**Exhibit 10.46**

 

**EXECUTION VERSION**

 

**AGREEMENT AND PLAN OF MERGERamongTIER TECHNOLOGIES, INC.BAKER ACQUISITION CORPORATION,EPOS CORPORATION, THE INDIVIDUALS NAMED HEREIN**

 

**and**

 

**MICHAEL A. LAWLER,**

 

**as Shareholder Representative**

 

 

**Effective as of June 1, 2004**

 

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TABLE OF CONTENTS

 
| ARTICLE 1 | DEFINITIONS                                                         |   |
|----------------|---------------------------------------------------------------------|--------|
|           |                                                                |   |
| 1.1            | Definitions                                                         |   |
|           |                                                                |   |
| ARTICLE 2 | MERGER,  CLOSING, CONVERSION OF SHARES AND PAYMENT FOR SHARES       |   |
|           |                                                                |   |
| 2.1            | Merger                                                              |   |
|           |                                                                |   |
| 2.2            | Closing                                                             |   |
|           |                                                                |   |
| 2.3            | Effective Time                                                      |   |
|           |                                                                |   |
| 2.4            | Effects of Merger;  Effective Date                                  |   |
|           |                                                                |   |
| 2.5            | Charter and  Bylaws; Directors and Officers                         |   |
|           |                                                                |   |
| 2.6            | Merger  Consideration                                               |   |
|           |                                                                |   |
| 2.7            | Conversion  of Securities                                           |   |
|           |                                                                |   |
| 2.8            | Receipt  of Consideration; Escrow Fund and Exchange Fund            |   |
|           |                                                                |   |
| 2.9            | Lost, Stolen or  Destroyed Certificates                             |   |
|           |                                                                |   |
| 2.10           | Withholding  Rights                                                 |   |
|           |                                                                |   |
| 2.11           | Shares of Dissenting  Shareholders                                  |   |
|           |                                                                |   |
| 2.12           | Adjustment to Merger  Consideration                                 |   |
|           |                                                                |   |
| 2.13           | Shareholder  Representative                                         |   |
|           |                                                                |   |
| ARTICLE 3 | REPRESENTATIONS  AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS |   |
|           |                                                                |   |
| 3.1            | Organization  and Authority                                         |   |
|           |                                                                |   |
| 3.2            | Capitalization  of the Company and the Company Subsidiary           |   |
|           |                                                                |   |
| 3.3            | Consents  and Approvals                                             |   |
|           |                                                                |   |
| 3.4            | Investments  in Others                                              |   |
|           |                                                                |   |
| 3.5            | Compliance  with Laws and Other Instruments                         |   |
|           |                                                                |   |
| 3.6            | Financial  Statements, Accounting Records and Internal Controls     |   |
|           |                                                                |   |
| 3.7            | Absence of  Undisclosed Liabilities                                 |   |
|           |                                                                |   |
| 3.8            | Taxes                                                               |   |
|           |                                                                |   |
| 3.9            | Absence of  Certain Changes and Events                              |   |
|           |                                                                |   |
| 3.10           | Title to  Property                                                  |   |
|           |                                                                |   |
| 3.11           | Certain  Transactions                                               |   |
|           |                                                                |   |
| 3.12           | Intellectual  Property.                                             |   |
|           |                                                                |   |
| 3.13           | Litigation and Other  Proceedings                                   |   |
|           |                                                                |   |
| 3.14           | Contracts                                                           |   |

 

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| 3.15           | Insurance and Banking  Facilities                                      |   |
|----------------|------------------------------------------------------------------------|--------|
|           |                                                                   |   |
| 3.16           | Employees;  Employee Plans                                             |   |
|           |                                                                   |   |
| 3.17           | Compliance  with ERISA                                                 |   |
|           |                                                                   |   |
| 3.18           | Labor Matters                                                          |   |
|           |                                                                   |   |
| 3.19           | Hazardous  Materials                                                   |   |
|           |                                                                   |   |
| 3.20           | Inventories                                                            |   |
|           |                                                                   |   |
| 3.21           | Receivables                                                            |   |
|           |                                                                   |   |
| 3.22           | Accredited  Investors                                                  |   |
|           |                                                                   |   |
| 3.23           | Brokers  and Finders                                                   |   |
|           |                                                                   |   |
| 3.24           | No Omissions                                                           |   |
|           |                                                                   |   |
| ARTICLE 4 | REPRESENTATIONS AND WARRANTIES OF PARENT  AND PURCHASER                |   |
|           |                                                                   |   |
| 4.1            | Authorization                                                          |   |
|           |                                                                   |   |
| 4.2            | Organization                                                           |   |
|           |                                                                   |   |
| 4.3            | Capitalization of Parent                                               |   |
|           |                                                                   |   |
| 4.4            | No Conflict of Transaction  with Obligations and Laws                  |   |
|           |                                                                   |   |
| 4.5            | Availability of Merger  Consideration; Valid Issuance of Parent Shares |   |
|           |                                                                   |   |
| 4.6            | Brokers, Finders or  Financial Advisors                                |   |
|           |                                                                   |   |
| 4.7            | SEC Filings                                                            |   |
|           |                                                                   |   |
| 4.8            | Interim Operations of  Purchaser                                       |   |
|           |                                                                   |   |
| 4.9            | Intellectual Property                                                  |   |
|           |                                                                   |   |
| 4.10           | Nasdaq Compliance                                                      |   |
|           |                                                                   |   |
| 4.11           | Absence of Changes                                                     |   |
|           |                                                                   |   |
| 4.12           | No Omissions                                                           |   |
|           |                                                                   |   |
| ARTICLE 5 | COVENANTS OF THE PARTIES                                               |   |
|           |                                                                   |   |
| 5.1            | Conduct of Business by the  Company Pending the Merger                 |   |
|           |                                                                   |   |
| 5.2            | No Solicitation                                                        |   |
|           |                                                                   |   |
| 5.3            | Access to Information                                                  |   |
|           |                                                                   |   |
| 5.4            | Public Announcements                                                   |   |
|           |                                                                   |   |
| 5.5            | Commercially Reasonable  Efforts                                       |   |
|           |                                                                   |   |
| 5.6            | Company Indebtedness                                                   |   |
|           |                                                                   |   |
| 5.7            | Fees and Expenses                                                      |   |
|           |                                                                   |   |
| 5.8            | Company 401(k) Plan                                                    |   |

 

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| 5.9             | Voting Agreement                                               |   |
|-----------------|----------------------------------------------------------------|--------|
|            |                                                           |   |
| 5.10            | Notification of Certain  Matters                               |   |
|            |                                                           |   |
| ARTICLE 6  | CONDITIONS TO CLOSING                                          |   |
|            |                                                           |   |
| 6.1             | Conditions to Each Party’s  Obligations                   |   |
|            |                                                           |   |
| 6.2             | Conditions to Obligations of  Parent and Purchaser             |   |
|            |                                                           |   |
| 6.3             | Conditions to Obligations of  the Company and the Stockholders |   |
|            |                                                           |   |
| ARTICLE 7  | POST-CLOSING COVENANTS                                         |   |
|            |                                                           |   |
| 7.1             | Non-Competition and  Non-Solicitation by Stockholders          |   |
|            |                                                           |   |
| 7.2             | Further Assurances                                             |   |
|            |                                                           |   |
| 7.3             | Employee Seniority                                             |   |
|            |                                                           |   |
| 7.4             | Rule 144                                                       |   |
|            |                                                           |   |
| ARTICLE 8  | SURVIVAL AND INDEMNIFICATION                                   |   |
|            |                                                           |   |
| 8.1             | Survival of Representations  and Warranties                    |   |
|            |                                                           |   |
| 8.2             | Recourse to Escrow Fund                                        |   |
|            |                                                           |   |
| 8.3             | Indemnification by Parent                                      |   |
|            |                                                           |   |
| 8.4             | Procedure                                                      |   |
|            |                                                           |   |
| 8.5             | Treatment of Indemnity  Payments                               |   |
|            |                                                           |   |
| 8.6             | No Contribution from the  Surviving Corporation                |   |
|            |                                                           |   |
| 8.7             | Indemnity not Affected by  Knowledge                           |   |
|            |                                                           |   |
| ARTICLE 9  | TERMINATION, AMENDMENT AND WAIVER                              |   |
|            |                                                           |   |
| 9.1             | Termination                                                    |   |
|            |                                                           |   |
| 9.2             | Effect of Termination                                          |   |
|            |                                                           |   |
| 9.3             | Waiver                                                         |   |
|            |                                                           |   |
| ARTICLE 10 | MISCELLANEOUS                                                  |   |
|            |                                                           |   |
| 10.1            | Entire Agreement                                               |   |
|            |                                                           |   |
| 10.2            | Dispute Resolution;  Governing Law                             |   |
|            |                                                           |   |
| 10.3            | Attorneys’ Fees                                           |   |
|            |                                                           |   |
| 10.4            | Headings                                                       |   |
|            |                                                           |   |
| 10.5            | Notices                                                        |   |
|            |                                                           |   |
| 10.6            | Waiver                                                         |   |
|            |                                                           |   |
| 10.7            | Binding Effect; Assignment                                     |   |
|            |                                                           |   |
| 10.8            | No Third Party  Beneficiaries                                  |   |
|            |                                                           |   |
| 10.9            | Counterparts                                                   |   |

 

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| 10.10  | Further Assurances |   |
|--------|--------------------|--------|
|   |               |   |
| 10.11  | Interpretation     |   |
|   |               |   |
| 10.12  | Severability       |   |

 
| Exhibits:                                                                                     |   |
|-----------------------------------------------------------------------------------------------|--------|
|                                                                                          |   |
| Exhibit A  – Form of Articles of Merger                                             |   |
| Exhibit B  – Form of Employment Agreement                                           |   |
| Exhibit C  – Form of Escrow Agreement                                               |   |
| Exhibit D  – Form of Letter of Transmittal                                          |   |
| Exhibit E  – Opinion of Bradley, Arant Rose & White LLP, Counsel to the Company |   |
| Exhibit F  – Opinion of Farella Braun + Martel LLP, Counsel to Parent and Purchaser |   |
| Exhibit G  – Form of Investor Representations Letter                                |   |
| Exhibit  H – Form of Warrant Redemption Agreement                                        |   |
| Schedule 1  – Company Disclosure Schedule                                           |   |
| Schedule 2  – Parent Disclosure Schedule                                            |   |

 

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**AGREEMENT AND PLAN OF MERGER**

 

This AGREEMENT AND PLAN OF MERGER (this “**Agreement**”) is made as of the 28th day of May, 2004 (the “**ExecutionDate**”), among Tier Technologies, Inc., a California corporation (“**Parent**”), Baker Acquisition Corporation, anAlabama corporation and a wholly owned subsidiary of Parent (“**Purchaser**”), EPOS Corporation, an Alabamacorporation (the****“**Company**”),each of the Stockholders (as defined below) and Michael A Lawler, asShareholder Representative.

 

**RECITALS**

 

WHEREAS, the Company is engaged, among other things, in the business ofsupplying interactive communications hardware and software to enable efficientand intelligent management of customer relationships (the “**Business**”);

 

WHEREAS, the Stockholders, who are also the Company’s principalmanagers, own, on a fully diluted basis, approximately 94% of the Company’scommon stock, par value $0.01 per share (the “**CompanyCommon Stock**”);

 

WHEREAS, subject to the terms and conditions set forth in thisAgreement, the parties to this Agreement desire that Purchaser be merged withand into the Company (the “**Merger**”),that the Company be the surviving corporation in the Merger (the “**Surviving Corporation**”), and that eachshare of the Company Common Stock and each warrant to acquire shares of CompanyCommon Stock that is outstanding immediately prior to the Effective Time of theMerger be converted into the right to receive a portion of the MergerConsideration in the manner contemplated by this Agreement;

 

WHEREAS, the boards of directors of Parent, Purchaser and the Companyhave approved the Merger in accordance with the provisions of the Alabama BusinessCorporation Act (the “**ABCA**”) andother applicable state law, and have determined that the Merger and the othertransactions contemplated by this Agreement (the “**Transactions**”), subject to the terms of this Agreement, are inthe best interest of Parent, Purchaser and the Company, respectively, and eachcompany’s respective shareholders;

 

WHEREAS, James F. Byrd, Edward R. Graf, Timothy A. Johnson and MichaelA. Lawler (collectively, the “**Stockholders**”)have executed employment agreements with Purchaser that will become effectiveimmediately after the Effective Time;

 

NOW THEREFORE, in consideration of the mutual agreements containedherein and for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the parties hereto, intending tobe legally bound, agree as follows:

 

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**ARTICLE 1**DEFINITIONS

** **

1.1                                                    *Definitions*.  The terms defined in this Article 1, whenever used in thisAgreement, shall have the following meanings for all purposes of thisAgreement:

 

“**AAA**”has the meaning provided in Section 10.2.

 

“**ABCA**”has the meaning provided in the Preamble.

 

“**A2DParties**” has the meaning provided in Section 8.2.

 

“**AcquisitionProposal**” has the meaning provided in Section 5.2.

 

“**Action**” has the meaningprovided in Section 3.13.

 

“**AdverseProposal**” has the meaning provided in Section 5.9.

 

“**Affiliate**” means, withrespect to any Person, any Person directly or indirectly controlling,controlled by, or under common control with, such other Person.  For purposes of this definition, “control”when used with respect to any Person, means the possession, directly orindirectly, of the power to direct or cause the direction of the management andpolicies of such Person, whether through the ownership of voting securities, bycontract or otherwise; the terms “controlling” and “controlled” have meaningscorrelative to the foregoing.

 

“**AggregateCash Payout**” means $428,693.

 

“**Agreement**” has themeaning provided in the Preamble.

 

“**Articles of Merger**” meansthe Articles of Merger substantially in the form attached hereto as Exhibit A.

 

“**AuditedFinancial Statements**” has the meaning provided in Section 3.6.

 

“**Business**”has the meaning provided in the Recitals.

 

“**Cash Consideration**” means$7,256,432 in cash, subject to adjustment as set forth in Section 2.12.

 

“**CashPayout**” means an amount of cash equal to $3.7278.

 

“**Certificates**” has themeaning provided in Section 2.8.

 

“**Closing**” has the meaningprovided in Section 2.2.

 

“**Closing Balance Sheet**”has the meaning provided in Section 2.12.

 

“**Closing Date**” means thedate the Closing takes place.

 

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“**Code**” means the InternalRevenue Code of 1986, as amended.

 

“**Company**” has the meaningprovided in the Preamble.

 

“**Company401(k) plan**” has the meaning provided in Section 5.8.

 

“**Company Common Stock**” hasthe meaning provided in the Recitals.

 

“**Company Disclosure Schedule**”has the meaning provided in Section 3.1.

 

“**Company Financials**” hasthe meaning provided in Section 3.6.

 

“**CompanyIntellectual Property**” has the meaning provided inSection 3.12.

 

“**Company Properties**” hasthe meaning provided in Section 3.19.

 

“**Company Shareholders**”means the holders of any shares of the Company Common Stock immediately priorto the Effective Time.

 

“**CompanySubsidiary**” has the meaning provided in Section 3.1.

 

“**CompanyTransaction Costs**” has the meaning provided in Section 2.8.

 

“**Competitive Business**” hasthe meaning provided in Section 7.1.

 

“**Dispute**”has the meaning provided in Section 10.2.

 

“**Dissenting Shares**” hasthe meaning provided in Section 2.11.

 

“**EffectiveDate**” has the meaning provided in Section 2.4.

 

“**Effective Time**” has themeaning provided in Section 2.3.

 

“**Employee Manuals**” has themeaning provided in Section 3.16.

 

“**Employee Plans**” has themeaning provided in Section 3.16.

 

“**Employment Agreement**” hasthe meaning provided in Section 6.2.

 

“**Encumbrances**” means anyliens, security interests, hypothecations, assessments, mortgages, pledges,agreements, easements, encroachments, claims, charges, options, restrictions orencumbrances of any nature whatsoever.

 

“**Environment**” means theland, soils, subsurface soils, surface or subsurface strata, geologicalformations, groundwater, surface waters, steam sediments, ambient air of theEarth, and any other environmental medium.

 

“**Environmental Requirements**”means all federal, state, local, foreign and other applicable laws, statutes,ordinances, rules, regulations, codes, licenses, orders, interpretations,

 

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guidance documents, decisions, decrees, notices, permits, approvals,plans, authorizations, concessions, franchises, common or decisional law(including, without limitation, principles of tort, negligence, trespass, nuisance,strict liability, contribution and indemnification) and similar items of allgovernmental authorities, relating in any way to the protection, investigation,remediation or restoration of the Environment (including, without limitation,natural resources) or human health or safety, as the same may be amended fromtime to time.

 

“**Equity Price**” means (a)$2.2005 in cash and (b) 0.1463 shares of Parent Class B Stock.

 

“**ERISA**” means the EmployeeRetirement Income Security Act of 1974, as amended.

 

“**EscrowAgent**” means U.S. Bank, National Association, as escrow agent.

 

“**EscrowAgreement**” has the meaning provided in Section 2.8.

 

“**EscrowFund**” has the meaning provided in Section 2.8.

 

“**ExchangeAct**” has the meaning provided in Section 3.1.

 

“**ExchangeAgent**” has the meaning provided in Section 2.8.

 

“**ExchangeFund**” has the meaning provided in Section 2.8.

 

“**ExecutionDate**” has the meaning provided in the Recitals.

 

“**FeeLetter**” has the meaning provided in Section 3.23.

 

“**GAAP**” means United Statesgenerally accepted accounting principles in effect from time to time.

 

“**GovernmentalEntity**” means any Federal, state or local government or any court,administrative agency, commission or other governmental authority or agency,domestic or foreign.

 

“**GrossMargin**” shall mean a percentage, determined by dividing (a) theProfit earned on an applicable agreement or contract by (b) the actualprofessional services revenue recognized on such agreement or contractdetermined in accordance with GAAP.

 

“**Hazardous Material**” meansany hazardous or toxic substance, material or waste which is regulated under,or defined as a “hazardous substance,” “pollutant,” “contaminant,” “toxicchemical,” “hazardous material,” “toxic substance” or “hazardous chemical”under (a) the Comprehensive Environmental Response, Compensation, andLiability Act (CERCLA); (b) the Emergency Planning and CommunityRight-to-Know Act, 42 U.S.C. Section 11001 et seq.; (c) the ResourceConservation and Recovery Act, 42 U.S.C. § 6901 et seq.; (d) theHazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.;(e) the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;(f) the Occupational Safety and Health Act of 1970, 29 U.S.C.Section 651 et seq.; (g) regulations promulgated under any of theabove statutes; or (h) any applicable state or local statute, ordinance,rule, or regulation that has a scope or purpose

 

4

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similar to those statutes identified above.  Hazardous Material includes petroleum and petroleum-relatedcompounds, asbestos, lead and lead-based paint, radon, PCBs and ureaformaldehyde foam insulation.

 

“**IndemnifiedParty**” has the meaning provided in Section 8.4.

 

“**Intellectual Property**”has the meaning provided in Section 3.12.

 

“**Knowledge of the Company**”or “**Company’s Knowledge**” means theactual knowledge of James F. Byrd, Edward R. Graf, Timothy A.Johnson, Michael A. Lawler, Michael Lightfoot and Benjamin Mitchell andthe knowledge that such persons would have obtained after reasonable inquiryand investigation.

 

“**LeasedReal Property**” has the meaning provided inSection 3.10.

 

“**Losses**”has the meaning provided in Section 8.2.

