**Exhibit 4(a).22**

 

 

**MERGER AGREEMENT**

**BY AND AMONG**

**CDC SOFTWARECORPORATION**

**AND**

**C I ACQUISITION CORPORATION**

**AND**

**CATALYST INTERNATIONAL, INC.**

**AND**

**THE STOCKHOLDERS OF CATALYST**

September 4, 2007 

 

 

 

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**MERGER AGREEMENT**

This MERGER AGREEMENT (this “***Agreement***”) is made and entered into as of September 4, 2007 by and among CDC Software Corporation (“***Buyer***”), C I AcquisitionCorporation, a Delaware corporation (“***Merger Subsidiary***” or “***Merger Sub***”), Catalyst International, Inc, a Delaware corporation (the “***Company***”) and the stockholders of theCompany listed on Schedule A attached hereto (collectively the “***Stockholders***”). 

RECITALS 

A. The Board of Directors of the Company has determined that the merger of Merger Subsidiary with and into the Company (the***“Merger”****)*and this Agreement are fair to, and in the best interests of, the Company and the Stockholders and has declared its advisability to recommend that the Stockholders vote their shares in favor of the Merger;and 

B. The Board of Directors of the Buyer and Merger Subsidiary have determined that the Merger and this Agreement are fair to, and inthe best interests of, the Buyer and the Merger Subsidiary; and 

C. As at the date of the Agreement, the Stockholders are the recordholders and beneficial owners of 100% of the issued and outstanding shares in the capital of the Company as set out in Schedule 3.4(a) of the Company Disclosure Schedule (as defined herein) and have agreed to enter into this Agreement and theMerger on the terms and conditions contained in this Agreement; and 

NOW, THEREFORE, in consideration of the foregoing and the mutualpromises, covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, each intending to be bound hereby, agree as follows: 

**ARTICLE I**

**DEFINITIONS**

1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: 

***“Affiliate”***means an “affiliate” within the meaning of Rule 144 promulgated under the Securities Act of 1933, asamended, and the rules and regulations promulgated thereunder. 

***“Audited Financial Statements”***shall mean theaudited consolidated financial statements of the Company comprising a consolidated balance sheet, profit and loss account, notes and reports thereon and a cashflow statement and the audited financial statements of the Company and each of theSubsidiaries, in each case for the period ended on December 31, 2006. 

***“Business”***means any business conductedby the Company and/or any of its Subsidiaries as at the date of this Agreement and during the preceding calendar year. 

***“Business Day”***shall mean a day other than Saturday, Sunday or any day on which banks located in California are authorized or obligated to close. 

***“Closing”***shall have the meaning given to such term in Section 2.2(f). 

***“Closing Balance Sheet”***means the unaudited consolidated balance sheet of the Company and its Subsidiaries prepared in accordancewith GAAP as at Closing, including, without limitation, all accruals and prepared as if such **Closing Balance Sheet**was a year end balance sheet. 

 

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***“Closing Date”***shall have the meaning given to such term in Section 2.2(f)***“Closing Net Asset Value”***means the Net Asset Value as of the Closing Date. ***“Code”***means the Internal Revenue Code of 1986, as amended. 

***“Option”***shall mean each outstanding stock option or similar rights to purchase shares of Company Stock and***“Options”***shall have a corresponding meaning. 

***“Company Balance Sheet”***shall have themeaning set forth in Section 3.6. 

***“Company Stock”***means the common stock of the Company, par value $.01 pershare. 

***“Contract”***means any contract, agreement, arrangement, commitment, undertaking, instrument, permit,mortgage, license, sublicense, lease, letter of intent, quotation or purchase order (in each case, whether oral or in writing). 

***“Effective Time”***shall mean the time at which the Surviving Corporation files the Certificate of Merger with the Secretary of State of Delaware. 

***“Encumbrance”***means, with respect to any asset, any mortgage, deed of trust, lien, pledge, charge, security interest, titleretention device, conditional sale or other security arrangement, collateral assignment, claim, charge, adverse claim of title, ownership or right to use, restriction or other encumbrance of any kind in respect of such asset (including anyrestriction on (a) the voting of any security or the transfer of any security or other asset, (b) the receipt of any income derived from any asset, (c) the use of any asset, or (d) the possession, exercise or transfer of anyother attribute of ownership of any asset). 

***“Environmental Laws”***means any federal, state, local or foreign law(including, without limitation, common law), treaty, judicial decision, regulation, rule, judgement, order, decree, injunction, permit or governmental restrictions or requirement or any agreement with any governmental authority, whether now orhereafter in effect, relating to human health and safety, the environment or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.

***“Estimated Closing Net Asset Value”***shall mean (negative) $2.4 million. 

***“Estimated Closing Net Asset Adjustment”***shall have the meaning given to such term in Section 2.7(a). 

***“Escrow Account”***shall mean the “Catalyst – CDC Escrow Account” held in an interest bearing account by the EscrowAgent for the benefit of the Stockholders and the Buyer jointly with Mellon Bank, N.A. 

***“Escrow Agent”***shall meanMellon Bank, N. A. 

***“Escrow Agent Fees”***shall mean the fees of the Escrow Agent associated or in connection withthe operation of the Escrow Account for the Holdback Period. 

***“Escrow Sum”***shall mean the balance of the EscrowAccount from time to time. 

 

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***“GAAP”***means United States generally accepted accounting principles. 

***“Governmental Entity”***means any supranational, national, state, municipal, local or foreign government, any court, tribunal,arbitrator, administrative agency, commission or other governmental official, authority or instrumentality, in each case whether domestic or foreign, any stock exchange or similar self-regulatory organization or any quasi-governmental or privatebody exercising any regulatory, Tax or other governmental or quasi-Governmental Entity. 

***“Holdback Consideration”***shall mean $4,500,000. 

***“Holdback Period”***shall mean the period starting on the day following the ClosingDate and ending of the day following twenty-four (24) months thereafter. 

***“Intellectual Property Rights”***meansworldwide industrial and intellectual property rights and all rights associated therewith, including all patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-partthereof, all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data, proprietary processes and formulae, algorithms, specifications, customer listsand supplier lists, all industrial designs and any registrations and applications therefor, all trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor, Internet domain names,Internet and World Wide Web URLs or addresses, all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto, all mask works, mask work registrations and applications therefor, and any equivalent orsimilar rights in semiconductor masks, layouts, architectures or topology, all computer software, including all source code, object code, firmware, development tools, files, records and data, all schematics, netlists, test methodologies, testvectors, emulation and simulation tools and reports, hardware development tools, and all rights in prototypes, breadboards and other devices, all databases and data collections and all rights therein, all moral and economic rights of authors andinventors, however denominated, and any similar or equivalent rights to any of the foregoing, and all tangible embodiments of the foregoing. 

***“IRS”***means the Internal Revenue Service. 

***“Independent Expert”***shall have themeaning set forth in Section 2.7(c). 

***“Knowledge”***means, with respect to any fact, circumstance, event orother matter in question, the actual knowledge of such fact, circumstance, event or other matter of (a) an individual, if used in reference to an individual, or (b) with respect to any Person that is not an individual, the directors andofficers of such Person including, without limitation, with respect to the Company the actual knowledge of the Executives, the Stockholders, or any employee, consultant or representative of the Company. Any such individual or Person shall be deemedto have actual knowledge of a particular fact, circumstance, event or other matter if such fact, circumstance, event or other matter is reflected in one or more documents (whether written or electronic) in, or that have been in, the possession ofsuch individual or Person. 

***“Liability”***shall mean any direct or indirect liability, indebtedness, obligation,expense, debt, claim, loss, damage, deficiency, guaranty or endorsement of any nature, of or by any Person, whether absolute or contingent, known or unknown, secured or unsecured, recourse or non-recourse, filed or unfiled, accrued or unaccrued, dueor to become due, or liquidated or unliquidated. 

***“Loss”***shall mean any and all damages, fines, fees, penalties,deficiencies, losses and expenses (including without limitation interest, reasonable court costs, reasonable fees of attorneys, reasonable retainers, reasonable fees of accountants and other experts or other reasonable expenses of litigation,reasonable witness costs/expenses or other proceedings or of any claim, default or assessment). 

 

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***“Material Adverse Change”***or ***“Material Adverse Effect”***means when used with reference to (i) any Person, shall mean any event, change, violation, circumstance or effect (regardless of whether such event, change, violation, circumstance or effect is inconsistent with any representations orwarranties made in this Agreement) that is or is reasonably likely to be, individually or in the aggregate, materially adverse to the condition (financial or otherwise), properties, assets (including intangible assets), business, operations orresults of operations of such Person and its Subsidiaries, taken as a whole, and (ii) the Business, shall mean a material diminution in the value or condition (financial or otherwise) of such Business; provided,however, that noneof the following, either alone or in combination, shall be deemed to be a ‘Material Adverse Change” or a “Material Adverse Effect”: (a) events, circumstances, changes or effects that generally affect the industries in whichthe Company and its Subsidiaries operate (including legal and regulatory changes), (b) general economic or political conditions or events, circumstances, changes or events affecting the securities markets generally, (c) changes arisingfrom the consummation of the transactions contemplated by, or the announcement of the execution of, this Agreement, (d) any circumstance, change or effect that results from any action taken pursuant to or in accordance with this Agreement or atrequest of the Buyer and/or Merger Subsidiary and (e) changes caused by a material worsening of current conditions caused by acts of terrorism or war (whether or not declared) occurring after the date hereof. 

***“Merger”***shall have the meaning set forth in the Recitals. 

***“Closing Consideration”***shall have the meaning set forth in Section 2.2. 

***“Net Receivables”***shall mean gross receivables less an allowance for uncollected receivables as determined in accordance withGAAP. 

***“NAV Adjustment”***shall have the meaning set forth in Section 2.7. 

***“NAV Notice of Objection”***shall have the meaning set forth in Section 2.7(b). 

***“Net Asset Value”***shall mean the Company’s and its Subsidiaries’ total consolidated current assets less total currentliabilities, as determined in accordance with GAAP excluding any debt, accrued and unpaid interest on debt, loans, bank overdrafts, credit lines, Transaction Incentives, all fees and expenses of any legal advisor, investment banker, broker, finder,accountant, financial advisor, tax advisor, or similar advisor. 

***“Person”***means any natural person, company,corporation, limited liability company, general partnership, limited partnership, trust, proprietorship, joint venture, business organization or Governmental Entity. 

***“Permitted Encumbrances”***means (i) statutory liens for Taxes to the extent that the payment thereof is not due, (ii) encumbrances in the nature of zoning restrictions, easements,rights or restrictions of record on the use of real property if the same do not impair its use in the Company’s business as currently conducted, (iii) statutory or common law liens to secure landlords, lessors or renters under leases orrental agreements confined to the premises rented to the extent that no payment or performance under any such lease or rental agreement is in arrears or is otherwise due, (iv) deposits or pledges made in connection with, or to secure paymentof, worker’s compensation, unemployment insurance, pension programs mandated under applicable laws or regulations or other social security, and (v) statutory or common law liens in favor of carriers, warehousemen, mechanics andmaterialmen, statutory or common law liens to secure claims for labor, materials or supplies and other similar, non-consensual liens arising in the ordinary course of business, which secure obligations to the extent that payment thereof is not inarrears or otherwise due. 

 

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***“Review Period”***shall have the meaning set forth in Section 2.7(b).

***“Software”***means, collectively, all of the software of the Company and/or its Subsidiaries in any form (includingall software programs, objects, modules, routines, algorithms and code, in both source code and object code form) and includes without limitation (a) all past and current versions and releases software products, all work-in-process anddeveloped but unreleased code, and all versions or releases under development as of the Closing Date, (b) any other software owned by the Company and/or any of its Subsidiaries or to which the Company (and/or its Subsidiaries) otherwise hasrights that is, has been or is intended to be used by the Company (and/or its Subsidiaries) in connection with the Business and/or the design, development, testing, maintenance or utilization of the software described in this paragraph, and(c) all derivative works of any of the software described in this paragraph. 

***“Stockholders”***shall mean theindividuals and entities listed on Schedule A to this Agreement being the registered holders and beneficial owners of 100% of the issued and outstanding shares in the capital of the Company immediately prior to the Effective Time and***“Stockholder”***shall have a corresponding meaning. 

***“Stockholders’ Representative”***shall mean ComVest Investment Partners II, LLC. 

***“Subsidiary”***of a specified entity means any corporation,association, business entity, partnership, limited liability company or other Person of which the specified entity, either alone or together with one or more Subsidiaries or by one or more other Subsidiaries (a) directly or indirectly owns orcontrols securities or other interests representing more than 50% of the voting power of such Person or (b) is entitled, by contract or otherwise, to elect, appoint or designate directors constituting a majority of the members of suchPerson’s board of directors or other governing body. 

***“Surviving Corporation”***means the Company as thesurviving corporation in the Merger. 

***“Tax”***(and, with correlative meaning, ***“Taxes”***and***“Taxable”)***means (a) any income, alternative or add-on minimum tax, gross income, estimated, gross receipts, sales, use, ad valorem, value added, transfer, franchise, capital stock, profits, license, registration,withholding, payroll, social security (or equivalent), employment, unemployment, disability, excise, severance, stamp, occupation, premium, property (real, tangible or intangible), environmental or windfall profit tax, custom duty or other Tax,governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to Tax or additional amount (whether disputed or not) imposed by any Governmental Entity responsible for the impositionof any such Tax (domestic or foreign), (b) any Liability for the payment of any amounts of the type described in clause (a) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate groupfor any Taxable period, and (c) any Liability for the payment of any amounts of the type described in clause (a) or (b) of this sentence as a result of being a transferee of or successor to any Person or as a result of any express orimplied obligation to assume such Taxes or to indemnify any other Person. 

