THIS AGREEMENT AND PLAN OF MERGER (this “**Agreement**”) is made and entered into as of December30, 2009 by and among Shanda Games Limited, a Cayman Islands company (“**Parent**”), M AcquisitionCorporation, a Delaware corporation and a wholly-owned subsidiary of Parent (“**Sub**”), Mochi Media,Inc., a Delaware corporation (the “**Company**”), Jameson Hsu and Bob Ippolito (each a “**Founder**,” andcollectively, the “**Founders**”), with respect to **Article VIII, Article IX**and **Article X**hereof only,Shasta Ventures II, L.P. as shareholder representative (the “**Shareholder Representative**”) and, onlyas to **Article VIII**, **Article IX**and **Article X**, US Bank National Association, as Escrow Agent (the“***Escrow Agent***”).**RECITALS**A. The Boards of Directors of each of Parent, Sub and the Company believe it is advisable andin the best interests of each company and its respective shareholders that Parent acquire theCompany through the statutory merger of Sub with and into the Company (the “**Merger**”), and, infurtherance thereof, have approved this Agreement and the Merger.B. Pursuant to the Merger, among other things, and subject to the terms and conditions of thisAgreement, all of the issued and outstanding shares of Company Common Stock (as defined below) andall of the issued and outstanding shares of Company Preferred Stock shall be converted into theright to receive, upon the terms set forth herein, an amount in cash.C. The Company and the Founders, on the one hand, and Parent and Sub, on the other hand,desire to make certain representations, warranties, covenants and other agreements in connectionwith the Merger.D. A portion of the consideration otherwise payable by Parent in connection with the Mergershall be placed into escrow by Parent as partial security for the indemnification obligations setforth in this Agreement.E. Concurrently with the execution and delivery of this Agreement, each of the Founders isentering into a Stock Consideration Agreement substantially in the form attached hereto as **ExhibitA**(collectively, the “**Stock Consideration Agreements**”), pursuant to which each Founder is agreeing,among other things, (i) to receive Parent Ordinary Shares in substitution for a portion of thecash consideration they would otherwise receive pursuant to **Section 2.****6(a)** under this Agreement(such shares, the “**Founder Stock Consideration**”) and (ii) to certain terms relating to the vestingschedule of a portion of the Founder Stock Consideration such Founder receives at Closing.F. Immediately following the execution of this Agreement, the Company shall obtain theirrevocable approval of the Merger, this Agreement and the transactions contemplated hereby by suchholders of the issued and outstanding shares of Company Capital Stock (as defined below),including, without limitation, the individuals set forth on **Schedule 6.6(a)**, sufficient to adoptand approve this Agreement and approve the Merger as required under (1) Delaware Law (as definedbelow) and (2) the Company’s certificate of incorporation and bylaws (the “**Initial ShareholderApproval**”).
 
 

 
NOW, THEREFORE, in consideration of the mutual agreements, covenants and other premises setforth herein, the mutual benefits to be gained by the performance thereof, and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted,the parties hereby agree as follows:**ARTICLE I**1.1 ***Certain Defined Terms***. For all purposes of and under this Agreement, the following capitalized terms shall have thefollowing respective meanings:(a) “**Action or Proceeding**” shall mean any action, suit, complaint, petition, investigation,proceeding, arbitration, litigation or investigation, audit or other proceeding, whether civil orcriminal, in law or in equity, or before any arbitrator or Governmental Entity.(b) “**ADSs**” shall mean the American Depositary Shares of Parent tradable upon the Nasdaq GlobalSelect Market (“**Nasdaq**”).(c) “**Affiliate**” shall mean, as applied to any Person, (i) any other Person directly orindirectly controlling, controlled by or under common control with, that Person, (ii) any otherPerson that owns or controls ten percent (10%) or more of the equity securities (including anyequity securities issuable upon the exercise of any option or convertible security) of that Personor any of its Affiliates, and (iii) as to a corporation, each director and officer thereof, and asto a partnership, each general partner thereof, and as to a limited liability company, eachmanaging member or similarly authorized person thereof (including officers), and as to any otherentity, each Person exercising similar authority to those of a director or officer of acorporation. For the purposes of this definition, “control” (including with correlative meanings,the terms “controlling”, “controlled by”, and “under common control with”) as applied to anyPerson, means the possession, directly or indirectly, of the power to direct or cause the directionof the management and policies of that Person, whether through ownership of voting securities or bycontract or otherwise.(d) “**Aggregate Consideration Amount**” shall mean an amount equal to (i) Eighty Million UnitedStates Dollars ($80,000,000) *minus*(ii) the amount of the Excess Third Party Expenses identified asof the time of the Closing and *minus*(iii) the Restricted Stock Unit Value.(e) “**Approval**” shall mean any approval, authorization, consent, permit, qualification orregistration, or any waiver of any of the foregoing, required to be obtained from or made with, orany notice, statement or other communication required to be filed with or delivered to, anyGovernmental Entity or any other Person.(f) “**Assets and Properties**” shall mean, with respect to any Person, all assets and propertiesof every kind, nature, character and description (whether real, personal or mixed, whether tangibleor intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated),including the goodwill related thereto, operated, owned, licensed or leased by such Person,including cash, cash equivalents, investment assets, accounts and notes receivable, chattel paper,documents, instruments, general intangibles, real estate, equipment, inventory, goods andIntellectual Property.(g) “**Associate**” shall mean, with respect to any Person, any corporation or other businessorganization of which such Person is an officer or partner or is the beneficial owner, directly orindirectly, of ten percent (10%) or more of the equity securities, any trust or estate in whichsuch Person has a substantial beneficial interest or as to which such Person serves as a trustee orin a similar capacity and any relative or spouse of such Person, or any relative of such spouse,who has the same home as such Person.(h) “**Business Day**” shall mean each day that is not a Saturday, Sunday or other day on whichParent is closed for business or banking institutions located in either of (i) San Francisco,California, United States or (ii) Shanghai, People’s Republic of China are authorized or obligatedby Law or Order to close.
 
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(i) “**COBRA**” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.(j) “**Company Capital Stock**” shall mean the Company Common Stock, the Company Preferred Stockand all other shares of capital stock, if any, of the Company, taken together.(k) “**Company Common Stock**” shall mean shares of common stock, par value $0.00001 per share, ofthe Company.(l) “**Company Employee Plan**” shall mean any plan, program, policy, practice, contract,agreement or other arrangement providing for compensation, severance, termination pay, deferredcompensation, performance awards, stock or stock-related awards, welfare benefits, fringe benefitsor other employee benefits or remuneration of any kind, whether written, unwritten or otherwise,funded or unfunded, including each “employee benefit plan,” within the meaning of Section 3(3) ofERISA which is maintained, contributed to, or required to be contributed to, by the Company or anyERISA Affiliate for the benefit of any Employee, or with respect to which the Company or any ERISAAffiliate has or may have any liability or obligation and any International Employee Plan butexcluding any Employee Agreements.(m) “**Company Financials**” shall mean the Unaudited Financial Statements and the InterimFinancial Statements.(n) “**Company Intellectual Property**” shall mean any Intellectual Property owned by the Company.(o) “**Company Material Adverse Effect**” shall mean any change, event, effect, occurrence orcircumstance that is materially adverse to the business, assets, financial condition or results ofoperations of the Company taken as a whole, except for any such changes, events, effects,occurrences or circumstances primarily resulting from (i) changes affecting the United States orworld economy generally that do not disproportionately impact the Company, (ii) changes or eventsaffecting the industry in which the Company operates generally that do not disproportionatelyimpact the Company relative to other participants in the Company’s industry, (iii) changes in U.S.GAAP or international accounting standards, (iv) changes caused by hostilities, acts of terrorismor war, or any material escalation of any such hostilities, acts of terrorism or war existing onthe date hereof that do not disproportionately impact the Company or (vi) the announcement orpendency of the Merger.(p) “**Company Options**” shall mean all issued and outstanding options to purchase or otherwiseacquire Company Capital Stock listed on **Section 3.****3(c)****of the Disclosure Schedule**held by anyemployee, consultant or director of the Company.(q) “**Company Preferred Stock**” shall mean shares of preferred stock, par value $0.00001 pershare, of the Company.(r) “**Contract**” shall mean any binding written or oral mortgage, indenture, lease, contract,covenant, plan, insurance policy or other agreement, instrument, arrangement, understanding orcommitment, permit, concession, franchise or license.(s) “**DOL**” shall mean the United States Department of Labor.
 
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(t) “**Eligible Stock**” shall mean each outstanding share of Company Common Stock and CompanyPreferred Stock issued and outstanding immediately prior to the Effective Time (other thanDissenting Shares).(u) “**Employee**” shall mean any current or former employee, consultant, independent contractoror director of the Company or any ERISA Affiliate.(v) “**Employee Agreement**” shall mean each management, employment, severance, separation,consulting, contractor, relocation, repatriation, expatriation, loan, visa, work permit or otheragreement, or contract (including, any offer letter or any agreement providing for acceleration ofCompany Options) between the Company or any ERISA Affiliate and any Employee, and which the Companyor any ERISA Affiliate has or may have any liability or obligation.(w) “**Environment**” shall mean air, surface water, ground water, or land, including land surfaceor subsurface, and any receptors such as persons, wildlife, fish, biota or other natural resources.(x) “**Environmental Law**” shall mean any federal, state, local or foreign environmental, healthand safety or other Law relating to of Hazardous Materials, including the Comprehensive,Environmental Response Compensation and Liability Act, the Clean Air Act, the Federal WaterPollution Control Act, the Solid Waste Disposal Act, the Federal Insecticide, Fungicide andRodenticide Act, and the California Safe Drinking Water and Toxic Enforcement Act.(y) “**Equity Equivalents**” shall mean any securities that, by its terms, is or may beexercisable, convertible or exchangeable for or into Company Common Stock, Company Preferred Stockor any other security of the Company.(z) “**ERISA Affiliate**” shall mean any other current or former Person or entity under commoncontrol with the Company within the meaning of Section 414(b), (c), (m) or (o) of the InternalRevenue Code, and the regulations issued thereunder.(aa) “**ERISA**” shall mean the Employee Retirement Income Security Act of 1974, as amended, andthe rules and regulations promulgated thereunder.(bb) “**Escrow Amount**” shall mean, with respect to each share of Eligible Stock held by aShareholder, an amount equal to the quotient obtained by *dividing*(i) the Total Escrow Amount, by(ii) the number of shares of Eligible Stock issued and outstanding immediately prior to theEffective Time.(cc) “**Exchange Act**” shall mean the United States Securities Exchange Act of 1933, as amended(dd) “**FMLA**” shall mean the Family Medical Leave Act of 1993, as amended.(ee) “**GAAP**” shall mean generally accepted accounting principles in the United States, as ineffect from time to time.(ff) “**Governmental Entity**” shall mean any court, tribunal, arbitrator, authority, agency,bureau, board, commission, department, official or other instrumentality of the United States, anyforeign country or any domestic or foreign state, county, city or other political subdivision.
 
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(gg) “**Hazardous Material**” shall mean: (i) any chemical, material, substance or wasteincluding, containing or constituting petroleum or petroleum products, solvents (includingchlorinated solvents), nuclear or radioactive materials, asbestos in any form that is or couldbecome friable, radon, lead-based paint, urea formaldehyde foam insulation or polychlorinatedbiphenyls; (ii) any chemicals, materials, substances or wastes which are now defined as or includedin the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremelyhazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants” or wordsof similar import under any Environmental Law; or (iii) any other chemical, material, substance orwaste which is regulated by any Governmental Entity or which could constitute a nuisance.(hh) “**HIPAA**” shall mean the Health Insurance Portability and Accountability Act of 1996, asamended.(ii) “**Holdback Shares**” shall have the meaning set forth in the Stock Consideration Agreements.(jj) **“Income Tax**” shall mean: (i) any income, alternative or add-on minimum tax, gross income,gross receipts, franchise, profits, including estimated taxes relating to any of the foregoing, orother similar tax or other like assessment or charge of similar kind whatsoever, excluding anyOther Tax, together with any interest and any penalty, addition to tax or additional amount imposedby any Taxing Authority responsible for the imposition of any such tax (domestic or foreign); (ii)any Liability of a Person for the payment of any taxes, interest, penalty, addition to tax or likeadditional amount resulting from the application of Treas. Reg. §1.1502-6 or comparable provisionsof any Taxing Authority in respect of a Tax Return or any Contract; or (iii) any Liability to anyPerson for any amount described in the immediately preceding clause (i) or (ii) as a result of anexpress or implied obligation to indemnify such Person, including pursuant to a tax sharing orallocation agreement.(kk) “**Indebtedness**” shall mean, with respect to any Person, all obligations of such Person (i)for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) forthe deferred purchase price of goods or services (other than trade payables or accruals incurred inthe ordinary course of business), (iv) under capital leases, and (v) in the nature of a guaranteeof any of the obligations described in clauses (i) through (iv) above of any other Person.(ll) “**Intellectual Property**” shall mean all trademarks and trademark rights, trade names andtrade name rights, service marks and service mark rights, service names and service name rights,patents and patent rights, utility models and utility model rights, copyrights, mask work rights,brand names, trade dress, product designs, product packaging, business and product names, logos,slogans, rights of publicity, trade secrets, inventions (whether patentable or not), inventiondisclosures, improvements, processes, formulae, industrial models, processes, designs,specifications, technology, methodologies, computer software (including all source code and objectcode), firmware, development tools, flow charts, annotations, all web addresses, sites and domainnames, all data bases and data collections and all rights therein, any other confidential andproprietary right or information, whether or not subject to statutory registration, and all relatedtechnical information, manufacturing, engineering and technical drawings, know-how and all pendingapplications for and registrations of (and all rights to apply for and register) patents, utilitymodels, trademarks, service marks and copyrights, and the right to sue for past infringement, ifany, in connection with any of the foregoing, and all documents, disks, records, files and othermedia on which any of the foregoing is stored.(mm) “**Interim Financial Statement Date**” shall mean November 30, 2009.
 
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(nn) “**Interim Financial Statements**” shall mean the unaudited balance sheet of the Company asof the Interim Financial Statement Date, and the related unaudited statements of operations andcash flows for the eleven-month period ended on such date.(oo) “**Internal Revenue Code**” shall mean the Internal Revenue Code of 1986, as amended, and therules and regulations promulgated thereunder.(pp) “**Internal Revenue Service**” shall mean the United States Internal Revenue Service.(qq) “**International Employee Plan**” shall mean each Company Employee Plan or Employee Agreementthat has been adopted or maintained by the Company or any ERISA Affiliate, whether formally orinformally, or with respect to which the Company or any ERISA Affiliate will or may have anyliability, for the benefit of Employees who perform services outside the United States.(rr) “**Investment Assets**” shall mean all debentures, notes and other evidences of Indebtedness,stocks, securities (including rights to purchase and securities convertible into or exchangeablefor other securities), interests in joint ventures and general and limited partnerships, mortgageloans and other investment or portfolio assets owned of record or beneficially by the Company.(ss) “**knowledge” or “known**” shall mean, with respect to the Company, the actual knowledge ofJameson Hsu, Bob Ippolito, Justin Wong and Josh Larson after reasonable inquiry of those personsemployed by the Company with administrative or operational responsibility for such matter.(tt) “**Law**” or “**Laws**” shall mean any law, statute, Order, decree, consent decree, judgment,rule, regulation, ordinance or other pronouncement having the effect of law whether in the UnitedStates, any foreign country, or any domestic or foreign state, county, city or other politicalsubdivision or of any Governmental Entity.(uu) “**Liability**” shall mean all Indebtedness, obligations and other liabilities of a Person ofany kind, character or description, whether know or unknown, absolute or contingent, accrued orunaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint orseveral, due or to become due, vested or unvested, executory, determined, determinable orotherwise, and whether or not the same is required to be accrued on the financial statements ofsuch Person.(vv) “**License**” shall mean any contract, commitment, agreement or other arrangement that grantsa Person the right to use or otherwise enjoy the benefits of any Intellectual Property (includingany covenants not to sue with respect to any Intellectual Property).(ww) “**Lien**” shall mean any lien, pledge, charge, claim, mortgage, security interest or otherencumbrance of any sort.(xx) “**Open Source Software**” shall mean any software, program, module, code, library, database,driver or similar component (or portion thereof) (“**Software**”) that meets one or more of thefollowing criteria: (i) has been distributed, contributed or otherwise transferred into the publicdomain, either voluntarily, involuntarily, by the operation of Law or otherwise; (ii) was formerlygoverned by intellectual property rights, all or some of which have been invalidated, terminated,expired, waived or otherwise lapsed; (iii) is subject to, distributed, transmitted, licensed orotherwise made available under any so-called “public license,” “open source license,” “freelicense,” “industry standard license,” intellectual property pool license” or similar license, theintention of which is to permit the public use, modification, distribution, incorporation and/orexploitation of the Software without conveying an exclusive or proprietary interest in suchlicensedSoftware (although certain other conditions may be imposed by such license); or (iv) subjectto, distributed, transmitted, licensed or otherwise made available under any of the followinglicenses: GNU General Public License, GNU Library or “Lesser” Public License, BSD license, MITlicense, Mozilla Public License, IBM Public License, Apache Software License, Sun IndustryStandards Source License, Intel Open Source License, Apple Public Source License, or anysubstantially similar license, or any license that has been approved by the Open Source Initiative.
 
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(yy) “**Option Exchange Ratio**” shall mean the quotient (rounded to the fourth decimal point)obtained by dividing (A) the Per Share Amount by (B) the Trading Price.(zz) “**Option Plan**” shall mean the Company’s 2007 Stock Plan, as amended to date.(aaa) “**Order**” shall mean any writ, judgment, decree, injunction or similar order of anyGovernmental Entity (in each such case whether preliminary or final).(bbb) “**Other Tax**” shall mean (i) any sales, use, ad valorem, business license, withholding,payroll, employment, excise, stamp, transfer, recording, occupation, premium, property, valueadded, custom duty, severance, windfall profit or license tax, governmental fee or other similarassessment or charge, together with any interest and any penalty, addition to tax or additionalamount imposed by any Taxing Authority responsible for the imposition of any such tax (domestic orforeign), or (ii) any Liability to any Person for amounts described in clause (i) above as a resultof an express or implied obligation to indemnify such Person, including pursuant to a tax sharingor allocation agreement.(ccc) “**Parent Material Adverse Effect**” shall mean any change, event, effect, occurrence orcircumstance that is materially adverse to the business, assets, financial condition or results ofoperations of Parent taken as a whole, except for any such changes, events, effects, occurrences orcircumstances resulting primarily from (i) changes affecting the United States or world economygenerally that do not disproportionately impact Parent, (ii) changes or events affecting theindustry in which Parent operates generally that do not disproportionately impact Parent relativeto other participants in Parent’s industry, (iii) changes in U.S. GAAP or international accountingstandards, (iv) changes caused by hostilities, acts of terrorism or war, or any material escalationof any such hostilities, acts of terrorism or war existing on the date hereof that do notdisproportionately impact Parent or (vi) the announcement or pendency of the Merger.(ddd) “**Parent Ordinary Shares**” shall mean the Class A ordinary shares, par value $0.01 pershare, of Parent.(eee) “**PBGC**” shall mean the United States Pension Benefit Guaranty Corporation.(fff) “**Pension Plan**” shall mean each Company Employee Plan that is an “employee pensionbenefit plan,” within the meaning of Section 3(2) of ERISA.(ggg) “**Per Share Amount**” shall mean an amount equal to the Aggregate Consideration Amountdivided by the Total Outstanding Shares.(hhh) “**Permitted Liens**” shall mean (i) statutory liens for taxes that are not yet due andpayable, (ii) statutory liens to secure obligations to landlords, lessors or renters under leasesor rental agreements, (iii) deposits or pledges made in connection with, or to secure payment of,workers’ compensation, unemployment insurance or similar programs mandated by applicable Law, (iv)statutory liens in favor of carriers, warehousemen, mechanics and materialmen, to secure claims forlabor, materials orsupplies and other like liens, and (v) liens in favor of customs and revenue authoritiesarising as a matter of applicable Law to secure payments of customs duties in connection with theimportation of goods.
 
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(iii) “**Person**” shall mean an individual or entity, including a partnership, a limitedliability company, a corporation, an association, a joint stock company, a trust, a joint venture,an unincorporated organization, or a Governmental Entity (or any department, agency, or politicalsubdivision thereof).(jjj) “**Pro Rata Portion**” shall mean, with respect to each Shareholder (other than aShareholder holding Dissenting Shares who does not effectively withdraw or lose such Shareholder’sdissenter’s rights as contemplated by **Section 2.7**hereof), an amount equal to the quotient of (i)the portion of the Aggregate Consideration Amount payable to such Shareholders in respect ofEligible Stock pursuant to **Section 2.****6(a)** (including, for the avoidance of doubt, for each Founder,the portion of the Aggregate Consideration Amount payable to such Founder that will be settledpursuant to the grant of Parent Ordinary Shares and restricted stock units covering Parent OrdinaryShares (the “**Equity Awards**”) as provided in the Stock Consideration Agreements) divided by theportion of the Aggregate Consideration Amount payable to all Shareholders in respect of EligibleStock pursuant to **Section 2.****6(a)** (including, for the avoidance of doubt, the portion of theAggregate Consideration Amount payable to the Founders that will be settled pursuant to the grantof Parent Ordinary Shares and restricted stock units covering Parent Ordinary Shares as provided inthe Stock Consideration Agreements), in each case excluding such portion of the AggregateConsideration Amount that would otherwise be delivered to Shareholders if they had not effectivelywithdrawn or lost their dissenters’ rights as contemplated by **Section 2.7**hereof.(kkk) “**PTO**” shall mean the United States Patent and Trademark Office.(lll) “**Registered Intellectual Property**” shall mean all United States, international, foreignand other non-United States: (i) patents and patent applications (including provisionalapplications); (ii) registered trademarks and service marks, applications to register trademarksand service marks, intent-to-use applications, other registrations or applications to trademarks orservice marks, or trademarks or service marks in which common law rights are owned or otherwisecontrolled; (iii) registered copyrights and applications for copyright registration; (iv) mask workregistrations and applications to register mask works; and (v) other Intellectual Property that isthe subject of an application, certificate, filing, registration or other document issued by, filedwith, or recorded by, any Governmental Entity.(mmm) “**Release**” shall mean any spilling, leaking, pumping, pouring, emitting, emptying,discharging, injecting, escaping, leaching, dumping or disposing of a Hazardous Material into theEnvironment.(nnn) “**Restricted Stock Unit Value**” shall mean $3,800,000.(ooo) “**SEC**” shall mean the United States Securities and Exchange Commission.(ppp) “**Securities Act**” shall mean the United States Securities Act of 1933, as amended.(qqq) “**Shareholder**” shall mean any holder of any Eligible Stock immediately prior to theEffective Time.(rrr) “**Shareholder Representative Escrow Amount**” shall mean an amount in cash equal to OneHundred Thousand United States Dollars ($100,000).
 
