the Parent Disclosure
Schedule would make a reasonable person aware that such disclosure is relevant to such other
sections or subsections.



     4.1      Organization of Parent and Merger Sub. Each of Parent and Merger Sub (i) is a corporation
duly organized, validly existing and in good standing under the laws of the jurisdiction in which
it is organized; (ii) has the corporate or other power and authority to own, lease and operate its
assets and property and to carry on its business as now being conducted; and (iii) except as would
not be material to Parent, is duly qualified or licensed to do business in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary.



     4.2      Authority; Non-Contravention.



               (a)      Parent and Merger Sub have all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary corporate action on the
part of Parent and Merger Sub, subject only to the filing of the Articles of Merger. The
Transaction Documents have been duly executed and delivered by Parent and Merger Sub and, assuming
the due authorization, execution and delivery by the Company and each Principal Stockholder,
constitute the valid and binding obligations of Parent and Merger Sub, enforceable against Parent
and Merger Sub in accordance with their terms, except as enforceability may be limited by
bankruptcy and other similar laws affecting the rights of creditors generally and general
principles of equity.



               (b)      The execution and delivery of the Transaction Documents by Parent and Merger Sub do not,
and the performance of the Transaction Documents by Parent and Merger Sub will not (i) conflict
with or violate the Parent Charter Documents or (ii) subject to



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compliance with the requirements set forth in Section 4.2(c) below, conflict with or violate
any material law, rule, regulation, order, judgment or decree applicable to Parent or Merger Sub or
by which any of their respective material properties is bound or affected.



               (c)      No consent, approval, order or authorization of, or registration, declaration or filing
with any Governmental Entity or other person is required to be obtained or made by Parent or Merger
Sub in connection with the execution and delivery of the Transaction Documents or the consummation
of the Merger, except for (i) the filing of the Articles of Merger with the Secretary of State of
the State of Oregon, (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal, foreign and state securities
(or related) laws and the securities or antitrust laws of any foreign country, and (iii) such other
consents, authorizations, filings, approvals and registrations which if not obtained or made would
not be material to Parent or the Surviving Corporation or have a material adverse effect on the
ability of the parties hereto to consummate the Merger.



     4.3      Litigation. Except as set forth on Part 4.3 of the Parent Disclosure Schedule, there are no
claims, suits, actions or proceedings pending or, to the knowledge of Parent, threatened against,
relating to or affecting Parent or any of its subsidiaries, before any Governmental Entity or any
arbitrator that seeks to restrain or enjoin the consummation of the transactions contemplated by
the Transaction Documents or which could reasonably be expected, either singularly or in the
aggregate with all such claims, actions or proceedings, to be material to Parent or have a material
adverse effect on the ability of the parties hereto to consummate the Merger.



     4.4      Board Approval. The Board of Directors of Parent has approved the execution and delivery
of the Transaction Documents and the performance of all actions contemplated under the Transaction
Documents by Parent and Merger Sub.



     4.5      Disclosure. No representation or warranty of Parent of Merger Sub in this Agreement, as
modified by the Parent Disclosure Schedule, or in any other Transaction Document contains any
untrue statement of a material fact, or omits to state any material fact required to be stated in
order to make the statements contained herein or therein not misleading in light of the
circumstances under which they were made.



Article 5

Conduct Prior to the Effective Time




     5.1      Conduct of Business by the Company. During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, the Company and each of its subsidiaries shall, except to the extent that Parent
shall otherwise consent in writing, carry on its business in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted and in compliance in all material
respects with all applicable laws and regulations, pay its debts and Taxes in the ordinary course
of business, consistent with past practice, subject to good faith disputes over such debts or
Taxes, pay or perform other material obligations in the ordinary course of business consistent with
past practice, and use its commercially reasonable efforts, consistent with past practice to (i)
preserve intact its present business organization, (ii) keep available the services of



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its present officers and employees, (iii) collect its accounts receivable and any other amounts
payable to it when due and otherwise enforce any obligations owed to it by others substantially in
accordance with their terms, and (iv) preserve its relationships with customers, suppliers,
licensors, licensees, and others with which it has business dealings. In addition, the Company
will promptly notify Parent of any material event involving its business or operations.



     In addition, except as permitted by the terms of this Agreement, without the prior written
consent of Parent, during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the Effective Time, the
Company shall not do any of the following and shall not permit its subsidiaries to do any of the
following:



               (a)      Waive any stock repurchase rights, accelerate, amend or change the period of
exercisability of options or repurchase of restricted stock, or reprice options granted to any
employee, consultant, director or authorize cash payments in exchange for any options or take any
such action with regard to any warrant or other right to acquire the Company’s capital stock;



               (b)      Grant any severance or termination pay to any officer or employee except pursuant to
written agreements in effect, or policies existing, on the date hereof and as previously disclosed
in writing to Parent, or adopt any new severance plan;



               (c)      Transfer or license to any person or entity or otherwise extend, amend or modify in any
material respect any rights to the Company Intellectual Property, other than non-exclusive licenses
in the ordinary course of business and consistent with past practice;



               (d)      Declare, set aside or pay any dividends on or make any other distributions (whether in
cash, stock, equity securities or property) in respect of any capital stock or split, combine or
reclassify any capital stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock;



               (e)      Purchase, redeem or otherwise acquire, directly or indirectly, any shares of capital stock
of the Company or its subsidiaries, except repurchases of unvested shares at cost in connection
with the termination of the employment relationship with any employee pursuant to option agreements
or purchase agreements in effect on the date hereof;



               (f)      Issue, deliver, sell, authorize, pledge or otherwise encumber any shares of capital stock
or any securities convertible into shares of capital stock, or subscriptions, rights, warrants or
options to acquire any shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character obligating it to issue any
such shares or convertible securities, other than (i) the issuance, delivery and/or sale of shares
of Common Stock pursuant to the exercise of currently outstanding Company Convertible Securities,
or (ii) pursuant to a bridge financing permitted by Section 6.6(b).



               (g)      Cause, permit or propose any amendments to the Company Charter Documents or to the charter
documents of any subsidiary;



               (h)      Acquire or agree to acquire by merging or consolidating with, or by purchasing any equity
interest in or a portion of the assets of, or by any other manner, any



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business or any corporation, partnership, association or other business organization or
division thereof; or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of the Company or enter into any material joint
ventures, strategic relationships or alliances or make any material loan or advance to, or
investment in, any person, except for loans or capital contributions to a subsidiary or advances of
routine business or travel expenses to employees, officers or directors in the ordinary course of
business, consistent with past practice;



               (i)      Sell, lease, license, encumber or otherwise dispose of any properties or assets which are
material, individually or in the aggregate, to the business of the Company;



               (j)      Incur any indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or options, warrants, calls or other rights to acquire
any debt securities of the Company, enter into any “keep well” or other agreement to maintain any
financial statement condition or enter into any arrangement having the economic effect of any of
the foregoing other than (i) in connection with the financing of ordinary course trade payables
consistent with past practice, (ii) pursuant to existing credit facilities in the ordinary course
of business, or (ii) pursuant to a bridge financing permitted by Section 6.6(b);



               (k)      Adopt or amend any employee benefit plan or employee stock purchase or employee stock
option plan, or enter into any employment contract or collective bargaining agreement (other than
offer letters and letter agreements entered into in the ordinary course of business consistent with
past practice with employees who are terminable “at will”), pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers, employees or
consultants other than in the ordinary course of business, consistent with past practice, or change
in any material respect any management policies or procedures; provided that, notwithstanding the
foregoing, the Company may agree to pay, and may accrue, the Transaction Bonuses;



               (l)      Make any capital expenditures outside of the ordinary course of business in excess of
$10,000 in the aggregate;