 

“**Material Adverse Effect**”or “**Material Adverse Change**”means, when used with respect to the Company or Parent, as the case may be, anychange, event, occurrence, state of facts or effect that is or could reasonablybe expected to be, individually or in the aggregate, materially adverse to thebusiness, results of operations, assets (whether tangible or intangible), orfinancial condition of the Company or Parent, as the case may be; *provided,however*, that none of the following shall be taken into account indetermining whether there has been a Material Adverse Effect: (i) the failureof the Company or the Company Subsidiary (as hereinafter defined), taken aloneand without reference to the preceding sentence, to meet internal projectionsor forecasts, (ii) any adverse change, effect, event or occurrence directlyresulting from the execution of this Agreement or the announcement orconsummation of the Transactions (including, without limitation, any loss ofcustomers, cancellations of or delays in customer orders, any reduction insales, any disruption in supplier, partner, distributor or similar relationships,any loss of employees or any litigation relating to the Merger, or any decreasein the trading price of Parent Class B Stock); (iii) any adverse change,effect, event or occurrence relating to the economy of the United States ingeneral or conditions in the industry in which the Company or Parent, as thecase may be, operates in general, and not specifically relating to the Companyor Parent or their respective subsidiaries; or (iv) any adverse change, event,occurrence, state of facts or effect required or directly resulting from anychange in GAAP, any FASB pronouncement or any change in applicable laws, rulesor regulations.

 

“**Merger**” has the meaningprovided in the Recitals.

 

“**Merger Consideration**” hasthe meaning provided in Section 2.6.

 

“**Non-AccreditedInvestors**” means Jack N. Figh and Keith N. Davis.

 

“**OwnedReal Property**” has the meaning provided in Section 3.10.

 

“**Parent**” has the meaningprovided in the Preamble.

 

“**ParentClass A Stock**” has the meaning provided in Section 4.3.

 

5

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“**ParentClass B Stock**” has the meaning provided in Section 2.6.

 

“**Parent Disclosure Schedule**”has the meaning set forth in Section 4.1.

 

“**ParentIndemnified Parties**” has the meaning provided in Section 8.2.

 

“**ParentLosses**” has the meaning provided in Section 8.2.

 

“**ParentPreferred Stock**” has the meaning provided in Section 4.3.

 

“**Parent SEC Reports**” meansall reports, schedules, forms, statements and other documents (includingexhibits and all other information incorporated therein) required to be filedor furnished with the Securities and Exchange Commission sinceDecember 31, 2002.

 

“**ParentShares**” has the meaning provided in Section 2.6.

 

“**Parent’s or Purchaser’s Knowledge**”means the actual knowledge of James Weaver, Jeffrey McCandless, and LauraDePole and the knowledge that such persons would have obtained after reasonableinquiry and investigation.

 

“**Permitted Liens**” means(a) liens (other than environmental liens and any lien imposed underERISA) for taxes, assessments or charges of any governmental authority orclaims not yet due or which are being contested in good faith by appropriateproceedings and with respect to which adequate reserves or other appropriateprovisions are being maintained in accordance with the provisions of GAAP;(b) statutory liens of landlords and liens of carriers, warehousemen,mechanics, materialmen and other liens (other than any lien imposed underERISA) imposed by law and created in the ordinary course of business foramounts not yet due or which are being contested in good faith by appropriateproceedings and with respect to which adequate reserves or other appropriateprovisions are being maintained in accordance with the provisions of GAAP or inrespect of which a payment or performance bond has been obtained;(c) liens (other than any lien imposed under ERISA) incurred or depositsmade in the ordinary course of business (including, without limitation, suretybonds and appeal bonds) in connection with workers’ compensation, unemploymentinsurance and other types of social security benefits or to secure theperformance of tenders, bids, leases, contracts (other than the repayment ofindebtedness), statutory obligations and other similar obligations or arisingas a result of progress payments under contracts; (d) easements(including, without limitation, reciprocal easement agreements and utilityagreements), rights-of-way, covenants, consents, reservations, encroachments,variations and other restrictions, charges or encumbrances (whether or notrecorded), which do not interfere materially with the ordinary conduct of thebusiness of such party or its subsidiaries; and (e) building restrictions,zoning laws and other statutes, laws, rules, regulations, ordinances andrestrictions, and any amendments thereto, now or at any time hereafter adoptedby any governmental authority having jurisdiction.

 

“**Person**” means anindividual, corporation, company, association, partnership, joint venture,limited liability company, trust, estate, unincorporated organization,governmental authority or other entity.

 

“**Plan**” has the meaningprovided in Section 3.17.

 

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“**Plan Administrator**” hasthe meaning provided in Section 3.17.

 

“**Profit**”means the actual professional services revenue recognized on an applicableagreement or contract determined in accordance with GAAP minus theactual professional services direct project costs incurred on such agreement orcontract.  For the avoidance of doubt, direct project costs do not includea general overhead burden.

 

“**PTO**” has the meaningprovided in Section 3.12.

 

“**Purchaser**” has themeaning provided in the Preamble.

 

“**Return**” means any return,report, information return, estimated tax return or report, schedule, form,certificate, statement, declaration, claim for refund or other document(including any schedule, attachment or amendment thereto, any extension to filethereof and any related or supporting information) filed or required to befiled with any federal, state, local or foreign governmental entity or otherauthority in connection with the determination, assessment or collection of anyTax or the administration of any laws, regulations or administrativerequirements relating to any Tax.

 

“**Rule144**” has the meaning provided in Section 7.4.

 

“**Rules**”has the meaning provided in Section 10.2.

 

“**SEC**” means the UnitedStates Securities and Exchange Commission.

 

“**SecuritiesAct**” has the meaning provided in Section 4.7

 

“**ShareholderIndemnified Parties**” has the meaning provided in Section 8.3.

 

“**ShareholderLosses**” has the meaning provided in Section 8.3.

 

“**ShareholderRepresentative**” has the meaning provided in Section 2.13.

 

“**Stockholders**” has themeaning provided in the Recitals.

 

“**Straddle Periods**” has themeaning provided in Section 3.8.

 

“**Subsidiary**” means, withrespect to any entity, any corporation or other organization, whetherincorporated or unincorporated, of which at least a majority of the securitiesor interests having by their terms ordinary voting power to elect a majority ofthe board of directors or others performing similar functions is owned,directly or indirectly, by such entity.

 

“**SubsidiaryCommon Stock**” has the meaning provided in Section 3.2.

 

“**SunTrust Warrant**” meansthe warrant issued to SunTrust Banks, Inc. pursuant to the Subordinated Noteand Warrant Purchase Agreement, dated December 3, 1999, by and among theCompany, the Company Subsidiary and SunTrust Banks, Inc. and assigned toSunTrust Equity Funding, LLC pursuant to an assignment executed by SunTrustBanks, Inc. on February 5, 2003.

 

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“**Surviving Corporation**”has the meaning provided in the Recitals.

 

“**Tax Affiliate**” means anyAffiliate of the Company that has been or is currently included in aconsolidated, unitary or combined Return with the Company for any taxableperiod during which the Company was required to be included in suchconsolidated, unitary or combined Return.

 

“**Taxes**” means all taxes,charges, fees, levies or other assessments imposed by any federal, state,local, or foreign taxing authority, including, without limitation, income,alternative or add-on minimum, value added, excise, real and personal property,sales, use, occupation, service, service use, transfer, payroll, withholding,franchise, environmental, customs, duty, stamp, employment, unemployment,social security (or similar), disability, severance, gross receipts, license,capital stock, intangible property and occupation taxes (whether payabledirectly or by withholding and whether or not requiring the filing of a Return)and any claim or assessment by the Internal Revenue Service, the Department ofLabor or other governmental agency arising from or relating to the failure totimely file any Return (including any interest, penalties or additionsattributable to or imposed on or with respect to any such claim or assessment).

 

“**TechnologyPark Lease**” has the meaning provided in Section 3.10.

 

“**ThirdParty Debt**” has the meaning provided in Section 5.6.

 

“**Transaction Documents**”means this Agreement, the Escrow Agreement, the Articles of Merger and theEmployment Agreements and any schedule or attachment to any of theforegoing.

 

“**Transactions**” has themeaning provided in the Recitals.

 

“**TransmittalLetter**” has the meaning provided in Section 2.8.

 

“**UnauditedFinancial Statements**” has the meaning provided in Section 3.6.

 

“**WarrantPayout**” means an amount of cash equal to $273,847.

 

“**WarrantRedemption Agreement**” has the meaning provided in Section 2.7.

 

**ARTICLE 2**MERGER, CLOSING, CONVERSION OF SHARES AND PAYMENT FOR SHARES

** **

2.1                                                    *Merger*. Subject to the provisions of this Agreement, and in accordance withSection 10-2B-11.01 of the ABCA, Purchaser shall be merged with and intothe Company at the Effective Time.  Uponconsummation of the Merger, the separate corporate existence of Purchaser shallcease and the Company shall be the Surviving Corporation and shall continue itscorporate existence under the ABCA.

 

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2.2                                                    *Closing*. Subject to the terms and conditions set forth herein, the Closing of theTransactions (the “**Closing**”) shalltake place at the offices of Farella, Braun & Martel LLP, 235Montgomery Street, Russ Building, San Francisco, California 94104 at 10:00 a.m.California time on June 1, 2004, or if earlier, three (3) business daysafter all of the conditions to closing set forth in Article 6 have beensatisfied or waived, or at such other place, date or time as Parent and theCompany may agree upon in writing. Simultaneously with the Closing, the Company and Purchaser shall filethe Articles of Merger with the Secretary of State of the State of Alabama.

 

2.3                                                    *Effective Time*.  The Merger shall become effective at the Effective Time.  When used in this Agreement, the term “**Effective Time**” shall mean the date andtime at which the Articles of Merger, which have been executed in accordancewith the relevant provisions of the ABCA and filed with the Secretary of Stateof the State of Alabama, are accepted for recording or such later timeestablished by the Articles of Merger.

 

2.4                                                    *Effects of Merger**; Effective Date*.

 

(a)                        TheMerger shall have the effects set forth in this Agreement and in the applicableprovisions of the ABCA.  Withoutlimiting the generality of the foregoing, and subject thereto, at the EffectiveTime all property, rights, powers, privileges and franchises of the Companyshall vest in Purchaser as the Surviving Corporation, and all debts,liabilities and duties of the Company shall become the debts, liabilities andduties of the Surviving Corporation. The Surviving Corporation may, at any time after the Effective Time,take any action (including executing and delivering any document) in the nameand on behalf of either the Company or Purchaser in order to carry out andeffectuate the Transactions.

 

(b)                       Ifthe Closing actually occurs, and the Closing Date is later than June 1,2004 (the “**Effective Date**”), Parent shall be deemed to (i) have assumedeffective managerial and operational control of the Company and the CompanySubsidiary on the Effective Date and (ii) receive credit and responsibility forall operations of, and events relating to, the Company accruing, occurring orarising on and after the Effective Date including, without limitation, thevarious items of income and expense of the Company and the Company Subsidiary.

 

2.5                                                    *Charter and Bylaws; Directors and Officers*.  At or as of the Effective Time (i) theArticles of Incorporation of the Surviving Corporation shall be amended as setforth in the Articles of Merger to be the same as those of Purchaserimmediately prior to the Effective Time (except the name of the SurvivingCorporation shall be EPOS Corporation) until further amended in accordance withapplicable law, and (ii) the Bylaws of Purchaser immediately prior to theEffective Time shall become the Bylaws of the Surviving Corporation.  At or as of the Effective Time, thedirectors and officers of Purchaser immediately prior to the Effective Timeshall become the directors and officers of the Surviving Corporation, until theearlier of their resignation or removal or until their respective successorsare duly elected and qualified, as the case may be.

 

2.6                                                    *Merger Consideration*.  The total consideration to be paid by Parentin the Merger (the “**Merger Consideration**”)is (a) the Cash Consideration and (b) 402,422 shares (the “**Parent Shares**”) of Parent’s Class BCommon Stock, no par value (the “**ParentClass B Stock**”).

 

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2.7                                                    *Conversion of Securities*.  As of the Effective Time, by virtue of theMerger and without any action on the part of Parent, Purchaser, the Company,the Stockholders or the holders of any securities of Parent, Purchaser or theCompany:

 

(a)                        Eachissued and outstanding share of Company Common Stock held by the Non-AccreditedInvestors shall be converted into the right to receive the Cash Payout, upon surrender of the Certificateformerly representing such outstanding share of Company Common Stock in themanner set forth in Section 2.8, and as of the Effective Time, each suchoutstanding share of Company Common Stock shall no longer be issued andoutstanding and shall automatically be cancelled and retired and shall cease toexist, and each such holder of a Certificate shall cease to have any rightswith respect thereto, except the right to receive the Cash Payout for each suchshare of Company Common Stock represented by such Certificate as hereinaboveset forth without interest (or, if applicable, to be treated as a DissentingShare);

 

(b)                       Eachissued and outstanding share of Company Common Stock (other than those sharesof Company Common Stock held by the Non-Accredited Investors) shall beconverted into the right to receive the Equity Price, upon surrender of the Certificate formerly representing suchoutstanding share of Company Common Stock in the manner set forth inSection 2.8, and as of the Effective Time, each such outstanding share ofCompany Common Stock shall no longer be issued and outstanding and shallautomatically be cancelled and retired and shall cease to exist, and each suchholder of a Certificate shall cease to have any rights with respect thereto,except the right to receive the Equity Price for each such share of CompanyCommon Stock represented by such Certificate as hereinabove set forth withoutinterest (or, if applicable, to be treated as a Dissenting Share); and

 

(c)                        TheSunTrust Warrant shall be redeemed by the Surviving Corporationcontemporaneously with the Closing pursuant to and in accordance with thatcertain Warrant Redemption Agreement between the Company and SunTrust EquityFunding, LLC, dated as of May 28, 2004 (the “**Warrant Redemption Agreement**”),substantially in the form attached hereto as Exhibit H, and Parentshall cause the Surviving Corporation to, upon surrender of the documentsformerly representing such SunTrust Warrant, pay to SunTrust Equity Funding,LLC an amount equal to the Warrant Payout, and as of the Effective Time and inaccordance with the Warrant Redemption Agreement, the SunTrust Warrant shall nolonger be issued and outstanding and shall automatically be cancelled andretired and shall cease to exist, and the holder of the SunTrust Warrant (the “**WarrantHolder**”) shall cease to have any rights with respect thereto, exceptthe right to receive the Warrant Payout.

 

2.8                                                    *Receipt ofConsideration; Escrow Fund and Exchange Fund*.

 

(a)                        Atthe Closing, the Merger Consideration shall first be paid or applied asfollows: (i) Parent shall cause the Surviving Corporation to pay in cashan amount sufficient to cover all of the Company’s transaction costs that havebeen incurred by the Company or the Company Subsidiary in connection with theTransactions then unpaid (the “**CompanyTransaction Costs**”); (ii) Parent shall withhold amounts inaccordance with Section 2.10; and (iii) Parent shall deliver to the EscrowAgent (A) cash equal to $300,000 and (B) 95,815 shares of Parent Class B Stock(collectively, the “**Escrow Fund**”),which will be deposited with the Escrow Agent (as such term is defined in theEscrow Agreement attached hereto as Exhibit C

 

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(the “**Escrow Agreement**”))and will be governed by the terms set forth in the Escrow Agreement.  The Escrow Fund shall terminate eighteen(18) months after the Effective Time (except for any portion to cover anytimely made claims of any Parent Indemnified Party pursuant to Article 8which remain unsatisfied at such time). The provisions of the Escrow Agreement shall govern in the event of anyconflict between the Escrow Agreement and this Section 2.8(a).

 

(b)                       Priorto the Effective Time, Parent will designate a Person reasonably acceptable tothe Company to act as agent (the “**Exchange Agent**”) for the CompanyShareholders to receive the funds necessary to make payments to such holderspursuant to this Section 2.8.  Onthe Closing Date, Parent shall deliver to the Exchange Agent, in trust for thebenefit of the Company Shareholders, (i) the Parent Shares less the stockportion of the Escrow Fund and (ii) a wire transfer in an amount equal to theCash Consideration less (x) the Company Transaction Costs and (y) thecash portion of the Escrow Fund (the “**Exchange Fund**”).

 

(c)                        AnyCompany Shareholder and the Warrant Holder that has complied with the followingrequirements, as applicable, but only to the extent all of the conditions inArticle 6 have been satisfied or waived, shall be entitled to receive,upon or as soon as practicable following the Effective Time, (i) in the case ofthe Stockholders, the Equity Price for each share of Company Common Stock heldby such Stockholders, (ii) in the case of the Non-Accredited Investors, theCash Payout for each share of Company Common Stock held by such Non-AccreditedInvestors, and (iii) in the case of the Warrant Holder, the Warrant Payout:

 

(i)                                     Forholders of shares of Company Common Stock, the Company Shareholder hasdelivered to the Exchange Agent its stock certificate or certificates withrespect to such share or shares (the “**Certificates**”)and a fully executed transmittal letter substantially in form and substance asset forth in Exhibit D (the “**TransmittalLetter**”); and

 

(ii)                                  Forthe Warrant Holder, such Warrant Holder has delivered to the Company at orprior to the Effective Time the documents representing such SunTrust Warrant andcomplied with the terms of the Warrant Redemption Agreement.

 

(d)                       Suchpayments to be made to the Company Shareholders and the Warrant Holderhereunder shall be made by wire transfer to the account of each such CompanyShareholder or the Warrant Holder, or by certified check, cashier’s check orother immediately available funds sent to each such Company Shareholder or theWarrant Holder, as designated by such Company Shareholder in its executedTransmittal Letter or by the Warrant Holder pursuant to the Warrant RedemptionAgreement.

 

(e)                        Withrespect to any holder of shares of Company Common Stock that has not compliedwith the requirements of Section 2.8(c), as soon as practicable after theEffective Time (but in no event later than five (5) business days thereafter),the Surviving Corporation shall cause the Exchange Agent to send a notice andTransmittal Letter, to each such holder of shares of Company Common Stockadvising such holder of the effectiveness of the Merger and the procedure forsurrendering to the Exchange Agent Certificates and Transmittal Letters, inexchange for (i) in the case of the Stockholders, the Equity Price payable tosuch Stockholders for each share of Company Common Stock held by suchStockholder and (ii) in the case of the

 

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Non-AccreditedInvestors, the Cash Payout payable to such Non-Accredited Investor for eachshare of Company Common Stock held by such Non-Accredited Investor.

 

(f)                          Allconsideration paid in accordance with the terms of this Section 2.8 shallbe deemed to have been paid in full satisfaction of all rights pertaining tothe shares of Company Common Stock represented by the Certificates and theSunTrust Warrant; subject, however, to the escrow arrangements set forth inSection 2.8(a) (with respect to the Stockholders only) and the withholdingprovisions of Section 2.10.

 

(g)                       Anyportion of the Exchange Fund (including the proceeds of any investmentsthereof) that remains unclaimed by any holder of shares of Company Common Stocktwelve (12) months after the Effective Time shall be delivered to the SurvivingCorporation.  Any holder of shares ofCompany Common Stock who has not theretofore complied with thisSection within twelve (12) months of the Effective Time shall thereafterhave no rights with respect to the Exchange Fund, and thereafter may makerequests for the payment of (i) with respect to the Stockholders, the EquityPrice for each share of Company Common Stock held by such Stockholder or (ii)with respect to the Non-Accredited Investors, the Cash Payout for each share ofCompany Common Stock held by such Non-Accredited Investor, without any interestthereon, only to the Surviving Corporation, which shall have the soleobligation thereafter to make such payments in response to such requests,subject to compliance by such holders of shares of Company Common Stock withthe terms and conditions of this Section 2.8.  None of the Company, Parent, Purchaser, the SurvivingCorporation, the Exchange Agent or any other Person shall be liable to anyholder of shares of Company Common Stock for any amount properly delivered to apublic official pursuant to applicable abandoned property, escheat or similarlaws.