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(sss) “**Site**” shall mean any of the real properties currently or previously owned, leased,occupied, used or operated by the Company, any predecessors of the Company, or any entitiespreviously owned by the Company, including all soil, subsoil, surface waters and groundwater.(ttt) “**Subsidiary**” shall mean any Person, whether or not existing on the date hereof, in whichthe Company or Parent, as the context requires, directly or indirectly through subsidiaries orotherwise, beneficially owns at least fifty percent (50%) of either the equity interest, or votingpower of or in such Person.(uuu) “**Tax Laws**” shall mean the Internal Revenue Code, federal, state, county, local orforeign laws relating to Taxes and any regulations or official administrative pronouncementsreleased thereunder.(vvv) “**Tax Return**” shall mean any return, report, information return, schedule, certificate,statement or other document (including any related or supporting information) filed or required tobe filed with, or, where none is required to be filed with a Taxing Authority, the statement orother document issued by, a Taxing Authority in connection with any Tax.(www) “**Tax**” or “**Taxes**” shall mean Income Taxes and/or Other Taxes, as the context requires.(xxx) “**Taxing Authority**” shall mean any governmental agency, board, bureau, body, departmentor authority of any United States federal, state or local jurisdiction or any foreign jurisdiction,having or purporting to exercise jurisdiction with respect to any Tax.(yyy) “**Total Escrow Amount**” shall mean an amount in cash equal to Eight Million United StatesDollars ($8,000,000).(zzz) “**Total Outstanding Shares**” shall mean the aggregate number of shares of Company CapitalStock plus the maximum aggregate number of such shares issuable upon full exercise, exchange orconversion of all options, warrants and any other rights, whether vested or unvested, convertibleinto, exercisable for or exchangeable for, shares of Company Capital Stock, issued and outstandingimmediately prior to the Effective Time, on an as converted to Company Common Stock basis.(aaaa) “**Trading Price**” shall mean an amount equal to one-half (1/2) of the average closingsale price of one ADS as reported on Nasdaq for the fifteen (15) consecutive trading days ending onthe last trading day prior to the Closing Date (as adjusted as appropriate to reflect any stocksplits, stock dividends, combinations, reorganizations, reclassifications or similar events).(bbbb) “**Unaudited Financial Statements**” shall mean the unaudited consolidated balance sheetsof the Company for each of the fiscal years ended December 31, 2007 and December 31, 2008,respectively, and the related statements of operations, cash flow and stockholders’ equity for eachof the fiscal years then ended.(cccc)“**WARN”**shall mean the Worker Adjustment and Retraining Notification Act.
 
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1.2 ***Interpretations***.(a) When a reference is made in this Agreement to an Exhibit or a Schedule, such referenceshall be to an Exhibit or a Schedule to this Agreement unless otherwise indicated.(b) When a reference is made in this Agreement to an Article or a Section, such referenceshall be to an Article or a Section of this Agreement unless otherwise indicated.(c) The words “include,” “includes” and “including” when used herein shall be deemed in eachcase to be followed by the words “without limitation.”(d) The headings set forth in this Agreement are for reference purposes only and shall notaffect in any way the meaning or interpretation of this Agreement.(e) Unless otherwise specifically provided or the context otherwise requires, all referencesin this Agreement to the Company shall mean and refer to the Company and its direct and indirectSubsidiaries, if any.(f) All references in this Agreement to the Subsidiaries of a Person shall be deemed toinclude all direct and indirect Subsidiaries of such Person.(g) Unless otherwise specifically provided, all references in this Agreement to monetaryamounts or dollars shall mean and refer to United States denominated dollars.**ARTICLE II****THE MERGER**2.1 ***The Merger***. At the Effective Time, and subject to and upon the terms and conditions ofthis Agreement and the applicable provisions of the General Corporation Law of the State ofDelaware (“**Delaware Law**”), Sub shall be merged with and into the Company, the separate corporateexistence of Sub shall cease, and the Company shall continue as the surviving corporation and as awholly-owned subsidiary of Parent. The surviving corporation after the Merger is sometimesreferred to hereinafter as the “**Surviving Corporation**.”2.2 ***Effective Time***. Unless this Agreement is earlier terminated pursuant to **Section 9.1**hereof, the closing of the Merger (the “**Closing**”) will take place as soon as practicable followingthe date upon which all of the conditions set forth in **Article VII**hereof, other than those that bytheir nature may only be satisfied or waived at the Closing, have been satisfied or waived, at theoffices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, at 650 Page Mill Road, PaloAlto, California 94304, U.S.A., unless another time or place is mutually agreed upon in writing byParent and the Company. The date upon which the Closing actually occurs shall be referred toherein as the “**Closing Date**.” On the Closing Date, the parties hereto shall cause the Merger to beconsummated by the filing of a certificate of merger with the Secretary of State of the State ofDelaware (the “**Certificate of Merger**”), in accordance with the applicable provisions under DelawareLaw (the time of the acceptance of such filing by the Secretary of State of the State of Delawareshall be referred to herein as the “**Effective Time**”).
 
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2.3 ***Effect of the Merger***. At the Effective Time, the effect of the Merger shall be as set forth in this Agreement andas provided in the applicable provisions of Delaware Law. Without limiting the generality of theforegoing, and subject thereto, at the Effective Time, all of the property, rights, privileges,powers and franchises of the Company and Sub shall vest in the Surviving Corporation, and alldebts, liabilities and duties of the Company and Sub shall become the debts, liabilities and dutiesof the Surviving Corporation.2.4 ***Certificate of Incorporation and Bylaws***.(a) Unless otherwise determined by Parent prior to the Effective Time, the certificate ofincorporation of the Surviving Corporation shall be amended and restated as of the Effective Timeto be identical to the certificate of incorporation of Sub as in effect immediately prior to theEffective Time, until thereafter amended in accordance with Delaware Law and as provided in suchcertificate of incorporation; *provided, however*, that at the Effective Time, Article I of thecertificate of incorporation of the Surviving Corporation shall be amended and restated in itsentirety to read as follows: “The name of the corporation is Mochi Media, Inc.”(b) Unless otherwise determined by Parent prior to the Effective Time, the bylaws of theSurviving Corporation shall be amended and restated as of the Effective Time to be identical to thebylaws of Sub as in effect immediately prior to the Effective Time, until thereafter amended inaccordance with Delaware Law, and as provided in the certificate of incorporation of the SurvivingCorporation and such bylaws; *provided*, *however*, that any express references to the name of Sub insuch bylaws shall be amended to refer to “Mochi Media, Inc.”2.5 ***Directors and Officers***.(a) ***Directors of Surviving Corporation***. Unless otherwise determined by Parent prior to theEffective Time, the directors of Sub immediately prior to the Effective Time shall be the directorsof the Surviving Corporation immediately after the Effective Time, except that Parent shall removeone such director and shall appoint, effective as of the Effective Time, Jameson Hsu to serve inhis place, each to hold the office of director of the Surviving Corporation in accordance with theprovisions of Delaware Law and the certificate of incorporation and bylaws of the SurvivingCorporation until his or her successor has been duly elected and qualified.(b) ***Officers of Surviving Corporation***. Unless otherwise determined by Parent prior to theEffective Time, the officers of Sub immediately prior to the Effective Time shall be the officersof the Surviving Corporation immediately after the Effective Time, each to hold office inaccordance with the provisions of the bylaws of the Surviving Corporation.2.6 ***Effect of Merger on the Capital Stock of the Constituent Corporations***.(a) ***Effect on Company Capital Stock***. At the Effective Time, by virtue of the Merger andwithout any action on the part of Sub, the Company or the Shareholders, the following shall occur:(i) ***Merger Consideration Available at Closing****.*Subject to the terms set forth in **Sections2.****6(a)(ii)****and 2.8**hereof and, with respect to the Founders, the terms of the Stock ConsiderationAgreements, at the Closing each share of Company Common Stock and each share of Company PreferredStock that constitutes, in each case, Eligible Stock will be cancelled and extinguished and will beconverted automatically into the right to receive, upon surrender of the certificate representingsuch share of Company Common Stock that is Eligible Stock or Company Preferred Stock that isEligible Stock, an amount of cash equal to the Per Share Amount.
 
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(ii) ***Escrow Amount.***At Closing, notwithstanding anything to the contrary set forth in thisAgreement, Parent will (A) withhold from the cash portion of the Aggregate Consideration Amountotherwise payable to each Shareholder such Shareholder’s Pro Rata Portion of the Total EscrowAmount and the Shareholder Representative Escrow Amount, other than the Founders, who, with respectto their Pro Rata Portion of the Total Escrow Amount (but not with respect to their Pro RataPortion of the Shareholder Representative Escrow Amount which they will deliver in accordance withthe following clause (C)) will contribute their Holdback Shares (as defined in the StockConsideration Agreement) to be held by the Secretary of Parent as security for the indemnificationobligations set forth in **Article VIII**(such cash amount, with respect to the Total Escrow Amount,the “**Cash Escrow Amount**”) and (B) will deliver such Cash Escrow Amount to the Escrow Agent to beheld by the Escrow Agent as security for the indemnification obligations under **Article VIII**and (C)will deliver their respective Pro Rata Portions of the Shareholder Representative Escrow Amount tothe Shareholder Representative who agrees to use such funds solely to pay ShareholderRepresentative Expenses and further agrees to return any portion of the Shareholder RepresentativeEscrow Amount not used to pay Shareholder Representative Expenses to the Shareholders, pro ratabased upon their contributions thereto upon the payment of all amounts from the Escrow Fund. Priorto the Effective Time, the Shareholder Representative may arrange for a third party financialinstitution (including an escrow agent) to hold the Shareholder Representative Escrow Amount inaccordance with the preceding sentences and, upon doing so, may (i) direct that the ShareholderRepresentative Escrow Amount be delivered to such financial institution rather than the ShareholderRepresentative as well as (ii) pay any expenses incurred in arranging for such third partyfinancial institution to hold and disburse the Shareholder Representative Escrow Amount from theShareholder Representative Escrow Amount. Any cash and all interest and other amounts earned onthe Cash Escrow Amount are referred to herein as the “**Escrow Fund**.” Distributions of any cash fromthe Escrow Fund shall be governed by the terms set forth in **Article VIII**. The adoption of thisAgreement and the approval of the Merger by the Shareholders shall constitute approval of all thearrangements relating to the Escrow Fund and the Shareholder Representative Escrow Amount,including, without limitation, the appointment of the Shareholder Representative.(iii) ***Limitation***. Notwithstanding anything set forth in this **Section 2.6(a)**, any unexpiredand unexercised Company Options shall be treated as provided for in **Section 2.****6(b)** hereof, anyCompany Capital Stock held by the Company shall be treated as provided for in **Section 2.6(c)**hereof, and any Dissenting Shares will be treated as set forth in **Section 2.7**hereof.(b) ***Treatment of Company Options and Company Restricted Stock***.(i) ***Substitution of Company Options***.(1) As soon as practicable following the Closing, but effective as of the Effective Time, andwithout any action on the part of the holders of any shares of Company Options, each Company Optionthat is issued and outstanding immediately prior to the Effective Time, other than the TerminatedCompany Options, whether or not then exercisable (the “***Substituted Options***”) shall be replaced byParent with a substitute option to purchase Parent Ordinary Shares (a “***Parent Option***”) as set forthbelow. Each holder of a Substituted Option shall receive a substitution agreement from Parentwithin 20 Business Days following the Effective Time, which substitutes a Parent Option for theSubstituted Option. Each Substituted Option which is substituted for shall be canceled with nofurther force or effect.(2) Notwithstanding the foregoing, each Company Option that is held by a person who will notbe an employee of, or a consultant to, Parent or any Subsidiary of the Parent as of the EffectiveTime (such Company Options, the “***Terminated Company Options***”) shall not be substituted for byParent pursuant to this Section 2.6(b) but shall, effective as of the Effective Time, be cancelledand terminate and be without further force and effect.
 
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(3) After substitution of a Parent Option for a Substituted Option, (a) each Parent Optionsubstituted for a Substituted Option shall be exercisable for that whole number of Parent OrdinaryShares (rounded down to the nearest whole number of Parent Ordinary Shares) equal to the product of(x) the number of shares of Company Common Stock that were issuable upon exercise of suchSubstituted Option immediately prior to the Effective Time, *multiplied by*(y) the Option ExchangeRatio, (b) the per share exercise price for the Parent Ordinary Shares issuable upon exercise ofsuch Substituted Option shall be equal to the quotient obtained by *dividing*(x) the exercise priceper share of Company Common Stock at which such Substituted Option was exercisable immediatelyprior to the Effective Time, by (y) the Option Exchange Ratio (the price per share, as sodetermined, being rounded upward to the nearest full cent), and (c) for each Substituted Option,the term, post-termination exercise period and vesting schedule of each Parent Option shall besubstantially similar to that of the corresponding Substituted Option *provided, however*, that theexercise price of the option, the number of shares purchasable pursuant to such option and theterms and conditions of exercise of such option shall be determined in order to comply with Section409A of the Code. It is the intention of the parties that each Parent Option substituted for aSubstituted Option shall qualify following the Effective Time as an incentive stock option asdefined in Section 422 of the Code to the extent such Substituted Option qualified as an incentivestock option prior to the Effective Time.(4) Except as provided in Section 2.6(b)(i)(3) above, each Substituted Option substituted forby Parent shall be exercisable and administered upon the same terms and conditions as a standardParent Option; *provided, however*, that if the substitution of a Substituted Option (whether anincentive stock option or a nonstatutory stock option) would constitute a modification, extensionor renewal, as defined in Section 424 of the Code and related Treasury Regulations, if suchSubstituted Option were an incentive stock option as defined in Section 422 of the Code, then theterm or condition of each Parent Option (whether an incentive stock option or a nonstatutory stockoption) that would constitute such a modification, extension or renewal if the Parent Option was anincentive stock option shall not apply; *provided, further,*that no “claw back” or forfeitureprovision shall apply to the Parent Options substituted for the Substituted Options other than thevesting terms thereof.(5) Parent has filed a registration statement on Form S-8 registering a number of ParentOrdinary Shares sufficient to cover the Parent Ordinary Shares issuable upon the exercise of allParent Options substituted for the Substituted Options and shall use commercially reasonableefforts to maintain the effectiveness of such registration statement for so long as such optionsremain outstanding.(6) Parent has filed a registration statement on Form F-6 registering a number of ADSssufficient to cover the conversion of all Parent Ordinary Shares issuable upon the exercise of allParent Options into ADSs and shall use commercially reasonable efforts to maintain theeffectiveness of such registration statement for so long as such options remain outstanding.(ii) ***Company Notice***. Prior to the Effective Time, and subject to the review and approval ofParent (not to be unreasonably withheld), the Company shall take all actions necessary to effectthe transactions anticipated by this **Section 2.****6(b)(ii)** under the Option Plan and all CompanyOption agreements and any other plan or arrangement of the Company (whether written or oral, formalor informal), including delivering all notices required thereby. Materials to be submitted to theholders of Company Options in connection with the notice required under this **Section 2.****6(b)(ii)**shall be subject to review and approval by Parent, which approval shall not be unreasonablywithheld, delayed or conditioned.(c) ***Cancellation of Company Owned Stock***. Each share of Company Capital Stock held by theCompany immediately prior to the Effective Time, if any, shall be cancelled and extinguished as ofthe Effective Time.
 
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(d) ***Withholding Taxes***. The Company, or on its behalf Parent and the Surviving Corporation,shall be entitled to deduct and withhold from any consideration payable or otherwise deliverablepursuant to this Agreement to any Person such amounts as may be required to be deducted or withheldtherefrom under any provision of federal, state, local or foreign tax Law or under any applicablelegal requirement. Any such amounts shall be withheld or deducted from that portion of theAggregate Consideration Amount payable to the Shareholder. To the extent such amounts are sodeducted or withheld, such amounts shall be treated for all purposes under this Agreement as havingbeen paid to the Person to whom such amounts would otherwise have been paid.(e) ***Capital Stock of Sub***. Each share of capital stock of Sub issued and outstandingimmediately prior to the Effective Time shall be converted into and exchanged for one validlyissued, fully paid and nonassessable share of capital stock of the Surviving Corporation. Eachstock certificate of Sub evidencing ownership of any such shares shall continue to evidenceownership of such shares of capital stock of the Surviving Corporation.2.7 ***Dissenting Shares***.(a) Notwithstanding any other provisions of this Agreement to the contrary, any shares ofCompany Capital Stock held by a holder who has demanded and perfected appraisal or dissenters’rights for such shares in accordance with Delaware Law (or, if the Company is subject to Section2115 of the California Corporations Code, such rights as may be granted to such persons in Chapter13 of the California Corporations Code (“**California Law**”)), and who, as of the Effective Time, hasnot effectively withdrawn or lost such holder’s dissenters’ rights (the “**Dissenting Shares**”), shallnot be converted into or represent a right to receive the applicable consideration set forth in**Section 2.6**hereof, but the holder thereof shall only be entitled to such rights as are provided byDelaware Law and, if applicable, California Law.(b) Notwithstanding the provisions of **Section 2.****7(a)** hereof, if any holder of DissentingShares who is otherwise entitled to exercise dissenters’ rights under Delaware Law and/orCalifornia Law shall effectively withdraw or lose (through failure to perfect or otherwise) suchholder’s dissenters’ rights under Delaware Law and California Law then, as of the later of theEffective Time and the occurrence of such event, such holder’s shares shall automatically beconverted into and represent only the right to receive the consideration for Company Capital Stock,as applicable, set forth in **Section 2.6**hereof, without interest thereon, upon surrender of thecertificate representing such shares in accordance with the terms of **Section 2.8**hereof.(c) The Company shall give Parent (i) prompt notice of any written demand for the exercise ofdissenters’ rights, withdrawals of such demands, and any other instruments served to or received bythe Company pursuant to the applicable provisions of Delaware Law or California Law, and (ii) theopportunity to participate in all negotiations and proceedings with respect to such demands. TheCompany shall not, except with the prior written consent of Parent, make any payment with respectto any such demands or offer to settle or settle any such demands. Any communication to be made bythe Company to any Shareholder with respect to such demands shall be submitted to Parent in advanceand shall not be presented to any Shareholder prior to the Company receiving Parent’s consent.Notwithstanding the foregoing, to the extent that Parent, the Surviving Corporation or the Company(1) makes any payment or payments in respect of any Dissenting Shares in excess of theconsideration that otherwise would have been payable in respect of such shares in accordance withthis Agreement, or (2) incurs any Losses (including attorneys’ and consultants’ fees, costs andexpenses and including any such fees, costs and expenses incurred in connection with investigating,defending against or settling any action or proceeding) in respect of any Dissenting Shares ((1)and (2) together “**Dissenting Share Payments**”), Parent shall be entitled to recover under the termsof **Article VIII**hereof the amount of such Dissenting Share Payments to the extent that suchDissenting Share Paymentsexceed the consideration that such dissenting Shareholders would have received in the Mergerhad no Dissenting Share Payments been made.
 
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2.8 ***Surrender of Certificates.***(a) ***Payment Agent***. The Secretary of Parent, or a Person selected by Parent, shall serve asthe exchange agent (the “**Payment Agent**”) for the Merger.(b) ***Parent to Provide Cash***. At the Closing Date, Parent shall make available to the PaymentAgent for exchange in accordance with this **Article II,**an amount of cash equal to the amount of theAggregate Consideration Amount payable at the time of Closing pursuant to **Section 2.6**hereof inexchange for outstanding shares of Eligible Stock.(c) ***Exchange Procedures***. Following the Effective Time, Parent or the Payment Agent shall maila letter of transmittal to each Shareholder at the address set forth opposite each such person’sname on the Spreadsheet (as defined below). After receipt of such letter of transmittal and anyother customary documents that Parent or the Payment Agent may reasonably require in order toeffect the exchange (the “**Exchange Documents**”), the Shareholders will surrender the certificatesrepresenting their shares of Eligible Stock (the “**Company Certificates**”) to the Payment Agent forcancellation together with duly completed and validly executed Exchange Documents. Until sosurrendered, each Company Certificate outstanding after the Effective Time will be deemed, for allcorporate purposes thereafter, to evidence only the right to receive the portion of the AggregateConsideration Amount provided for in **Section 2.6(a)**. No portion of the Aggregate ConsiderationAmount owed hereunder will be paid to the holder of any unsurrendered Company Certificate withrespect to shares of Eligible Stock formerly represented thereby until the holder of record of suchCompany Certificate shall surrender such Company Certificate and the Exchange Documents pursuanthereto. Upon surrender of a Company Certificate for cancellation to the Payment Agent, or suchother agent or agents as may be appointed by Parent, together with such Exchange Documents, dulycompleted and validly executed in accordance with the instructions thereto, subject to the termshereof, the holder of such Company Certificate shall be entitled to receive from the Payment Agentin exchange therefor the cash payment to which such holder is entitled pursuant to **Section 2.6(a)**hereof (less such holder’s respective portion of the Total Escrow Amount to be placed in escrowpursuant to **Section 2.****6(a)(ii)** hereof).(d) ***No Liability***. Notwithstanding anything to the contrary in this **Section 2.8**, neither thePayment Agent, the Surviving Corporation, nor any party hereto shall be liable to a holder ofshares of Company Capital Stock for any amount paid to a public official pursuant to any applicableabandoned property, escheat or similar Law.2.9 ***No Further Ownership Rights in Company Capital Stock***. The cash paid in respect of the surrender for exchange of shares of Eligible Stock in accordancewith the terms hereof shall be deemed to be full satisfaction of all rights pertaining to suchshares of Eligible Stock, and there shall be no further registration of transfers on the records ofthe Surviving Corporation of shares of Eligible Stock which were outstanding immediately prior tothe Effective Time. If, after the Effective Time, Company Certificates are presented to theSurviving Corporation for any reason, they shall be cancelled and exchanged as provided in this**Article II**.2.10 ***Lost, Stolen or Destroyed Certificates***. In the event any Company Certificates withrespect to Eligible Stock shall have been lost, stolen or destroyed, the Payment Agent shall issuein exchange for such lost, stolen or destroyed certificates, upon the making of an affidavit ofthat fact by the holder thereof, such amount, if any, as may be required pursuant to **Section 2.6**hereof; *provided*, *however*, that Parent may, in itsdiscretion and as a condition precedent to the issuance thereof, require the Shareholder whois the owner of such lost, stolen or destroyed certificates to either (a) deliver a bond in suchamount as it may direct, or (b) provide an indemnification agreement in form and substanceacceptable to Parent, against any claim that may be made against Parent or the Payment Agent withrespect to the certificates alleged to have been lost, stolen or destroyed.
 