               (m)      Modify, amend or terminate any material Company Contract or waive, release or assign any
material rights or claims thereunder; provided, that (i) the renewal in the ordinary course of
business of any software maintenance agreement that is in force on the date of this Agreement,
which renewal is on terms substantially as favorable to the Company as those of the agreement
currently in force, shall not be deemed to constitute a modification or amendment prohibited by
this clause (m) and (ii) the consent of Parent to any such modification, amendment or termination
shall not unreasonably be withheld or delayed;



               (n)      Enter into any development services, licensing, distribution, sales, sales representation
or other similar agreement or obligation with respect to any material Intellectual Property or
enter into any contract of a character required to be disclosed by Section 2.16 other than such
agreements entered into in the ordinary course of business consistent with past practices,
including pricing and contract terms;



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               (o)      Materially revalue any of its assets or, except as required by GAAP, make any change in
accounting methods, principles or practices;



               (p)      Discharge, settle or satisfy any disputed claim, litigation, arbitration, disputed
liability or other controversy (absolute, accrued, asserted or unasserted, contingent or
otherwise), including any liability for Taxes, other than the discharge or satisfaction in the
ordinary course of business consistent with past practice, or in accordance with their terms, of
liabilities reflected or reserved against in the Company Balance Sheet in the ordinary course of
business consistent with past practice, or waive any material benefits of, or agree to modify in
any material respect, any confidentiality, standstill or similar agreements to which the Company or
any of its subsidiaries is a party; provided, however, that the discharge or settlement of any
disputed claim, liability or other controversy in the amount of less than $10,000 shall not be
deemed to be prohibited by the foregoing;



               (q)      Engage in any action with the intent to directly or indirectly adversely affect any of the
transactions contemplated by this Agreement, including with respect to any “poison pill” or similar
plan, agreement or arrangement, or any anti-takeover, control share acquisition, fair price,
moratorium or other similar statute; or



               (r)      Agree in writing or otherwise to take any of the actions described in Section 5.1(a)
through 5.1(q) above.



     5.2      Covenant of Parent. During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, Parent agrees (except as
expressly contemplated by this Agreement or with Company’s prior written consent) that Parent will
promptly apply for or otherwise seek, and use its commercially reasonable efforts to obtain, all
consents and approvals, and make all filings, required for the consummation of the Merger.



Article 6

Additional Agreements




     6.1      Antitrust and Other Filings.



               (a)      As promptly as practicable after the execution of this Agreement, each of the Company and
Parent will prepare and file any pre-merger notification forms required by the merger notification
or control laws and regulations of any applicable jurisdiction, as agreed to by the parties (the
“Antitrust Filings”) and (ii) any other filings required to be filed by it under the Exchange Act,
the Securities Act or any other federal, state or foreign laws relating to the Merger and the
transactions contemplated by this Agreement (the “Other Filings”). The Company and Parent each
shall promptly supply the other with any information which may be required in order to effectuate
any filings pursuant to this Section 6.1.



               (b)      Each of the Company and Parent will notify the other promptly upon the receipt of any
comments from any government officials in connection with any filing made pursuant hereto and of
any request by any government officials for amendments or supplements to any Antitrust Filings or
Other Filings or for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one



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hand, and the government officials, on the other hand, with respect to the Merger or any
Antitrust Filing or Other Filing. Each of the Company and Parent will cause all documents that it
is responsible for filing with regulatory authorities under this Section 6.1 to comply in all
material respects with all applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set forth in an amendment or
supplement to any Antitrust Filing or Other Filing, the Company or Parent, as the case may be, will
promptly inform the other of such occurrence and cooperate in filing with the government officials
such amendment or supplement.



     6.2      Information Statement; Company Stockholder Meeting. Promptly after the execution of this
Agreement, but in any event no later than five (5 ) business days thereafter, the Company shall
mail to the Company Stockholders an information statement (the “Information Statement”) for use by
the Company in connection with its solicitation of the approval of the holders of outstanding
Company Capital Stock of the Merger, this Agreement and the transactions contemplated by this
Agreement at a special meeting of the Company Stockholders to be duly called and convened under
Oregon Law (the “Special Meeting”). The Information Statement shall be in form and substance
reasonably acceptable to each of Parent and the Company. The Information Statement shall include
(i) proper notice under Oregon Law that the holders of outstanding Company Capital Stock are or may
be entitled to assert dissenters’ or appraisal rights under such law, (ii) a copy of this
Agreement, and (iii) a copy of any other documents and all information required to be disclosed to
Company Stockholders under Oregon Law to approve the Merger, this Agreement and the transactions
contemplated by this Agreement. Each of Parent and the Company shall provide promptly to the other
such information concerning its business and affairs as any other shall reasonably request for
inclusion in such Information Statement. The Company will promptly advise Parent, and Parent will
promptly advise the Company, if at any time prior to the Effective Time either the Company or
Parent, as applicable, shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Information Statement in order to make the statements
contained or incorporated by reference therein not misleading or to comply with applicable law.
Promptly after the dissemination of the Notice of Stockholders Special Meeting and Information
Statement and in accordance with Oregon Law, the Company shall duly hold the Special Meeting in
accordance with Oregon Law necessary to obtain the necessary approval and adoption of the Merger,
this Agreement and the transactions contemplated by this Agreement.



     6.3      Tax Matters.



               (a)      Prior to the Closing. Without the prior written consent of Parent (which consent shall
not be unreasonably withheld), the Company shall not make or change any election, change an annual
accounting period, adopt or change any accounting method, file any amended Tax Return, enter into
any closing agreement, settle any Tax claim or assessment, surrender any right to claim a refund of
Taxes, consent to any extension or waiver of the limitation period applicable to any Tax claim or
assessment, or take any other similar action relating to the filing of any Tax Return or the
payment of any Tax.



               (b)      Following the Closing. The following provisions shall govern the allocation of
responsibility as between Parent and the Company Stockholders for certain tax matters following the
Closing Date:



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                    (i)      Tax Indemnification. In accordance with the indemnification provisions of Article
7 and subject to any limitations contained therein, the Company Stockholders shall jointly
and severally indemnify the Company, any Company Subsidiary, Parent and each Parent
affiliate and hold them harmless from and against without duplication, any loss, claim,
liability, expense, or other damage attributable to the following Taxes, net of any reserves
set forth on the Company Balance Sheet: (i) all Taxes (or the non-payment thereof) of the
Company or any such Company Subsidiary for all taxable periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any taxable period that
includes (but does not end on) the Closing Date (“Pre-Closing Tax Period”), (ii) all Taxes
of any member of an affiliated, consolidated, combined or unitary group of which the Company
or any Company Subsidiary (or any predecessor of the Company or any such Company Subsidiary)
is or was a member on or prior to the Closing Date, including pursuant to Treasury
Regulation §1.1502-6 or any analogous or similar state, local, or foreign law or regulation,
and (iii) any and all Taxes of any person (other than the Company or any Company Subsidiary)
imposed on the Company or any such Company Subsidiary as a transferee or successor, by
contract or pursuant to any law, rule, or regulation, which Taxes relate to an event or
transaction occurring before the Closing.




                    (ii)     Straddle Period. In the case of any taxable period that includes (but does not
end on) the Closing Date (a “Straddle Period”), the amount of any Taxes based on or measured
by income or receipts of the Company for the Pre-Closing Tax Period shall be determined
based on an interim closing of the books as of the close of business on the Closing Date
(and for such purpose, the taxable period of any partnership or other pass-through entity in
which the Company holds a beneficial interest shall be deemed to terminate at such time) and
the amount of other Taxes of the Company for a Straddle Period that relates to the
Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire taxable
period multiplied by a fraction the numerator of which is the number of days in the taxable
period ending on the Closing Date and the denominator of which is the number of days in such
Straddle Period.