 

2.9                                                    *Lost, Stolen or Destroyed Certificates*.  In the event any Certificate shall have beenlost, stolen or destroyed, upon the making of an affidavit of that fact by thePerson claiming such Certificate to be lost, stolen or destroyed and, ifrequired by the Surviving Corporation, the posting by such Person of a bond insuch reasonable amount as the Surviving Corporation may require as indemnityagainst any claim that may be made against it with respect to such Certificate,the Exchange Agent or the Surviving Corporation, as applicable, will pay tosuch Person, in exchange for such lost, stolen or destroyed Certificate, theCash Payout or Equity Price, as applicable, for each share of Company CommonStock to which the holder thereof is entitled pursuant to Section 2.7.

 

2.10                                              *Withholding Rights*.  The Surviving Corporation shall be entitledto deduct, and withhold from the Cash Payout or Equity Price, as applicable,otherwise payable hereunder to any holder of shares of Company Common Stock, orto deduct, and withhold from the Warrant Payout otherwise payable to the WarrantHolder, such amounts as the Surviving Corporation is required to deduct andwithhold with respect to the making of such payment under the Code or anyprovision of state, local or foreign Tax law. To the extent that amounts are so withheld by the Surviving Corporation,such withheld amounts shall be treated for all purposes of this Agreement ashaving been paid to the holder of such shares of Company Common Stock or theWarrant Holder in respect of which such deduction and withholding was made bythe Surviving Corporation.

 

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2.11                                              *Shares of Dissenting Shareholders*.

 

(a)                        Notwithstanding anything in thisAgreement to the contrary, any shares of Company Common Stock that are issuedand outstanding immediately prior to the Effective Time and that are held by aholder who has properly exercised and perfected his or her dissenters’ rightsunder Article 13 of the ABCA (“**DissentingShares**”) shall not be converted into or exchangeable for the rightto receive the Cash Payout or Equity Price, as applicable, but shall entitlethe holder thereof to receive payment of the fair value of such DissentingShares in accordance with the provisions of Article 13 of the ABCA.

 

(b)                       At the Effective Time, theDissenting Shares shall no longer be outstanding and shall automatically becanceled and shall cease to exist, and each holder of Dissenting Shares shallcease to have any rights with respect thereto, except the right to receive thefair value of such Dissenting Shares in accordance with Article 13 of theABCA.  If such holder shall have failedto perfect or shall have effectively withdrawn or lost his or her right toreceive payment under Article 13 of the ABCA, each share of Company CommonStock of such holder shall no longer be a Dissenting Share and thereupon shallbe deemed to have been converted into and to have become exchangeable for, asof the Effective Time, the right to receive the Cash Payout or Equity Price, asapplicable, without any interest thereon in accordance with Section 2.8.

 

(c)                        The Company shall give Parent(i) prompt notice of any written demands for appraisal of any shares ofCompany Common Stock, withdrawals of such demands, and any other instrumentsserved pursuant to the ABCA (including instruments concerning appraisal ordissenters’ rights) and received by the Company, together with a copy of anysuch demand and (ii) the opportunity to participate in all negotiationsand proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent,voluntarily make any payment with respect to any demands for the appraisal ofany shares of Company Common Stock or offer to settle or settle any suchdemands unless such payment or settlement will not result in any obligation ofParent or the Surviving Corporation following the Effective Time.

 

(d)                       In the event that any holder ofshares of Company Common Stock asserts any dissenters’ rights, this Agreementshall be deemed to have been amended and restated to reduce the aggregatepayments (including the Cash Consideration, the Parent Shares and Escrow Fund)contemplated to be made to the Company Shareholders hereunder so as to causeeach such holder (other than any such holder with Dissenting Shares) to receivethe consideration that such holder would have received in connection with theMerger had there been no Dissenting Shares.

 

2.12                                              *Adjustment to Merger Consideration*.  At least three (3) business days prior tothe Closing Date, the Company shall deliver to Parent the Company’sconsolidated balance sheet as of the close of business on April 30, 2004(the “**Closing Balance Sheet**”).  If the total liabilities reflected on theClosing Balance Sheet exceed the total assets reflected on the Closing BalanceSheet by more than $1,300,000, then the amount of the Cash Consideration paidby Parent at Closing pursuant to Section 2.8 shall be reduced by an amountequal to the amount that such difference exceeds $1,300,000.

 

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2.13                                              *Shareholder Representative*.  Effective automatically upon the approval ofthe Merger and the other Transactions by the Company Shareholders, and withoutfurther act of any Company Shareholder, each Company Shareholder shall bedeemed to have appointed Michael A. Lawler (the “**Shareholder Representative**”) as the attorney-in-fact of suchCompany Shareholder (except such Company Shareholders, if any, that haveperfected their dissenters’ rights under Alabama law), with full power andauthority, including power of substitution, acting in the name of and for andon behalf of such Company Shareholder and to, in his sole discretion:(a) enter into and amend or waive any provision of this Agreement;(b) terminate this Agreement pursuant to the provisions of Article 9;(c) do all other things and take all other action under or related to thisAgreement which he may consider necessary or proper to effectuate the Mergerand the other Transactions; (d) resolve any dispute with Parent, Purchaseror the Surviving Corporation over any aspect of this Agreement or anyinstrument or document delivered hereunder; (e) execute and take anyactions under the Escrow Agreement; (f) give and receive notices andcommunications; (g) authorize delivery to Parent of cash from the EscrowFund in satisfaction of claims by Parent and the Escrow Agent; (h) objectto such deliveries; (i) agree to, negotiate, enter into settlements andcompromises of, and demand litigation or arbitration and comply with orders andawards of courts and arbitrators in respect of such claims; (j) on behalfof such Company Shareholder to enter into any agreement to effectuate any ofthe foregoing items (a)–(i) which shall have the effect of binding such CompanyShareholder as if such Company Shareholder had personally entered into suchagreement(s), taken such actions or refrained from taking such actionsdescribed in Sections (a)-(i) above; and (k) take all other actionsnecessary or appropriate in the judgment of the Shareholder Representative forthe accomplishment of the foregoing. Notwithstanding the foregoing, all actions taken or decisions made bythe Shareholder Representative on behalf of the Company Shareholders shall betaken or made in a manner which is ratable and equitable among all CompanyShareholders.  This appointment andpower of attorney shall be deemed an agency coupled with an interest and allauthority conferred hereby shall be irrevocable and shall not be subject totermination by operation of law, whether by the death or incapacity orliquidation or dissolution of any Company Shareholder or the occurrence of anyother event or events and any action taken by the Shareholder Representativepursuant to this Section 2.13 shall be as valid as if any such death,incapacity, liquidation, dissolution or other event had not occurred,regardless or whether or not the Shareholder Representative, the Company,Parent or Purchaser shall have received notice of any such death, incapacity,liquidation, dissolution or other event. The Shareholder Representative may not terminate this power of attorneywith respect to any Company Shareholder or such successors or assigns withoutthe consent of Parent.  Effectiveautomatically upon approval of the Merger and the other Transactions by theCompany Shareholders, and without further act of any Company Shareholders, eachCompany Shareholder agrees to hold the Shareholder Representative harmless andindemnify the Shareholder Representative, severally (and not jointly) inaccordance with the amount of Merger Consideration received by suchindemnifying Company Shareholder, with respect to any and all loss, damage orliability and expenses (including legal fees) which such Company Shareholdermay sustain as a result of any action taken in good faith by the ShareholderRepresentative.  In the event of thedeath, physical or mental incapacity or resignation of the initial ShareholderRepresentative or any successor, the Company Shareholders shall, by a vote ofthe Company Shareholders who held at least a majority of the outstanding sharesof Company Common Stock on the Execution Date, promptly appoint a substituteand shall in writing advise Parent thereof.

 

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**ARTICLE 3**REPRESENTATIONS AND WARRANTIES OFTHE COMPANY AND THE STOCKHOLDERS

** **

Except as described in the Company Disclosure Schedule attachedhereto, the Company and each of the Stockholders hereby jointly and severallyrepresent and warrant to Parent and Purchaser, as of the Execution Date:

 

3.1                                                    *Organizationand Authority*.

 

(a)                        TheCompany has all necessary corporate power and authority to execute and deliverthis Agreement and the Transaction Documents to which the Company is a partyand to perform its obligations hereunder and thereunder.  The execution and delivery by the Company ofthis Agreement and the Transaction Documents to which the Company is a party,the performance by it of its obligations hereunder and thereunder, and theconsummation by it of the transactions contemplated hereby and thereby, havebeen duly authorized by all necessary corporate action on the part of theCompany and the Company Shareholders. This Agreement, and the Transaction Documents to which the Company is aparty, constitute valid and binding obligations of the Company, and, assumingthe valid execution and delivery of this Agreement by Parent, Purchaser and theShareholder Representative, are enforceable against the Company in accordancewith their respective terms, except, in each such case, as such enforceabilitymay be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,moratorium, or other similar laws of general application relating to, affectingor limiting creditors’ rights and by general principles of equity, regardlessof whether such enforceability is considered in a proceeding at law or inequity.  The Company owns 100% of theequity interests of Computer Communications Specialists, Inc., a Georgiacorporation (the “**Company Subsidiary**”),and the Company Subsidiary is the only Subsidiary of the Company.

 

(b)                       TheCompany is a corporation duly incorporated, validly existing and in goodstanding under the laws of Alabama, with full corporate power to execute anddeliver this Agreement and to carry out the Transactions.  The Company is qualified to conduct businessas a foreign corporation in the jurisdictions indicated on Section 3.1(b)of the Company Disclosure Schedule attached as Schedule 1 tothis Agreement (the “**Company DisclosureSchedule**”). Section 3.1(b) of the Company Disclosure Schedule lists allstates in which the Company or the Company Subsidiary owns or leases propertyor has resident employees.  Neither theCompany nor the Company Subsidiary has received any written claim or writtennotice, whether formal or otherwise, (i) from any jurisdiction other than thoselisted on Section 3.1(b) of the Company Disclosure Schedule to theeffect that it is or was required to qualify to conduct business or (ii) fromany jurisdiction listed on Section 3.1(b) of the Company DisclosureSchedule that such jurisdiction may withdraw the Company’s or the CompanySubsidiary’s authorization to conduct business therein.  True, correct and complete copies of thearticles of incorporation, bylaws or other charter documents of the Company andthe Company Subsidiary as in effect on the Execution Date have been deliveredto Parent or its representatives. Neither the Company nor the Company Subsidiary is in violation of any ofthe provisions of its articles of incorporation, bylaws or other charterdocuments.

 

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(c)                        Neitherthe Company nor the Company Subsidiary is a registered or reporting companyunder the Securities Exchange Act of 1934, as amended (the “**Exchange Act**”)

 

3.2                                                    *Capitalizationof the Company and the Company Subsidiary*.

 

(a)                        Theauthorized capital stock of the Company consists of 5,000,000 shares of CompanyCommon Stock.  As of the Execution Date,2,865,000 shares of Company Common Stock are issued and outstanding and1,949,000 shares of Company Common Stock are held by the Company in itstreasury.  The authorized capital stockof the Company Subsidiary consists of 100,000 shares of common stock, par value$1.00 per share (the “**Subsidiary Common Stock**”).  As of the Execution Date, 100 shares ofSubsidiary Common Stock were issued and outstanding and all of such shares wereheld by the Company.  All issued andoutstanding shares of the Company and the Company Subsidiary are validlyissued, fully paid and nonassessable and, to the Company’s Knowledge, are ownedfree and clear of all Encumbrances.  Tothe Company’s Knowledge, the names, addresses and states of residency of therecord holders of the issued and outstanding shares of Company Common Stock areas set forth on Section 3.2(a) of the Company Disclosure Schedule.

 

(b)                       Exceptfor the SunTrust Warrant (which will be redeemed by the Surviving Corporationat the Effective Time in accordance with the terms of the Warrant RedemptionAgreement) there are no outstanding options, warrants, scrip, rights tosubscribe to, calls or commitments of any character whatsoever relating to, orsecurities or rights convertible into or exchangeable for, shares of thecapital stock of the Company or the Company Subsidiary or rights to obtain anyof the foregoing.

 

3.3                                                    *Consents and Approvals*.  No consent, waiver, authorization orapproval of any foreign, domestic, federal, territorial, state or localgovernmental authority, quasi-governmental authority, instrumentality, court,government or self-regulatory organization, commission, tribunal or organizationor any regulatory body, and no declaration to or filing with any governmentalauthority, is required in connection with the execution and delivery of thisAgreement or any of the Transaction Documents by the Company or theStockholders, or the performance of their respective obligations hereunder orthereunder, except (i) such consents, waivers, authorizations, approvals,declarations and filings as may be required under applicable securities laws,(ii) the filing of the Articles of Merger with the Secretary of State of theState of Alabama, (iii) the approval of this Agreement and the Transactions bythe Company Shareholders, and (iv) such consents, waivers, authorizations,approvals, declarations and filings, the failure of which to obtain could notreasonably be expected to have a Material Adverse Effect on the Company.

 

3.4                                                    *Investments in Others*.  The Company does not have any investment inor advance or loan to or guarantee of, or any commitment to make any investmentin, advance or loan to or guarantee of, any Person other than the CompanySubsidiary.

 

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3.5                                                    *Compliancewith Laws and Other Instruments*.

 

(a)                        TheCompany and the Company Subsidiary hold all licenses, permits andauthorizations necessary for the lawful conduct of their business as now beingconducted pursuant to all applicable statutes, laws, ordinances, rules andregulations of all governmental bodies, agencies and other authorities havingjurisdiction over them or any part of its respective operations, except forsuch licenses, permits and authorizations the failure of which to obtain havenot had and could not reasonably be expected to have a Material Adverse Effecton the Company.  There are no violationsor, to the Company’s Knowledge, claimed violations by the Company or theCompany Subsidiary of any such license, permit or authorization or any suchstatute, law, ordinance, rule or regulation, except for such violations orclaimed violations that have not had and could not reasonably be expected tohave a Material Adverse Effect on the Company.

 

(b)                       Neitherthe execution and delivery of this Agreement or any of the TransactionDocuments by the Company nor the performance by the Company of any of itsobligations hereunder or thereunder, will (i) violate any provision of anyUnited States federal, state or local statute, law, ordinance, rule orregulation or any decree or order of any governmental entity thereof, (ii)conflict with, result in the breach of any of the terms or conditions of,constitute a default under, permit any party to accelerate any right under orterminate, constitute a waiver of any material right under, require consent ofany party under, or result in the creation of any Encumbrance upon any of theproperties, assets or capital stock of the Company or the Company Subsidiarypursuant to any material agreement, indenture, mortgage, lease, franchise,license, permit, authorization or other similar instrument of any kind to whichthe Company or the Company Subsidiary is a party or by which any of theCompany’s properties or assets is bound or (iii) conflict with, result in thebreach of any of the terms or conditions of, or constitute a default under anyprovision of any charter document of the Company or the Company Subsidiary,except, in the case of clauses (i) and (ii) only, such violations, conflicts,breaches, defaults, waivers, consents and Encumbrances that could notreasonably be expected to have a Material Adverse Effect on the Company.

 

3.6                                                    *FinancialStatements, Accounting Records and Internal Controls*.

 

(a)                        AuditedFinancial Statements.  The Companyhas delivered to Parent (i) copies of the Company’s audited consolidatedbalance sheet as of August 31, 2001, 2002, 2003, and the relatedconsolidated statements of operations, stockholders’ equity and cash flows(together with the auditors’ report thereon) for the periods then ended,together with notes to such financial statements (the “**Audited Financial Statements**”).  The Audited Financial Statements are inaccordance with the books and records of the Company and the Company Subsidiaryand have been prepared in accordance with GAAP consistently applied throughoutthe periods covered thereby and present fairly in all material respects, as oftheir respective dates, the financial condition, cash flows and results ofoperations of the Company and the Company Subsidiary as of their respectivedates.  The Company has made availableto Parent copies of each management letter or other letter delivered to theCompany in connection with such financial statements or relating to any reviewby auditors of the internal controls of the Company during the five-year periodended August 31, 2003 or thereafter, and has made available for inspectionall reports and working papers produced or developed by auditors or managementin

 

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connection withtheir examination of such financial statements, as well as all such reports andworking papers for prior periods for which any Tax liability of Company has notbeen finally determined or barred by applicable statutes of limitation.  Since August 31, 1998, there has beenno change in any of the significant accounting policies, practices orprocedures of the Company or the Company Subsidiary other than those changesspecifically required by GAAP.

 

(b)                       UnauditedInterim Financial Statements.  TheCompany has delivered to Parent consolidated balance sheets for the Company foreach month since August 31, 2003, and the related consolidated statements ofoperations, stockholder’s equity and cash flows for the one month period thenended (the “**Unaudited Financial Statements**” and, together with the AuditedFinancial Statements, the “**Company Financials**”).  The Unaudited Financial Statements are inaccordance with the books and records of the Company and have been prepared inconformity with GAAP applied on a consistent basis, except that the UnauditedFinancial Statements do not have notes thereto and may be subject to ordinaryperiod end adjustments.  The statementsof operations and cash flows present fairly in all material respects theconsolidated results of operations and cash flows of Company for the respectiveperiods covered, and the balance sheets present fairly in all material respectsthe financial condition of Company as of their respective dates.

 

(c)                        Changein Auditor.  The Company changed itsauditor during the fiscal year ended August 31, 2002.  The reasons for the change in auditor aredescribed in Section 3.6(c) of the Company Disclosure Schedule.  Other than the change in auditor describedin Section 3.6 of the Company Disclosure Schedule, there has been nochange in the Company’s auditor.

 

(d)                       AccountingRecords.  The Company and theCompany Subsidiary have records that accurately and validly reflect itsrespective transactions and accounting controls sufficient to ensure that suchtransactions are (i) executed in accordance with management’s general orspecific authorization and (ii) recorded in conformity with GAAP so as tomaintain accountability for assets. Such records are stored safely and securely pursuant to procedures andtechniques utilized by companies of comparable size in similar lines ofbusiness.  The data processingequipment, data transmission equipment, related peripheral equipment andsoftware used by the Company or the Company Subsidiary in the operation of theBusiness (including any disaster recovery facility) to generate and retrievesuch records are comparable in performance, condition and capacity with thoseutilized by companies of comparable size in similar lines of business.

 

3.7                                                    *Absence of Undisclosed Liabilities*.  To the Company’s Knowledge, neither theCompany nor the Company Subsidiary has any indebtedness or any other liability(absolute, contingent, asserted or unasserted), which is not reflected on orprovided for in full on the balance sheets in the Company Financials which isrequired by GAAP to be provided or reserved on such Company Financials.

 

3.8                                                    *Taxes*.

 

(a)                        TaxReturns.  The Company has timelyfiled or caused to be timely filed with the appropriate taxing authorities allReturns that are required to be filed by, or with respect to, the Company andsuch Returns are correct and complete in all material respects.  None of

 

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such Returnscontains a disclosure statement under Section 6662 of the Code or anysimilar provision of state, local or foreign tax law.  For purposes of this Section 3.8, references to the Companyshall be deemed to include a reference to the Company, its Tax Affiliates andthe Company Subsidiary.

 

(b)                       Paymentof Taxes.  All Taxes and Taxliabilities of the Company (whether or not disclosed on any Return) for alltaxable years or periods that end on or before the Effective Time and, withrespect to any taxable year or period beginning before and ending after theEffective Time (“**Straddle Periods**”),the portion of such taxable year or period ending on and including theEffective Time have been paid or adequate reserves therefor accrued, or will bepaid or so accrued prior to the date of the Closing Balance Sheet, as aliability on the Company Financials (and such reserves are adequate inaccordance with GAAP).  For purposes ofthis representation, all Taxes and Tax liabilities with respect to the income,property or operations of the Company that relate to a Straddle Period shall beapportioned between the pre-Effective Time period and the post-Effective Timeperiod as follows: (i) in the case of Taxes other than income Taxes andsales and use Taxes, on a per diem basis, and (ii) in the case of incomeTaxes and sales and use Taxes, as determined from the books and records of theCompany, to the portion of such period ending on the Effective Time as thoughthe taxable year of the Company terminated at the close of business on theEffective Time, and based on accounting methods, elections and conventions thatdo not have the effect of distorting income and expenses.