***“Total Consideration”***means,collectively, the Closing Consideration and the Holdback Consideration. 

***“Transaction Incentives”***shall mean allamounts payable to current or former employees of the Company and/or any Subsidiary by way of bonuses, commissions, and other incentives associated with and payable as a result of transactions contemplated under this Agreement. 

 

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***“True-Up Net Asset Value”***shall have the meaning set forth inSection 2.7(b). 

***“Warrants”***shall mean a warrant (if any) or other contractual right to purchase or acquireshares of Company Stock; provided, however, that the Options shall not be considered Warrants. 

Other capitalized terms defined elsewherein this Agreement and not defined in this Article I shall have the meanings assigned to such terms in this Agreement. 

**ARTICLE II**

**THE MERGER**

******2.1 The Merger. Upon and subject to the terms and conditions of this Agreement, Merger Subsidiary shall merge with and into the Company at the Effective Time. From and after the Effective Time, the separate corporateexistence of Merger Sub shall cease and the Company shall continue as the Surviving Corporation. The Merger shall have the effects set forth in the Delaware General Corporation Law (the ***“DGCL”).***

2.2 Closing Consideration and Conversion of Shares.

(a) The aggregate amount to be paid by Buyer on the Closing Date with respect to the outstanding shares of Company Stock **on a fully-diluted basis**(to be allocated as set forth in Sections 2.2(b),(c) and (d))shall equal (such amount, as adjusted pursuant to Section **2.7, Section 2.8, Section 2.9, Section 2.10 and Section 2.11)**(the ***“Closing Consideration”)***$29,500,000, minus (i) the unpaidprincipal amount of, and accrued interest on, all indebtedness for borrowed money of the Company and/or its Subsidiaries not satisfied on or prior to the Closing by the Company or Buyer on behalf of the Company including, without limitation alloutstanding debts, loans, bank facilities, credit facilities, lines of credit and similar liabilities of the Company and/or its Subsidiaries, minus (ii) the amount of all fees and expenses of the Company and/or its Subsidiaries payable, and dueto be payable, in connection with the transactions contemplated by this Agreement including, without limitation, all fees and expenses associated with or relating to any legal advisor, investment banker, broker, finder, accounting advisor, financialadvisor, tax advisor or similar party, minus (iii) the **Estimated Closing Net Asset Adjustment,**minus (iv) the Holdback Consideration, minus (v) one half of the Escrow Agents Fees, and minus (vi) any other adjustmentsprovided for in Section 2.9, Section 2.10 and Section 2.11, minus (vii) amounts payable by Stockholders pursuant to Sections 6.6 and 7.3(i), minus any additional severance and benefit payments to be made to Douglas B. Coder andJames G. Stowers pursuant to their respective agreements with the Company, and minus severance as a sale bonus payments made to Michael Eleftheriou after the Closing . Schedule 2.2(a) hereto sets forth (i) the estimated amount of theClosing Consideration calculated in accordance with this Section 2.2(a), and (ii) the estimated amount of Closing Consideration payable to each Stockholder **(on a fully-diluted basis).**To the extent an amount to be deducted underthis section 2.2 is not known at the Closing, the stockholders authorize the Stockholders’ Representative to determine an amount to reserve from the Total Consideration for that deduction, and authorize the Stockholders Representative tomaintain that reserve until such time that amount is known and paid. 

(b) At the Effective Time, each share of Company Stockissued and outstanding immediately prior to the Effective Time shall automatically be converted into the right to receive an amount in cash equal to the amount set forth in Schedule 2.2(a) hereto. Upon receipt of each Stockholders bankaccount details, the Buyer shall pay to each Stockholder (by wire transfer) in accordance with Sections 2.2(a) and 2.2(d), the pro-rata portion of the Closing Consideration as set forth in Schedule 2.2(a), in cash. 

 

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(c) At the Effective Time, by virtue of the Merger and without any action on the part ofany party or the holder of any of the following securities (A) each of the Company Stock held in the Company’s treasury immediately prior to the Effective Time shall be cancelled and retired without payment of any consideration theretoexcept as may be expressly set forth in this Agreement, (B) all Company Stock shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate representing any such share of CompanyStock shall cease to have any rights with respect thereto, except the right to receive such holder’s share of the Closing Consideration pursuant to this Section 2.2 upon the surrender of such certificate in accordance with this Agreement,without interest, and (C) each share of common stock, no par value per share, of Merger Subsidiary issued and outstanding immediately prior to the Effective Time shall be converted into and thereafter evidence one share of common stock, $0.01par value per share, of the Surviving Corporation. 

(d) At the Effective Time, but prior to the distribution of any ClosingConsideration to the Stockholders, the Buyer shall have received, in addition to all required closing documentation as set forth in Article VII hereto, the surrender of the certificates representing all Company Stock, along with a customary letterof transmittal, from the Stockholders for cancellation. If payment under this Section 2.2 is to be made to a Person other than the Person in whose name the surrendered certificate formerly evidencing Company Stock is registered in the stocktransfer books of the Company, it shall be a condition of payment that the certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the Person requesting such payment shall have paid all transfer andother taxes required by reason of the payment of the Closing Consideration to a Person other than the registered holder of the certificate surrendered. After the Effective Time, the holders of the certificates representing all of the Company Stockshall cease to have any rights whatsoever with respect to such certificates. 

(e) All amounts paid to the Stockholders underthis Agreement (including both the Closing Consideration and the Holdback Consideration (if any)) shall be apportioned between the Stockholders in accordance with their pro-rata shareholding in the Company immediately prior to the Effective Time asset forth in Schedule 2.2(a).

(f) The closing of the Merger (the ***“Closing”)***shall take placeas soon as practicable after the satisfaction or waiver of each of the conditions set forth in Article VII or at such other time as the parties hereto agree in writing. The Closing shall take place at the offices of the Buyer, located at TwoConcourse Parkway, Suite 800, Atlanta, GA, or at such other location as the parties hereto agree. The date on which the Closing actually occurs is herein referred to as the ***“Closing Date.”***

(g) Subject to Closing, each Stockholder hereby releases and forever discharges any and all known or unknown claims, causes of action,promises or similar rights of any type (however described and however arising) that existed prior to the Effective Time that it or any of its Affiliates may have against or relating to the Company or any Subsidiaries including without limitationthose existing under (i) the Stockholders Agreement dated September 8, 2004, by and among William G. Nelson, Terrance L. Mealy, the Stockholders’ Representative, and any other signatories to such agreement; (ii) the Subscriptionand Stockholders’ Agreement, dated November 30, 2004, by and among James Treleaven, John Gorman, David Jacobson, Nigel Davies, S. Michael Godshall, the Company, and the Stockholders’ Representative, and (iii) the Subscription andStockholders’ Agreement, dated August 15, 2004, by and between Peter Kight, CLYS Holdings, LLC, a Nevada limited liability company, CAT Acquisition Corp., a Delaware corporation, and the 

 

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Stockholders’ Representative (collectively, the *“Stockholders Agreements”)*other than such claims or causes of action relating to orarising out of this Agreement and/or the transactions contemplated hereby. Without limiting the preceding sentence, each Stockholder hereby confirms that he is not, and will not following Closing, in any way be entitled to any payment from theCompany or any Subsidiary except as may be expressly set forth in this Agreement. The Stockholders hereby covenant and agree that effective as at the Effective Time, the Stockholders Agreements shall be terminated and have no further force oreffect. 

2.3 No Dissenting Shares – Stockholders Consent.

(a) The Stockholders, being the holders of 100% of the issued and outstanding Company Stock immediately prior to Effective Time, herebyconsent to the Merger. Accordingly, the Company and each Stockholder hereby covenant and agrees that no Stockholder shall be exercising its appraisal rights under the DGCL and each Stockholder’s Company Stock shall be converted into theright to receive the respective portion of the Closing Consideration determined pursuant to this Agreement and each of such Stockholder’s Company Stock shall upon Closing be deemed to have been converted into and to have become, as of theEffective Time, the right to receive, without interest or dividends thereon, the respective portion of the Closing Consideration determined pursuant to this Agreement. 

2.4 Options and Company Stock Plans.

(a) Release. In connection with theMerger, effective at the Effective Time, each of the Company and each Stockholder hereby covenants and agrees that each holder of an Option shall (in a form reasonably acceptable to the Buyer) release and forever discharge the Company, itsSubsidiaries, the Buyer, the Merger Subsidiary and the Surviving Corporation from any and all known or unknown claims, causes of action, promises or similar rights of any type (however described and however arising) that such holder of an Option mayhave against such entities in relation to, or in connection with, any Option. 

(b) Cancellation. The Company and eachStockholder covenants and agrees to use their respective best efforts to cause each Option to be cancelled in accordance with its terms and, prior to the Effective Time, the Stockholders and the Board of Directors of the Company shall adoptappropriate resolutions and take all other actions necessary to terminate all equity-compensation plans maintained by the Company and/or its Subsidiaries including without limitation to Catalyst International, Inc. 2004 Stock Option Plan (the***“Company Stock Plans”)***and all individual option agreements outside of the Company Stock Plans as of the Effective Time. Each Option, to the extent unexercised as of the Effective Time, shall thereafter cease to beexercisable, and shall entitle the holder of such option ***(“Optionholder”),***in cancellation and settlement therefor, to a payment in cash, at the Effective Time, equal to the extent to which the per share Total Considerationexceeds the per share “strike” or “exercise” price of such Option “share”. Such payment, if any, shall be made by the Company at the Effective Time of the Merger. 

2.5 Certificate of Incorporation and By-laws.

(a) The Certificate of Incorporation (as amended) of the Company (the ***“Company Certificate”)***shall be amended at the Effective Time and, as so amended, such Company Certificate shall be theRestated Certificate of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. 

(b) The By-laws of the Company as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.

 

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2.6 Closing of Transfer Books. At the Effective Time, the stock transfer books of the Companyshall be closed and no transfer of Company Stock shall thereafter be made. If, after the Effective Time, certificates formerly representing Company Stock are presented to Buyer or the Surviving Corporation, they shall be cancelled. 

2.7 NAV Adjustment. The ***“NAV Adjustment”***(if any) shall be determined as follows: 

(a) Immediately prior to the Effective Time, the Buyer and the Stockholders shall together prepare and agree a good faith estimate of theClosing Net Asset Value determined in accordance with GAAP (the ***“Estimated Closing Net Asset Value”)***and the Closing Balance Sheet. 

(b) If the Estimated Closing Net Asset Value is less than (worse than) negative $2,400,000, then such difference shall be deducted from the Closing Consideration to be paid by Buyer at Closing (such amount deducted tobe the “Estimated Closing Net Asset Adjustment”). 

(c) Within 75 days after the Closing Date, Buyer shall usereasonable best efforts to prepare, or cause to be prepared, and deliver to the Stockholders’ Representative an unaudited statement which shall set forth Buyer’s calculation of the Closing Net Asset Value (which shall include wherepossible, actual numbers rather than accruals) (the ***“True-up Net Asset Value”).***Upon receipt from Buyer, the Stockholders’ Representative shall have 10 days to review the True-Up Net Asset Value (the ***“ReviewPeriod”).***If the Stockholders’ Representative disagrees with the True-Up Net Asset Value, the Stockholders’ Representative may, on or prior to the last day of the Review Period, deliver a notice to Buyer (the ***“NA VNotice of Objection”),***which sets forth the Stockholders’ Representative’s objection to the True-Up Net Asset Value. Any NAV Notice of Objection shall specify those items or amounts with which the Stockholders’Representative disagrees, and shall set forth the Stockholders’ Representative’s calculation of the Closing Net Asset Value and the Closing Balance Sheet based on such objections. 

(d) Unless the Stockholders’ Representative delivers the NAV Notice of Objection to Buyer within the Review Period, theStockholders’ Representative and the Stockholders shall be deemed to have accepted the True-Up Closing Net Asset Value, and the True-Up Net Asset Value shall be final, conclusive and binding and the Escrow Agent shall be immediately directed bythe Stockholders and the Buyer to release to the Buyer the difference (if any) between the Estimated Closing Net Asset Value and the True-up Net Asset Value. If the Stockholders’ Representative delivers the NAV Notice of Objection to Buyerwithin the Review Period, Buyer and the Stockholders’ Representative shall, during the 30 days following such delivery (or any mutually agreed extension thereof), use their commercially reasonable efforts to reach agreement on the disputeditems and amounts in order to determine the amount of the Closing Net Asset Value and the Closing Balance Sheet. If, at the end of such period (or any mutually agreed extension thereof), Buyer and the Stockholders’ Representative are unable toresolve their disagreements, they shall jointly retain and refer their disagreements to an independent certified public accounting firm mutually acceptable to Buyer and the Stockholders’ Representative (the ***“IndependentExpert”).***The parties shall instruct the Independent Expert promptly to review this Section 2.7 and to determine solely with respect to the disputed items and amounts so submitted whether and to what extent, if any, the Closing NetAsset Value and the Closing Balance Sheet set forth in the True-Up Net Asset Value requires adjustment. The Independent Expert shall base its 

 

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determination solely on written submissions by Buyer and the Stockholders’ Representative and not on an independent review. Buyer and theStockholders’ Representative shall make available to the Independent Expert all relevant books and records and other items reasonably requested by the Independent Expert. As promptly as practicable, but in no event later than 30 days after itsretention, the Independent Expert shall deliver to Buyer and the Stockholders’ Representative a report which sets forth its resolution of the disputed items and amounts and its calculation of the Closing Net Asset Value and the Closing BalanceSheet. The decision of the Independent Expert shall be final, conclusive and binding on the parties. The costs and expenses of the Independent Expert shall be shared equally by Buyer and the Stockholders, provided,however, that if theIndependent Expert determines a less than or equal to 10% variation in the Buyer’s calculation of the Closing Net Asset Value, the Stockholders’ shall pay the costs and expenses of the Independent Expert in full. 