                    (iii)    Responsibility for Filing Tax Returns. Parent shall prepare or cause to be
prepared and file or cause to be filed in a timely manner all Tax Returns for the Company
that are filed after the Closing Date. Parent shall permit the Stockholder Representative
to review and comment on each such Tax Return for a Pre-Closing Tax Period




                    (iv)     Cooperation on Tax Matters.




                      (1)      Parent, the Company, the Surviving Corporation and the Company Stockholders
shall cooperate fully, as and to the extent reasonably requested by the other Party,
in connection with the filing of Tax Returns pursuant to this Section 6.3 and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other Party’s request) the provision of records
and information that are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to provide
additional information and explanation of



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any material provided hereunder. The Company, the Surviving Corporation and
the Company Stockholders agree (A) to retain all books and records with respect to
Tax matters pertinent to the Company relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Parent and the Company Stockholders, any extensions thereof) of
the respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other Party reasonable
written notice prior to transferring, destroying or discarding any such books and
records and, if the other Party so requests, Parent or the Company Stockholders, as
the case may be, shall allow the other Party to take possession of such books and
records.




                      (2)      All transfer, documentary, sales, use, stamp, registration and other such
Taxes (including all applicable real estate transfer Taxes) and related fees
(including any penalties, interest and additions to Tax) (“Transfer Taxes”) arising
out of or incurred in connection with the transactions contemplated by this
Agreement shall be borne by the Company Stockholders. All necessary Tax Returns and
other documentation with respect to all such Transfer Taxes shall be prepared and
filed when due by the party primarily responsible under applicable Legal Requirement
for filing such Tax Returns, and, if required by applicable Legal Requirement,
Parent or the relevant Company Stockholder, as applicable, will join in the
execution of any such Tax Returns.




                      (3)      Parent and the Company Stockholders further agree, upon request, to provide
the other Party with all information that either Party may be required to report
pursuant to Code Sections 6043 or 6043A, or Treasury Regulations promulgated
thereunder.




                    (v)      Tax-Sharing Agreements. All tax-sharing agreements or similar agreements with
respect to or involving the Company shall be terminated as of the Closing Date and, after
the Closing Date, the Company shall not be bound thereby or have any liability thereunder.



     6.4      Confidentiality. The parties acknowledge that the Company and Parent have previously executed that
certain Nondisclosure Agreement dated October 7, 2007 (the “Confidentiality Agreement”), which
Confidentiality Agreement will continue in full force and effect in accordance with its terms.



     6.5      Access to Information. Parent, on the one hand, and the Company, on the other, will afford the
other party and the other party’s accountants, counsel and other representatives reasonable access
to its properties, books, records and personnel during the period prior to the Effective Time to
obtain all information concerning the business, including the status of product development
efforts, properties, results of operations and personnel, as the other party may reasonably
request. No information or knowledge obtained by a party in any investigation pursuant to this
Section 6.5 will affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to consummate the Merger.



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     6.6      No Solicitation.



               (a)      From and after the date of this Agreement until the Effective Time or termination of this
Agreement pursuant to its terms, the Company will not and will cause each Target Company not to,
and the Company Stockholders will not, nor will they authorize or permit any of their respective
officers, directors, Affiliates, or employees or any investment banker, attorney or other
consultant, advisor, representative or agent retained by any of them to, directly or indirectly,
(i) solicit, initiate, encourage or induce the making, submission or announcement of any
Acquisition Proposal, (ii) participate in any discussions or negotiations regarding, or furnish to
any Person any nonpublic information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to,
any Acquisition Proposal, (iii) engage in discussions with any Person with respect to any
Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into
any letter of intent or similar document or any Contract contemplating or otherwise relating to any
Acquisition Proposal. The Company will and will cause each Target Company to, and the Company
Stockholders will, immediately cease any and all existing activities, discussions or negotiations
with any Persons conducted heretofore with respect to any Acquisition Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set forth in the preceding
two sentences by any Target Company, or by any officer, director, Affiliate or employee of any
Target Company or any of the Company Stockholders or any investment banker, attorney or other
consultant, advisor, representative or agent of any Target Company or any of the Company
Stockholders shall be deemed to be a breach of this Section 6.6 by the Company.



               (b)      The foregoing shall not be deemed to prohibit the Company from negotiating and obtaining
bridge financing of up to $400,000 from the Company’s current shareholders and other investors,
executive officers, and/or directors (provided that the effect of the Merger on any such bridge
lenders in the Transaction is not more favorable to such lenders in all material respects as its
effect on holders of the Company’s currently outstanding Convertible Promissory Notes).



               (c)      In addition to the obligations of the Company and the Company Stockholders set forth in
Section 6.6(a), each of the Company and the Company Stockholders as promptly as practicable, and in
any event within 24 hours of its receipt, shall advise Parent orally and in writing of an
Acquisition Proposal or any request for nonpublic information or other inquiry which the Company or
such Company Stockholder believes or should reasonably believe could lead to an Acquisition
Proposal, the material terms and conditions of such Acquisition Proposal, request or inquiry, and
the identity of the Person or group making any such Acquisition Proposal, request or inquiry. The
Company and the Company Stockholders will keep Parent informed as promptly as practicable in all
material respects of the status and details (including material amendments or proposed amendments)
of any such Acquisition Proposal, request or inquiry.



     6.7      Public Disclosure. Parent and the Company will consult with each other, and to the extent
practicable, agree, before issuing any press release or otherwise making any public statement with
respect to the Merger, this Agreement or an Acquisition Proposal and will not



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issue any such press release or make any such public statement prior to such consultation, except
as may be required by law or any listing agreement with a national securities exchange.



     6.8      Reasonable Efforts; Notification; Discharge of Certain Liabilities.



               (a)      Upon the terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use all commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using all commercially reasonable efforts to accomplish the following: (i)
causing the conditions precedent set forth in Article 8 to be satisfied, (ii) obtaining all
necessary actions or nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and making of all necessary registrations, declarations and filings
(including registrations, declarations and filings with Governmental Entities) and taking all steps
that may be necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) obtaining all necessary consents, approvals or waivers from third
parties, (iv) defending any suits, claims, actions, investigations or proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed and (v) executing and delivering any additional
instruments necessary to consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement. Notwithstanding anything in this Agreement to the contrary, neither
Parent nor any of its affiliates shall be under any obligation to make proposals, execute or carry
out agreements or submit to orders providing for the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories of assets of Parent
or any of its affiliates or the Company or any of its subsidiaries or the holding separate of the
shares of Common Stock (or shares of stock of the Surviving Corporation) or imposing or seeking to
impose any limitation on the ability of Parent or any of its subsidiaries or affiliates to conduct
their business or own such assets or to acquire, hold or exercise full rights of ownership of the
shares of Common Stock (or shares of stock of the Surviving Corporation).



               (b)      Each of the Company and Parent will give prompt notice to the other of (i) any notice or
other communication from any person alleging that the consent of such person is or may be required
in connection with the Merger, (ii) any notice or other communication from any Governmental Entity
in connection with the Merger, (iii) any litigation relating to, involving or otherwise affecting
the Company, Parent or their respective subsidiaries that relates to the consummation of the
Merger. The Company shall give prompt notice to Parent of any representation or warranty made by
it contained in this Agreement becoming untrue or inaccurate, or any failure of the Company to
comply with or satisfy in any material respect any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties or the conditions to
the obligations of the parties under this Agreement. Parent shall give prompt notice to the
Company of any representation or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent or Merger Sub to comply with or satisfy in
any material respect any



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covenant, condition or agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of the parties under
this Agreement.



               (c)      The Company shall give prompt notice to Parent of receipt by the Company of any demand for
appraisal rights pursuant to Section 60.554 of the BCA.



