exv10w1






Exhibit 10.1




AGREEMENT AND PLAN OF MERGER




among



H&R BLOCK, INC.,



HRB ISLAND ACQUISITION, INC.,



2SS HOLDINGS, INC.



and



The Other Parties Named Herein



Dated as of October 13, 2010








 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE I DEFINITIONS	 	 	2	 
	 
	 	 	 	 	 	 
	Section 1.1
	 	Certain Defined Terms	 	 	2	 
	Section 1.2
	 	Table of Definitions	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE II THE MERGER	 	 	10	 
	 
	 	 	 	 	 	 
	Section 2.1
	 	The Merger	 	 	10	 
	Section 2.2
	 	Closing; Effective Time	 	 	10	 
	Section 2.3
	 	Effects of the Merger	 	 	10	 
	Section 2.4
	 	Certificate of Incorporation and Bylaws	 	 	10	 
	Section 2.5
	 	Directors; Officers	 	 	11	 
	Section 2.6
	 	Subsequent Actions	 	 	11	 
	Section 2.7
	 	Conversion of Stock; Options	 	 	11	 
	Section 2.8
	 	Dissenting Shares	 	 	12	 
	Section 2.9
	 	Payment for Shares and Options	 	 	12	 
	Section 2.10
	 	Withholding Rights	 	 	16	 
	Section 2.11
	 	Stockholder Representatives	 	 	16	 
	 
	 	 	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	19	 
	 
	 	 	 	 	 	 
	Section 3.1
	 	Organization and Qualification	 	 	19	 
	Section 3.2
	 	Authority	 	 	19	 
	Section 3.3
	 	No Conflict; Required Filings and Consents	 	 	20	 
	Section 3.4
	 	Capitalization	 	 	21	 
	Section 3.5
	 	Equity Interests	 	 	22	 
	Section 3.6
	 	Financial Statements; No Undisclosed Liabilities; Books and Records	 	 	22	 
	Section 3.7
	 	Absence of Certain Changes or Events	 	 	23	 
	Section 3.8
	 	Compliance with Law; Permits	 	 	24	 
	Section 3.9
	 	Litigation	 	 	25	 
	Section 3.10
	 	Employee Benefit Plans	 	 	25	 
	Section 3.11
	 	Labor and Employment Matters	 	 	28	 
	Section 3.12
	 	Title to and Condition of Assets	 	 	29	 
	Section 3.13
	 	Real Property	 	 	29	 
	Section 3.14
	 	Intellectual Property	 	 	30	 
	Section 3.15
	 	Taxes	 	 	34	 
	Section 3.16
	 	Environmental Matters	 	 	36	 
	Section 3.17
	 	Material Contracts	 	 	36	 
	Section 3.18
	 	Affiliate Interests and Transactions	 	 	38	 
	Section 3.19
	 	Insurance	 	 	39	 
	Section 3.20
	 	Brokers	 	 	39	 
	Section 3.21
	 	Bank Accounts; Powers of Attorney	 	 	39	 
	Section 3.22
	 	Employees	 	 	39	 
	Section 3.23
	 	Customers; Suppliers	 	 	40	 






i









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 3.24
	 	Accounts Receivable	 	 	40	 
	Section 3.25
	 	Accounts Payable	 	 	41	 
	Section 3.26
	 	Warranties and Guarantees	 	 	41	 
	Section 3.27
	 	Certain Payments, Etc.	 	 	41	 
	Section 3.28
	 	Disclosure	 	 	41	 
	 
	 	 	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR AND SUB	 	 	42	 
	 
	 	 	 	 	 	 
	Section 4.1
	 	Organization	 	 	42	 
	Section 4.2
	 	Authority	 	 	42	 
	Section 4.3
	 	No Conflict; Required Filings and Consents	 	 	42	 
	Section 4.4
	 	Brokers	 	 	43	 
	Section 4.5
	 	Litigation	 	 	43	 
	Section 4.6
	 	Financing	 	 	43	 
	 
	 	 	 	 	 	 
	ARTICLE V COVENANTS	 	 	43	 
	 
	 	 	 	 	 	 
	Section 5.1
	 	Conduct of Business Prior to the Closing	 	 	43	 
	Section 5.2
	 	Exclusivity	 	 	45	 
	Section 5.3
	 	Notification of Certain Matters	 	 	45	 
	Section 5.4
	 	Takeover Statutes	 	 	45	 
	Section 5.5
	 	Confidentiality	 	 	46	 
	Section 5.6
	 	Efforts	 	 	46	 
	Section 5.7
	 	Public Announcements	 	 	47	 
	Section 5.8
	 	Indemnification	 	 	48	 
	Section 5.9
	 	Employment Benefits	 	 	48	 
	Section 5.10
	 	Integration Matters	 	 	49	 
	Section 5.11
	 	Stockholder Approval	 	 	49	 
	Section 5.12
	 	Conflicts and Privilege	 	 	49	 
	Section 5.13
	 	Tax Matters	 	 	50	 
	Section 5.14
	 	Access to Information	 	 	50	 
	Section 5.15
	 	Payoff Letters	 	 	50	 
	Section 5.16
	 	Wells Fargo Security Interest Release	 	 	50	 
	Section 5.17
	 	Key Person Insurance	 	 	50	 
	 
	 	 	 	 	 	 
	ARTICLE VI TAX MATTERS	 	 	51	 
	 
	 	 	 	 	 	 
	Section 6.1
	 	Cooperation in Tax Matters	 	 	51	 
	Section 6.2
	 	Straddle Period	 	 	51	 
	Section 6.3
	 	Preparation and Filing of Tax Returns	 	 	51	 
	Section 6.4
	 	Refunds and Tax Benefits	 	 	52	 
	Section 6.5
	 	Amended Tax Returns	 	 	52	 
	Section 6.6
	 	Certain Taxes and Fees	 	 	52	 
	Section 6.7
	 	No Section 338 Election	 	 	53	 
	Section 6.8
	 	Tax-Sharing Agreements	 	 	53	 
	 
	 	 	 	 	 	 
	ARTICLE VII CONDITIONS TO CLOSING	 	 	53	 
	 
	 	 	 	 	 	 
	Section 7.1
	 	General Conditions	 	 	53	 






ii









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 7.2
	 	Conditions to Obligations of the Company	 	 	53	 
	Section 7.3
	 	Conditions to Obligations of the Acquiror and Sub	 	 	54	 
	 
	 	 	 	 	 	 
	ARTICLE VIII INDEMNIFICATION	 	 	56	 
	 
	 	 	 	 	 	 
	Section 8.1
	 	Survival	 	 	56	 
	Section 8.2
	 	Indemnification in Favor of the Acquiror	 	 	56	 
	Section 8.3
	 	Indemnification by the Acquiror	 	 	57	 
	Section 8.4
	 	Manner of Indemnification	 	 	57	 
	Section 8.5
	 	Third Party Claims	 	 	60	 
	Section 8.6
	 	Limits on Indemnification	 	 	60	 
	Section 8.7
	 	Exclusive Remedy	 	 	61	 
	Section 8.8
	 	Tax Treatment of Indemnity Payments	 	 	61	 
	 
	 	 	 	 	 	 
	ARTICLE IX TERMINATION	 	 	61	 
	 
	 	 	 	 	 	 
	Section 9.1
	 	Termination	 	 	61	 
	Section 9.2
	 	Effect of Termination	 	 	62	 
	 
	 	 	 	 	 	 
	ARTICLE X GENERAL PROVISIONS	 	 	62	 
	 
	 	 	 	 	 	 
	Section 10.1
	 	Fees and Expenses	 	 	62	 
	Section 10.2
	 	Amendment and Modification	 	 	63	 
	Section 10.3
	 	Extension	 	 	63	 
	Section 10.4
	 	Waiver	 	 	63	 
	Section 10.5
	 	Notices	 	 	63	 
	Section 10.6
	 	Interpretation	 	 	64	 
	Section 10.7
	 	Entire Agreement	 	 	64	 
	Section 10.8
	 	No Third-Party Beneficiaries	 	 	65	 
	Section 10.9
	 	Governing Law	 	 	65	 
	Section 10.10
	 	Submission to Jurisdiction	 	 	65	 
	Section 10.11
	 	Assignment; Successors	 	 	65	 
	Section 10.12
	 	Enforcement	 	 	66	 
	Section 10.13
	 	Currency	 	 	66	 
	Section 10.14
	 	Severability	 	 	66	 
	Section 10.15
	 	Waiver of Jury Trial	 	 	66	 
	Section 10.16
	 	Counterparts	 	 	66	 
	Section 10.17
	 	Facsimile Signature	 	 	66	 
	Section 10.18
	 	Time of Essence	 	 	66	 
	Section 10.19
	 	No Presumption Against Drafting Party	 	 	66	 






iii









 






EXHIBITS




	 	 	 

	Exhibit A

	 	Escrow Agreement
	 
	 	 
	Exhibit B

	 	Option Surrender Agreement
	 
	 	 
	Exhibit C

	 	Certificate of Merger
	 
	 	 
	Exhibit D

	 	Letter of Transmittal and Release
	 
	 	 
	Exhibit E

	 	Example of Net Working Capital Amount Calculation
	 
	 	 
	Exhibit F

	 	Forms of Non-Competition Agreement
	 
	 	 
	Exhibit G

	 	Form of Non-Solicitation Agreement







iv











 





AGREEMENT AND PLAN OF MERGER




     THIS AGREEMENT AND PLAN OF MERGER, dated as of October 13, 2010 (this “Agreement”), is
among (i) H&R BLOCK, INC., a Missouri corporation (the “Acquiror”), (ii) HRB ISLAND
ACQUISITION, INC., a Delaware corporation and an indirect wholly owned subsidiary of the Acquiror
(“Sub”), (iii) 2SS HOLDINGS, INC., a Delaware corporation (the “Company”), (iv) TA
Associates Management, L.P. solely in its capacity as Stockholder Representative and only for the
express purposes provided for herein and for no other purpose, and (v) Lance Dunn solely in his
capacity as Stockholder Representative and only for the express purposes provided for herein and
for no other purpose.



RECITALS




     (A) (i) The Boards of Directors of each of the Acquiror, the Company and Sub have determined
that the merger of Sub with and into the Company upon the terms and conditions set forth in this
Agreement (the “Merger”) would be advisable and fair to, and in the best interests of,
their respective stockholders, (ii) the Board of Directors of the Acquiror has approved the Merger
upon the terms and subject to the conditions set forth in this Agreement pursuant to the Delaware
General Corporation Law (“Delaware Law”), and (iii) (a) the Board of Directors of the
Company has (i) approved this Agreement and the Merger upon the terms and conditions set forth in
this Agreement and (ii) resolved to recommend adoption of this Agreement and approval of the Merger
upon the terms and conditions set forth in this Agreement by the stockholders of the Company, and
(b) the Board of Directors of Sub has (i) approved this Agreement and the Merger upon the terms and
conditions set forth in this Agreement and (ii) recommended adoption of this Agreement and approval
of the Merger upon the terms and conditions set forth in this Agreement by its sole stockholder;
and



     (B) Concurrently with the execution of this Agreement, and as an inducement to the Acquiror
and Sub to enter into this Agreement: (i) each Founder has entered into an employment agreement
with the Company’s subsidiary, dated as of the date hereof, but effective as of the Closing Date
(collectively, the “Employment Agreements”); and (ii) the Acquiror and stockholders holding
in the aggregate at least 95% of the issued and outstanding equity securities of the Company on an
as-converted basis have entered into Voting Agreements, dated as of the date hereof (the
“Voting Agreements”), pursuant to which such stockholders have agreed, subject to the terms
thereof, to (a) vote, or cause to be voted, all of the shares of the Company’s Class A Common
Stock, par value $.001 per share (the “Class A Common Stock”), and/or the Company’s Class B
Common Stock, par value $.001 per share (the “Class B Common Stock” and together with the
Class A Common Stock, the “Company Common Stock”), beneficially owned by them in favor of,
or execute a written consent to, the adoption of this Agreement and the approval of the
transactions contemplated hereby, including the approval of the Merger, all in accordance with the
Company’s certificate of incorporation and bylaws and Delaware Law and (b) exercise the drag-along
rights set forth in Section 3.6(a) of the Company’s Amended and Restated Stockholders Agreement
(the “Stockholders Agreement”) to the extent any other stockholder refuses to vote in favor
of, or consent to, the adoption of this Agreement and the approval of the transactions contemplated
hereby, including the approval of the Merger.



 









 





AGREEMENT




     In consideration of the foregoing and the mutual covenants and agreements herein contained,
and intending to be legally bound hereby, the parties agree as follows:



ARTICLE I

DEFINITIONS




     Section 1.1 Certain Defined Terms. For purposes of this Agreement:



          “Action” means any claim, action, suit, litigation, inquiry, proceeding, prosecution,
hearing, contest, audit, examination or investigation by or before any Governmental Authority, or
any other arbitration, mediation or similar proceeding.




          “Affiliate” means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, Controls, is Controlled by, or is under common
Control with, such first Person.




          “Ancillary Agreements” means the Escrow Agreement and the Voting Agreements.




          “Antitrust Law” means the Sherman Act, as amended, the Clayton Act, as amended, the
HSR Act, the Federal Trade Commission Act, as amended, and all other federal, state and foreign, if
any, Laws that are designed or intended to control mergers and acquisitions or to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or restraint of trade
or lessening of competition through merger or acquisition.




          “Balance Sheet” means the Company’s balance sheet as of August 31, 2010 forming a part
of the Unaudited Financial Statements.




          “Books and Records” shall mean all books, records, original documents, files and
papers of the Company and its Subsidiaries, whether in hard copy or electronic format, in the
possession or control of the Company or its Subsidiaries as of the Closing Date, including all
books of account, financial records, customer files, customer account records, equipment
maintenance data, sales and sales promotional data, advertising materials, customer lists, cost and
pricing information, supplier lists, business plans, reference catalogs, stock transfer books,
minute books and any other similar records.




          “Business Day” means any day that is not a Saturday, a Sunday or other day on which
banks are required or authorized by Law to be closed in the City of New York.




          “Cash and Cash Equivalents” means the Company’s and each of its Subsidiary’s cash,
cash equivalents (including, without limitation, all bank account balances, marketable securities
and short-term investments) and certificates of deposit, calculated in accordance with GAAP, but
excluding any deposit held by the Company under Section 2.9(b)(ii) to pay Transaction Expenses.







2









 








          “Closing Date Merger Consideration” means the Merger Consideration, less the Escrow
Amount.




          “Closing Date Per Share Merger Consideration” means the quotient of (i) the sum of (A)
the number that represents the Closing Date Merger Consideration plus (B) the number that
represents the aggregate exercise price for all Share equivalents (including options, warrants and
other interests convertible into or exchangeable for Shares) outstanding immediately prior to the
Effective Time, divided by (ii) the number of Fully Diluted Shares.




          “Competitively Sensitive Information” means certain commercial information of the
Company related to the development, advertising, marketing or sale of the Company’s products or
services, the disclosure of which information to the Acquiror, would or would reasonably be
expected to, in the reasonable judgment of an experienced professional in the consumer tax return
preparation software industry, place the Company at a competitive disadvantage vis-à-vis the
Acquiror in the development, marketing, advertising or sale of products to end customers.




          “Contract” means any contract, agreement, arrangement or understanding, whether
written or oral.




          “Control,” including the terms “Controlled by” and “under common Control
with,” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of voting
securities, as trustee or executor, as general partner or managing member, by Contract or
otherwise, including the ownership, directly or indirectly, of securities having the power to elect
a majority of the board of directors or similar body governing the affairs of such Person.




          “Encumbrance” means any charge, claim, limitation, condition, equitable interest,
mortgage, lien, option, pledge, security interest, license granted under any Intellectual Property,
easement, encroachment, right of first refusal, adverse claim or restriction.




          “Environmental Laws” means: any Laws of any Governmental Authority relating to: (i)
releases or threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (ii) the manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or (iii) pollution or protection
of the environment, health, safety or natural resources.




          “Environmental Permits” means all Permits under any Environmental Law.




          “ERISA Affiliate” means any trade or business, whether or not incorporated, under
common Control with the Company or any of its Subsidiaries and that, together with the Company or
any of its Subsidiaries, is treated as a single employer within the meaning of Section 414(b), (c),
(m) or (o) of the Code.




          “Escrow Agent” means The Bank of New York Mellon, or its successor under the
Escrow Agreement.







3









 








          “Escrow Agreement” means the Escrow Agreement to be entered into by the Acquiror, the
Stockholder Representatives and the Escrow Agent, substantially in the form of Exhibit A.




          “Escrow Amount” means an amount equal to $20,000,000.




          “Escrow Fund” means the Escrow Amount deposited with the Escrow Agent, plus any
earnings and less any losses based on investment of the Escrow Amount in accordance with the Escrow
Agreement, minus all amounts released from escrow in accordance with the terms of this Agreement or
the Escrow Agreement.




          “Founders” means each of Lance Dunn, Jerome McConnell, Alan Sperfslage and Camela
Greif.




          “Fully Diluted Shares” means the aggregate number of Shares (other than Shares to be
cancelled in accordance with Sections 2.7(b) and 2.7(c)) and Share equivalents (including options,
warrants and other interests convertible into or exchangeable for Shares) outstanding immediately
prior to the Effective Time.




          “GAAP” means United States generally accepted accounting principles and practices as
in effect from time to time.




          “Governmental Authority” means any United States or foreign federal, national, state,
provincial, local or similar government, governmental, regulatory or administrative authority,
branch, agency or commission or any court, tribunal or arbitral or judicial body.




          “Hazardous Substances” means: (i) those substances defined in or regulated under the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide,
and Rodenticide Act and the Clean Air Act, and their state counterparts, as each may be amended
from time to time, and all regulations thereunder; (ii) petroleum and petroleum products, including
crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures thereof;
(iv) polychlorinated biphenyls, asbestos and radon; (v) any other pollutant or contaminant; and
(vi) any substance, material or waste regulated by any Governmental Authority pursuant to any
Environmental Law.




          “Immediate Family” of a Person means such Person’s spouse, parents, children and
siblings, including adoptive relationships and relationships through marriage, or any other
relative of such Person that shares such Person’s home.




          “Indebtedness” means, without duplication and together with all unpaid interest, fees,
premiums, penalties and other expenses or liabilities in respect thereof or due upon termination or
repayment thereof, any obligations of the Company or any of its Subsidiaries (a) to third parties
for borrowed money (other than trade payables and accrued expenses incurred in the ordinary course
of business), (b) evidenced by any note, bond, debenture or other debt security, (c) under leases
required to be capitalized in accordance with GAAP, (d) under






4









 







outstanding letters of credit or similar credit transactions and (e) under any currency or
interest swap, hedge or similar protection device.




          “Insurance Premiums” means all amounts paid by the Company with respect to additional
“key person” insurance coverage obtained by the Company after the date hereof as described in
Section 5.17.




          “Intellectual Property” means all intellectual property rights arising from or
associated with the following, whether protected, created or arising under the laws of the United
States or any other jurisdiction throughout the world: (i) rights under applicable Laws (e.g.,
trademark and service mark Laws) in or to trade names, trademarks, service marks, slogans, logos,
designs and other indicia of origin (registered and unregistered), domain names and other Internet
addresses or identifiers, trade dress and similar rights, and all common law rights, applications
(including intent-to-use applications) to register, registrations, renewals and goodwill associated
with any of the foregoing (collectively, “Marks”); (ii) patents, patent applications,
together with all reissuances, continuations, continuations-in-part, divisions, revisions,
extensions, reexaminations and counterparts thereof (collectively, “Patents”); (iii)
copyrights (registered and unregistered), works of authorship, computer software (including source
code, executable code, databases and related documentation) and all applications for registration,
registrations and renewals in connection with any of the foregoing (collectively,
“Copyrights”); and (iv) rights under applicable Laws (e.g. trade secret Laws) in or to
know-how, ideas, inventions, designs, methods, processes, formulae, algorithms, techniques,
technical data, specifications, research and development information, technology, product roadmaps,
drawings, customer and supplier lists, business and marketing plans, proposals, studies, reports,
price and cost information and any other information, in each case to the extent any of the
foregoing derives economic value (actual or potential) from not being generally known to other
persons who can obtain economic value from its disclosure or use, excluding any Copyrights or
Patents that may cover or protect any of the foregoing (collectively, “Trade Secrets”).




          “Knowledge of the Company” or “Company’s Knowledge” or similar expression,
means the knowledge each of Lance Dunn, JoAnn Kintzel, Jerome McConnell, Alan Sperfslage, and
Camela Greif actually possesses or would have obtained after reasonable inquiry.




          “Law” means any statute, law, ordinance, regulation, rule, code, injunction, judgment,
decree or order of any Governmental Authority.




          “Leased Real Property” means all real property leased, subleased or licensed to the
Company or any of its Subsidiaries or which the Company or any of its Subsidiaries otherwise has a
right or option to use or occupy, together with all structures, facilities, fixtures, systems,
improvements and items of property previously or hereafter located thereon, or attached or
appurtenant thereto, and all easements, rights and appurtenances relating to the foregoing.




          “Material Adverse Effect” means any event, change, effect, state of facts, occurrence,
circumstance or development that individually, or in the aggregate, would reasonably be expected to
be materially adverse to (a) the business, operations, assets, financial condition, results of
operations or liabilities of the Company and its Subsidiaries, taken as a whole or (b) the ability
of the Company to perform, in a timely manner, its obligations under this






5









 







Agreement and the Ancillary Agreements or to consummate, in a timely manner, the transactions
contemplated hereby and thereby; provided, however, that none of the following
constitute, or will be considered in determining whether there has occurred, a Material Adverse
Effect (i) for purposes of clause (a) above: (A) changes or conditions generally affecting the
industry in which the Company and its Subsidiaries operate (so long as the Company is not
disproportionately affected thereby), (B) changes in regulatory or political conditions generally
(so long as the Company is not disproportionately affected thereby when compared to other
participants in its industry), (C) the announcement or pendency of the transactions contemplated
herein (including, without limitation, any cancellation of any marketing, partner or similar
relationships), (D) any change in Laws (so long as the Company is not disproportionately affected
thereby when compared to other participants in its industry), or (E) changes that are the result of
economic factors affecting the national, regional or world economy (so long as the Company is not
disproportionately affected thereby when compared to other participants in its industry) or acts of
war or terrorism, and (ii) for purposes of clauses (a) and (b) above, the receipt from a
Governmental Authority of a Second Request or other similar antitrust investigation, claim, suit or
cause of action.




          “Merger Consideration” means the sum of (i) $287,500,000, plus (ii) the Estimated Net
Working Capital Amount set forth in the Net Working Capital Amount Schedule, minus (iii) the unpaid
Transaction Expenses set forth in the Schedule of Expenses.