(e) Within ten (10) Days after the final determination of the Closing Net Asset Value and the Closing Balance Sheet if (x) thefinally determined Closing Net Asset Value is worse than (y) the Estimated Net Asset Value, (i.e., the finally determined Net Asset Value is a greater negative number (i.e., -$2,400,001, -2,400,002, etc.), the Escrow Agent shall be immediatelydirected to release to the Buyer such difference between the Estimated Closing Net Asset Value and the finally determined Closing Net Asset Value on a dollar for dollar basis. If the Closing Net Asset Value is negative (-$2,400,000) or better (e.g.-$2,399,999) there will be no additional adjustments, no claims against the Holdback Consideration and no action required by the Escrow Agent. 

2.8 Holdback, Escrow and Release of Escrow.

(a) The Buyer and the Stockholders agree to execute the EscrowAgreement as attached hereto as Exhibit A as required by the Escrow Agent in relation to the establishment and dealings of the Escrow Account. 

******(b) The Holdback Consideration shall be paid by Buyer to the Escrow Account on the Closing Date and shall be held for the purpose and to the extent and satisfaction of any Loss arising during theHoldback Period in respect of the amount of any claim by the Buyer: (i) for breaches of, or inaccuracies in, the representations and warranties given by the Company and/or the Stockholders herein or the nonfulfillment of, or failure to perform,any covenant or agreement on the part of the Stockholders and/or the Company contained in this Agreement; and/ or (ii) pursuant to the indemnifications granted under Section 9.; and/or (iii) pursuant to Sections 2.9, 2.10 and/or 2.11hereof (a ***“Claim”).***

(c) At any time during the Holdback Period, the Buyer may forward to theStockholders’ Representative a notice of a Claim ***(“Claim Notice”)***which sets forth in reasonable detail the nature and amount of the Claim ***(“Amount Claimed”).***Upon receipt from Buyer, theStockholders’ Representative shall have 10 days to review the Claim Notice (the ***“Claim Review Period”).***If the Stockholders’ Representative disagrees with the Amount Claimed, the Stockholders’ Representativemay, on or prior to the last day of the Review Period, deliver a notice to Buyer (the ***“Claim Notice of Objection”)***(with a copy to the Escrow Agent), which sets forth the Stockholders’ Representative’s objection tothe Amount Claimed. Any Claim Notice of Objection shall specify those items and amounts with which the Stockholders’ Representative disagrees and detailed reasons for such disagreement. If the Stockholders’ Representative fails to delivera Claim Notice of Objection within the Review Period, the Stockholders’ Representative and the Stockholders shall be deemed to have accepted the Claim and the Amount Claimed shall be final, conclusive and binding and the Escrow Agent shall beimmediately directed by the Buyer and the Stockholders to release to the Buyer the Amount Claimed. If the Stockholders’ Representative 

 

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delivers a Claim Notice of Objection to Buyer within the Claim Review Period, and such Claim Notice of Objection shows that only a portion of the AmountClaimed is disputed, then such undisputed portion of the Amount Claimed shall be deemed to have been accepted by the Stockholders and the Escrow Agent shall be immediately directed by the Buyer and the Stockholders to release to the Buyer theundisputed portion of the Amount Claimed. Buyer and the Stockholders’ Representative shall, during the 30 days following delivery of a Claim Notice of Objection (or any mutually agreed extension thereof), use their commercially reasonableefforts to reach agreement on the disputed items and amounts in order to agree upon the disputed Amount Claimed. If, at the end of such period (or any mutually agreed extension thereof) Buyer and the Stockholders’ Representative are unable toresolve their disagreements, either shall be entitled to refer the matter to the American Arbitration Association of Delaware for determination ***(“AAA”),***in accordance with the commercial arbitration rules of the AAA governingthe arbitration, and if following either agreement between the Buyer and the Stockholders’ Representative or a determination by the AAA, the Buyer and the Stockholders’ Representative shall jointly instruct the Escrow Agent in writing torelease the agreed or determined Amount Claimed to the Buyer. In the event that either the Stockholders or the Buyer fails to give direction to the Escrow Agent in accordance with this Section, for whatever reason, the other may obtain an order froma court of competent jurisdiction that such instructions are given or treated as given. 

(d) Each of the Buyer and theStockholders shall ensure, during such period of time as the Escrow Agent is holding any Escrow Sum, that all of its respective rights to such Escrow Sum remain free from any Encumbrance (other than that such Escrow Sums are held in escrow), set offor counterclaim. 

(e) Interest accruing from time to time on the Escrow Sum shall be added to the money standing to thecredit of the Escrow Account. Any portion of interest shall be owned by and attributed to the party or parties who are ultimately adjudged in accordance with this Section to be the rightful owner of the respective amounts so held in escrow.

(f) The Buyer, on the one hand, and the Stockholders, on the other hand, shall equally pay the Escrow Agent’s Fees.

(g) The Escrow Agent may withdraw from the Escrow Account an amount equal to any tax payable in respect of the interestearned in respect of the Escrow Sum for which it is or may become liable. 

(h) In the event that the Buyer has not issued,or has no outstanding Claim Notices or Claimed Amounts at the end of the Holdback Period, the Escrow Agent shall be directed by both the Buyer and the Stockholders Representative to return any remaining Escrow Sum to the Stockholders in accordancewith their pro-rata shareholdings in the Company immediately prior to the Effective Time as set forth in Section 2.2(e). 

2.9Transaction Incentives. The Stockholders covenant and agree to pay from the proceeds of the Closing Consideration all amounts (if any) payable to current employees of the Company and/or any of its Subsidiaries *(“TransactionIncentives”)*by way of bonuses, commissions, and other incentives associated with the transactions contemplated under this Agreement as set out in Schedule 2.9. Except as set out in Schedule 2.9, the Company and eachStockholder represents and warrants to Buyer that the Company has no obligations to any of its current employees, officers or directors for any bonus, commission, option payment or similar incentive associated with or relating to the transactionscontemplated under this Agreement. 

2.10 Receivables. In the event that less than the full amount of the Net Receivables containedin 

 

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the finally determined Company Balance Sheet ***(“Company Balance Sheet Net Receivables”)***are actually received by the Company withinone hundred eighty (180) days following Closing, the difference between the Company Balance Sheet Net Receivables and the portion of the Net Receivables actually received by the Company shall be released to the Buyer on a one-to-one basis fromthe Holdback Consideration and the Escrow Agent shall be immediately directed by the Stockholders and the Buyer accordingly. During the 180 day period of time referred to above, Buyer shall allow the Stockholders at their own expense to designate acollection agent suitable to Buyer, who shall be provided with all books and records related to the Net Receivables, including an account receivables ledgers, and contact lists, and shall be permitted to contact related third party accounts, forpurposes of collecting said receivables so long as such appointed agent complies with Buyers procedures. With respect to any receivables which are not so collected during said 180 day period of time, Buyer shall cause the Company to immediatelytransfer (by way of assignment and any other instrument reasonably requested by the Stockholder Representative) all right, title and interest in and to such receivable to the Stockholders. During such 180 day period of time, the Company shall useall commercially reasonable best efforts to pursue the collection of Company accounts receivable existing as of the Closing Date. 

2.11Severances.

(a) If the employment of any of the employees of the Business is terminated prior to the expiration oftwelve (12) months following Closing, Buyer shall be entitled to immediately receive from the Holdback Consideration any severance, notice and/or other similar payment required to be paid to such employee which is over and above the minimumstatutory obligations (if any) and the Escrow Agent shall immediately be directed by the Stockholders and the Buyer accordingly. 

(b) Notwithstanding anything to the contrary contained herein, Buyer shall not be entitled to receive from the Holdback or elsewhere an amount (in the aggregate) in excess of $250,000 pursuant to the provisions set forth in thisSection 2.11. 

**ARTICLE III**

**REPRESENTATIONS AND WARRANTIES OF THE COMPANY**

The Company and each Stockholder jointly andseverally represents and warrants to the Buyer that each statement contained in this Article III is true and correct as of the date hereof, except for the exceptions set forth in the disclosure letter of the Company (the ***“CompanyDisclosure Letter”)***(each of which exceptions, in order to be effective, shall clearly indicate the section and, if applicable, the subsection to which it relates; however, any information disclosed under any section number shall bedeemed to be disclosed and incorporated into any other section number where there is an appropriate cross reference or where it would otherwise be reasonably appropriate): 

3.1 Organization and Good Standing. 

(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Except as set forth on Section 3.1 of the Company Disclosure Letter. The Company has the corporate powerand authority to own, operate and lease its properties and to carry on its business as now conducted. The Company is duly qualified to do business, and is in good standing, in each jurisdiction in which it owns or leases property or conducts anybusiness so as to require such qualification. 

 

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(b) Each of the Companies’ Subsidiaries are corporations duly organized, validlyexisting, and in good standing under laws of their jurisdictions of incorporation and have all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on their businesses as now conducted andto own, use and lease their assets and properties. Each of the Companies’ Subsidiaries is duly qualified to do business in each jurisdiction where they carry on business and are in good standing in each jurisdiction where they carry onbusiness. 

(c) During the preceding twelve (12) months from the Closing Date, the Company and its Subsidiaries haveonly conducted business in the countries listed in Section 3.1 of the Company Disclosure Letter and are duly qualified, licensed or admitted to do business in each of such jurisdiction to the extent that such qualification, license or admissionis required by that jurisdiction’s laws. The Company and its Subsidiaries have full corporate power to own their properties, assets and business and to carry on their business operations. 

(d) The name of each director and officer of the Company and its Subsidiaries on the Closing Date, and the position with the Companyand/or Subsidiaries held by each, are listed in Schedule 3.1(d) of the Company Disclosure Letter.

(e) TheCompany and its Subsidiaries have filed and/or registered all company filings where required to be filed and/or registered. 

3.2 NoSubsidiaries. Except as set forth in Schedule 3.2 of the Company Disclosure Letter, the Company does not have any Subsidiaries or any equity or ownership interest, whether direct or indirect, in any Person. The Company is notobligated to make, and is not bound by any agreement or obligation to make, any investment in or capital contribution in or on behalf of any other Person, and the Company is not a party to any joint venture. 

3.3 Authorization; Noncontravention; Enforceability.

(a) Authorization. The Company has all requisite corporate power and authority to enter into, execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplatedhereby. The execution, delivery and performance by the Company of this Agreement and all other agreements, transactions and actions contemplated hereby have been duly and validly approved and authorized by the Company’s Board of Directors, andwill be on the Closing Date, duly and validly approved and authorized by the Company’s stockholders. 

(b)Noncontravention. The execution and delivery by the Company of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (i) result in the creation of any Encumbrance, other than PermittedEncumbrances, on any of the asset of the Company, or (ii) conflict with, or result in any violation of or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration ofany obligation or loss of any benefit under, or require any consent, approval or waiver from any Person pursuant to, (A) any provision of the Certificate of Incorporation or Bylaws of the Company, in each case as amended to date, or(B) any material Contract, concession, franchise, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company. Except as listed in Section 3.3 of the Company Disclosure Letter. No consent, approval, orderor authorization of, or registration, declaration or filing with, any Governmental Entity or any other Person is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation of thetransactions contemplated hereby. 

 

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(c) Enforceability. This Agreement has been duly executed and delivered by theCompany and the Stockholders. This Agreement is a valid and binding obligation of the Company and the Stockholders, enforceable against the Company and the Stockholders in accordance with its terms, subject only to the effect, if any, of(i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to rights of creditors generally and (ii) rules of law and equity governing specific performance, injunctive reliefand other equitable remedies. 

(d) No Liens. Except as listed in Schedule 3.3(d) of the Company DisclosureLetter, the Company Stock and any ownership interest in any Subsidiary is not, and shall not be, encumbered by any lien, encumbrance or other interests of any other third party whatsoever. The Stockholders, collectively, are the registered andbeneficial owners of all of the Company Stock, and the Company is the registered and beneficial owner of all of the ownership interests in the Subsidiaries, free and clear of any lien, encumbrance and any other limitation or restriction (includingwithout limitation, any restriction on the right to vote, sell or otherwise dispose of such ownership interests). None of the Company Stock or any ownership interest in any Subsidiary has been transferred, sold, exchanged, assigned or given as agift, granted as a security interest, pledged or encumbered, made part of any voting trust or other agreement or arrangement with respect to the transfer of voting rights therein. 

3.4 Capitalization.

(a) The authorized capital stock of the Company consists solely of 1,000 shares of preferred stock and 1,000,000 shares of common ordinary shares of Company Stock, of which a total of 1,097.84 shares of Common Stock are issued andoutstanding. Subject to the preceding sentence, there are no other types of shares in the Company whatsoever including without limitation any preferred stock. The number of issued and outstanding shares of Company Stock held by each Stockholder areset forth on Schedule 3.4(a) of the Company Disclosure Letter, and no shares of Company Stock are issued or outstanding as of the date of this Agreement, or will be at the Closing Date, that are not set forth on Schedule 3.4(a) of theCompany Disclosure Letter and no such shares will be issued or outstanding as of the Closing Date that are not set forth on Schedule 3.4(a) of the Company Disclosure Letter. Except as set forth on Schedule 3.4(a), there are nooutstanding options or Warrants to purchase any shares of the Company, including without limitation, any Company Stock. Except as set forth on Schedule 3.4(b) of the Company Disclosure Letter, there are no stock appreciation rights, options,warrants, calls, rights, commitments, conversion privileges or preemptive or other rights or agreements outstanding to purchase or otherwise acquire any shares of the Company capital stock or any securities or debt convertible into or exchangeablefor the Company capital stock. Except as contemplated by this Agreement, there are no voting agreements, voting trusts or proxies applicable to any of the Company’s outstanding capital stock or to the conversion of any shares of theCompany’s capital stock to which the Company is a party or pursuant to any other agreement or obligation. 