               (d)      Parent will cause the Surviving Corporation to promptly pay and discharge at or
immediately following the Closing (i) the obligations of the Company to redeem in accordance with
its terms any Convertible Note outstanding immediately prior to the Effective Time that is not
converted to Company Capital Stock prior to the Effective Time, and (ii) any accrued and unpaid
Transaction Expenses incurred by the Company prior to the Closing. Parent will cause the Surviving
Corporation to make the Option Cash-Out Payments in accordance with Section 1.6(d) above, and will
make available to the Surviving Corporation such funds as are necessary to enable the making of
such payments.



     6.9      Third Party Consents. As soon as practicable following the date hereof, Parent and the Company
will each use all commercially reasonable efforts to obtain any consents, waivers and approvals
under any of its or its subsidiaries’ respective agreements, contracts, licenses or leases required
to be obtained in connection with the consummation of the transactions contemplated hereby,
including without limitation, the Required Consents described in Section 8.3 below.



     6.10    Certain Employee Benefits. As soon as practicable after the execution of this Agreement, the
Company and Parent shall confer and work together in good faith to agree upon mutually acceptable
employee benefit and compensation arrangements (and terminate the Company Employee Plans
immediately prior to the Effective Time if appropriate). In addition, the Company agrees that it
and its subsidiaries shall terminate its and their 401(k) plans and, at the request of Parent, any
other Employee Plans, severance, separation, retention and salary continuation plans, programs or
arrangements, in each case prior to the Effective Time. Each individual who is employed by the
Company immediately prior to the Effective Time shall remain an employee of the Company following
the Effective Time, provided, however that nothing in this Section 6.10 shall be construed to limit
the ability of the applicable employer to terminate the employment of any such employee following
the Effective Time in accordance with applicable Legal Requirements. To the extent the applicable
plan permits, or can be amended to permit, Parent shall recognize each such employee’s service
with, or recognized by, the Company prior to the Closing Date as service with Parent or its
subsidiary, as applicable, in connection with any pension plan, 401(k) savings plan and welfare
benefit plan (including vacations and holidays) maintained by Parent or such subsidiary that is
made available by Parent, in its sole discretion, to such employee following the Closing Date and
in which such employee elects to participate for purposes of any waiting period, vesting,
eligibility and benefit entitlements (but excluding benefit accruals other than vacation) and shall
cause all applicable welfare benefit plans to waive any preexisting condition limitation, exclusion
or waiting period for such employees and their dependents, to the same extent such limitations,
exclusions or waiting periods were satisfied, covered or waived under similar Company Benefit
Plans. Parent shall credit such employees with any amounts paid prior to the Closing Date under
any Company



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Benefit Plan with respect to satisfaction of any applicable deductible amounts and co-payment
minimums under any Parent plans established as of the Closing Date which provide similar benefits.



Article 7

Survival of Representations; Indemnification




     7.1      Indemnification by Company Stockholders. Subject to the terms, conditions and limitations of this
Article 7, each Company Stockholder hereby agrees (without any right of contribution from the
Company or the Surviving Corporation or any right of indemnification against the Company or the
Surviving Corporation) to indemnify, defend and hold harmless Parent and each of its Subsidiaries
and each of their respective directors, officers, agents and Affiliates (collectively, the “Parent
Group”) from and against any loss, liability, damage, cost or expense (including costs and
reasonable attorneys’ fees and disbursements, but excluding any consequential, special or punitive
damages, except when asserted by a third party in a Third Party Claim) (collectively, “Damages”)
suffered, incurred or paid by any member of the Parent Group which arise out of or result from any
or all of the following:



               (a)      Any breach or inaccuracy of any representation or warranty made by the Company in this
Agreement or by the Company or any Company Stockholder in any other Transaction Document;



               (b)      Any failure to perform or comply with any covenant, agreement or obligation of the Company
or any Company Stockholder contained in this Agreement or the Company or any Company Stockholder in
any other Transaction Document;



               (c)      Any indemnification with respect to Tax matters provided for pursuant to Section 6.3
hereto;



               (d)      Any downward adjustment to the Base Consideration based on the Adjusted Working Capital
provided for in Sections 1.7 through 1.9 hereto; and



               (e)      Any claim identified or described in Part 7.1(e) of the Company Disclosure Schedule.



     For purposes of this Section 7.1, and notwithstanding anything to the contrary contained
herein, the covenants and representations and warranties of each of the Company Stockholders in the
Transmittal Certificates and in Article 3 of this Agreement are several obligations and, subject to
the terms, conditions and limitations set forth in this Article 7, the particular Company
Stockholder making those representations, warranties, or covenants will be solely responsible for
Damages that Parent or Merger Sub may suffer as a result of any breach thereof by such Company
Stockholder, and not for the breach thereof by any other Company Stockholder.



     7.2      Indemnification by Parent and Merger Subs. Parent and Merger Sub, jointly and severally, shall
indemnify and hold harmless the Company Stockholders, the Stockholders Representative and each of
such Company Stockholders’ and Stockholders Representative’s respective heirs, executors,
administrators, attorneys, agents and representatives (collectively,



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“Stockholders Group”) from and against any and all Damages suffered, incurred or paid by any member
of the Stockholders Group which arise out of or result from any or all of the following:




               (a)      Any breach or inaccuracy of any representation or warranty made by Parent or Merger Sub in
this Agreement or in any agreement, schedule, certificate or other document referred to in this
Agreement; and



               (b)      Any failure to perform or comply with any covenant, agreement or obligation of Parent or
Merger Sub contained in this Agreement or any agreement, certificate, document or other instrument
referred to in this Agreement.



     7.3      Survival of Representations. All representations and warranties made by any party in this
Agreement or any certificate or other writing delivered pursuant hereto shall survive the Closing
for a period of twelve (12) months after the Closing Date (“Survival Period”) and shall not be
deemed waived by any investigation at any time made by or on behalf of any other party, subject to
the following provisions regarding the Survival Period:



               (a)      claims for fraud and any claim relating to title to the Company Capital Stock or any
breach of the representations contained in Sections 2.2, 2.3, 2.4 and 2.8 and any indemnification
provided for by Sections 7.1(c) and 7.1(e) shall survive until the end of the applicable statute of
limitations period under applicable law.



               (b)      (i) if, at any time prior to the expiration of the Survival Period, or other applicable
expiration date specified in Section 7.3(a) above, any member of the Parent Group (acting in good
faith) delivers to the Stockholders Representative a written notice alleging any inaccuracy or
misrepresentation in, or breach of, any such representation or warranty made by the Company or the
Company Stockholders, and asserting a claim (“Parent Claim”) for recovery under this Article 7
based on such alleged inaccuracy or other breach, then the claim asserted in such notice shall
survive the applicable expiration date until such time as such claim is fully and finally resolved,
and (ii) if, at any time prior to the expiration of the Survival Period, or other expiration date,
if applicable, any member of the Stockholders Group (acting in good faith) delivers to Parent a
written notice alleging any inaccuracy or misrepresentation in, or breach of, any such
representation or warranty made by Parent or Merger Sub, and asserting a claim (“Stockholder
Claim”) for recovery under this Article 7 based on such alleged inaccuracy or other breach, then
the claim asserted in such notice shall survive the applicable expiration date until such time as
such claim is fully and finally resolved.



     7.4      Process of Indemnification for Parent Claims and Stockholder Claims.



               (a)      Claims for Indemnification. Whenever any claim shall arise for indemnification under this
Agreement, the party entitled to indemnification (the “Indemnified Party”) shall promptly notify
the party obligated to provide indemnification (the “Indemnifying Party”) of the claim in writing
and, when known, the facts constituting the basis for such claim; provided,
however, that the failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligation hereunder to the extent such failure does not materially
prejudice the Indemnifying Party. In the event of any claim for indemnification hereunder
resulting from or in connection with any claim or legal proceeds by a third party, the notice to



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the Indemnifying Party shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom.