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2.11 ***Taking of Necessary Action; Further Action***. If at any time after the Effective Time, anyfurther action is necessary or desirable to carry out the purposes of this Agreement and to vestthe Surviving Corporation with full right, title and possession to all assets, property, rights,privileges, powers and franchises of the Company, Parent and the Surviving Corporation and theofficers and directors of Parent and the Surviving Corporation are fully authorized in the name oftheir respective corporations or otherwise to take, and will take, all such lawful and necessaryaction.2.12 ***Adjustments to Merger Consideration***. The amounts payable to the shareholders of theCompany pursuant to **Section 2.6(a)**, and any other applicable numbers or amounts, shall be adjustedto reflect appropriately the effect of any stock split, reverse stock split, stock dividend(including any dividend or distribution of securities convertible into Company Capital Stock),reorganization, recapitalization, reclassification or other like change with respect to CompanyCapital Stock occurring or having a record date on or after the date hereof and prior to theEffective Time.**ARTICLE III****REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE FOUNDERS**The Company and, severally and not jointly, each of the Founders hereby represent and warrant(it being understood, without limiting the rights of the Indemnified Parties set forth in **ArticleVIII**hereof, that solely with respect to the Founders, such representations and warranties aregiven by the Founders only to such Founder’s knowledge) to Parent and Sub as of the date hereof andas of the Effective Time as though made at the Effective Time (except for any representation orwarranty that is made as of a specific earlier date, which representation or warranty shall be trueas of such date), subject to such exceptions as are specifically disclosed in the DisclosureSchedule (each of which disclosures, in order to be effective, shall clearly reference theappropriate section and, if applicable, subsection, of this **Article III**to which it relates andeach of which disclosures shall be deemed to be incorporated by reference into the representationsand warranties made in this **Article III**; provided, however, that each disclosure shall also provideexceptions to any other section hereof where it is reasonably apparent, upon a reading of suchdisclosure without any independent knowledge on the part of the reader regarding the matterdisclosed, that the disclosure is intended to apply to such other section) delivered by theCompany to Parent concurrently with the execution of this Agreement and dated as of the date hereof(the “**Disclosure Schedule**”) as follows:3.1 ***Organization and Standing***. The Company is a corporation duly organized, validly existingand in good standing under the Laws of the State of Delaware. The Company has full corporate powerand authority to conduct its business as presently conducted and as presently proposed to beconducted, and to own, use, license and lease its Assets and Properties. The Company is dulyqualified or licensed to do business, and is in good standing as a foreign corporation, in eachjurisdiction in which the ownership, use, licensing or leasing of its Assets and Properties, or theconduct or nature of its business as presently conducted, makes such qualification or licensing orgood standing necessary. **Section 3.1**of the Disclosure Schedule sets forth each jurisdiction wherethe Company is so qualified or licensed, and separately lists each other state or country in whichthe Company owns, uses, licenses or leases its Assets and Properties, or conducts business or hasemployees or engages independent contractors.
 
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3.2 ***Authority***. The Company has all requisite corporate power and authority to enter into thisAgreement and to consummate the transactions contemplated hereby. The execution and delivery bythe Company of this Agreement, and the consummation of the transactions contemplated hereby, havebeen duly authorized by all necessary corporate action on the part of the Company, and no furthercorporate action is required on the part of the Company to authorize the execution and delivery ofthe Agreement (other than the Initial Shareholder Approval and the filing and recordation of theCertificate of Merger with the Secretary of State of the State of Delaware). This Agreement hasbeen duly executed and delivered by the Company and, assuming due authorization, execution anddelivery by the other parties thereto, constitutes the valid and binding obligation of the Company,enforceable against the Company in accordance with its terms, except as the enforceability thereofmay be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium orother similar laws relating to the enforcement of creditors’ rights generally and by generalprinciples of equity.3.3 ***Capital Stock***.(a) The authorized capital stock of the Company consists only of 24,000,000 shares of CompanyCommon Stock, of which 10,092,206 shares are issued and outstanding as of the date hereof, and9,597,561 shares of Company Preferred Stock. Of the Company Preferred Stock: (i) 4,097,561 sharesare designated as Series A Preferred Stock (“**Series A Preferred Stock**”), all of which are issuedand outstanding as of the date hereof; and (ii) 5,500,000 shares are designated as Series BPreferred Stock (“**Series B Preferred Stock**”), 5,222,841 of which are issued and outstanding as ofthe date hereof. As of the date hereof, the Company has reserved 4,097,561 shares of CompanyCommon Stock for issuance upon conversion of outstanding shares of Series A Preferred Stock and5,222,841 shares of Company Common Stock for issuance upon conversion of outstanding shares ofSeries B Preferred Stock. As of the date hereof, the Company has reserved 3,521,409 shares ofCompany Common Stock for issuance under the Option Plan, 92,206 of which have been issued pursuantto the exercise of options granted under the Option Plan, 2,342,512 of which are subject tooutstanding options granted under the Option Plan and 1,086,691 of which remain available forissuance under the Option Plan. All of the issued and outstanding shares of Company Common Stockand Company Preferred Stock are validly issued, fully paid and nonassessable, and have been issuedin compliance with all applicable federal, state and foreign securities laws. Except as set forthabove or in **Section 3.****3(a)****of the Disclosure Schedule**, no shares of Company Capital Stock areauthorized or reserved for issuance.(b) With respect to any share of Company Capital Stock that has been issued subject to arepurchase option on the part of the Company, risk of forfeiture or other similar condition (the“**Restricted Company Stock**”), **Section 3.****3(b)****of the Disclosure Schedule**sets forth the holderthereof, the number and type of securities covered thereby as of the date hereof. As of theClosing, the Company shall not have any outstanding shares of Restricted Company Stock, other thanthose that will accelerate in full at the Effective Time pursuant to their terms (including as suchterms may be amended by the Company in connection with the Merger).(c) **Section 3.****3(c)****of the Disclosure Schedule**sets forth a list of all outstanding CompanyOptions and any other Equity Equivalents, and all agreements, arrangements or understandings(written or oral) relating thereto. All Company Options and any other Equity Equivalents wereissued in compliance with all applicable federal, state and foreign securities laws.
 
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(d) Except for the capital stock described in **Section 3.****3(a)** and the Company Options andEquity Equivalents set forth in **Section 3.****3(c)****of the Disclosure Schedule,**there are no shares ofCompany Capital Stock or other securities of the Company issued or outstanding and there are nooptions, warrants, calls, rights, convertible securities, commitments or agreements of anycharacter, written or oral, to which theCompany is a party or by which the Company is bound obligating the Company to issue, deliver,sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, anyshares of the capital stock or other securities of the Company or obligating the Company to grant,extend, accelerate the vesting of, change the price of, otherwise amend or enter into any suchoption, warrant, call, right, commitment or agreement. There are no outstanding or authorizedstock appreciation, phantom stock, profit participation, or other similar rights with respect tothe Company. There are no preemptive rights or agreements, arrangements or understandings (writtenor oral) to issue preemptive rights with respect to the issuance or sale of Company Capital Stockcreated by statute, the certificate of incorporation or bylaws of the Company, or any agreement orother arrangement (written or oral) to which the Company is a party or by which it is bound andthere are no agreements, arrangements or understandings (written or oral) to which the Company is aparty pursuant to which the Company has the right to elect to satisfy any Liability by issuingCompany Capital Stock or Equity Equivalents.(e) True and complete copies of the forms of all agreements and instruments relating to orissued under the Option Plan have been made available to Parent and all grants or issuances as setforth in **Section 3.****3(e)****of the Disclosure Schedule**and made under or pursuant to the Option Planhave been made pursuant to such forms. None of the foregoing agreements and instruments have beenamended, modified or supplemented, and there is no agreement, arrangement or understanding (writtenor oral) to amend, modify or supplement such agreements or instruments in any case from the formmade available to Parent. Except as set forth in **Section 3.****3(e)****of the Disclosure Schedule**, theCompany is not a party or subject to any agreement, arrangement or understanding (written or oral),and, to the Company’s knowledge, there is no agreement, arrangement or understanding (written ororal) between or among any Persons which affects, restricts or relates to voting, giving of anywritten consent, or dividend right with respect to or the transferability of any shares of CompanyCapital Stock, including any voting trust agreement or proxy. The Company does not have any debtsecurities issued and outstanding.(f) The information contained in the Spreadsheet will be complete and correct as of theClosing Date.3.4 ***No Subsidiaries***. The Company has and has had (and prior to the Closing will have) noSubsidiaries and does not (and prior to the Closing will not) otherwise hold any equity,membership, partnership, joint venture or other ownership interest in any Person.3.5 ***Directors and Officers***. The names of each director and officer of the Company on the datehereof, and his or her position with the Company as of the date hereof, are listed in **Section 3.5of the Disclosure Schedule**.3.6 ***No Conflicts***. The execution and delivery by the Company of this Agreement do not, and theperformance by the Company of its obligations under this Agreement and the consummation of thetransactions contemplated hereby, do not and will not:(a) conflict with or result in a violation or breach of any of the terms, conditions orprovisions of the certificate of incorporation or bylaws of the Company;(b) subject to obtaining the consents, approvals and actions, making the filings and givingthe notices disclosed in **Section 3.****6(b)****of the Disclosure Schedule**, if any, conflict with, orresult in a violation or breach of, any Law or Order applicable to the Company or any of its Assetsand Properties; or
 
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(c) subject to obtaining the consents, approvals and actions, making the filings and givingthe notices disclosed in **Section 3.****6(c)****of the Disclosure Schedule**, if any, (i) conflict with inany materialrespect, or result in a material violation or material breach of, (ii) constitute a materialdefault (or an event that, with or without notice or lapse of time or both, would constitute adefault) under, (iii) require the Company to obtain any consent, approval or action of, make anyfiling with or give any notice to any Person as a result or under the terms of, (iv) result in orgive to any Person any right of termination, cancellation, acceleration or modification in or withrespect to, (v) result in or give to any Person any additional right or entitlement to any materialincreased, additional, accelerated or guaranteed payment or performance under, (vi) result in thecreation or imposition of (or the obligation to create or impose) any Lien upon the Company or anyof its Assets and Properties under, or (vii) result in the loss of any material benefit under, anyof the terms, conditions or provisions of any Contract or License to which the Company is a partyor by which any of the Company’s Assets and Properties is bound.3.7 ***Books and Records; Organizational Documents***. The minute books and stock record books andother similar records of the Company have been made available to Parent prior to the execution ofthis Agreement and are complete and correct in all respects. Such minute books contain a true andcomplete record of all actions taken at all meetings and by all written consents in lieu ofmeetings of the shareholders, directors, and committees of the Board of Directors of the Companyfrom the date of the Company’s incorporation through the date hereof. The Company has, prior tothe execution of this Agreement, made available to Parent true and complete copies of itscertificate of incorporation and bylaws, both as amended through the date hereof. The Company isnot in violation of any provision of its certificate of incorporation or bylaws, both as amendedthrough the date hereof.3.8 ***Company Financial Statements***.(a) Attached to **Section 3.****8(a)****of the Disclosure Schedule**is a true, correct and complete copyof the Company Financials. The Company Financials are accurate and complete in all materialrespects, and fairly present in all material respects the financial position of the Company as ofthe respective dates thereof and the results of operations and cash flows of the Company for theperiods covered thereby. The Company Financials have been prepared in accordance with GAAP appliedon a consistent basis throughout the periods covered, except that the Company Financials do notcontain footnotes. Since January 1, 2009, there has been no change in any accounting policies,principles, methods or practices, including any change with respect to reserves (whether for baddebts, contingent liabilities or otherwise), of the Company.(b) The Company has at all times made and kept accurate books and records.3.9 ***Absence of Changes***. Since the Interim Financial Statement Date to the date hereof, therehas not been any Company Material Adverse Effect or any occurrence or event that, individually orin the aggregate would be reasonably expected to have any Company Material Adverse Effect. Inaddition, without limiting the generality of the foregoing, except as expressly required by thisAgreement since the Interim Financial Statement Date:(a) except as set forth in **Section 3.****9(a)****of the Disclosure Schedule**, the Company has notentered into any Contract, commitment or transaction or incurred any Liability outside of theordinary course of business consistent with past practice;(b) the Company has not entered into, approved or resolved to enter into any agreementrelating to the acquisition by the Company of, or agreement by the Company to acquire by merging orconsolidating with, or by purchasing any assets or equity securities of, or by any other manner,any business or corporation, partnership, association or other business organization or divisionthereof, or other acquisition or agreement to acquire any assets or any equity securities that arematerial, individually or in the aggregate, to the business of the Company;
 
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(c) the Company has not altered or entered into any Contract or other commitment to alter, itsdebt or equity interest in any corporation, association, joint venture, partnership or businessentity in which the Company directly or indirectly holds any interest (or any right to acquire anyinterest) on the date hereof;(d) the Company has not entered into any strategic alliance, joint development or jointmarketing Contract;(e) there has not been any amendment or other modification (or agreement to do so), or anyviolation by the Company or (to the knowledge of the Company) by any other party thereto of any ofthe Material Contracts set forth or described in the Disclosure Schedule in any material respect;(f) the Company has not entered into any transaction with any officer, director, shareholder,Affiliate or Associate of the Company, other than in the case of officers, expense reimbursementsin the ordinary course of business consistent with past practice;(g) the Company has not made or entered into any agreement to make any loan to any employee,consultant, director, officer of any other Person;(h) no Action or Proceeding has been commenced or threatened by or, to the knowledge of theCompany, against the Company;(i) the Company has not declared or set aside or paid any dividend on or made any otherdistribution (whether in cash, stock or property) in respect of any Company Capital Stock or EquityEquivalent, or effected or approved any split, combination or reclassification of any CompanyCapital Stock or Equity Equivalent, or issued or authorized the issuance of any other securities inrespect of, in lieu of or in substitution for any Company Capital Stock or Equity Equivalent, orrepurchased, redeemed or otherwise acquired, directly or indirectly, any Company Capital Stock orEquity Equivalent, except repurchases of Company Capital Stock pursuant to agreements withemployees of the Company, officers, directors and consultants relating to repurchases at cost upontermination of service with the Company;(j) there has not been any amendment to the Company’s certificate of incorporation or bylaws;(k) there has not been any transfer (by way of a License or otherwise) to any Person of anyright to any Company Intellectual Property;(l) the Company has not made or agreed to make any disposition or sale of, waiver of any rightto, license or lease of, or incurrence of any Lien on, any Asset and Property of the Company, otherthan dispositions of inventory or non-exclusive licenses of products to Persons in the ordinarycourse of business of the Company consistent with past practice;(m) the Company has not made or agreed to make any purchase of any Asset and Property of anyPerson other than (i) acquisitions of inventory, or licenses of products, in the ordinary course ofbusiness of the Company consistent with past practice, and (ii) other acquisitions in an amount notexceeding ($10,000) in the case of any individual item or ($50,000) in the aggregate;(n) the Company has not made or agreed to make any capital expenditure or commitment foradditions to property, plant or equipment constituting capital assets in an amount exceeding($10,000) in the case of any individual item or ($50,000) in the aggregate;
 
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(o) the Company has not made or agreed to make any write-off or write-down, any determinationto write off or write-down, or revalue, any of its Assets and Properties, or change any reserves orliabilities associated therewith in an amount exceeding ($10,000) in the case of any individualitem or ($50,000) in the aggregate;(p) the Company has not made or agreed to make payment, discharge or satisfaction, in anamount exceeding ($10,000) in any one case or ($50,000) in the aggregate, of any claim or Liability(whether absolute, accrued, asserted or unasserted, contingent or otherwise), other than thepayment, discharge or satisfaction in the ordinary course of business of Liabilities reflected orreserved against in the Company Financials;(q) the Company has not failed to pay or otherwise satisfy any Liability of the Companypresently due and payable, except such Liabilities which are being contested in good faith byappropriate means or procedures and which, both individually and in the aggregate, are immaterialin amount;(r) the Company has not incurred any Indebtedness or guaranteed any Indebtedness, or sold anydebt securities of the Company or guaranteed any debt securities of any other Person;(s) the Company has not granted or paid or made any commitment to pay any severance ortermination payment to any director, officer employee or consultant, except payments made pursuantto written Contracts outstanding on the date hereof, copies of which have been made available toParent or its counsel and the terms of which are disclosed in **Section 3.****9(s)****of the DisclosureSchedule**;(t) the Company has not granted or approved any increase of greater than five percent (5%) insalary, rate of commissions, rate of consulting fees or any other compensation of any current orformer officer, director, shareholder, employee, independent contractor or consultant of theCompany;(u) the Company has not paid or approved the payment of any consideration of any naturewhatsoever (other than salary, commissions or consulting fees and customary benefits paid to anycurrent or former officer, director, shareholder, employee or consultant of the Company, in eachcase in amounts, on terms, and of a type consistent with the Company’s past practices) to anycurrent or former officer, director, shareholder, employee, independent contractor or consultant ofthe Company;(v) the Company has not established or modified any target, goal, pool or similar provisionunder, or any salary range, increased guideline or similar provision in respect of, any CompanyEmployee Plan, Employee Agreement or other employee compensation arrangement or independentcontractor Contract or other compensation arrangement;(w) the Company has not adopted, entered into, amended, modified or terminated (partially orcompletely) any Company Employee Plan or Employee Agreement;(x) the Company has not paid or agreed or made any commitment to pay any discretionary or staybonus;(y) the Company has not (i) made, changed or rescinded any material election in respect of anyTax, adopted or changed any accounting method in respect of any Tax, (ii) entered into any Taxallocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement,settlement or compromise of any claim or assessment in respect of any Tax, or (iii) consented toany extension or waiver of the limitation period applicable to any claim or assessment in respectof any Tax with any Taxing Authority or otherwise;
 
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(z) the Company has not made any change in accounting policies, principles, methods, practicesor procedures (including for bad debts, contingent liabilities or otherwise, respectingcapitalization or expense of research and development expenditures, depreciation or amortizationrates or timing of recognition of income and expense);(aa) other than in the ordinary course of business, the Company has not made anyrepresentation or proposal to, or engaged in any substantive discussion with, any holder (or anyrepresentative of any holder) of any Indebtedness, or to or with any Person which has issued aletter of credit which benefits the Company;(bb) the Company has not commenced or terminated, or made any change in, any line of business;(cc) the Company has not failed to renew any insurance policy; no insurance policy of theCompany has been cancelled or materially amended; and the Company has given all notices andpresented all claims (if any) under all such policies in a timely fashion;(dd) the Company has taken all action required (i) to procure, maintain, renew, extend orenforce any of its Registered Intellectual Property (such Registered Intellectual Property, the“Company Registered Intellectual Property”), including submission of required documents or feesduring the prosecution of patent, trademark or other applications for such Company RegisteredIntellectual Property right, and (ii) to protect, maintain or enforce all other CompanyIntellectual Property owned by or exclusively licensed to the Company;(ee) there has been no physical damage, destruction or other casualty loss (whether or notcovered by insurance) affecting any of the real or personal property or equipment of the Company inan amount exceeding ($10,000) in the case of any individual item or ($50,000) in the aggregate; and(ff) the Company has not repurchased, cancelled, accelerated or modified the terms of anyshare of Company Capital Stock, any Company Option, any Equity Equivalent or other financialinstrument that derives value from its convertibility into Company Capital Stock or any EquityEquivalent.3.10 ***No Undisclosed Liabilities***. The Company has no Liabilities which would be required to bereflected or reserved on a balance sheet prepared in accordance with U.S. GAAP, or reflected orreserved in any footnotes thereto, except for Liabilities reflected or reserved against in theCompany Financials, liabilities incurred in the ordinary course of business consistent with pastpractice since the Interim Financial Statement Date or Liabilities incurred in connection with thetransactions contemplated hereby that are Third Party Expenses.3.11 ***Taxes***.(a) All Tax Returns required to have been filed by or with respect to the Company have beenduly and timely filed (including any extensions), and each such Tax Return is true, complete andcorrect and correctly and completely reflects Tax Liability and all other information required tobe reported thereon. All Taxes due and payable by the Company, whether or not shown on any TaxReturn, or claimed to be due by any Tax Authority, have been timely paid in full or fully accruedon the balance sheet included in the Company Financials and are otherwise appropriately and fullyreflected in the Company Financials to the extent applicable to the periods covered thereby, and tothe extent applicable to periods after those covered by the Company Financials, have been fullyaccrued and adequately and fully reflected in the books and records of the Company in the ordinarycourse of business consistent with past practice. The Company has disclosedon its Tax Returns all positions (if any) that could give rise to a substantial understatementpenalty under Section 6662 of the Internal Revenue Code.
 
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(b) The Company has incurred no Liability for Taxes other than in the ordinary course ofbusiness. The unpaid Taxes of the Company (i) did not, as of the most recent fiscal month end,exceed by any material amount the reserve for Liability for Income Tax (other than the reserve fordeferred taxes established to reflect timing differences between book and tax income) or Other Taxset forth on the face of the balance sheet included in the Interim Financial Statements, and (ii)will not exceed such reserve as adjusted for operations and transactions in the ordinary course ofbusiness through the Closing Date.(c) The Company is not a party to any agreement extending the time within which to file anyTax Return. No claim has ever been made by a Taxing Authority of any jurisdiction in which theCompany does not file Tax Returns that the Company is or may be subject to taxation by thatjurisdiction.(d) The Company has withheld and paid all Taxes required to have been withheld and paid inconnection with amounts paid or owing to any employee, creditor, independent contractor,shareholder or third party.(e) The Company has not received any demand for payment or notice of assessment of, and doesnot have knowledge of any action by any Taxing Authority in connection with assessing, additionalTaxes against or in respect of it for any past period. There is no dispute or claim concerning anyTax Liability of the Company (i) threatened, claimed, raised or assessed by any Taxing Authorityand (ii) to the Company’s knowledge, no basis exists for any such claim or dispute. There are noLiens for Taxes upon the Assets and Properties of the Company other than Liens for Taxes not yetdue and payable. **Section 3.****11(e)****of the Disclosure Schedule**lists those Tax Returns, if any, ofthe Company that have been audited or examined by Taxing Authorities, and indicates those TaxReturns of the Company that currently are the subject of audit or examination. The Company hasmade available to Parent complete and correct copies of all federal, state, local and foreignincome Tax Returns filed by, and all Tax examination reports and statements of deficienciesassessed against or agreed to by, the Company since the inception of the Company.(f) There are no outstanding agreements or waivers extending the statutory period oflimitation applicable to any Tax Return required to be filed by, or which includes or is treated asincluding, the Company or with respect to any Tax assessment or deficiency affecting the Company.(g) The Company has not received any written ruling related to Taxes or entered into anyagreement with a Taxing Authority relating to Taxes.(h) The Company has no liability for any Tax of any Person other than the Company (i) underSection 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreignLaw), (ii) as a transferee or successor, (iii) by Contract or (iv) otherwise.(i) The Company has neither agreed to make nor is required to make any adjustment underSection 481 of the Internal Revenue Code by reason of a change in accounting method.(j) The Company is not a party to or bound by any obligations under any Tax sharing, Taxallocation, Tax indemnity or similar agreement or arrangement.(k) The Company is not involved in, subject to, or a party to any joint venture, partnership,Contract or other arrangement that could be treated as a partnership for federal, state, local orforeign Income Tax purposes.
 
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(l) There is no Contract, agreement or arrangement to which the Company is a party, includingthe provisions of this Agreement, covering any current or former employee of the Company which,individually or collectively, could give rise to the payment of any amount that would not bedeductible under Section 280G and Section 404 of the Internal Revenue Code or that would requirepayment of an excise tax under Section 4999 of the Internal Revenue Code.(m) The Company is not and has never been a United States real property holding corporationwithin the meaning of Section 897(c)(1)(A)(ii) of the Internal Revenue Code.(n) The Company has not constituted either a “distributing corporation” or a “controlledcorporation” (within the meaning of Section 355(a)(1)(A) of the Internal Revenue Code) in adistribution of stock intended to qualify for tax-free treatment under Section 355 of the InternalRevenue Code (i) in the two (2) years prior to the date of this Agreement or (ii) in a distributionwhich could otherwise constitute part of a “plan” or “series of related transactions” (within themeaning of Section 355(e) of the Internal Revenue Code) in conjunction with the transactionscontemplated by this Agreement.(o) Except as set forth in **Section 3.****11(n)****of the Disclosure Schedule**, the Company does nothave, nor has ever had, a permanent establishment in any country other than the United States, andhas not engaged in a trade or business in any country other than the United States that subjectedthe Company to any Taxes in such country.(p) The Company has not participated in or cooperated with any international boycott and hasnot been requested to do so in connection with any transaction or proposed transaction.(q) The Company has not engaged in a transaction that is the same as or substantially similarto one of the types of transactions that the Internal Revenue Service has determined to be a taxavoidance transaction and identified by notice, regulation or other form of published guidance as alisted transaction as set forth in Treas. Reg. § 1.6011-4(b)(2).(r) Each “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of theInternal Revenue Code) has been operated since January 1, 2005 in good faith compliance withSection 409A of the Internal Revenue Code and Internal Revenue Service Notice 2005-1. Nononqualified deferred compensation plan has been “materially modified” (within the meaning ofInternal Revenue Service Notice 2005-1) at any time after October 3, 2004. Each Company Option wasoriginally granted with an exercise price that the Board of Directors of the Company, in goodfaith, determined to be equal to the fair market value of a share of Company Common Stock on thedate of grant.
 