(b) Theauthorized capital stock of Catalyst WMS International Limited consists solely of 500,000 ordinary shares, of which a total of 1,000 shares are issued and outstanding. Subject to the preceding sentence, there are no other types of shares each of theCompany’s Subsidiaries whatsoever including without limitation any preferred stock. Except as set forth on Schedule 3.4(a), there are no outstanding options or Warrants to purchase any shares 

 

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of any of the Company’s Subsidiaries. Except as set forth on Schedule 3.4(b) of the Company Disclosure Letter, there are no stock appreciationrights, options, warrants, calls, rights, commitments, conversion privileges or preemptive or other rights or agreements outstanding to purchase or otherwise acquire any shares of any of the Company Subsidiaries’ capital stock or any securitiesor debt convertible into or exchangeable for Subsidiaries such capital stock. Except as contemplated by this Agreement, there are no voting agreements, voting trusts or proxies applicable to any of the Company’s Subsidiaries’ outstandingcapital stock or to the conversion of any such shares. 

3.5 Litigation.

(a) Except as set forth on Schedule 3.5 of the Company Disclosure Letter, there is no action, suit, arbitration, proceeding,inquiry, claim or investigation pending against, or threatened against or affecting either the Company, any Subsidiary, any Stockholder or any of their respective properties or assets before any court or arbitrator or any governmental body, agencyor official (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) whatsoever and there is no reasonable basis for any such action, suit, proceeding, claim, arbitration, mediation or investigation (any***“Proceeding”).***To the Company’s Knowledge, there are no facts existing as at the Closing Date which would likely give rise to any material Proceeding. 

(b) There is no judgment, decree, injunction, rule or order against the Company. To the Company’s Knowledge, there is no reasonablebasis for any Person to assert a claim against the Company based upon: (A) the Company entering into this Agreement or any of the other transactions or agreements contemplated hereby; (B) any confidentiality or similar agreement enteredinto by the Company; or (C) any claim that the Company has agreed to sell or dispose of its assets to any party other than Buyer, whether by way of merger, consolidation, sale of assets or otherwise. Except as set forth on Schedule 3.5of the Company Disclosure Letter, the Company has no action, suit, proceeding, claim, arbitration or mediation against any other Person. Neither the Company nor any Subsidiary have commenced or settled any legal proceedings within the last five(5) years. 

(c) Except as set forth on Section 3.5 of the Company Disclosure Letter. No claim has been madeagainst the Company or any Subsidiary in connection with any defective product or services supplied by it in the course of carrying on its business and the Company and each Subsidiary has maintained insurance that is customary to the applicableindustry and type of business, for at least the last five (5) years against any such claim. 

(d) Except as set forth onSection 3.5 of the Company Disclosure Letter. Each of the products produced or sold by the Company and each Subsidiary is, and at all times up to and including the Closing Date, has been: (i) in compliance in all material respects with allapplicable federal, state, local and foreign Laws and regulations; and (ii) fit for the ordinary purposes for which it is intended to be used and conforms to any promises or affirmations of fact made in respect of such product or in connectionwith such sale. There is no design defect with respect to any such products the existence of which could have a Material Adverse Effect on the Company and each of such products contains adequate warnings, presented in a reasonably prominent manner,in accordance with all applicable laws, rules and regulations and current industry practice with respect to its content and use. 

 

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3.6 Financial.

(a) The Company has delivered to Buyer as attachments to Schedule 3.6 of the Company Disclosure Letter (i) an unauditedconsolidated balance sheet for the Business dated June 30, 2007 (the ***“Balance Sheet Date”***and such unaudited consolidated balance sheet, the ***“Company Balance Sheet”),***(ii) an unauditedconsolidated income statement and statement of cash flows for the seven months ended June 30, 2007, (iii) audited consolidated balance sheets of the Company dated December 31, 2005 and 2006, and (iv) audited consolidated incomestatements and statements of cash flows for the years ended December 31, 2005 and 2006 (all such financial statements of the Company and any notes thereto are hereinafter collectively referred to as the ***“Company FinancialStatements”).***The Company Financial Statements for June 30, 2007 and year end audited statements: (i) correct and complete in all material respects, (ii) are derived from and are in accordance with the books and recordsof the Company in all material respects; (iii) fairly and accurately represent in all material respects the financial condition of the Business or the Company, as the case may be, at the respective dates specified therein and the results ofoperations for the respective periods specified therein in conformity with GAAP applied on a consistent basis; and (iv) have been prepared in accordance with GAAP applied on a basis consistent with prior periods, except for any absence of notesthereto and normal year-end adjustments. There has been no material change in the Company’s accounting policies other than as specifically described in the notes to the Company Financial Statements. The Company has no Liabilities other than(a) Liabilities set forth on the **Company Balance Sheet**or elsewhere in the Company’s Financial Statements, and (b) Liabilities set forth on Schedule 3.6.

(b) The Maintenance Revenue projections for calendar year 2007 and 2008 provided to the Buyer by or on behalf of the Company or anySubsidiary, were prepared in good faith and were based upon reasonable assumptions. There was at the time of the Closing no matters or circumstances that were known by the Company, or any Stockholder that would reasonably have had a material impacton the actual and projected financial results of the Company or any Subsidiary set forth therein. For the avoidance of doubt, financial results for calendar year 2007 have differed from those projections set forth on the Company’s 2007 calendaryear budget, a copy of which has been provided to Buyer. 

(c) The Company and each of its Subsidiaries is not directly orindirectly obliged in any way to guarantee, assume or provide funds to satisfy an obligation of any Person. No letter of comfort has been given by the Company or any of its Subsidiaries. 

3.7 Taxes. Except as set forth on Schedule 3.7:

(a) The Company and each Subsidiary (i) has properly completed and timely filed all Tax and information returns and reports(collectively, ***“Tax Returns”)***required to be filed by it, (ii) has timely paid all Taxes required to be paid in respect of all periods whether or not shown on a Tax Return, (iii) has established an adequate accrualor reserve for the payment of all unpaid Taxes up to the Balance Sheet Date, and (iv) has withheld all amounts required by any applicable laws or regulations to be withheld from compensation paid or owed to the Company’s (or respectiveSubsidiaries’) employees, consultants, directors or other third parties. 

(b) Neither the Company nor any Subsidiaryhas received any written notice that a Tax Return is under audit by the IRS or other Governmental Entity, and any such past audits (if any) have been completed and fully resolved to the satisfaction of the applicable Governmental Entity conductingsuch audit and all Taxes and any penalties or interest determined by such audit to be due from the Company (or such Subsidiary) have been paid in full to the applicable Governmental Entities. 

 

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(c) No Tax liens are currently in effect against the Company or any Subsidiary, exceptPermitted Encumbrances and Encumbrances for such Taxes not yet due and payable. 

(d) There is not in effect any waiver bythe Company or any Subsidiary of any statute of limitations with respect to any Taxes nor has the Company (or any Subsidiary) agreed to any extension of time for filing any such Tax Return that has not been filed, and neither the Company nor anySubsidiary has not consented to extend to a date later than the date hereof the period in which any such Tax may be assessed or collected by any Governmental Entity; and 

(e) No benefit payable or which may become payable by the Company or any Subsidiary pursuant to any employee plan or as a result of orarising under this Agreement will constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code) which is subject to the imposition of an excise Tax under Section 4999 of the Code or which would not bedeductible by reason of Section 280G of the Code. 

3.8 Title to Assets; Sufficiency of Assets; Permits; Compliance. The Companyand each of its Subsidiaries has good and marketable title to, or a valid leasehold interest in, all of the Company’s (and such Subsidiary’s) assets, free and clear of any Encumbrances except Permitted Encumbrances, and as otherwise setforth in the Company Balance Sheet or on Schedule 3.8 of the Company Disclosure Letter. All of the Company’s and each of its Subsidiaries’ tangible personal property is in good operating condition and repair, normal wear and tearexcepted. All leases of real or personal property to which the Company or any Subsidiary is a party are fully effective. The Company and its Subsidiaries do not own any real property, and, since its inception, the Company has not been a “UnitedStates real property holding corporation,” as defined in Section 897(c)(2) of the Code. Neither the Company nor any Subsidiary is in violation of any zoning, building, safety or environmental ordinance, regulation or requirement applicableto the operation of its owned or leased properties or of any other applicable material law, nor has the Company or any Subsidiary received any written notice of any such violation. Except as set forth in Schedule 3.8 of the Company DisclosureLetter, none of the Company’s (or any Subsidiaries’) assets is licensed or leased from any third party and no royalties, license fees or similar payments are due or payable (or may become due or payable) to any third party under anycontract. The Company and each of its Subsidiaries is in possession of all registrations, , authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and others of any Government Entity necessary for theCompany (and such Subsidiary) to own, lease and operate its properties or to carry on its business as it is now being conducted ***(“Permits”).***As of the date hereof, no suspension or cancellation of any of the Permits ispending, or to the Company’s Knowledge, threatened. 

3.9 Absence of Certain Changes. Except as set forth on Schedule 3.9of the Company Disclosure Letter, since the Balance Sheet Date, the Company and each of its Subsidiaries has conducted the Business in the ordinary course substantially in accordance with the procedures and practices in effect on the Balance SheetDate, and since the Balance Sheet Date there has not been with respect to the Company and each Subsidiary any: 

(a) MaterialAdverse Change; 

(b) material revaluation by the Company of any of the Company’s or its Subsidiaries’ assets;

 

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(c) incurrence, creation or assumption by the Company or any Subsidiary of (i) anyEncumbrance on any of the Company’s (or Subsidiary’s) assets, other than Permitted Encumbrances and as set forth in Schedule 3.9, (ii) any Liability or any indebtedness for borrowed money, or (iii) any contingent liabilityas a guarantor or surety with respect to the obligations of others; 

(d) purchase, license, sale, assignment or otherdisposition or transfer, or any contract or other arrangement for the purchase, license, sale, assignment or other disposition or transfer, of any of the Company’s or any Subsidiaries’ assets outside the ordinary course of business;

(e) damage, destruction or loss of any of the Company’s (or any Subsidiaries’) assets, whether or not covered byinsurance; 

(f) payment or discharge by the Company (or any Subsidiary) of any Encumbrance on any of the Company’s (orany Subsidiaries’) assets or payment or discharge of any Liability of the Company (or such Subsidiary), in each case that was not shown on the Company Financial Statements; outside the ordinary course of business; 

(g) entering into, amendment of, relinquishment, termination or non-renewal by the Company or any Subsidiary of any material Contract,transaction, commitment or other right or obligation (or any waiver by the Company or any Subsidiary of a valuable right or of a material debt) or any written or oral indication or assertion by the other party thereto of any material problems withthe Company’s (or any Subsidiaries’) products or services or performance under such Contract, transaction, commitment or other right or obligation or its desire to so amend, relinquish, terminate or not renew any such Contract,transaction, commitment or other right or obligation outside the ordinary course of business; 

(h) license, transfer orgrant of a right under any Company or any of its Subsidiaries’ IP Rights (as defined in Section 3.12(a)) outside the ordinary course of business; 

(i) change or amendment to the Company’s or any Subsidiaries’ Certificate of Incorporation or Bylaws; 

(j) material change in the manner in which the Company or any Subsidiary extends discounts, credits or warranties to its customers or otherwise deals with its customers; 

(k) change or increase in the compensation payable or to become payable to any of the directors, officers, employees or consultants of theCompany or any Subsidiary or in any bonus, pension, severance, retention, insurance or other benefit payment or arrangement (including stock awards, stock option grants, stock appreciation rights or stock option grants) made to or with any of suchdirectors, officers, employees or consultants; or 

(l) other event or condition of any character which would materially andadversely affect the Company or any Subsidiary. 

 

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3.10 Material Contracts. Except as specifically identified in subsections (a) through(l) of Schedule 3.10 of the Company Disclosure Letter, neither the Company nor any Subsidiary is a party or subject to any of the following in connection with the Business: 

(a) any Contract providing for payments (whether fixed, contingent or otherwise) by or to the Company in an aggregate amount of $75,000 ormore; 

(b) any dealer, distributor, OEM (original equipment manufacturer), VAR (value added reseller), marketing, salesrepresentative or similar agreement under which any third party is authorized to sell, sublicense, lease, distribute, market or take orders for, any product, service or technology of the Company; 

(c) any Contract providing for the development of any software, content (including textual content and visual, photographic or graphicscontent), technology or Intellectual Property Right for (or for the benefit or use of) the Company or any Subsidiary, or providing for the purchase by (or for the benefit or use of) or license to the Company or any Subsidiary of any software,content (including textual content and visual, photographic or graphics content), technology or Intellectual Property Right, which software, content, technology or Intellectual Property Right is in any manner used or incorporated (or is presentlycontemplated by the Company or any Subsidiary to be used or incorporated) in connection with any aspect or element of any Software, product, service or technology of the Company or any Subsidiary (other than software generally available to thepublic at a per copy license fee of less than $500 per copy); 

(d) any Contract which has involved, or is reasonablyexpected to involve, a sharing of revenues, profits, cash flows, expenses or losses by the Company or any Subsidiary with any other Person; 

(e) any Contract for or relating to the employment of any officer, employee or consultant of the Company or any Subsidiary or any other type of Contract with any officer, employee or consultant of the Company or anySubsidiary; 

(f) any Contract pursuant to which the Company or any Subsidiary has acquired a business or entity, or materialportion of the assets of a business or entity, whether by way of merger, consolidation, purchase of stock, purchase of assets, exclusive license or otherwise; 

(g) any lease or other agreement under which the Company or any Subsidiary is lessee of or holds or operates any items of tangiblepersonal property or real property owned by any other Person; 

(h) any Company IP Rights Agreement (as defined inSection 3.12(b)); 

(i) any Governmental Permit (as defined in Section 3.13); or 

(j) any other Contract to which the Company or any Subsidiary is a party or by which the Company, any Subsidiary or any of its assets orproperties are bound. 