               (b)      Recovery by Parent. If the Stockholders Representative does not dispute the basis or
amount of any Parent Claim within 30 days of receiving written notice thereof, Parent shall have
the right promptly to recover indemnity as and to the extent provided herein. If the Stockholders
Representative disagrees with the basis of the Parent Claim or the amount of Damages caused
thereby, then within 30 days of receiving written notice thereof, the Stockholders Representative
shall give notice to Parent of such disagreement and, in that case, Parent shall have no right to
recover indemnity hereunder until such time, if at all, as (a) a court of competent jurisdiction
issues a final, non-appealable order specifying the amount of Parent’s recovery, in which case
Parent shall have the right promptly to recover the amount so specified (subject to the limitations
contained in Section 7.3 and Section 7.4(f) hereof) or (b) Parent and the Stockholders
Representative agree in writing to the amount of Parent’s recovery, in which case Parent shall have
the right promptly to recover the amount so agreed.



               (c)      Recovery by Stockholders. If the Parent does not dispute the basis or amount of any
Stockholder Claim within 30 days of receiving written notice thereof, Stockholders shall have the
right promptly to recover indemnity as and to the extent provided herein. If Parent disagrees with
the basis of the Stockholder Claim or the amount of Damages caused thereby, then within 30 days of
receiving written notice thereof, Parent shall give notice to the Stockholders Representative of
such disagreement and, in that case, Stockholders shall have no right to recover indemnity
hereunder until such time, if at all, as (a) a court of competent jurisdiction issues a final,
non-appealable order specifying the amount of Stockholders’ recovery, in which case Stockholders
shall have the right promptly to recover the amount so specified (subject to the limitations
contained in Section 7.3 and Section 7.4(f) hereof) or (b) Parent and the Stockholders
Representative agree in writing to the amount of Stockholders’ recovery, in which case Stockholders
shall have the right promptly to recover the amount so agreed.



               (d)      Third-Party Claims. Parent agrees to notify the Stockholders Representative in writing of
any Claims asserted by third parties that, in the opinion of Parent, are reasonably likely to give
rise to indemnification of any member of the Parent Group hereunder (“Third-Party Claims”). In the
event of any Third Party Claim, the Indemnifying Party shall be entitled: (a) to participate in
such action and (b) to elect, by written notice delivered to the Indemnified Party within 30 days
after the Indemnifying Party’s receipt of notice of the Third Party Claim, to defend, compromise or
settle such action, with counsel reasonably satisfactory to the Indemnified Party. The Indemnified
Party shall cooperate with respect to any such participation, defense, settlement or compromise.
The Indemnified Party shall have the right to employ its own counsel in any such case, but the fees
and expenses of the Indemnified Party’s counsel shall be at the sole expense of the Indemnified
Party unless: (i) the Indemnifying Party shall have authorized in writing employment of such
counsel at the expense of the Indemnifying Party; (ii) the Indemnifying Party shall not have
employed counsel reasonably satisfactory to the Indemnified Party to defend such action within 30
days after the Indemnifying Party received notice of the Asserted Liability; (iii) the Indemnified
Party shall have reasonably concluded, based upon advice of counsel, that there are defenses
available to the Indemnified Party that are different from or additional to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the
defense of such action on behalf



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of the Indemnified Party with respect to such different defenses); or (iv) representation of
such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due
to actual or potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding, in any of which events the fees and expenses of one
additional counsel shall be borne by the Indemnifying Party. The Indemnifying Party shall not
settle or compromise any action or consent to the entry of a judgment that: (a) does not provide
for the claimant to give an unconditional release to the Indemnified Party in respect of the Third
Party Claim; (b) involves relief other than monetary damages; (c) places restrictions or conditions
on the operation of the business of the Indemnified Party or any of its Affiliates; or (d) involves
any finding or admission of liability or of any violation of applicable law. The Indemnifying
Party shall not be liable for any settlement of any claim or action effected without its written
consent; provided that such consent is not unreasonably withheld. After payment of any
claim by the Indemnifying Party, the Indemnified Party, if requested by the Indemnifying Party,
shall assign to the Indemnifying Party all rights the Indemnified Party may have against any
applicable account debtor or other responsible Person in respect of such claim. If the
Indemnifying Party chooses to defend any Third Party Claim, the Indemnified Party shall make
available to the Indemnifying Party any books, records or other documents within its control that
are necessary or appropriate for such defense. Any expenses of any Indemnified Party for which
indemnification is available hereunder shall be paid upon written demand therefor. Notwithstanding
the foregoing, if an Indemnified Party determines in good faith that there is a reasonable
probability that an action by a third party may adversely affect it or its Affiliates other than
solely as a result of monetary damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Party may, by notice to the Indemnifying Party, assume the exclusive
right to defend, compromise, or settle such action, and the Indemnifying Party will indemnify the
Indemnified Party for the costs associated therewith. The Indemnifying Party will not be bound by
any settlement of such an action effected without its consent (which will not be unreasonably
withheld).



               (e)      Recovery of Parent Claims. Subject to the limitations of Section 7.3 and Section 7.4(f),
if Parent shall be finally determined to be entitled to indemnification hereunder; Parent shall
first seek recovery from the Company Stockholders for the amount of the related Parent Claim, as
determined hereunder, by (x) recovering from the Company Stockholders first out of the General
Indemnity Escrow (or in the case of Section 7.1(d), first the Working Capital Escrow, and then if
that is insufficient the General Indemnity Escrow; or, in the case of Section 7.1(d), first the
Special Indemnity Escrow, and then if that is insufficient the General Indemnity Escrow, allocated
among the Company Stockholders on a pro rata basis based on the portion of the General Indemnity
Escrow, Special Indemnity Escrow and/or Working Capital Escrow allocated to each of them as set
forth in Schedule II and, if the General Indemnity Escrow, Special Indemnity Escrow and/or
Working Capital Escrow, as the case may be, are not sufficient to recover payment for the required
amount then from other Merger Consideration previously received by the Principal Stockholders with
each Principal Stockholder contributing such Principal Stockholder’s pro rata portion of such
Merger Consideration, as set forth on Schedule I, and (y) by setting off the related amount
against any Parent obligations to indemnify the Stockholder Group; and thereafter, shall be
entitled to recover payment directly from the Principal Stockholders; it being understood that the
indemnification provided by any Principal Stockholder in respect of the representations in the
Transmittal Certificates and Article 3 and its covenants in this Agreement are several and not
joint, such that any indemnity in respect of a



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breach by such Principal Stockholder may be recovered only from the escrow property held by
the Escrow Agent for the account of the Principal Stockholder whose representation was breached or,
to the extent otherwise permitted hereby, from such Principal Stockholder.



               (f)      Threshold and Limitations.




                    (i)      No Parent Group member shall be entitled to receive any indemnification payment
with respect to any claim for indemnification under this Article 7 (“Claims”) until the
aggregate Damages for which the Parent Group would otherwise be entitled to receive
indemnification exceeds $100,000 (“Threshold”). Once such aggregate Loss exceeds the
Threshold, the Parent Group shall be entitled to indemnification for the aggregate amount of
all Damages, regardless of the Threshold. Notwithstanding the foregoing, Parent shall be
entitled to indemnification for all Damages based upon a claim of fraud or any breach of the
representations contained in Sections 2.2, 2.3, 2.4, 2.8, 3.2, 3.3 and 3.4, and any
indemnification provided for by Sections 7.1(c), 7.1(d) and 7.1(e) without regard to the
Threshold.