          “Net Working Capital Amount” means (i) the total current assets (including Cash and
Cash Equivalents, but excluding any deposit of funds provided by the Acquiror held by the Company
under Section 2.9(b)(ii) to pay Transaction Expenses), plus (ii) any Insurance Premiums less (iii)
total current liabilities (but excluding deferred revenue and accruals, if any, for Transaction
Expenses set forth in the Schedule of Expenses), less (iv) Indebtedness (excluding any current
portion thereof included in current liabilities), on the consolidated balance sheets of the Company
and its Subsidiaries prepared in accordance with GAAP and on a basis consistent with the Audited
Financial Statements (to the extent such statements were prepared in accordance with GAAP), less
(v) all insurance proceeds collected, or uncollected insurance proceeds receivable, by the Company
or any of its Subsidiaries due to an insured loss, damage or destruction, including but not limited
to proceeds of key person life insurance, which have not been expended on repair, replacement or
remediation of such loss. In calculating current assets and liabilities of the Company with
respect to Taxes, any deferred Tax assets and deferred Tax liabilities shall not be taken into
account. Notwithstanding the exclusion of Transaction Expenses above, the Transaction Expenses
will be taken into account (to the extent deductible) in determining the current liability for
Taxes.




          “Option Surrender Agreement” means an agreement or certificate duly executed by an
optionholder acknowledging cancellation of all Options held by such optionholder, in the form
attached hereto as Exhibit B.




          “Person” means an individual, corporation, partnership, limited liability company,
limited liability partnership, syndicate, person, trust, association, organization or other entity,
including any Governmental Authority, and including any successor, by merger or otherwise, of any
of the foregoing.







6









 








          “Related Party,” with respect to any specified Person, means: (i) any Affiliate of
such specified Person, or any director, executive officer, general partner or managing member of
such Affiliate; (ii) any Person who serves or within the past five years has served as a director,
executive officer, partner, member or in a similar capacity of such specified Person; (iii) any
Immediate Family member of a Person described in clause (ii); or (iv) any other Person who holds,
individually or together with any Affiliate of such other Person and any member(s) of such Person’s
Immediate Family, more than 5% of the outstanding equity or ownership interests of such specified
Person.




          “Return” means any return, declaration, report, statement, information statement and
other document required to be filed with respect to Taxes.




          “Subsidiary” means, with respect to any Person, any other Person Controlled by such
first Person, directly or indirectly, through one or more intermediaries.




          “Tax” or “Taxes” means any federal, state, local, foreign and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
registration, license, lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, real property, personal property, windfall profits,
environmental (including taxes under Code §59A), customs, duties, capital stock, social security
(or similar), unemployment, disability, alternative or add-on minimum, estimated or other taxes,
fees, assessments or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto, whether disputed or not and including
any obligations to indemnify or otherwise assume or succeed to the tax liability of any other
Person.




          “Transaction Expenses” means all fees and expenses payable by the Company and its
Subsidiaries in connection with the transactions contemplated by this Agreement and the Ancillary
Agreements, including without limitation: (i) fees and expenses payable to all attorneys,
accountants, auditors, financial advisors and other professionals and bankers’, brokers’ or
finders’ fees for persons engaged by the Company or any of its Subsidiaries or any stockholder of
the Company, including the Company’s portion of the fees and expenses of the Payment Agent; (ii)
any other expenses or costs of the Company or any of its Subsidiaries triggered or accelerated by
this Agreement or the transactions contemplated by this Agreement, such as vacation or severance
payable to employees of the Company or any of its Subsidiaries and (iii) the cost of the extended
reporting period insurance endorsement set forth in Section 5.8(b). The Schedule of Expenses shall
reflect all Transaction Expenses and identify those that have been paid as of such date and those
that remain unpaid.




          “Transfer” of a security shall mean the occurrence of a Person directly or indirectly:
(i) selling, assigning, pledging, encumbering, granting an option with respect to, transferring or
disposing of (by operation of law or otherwise) such security or any interest in such security; or
(ii) entering into an agreement or commitment providing for the sale of, assignment of, pledge of,
encumbrance of, grant of an option with respect to, transfer of or disposition of (by operation of
law or otherwise) such security or any interest therein.







7









 








     Section 1.2 Table of Definitions. The following terms have the meanings set forth in
the Sections referenced below:



	 	 	 	 	 
	Definition	 	Location	 	 
	 
	 	 	 	 
	409A 
	 	3.10(n)	 	 
	Acquiror 
	 	Preamble	 	 
	Acquiror Indemnification Claim 
	 	8.4(a)	 	 
	Acquiror Indemnified Parties 
	 	8.2	 	 
	Acquisition Proposal 
	 	5.2	 	 
	Agreement 
	 	Preamble	 	 
	Antitrust Authority 
	 	5.6(a)	 	 
	Antitrust Filings 
	 	5.6(a)	 	 
	Audited Financial Statements 
	 	3.6(a)	 	 
	CERCLA 
	 	1.1	 	 
	Certificate of Merger 
	 	2.2(b)	 	 
	Certificates 
	 	2.9(c)	 	 
	Class A Common Stock 
	 	Recitals	 	 
	Class B Common Stock 
	 	Recitals	 	 
	Closing 
	 	2.2(a)	 	 
	Closing Date 
	 	2.2(a)	 	 
	Closing Schedules 
	 	2.9(g)	 	 
	Code 
	 	3.10(b)	 	 
	Company 
	 	Preamble	 	 
	Company 401(a) Plan 
	 	3.10(o)	 	 
	Company Common Stock 
	 	Recitals	 	 
	Company Indemnified Parties 
	 	8.3	 	 
	Company IP 
	 	3.14(a)	 	 
	Confidentiality Agreement 
	 	5.5	 	 
	Contractors 
	 	3.22	 	 
	Copyrights 
	 	1.1	 	 
	Counsel 
	 	5.12	 	 
	Delaware Law 
	 	Recitals	 	 
	Disclosure Schedules 
	 	Article III	 	 
	Dissenting Shares 
	 	2.8	 	 
	Divestiture 
	 	5.6(d)	 	 
	DOJ 
	 	5.6(a)	 	 
	Effective Time 
	 	2.2(b)	 	 
	Employment Agreements 
	 	Recitals	 	 
	ERISA 
	 	3.10(a)(i)	 	 
	Estimated Net Working Capital Amount 
	 	2.9(g)	 	 
	Expiration Date 
	 	8.1	 	 
	Expiration Time 
	 	5.10	 	 
	Final Net Working Capital Amount 
	 	2.9(h)	 	 
	Financial Statements 
	 	3.6(a)	 	 
	FTC 
	 	5.6(a)	 	 
	HSR Act 
	 	3.3(b)	 	 






8









 






	 	 	 	 	 
	Definition	 	Location	 	 
	 
	 	 	 	 
	Inbound License Agreements 
	 	3.14(e)	 	 
	Indemnified Party 
	 	8.5(a)	 	 
	Indemnifying Party 
	 	8.5(a)	 	 
	Independent Accountants 
	 	2.9(h)	 	 
	IRS 
	 	3.10(b)	 	 
	Legal Privilege 
	 	5.6(b)	 	 
	Losses 
	 	8.2	 	 
	Marks 
	 	1.1	 	 
	Material Contracts 
	 	3.17(a)	 	 
	Material Supplier 
	 	3.23(b)	 	 
	Merger
	 	Recitals	 	 
	Multiemployer Plan
	 	3.10(c)	 	 
	Multiple Employer Plan 
	 	3.10(c)	 	 
	Net Working Capital Amount Schedule 
	 	2.9(g)	 	 
	Non-Competition Agreements 
	 	7.3(f)	 	 
	Non-Solicitation Agreements 
	 	7.3(g)	 	 
	Officer’s Certificate 
	 	8.4(c)	 	 
	Open Source License 
	 	3.14(g)	 	 
	Option Payment 
	 	2.7(e)	 	 
	Outbound License Agreements 
	 	3.14(e)	 	 
	Outside Date 
	 	9.1(c)	 	 
	Patents 
	 	1.1	 	 
	Payment Agent 
	 	2.9(c)	 	 
	Permits 
	 	3.8(b)	 	 
	Permitted Encumbrances 
	 	3.12(a)	 	 
	Plans 
	 	3.10(a)(iv)	 	 
	Pre-Closing Straddle Amount 
	 	6.2	 	 
	Pre-Closing Tax Return 
	 	6.3	 	 
	Principal Stockholders 
	 	7.3(g)	 	 
	Pro Rata Share 
	 	2.11(b)	 	 
	Reduced Tax Liability 
	 	6.4	 	 
	Representatives 
	 	5.10	 	 
	Schedule of Expenses 
	 	2.9(g)	 	 
	Second Request 
	 	5.6(b)	 	 
	Shares 
	 	2.7	 	 
	Stockholder Representative 
	 	2.11(a)	 	 
	Stockholders Agreement 
	 	Recitals	 	 
	Straddle Period 
	 	6.2	 	 
	Sub 
	 	Preamble	 	 
	Surviving Corporation 
	 	2.1	 	 
	Systems 
	 	3.14(i)	 	 
	Tax Benefit 
	 	8.6(b)	 	 
	Tax Cost 
	 	8.6(b)	 	 
	Tax Losses 
	 	8.4(b)	 	 
	Tax Matters Expiration Date 
	 	8.1	 	 
	Third Party Claim 
	 	8.5(a)	 	 






9









 






	 	 	 	 	 
	Definition	 	Location	 	 
	 
	 	 	 	 
	Trade Secrets 
	 	1.1	 	 
	Unaudited Financial Statements 
	 	3.6(a)	 	 
	Voting Agreements 
	 	Recitals	 	 






ARTICLE II

THE MERGER




     Section 2.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time and in accordance with Delaware Law, Sub shall be merged with and
into the Company pursuant to which (i) the separate corporate existence of Sub shall cease, (ii)
the Company shall be the surviving corporation in the Merger (the “Surviving Corporation”)
and shall continue its corporate existence under the laws of the State of Delaware as an indirect
wholly owned Subsidiary of the Acquiror and (iii) all of the properties, rights, privileges, powers
and franchises of the Company will vest in the Surviving Corporation, and all of the debts,
liabilities, obligations and duties of the Company will become the debts, liabilities, obligations
and duties of the Surviving Corporation.



     Section 2.2 Closing; Effective Time.



          (a) The closing of the Merger (the “Closing”) shall take place at the offices of
Goodwin Procter LLP, Exchange Place, 53 State Street, Boston, MA 02109, at 10:00 A.M., eastern
time, on the third Business Day following the satisfaction or, to the extent permitted by
applicable Law, waiver of all conditions to the obligations of the parties set forth in Article VII
(other than such conditions as may, by their terms, only be satisfied at the Closing or on the
Closing Date), or at such other place or at such other time or on such other date as the parties
mutually may agree in writing. The day on which the Closing takes place is referred to as the
“Closing Date.”




          (b) As soon as practicable on the Closing Date, the parties shall cause a certificate of
merger substantially in the form attached as Exhibit C to be executed and filed with the
Secretary of State of the State of Delaware (the “Certificate of Merger”), executed in
accordance with the relevant provisions of Delaware Law. The Merger shall become effective upon
the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at
such other time as the parties shall agree and as shall be specified in the Certificate of Merger.
The date and time when the Merger shall become effective is herein referred to as the
“Effective Time.”




     Section 2.3 Effects of the Merger. The Merger shall have the effects provided for
herein and in the applicable provisions of Delaware Law.



     Section 2.4 Certificate of Incorporation and Bylaws. From and after the Effective
Time, (a) the certificate of incorporation of the Company, as amended to be identical to the
certificate of incorporation of Sub, as in effect immediately prior to the Effective Time, shall be
the certificate of incorporation of the Surviving Corporation until amended in accordance with the
provisions thereof and applicable Law and (b) the bylaws of Sub, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation until amended in accordance
with the provisions thereof and applicable Law.




10











 





     Section 2.5 Directors; Officers. From and after the Effective Time, (a) the
directors of Sub serving immediately prior to the Effective Time shall be the directors
of the Surviving Corporation and each Subsidiary of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be and (b) the officers of the Company serving
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation and the officers of each Subsidiary of the Company serving immediately
prior to the Effective Time shall be the officers of such Subsidiary of the Surviving
Corporation, in each case until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.



     Section 2.6 Subsequent Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either the Company or Sub acquired or to be acquired by the
Surviving Corporation as a result of or in connection with the Merger or otherwise to carry out
this Agreement, the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name of and on behalf of either the Company or Sub, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of
such corporations or otherwise, all such other actions and things as may be necessary to vest,
perfect or confirm any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.



     Section 2.7 Conversion of Stock; Options. At the Effective Time, by virtue of the
Merger and without any further action on the part of the Acquiror, Sub, the Company or any holder
of any shares of Company Common Stock (the “Shares”) or any shares of capital stock of Sub
or any option to acquire Shares:



          (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any
Shares described in Sections 2.7(b) and (c) and any Dissenting Shares) shall be converted into the
right to receive the Closing Date Per Share Merger Consideration, in cash, without interest,
together with any Merger Consideration which may be payable in respect of such Share pursuant to
the Escrow Agreement, Section 2.9(h)(i) and Article VIII of this Agreement upon the terms and
subject to the conditions set forth herein and therein;




          (b) Each Share that is owned by Acquiror or Sub immediately prior to the Effective Time shall
automatically be cancelled and retired and shall cease to exist, and no cash or other consideration
shall be delivered or deliverable in exchange therefor;




          (c) Each Share that is held in the treasury of the Company or owned by the Company or any of
its wholly owned Subsidiaries immediately prior to the Effective Time shall automatically be
cancelled and retired and shall cease to exist, and no cash or other consideration shall be
delivered or deliverable in exchange therefor; and




          (d) Each share of common stock, par value $.01 per share, of Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one fully paid share of common
stock, par value $.01 per share, of the Surviving Corporation.






11









 








          (e) Each option to acquire any Shares, whether vested or unvested, that is outstanding and
unexercised immediately prior to the Effective Time shall become fully vested and exercisable and
shall be cancelled and converted into the right to receive (i) the product of (A) Closing Date Per
Share Merger Consideration, in cash, without interest, multiplied by (B) the aggregate number of
Shares for which such option is exercisable as of immediately prior to the Effective Time, minus
(ii) the aggregate cash exercise price payable upon exercise of such option (without regard to any
cashless exercise provisions) (the “Option Payment”), together with any Merger
Consideration which may be payable in respect of the aggregate number of Shares for which such
option is exercisable as of immediately prior to the Effective Time pursuant to the Escrow
Agreement, Section 2.9(h)(i) and Article VIII of this Agreement upon the terms and subject to the
conditions set forth herein; provided, however, that the holder of any such option
shall have the right to exercise such option as of immediately prior to the Effective Time and to
the extent vested as a result of this Section 2.7(e) subject to the consummation of the
transactions contemplated hereby. From and after the Effective Time, any such cancelled option
shall no longer be exercisable by the former holder thereof, but shall only entitle such holder to
the Option Payment (if applicable) with respect to such option upon the execution and delivery of
an Option Surrender Agreement in accordance with this Agreement.




     Section 2.8 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, Shares (other than any Shares to be cancelled pursuant to Sections 2.7(b) and 2.7(c))
outstanding immediately prior to the Effective Time and held by a holder who has appraisal rights
for such Shares in the Merger under Section 262 of Delaware Law (“Dissenting Shares”),
shall not be converted into or be exchangeable for the right to receive a portion of the Merger
Consideration unless and until such holder loses such holder’s right to appraisal and payment under
Delaware Law. If, after the Effective Time, any such holder loses such holder’s right to
appraisal, such Dissenting Shares shall thereupon be treated as if they had been converted as of
the Effective Time into the right to receive the portion of the Merger Consideration to which such
holder is entitled, without interest, and such holder shall have all of the other rights of a
stockholder set forth hereunder. The Company shall give the Acquiror (i) prompt notice of any
demands received by the Company for appraisal of Shares, attempted written withdrawals of such
demands, and any other instruments served pursuant to Delaware Law and received by the Company
relating to stockholders’ rights to appraisal with respect to the Merger and (ii) the opportunity
to direct all negotiations and proceedings with respect to any exercise of such appraisal rights
under Delaware Law. The Company shall not, except with the prior written consent of the Acquiror,
voluntarily make any payment with respect to any demands for payment of fair value for capital
stock of the Company or offer to settle or settle any such demands.



     Section 2.9 Payment for Shares and Options.



          (a) As part of the Merger Consideration, concurrently with the Effective Time, the Acquiror
shall, or shall cause the Surviving Corporation to, make available for the benefit of the
stockholders of the Company in immediately available funds, the Closing Date Merger Consideration
to which such stockholders shall be entitled at the Effective Time pursuant to Section 2.7(a). As
part of the Merger Consideration, concurrently with the Effective Time, the Acquiror shall, or
shall cause the Surviving Corporation to, make available for the benefit of the holders of options
to acquire Shares, the Option Payments to which such optionholders shall be entitled at the
Effective Time pursuant to Section 2.7(e).








12









 








          (b) As part of the Merger Consideration, concurrently with the Effective Time, the Acquiror
shall deposit or cause to be deposited with the Escrow Agent for deposit into the escrow
established pursuant to the Escrow Agreement, the Escrow Amount. Concurrently with the Effective
Time, the Acquiror shall deposit or cause to be deposited with the Company, an amount equal to the
sum of the unpaid Transaction Expenses that are set forth on the Schedule of Expenses, in each case
by wire transfer of immediately available funds. The Escrow Fund shall be held, invested and
distributed as provided in the Escrow Agreement and this Agreement.




          (c) At least five (5) Business Days prior to the Closing Date, the Acquiror shall provide to
the Company, and the Company shall provide to each holder of record of a certificate or
certificates that, immediately prior to the Effective Time, evidenced outstanding Shares (the
“Certificates”) and whose Shares may be converted into the right to receive the
consideration described in Section 2.7(a) (including holders of any Dissenting Shares): (i) a
letter of transmittal and release in the form attached hereto as Exhibit D requiring each
stockholder to release all claims against the Company arising on or prior to the Effective Time and
to acknowledge and agree to the authority of the Stockholder Representatives and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for payment therefor. Upon
surrender of a Certificate for cancellation at or after the Closing to the Acquiror or such other
agent or agents as may be appointed by the Acquiror (the “Payment Agent”), together with
such letter of transmittal duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor (as promptly as practicable and in any event on the Closing Date if
such duly executed letter of transmittal and Certificate are delivered to the Acquiror at the
Closing, and within two (2) Business Days of receipt of such Certificate and duly executed letter
of transmittal if such Certificate and letter of transmittal are delivered to the Acquiror at any
time following the Closing), an amount in cash equal to (A) the Closing Date Per Share Merger
Consideration multiplied by (B) the number of Shares formerly represented by such Certificate,
without interest, and such Certificate shall, upon such surrender, be cancelled. If payment in
respect of any Certificate is to be made to a Person other than the Person in whose name such
Certificate is registered, it shall be a condition of payment that the Certificate so surrendered
shall be properly endorsed or shall otherwise be in proper form for transfer, that the signatures
on such Certificate or any related stock power shall be properly guaranteed and that the Person
requesting such payment shall have established to the reasonable satisfaction of the Acquiror that
any transfer and other Taxes required by reason of such payment to a Person other than the
registered holder of such Certificate have been paid or are not applicable. Until surrendered in
accordance with the provisions of this Section 2.9, any Certificate (other than Certificates
representing Shares described in Sections 2.7(b) and (c) and any Dissenting Shares) shall be
deemed, at any time after the Effective Time, to represent only the right to receive the portion of
the Merger Consideration payable with respect thereto, in cash, without interest, as contemplated
herein. At least five (5) Business Days prior to the Closing Date, the Acquiror shall provide to
the Company, and the Company shall provide to each holder of an option to acquire Shares and who
may be entitled to receive the consideration described in Section 2.7(e), an Option Surrender
Agreement. At or after the Closing, as promptly as practicable after delivery of an Option
Surrender Agreement (and in any event on the Closing Date if such duly executed Option Surrender
Agreement is delivered to the Acquiror at the Closing, and within two (2) Business Days of receipt
of such Option Surrender Agreement delivered to the Acquiror at any time following the Closing),
the holder of a cancelled option shall be entitled to receive the Option Payment. At the Closing,
the Acquiror and the Company shall each pay one-half of the





13









 







fees and expenses of any Payment Agent appointed by the Acquiror. Any portion of the Closing
Date Merger Consideration attributable to Dissenting Shares shall be returned to the Acquiror by
the Payment Agent within five (5) Business Days after the holders of such Dissenting Shares shall
have perfected their appraisal rights pursuant to Section 262 of Delaware Law.




          (d) At the Effective Time, the stock transfer books of the Company shall be closed and there
shall be no further registration of transfers of any shares of capital stock thereafter on the
records of the Company. If, after the Effective Time, a Certificate (other than representing
Shares described in Sections 2.7(b) and (c)) is presented to the Surviving Corporation, it shall be
cancelled and exchanged as provided in this Section 2.9.




          (e) All cash paid upon conversion of the Shares and options in accordance with the terms of
this Article II and all cash deposited with the Escrow Agent and the Company pursuant to this
Section 2.9 shall be deemed to have been paid in full satisfaction of all rights pertaining to such
Shares and the options to acquire Shares. From and after the Effective Time, the holders of
Certificates shall cease to have any rights with respect to Shares represented thereby, except as
otherwise provided herein or by applicable Law.




          (f) If any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the holder thereof, the Surviving Corporation shall pay or cause to be
paid in exchange for such lost, stolen or destroyed Certificate the relevant portion of the Merger
Consideration payable in respect thereof pursuant to Section 2.9(c) for Shares represented thereby.




          (g) Not less than three (3) Business Days prior to the Closing Date, the Company will provide
to the Acquiror the following: (i) an itemized schedule (the “Schedule of Expenses”)
containing (x) a true and complete list of all Transaction Expenses that have been paid (or for
which bills have been received) or shall have been paid as of the Closing Date and (y) an itemized
good faith estimate of all such additional Transaction Expenses that have been incurred or shall
have been incurred as of the Closing Date but are not reflected in clause (x) hereof; and (ii) an
itemized schedule (the “Net Working Capital Amount Schedule” and, collectively with the
Schedule of Expenses, the “Closing Schedules”) containing a good faith estimate of the Net
Working Capital Amount as of the Effective Time (the “Estimated Net Working Capital
Amount”) and prepared in the format of the example set forth on Exhibit E. Prior to
Closing, the Acquiror and the Company shall discuss the estimates set forth in the Closing
Schedules and make revisions to such estimates as they mutually agree. Following any such
revisions, the final Closing Schedules will be delivered together with a certificate of an
authorized officer of the Company certifying the accuracy and completeness of the Closing
Schedules. The Schedule of Expenses shall include all fees and expenses of all legal counsel,
auditors, financial advisors and other professional advisors for services rendered in connection
with the transactions contemplated by this Agreement on or prior to the Closing Date. On or before
the Closing Date, the Company shall have paid each Transaction Expense set forth in the Schedule of
Expenses, other than the fees and expenses set forth therein that are estimated for services to be
performed after the Closing Date or for services performed prior to the Closing Date for which the
Company has not yet been billed, which fees and expenses shall be paid by the Surviving Corporation
as they are later incurred or billed; provided that the Acquiror shall be




14









 







indemnified for any such fees and expenses in excess of the amount estimated therefor in the
Schedule of Expenses as provided in Section 8.2(c).