A true and complete copy of each Contract and document (or, with respect to subsection (i), Governmental Permit) required bysubsections (a) through (j) of this Section 3.10 to be listed on Schedule 3.10 of the Company Disclosure Letter (the ***“Material Contracts”)***has been made available to Buyer. 

 

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3.11 No Default; No Restrictions.

(a) Except as set forth on Section 3.11 of the Company Disclosure Letter. Each Material Contract is valid and in full force andeffect. Neither the Company nor any Subsidiary, nor to the Company’s Knowledge, any other party is in material breach or default under any Material Contract. To the Company’s Knowledge, no event has occurred, and no circumstance orcondition exists, that (with or without notice or lapse of time, or both) will (i) result in a material violation or breach by the Company, any of its Subsidiaries or any other party of any of the provisions of any Material Contract or(ii) give any third party (A) the right to declare a default or exercise any remedy under any Material Contract, (B) the right to a rebate, chargeback or penalty under any Material Contract, (C) the right to accelerate thematurity or performance of any obligation of the Company or any Subsidiary under any Material Contract, or (D) the right to cancel, terminate or modify (in a manner materially adverse to the Company or any of its Subsidiaries) any MaterialContract. Neither the Company nor any Subsidiary has received any written notice regarding any actual or possible material violation or breach of, or default under, any Material Contract and to the Company’s Knowledge, does not reasonablyexpect to receive any such notice. 

(b) Except as set forth on Section 3.11 of the Company Disclosure Letter. Neitherthe Company nor any Subsidiary is a party to, and none of the Company’s (or any Subsidiaries’) assets is bound or affected by, any judgment, injunction, order, decree, covenant or Contract (noncompete or otherwise) that materiallyrestricts or prohibits, or purports to materially restrict or prohibit, the Company or its Subsidiaries from freely engaging in any business now conducted by the Company or any of its Subsidiaries or from competing anywhere in the world (includingany covenants or Contracts restricting the geographic area in which the Company or any of its Subsidiaries may sell, license, market, distribute or support any products or technology or provide services or restricting the markets, customers orindustries that the Company or any of its Subsidiaries may address in operating the Business or restricting the prices that the Company or any of its Subsidiaries may charge for its products, technology or services) or includes any grants by theCompany or any of its Subsidiaries of exclusive rights or licenses. 

(c) To the extent any Material Contract provides forservices to be performed by the Company or any of its Subsidiaries: (i) such services have been timely and properly completed in all material respects in accordance with the terms of such Material Contracts, and to the Company’s Knowledge,it has no liability arising out of any prior deliverables; (ii) neither the Company nor any of its Subsidiaries have received any written communication of non-compliance in relation to any Material Contract; and (iii) the Company and itsSubsidiaries are in material compliance with all maintenance and enhancement obligations contained in all Material Contracts. 

3.12Intellectual Property Rights.

(a) The Company (i) owns, or (ii) has the valid right or license to use,possess, develop, sell, license, copy, distribute, market, advertise and/or dispose of, all Intellectual Property Rights and Software used in the conduct of the Business (such Intellectual Property Rights being hereinafter collectively referred toas the ***“Company IP Rights”).***Such Company IP Rights are sufficient for the conduct of the Business as conducted prior to the Closing. 

 

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(b) Neither the execution, delivery and performance of this Agreement nor theconsummation of the transactions contemplated by this Agreement will, in accordance with their terms: (i) constitute a material breach of or default under any Material Contract governing any Company IP Right (collectively, the***“Company IP Rights Agreements”);***(ii) cause the forfeiture or termination of, or give rise to a right of forfeiture or termination of, any Company IP Right; or (iii) materially impair the right of the Company orBuyer, to use, possess, sell or license any Company IP Right or portion thereof. There are no royalties, honoraria, fees or other payments payable by the Company to any third Person (other than salaries payable to employees and independentcontractors not contingent on or related to use of their work product) as a result of the ownership, use, possession, license-in, sale, marketing, advertising or disposition of any Company IP Rights by the Company, and none will become payable as aresult of the consummation of the transactions contemplated hereby. 

(c) To the Company’s Knowledge, neither the use,marketing, license, sale, distribution or intended use of any product or service currently licensed, utilized, sold, provided or distributed by the Company: (i) violates any license or other Contract between the Company and any third party, or(ii) infringes or misappropriates any Intellectual Property Right of any other party. 

(d) Schedule 3.12(d) ofthe Company Disclosure Letter contains a true and complete list of all registered Intellectual Property Rights, as well as all pending applications to register any of the same that are owned by the Company. To the Company’s Knowledge, allregistered Intellectual Property Rights owned by the Company are valid, enforceable and subsisting. 

(e) To theCompany’s Knowledge, there has not been any infringement of any Company IP Rights. 

(f) To the Company’sKnowledge, there has not been any infringement by the Company of any third party’s Intellectual Property rights. 

(g)Schedule 3.12(g) of the Company Disclosure Letter lists all software or other material that is distributed as “free software”, “open source software” or under a similar licensing or distribution model(*“****Open Source Materials****”*) that is included in any Software or other intellectual property assets owned by the Company or any of its Subsidiaries, or that, to Company’s Knowledge, is included in any Softwareor other intellectual property assets used by Company or any of its Subsidiaries in any way, and describes the manner in which such Open Source Materials were used (such description shall include whether (and, if so, how) the Open Source Materialswere modified and/or distributed by Company or any of its Subsidiaries.) Except as explicitly set forth in the Disclosure Letter, the Company or any of its Subsidiaries has not (i) incorporated Open Source Materials into, or combined OpenSource Materials with, any Software or other intellectual property assets owned or licensed by the Company or any of its Subsidiaries; (ii) distributed Open Source Materials in conjunction with any Software or other intellectual property assetsowned or licensed by the Company or any of its Subsidiaries; or (iii) used Open Source Materials that create, or purport to create, obligations for Company or any Subsidiary with respect to any of its/their Software or Company IP Rights orgrant, or purport to grant, to any third party, any rights or immunities under any Software or Company IP Rights (including using any Open Source Materials that require, as a condition of use, modification and/or distribution of such 

 

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Open Source Materials that other software incorporated into, derived from or distributed with such Open Source Materials be (A) disclosed or distributedin source code form, (B) be licensed for the purpose of making derivative works, or (C) be redistributable at no charge.) 

3.13Compliance with Laws. Except as set forth on Section 3.13 of the Company Disclosure Letter the Company and its Subsidiaries have complied in all material respects with, and to its knowledge, has not received any written notices ofviolation with respect to, any federal, state, local or foreign statute, law or regulation, including United States export control laws and regulations. The Company and each of its Subsidiaries has obtained each federal, state, county, local orforeign governmental consent, license, permit, grant or other authorization of a Governmental Entity (i) pursuant to which the Company and/or such Subsidiary currently operates or holds any interest in any of its assets or (ii) that isrequired for the operation of the Business in material compliance with all applicable federal, state, local or foreign statutes, laws or regulations (all of the foregoing consents, licenses, permits, grants and other authorizations, collectively,the ***“Governmental Permits”),***and all of the Governmental Permits are in full force and effect, except where the failure to have such Governmental Permits or for such Governmental permits to be in full force and effect, asapplicable, would not have a Material Adverse Effect on the Company or any of its Subsidiaries. Neither the Company nor any Subsidiary has received any written notice from any Governmental Entity regarding (i) any actual or possible violationof any Governmental Permit or any failure to comply with any term or requirement of any Governmental Permit or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Permit.The Company and each of its Subsidiaries are in compliance in all material respects with the terms of all Governmental Permits. Since inception, neither the Company, any Subsidiary, nor, to the Company’s Knowledge, any director, officer, agentor employee of the Company or any of its Subsidiaries, has given, offered, paid, promised to pay or authorized payment of any money, any gift or anything of value, with the purpose of influencing any act or decision of the recipient in his or herofficial capacity or inducing the recipient to use his or her influence to affect an act or decision of a government official or employee, to any (i) governmental official or employee, (ii) political party or candidate thereof, or(iii) Person while knowing that all or a portion of such money or thing of value would be given or offered to a governmental official or employee or political party or candidate thereof. 

3.14 Employee Matters.

(a) General. 

(i) The Company and each of its Subsidiaries is in material compliance with all applicable laws and Contractsrelating to employment, employment practices, immigration, wages, hours and terms and conditions of employment, including employee compensation matters, and has correctly classified employees as exempt employees and non-exempt employees under theFair Labor Standards Act. 

(ii) Neither the Company nor any of its Subsidiaries is liable for any arrears of wages or any employee relatedTaxes or any penalty for failure to comply with any of the foregoing. 

(iii) Neither the Company nor any of its Subsidiaries is liable forany payment to any trust or other fund or to any Governmental Entity with respect to unemployment compensation contributions, social security or other benefits or obligations for any of its employees (other than routine payments to be made in theordinary course of business and consistent with its past practice). Schedule 3.14(a) of the Company Disclosure Letter contains true and correct details of all remuneration payable (including any bonus or commission entitlements) and any otherbenefits provided or which the Company or any of its Subsidiaries is bound to provide (whether now or in the future) for all employees and consultants, other than those employees and consultants are to be terminated prior to Closing, including

 

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without limitation, accrued vacation and accrued sick leave. There are no controversies or claims pending or, to the Company’s Knowledge, threatenedbetween the Company, any of its Subsidiaries and any of its respective employees, other than as listed on Schedule 3.14(a). 

(b) Employee Plans. Schedule 3.14(b) of the Company Disclosure Letter sets forth a complete list or summary of each “employee pension benefit plan,” as defined in Section 3(2) of the Employee Retirement Income SecurityAct of 1974, as amended ***(“ERISA”),***each material “employee welfare benefit plan,” as defined in Section 3(1) of ERISA, each material employment, consulting, severance or similar contract, plan, program,arrangement or policy and each other material plan, program, policy or arrangement providing for benefits, compensation, retention payments, bonuses, fees, profit-sharing, stock option, stock purchase or other stock related rights or other forms ofincentive or deferred compensation, change in control benefits, vacation benefits, other “fringe” benefits, insurance (including any self-insured arrangements), health or medical benefits, employee assistance programs, disability or sickleave benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits that is has been, within the six calendar years preceding the Closing Date, maintained, administered orcontributed to by the Company or any of its Subsidiaries (such plans, collectively, the ***“Company Benefit Plans”).***The Company has made available to Buyer true and complete copies of each Company Benefit Plan or a summary ofsuch plan. 

(c) Except as set forth on Schedule 3.14 of the Company Disclosure Letter, to the Company’sKnowledge, all Company Benefit Plans are, by their terms and in operation, in material compliance with ERISA and the Code (as amended through the Closing Date), the regulations and published authorities thereunder, and all other applicable legalrequirements. 

(d) Neither the Company nor any Subsidiaries maintains or contributes to, and neither have maintained orcontributed to (or been obligated to contribute to) within the six calendar years preceding the Closing Date, any employee pension benefit plan (within the meaning of Section 3(2) of ERISA) that is a defined benefit plan, any multiemployer plan(within the meaning of Section 3(37) of ERISA), any “multiple employer plan” (within the meaning of Section 4063 or 4064 of ERISA or Section 413(c) of the Code), any employee benefit plan, fund, program, contract orarrangement that is subject to Section 302 of ERISA or Title IV of ERISA or Section 412 of the Code, or any “multiple employer welfare arrangements” (within the meaning of Section 3(40) of ERISA). Except as set forth onSchedule 3.14 of the Company Disclosure Letter, none of the Company Benefit Plans provides for post-termination benefits of any kind with respect to any of the Company’s or any of its Subsidiaries’ current or former officers,employees, agents, directors or independent contractors, except as otherwise required by Sections 601 through 608 of ERISA and Section 4980B(f) of the Code or comparable state laws. 

3.15 No Brokers. Except as set forth on Schedule 3.15, none of the Company, or any of its Subsidiaries or any Affiliate of the Company orany of its Subsidiaries is obligated for the payment of any fees or expenses of any investment banker, broker, finder or similar party in connection with the origin, negotiation or execution of this Agreement or in connection with the transactionscontemplated hereby. None of the Buyer, Merger Subsidiary, Surviving Corporation or the Company will incur any Liability, either directly or indirectly, to any such investment banker, broker, finder or similar party as a result of this Agreement,the transactions contemplated hereby or any act or omission of the Company or any of its employees, officers, directors, stockholders, agents or Affiliates. 

3.16 Books and Records. The minute books of the Company and each of its Subsidiaries in all material respects reflect all meetings of directors and stockholders or actions by written consent since the 

 

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time of incorporation of such entity. The minute books, statutory books and registers and other similar records of the Company and its Subsidiaries:(i) are true and complete in all material respects, and (ii) have been maintained in accordance with reasonable business practices on a basis consistent with prior years. 

3.17 Insurance. The Company and its Subsidiaries maintain policies of insurance and bonds (each, an ***“Insurance Policy”)***ofthe type and in amounts reasonably and customarily carried by Persons conducting businesses or owning assets similar in type and size to those entities, including all legally required workers’ compensation insurance and errors and omissions,casualty, fire and general liability insurance. Each Insurance Policy now held by the Company and/or its Subsidiaries is set forth on Schedule 3.17 of the Company Disclosure Letter, together with the name of the insurer, the type of policy orbond and the coverage amount. There is no claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds, and all such policies and bonds are in full forceand effect. All premiums due and payable under all such policies and bonds have been paid, and the Company and its Subsidiaries are otherwise in material compliance with the terms of such policies and bonds. 