                    (ii)     Except as provided below for Damages based upon a claim of fraud or any breach of
the representations contained in Sections 2.2, 2.3, 2.4, 2.8, 3.2, 3.3 and 3.4, and any
indemnification provided for by Sections 7.1(c), 7.1(d) and 7.1(e), (A) the aggregate
liability of all Company Stockholders under this Article 7 (other than pursuant to Section
7.1(d)), shall be limited to the amount of the General Indemnity Escrow (the “Escrow
Value”), (B) the aggregate liability of Parent and the Merger Sub under this Article 7,
shall be limited to the amount of the Escrow Value, and (C) the liability of any Company
Stockholder shall be limited to the amount of the Escrow Value originally deposited in
escrow for his or its account. With respect to any Claim based on a claim of fraud, any
breach of the representations contained in Sections 2.2, 2.3, 2.4, 2.8, 3.2, 3.3 and 3.4
and any indemnification provided for by Sections 7.1(c), the liability of each Company
Stockholder shall be up to the amount of the Merger Consideration actually received by such
Company Stockholder; with respect to any Claim based on the indemnification provided for by
Section 7.1(d), the aggregate liability of the Company Stockholders shall be limited to the
value of the General Indemnity Escrow plus the Working Capital Escrow, it being understood
that Parent shall first have recourse to the Working Capital Escrow for any such Claim; and
with respect to any Claim based on the indemnification provided for by Section 7.1(e) the
aggregate liability of the Company Stockholders shall be limited to the sum of the General
Indemnity Escrow and the Special Indemnity Escrow it being understood that Parent shall
first have recourse to the Special Indemnity Escrow for any such Claim; provided, that the
indemnification provided by any Principal Stockholder in respect of the representations in
the Transmittal Certificates and Article 3 and its covenants in this Agreement are several
and not joint, such that no Principal Stockholder shall be liable in indemnity for the
breach of any such representation other than those made by such Principal Stockholder, as
the case may be.




                    (iii)    An indemnifying party shall not be obligated to defend and hold harmless an
indemnified party or otherwise be liable to such party with respect to any claims made by
indemnifying party after the expiration of the applicable time period as set forth in, and
subject to, Section 7.3.



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                    (iv)     In determining the amount of Damages for which any Parent Group member is entitled
assert a claim for indemnification, the amount of any such Damages shall be determined after
deducting therefrom the amount of any insurance proceeds actually received by Parent or the
Company in respect of such matter (which recoveries Parent agrees to use and to cause the
Company to use commercially reasonable efforts to obtain). If an indemnification payment is
received by a member of the Parent Group hereunder, and such person or the Company later
receives insurance proceeds in respect of the related Damages, Parent shall return to the
Company Stockholders within 10 days of the receipt of such insurance proceeds, Merger
Consideration previously distributed to Parent from the General Indemnity Escrow to the
lesser of (A) the actual amount of insurance proceeds and (B) the actual amount of the
indemnification payment previously paid by the Company Stockholders with respect to such
Damages. If an Indemnifying Party (as defined below) makes any indemnification payment
hereunder, such Indemnifying Party shall be subrogated, to the extent of such payment, to
all rights and remedies of the Indemnified Party (as defined below) to any third party in
connection with the Damages to which such payment relates.



               (g)      Remedies. The indemnification provisions of this Article 7 are the sole and exclusive
remedy of any party to this Agreement for a breach of any representation, warranty or covenant
contained in, or any obligation arising under, this Agreement, as modified by the Disclosure
Schedule, other than a suit for specific performance.



               (h)      Effect of Certain Payments. The parties acknowledge and agree that the amount of any
disbursement from the Working Capital Escrow, from the General Indemnity Escrow or the Special
Indemnity Escrow for the account of any Company Stockholder, and the amount of any other recovery
by a member of the Parent Group of indemnification from any Company Stockholder pursuant to this
Article 7, shall constitute, as to such Company Stockholder, a reduction in the amount of Merger
Consideration received by such Company Stockholder.



Article 8

Conditions to the Merger




     8.1      Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each
party to this Agreement to effect the Merger shall be subject to the satisfaction at or prior to
the Closing Date of the following conditions:



               (a)      Stockholder Approvals. The Company shall have obtained the Required Stockholder Vote.



               (b)      No Order. No Governmental Entity shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger.



               (c)      No Restraints. There shall not be instituted or pending any action or proceeding by any
Governmental Entity (i) seeking to restrain, prohibit or otherwise interfere



-59-









 







with the ownership or operation by Parent or any of its subsidiaries of all or any portion of
the business of the Company or any of its subsidiaries or of Parent or any of its subsidiaries or
to compel Parent or any of its subsidiaries to dispose of or hold separate all or any portion of
the business or assets of the Company or any of its subsidiaries or of Parent or any of its
subsidiaries, (ii) seeking to impose or confirm limitations on the ability of Parent or any of its
subsidiaries effectively to exercise full rights of ownership of the shares of Common Stock (or
shares of stock of the Surviving Corporation) including the right to vote any such shares on any
matters properly presented to shareholders or (iii) seeking to require divestiture by Parent or any
of its subsidiaries of any such shares.



               (d)      Antitrust Filings. If applicable, all waiting periods (and any extensions thereof)
applicable to any Antitrust Filings relating to the transactions contemplated hereby shall have
expired or been terminated.



     8.2      Additional Conditions to Obligations of the Company. The obligation of the Company to consummate
and effect the Merger shall be subject to the satisfaction at or prior to the Closing Date of each
of the following conditions, any of which may be waived, in writing, exclusively by the Company:



               (a)      Representations and Warranties. Each representation and warranty of Parent and the Merger
Sub contained in this Agreement (i) shall have been true and correct as of the date of this
Agreement and (ii) shall be true and correct on and as of the Closing Date with the same force and
effect as if made on the Closing Date except, in each case, or in the aggregate, as would not have
a material adverse effect on the ability of the parties to consummate the transactions contemplated
by this Agreement.



               (b)      Agreements and Covenants. Parent and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement to be performed or
complied with by them on or prior to the Closing Date, and the Company shall have received a
certificate to such effect signed on behalf of Parent by an authorized officer of Parent.



               (c)      Escrow Agreement. Parent and the Escrow Agent shall have executed and delivered the
Escrow Agreement.



               (d)      Payment of Convertible Notes. Parent or Merger Sub shall have paid, or shall have made
provision for payment immediately following the Effective Time, of the outstanding principal of and
interest accrued and unpaid on any Convertible Promissory Note outstanding immediately prior to the
Effective Time that was not converted into Company Capital Stock.



     8.3      Additional Conditions to the Obligations of Parent and Merger Sub. The obligations of Parent and
Merger Sub to consummate and effect the Merger shall be subject to the satisfaction at or prior to
the Closing Date of each of the following conditions, any of which may be waived, in writing,
exclusively by Parent:



               (a)      Representations and Warranties. Each representation and warranty of the Company contained
in this Agreement (i) shall have been true and correct as of the date of



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this Agreement and (ii) shall be true and correct on and as of the Closing Date with the same
force and effect as if made on and as of the Closing Date except in each case, or in the aggregate,
as does not constitute a Company Material Adverse Effect as of the Closing Date; or a material
adverse effect on the ability of the parties to consummate the transactions contemplated by this
Agreement. Parent shall have received a certificate with respect to the foregoing signed on behalf
of the Company by the Chief Executive Officer of the Company.



               (b)      Agreements and Covenants. The Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be performed or complied
with by it at or prior to the Closing Date, and Parent shall have received a certificate to such
effect signed on behalf of the Company by the Chief Executive Officer of the Company.



               (c)      Legal Opinion. Parent shall have received an opinion of Davis, Wright & Tremaine LLP,
counsel to the Company, in substantially the form attached as Exhibit D.



               (d)      Material Adverse Effect. No Company Material Adverse Effect shall have occurred since the
date of this Agreement and be continuing.