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3.12 ***Legal Proceedings***. There is no Action or Proceeding pending or, to the knowledge of theCompany, threatened against, relating to or affecting the Company or any of its Assets andProperties. There is no fact or circumstance known to the Company that, either alone or togetherwith other facts and circumstances, could reasonably be expected to give rise to any Action orProceeding against, relating to or affecting the Company or any of its Assets and Properties. TheCompany has not received notice, and does not otherwise have knowledge of, any Order outstandingagainst the Company.3.13 ***Compliance with Laws and Orders***. Neither the Company nor, to the Company’s knowledge,any of its directors, officers, Affiliates, agents or employees in his, her or its capacity as suchhas violated in any material respect since the incorporation of the Company, or is currently indefault or violation in any material respect under, any Law or Order applicable to the Company orany of its Assets and Properties, and the Company is not aware of any such claim of violation, orof any such actual violation, of any such Law or Order by the Company since the incorporation ofthe Company.3.14 ***Employee Benefit Plans and Compensation***.(a) ***Company Employee Plans and Employee Agreements***. **Section 3.****14(a)** of the DisclosureSchedule contains an accurate and complete list of each Company Employee Plan and each EmployeeAgreement. The Company has not made any plan or commitment to establish any new Company EmployeePlan or Employee Agreement, to modify any Company Employee Plan or Employee Agreement (except tothe extent required by Law or to conform any such Company Employee Plan or Employee Agreement tothe requirements of any applicable Law, in each case as previously disclosed to Parent in writing,or as required by this Agreement), or to enter into any Company Employee Plan or EmployeeAgreement.(b) ***Documents***. The Company has made available to Parent (i) correct and complete copies ofall documents embodying each Company Employee Plan and each Employee Agreement including allamendments thereto and all related trust documents, (ii) the three (3) most recent annual reports(Form Series 5500 and all schedules and financial statements attached thereto), if any, requiredunder ERISA or the Internal Revenue Code or by any other applicable Law in connection with eachCompany Employee Plan, (iii) if the Company Employee Plan is funded, the most recent annual andperiodic accounting of Company Employee Plan assets, (iv) the most recent summary plan descriptiontogether with the summary(ies) of material modifications thereto, if any, required under ERISA orby any other applicable Law with respect to each Company Employee Plan, (v) all material writtenagreements and contracts relating to each Company Employee Plan, including administrative serviceagreements and group insurance contracts, (vi) all material Employee communications relating to anyCompany Employee Plan and any proposed Company Employee Plan, in each case, relating to anyamendments, terminations, establishments, increases or decreases in benefits, acceleration ofpayments or vesting schedules or other events which would result in any liability to the Company,(vii) all correspondence to or from any governmental agency relating to any Company Employee Plan,(viii) all COBRA forms and related notices, (ix) all policies pertaining to fiduciary liabilityinsurance covering the fiduciaries for each Company Employee Plan, (x) all discrimination tests foreach Company Employee Plan for the three (3) most recent plan years, and (xi) the most recentInternal Revenue Service (or any other applicable tax authority) determination or opinion letterissued with respect to each Company Employee Plan.
 
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(c) ***Company Employee Plan Compliance***. The Company has performed all material obligationsrequired to be performed by it under, is not in default or violation of, and the Company does nothave knowledge of any default or violation by any other party to, any Company Employee Plan, andeach Company Employee Plan has been established and maintained in accordance with its terms and inmaterial compliance with all applicable Laws, statutes, orders, rules and regulations, includingERISA or the InternalRevenue Code. Any Company Employee Plan intended to be qualified under Section 401(a) of theInternal Revenue Code has obtained a favorable determination letter (or opinion letter, ifapplicable) as to its qualified status under the Internal Revenue Code. No “prohibitedtransaction,” within the meaning of Section 4975 of the Internal Revenue Code or Sections 406 and407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to anyCompany Employee Plan. There are no actions, suits or claims pending or, to the knowledge of theCompany, threatened or reasonably anticipated (other than routine claims for benefits) against anyCompany Employee Plan or against the assets of any Company Employee Plan. Each Company EmployeePlan can be amended, terminated or otherwise discontinued after the Effective Time in accordancewith its terms, without liability to Parent, the Company or any ERISA Affiliate (other thanordinary administration expenses). There are no audits, inquiries or proceedings pending or to theknowledge of the Company or any ERISA Affiliates, threatened by the Internal Revenue Service, DOL,or any other Governmental Entity with respect to any Company Employee Plan. Neither the Companynor any ERISA Affiliate is subject to any penalty or Tax with respect to any Company Employee Planunder Section 502(i) of ERISA or Sections 4975 through 4980 of the Internal Revenue Code. TheCompany has timely made all contributions and other payments required by and due under the terms ofeach Company Employee Plan.(d) ***No Pension Plan***. Neither the Company nor any ERISA Affiliate has ever maintained,established, sponsored, participated in, or contributed to, any Pension Plan subject to Part 3 ofSubtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Internal Revenue Code(e) ***No Self Insured Plan***. Neither the Company nor any ERISA Affiliate has ever maintained,established, sponsored, participated in or contributed to any self insured plan that providesbenefits to Employees (including any such plan pursuant to which a stop loss policy or contractapplies).(f) ***Collectively Bargained, Multiemployer and Multiple Employer Plan***. At no time has theCompany or any ERISA Affiliate contributed to or been obligated to contribute to any multiemployerplan (as defined in Section 3(37) of ERISA). Neither the Company nor any ERISA Affiliate has atany time ever maintained, established, sponsored, participated in or contributed to any multipleemployer plan or to any plan described in Section 413 of the Internal Revenue Code.(g) ***No Post Employment Obligations***. No Company Employee Plan or Employee Agreement provides,or reflects or represents any liability to provide, post termination or retiree life insurance,health or other employee welfare benefits to any Person for any reason, except as may be requiredby COBRA or other applicable statute, and the Company has never represented, promised or contracted(whether in oral or written form) to any Employee (either individually or to Employees as a group)or any other Person that such Employee(s) or other Person would be provided with life insurance,health or other employee welfare benefits, except to the extent required by statute.(h) ***COBRA; FMLA; HIPAA***. The Company and each ERISA Affiliate has, prior to the EffectiveTime, complied with COBRA, FMLA, HIPAA, the Women’s Health and Cancer Rights Act of 1998, theNewborns’ and Mothers’ Health Protection Act of 1996, and any similar provisions of foreign orstate Law applicable to its Employees. The Company does not have any unsatisfied obligations toany Employees or qualified beneficiaries pursuant to COBRA, HIPAA or any state Law governing healthcare coverage or extension.
 
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(i) ***Effect of Transaction***. Except as set forth in **Section 3.****14(i)****of the Disclosure Schedule**,neither the execution and delivery of this Agreement nor the consummation of the transactionscontemplated hereby or any termination of employment or service in connection therewith will (i)result in any payment (including severance, bonus or otherwise), becoming due to any Employee, (ii)result in anyforgiveness of indebtedness, (iii) materially increase any benefits otherwise payable by theCompany, or (iv) result in the acceleration of the time of payment or vesting of any such benefitsexcept as required under Section 411(d)(3) of the Internal Revenue Code.(j) ***Parachute Payments***. Except as set forth in **Section 3.****14(j)****of the Disclosure Schedule**,there is no agreement, plan, arrangement or other contract covering any Employee that, consideredindividually or considered collectively with any other such agreements, plans, arrangements orother contracts, will, or could reasonably be expected to, give rise directly or indirectly to thepayment of any amount that would be characterized as a “parachute payment” within the meaning ofSection 280G(b)(2) of the Internal Revenue Code. There is no agreement, plan, arrangement or othercontract by which the Company is bound to compensate any Employee for excise taxes paid pursuant toSection 4999 of the Internal Revenue Code. **Section 3.****14(j)** of the Disclosure Schedule lists allpersons who are “disqualified individuals” (within the meaning of Section 280G of the InternalRevenue Code and the regulations promulgated thereunder) as determined as of the date hereof.(k) ***Employment Matters***. The Company is in material compliance with all applicable foreign,federal, state and local Laws, rules and regulations, collective bargaining agreements andarrangements, extension orders and binding customs respecting employment, employment practices,terms and conditions of employment, employee safety and health and wages and hours, and in eachcase, with respect to Employees: (i) has withheld and reported all amounts required by Law or byagreement to be withheld and reported with respect to wages, salaries and other payments toEmployees; (ii) is not liable for any arrears of wages, severance pay or any Taxes or any penaltyfor failure to comply with any of the foregoing; and (iii) is not liable for any payment to anytrust or other fund governed by or maintained by or on behalf of any governmental authority, withrespect to unemployment compensation benefits, social security or other benefits or obligations forEmployees (other than routine payments to be made in the normal course of business and consistentwith past practice). There are no actions, suits, claims or administrative matters pending,threatened or reasonably anticipated against the Company or any of its Employees relating to anyEmployee, Employee Agreement or Company Employee Plan. There are no pending or threatened orreasonably anticipated claims or actions against Company or any Company trustee under any worker’scompensation policy or long term disability policy. The services provided by each of the Company’sand any ERISA Affiliates’ Employees is terminable at the will of the Company and its ERISAAffiliates and any such termination would result in no liability to the Company or any ERISAAffiliate. **Section 3.****14(k)** of the Disclosure Schedule lists all liabilities of the Company to anyEmployee that result from the termination by the Company or Parent of such Employee’s employment orprovision of services, a change of control of the Company, or a combination thereof. To theknowledge of the Company, neither the Company nor any ERISA Affiliate has direct or indirectliability with respect to any misclassification of any person as an independent contractor ratherthan as an “employee”, or with respect to any Employee leased from another employer.(l) ***Labor***. No work stoppage or labor strike against the Company is pending, or to theknowledge of the Company, threatened, or reasonably anticipated. The Company does not haveknowledge of any activities or proceedings of any labor union to organize any current Employees.There are no actions, suits, claims, labor disputes or grievances pending or threatened orreasonably anticipated relating to any labor matters involving any current employee, includingcharges of unfair labor practices. The Company has not engaged in any unfair labor practiceswithin the meaning of the National Labor Relations Act. The Company is not presently, nor has itbeen in the past, a party to, or bound by, any collective bargaining agreement or arrangement orunion contract with respect to Employees, and no collective bargaining agreement is beingnegotiated by the Company. Within the past year, the Company or has not incurred any liability orobligation under WARN or any similar state or local Law that remains unsatisfied, and noterminations prior to the Closing Date shall result in unsatisfied liability or obligationunder WARN or any similar state or local Law.
 
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(m) ***No Interference or Conflict***. To the knowledge of the Company, no shareholder, director,officer, employee or consultant of the Company is obligated under any contract or agreement,subject to any judgment, decree, or order of any court or administrative agency that wouldinterfere with such Person’s efforts to promote the interests of the Company or that wouldinterfere with the Company’s business. Neither the execution nor delivery of this Agreement, northe carrying on of the Company’s business as presently conducted or proposed to be conducted norany activity of such officers, directors, employees or consultants in connection with the carryingon of the Company’s business as presently conducted or currently proposed to be conducted will, tothe knowledge of the Company, conflict with or result in a breach of the terms, conditions, orprovisions of, or constitute a default under, any contract or agreement under which any of suchofficers, directors, employees, or consultants is now bound.(n) ***No International Employee Plan***. Neither the Company nor any ERISA Affiliate has evermaintained, established, sponsored, participated in, or contributed to, any International EmployeePlan.(o) ***Certain Employee Matters***. **Section 3.****14(o)** of the Disclosure Schedule contains a completeand accurate list of the current employees of the Company as of the date hereof and shows withrespect to each such employee (i) the employee’s name, position held, base salary and target bonus,(ii) the date of hire, (iii) accrued vacation days, (iv) leave status (including type of leave,expected return date for non disability related leaves and expiration dates for disability leaves),(v) visa status, (vi) the name of any union, collective bargaining agreement or other similar laboragreement covering such employee, (vii) any known performance issues, improvement or disciplinaryactions contemplated or pending against such employee, (viii) accrued sick days for currentcalendar year, (ix) relevant prior notice period required, and (x) eligibility to company car. Tothe knowledge of the Company, no employee listed in **Section 3.****14(o)** of the Disclosure Scheduleintends to terminate his or her employment for any reason, other than in accordance with theemployment arrangements provided for in this Agreement.(p) ***Consultants and Advisors***. **Section 3.****14(p)** of the Disclosure Schedule contains an accurateand complete list of all Persons that have a consulting or advisory relationship with the Company.3.15 ***Real Property***.(a) **Section 3.****15(a)****of the Disclosure Schedule**contains a true and correct list of (i) eachparcel of real property leased, occupied and/or operated by the Company (as lessor or lessee orotherwise) (the “**Leased Real Property**”), and (ii) all Liens relating to or affecting any parcel ofreal property referred to in clause (i) to which the Company is a party. The Company owns no realproperty other than Company-owned leasehold improvements, if any, on the Leased Real Property.(b) Subject to the terms of its respective leases, the Company has a valid and subsistingleasehold estate in and the right to quiet enjoyment of each of the Leased Real Properties for thefull term of the leases (including renewal periods) relating thereto. Each Lease Document referredto in **Section 3.****15(d)** below is a legal, valid and binding agreement, enforceable in accordance withits terms, of the Company, and to the Company’s knowledge, of each other Person that is a partythereto, and there is no, and the Company has not received notice of any, default by the Company(or any condition or event which, after notice or lapse of time or both, would constitute a defaultby the Company) under any Lease Document and, to the Company’s knowledge, there is no default underany Lease Document (or any condition or event which, after notice or lapse of time or both, wouldconstitute a default) by any other Person that is a party thereto. The Company does not owebrokerage commissions or finder’s fees with respect to any such Leased RealProperty, except to the extent that the Company may renew the term of any such lease, in whichcase, any such commissions and fees would be in amounts that are reasonable and customary for thespaces so leased, given their intended use and terms.
 
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(c) All improvements on the Leased Real Property (i) comply with and are operated in allmaterial respects in accordance with applicable Laws (including Environmental Laws) and allapplicable Liens, Approvals, Contracts, covenants and restrictions and (ii) are in all materialrespects in good operating condition and in a state of good maintenance and repair, ordinary wearand tear excepted, and such improvements are in all material respects adequate and suitable for thepurposes for which they are presently being used and there is no condemnation or appropriationproceeding, pending or, to the knowledge of the Company, threatened against any of such realproperty or any of the improvements thereon.(d) True and correct copies of the documents under which the Leased Real Property is leased,subleased (to or by the Company or otherwise), utilized, and/or operated (the “**Lease Documents**”)have been made available to Parent. The Lease Documents are unmodified and in full force andeffect, and there are no other Contracts between the Company and any other Person or to theCompany’s knowledge, by and among any other Persons, claiming an interest in the interest of theCompany in the Leased Real Property or otherwise relating to the use and occupancy of the LeasedReal Property.3.16 ***Tangible Personal Property***. The Company is in possession of and has good and marketabletitle to, or has valid leasehold interests in or valid rights under Contract to use, all tangiblepersonal property used in the conduct of its business, including all tangible personal propertyreflected on the Company Financials, other than property disposed of since such date in theordinary course of business consistent with past practice which is not material in nature oramount. All such tangible personal property (including plant, property and equipment) is free andclear of all Liens, other than Permitted Liens and except as set forth in **Section 3.16 of theDisclosure Schedule**, and is adequate and suitable in all material respects for the conduct by theCompany of its business as presently conducted, and is in good working order and condition in allmaterial respects, ordinary wear and tear excepted, and its use complies in all material respectswith all applicable Laws.3.17 ***Intellectual Property***.(a) **Section 3.****17(a)****of the Disclosure Schedule**lists all Company Registered IntellectualProperty and lists any proceedings or actions pending as of the date hereof before any court ortribunal (including the PTO or equivalent authority anywhere in the world) related to any of theCompany Registered Intellectual Property.(b) Except as set forth in **Section 3.****17(b)****of the Disclosure Schedule**, to its knowledge, theCompany has all requisite right, title and interest in, to and under (or valid and enforceablerights under Contracts or Licenses to use) all Intellectual Property necessary to the conduct ofits business as presently conducted. To the Company’s knowledge, each item of Company IntellectualProperty, including all Company Registered Intellectual Property listed in **Section 3.****17(a)****of theDisclosure Schedule**, is owned exclusively by the Company (excluding Intellectual Property licensedto the Company under any License, which licensed Intellectual Property is so identified in **Section3.****17(b)****of the Disclosure Schedule**or constitutes standard off-the-shelf shrink-wrap orclick-through licensed software) and, except as otherwise disclosed in **Section 3.****17(b)****of theDisclosure Schedule**, is free and clear of all Liens (with the exception of any Permitted Liens orLiens on Intellectual Property licensed by Company from third parties). Except as set forth in**Section 3.****17(b)****of the Disclosure Schedule,**to its knowledge, the Company: (i) owns exclusively alltrademarks, service marks and trade names used by the Company in connection with the operation orconduct of the business of the Company, including the sale of any products or technology or theprovision of anyservices by the Company; *provided, however*, that the Company may use trademarks, service marksand trade names of third parties which are licensed to the Company or are in the public domain; and(ii) owns exclusively, and has good title to, each copyrighted work that is incorporated in anyCompany product (other than copyrighted works licensed to the Company by third parties, which worksare so identified in **Section 3.****17(b)****of the Disclosure Schedule**or constitute standardoff-the-shelf shrink-wrap or click-through licensed software) and each other work of authorshipthat the Company otherwise purports to own.
 
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(c) To the extent that any Company Intellectual Property has been developed or created by anyPerson other than the Company, the Company has a legal, valid and binding written (or electronic)agreement with such Person with respect thereto, enforceable in accordance with its terms, and theCompany either (i) has obtained ownership of, and to its knowledge, is the exclusive owner of, allsuch Intellectual Property by operation of Law or by valid assignment of any such rights (otherthan moral rights and other inalienable rights inherent in such Intellectual Property that areincapable of being assigned to the Company under Laws of certain foreign jurisdictions) or (ii) hasobtained a License under or to such Intellectual Property. Each such agreement, assignment andLicense is listed in **Section 3.****17(c)****of the Disclosure Schedule**.(d) Except pursuant to agreements listed in **Section 3.****17(d)(i)****of the Disclosure Schedule**, theCompany has not transferred ownership of or granted (and is not obligated to grant) any License ofor other right to use any Intellectual Property that is or was Company Intellectual Property, toany other Person. None of the Company Intellectual Property is required to be licensed under anyforum, consortium or other standards body agreement. **Section 3.****17(d)(ii)****of the DisclosureSchedule**lists all forums, consortiums, standards bodies or similar organizations in which theCompany currently, or has in the past participated, or been a member or to which the Company hasmade any disclosure or contribution of any Intellectual Property.(e) Except as set forth in **Section 3.****17(e)****of the Disclosure Schedule**, the CompanyIntellectual Property includes all the Intellectual Property used in and/or necessary for theconduct of the Company’s business as it presently is conducted, including for the design,development, distribution, marketing, manufacture, use, import, license, and sale of the products,technologies and services of the Company (including products, technologies, and services currentlyunder development), a true, correct and complete list of which is set forth in **Section 3.****17(e)****ofthe Disclosure Schedule**.(f) **Section 3.****17(f)****of the Disclosure Schedule**lists all Contracts and Licenses (including allinbound Licenses other than standard off-the-shelf shrink-wrap or click-through licensed software)to which the Company is a party with respect to any Intellectual Property (other than standardagreements with developers, distributors or customers of Mochi entered into in the ordinary courseof business). The Company is not party to any agreement that includes an express grant back ofrights by Company to improvements created by the Company with respect to technology licensed toCompany under such agreement.(g) **Section 3.****17(g)****of the Disclosure Schedule**lists all Contracts and Licenses between theCompany and any other Person wherein or whereby the Company has agreed to, or assumed, anyobligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume orincur any obligation or Liability or provide a right of rescission with respect to the infringementor misappropriation by the Company or such other Person of the Intellectual Property of any Personother than the Company, except for obligations in Licenses entered into in the ordinary course ofbusiness.
 
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(h) Except as set forth in **Section 3.****17(h)****of the Disclosure Schedule**, to the Company’sknowledge, the operation of the business of the Company as heretofore conducted, as presentlyconducted andas presently proposed to be conducted, including the Company’s design, development,distribution, marketing, manufacture, use, import, license, and sale of products, technologies andservices (including products, technologies and services currently under development by the Company)does not (and did not at any time) (i) infringe or misappropriate the Intellectual Property of anyPerson, (ii) violate any term or provision of any License or Contract concerning such IntellectualProperty, including any provision required by or imposed pursuant to 35 U.S.C. §§200-212 in anyLicense or Contract to which the Company is a party requiring that products be manufacturedsubstantially in the United States (“**Made-in-America Requirements**”), (iii) violate any right of anyPerson (including any right to privacy or publicity), (iv) disclose any confidential information ofthe Company that is not pursuant to a confidentiality agreement or any third-party confidentialinformation that is protected by a confidentiality agreement, or (v) constitute unfair competitionor an unfair trade practice under any Law. Except as set forth in **Section 3.****17(h)****of theDisclosure Schedule**, neither the Company nor any of its representatives has received from anyPerson any (x) notice claiming that such operation or any act, product, technology or service ofthe Company (including products, technologies and services currently under development) infringesor misappropriates the Intellectual Property of any Person or constitutes unfair competition ortrade practices under any Law or (y) notice of third-party patent or other Intellectual Propertyrights from a putative or potential licensor of such rights. Without limiting the generality ofthe foregoing, the Company has not made any shipment of source code in violation of the terms ofany agreement between the Company and any Person pursuant to which the Company has licensedtechnology or Intellectual Property from any Person. The Company has not brought any Action orProceeding for infringement of Intellectual Property or breach of any License or Contract involvingIntellectual Property against any Person.(i) Each item of Company Registered Intellectual Property is valid and subsisting, and allnecessary registration, maintenance, renewal fees, annuity fees and taxes in connection with suchCompany Registered Intellectual Property have been paid and all necessary documents andcertificates in connection with such Company Registered Intellectual Property have been filed withthe relevant patent, copyright, trademark or other authorities in the United States or the relevantforeign jurisdictions, as the case may be, for the purposes of maintaining such RegisteredIntellectual Property. **Section 3.****17(i)****of the Disclosure Schedule**lists all actions that must betaken by the Company within one hundred eighty (180) days from the date hereof, including thepayment of any registration, maintenance, renewal fee, annuity fee and Tax or the filing of anydocument, application or certificate for the purposes of maintaining, perfecting or preserving orrenewing any Company Registered Intellectual Property. In each case in which the Company hasacquired ownership of any Intellectual Property right from any Person, the Company has obtained avalid and enforceable assignment sufficient to irrevocably transfer all rights in such IntellectualProperty to the Company (other than moral rights and other inalienable rights inherent in suchIntellectual Property that are incapable of being assigned to the Company under Laws of certainforeign jurisdictions) and, to the maximum extent provided for by and required to protect theCompany’s ownership rights in and to any such Intellectual Property that is Company RegisteredIntellectual Property in accordance with all applicable Laws, the Company has recorded each suchassignment of Registered Intellectual Property with the relevant Governmental or RegulatoryAuthority, including the PTO, the U.S. Copyright Office, or their respective equivalents in allrelevant foreign jurisdictions, as the case may be.(j) There is no Contract or License between the Company and any other Person with respect toCompany Intellectual Property under which there is any dispute (and there are no facts orcircumstances that may reasonably be expected to lead to a dispute) regarding the scope of suchContract or License, or performance under such Contract or License, including with respect to anypayment to be made or received by the Company thereunder.(k) To the knowledge of the Company, no Person is infringing or misappropriating any CompanyIntellectual Property.
 