 

(c)                        OtherTax Matters.

 

(i)                                     Section 3.8(c)of the Company Disclosure Schedule sets forth (A) for each of thepast five taxable years, each federal and state jurisdiction in which theCompany or the Company Subsidiary paid, or was obligated to pay, any Taxes,(B) each taxable year or other taxable period of the Company for which anaudit or other examination of Taxes by the appropriate tax authorities of anynation, state or locality is currently in progress (or scheduled as of theExecution Date to be conducted) together with the names of the respective taxauthorities conducting (or scheduled to conduct) such audits or examinationsand a description of the subject matter of such audits or examinations,(C) the most recent taxable year or other taxable period for which anaudit or other examination relating to Taxes of the Company has been finallycompleted and the disposition of such audits or examinations, (D) thetaxable years or other taxable periods of the Company which will not be subjectto the normally applicable statute of limitations by reason of the existence ofcircumstances that would cause any such statute of limitations for applicableTaxes to be extended, (E) the amount of any proposed adjustments (and theprincipal reason therefor) relating to any Returns for Tax liability of theCompany which have been proposed or assessed by any taxing authority and notsatisfied as of the Execution Date and (F) a list of all notices receivedby the Company from any taxing authority relating to any issue which couldaffect the Tax liability of the Company, which issue has not been finallydetermined and which, if determined adversely to the Company, would reasonablybe expected to result in a Tax liability.

 

(ii)                                  Otherthan with respect to the Company itself and the Company Subsidiary, the Companyhas not been included in any “consolidated,” “unitary” or “combined” Returnprovided for under the law of the United States, any foreign jurisdiction orany state or locality with respect to Taxes for any taxable period for whichthe statute of limitations has not

 

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expired.  The Company does not have any liability forthe Taxes of any Person (other than the Company itself and the CompanySubsidiary) as defined in Section 7701(a)(1) of the Code under TreasuryRegulation Section 1.1502-6 (or any similar provision of state, local, orforeign law), as a transferee or successor, by contract, or otherwise.

 

(iii)                               AllTaxes which the Company is (or was) required by law to pay, withhold or collecthave been duly paid, withheld or collected, and with respect to amounts whichthe Company is (or was) required to withhold or collect, such amounts have beentimely paid over to the proper authorities to the extent due and payable.

 

(iv)                              Thereare no tax sharing, allocation, indemnification or similar agreements orarrangements in effect as between the Company and any other party (includingany predecessor or Affiliate thereof) under which Parent or the Company couldbe liable for any Taxes or other claims of any party and any such agreements orarrangements that do exist shall be terminated prior to the Effective Time.

 

(v)                                 TheCompany is not a party to any agreement, contract, arrangement or plan thatwould result in the payment by the Company of any “excess parachute payment”within the meaning of Section 280G of the Code.

 

(vi)                              Neitherthe Company nor the Company Subsidiary were acquired in a “qualified stockpurchase” under Section 338(d)(3) of the Code and neither the Company northe Company Subsidiary are subject to any constructive elections under Section 338of the Code or the regulations thereunder.

 

(vii)                           TheCompany is not required to include in income any adjustment pursuant toSection 481(a) of the Code (or similar provisions of other law orregulations) by reason of a change in accounting method.

 

(viii)                        Noneof the assets of the Company is property that is required to be treated asowned by any other Person pursuant to the “safe harbor lease” provisions offormer Section 168(f)(8) of the Internal Revenue Code of 1954, as amended,and in effect immediately prior to the enactment of the Tax Reform Act of 1986,none of the assets of the Company is “tax exempt use property” within themeaning of Section 168(h) of the Code and none of the assets of theCompany secures any debt the interest on which is tax exempt underSection 103 of the Code.

 

(ix)                                Noindebtedness of the Company consists of “corporate acquisition indebtedness”within the meaning of Section 279 of the Code.

 

(x)                                   TheCompany is not a “United States real property holding company” within the meaningof Section 897 of the Code.

 

(xi)                                Therecurrently are no excess loss accounts, deferred intercompany gains or losses orother like items pertaining to the Company that could result in any Taxliability for the Company.

 

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(xii)                             TheCompany is not engaged in business in any tax jurisdiction in which it does notfile Returns for sales and use, income or other Taxes.

 

3.9                                                    *Absence of Certain Changes and Events*.  Except as set forth on Section 3.9 ofthe Company Disclosure Schedule, since August 31, 2003, there has notbeen:

 

(a)                        Anyevent or occurrence that has had or could reasonably be expected to have aMaterial Adverse Effect on the Company;

 

(b)                       Anydamage, destruction or loss, of or to any material asset of the Company or theCompany Subsidiary, whether or not covered by insurance, except for ordinarywear and tear in the normal course of business;

 

(c)                        Anywaiver or compromise by the Company or the Company Subsidiary of a valuableright or of a material debt owed to it;

 

(d)                       Anysatisfaction or discharge of any Encumbrance or payment of any obligation bythe Company or the Company Subsidiary in any amount in excess of $50,000 in anyone case, or $100,000 in the aggregate, other than payments, discharges orsatisfactions made or given in the ordinary course of business consistent withpast practices;

 

(e)                        Anychange to a material contract or agreement by which the Company, the CompanySubsidiary or any of their assets is bound or subject, other than changes madein the ordinary course of business consistent with past practices;

 

(f)                          Anymaterial change in any compensation arrangement or agreement (including,without limitation, the entry into, or modification of, any employment,severance or termination agreement) with any employee, officer, director orshareholder of the Company or the Company Subsidiary;

 

(g)                       Otherthan in the ordinary course of business consistent with past practices, anysale, assignment or transfer of any Intellectual Property or other intangibleassets of the Company or the Company Subsidiary;

 

(h)                       Otherthan in the ordinary course of business consistent with past practices, anysale or other disposition of any right, title or interest in or to any assetsor properties of the Company or the Company Subsidiary or any revenues derivedtherefrom;

 

(i)                           Anycreation, incurrence or assumption of any indebtedness for money borrowed bythe Company or the Company Subsidiary exceeding $50,000****in the aggregate;

 

(j)                           Anycapital expenditures by the Company or the Company Subsidiary exceeding $50,000in the aggregate;

 

(k)                        Anymaterial change in any accounting principle or method or election for federalincome tax purposes used by the Company, other than as specifically required byGAAP;

 

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(l)                           Anyresignation or termination of employment of any officer or employee of theCompany or the Company Subsidiary, or any resignation or termination ofconsulting services of any consultant of the Company or the Company Subsidiary;

 

(m)                     Anymortgage, pledge, transfer of a security interest in, or Encumbrance, createdby the Company or the Company Subsidiary, with respect to any of its respectiveproperties or assets, except Permitted Liens;

 

(n)                       Anyloans or guarantees made by the Company or the Company Subsidiary to or for thebenefit of its employees, officers or directors, or any members of theirimmediate families, other than travel advances and other advances made in theordinary course of its business;

 

(o)                       Anychange in the capital stock of the Company or the Company Subsidiary or anydeclaration, setting aside or payment or other distribution in respect to anyof such capital stock, or any direct or indirect redemption, purchase, or otheracquisition of any such capital stock; or

 

(p)                       Anyauthorization, approval, arrangement, agreement or commitment by the Company orthe Company Subsidiary to do any of the things described in thisSection 3.9.

 

3.10                                              *Title toProperty*.

 

(a)                        Eachof the Company and the Company Subsidiary have good and marketable title to allreal property owned by them (the “**Owned RealProperty**”), and good title to all other tangible and intangibleproperty owned by them.  All suchproperty is held free and clear of all Encumbrances (other than PermittedLiens).  All of the leases and subleasesunder which the Company or the Company Subsidiary holds a leasehold interest inreal property (the “**Leased Real Property**”), are in full forceand effect and are valid, binding and enforceable, and neither the Company northe Company Subsidiary has received any notice of any claim of any sort thathas been asserted by anyone adverse to the rights of the Company or the CompanySubsidiary under any of the leases or subleases mentioned in this Section 3.10.  To the Knowledge of the Company, there areno adverse possession claims regarding any Owned Real Property or Leased RealProperty. Assuming exercise of the purchase option in the Lease Agreement byand between the Industrial Development Board of the City of Auburn, Alabama andthe Company, dated as of September 1, 1998 (the “**Technology Park Lease**”), the Company wouldobtain upon such exercise good and marketable title to the real propertydescribed in the Technology Park Lease, free and clear of all Encumbrances(other than Permitted Liens); *provided* that the preceding clause shallbe limited to the Company’s Knowledge with respect to the condition of thetitle held by the Industrial Development Board of the City of Auburn, Alabama.

 

(b)                       Neitherthe Company nor the Company Subsidiary has received any written notice that anyentity or Governmental Entity considers the operation, use or ownership of theOwned Real Property or the Leased Real Property to have violated any zoning,land use or similar laws, ordinances, rules, regulations or administrativeinterpretations applicable thereto, or that any investigation has beencommenced regarding such possible violation, except in each

 

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case suchviolations that have not had and could not reasonably be expected to have aMaterial Adverse Effect on the Company. To the Knowledge of the Company, the present use and operation of theOwned Real Property and the Leased Real Property is in compliance in allmaterial respects with all existing zoning, land use and similar laws,ordinances, rules, regulations or administrative interpretations applicablethereto.  No condemnation or eminentdomain proceeding against any part of the Owned Real Property or Leased RealProperty is pending or, to the Knowledge of the Company, threatened.  All operating facilities located on theOwned Real Property and the Leased Real Property are supplied with utilitiesand other services, assuming the operation of such utilities, in such amountsas are reasonably necessary for the current operation of such facilities.

 

(c)                        Allof the material tangible personal property used in the operation of thebusiness (including, without limitation, the physical plants and equipment) ofthe Company and the Company Subsidiary have been maintained in accordance withstandard industry practice or are in sufficient operating condition and repairfor the operation of the business of the Company and the Company Subsidiary ascurrently conducted, except for ordinary wear and tear and such repair,maintenance or replacement items as are set forth on Section 3.10(c) ofthe Company Disclosure Schedule.  Exceptas set forth on Section 3.10(c) of the Company Disclosure Schedule, allsuch material tangible personal property is held free and clear of allEncumbrances (other than Permitted Liens).

 

(d)                       TheCompany is in compliance in all material respects as of the Execution Date, andwill continue to be in compliance in all material respects until the EffectiveTime, with the Technology Park Lease. The Company has a fully vested and exercisable option to purchase theland leased under the Technology Park Lease in accordance with the terms of theTechnology Park Lease.

 

3.11                                              *CertainTransactions*.

 

(a)                        Exceptas disclosed on Section 3.11(a) of the Company Disclosure Schedule:(i) no Affiliate of the Company is presently a party to any agreement orarrangement with the Company (A) providing for the furnishing ofmaterials, products or services to or by, or (B) providing for the sale orrental of real or personal property, (including any Intellectual Property) toor from, any such Affiliate; and (ii) to the Company’s Knowledge, noholder of Company Common Stock nor any officer or director of the Company orthe Company Subsidiary possesses, directly or indirectly, any financialinterest in, or is a director, officer or employee of, any Person which is asupplier, customer, lessor, lessee, licensor, developer or competitor of theCompany or the Company Subsidiary.

 

(b)                       TheCompany is not bound by any agreement with, is not indebted to, and no amountis owing to the Company by, any of the officers or directors of the Company,any of the Stockholders or any Affiliate of any of the Stockholders.  The Company has not made or authorized anypayment to any of the Stockholders or any of their Affiliates except forsalaries and other employment compensation payable to employees of the Companyor the Company Subsidiary in the ordinary course of business consistent withpast practice and at the regular rates payable to them.

 

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3.12                                              *IntellectualProperty*.

 

(a)                        Forall purposes of this Agreement, the following terms shall have the followingrespective meanings:

 

##### (i)                                     “**Intellectual Property**” means all patents,trademarks, trade names, service marks, copyrights, software, supplier lists,customer lists, trade secrets, and know-how, and applications or registrationsfor any of the foregoing, and all licenses and similar rights from any thirdparty related to any of the foregoing.

#####  

(ii)                                  “**Company Intellectual Property**”means the Intellectual Property of the Company and the Company Subsidiary.

 

(b)                       Section 3.12(b) of the CompanyDisclosure Schedule sets forth a list of all Company IntellectualProperty, including a summary description and specification of each item,identifying, where applicable, the date registered, granted or applied for, theexpiration date and the status.

 

(c)                        Except as set forth inSection 3.12(c) of the Company Disclosure Schedule and subject to thefurther provisions of this Section 3.12(c): (i) the Company or the CompanySubsidiary owns, on an exclusive basis (other than with respect to IntellectualProperty licensed from third parties), free and clear of all Encumbrances (otherthan Permitted Liens), all of the Company Intellectual Property; (ii) noother Person has any rights in such Company Intellectual Property, (other thanwith respect to Intellectual Property licensed from third parties);(iii) such Company Intellectual Property is sufficient in all materialrespects to permit the continued lawful conduct of the business in the mannernow conducted by the Company and the Company Subsidiary; (iv) the Companyand the Company Subsidiary do not pay or receive any royalty from any Personwith respect to any of the Company Intellectual Property (other than withrespect to Intellectual Property licensed from third parties) nor has theCompany or the Company Subsidiary licensed any Person to use any of the CompanyIntellectual Property; (v) there are no restrictions on the transfer ofany item of Company Intellectual Property or any license or other interesttherein held by the Company or the Company Subsidiary in respect of suchCompany Intellectual Property; (vi) there are no assignments or agreementsto assign the Company Intellectual Property to any Person; (vii) allrights of the Surviving Corporation in and to the Company Intellectual Propertyafter the Closing will be unaffected by the Transactions and the TransactionDocuments; (viii) neither the Company nor the Company Subsidiary has givenor received any notice of any pending or overtly threatened conflict with,misappropriation of, or infringement of the rights of others with respect to,any of the Company Intellectual Property or with respect to any license of theCompany Intellectual Property; (ix) to the Company’s Knowledge, no Personis infringing on or violating the Company Intellectual Property; and,(x) no Company Intellectual Property, and no services or products sold bythe Company or the Company Subsidiary, conflict with or infringe upon anyIntellectual Property of any third party. Neither the Company, the Company Subsidiary or any Stockholder, nor, tothe Company’s Knowledge, any other employee, contractor or agent of the Companyor the Company Subsidiary, has intentionally misappropriated the trade secrets,know how or other Intellectual Property of any third party.

 

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(d)                       Except as set forth onSection 3.12(d) of the Company Disclosure Schedule, each item of CompanyIntellectual Property is subsisting, all necessary application, prosecution,registration, issuance, maintenance and renewal fees in connection with theregistered Company Intellectual Property have been paid and all necessarydocuments and certificates in connection with the registered CompanyIntellectual Property have been filed with the relevant patent, copyright,trademark or other authorities in the United States or foreign jurisdictions,as the case may be, for the purposes of maintaining the Company IntellectualProperty.  Except as set forth onSection 3.12(d) of the Company Disclosure Schedule, there are no actionsthat must be taken by the Surviving Corporation, Parent or Purchaser within onehundred twenty (120) days of the Effective Time, including the payment of anyregistration, maintenance or renewal fees or the filing of any responses to theU.S. Patent and Trademark Office (the “**PTO**”) office actions, documents,applications or certificates for the purposes of obtaining, maintaining,perfecting, preserving or renewing any registered Company IntellectualProperty.  In each case in which theCompany or the Company Subsidiary has acquired any Company IntellectualProperty from any person, the Company or the Company Subsidiary, as applicable,has obtained an enforceable assignment, sufficient to irrevocably transfer allsuch Company Intellectual Property (including the right to seek past and futuredamages with respect thereto) to the Surviving Corporation.  To the maximum extent provided for, by, andin accordance with, applicable laws and regulations, the Company or the CompanySubsidiary, as applicable, has recorded each such assignment of CompanyIntellectual Property with the relevant governmental entity, including the PTO,the U.S. Copyright Office, or their respective equivalents in any relevantforeign jurisdiction, as the case may be.

 

(e)                        To the Company’s Knowledge, there are no facts or circumstances thatwould render any of the Company Intellectual Property invalid orunenforceable.  Without limiting theforegoing, to the Company’sKnowledge, thereis no information, materials, facts or circumstances, including any informationor fact that would constitute prior art, that would render any of the CompanyIntellectual Property invalid or unenforceable, or would adversely affect anypending application for any item of Company Intellectual Property, and theCompany has notmisrepresented, or failed todisclose, and, is unaware of any misrepresentation or failure to disclose, anyfact or circumstances in any application for any item of Company IntellectualProperty that would constitute fraud or a misrepresentation with respect tosuch application or that would otherwise affect the validity or enforceabilityof any item of Company Intellectual Property.

 

(f)                          There was no material breach of the duty of candor to the PTO during the application andprosecution of each patent, including, but not limited to, materialmisrepresentations, misleading statements or omissions relating to theapplication or prosecution of each patent, including, but not limited to,inventorship, prior public use, citation of prior art or date of invention.

 

(g)                       No item of Company IntellectualProperty was developed by copying, modifying, reverse engineering, decompiling,disassembling, or creating derivatives of, any technology belonging to a thirdparty in violation ofapplicable lawor such third party’s ownership rights without having the express permissionof, and an assignment of, or license of, any and all Company IntellectualProperty relating thereto from such third party.

 

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(h)                       The Company and the CompanySubsidiary have taken reasonable security measures to protect the secrecy,confidentiality and value of their respective trade secrets, includingrequiring all employees and consultants to execute and deliver biding agreementrelating to non-disclosure of confidential information and assignments ofinventions, a copy of the form of which has been delivered to Parent.  No proprietary technology has been disclosedto any Person who is not an employee or contractor of the Company or theCompany Subsidiary.  All of the CompanyIntellectual Property was developed by Persons who are or were employees orcontractors of the Company or the Company Subsidiary (except that CompanyIntellectual Property which is licensed from a third party), each of whomentered into a form of assignment of intellectual property and confidential informationagreement with the Company.  To the Company’s Knowledge, no employee or contractor of theCompany or the Company Subsidiary has executed any agreement to assign anyCompany Intellectual Property to any Person other than the Company or theCompany Subsidiary.

 

(i)                           The Company has delivered to Parentall known material documentation with respect to theCompany Intellectual Property that isin the possession of the Company or the Company subsidiary, which documentation is accurateand complete in all material respects and reasonably sufficient in detail andcontent to explain such Company Intellectual Property to a third party.  None of the Company Intellectual Property issubject to any export restriction by the United States government.

 

(j)                           Section 3.12(j) of the CompanyDisclosure Schedule lists all licenses, grants, assignments or otherconveyances of any interest in Company Intellectual Property made by theCompany or the Company Subsidiarylicensed, granted, assigned or conveyed since September 1, 2002 for whichthe Company has received or is entitled to receive consideration in excess of $50,000.

 

(k)                        Section 3.12(k) of the CompanyDisclosure Schedule lists all materialreadilyavailable off-the-shelf software programs that the Company or the CompanySubsidiary licenses from third parties.