               (e)      Consents. (i) All required approvals or consents of any Governmental Entity (with such
permitted exceptions as are set forth on Part 8.3(e) of the Parent Disclosure Schedule) or other
person in connection with the Merger and the consummation of the other transactions contemplated
hereby, including, without limitation, that of each person and entity identified on Part 8.3(e) of
the Parent Disclosure Schedule (the “Required Consents”), shall have been obtained (and all
relevant statutory, regulatory or other governmental waiting periods, shall have expired, with such
permitted exceptions as are set forth on Part 8.3(e) of the Parent Disclosure Schedule) and (ii)
all such approvals and consents which have been obtained shall be on terms that are not reasonably
likely, directly or indirectly, to result in a Company Material Adverse Effect.



               (f)      Dissenters’ Rights. As of the Closing Date, the aggregate number of Dissenting Shares
shall not exceed five percent (5%) of the number of issued and outstanding shares of Company
Capital Stock (on an as converted to common stock basis).



               (g)      Escrow Agreement. The Stockholder Representative and the Escrow Agent shall have executed
and delivered the Escrow Agreement.



               (h)      Tax Certificate. The Target Company shall have delivered to Parent a certificate that
meets the requirements of Sections 1.1445-2(c)(3) and 1.897-2(h) of the Treasury Regulations,
certifying that the Company is not and has not been a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.



               (i)      Employment Agreements. The employees of the Company described in Part 8.3(i) of the
Company Disclosure Schedule, including those who executed, contemporaneously with the execution and
delivery of this Agreement, an offer letter from Parent setting forth the terms of his continued
employment by the Company following the Closing (each a “Key Employee”) shall remain employed by
the Company and no such Key



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Employee shall have notified Parent or the Company of his or her intention to terminate such
employment or not to accept employment by Parent following the Closing.



               (j)      Matters Relating to Convertible Notes and Warrants. The Company and the holders of those
certain Convertible Promissory Notes and Company Warrants described therein shall have executed and
delivered to the Company an agreement or agreements in the form or forms attached as Exhibit
E hereto, providing for the acceleration of certain of such Company Warrants and the agreement
of such holders to elect the redemption of such Convertible Promissory Notes and to exercise such
Company Warrants, as the case may be, immediately prior to the Effective Time (each a “Note and
Warrant Amendment and Exercise Agreement”), and all such Company Warrants that are subject to such
agreements shall have been converted or exercised, as the case may be, in accordance with the
applicable Note and Warrant Amendment and Exercise Agreement.



               (k)      Consent of Company Auditors. The Company Auditors shall have executed and delivered or
stated in writing that they are prepared to execute and deliver their consent to the incorporation
by reference in any registration statement of Parent of their audit opinion on the consolidated
financial statements of the Company as of June 30, 2006 and 2007 and for the fiscal years then
ended, which consent will be filed with the Securities and Exchange Commission as part of Parent’s
Current Report on Form 8-K disclosing the consummation of the Merger and, if required by law, may
be included in any other current and periodic report filed by Parent with the Securities and
Exchange Commission.



               (l)      Patent Assignment. Bruce D’Ambrosio shall have executed and delivered to the Company an
assignment, in form and substance acceptable to Parent, of U.S. patent application, serial no.
11/543,728, Tracking Methods and Systems that Employ Bayesian Networks.



               (m)      Termination of Certain Consulting Agreements. Each agreement specified in Part
2.2(b)(4),(5), (6), (7), and (8) of the Company Disclosure Schedule shall have been terminated
without liability on the part of the Company.



Article 9

Termination, Amendment and Waiver




     9.1      Termination. This Agreement may be terminated at any time prior to the Effective Time, whether
before or after the Required Stockholder Vote for the adoption and approval of this Agreement and
the Merger has been obtained:



               (a)      by mutual written consent executed by a duly authorized officer of Parent and the Company;



               (b)      by either the Company or Parent if the Merger shall not have been consummated by March 31,
2008 for any reason; provided, however, that the right to terminate this Agreement under this
Section 9.1(b) shall not be available to any party whose action or



-62-









 







failure to act has been a principal cause of or resulted in the failure of the Merger to occur
on or before such date and such action or failure to act constitutes a breach of this Agreement;



               (c)      by either the Company or Parent if a Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, which order, decree, ruling or other
action is final and nonappealable;



               (d)      by the Company, upon a breach of any representation, warranty, covenant or agreement on
the part of Parent set forth in this Agreement, or if any representation or warranty of Parent
shall have become untrue, in either case such that the conditions set forth in Section 8.2(a) or
Section 8.2(b) would not be satisfied, provided that if such inaccuracy in Parent’s representations
and warranties or breach by Parent is curable by Parent, then the Company may not terminate this
Agreement under this Section 9.1(d) for 30 days after delivery of written notice from the Company
to Parent of such breach and intent to terminate, provided Parent continues to exercise
commercially reasonable efforts to cure such breach (it being understood that the Company may not
terminate this Agreement pursuant to this paragraph (d) if such breach by Parent is cured during
such 30-day period, or if the Company shall have materially breached this Agreement); or



               (e)      by Parent, upon a breach of any representation, warranty, covenant or agreement on the
part of the Company set forth in this Agreement, or if any representation or warranty of the
Company shall have become untrue, in either case such that the conditions set forth in Section
8.3(a) or Section 8.3(b) would not be satisfied, provided that if such inaccuracy in the Company’s
representations and warranties or breach by the Company is curable by the Company, then Parent may
not terminate this Agreement under this Section 9.1(e) for 30 days after delivery of written notice
from Parent to the Company of such breach, and intent to terminate, provided the Company continues
to exercise commercially reasonable efforts to cure such breach (it being understood that Parent
may not terminate this Agreement pursuant to this paragraph (e) if such breach by the Company is
cured during such 30-day period, or if Parent shall have materially breached this Agreement).



     9.2      Notice of Termination; Effect of Termination. Any proper termination of this Agreement under
Section 9.1 will be effective immediately upon the delivery of written notice of the terminating
party to the other parties hereto. In the event of the termination of this Agreement as provided
in Section 9.1, this Agreement shall be of no further force or effect, and all further obligations
of the parties shall terminate without further liability of any such party, except (i) as set forth
in this Section 9.2, Section 9.3 and Article 10, each of which shall survive the termination of
this Agreement, and (ii) nothing herein shall relieve any party from liability for any willful
breach of this Agreement. No termination of this Agreement shall affect the obligations of the
parties contained in the Confidentiality Agreement, all of which obligations shall survive
termination of this Agreement in accordance with their terms.



     9.3      Fees and Expenses. Except as set forth in Section 1.10, all fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses whether or not the Merger is consummated.



-63-









 





     9.4      Amendment. Subject to applicable law, this Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of Parent, the Company and
the Stockholder Representative.



     9.5      Extension; Waiver. At any time prior to the Effective Time any party hereto may, to the extent
legally allowed, (i) extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and warranties made to
such party contained herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. Delay in exercising any right
under this Agreement shall not constitute a waiver of such right.



Article 10

General Provisions




     10.1    Notices. All notices and other communications hereunder shall be in writing and shall be deemed
given upon delivery either personally or by commercial delivery service, or sent via facsimile
(receipt confirmed) to the parties at the following addresses or facsimile numbers (or at such
other address or facsimile numbers for a party as shall be specified by like notice):



	 	 	 
	(a)

	 	if to Parent or Merger Sub, to:
	 
	 	 
	 

	 	Art Technology Group, Inc.
	 

	 	One Main Street
	 

	 	Cambridge, MA 02142
	 

	 	Facsimile: (617) 386-1142
	 

	 	Attention: Chief Executive Officer
	 
	 	 
	 

	 	with a copy to:
	 
	 	 
	 

	 	Foley Hoag llp
	 

	 	Seaport World Trade Center West
	 

	 	155 Seaport Boulevard
	 

	 	Boston, Massachusetts 02210
	 

	 	Facsimile: (617) 832-7000
	 

	 	Attention: John D. Patterson, Jr. and Robert W. Sweet, Jr.
	 