          (h) Within ninety (90) days after the Closing Date, the Acquiror shall prepare and deliver to
the Stockholder Representatives a calculation of the Net Working Capital Amount as of the Effective
Time (the “Final Net Working Capital Amount”) prepared in accordance with GAAP and on a
basis consistent with the Audited Financial Statements and the Net Working Capital Amount Schedule
(to the extent prepared in accordance with GAAP) along with reasonable detail and documentation
supporting such calculation.




               (i) If, within thirty (30) days following delivery of the Final Net Working Capital Amount,
the Stockholder Representatives have not provided the Acquiror with written notice of objection as
to the Final Net Working Capital Amount (that shall state the basis of the Stockholder
Representatives’ objection), then the Final Net Working Capital Amount shall be binding and
conclusive on the Acquiror, the Stockholder Representatives and the stockholders of the Company.
If the Estimated Net Working Capital Amount exceeds the Final Net Working Capital Amount, as
finally determined pursuant to this Section 2.9(h) (including, without limitation, the resolution
of any notice of objection as set forth in (ii) below), the amount of such excess shall be
disbursed to the Acquiror from the Escrow Fund pursuant to the terms of the Escrow Agreement within
five (5) Business Days of such final determination. Alternatively, if the Final Net Working
Capital Amount, as finally determined pursuant to this Section 2.9(h) (including, without
limitation, the resolution of any notice of objection as set forth in (ii) below), exceeds the
Estimated Net Working Capital Amount, the Acquiror shall deposit the amount of such excess with the
Payment Agent for the benefit of the stockholders and optionholders of the Company within five (5)
Business Days of such final determination for prompt distribution to such stockholders and
optionholders.



               (ii) If the Stockholder Representatives deliver to the Acquiror a notice of objection to the
Final Net Working Capital Amount within thirty (30) days of receipt, and if the Acquiror and the
Stockholder Representatives fail to resolve the issues outstanding with respect to the Final Net
Working Capital Amount within fifteen (15) days (or such longer period as the Stockholder
Representatives and the Acquiror may agree) of delivery of the Stockholder Representatives’
objection notice, the Stockholder Representatives and the Acquiror shall submit, within thirty (30)
days of the delivery of the Stockholder Representatives objection notice (or within fifteen (15)
days of the expiration of any longer period as to which the Stockholder Representatives and the
Acquiror may agree, as contemplated above), the Final Net Working Capital Amount to a nationally
recognized firm of independent certified public accountants with a nationwide audit and accounting
practice as Acquiror and the Stockholder Representatives may agree in writing (the “Independent
Accountants”), so that such Independent Accountants can determine the Final Net Working Capital
Amount in accordance with GAAP and on a basis consistent with the Audited Financial Statements and
the Net Working Capital Amount Schedule (to the extent prepared in accordance with GAAP).



               (iii) If the Final Net Working Capital Amount is submitted to the Independent Accountants, (A)
the Stockholder Representatives and the Acquiror shall furnish or cause to be furnished to the
Independent Accountants such work papers and other documents and information as the Independent
Accountants may reasonably request and are available to that



15









 




party or its agents and shall be afforded the opportunity to present to the Independent
Accountants any material relating to the Final Net Working Capital Amount and to discuss the Final
Net Working Capital Amount with the Independent Accountants; (B) the determination of the Final Net
Working Capital Amount by the Independent Accountants, as set forth in a notice to be delivered to
both the Stockholder Representatives and the Acquiror within thirty (30) days of the submission of
the Final Net Working Capital Amount to the Independent Accountants, shall be final, binding and
conclusive on the parties; and (C) the Acquiror, on the one hand, and the stockholders and
optionholders of the Company, on the other hand, will each bear one-half of the fees and costs of
the Independent Accountants for such determination.




          (i) Following the date that is six (6) months after the Effective Time, the holders of
Certificates or options to acquire Shares shall be entitled to look to the Acquiror only as a
general creditor thereof with respect to any portion of the Merger Consideration payable upon due
surrender of their Certificates or options, without interest. Notwithstanding anything to the
contrary in this Section 2.9, to the fullest extent permitted by Law, neither the Acquiror nor the
Surviving Corporation shall be liable to any holder of a Certificate or option for any amount
properly delivered to a public official pursuant to any applicable abandoned property, escheat or
similar Law.




     Section 2.10 Withholding Rights. Each of the Acquiror and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration otherwise payable to any Person
pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of applicable Tax Law. To the extent
that such amounts are so withheld or paid over to or deposited with the relevant Governmental
Authority by the Acquiror or the Surviving Corporation, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the applicable Person in respect to which
such deduction and withholding was made.



     Section 2.11 Stockholder Representatives.



          (a) The parties hereto agree that it is desirable to designate TA Associates Management, L.P.
and Lance Dunn as the representatives of the Company’s stockholders and optionholders and their
attorneys in fact (each a “Stockholder Representative” and collectively, the
“Stockholder Representatives”), with full power of substitution to act on behalf of the
Company’s stockholders and optionholders (only with respect to their interests as stockholders and
optionholders under this Agreement and the Escrow Agreement) to the extent and in the manner set
forth in this Agreement and the Escrow Agreement but not with respect to any amendments to this
Agreement or the Escrow Agreement. The Company has designated the Stockholder Representatives as
the representatives of the Company’s stockholders and optionholders for purposes of this Agreement
and the Escrow Agreement, and approval of this Agreement and the Merger by such holders shall
constitute ratification and approval of such designation on the terms set forth herein. All
decisions, actions, consents and instructions by the Stockholder Representatives with respect to
this Agreement and the Escrow Agreement (but not with respect to any amendments hereto or thereto)
shall be binding upon all of the stockholders and optionholders of the Company with respect to
their interests as stockholders and optionholders under this Agreement and the Escrow Agreement,
and no such stockholder shall have the right to object to, dissent from, protest or otherwise
contest the same. The Stockholder





16









 







Representatives shall act in unanimity with respect to any decision, action, consent or
instruction contemplated by this Agreement and in all communications with the Acquiror and the Sub,
and the Acquiror and Sub shall be entitled to rely on any such decision, action, consent or
instruction as being the decision, action, consent or instruction of the Company’s stockholders and
optionholders, and the Acquiror and Sub are hereby relieved from any liability to any Person for
acts done by them in accordance with any such decision, act, consent or instruction. By way of
amplification and not limitation, as Stockholder Representatives, the Stockholder Representatives
shall be authorized and empowered, as agents of and on behalf of all stockholders and optionholders
of the Company (only with respect to their interests as stockholders and optionholders) to give and
receive notices and communications as provided herein, to object to any Acquiror Indemnification
Claims, to agree to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to, such claims or Losses,
to waive after the Effective Time any breach or default of the Acquiror or Sub of any obligation to
be performed by it under this Agreement, to receive service of process on behalf of each
stockholder and optionholder of the Company in connection with any claims against such stockholder
or optionholder arising under or in connection with this Agreement, any document or instrument
provided for hereby (other than Employment Agreements, Non-Competition Agreements and
Non-Solicitation Agreements) or any of the transactions contemplated hereby or under any Ancillary
Agreement, and to take all other actions that are either (i) necessary or appropriate in the
judgment of the Stockholder Representatives for the accomplishment of the foregoing or (ii)
specifically mandated by the terms of this Agreement. Notices or communications to or from both of
the Stockholder Representatives shall constitute notice to or from the stockholders and
optionholders of the Company.




          (b) A Stockholder Representative may resign at any time, and in the event of the death,
incapacity or resignation of a Stockholder Representative, a new Stockholder Representative may be
appointed by the vote or written consent of stockholders holding a majority of the aggregate Fully
Diluted Shares immediately prior to the Effective Time, except that, with respect to any
resignation, death, or incapacity of Lance Dunn as a Stockholder Representative, the holders of a
majority of the outstanding shares of Class A Common Stock as of the date hereof shall have the
right to appoint such replacement Stockholder Representative. Notice of such vote or a copy of the
written consent appointing such new Stockholder Representative shall be sent to the Acquiror and,
after the Effective Time, to the Surviving Corporation, such appointment to be effective upon the
later of the date indicated in such consent and the date such consent is received by the Acquiror
and, after the Effective Time, the Surviving Corporation; provided that until such notice
is received, the Acquiror, Sub and the Surviving Corporation, as applicable, shall be entitled to
rely on the decisions, actions, consents and instructions of the prior Stockholder Representative
as described in Section 2.11(a). Each Stockholder Representative may charge a reasonable fee, not
to exceed $50,000 per Stockholder Representative per year, for his or its services subject to the
approval of the other Stockholder Representative; provided that all fees and expenses
incurred by the Stockholder Representatives in performing his or its duties hereunder (including
legal fees and expenses related thereto) and any indemnification in favor of the Stockholder
Representatives shall be borne by the stockholders and optionholders of the Company (other than
holders of Dissenting Shares) pro rata in accordance with the portion of the Merger Consideration
each such stockholder or optionholder would otherwise have been entitled to receive under Section
2.9(c), by virtue of the




17









 







ownership of outstanding Shares or options immediately prior to the Effective Time (each such
stockholder’s and optionholder’s pro rata interest, a “Pro Rata Share”) in the manner
provided in the Escrow Agreement.




          (c) In dealing with this Agreement and any notice, instrument, agreement or document relating
thereto, and in exercising or failing to exercise all or any of the powers conferred upon the
Stockholder Representatives hereunder or thereunder, (i) the Stockholder Representatives and his or
its agents, counsel, accountants and other representatives shall not assume any, and shall not
incur any, responsibility whatsoever (in each case, to the extent permitted by applicable Law) to
any stockholder or optionholder of the Company, the Acquiror, the Company, Sub or the Surviving
Corporation, including, without limitation, by reason of any error in judgment or other act or
omission performed or omitted hereunder or in connection with this Agreement or any such other
agreement, instrument or document, except to the extent such actions shall have been determined by
a court of competent jurisdiction to have constituted willful misconduct or fraud, and (ii) the
Stockholder Representatives shall be entitled to rely in good faith on the advice of counsel,
public accountants or other independent experts experienced in the matter at issue, and any error
in judgment or other act or omission of the Stockholder Representatives pursuant to such advice
shall in no event subject the Stockholder Representatives to liability to any stockholder of the
Company, the Acquiror, the Company, Sub or the Surviving Corporation. Except in cases where a
court of competent jurisdiction has made such a finding, the stockholders and optionholders of the
Company shall on a pro rata basis (based on each such stockholder’s and optionholder’s Pro Rata
Share) indemnify and hold harmless the Stockholder Representatives from and against any and all
losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys’ fees
and disbursements, arising out of and in connection with his or its activities as the Stockholder
Representatives under this Agreement, the Escrow Agreement or otherwise.




          (d) The grant of authority provided for in this Section 2.11 (i) is coupled with an interest
and is being granted, in part, as an inducement to the Acquiror and Sub to enter into this
Agreement and the Escrow Agreement, and shall be irrevocable and survive the dissolution,
liquidation or bankruptcy of the Company or the death, incompetency, liquidation or bankruptcy of
any stockholder or optionholder of the Company, shall be binding on any successor thereto and (ii)
shall survive the assignment by any stockholder or optionholder of the Company of the whole or any
portion of his, her or its interest in the Escrow Fund.




          (e) In connection with the performance of his or its obligations hereunder, the Stockholder
Representatives shall have the right, acting together, at any time and from time to time to select
and engage, at the cost and expense of the stockholders and optionholders of the Company (as
contemplated by Section 2.11(b)), attorneys, accountants, investment bankers, advisors, consultants
and clerical personnel and obtain such other professional and expert assistance, and maintain such
records, as he or it may deem necessary or desirable and incur other out-of-pocket expenses related
to performing his or its services hereunder.




          (f) All of the immunities and powers granted to the Stockholder Representatives under this
Agreement with respect to this Agreement and the Escrow Agreement shall survive the Closing and/or
any termination of this Agreement, except that such powers shall terminate upon termination of this
Agreement.








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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY




     Except as set forth in the corresponding sections or subsections of the Disclosure Schedules
attached hereto (collectively, the “Disclosure Schedules”) (each of which shall qualify the
specifically identified Sections or subsections hereof to which such Disclosure Schedule relates
and any other Sections or subsections to the extent it is readily apparent from the face of such
disclosure that such disclosure is applicable to such other Sections or subsections), the Company
hereby represents and warrants to the Acquiror and Sub as follows:



     Section 3.1 Organization and Qualification.



          (a) Each of the Company and its Subsidiaries is (i) a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation as set forth
in Schedule 3.1(a) of the Disclosure Schedules, and has full corporate power and authority to own,
lease and operate its properties and to carry on its business as it is now being conducted and (ii)
duly qualified or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary.




          (b) The Company has heretofore furnished or made available to the Acquiror a complete and
correct copy of the certificate of incorporation and bylaws or equivalent organizational documents,
each as amended to date, of the Company and each of its Subsidiaries. Such certificates of
incorporation, bylaws or equivalent organizational documents are in full force and effect. Neither
the Company nor any of its Subsidiaries is in violation of any of the provisions of its certificate
of incorporation, bylaws or equivalent organizational documents. True and complete copies of the
transfer books and minute books of each of the Company and its Subsidiaries have been made
available to the Acquiror prior to the date hereof and such transfer books and minute books contain
(i) true, complete and correct records of all actions taken at all meetings and by written consent
in lieu of a meeting of the board of directors, any committees thereof, and stockholders or other
equity holders of the Company and its Subsidiaries, (ii) true, complete and correct records of the
original issuance, transfer, cancellation and other capitalization maters of the capital stock or
other equity of the Company and its Subsidiaries, and (iii) complete copies of the stock
certificates evidencing ownership interests in the Company and its Subsidiaries.




     Section 3.2 Authority.



          (a) The Company has full corporate power and authority to execute and deliver this Agreement
and each of the Ancillary Agreements to which it will be a party and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby and thereby,
provided that the Requisite Stockholder Consent is required for the Company to consummate
the Merger. The execution and delivery by the Company of this Agreement and each of the Ancillary
Agreements to which the Company will be a party and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly and validly authorized by the Board of
Directors of the Company. Subject to receipt of the Requisite Stockholder Consent, no other
corporate proceedings or actions on the part of





19









 







the Company are necessary to authorize the execution and delivery of this Agreement or any
Ancillary Agreement or to consummate the transactions contemplated hereby and thereby. This
Agreement has been, and upon their execution each of the Ancillary Agreements to which the Company
will be a party will have been, duly executed and delivered by the Company. This Agreement
constitutes, and upon their execution each of the Ancillary Agreements to which the Company will be
a party will constitute, the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general principles of equity (regardless of whether considered
in a proceeding in equity or at law).




          (b) The Board of Directors of the Company on October 13, 2010 (i) determined that this
Agreement, the Ancillary Agreements and the Merger are fair to and in the best interests of the
Company and its stockholders and (ii) resolved to recommend that the Company’s stockholders approve
and adopt this Agreement and the Merger. The affirmative votes of (A) the holders of a majority of
the outstanding Shares (voting together on an as converted to Class A Common Stock basis) and (B)
the holders of a majority of the outstanding Class B Common Stock (voting separately as a single
class), are the only votes of the holders of any class or series of the Company’s capital stock
necessary to approve and adopt this Agreement, the Ancillary Agreements and the Merger (the
“Requisite Stockholder Consent”).




     Section 3.3 No Conflict; Required Filings and Consents.



          (a) The execution, delivery and performance by the Company of this Agreement and each of the
Ancillary Agreements to which the Company will be a party, and the consummation of the transactions
contemplated hereby and thereby, do not and will not:




               (i) conflict with or violate the certificate of incorporation or bylaws or equivalent
organizational documents of the Company or any of its Subsidiaries;



               (ii) assuming the filings described in (b) below have been made, conflict with or violate any
Law applicable to the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected or give any Governmental Authority the
right to revoke, withdraw, suspend, cancel, terminate or modify any Permit that is held by the
Company or any of its Subsidiaries or that otherwise relates to the business or assets of the
Company or any of its Subsidiaries;



               (iii) except as set forth in Schedule 3.3(a) of the Disclosure Schedules, result in any breach
of, constitute a default (or an event that, with notice or lapse of time or both, would become a
default) under, result in the acceleration of, or require the payment of amounts under, or create
in any party the right to accelerate, terminate, modify or cancel, or require any consent of any
Person pursuant to, any material note, bond, mortgage, indenture, agreement, lease, license,
permit, restriction, Encumbrance, franchise, instrument, liability or obligation or Material
Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or any of their respective properties, assets or rights are bound or affected;
or



20









 





               (iv) result in the imposition or creation of any Encumbrance, other than a Permitted
Encumbrance, upon or with respect to the capital stock or assets of the Company or any of its
Subsidiaries.



          (b) Neither the Company nor any of its Subsidiaries is required to file, seek or obtain any
notice, authorization, approval, order, permit or consent of or with any Governmental Authority in
connection with the execution, delivery and performance by the Company of this Agreement and each
of the Ancillary Agreements to which the Company will be a party or the consummation of the
transactions contemplated hereby or thereby, except for (i) any filings required to be made under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (ii)
the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and
(iii) such filings as may be required by any applicable federal or state securities or “blue sky”
laws.




     Section 3.4 Capitalization. The authorized capital stock of the Company consists of
10,526,904 shares of Company Common Stock, of which (i) 7,500,000 shares are designated Class A
Common Stock, of which as of the date hereof 1,469,773 shares are issued and outstanding and (ii)
3,026,904 shares are designated Class B Common Stock, all of which shares are issued and
outstanding. As of the date hereof, 23,183 shares of Class A Common Stock are reserved for
issuance and issuable upon or otherwise deliverable in connection with the exercise of outstanding
options. Schedule 3.4 of the Disclosure Schedules sets forth (a) each holder (b) the exercise,
conversion, purchase, strike or base price, as applicable, of each such option, (c) the date of
grant of each such Option, and (d) the date of expiration of each such option. Schedule 3.4 of the
Disclosure Schedules sets forth, for each Subsidiary of the Company, the amount of its authorized
capital stock, the amount of its outstanding capital stock and the record and beneficial owners of
its outstanding capital stock. Except for the Shares and as set forth in Schedule 3.4 of the
Disclosure Schedules, neither the Company nor any of its Subsidiaries has issued or agreed to issue
any: (i) share of capital stock or other equity or ownership interest; (ii) option, warrant, right
to subscribe or interest convertible into or exchangeable or exercisable for the purchase of
shares of capital stock or other equity or ownership interests; (iii) stock appreciation right,
phantom stock, interest in the ownership or earnings of the Company or any of its Subsidiaries or
other equity equivalent or equity-based award or right; or (iv) bond, debenture or other
indebtedness having the right to vote or convertible or exchangeable for securities having the
right to vote; and there is no condition or circumstance that directly or indirectly gives rise to
or provides a basis for the assertion of a claim by any Person against the Company or any of its
Subsidiaries to the effect that such Person is entitled to acquire or receive any shares of capital
stock or other securities of the Company or any of its Subsidiaries. Each outstanding share of
capital stock or other equity or ownership interest of the Company and each of its Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable, and in the case of its Subsidiaries,
each such share or other equity or ownership interest is owned by the Company or another Subsidiary
of the Company, free and clear of any Encumbrance, except for Permitted Encumbrances. All of the
aforesaid shares or other equity or ownership interests have been offered, sold and delivered by
the Company or its Subsidiary in compliance with all applicable federal and state securities Laws.
Except as set forth in Schedule 3.4 of the Disclosure Schedules and except for rights granted to
the Acquiror and Sub under this Agreement, there are no outstanding obligations of the Company or
any of its Subsidiaries to issue, sell or transfer or repurchase, redeem or otherwise acquire, or
that relate to the holding,



21









 




voting or disposition of, or that restrict the transfer of, the issued or unissued capital stock or other equity or
ownership interests of the Company or any of its Subsidiaries.




     Section 3.5 Equity Interests. Except for the Subsidiaries set forth in Schedule 3.5
of the Disclosure Schedules, neither the Company nor any of its Subsidiaries directly or indirectly
owns any equity, partnership, membership or similar interest in, or any interest convertible into,
exercisable for the purchase of or exchangeable for any such equity, partnership, membership or
similar interest, or is under any current or prospective obligation to form or participate in,
provide funds to, make any loan, capital contribution or other investment in, or assume any
liability or obligation of, any Person.



     Section 3.6 Financial Statements; No Undisclosed Liabilities; Books and Records.



          (a) True and complete copies of the audited consolidated balance sheets of the Company and its
Subsidiaries as at April 30, 2008, 2009 and 2010, and the related audited consolidated statements
of income, retained earnings, stockholders’ equity and changes in financial position of the Company
and its Subsidiaries, together with all related notes and schedules thereto, accompanied by the
reports thereon of the Company’s independent auditors (collectively referred to as the “Audited
Financial Statements”) and the unaudited consolidated balance sheet of the Company and its
Subsidiaries as at August 31, 2010, and the related unaudited consolidated statements of income,
retained earnings, stockholders’ equity and changes in financial position of the Company and its
Subsidiaries (collectively referred to as the “Unaudited Financial Statements” and,
together with the Audited Financial Statements, the “Financial Statements”) have been made
available to the Acquiror. Except as provided on Schedule 3.6(a) of the Disclosure Schedules, each
of the Financial Statements: (i) are correct and complete in all material respects and have been
prepared in accordance with the financial Books and Records of the Company and its Subsidiaries;
(ii) have been prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated, except as may be indicated in the notes thereto or, with respect to the
Unaudited Financial Statements, except for the lack of footnotes; and (iii) fairly present in all
material respects the consolidated financial condition, results of operations and cash flows of the
Company and its Subsidiaries as of the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein or, with respect to the Unaudited Financial
Statements, subject to normal and recurring year-end adjustments and footnote disclosures.




          (b) Except as accrued or reserved against on the Balance Sheet and except as provided on
Schedule 3.6(b) of the Disclosure Schedules,, neither the Company nor any of its Subsidiaries has
any liability or obligation required by GAAP to be reflected in a consolidated balance sheet of the
Company and its Subsidiaries or disclosed in the notes thereto, except for liabilities or
obligations (i) for accounts payable, accrued expenses and accrued taxes of the type required to be
reflected as current liabilities in the “liabilities” column of a balance sheet prepared in
accordance with GAAP incurred in the ordinary course of business consistent with past practice
since the date of the Balance Sheet which were not incurred in breach of any of the representations
or warranties contained in Section 3.7 hereof, and which alone or together would not have a
Material Adverse Effect and which are fully reflected on the books of account of the Company or its
Subsidiaries, or (ii) incurred as a result of or arising out of the transactions contemplated in
this Agreement.