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(l) The Company has taken commercially reasonable steps to protect the Company’s rights inconfidential information and trade secrets of the Company or provided by any other Person to theCompany subject to a duty of confidentiality or a limitation on use. Without limiting thegenerality of the foregoing, the Company has, and enforces, a policy requiring each employee,consultant and independent contractor to execute proprietary information, confidentiality andinvention and copyright assignment agreements substantially in the forms set forth in or attachedto **Section 3.****17(l)****of the Disclosure Schedule**, and all current and former employees, consultantsand independent contractors of the Company have executed such an agreement and copies of all suchagreements have been made available to Parent or made available to Parent for review.(m) No Company Intellectual Property or product, technology or service of the Company issubject to any Order, Action or Proceeding, settlement, or “march in” right that materiallyrestricts, or that could reasonably be expected to materially restrict, in any manner the use,transfer or licensing of any Company Intellectual Property by the Company or that may materiallyaffect the validity, use or enforceability of such Company Intellectual Property. The Company hasnot developed or created any technology or Intellectual Property by or for any Governmental Entity,university, academic institution or other similar non-commercial enterprise and has not receivedany funding from such enterprise or otherwise have any obligation to such enterprise with respectto any Company Intellectual Property. There are no restrictions either pursuant to any privateContract or under any Law on the transferability or ownership of the Company Intellectual Property.Except as set forth in **Section 3.****17(m)****of the Disclosure Schedule**, no Company IntellectualProperty is held or owned outside of the United States of America other than patents issued to theCompany in a foreign jurisdiction.(n) To the Company’s knowledge, no (i) product, technology, service or publication of theCompany, (ii) material published or distributed by the Company or (iii) conduct or statement of theCompany constitutes obscene material, a defamatory statement or material, false advertising orotherwise violates any Law.(o) Except as set forth in **Section 3.****17(o)****of the Disclosure Schedule**, neither this Agreementnor any of the transactions contemplated hereby, including the Merger or the transfer of assetsfrom the Company to Parent or a subsidiary of Parent, will result in the grant of any right orlicense with respect to the Intellectual Property of Parent, the Company or the SurvivingCorporation to any Person pursuant to any Contract to which the Company is a party or by which anyof its Assets and Properties are bound, or subject any of them to any non-compete or otherrestriction with respect to their respective businesses (other than rights, licenses orrestrictions with respect to Company or the Surviving Corporation that would have existed absentthe transactions contemplated by this Agreement).(p) **Section 3.****17(p)****of the Disclosure Schedule**sets forth a list of (i) all software which theCompany has licensed from any third party which is used by the Company in its products or otherwisein its business (other than standard off-the-shelf shrink-wrap or click-through licensed software)and (ii) a list of all “freeware” and “shareware” incorporated into any product now or heretoforeshipped by the Company. The Company has all rights necessary for its current use (and had allrights necessary for the Company’s past use) of such software, “freeware” and “shareware”.(q) The Company’s products comply in all material respects with the feature specifications andperformance standards set forth in the Company’s product data sheets, if any. There are nooutstanding claims (or facts that may reasonably lead to a claim) for breach of warranty by theCompany in connection with such specifications. All product performance comparisons heretoforefurnished by the Company to customers or Parent are accurate in all material respects as of thedates so furnished (except that, in the case of product performance comparisons made as of aspecified earlier date, such comparisons shall be accurate inall material respects as of such specified earlier date, and, in the case of productperformance comparisons superseded by a subsequent product performance comparison furnished to thecustomer before the customer’s acquisition of a license on the product covered by the supersededcomparison, the superseding comparison shall be accurate in all material respects and thesuperseded comparison shall be disregarded).
 
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(r) The Company has taken all necessary steps to protect and preserve ownership of CompanyIntellectual Property (excluding Intellectual Property licensed to the Company under any License;*provided, however*that such exclusion shall not apply where the failure to take such steps wouldconstitute a breach of any agreement between the Company and any third party(ies)). The Companyhas secured valid written assignments from all consultants and employees who contributed to thecreation or development of the Company Intellectual Property. In the event that such a consultantis concurrently employed by the Company and another Person, the Company has taken additional stepsto confirm that any Company Intellectual Property developed by such a consultant does not belong tosuch other Person or conflict with such consultant’s employment agreement with such other Person.Except as set forth in **Section 3.****17(r)****of the Disclosure Schedule**, such steps include requiringthat all research and development work performed by such a consultant are performed only on theCompany’s facilities or, if outside of the facilities, only using the Company’s resources.(s) Except as set forth in **Section 3.****17(s)****of the Disclosure Schedule**, (i) no Open SourceSoftware is incorporated (either directly by the Company, or indirectly, by the incorporation ofthird party software that itself incorporates Open Source Software) into any of the Company’sproducts or services, (ii) no product or service of the Company is intermingled or bundled with orotherwise derived from or contains part of any Open Source Software or uses or links to anylibraries or routines that constitute Open Source Software, (iii) no Open Source Software isotherwise used by the Company, whether or not incorporated with the Company’s products or services,and (iv) the Company has not developed, acquired, licensed, used or otherwise obtained any Softwarethat is now, or is intended by the Company in the future to be Open Source Software. To theknowledge of the Company, no third party has (i) combined, bundled, or merged Open Source Softwarewith Company’s products or services; or (ii) used Company’s products or services to link to, shareddata structures with, or make function calls to Open Source Software.(t) Except as set forth in **Section 3.****17(t)****of the Disclosure Schedule**, to the knowledge ofCompany neither the product, technology or service of the Company, nor any third party product,technology or service incorporated in or otherwise distributed with a product, technology orservices of the Company, contains any error, flaw, virus or other fault that would materiallyimpair or delay the Company’s ability to distribute Company’s products, technology or services inconformance with the specifications for such products, technology or services.(u) The Company has taken all reasonable measures and opportunities available to it to assurethat, to the maximum extent permissible under safe harbors and other similar provisions ofapplicable law, it has no liability (including any liability for infringement of IntellectualProperty rights of a third party) with respect to, or arising from, any software, technology,content, or materials distributed, licensed, or otherwise made available by the Company.
 
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3.18 ***Contracts***.(a) **Section 3.****18(a)****of the Disclosure Schedule**sets forth a complete and accurate list of eachof the following Contracts to which the Company is a party or otherwise bound (any Contract of anature described below (whether or not set forth on the Disclosure Schedule) to which the Companyis a party or otherwise bound, being referred to herein as a “**Material Contract**” and, collectively,as the “**Material Contracts**”):(i) any employment, contractor or consulting agreement, Contract with an employee orindividual consultant, contractor, or salesperson, any agreement, Contract or commitment to grantany bonus, severance or termination pay (in cash or otherwise) to any employee, or any contractor,consulting or sales agreement, Contract, or commitment with a firm or other organization, in eachcase, in an amount exceeding annual payments, or exceeding an amount for any shorter period, of$50,000;(ii) any agreement or plan, including any stock option plan, stock appreciation rights plan orstock purchase plan, any of the benefits of which will be increased, or the vesting of benefits ofwhich will be accelerated, by the occurrence of any of the transactions contemplated by thisAgreement or the value of any of the benefits of which will be calculated on the basis of any ofthe transactions contemplated by this Agreement;(iii) any fidelity or surety bond or completion bond;(iv) any lease of personal property having a value in excess of $10,000 individually or$50,000 in the aggregate;(v) any agreement of indemnification or guaranty;(vi) any Contract or commitment relating to capital expenditures and involving future paymentsin excess of $10,000 individually or $50,000 in the aggregate;(vii) any Contract or commitment relating to the disposition or acquisition of assets or anyinterest in any business enterprise outside the ordinary course of the Company’s business;(viii) any mortgages, indentures, guarantees, loans or credit agreements, security agreementsor other agreements or instruments relating to the borrowing of money or extension of credit;(ix) any purchase order or Contract for the purchase of materials involving in excess of$10,000 individually or $50,000 in the aggregate;(x) any Contracts that contain “most favored nation” or preferred pricing provisions;(xi) any dealer, distribution, joint marketing, strategic alliance, affiliate or developmentagreement;(xii) any Contract or commitment to alter the Company’s interest in any Subsidiary,corporation, association, joint venture, partnership or business entity in which the Companydirectly or indirectly holds any interest;(xiii) any sales representative, original equipment manufacturer, manufacturing, value added,remarketer, reseller, or independent software vendor, or other agreement for use or distribution ofthe products, technology or services of the Company; or(xiv) any other Contract or commitment that involves $10,000 individually or $50,000 in theaggregate or more and is not cancelable without penalty within thirty (30) days.
 
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(b) Each Material Contract to which the Company is a party or any of its Assets andProperties, is subject is a valid and binding agreement of the Company, enforceable against each ofthe parties thereto in accordance with its terms, and is in full force and effect with respect tothe Company and, to the knowledge of the Company, any other party thereto. The Company is incompliance with and has not breached, violated or defaulted under, or received notice that theyhave breached, violated or defaulted under, any of the terms or conditions of any Contract to whichit is or was bound, nor to the knowledge of the Company is any party obligated to the Companypursuant to any Material Contract subject to any breach, violation or default thereunder, nor doesthe Company have knowledge of any event that with the lapse of time, giving of notice or both wouldconstitute such a breach, violation or default by the Company or any such other party. True andcomplete copies of each Material Contract (whether or not disclosed in the Disclosure Schedule)have been made available to Parent.(c) The Company has fulfilled all material obligations required to have been performed by theCompany prior to the date hereof pursuant to each Material Contract to which the Company is a partyor any of its Assets and Properties is bound, and to the knowledge of the Company, without givingeffect to the Merger, the Company will fulfill, when due, all of its obligations under suchMaterial Contract that remain to be performed after the date hereof.(d) There are no, and the Company has no knowledge of any, threatened disputes ordisagreements with respect to any Material Contract to which the Company is a party or any of itsAssets and Properties subject.(e) The Material Contracts to which the Company is a party or any of its Assets and Propertiesis subject that constitute licenses of goods, services or rights from third parties that areincorporated in any products, services or rights which the Company sublicense to their customersare fully sublicensable without any further payment to any Person, except as identified in **Section3.****18(e)****of the Disclosure Schedule**. Except as identified in **Section 3.****18(e)****of the DisclosureSchedule,**no royalties, fees, honoraria, volume-based, milestone or other payments are payable bythe Company to any Person by reason of the ownership, use, sale, licensing, distribution or otherexploitation of any Company Intellectual Property relating to the conduct or operation of thebusiness of the Company or the delivery or provision of any products, services or rights deliveredor provided thereby or thereunder, except for obligations relating solely to end-user operatingsystems and application software, the license of which is obtained with the acquisition or licensethereof.3.19 ***Insurance***.(a) **Section 3.****19(a)****of the Disclosure Schedule**contains a true and complete list (includingthe names and addresses of the insurers, the expiration dates of the policies, the annual premiumsthereof, frequency of payment thereof, the due date of the next payment thereof, the period of timecovered thereby and a brief description of the interests insured thereby) of all liability,property, workers’ compensation, directors’ and officers’ liability and other insurance policiescurrently in effect that insure any of the business, operations, directors, officers or employeesof the Company or affect or relate to the ownership, use or operation of any of the Assets andProperties of the Company and that (i) have been issued to the Company or (ii) to the knowledge ofthe Company, have been issued to any other Person for the benefit of the Company. The insurancecoverage provided by the policies set forth in **Section 3.****19(a)****of the Disclosure Schedule**will notterminate or lapse by reason of any of the transactions contemplated by this Agreement. Eachpolicy listed in **Section 3.****19(a)****of the Disclosure Schedule**is, to the Company’s knowledge, validand binding and, further, is in full force and effect, all premiums due thereunder have been paidwhen due and neither the Company nor the Person to whom such policy has been issued has receivedany notice of cancellation or termination in respect of any such policy or is in defaultthereunder, and the Company has no knowledge ofany reason or state of facts that could reasonably be expected to lead to the cancellation ofsuch policies or of any threatened termination of, or material premium increase with respect to,any of such policies. The insurance policies listed in **Section 3.****19(a)****of the Disclosure Schedule**,(i) in light of the business, operations and Assets and Properties of the Company, are in amountsand have coverages that are reasonable and customary for Persons engaged in similar businesses andoperations and having similar Assets and Properties and (ii) are in amounts and have coveragesrequired by any Contract to which the Company is a party or by which any of its Assets andProperties is bound.
 
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(b) **Section 3.****19(b)****of the Disclosure Schedule**contains a list of all claims made under anyinsurance policies covering the Company in the two (2) years immediately preceding the date of thisAgreement. The Company has not received notice that any insurer under any policy listed (orrequired to be listed) in **Section 3.****19(b)****of the Disclosure Schedule**is denying, disputing orquestioning liability with respect to a claim thereunder or defending under a reservation of rightsclause. The Company has, in its reasonable judgment, in light of its business, location,operations and Assets and Properties, maintained, at all times, without interruption, appropriateinsurance, both in scope and amount of coverages.3.20 ***Affiliate Transactions***.(a) Except as set forth in **Section 3.****20(a)****of the Disclosure Schedule**: (i) there is noContract or Liability between the Company, on the one hand, and (A) any current or former officer,director, shareholder, or to the Company’s knowledge, any Affiliate or Associate of the Company or(B) any Person who, to the Company’s knowledge, is an Associate of any such officer, director,shareholder or Affiliate, on the other hand; (ii) the Company does not provide or cause to beprovided any asset, service or facility to any such current or former officer, director, employee,security holder, Affiliate or Associate, including loans relating to the purchase of any security;(iii) no such current or former officer, director, shareholder, Affiliate or Associate provides orcauses to be provided any assets, services or facilities to the Company; and (iv) the Company doesnot beneficially own, directly or indirectly, any Investment Assets of any such current or formerofficer, director, shareholder, Affiliate or Associate.(b) Each of the Contracts and Liabilities listed in **Section 3.****20(a)****of the Disclosure Schedule**was entered into or incurred, as the case may be, on terms no less favorable to the Company (in thereasonable judgment of the Company) than if such Contract or Liability was entered into or incurredon an arm’s- length basis on competitive terms. Any Contract to which the Company is a party andin which any director of the Company has a financial interest was approved by a majority of thedisinterested members of the Board of Directors of the Company and/or shareholders of the Company,as the case may be, in accordance with applicable Law.3.21 ***Accounts Receivable***. The accounts and notes receivable of the Company reflected on theCompany Financials, and all accounts and notes receivable arising subsequent to the InterimFinancial Statement Date, (a) arose from bona fide sales transactions in the ordinary course ofbusiness, consistent with past practice, and are payable on ordinary trade terms, (b) to theCompany’s knowledge, are legal, valid and binding obligations of the respective debtors enforceablein accordance with their respective terms, (c) to the Company’s knowledge, are not subject to anyvalid set-off or counterclaim and (d) do not represent obligations for goods sold on consignment,on approval or on a sale-or-return basis or subject to any other repurchase or return arrangement.
 
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3.22 ***Other Negotiations; Brokers; Third Party Expenses***. Neither the Company nor any of itsofficers, directors, employees, agents, or, to the knowledge of the Company, any of itsshareholders or Affiliates (nor any investment banker, financial advisor, attorney, accountant orother Person retained by or acting for or on behalf of the Company or any such Affiliate) hasentered into (a) any Contract that conflictswith any of the transactions contemplated by this Agreement, or (b) any Contract or had anydiscussions with any Person regarding any transaction involving the Company which could reasonablybe expected to result in Parent, the Company or any officer, director, employee, agent or Affiliateof any of them being subject to any claim for liability to such Person as a result of entering intothis Agreement or consummating the transactions contemplated hereby or thereby. Without limitingthe generality of the foregoing, the Company has not signed, entered into or otherwise become oragreed to become bound by any engagement letter or similar agreement or ever signed by or on behalfof the Company with any investment bank, business broker or financial advisor other than theagreement entered into with China e-Capital set forth in **Section 3.****22(a)****of the Disclosure Schedule**. No broker, investment banker, financial advisor or other Person is entitled to any broker’s,finder’s, financial advisor’s or similar fee or commission in connection with this Agreement or anyof the transactions contemplated hereby based on arrangements made by or on behalf of the Companyother than the amounts to be owed to China e-Capital as set forth in **Section 3.****22(a)****of theDisclosure Schedule**. **Section 3.****22(a)****of the Disclosure Schedule**sets forth all Contracts withrespect to, and the Company’s best estimate of, all third party expenses expected to be incurred bythe Company in connection with the negotiation and effectuation of the terms and conditions of thisAgreement and the transactions contemplated hereby (such expenses, whether or not set forth in**Section 3.****22(a)****of the Disclosure Schedule**, the “**Third Party Expenses**”). As used herein, “**ExcessThird Party Expenses**” shall mean the amount by which the Third Party Expenses exceed $2,500,000.3.23 ***Restrictions on Business Activities***. There is no agreement (non-competition orotherwise), commitment, judgment, injunction, order or decree to which the Company is a party orotherwise binding upon the Company which has or would reasonably be expected to have the effect ofprohibiting or impairing in any material respect any business practice of the Company, anyacquisition of Assets and Properties by the Company, the conduct of business by the Company, orotherwise limiting the freedom of the Company to engage in any line of business or to compete withany person. Without limiting the generality of the foregoing, the Company has not entered into anyagreement under which the Company is restricted from selling, licensing, manufacturing or otherwisedistributing any of its technology or products or from providing services to customers or potentialcustomers or any class of customers, in any geographic area, during any period of time, or in anysegment of the market.3.24 ***Environmental Matters.***(a) There are no Hazardous Materials in, on, or under anyproperties currently owned or leased by the Company or its Subsidiaries, and (b) the Company andits Subsidiaries have not disposed of, emitted, discharged, handled, stored, transported, used orreleased any Hazardous Materials, or arranged for the disposal, discharge, storage or release ofany Hazardous Materials. The Company and each of its Subsidiaries have not received any writtennotice of any alleged claim, violation of or liability under any Environmental Law. The Companyand its Subsidiaries have made available for inspection by Parent all environmental audits andenvironmental assessments of any facility owned, leased or used at any time by the Company or eachof its Subsidiaries in the possession or control of the Company or any of its Subsidiaries. Each ofthe Company and its Subsidiaries has been and currently is in compliance in all material respectswith all applicable Environmental Laws.3.25 ***Approvals***.(a) **Section 3.****25(a)****of the Disclosure Schedule**sets forth a list of all material Approvals ofGovernmental Entities relating to the business conducted by the Company which are required to begiven by the Company to or obtained by the Company from any and all Governmental Entities inconnection with the consummation of the transactions contemplated by this Agreement (other than thefiling of the Certificate of Merger, and such consents, approvals, orders, authorizations,registrations, declarations and filings as may be required under state or federal securities laws).
 
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(b) **Section 3.****25(b)****of the Disclosure Schedule**sets forth a list of all material Approvalswhich are required to be given by the Company to or obtained by the Company from any and allPersons other than Governmental Entities in connection with the consummation of the transactionscontemplated by this Agreement.(c) The Company has obtained all material Approvals from Governmental Entities necessary tothe conduct of the business of the Company as heretofore and presently conducted; there has been nowritten notice received by the Company of any material violation or material non-compliance withany such Approvals; and each such Approval required for the conduct of the business of the Companyas presently conducted is in full force and effect. All material Approvals from GovernmentalEntities necessary to the conduct of the business of the Company as presently conducted are listedin **Section 3.****25(c)****of the Disclosure Schedule**.(d) Other than the Initial Shareholder Approval, no other votes of the holders of any sharesof the Company Capital Stock are required to adopt and approve this Agreement and approve theMerger. The Company will obtain the Initial Shareholder Approval, and deliver true and correctcopies thereof to Parent, immediately following the execution of this Agreement.3.26 ***Takeover Statutes***. No “fair price,” “moratorium,” “control share acquisition” or othersimilar anti-takeover statute or regulation enacted under state or federal laws in the UnitedStates, including, without limitation, Section 203 of Delaware Law, is applicable to the Merger orany of the transactions contemplated by this Agreement.3.27 ***Consent Solicitation***. All information furnished on or in any document mailed, deliveredor otherwise furnished or to the be mailed, delivered or otherwise furnished to shareholders by theCompany in connection with the solicitation of their consent to this Agreement and the Merger andthe other matters contemplated by **Section 6.6**hereof, did not and will not, as the case may be,contain any untrue statement of a material fact and did not and will not omit to state any materialfact necessary in order to make the statements made therein, in light of the circumstances underwhich made, not misleading.3.28 ***Hart-Scott-Rodino***. The Company (a) is its own “ultimate parent entity” as defined under16 C.F.R. 801.1 and the Hart-Scott-Rodino Act, (b) had less than $12,000,000 of revenue in its lastcompleted fiscal year, and (c) has total assets less than $12,000,000 as shown on its most recentregularly-prepared balance sheet (including unaudited statements).3.29 ***Disclosure***. To the knowledge of the Company, no representation or warranty made by the Company containedin this Agreement, and no statement contained in the Disclosure Schedule or in any certificate,list or other writing furnished to Parent pursuant to any provision of this Agreement (includingthe Company Financials and the notes thereto) contains any untrue statement of a material fact oromits to state a material fact necessary in order to make the statements herein or therein, in thelight of the circumstances under which they were made, not misleading.**ARTICLE IV****REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB**Each of Parent and Sub hereby represents and warrants to the Company, on the date hereof andas of the Effective Time, as though made at the Effective Time, as follows:4.1 ***Organization and Standing***. Parent is company limited by shares duly organized, validlyexisting and in good standing under the Laws of the Cayman Islands. Sub is a corporation dulyorganized, validly existing and in good standing under the Laws of the State of Delaware. Each ofParent and Sub is duly qualified or licensed to do business and is in good standing as a foreigncorporation in each jurisdiction in which the failure to be so qualified or licensed or in goodstanding would have a Parent Material Adverse Effect.
 