	 	 
	(b)

	 	if to Company, to:
	 
	 	 
	 

	 	eShopperTools.com Inc.
	 

	 	1201 Western Avenue, Suite 400
	 

	 	Seattle, Washington 98101
	 

	 	Facsimile: (206) 903-8512
	 

	 	Attention: Chief Executive Officer






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	 	with a copy to:
	 
	 	 
	 

	 	Davis Wright Tremaine llp
	 

	 	1201 Third Avenue, Suite 2200
	 

	 	Seattle, Washington 98101-3045
	 

	 	Fax: (206) 757-7700
	 

	 	Attention: Jacob Heth and Stuart Campbell
	 
	 	 
	(c)

	 	if to the Stockholder Representative:
	 
	 	 
	 

	 	Cedar Grove Investments LLC
	 

	 	1000 Second Avenue #1200
	 

	 	Seattle, WA 98104
	 

	 	Fax: 206-332-1201
	 

	 	Attention: Mr. Scott Anderson






     10.2    Interpretation. When a reference is made in this Agreement to Exhibits, such reference shall be to
an Exhibit to this Agreement unless otherwise indicated. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise
indicated. The words “include,” “includes” and “including” when used herein shall be deemed in
each case to be followed by the words “without limitation.” The table of contents and headings
contained in this Agreement are only for reference purposes and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is made herein to “the business of” an
entity, such reference shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall be deemed to include
all direct and indirect subsidiaries of such entity. Reference to an agreement herein is to such
agreement as amended in accordance with its terms up to the date hereof. Reference to a statute
herein is to such statute, as amended.



     10.3    Counterparts; Facsimile. This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart. For purposes of this Agreement, a document (or
signature page thereto) signed and transmitted by facsimile machine, telecopier or electronic mail
is to be treated as an original document. The signature of any party thereon, for purposes hereof,
is to be considered as an original signature, and the document transmitted is to be considered to
have the same binding effect as an original signature on an original document. At the request of
any party, any facsimile, telecopy or scanned document is to be re-executed in original form by the
parties who executed the facsimile, telecopy or scanned document. No party may raise the use of a
facsimile machine, telecopier or electronic mail or the fact that any signature was transmitted
through the use of a facsimile, telecopier or electronic mail as a defense to the enforcement of
this Agreement or any amendment or other document executed in compliance with this Agreement.



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     10.4      Entire Agreement; Third Party Beneficiaries. This Agreement, its Exhibits and the documents and
instruments and other agreements among the parties hereto as contemplated by or referred to herein,
including the Company Disclosure Schedule and the Parent Disclosure Schedule (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement shall continue in
full force and effect until the Closing and shall survive any termination of this Agreement; and
(b) are not intended to confer upon any other person any rights or remedies hereunder. Without
limiting the generality of the foregoing, the parties hereto acknowledge that no party hereto
makes, and each hereby disclaims, any representations or warranties, express or implied, by such
party other than as expressly set forth herein or in any other Transaction Documents.



     10.5      Severability. In the event that any provision of this Agreement or the application thereof becomes
or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or unenforceable provision.



     10.6      Other Remedies; Specific Performance; Fees.



                 (a)      Except as otherwise provided herein, any and all remedies herein expressly conferred upon
a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or
by law or equity upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the parties shall be
entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof [in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are entitled at law or in
equity].



                 (b)      If any action, suit or other proceeding (whether at law, in equity or otherwise) is
instituted concerning or arising out of this Agreement or any transaction contemplated hereunder,
the prevailing party shall recover, in addition to any other remedy granted to such party therein,
all such party’s costs and attorneys fees incurred in connection with the prosecution or defense of
such action, suit or other proceeding.



     10.7      Governing Law. This Agreement shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof.



     10.8      Rules of Construction. The parties hereto agree that they have been represented by counsel during
the negotiation and execution of this Agreement and, therefore, waive the



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application of any law, regulation, holding or rule of construction providing that ambiguities in
an agreement or other document will be construed against the party drafting such agreement or
document.



     10.9      Assignment. No party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written consent of the other parties hereto. Subject to
the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Any purported assignment in
violation of this Section 10.9 shall be void.



     10.10    Waiver of Jury Trial. EACH OF PARENT, THE COMPANY AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE
COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.



*    *    *    *    *




-67-









 





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



	 	 	 	 	 
	 	Art Technology Group, Inc.

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



	 	 	 	 	 
	 	Einstein Acquisition Corp.

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



	 	 	 	 	 
	 	eShopperTools.com, Inc.

 	 
	 	 	/s/
Todd Humphrey
 	 
	 	By: 	Todd Humphrey	 
	 	Title: 	Chief Executive Officer	 
	 	 	 	 



	 	 	 	 	 
	 	Stockholder Representative

 	 
	 	/s/ Scott Anderson
 	 
	 	Scott Anderson 	 
	 	 	 
	 








 









 











	 	 	 	 	 
	 	PRINCIPAL STOCKHOLDERS:

 	 
	 	
/s/ Michael P. Wellman	 
	 	Name  	 



	 	 	 	 	 
	 	 	 
	 	By:  	
 Michael P. Wellman	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	 

 	 
	 	
/s/ Andreas S. Weigend	 
	 	Name  	 



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



	 	 	 	 	 
	 	 

 	 
	 	
/s/ Robust Decisions Inc.	 
	 	Name  	 



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



	 	 	 	 	 
	 	 

 	 
	 	
/s/ David G. Ullman	 
	 	Name  	 



	 	 	 	 	 
	 	 	 
	 	By:  	
 David G. Ullman	 
	 	 	Name:  		 
	 	 	Title:  		 
	 




	 	 	 	 	 
	 	 

 	 
	 	
/s/ Peter Norvig	 
	 	Name  	 



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



	 	 	 	 	 
	 	 

 	 
	 	
/s/ Jan Hendrickson	 
	 	Name  	 



	 	 	 	 	 
	 	 	 
	 	By:  	
 Jan Hendrickson	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




	 	 	 	 	 
	 	 

 	 
	 	
/s/ John R. Garrett	 
	 	Name  	 



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



	 	 	 	 	 
	 	 

 	 
	 	
/s/ Craig Kinzer	 
	 	Name  	 



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




	 	 	 	 	 
	 	 

 	 
	 	
/s/ Craig Kinzer	 
	 	Name  	 



	 	 	 	 	 
	 	 	 
	 	By:  	
 Craig Kinzer	 
	 	 	Name:  	Craig Kinzer	 
	 	 	Title:  	 	 
	 




	 	 	 	 	 
	 	 

 	 
	 	
/s/ Robert M. Arnold	 
	 	Name  	 



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




	 	 	 	 	 
	 	 

 	 
	 	
/s/ Jane L. Jorgensen Living Trust	 
	 	Name  	 



	 	 	 	 	 
	 	 	 
	 	By:  	
 Jane Jorgensen	 
	 	 	Name:  	Jane Jorgensen	 
	 	 	Title:  	Trustee	 
	 



	 	 	 	 	 
	 	 

 	 
	 	
/s/ Robert D. Rector	 
	 	Name  	 



	 	 	 	 	 
	 	 	 
	 	By:  	
 Robert D. Rector	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	 

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



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

























Principal Stockholder
Signature Page to Agreement and Plan of Merger


 









 








List of Exhibits




	 	 	 
	Schedule I

	 	Principal Stockholders
	 
	 	 
	Schedule II

	 	Merger Consideration
	 
	 	 
	Exhibit A

	 	Form of Voting Agreement
	 
	 	 
	Exhibit B

	 	Escrow Agreement
	 
	 	 
	Exhibit C

	 	Transmittal Certificate
	 
	 	 
	Exhibit D

	 	Company Legal Opinion
	 
	 	 
	Exhibit E

	 	Note and Warrant Amendment and Exercise Agreements