22









 








          (c) The Books and Records are true, complete and correct in all material respects. The books
of account and financial records have been prepared and are maintained in accordance with sound
accounting practice. The Books and Records accurately and fairly reflect in all material respects
the transactions and dispositions of assets of the Company and its Subsidiaries.




          (d) The Company maintains a system of accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with management’s general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation of audited
financial statements in conformity with GAAP and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any differences.




     Section 3.7 Absence of Certain Changes or Events. Since August 31, 2010: (i) the
Company and its Subsidiaries have conducted their businesses only in the ordinary course consistent
with past practice; (ii) through the date of this Agreement, there has not been any event or
circumstance, individually or in the aggregate with other events or circumstances, that could
reasonably be expected to have a Material Adverse Effect; and (iii) except as set forth on Schedule
3.7 of the Disclosure Schedules, neither the Company nor any of its Subsidiaries has:



          (a) suffered any material loss, damage, destruction or other casualty affecting any of its
material properties or assets, whether or not covered by insurance;




          (b) amended or otherwise changed its certificate of incorporation or bylaws or equivalent
organizational documents;




          (c) issued, sold, pledged, disposed of or otherwise subjected to any Encumbrance (other than
any Permitted Encumbrance) (i) any shares of capital stock of the Company or any of its
Subsidiaries, or any options, warrants, convertible securities or other rights of any kind to
acquire any such shares, or any other ownership interest in the Company or any of its Subsidiaries,
except for the issuance of shares upon the exercise of options or warrants outstanding as of the
date of this Agreement or (ii) any properties or assets of the Company or any of its Subsidiaries;




          (d) declared, set aside, made or paid any dividend or other distribution, payable in cash,
stock, property or otherwise, or made any other payment on or with respect to any of its capital
stock, except for dividends (i) paid solely in cash or (ii) by any direct or indirect wholly-owned
Subsidiary of the Company to the Company;




          (e) reclassified, combined, split, subdivided or redeemed, or purchased or otherwise acquired,
directly or indirectly, any of its capital stock;




          (f) acquired any corporation, partnership, limited liability company or other business
organization or any material amount of assets, or entered into any joint venture, strategic
alliance, exclusive dealing, noncompetition or similar contract or arrangement;








23









 








          (g) other than as contemplated hereby, adopted a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries;




          (h) incurred any indebtedness for borrowed money or issued any debt securities or assumed,
guaranteed or endorsed, or otherwise become responsible for, the obligations of any Person, or made
any loans or advances, except for amounts borrowed under the Company’s existing revolving line of
credit with Cedar Rapids Bank & Trust Company;




          (i) authorized, or made any commitment with respect to, any single capital expenditure in
excess of $250,000 or capital expenditures that are, in the aggregate, in excess of $750,000 for
the Company and its Subsidiaries taken as a whole, or entered into any lease of real or personal
property or any renewals thereof;




          (j) increased the compensation payable or to become payable or the benefits (including equity
or equity-based grants) provided to, granted any severance or termination pay to, established,
adopted, entered into or amended any indemnification arrangement, or paid any bonus to its
directors, officers or employees or established, adopted, entered into or amended any Plan, other
than as may be required by any Governmental Authority or to comply with any applicable Laws, in
each case other than in the ordinary course of business consistent with past practice;




          (k) permitted the lapse of any right relating to Intellectual Property or any other intangible
asset used in the business of the Company or any of its Subsidiaries;




          (l) commenced or settled any Action;




          (m) changed any material tax or accounting policy or practice;




          (n) received any notices from a supplier of its intent to increase prices or decrease the
availability of products or services or suffered any recurring or prolonged interruption of
products or services necessary to conduct its business;




          (o) entered into any transaction with any Affiliate; or




          (p) announced an intention, entered into any formal or informal agreement, or otherwise made a
commitment to do any of the foregoing.




     Section 3.8 Compliance with Law; Permits.



          (a) Each of the Company and its Subsidiaries is, and since May 1, 2007 has been, in compliance
in all material respects with all Laws applicable to it including, without limitation, credit
service organizations, loan or mortgage broker laws, and Section 7216 of the Code. None of the
Company or any of its Subsidiaries has received during the past three (3) years any written notice,
order, inquiry, investigation, complaint or other communication from any Governmental Authority or
any other Person that the Company or any of its Subsidiaries is not in compliance with any Law
applicable to it.








24









 








          (b) Schedule 3.8 of the Disclosure Schedules sets forth a true and complete list of all
material permits, licenses, franchises, approvals, certificates, consents, waivers, concessions,
exemptions, orders, registrations, notices or other authorizations of or right under any Contract
with any Governmental Authority (the “Permits”) held by the Company or any of its
Subsidiaries. The Permits set forth on Schedule 3.8 constitute all of the material Permits
necessary for each of the Company and its Subsidiaries to own, lease and operate its properties and
to carry on its business as currently conducted. Each of the Company and its Subsidiaries is in
compliance in all material respects with all such Permits and each Permit set forth on Schedule 3.8
or required to be set forth on Schedule 3.8 is in full force and effect.




     Section 3.9 Litigation. There is no Action pending or, to the Knowledge of the
Company, threatened against the Company or any of its Subsidiaries. There is no Action pending or,
to the Knowledge of the Company, threatened seeking to prevent, hinder, modify, delay or challenge
the transactions contemplated by this Agreement or the Ancillary Agreements. There is no
outstanding (a) order, writ, judgment, injunction, decree, determination or award, or (b) pending
or, to the Knowledge of the Company, threatened Action, in either case by any Governmental
Authority, relating to the Company, any of its Subsidiaries, any of their respective properties or
assets or the transactions contemplated by this Agreement or the Ancillary Agreements.



     Section 3.10 Employee Benefit Plans.



          (a) Schedule 3.10(a) of the Disclosure Schedules sets forth a true and complete list of, and
the Acquiror has previously been provided, or otherwise had made available to it, true and complete
copies of:




               (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”)) and all bonus, commission, equity or equity
incentive (including but not limited to stock appreciation right, performance share or unit, stock
option, stock purchase and restricted stock), incentive, deferred compensation, retiree medical or
life insurance or benefits, supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, retention, termination, severance, change in control, salary
continuation, employee loan, fringe benefit or other plans, programs, policies, arrangements,
contracts or agreements that are for the benefit of any current or former employee, officer or
director of the Company or any of its Subsidiaries; and (x) to which the Company or any of its
Subsidiaries is a party, (y) with respect to which the Company or any of its Subsidiaries has any
present or will have any future liability (actual or contingent) or other obligation; or (z) which
are maintained, contributed to or sponsored by the Company or any of its Subsidiaries;



               (ii) each employee benefit plan for which the Company or any of its Subsidiaries could incur
liability under Section 4069 of ERISA in the event such plan has been or were to be terminated;



               (iii) any plan in respect of which the Company or
any of its Subsidiaries could incur liability under Section 4212(c) of
ERISA; and



25









 





               (iv) any Contracts between the Company or any of its Subsidiaries and any employee, officer or
director of the Company or any of its Subsidiaries, including any Contracts relating in any way to
a sale of the Company or any of its Subsidiaries (the items set forth in clauses (i)-(iv),
collectively, the “Plans”).



          (b) The Company has furnished or made available to the Acquiror a true and complete copy of
each material document, if any, prepared in connection with each such Plan, including (i) a copy of
each trust or other funding arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the two most recently filed Internal Revenue Service (“IRS”) Form 5500
(iv) the most recent IRS determination letter (if applicable); and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan. Neither the Company
nor any of its Subsidiaries has any express or implied commitment (A) to create, incur liability
with respect to or cause to exist any other employee benefit plan, program or arrangement, (B) to
enter into any Contract to provide compensation or benefits to any individual or (C) to modify,
change or terminate any Plan, other than with respect to a modification, change or termination
required by ERISA or the Internal Revenue Code of 1986, as amended (the “Code”).




          (c) None of the Plans is a multiemployer plan within the meaning of Section 3(37) or
4001(a)(3) of ERISA (a “Multiemployer Plan”) or a single employer pension plan within the
meaning of Section 4001(a)(15) of ERISA for which the Company or any of its Subsidiaries could
incur liability under Section 4063 or 4064 of ERISA (a “Multiple Employer Plan”). None of
the Plans: (i) provides for the payment of separation, severance, termination or similar type
benefits to any person; (ii) obligates the Company or any of its Subsidiaries to pay separation,
severance, termination or similar type benefits solely or partially as a result of the transactions
contemplated by this Agreement or the Ancillary Agreements; or (iii) obligates the Company or any
of its Subsidiaries to make any payment or provide any benefit as a result of the transactions
contemplated by this Agreement or the Ancillary Agreements. None of such Plans provides for or
promises retiree medical, disability or life insurance benefits to any current or former employee,
officer or director of the Company or any of its Subsidiaries. Each of the Plans is maintained in
the United States and is subject only to the Laws of the United States or a political subdivision
thereof.




          (d) Each Plan is now and for the longer of the past three (3) years or the relevant statute of
limitations period has been operated and administered in all material respects in accordance with
its terms and the requirements of all applicable Laws, including ERISA and the Code. Each of the
Company and its Subsidiaries, each Plan fiduciary, and any Person to whom the Company or any of its
Subsidiaries might owe an indemnification obligation has performed in all material respects all
obligations required to be performed by it and is not in any material respect in default under or
in violation under any Plan (but only to the extent any such failure or any default or violation
would result in material liability to the Company or any of its Subsidiaries), nor does the Company
have any Knowledge of any such default or violation by any other party to any Plan. No Action is
pending or, to the Knowledge of the Company, threatened with respect to any Plan, other than claims
for benefits in the ordinary course, and no fact or event exists that would give rise to any such
Action. Each Plan which is intended to be qualified within the meaning of Code Section 401(a) has
received a favorable determination letter or opinion letter as to its qualification, such Plan
qualifies and has qualified under Section




26









 







401(a) at all times in form and all amendments required by applicable Law have been timely
adopted. With respect to each such Plan, no operational failure to comply with applicable Law has
occurred, whether by action or failure to act, that would reasonably be expected to cause the loss
of qualification in the absence of correction, which correction would not result in a material
cost.




          (e) There has not been any non-exempt prohibited transaction, within the meaning of Section
406 of ERISA or Section 4975 of the Code, with respect to any Plan that would reasonably be
expected to result in a material liability to the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries has incurred any liability under, arising out of or by
operation of Title IV of ERISA, other than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course, including any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV of ERISA or (ii) the
withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no fact or event exists that
would give rise to any such liability.




          (f) All contributions, premiums or payments required to be made with respect to any Plan have
been made. No deduction for such contributions has been challenged or disallowed by any
Governmental Authority. No Plan is subject to Title IV of ERISA.




          (g) No Plan or any related trust or other funding medium thereunder or any fiduciary thereof
is, to the Knowledge of the Company, the subject of an audit, investigation or examination by any
Governmental Authority.




          (h) No “reportable event,” as such term is used in Section 4043 of ERISA, “accumulated funding
deficiency,” as such term is used in Section 412 or 4971 of the Code or Section 302 of ERISA or
application for or receipt of a waiver from the IRS of any minimum funding requirement under
Section 412 of the Code has occurred with respect to any Plan.




          (i) The Company and its ERISA Affiliates do not maintain any Plan which is a “group health
plan,” as such term is defined in Section 5000(b)(1) of the Code, that has not been administered
and operated in all material respects in compliance with the applicable requirements of Section 601
of ERISA, Section 4980B(b) of the Code and the applicable provisions of the Health Insurance
Portability and Accountability Act of 1986.




          (j) None of the employees of the Company or any of its Subsidiaries resides or performs
services outside the United States.




          (k) Except as provided on Schedule 3.10(k) of the Disclosure Schedules, neither the Company
nor any of its Subsidiaries has or would reasonably be expected to incur any liability with respect
to post-employment or post-retirement health, medical or life insurance or benefits, except as
required to avoid an excise tax under Code Section 4980B and except as otherwise may be required by
applicable Law.




          (l) Except as provided in Sections 2.7(e), neither the execution of this Agreement nor the
Merger (whether alone or in connection with any other event(s)) will:








27









 








               (i) result in severance pay or any increase in severance pay upon any termination of service;
or



               (ii) accelerate the time of payment or vesting under, result in any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under, or increase any amount
payable under any Plan.



          (m) Neither the execution of this Agreement nor the Merger (whether alone or in connection
with other events), will result in any payment under any Plan that would not be deductible under
Section 280G of the Code.




          (n) Each Plan that constitutes in any part a nonqualified deferred compensation plan within
the meaning of Section 409A of the Code has been operated and maintained in operational and
documentary compliance with Section 409A of the Code and applicable guidance thereunder. No
payment to be made under any Company Employee Program is, or to the knowledge of the Company, will
be, subject to the penalties of Section 409A(a)(1) of the Code.




          (o) Except as set forth in Schedule 3.10(o) of the Disclosure Schedules, no fees or charges
payable by the Company or any Subsidiary would result from terminating any investment contract
related to any Plan that is intended to be a cash or deferred arrangement under Code Section 401(k)
other than routine administrative expenses.




     Section 3.11 Labor and Employment Matters.



          (a) Neither the Company nor any of its Subsidiaries is a party to, or bound by, or has ever
been a party to or bound by, any labor or collective bargaining Contract that pertains to employees
of the Company or any of its Subsidiaries. To the Company’s Knowledge, there are no organizing
activities or collective bargaining arrangements that could affect the Company or any of its
Subsidiaries pending or under discussion with any labor organization or group of employees of the
Company or any of its Subsidiaries. There is, and during the past two (2) years there has been, no
labor dispute, strike, controversy, slowdown, work stoppage or lockout against or affecting the
Company or any of its Subsidiaries.




          (b) Neither the Company nor any of its Subsidiaries has engaged or is engaging in any unfair
labor practice. No unfair labor practice or labor charge or complaint is pending or, to the
Knowledge of the Company, threatened in writing with respect to the Company or any of its
Subsidiaries before the National Labor Relations Board, the Equal Employment Opportunity Commission
or any other Governmental Authority.




          (c) The Company and each of its Subsidiaries have withheld and paid to the appropriate
Governmental Authority or are holding for payment not yet due to such Governmental Authority all
amounts required to be withheld from employees of the Company or any of its Subsidiaries and are
not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any
applicable Laws relating to the employment of labor. The Company and each of its Subsidiaries have
paid in full to all their respective employees or adequately accrued in accordance with GAAP for
all wages, salaries, commissions, bonuses, benefits, vacation, paid time off and other compensation
due to or on behalf of such employees.








28









 








          (d) Except as set forth in Schedule 3.11 to the Disclosure Schedules, to the Knowledge of the
Company, no employee of the Company or any of its Subsidiaries: (i) is in violation, in any
material respect, of any term of any employment agreement, nondisclosure agreement, non-competition
agreement or restrictive covenant to a former employer; (ii) intends to terminate his or her
employment; or (iii) has received an offer to join a business that may be competitive with the
business of the Company and its Subsidiaries.




          (e) There are no material written personnel manuals, handbooks, policies, rules or procedures
applicable to any employee of the Company or its Subsidiaries, other than those set forth in
Schedule 3.11(e) of the Disclosure Schedules, true and complete copies of which have heretofore
been provided or made available to the Acquiror.




          (f) Neither the Company nor any of its Subsidiaries is a party to, or otherwise bound by, any
consent decree with, or citation by, any Governmental Authority relating to employees or employment
practices. None of the Company nor any of its Subsidiaries has received within the past two (2)
years any written notice of intent by any Governmental Authority responsible for the enforcement of
labor or employment laws to conduct an investigation relating to the Company or any of its
Subsidiaries and, to the Knowledge of the Company, no such investigation is in progress.




     Section 3.12 Title to and Condition of Assets.



          (a) The Company and its Subsidiaries have valid title to or a valid leasehold interest in all
of their assets, including all of the assets reflected on the Balance Sheet or acquired in the
ordinary course of business since August 31, 2010, except those sold or otherwise disposed of since
August 31, 2010 in the ordinary course of business consistent with past practice. None of the
assets owned or leased by the Company or any of its Subsidiaries is subject to any Encumbrance,
other than (i) liens for current taxes and assessments not yet past due, (ii) mechanics’,
workmen’s, repairmen’s, warehousemen’s and carriers’ liens arising in the ordinary course of
business of the Company or such Subsidiary consistent with past practice and (iii) any such matters
of record, Encumbrances and other imperfections of title that do not, individually or in the
aggregate, impair the continued ownership, use and operation of the assets to which they relate in
the business of the Company and its Subsidiaries as currently conducted (collectively,
“Permitted Encumbrances”).




          (b) Schedule 3.12 of the Disclosure Schedules contains a complete and correct list of each
tangible asset owned or leased by the Company or its Subsidiaries with a value in excess of $1,000,
and all such assets have been maintained in all material respects in accordance with generally
accepted industry practice and are in good operating condition and repair, ordinary wear and tear
excepted.




     This Section 3.12 does not relate to real property or interests in real property, such items
being the subject of Section 3.13, or to Intellectual Property, such items being the subject of
Section 3.14.



     Section 3.13 Real Property. Neither the Company nor any of its Subsidiaries own any
real property. Schedule 3.13(a) of the Disclosure Schedules sets forth a true and complete list of



29









 







all Leased Real Property. Each of the Company and its Subsidiaries has valid and binding
leasehold title to all Leased Real Property, in each case, free and clear of all Encumbrances,
except Permitted Encumbrances. No Leased Real Property is subject to any governmental decree or
order to be sold or is being condemned, expropriated or otherwise taken by any public authority
with or without payment of compensation therefore, nor, to the Knowledge of the Company, has any
such condemnation, expropriation or taking been proposed. All leases of Leased Real Property and
all amendments and modifications thereto are in full force and effect, and there exists no default
under any such lease by the Company, any of its Subsidiaries or, to the Company’s Knowledge, any
other party thereto, nor any event which, with notice or lapse of time or both, would constitute a
default thereunder by the Company, any of its Subsidiaries or, to the Company’s Knowledge, any
other party thereto. All structures on the Leased Real Property are adequately maintained and are
in good operating condition and repair, ordinary wear and tear excepted, for the requirements of
the business of the Company and its Subsidiaries as currently conducted. Schedule 3.13(b) of the
Disclosure Schedules sets forth a true and complete list of all real property leased, subleased or
licensed by the Company or any of its Subsidiaries to any Person, and except as set forth on
Schedule 3.13(b) of the Disclosure Schedules, neither the Company nor any of its Subsidiaries has
leased, subleased or licensed any real property to any Person.



     Section 3.14 Intellectual Property.



          (a) Schedule 3.14(a) of the Disclosure Schedules sets forth a true and complete list of all
registered Marks, pending applications for registrations of Marks, and unregistered Marks that are
material to the operation of the business of the Company and its Subsidiaries as currently
conducted, Patents and registered Copyrights owned (in whole or in part) by or exclusively licensed
to the Company or any of its Subsidiaries, and unregistered Copyrights in all software products
made commercially available by the Company and its Subsidiaries (collectively, “Company Listed
IP”), identifying for each whether it is owned by or exclusively licensed to the Company or the
relevant Subsidiary. To the Knowledge of the Company, all Intellectual Property owned by or
exclusively licensed to the Company (collectively, “Company IP”), including all Company IP
issued by or registered with the U.S. Patent and Trademark Office, the U.S. Copyright Office or any
similar office or agency anywhere in the world (collectively “Company Registered IP”)
(other than patent applications or applications to register trademarks or copyrights), is
subsisting, valid and enforceable. Except as set forth on Schedule 3.14(a) of the Disclosure
Schedules, neither the Company nor any of its Subsidiaries has received any written notice or claim
challenging the validity or enforceability of any Company IP or alleging any misuse of such Company
IP. Neither the Company nor any of its Subsidiaries has taken any action or failed to take any
action that could reasonably be expected to result in the abandonment, cancellation, forfeiture,
relinquishment, invalidation or unenforceability of any of the Company Listed IP, except for any
issuances, registrations or applications for any Company Listed IP that the Company or its
Subsidiaries has permitted to expire or has cancelled or abandoned in their reasonable business
judgment. No Company Listed IP has been or is now involved in any interference, reissue,
reexamination, opposition, cancellation or similar proceeding and, to the Knowledge of the Company,
no such action is or has been threatened with respect to any of the Company Listed IP.








30









 








          (b) The Company or its Subsidiaries exclusively own, free and clear of any and all
Encumbrances, all Company IP (other than Company IP identified on Schedule 3.14(a) of the
Disclosure Schedules as exclusively licensed to the Company or a Subsidiary thereof) and all other
Intellectual Property used in the Company’s and its Subsidiaries’ businesses, other than
Intellectual Property that is licensed to the Company or its Subsidiaries by a third party licensor
pursuant to a written license agreement that remains in effect (including without limitation,
so-called shrink-wrap, click-wrap, browse-wrap and other electronic agreements). Notwithstanding
the foregoing to the contrary, this Section 3.14(b) shall not be deemed a representation regarding
noninfringement of third party intellectual property rights, which representation is made solely in
Section 3.14(d) below. Neither the Company nor any of its Subsidiaries has received any written
notice or claim challenging the Company’s or its Subsidiaries’ ownership of any of the Intellectual
Property owned (in whole or in part) by the Company or any of its Subsidiaries.




          (c) Each of the Company and its Subsidiaries has taken commercially reasonable steps to
maintain the confidentiality of all information that constitutes or constituted a Trade Secret of
the Company or any of its Subsidiaries. All current and former employees, consultants and
contractors of the Company or any of its Subsidiaries, along with all stockholders of the Company
or any of its Subsidiaries who have developed Intellectual Property for the Company or any of its
Subsidiaries, have executed and delivered non-disclosure and invention assignment agreements
substantially in the Company’s standard forms, copies of which standard forms have previously been
provided or made available to the Acquiror (all of which provide for the assignment of Intellectual
Property by current and former employees, consultants and contractors to the Company or its
Subsidiaries). The Company and its Subsidiaries have not disclosed, and have no obligation to
disclose, to another Person any Trade Secrets of the Company or any of its Subsidiaries, except
pursuant to a confidentiality agreement or undertaking, and, to the Knowledge of the Company, no
Person has materially breached any such agreement or undertaking.