3.18 Certain Transactions. Except as set forth on Schedule 3.18, to the Company’s Knowledge, none of the directors or officers of theCompany or its Subsidiaries (i) has or ever had any direct or indirect ownership, participation, royalty or other interest in, or is a director, officer, employee, consultant or contractor for, any firm, partnership, entity or corporation thatcompetes with, or does business with, or has any contractual arrangement with, the Company or any of its Subsidiaries (except with respect to any interest in less than 1% of the stock of any corporation whose stock is publicly traded), (ii) isor ever was a party to, or is or ever was otherwise directly or indirectly interested in, any Contract or formal or informal arrangement or understanding with the Company or any of its Subsidiaries, except for normal compensation for services as adirector, officer or employee that has previously been disclosed in writing to Buyer, (iii) has or ever had any interest in any of the Company’s (and/or its Subsidiaries’) assets, except for the rights of stockholders under applicablelaw, or (iv) has or ever had, either directly or indirectly, a material interest in any Contract to which the Company or any of its Subsidiaries is a party or by which the Company (or any of its Subsidiaries) or any of their assets orproperties may be bound or affected. 

3.19 Real Property and Business Premises. Neither the Company nor any of its Subsidiaries ownsany real property whatsoever. All commercial leases and subleases executed by the Company and/or any of its Subsidiaries are in full force and effect, and neither the Company nor any of its Subsidiaries has received written notice of any claim ofany sort that is currently outstanding and that has been asserted by anyone adverse to the rights of the Company (or such Subsidiary) under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company (orsuch Subsidiary) to the continued possession of the commercial leases or subleases premises under any such commercial lease or sublease. 

3.20 Powers of Attorney. There are no outstanding powers of attorney executed on behalf of the Company and/or any of its Subsidiaries. 

3.21 No Bankruptcy or Insolvency. No order has been made, or petition presented, for the winding-up or bankruptcy of any of the Stockholders, the Company or any of its Subsidiaries. None of the Company, any ofits Subsidiaries or any Stockholder has had: (i) any petition or order for winding-up or bankruptcy filed against it; (ii) any appointment of a receiver over the whole or part of the undertaking of its assets; (iii) any petition ororder for administration against it; (iv) any distress or execution or other process levied in respect of it which remain undischarged; or (v) any unfulfilled or unsatisfied judgment or court order against it over the amount of $5,000.

3.22 Dividends. All dividends payable with respect to the Company Stock have been fully and properly paid to the holders of suchCompany Stock. 

 

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3.23 Environmental Matters. No written notice, notification, demand, request for information,citation, summons or order has been received, no complaint has been filed, no penalty has been assessed and no investigation, action, claim, suit, proceeding or review is pending, or threatened by any government entity or other Person with respectto any matters relating to the Company or any Subsidiary and relation to or arising out of any Environmental Law. There are no facts, conditions, situations or set of circumstances which could reasonably be expected to result in or be the basis forany liability of or relating to the Company or any Subsidiary arising under or relating to any Environmental Law. 

3.24 Disclosure.To the Company’s Knowledge, none of the representations or warranties made herein contains any untrue statement of material fact or omits to state any material fact necessary in order to make the statements contained herein, in the light of thecircumstances under which such statements were made, not misleading. There have been no events or transactions or information that, to the Company’s Knowledge, could reasonably be expected to have a Material Adverse Effect on the Company or anyof its Subsidiaries. 

**ARTICLE IV**

**REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY**

Each of Buyer and Merger Subsidiaryjointly and severally represents and warrants to the Stockholder Parties that each statement contained in this Article IV is true and correct as of the date hereof, except as set forth in the disclosure letter of the Buyer (collectively, the***“Buyer Disclosure Letter”).***The Buyer Disclosure Letter has been arranged for purposes of convenience only, as sections corresponding to the Sections of this Article IV. Each section of the Buyer Disclosure Letter shall bedeemed to incorporate by reference all information disclosed in any other section of the Buyer Disclosure Letter. 

4.1 Organization andGood Standing. Each of Buyer and Merger Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Buyer has the corporate power to own, lease and operate itsproperties and to carry on its business as now being conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which it owns or leases property or conducts any business so as to requiresuch qualification. 

4.2 Authorization. The Buyer and Merger Subsidiary have all requisite corporate power and authority to enterinto, execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Buyer and Merger Subsidiary of this Agreement and all other agreements,transactions and actions contemplated hereby have been duly and validly approved and authorized by the Buyer and Merger Subsidiary’s Board of Directors. 

4.3 No Brokers. None of the Buyer or Merger Subsidiary, or any Affiliate of the Buyer or Merger Subsidiary is obligated for the payment of any fees or expenses of any investment banker, broker, finder orsimilar party in connection with the origin, negotiation or execution of this Agreement or in connection with the transactions contemplated hereby. Neither Buyer or Merger Subsidiary will incur any Liability, either directly or indirectly, to anysuch investment banker, broker, finder or similar party as a result of this Agreement, the transactions contemplated hereby or any act or omission of the Buyer or Merger Subsidiary or any of its employees, officers, directors, stockholders, agentsor Affiliates. 

4.4 Closing Consideration. Each of Buyer and Merger Subsidiary has available to it, and at the 

 

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Closing will have available to it, sufficient cash and other financial resources sufficient to make full payment of the aggregate Closing Consideration andpay all associated costs and expenses contemplated by this Agreement. 

**ARTICLE V**

**CONDUCT PRIOR TO THE CLOSING**

5.1Company Stockholder Approval. Promptly after the date of this Agreement, the Company will take all action necessary in accordance with its Certificate of Incorporation and Bylaws, each as currently in effect, and all applicable laws to call, notice,convene, hold and conduct a meeting of the Company’s stockholders (the “Company Stockholders Meeting”) to be held as soon as practicable for the purpose of voting upon the Merger. In lieu of the Company Stockholders Meeting, suchapproval by the Company’s stockholders may be obtained by the written consent of the Company’s stockholders (the “Company Stockholders Consent”) where authorized by the Certificate of Incorporation and Bylaws of the Company. TheBoard of Directors of the Company will recommend that the Company’s stockholders vote in favor of the Merger at the Company Stockholders Meeting or pursuant to the Company Stockholders Consent and will not change such recommendation.

5.2 Advice of Changes. The Company will promptly advise Buyer in writing of any (a) event occurring subsequent to the date ofthis Agreement that would render any representation or warranty of the Company contained in this Agreement, if made on or as of the date of such event or the Closing Date, materially untrue or inaccurate, (b) material breach of any covenant orobligation of the Company pursuant to this Agreement, or (c) Material Adverse Change in the Business or operations. The Buyer will promptly advise Company in writing of any (a) event occurring subsequent to the date of this Agreement thatwould render any representation or warranty of the Buyer contained in this Agreement, if made on or as of the date of such event or the Closing Date, materially untrue or inaccurate, or (b) material breach of any covenant or obligation of theCompany pursuant to this Agreement. 

5.3 Conduct of Business. During the time period from the date of this Agreement until theearlier to occur of (i) the Closing and (ii) the termination of this Agreement in accordance with the provisions of Article VIII, the Company covenants and agrees that, except as expressly contemplated by this Agreement, or by the Companyor any of its Subsidiaries in accordance with their ordinary course of business, the Company and each Subsidiary will continue to conduct the Business in the ordinary and usual course, and neither the Company or any of its Subsidiaries will, withoutBuyer’s prior written consent except as may occur in the ordinary course of business: (i) enter into any material transaction or agreement or take any other action not in the ordinary course of business, consistent with its past practice;(ii) grant or permit any Encumbrance on any of its assets; (iii) sell, transfer, assign, convey, lease, license, move, relocate or otherwise dispose of any of its assets; (iv) enter into any material Contract for the purchase or saleof any of its assets; (v) amend or terminate any material Contract to which the Company or any of its Subsidiaries is a party; (vi) waive or release any material right or claim; (viii) license any of its technology or IntellectualProperty Rights or acquire any Intellectual Property Rights (or any license thereto) from any third party; or (viii) agree to do any of the things described in the preceding clauses (i) through (vii). 

5.4 No Other Negotiations.

(a) The Company will not, and will not authorize, encourage or permit any other Person, including any of its directors, officers, agents, advisors and other representatives (all of the foregoing Persons collectively being the***“Company Representatives”),***on its behalf to, directly or indirectly: (i) solicit, initiate, encourage, induce or facilitate the making, submission or 

 

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announcement of any inquiry, expression of interest, offer or proposal from any Person concerning any Alternative Transaction (as defined below) or take anyother action that could reasonably be expected to lead to an Alternative Transaction or a proposal therefor; (ii) furnish any information regarding the Business to any Person (other than Buyer) in connection with, or enter into, participate in,maintain or continue, any discussions or negotiations with any Person (other than Buyer) regarding, any inquiry, offer or proposal concerning any Alternative Transaction; (iii) cooperate with, facilitate or encourage any effort or attempt byany Person (other than Buyer) to effect any Alternative Transaction; or (iv) enter into or become bound by any letter of intent, agreement, commitment or understanding between the Company and any Person (other than Buyer) that is related to,provides for or concerns any Alternative Transaction. As used herein, the term ***“Alternative Transaction”***means any commitment, agreement or transaction with any party other than Buyer or any of its Affiliates involving orproviding for the **possible**disposition of the Business, whether by way of merger, consolidation, sale of assets, sale of stock, stock exchange, tender offer and/or any other form of business combination or strategic transaction. 

(b) The Company shall immediately notify Buyer after receipt by the Company (or, to the Company’s Knowledge, by any of the CompanyRepresentatives) of any inquiry, expression interest, offer or proposal that constitutes, or could reasonably be expected to lead to, an Alternative Transaction or any other notice that any Person is considering an Alternative Transaction or anyrequest for information relating to the Company or the Business or for access to any of the properties, books or records of the Company by any Person or Persons other than Buyer (which notice shall identify the Person or Persons making, orconsidering making, such inquiry, expression of interest, proposal, offer or request) and shall keep Buyer fully informed of the status and details of any such inquiry, expression of interest, proposal, offer or request and any correspondence orcommunications related thereto and shall provide to Buyer a true, correct and complete copy of such inquiry, expression of interest, proposal, offer or request and any amendments, correspondence and communications related thereto, if it is inwriting, or a written summary thereof, if it is not in writing. The Company shall immediately cease and cause to be terminated any and all existing activities, discussions and negotiations with any Persons conducted heretofore with respect to anAlternative Transaction. 

**ARTICLE VI**

**ADDITIONAL AGREEMENTS**

6.1 Access to Information. During the period commencing on the date ofthis Agreement and continuing until the earlier of the termination of this Agreement in accordance with the provisions of Article VIII and the Closing, the Company shall afford Buyer and its accountants, counsel and other representatives reasonableaccess during normal business hours to all of the Company’s properties, books, Contracts and records and all other information concerning the Business as Buyer may reasonably request. Subject to compliance with applicable law, from the date ofthis Agreement until the earlier of the termination of this Agreement in accordance with the provisions of Article VIII and the Closing, the Company shall confer from time to time as reasonably requested by Buyer with one or more representatives ofBuyer to discuss any material changes or developments in the Business. No information or knowledge obtained in any investigation pursuant to this Section 6.1 shall affect or be deemed to modify any representation or warranty contained herein orthe conditions to the obligations of the parties hereto to consummate the Merger. 

6.2 Confidentiality. The Company and eachStockholder covenants and agrees with Buyer that, from and at all times after the Closing, all confidential and/or proprietary information relating to the Company and the Business, including any trade secrets, will be held in strict confidence bythe Company and will not be disclosed by the Company, any Subsidiary, any Stockholder or any director, officer, 

 

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employee or agent of or on behalf of the Company, and Subsidiary or any Stockholder, other than as may be required under applicable law. The Buyer and MergerSubsidiary covenants and agrees with Company and the Stockholders that, from and at all times after the date hereof, all confidential and/or proprietary information relating to the Company and the Business, including any trade secrets, will be heldin strict confidence by the Buyer and Merger Subsidiary and will not be disclosed by the Buyer, the Merger Subsidiary or any director, officer, employee or agent of or on behalf of the Buyer or Merger Subsidiary, other than as may be required underapplicable law. 

6.3 Public Disclosure. The Company shall not directly or indirectly, issue any press release or other publicstatement relating to the terms of this Agreement or the transactions contemplated hereby without Buyer’s prior written approval. The Company shall not directly or indirectly, use Buyer’s name or refer to Buyer directly or indirectly inconnection with Buyer’s relationship with the Company in any media interview, advertisement, news release, press release or professional or trade publication, or in any print media, whether or not in response to an inquiry, unless otherwiserequired by applicable law or with Buyer’s prior written consent. Buyer shall provide the Company with an advance copy of any press releases issued by Buyer pertaining to this Agreement or the transactions contemplated hereby at least 24 hoursprior to its release, for the Company’s approval, which approval shall not be unreasonably withheld. 

6.4 Consents. The Companyshall use its commercially reasonable efforts to obtain at or prior to Closing, the consents, waivers and approvals set forth on Schedule 6.4, in each case in a form that is reasonably acceptable to Buyer. 

6.5 Legal Requirements. Buyer and the Company shall (i) take all reasonable actions necessary to comply promptly with all legal requirementswhich may be imposed on it with respect to the consummation of the transactions contemplated by this Agreement (ii) promptly cooperate with and furnish information to the other party hereto necessary in connection with any such requirementsimposed upon such other party in connection with the consummation of the transactions contemplated by this Agreement, and (iii) take all reasonable actions necessary to obtain (and shall cooperate with the other party hereto in obtaining) anyconsent, approval, order or authorization of, or any registration, declaration or filing with, any Governmental Entity or other Person required to be obtained or made in connection with the taking of any action contemplated by this Agreement.