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4.2 ***Authority***. Each of Parent and Sub has all requisite corporate power and authority toenter into this Agreement and to consummate the transactions contemplated hereby. The executionand delivery by each of Parent and Sub of this Agreement, and the consummation of the transactionscontemplated hereby, have been duly authorized by all necessary corporate action on the part ofParent and Sub, and no further corporate action is required on the part of Parent and Sub toauthorize the execution of delivery of the Agreement. This Agreement has been duly executed anddelivered by Parent and Sub and, assuming due authorization, execution and delivery by the otherparties thereto, constitutes the valid and binding obligation of Parent and Sub, enforceableagainst each in accordance with its terms, except as the enforceability thereof may be limited bybankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar lawsrelating to the enforcement of creditors’ rights generally and by general principles of equity.4.3 ***Consents***. No Approval of any Governmental Entity or any other Person is required by orwith respect to Parent or Sub in connection with the execution and delivery of this Agreement orthe consummation of the transactions contemplated hereby, except for (a) such Approvals as may berequired under applicable securities laws, (b) the filing of the Certificate of Merger with theSecretary of State of the State of Delaware, and (c) such Approvals that, if not obtained or made,would not have a Parent Material Adverse Effect or prevent or delay the consummation of thetransactions contemplated hereby.4.4 ***Capital Resources***. Parent has and, at the Effective Time, will have, sufficient cashresources to pay the Per Share Amounts payable pursuant to **Section 2.****6(a)(i)** hereof.4.5 ***No Conflict***. The execution and delivery by Parent and Sub of this Agreement and theconsummation of the transactions contemplated hereby do not and will not conflict with or result ina conflict under (a) any provision of the organizational documents of Parent or Sub, or (b) any Lawor Order applicable to Parent or Sub or any of their Assets and Properties.**ARTICLE V****CONDUCT PRIOR TO THE EFFECTIVE TIME**5.1 ***Conduct of Business of the Company***. During the period from the date of this Agreement andcontinuing until the earlier of the termination of this Agreement pursuant to **Section 9.1**hereof orthe Effective Time (the “***Pre-Closing Period***”), the Company agrees to conduct the business of theCompany, except to the extent that Parent shall otherwise consent in writing in accordance with**Section 5.3**hereof, in the usual, regular and ordinary course in substantially the same manner asheretofore conducted, to pay thedebts and Taxes of the Company when due, to pay or perform other obligations when due, and topreserve intact the present business organization of the Company, keep available the services ofthe present officers and employees of the Company and preserve the relationships of the Companywith customers, suppliers, distributors, licensors, licensees, and others having business dealingswith them, all with the goal of preserving substantially unimpaired the goodwill and ongoingbusinesses of the Company at the Effective Time. The Company shall promptly notify Parent of anymaterial event or occurrence involving the Company that arises during the period from the date ofthis Agreement and continuing until the earlier of the termination date of this Agreement or theEffective Time. The Company shall not, without the prior written consent of Parent (which consent,with respect to clauses (b), (c), (d), (e), (f), (l), (r), (aa) and, solely with respect to theforegoing, (bb) of this **Section 5.1**, shall not be unreasonably withheld), which consent is to berequested in accordance with **Section 5.3**hereof:(a) cause or permit any modifications, amendments or changes to its certificate ofincorporation or bylaws;
 
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(b) undertake any expenditure, transaction or commitment not in the ordinary course ofbusiness consistent with past practice and exceeding $10,000 individually or $50,000 in theaggregate;(c) pay, discharge, waive or satisfy, in an amount in excess of $10,000 in any one case, or$50,000 in the aggregate, any claim, liability, right or obligation (absolute, accrued, asserted orunasserted, contingent or otherwise), other than the payment, discharge or satisfaction in theordinary course of business of (i) liabilities reflected or reserved against in the InterimFinancial Statements, (ii) claims, liabilities, rights or obligations (absolute, accrued, assertedor unasserted, contingent or otherwise) incurred or to be incurred in the ordinary course ofbusiness or (iii) liabilities incurred in connection with the transactions contemplated hereby,which amounts shall be deemed Third Party Expenses;(d) adopt or change accounting methods or practices (including any change in depreciation oramortization policies or rates) other than as required by GAAP;(e) make or change any material election in respect of Taxes, adopt or change any accountingmethod in respect of Taxes, enter into any agreement, settle any claim or assessment in respect ofTaxes, or consent to any extension or waiver of the limitation period applicable to any claim orassessment in respect of Taxes or file any Return unless a copy of such Return has been deliveredto Parent for review a reasonable time prior to filing and Parent has approved such Return;(f) revalue any of its assets (whether tangible or intangible), including writing down thevalue of inventory or writing off notes or accounts receivable;(g) declare, set aside, or pay any dividends on or make any other distributions (whether incash, stock or property) in respect of any Company Capital Stock, or split, combine or reclassifyany Company Capital Stock or issue or authorize the issuance of any other securities in respect of,in lieu of or in substitution for shares of Company Capital Stock, or directly or indirectlyrepurchase, redeem or otherwise acquire any shares of Company Capital Stock (or options, warrantsor other rights convertible into, exercisable or exchangeable for Company Common Stock) except inaccordance with the agreements evidencing Company Options or Company Common Stock or pursuant tothe conversion rights of the Company Preferred Stock;(h) increase or otherwise change the salary or other compensation payable or to become payableto any officer, director, employee, consultant or advisor, or make any declaration, payment orcommitment or obligation of any kind for the payment (whether in cash or equity) of aseverance payment, termination payment, bonus or other additional salary or compensation to anysuch person;(i) sell, lease or otherwise dispose of any of the assets or properties of the Company orgrant any security interest in any of its properties or assets;(j) make any loan to any Person or purchase debt securities of any Person or amend the termsof any outstanding loan agreement;(k) incur any indebtedness for borrowed money, amend the terms of any outstanding loanagreement, guarantee any indebtedness for borrowed money of any Person, issue or sell any debtsecurities or guarantee any debt securities of any Person;
 
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(l) waive or release any material right or claim of the Company, including any write-off orother compromise of any account receivable of the Company;(m) commence or settle any lawsuit, threat of any lawsuit or proceeding or other investigationby or against the Company or relating to any of their businesses, properties or assets;(n) issue, grant, deliver or sell or authorize or propose or contract for the issuance, grant,delivery or sale of, or purchase or propose or contract for the purchase of, any Company CapitalStock or any securities convertible into, exercisable or exchangeable for, or subscriptions,rights, warrants or options to acquire, or other agreements or commitments of any characterobligating any of them to issue or purchase any such shares or other convertible securities, exceptfor the issuance of Company Capital Stock pursuant to the exercise of outstanding Company Optionsor conversion of outstanding Company Preferred Stock;(o) (i) sell, lease, license or transfer to any Person any rights to any Company IntellectualProperty or enter into any agreement or modify or amend any existing agreement with respect to anyCompany Intellectual Property with any Person or with respect to any Intellectual Property of anyPerson except in the ordinary course of business consistent with past practice, (ii) license anymaterial Intellectual Property, license any Intellectual Property to be incorporated into anyproduct of the Company, or purchase any Intellectual Property, or enter into any agreement ormodify or amend any existing agreement with respect to the Intellectual Property of any Person,except, in each case, in the ordinary course of business consistent with past practice (iii) enterinto any agreement or modify or amend any existing agreement with respect to the development of anyIntellectual Property with a third party, or (iv) propose or consent to any change to pricing orroyalties set or charged by the Company to its customers or licensees, or the pricing or royaltiesset or charged by Persons who have licensed Intellectual Property to the Company;(p) enter into or amend any Contract pursuant to which any other party is granted marketing,distribution, development, manufacturing or similar rights of any type or scope with respect to anyproducts or technology of the Company, except, in each case, in the ordinary course of businessconsistent with past practice on the Company’s standard terms and conditions as disclosed to Parentprior to the date hereof;(q) enter into any agreement to purchase or sell any interest in real property, grant anysecurity interest in any real property, enter into any lease, sublease, license or other occupancyagreement with respect to any real property or alter, amend, modify or terminate any of the termsof any Lease Agreements;(r) terminate, amend or otherwise modify (or agree to do so), or violate the terms of, any ofthe Contracts set forth or described in the Disclosure Schedule;(s) acquire or agree to acquire by merging or consolidating with, or by purchasing any assetsor equity securities of, or by any other manner, any business or any corporation, partnership,association or other business organization or division thereof, or otherwise acquire or agree toacquire any assets which are material or any equity securities, individually or in the aggregate,to the business of the Company;(t) grant any severance or termination pay (in cash or otherwise) to any employee, includingany officer, except payments made pursuant to written agreements existing on the date hereof anddisclosed in the Disclosure Schedule;(u) adopt or amend the Option Plan, enter into or amend any employee agreement, enter into anyemployment contract, pay or agree to pay any bonus or special remuneration to any director oremployee, or increase or modify the salaries, wage rates, or other compensation (including anyequity-based compensation) of its employees except payments made pursuant to written agreementsoutstanding on the date hereof and disclosed in **Section 5.****1(u)****of the Disclosure Schedule**or tomeet the requirements of applicable Law or as required by this Agreement;
 
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(v) enter into any strategic alliance, affiliate agreement or joint marketing arrangement oragreement, outside the ordinary course of business consistent with past practice;(w) take any action to accelerate the vesting schedule of any of the outstanding CompanyOptions or Company Common Stock;(x) hire, offer to hire or terminate any employees, or encourage or otherwise cause anyemployees to resign from the Company;(y) promote, demote, terminate or otherwise change the employment status or titles of anyemployee;(z) alter, or enter into any commitment to alter, its interest in any corporation,association, joint venture, partnership or business entity in which the Company directly orindirectly holds any interest;(aa) cancel, amend or renew any insurance policy; or(bb) take, commit, or agree in writing or otherwise to take, any of the actions described in**Sections 5.****1(a)** through **5.1(aa)**hereof, or any other action that would (i) prevent the Company fromperforming, or cause the Company not to perform, its covenants or agreements hereunder or (ii)cause or result in any of its respective representations and warranties contained herein beinguntrue or incorrect.5.2 ***No Solicitation***.(a) During the Pre-Closing Period, the Company shall not (nor shall the Company permit, asapplicable, any of its officers, directors, employees, shareholders, agents, representatives orAffiliates to), directly or indirectly, take any of the following actions with any Person otherthan Parent and its designees: (i) solicit, encourage, seek, entertain, support, assist, initiateor participate in any inquiry, negotiations or discussions, or enter into any agreement, withrespect to any offer or proposal to acquire all or any part of the business, properties, assets ortechnologies of the Company (other than inventory or licenses in the ordinary course of business ofthe Company), or any amount of the Company Capital Stock (whether or not outstanding), whether bymerger, purchase of assets, tender offer, license or otherwise, or effect any such transaction (anysuch offer or proposal, an “Acquisition Proposal”); (ii) disclose any confidential informationconcerning the business, technologies or properties of the Company, or afford to any Person accessto its ortheir respective properties, technologies, books or records, in either case in furtherance ofan Acquisition Proposal; (iii) assist or cooperate with any Person in connection with anAcquisition Proposal; or (iv) enter into any agreement with any Person relating to an AcquisitionProposal, and shall provide copies of all writings provided by such Person in connection with suchAcquisition Proposal. The Company shall immediately cease and cause to be terminated any suchnegotiations, discussion or agreements (other than with Parent) that are the subject matter ofclause (i), (ii), (iii) or (iv) above.
 
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(b) The Company shall notify Parent as promptly as practicable (but in no event later thantwenty-four (24) hours) after receipt of any Acquisition Proposal, or modification of or amendmentto any Acquisition Proposal, or request for nonpublic information relating to the Company or foraccess to the properties, books or records of the Company, or notice by any Person that it isconsidering making, or has made, an Acquisition Proposal. Such notice to Parent shall be madeorally and in writing and shall indicate the identity of the Person making the Acquisition Proposalor intending to make or considering making an Acquisition Proposal or requesting non-publicinformation or access to the books and records of the Company and the terms of any such AcquisitionProposal or modification or amendment to the Acquisition Proposal. The Company shall keep Parentinformed, on a current basis, of any material changes in the status and any material changes ormodifications in the terms of any such Acquisition Proposal, indication or request.(c) The parties hereto agree that irreparable damage would occur in the event that theprovisions of this **Section 5.2**were not performed in accordance with their specific terms or wereotherwise breached. It is accordingly agreed by the parties hereto that Parent shall be entitledto an immediate injunction or injunctions, without the necessity of proving the inadequacy of moneydamages as a remedy and without the necessity of posting any bond or other security, to preventbreaches of the provisions of this **Section 5.2**and to enforce specifically the terms and provisionshereof in any court of the United States or any state having jurisdiction, this being in additionto any other remedy to which Parent may be entitled at law or in equity. Without limiting theforegoing, it is understood that any violation of the restrictions set forth above by any officer,director, agent, representative or Affiliate of Company shall be deemed to be a breach of thisAgreement by Company.5.3 ***Procedures for Requesting Parent Consent***. If the Company desires to take an action whichwould be prohibited pursuant to **Section 5.1**hereof without the written consent of Parent, prior totaking such action the Company may request such written consent by sending an e-mail to each of thefollowing individuals:Diana LiTelephone: +86 (21) 5050-4740E-mail address: diana@shandagames.comThomas YihTelephone: +86 (21) 5050-4740, extension 8709Email address: thomas@shandagames.com**ARTICLE VI****ADDITIONAL AGREEMENTS**6.1 ***Access to Information***. Until the earlier of the termination of this Agreement or theEffective Time, the Company shall afford Parent and its accountants, counsel and otherrepresentatives, reasonable access at reasonable times to (a) all of the properties (including forthe performance of environmental tests orinvestigations as Parent may desire), books, contracts, commitments and records of theCompany, including all Company Intellectual Property, (b) all other information concerning thebusiness, properties and personnel (subject to restrictions imposed by applicable Law) of theCompany as Parent may reasonably request, and (c) all employees of the Company as identified byParent. Any access to the Company’s offices will be subject to the Company’s reasonable securitymeasures and insurance requirements. The Company agrees to provide to Parent and its accountants,counsel and other representatives copies of internal financial statements (including Tax Returnsand supporting documentation) promptly upon request. No information or knowledge obtained in anyinvestigation pursuant to this **Section 6.1**or otherwise shall affect or be deemed to modify anyrepresentation or warranty contained herein or the conditions to the obligations of the parties toconsummate the Merger in accordance with the terms and provisions hereof.
 
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6.2 ***Confidentiality***. Each of the parties hereto hereby agrees that the information obtainedin any investigation pursuant to **Section 6.1**hereof, pursuant to the negotiation and execution ofthis Agreement or the effectuation of the transactions contemplated hereby, shall be governed bythe terms of Confidentiality and Non-Disclosure Agreement between Parent and the Company dated asof December 10, 2009 (the “**Confidentiality Agreement**”). Parent and the Company agree that suchinformation will constitute “Confidential Information” as contemplated by the ConfidentialityAgreement. The Company further acknowledges that the ADSs are publicly traded and that anyinformation obtained during the course of its due diligence could be considered to be materialnon-public information within the meaning of federal and state securities laws. Accordingly, theCompany acknowledges and agrees not to engage in any discussions or correspondence regarding ortransactions in the ADSs or the Parent Ordinary Shares in violation of applicable securities laws.6.3 ***Public Disclosure***. Neither Parent nor the Company (nor any of their respectiverepresentatives) shall issue any statement or communication to any third party (other than theiragents that are bound by confidentiality restrictions) regarding the subject matter of thisAgreement or the transactions contemplated hereby, including, if applicable, the termination ofthis Agreement and the reasons therefor, without the consent of the other, except that thisrestriction shall be subject to Parent’s obligation to comply with applicable securities laws andNasdaq rules.6.4 ***Reasonable Efforts***. Subject to the terms and conditions provided in this Agreement, eachof the parties hereto shall use its reasonable efforts to take promptly, or cause to be takenpromptly, all actions, and to do promptly, or cause to be done promptly, all things necessary,proper or advisable under applicable Laws and regulations to consummate and make effective thetransactions contemplated hereby, to cause all conditions to the obligations of the other partieshereto to effect the Merger to occur, to obtain all necessary Approvals and other documentsrequired to be delivered hereunder and to effect all necessary registrations and filings and toremove any injunctions or other impediments or delays, legal or otherwise, in order to consummateand make effective the transactions contemplated by this Agreement; *provided*, *however*, that Parentshall not be required to agree to (i) any license, sale or other disposition or holding separate(through establishment of a trust or otherwise) of any shares of capital stock, any business, orany Assets and Properties of Parent, its Subsidiaries or Affiliates, or of the Company, (ii) theimposition of any limitation on the ability of Parent, its Subsidiaries or Affiliates, or theCompany, to conduct their respective businesses or own any capital stock or Assets and Propertiesor to acquire, hold or exercise full rights of ownership of their respective businesses and, in thecase of Parent, the businesses of the Company, or (iii) the imposition of any impediment on Parent,its Subsidiaries or Affiliates, or the Company, under any Law or order other legal restraintgoverning competition, monopolies or restrictive trade practices (any such action described in (i),(ii) or (iii), an “**Action of Divestiture**”). Nothing herein shall require Parent to litigate withany Governmental Entity.6.5 ***Notification of Certain Matters.***The Company shall give prompt notice to Parent of: (a)the occurrence or non-occurrence of any event, which occurrence or non-occurrence is reasonablylikely to cause any representation or warranty of the Company contained in this Agreement to beuntrue or inaccurate at or prior to the Effective Time; and (b) any failure of the Company tocomply with or satisfy any covenant, condition or agreement to be complied with or satisfied by ithereunder; *provided*, *however*, that the delivery of any notice pursuant to this **Section 6.5**shallnot (i) limit or otherwise affect any remedies available to the party receiving such notice, or(ii) constitute an acknowledgment or admission of a breach of this Agreement. No disclosure by theCompany pursuant to this **Section 6.5**shall be deemed to amend or supplement the Disclosure Scheduleor prevent or cure any misrepresentations, breach of warranty or breach of covenant.
 
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6.6 ***Shareholder Approval***.(a) Immediately following the execution of this Agreement, the Company shall deliver to Parentan action by written consent, in a form reasonably acceptable to Parent, executed by each of thepersons listed on **Schedule 6.****6(a)** representing the Initial Shareholder Approval.(b) Following the execution of this Agreement, the Company shall solicit the written consentof the remaining shareholders of the Company to approve and adopt the Agreement and approve theMerger (the “**Final Shareholder Approval**”). In connection with such shareholder approval and assoon as practicable after the execution of this Agreement, the Company shall prepare, with thecooperation of Parent, an information statement (the “**Information Statement**”) for the purpose ofsoliciting the written consent of the shareholders of the Company. Each of Parent and theCompany agrees to provide promptly to the other such information concerning its business andfinancial statements and affairs as, in the reasonable judgment of the providing party or itscounsel, may be required or appropriate for inclusion in the Information Statement or in anyamendments or supplements to the Information Statement. Each of the parties hereto will promptlyadvise the other parties in writing if at any time prior to the Effective Time either the Companyor Parent shall obtain knowledge of any facts that might make it necessary or appropriate to amendor supplement the Information Statement in order to make the statements contained or incorporatedby reference therein not misleading or to comply with applicable Law. The Board of Directors ofthe Company shall recommend to the shareholders of the Company that such shareholders approve andadopt the Agreement and approve the Merger and the transactions contemplated hereby, and theInformation Statement shall containsuch recommendation, as well as the conclusion of the Board of Directors of the Company thatthe terms and conditions of the Merger are in the best interests of the shareholders in the opinionof the Board of Directors. Notwithstanding anything to the contrary contained herein, the Companyshall not include in the Information Statement any information with respect to Parent or itsAffiliates or Associates, the form and content of which information shall not have been approved byParent prior to such inclusion.6.7 ***Board and Shareholder Approval.***The Board of Directors of the Company shall not alter,modify, change or revoke its unanimous approval of this Agreement, the Merger and the transactionscontemplated hereby, nor shall the Board of Directors of the Company encourage or solicit theshareholders of the Company to alter, modify, change or revoke their approval of this Agreement,the Merger and the transactions contemplated hereby.6.8 ***Merger Notification***.(a) To the extent applicable, as soon as may be reasonably practicable, the Company and Parent(and any applicable shareholder of the Company) shall make all filings, notices, petitions,statements, registrations and submissions of information, application or submission of otherdocuments required by any Governmental Entity in connection with the Merger and the transactionscontemplated hereby. Each of Parent and the Company shall cause all documents that it isresponsible for filing with any Governmental Entity under this **Section 6.8**to comply in allmaterial respects with applicable Law.(b) The Company and Parent (and/or any applicable shareholder of the Company) each shallpromptly (i) supply the others with any information which reasonably may be required in order toeffectuate the filings contemplated by **Section 6.****8(a)****,**and (ii) supply any additional informationwhich reasonably may be required by the competition or merger control authorities of anyjurisdiction and which the parties may reasonably deem appropriate. Except where prohibited byapplicable Law, the Company shall consult with Parent prior to taking a position with respect toany such filings, shall permit Parent to review and discuss in advance, and consider in good faiththe views of Parent in connection with, any analyses, appearances, presentations, memoranda,briefs, white papers, other materials, arguments, opinions and proposals before making orsubmitting any of the foregoing to any Governmental Entity in connection with any investigations orproceedings in connection with this Agreement or the transactions contemplated hereby, coordinatewith Parent in preparing and providing such information and promptly provide Parent (and itscounsel) copies of all filings, presentations and submissions (and a summary of oral presentations)made by the Company with any Governmental Entity in connection with this Agreement and thetransactions contemplated hereby. Parent shall have principal control over the strategy forinteracting with such Governmental Entities in connection with the matters contained in this**Section 6.8**.
 
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(c) Each of Parent and the Company shall notify the other promptly upon the receipt of (i) anycomments from any officials of any Governmental Entity in connection with any filings made pursuanthereto, and (ii) any request by any officials of any Governmental Entity for amendments orsupplements to any filings made pursuant to, or information provided to comply in all materialsrespect with, applicable Law. Whenever any event occurs that is required to be set forth in anamendment or supplement to any filing made pursuant to **Section 6.8(a)**, Parent or the Company, asthe case may be, will promptly inform the other of such occurrence and cooperate in filing with theapplicable Governmental Entity such amendment or supplement.6.9 ***Consents***. The Company shall use commercially reasonable best efforts to obtain allApprovals of any parties to any Contract as are required thereunder in connection with the Mergeror for any such Contracts to remain in full force and effect so as to preserve all rights of, andbenefits to, the Company under such Contract from and after the Effective Time. Such Approvalsshall be in a form reasonably acceptable to Parent. In the event that the other parties to anysuch Contract, including any lessor or licensorof any Leased Real Property, conditions its grant of a consent, waiver or approval (includingby threatening to exercise a “recapture” or other termination right) upon the payment of a consentfee, “profit sharing” payment or other consideration, including increased rent payments or otherpayments under the Contract, the Company shall be responsible for making all payments required toobtain such consent, waiver or approval, and Parent shall be entitled to indemnification for alllosses, costs, claims, liabilities and damages arising from the same to the extent they are ExcessThird Party Expenses.6.10 ***Section 280G****.*The Company shall promptly submit to the shareholders of the Company forapproval (in a manner reasonably satisfactory to Parent), by such number of Company shareholders asis required by the terms of Section 280G(b)(5)(B) of the Internal Revenue Code, any payments and/orbenefits that may separately or in the aggregate constitute “parachute payments” pursuant toSection 280G of the Internal Revenue Code (“**Section 280G Payments**”) (which determination shall bemade by the Company and shall be subject to reasonable review and approval by Parent), such thatpayments and benefits shall not be deemed to be Section 280G Payments, and prior to the EffectiveTime the Company shall deliver to Parent evidence satisfactory to Parent that (A) a vote of theshareholders of the Company was solicited in conformance with Section 280G of the Internal RevenueCode and the regulations thereunder and the requisite shareholder approval was obtained withrespect to any payments and/or benefits that were subject to the shareholder vote (the “**280GShareholder Approval**”), or (B) that the 280G Shareholder Approval was not obtained and as aconsequence, that such payments and/or benefits shall not be made or provided to the extent theywould cause any amounts to constitute Section 280G Payments, pursuant to the waivers of thosepayments and/or benefits, which were executed by the affected individuals prior to the shareholdervote.6.11 ***Spreadsheet***. The Company shall deliver to Parent and the Payment Agent three (3)Business Days prior to the Closing Date a spreadsheet (the “**Spreadsheet**”) in form and substance asreasonably agreed upon by Parent and Shareholder Representative, which spreadsheet shall becertified as complete and correct by the Chief Executive Officer of the Company as of the Closing.The Spreadsheet shall include, among other things, the following information: all Shareholders andtheir respective addresses, the number of shares of Company Capital Stock held by such persons, therespective certificate numbers, the date of acquisition of such shares, the Escrow Amount to beplaced in escrow pursuant to **Section 2.****6(a)(ii)** or, with respect to the Founders, pursuant to theStock Consideration Agreements, the Pro Rata Portion, the amount of Merger Cash to be paid to eachholder at Closing, and such other information relevant thereto which Parent or the Payment Agentmay reasonably request, as well as all information reasonably requested by Parent relating to alloutstanding Company Options. The Spreadsheet shall be reasonably satisfactory to Parent.
 