          (d) The conduct by the Company and its Subsidiaries of their respective businesses does not as
currently conducted, and has not in the past, infringed upon, misappropriated, violated, diluted or
constituted the unauthorized use of, any Intellectual Property of any third party, other than the
rights of any Person or entity under any Patent, or resulted in a material breach of any software
license to which the Company or any Subsidiary is a party. The conduct by the Company and its
Subsidiaries of their respective businesses as currently conducted does not infringe upon (or in
the past infringed on) the rights of any third party under any Patent, and neither the Company nor
any of its Subsidiaries has received any notice or claim (other than an oral notice or claim
asserted prior to January 1, 2005) asserting that any such infringement, misappropriation,
violation or unauthorized use is or may be occurring or has or may have occurred. No Intellectual
Property owned by the Company or any of its Subsidiaries, and to the Knowledge of the Company, no
Intellectual Property licensed to the Company or any of its Subsidiaries, is subject to any
outstanding order, judgment, decree, or stipulation restricting the use or licensing thereof by the
Company or its Subsidiaries. To the Knowledge of the Company, no third party is misappropriating,
infringing, diluting or violating any Intellectual Property owned by or exclusively licensed to the
Company or any of its Subsidiaries in a material manner.








31









 








          (e) Schedule 3.14(e)(1) of the Disclosure Schedules sets forth a complete and accurate list of
all agreements granting to the Company or any of its Subsidiaries any right under or with respect
to any Intellectual Property owned by a third party that is used in connection with the businesses
of the Company or any such Subsidiary as such business is currently conducted, other than
commercially available standard off-the-shelf applications used generally in the Company’s or any
such Subsidiary’s operations and that are licensed for a license fee of no more than $10,000 in the
aggregate pursuant to a license (collectively, the “Inbound License Agreements”),
indicating for each the title and the parties thereto. Schedule 3.14(e)(2) of the Disclosure
Schedules sets forth a complete and accurate list of all license agreements under which the Company
or any of its Subsidiaries grants any rights under any Intellectual Property, excluding
non-exclusive, end user licenses granted by the Company or any of its Subsidiaries in the ordinary
course of business in substantially Company’s standard forms (which forms have previously been
provided or made available to the Acquiror). To the Knowledge of the Company, there is no
outstanding or threatened dispute or disagreement with respect to any Inbound License Agreement or
any license agreement under which the Company or any of its Subsidiaries grants to any third party
any rights under any Intellectual Property (collectively, “Outbound License Agreements”)
that could materially affect any of the respective rights and obligations of the parties
thereunder.




          (f) Upon the consummation of the Closing, the Acquiror shall have the same rights and
privileges in the Intellectual Property owned by or licensed to the Company or its Subsidiaries as
the Company or the applicable Subsidiary had in such Intellectual Property prior to the Closing.




          (g) Except as disclosed in Schedule 3.14(g) of the Disclosure Schedules, all of the Company’s
or its Subsidiaries’ software products were (A) developed by employees of the Company or such
Subsidiary within the scope of their employment, (B) developed by independent contractors who have
expressly assigned their rights and interest therein to the Company or such Subsidiary pursuant to
written agreements or (C) otherwise acquired by the Company or such Subsidiary from a third party
pursuant to a written agreement in which the ownership rights therein were expressly assigned to
the Company or such Subsidiary. Except as disclosed in Schedule 3.14(g) of the Disclosure
Schedules, no software products of the Company or any of its Subsidiaries contain any code that is
owned by any third party, including any code that is licensed pursuant to the provisions of any
“open source” license agreement, including without limitation GNU’s General Public License or
Lesser/Library GPL, or any other license agreement that requires source code be distributed or made
available in connection with the distribution of the licensed software in object code form or that
limits the amount of fees that may be charged in connection with sublicensing or distributing such
licensed software (each, an “Open Source License”). None of the software products of the
Company or any of its Subsidiaries, as a result of the intermingling or integration of code owned
by the Company or any of its Subsidiaries with any “open source” software licensed under any Open
Source License is, in whole or in part, subject to the provisions of any Open Source License.




          (h) No source code of any computer software owned by the Company or any of its Subsidiaries
has been licensed or otherwise provided to another Person other than an escrow agent pursuant to
the terms of a source code escrow agreement in customary form, and such source code has been
safeguarded and protected as a Trade Secret of the Company or one of





32









 







its Subsidiaries. The Company and its Subsidiaries have not intentionally included in the
software products made commercially available by the Company or its Subsidiaries, and use industry
standard methods to detect and prevent, in all software used or provided by the Company and its
Subsidiaries, disabling codes or instructions, and any virus, worms, time bombs, key-locks, trojan
horses or other intentionally created, undocumented contaminant, that is intended to be used to,
access, modify, delete, damage, disrupt, interfere with or disable any of the internal computer
systems (including hardware, software, databases and embedded control systems) of the Company and
its Subsidiaries. The Company and its Subsidiaries have taken reasonable steps to safeguard such
systems and restrict unauthorized access thereto.




          (i) The computer systems, including the software, firmware, hardware, networks, interfaces,
platforms and related systems currently used in the conduct of the Company’s and its Subsidiaries’
businesses (collectively, the “Systems”) are in good working condition to effectively
perform all information technology operations necessary for the Company’s and its Subsidiaries’
businesses to deliver their software products to their customers. Except as disclosed in Schedule
3.14(i) of the Disclosure Schedules, all Systems, other than software licensed from third parties,
used in the Company’s and its Subsidiaries’ businesses are owned and operated by and are under the
control of the Company or its Subsidiaries and are not wholly or partly dependent on any facilities
which are not under the ownership, operation or control of the Company or its Subsidiaries.




          (j) Except as set forth in Schedule 3.14(j) of the Disclosure Schedules, in the twelve-month
(12) period prior to the date hereof, the Systems have performed in accordance with the service
level agreements and warranties that the Company has made in writing with or to customers. The
Company and its Subsidiaries have taken commercially reasonable steps to provide for the back-up
and recovery of data and information critical to the conduct of their businesses (including such
data and information that is stored on magnetic or optical media in the ordinary course) without
material disruption to, or material interruption in, the conduct of such businesses. The Company
and its Subsidiaries have in place commercially reasonable disaster recovery and business
continuity plans, procedures and facilities, acts in compliance therewith and has taken
commercially reasonable steps to test such plans and procedures on a periodic basis, and such plans
and procedures have been proven effective in all material respects upon such testing. The Company
and its Subsidiaries have in place commercially reasonable security plans, procedures and
facilities (including all commercially reasonable firewalls, intrusion prevention systems and
intrusion detection systems), and such plans and procedures have been proven effective upon such
testing in all material respects.




          (k) Except as set forth in Schedule 3.14(k) of the Disclosure Schedules, the Company’s and its
Subsidiaries’ businesses (including any services provided by a third party on behalf of such
business) are, and since their inception have been, in compliance with (i) all applicable Laws
concerning data protection, privacy and the collection or use of personal information, including,
without limitation, the Gramm-Leach-Bliley Act of 1999 and any amendment thereto; and (ii) its and
their published privacy policies and all Laws concerning online and e-mail advertising, including,
without limitation, the CAN-SPAM Act of 2003 and any amendments thereto. Except as set forth in
Schedule 3.14(k) of the Disclosure Schedules, since the Company and its Subsidiaries’ inception
there have not been any incidents of (i) data security breaches of any personal information that
have required Company or its Subsidiaries to





33









 







make consumer data breach notifications in order to comply with applicable Law; (ii) any
audits, proceedings or investigations conducted or claims asserted by any Person (including any
Governmental Authority) asserting that Company has violated Law in connection with its collection,
use, transmission or disclosure of personal information, and (iii) to the Knowledge of the Company,
there is no reasonable basis for the same and no such claim has been threatened or pending.
Neither the Company nor any of its Subsidiaries has sold, shared or otherwise disclosed any client
or customer information to any Person for any commercial use, marketing or exploitation by such
Person in a manner that violates Law or any of the Company’s or its Subsidiaries’ published privacy
policies. Any event indicated in Schedule 3.14(k) of the Disclosure Schedules has not resulted in
any litigation, claims, charges, fines, penalties, investigations or other actions that could
reasonably be expected to have a Material Adverse Effect.




     Section 3.15 Taxes.



          (a) Each of the Company and its Subsidiaries has prepared and timely filed (including
extensions) all federal income Tax Returns and all other material Tax Returns required to be filed
by it. All such Tax Returns were correct and complete in all material respects and were prepared
in substantial compliance with all applicable laws and regulations.




          (b) Each of the Company and its Subsidiaries has paid all material Taxes due and owing by each
of them (whether or not shown on any Tax Return). The unpaid Taxes of the Company and its
Subsidiaries (A) did not, as August 31, 2010, exceed the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between book and Tax income)
set forth on the face of the Financial Statements (rather than in any notes thereto) and (B) will
not exceed that reserve as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company and its Subsidiaries in filing their
Tax Returns.




          (c) To the Company’s Knowledge, no claim has been made by any taxing authority in any
jurisdiction where the Company or any of its Subsidiaries does not file Returns that it is or may
be subject to Tax by that jurisdiction.




          (d) Each of the Company and its Subsidiaries have withheld all Taxes required to have been
withheld and paid in connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.




          (e) Except as set forth in Schedule 3.15(e) of the Disclosure Schedules, neither the Company
nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency.




          (f) To the Company’s Knowledge, there is no material dispute or claim concerning any Tax
liability of the Company or any of its Subsidiaries.




          (g) Neither the Company nor any of its Subsidiaries is or has been a party to any “listed
transaction” as defined in Code §6707A(c)(2) and Regulations §1.6011-4(b)4).








34









 








          (h) All deficiencies asserted or assessments made against the Company or any of its
Subsidiaries as a result of any examinations by any taxing authority have been fully paid.




          (i) There are no Encumbrances for Taxes, other than Encumbrances for current Taxes not yet due
and payable, upon the assets of the Company or any of its Subsidiaries.




          (j) Neither the Company nor any of its Subsidiaries is a party to or bound by any tax
indemnity, tax sharing or tax allocation agreement.




          (k) Neither the Company nor any of its Subsidiaries is a party to or bound by any closing
agreement or offer in compromise with any taxing authority.




          (l) Neither the Company nor any of its Subsidiaries has been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the Code, or a member of a combined,
consolidated or unitary group for state, local or foreign Tax purposes, other than a group of which
the Company is the common parent. Neither the Company nor any of its Subsidiaries has any
liability for Taxes of any Person other than the Company and its Subsidiaries under Treasury
Regulations Section 1.1502-6 or any corresponding provision of state, local or foreign income Tax
Law, as transferee or successor, by contract or otherwise. Neither the Company nor any of its
Subsidiaries has made a consent dividend election under Section 565 of the Code. Neither the
Company nor any of its Subsidiaries has been a personal holding company under Section 542 of the
Code. Neither the Company nor any of its Subsidiaries has participated in an international boycott
within the meaning of Section 999 of the Code.




          (m) None of the assets of the Company or any of its Subsidiaries is property that the Company
or such Subsidiary is required to treat as being owned by any other Person pursuant to the
so-called “safe harbor lease” provisions of former Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended. None of the assets of the Company or any of its Subsidiaries directly or
indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code.
None of the assets of the Company or any of its Subsidiaries is “tax-exempt use property” within
the meaning of Section 168(h) of the Code. None of the assets of the Company or any of its
Subsidiaries is required to be or is being depreciated pursuant to the alternative depreciation
system under Section 168(g)(2) of the Code.




          (n) Neither the Company nor any of its Subsidiaries is a party to any Contract or plan that
(i) has resulted or would result, separately or in the aggregate, in connection with this Agreement
or any change of Control of the Company or its Subsidiaries, in the payment of any “excess
parachute payments” within the meaning of Section 280G of the Code (or any corresponding provision
of state, local or foreign Tax law) or (ii) could obligate it to make any payments that will not be
fully deductible under Section 162(m) (or any corresponding provision of state, local or foreign
Tax law) of the Code.




          (o) Neither the Company nor any of its Subsidiaries is a party to any joint venture,
partnership, or other arrangement or Contract that could be treated as a partnership for federal
income tax purposes.





35












 





          (p) Neither the Company nor any of its Subsidiaries is, or has been, a United States real
property holding corporation, as defined in Section 897(c)(2) of the Code, during the applicable
period specified in Section 897(c)(1)(a) of the Code.



          (q) Neither the Company nor any of its Subsidiaries has been a “distributing corporation” or a
“controlled corporation” in connection with a distribution described in Section 355 of the Code.



          (r) Neither the Company nor any of its Subsidiaries has agreed to make any adjustment under
481(a) of the Code or any comparable provision of state, local or foreign Tax Laws by reason of a
change in accounting method or otherwise nor will any of them be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any:



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



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



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



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



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



     Section 3.16 Environmental Matters. Each of the Company and its Subsidiaries is in
material compliance with all applicable Environmental Laws and has obtained and is in material
compliance with all Environmental Permits. None of the Company or any of its Subsidiaries has
received during the past two (2) years any written communication from a Governmental Authority or
other Person alleging that the Company or any of its Subsidiaries has any liability under any
Environmental Law or is not in compliance with any Environmental Law.



     Section 3.17 Material Contracts.



          (a) Except as set forth in Schedule 3.17(a) of the Disclosure Schedules, as of the date of
this Agreement, neither the Company nor any of its Subsidiaries is a party to or is bound by any
Contract of the following nature, excluding in each case any Contract where the existence or terms
of such Contract, if disclosed to the Acquiror, would constitute Competitively Sensitive
Information of the Company or its Subsidiaries (such Contracts as are required to be set forth in
Schedule 3.17(a) of the Disclosure Schedules being “Material Contracts”):



36









 





               (i) each Contract that involves performance of services or delivery of goods or materials by
the Company or its Subsidiaries of an amount or value in excess of $50,000;



               (ii) each Contract that involves performance of services or delivery of goods or materials to
the Company or its Subsidiaries of an amount or value in excess of $50,000;



               (iii) each lease (as lessor or lessee) of tangible personal property (other than any such
lease calling for payments of less than $50,000 per year);



               (iv) any broker, distributor, dealer, manufacturer’s representative, franchise, agency,
continuing sales or purchase, sales promotion, market research, marketing, consulting or
advertising Contract that involves an aggregate in excess of $50,000 in any instance;



               (v) any Contract relating to or evidencing Indebtedness;



               (vi) any employment Contract that involves a future liability in excess of $100,000;



               (vii) any Contract that limits, or purports to limit, the ability of the Company or any of its
Subsidiaries to compete in any line of business or with any Person or in any geographic area or
during any period of time, or that restricts the right of the Company and its Subsidiaries to sell
to or purchase from any Person or to hire any Person, or that grants the other party or any third
person “most favored nation” status or any type of special discount rights;



               (viii) any Contract relating to settlement of any administrative or judicial proceedings
within the past two (2) years;



               (ix) any Contract relating in whole or in part to any Intellectual Property, other than
Contracts for commercially available standard applications used generally in the Company’s business
and non-exclusive, end-user licenses granted by the Company or any of its Subsidiaries in the
ordinary course of business substantially in the Company’s standard forms;



               (x) any joint venture or partnership, merger, asset or stock purchase or divestiture Contract
relating to the Company or any of its Subsidiaries;



               (xi) each Contract (however named) involving a sharing of profits, losses, costs or
liabilities by the Company or any of its Subsidiaries with any other Person;



               (xii) each outstanding power of attorney with respect to the Company or any of its
Subsidiaries (other than those entered into in its ordinary course of business in connection with
any Intellectual Property or Tax matter);



               (xiii) any Contract between the Company or any of its Subsidiaries with any bank or other
party relating to the offering or promotion of refund anticipation loans, refund



37









 




transfers or other similar products or services and the form of any agreements between such banks
or other parties and customers using such bank products or services (whether taxpayers or tax
preparers) relating thereto;




               (xiv) any Contract for the purchase of any debt or equity security or other ownership interest
of any Person, or for the issuance of any debt or equity security or other ownership interest, or
the conversion of any obligation, instrument or security into debt or equity securities or other
ownership interests of, the Company or any of its Subsidiaries; and



               (xv) any other Contract, whether or not made in the ordinary course of business that (A)
involves a future or potential liability or receivable, as the case may be, in excess of $100,000
or (B) has a term greater than one year and cannot be cancelled by the Company or a Subsidiary of
the Company without penalty or further payment and without more than 30 days’ notice.



          (b) Each Material Contract is a legal, valid, and, to the Company’s Knowledge, enforceable
agreement and is in full force and effect, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights
generally and by general principles of equity (regardless of whether considered in a proceeding in
equity or at law). None of the Company or any of its Subsidiaries or, to the Knowledge of the
Company, any other party is in breach or violation of, or (with or without notice or lapse of time
or both) default under, any Material Contract, nor has the Company or any of its Subsidiaries
received any written notice of any such breach, violation or default and, to the Company’s
Knowledge, no event has occurred, and no circumstance or condition exists, that could reasonably be
expected to (with or without notice or lapse of time or both) (i) result in a violation or breach
of any of the provisions of any Material Contract, (ii) give any Person the right to declare a
default or exercise any remedy under any Material Contract, (iii) give any Person the right to
accelerate the maturity or performance of any Material Contract, or (iv) give any Person the right
to cancel, terminate or modify any Material Contract. Neither the Company nor any of its
Subsidiaries have waived any of their rights under any Material Contract, and no Person is
renegotiating or has the right to renegotiate, any amount paid or payable to the Company or any of
its Subsidiaries under any Material Contract or any other term or provision of any Material
Contract. The Company has made available to the Acquiror true and complete copies of all Material
Contracts, including all amendments thereto.



     Section 3.18 Affiliate Interests and Transactions.



          (a) Except as set forth in Schedule 3.18 of the Disclosure Schedules, no Related Party of the
Company or any of its Subsidiaries: (i) owns, directly or indirectly, any equity or other
financial or voting interest in any supplier, licensor, lessor, distributor, independent contractor
or customer of the Company or any of its Subsidiaries or their business; (ii) owns, directly or
indirectly, or has any interest in any property (real or personal, tangible or intangible) that the
Company or any of its Subsidiaries uses in the business of the Company or any of its Subsidiaries;
or (iii) has any business dealings or a financial interest in any transaction with the Company or
any of its Subsidiaries or involving any assets or property of the Company or any of its
Subsidiaries, other than business dealings or transactions conducted in the ordinary course of
business at prevailing market prices and on prevailing market terms.



38









 





          (b) There are no outstanding notes payable to, accounts receivable from or advances by the
Company or any of its Subsidiaries to, and neither the Company nor any of its Subsidiaries is
otherwise a debtor or creditor of any Related Party of the Company or any of its Subsidiaries.
Since August 31, 2010, neither the Company nor any of its Subsidiaries has incurred any obligation
or liability to, or entered into or agreed to enter into any transaction with or for the benefit
of, any Related Party of the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement and the Ancillary Agreements.



          (c) Except as set forth in Schedule 3.18 of the Disclosure Schedules, no Related Party: (i)
provides any Services to or pays any costs or expenses on behalf of the Company or any of its
Subsidiaries; (ii) competes, directly or indirectly, with the Company or any of its Subsidiaries in
any market currently served by the Company or its Subsidiaries; or (iii) has any claim or right
against the Company or any of its Subsidiaries.



     Section 3.19 Insurance. Schedule 3.19 of the Disclosure Schedules identifies each
casualty, directors and officers liability, general liability, product liability and all other
types of insurance maintained with respect to the Company or any of its Subsidiaries, together with
the carriers and liability limits for each such policy. A true and complete copy of the policies
set forth on Schedule 3.19 has previously been provided or made available to the Acquiror. All
such policies are in full force and effect, and all premiums with respect thereto have been paid to
the extent due. No notice of cancellation, termination or reduction of coverage has been received
by the Company or any of its Subsidiaries with respect to any such policy. The Company has not
received any notice or other communication regarding premium audits or adjustments and there has
never been a gap in coverage under the policies set forth on Schedule 3.19. Other than the
insurance set forth on Schedule 3.19, the Company and its Subsidiaries self-insure. The Company
and its Subsidiaries do not have any co-insurance programs. No claim currently is pending under
any such policy, and the policy limits under the policies set forth on Schedule 3.19 have not been
exhausted or materially reduced.



     Section 3.20 Brokers. Except as set forth in Schedule 3.20 of the Disclosure
Schedules, no broker, finder or investment banker is entitled to any brokerage, finder’s or other
fee or commission in connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Company or any of its Subsidiaries.



     Section 3.21 Bank Accounts; Powers of Attorney. Schedule 3.21 of the Disclosure
Schedules sets forth a true and complete list of (a) all bank accounts or safe deposit boxes under
the control or for the benefit of the Company or any of its Subsidiaries, (b) the names of all
persons authorized to draw on or have access to such accounts and safe deposit boxes and (c) all
outstanding powers of attorney or similar authorizations granted by the Company or any of its
Subsidiaries, copies of which have been furnished to the Acquiror.



     Section 3.22 Employees. Schedule 3.22(a) of the Disclosure Schedules sets forth the
name, title, start date, accrued vacation, paid time off, specific employer, place of employment,
current annual salary rates and/or commissions and, if applicable, leave status, reason for leave
and return date, of each employee of the Company or any of its Subsidiaries as of the date of this
Agreement. Except as set forth on Schedule 3.22(a) of the Disclosure Schedules, the employment of
all current employees of the Company is terminable at will by the Company or its



39









 




Subsidiaries. Except as set forth on Schedule 3.22(b), since August 31, 2009 the Company and its
Subsidiaries have not engaged or contracted with any consultants, independent sales representatives
or independent contractors (collectively “Contractors”) and all Contractors may be
terminated without liability or penalty of any kind.




     Section 3.23 Customers; Suppliers.



          (a) Schedule 3.23(a) of the Disclosure Schedules sets forth the information the Company and
its Subsidiaries retain regarding the number of clients served in the 12-month periods ended April
30, 2008, April 30, 2009 and April 30, 2010, respectively, including, but not limited to,
percentages of such customers using free services versus paid services, online versus desktop,
professional versus nonprofessional, etc., excluding any such information which, if disclosed to
Acquiror, would constitute Competitively Sensitive Information of the Company or its Subsidiaries.



          (b) Schedule 3.23(b) of the Disclosure Schedules sets forth an accurate and complete breakdown
of the amounts paid to each vendor or supplier of the Company that (i) was paid more than $100,000
in the aggregate by the Company and its Subsidiaries in the 12-month period ended April 30, 2010 or
(ii) is the sole supplier of any significant product or service to the Company and its Subsidiaries
(each a “Material Supplier”), excluding in each case any such information which, if
disclosed to Acquiror, would constitute Competitively Sensitive Information.



          (c) To the Knowledge of Company, except as set forth on Schedule 3.23(c) of the Disclosure
Schedules, (i) there are no material outstanding disputes with any Material Supplier, and (b) no
Material Supplier has terminated or materially altered its relationship with the Company or any of
its Subsidiaries or has given the Company or any of its Subsidiaries written notice of its
intention not to continue to do business with the Company or any of its Subsidiaries or to
terminate or materially alter its relationship with the Company or any of its Subsidiaries.



          (d) To the Knowledge of the Company, the transactions contemplated hereby will not adversely
affect the Company’s or any of its Subsidiary’s relations with, or products or services received
from, or fees or price charged by, any Material Supplier.