6.6 Expenses. Whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and thetransactions contemplated hereby shall be paid by the party incurring such expense providedhowever, that if the Merger is consummated, all costs and expenses incurred by the Company in connection with this Agreement and thetransactions contemplated hereby shall be paid by the Stockholders and shall be deducted from the Closing Consideration. 

6.7 FurtherAssurances. On the terms and subject to the conditions set forth in this Agreement, each of the parties hereto shall use commercially reasonable efforts, and shall cooperate with each other party hereto, to take, or cause to be taken, allactions, and to do, or cause to be done, all things reasonably necessary, reasonably appropriate or reasonably desirable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplatedhereby. Notwithstanding the foregoing, none of the Buyer, the Company or the Stockholders shall be obligated to contest or litigate any proposed injunction or other order preventing the consummation of the Merger. Each party hereto, at thereasonable request of any other party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be reasonably necessary or reasonably desirable to the consummation of the Merger and the othertransactions contemplated hereby. In addition to the foregoing the Company and the Stockholders shall use commercially reasonable efforts to cause Michael Eleftheriou to remain employed by the Company until September 15, 2007 

6.8 Cooperation on Tax Matters. Buyer, the Company and the Stockholders shall cooperate 

 

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fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns and any audit, litigation or otherproceeding with respect to Taxes. Such cooperation shall include the retention and (upon another party’s request) the provision of records and information which are reasonably relevant to any such Tax Return, audit, litigation or otherproceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Company and the Stockholders agree (A) to retain all books and records withrespect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and any extensions thereof) of the respective taxable periods, and to abide by allrecord retention agreements entered into with any taxing authority, and (B) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, toallow the other party to take possession of such books and records. With respect to any and all tax matters set forth on Schedule 3.7(a), on and after the Closing, the Surviving Corporation and Buyer shall promptly confer and consult with theStockholders’ Representative, with respect to any potential liability exceeding $50,000, as to the status of the negotiations with respect to these matters. Buyer and Surviving Corporation agree to use their reasonable best efforts when workingwith taxing authorities and other governmental entities to which the tax matters relate so as to minimize the amount of interest, penalties and taxes due. This covenant shall survive the closing. 

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

Buyer shall prepare or cause to be prepared and file or cause to be filed all Tax Returns for the Companythat are filed after the Closing Date other than income Tax Returns with respect to periods for which a consolidated, unitary or combined income Tax Return of Seller will include the operations of the Company. Buyer shall permit Sellers to reviewand comment on each such Tax Return described in the preceding sentence prior to filing. 

All transfer, documentary, sales, use, stamp,registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement shall be paid by the Stockholders when due, and the Stockholders shall, at their own expense, file all necessary Tax Returnsand other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and, if required by applicable law, Buyer shall, and shall cause its affiliates to, join in the execution of any suchTax Returns and other documentation. 

**ARTICLE VII**

**CONDITIONS TO THE MERGER**

7.1 Conditions to Obligations of Each Party.The respective obligations of each party hereto to consummate the transactions contemplated hereby shall be subject to the fulfillment or satisfaction, at or prior to the Closing, of each of the following conditions, any of which, to the extentlawful, may be waived, in writing, by agreement of the parties hereto (it being understood that each such condition is solely for the benefit of the parties hereto and may be so waived in writing by their mutual agreement without notice, Liabilityor obligation to any Person): 

(a) No Injunctions or Restraints; Illegality. No temporary restraining order, 

 

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preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibitionpreventing the consummation of the Merger shall be in effect, nor shall any proceeding seeking any of the foregoing be pending. No action taken by any Governmental Entity, and no statute, rule, regulation or order shall have been enacted, entered,enforced or deemed applicable to the Merger, which makes the consummation of the Merger illegal. 

(b) GovernmentalApprovals. Buyer and the Company shall have timely obtained from each Governmental Entity all approvals, waivers and consents, if any, necessary for the consummation of, the Merger and the other transactions contemplated hereby. 

(c) Company Stockholder Approval. The Company Stockholder Approval shall have been obtained. 

(d) Certificate of Merger. At the Effective Time, the Certificate of Merger shall be accepted for filing with the Secretary ofState of the State of Delaware. 

7.2 Additional Conditions to Obligations of the Company. The obligations of the Company toconsummate the transactions contemplated hereby shall be subject to the fulfillment or satisfaction, at or prior to the Closing, of the following conditions, each of which, to the extent lawful, may be waived, in writing, by the Company (it beingunderstood that such conditions are solely for the benefit of the Company and may be so waived in writing by the Company in its sole discretion without notice, Liability or obligation to any Person): 

(a) Representations and Warranties. The representations and warranties of Buyer and Merger Subsidiary in this Agreement shall betrue and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality, which representations and warranties as so qualified shall be true and correct in allrespects) on and as of the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on and as of such date (except for representations and warranties which address matters only as to aspecified date, which representations and warranties shall be true and correct with respect to the specified date) and at the Closing the Company will have received a certificate to such effect executed by the Buyer’s President. 

(b) Covenants. Buyer and Merger Subsidiary shall have performed and complied in all material respects with all covenants,obligations and conditions of this Agreement required to be performed and complied with by it at or prior to the Closing and at the Closing the Company will have received a certificate to such effect executed by the Buyer’s President.

7.3 Additional Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated herebyshall be subject to the fulfillment or satisfaction, at or prior to the Closing, of each of the following conditions, any of which may be waived, in writing, by Buyer (it being understood that each such condition is solely for the benefit of Buyerand may be waived by Buyer in its sole discretion without notice, Liability or obligation to any Person): 

(a)Representations and Warranties. The representations and warranties of the Company and the Stockholders in this Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified bytheir terms by a reference to materiality, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the date of this Agreement and on and as of the Closing Date as though such representations andwarranties were made on and as of such date (except for representations and warranties which address matters only as to a specified date, which 

 

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representations and warranties shall be true and correct with respect to the specified date), and at the Closing Buyer will have received a certificate tosuch effect executed by the Company’s Chief Executive Officer. 

(b) Covenants. The Company and each Stockholdershall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by it at or prior to the Closing, and at the Closing Buyer will have received acertificate to such effect executed by the Company’s Chief Executive Officer. 

(c) Release of Encumbrances.Buyer shall have received a release of any and all Encumbrances (other than Permitted Encumbrances) on the Company’s or any of its Subsidiaries’ assets. 

(d) Change of Directors. The members of the board of directors of the Company in office immediately prior to the Effective Dateshall have resigned. 

(e) Cancellation/Termination of Options. Buyer shall have received evidence that alloutstanding Options of the Company and any of its Subsidiaries have been fully exercised, cancelled or terminated in accordance with their terms. 

(f) Delivery of Company Seal and Books & Records. Buyer shall have received the Company’s (and each of its Subsidiaries’) original corporate books and records and any company seals of theCompany (and its Subsidiaries). 

(g) Material Adverse Effect. No Material Adverse Effect in relation to the Companyshall have occurred since the date of this Agreement. 

(h) Dissenting Shares. There shall be no Dissenting Shares.

(i) Termination of Certain Employees. Each of the Chief Executive Officer of the Company shall have been terminatedby the Company, and the Stockholders’ shall be responsible for a severance payment to be made to such employee from the Closing Consideration. 

(j) Company Board Approval. The board of directors of the Company shall have approved the execution of this Agreement and the transactions contemplated hereby. 

(k) Secretary Certificate. The Company shall have delivered to Buyer a certificate, dated the Closing Date, signed by the companysecretary of the Company in form reasonably acceptable to Buyer. 

(l) Financial Statements. On the Closing Date, theStockholders shall deliver to the Buyer true and complete copies of the Audited Financial Statements and other financial statements contemplated to be delivered at the Closing pursuant to Section 2.7 hereof. 

(m) Termination of Rights and Certain Securities. Any and all registration rights, rights of first refusal, rights of first offer,co-sale, tag-along, drag-along, voting rights, rights to any liquidation preference or redemption rights, or any similar rights relating to the Company Stock or any of the Company’s or any Subsidiary’s capital, will either be fullyterminated, satisfied or irrevocably waived as of the Closing Date. 

(n) Third Party Consents. The Buyer shall havereceived copies of the consents to the change of control of the Company from each third party contract requiring such consent. 

 

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(o) Surrender of Certificates and Customary Letter of Transmittal. At the Closing,the Buyer shall receive the documents required to be received by it in accordance with Section 2.2(d) hereto, including, but not limited to, a standard letter of transmittal. 

(p) Legal Opinion. The Buyer shall have a received a legal opinion substantially in the form of Exhibit B. 

(q) United Kingdom Premises Lease. The Company shall have terminated the real property lease covering the premises occupied by theCompany in the United Kingdom. 

**ARTICLE VIII**

**TERMINATION**

8.1 Termination by Mutual Consent. This Agreement may be terminated at any timeprior to the Closing by the mutual written consent of Buyer and the Company. 

8.2 Unilateral Termination.

(a) Either Buyer, on the one hand, or the Company, on the other hand, by giving written notice to the other, may terminate this Agreementif a court of competent jurisdiction or other Governmental Entity shall have issued an injunction, order, decree or ruling or taken any other action to restrain, enjoin, make illegal or otherwise prohibit the Merger. 

(b) Either Buyer, on the one hand, or the Company, on the other hand, by giving written notice to the other, may terminate this Agreementif the Merger shall not have been consummated by midnight Pacific Time on September 15, 2007; provided,however, that the right to terminate this Agreement pursuant to this Section 8.2(b) shall not be available to any partywhose failure to perform in any material respect any of its obligations or covenants under this Agreement results in the failure of any condition set forth in Article VII or if the failure of such condition results from facts or circumstances thatconstitute a material breach of a representation or warranty or covenant made under this Agreement by such party. 

(c)Either Buyer, on the one hand, or the Company, on the other hand, by giving written notice to the other, may terminate this Agreement at any time prior to the Closing if the other has committed a material breach of (i) any of such party’srepresentations and warranties contained in this Agreement or (ii) any of such party’s covenants contained in this Agreement, and has not cured such material breach within twenty days after the party seeking to terminate this Agreement hasgiven the other party written notice of the material breach and its intention to terminate this Agreement pursuant to this Section 8.2(c). 

8.3 No Liability for Termination. Termination of this Agreement by a party (the ***“Terminating Party”)***in accordance with the provisions of this Article VIII will not give rise to any Liability on the part ofthe Terminating Party on account of such termination; provided,however, that nothing herein shall relieve a party from liability for a willful breach of this Agreement. The provisions of this Article VIII and Article IX shall surviveany termination of this Agreement. 

 

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**ARTICLE IX**

**INDEMNIFICATION**

9.1 Survival of Representations. The representations and warranties of theCompany and Buyer contained in this Agreement (including the Exhibits to this Agreement) shall survive the Closing and shall remain operative and in full force and effect, from the Closing Date until the end of the Holdback Period (the***“Release Date”);***provided,however, that such expiration shall not affect claims of fraud, willful misrepresentation, willful misconduct or any criminal activity. 

9.2 Indemnification.

(a) (i) By the Stockholders. Subject to the limitations set forth in this Article IX, from and after the Closing, by virtue of the Merger, the Stockholders shall jointly and severally, to the extent of their interest in theHoldback and not personally, indemnify and hold harmless Buyer, the Merger Subsidiary, the Company and the Surviving Corporation and its directors, officers and agents (each of the foregoing being referred to individually as an***“Indemnified Buyer Party”***and collectively as ***“Indemnified Buyer Parties”)***from and against any and all Losses, Liabilities, damages, costs and expenses, including reasonable costs of investigation anddefense, reasonable legal fees and expenses and other professionals’ and experts’ reasonable fees and reasonable expenses (collectively, ***“Damages”)***arising from assessments, claims, demands, assertions of liabilityor actual or threatened actions, suits or proceedings (whether civil, criminal, administrative or investigative) directly or indirectly incurred, paid or accrued in connection with, resulting from or arising out of (i) any breach of anyrepresentation or warranty made by the Company and/or any of the Stockholders in this Agreement (and the Schedules and Exhibits to this Agreement), (ii) any breach of or default in connection with any of the covenants or agreements made by theCompany and/or any Stockholders in this Agreement, (iii) any of the matters set forth on Schedule 3.5 of the Company Disclosure Letter, (iv) any Liability of the Business not set forth on the **Company Balance Sheet,**(v) any suit, action, claim or Loss by any holder of any Options, and/or (vi) any suit, action, proceeding, claim or Loss resulting from an action initiated by any State of the United States of America for unpaid sales tax on allsoftware license, service and maintenance sells conducted by the Company prior to the Closing. 

(ii) By the Buyer and MergerSubsidiary. Subject to the limitations set forth in this Article IX, from and after the Closing, by virtue of the Merger, the Buyer and the Surviving Corporation shall jointly and severally indemnify and hold harmless the Stockholders (the***“Indemnified Seller Party” “Indemnified Seller Parties”)***from and against any and all Losses, Liabilities and Damages arising from assessments, claims, demands, assertions of liability or actual or threatenedactions, suits or proceedings (whether civil, criminal, administrative or investigative) directly or indirectly incurred, paid or accrued in connection with, resulting from or arising out of (i) any breach of any representation or warranty madeby the Buyer and/or Merger Subsidiary in this Agreement (and the Schedules and Exhibits to this Agreement) and (ii) any breach of or default in connection with any of the covenants or agreements made by the Buyer and/or Merger Subsidiary inthis Agreement. 

(b) Limitations. In no event shall the Stockholders’ or the Company’s obligations pursuantto this Article IX exceed the Holdback Consideration with respect to all Indemnified Buyer Party claims for indemnification for damages (the ***“Indemnification Cap”)***provided,however, that the Indemnification Capshall not apply to claims of fraud, willful misrepresentation, willful misconduct or any criminal activity. 