 

3.13                                              *Litigation and Other Proceedings*.  Except as disclosed on Section 3.13(a)of the Company Disclosure Schedule, none of the Company, the Company Subsidiaryor any Stockholder, or, to the Company’s Knowledge, any other officer ordirector of the Company or the Company Subsidiary or any Company Shareholder isa party to any pending or, to the Knowledge of the Company, threatened action,suit, claim, arbitration, proceeding or investigation (“**Action**”) in the United States or elsewhererelating to the Company or the Company Subsidiary or their respectivebusinesses, and the Company and the Company Subsidiary are not subject to anyorder, writ, judgment, decree or injunction, which has had or could reasonablybe expected to have a Material Adverse Effect on the Company, or whichprevents, or could reasonably be expected to prevent, completion of the Mergerand the other Transactions. Section 3.13(b) of the Company Disclosure Schedule contains acomplete list of all material lawsuits brought against the Company or theCompany Subsidiary during the last five (5) years, together with a briefstatement of the nature and amount of the claim, the court and jurisdiction inwhich the claim was brought, the resolution (if resolved), and the availabilityof insurance to cover the claim.

 

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3.14                                              *Contracts*.  Section 3.14 of the Company DisclosureSchedule describes all currently effective contracts to which the Companyor the Company Subsidiary is a party or by which the Company or the CompanySubsidiary or any of their respective properties or assets are bound which(a) involve the payment by the Company or the Company Subsidiary of morethan $100,000 over the remaining term of the contract; (b) are financingdocuments, loan agreements, guaranties or promissory notes; (c) aremanufacturing representative, distributorship, sales agency or other similaragreements that have a term of one year or more after the Effective Date and arenot terminable by the Company on thirty (30) days or less without penalty orpremium; (d) any contract or agreement providing for the indemnification of anyofficer or director of the Company or the Company Subsidiary; (e) any contractprohibiting or materially restricting the ability of the Company or the CompanySubsidiary to compete in any geographic area with any person, other than thecontracts set forth in Section 3.14(c); (f) any joint venture agreement,partnership agreement or other similar contract involving a sharing of profitsand expenses; or (g) any contract which has a term of one year or more afterthe Effective Date and is not terminable by the Company on ninety (90) days orless without penalty or premium.  TheCompany and the Company Subsidiary, and to the Knowledge of the Company, all ofthe other parties to such agreements, are in compliance in all materialrespects with all material provisions of all such agreements.

 

3.15                                              *Insurance and Banking Facilities*.  Section 3.15 of the Company DisclosureSchedule contains a list of (i) all material contracts of insuranceand indemnity (other than indemnity provisions contained in contracts theprimary purpose of which is not indemnity) of or relating to the Company or theCompany Subsidiary (except insurance related to Employee Plans) in force at theExecution Date (including name of insurer or indemnitor, agent, annual charge,coverage and expiration date); (ii) the names and locations of all banksin which the Company or the Company Subsidiary have accounts; and(iii) the names of all Persons authorized to draw on such accounts.  All premiums and other payments due prior tothe Execution Date with respect to all contracts of insurance or indemnity inforce at the Execution Date have been or will be paid prior to theClosing.  The Company and the CompanySubsidiary are, and at all times, during the past two (2) years have been,insured with reputable insurers against all risks normally insured against bycompanies in similar lines of business.

 

3.16                                              *Employees;Employee Plans*.

 

(a)                        Section 3.16(a)of the Company Disclosure Schedule sets forth a list of the Company’s andthe Company Subsidiary’s currently effective contracts for the employment orengagement of any officer, employee or consultant, whether on a full-time,part-time or consulting basis and the Company has provided copies of suchcontracts to Parent.  There are noagreements, arrangements or understandings that would restrict the ability ofthe Company to terminate the employment or engagement of any of the Company’sor the Company Subsidiary’s employees or consultants at any time, at will,without liability.  To the Knowledge ofthe Company, no employee or consultant has any plan or intention to terminatehis or her employment or consulting services with the Company or the CompanySubsidiary.

 

(b)                       Section 3.16(b)of the Company Disclosure Schedule sets forth a: (i) list of thedirectors, officers, employees, and contractors of the Company and the CompanySubsidiary (including all employees or consultants during the two (2) yearsimmediately preceding the

 

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Execution Date that provided material services to the Company or theCompany Subsidiary); and (ii) summary description of, for each suchPerson, the date of hire, termination date (if applicable), job title, thecurrent rate of compensation payable to such Person (including the date of themost recent increase thereof and including the scheduled date for the nextincrease), bonuses paid to such Person in each of the two (2) years ending onthe same date as the Execution Date, whether such Person is an active employeeor on leave, whether such Person is employed or engaged on a full-time,part-time or consulting basis, whether such Person is exempt or non-exempt, theamount of vacation pay accrued for such Person, and any severance pay, lump sumor other payment, compensation or other remuneration that such Person is orwould be eligible to receive upon termination of employment or service or as aresult of any of the Transactions or any of the Transaction Documents.

 

(c)                        TheCompany and the Company Subsidiary are in compliance in all material respectswith all applicable federal, state, local, municipal, foreign or other law,statute, legislation, constitution, principle of common law, ordinance, code,edict, decree, treaty, convention, rule, regulation, ruling, directive,requirement, determination or decision of any governmental entity respectingemployment, employment practices, terms and conditions of employment and wagesand hours and are not engaged in any unfair labor practice.  No present or former employee of the Companyor the Company Subsidiary has a pending claim which has been asserted or, tothe Company’s Knowledge, threatened against the Company or the CompanySubsidiary for (i) overtime pay; (ii) wages, salaries or profitsharing; (iii) any violation of any contract or legal requirement relatingto wages or hours of work; (iv) discrimination against employees on anybasis; (v) unlawful or wrongful employment or termination practices; or(vi) any violation of occupational safety or health standards.  To the Knowledge of the Company, allemployees of the Company or the Company Subsidiary who are not United Statescitizens hold all requisite visas and have satisfied all applicable legalrequirements in all material respects respecting their immigration status.  Neither the Company nor the CompanySubsidiary employs people resident outside of the United States.

 

(d)                       Setforth on Section 3.16(d) of the Company Disclosure Schedule is a listof all bonus, incentive, profit sharing, stock bonus, retirement, pension,401(k), ESOP, benefit, welfare, medical, dental, disability, supplementalunemployment, life insurance, vacation, stock option, stock purchase, phantomstock, royalty, flexible spending, deferred compensation, severance and othersimilar compensation or employee benefit plans, agreements, funds, trusts,programs or arrangements, under which the Company or the Company Subsidiary hasany current or future obligation or liability or under which any employee,consultant or former employee or consultant (or beneficiary of any of them) ofthe Company or the Company Subsidiary has or may have any current or futureright to benefits (the “**Employee Plans**”).  An accurate and complete copy of eachEmployee Plan and any trust agreement, annuity contract, insurance contract orother funding instrument associated therewith, including summary plandescriptions for the Employee Plans, where applicable, and all manuals,brochures, publications, policies, procedures or similar documents of theCompany or the Company Subsidiary regarding compensation, benefits,perquisites, affirmative action, office administration and personnel matters(the “**Employee Manuals**”) has beendelivered to Parent. Section 3.16(d) of the Company Disclosure Schedule sets fortha brief description of any oral Employee Plan. All benefits, expenses and other amounts due and payable under any Plan(as defined below) or Employee Plan, and all employee and employercontributions (including penalties for delinquent

 

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funding), transfers or payments required to be made to any Plan orEmployee Plan as of the Effective Time have been timely paid or made, accruedand booked.

 

3.17                                              *Compliance with ERISA*.  Section 3.17 of the Company DisclosureSchedule contains a list of all “employee pension benefit plans” and all“employee welfare benefit plans” (within the meaning of ERISA) (each, a “**Plan**”) of the Company or the CompanySubsidiary in which any of their respective employees participate.  Each such Plan intended to qualify underSection 401(a) or Section 501(c)(9) of the Code has received a favorabledetermination letter as to its qualification and has been administered incompliance in all material respects with ERISA and the Code and, to theCompany’s Knowledge, no fact or circumstance exists which would precludecontinuing, good faith reliance on such determination letter or would adverselyaffect the qualified status of any such Plan. To the Company’s Knowledge, no fact or circumstance exists, including,without limitation, any “reportable event” (within the meaning of ERISA) orfailure to file a Return, in connection with any such Plan which is likely toconstitute grounds for: (a) termination of such Plan by the planadministrator (the “**Plan Administrator**”);(b) the appointment by a court of a trustee to administer such Plan; or(c) the Company or the Company Subsidiary to become subject to anyliability under the terms of the Plans, ERISA, the Code or any other applicablelaw.  The Company and the CompanySubsidiary have not incurred any liability to the Plan Administrator (otherthan for payment of contributions and premiums which have been timelymade).  The Company and the CompanySubsidiary have complied in full with the minimum funding requirements and inall material respects with the reporting, disclosure and fiduciary requirementsof ERISA and the Code.  No employeewelfare benefit plan (within the meaning of ERISA) maintained by the Company orthe Company Subsidiary provides benefits after termination of employment to anyemployee or dependent other than as required by Section 4980B of the Code.

 

3.18                                              *Labor Matters*.  The Company and the Company Subsidiary are not party to or boundby any collective bargaining agreement with any labor organization applicableto employees of, or Persons providing services to, the Company or the CompanySubsidiary, and, to the Company’s Knowledge, there are no actual or threatenedactivities or proceedings of any labor organization (or representative thereof)to organize any unorganized employees of the Company or the CompanySubsidiary.  There is: (a) no unfairlabor practice complaint against the Company or the Company Subsidiary pendingor, to the Knowledge of the Company, threatened before the National LaborRelations Board, Office of Federal Contract Compliance Programs, or anycomparable state, local or foreign agency; (b) no labor strike, dispute,slowdown, lockout or stoppage actually pending, or, to the Knowledge of theCompany, threatened against or directly affecting the Company or the CompanySubsidiary; (c) no grievance or arbitration proceeding pending and, to theKnowledge of the Company, no claims therefor exist; (d) no agreement towhich the Company or the Company Subsidiary are party that is binding on theCompany or the Company Subsidiary that restricts the Company or the CompanySubsidiary from relocating or closing any of its operations; (e) nomaterial work stoppage at the Company or the Company Subsidiary; (f) nodelinquency in payments to any of the employees of the Company or the CompanySubsidiary for any wages, salaries, commissions, bonuses or other directcompensation for any services performed by them or amounts required to bereimbursed to such employees; or (g) no liability to any employee of theCompany or the Company Subsidiary that is or will be due to such employee upontermination of the employment of any of such employees before or after theClosing Date.

 

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3.19                                              *HazardousMaterials*.

 

(a)                        TheCompany and the Company Subsidiary have not caused any disposals or releases ofany Hazardous Material on or under any of the (i) Owned Real Property,(ii) Leased Real Property, or (iii) property that the Company or theCompany Subsidiary retains a contractual or other legal obligation with respectto Environmental Requirements (collectively, the****“**Company Properties**”).  To the Knowledge of the Company, no suchdisposals or releases occurred prior to the Company having taken title to, orpossession or operation of, any the Company Properties or during its time oftitle, possession or operation of the same;

 

(b)                       TheCompany and the Company Subsidiary have neither (i) arranged for thedisposal or treatment of Hazardous Material in violation of any applicableEnvironmental Requirements at any facility owned or operated by another Person,or (ii) accepted any Hazardous Material for transport to disposal ortreatment facilities or other third-party sites;

 

(c)                        Tothe Company’s Knowledge, no release or threatened release of any HazardousMaterial originating from a property other than the Owned Real Property or theLeased Real Property has come to be (or may come to be) located on or under theCompany Properties;

 

(d)                       TheCompany and the Company Subsidiary have never installed, used, buried orremoved any surface impoundment or underground fuel tank or vessel on theCompany Properties;

 

(e)                        Therehas been no litigation, administrative proceeding or, to the Knowledge of theCompany, governmental investigations or any other actions, claims, demands,notices of potential responsibility or requests for information brought or, tothe Knowledge of the Company, threatened against the Company or the CompanySubsidiary, or any settlement reached by the Company or the Company Subsidiarywith any Person or persons alleging the presence, disposal, release orthreatened release of any Hazardous Material on, from or under the CompanyProperties or as otherwise relating to potential liabilities, includingviolations of Environmental Requirements.

 

(f)                          Neitherthe Company nor the Company Subsidiary is under or subject to any currentcontractual obligation, order, or decree imposed by any governmental agency orother entity to achieve or maintain compliance with any EnvironmentalRequirements, including site investigation or remediation.

 

(g)                       Tothe Company’s Knowledge, there are no PCBs, asbestos or asbestos-containingmaterials, lead or lead-based paint or urea formaldehyde foam insulationlocated on or within any of the Company Properties.

 

3.20                                              *Inventories*.  All inventories of the Company and the Company Subsidiary are ofgood and merchantable quality; *provided* that the value of obsolete,damaged or excess inventory and of inventory below standard quality has beenwritten down on the Closing Balance Sheet, or with respect to inventoriespurchased since such Closing Balance Sheet date, on the books and records ofthe Company and the Company Subsidiary, to ascertainable market value, oradequate reserves described on such Closing Balance Sheet have been providedtherefor, and

 

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the value at which inventories are carried reflects the customaryinventory valuation policy of the Company and the Company Subsidiary (whichfairly reflects the value of obsolete, spoiled or excess inventory) for statinginventory, in accordance with GAAP consistently applied.  All inventories received back from customersfor the express purpose of upgrading to new hardware that are subsequently usedfor repair and maintenance of other existing customer hardware are carried atno value on the Closing Balance Sheet in accordance with GAAP.  Notwithstanding the foregoing, fifty (50%)percent of the amount in the following inventory accounts included in theCompany’s March 31, 2004 balance sheet shall be included in calculatingthe value of the Company’s total assets for the purposes of Section 2.12:(a) MRB Stock; (b) SVC Stock; (c) Outstanding Service Exchange; and (d) Pilots.

 

3.21                                              *Receivables*.  All receivables of the Company and the Company Subsidiary,whether reflected on the Company’s consolidated balance sheet or otherwise,represent sales actually made or services actually provided in the ordinarycourse of business, and are current and, to the Company’s Knowledge, fullycollectible net of any reserves shown on the Company’s consolidated balancesheet (which such reserves are adequate and were calculated on a basisconsistent with GAAP and past practice) within 90 days after the Closing.  The Company has delivered to Parent acomplete and accurate aging list of all receivables of the Company and theCompany Subsidiary.  All individual amountsdue from customers that are in excess of 90 days old represent fullycollectible amounts as of the Closing Date within seventeen (17) monthsfollowing the Closing Date.

 

3.22                                              *Accredited Investors*.  Other than the Non-Accredited Investors,each Company Shareholder is an “Accredited Investor” as that term is defined inRule 501(a) of the General Rules and Regulations under the Securities Act of1933, as amended, and has executed the investor representations letter in theform attached hereto as Exhibit G.

 

3.23                                              *Brokers and Finders*.  Other than Corporate Finance Associates,Inc., no broker, investment broker, financial advisor or other Person isentitled to any broker’s, finder’s, financial advisor’s or other similar fee orcommission from the Company or the Company Subsidiary in connection with theconsummation of the Transactions.  TheCompany has provided Parent with a copy of the engagement letter, dated as ofAugust 14, 2003, as amended on February 17, 2004, by and between theCompany and Corporate Finance Associates, Inc., and any amendments thereto (the“**FeeLetter**”).  The fee specifiedin and calculated in accordance with the Fee Letter, including any expenses orother charges payable thereunder, shall be included in the Company TransactionCosts.

 

3.24                                              *No Omissions*.  No representation or warranty of the Company or any Stockholderin this Agreement, in the Transaction Documents to which the Company or anyStockholder is a party, or any statement, certificate, schedule or exhibithereto furnished or to be furnished by or on behalf of the Company or any ofthe Stockholders pursuant to this Agreement or any Transaction Document,contains or will contain any untrue statement of a material fact or omits orwill omit to state a material fact required to make the statements herein ortherein, in light of the circumstances under which they were made, notmisleading.

 

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**ARTICLE 4**REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

** **

Parent and Purchaser, jointly and severally, hereby represent andwarrant to the Company, except as set forth in the Parent SEC Reports or thedisclosure schedule attached as Schedule 2 to this Agreement(the “**Parent Disclosure Schedule**”):

 

4.1                                                    *Authorization*.  Each of Parent and Purchaser has allnecessary corporate power and authority to execute and deliver this Agreementand the Transaction Documents to which it is a party and to perform itsobligations hereunder and thereunder. The execution and delivery of this Agreement and the TransactionDocuments to which Parent or Purchaser is a party, the performance by Parent orPurchaser of their respective obligations hereunder and thereunder, and theconsummation by them of the Transactions, have been duly authorized by allnecessary corporate action on the part of Parent and Purchaser.  This Agreement, and the TransactionDocuments to which Parent or Purchaser is a party, have been duly executed anddelivered by Parent and Purchaser and, assuming the valid execution anddelivery hereof and thereof by the Company, each of the Stockholders and theShareholder Representative, constitute valid and binding obligations of Parentand Purchaser, are enforceable against Parent and Purchaser, as applicable, inaccordance with their respective terms, except, in each such case, as suchenforceability may be limited by bankruptcy, insolvency, fraudulent transfer,reorganization, moratorium or other similar laws of general applicationrelating to, affecting or limiting creditors’ rights and by general principlesof equity, regardless of whether such enforceability is considered in aproceeding at law or in equity.  No furtherapproval by the board of directors, shareholders or other security holders ofParent or Purchaser is required for the execution, delivery and performance ofthis Agreement by Parent or Purchaser, including without limitation theconsummation of the Merger and the issuance of the Parent Shares to the CompanyShareholders.

 

4.2                                                    *Organization*.

 

(a)                        Parentis a corporation duly incorporated, validly existing and in good standing underthe laws of the State of California, with full corporate power to execute anddeliver this Agreement and to carry out the Transactions.

 

(b)                       Purchaseris a corporation duly incorporated, validly existing and in good standing underthe laws of the State of Alabama.

 

(c)                        Trueand complete copies of the Articles of Incorporation and Bylaws of Parent, andthe Certificate of Incorporation and Bylaws of Purchaser, with all amendmentsand restatements thereto through the Execution Date have been provided to theCompany prior to the Execution Date.

 

(d)                       Eachof Parent and Purchaser has the corporate power to own its properties and tocarry on its business as currently conducted and is duly qualified or licensedto do business and is in good standing in each jurisdiction in which thefailure to be so qualified or licensed would have a Material Adverse Effect onParent.

 

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4.3                                                    *Capitalization of Parent*.  The authorized capital stock of Parentconsists of (a) 4,579,407 shares of preferred stock, no par value (the “**Parent Preferred Stock**”), (b) 880,000shares of Class A Common Stock, no par value (the “**Parent Class A Stock**”), and (c)42,600,000 shares of Parent Class B Stock.  As of May 26, 2004, no shares of Parent Preferred Stock, 880,000shares of Parent Class A Stock and 18,921,733 shares of ParentClass B Stock were issued and outstanding.  As of May 26, 2004, no shares of Parent Preferred Stock, ParentClass A Stock or Parent Class B Stock were held by Parent in itstreasury.  All of the issued andoutstanding shares of Parent Class A Stock and Parent Class B Stockare, and the Parent Shares when issued will be, validly issued, fully paid andnonassessable and are owed free and clear of all Encumbrances.

 

4.4                                                    *No Conflictof Transaction with Obligations and Laws*.

 

(a)                        Theexecution, delivery and performance of this Agreement and the TransactionDocuments to which Parent or Purchaser is a party by Parent and Purchaser, andthe consummation of the Transactions do not and will not (a) contravenethe articles of incorporation, bylaws or other charter or organizational documentsof Parent or Purchaser, (b) conflict with or violate any applicable law,or (c) conflict with or result in a breach of or constitute a default (oran event which with notice or lapse of time or both would become a default)under, or give to others any rights of termination, amendment, acceleration orcancellation of, or result in any loss of any material benefit, or the creationof any Encumbrance on any of the property or assets of Parent or Purchaserpursuant to any contract, judgment, decree, order or ruling to which Parent orPurchaser is a party or by which they or any of their assets or properties isbound or affected, except for such contraventions, violations, conflicts,breaches, defaults, rights creation or lien creation which have not had andcould not reasonably be expected to have a Material Adverse Effect on Parent.