     Section 3.24 Accounts Receivable. Schedule 3.24(a) of the Disclosure Schedules sets
forth an accurate and complete aging of the accounts receivable of the Company and all Subsidiaries
as of August 31, 2010, excluding any information which, if disclosed to the Acquiror, would
constitute Competitively Sensitive Information of the Company or its Subsidiaries. The accounts
receivable reflected in the Financial Statements, and all accounts receivable arising since August
31, 2010, arose only from bona fide transactions in the ordinary course of business and have been
properly recorded and reserved against on the books of account of the Company and its Subsidiaries,
all in accordance with GAAP and consistent with past practice. Except as set forth in Schedule
3.24(b) of the Disclosure Schedules, no account receivable has been assigned or pledged to any
other Person or is subject to any right of set-off other than in the ordinary course of business
and for which adequate reserves are reflected in the Financial Statements.



40









 





     Section 3.25 Accounts Payable. Schedule 3.25 of the Disclosure Schedules sets forth a
true, correct and complete aging of all accounts payable of the Company and its Subsidiaries as of
August 31, 2010.



     Section 3.26 Warranties and Guarantees.



          (a) Except as set forth on Schedule 3.26(a) of the Disclosure Schedules, neither the Company
nor any of its Subsidiaries has provided to its customers or any other third parties (i) any
warranties or guarantees or any rights to obtain refunds or credits with respect to products or
services provided by the Company and its Subsidiaries or (ii) any indemnities with respect to the
performance of any product or service provided by the Company and its Subsidiaries.



          (b) Except as set forth in Schedule 3.26(b) of the Disclosure Schedules, there are no
outstanding claims, or to the Knowledge of the Company, threatened claims, in each case in excess
of $1,000, against the Company or any of its Subsidiaries (i) under or based upon any warranty or
guarantee provided by or on behalf of the Company or any of its Subsidiaries, or (ii) relating to
any products sold or services provided by the Company or any of its Subsidiaries.



     Section 3.27 Certain Payments, Etc. Except as set forth in Schedule 3.27 of the
Disclosure Schedules, neither the Company nor any of its Subsidiaries, nor any officer, director,
Employee, agent or other Person associated with or acting for or on behalf of the Company or any of
its Subsidiaries, has at any time, directly or indirectly, taken any of the following actions:



          (a) used any corporate funds (i) to make any unlawful political contribution or gift or for
any other unlawful purpose relating to any political activity, (ii) to make any unlawful payment to
any governmental official or employee, or (iii) to establish or maintain any unlawful or unrecorded
fund or account of any nature;



          (b) made any payoff, influence payment, bribe, rebate, kickback or unlawful payment to any
Person;



          (c) made any unlawful payment to any Person (whether in the form of property or services, or
in any other form), for the purpose of obtaining or paying for (i) favorable treatment in securing
business, or (ii) any other special concession; or



          (d) agreed, committed, offered or attempted to take any of the actions described in clauses
“(a)” through “(c)” above.



     Section 3.28 Disclosure. No representation or warranty or other statement made by the
Company in this Agreement, the Disclosure Schedules, or any certificate delivered in connection
with the transactions contemplated hereby contains any untrue statement of a material fact or omits
to state a material fact necessary to make them, in light of the circumstances in which it was
made, not misleading.



41









 





ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR AND SUB




     The Acquiror and Sub hereby represent and warrant to the Company as follows:



     Section 4.1 Organization. Each of the Acquiror and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted.



     Section 4.2 Authority. Each of the Acquiror and Sub has full corporate power and
authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it
will be a party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by the Acquiror and Sub
of this Agreement and each of the Ancillary Agreements to which it will be a party and the
consummation by the Acquiror and Sub of the transactions contemplated hereby and thereby have been
duly and validly authorized by the Boards of Directors of the Acquiror and Sub and by the Acquiror
as the sole stockholder of Sub. No other corporate proceedings on the part of the Acquiror or Sub
are necessary to authorize this Agreement or any Ancillary Agreement or to consummate the
transactions contemplated hereby or thereby. This Agreement has been, and upon their execution
each of the Ancillary Agreements to which the Acquiror or Sub will be a party will have been, duly
and validly executed and delivered by the Acquiror and Sub, as applicable. This Agreement
constitutes, and upon their execution each of the Ancillary Agreements to which the Acquiror or Sub
will be a party will constitute, the legal, valid and binding obligations of the Acquiror and Sub,
as applicable, enforceable against the Acquiror and Sub, as applicable, in accordance with their
respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally and by general
principles of equity (regardless of whether considered in a proceeding in equity or at law).




	 	 	Section 4.3 No Conflict; Required Filings and Consents.





          (a) The execution, delivery and performance by each of the Acquiror and Sub of this Agreement
and each of the Ancillary Agreements to which it will be a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not:



               (i) conflict with or violate the certificate of incorporation or bylaws of the Acquiror or
Sub;



               (ii) conflict with or violate any Law applicable to the Acquiror or Sub or by which any
property or asset of the Acquiror or Sub is bound or affected; or



               (iii) result in any breach of, constitute a default (or an event that, with notice or lapse of
time or both, would become a default) under or require any consent of any Person pursuant to, any
material note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument,
obligation or other Contract to which the Acquiror or Sub is a party or by which the Acquiror or
Sub or any of their respective properties, assets or rights are bound or affected;



42









 




except in the case of clauses (ii) and (iii), as to matters that could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the ability of the Acquiror
or Sub to perform its obligations under this Agreement or the Ancillary Agreements to which it will
be a party.




          (b) Neither the Acquiror nor Sub is required to file, seek or obtain any notice,
authorization, approval, order, permit or consent of or with any Governmental Authority in
connection with the execution, delivery and performance by the Acquiror and Sub of this Agreement
and each of the Ancillary Agreements to which it will be party or the consummation of the
transactions contemplated hereby or thereby, except for (i) any filings required to be made under
the HSR Act, (ii) the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware and (iii) such filings as may be required by any applicable federal or state securities
or “blue sky” laws.



     Section 4.4 Brokers. Except for the fee being paid by the Acquiror to Bank of America
Merrill Lynch and Greenhill & Co. upon Closing, no broker, finder or investment banker is entitled
to any brokerage, finder’s or other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the Acquiror or Sub.



     Section 4.5 Litigation. There is no Action pending against or, to the knowledge of
the Acquiror, threatened in writing against or affecting the Acquiror before any court of
arbitrator or any governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.



     Section 4.6 Financing. The Acquiror and Sub have sufficient funds to perform all of
their respective obligations under this Agreement and to consummate the Merger.



ARTICLE V

COVENANTS




     Section 5.1 Conduct of Business Prior to the Closing. Between the date of this
Agreement and the earlier of the date of termination of this Agreement or the Closing Date, unless
the Acquiror shall otherwise agree in writing, the business of the Company and its Subsidiaries
shall be conducted only in the ordinary course of business consistent with past practice, including
the continued ordinary course development work on the Company’s and its Subsidiaries’ products for
the next tax season; and the Company shall, and shall cause each of its Subsidiaries to, use
commercially reasonable efforts to preserve substantially intact the business organization and
assets of the Company and its Subsidiaries, keep available the services of the current officers,
employees and consultants of the Company and its Subsidiaries and preserve the current
relationships of the Company and its Subsidiaries with customers, suppliers and other persons with
which the Company or any of its Subsidiaries has significant business relations. By way of
amplification and not limitation, between the date of this Agreement and the earlier of the date of
termination of this Agreement or the Closing Date, neither the Company nor any of its Subsidiaries
shall, except as set forth on Schedule 5.1 of the Disclosure Schedules or as contemplated by
Section 5.8(b) of this Agreement, do, or propose to do, directly or indirectly, any of the
following without the prior written consent of the Acquiror:



43









 





          (a) amend or otherwise change its certificate of incorporation or bylaws or equivalent
organizational documents;



          (b) issue, sell, pledge, dispose of or otherwise subject to any Encumbrance (other than any
Permitted Encumbrance) (i) any shares of capital stock of the Company or any of its Subsidiaries,
or any options, warrants, convertible securities or other rights of any kind to acquire any such
shares, or any other ownership interest in the Company or any of its Subsidiaries, except for the
issuance of shares upon the exercise of options or warrants outstanding as of the date of this
Agreement or (ii) any properties or assets of the Company or any of its Subsidiaries other than in
connection with the sales or transfers of inventory or accounts receivable in the ordinary course
of business consistent with past practice;



          (c) declare, set aside, make or pay any dividend or other distribution, payable in stock,
property or otherwise, or make any other payment on or with respect to any of its capital stock,
except for dividends (i) paid solely in cash or (ii) by direct or indirect wholly owned
Subsidiaries of the Company to the Company;



          (d) reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire,
directly or indirectly, any of its capital stock;



          (e) acquire any corporation, partnership, limited liability company or other business
organization or any material amount of assets, or enter into any joint venture, strategic alliance,
exclusive dealing, noncompetition or similar contract or arrangement;



          (f) except for the Merger, adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization of the Company or
any of its Subsidiaries;



          (g) incur any indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for, the obligations of any Person, or make
any loans or advances, except for amounts borrowed under the Company’s existing revolving line of
credit with Cedar Rapids Bank & Trust Company;



          (h) enter into any Contract that would be a Material Contract;



          (i) authorize, or make any commitment with respect to, any single capital expenditure that is
in excess of $250,000 or capital expenditures that are, in the aggregate, in excess of $750,000 for
the Company and its Subsidiaries taken as a whole, or enter into any lease or sublease of real or
personal property or any renewals thereof;



          (j) increase the compensation payable or to become payable or the benefits (including equity
or equity-based grants) provided to, grant any severance or termination pay to, establish, adopt,
enter into or amend any indemnification arrangement, or pay any bonus to its directors, officers or
employees, or establish, adopt, enter into or amend any Plan, other than as may be required by any
Governmental Authority or to comply with any applicable Laws, in each case other than in the
ordinary course of business consistent with past practice;



          (k) change any material tax or accounting policy or practice;



44









 





          (l) permit the lapse of any right relating to Intellectual Property or any other intangible
asset used in the business of the Company or any of its Subsidiaries;



          (m) commence or settle any Action; or



          (n) announce an intention, enter into any formal or informal agreement, or otherwise make a
commitment to do any of the foregoing.



     Section 5.2 Exclusivity. The Company agrees that between the date of this Agreement
and the earlier of the Closing and the termination of this Agreement, the Company shall not, and
shall take all action necessary to ensure that none of its Subsidiaries or any of the Affiliates or
Representatives of the Company or any of its Subsidiaries, (i) solicit, initiate, consider,
encourage or accept any proposal or offer than constitutes an Acquisition Proposal or (ii)
participate in any discussions, conversations, negotiations or other communications regarding, or
furnish to any other Person information with respect to, or otherwise cooperate, assist or
participate in, facilitate or encourage the submission of, any proposal that constitutes, or could
reasonably be expected to lead to, an Acquisition Proposal. The Company immediately shall cease
and cause to be terminated all existing discussions, conversations, negotiations and other
communications with any Persons conducted heretofore by the Company or its Subsidiaries or any of
their respective Affiliates and Representatives with respect to any of the foregoing. The Company
shall not, and shall cause its Subsidiaries not to, release any Person from, or waive any provision
of, any confidentiality or standstill agreement to which the Company or any of its Subsidiaries is
a party, without the prior written consent of the Acquiror. For purposes of this Agreement,
“Acquisition Proposal” means any offer or proposal for, or any indication of interest in,
any of the following (other than the Merger): (A) any direct or indirect acquisition or purchase
of the capital stock of the Company or any of its Subsidiaries or all or substantially all of
assets of the Company or any of its Subsidiaries, (B) any merger, consolidation or other business
combination relating to the Company or any of its Subsidiaries or (C) any recapitalization,
reorganization or any other extraordinary business transaction involving or otherwise relating to
the Company or any of its Subsidiaries.



     Section 5.3 Notification of Certain Matters. The Company shall give prompt written
notice to the Acquiror of the occurrence or non-occurrence of any event or condition that would
reasonably be expected to result in the nonfulfillment of any of the conditions to the Acquiror’s
and Sub’s obligations hereunder as set forth in Sections 7.1 and 7.3. The Acquiror shall give
prompt written notice to the Company of the occurrence or non-occurrence of any event or condition
that would reasonably be expected to result in the nonfulfillment of any of the conditions to the
Company’s obligations hereunder as set forth in Sections 7.1 and 7.2.



     Section 5.4 Takeover Statutes. If any state takeover statute or similar Law shall
become applicable to the transactions contemplated by this Agreement or the Ancillary Agreements,
the Company and its Board of Directors shall grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby or thereby may be consummated as promptly as
practicable on the terms contemplated hereby or thereby and otherwise act to eliminate the effects
of such statute or regulation on the transactions contemplated hereby or thereby.



45









 





     Section 5.5 Confidentiality. Each of Acquiror, Sub and the Company shall hold, and
shall cause its Representatives to hold, in confidence all documents and information furnished to
it by or on behalf of any other party to this Agreement in connection with the transactions
contemplated hereby pursuant to the terms of the Reciprocal Non-Use and -Disclosure Agreement,
dated July 6, 2009 between the Acquiror and the Company (the “Confidentiality Agreement”),
which shall continue in full force and effect until the Closing Date. If for any reason this
Agreement is terminated prior to the Closing Date, the Confidentiality Agreement shall nonetheless
continue in full force and effect in accordance with its terms.




	 	 	Section 5.6 Efforts.





          (a) Each of the parties (provided, however, that the Stockholder Representatives shall have no
obligations pursuant to this Section 5.6) shall use its best efforts to take, or cause to be taken,
all appropriate actions and to do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the transactions contemplated by
this Agreement and the Ancillary Agreements as promptly as practicable, including to obtain from
Governmental Authorities and other Persons all consents, approvals, authorizations, qualifications
and orders as are necessary for the consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements. As promptly as practicable (and no later than ten (10) business
days) after the date of this Agreement, the parties shall each file (i) Premerger Notification and
Report Forms under and in compliance with the HSR Act with the U.S. Department of Justice
(“DOJ”) and the U.S. Federal Trade Commission (“FTC”) with respect to the
transactions contemplated by this Agreement and the Ancillary Agreements and (ii) such other
notifications, applications or filings as the parties deem necessary or desirable in connection
with the Merger under applicable Antitrust Law ((i) and (ii) collectively, the “Antitrust
Filings”) with the appropriate Governmental Authority designated by Law to receive such filings
(together with DOJ and FTC, an “Antitrust Authority”). The parties shall cooperate in the
timely preparation and submission of any necessary filings, including furnishing to the other party
or its counsel information required for any necessary filing or other application in connection
with the Merger or the other transactions contemplated by this Agreement and the Ancillary
Agreements. The Acquiror shall pay all filing fees in connection with the Antitrust Filings, but
each party shall bear its own costs and expenses (including attorneys’ fees) in connection with the
Antitrust Filings.



          (b) The parties shall each cooperate with one another in connection with resolving any
inquiry, investigation, or litigation by any Antitrust Authority relating to their respective
Antitrust Filings or the Merger and other transactions contemplated hereby. In connection with
such collaboration, each of the parties shall act reasonably and as promptly as practicable.
Subject to applicable Laws relating to the exchange of information and the preservation of any
applicable attorney-client privilege, work-product doctrine, self-audit privilege or other similar
privilege (collectively, “Legal Privilege”), each party shall (i) promptly inform the other
party of any substantive written or oral communication received from any Antitrust Authority
relating to its Antitrust Filing or the Merger and other transactions contemplated hereby (and if
in writing, furnish the other party with a copy of such communication); (ii) use its best efforts
to respond as promptly as practicable to any request from any Antitrust Authority for information,
documents or other materials in connection with the review of the Antitrust Filings or with respect
to the Merger and other transactions



46









 




contemplated hereby; (iii) provide to the other party, and permit the other party to review and
comment upon in advance of submission, all proposed substantive correspondence, filings, and
written communications to any Antitrust Authority with respect to the Merger and other transactions
contemplated hereby; and (iv) not participate in any substantive meeting or discussion in respect
of any filings, investigation or inquiry concerning the Merger and other transactions contemplated
hereby unless it consults with the other party in advance and, except as prohibited by applicable
Law or Governmental Authority, gives the other party the opportunity to attend and participate
thereat; provided, however, that any exchange of Competitively Sensitive Information shall be
limited to the other party’s outside antitrust counsel. Without in any way limiting the foregoing,
the parties will consult and cooperate with each other, and consider in good faith the views of one
another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of any party in connection with
proceedings under or relating to any Antitrust Law, except as may be prohibited or restricted by
Law.




          (c) Each party hereby covenants and agrees to use its best efforts to secure as promptly as is
practicable the termination or expiration of any waiting periods under any applicable Antitrust Law
or other domestic or foreign Law and to obtain the approval of any Antitrust Authority, as
applicable, for the Merger and other transactions contemplated hereby, including but not limited to
promptly complying with any requests for additional information, as issued and/or as modified, by
any Antitrust Authority (and if such request is a Second Request issued by DOJ or FTC, certifying
substantial compliance as promptly as is practicable), or litigating Antitrust Law issues;
provided, however, that following the date hereof, the Acquiror shall have the sole and exclusive
right, to propose, negotiate, offer to commit and effect, by consent decree, hold separate order or
otherwise, the Divestiture of such assets of the Acquiror, the Company, or their respective
Subsidiaries or otherwise offer to take or offer to commit (and if such offer is accepted, commit
to and effect) to take any action as may be required to resolve such objections or suits.



          (d) Notwithstanding anything in this Agreement to the contrary, in no event shall the Acquiror
be required to take any of the following actions (each and collectively a “Divestiture”):
(i) extend any such waiting period or agree with any Antitrust Authority not to consummate the
transactions contemplated hereby, (ii) negotiate, commit to or effect, by consent decree, hold
separate order or otherwise, the sale, divestiture, license or other disposition of any or all of
the capital stock, assets, rights, products or businesses of the Acquiror and its Subsidiaries or
any other restrictions on the activities of the Acquiror and its Subsidiaries, (iii) terminate,
amend or assign existing relationships or contractual rights or obligations, or (iv) amend, assign
or terminate existing licenses or other agreements or enter into new licenses or other agreements.



     Section 5.7 Public Announcements. Each of the parties shall consult with one another
before issuing, and provide each other the opportunity to review and comment upon, any press
release or other public statement with respect to the transactions contemplated hereby, and shall
not issue any such press release or make any such public statement prior to such consultation,
except as may be required by applicable Law or listing agreement with or listing rule of a national
securities exchange or trading market or inter-dealer quotation system or any other similar duty or
requirement imposed on the Acquiror as an entity with publicly-traded securities;



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provided, however, that the Acquiror and the Company may make a public
statement in response to specific questions by the press, analysts, investors or those attending
industry conferences or financial analyst conference calls so long as any such statements are not
inconsistent with previous press releases, public disclosures or public statements made jointly by
the Acquiror and the Company and do not reveal non-public information regarding the Acquiror, the
Company or any of their Affiliates.



     Section 5.8 Indemnification.



          (a) The certificate of incorporation of the Surviving Corporation shall contain provisions no
less favorable with respect to indemnification than are set forth in the certificate of
incorporation and bylaws of the Company, which provisions shall not be amended, repealed or
otherwise modified in any manner that would affect adversely the rights thereunder of individuals
who, prior to the Effective Time, were directors, officers, employees, fiduciaries or agents of the
Company, with respect to acts or omissions occurring prior to the Effective Time, unless such
modification shall be required by applicable Law. The certificate of incorporation or other
organizational documents of each Subsidiary of the Company shall not be amended, repealed or
otherwise modified in any manner that would affect adversely the rights thereunder of individuals
who, prior to the Effective Time, were directors, officers, employees, fiduciaries or agents of
such Subsidiary, with respect to acts or omissions occurring prior to the Effective Time, unless
such modification shall be required by applicable Law.



          (b) Prior to the Effective Time, after consultation with the Acquiror, the Company shall
obtain directors’ and officers’ liability insurance coverage with an extended reporting period
endorsement for the Company’s and each of its Subsidiary’s directors and officers, the form of
which shall be delivered by the Company to the Acquiror prior to becoming effective, which shall
provide such directors and officers with coverage for six years following the Effective Time in
such amount and on such terms as is customary and reasonable for similarly situated companies. The
cost of such coverage shall be treated as a Transaction Expense hereunder. The Acquiror shall
cause the Surviving Corporation and each of its Subsidiaries to refrain from taking any act that
would cause such coverage to cease to remain in full force and effect.



          (c) In the event the Acquiror or the Surviving Corporation or any of their respective
Subsidiaries, successors or assigns (i) consolidates with or merges into any other Person and shall
not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to any Person, then, and
in each such case, to the extent necessary, proper provision shall be made so that the successors
and assigns of the Acquiror, the Surviving Corporation, or any of their respective Subsidiaries
assume the obligations set forth in this Section 5.8.



     Section 5.9 Employment Benefits. The Acquiror will or will cause the Surviving
Corporation or appropriate subsidiary of the Acquiror or the Surviving Corporation to keep in
effect as of the Effective Time all of the Company’s and its Subsidiaries’ employee benefit plans,
programs and policies in effect as of the date hereof and to give employees of the Company or its
Subsidiaries full credit under such policies for prior service at the Company or any Subsidiary of
the Company for purposes of determination of the level of benefits under the Company’s and its



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Subsidiaries’ benefit plans, programs or policies; provided, however, that nothing
herein shall preclude the Acquiror or the Surviving Corporation from amending or terminating any
such benefit after the Effective Time. Nothing contained in this Agreement, whether express or
implied, shall be treated as an amendment or other modification of any compensation or benefit
plan. This Section shall inure exclusively to the benefit of, be binding solely upon and be
enforceable solely by, the Company, the Acquiror, the Stockholder Representatives, and each of
their respective successors, permitted assigns, executors and legal representatives, and shall not
inure to the benefit of, be binding upon or be enforceable by any other party to this Agreement or
any other person. Nothing in this Agreement, expressed or implied, shall be construed to create
any third-party beneficiary rights in any present or former employee, service provider or any such
person’s alternate payees, dependents or beneficiaries, whether in respect of continued employment
or resumed employment, compensation, employee benefits or otherwise.




     Section 5.10 Integration Matters. From the date hereof until the Effective Date or
the earlier termination of this Agreement (the “Expiration Time”), the Company and its
Subsidiaries shall cooperate with the Acquiror and its officers, directors, principals, employees,
advisors, auditors, agents, bankers and other representatives (collectively,
“Representatives”) with respect to post-Closing integration matters to the extent allowed
under applicable Laws and to the extent reasonably requested by the Acquiror; provided, however,
the Company and its Subsidiaries shall not be required to share Competitively Sensitive Information
with anyone other than the Acquiror’s outside antitrust counsel.