(c)Exclusive Remedy. The indemnification remedies provided in this Article IX shall not create any personal liability for the Stockholders, other than to the extent of their interest in the Holdback and shall constitute the sole and exclusiveremedy of the parties for any claim in 

 

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connection with this Agreement or any other transaction documents, including any claim for any Damages resulting from a breach of any party of anyrepresentation, warranty, covenant or agreement. 

9.3 Claims Period. The period during which claims of an Indemnified Buyer Partyfor indemnification pursuant to this Agreement may be initiated (the ***“Claims Period”),***shall commence at the Closing and terminate on the Release Date. 

9.4 Resolution of Objections to Claims.

(a) Any Person who desires to seek indemnification under any part of this Article IX (each, an ***“Indemnified Party”)***shall give written notice in reasonable detail (a ***“IndemnificationClaim Notice”)***to the party responsible or alleged to be responsible for indemnification hereunder (an ***“Indemnitor”)***prior to the end of any applicable Claims Period. Such notice shall briefly explain the natureof the claim and the parties known to be involved, and shall specify the amount thereof. If the matter to which a claim relates shall not have been resolved as of the date of the Indemnification Claim Notice, the Indemnified Party shall estimate theamount of the claim in the Indemnification Claim Notice. Each Indemnitor to which an Indemnification Claim Notice is given shall respond to any Indemnified Party that has given a Indemnification Claim Notice (a ***“Claim Response”)***within fifteen (15) days (the ***“Response Period”)***after the date that the Indemnification Claim Notice is given. Any Claim Response shall specify whether or not the Indemnitor giving the Claim Response disputesthe claim described in the Indemnification Claim Notice. If any Indemnitor fails to give a Claim Response within the Response Period, such Indemnitor shall be deemed not to dispute the claim described in the related Indemnification Claim Notice. Ifany Indemnitor elects not to dispute a claim described in an Indemnification Claim Notice, whether by failing to give a timely Claim Response in accordance with the terms hereof or otherwise, then the amount of such claim shall be conclusivelydeemed to be an obligation of such Indemnitor. 

(b) If, during the Response Period, an Indemnified Party receives a ClaimResponse from the Indemnitor, then for a period of twenty (20) days (the ***“Resolution Period”)***after the Indemnified Party’s receipt of such Claim Response, the Indemnified Party and the Indemnitor shall endeavor toresolve any dispute arising therefrom. If such dispute is resolved by the parties during the Resolution Period, the amount that the parties have specified in writing as the amount to be paid by the Indemnitor, if any, as settlement for such disputeshall be conclusively deemed to be an obligation of such Indemnitor. If the parties are unable agree upon a resolution to such dispute prior to the expiration of the Resolution Period (or any extension thereto to which the Indemnitor and IndemnifiedParty agree in writing), the issue shall be presented to the *AAA*for determination. The arbitration shall be before a panel of three arbitrators, one selected by Buyer, one selected by the Stockholders’ Representative and one selected bythe two selected arbitrators, and the commercial arbitration rules of the AAA shall govern such arbitration. The written determination of the AAA shall be binding upon the parties and not subject to any appeal. 

9.5 Third-Party Claims. An Indemnified Party that desires to seek indemnification under any part of this Article IX with respect to any actions,suits or other administrative or judicial proceedings (each, an ***“Action”)***that may be instituted by a third party shall give each Indemnitor notice after having knowledge of such Action, of a third party’s institution ofsuch Action, and copies of all documents and information relating to such Action after receipt thereof. After such notice, any Indemnitor may, at its sole option and expense, participate in such Action or assume the defense thereof, with counsel ofits own choice. The Indemnified Party shall not consent to the entry of any judgment or enter into any settlement, except with the written consent of the Indemnitor. Any failure to give notice under this Section 9.5 shall not bar an 

 

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Indemnified Party’s right to claim indemnification under this Article IX, except to the extent that an Indemnitor shall have been harmed by suchfailure. If a firm written offer is made to settle any such Action, the Indemnitor proposes to accept such settlement and the Indemnified Party refuses to consent to such settlement, then: (i) the Indemnitor shall be excused from, and theIndemnified Party shall be solely responsible for, all further defense of such Action, and (ii) provided that only monetary damages may be recovered in such Action (and the Indemnified Party is not subject to any injunctive relief, equitable orother non-monetary relief in connection with such Action), the maximum liability of the Indemnitor relating to such Action shall be the amount of the proposed settlement if the actual monetary amount thereafter recovered from the Indemnified Partyon such Action is greater. 

9.6 Stockholders’ Representative.

(a) Upon approval of the Merger and this Agreement by the Stockholders, each Stockholder will be deemed to have irrevocably appointedComVest Investment Partners II LLC, as its, his or her true and lawful attorney-in-fact and agent (the ***“Stockholders’ Representative”),***each with full power of substitution or resubstitution, to act solely andexclusively on behalf of such Stockholder with respect to the transactions contemplated by this Agreement, including the Merger, and to act on behalf of such Stockholder in any litigation or arbitration involving this Agreement, to do or refrainfrom doing all such further acts and things, and to execute all such documents as the Stockholders’ Representative shall deem necessary or appropriate in connection with the transactions contemplated hereby, including the power: 

(i) to act for such Stockholder with regard to matters pertaining to indemnification referred to in this Agreement, including the power to compromise anyindemnity claim on behalf of such Stockholder; 

(ii) to act for such Stockholder with regard to matters pertaining to litigation;

(iii) to execute and deliver all documents in connection with the transactions contemplated hereby or amendments thereto that theStockholders’ Representative deems necessary or appropriate; 

(iv) to receive funds, make payments of funds, and give receipts forfunds; 

(v) to receive funds for the payment of expenses of such Stockholder and apply such funds in payment for such expenses;

(vi) to do or refrain from doing any further act or deed on behalf of such Stockholder that the Stockholders’ Representative deemsnecessary or appropriate in his sole discretion relating to the subject matter of this Agreement as fully and completely as such Stockholder could do if personally present; and 

(vii) to receive service of process in connection with any claims under this Agreement. 

(b) The appointment of the Stockholders’ Representative shall be deemed coupled with an interest and shall be irrevocable, and Buyer,Merger Subsidiary and Surviving Corporation and any other person may conclusively and absolutely rely, without inquiry, upon any action of the Stockholders’ Representative in all matters referred to herein. Any notices required to be made ordelivered to the Company or any of the Stockholders shall be made to the Stockholders’ Representative and shall discharge in full all notice requirements, as applicable, to such 

 

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Stockholder and/or the Company with respect thereto. By their appointment of the Stockholders’ Representative, the Stockholders thereby confirm all thatthe Stockholders’ Representative shall do or cause to be done by virtue of his appointment as the representatives of the Stockholders hereunder. The Stockholders’ Representative shall act for the Stockholders on all of the matters setforth in this Agreement in the manner the Stockholders’ Representative believes to be in the best interest of the Stockholders and consistent with the obligations of the Stockholders under this Agreement, but the Stockholders’Representative shall not be responsible to any Stockholder for any damages which the Stockholders may suffer by the performance of the Stockholders’ Representative’s duties under this Agreement, other than damages arising from willfulviolation of applicable law or gross negligence in the performance of such duties under this Agreement. The Stockholders’ Representative shall not have any duties or responsibilities except those expressly set forth in this Agreement, and noimplied covenants, functions, responsibilities, duties or liabilities shall be read into this Agreement or shall otherwise exist against the Stockholders’ Representative. 

**ARTICLE X**

**GENERAL PROVISIONS**

10.1 Governing Law; Dispute Resolution; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the laws ofthe State of Delaware applicable to contracts executed in and to be performed in that state and without regard to any applicable conflicts of law. Except as otherwise provided in Sections 2.7, 2.8 and 9.4, any dispute directly or indirectly basedupon, arising out of, connected to or relating to this Agreement, the transactions contemplated hereby or any right or obligation created hereby, irrespective of the legal theory or claims underlying any such dispute (including any tort andstatutory claims), shall be resolved in any court of competent jurisdiction located in the County of New Castle, Delaware. Each of the parties to this Agreement hereby irrevocably (a) consents to submit itself to the personal jurisdiction ofany state or federal court located in the State of Delaware in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (b) agrees that it will not attempt to deny or defeat such personal jurisdictionby motion or other request for leave from any such court, including a motion for forum of non conveniens or other actions or other motions asserting the aforementioned forum is inconvenient, and (c) agrees that it will not bring any action inrelation of this Agreement or any of the other transactions contemplated hereby in any court other than a state or federal court located in the State of Delaware. Each party acknowledges and agrees that any controversy which may arise under thisAgreement is likely to involve complicated and difficult issues, and therefore EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ISSUE WITHIN ANY ACTION AT LAW OR SUIT INEQUITY DIRECTLY OR INDIRECTLY BASED UPON, ARISING OUT OF, CONNECTED TO OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY RIGHT OR OBLIGATION CREATED HEREBY. 

10.2 Notices. All notices and other communications required or Permitted under this Agreement will be in writing and will be either hand deliveredin person, sent by facsimile, sent by certified or registered first-class mail, postage pre-paid, or sent by nationally recognized express courier service. Such notices and other communications will be effective upon receipt if hand delivered orsent by facsimile, five days after mailing if sent by mail, and one day after dispatch if sent by express courier, to the following addresses, or such other addresses as any party may notify the other parties in writing in accordance with thisSection 10.2. 

 

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 (i)if to Buyer: 
Two Concourse Parkway 

Suite 800 

Atlanta, Georgia 30328

Attn: Eric Musser 

With acopy to: 

Two Concourse Parkway 

Suite 800 

Atlanta, Georgia 30328 

Attn: Verome Johnston 

 
 (ii)if to the Stockholders’ Representative: 
ComVestPartners II LLC 

One North Clematis Street 

Suite 300 

West Palm Beach, FL 33401 

Attn: Inder Tallur 

10.3 Interpretation;Rules of Construction. When a reference is made in this Agreement to Articles, Sections or Exhibits, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. The words “include,”“includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” Unless the context of this Agreement otherwise requires: (i) words of any gender includeeach other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; and (iii) the terms “hereof,” “herein,” “hereunder” and derivative or similar wordsrefer to this entire Agreement. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The parties hereto have been represented by counsel during thenegotiation, preparation and execution of this Agreement and, therefore, hereby waive, with respect to this Agreement and each Exhibit attached hereto, the application of any law, regulation, holding or rule of construction providing thatambiguities in an agreement or other document shall be construed against the party drafting such agreement or document. Each reference herein to a law, statute, regulation, document or agreement will be deemed in each case to include all amendmentsthereto. 

10.4 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced byany rule of law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in anymanner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect theoriginal intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible. 

10.5 Entire Agreement; Parties in Interest. This Agreement and the documents and instruments and other agreements specifically referred to hereinor delivered pursuant hereto, including all the Exhibits attached hereto and the Company Disclosure Letter, (i) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prioragreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof and (ii) are not intended to confer, and shall not be construed as conferring, upon any Person other than the partieshereto any rights or remedies hereunder unless specifically provided otherwise herein. The express terms of this Agreement control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof. 

 

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10.6 Assignment. Neither this Agreement nor any of the rights, interests or obligations under thisAgreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties hereto, and any such assignment without such prior written consentshall be null and void, except that Buyer may assign this Agreement to any direct or indirect wholly owned subsidiary of Buyer without the Company’s prior consent; provided,however, that Buyer shall remain liable for all of itsobligations under this Agreement. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. 

10.7 Amendment; Extension; Waiver. Subject to the provisions of applicable law, the parties hereto may amend this Agreement at any time pursuantto an instrument in writing signed on behalf of each of the parties hereto. At any time, either Buyer or the Company may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of theother party hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions forthe benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Without limiting the generality oreffect of the preceding sentence, no delay in exercising any right under this Agreement shall constitute a waiver of such right, and no waiver of any breach or default shall be deemed a waiver of any other breach or default of the same or any otherprovision in this Agreement. 

10.8 No Joint Venture. Nothing contained in this Agreement will be deemed or construed as creating ajoint venture or partnership between any of the parties hereto. No party is by virtue of this Agreement authorized as an agent, employee or legal representative of any other party. No party will have the power to control the activities andoperations of any other, and their status is, and at all times will continue to be, that of independent contractors with respect to each other. No party will have any power or authority to bind or commit any other party. No party will hold itselfout as having any authority or relationship in contravention of this Section 10.8. 

10.9 Counterparts; Facsimile. ThisAgreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement. This Agreement may be executed and delivered byfacsimile and upon such delivery the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other parties. 

[Signature Page Follows] 

 

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

 
**COMPANY:**CATALYST INTERNATIONAL, INC.By: 
/s/ Michael Eleftheriou
Name: Michael EleftheriouTitle: President & CEO**MERGER SUBSIDIARY:**C I ACQUISITION CORPORATIONBy: 
/s/ Eric Musser
Name: Eric MusserTitle: President**BUYER:**CDC SOFTWARE CORPORATIONBy: 
/s/ Eric Musser
Name: Eric MusserTitle: President and Chief Executive Officer**STOCKHOLDERS**COMVEST INVESTMENT PARTNERS II LLCBy: 
/s/ Inder Tallur
Name: Inder TallurTitle: PartnerCLYS HOLDINGS, LLCBy: 
/s/ Michael T. Davies
Name: Michael T. DaviesTitle: Secretary & Treasurer 
/s/ Terrance L. Mealy
Name: TERRANCE L. MEALY
CDC/Catalyst – Merger Agreement 

 
/s/ Peter Kight
Name: PETER KIGHT 
/s/ William G. Nelson
Name: WILLIAM G. NELSON 
/s/ John Gorman
Name: JOHN GORMAN 
/s/ Nigel Davies
Name: NIGEL DAVIES 
/s/ S. Michael Godshall    9/4/07
Name: S. MICHAEL GODSHALL
Merger Agreement Signature Pages 

CDC/Catalyst – Merger Agreement