 

(b)                       Noapproval, authorization, consent, order, filing, registration or notificationis required to be obtained by Parent or Purchaser from, or made or given byParent or Purchaser to, any governmental authority or other Person inconnection with the execution, delivery and performance of this Agreement byParent or Purchaser and the consummation of the Transactions, except for suchapprovals, authorizations, orders, filings, registrations or notifications ofwhich the failure to obtain could not reasonably be expected to have a MaterialAdverse Effect on Parent.

 

4.5                                                    *Availability of Merger Consideration; Valid Issuanceof Parent Shares.*

 

(a)                        Atthe Effective Time, Parent will have the funds available for the payment of theCash Consideration.

 

(b)                       Atthe Effective Time, the Parent Shares will be duly authorized, validly issued,fully paid and nonassessable shares of Class B Common Stock, free and clear ofEncumbrances, other than Encumbrances imposed by this Agreement or the EscrowAgreement.  Except as provided in thisAgreement or the Escrow Agreement, none of the issuance, sale or delivery ofthe Parent Shares to the Company Shareholders is subject to any preemptiveright of stockholders of Parent or to any right of first refusal or other rightin favor of any Person which has not been observed or waived.

 

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(c)                        Assumingthat the representations and warranties of the Company and the Stockholders setforth in Section 3.22 (Accredited Investors) are true as of the EffectiveTime, the issuance of the Parent Shares to the Company Shareholders at theEffective Time in accordance with this Agreement and the Escrow Agreement willbe exempt from registration under applicable federal and state securities laws.

 

4.6                                                    *Brokers, Finders or Financial Advisors*.  Other than Adams, Harkness & Hill, nobroker, investment broker, financial advisor or other Person is entitled to anybroker’s, finder’s, financial advisor’s or other similar fee or commission fromParent or Purchaser in connection with the consummation of the Transactions.

 

4.7                                                    *SEC Filings*.  Parent has filed with the SEC and madeavailable to the Company or its representatives the Parent SEC Reports.  The Parent SEC Reports (i) at the time filed(or as amended, superceded or subsequently modified in the Parent SEC Reportsfiled prior to the Execution Date), complied in all material respects with theapplicable requirements of the Securities Act of 1933, as amended, (the “**SecuritiesAct**”), and the Exchange Act, as amended by the Sarbanes-Oxley Act of2002, as the case may be, and (ii) did not at the time they were filed (orif amended, superseded or modified by a filing prior to the Execution Date, thenon the date of such filing) contain any untrue statement of a material fact oromit to state a material fact required to be stated in such Parent SEC Reportsor necessary in order to make the statements in such Parent SEC Reports, takenas a whole, in the light of the circumstances under which they were made, notmisleading, except in the case of clause (i) or (ii) of this Section 4.7where (X) such non-compliance has not had and could not reasonably be expectedto have a Material Adverse Effect on Parent or (Y) where the trading price ofthe Parent’s Class B Stock at the first time when Stockholders would beentitled to sell such shares pursuant to Section 7.4 (Rule 144) is equalor greater than the average closing trading price of Parent’s Class B Stock onthe Nasdaq NMS during the 60 calendar days prior to the Execution Date.

 

4.8                                                    *InterimOperations of Purchaser*. Purchaser is a wholly owned subsidiary of Parent that was formed byParent solely for the purpose of engaging in the Merger and the other Transactions.  As of the Execution Date and the EffectiveTime, Purchaser (i) has engaged in no other business activities, (ii) hasconducted its operations only as contemplated by this Agreement, and (iii) hasno liabilities and is not a party to any agreement other than this Agreement.

 

4.9                                                    *IntellectualProperty*. Parent has full title and ownership of, or is duly licensed under orotherwise authorized to use, all Intellectual Property necessary to enable itto carry on its business as now conducted, without any conflict with orinfringement upon the rights of others, except where such failure hasnot had and could not reasonably be expected to have a Material Adverse Effecton Parent or where such non-compliance has not had a material adverse effect onthe trading price of the Parent’s Class B Common Stock at a time whenStockholders would have a right to sell such shares pursuant toSection 7.4 (Rule 144).  Parent has not received any communications alleging that Parent(or any of its employees or consultants) has violated or infringed or, byconducting its business as currently conducted, would violate or infringe, anyIntellectual Property of any other person or entity that would require Companyto disclose such communication pursuant to the requirements of the ExchangeAct.

 

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4.10                                              *NasdaqCompliance*.  Parent is incompliance in all material respects with the rules, regulations and policies ofthe Nasdaq National Market applicable to Parent, including, without limitation,its corporate governance standards.

 

4.11                                              *Absence ofChanges*.  FromDecember 31, 2003, neither Parent nor Purchaser has suffered any changethat has resulted, or could reasonably be expected to result, in a MaterialAdverse Effect.

 

4.12                                              *No Omissions*.  No representation or warranty of Parent or Purchaser in thisAgreement, in the Transaction Documents to which Parent or Purchaser is aparty, or in any schedule or exhibit hereto furnished or to be furnishedto the Company or the Stockholders by or on behalf of Parent or Purchaserpursuant to this Agreement or any Transaction Document, contains or willcontain any untrue statement of a material fact or omits or will omit to statea material fact required to make the statements herein or therein, in light ofthe circumstances under which they were made, not misleading.

 

**ARTICLE 5**COVENANTS OF THE PARTIES

** **

5.1                                                    *Conduct of Business by the Company Pending the Merger*.  Except as expressly permitted in thisArticle 5, during the period from the Execution Date through the EffectiveTime, the Company shall, and it shall cause the Company Subsidiary to, carry onits business in the ordinary course of business as currently conducted and, tothe extent consistent therewith, use commercially reasonable efforts consistentwith past practices to preserve intact its current business organizations, keepavailable the services of its current officers and employees and preserve itsrelationships with customers, suppliers and others having business dealingswith it to the end that its goodwill and ongoing business shall be unimpairedat the Effective Time.  Without limitingthe generality of the foregoing, and except as otherwise expressly contemplatedby this Agreement, the Company shall not, and it shall cause the CompanySubsidiary not to, without the prior written consent of Parent (which consentshall not be unreasonably withheld or delayed):

 

(a)                        (i) declare,set aside or pay any dividends on, or make any other actual, constructive ordeemed distributions in respect of, any of its capital stock, or otherwise makeany payments to its shareholders in their capacity as such, (ii) split,combine or reclassify any of its capital stock or issue or authorize theissuance of any other securities in respect of, in lieu of or in substitutionfor shares of its capital stock, or (iii) purchase, redeem or otherwiseacquire any shares of its capital stock or any other securities thereof or anyrights, warrants or options to acquire any such shares or other securities;

 

(b)                       Issue,deliver, sell, pledge, dispose of or otherwise encumber any shares of itscapital stock, any other voting securities or equity equivalents or anysecurities convertible into, or any rights, warrants or options to acquire anysuch shares, voting securities, equity equivalents or convertible securities;

 

(c)                        Amendits articles of incorporation, bylaws or other charter documents;

 

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(d)                       Acquireor agree to acquire by merging or consolidating with, or by purchasing aportion of the assets of or equity in, or by any other manner, any business orany corporation, limited liability company, partnership, association or otherbusiness organization or division thereof or otherwise acquire or agree toacquire any assets;

 

(e)                        Sell,lease, or otherwise dispose of, or agree to sell, lease or otherwise disposeof, any of its assets (including any Intellectual Property) other than sales,leases, or other dispositions in the ordinary course of business consistentwith past practice;

 

(f)                          Incurany indebtedness for borrowed money, guarantee any such indebtedness or makeany loans, advances or capital contributions to, or other investments in, anyother Person;

 

(g)                       Alter(through merger, liquidation, reorganization, restructuring or in any otherfashion) the corporate structure or ownership of the Company or the CompanySubsidiary;

 

(h)                       Enterinto or adopt any, or amend any existing, severance plan, agreement orarrangement or enter into or amend any Plan or Employee Plan or employment orconsulting agreement;

 

(i)                           Increasethe compensation payable or to become payable to its directors, officers oremployees or grant any severance or termination pay to, or enter into anyemployment or severance agreement with, any director, officer or employee ofthe Company or the Company Subsidiary, or establish, adopt, enter into, or,except as may be required to comply with applicable law, amend in any materialrespect or take action to enhance in any material respect or accelerate any rightsor benefits under, any labor, collective bargaining, bonus, profit sharing,thrift, compensation, stock option, restricted stock, pension, retirement,deferred compensation, employment, termination, severance or other plan,agreement, trust, fund, policy or arrangement for the benefit of any director,officer or employee;

 

(j)                           Knowinglyviolate or knowingly fail to perform any obligation or duty imposed upon it byany applicable federal, state, local or foreign law, rule, regulation,guideline or ordinance;

 

(k)                        Makeany change to accounting policies or procedures (other than actions required tobe taken by GAAP);

 

(l)                           Prepareor file any Return inconsistent with past practice or, on any such Return, takeany position, make any election, or adopt any method that is inconsistent withpositions taken, elections made or methods used in preparing or filing similarReturns in prior periods;

 

(m)                     Makeor rescind any express or deemed tax election related to Taxes or change any ofits methods of reporting income or deductions for Tax purposes;

 

(n)                       Commenceany litigation or proceeding with respect to any material Tax liability orsettle or compromise any material Tax liability or commence any otherlitigation or proceedings or settle or compromise any other material claims orlitigation;

 

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(o)                       Exceptin the ordinary course of business consistent with past practices, enter intoor amend any agreement or contract with any customer, supplier, salesrepresentative or agent: (i) having a term in excess of 12 months andwhich is not terminable by the Company without penalty or premium by notice of30 days or less or (ii) which involves or is expected to involvepayments of $100,000 or more during the term thereof; (iii) enter into or amendany other agreement or contract material to the Company; or (iv) purchase orlease any real property; or make or agree to make any new capital expenditureor expenditures which in the aggregate are in excess of $50,000;

 

(p)                       Exceptin the ordinary course of business consistent with past practice, enter into oramend any agreement or contract with any other person pursuant to which theCompany is the licensor or licensee of any Intellectual Property;

 

(q)                       Pay,accelerate, discharge or satisfy any claims, liabilities or obligations(absolute, accrued, asserted or unasserted, contingent or otherwise), otherthan the payment, discharge or satisfaction, in the ordinary course of businessconsistent with past practice or in accordance with their terms, of liabilitiesreflected or reserved against in, or contemplated by, the Audited FinancialStatements or incurred in the ordinary course of business consistent with pastpractice; or

 

(r)                          Authorize,recommend, propose or announce an intention to do any of the foregoing, orenter into any contract, agreement, commitment or arrangement to do any of theforegoing.

 

5.2                                                    *No Solicitation*.  During the period between the Execution Date and the ClosingDate, the Company shall not, and the Company shall require the CompanySubsidiary and each of their respective officers, directors, employees,representatives and agents not to, directly or indirectly, (a) initiate,solicit, encourage or otherwise facilitate any inquiry, proposal, offer ordiscussion with any party (other than Parent or Purchaser) concerning anymerger, reorganization, consolidation, recapitalization, business combination,liquidation, dissolution, share exchange, sale of stock, sale of materialassets, tender offer or similar business transaction involving the Company (an“**Acquisition Proposal**”),(b) engage in discussions or negotiations with any Person (other thanParent) concerning any such Acquisition Proposal, or (c) following receiptof an Acquisition Proposal, withhold, withdraw, modify or change in a manneradverse to Parent, or fail to make, a recommendation that the CompanyShareholders vote in favor of the Transactions or approve, endorse or recommendsuch Acquisition Proposal.

 

5.3                                                    *Access to Information*.  The Company shall, and shall cause theCompany Subsidiary to, use commercially reasonable efforts to facilitate andassist Parent’s ongoing due diligence investigation of the Company, the CompanySubsidiary and their business.  Infurtherance thereof, and without limiting the generality of the foregoing, theCompany shall afford to the accountants, counsel, financial advisors and otherrepresentatives of Parent reasonable access to, and permit them to make suchinspections as they may reasonably require of, during the period from theExecution Date through the Effective Time, all of their respective properties,books, contracts, commitments and records (including Returns and the workpapers of independent accountants), subject to restrictions on disclosureimposed by contract or applicable

 

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law.  No investigation pursuantto this Section 5.3 shall affect any representation or warranty in thisAgreement of any party hereto or any condition to the obligations of theparties hereto.

 

5.4                                                    *Public Announcements*.  From the Execution Date until the earlier ofthe Effective Time or the termination of this Agreement, no party hereto willissue or cause the publication of any press release or other publicannouncement with respect to this Agreement or the Transactions without theprior consent of Parent (in the case of the Company or any Stockholder) or theCompany (in the case of Parent or Purchaser), which consent shall not beunreasonably withheld; *provided, however*,that:  (a) nothing herein willprohibit either party from issuing or causing publication of any such pressrelease or public announcement to the extent that such party’s counsel inwriting reasonably determines such action to be required by applicable law orgovernmental regulations, in which case the party making such determinationwill, to the greatest extent practicable in light of the circumstances, usebest efforts to allow the other party reasonable time to comment on suchrelease or announcement in advance of its issuance; and (b) Parent and theCompany may disclose this Agreement and the Transactions to (i) theirrespective directors, officers, employees, financial advisors, potential andactual financing sources and their advisors, legal counsel, independent certifiedpublic accountants or other agents, advisors or representatives on aneed-to-know basis (to the extent such parties are under non-disclosureobligations) and (ii) third parties in connection with securing consentsof such third parties to the extent necessary to consummate the Transactions orto prevent a default in connection with consummation of the Transactions and inconnection with any permits, approvals, filings or consents required by law tobe obtained.  Prior to the Closing, allpress releases or other announcements or notices regarding the Transactionsshall be made jointly by Parent and the Company.

 

5.5                                                    *CommerciallyReasonable Efforts*.

 

(a)                        Uponthe terms and subject to the conditions set forth in this Agreement, each ofthe parties shall use all commercially reasonable efforts to take, or cause tobe taken, all actions, and to do, or cause to be done, and to assist andcooperate with the other parties in doing, all things necessary, proper oradvisable to consummate and make effective, in the most expeditious mannerpracticable, the Merger and the other Transactions, including:  (i) the obtaining of all necessaryactions or non-actions, waivers, consents and approvals from all governmentalentities and the making of all necessary registrations and filings (includingfilings with any governmental entity) and the taking of all reasonable steps asmay be necessary to obtain an approval or waiver from, or to avoid an action orproceeding by, any governmental entity, (ii) the obtaining of all necessaryconsents, approvals or waivers from third parties, including, but not limitedto, consents from the Company’s employees related to their transition from theCompany Benefit Plans to Parent’s employee benefit plans, and (iii) theexecution and delivery of any additional instruments necessary to consummatethe Transactions.

 

(b)                       Noparty shall take any action, or enter into any transaction, which would causeany of its representations or warranties contained in this Agreement to beuntrue or result in a breach of any covenant made by it in this Agreement.

 

5.6                                                    *Company Indebtedness*.  At the Closing, Parent shall, at its option,either (a) repay in full the outstanding principal balance of, and any accruedand unpaid interest, fees and

 

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other amounts (including any prepayment penalties) payable by Companyor the Company Subsidiary in respect of, any indebtedness for borrowed money(including bank overdrafts) to any bank or other financial institution or otherunaffiliated lender (including the lessor on all capital leases) as of theEffective Time (the “**Third Party Debt**”)or (b) cause the Surviving Corporation to assume any of such Third Party Debtand cause the personal guarantees of the Stockholders (and all collateral ofthe Stockholders pledged to secure such guarantees) of any of such Third PartyDebt to be unconditionally released by the applicable lenders; *provided* that the aggregate amount of suchThird Party Debt shall not exceed $7,500,000. At the Closing, Parent shall, or it shall cause the SurvivingCorporation to, at its option either (x) replace and cause to be cancelled the$500,000 letter of credit issued to secure a performance bond issued inconnection with the Company’s contract with the Virginia Employment Commission(the “**LOC**”),(y) cause the issuer of the LOC to unconditionally release the personalguarantees of the Stockholders (and all collateral of the Stockholders pledgedto secure such guarantees), or (z) make such other arrangements as are acceptableto the Stockholders in their sole discretion.

 

5.7                                                    *Fees and Expenses*.  Except as otherwise expressly provided inthis Agreement, each party hereto will pay its own expenses incurred inconnection with the negotiation of this Agreement, the performance of theirrespective obligations hereunder and the consummation of the Transactions,whether or not consummated.  Alltransfer, documentary, sales, use, stamp, registration and other such Taxes andfees (including any penalties and interest) incurred in connection with thisAgreement and the Transactions, other than any taxes relating to the issuanceof the Parent Shares to the Company Shareholders, shall be the responsibilityof the Company and be deemed part of Company Transaction Costs.  The Company will, at its own expense, fileall necessary Returns and other documentation with respect to all such Taxesand fees, and, if required by law, Parent will join in the execution of anysuch Returns and other documentation.

 

5.8                                                    *Company 401(k) Plan*.  Prior to the Effective Time, the Company’sBoard of Directors shall have authorized and directed the termination of theEPOS Corporation 401(k) Plan (the “**Company****401(k) Plan**”).

 

5.9                                                    *VotingAgreement. *Provided thatParent is in compliance in all material respects with its obligations underthis Agreement, at any meeting of the Company Shareholders, called to considerand vote upon the adoption of this Agreement (and at any and all postponementsand adjournments thereof), and in connection with any action to be taken inrespect of the adoption of this Agreement by written consent of CompanyShareholders, each of the Stockholders hereby agrees that he will vote or causeto be voted (including by written consent, if applicable) all of suchStockholder’s shares of Company Common Stock which he has the right to vote infavor of the adoption of this Agreement and in favor of any other matternecessary or appropriate for the consummation of the Merger and the otherTransactions that is considered and voted upon at any such meeting or made thesubject of any such written consent, as applicable.  At any meeting of the Company Shareholders, called to considerand vote upon any Adverse Proposal (and at any and all postponements and adjournmentsthereof), and in connection with any action to be taken in respect of anyAdverse Proposal by written consent of the Company Shareholders, eachStockholder hereby agrees to vote or cause to be voted (including by writtenconsent, if applicable) all of such Stockholder’s shares of Company CommonStock which he has the right to vote against the adoption of such AdverseProposal.

 

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For purposes of this Agreement, the term “**Adverse Proposal**” means (a) any proposal or action thatwould reasonably be expected to result in a breach of any covenant, agreement,representation or warranty of the Company set forth in this Agreement, or(b) the following actions (other than the Merger and the otherTransactions):  (i) anyextraordinary corporate transaction, such as a merger, consolidation or otherbusiness combination involving the Company or the Company Subsidiary;(ii) a sale, lease or transfer of a material amount of assets of theCompany or the Company Subsidiary, or a reorganization, recapitalization,dissolution or liquidation of the Company or the Company Subsidiary; and(iii) (A) any change in a majority of the persons who constitute theboard of directors of the Company or the Company Subsidiary as of the ExecutionDate; (B) any change in the present capitalization of the Company or anyamendment of the Company’s or the Company Subsidiary’s articles ofincorporation or bylaws, as amended as of the Execution Date; (C) anyother material change in the Company’s or the Company Subsidiary’s corporatestructure or business; or (D) any other action that is intended, or couldreasonably be expected, to impede, interfere with, delay, postpone, oradversely affect the Merger or the other Transactions or increase thelikelihood that such Transactions will not be consummated.

 

5.10                                              *Notificationof Certain Matters*.  TheCompany and each of the Stockholders shall give prompt notice to Parent of: (i)the occurrence or non-occurrence of any event, the occurrence or non-occurrenceof which is likely to cause any representation or warranty of the Company orany such Stockholder, as applicable, contained in this Agreement to be untrueor inaccurate in any material respect at or prior to the Effective Time; and(ii) any failure of the Company or any such Stockholder to comply with orsatisfy any covenant, condition or agreement to be complied with or satisfiedby it hereunder; *provided, however*, that the delivery of any notice pursuantto this Section 5.10 shall not constitute an acknowledgment or admissionof a breach of this Agreement.  Nodisclosure by the Company or any Stockholder pursuant to this Section 5.10shall be deemed to have cured any breach of any representation or warranty madein this Agreement for purposes of determining whether or not the conditions setforth in Article 6 have been satisfied, but will be deemed to have curedany such breach of representation or warranty in this Agreement and to havebeen disclosed as of the Execution Date for purposes of Article 8 hereof.

 

**ARTICLE 6**CONDITIONS TO CLOSING

** **

6.1                                                    *Conditions to Each Party’s Obligations*.  The respective obligations of each party toconsummate the transactions contemplated hereby at the Closing are subject tothe fulfillment to each party’s reasonable satisfaction on or prior to theEffective Time of each of the following conditions:

 

(a)                        HSRAct.  Any waiting period (and anyextension thereof) applicable to the Merger under the HSR Act and anyapplicable foreign antitrust and competition laws shall have been terminated orshall have expired.

 

(b)                       NoInjunctions or Restraints.  Notemporary restraining order, preliminary or permanent injunction or otherjudgment or order issued by any Governmental Entity, court of

 

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competent jurisdiction or other statute, law, rule, legal restraint orprohibition shall be in effect preventing the consummation of the transactionscontemplated hereby.

 

(c)                        EscrowAgreement.  Parent and the Companyshall have each executed and delivered the Escrow Agreement, and Parent shallhave deposited the Escrow Fund with the Escrow Agent.

 

(d)                       StockholderApproval.  This Agreement shall havebeen approved and adopted, and the Merger shall have been duly approved, by therequisite vote under applicable law, by the Company Shareholders entitled tovote on such matters.

 

(e)                        CompanyBudget, Plan and Financing.  TheCompany shall have prepared a monthly operating budget for the period from theClosing Date through September 30, 2004 and the ensuing twelve monthsended September 30, 2005 that is reasonably acceptable to Parent.

 

6.2                                                    *Conditions to Obligations of Parent and Purchaser*.  The obligation of Parent and Purchaser toconsummate the Merger at the Closing is subject to the fulfillment to theParent’s and Purchaser’s reasonable satisfaction on or prior to the EffectiveTime of each of the following conditions:

 

(a)                        Representationsand Warranties.  Each representationand warranty of the Company and the Stockholders contained in this Agreementshall be true and correct in all material respects (unless any suchrepresentation or warranty is qualified by materiality and in such case shallbe true and correct in all respects as so qualified) as of the Execution Dateand as of the Effective Time as though made as of the Effective Time, except asdescribed in the Company Disclosure Schedule, and except to the extent suchrepresentations and warranties expressly relate to an earlier date, in whichcase as of such earlier date.  Parentand Purchaser shall have received a certificate signed by a duly authorizedofficer of the Company to such effect.

 

(b)                       Performance.  All covenants, agreements and conditionscontained in this Agreement to be performed or complied with by the Company andthe Stockholders at or prior to the Effective Time shall have been performed orcomplied with by the Company and the Stockholders in all materialrespects.  Parent and Purchaser shallhave received a certificate signed by a duly authorized officer of the Companyto such effect.

 

(c)                        Consents.  Schedule 6.2(c) of the CompanyDisclosure Schedule sets forth a list of all consents, approvals,authorizations, whether governmental or otherwise, the absence of which,individually or in the aggregate, would have a Material Adverse Effect on theCompany, and the Company shall have obtained each of such consents.

 

(d)                       DueDiligence.  Parent and its advisorsshall have completed the financial, business, technology and legal duediligence investigations of the technology, financial condition, operatingresults, business and prospects of the Company and the Company Subsidiary, theresults of which investigations shall be satisfactory to Parent in its solediscretion.

 

(e)                        EmploymentAgreements and Arrangements.  As ofthe Closing Date, each of the Stockholders shall have executed and delivered toParent an Employment Agreement in

 

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substantially the form of Exhibit B hereto (each, an “**Employment Agreement**”) and Parent or theCompany shall have entered into employment arrangements on terms reasonablysatisfactory to Parent with such additional key employees of the Company, asdetermined by Parent in its sole discretion.

 

(f)                          NoMaterial Adverse Effect.  No fact ordevelopment shall have occurred since the Execution Date and be continuingwhich, individually or in the aggregate, has had or would have a MaterialAdverse Effect on the Company.  Parentshall have received a certificate signed by a duly authorized officer of theCompany to such effect.

 

(g)                       LegalOpinion.  Parent shall have receivedan opinion of Bradley Arant Rose & White LLP, the Company’s counsel, insubstantially the form attached hereto as Exhibit E.

 

(h)                       ClosingBalance Sheet.  The Company shallhave prepared and delivered to Parent the Closing Balance Sheet in a formacceptable to Parent.

 

(i)                           Certificatesand Documents.  The Company and theStockholders shall have delivered to Parent at or prior to the Closing:

 

(i)                                     Acopy of the Company’s articles of incorporation and evidence of good standing,with all amendments to date, certified by the Secretary of State of Alabama asof a date within a reasonable period of time prior to the Effective Time,together with true and correct bylaws of the Company, certified by itssecretary as of the Effective Time;

 

(ii)                                  Acopy of the Company Subsidiary’s articles of incorporation and evidence of goodstanding, with all amendments to date, certified by the Secretary of State ofGeorgia as of a date within a reasonable period of time prior to the EffectiveTime, together with true and correct bylaws of the Company Subsidiary,certified by its secretary as of the Effective Time;

 

(iii)                               Resolutionsof the board of directors of the Company authorizing and approving all mattersin connection with this Agreement and the Transactions, certified by a dulyauthorized officer of the Company as of the Effective Time;

 

(iv)                              Completecorporate minute books and stock register books for each of the Company and theCompany Subsidiary; and

 

(v)                                 Suchother documents relating to the transactions contemplated in this Agreement asParent may reasonably request.

 

(j)                           FIRPTA.  Either (i) the Company shall havedelivered to Parent and to the Internal Revenue Service notices that the sharesof Company Common Stock are not a “U.S. real property interest” in accordancewith Treasury Regulations under Sections 897 and 1445 of the Code, or(ii) each of the Company Shareholders shall deliver to Parentcertifications that they are not foreign persons in accordance with theTreasury Regulations under Section 1445 of the Code.  If Parent does not receive either thenotices or the certifications described above on or before the Closing Date ina form reasonably satisfactory to Parent, Parent, Purchaser, and the

 

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Surviving Corporation shall be permitted to withhold from the paymentsto be made pursuant to this Agreement any required withholding tax underSection 1445 of the Code.

 

(k)                        AppraisalRights.  No more than six (6%)percent of the shares of the Company Common Stock shall have exercised or beeligible to exercise Dissenters’ Rights in connection with the Merger.

 

(l)                           Terminationof Company 401(k) Plan.  TheCompany’s Board of Directors shall have authorized and directed the terminationof the Company 401(k) Plan.

 

6.3                                                    *Conditions to Obligations of the Company and theStockholders*.  The Company’sobligation to consummate the Merger at the Closing is subject to thefulfillment to its reasonable satisfaction or waiver on or prior to theEffective Time of each of the following conditions:

 

(a)                        Representationsand Warranties.  Each representationand warranty of Parent and Purchaser contained in this Agreement shall be trueand correct in all material respects (unless any such representation orwarranty is qualified by materiality and in such case shall be true and correctin all respects as so qualified) as of the Execution Date and as of theEffective Time as though made as of the Effective Time, except as described inthe Parent Disclosure Schedule, and except to the extent such representationsand warranties expressly relate to an earlier date, in which case as of suchearlier date.  The Company shall havereceived a certificate signed on behalf of Parent and Purchaser by dulyauthorized executive officers of Parent and Purchaser to such effect.

 

(b)                       Performance.  All covenants, agreements and conditionscontained in this Agreement to be performed or complied with by Parent orPurchaser on or prior to the Effective Time shall have been performed orcomplied with by Parent or Purchaser in all material respects. The Companyshall have received a certificate signed on behalf of Parent and Purchaser byduly authorized executive officers of Parent and Purchaser to such effect.

 

(c)                        Fundingof the Exchange Fund.  At theEffective Time, Parent or Purchaser shall have deposited the Cash Considerationinto the Exchange Fund and the Escrow Fund in amounts consistent with the termsand conditions of Section 2.8, deposited the Parent Shares into theExchange Fund and the Escrow Fund in amounts consistent with the terms andconditions of Section 2.8, and assumed, or caused the SurvivingCorporation to have assumed, the Third Party Debt.

 

(d)                       Consents.  All consents, the absence of which,individually or in the aggregate, would have a Material Adverse Effect onParent, shall have been obtained.

 

(e)                        NoMaterial Adverse Effect.  No fact ordevelopment shall have occurred since the Execution Date and be continuingwhich, individually or in the aggregate, has had or would have a MaterialAdverse Effect on Parent.  The Companyshall have received a certificate signed on behalf of Parent by a dulyauthorized officer of Parent to such effect.

 

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(f)                          LegalOpinion.  The Company shall havereceived an opinion of Farella Braun + Martel LLP, Parent’s and Purchaser’scounsel, in substantially the form attached hereto as Exhibit F.

 

(g)                       Listingof Shares.  As of the Closing Date,the Parent Class B Stock shall not have been delisted from the Nasdaq NationalMarket nor shall proceedings have been instituted or initiated therefor, andParent shall have paid all Nasdaq National Market listing fees required inconnection with the issuance of the Parent Shares.

 

(h)                       Certificatesand Documents.  Parent and Purchasershall have delivered at or prior to the Closing to the Company and theStockholders:

 

(i)                                     Acopy of Parent’s and Purchaser’s respective articles or certificates ofincorporation, with all amendments to date, certified by the Secretary of Stateor similar officer of Parent’s and Purchaser’s respective jurisdictions oforganization as of a date within a reasonable period of time prior to theEffective Time, together with bylaws of Parent and Purchaser, certified bytheir respective secretaries as of the Effective Time;

 

(ii)                                  Resolutionsof the boards of directors of Parent and Purchaser, authorizing and approvingall matters in connection with this Agreement and the Transactions, certifiedby the respective secretaries of Parent and Purchaser as of the Effective Time;and

 

(iii)                               Suchother documents relating to the Transactions as the Company or the Stockholdersmay reasonably request.

 

**ARTICLE 7**POST-CLOSING COVENANTS

** **

7.1                                                    *Non-Competitionand Non-Solicitation by Stockholders*.

 

(a)                        Noncompetition.  In consideration of: (i) the Equity Price tobe paid to each Stockholders in exchange for each share of Company Common Stockheld by such Stockholder at the Effective Time; (ii) the wide access theCompany grants to each Stockholder to review and become familiar with theCompany’s business, including certain valuable trade secrets and theopportunity to contact and develop business relationships with the Company’sclients, vendors, and business partners; (iii) to protect the SurvivingCorporation from the harm to its goodwill that would otherwise result; and (iv)in view of other considerations; each Stockholder hereby covenants and agreesthat, commencing on the Execution Date and continuing for three (3) yearsfollowing the Closing Date (the “**Non-Competition Period**”), he will notdirectly or indirectly own, manage, join, invest in, finance, control, acceptemployment with, or provide consulting or advisory services to, directly orindirectly, any Competitive Business.  A“**Competitive Business**” is anybusiness (other than a business of Parent or the Surviving Corporation) thatmarkets, sells, provides or is actively developing hardware or softwaretechnology that is competitive with the Company including, but not limited to,IVR or WEB technology.  Nothingcontained in this Section 7.1 shall prevent any of Stockholders fromowning, directly or indirectly, solely for investment purposes up to anaggregate of one percent (1.0%) of the

 

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outstanding debt or equity securities of any privately held or publiclytraded corporation or other business entity which may otherwise be aCompetitive Business.

 

(b)                       NonsolicitationCovenant.  In consideration of (i)the Equity Price to be paid to each Stockholders in exchange for each share ofCompany Common Stock held by such Stockholder at the Effective Time; (ii) thewide access the Company grants to each Stockholder to review and becomefamiliar with the Company’s business, including certain valuable trade secretsand the opportunity to contact and develop business relationships with theCompany’s clients, vendors, and business partners; (iii) to protect the Companyfrom the harm to its goodwill that would otherwise result; and (iv) in view ofother considerations; during the Non-Competition Period, each of theStockholders agrees that he will not, directly or indirectly, for himself orfor the benefit of, or in conjunction with, any other Person:

 

(i)                                     callupon any Person that was a customer of the Company at any time prior to theClosing Date, for the purpose of soliciting, selling, diverting, taking away,transferring or interfering with any of the customers’ trade with or patronageof the Surviving Corporation;

 

(ii)                                  callupon any Person which has been the subject of a solicitation, in the form of aproject proposal, submission of a bid or otherwise, by the Company prior to theClosing Date;

 

(iii)                               solicit,or attempt to solicit, any person employed by the Company on the Closing Datein order to cause the termination of said employee’s employment with theCompany; or

 

(iv)                              divert,take away, transfer or otherwise interfere with the relationship(s) of theCompany with any of its suppliers, manufacturers, licensors or consultants.

 

(c)                        If at any time during theNoncompetition Period, any of the Stockholders desires to participate in anactivity that he believes might be prohibited by this Section 7.1, suchperson may request in writing a determination by Parent as to whether suchproposed activity would violate this Section 7.1.  Such written request (a “**ClarificationRequest**”) shall be sent by certified U.S. Mail, return receiptrequested, to the Parent notice parties set forth in Section 10.5(Notices) and shall (X) provide reasonably sufficient written information to allowParent to evaluate the proposed activity and (Y) include a copy of thisSection 7.1.  Parent shall respondin writing (a “**Clarification Response**”) to any Clarification Request thatcomplies with this Section 7.1(c) within twenty (20) business days ofreceipt thereof from the requesting person. In the event that Parent fails to deliver a Clarification Response tothe requesting person within such twenty (20) business day period, Parent shallbe deemed to have (i) irrevocably consented to the activity proposed in theClarification Request and (ii) irrevocably determined that such activity asdescribed in the Clarification Request does not violate this Section 7.1.

 

7.2                                                    *Further Assurances*.  If at any time after the Effective Time theSurviving Corporation shall consider or be advised that any deeds, bills ofsale, assignments or assurances or any other acts or things are reasonablynecessary, desirable or proper (a) to vest, perfect or confirm, of recordor otherwise, in the Surviving Corporation its right, title or interest in, toor

 

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under any of the rights, privileges, powers, franchises, properties orassets of either Purchaser or the Company, or (b) otherwise to carry outthe purposes of this Agreement, the Surviving Corporation and its properofficers and directors or their designees shall be authorized to execute anddeliver, in the name and on behalf of either of Purchaser or the Company, allsuch deeds, bills of sale, assignments and assurances and to do, in the nameand on behalf of either Purchaser or the Company, at the Purchaser’s soleexpense, all such other acts and things as may be reasonably necessary,desirable or proper to vest, perfect or confirm the Surviving Corporation’sright, title or interest in, to or under any of the rights, privileges, powers,franchises, properties or assets of such Purchaser or the Company and otherwiseto carry out the purposes of this Agreement and the Merger.

 

7.3                                                    *EmployeeSeniority*.  For the purposesof all Parent employment policies and practices affected by seniority, to theextent permitted by the terms of such policies and practices, the employees ofthe Company (including, without limitation, the Stockholders) shall be deemedto have seniority dating to the commencement of their respective employmentwith the Company or the Company Subsidiary, as applicable.

 

7.4                                                    *Rule 144*.  Parent hereby agrees to use commerciallyreasonable efforts, and to cause its officers, legal counsel and otheremployees and representatives to use their respective commercially reasonableefforts, to ensure that Parent satisfies the conditions set forth in paragraph(c) of Rule 144 such that, if the Company Shareholders satisfy the otherconditions set forth in Rule 144 promulgated under the Securities Act (“**Rule 144**”),the Company Shareholders may sell their Parent Shares under Rule 144 commencingone year following the Closing Date. Without limiting the foregoing, Parent hereby agrees to respond in atimely manner, and to cause its officers, legal counsel and otherrepresentatives to respond in a timely manner, to requests by the CompanyShareholders or their brokers to sell Parent Shares under Rule 144 followingthe Closing Date and at all times thereafter, including, without limitation, torequests to have the applicable legends removed from the stock certificatesrepresenting the Parent Shares sought to be sold.

 

**ARTICLE 8**SURVIVAL AND INDEMNIFICATION

** **

8.1                                                    *Survival of Representations and Warranties*.  The representations and warranties containedin Articles 3 and 4 hereof shall survive the Effective Time for a period ofeighteen (18) months following the Effective Time, after which all suchrepresentations and warranties shall terminate and be of no further force oreffect; *provided, however*, thatthe representations and warranties contained in Sections 3.1 (Organization andAuthority), 3.2 (Capitalization of the Company and the Company Subsidiary), 3.8(Taxes), and 3.20 (Hazardous Materials) shall survive the Effective Time and continueuntil the expiration of the applicable statute of limitations.  If a claim or notice is given underArticle 8 with respect to any representation or warranty prior to theexpiration date, such representation or warranty shall continue indefinitely untilsuch claim is finally resolved.

 

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8.2                                                    *Recourse toEscrow Fund*.

 

(a)                        Subjectto the limitations set forth herein, for a period of eighteen (18) months fromand after the Effective Time, the Escrow Fund shall be available (and shall bethe sole and exclusive remedy) to compensate Parent, Purchaser and theirrespective officers, directors, employees, agents (collectively, the “**Parent Indemnified Parties**”) for any loss,liability, deficiency, damage, expense or cost (including legal expenses),incurred or paid (collectively, “**Losses**”) by a Parent Indemnified Party (whether or notinvolving a third party claim), which arise as a result of:

 

(i)                                     anybreach or failure of any of the representations and warranties of the Companyor the Stockholders contained in this Agreement;

 

(ii)                                  anybreach of, or failure to perform, any agreement or covenant of the Company orthe Stockholders contained in this Agreement;

 

(iii)                               any Action related to theIntellectual Property initiated by, resulting from, or directly related to, anyAction initiated by any of thefollowing or their respective representatives: (A) Ronald A. Katz TechnologyLicensing, L.P. or its licensing arm, A2D; (B) Next Generation Information,Inc.; (C) MCI WorldCom, Inc.; (D) Bruce Dickens or Dickens 2000; (E) TouchNetInformation Systems, Inc.; or (F) Philip S. Jackson (collectively, the “**A2D Parties**”);*provided,however*, that neither Parent nor Purchaser may be indemnifiedpursuant to the preceding clause to the extent such Action directly resultsfrom Parent’s affirmative conduct; notwithstanding the foregoing clause,Parent’s right to indemnification pursuant to this Section 8.2 shall notbe limited or qualified as a result of any lawful action or undertaking byParent reasonably necessary to determine the scope of the Intellectual Propertyof the A2D Parties or to obtain rights to use such Intellectual Property.  For the avoidance of doubt, nothingcontained in Section 3.13 of the Company Disclosure Schedule shalllimit the rights to indemnification of the Parent Indemnified Parties arisingunder this Section 8.2.

 

(iv)                              anyAction related to the Company 401(k) Plan.

 

(v)                                 thefailure of the Surviving Corporation to realize a Gross Margin of (A) at least45% on the professional services component of the agreement between the Companyand the Virginia Employment Commission, (B) at least 45% on the professionalservices component of the agreement between the Company and the OklahomaEmployment Security Commission, and (C) at least 40% on the on the professionalservices component of the notice of intent to award contract received by theCompany from the Georgia Department of Labor, in each case over the period oftime commencing on the Closing Date and ending, with respect to each suchagreement or contract, on the date of final client acceptance and satisfactorycompletion of services performed in accordance with the terms of the agreementor contract; *provided*, that the amount of Losses that the ParentIndemnified Parties shall suffer on account of the failure of the SurvivingCorporation to achieve any such Gross Margin shall be deemed for all purposesto be equal to the difference between (x) the Profit that would have had tohave been earned on such agreement or contract to generate the applicabletargeted Gross Margin set forth above and (y) the actual Profit earned on theapplicable agreement or contract; *provided, further*, that when calculatingthe Gross Margin and Profit of an agreement or contract for purposes of

 

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thissubsection 8.2(a)(v), any amendments, modifications or other changes madeto such agreement or contract following the Closing Date that (1) have beenagreed to in writing by Parent and the Shareholder Representative and (2) havehad a negative impact on the Gross Margin or Profit, shall be disregarded.

 

(b)                       TheEscrow Fund will be available to compensate the Parent Indemnified Parties forany Losses (the “**Parent Losses**”)only if Parent delivers to the Shareholder Representative written notice,setting forth in reasonable detail the identity, nature and amount of ParentLosses related to such claim or claims prior to the end of the eighteen (18)month period following the Effective Time. The Parent Indemnified Parties may not make any claims against theEscrow Fund unless the aggregate Parent Losses incurred exceed $100,000 (atwhich such time claims may be made, subject to the limitations set forthherein, for such Parent Losses incurred including the $100,000 thresholdamount).  Notwithstanding any otherprovision hereof to the contrary, in no event will the aggregate indemnityobligation hereunder with respect to Parent Losses exceed the aggregate valueat any time of the Escrow Fund, and the sole source of payment or recourse forany claim by any Parent Indemnified Party with respect to any Parent Lossesshall be the Escrow Fund.  Parent andthe Surviving Corporation shall act in good faith and shall not take any actionthe intent of which is to reduce or otherwise negatively impact the GrossMargin or Profit earned on any agreement or contract that is described insubsection 8.2(a)(v) above.

 

8.3                                                    *Indemnificationby Parent*.

 

(a)                        Fora period of eighteen (18) months from and after the Effective Time, Parent andPurchaser jointly and severally agree to indemnify and hold harmless theCompany Shareholders and their respective heirs, administrators, executors,trustees and assigns (collectively, the “**ShareholderIndemnified Parties**”) against any Losses incurred or paid by anyShareholder Indemnified Party (the “**ShareholderLosses**”), as a result of (i) any breach or failure of any ofthe representations and warranties of Parent or Purchaser contained in thisAgreement or (ii) any breach of, or failure to perform, any agreement orcovenant of Parent or Purchaser contained in this Agreement.  The Shareholder Indemnified Parties may notmake claims against Parent or Purchaser unless the aggregate Shareholder Lossesincurred exceed $100,000 (at which such time claims may be made, subject to alimit of an amount equal to the agreed upon limit for Parent’s indemnity, forsuch Shareholder Losses incurred including the $100,000 threshold).

 

(b)                       Parentand Purchaser will be liable to the Shareholder Indemnified Parties for anyLosses only if the Shareholder Indemnified Parties deliver to Parent notice,setting forth in reasonable detail the identity, nature and amount of Lossesrelated to such claim or claims prior to the eighteen (18) month anniversary ofthe Effective Time.

 

8.4                                                    *Procedure*.  Promptly after receipt by a Parent Indemnified Party or aShareholder Indemnified Party (an “**IndemnifiedParty**”) as the case may require) of notice of the commencement ofany action, such Indemnified Party shall, if a claim in respect thereof is tobe made against the indemnifying party under this Section 8.4, or may bemade following satisfaction of the minimum amounts set forth above, notify inwriting the indemnifying party of the commencement thereof.  In case any such action is brought againstany Indemnified Party,

 

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and such Indemnified Party notifies the indemnifying party of thecommencement thereof, the indemnifying party shall be entitled to participatein and, to the extent that it may wish, jointly with any other indemnifyingparty similarly notified, to assume the defense thereof, subject to theprovisions hereof, with counsel reasonably satisfactory to such IndemnifiedParty (provided that in matters of Tax indemnities, Parent shall control thedispute to the extent that the Tax dispute could have an adverse effect onParent or any Affiliate for any period after the Closing).  Following notification to the IndemnifiedParty of its election so to assume the defense thereof, the indemnifying partyshall not be liable to such Indemnified Party under this Section 8.4 forany legal or other expenses subsequently incurred by such Indemnified Party inconnection with the defense thereof, other than reasonable costs of investigation.  The Indemnified Party shall have the rightto employ separate counsel in any such action and to participate in the defensethereof, but the fees and expenses of such counsel shall not be at the expenseof the indemnifying party if the indemnifying party has assumed the defense ofthe action, within a reasonable time after notice of commencement of theaction, with counsel reasonably satisfactory to the Indemnified Party; *provided however*, that the indemnifyingparty shall be required to pay for Indemnified Party’s counsel if suchIndemnified Party shall have reasonably concluded, on reliance of the writtenopinion of counsel experienced in such matters, that there may be defensesavailable to it or him which are different from or additional to thoseavailable to the indemnifying party (in which case the indemnifying party shallnot have the right to direct the defense of the action).  No settlement of any action against anIndemnified Party shall be made without the consent of the Indemnified Party,which shall not be unreasonably withheld. In the event that any Indemnified Party should have a direct claimagainst any indemnifying party hereunder that does not involve any third partyclaim or claims asserted against the Indemnified Party, the Indemnified Partyshall transmit to the indemnifying party a written notice describing inreasonable detail the nature of the claim, an estimate of the amount of damagesattributable to such claim to the extent feasible (which estimate shall not beconclusive of the final amount of such claim) and the basis of the IndemnifiedParty’s request for indemnification under this Article 8.  If the indemnifying party does not notifythe Indemnified Party within 90 days from its receipt of such notice that theindemnifying party disputes such claim, the claim specified by the IndemnifiedParty in the indemnity notice shall be deemed a liability of the indemnifyingparty hereunder.  If the indemnifyingparty has timely disputed such claim, as provided above, such dispute shall beresolved by binding arbitration pursuant to Section 10.2 hereof.  Except as provided in the last sentence ofSection 10.3, the parties agree that the sole and exclusive remedy whichany party hereto shall have against any other party hereto under this Agreementshall be the right to proceed for compensation or indemnification in the mannerand only to the extent provided in this Article 8.

 

8.5                                                    *Treatment of Indemnity Payments*.  Any indemnity payment made to an IndemnifiedParty pursuant to this Agreement shall be treated as an adjustment to theMerger Consideration to the extent permitted by Law, provided that in the eventany Tax is imposed on an Indemnified Party in connection with the indemnitypayment, the Indemnified Party shall be grossed-up for such Taxes (and for anyadditional Taxes imposed in connection with payments made pursuant to thisSection 8.5).

 

8.6                                                    *No Contribution from the Surviving Corporation*.  The Surviving Corporation shall under nocircumstance be required to indemnify or contribute to any party to satisfy anyclaims for Losses owed the Parent Indemnified Parties in connection with thisArticle 8.

 

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8.7                                                    *Indemnity not Affected by Knowledge*. Subject toSection 5.10 or as reasonably disclosed in the Company DisclosureSchedule or the Parent Disclosure Schedule, the rightto indemnification under this Article 8 shall not be affected by anyknowledge of, examination made or investigation conducted by or on behalf ofthe Parent Indemnified Parties or Shareholder Indemnified Parties, as the casemay be, or their respective legal, accounting or financial advisors orconsultants, or the acceptance by any of the foregoing of any certificate oropinion or the consummation of the Closing.

 

**ARTICLE 9**TERMINATION, AMENDMENT AND WAIVER

** **

9.1                                                    *Termination*.  This Agreement may be terminated at any time prior to the Closing(except as limited as to time in paragraph (b) below):

 

(a)                        Bythe mutual written consent of Parent and the Company;

 

(b)                       ByParent or the Company, if the Merger has not been effected on or prior to theclose of business on the 30th calendar date after the Execution Date; *provided, however*, that the right toterminate this Agreement under this Section 9.1(b) shall not be availableto any party if such party’s failure to fulfill any obligation under thisAgreement shall have been the cause of, or shall have resulted in, the failureof the Closing to occur prior to such date;

 

(c)                        Bythe Company in the event a condition set forth in Section 6.1 or 6.3becomes incapable of being fulfilled; or

 

(d)                       ByParent in the event a condition set forth in Section 6.1 or 6.2 becomesincapable of being fulfilled.

 

(e)                        ByParent if, prior to the Closing, the Company’s board of directors shall have,in any manner, withdrawn or materially modified or amended in any respectadverse to Parent, or failed to issue, a recommendation that the CompanyShareholders vote in favor of the Merger and the other Transactions or shallhave resolved or announced an intention to do so.

 

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9.2                                                    *Effect ofTermination*.  In the event ofthe termination of this Agreement as provided in Section 9.1, thisAgreement shall forthwith become void and there shall be no liability on thepart of any party hereto; *provided, however*,that nothing herein shall relieve either the Company or Parent from liabilityfor any breach of this Agreement or failure to perform hereunder prior to thedate of termination.  Notwithstandingthe foregoing, the obligations of the parties contained in Section 5.7(Fees and Expenses), Article 8 (Survival and Indemnification), thisSection 9.2 (Effect of Termination), Section 10.1 (Entire Agreement),10.2 (Dispute Resolution; Governing Law), 10.3 (Attorneys’ Fees), 10.4(Headings), 10.5 (Notices) and Section 10.8 (No Third Party Beneficiaries)shall survive any such termination.  Ifthis Agreement is terminated as provided herein, upon request therefor, each partywill re-deliver all documents, workpapers and other material of any other partyrelating to the Transactions, whether obtained before or after the executionhereof, to the party furnishing the same.

 

9.3                                                    *Waiver*. At any time prior to the Closing, any party may (a) extend the timefor the performance of any of the obligations or other acts of any other partyhereto, (b) waive any inaccuracies in the representations and warrantiescontained herein or in any document delivered pursuant hereto or (c) waivecompliance with any of the agreements or conditions contained herein.  Any such extension or waiver shall be validonly if set forth in an instrument in writing signed by the party to be boundthereby.

 

**ARTICLE 10**

** **

**MISCELLANEOUS**

** **

10.1                                              *Entire Agreement*.  This Agreement, including the exhibits,schedules and other documents delivered pursuant to this Agreement, contain allof the terms and conditions agreed upon by the parties relating to the subjectmatter of this Agreement and supersede all prior and contemporaneous agreements(including, but not limited to, the Letter Agreement, dated February 13,2004, by and between the Company and Parent), negotiations, correspondence,undertakings and communications of the parties, oral or written, respecting thesubject matter of this Agreement.

 

10.2                                              *Dispute Resolution; Governing Law*.

 

(a)                        Eachdispute, difference, controversy, question or claim arising under or relatingto this Agreement, the Transaction Documents, the Transactions, or the subjectmatter hereof or thereof, between or among the parties to this Agreement (a “**Dispute**”)shall be finally settled by binding arbitration held in the city of Atlanta,Georgia, in accordance with the Commercial Arbitration Rules (the “**Rules**”)of the American Arbitration Association (the “**AAA**”) In the event theparties to the Dispute fail to agree upon an arbitrator from the first list ofpotential arbitrators proposed by the AAA, the AAA will submit a second list inaccordance with the Rules.  In the eventthe parties to the Dispute shall have failed to agree upon an arbitrator fromsaid second list, the arbitrator shall be appointed by the AAA in accordancewith the Rules.   The foregoingarbitration proceedings may be commenced by any party to a Dispute by notice tothe other parties to the Dispute.  Thedecision of the arbitrator shall be binding and conclusive upon the parties tothis Agreement.  Such decision shall bewritten and shall be supported by written findings of fact and conclusions thatshall set forth the award, judgment or

 

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decree of the arbitrator.  Theparties to this Agreement expressly acknowledge and stipulate that thisAgreement is in interstate commerce, as that term is defined in connection withthe Federal Arbitration Act, and that this agreement to arbitrate shall begoverned by the Federal Arbitration Act. Any challenges to the scope, validity, or enforceability of thisagreement to arbitrate, including, without limitation, any allegation that thisagreement to arbitrate was procured by fraud or procured under duress, shall bedetermined by the arbitrator in accordance with the provisions of the FederalArbitration Act.

 

(b)                       Exceptas provided in the Federal Arbitration Act and subject to the provisions ofthis Section 10.2, the parties to this Agreement hereby exclude any rightof appeal to any court on the merits of the dispute.  The provisions of this Section 10.2 may be enforced in anycourt having jurisdiction over the award or any party to the Dispute, andjudgment on the award granted in any arbitration hereunder may be entered inany such court.

 

(c)                        ThisAgreement shall be governed by, and construed in accordance with, the laws ofthe State of California, regardless of the laws that might otherwise governunder applicable principles of conflicts of laws thereof.

 

10.3                                              *Attorneys’ Fees*.  In the event of any arbitration or litigation between theparties, whether based on contract, tort or other cause of action, in any wayrelated to this Agreement or any of the Transaction Documents, the non-prevailingparty shall pay to the prevailing party all reasonable attorneys’ fees andcosts and expenses of any type, without restriction by statute, court rule orotherwise, incurred by the prevailing party in connection with any action orproceeding (including arbitration proceedings, any appeals and the enforcementof any judgment or award), whether or not the dispute is prosecuted to finaljudgment.  The “prevailing party” shallbe determined based on an assessment of which party’s major arguments orpositions taken in the action or proceeding could be fairly said to haveprevailed (whether by compromise, settlement, abandonment by the other party ofits claim or defense, final decision, after any appeals, or otherwise) over theother party’s major arguments or positions on major disputed issues.  Any fees and costs incurred in enforcing ajudgment shall be recoverable separately from any other amount included in thejudgment and shall survive and not be merged in the judgment.

 

10.4                                              *Headings*. The headings contained in this Agreement are intended solely forconvenience and shall not affect the rights of the parties to this Agreement.

 

10.5                                              *Notices*. All notices, requests, demands and other communications made inconnection with this Agreement shall be in writing and shall be deemed to havebeen duly given on the date of delivery, if delivered to the persons identifiedbelow, including delivery by facsimile provided sender receives telephonicconfirmation of delivery, on the next succeeding business day if delivered byovernight courier, or five (5) days after mailing if mailed by certified orregistered mail, postage prepaid, return receipt requested, addressed asfollows:

 

If to Parent or Purchaser:

 

Tier Technologies, Inc.

10780 Parkridge Boulevard

 

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4th Floor

Reston, VA   20191

Attn:                    James R.Weaver, President & CEO

Jeffrey A. McCandless, CFO

Fax:  (571) 583-1002

Telephone:  (571) 382-1027

 

With a copy to:

 

Farella Braun + Martel LLP235 Montgomery Street, Russ BuildingSan Francisco, CA 94104Attn:  Bruce R. Deming, Esq.Fax:  (415) 954-4480

 

Telephone: (415) 954-4981

 

If to the Company:

 

EPOS Corporation

Attn: Michael A. Lawler

P.O. Box 3140

Auburn, AL 36831-3140

Fax: (334) 321-7285

Telephone: (334) 321-7400

 

With a copy to:

 

Bradley Arant Rose & White LLPOne Federal Place1819 Fifth Avenue NorthBirmingham, Alabama 35203

Attn:                    James E.Rotch, Esq.James W. Childs, Jr., Esq.

Fax:                           (205)488-6211(205) 488-6207

Telephone: (205) 521-8000

 

Such persons and addresses may be changed, from time to time, by meansof a notice given in the manner provided in this Section 10.5.

 

10.6                                              *Waiver*. Waiver of any term or condition of this Agreement by any party shall notbe construed as a waiver of any subsequent breach or failure of the same termor condition, or a waiver of any other term or condition of this Agreement.

 

10.7                                              *Binding Effect; Assignment*.  The parties agree that this Agreement shallbe binding upon and inure to the benefit of the parties and their respective successorsand assigns.

 

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No party to this Agreement may assign or delegate, by operation of lawor otherwise, all or any portion of its rights, obligations or liabilitiesunder this Agreement without the prior written consent of all other parties tothis Agreement, which they may withhold in their absolute discretion; *provided, however*, that Purchaser mayassign this Agreement to any Affiliate of Parent.

 

10.8                                              *No Third Party Beneficiaries*.  Nothing in this Agreement shall confer anyrights upon any Person which is not a party or an assignee of a party to thisAgreement.

 

10.9                                              *Counterparts*.  This Agreement may be signed in any number of counterparts withthe same effect as if the signatures to each counterpart were upon a singleinstrument.  All counterparts shall bedeemed an original of this Agreement.

 

10.10                                        *Further Assurances*.  After the Closing, the parties to thisAgreement shall take such further actions as are reasonably required to carryout the Transactions.

 

10.11                                        *Interpretation*.  The phrase “including, but not limited to,” or words of similareffect wherever used in this Agreement shall not be construed as limited to thespecified items listed.

 

10.12                                        *Severability*.  In case any provision in this Agreement shall be held invalid,illegal or unenforceable, the validity, legality and enforceability of theremaining provisions hereof will not in any way be affected or impairedthereby.

 

[*signaturepage follows*]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement and Planof Merger on the Execution Date, effective as of the Effective Date.

 
|   | **TIER TECHNOLOGIES, INC.**       |
|--------|-----------------------------------|
|   |                              |   |   |
|   | By:                               |   |   |
|   |                              | Name: |   |
|   |                              | Title: |   |
|   |                              |   |   |
|   |                              |   |   |
|   | **BAKER ACQUISITION CORPORATION** |
|   |                              |   |   |
|   | By:                               |   |   |
|   |                              | Name: |   |
|   |                              | Title: |   |
|   |                              |   |   |
|   |                              |   |   |
|   | **EPOS CORPORATION**              |
|   |                              |   |   |
|   | By:                               |   |   |
|   |                              | Name: |   |
|   |                              | Title: |   |
|   |                              |   |   |
|   |                              |   |   |
|   | **STOCKHOLDERS**                  |
|   |                              |   |   |
|   |                              |   |
|   | James F. Byrd                     |
|   |                              |   |   |
|   |                              |   |
|   | Edward R. Graf                    |
|   |                              |   |   |
|   |                              |   |
|   | Timothy A. Johnson                |
|   |                              |   |   |
|   |                              |   |
|   | Michael A. Lawler                 |
|   |                              |   |   |
|   |                              |   |   |
|   | **SHAREHOLDER REPRESENTATIVE**    |
|   |                              |   |   |
|   |                              |   |
|   | Michael A. Lawler                 |

 

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**EXHIBITA**

 

**FORM OF ARTICLES OF MERGER**

 

A-1

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**EXHIBITB**

 

**FORM OF EMPLOYMENT AGREEMENTS**

 

B-1

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**EXHIBITC**

 

**FORM OF ESCROW AGREEMENT**

 

C-1

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**EXHIBITD**

 

**FORM OF LETTER OF TRANSMITTAL**

 

D-1

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**EXHIBITE**

 

**FORM OF LEGAL OPINION OF COUNSEL TO THECOMPANY**

 

E-1

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**EXHIBITF**

 

**FORM OF LEGAL OPINION OF COUNSEL TO PARENTAND PURCHASER**

 

F-1

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**EXHIBITG**

 

**FORM OF INVESTOR REPRESENTATIONS LETTER**

 

G-1

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**EXHIBITH**

 

**FORM OF WARRANT REDEMPTION AGREEMENT**

 

H-1

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**SCHEDULE 1**

 

**COMPANY DISCLOSURE SCHEDULE**

 

S1-1

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**SCHEDULE 2**

 

**PARENT DISCLOSURE SCHEDULE**

 

S2-1

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