     Section 5.11 Stockholder Approval. The Company shall, through its Board of Directors,
recommend to the stockholders the adoption of this Agreement and the approval of the transactions
contemplated hereby, including the approval of the Merger, and shall not withdraw, modify or change
such recommendation. The Company shall use its best efforts to obtain a unanimous written consent,
validly executed by all of the stockholders of the Company pursuant to Section 228 of Delaware Law,
which adopts this Agreement and approves the transactions contemplated hereby, including the
approval of the Merger. To the extent a stockholder refuses to execute such written consent, a
Majority Interest, as defined in the Stockholders Agreement, shall exercise the drag-along rights
set forth in Section 3.6(a) of the Stockholders Agreement to obtain the written consent of such
stockholder.



     Section 5.12 Conflicts and Privilege. It is acknowledged by each of the parties
hereto that the Stockholder Representatives may retain existing special counsel to the Company
(“Counsel”) to act as its counsel in connection with the transactions contemplated hereby.
The Acquiror and Sub hereby agree that, in the event that a dispute arises after the Closing
between the Acquiror and Sub and the Stockholder Representatives, Counsel may represent the
Stockholder Representatives in such dispute even though the interests of the Stockholder
Representatives may be directly adverse to the Acquiror, Sub, the Company or its Subsidiaries, and
even though Counsel may have represented the Company or its Subsidiaries in a matter substantially
related to such dispute, or may be handling ongoing matters for the Acquiror, Sub, the Company or
its Subsidiaries. Acquiror and Sub further agree that, as to all communications among Counsel, the
Company, its Subsidiaries and the Stockholder Representatives that relate in any way to the
transactions contemplated by this Agreement, the attorney or solicitor-client privilege and the
expectation of client confidence belongs to the Stockholder Representatives and may be controlled
by the Stockholder Representatives and shall not pass to or be claimed by the



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Acquiror, Sub, the Company or its Subsidiaries. Notwithstanding the foregoing, in the event that a
dispute arises between the Acquiror, Sub, the Company or its Subsidiaries and a third party other
than a party to this Agreement after the Closing, the Company and its Subsidiaries may assert the
attorney or solicitor-client privilege to prevent disclosure of confidential communications by
Counsel to such third party; provided, however, that neither the Company nor its Subsidiaries may
waive such privilege without the prior written consent of the Stockholder Representatives.




     Section 5.13 Tax Matters. Without the prior written consent of the Acquiror, which
consent shall not be unreasonably withheld or delayed, neither the Company nor any of its
Subsidiaries shall prior to the Closing Date make or change any election, change an annual
accounting period, adopt or change any accounting method, file any amended Tax Return, enter into
any closing agreement, settle any Tax claim or assessment relating to the Company or any of its
Subsidiaries, surrender any right to claim a refund of Taxes, consent to any extension or waiver of
the limitation period applicable to any Tax claim or assessment relating to the Company or any of
its Subsidiaries, or take any other similar action relating to the filing of any Tax Return or the
payment of any Tax, if such election, adoption, change, amendment, agreement, settlement,
surrender, consent or other action would have the effect of increasing the Tax liability of the
Company or any of its Subsidiaries for any period ending after the Closing Date or decreasing any
Tax attribute of the Company or any of its Subsidiaries existing on the Closing Date.



     Section 5.14 Access to Information. From and after the date hereof, except as
otherwise required by Law, the Acquiror and its Representatives shall have full access, upon
reasonable notice and during normal business hours, to the Company and its Subsidiaries and their
Representatives with knowledge of their businesses and to all of their books, records, properties,
Contracts and commitments as the Acquiror may reasonably request, provided,
however, that the Company and its Subsidiaries may, in their sole discretion, limit the
Acquiror’s and its Representatives’ access to any Competitively Sensitive Information.



     Section 5.15 Payoff Letters. If requested by the Acquiror, the Company shall obtain
payoff letters evidencing the payment in full of all Indebtedness before Closing.



     Section 5.16 Wells Fargo Security Interest Release. Before Closing, the Company shall
obtain a full release of Wells Fargo’s security interest in the TAXACT trademark that is filed with
the U.S. Patent and Trademark Office.



     Section 5.17 Key Person Insurance. As promptly as possible after the date hereof, the
Company shall use commercial best efforts to obtain, from financially sound and reputable insurers,
term “key person” insurance on Lance Dunn, Jerome McConnell and Camela Greif, each in an amount not
less than $20,000,000, $10,000,000 and $10,000,000, respectively and otherwise reasonably
satisfactory to the Acquiror.



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ARTICLE VI

TAX MATTERS




     The following provisions shall govern the allocation of responsibility as between the Acquiror
and the stockholders and optionholders for certain tax matters following the Closing Date:



     Section 6.1 Cooperation in Tax Matters. The Stockholder Representatives agree to
furnish or cause to be furnished to the Acquiror, upon request, as promptly as practicable, such
information and assistance relating to the Company and its Subsidiaries as is reasonably necessary
for the filing of all Tax Returns of or with respect to the Company and its Subsidiaries for any
period (or portion thereof) ending on or prior to the Closing Date, the preparation for any audit
by any taxing authority with respect to any such period, and the prosecution or defense of any
claim, suit or proceeding relating to any Tax Return of or with respect to the Company or any of
its Subsidiaries with respect to any such period. Such cooperation shall include the retention and
the provision of records and information that are reasonably relevant to any such audit, litigation
or other proceeding. The Acquiror and the Stockholder Representatives shall cooperate with each
other in the conduct of any audit or other Action related to Taxes of or with respect to the
Company or any of its Subsidiaries (and each shall execute and deliver such powers of attorney and
other documents) as necessary to carry out the intent of this Section 6.1.



     Section 6.2 Straddle Period. In the case of any taxable period that includes (but
does not end on) the Closing Date (a “Straddle Period”), the amount of any Taxes based on
or measured by income or receipts of the Company or any of its Subsidiaries for the pre-Closing tax
period shall be determined based on an interim closing of the books as of the close of business on
the Closing Date and the amount of other Taxes of the Company or any of its Subsidiaries for a
Straddle Period that relates to the pre-Closing Tax period shall be deemed to be the amount of such
Taxes for the entire taxable period multiplied by a fraction the numerator of which is the number
of days in the taxable period ending on the Closing Date and the denominator of which is the number
of days in such Straddle Period (the “Pre-Closing Straddle Amount”).



     Section 6.3 Preparation and Filing of Tax Returns. Acquiror shall timely prepare and
file, or shall cause to be prepared and filed, all Tax Returns of the Company and its Subsidiaries
with respect to any taxable year or period that ends on or before the Closing Date and any taxable
year or period beginning before and ending after the Closing Date that are due after the Closing
Date (“Pre-Closing Tax Returns”); provided, however, that Acquiror shall,
or shall cause the Company to (a) file a U.S. federal income Tax Return of the Company for the
Company’s taxable year ending on the Closing Date pursuant to Treasury Regulations Section
1.1502-76(c); (b) allocate all items accruing on the Closing Date to the Company’s taxable period
ending on the Closing Date pursuant to Treasury Regulations Section 1.1502-76(b)(1)(ii)(A)(1) (and
not pursuant to the “next day” rule under Treasury Regulations Section 1.1502-76(b)(1)(ii)(B) or
pursuant to the ratable allocation method under Treasury Regulations Section 1.1502-76(b)(2)(ii) or
1.1502-76(b)(2)(iii)); (c) not elect to waive any carryback of net operating losses under Section
172(b)(3) of the Code on any Tax Return of the Company filed in respect of a taxable period ending
on or before the Closing Date; and (d) deduct the Transaction Expenses (to the extent properly
deductible) on the Company’s income Tax Returns for the taxable period ending on the Closing Date,
unless otherwise required by applicable Tax law. Acquiror shall prepare



51









 




such Tax Returns consistent with past practices of the Company (unless otherwise required by clause
(a) through (d) above or otherwise pursuant to this Agreement) and shall provide the Stockholder
Representatives the right to review and comment on such Tax Returns no later than thirty (30) days
prior to the due date for filing such Tax Returns. Acquiror shall make all such changes as are
reasonably requested by the Stockholder Representatives, except to the extent inconsistent with
applicable Tax law. Acquiror shall cause any amounts shown to be due on such Tax Returns to be
timely remitted to the applicable governmental body before such Taxes are due.




     Section 6.4 Refunds and Tax Benefits. Any Tax refunds or credits for overpayment that
are received by the Acquiror or the Company and its Subsidiaries in excess of the amounts accrued
for such Tax refunds or credits in the Final Net Working Capital Amount to which the Acquiror or
the Company and its Subsidiaries become entitled that relate to income Tax periods or portions
thereof ending on or before the Closing Date shall be for the account of the stockholders and
optionholders of the Company, and the Acquiror shall pay over to the stockholders and optionholders
of the Company any such refund or the amount of any such credit within 15 days after receipt or
entitlement thereto. If the amount accrued for such Taxes in the Final Net Working Capital Amount
exceeds the actual unpaid liability of the Company due in respect of Pre-Closing Tax Returns (such
excess the “Reduced Tax Liability”), the amount of the Reduced Tax Liability shall be for
the account of the stockholders and optionholders of the Company, and the Acquiror shall pay over
to the stockholders and optionholders of the Company any such amount within 15 days after receipt
or entitlement thereto. Upon a request from the Stockholder Representatives, Acquiror shall, as
soon as is reasonably practicable, cause the Company or its Subsidiaries or affiliates to file an
amended Tax return or application for Tax refund in order to obtain a Tax refund that the Company
is entitled to pursuant to this Section 6.4, and Acquiror, the Company and their Subsidiaries or
affiliates shall execute all other documents, take reasonable additional actions, not take any
action the result of which would be to forego the right to any such Tax refund, and otherwise
reasonably cooperate as may be necessary for the Acquiror, the Company and their Subsidiaries or
affiliates to perfect their rights in and obtain the Tax refunds contemplated by this Section 6.4.



     Section 6.5 Amended Tax Returns. None of the Acquiror, Sub, the Company or any of
their affiliates shall amend any Tax Returns of the Company or any of its Subsidiaries of the
Company for any pre-Closing tax period without the prior written consent of the Stockholder
Representatives acting together, which consent shall not be unreasonably conditioned, delayed or
withheld.



     Section 6.6 Certain Taxes and Fees. All transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges and other similar
transfer fees and charges (including any penalties and interest) incurred in connection with the
consummation of the transactions contemplated by this Agreement shall be paid by the stockholders
and optionholders when due, and the stockholders and optionholders will, at their own expense, file
all necessary Tax Returns and other documentation with respect to all such Taxes, fees and charges,
and, if required by applicable Law, the Acquiror will, and will cause its Affiliates to, join in
the execution of any such Tax Returns and other documentation.



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     Section 6.7 No Section 338 Election. None of the Acquiror, Sub, the Company or any of
their affiliates shall make an election under Section 338 of the Code with respect to the
transactions contemplated by this Agreement.



     Section 6.8 Tax-Sharing Agreements. All tax-sharing agreements or similar agreements
with respect to or involving the Company and its Subsidiaries shall be terminated as of the Closing
Date and, after the Closing Date, the Company and its Subsidiaries shall not be bound thereby or
have any liability thereunder.



ARTICLE VII

CONDITIONS TO CLOSING




     Section 7.1 General Conditions. The respective obligations of each party to
consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at
or prior to the Closing, of each of the following conditions, any of which may, to the extent
permitted by applicable Law, be waived in writing by any party in its sole discretion (provided
that such waiver shall only be effective as to the obligations of such party):



          (a) No Injunction, Prohibition or Action. No Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent), that is then in effect and that enjoins, restrains, conditions, makes illegal or
otherwise prohibits the consummation of the transactions contemplated by this Agreement or the
Ancillary Agreements or instituted any Action challenging or seeking to restrain or prohibit
consummation of the transactions contemplated by this Agreement or the Ancillary Agreement that has
not been overturned.



          (b) HSR Act. Any waiting period (and any extension thereof) under the HSR Act
applicable to the transactions contemplated by this Agreement and the Ancillary Agreements shall
have expired or shall have been terminated.



          (c) Approval of Stockholders. The Company shall deliver to Acquiror, a written
consent, validly executed pursuant to Section 228 of Delaware Law by stockholders holding in the
aggregate at least 95% of the issued and outstanding equity securities of the Company on an
as-converted basis, which adopts this Agreement and approves the transactions contemplated hereby,
including the Merger.



          (d) Third-Party Consents. The Company shall have obtained the consents set forth on
Schedule 7.1(d) of the Disclosure Schedules.



     Section 7.2 Conditions to Obligations of the Company. The obligations of the Company
to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment,
at or prior to the Closing, of each of the following conditions, any of which may be waived in
writing by the Company in its sole discretion:



          (a) Representations, Warranties and Covenants. (i) (A) Each of the representations
and warranties in Section 4.2, and the representations and warranties of the Acquiror and Sub
contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other
document delivered pursuant hereto or thereto or in connection with the



53









 




transactions contemplated hereby or thereby that are qualified as to materiality, “Material Adverse
Effect” or words of similar effect shall be true and correct in all respects both when made and as
of the Closing Date (other than representations and warranties that are made as of a specified
date, which representations and warranties shall be true and correct as of such specified date),
and (B) all other representations of the Acquiror and Sub contained in this Agreement or any
Ancillary Agreement or any schedule, certificate or other document delivered pursuant hereto or
thereto or in connection with the transactions contemplated hereby or thereby shall be true and
correct in all material respects both when made and as of the Closing Date (other than
representations and warranties that are made as of a specified date, which representations and
warranties shall be true and correct in all material respects as of such specified date); (ii) the
Acquiror and Sub shall have performed all obligations and agreements and complied with all
covenants and conditions required by this Agreement or any Ancillary Agreement to be performed or
complied with by them prior to or at the Closing, except where the failure to comply would not,
individually or in the aggregate, reasonably be expected to have a material adverse effect on the
ability of the Acquiror or Sub to perform its obligations under this Agreement or the Ancillary
Agreements to which it will be a party; and (iii) the Company shall have received from the Acquiror
and Sub a certificate to the effect set forth in the foregoing clauses (i) and (ii), signed by a
duly authorized officer thereof.




          (b) Escrow Agreement. The Company shall have received an executed counterpart to the
Escrow Agreement, signed by each party other than the Company.



     Section 7.3 Conditions to Obligations of the Acquiror and Sub. The obligations of the
Acquiror and Sub to consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may
be waived in writing by the Acquiror in its sole discretion:



          (a) Representations, Warranties and Covenants. (i) (A) Each of the representations
and warranties in Section 3.2(a) and the representations and warranties of the Company contained in
this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered
pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby
that are qualified as to materiality, “Material Adverse Effect” or words of similar effect shall be
true and correct in all respects both when made and as of the Closing Date (other than
representations and warranties that are made as of a specified date, which representations and
warranties shall be true and correct as of such specified date), and (B) all other representations
of the Company contained in this Agreement or any Ancillary Agreement or any schedule, certificate
or other document delivered pursuant hereto or thereto or in connection with the transactions
contemplated hereby or thereby shall be true and correct in all material respects both when made
and as of the Closing Date (other than representations and warranties that are made as of a
specified date, which representations and warranties shall be true and correct in all material
respects as of such specified date); (ii) the Company shall have performed in all material respects
all obligations and agreements and complied with all covenants and conditions required by this
Agreement or any Ancillary Agreement to be performed or complied with by it prior to or at the
Closing; and (iii) the Acquiror shall have received from the Company a certificate to the effect
set forth in the foregoing clauses (i) and (ii), signed by a duly authorized officer thereof.



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          (b) Escrow Agreement. The Acquiror shall have received an executed counterpart to the
Escrow Agreement, signed by each party other than the Acquiror.



          (c) Certificate. The Acquiror shall have received from the Company an affidavit,
under penalties of perjury, stating that Company is not and has not been a United States real
property holding corporation, dated as of the Closing Date and in form and substance required under
Treasury Regulations Section 1.897-2(h) so that the Acquiror is exempt from withholding any portion
of the Merger Consideration thereunder.



          (d) No Material Adverse Effect. Since the date of this Agreement, there have not been
any events, occurrences, developments or changes that individually, or in the aggregate, constitute
or could reasonably be expected to have a Material Adverse Effect.



          (e) Employment Agreements. The Employment Agreements shall not have been terminated
by any Founder (other than by death or disability) and shall become effective as of the Closing.
For the avoidance of doubt, any Company approved leave of absence shall not be deemed to be a
termination by any Founder.



          (f) Non-Competition Agreements. The Acquiror shall have received an executed
counterpart to the forms of Non-Competition Agreement attached hereto as Exhibit F
(collectively, the “Non-Competition Agreements”), signed by each Founder, which agreement
will impose covenants restricting competition, solicitation of customers and employees and
disparagement by such stockholder for five (5) years after the Closing Date.



          (g) Non-Solicitation Agreements. The Acquiror shall have received an executed
counterpart to the form of Non-Solicitation Agreement attached hereto as Exhibit G
(collectively, the “Non-Solicitation Agreements”), signed by each holder of Class B Common
Stock (collectively, the “Principal Stockholders”), which agreement will impose covenants
regarding the solicitation of employees by such Principal Stockholders for three (3) years after
the Closing Date.



          (h) Termination of Agreements with Related Parties. The Company shall have
terminated, without any further liability to the Acquiror or the Surviving Corporation, all
Contracts and other interests and business dealings between the Company and its Subsidiaries, on
the one hand, and any Related Party of the Company or any of its Subsidiaries, on the other hand,
other than existing employment arrangements, existing arrangements relating to the indemnification
of directors and officers of the Company and its Subsidiaries, the Escrow Agreement and any other
agreements contemplated by this Agreement, commercial agreements with terms comparable to those
available from a third party or those agreements and Contracts that the Acquiror approves in
writing prior to the Effective Time.



          (i) Resignations by Directors and Officers. All directors and officers of the Company
and its Subsidiaries, for whom the Acquiror has requested resignations as of the Closing, shall
have submitted letters of resignation in a form reasonably acceptable to the Acquiror effective as
of the Effective Time.



55









 





ARTICLE VIII

INDEMNIFICATION




     Section 8.1 Survival. Except for the representations and warranties set forth in
Section 3.15, the representations and warranties of the Company, the Acquiror and Sub contained in
this Agreement shall survive the Closing until June 30, 2012 (the “Expiration Date”). The
representations and warranties set forth in Section 3.15 and the indemnification obligations under
Section 8.2(e) shall survive the Closing until three (3) years following the Closing Date (the
“Tax Matters Expiration Date”). All of the covenants in this Agreement shall survive in
accordance with their respective terms.



     No party shall have any liability whatsoever with respect to any such representations or
warranties unless a claim is made hereunder prior to July 31, 2012, or the twentieth Business Day
following the Tax Matters Expiration Date, as applicable, in which case such representation or
warranty shall survive as to such claim until such claim has been finally resolved.
Notwithstanding anything to the contrary contained in this Agreement, none of the time limitations
set forth in this Article VIII shall apply to any action for specific performance, injunctive
relief or other equitable remedy.



     Section 8.2 Indemnification in Favor of the Acquiror. Subject to the provisions of
this Article VIII, prior to the Closing the Company, and after the Closing only the stockholders
and optionholders of the Company, pro rata in proportion to their Pro Rata Share, shall save,
defend, indemnify and hold harmless the Acquiror, Sub, the Surviving Corporation and their
Affiliates, and the respective Representatives, successors and assigns of each of the foregoing
(the “Acquiror Indemnified Parties”) from and against any and all losses, damages,
liabilities, deficiencies, claims, interest, awards, judgments, penalties, costs and expenses
(including attorneys’ fees, costs and other out-of-pocket expenses incurred in investigating,
preparing or defending the foregoing) (collectively, “Losses”), except as provided below,
any Losses with respect to Taxes shall be limited to the taxable periods or portions thereof ending
on or before the Closing Date, asserted against, incurred, sustained or suffered by any of the
foregoing as a result of, arising out of or relating to:



          (a) any breach of any representation or warranty made by the Company contained in this
Agreement or any certificate or schedule delivered pursuant hereto;



          (b) any breach of any covenant or agreement by the Company contained in this Agreement or any
certificate or schedule delivered pursuant hereto;



          (c) any Transaction Expenses charged to the Acquiror, Sub, the Surviving Corporation or the
Company that shall not have been, or shall exceed the amount, reflected on the Schedule of
Expenses;



          (d) any amount by which the Estimated Net Working Capital Amount exceeds the Final Net Working
Capital Amount;



          (e) (i) all Taxes (or the non-payment thereof) of the Company and its Subsidiaries for all
taxable periods ending on or before the Closing Date and the portion through the end of the Closing
Date for any taxable period that includes (but does not end on) the Closing



56









 




Date (“Pre-Closing Tax Period”), (ii) any and all Taxes of any member of an affiliated,
consolidated, combined, or unitary group of which the Company or any of its Subsidiaries (or any
predecessor of any of the foregoing) is or was a member on or prior to the Closing Date, including
pursuant to Treasury Regulation §1.1502-6 or any analogous or similar state, local, or non-U.S. law
or regulation and (iii) any and all Taxes of any person (other than the Company and its
Subsidiaries) imposed on the Company or any of its Subsidiaries as a transferee or successor, by
contract or pursuant to any law, rule or regulation, which Taxes relate to an event or transaction
occurring before the Closing; provided, however, that in the case of clauses (i), (ii) and
(iii) above, the stockholders and optionholders of the Company shall be liable only to the extent
that such Taxes are in excess of the amount, if any, reserved for such Taxes (excluding any reserve
for deferred Taxes established to reflect timing differences between book and Tax income) on the
face of the closing balance sheet (rather than in any notes thereto) and taken into account in
determining the Final Net Working Capital Amount pursuant to Section 2.9(h);




          (f) any payments made in respect of Dissenting Shares in excess of the amounts payable for
such shares pursuant to this Agreement; and



          (g) any Action by a stockholder or optionholder of the Company in respect of any breach of
fiduciary duty or derivative or other similar claim in respect of this Agreement or the
transactions contemplated hereby.



     Section 8.3 Indemnification by the Acquiror. Subject to the provisions of this
Article VIII, the Acquiror (and after the Closing jointly and severally with the Surviving
Corporation) shall save, defend, indemnify and hold harmless the stockholders and optionholders of
the Company and their Affiliates, and the respective Representatives, successors and assigns of
each of the foregoing (the “Company Indemnified Parties”), acting solely through the
Stockholder Representatives, from and against any and all Losses asserted against, incurred,
sustained or suffered by any of the foregoing as a result of, arising out of or relating to:



          (a) any breach of any representation or warranty made by the Acquiror or Sub contained in this
Agreement; and



          (b) any breach of any covenant or agreement by the Acquiror or Sub contained in this
Agreement.



     Section 8.4 Manner of Indemnification.