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6.12 ***RSU Grants***. As soon as reasonably practicable following the Closing, Parent shall grantrestricted stock units (“**RSUs**”) with an aggregate value equal to the Restricted Stock Unit Value atthe time of grant based on the Trading Price, to certain employees of the Company, such employeesto be determined by the Company prior to the Closing in consultation with the Parent. The terms ofthe RSUs shall provide for, among other things, that 1/4 of the RSUs shall vest on the first fouranniversaries of the Closing Date, subject to the grantee’s continued employment with the Sub orParent.6.13 ***Indemnification of Officers and Directors****.*(a) For a period of six (6) years from and after the Closing Date, Parent and the SurvivingCorporation agree to indemnify (including advancement of expenses) and hold harmless all past andpresent officers and directors of the Company to the same extent such persons are indemnified bythe Company as of the date of this Agreement pursuant to the Company’s certificate of incorporationor bylaws, indemnification agreements or under applicable Law for acts or omissions which occurredat or prior to the Effective Time. The certificate of incorporation and bylaws of the SurvivingCorporation shall contain provisions with respect to indemnification and exculpation that are atleast as favorable to the past and present officers and directorsof the Company as those provisions contained in the Company’s certificate of incorporation andbylaws in effect on the date hereof, and such provisions shall not be amended, repealed orotherwise modified for a period of six (6) years in any manner that would adversely affect therights of the past and present officers and directors of the Company (unless such modification isrequired by applicable Law. This indemnification shall not apply to any claim or action by anysuch officer or director brought against the Company or any of its predecessors, successors,assigns, officers, directors, stockholders, employees or agents in response to or in connectionwith any claim brought by a Parent Indemnified Party (as defined below) pursuant to Article VIII ofthis Agreement. The Company hereby represents to Parent that no claim for indemnification has beenmade by any director or officer of the Company and, to the knowledge of the Company, no basisexists for any such claim for indemnification.(b) The provisions of this **Section 6.13**are intended for the benefit of, and shall beenforceable by, all past and present officers and directors of the Company and his or her heirs andrepresentatives. The rights of all past and present officers and directors of the Company underthis **Section 6.13**are in addition to, and not in substitution for, any other rights toindemnification or contribution that any such person may have by contract, applicable Law orotherwise.(c) Prior to the Closing, the Company shall purchase a six year “tail” policy to maintaindirectors’ and officers’ liability insurance, covering those Persons who are covered by theCompany’s directors’ and officers’ liability insurance policy as of the date hereof in an amountand on terms as favorable as to coverage and amount in the aggregate, as under those policies ineffect on the date of this Agreement and applicable to the current directors and officers of theCompany. The cost of such “tail” policy shall be deemed Third Party Expenses.
 
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**ARTICLE VII****CONDITIONS TO THE MERGER**7.1 ***Conditions to Obligations of Each Party to Effect the Merger***. The respective obligationsof the Company, Parent and Sub to effect the Merger shall be subject to the satisfaction, at orprior to the Effective Time, of each of the following conditions:(a) ***No Order; Injunctions; Restraints; Illegality***. No Governmental Entity shall have enacted,issued, promulgated, enforced or entered any Law or Order which is in effect and which has theeffect of making the Merger illegal or otherwise prohibiting or preventing consummation of theMerger.(b) ***Governmental Approval***. All Approvals from any Governmental Entity relating to thetransactions contemplated by this Agreement shall have been obtained.7.2 ***Conditions to the Obligations of Parent and Sub***. The obligations of Parent and Sub toeffect the Merger shall be subject to the satisfaction, at or prior to the Effective Time, of eachof the following conditions, any of which may be waived, in writing, exclusively by Parent:(a) ***Representations, Warranties and Covenants***. (i) Each of the representations and warrantiesof the Company and the Founders in this Agreement (other than the representations and warranties asof a specified date, each of which shall be true and correct as of such date), (A) shall have beentrue and correct on the date they were made in all material respects (without giving effect to anylimitation as to “materiality” or “Company Material Adverse Effect” set forth therein), and (B)shall be true and correct on and as of the Closing Date as though such representations andwarranties were made on and as of such dateexcept to the extent the failure of such representations and warranties to be so true andcorrect has not had, and would not be reasonably expected to have a Company Material Adverse Effectand (ii) the Company shall have performed and complied in all material respects with each of thecovenants and obligations under this Agreement required to be performed and complied with by it asof the Closing.(b) ***No Material Adverse Effect***. Since the Interim Financial Statement Date, there shall nothave occurred any event or condition of any character that has had or is reasonably likely to have,either individually or in the aggregate with all such other events or conditions, a CompanyMaterial Adverse Effect, determined without regard to whether such change constitutes a breach of arepresentation or warranty.(c) ***Shareholder Approval***. The Initial Shareholder Approval and the Final Shareholder Approvalremain valid and in effect such that no votes of the holders of any shares of the Company CapitalStock are required to adopt and approve this Agreement and approve the Merger.(d) ***280G Payments***. With respect to any payments and/or benefits that Parent reasonablydetermines may constitute a Section 280G Payment, the shareholders of the Company shall have (i)approved, pursuant to the method provided for in the regulations promulgated under Section 280G ofthe Internal Revenue Code, any such Section 280G Payments, or (ii) shall have voted upon anddisapproved such payments and/or benefits and, as a consequence, no Section 280G Payments shall bepaid or provided for in any manner and Parent shall not have any liabilities with respect to anySection 280G Payments.(e) ***Dissenters’ Rights***. No more than ninety five percent (95)% of the outstanding shares ofCompany Capital Stock shall be held by shareholders of the Company that have a right to exerciseappraisal, dissenters’ or similar rights under applicable Law with respect to their Company CapitalStock by virtue of the Merger.
 
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(f) ***Litigation***. There shall be no Action or Proceeding of any nature pending, or overtlythreatened, against Parent, the Company, their respective Assets and Properties or any of theirrespective officers or directors arising out of, or in any way connected with, the Merger or theother transactions contemplated by the terms of this Agreement or otherwise seeking any of theresults set forth in **Section 7.****1(a)** hereof, that is reasonably likely to materially and adverselyaffect the consummation of the Merger.(g) ***Resignation of Officers and Directors***. Parent shall have received a written resignationletter from each of the directors of the Company effective as of the Effective Time in a formacceptable to Parent.(h) ***Legal Opinion***. Parent shall have received a legal opinion from legal counsel to theCompany in the form attached hereto as **Exhibit B**.(i) ***Spreadsheet***. Parent and the Payment Agent shall have received from the Company three (3)Business Days prior to the Closing Date the Spreadsheet pursuant to **Section 6.11**, which shall havebeen certified as of the Closing Date as complete and correct by the Chief Executive Officer of theCompany.(j) ***Certificate of the Company***. Parent shall have received a certificate from the Company,validly executed by the Chief Executive Officer of the Company for and on the Company’s behalf, tothe effect that, as of the Closing:(i) the condition set forth in **Section 7.****2(a)** has been satisfied; and(ii) the Company has performed and complied in all material respects with each of thecovenants and obligations under this Agreement required to be performed and complied with by it asof the Closing.(k) ***Certificate of Secretary of Company***. Parent shall have received a certificate, validlyexecuted by the Secretary of the Company, certifying as to (i) the terms and effectiveness of theCompany’s current certificate of incorporation and bylaws, (ii) the valid adoption of resolutionsof the Board of Directors of the Company (whereby the Merger and the transactions contemplatedhereunder, were unanimously approved by the Board of Directors) and (iii) that the shareholders ofthe Company constituting the Final Shareholder Approval have adopted and approved the Merger, thisAgreement and the consummation of the transactions contemplated hereby.(l) ***Certificate of Good Standing***. Parent shall have received a certificate of good standingfrom the Secretary of State of the State of Delaware which is dated within two (2) Business Daysprior to Closing with respect to the Company.(m) ***FIRPTA Certificate***. Parent shall have received a copy of a customary FIRPTA compliancecertificate for purposes of satisfying Parent’s obligations under Treasury Regulation Section1.1445-2(c)(3), in form and substance satisfactory to Parent, validly executed by a duly authorizedofficer of the Company.(n) ***Founder Stock Consideration Agreements***. Each Founder shall have executed and delivered toParent a Stock Consideration Agreement in the form attached hereto as **Exhibit A.**
 
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(o) ***No Action of Divestiture***. There shall not have been any action taken, or any Law or Orderenacted, promulgated or issued or deemed applicable to the Merger by any Governmental Entity whichwould constitute an Action of Divestiture.7.3 ***Conditions to Obligations of the Company***. The obligations of the Company to effect theMerger shall be subject to the satisfaction, at or prior to the Effective Time, of each of thefollowing conditions, any of which may be waived, in writing, exclusively by the Company:(a) ***Representations, Warranties and Covenants***. (i) Each of the representations and warrantiesof Parent and Sub in this Agreement (other than the representations and warranties of Parent andSub as of a specified date, each of which shall be true and correct as of such date) shall havebeen true and correct when made and shall be true and correct on and as of the Closing Date asthough such representations and warranties were made on and as of such date, in each case in allmaterial respects (without giving effect to any limitation as to “materiality” or “Parent MaterialAdverse Effect” set forth therein), and (ii) each of Parent and Sub shall have performed andcomplied in all material respects with each of the covenants and obligations under this Agreementrequired to be performed and complied with by it as of the Closing Date.(b) ***Certificate of Parent***. The Company shall have received a certificate from Parent, validlyexecuted by an officer of Parent for and on Parent’s behalf, to the effect that, as of the Closing:(i) the condition set forth in **Section 7.****3(a)** has been satisfied; and(ii) Parent and Sub have performed and complied in all material respects with each of thecovenants and obligations under this Agreement required to be performed or complied with by Parentand Sub as of the Closing.**ARTICLE VIII****SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW**8.1 ***Survival of Representations and Warranties***.(a) The representations and warranties of the Company and the Founders set forth in thisAgreement, or in the certificate delivered pursuant to **Sections 7.****2(j)** or **7.****2(k)** of this Agreement,shall survive the Closing and the Effective Time for a period of twelve (12) calendar monthsfollowing the Closing Date (the “**Survival Date**”), except with respect to claims based on fraud, forwhich such period shall only terminate upon expiration of the applicable statute of limitations.If written notice of a claim has been given prior to the Survival Date, then the relevantrepresentations and warranties shall survive as to such claim until such claim has been finallyresolved.(b) The representations and warranties of Parent and Sub set forth in this Agreement, or inany certificate or other instrument delivered pursuant to this Agreement, shall expire at theEffective Time.(c) The agreements, covenants and other obligations of the parties hereto shall survive theClosing and the Effective Time in accordance with their respective terms.
 
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8.2 ***Indemnification***.(a) By virtue of the consummation of the Merger, the Shareholders agree to severally (and notjointly) indemnify and hold harmless Parent and its officers, directors, Affiliates, employees,agents and representatives, including the Surviving Corporation (the “**Indemnified Parties**”),against all claims, losses, liabilities, damages, deficiencies, diminution in value, costs,interest, awards, judgments, penalties and expenses, including reasonable attorneys’ andconsultants’ fees and expenses and including any such reasonable expenses incurred in connectionwith investigating, defending against or settling any of the foregoing (hereinafter individually a“**Loss**” and collectively “**Losses**”) incurred or sustained by the Indemnified Parties, or any of them(including the Surviving Corporation), directly or indirectly, as a result of: (i) any breach orinaccuracy of a representation or warranty by the Company or the Founders contained in thisAgreement or the certificates delivered by or on behalf of the Company pursuant to **Sections 7.2(j)**or **7.****2(k)** of this Agreement (*provided*that, in the event of any such breach or inaccuracy, forpurposes of determining the amount of any Loss no effect will be given to any qualification as to“materiality”, a “Company Material Adverse Effect” or “knowledge” contained therein); (ii) anyfailure by the Company to perform or comply with any covenant applicable to it contained in thisAgreement or any certificates or other instruments delivered pursuant to this Agreement; (iii) anyfraud in connection with this Agreement or the certificates delivered by or on behalf of theCompany pursuant to **Sections 7.****2(j)** or **7.****2(k)** of this Agreement; (iv) any payment or considerationarising under any Approvals of any party under any agreement as are required in connection with theMerger or for any such agreement to remain in full force or effect following the Effective Time;(v) any failure of the Spreadsheet to be true and correct in all respects; (vi) any DissentingShare Payments, to the extent that such Dissenting Share Payments exceed the consideration thatsuch dissenting Shareholders would have received in the Merger had no Dissenting Share Paymentsbeen made; and (vii) any Excess Third Party Expenses which were not included in the calculation ofthe Aggregate Consideration Amount at the time of Closing. The Shareholders (including any officeror director of the Company) shall not have any right of contribution, indemnification or right ofadvancement from the Surviving Corporation or Parent with respect to any Loss claimed by anIndemnified Party.(b) Any Person committing fraud in connection with this Agreement or any certificate deliveredpursuant to this Agreement, or who has knowledge of such fraud being committed, shall beseverally, and not jointly, liable for, and shall indemnify and hold the Indemnified Partiesharmless for, any Losses incurred or sustained by the Indemnified Parties, or any of them(including the Surviving Corporation), directly or indirectly, as a result of such fraud committedby such Person (or who has actual knowledge of such fraud being committed).(c) Subject to **Section 8.****2(b)** and **Section 8.3(b)**, the Shareholders shall be severally and notjointly liable for, and shall indemnify and hold the Indemnified Parties harmless for, any Lossesincurred or sustained by the Indemnified Parties, or any of them (including the SurvivingCorporation), directly or indirectly, arising out of any fraud in connection with this Agreement orthe certificates delivered by or on behalf of the Company pursuant to **Sections 7.****2(j)** or **7.****2(k)** ofthis Agreement.8.3 ***Maximum Payments; Remedy***.(a) Except as set forth in **Sections 8.****3(b)** and **9.2**hereof, following the Closing:(i) recovery from the Escrow Fund (and in the case of the Founders, the forfeiture of theHoldback Shares) shall be the sole and exclusive right and remedy for any Losses arising out of anyand all claims relating to the subject matter of this Agreement;
 
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(ii) the maximum amount an Indemnified Party may recover from a Shareholder individuallypursuant to the indemnity set forth in **Section 8.****2(a)** hereof for Losses shall be limited to suchShareholder’s Pro Rata Portion of the amounts held in the Escrow Fund (and, in the case of theFounders, the forfeiture of the Holdback Shares);(iii) no indemnification payment by the Shareholders with respect to any indemnifiable Lossesotherwise payable under **Section 8.****2(a)** and arising out of or resulting from the causes enumeratedin **Section 8.****2(a)** shall be payable until such time as all such indemnifiable Losses shall aggregateto more than $100,000, after which time the Shareholders shall be liable in full for allindemnifiable Losses (excluding the first $100,000).(b) Notwithstanding anything to the contrary set forth in this Agreement, in the event ofLosses arising out of any fraud by or on behalf of the Company or any Shareholder in connectionwith this Agreement or the certificates delivered pursuant to **Sections 7.****2(j)** or **7.****2(k)** of thisAgreement, each Shareholder shall be liable for all such Losses up to the full amount of theAggregate Consideration Amount payable to such Shareholder, *provided*that nothing in this Agreementshall limit the liability of any Person (including any Shareholder) for any such Losses if suchPerson perpetrated such fraud or had actual knowledge of such fraud being committed, and nothing inthis Agreement shall prevent or limit any right of other Shareholders for contribution from anyother Shareholder who perpetrated such fraud.(c) Notwithstanding anything to the contrary herein, the parties hereto agree and acknowledgethat any Indemnified Party may bring a claim for indemnification for any Loss under this **ArticleVIII**notwithstanding the fact that such Indemnified Party had knowledge of the breach, event orcircumstance giving rise to such Loss prior to the Closing or waived any condition to the Closingrelated thereto.(d) Notwithstanding anything to the contrary herein, nothing shall prohibit Parent fromseeking and obtaining recourse against any Shareholder in the event that Parent pays moreconsideration to any Shareholder than such Shareholder is entitled pursuant to **Article II**of thisAgreement.(e) Notwithstanding anything to the contrary set forth in this Agreement, nothing in thisAgreement shall limit the rights of any party hereto to apply for equitable remedies to enforce theother party or parties’ obligations hereunder.8.4 ***Means of Indemnification***.(a) ***Procedures for Claims for Indemnification***.(i) Each claim for indemnification by an Indemnified Party pursuant to the terms of thisArticle VIII shall be made only in accordance with this **Section 8.4**.(ii) ***Officer’s Certificate***. At any time on or prior to the date that is 14 days following theSurvival Date (the “**Claim Deadline Date**”), an Indemnified Party may make an indemnification claimpursuant to this Agreement by delivering a certificate (an “***Officer’s Certificate***”) to theShareholder Representative, with a copy to the Escrow Agent (i) stating that an Indemnified Partyhas paid, sustained, incurred, properly accrued, or reasonably anticipates in good faith that itwill have to pay, sustain, incur or accrue Losses and (ii) specifying in reasonable detail theindividual items of Losses included in the amount so stated (and the method of computation of eachsuch item of Loss, if applicable), the date each such item was paid, sustained, incurred, orproperly accrued (in accordance with GAAP), or the basis for such reasonably anticipated Loss(es);and (iii) the basis for indemnification under this **Article VIII**to which such item of Loss isrelated (including, if applicable, the specific nature of the misrepresentation, breach of warrantyor covenant to which such item is related) and (iv) the amount of the Founders’ combined Pro RataPortion of such indemnification claim (the “**Founder’s Indemnification Portion**”).
 
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(iii) ***Objection Notice***. Following the receipt of an Officer’s Certificate, the ShareholderRepresentative, on behalf of the Shareholders, shall have fifteen (15) Business Days to object toany item(s) or amount(s) set forth therein by delivering written notice thereof (an “***ObjectionNotice***”) to Parent, with a copy to the Escrow Agent. In the event that the ShareholderRepresentative shall fail to object to any item or amount set forth in an Officer’s Certificate bydelivering to Parent an Objection Notice within the foregoing ten (15) Business Day period, suchfailure shall be an irrevocable acknowledgement and be deemed to be an agreement by the ShareholderRepresentative and the Shareholders that the Indemnified Party is entitled to the full amount ofthe claim for Losses set forth in the Officer’s Certificate and upon the expiration of such fifteen(15) Business Day period, the Escrow Agent shall promptly release from the Escrow Fund and deliverto Parent or its designated Indemnified Party an amount of cash equal to (i) any item(s) andamount(s) that the Shareholder Representative is deemed to have acknowledged and agreed to pursuantto this **Section 8.****4(a)(iii)***minus*(ii) the applicable Founder’s Indemnification Portion.(iv) ***Resolution of Conflicts; Arbitration***.(1) In the event that the Shareholder Representative shall have objected to any item(s) oramount(s) set forth in any Officer’s Certificate pursuant to **Section 8.****4(a)(iii)**, the ShareholderRepresentative and Parent shall attempt in good faith to agree upon the rights of the respectiveparties with respect to each of such claims. If the Shareholder Representative and Parent shouldso agree, a memorandum setting forth such agreement shall be prepared and signed by both partiesand, in the case of a claim against the Escrow Fund, shall be furnished to the Escrow Agent. TheEscrow Agent shall be entitled to rely on any such memorandum and make distributions from theEscrow Fund in accordance with the terms thereof.(2) If no such agreement can be reached after good faith negotiation and prior to thirty (30)calendar days after delivery of an Objection Notice, either Parent or the ShareholderRepresentative may demand arbitration of the matter unless the amount of the Loss that is atissue is the subject of pending litigation with a third party, in which event arbitration shall notbe commenced with respect to the amount of any potential award or settlement amount in such pendinglitigation (without limiting an Indemnified Parties’ right to claim and recover amounts incurred oraccrued by the Indemnified Parties in defense of a Third Party Claim) until such amount isascertained pursuant to an award or settlement of such pending litigation or if Parent and theShareholder Representative agree to arbitration, and in either such event the matter shall besettled by arbitration conducted by one arbitrator mutually agreeable to Parent and the ShareholderRepresentative and not affiliated with either party. In the event that, within thirty (30)calendar days after submission of any dispute to arbitration, Parent and the ShareholderRepresentative cannot mutually agree on one arbitrator, then, within fifteen (15) calendar daysafter the end of such thirty (30) calendar day period, Parent and the Shareholder Representativeshall each select one arbitrator. The two (2) arbitrators so selected shall select a thirdarbitrator. If either party fails to select an arbitrator during this fifteen (15) day period,then the parties agree that the arbitration will be conducted by one arbitrator selected by theparty that did not fail to select an arbitrator during such period.
 
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(3) Any such arbitration shall be held in Santa Clara County, California, under the rules thenin effect of the American Arbitration Association. The arbitrator(s) shall determine how allexpenses relating to the arbitration shall be paid, including the respective expenses of eachparty, the fees of each arbitrator and the administrative fee of the American ArbitrationAssociation. The arbitrator or arbitrators, as the case may be, shall set a limited time periodand establish procedures designed to reduce the cost and time for discovery while allowing theparties an opportunity, adequate in the sole judgment of the arbitrator or majority of the three(3) arbitrators, as the case may be, to discover relevant information from the opposing partiesabout the subject matter of the dispute. The arbitrator, or a majority of the three (3)arbitrators, as the case may be, shall rule upon motions to compel or limit discovery and shallhave the authority to impose sanctions, including reasonable attorneys’ fees and costs, to the sameextent as a competent court of law or equity, should the arbitrators or a majority of the three (3)arbitrators, as the case may be, determine that discovery was sought without substantialjustification or that discovery was refused or objected to without substantial justification. Thedecision of the arbitrator or a majority of the three (3) arbitrators, as the case may be, as tothe validity and amount of any claim in such Officer’s Certificate shall be final, binding, andconclusive upon the parties to this Agreement and the Shareholders. Such decision shall be writtenand shall be supported by written findings of fact and conclusions which shall set forth the award,judgment, decree or order awarded by the arbitrator(s). The Escrow Agent shall be entitled to relyon, and make distributions from the Escrow Fund in accordance with, the terms of such award,judgment, decree or order as applicable and following receipt of such award, judgment, decree ororder, the Escrow Agent shall promptly release from the Escrow Fund and deliver to Parent an amountof cash equal to (i) the amount that Parent is entitled to pursuant to such award, judgment, decreeor order *minus*(ii) the applicable Founder’s Indemnification Portion.(4) Judgment upon any award rendered by the arbitrator(s) may be entered in any court havingjurisdiction. Except as set forth in **Section 8.****4(a)(v)** hereof, the forgoing arbitration provisionshall apply to any dispute among the Shareholders or any Indemnified Parties under this **ArticleVIII**with respect to claims made against the Escrow Fund.(5) This **Section 8.****4(a)(iv)** shall not apply to claims against the Escrow Fund made in respectof any Dissenting Share Payments to the extent that such Dissenting Share Payments exceed theconsideration that such dissenting Shareholders would have received in the Merger had no DissentingShare Payment been made (an “**Agreed-Upon Loss**”).(v) ***Agreed-Upon Losses***. Notwithstanding the foregoing, the Shareholder Representative herebywaives the right to object to any claims against the Escrow Fund in respect of anyAgreed-Upon Loss. The Shareholder Representative hereby authorizes the Escrow Agent to payfrom the Escrow Fund all such amounts equal to the amount of Losses claimed in any Officer’sCertificate in respect of any Agreed-Upon Loss upon receipt of such Officer’s Certificate withoutregard to the fifteen (15) Business Day period set forth in this Section 8.4(a)(iii).(b) ***Third-Party Claims***. In the event Parent becomes aware of a third party claim or othercircumstance (other than a claim or circumstance that is the subject of an Agreed-Upon Loss) (a“**Third Party Claim**”) which Parent reasonably believes may result in a demand against the EscrowFund or for other indemnification pursuant to this **Article VIII**, Parent shall notify theShareholder Representative of such claim or circumstance, and the Shareholder Representative shallbe entitled on behalf of the Shareholders, at their expense, to participate in, but not todetermine or conduct, the defense of such Third Party Claim; provided, however,that Parent will conduct any defense and/or settlement of any Third Party Claim in good faith.Parent shall have the right in its sole discretion to conduct the defense of, and to settle, anysuch claim by providing Shareholder Representative prompt notice of such election; *provided,however*, that except with the consent of the Shareholder Representative, no settlement of any suchThird Party Claim with third party claimants shall be determinative of the amount of Lossesrelating to such matter. In the event that the Shareholder Representative has consented to anysuch settlement, the Shareholders shall have no power or authority to object under any provision ofthis **Article VIII**to the amount of any Third Party Claim by Parent against the Escrow Fund or theShareholders, with respect to such settlement. If there is a Third Party Claim that, if adverselydetermined would give rise to a right of recovery for Losses hereunder, then any amounts incurredor accrued by the Indemnified Parties in defense of such Third Party Claim, regardless of theoutcome of such claim, shall be deemed Losses hereunder. Notwithstanding anything in this Agreementto the contrary, this **Section 8.****4(a)** shall not apply to any Third Party Claim that is the subjectof an Agreed-Upon Loss. Claims against the Total Escrow Amount made in respect of any Agreed-UponLoss shall be resolved in the manner described in **Section 8.****4(a)(v)** above.
 
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8.5 ***Escrow Arrangements***.(a) ***Escrow Fund***. The Escrow Fund shall constitute security for the indemnificationobligations provided for in this **Article VIII**and shall be available to compensate the IndemnifiedParties for any claims made by such parties for any Losses paid, sustained, suffered or incurred bythem and for which they are entitled to recovery under this **Article VIII**. The Escrow Agent mayexecute this Agreement following the date hereof and prior to the Closing, and such laterexecution, if so executed after the date hereof, shall not affect the binding nature of thisAgreement as of the date hereof between the other signatories hereto.(b) ***Distribution of Escrow Fund***. Subject to the following requirements, the Escrow Fund shallbe in existence immediately following the Closing until 11:59 p.m., Pacific Time, on the ClaimDeadline Date (the “***Escrow Period***”) and the Escrow Agent shall, subject to the terms hereof,promptly distribute the funds then held in the Escrow Fund to the Shareholders following suchtermination; *provided, however*, that the Escrow Fund shall not terminate with respect to any amountnecessary in the good faith, reasonable judgment of Parent to satisfy any unsatisfied claimsspecified in any Officer’s Certificate (“***Unresolved Claims***”) delivered to the Escrow Agent and theShareholder Representative during the Escrow Period and any such amount shall not be distributed tothe Shareholders at such time; provided that as soon as all such Unresolved Claims have beenresolved and all amounts to which the Indemnified Parties are entitled have been distributed to theIndemnified Parties, the Escrow Agent shall promptly deliver to the Shareholders that portion ofthe remaining Escrow Fund, if any. Deliveries of the amounts held in the Escrow Fund to theShareholders pursuant to this **Section 8.5**shall be made in proportion to their respective Pro RataPortions of the amounts remaining in the Escrow Fund, with the amount delivered to each Shareholderrounded to thenearest one hundredth (0.01) (with amounts 0.005 and above rounded up), it being understoodthat no amounts held in the Escrow Fund shall be distributed to the Founders.(c) ***Protection of Escrow Fund***.(i) The Escrow Agent shall hold and safeguard the Escrow Fund during the Escrow Period, shalltreat such fund as an escrow fund in accordance with the terms of this Agreement and shall hold anddispose of the Escrow Fund only in accordance with the terms of **Section 8.4 Section 8.5**and **Section8.6**, as applicable and only pursuant to their terms.(ii) The Escrow Agent is hereby directed to deposit and invest the Escrow Funds in the U.S.Bank Money Market Deposit Account. The parties hereto acknowledge that the U.S. Bank Money Marketaccount is a U.S. Bank National Association (“U.S. Bank”) interest-bearing money market depositaccount designed to meet the needs of U.S. Bank’s Corporate Trust Services Escrow Group and otherCorporate Trust customers of U.S. Bank. Selection of this investment includes authorization toplace funds on deposit with U.S. Bank. U.S. Bank uses the daily balance method to calculateinterest on this account (actual/365 or 366). This method applies a daily periodic rate to theprincipal balance in the account each day. Interest is accrued daily and credited monthly to theaccount. Interest rates currently offered on the accounts are determined at U.S. Bank’s discretionand may be tiered by customer deposit amount. The owner of the accounts is U.S. Bank as escrowagent for its trust customers. U.S. Bank’s trust department performs all account deposits andwithdrawals. Each account is insured by the Federal Deposit InsuranceCorporation as determined
 
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under FDIC Regulations, up to applicable FDIC limits. Any and all interest earned on the EscrowFund after the deposit shall be added to the Escrow Fund and shall become a part thereof. EscrowAgent shall thereafter hold, maintain and utilize the Escrow Fund pursuant to the terms andconditions of this Agreement. The letter of transmittal delivered to the Shareholders pursuant toSection 2.8 shall include a Form W-9 or original W-8 IRS tax form which shall be provided to theEscrow Agent prior to the disbursement of interest and the Escrow Agent will file the appropriate1099 or other required forms pursuant to Federal and State laws. A statement of citizenship will beprovided if requested by Escrow Agent. Escrow Agent shall not be responsible for maximizing theyield on the Escrow Fund. Escrow Agent shall not be liable for losses, penalties or chargesincurred upon any sale or purchase of any such investment. For tax reporting and withholdingpurposes, and consistent with Proposed Treasury Regulation Section 1.468B 8(c), Parent shall betreated as the owner of the cash in the Escrow Fund and shall be liable and responsible for anyTaxes due with respect to such income; provided, however that interest earned on the Escrow Fund isintended to qualify for the “portfolio interest” exemption from U.S. federal withholding tax.Upon the release of any portion of the Escrow Fund to the Shareholders, a portion of such amountpaid from the Escrow Fund shall be treated as interest under the imputed interest rules of theCode. The parties acknowledge that to the extent regulations of the Comptroller of Currency orother applicable regulatory entity grant a right to receive brokerage confirmations of securitytransactions of the escrow, the parties waive receipt of such confirmations, to the extentpermitted by law. The Escrow Agent shall furnish a statement of security transactions on itsregular monthly reports.(d) ***Escrow Agent’s Duties***.(i) The Escrow Agent shall be obligated only for the performance of such duties as arespecifically set forth herein, and as set forth in any additional written escrow instructions whichthe Escrow Agent may receive after the date of this Agreement which are signed by an officer ofParent and the Shareholder Representative, and may rely and shall be protected in relying orrefraining from acting on any instrument reasonably believed to be genuine and to have been signedor presented by the proper party or parties. The Escrow Agent shall not be liable for any act doneor omitted hereunder as Escrow Agent whileacting in good faith and in the exercise of reasonable judgment, and any act done or omittedpursuant to the advice of legal counsel shall be conclusive evidence of such good faith.(ii) The Escrow Agent is hereby expressly authorized to disregard any and all warnings givenby any of the parties hereto or by any other Person, excepting only orders or process of courts oflaw, and is hereby expressly authorized to comply with and obey orders, judgments or decrees of anycourt, awards of arbitrators and joint written instructions of Parent and the ShareholderRepresentative. In case the Escrow Agent obeys or complies with any such order, judgment or decreeof any court, award of arbitrator or instructions, the Escrow Agent shall not be liable to any ofthe parties hereto or to any other Person by reason of such compliance, notwithstanding any suchorder, judgment, decree or award being subsequently reversed, modified, annulled, set aside,vacated or found to have been entered without jurisdiction.(iii) The Escrow Agent shall not be liable in any respect on account of the identity,authority or rights of the parties executing or delivering or purporting to execute or deliver thisAgreement or any documents or papers deposited or called for hereunder.(iv) The Escrow Agent shall not be liable for the expiration of any rights under any statuteof limitations with respect to this Agreement or any documents deposited with the Escrow Agent.
 
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(v) In performing any duties under this Agreement, the Escrow Agent shall not be liable to anyparty for damages, losses, or expenses, except for gross negligence or willful misconduct on thepart of the Escrow Agent. The Escrow Agent shall not incur any such liability for (A) any act orfailure to act made or omitted in good faith, or (B) any action taken or omitted in reliance uponany instrument, including any written statement or affidavit provided for in this Agreement thatthe Escrow Agent shall in good faith believe to be genuine, nor will the Escrow Agent be liable orresponsible for forgeries, fraud, impersonations of another Person, or determining the scope of anyrepresentative authority. In addition, the Escrow Agent may consult with legal counsel inconnection with performing the Escrow Agent’s duties under this Agreement and shall be fullyprotected in any act taken, suffered, or permitted by him/her in good faith in accordance with theadvice of counsel. The Escrow Agent is not responsible for determining and verifying the authorityof any Person acting or purporting to act on behalf of any party to this Agreement.(vi) If any controversy arises between the parties to this Agreement, or with any other party,concerning the subject matter of this Agreement, its terms or conditions, the Escrow Agent will notbe required to determine the controversy or to take any action regarding it. The Escrow Agent mayhold all documents and all amounts held in the Escrow Fund and may wait for settlement of any suchcontroversy by final appropriate legal proceedings or other means as may be required, despite whatmay be set forth elsewhere in this Agreement. In such event, the Escrow Agent will not be liablefor damages, except for gross negligence or willful misconduct on the part of the Escrow Agent.Furthermore, the Escrow Agent may at its option, file an action of interpleader requiring theparties to answer and litigate any claims and rights among themselves. The Escrow Agent isauthorized to deposit with the clerk of the court all documents and the Escrow Fund, except allcosts, expenses, charges and reasonable attorney fees incurred by the Escrow Agent due to theinterpleader action (the “***Agent Interpleader Expenses***”) and which the parties agree to pay asfollows: 50% to be paid by Parent and 50% to be paid by the Escrow Fund. Upon initiating suchaction, the Escrow Agent shall be fully released and discharged of and from all obligations andliability imposed by the terms of this Agreement.(e) The parties and their respective successors and assigns agree severally, but not jointly,to indemnify and hold Escrow Agent harmless against any and all losses, claims, damages,liabilities, and expenses, including reasonable costs of investigation, counsel fees, includingallocated costs of in house counsel and disbursements that may be imposed on Escrow Agent orincurred by Escrow Agent in connectionwith the performance of his/her duties under this Agreement, including any litigation arisingfrom this Agreement or involving its subject matter, other than those arising out of the grossnegligence or willful misconduct of the Escrow Agent (the “***Agent Indemnification Expenses***”) asfollows: 50% to be paid by Parent and 50% to be paid by the Escrow Fund; provided, however, that inthe event any Shareholder fails to timely pay his or her Pro Rata Portion of the AgentIndemnification Expenses, the parties agree that Parent may at its option pay such Shareholder’sPro Rata Portion of the Agent Indemnification Expenses and recover an equal amount from suchShareholder’s Pro Rata Portion of the Escrow Fund.(f) The Escrow Agent may resign at any time upon giving at least thirty (30) days writtennotice to the Parent and the Shareholder Representative; provided, however, that no suchresignation shall become effective until the appointment of a successor escrow agent which shall beaccomplished as follows: Parent and the Shareholder Representative shall use their commerciallyreasonable efforts to mutually agree on a successor escrow agent within thirty (30) days afterreceiving such notice. If the parties fail to agree upon a successor escrow agent within suchtime, the Escrow Agent shall have the right to appoint a successor escrow agent. The successorescrow agent shall execute and deliver an instrument accepting such appointment, and it shall,without further acts, be vested with all the estates, properties, rights, powers, and duties of thepredecessor escrow agent as if originally named as escrow agent. Upon appointment of a successorescrow agent, the Escrow Agent shall be discharged from any further duties and liability under thisAgreement.
 
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(g) ***Fees***. All fees of the Escrow Agent for performance of its duties hereunder shall be paid50% by Parent and 50% from the Escrow Fund and such fee shall be based in accordance with thestandard fee schedule of the Escrow Agent, attached hereto as **Exhibit C**. It is understood that thefees and usual charges agreed upon for services of the Escrow Agent shall be consideredcompensation for ordinary services as contemplated by this Agreement. In the event that theconditions of this Agreement are not promptly fulfilled, or if the Escrow Agent renders any servicenot provided for in this Agreement but that has been requested by an officer of Parent, or if theparties request a substantial modification of the terms of this Agreement, or if any controversyarises, or if the Escrow Agent is made a party to, or intervenes in, any litigation pertaining tothe Escrow Fund or its subject matter, the Escrow Agent shall be reasonably compensated for suchextraordinary services and reimbursed for all costs, attorney’s fees, including allocated costs ofin house counsel, and expenses occasioned by such default, delay, controversy or litigation.(h) ***Successor Escrow Agents***. Any corporation into which the Escrow Agent in its individualcapacity may be merged or converted or with which it may be consolidated, or any corporationresulting from any merger, conversion or consolidation to which the Escrow Agent in its individualcapacity shall be a party, or any corporation to which substantially all the corporate trustbusiness of the Escrow Agent in its individual capacity may be transferred, shall be the EscrowAgent under this Agreement without further act.(i) ***Disclosure***. The parties hereto hereby agree not to use the name of U.S. BANK NATIONALASSOCIATION to imply an association with the transaction other than that of a legal escrow agent.(j) ***Pro Rata Portions***. For purposes of calculating the Pro Rata Portions referenced in thisArticle VIII, in the absence of mutual written instructions to the contrary by Parent and theShareholder Representative, the Escrow Agent shall be entitled to rely on the amount of the ProRata Portions set forth in the Spreadsheet.8.6 ***Shareholder Representative***.(a) By virtue of the approval of the Merger and this Agreement by the Shareholders, each ofthe Shareholders shall be deemed to have agreed to appoint Shasta Ventures II, L.P. as its agentand attorney-in-fact, as the Shareholder Representative for and on behalf of the Shareholders togive and receive notices and communications, to agree to the adjustment (if any) of the AggregateConsideration Amount pursuant to the terms of the **Article VIII**, to authorize deductions from theEscrow Fund and a proportionate forfeiture of the Founder’s Holdback Shares pursuant to the StockConsideration Agreements, in satisfaction of claims by any Indemnified Party, to object to theforegoing adjustments or payments, to agree to, negotiate, enter into settlements and compromisesof, and demand arbitration and comply with orders of courts and awards of arbitrators with respectto such claims, to assert, negotiate, enter into settlements and compromises of, and demandarbitration and comply with orders of courts and awards of arbitrators with respect to, any otherclaim by any Indemnified Party against any Shareholder or by any such Shareholder against anyIndemnified Party, any dispute between any Indemnified Party and any such Shareholder, any disputerelating to the Company Assumed Liabilities Report, in each case relating to this Agreement or thetransactions contemplated hereby, and to take all other actions that are either (1) necessary orappropriate in the judgment of the Shareholder Representative for the accomplishment of theforegoing, or (2) specifically mandated by the terms of this Agreement. Such agency may be changedby the Shareholders from time to time upon not less than thirty (30) days prior written notice toParent; *provided, however*, that the Shareholder Representative may not be removed unless holders ofa two-thirds interest of the Total Escrow Amount agree to such removal and to the identity of thesubstituted agent. Notwithstanding the foregoing, a vacancy in the position of ShareholderRepresentative may be filled by the holders of a majority in interest of the Total Escrow Amount.No bond shall be required of the Shareholder Representative, and the Shareholder Representativeshall not receive any compensation for its services. Notices or communications to or from theShareholder Representative shall constitute notice to or from the Shareholders.
 
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(b) The Shareholder Representative shall not be liable for any act done or omitted hereunderas Shareholder Representative while acting in good faith and in the exercise of reasonablejudgment. The Shareholders shall indemnify the Shareholder Representative and hold the ShareholderRepresentative harmless against any loss, liability or expense incurred without gross negligence orbad faith on the part of the Shareholder Representative and arising out of or in connection withthe acceptance or administration of the Shareholder Representative’s duties hereunder, includingthe reasonable fees and expenses of any legal counsel retained by the Shareholder Representative(“**Shareholder Representative Expenses**”). Following the resolution of all Unresolved Claims and thesatisfaction of all claims made by Indemnified Parties for Losses, the Shareholder Representativeshall have the right to recover Shareholder Representative Expenses from the Escrow Fund (and theFounders agree to pay the Shareholder Representative their Pro Rata Portion of such amount) priorto any distribution to the Shareholders, and prior to any such distribution, shall deliver toParent and the Escrow Agent a certificate setting forth the Shareholder Representative Expensesactually incurred and the amount in cash to be distributed as satisfaction of such expenses. TheEscrow Agent shall be entitled to rely upon such certificate and shall have no duty to investigateor confirm its accuracy. A decision, act, consent or instruction of the ShareholderRepresentative, including an amendment, extension or waiver of this Agreement pursuant to **Section9.4**and **Section 9.5**hereof, shall constitute a decision of the Shareholders and shall be final,binding and conclusive upon the Shareholders; and Parent may rely upon any such decision, act,consent or instruction of the Shareholder Representative as being the decision, act, consent orinstruction of the Shareholders. Parent, Sub and Payment Agent is hereby relieved from anyliability to any person for any acts done by them in accordance with such decision, act, consent orinstruction of the Shareholder Representative.**ARTICLE IX****TERMINATION, AMENDMENT AND WAIVER**9.1 ***Termination***. Subject to **Section 9.2**hereof, this Agreement may be terminated and theMerger abandoned at any time prior to the Closing:(a) by mutual agreement of the Company and Parent;(b) by Parent or the Company if any Governmental Entity shall have enacted, issued,promulgated, enforced or entered Law or Order which is in effect and which has the effect of makingthe Merger illegal;(c) by Parent if neither it nor Merger Sub is in material breach of its obligations under thisAgreement and there has been a breach of any representation, warranty, covenant or agreement of theCompany or the Founders contained in this Agreement such that the conditions set forth in **Section7.****2(a)** hereof would not be satisfied and such breach has not been cured within twenty (20) calendardays after written notice thereof to the Company;(d) by the Company if none of the Company or the Founders is in material breach of itsrespective obligations under this Agreement and there has been a breach of any representation,warranty, covenant or agreement of Parent or Merger Sub contained in this Agreement such that theconditions set forth in **Section 7.****3(a)** hereof would not be satisfied and such breach has not beencured within twenty (20) calendar days after written notice thereof to Parent; or
 
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(e) by Parent or the Company if the Closing Date shall not have occurred by April 1, 2010 (the“**Termination Date**”); *provided, however*, that the right to terminate this Agreement under this**Section 9.****1(e)** shall not be available to any party whose action or failure to act has been aprincipal cause of or resulted in the failure of the Merger to occur on or before such date andsuch action or failure to act constitutes breach of this Agreement.9.2 ***Effect of Termination***. In the event of termination of this Agreement as provided in**Section 9.1**hereof, this Agreement shall forthwith become void and there shall be no liability orobligation on the part of Parent, the Company, or its respective officers, directors orShareholders, if applicable; *provided*, *however*, that Parent and the Company shall remain liable forany knowing, intentional or willful breaches of this Agreement or in any certificate or otherinstruments delivered pursuant to this Agreement prior to its termination; and *provided further*,*however*, that the provisions of **Sections 6.2**, **6.3**, and **9.3**hereof, **Article X**hereof and this**Section 9.2**shall remain in full force and effect and survive any termination of this Agreementpursuant to the terms of this **Article IX**.9.3 ***Fees and Expense***. All fees and expenses incurred in connection with this Agreement andthe transactions contemplated hereby shall be paid by the party incurring such expenses if theMerger is not consummated. The parties hereby agree that all fees and expenses to be paid to Chinae-Capital shall be deemed Third Party Expenses.9.4 ***Amendment***. This Agreement may be amended by the parties hereto at any time by executionof an instrument in writing signed on behalf of the party against whom enforcement is sought. Forpurposes of this **Section 9.4**, the Shareholders agree that any amendment of this Agreement signed bythe Shareholder Representative shall be binding upon and effective against the Shareholders whetheror not they have signed such amendment.9.5 ***Extension; Waiver***. At any time prior to the Closing, Parent, on the one hand, and theCompany and the Shareholder Representative, on the other hand, may, to the extent legally allowed,(i) extend the time for the performance of any of the obligations of the other party hereto, (ii)waive any inaccuracies in the representations and warranties made to such party contained herein orin any document delivered pursuant hereto, and (iii) waive compliance with any of the covenants,agreements or conditions for the benefit of such party contained herein. Any agreement on the partof a party hereto to any such extension or waiver shall be valid only if set forth in an instrumentin writing signed on behalf of such party. For purposes of this **Section 9.5**, the Shareholdersagree that any extension or waiver signed by the Shareholder Representative shall be binding uponand effective against all Shareholders whether or not they have signed such extension or waiver.
 
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**ARTICLE X****GENERAL PROVISIONS**10.1 ***Notices***. All notices and other communications hereunder shall be in writing and shall bedeemed given if delivered personally or by commercial messenger or courier service, or mailed byregistered or certified mail (return receipt requested) or sent via facsimile (with acknowledgmentof complete transmission) to the parties at the following addresses (or at such other address for aparty as shall be specified by like notice or, if specifically provided for elsewhere in thisAgreement such as **Section 5.3**, by email); *provided*, *however*, that notices sent by mail will not bedeemed given until received:(a) if to Parent or Sub, to:Shanda Games LimitedNo. 1 Intelligent BuildingNo. 690 Bibo RoadPudong New AreaShanghai 201203People’s Republic of ChinaAttn: Chief Executive OfficerTelephone: 86-21-5050-4740Facsimile: 86-21-5080-5132with a copy to:Wilson Sonsini Goodrich & Rosati, Professional Corporation650 Page Mill RoadPalo Alto, CA 94304Attention: Carmen ChangTelephone No.: (650) 493-9300