          (a) Escrow Fund. To provide a fund against which an Acquiror Indemnified Party may
assert claims of indemnification under this Article VIII (an “Acquiror Indemnification
Claim”), the Escrow Amount shall be deposited into escrow pursuant to the Escrow Agreement in
accordance with Section 2.9. The Escrow Fund shall be held and distributed in accordance with this
Article VIII and the Escrow Agreement. Each Acquiror Indemnification Claim shall be made only in
accordance with this Article VIII and the Escrow Agreement. An Acquiror Indemnified Party shall
seek monetary recourse for Acquiror Indemnification Claims solely by offset against the Escrow
Fund. Notwithstanding anything to the contrary contained in this Agreement, none of the
limitations set forth in this Article VIII shall apply to any action for specific performance,
injunctive relief or other equitable remedy. Acquiror, Sub and the



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Company agree for all tax purposes: (i) the optionholders’ portion of the Escrow Fund shall be
treated as compensation paid by the Company to the optionholders if and to the extent any portion
of the optionholders’ portion of the Escrow Fund is actually distributed to the optionholders, (ii)
the right of the stockholders to the stockholders’ portion of the Escrow Fund shall be eligible to
be treated as deferred contingent purchase price eligible for installment sale treatment under
Section 453 of the Code and any corresponding provision of foreign, state or local law, as
appropriate; (iii) Acquiror shall be treated as the owner of the Escrow Fund solely for tax
purposes, and all interest and earnings earned from the investment and reinvestment of the Escrow
Amount, or any portion thereof, shall be allocable to the Acquiror pursuant to Section 468B(g) of
the Code and Proposed Treasury Regulation Section 1.468B-8; (iv) if and to the extent any amount of
the stockholders’ portion of the Escrow Fund is actually distributed to the stockholders, interest
may be imputed on such amount, as required by Section 483 or 1274 of the Code; and (v) in no event
shall the total amount of the Escrow Fund paid to the stockholders and optionholders under this
Agreement exceed an amount to be designated by the Stockholder Representatives prior to the
Closing. Clause (v) of the preceding sentence is intended to ensure that the right of the
stockholders to the stockholders’ portion of the Escrow Fund is not treated as a contingent payment
without a stated maximum selling price under Section 453 of the Code and the Treasury Regulations
promulgated thereunder. Acquiror, Sub and the Company shall file all Tax Returns consistently with
the foregoing.




          (b) Release From Escrow. On July 31, 2012, the Escrow Agent shall, subject to the
terms set forth in the Escrow Agreement, disburse any portion of the Escrow Fund which exceeds the
sum of (i) $5,000,000 and (ii) any amounts on that date reserved against pending claims for
indemnifiable Losses. The $5,000,000 required minimum balance in the Escrow Fund after the
Expiration Date shall be solely to fund potential Losses from (x) breaches of the representations
and warranties set forth in Section 3.15 and (y) indemnification obligations under Section 8.2(e)
((x) and (y) collectively, “Tax Losses”), and shall be disbursed on the twentieth (20th)
Business Day after the Tax Matters Expiration Date except to the extent such Escrow Funds are
reserved against pending claims for indemnifiable Losses on such date. Such disbursement shall be
made to the stockholders and optionholders of the Company (other than holders of any Dissenting
Shares) as instructed by the Stockholder Representatives acting together. Payment of any amounts
to the Company’s stockholders and optionholders shall be made on a pro rata basis (based on each
such stockholder’s and optionholder’s Pro Rata Share). Notwithstanding anything in this Section
8.4(b) to the contrary, any distribution contemplated in this Section 8.4(b) shall be subject to
the stockholders’ and optionholders’ obligations to the Stockholder Representatives as set forth in
the Escrow Agreement and Section 2.11 hereof.



          (c) Claims for Indemnification. For the purposes hereof, an “Officer’s
Certificate” shall mean a certificate signed by an officer of Acquiror and delivered to the
Escrow Agent and the Stockholder Representatives: (i) stating that the Acquiror has paid,
incurred, sustained or accrued Losses, (ii) specifying in reasonable detail the individual items of
Loss included in the amount so stated, the date insofar as practicable each such item was paid,
incurred or sustained, and the nature of the misrepresentation, breach of warranty or covenant to
which such item is related or the indemnification obligation to which such Losses are related, and
(iii) the amount of cash sought to be delivered to the Acquiror (for the benefit of the pertinent
Acquiror Indemnified Party) in compensation for such Losses. Upon receipt by the Escrow Agent of
an Officer’s Certificate at any time on or before July 31, 2010, or, in the case of



58









 




Tax Losses, at any time on or before the twentieth (20th) Business Day after the Tax Matters
Expiration Date, as applicable, the Escrow Agent shall, subject to the provisions of Section 8.4(d)
and (e), deliver to the Acquiror, as promptly as practicable, an amount of cash from the Escrow
Fund equal to the amount of Losses set forth in such Officer’s Certificate; provided,
however, that to the extent an Officer’s Certificate alleges only the basis for anticipated
Losses, no amount shall be distributed until such Losses are actually paid, incurred or sustained.




          (d) Objections to Claims against the Escrow Fund. At the time of delivery of any
Officer’s Certificate to the Escrow Agent, a duplicate copy of such certificate shall be delivered
simultaneously to the Stockholder Representatives, and for a period of thirty (30) days after such
delivery, the Escrow Agent shall make no delivery to the Acquiror of any portion of the Escrow Fund
pursuant to Section 8.4(c) unless the Escrow Agent shall have received written authorization from
the Stockholder Representatives acting together to make such delivery. After the expiration of
such thirty (30) day period, the Escrow Agent shall make delivery of amounts stated in the
Officer’s Certificate unless the Stockholder Representatives deliver an objection in writing to the
Escrow Agent about the Losses claimed in the Officer’s Certificate. Notwithstanding the foregoing,
no disbursements relating to the working capital adjustment under Section 2.9(h) shall be subject
to this Section 8.4(d).



          (e) Resolution of Conflicts.



               (i) If the Stockholder Representatives shall object in writing to any claim or claims made in
any Officer’s Certificate to recover Losses from the Escrow Fund in accordance with Section 8.4(d),
then the Stockholder Representatives and the Acquiror shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the Stockholder
Representatives and the Acquiror should so agree, a memorandum setting forth such agreement shall
be prepared and signed by the Stockholder Representatives and the Acquiror and shall be furnished
to the Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum and make
distributions from the Escrow Fund in accordance with the terms thereof.



               (ii) If no such agreement can be reached after good faith negotiation within sixty (60) days
after delivery of an Officer’s Certificate, either the Acquiror or the Stockholder Representatives
may pursue any legal remedy available to him or it with respect to the portion of the Escrow Fund
in dispute.



59









 





     Section 8.5 Third Party Claims.



          (a) In order for an Acquiror Indemnified Party or a Company Indemnified Party (each, an
“Indemnified Party”) to be entitled to any indemnification provided for under this
Agreement in respect of, arising out of or involving a Loss or a claim or demand made by any person
against the Indemnified Party (a “Third Party Claim”), such Indemnified Party shall deliver
notice thereof to the Stockholder Representatives, on behalf of the stockholders and optionholders
of the Company, or to the Acquiror, as applicable (the “Indemnifying Party”);
provided, however, that no delay or failure on the part of an Indemnified Party in
notifying the Stockholder Representatives or the Acquiror, as the case may be, shall relieve an
Indemnifying Party from its obligations hereunder unless the Indemnifying Party is thereby
materially prejudiced (and then solely to the extent of such prejudice).



          (b) The Indemnifying Party shall have the right, upon written notice to the Indemnified Party
within fifteen (15) days of receipt of notice from the Indemnified Party of the commencement of
such Third Party Claim, to assume the defense thereof at the expense of the Indemnifying Party with
counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party.
If the Indemnifying Party does not expressly elect to assume the defense of such Third Party Claim
within the time period set forth in this Section 8.5(b), the Indemnified Party shall have the sole
right to assume the defense of and to settle such Third Party Claim. If the Indemnifying Party
assumes the defense of any Third Party Claim, the Indemnified Party shall, at the Indemnifying
Party’s expense, cooperate with the Indemnifying Party in such defense and make available to the
Indemnifying Party all witnesses, pertinent records, materials and information in the Indemnified
Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably
required by the Indemnifying Party. If the Indemnifying Party assumes the defense of any Third
Party Claim, the Indemnifying Party shall not, without the prior written consent of the Indemnified
Party (not to be unreasonably withheld, conditioned or delayed), enter into any settlement or
compromise or consent to the entry of any judgment with respect to such Third Party Claim if such
settlement, compromise or judgment (i) involves a finding or admission of wrongdoing, (ii) does not
include an unconditional written release by the claimant or plaintiff of the Indemnified Party from
all liability in respect of such Third Party Claim or (iii) imposes equitable remedies or any
obligation on the Indemnified Party other than solely the payment of money damages for which the
Indemnified Party will be indemnified hereunder.



     Section 8.6 Limits on Indemnification. Notwithstanding anything to the contrary
contained in this Agreement:



          (a) An Indemnifying Party shall not be liable for any claim for indemnification pursuant to
Section 8.2(a) or (b) or Section 8.3, as the case may be, unless and until the aggregate amount of
indemnifiable Losses which may be recovered from such Indemnifying Party exceeds $500,000.00, in
which case the Indemnifying Party shall be liable for the entire amount of such Losses; provided,
however, that this Section 8.6(a) shall not limit or apply to any payments owed by Acquiror under
Sections 2.9 or 6.4 hereof.



          (b) No Indemnified Party may make a claim for indemnification under Section 8.2(a) or Section
8.3, as the case may be, for breach by the Indemnifying Party of a



60









 




particular representation or warranty that occurs or is identified after the expiration of the
survival period thereof specified in Section 8.1.




          (c) For purposes of calculating the amount of Losses incurred by an Indemnified Party for
purposes of this Agreement, such amount shall be: (i) reduced by the amount of any insurance
benefits and proceeds actually paid to such Indemnified Party, or any Affiliate of any such party,
in respect of such Losses net of any deductible amounts; (ii) reduced by the amount of any
indemnification, contribution or other similar payment actually recovered by the Indemnified Party
from any third party with respect to such Losses; (iii) reduced by any net Tax Benefit realized by
the applicable Indemnified Party as a result of such Losses where the “Tax Benefit” equals
the reduction in Taxes realized by such Indemnified Party as a result of the payment or accrual of
any loss, expense, deduction or Taxes resulting from the event or circumstance giving rise to such
Losses, and (iv) increased to take into account any net Tax Cost incurred by the Indemnified Party
arising from (x) the receipt of indemnity payments hereunder or (y) the indemnification,
contribution or other similar payments actually recovered by the Indemnified Party from any third
party with respect to such Losses (in the case of either (x) or (y) grossed up for any income Tax
incurred based on such increase), where the “Tax Cost” equals the increase in Taxes
realized by such Indemnified Party as a result of the receipt or accrual of such indemnity payments
or indemnification, contribution or other similar payments from a third party.



     Section 8.7 Exclusive Remedy. The parties agree that from and after the Closing Date,
the exclusive remedies of the parties for any Losses based upon, arising out of or otherwise in
respect of the matters set forth in this Agreement are the indemnification obligations of the
parties set forth in this Article VIII and that the Escrow Fund shall be the sole and exclusive
remedy for the Acquiror Indemnification Claims; provided, however, that nothing in
this Agreement shall be deemed a waiver by any party of any right to specific performance,
injunctive relief or other equitable remedy.



     Section 8.8 Tax Treatment of Indemnity Payments. Acquiror, Sub, the Company and each
Indemnified Party and Indemnifying Party agree to treat any indemnity payment made pursuant to this
Article VIII as an adjustment to the Merger Consideration for federal, state, local and foreign
income tax purposes unless a contrary treatment is required under applicable Law.



ARTICLE IX

TERMINATION




     Section 9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:



          (a) by mutual written consent of the Acquiror, the Company and the Stockholder Representatives
acting together;



          (b) (i) by the Company or the Stockholder Representatives, acting together, if the Acquiror or
Sub breaches or fails to perform any of its representations, warranties or covenants contained in
this Agreement or any Ancillary Agreement and such breach or failure to perform (A) would give rise
to the failure of a condition set forth in Section 7.2, (B) cannot be or



61









 




has not been cured within fifteen (15) days following delivery of written notice of such breach or
failure to perform and (C) has not been waived by the Company or (ii) by the Acquiror, if the
Company breaches or fails to perform in any respect any of its representations, warranties or
covenants contained in this Agreement or any Ancillary Agreement and such breach or failure to
perform (x) would give rise to the failure of a condition set forth in Section 7.3, (y) cannot be
or has not been cured within fifteen (15) days following delivery of written notice of such breach
or failure to perform and (z) has not been waived by the Acquiror;




          (c) by either the Company or the Stockholder Representatives, acting together, or the
Acquiror, if the Merger shall not have been consummated on or before April 30, 2011 (the
“Outside Date”); provided that if the Merger shall not have been consummated by
such date, the Outside Date may be extended in one month increments upon the written agreement of
the Acquiror and the Stockholder Representatives, provided, further, that the right
to terminate this Agreement under this Section 9.1(c) shall not be available if the failure of the
party requesting termination to fulfill any obligation under this Agreement prior to such date
shall have been the cause of the failure of the Merger to be consummated on or prior to such date;
or



          (d) by either the Company or the Stockholder Representatives, acting together, or the
Acquiror, if any Governmental Authority shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final and nonappealable;
provided, that the Acquiror and Sub (if the Acquiror is so requesting termination) or the
Company (if it is so requesting termination), as the case may be, shall have used their best
efforts, in accordance with Section 5.6, to have such order, decree, ruling or other action
vacated.



     The party seeking to terminate this Agreement pursuant to this Section 9.1 (other than Section
9.1(a)) shall give prompt written notice of such termination to the other parties.



     Section 9.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 9.1, this Agreement shall forthwith become void and there shall be no liability
on the part of either party except (a) for the provisions of Section 3.20 and Section 4.4 relating
to broker’s fees, Section 5.5 relating to confidentiality, Section 5.7 relating to public
announcements, Section 10.1 relating to fees and expenses, Section 10.5 relating to notices,
Section 10.8 relating to third-party beneficiaries, Section 10.9 relating to governing law, Section
10.10 relating to submission to jurisdiction and this Section 9.2, (b) that nothing herein shall
relieve any party from liability for any willful or intentional material breach of this Agreement
or any agreement made as of the date hereof or subsequent thereto pursuant to this Agreement.



ARTICLE X

GENERAL PROVISIONS




     Section 10.1 Fees and Expenses. All fees and expenses incurred in connection with or
related to this Agreement and the Ancillary Agreements and the transactions contemplated hereby and
thereby shall be paid by the party incurring such fees or expenses, whether or not such
transactions are consummated; provided, however, that if the Merger is consummated, all Transaction
Expenses shall be paid as provided in this Agreement.



62









 





     Section 10.2 Amendment and Modification. This Agreement may be amended, modified or
supplemented in writing by the Company, the Stockholder Representatives acting together, the
Acquiror and Sub at any time prior to the Closing Date (notwithstanding any stockholder approval);
provided, however, that after stockholder consent has been obtained as required by Section 7.1(c),
no amendment shall be made which pursuant to applicable Law requires further approval by the
Company’s stockholders or optionholders without such further approval.



     Section 10.3 Extension. At any time prior to the Effective Time, the parties, by
action taken in writing, may, to the extent permitted by applicable Law, extend the time for the
performance of any of the obligations or other acts of the parties.



     Section 10.4 Waiver. At any time prior to the Effective Time, the parties may, by
action taken in writing, to the extent permitted by applicable Law, (a) waive any inaccuracies in
the representations and warranties of the other parties contained in this Agreement or any document
delivered pursuant hereto or (b) subject to applicable Law, waive compliance with any of the
agreements or conditions of the other parties contained herein. Any agreement on the part of a
party to any such waiver shall be valid only if set forth in a written instrument executed and
delivered by a duly authorized officer on behalf of such party. No failure or delay of any party
in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or discontinuance of steps to
enforce such right or power, or any course of conduct, preclude any other or further exercise
thereof or the exercise of any other right or power. Subject to Article VIII of this Agreement,
the rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights
or remedies which they would otherwise have hereunder.



     Section 10.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if
by facsimile, upon written confirmation of receipt by facsimile, or otherwise, (b) on the first
Business Day following the date of dispatch if delivered utilizing a next-day service by a
recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day
following the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth
below, or pursuant to such other instructions as may be designated in writing by the party to
receive such notice:



          (a) if to the Acquiror, Sub or the Surviving Corporation, to:


H&R Block, Inc.

One H&R Block Way

Kansas City, MO 64105

Attention: Tony Bowen

Facsimile: (816) 854-8043







63









 








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


Husch Blackwell Sanders LLP

4801 Main Street, Suite 1000

Kansas City, MO 64112

Attention: Gary D. Gilson

Facsimile: (816) 983-8080




          if to Company or the Stockholder Representatives, to:



2SS Holdings, Inc.

c/o Second Story Software, Inc

5925 Dry Creek Lane NE

Cedar Rapids, IA 52402

Attention: Lance Dunn

Facsimile: (319) 261-0395




TA Associates Management , L.P.

c/o TA Associates, Inc.

John Hancock Tower, 56th Floor

200 Clarendon Street, Boston, MA 02116__

Attention: Chief Financial Officer

Facsimile: (617) 574-6728




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


Goodwin Procter LLP

Exchange Place

Boston, MA 02109

Attention: Jeffrey C. Hadden, Esq. and Kathy Fields, Esq.

Facsimile: (617) 523-1231




     Section 10.6 Interpretation. When a reference is made in this Agreement to a Section,
Article or Exhibit such reference shall be to a Section, Article or Exhibit of this Agreement
unless otherwise indicated. The table of contents and headings contained in this Agreement or in
any Exhibit are for convenience of reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All words used in this Agreement will be construed to
be of such gender or number as the circumstances require. Any capitalized terms used in any
Exhibit but not otherwise defined therein shall have the meaning as defined in this Agreement. All
Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth herein. The word “including” and words of similar import when used in
this Agreement will mean “including, without limitation,” unless otherwise specified.



     Section 10.7 Entire Agreement. This Agreement (including the Exhibits and Schedules
hereto), the Ancillary Agreements and the Confidentiality Agreement constitute the entire
agreement, and supersede all prior written agreements, arrangements, communications and
understandings and all prior and contemporaneous oral agreements, arrangements, communications and
understandings, among the parties with respect to the subject matter of this



64









 




Agreement. No party to this Agreement shall be under any legal obligation to enter into or
complete the transactions contemplated hereby unless and until this Agreement shall have been
executed and delivered by each of the parties.




     Section 10.8 No Third-Party Beneficiaries. Except as provided in Section 5.8 and
Article VIII, nothing in this Agreement, express or implied, is intended to or shall confer upon
any Person other than the parties and their respective successors and permitted assigns any legal
or equitable right, benefit or remedy of any nature under or by reason of this Agreement.



     Section 10.9 Governing Law. This Agreement and all disputes or controversies arising
out of or relating to this Agreement or the transactions contemplated hereby shall be governed by,
and construed in accordance with, the internal laws of the State of Delaware, without regard to the
laws of any other jurisdiction that might be applied because of the conflicts of laws principles of
the State of Delaware.



     Section 10.10 Submission to Jurisdiction. Each of the parties irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement or for recognition and
enforcement of any judgment in respect hereof brought by any other party or its successors or
assigns shall be brought and determined in the Delaware Court of Chancery and any state appellate
court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to
accept jurisdiction over a particular matter, in any state or federal court within the State of
Delaware), and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the
aforesaid courts for itself and with respect to its property, generally and unconditionally, with
regard to any such action or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any action, suit or proceeding
relating thereto except in such courts). Each of the parties further agrees to accept service of
process in any manner permitted by such courts. Each of the parties hereby irrevocably and
unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or
otherwise, in any action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure lawfully to serve
process, (b) that it or its property is exempt or immune from jurisdiction of any such court or
from any legal process commenced in such courts (whether through service of notice, attachment
prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise)
and (c) to the fullest extent permitted by law, that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.



     Section 10.11 Assignment; Successors. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by
operation of law or otherwise, by any party without the prior written consent of the Acquiror (in
the case of an assignment by the Company) or the Company (in the case of an assignment by the
Acquiror or Sub), and any such assignment without such prior written consent shall be null and
void; provided, however, that that no assignment shall limit the assignor’s obligations hereunder.
Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of,
and be enforceable by, the parties and their respective successors and assigns.



65









 





     Section 10.12 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to
specific performance of the terms hereof, including an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement
in any Delaware state or federal court, this being in addition to any other remedy to which they
are entitled at law or in equity. Each of the parties further hereby waives (a) any defense in any
action for specific performance that a remedy at law would be adequate and (b) any requirement
under any law to post security as a prerequisite to obtaining equitable relief.



     Section 10.13 Currency. All references to “dollars” or “$” or “US$” in this Agreement
or any Ancillary Agreement refer to United States dollars, which is the currency used for all
purposes in this Agreement and any Ancillary Agreement.



     Section 10.14 Severability. Whenever possible, each provision or portion of any
provision of this Agreement shall be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision or portion of any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable Law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.



     Section 10.15 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.



     Section 10.16 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same instrument and shall become
effective when one or more counterparts have been signed by each of the parties and delivered to
the other party.



     Section 10.17 Facsimile Signature. This Agreement may be executed by facsimile
signature and a facsimile signature shall constitute an original for all purposes.



     Section 10.18 Time of Essence. Time is of the essence with regard to all dates and
time periods set forth or referred to in this Agreement.



     Section 10.19 No Presumption Against Drafting Party. Each of the Acquiror, Sub, the
Stockholder Representatives and the Company acknowledges that each party to this Agreement has been
represented by counsel in connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of
any claimed ambiguities in this Agreement against the drafting party has no application and is
expressly waived.



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66









 





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



	 	 	 	 	 
	 	H&R BLOCK, INC.

 	 
	 	By:  	/s/ Alan M. Bennett
 	 
	 	 	Name:  	Alan M. Bennett 	 
	 	 	Title:  	President 	 
	 
	 	HRB ISLAND ACQUISITION, INC.

 	 
	 	By:  	/s/ Andrew J. Somora
 	 
	 	 	Name:  	Andrew J. Somora 	 
	 	 	Title:  	Secretary 	 
	 
	 	2SS HOLDINGS, INC.

 	 
	 	By:  	/s/ Lance Dunn
 	 
	 	 	Name:  	Lance Dunn 	 
	 	 	Title:  	President 	 
	 
	 	TA ASSOCIATES MANAGEMENT, L.P.

(solely in its capacity as a Stockholder
Representative)

 	 
	 	By:  	/s/ Todd R. Crockett
 	 
	 	 	Name:  	Todd R. Crockett 	 
	 	 	Title:  	Managing Director 	 
	 
	 	 	 
	 	                                /s/ Lance Dunn
 	 
	 	Lance Dunn 	 
	 	(Solely in his capacity as a Stockholder Representative) 	 
	 



SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER