exv10w2






Exhibit 10.2




SECOND AMENDED AND RESTATED

AGREEMENT AND PLAN OF MERGER




     SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the “Agreement”), dated March
12, 2009 amends and restates in its entirety that Agreement and Plan of Merger dated September 9,
2008, as amended by that First Amendment to Agreement and Plan of Merger dated November 10, 2008
among Flow International Corporation, a Washington corporation (“Parent”), Orange Acquisition
Corporation, a Washington corporation and a wholly-owned subsidiary of Parent (“Sub”), OMAX
Corporation, a Washington corporation (“Company”), John B. Cheung, John H. Olsen, James M. O’Connor
and Puget Partners, L.P., the holders of forty-five percent (45%) of the issued and outstanding
ownership interests (other than holders of Company Options) in the Company (collectively referred
to as the “Major Shareholders”), and John B. Cheung, Inc., a personal holding corporation owned by
John B. Cheung (the “Shareholders’
Representative”) as agent and attorney-in-fact for the holders
of Company Shares (as defined in Section 2.1).



     WHEREAS, in order to induce the parties to enter into this Agreement, Parent has agreed to
pay, contemporaneously with the execution of this Agreement, Company $2,000,000 in cash from
Parent, receipt of which amount is hereby acknowledged;



     INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the mutual
representations, warranties, covenants, and agreements in this Agreement, the parties hereby agree
as follows:



ARTICLE I

THE MERGER




     1.1 Effective Time of the Merger. Subject to the provisions of this Agreement, Sub will be merged with and into Company (the
“Merger”). Articles of Merger (“Articles of Merger”) will be duly prepared by the parties,
executed by Surviving Corporation (as defined below) and thereafter delivered to the Secretary of
State of Washington for filing, as provided in the Washington Business Corporation Act (the “WBCA”)
as soon as practicable on or after the Closing Date (as defined in Section 1.2). The Merger will
become effective upon the later of the acceptance for filing of the Articles of Merger by the
Secretary of State of Washington or at such later time as is provided in the Articles of Merger
(the “Effective Time”).



     1.2 Closing. The closing of the Merger (“Closing”) will take place as soon as practicable after
satisfaction or waiver of the last to be fulfilled of the conditions set forth in Article VII (the
“Closing Date”), at the offices of K&L Gates LLP at 925 Fourth Avenue,
Suite 2900, Seattle, Washington 98104, unless another date or place is agreed to in writing by
Parent and Company.



     1.3 Effects of the Merger. At the Effective Time: (i) the separate existence of Sub will cease and Sub will be merged with and
into Company and Company will continue as the surviving corporation and as a wholly owned
subsidiary of Parent (after the Merger, Company is



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sometimes referred to in this Agreement as the
“Surviving Corporation”); (ii) the certificate of incorporation of Company will be amended in its
entirety to be the same as the certificate of incorporation of Sub, as in effect immediately before
the Effective Time, until later amended in accordance with the WBCA; (iii) the bylaws of Surviving
Corporation will be amended and restated in their entirety to be the same as the bylaws of Sub, as
in effect immediately before the Effective Time, until later amended in accordance with the
provisions thereof, the certificate of incorporation and the WBCA; (iv) the directors and officers
of Sub immediately before the Effective Time will be the directors and officers of the Surviving
Corporation in each case until their respective successors have been duly elected, designated, or
qualified or until their earlier death, resignation, or removal in accordance with the Surviving
Corporation’s certificate of incorporation and bylaws; and (v) the Merger will, from and after the
Effective Time, have all the effects provided by Chapter 23B.11 RCW of the WBCA and other
applicable law.



ARTICLE II

EFFECT OF THE MERGER; DELIVERY OF CONSIDERATION




     2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action (except as provided
in Section 4.5 and in this Section 2.1) on the part of Sub, Parent, Company, or the holder of any
shares of Company capital stock (“Company Shares”):



          2.1.1 Capital Stock of Sub. Each share of Sub common stock, no par value per share, issued and outstanding immediately
before the Effective Time, will be converted into one validly issued, fully paid, and nonassessable
share of Surviving Corporation common stock (“Surviving
Corporation Common Stock”), with the stock
certificate of Sub evidencing ownership of such share of Surviving Corporation Common Stock.




          2.1.2 Cancellation of Company Shares. Each Company Share owned directly or indirectly by Company or by any subsidiary (as defined in
Section 10.2) of Company will automatically be cancelled and retired and will cease to exist and no
consideration will be delivered or deliverable in exchange for such Company Shares. Company will
obtain a written consent to such cancellation from any subsidiary, whether or not wholly owned,
that owns Company Shares.




          2.1.3 Conversion of Company Securities. Subject to the limitations on payments and the timing of payments as set forth in Section 2.2,
Section 2.3 and Article VIII, each Company Share and Company Option (as defined below) validly
issued and outstanding immediately before the Effective Time (other than Appraisal Shares, as
defined in Section 2.1.6, and those Company Shares referred to in Section 2.1.2), will, without any
action on the part of the holder thereof (except as set forth in this Section 2.1.3) be converted
into, or with respect to Company Options, cancelled in exchange for, their respective conversion
payment (“Conversion Payment”), which will be calculated as follows:




               (a) Each share of Company common stock, no par value (the “Company Common Shares”), issued and
outstanding immediately before the Effective Time will convert into the right to receive (i) an
amount in cash equal to the Per Share Cash Consideration (as defined below), (ii) the Per Share
Stock Consideration (as defined below), and (iii) the Per Share Contingent Consideration (as
defined below).



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               (b) Each Company Option (as defined below) that is validly issued and unexpired, unexercised,
and outstanding immediately before the Closing will be exercised immediately before Closing, with
the consent of the holder thereof, (such person, the “Option Holder”), for Company Shares; provided
that the right of the Option Holder to receive the Per Share Cash Consideration (as defined below)
shall be subject first to deduction for (i) the respective aggregate exercise price of the Company
Option(s) being exercised, (ii) any previous loans or advances to such Option Holder related to the
previous acquisition of Company Shares by the exercise of options, and (iii) the amount of any
applicable payroll, income tax or other withholding taxes being paid on behalf of the Option Holder
arising from the exercise of a Company Option (collectively, the “Option Advances”), which shall be
treated as a partial payment of the Per Share Cash Consideration due the former Option Holder.



     At the Effective Time, all Company Shares will be cancelled and will cease to exist and each
certificate (a “Certificate”) previously representing any Company Shares will represent only the
right to receive the applicable Conversion Payment as provided by this Section 2.1.3. The amount
that the holders of Company Shares are entitled to receive at Closing under this Section 2.1.3 will
be reduced by their pro rata share of (i) the Escrow Amount (as defined in Section 2.2.1), (ii) the
Employee Retention Pool Amount (as defined in Section 2.2.2), and (iii) in the case of the Option
Holders, the amount of Option Advances.



     The numbers used below and in the pro forma calculations in the attached Schedule 2.1, each
rounded to the nearest dollar are for purposes of illustration of the Per Share Cash Consideration
only and will be adjusted and set forth in the final Schedule 2.1, which will be determined in
accordance with the following procedures, adjustments, and definitions and when approved in writing
by Parent and Company before Closing will be the final and determinative interpretation of the
following, each term used as defined below:



	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 
	(i)	 	Base Cash Amount
	 	$	[•]	 
	 	 	 
	 	 	 	 
	(ii)	 	Plus: Option Consideration
	 	$	[•]	 
	 	 	 
	 	 	 	 
	(iii)	 	Less: Working Capital Deficit, or plus Working Capital Credit (defined in Section 2.3(a))
	 	$	[•]	 
	 	 	 
	 	 	 	 
	(iv)	 	Less: Expenses
	 	 	 	 
	 	 	 
	 	 	 	 
	(v)	 	Subtotal: Gross Distributable Cash Amount (defined below)
	 	$	[•]	 
	 	 	 
	 	 	 	 
	(vi)	 	Divided by: Participating Common Share Equivalents (PCSEs)
	 	$	[•]	 
	 	 	 
	 	 	 	 
	(vii)	 	Per Share Cash Consideration
	 	$	[•]	 






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The following definitions will be used in making the above calculation and for purposes of this
Article II:




     “Base Cash Amount” means $61,000,000, increased by ALI and less the Employee Retention Pool
Amount and less the amounts provided for in Section 6.9.



     “Company Options” means each unexpired, unexercised vested (following vesting immediately
prior to Closing in accordance with Section 3.1.23) Company Option that is outstanding immediately
before the Closing with an exercise price less than the Per Share Amount as finally determined.



     “Expenses” means the fees (including financial advisory and professional fees), costs,
expenses, bonuses, and charges incurred by Company in connection with the Transactions, including
fees for services provided by the parties as listed on Schedule 2.1.3, which schedule shall be
provided by Company to Parent prior to Closing, and fees to be paid by Parent pursuant to Section
6.9, except to the extent such fees, costs, expenses, bonuses and charges were paid or accrued
prior to the computation of Net Working Capital or are included in the computation of Net Working
Capital.



     “Gross Distributable Cash Amount” means the Base Cash Amount, plus the Option Consideration
and the Working Capital Credit, and less (a) the Working Capital Deficit, and (b) Expenses.



     “Gross Distributable Contingent Consideration” means the contingent consideration payable
pursuant to Section 2.1.5below.



     “Gross Distributable Stock Consideration” means the consideration payable pursuant to Section
2.1.4below.



     “Option Consideration” means the aggregate exercise price of all Company Options outstanding
immediately before Closing (and before the exercise of such Company Options pursuant to this
Section), and including the aggregate of any previous
loans or advances to Option Holders related to the previous acquisition of Company Shares by
the exercise of options.



     “PCSEs”
or “Participating Common Stock Equivalents” means all of the Company Common Shares
including Company Common Shares issued upon exercise of Company Options outstanding immediately
before Closing.



     “Per Share Cash Consideration” means the Gross Distributable Cash Amount divided by the PCSEs.



     “Per Share Contingent Consideration” means the Gross Distributable Contingent Consideration
divided by the PCSEs.



     “Per Share Stock Consideration” means the Gross Distributable Stock Consideration divided by
the PCSEs.



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          2.1.4 Stock Consideration. Subject to the terms and conditions of Section 2.1.3 above, the Conversion Payment shall include
the right to receive shares of Parent Common Stock, $.01 par value
(“Parent Common Stock”) to be
issued pro rata to the holders of PCSEs, in a number reflecting a value, at Parent’s discretion, up
to $14,000,000, based upon the average daily closing price per share of Parent Common Stock quoted
on the The NASDAQ Global Market during the ten (10) trading day period ending two (2) business days
prior to Closing (“Closing Share Price”). For each whole dollar of value that the Parent Common
Stock exceeds $4,000,000, the Base Cash Amount will be reduced by one (1) whole dollar. For each
whole dollar of value that the Stock Consideration is less than $4,000,000, the Base Cash Amount
will be increased by one (1) whole dollar. Notwithstanding any other provision of this Agreement,
neither certificates nor scrip for fractional shares of Parent Common Stock shall be issued in the
Merger. Each holder of Company Common Shares who otherwise would have been entitled to a fraction
of a share of Parent Common Stock (after taking into account all PCSEs delivered by such holder)
shall receive in lieu thereof cash (without interest) in an amount determined by multiplying the
fractional share interest to which such holder would otherwise be entitled by the Closing Share
Price, rounded to the nearest whole cent.




          2.1.5 Contingent Consideration. Subject to the terms of Section 2.1.3 above, and subject to the right of a holder of PCSEs to make
an Interim Election as set forth below, the Conversion Payment shall include the right to receive
an aggregate amount up to $52,000,000, which shall be paid on the third anniversary of Closing
based on the average daily closing share price for Parent Common Stock quoted on The NASDAQ Global
Market or similar quotation service for the six (6) months ending thirty six (36) months after
Closing, or if no such quotation is available, the average daily closing share price for Parent
Common Stock for the last six (6) months that such quotations were available (“Average Share
Price”). The calculation of Average Share Price shall be adjusted as appropriate in the event of
any stock split or stock dividend by Parent. If any amounts become payable pursuant to this
Section 2.1.5, Parent shall have the option of distributing Parent Common Stock to the holders of
PCSEs in lieu of such cash, which shall be based on the Average Share Price, or if an Interim Election is made as described below, the Interim
Average Share Price. If the Average Share Price is:




     a. less than or equal to $6.99, no payment or distribution shall be made under this Section
2.1.5;



     b. equal to $7.00, a payment of an additional $5,000,000 shall be paid to the holders of the
PCSEs; or



     c. between $7.01 and $14.00, additional amounts shall be derived on a straight line
interpolation basis between $5,000,000 and $52,000,000 and distributed to the holders of PCSEs
accordingly .



     If, during the period beginning on the last day of the sixth (6th) full month after Closing
and ending on the last day of the thirty-fifth (35th) full month after Closing (“Interim Election
Period”), the average daily closing share price of Parent Common Stock for the trailing six (6)
month period quoted on The NASDAQ Global Market or similar quotation service is equal to or greater
than $7.00 (“Interim Average Share Price”), a holder of PCSEs may elect to receive contingent
consideration under this Section 2.1.5 on the basis of the Interim Average Share Price



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in lieu of the Average Share Price (“Interim Election”). No later than the fifth (5th) day of every calendar
month during the Interim Election Period, Parent shall publish on its website, a monthly statement
of the Interim Average Share Price for the applicable trailing six month period and all prior
trailing six month periods in a format reasonably acceptable to the Shareholders’ Representative.
A holder of PCSEs may only make an Interim Election once for all the PCSEs held, any Interim
Election is permanent and may not be revoked, and any Interim Election will also be subject to the
terms and conditions of the Escrow Agreement. Any Interim Election will be reported to Parent on
an Interim Election form substantially in the form attached hereto as Exhibit 2.1.5, and may be
made in the first fifteen (15) calendar days of any month, following the sixth (6th) full calendar
month after Closing, with reference to the Interim Average Share Price occurring during the prior
six (6) calendar months then elapsed. For example, if the Closing occurs on June 15, 2009, and the
Interim Average Share Price for the 6 months beginning July 1, 2009 and ending December 31, 2009 is
$7.50, then a holder of PCSEs may elect between January 1 to January 15, 2010 to make an Interim
Election on a $7.50 basis. Such election will be deemed valid if postmarked or otherwise sent with
a documented confirmation, on or before the end of business (5:00 PM Pacific Time) of the
15th day of the open election period (the first fifteen calendar days of each month).
If a holder of PCSEs does not make a valid Interim Election during the Interim Election Period,
then that holder shall receive contingent consideration using the Average Share Price as described
above. The right to any payment under this Section 2.1.5 shall be personal, non-negotiable, and
non-transferable except by operation of law or by will.



          2.1.6 Appraisal Rights. Company Shares validly issued and outstanding immediately before the Effective Time and held by a
holder who has not consented to the Merger in writing and who is entitled to demand and properly
demands appraisal rights for such Company Shares in accordance with the WBCA (the “Appraisal
Shares”) will not be converted into a right to receive the Conversion Payment unless such holder
fails to perfect or withdraws or otherwise loses such holder’s appraisal rights. If, after the Effective Time, such holder fails to perfect or withdraws
or otherwise loses such holder’s appraisal rights, such Company Shares will be treated as if they
had been converted as of the Effective Time in accordance with Section 2.1.3, without any interest.
Company will give Parent prompt notice of any demands received by Company for appraisal rights,
and Parent will have the right to participate in all negotiations and proceedings with respect to
such demands. Company will not, except with the prior written consent of Parent, make any payment
with respect to, or settle or offer to settle, any such demands. Any amounts paid to a holder by
Company in accordance with appraisal rights in excess of the Per Share Amount such holder would
have otherwise received will be deducted from the Escrow Amount (as defined in Section 2.2 below)
and will not be reimbursed by Parent or any affiliate of Parent.




     2.2 Escrow.




          2.2.1 Escrow Amount. At Closing, an amount equal to $8,450,000 (pro rata based upon the total consideration to be
received by such holder at Closing, the “Escrow
Amount”) will not be distributed to holders of
Company Shares in accordance with Section 2.1.3 but rather will be deposited by Parent with, and
held by BNY Mellon Shareowner Services or other bank or trust company as Parent may choose in its
discretion, as escrow agent, in an escrow fund in accordance with the Escrow Agreement
substantially in the form attached hereto as



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Exhibit 2.2.1(a)
(the “Escrow Agreement”) to fund payments related to Net Working Capital to the extent required by Section 2.3 and to be the sole
and exclusive remedy to secure claims by Parent or Surviving Corporation for indemnification under
this Agreement, in accordance with and subject to the terms of Article VIII. The Escrow Amount
will be funded by an unsecured promissory note substantially as attached hereto as Exhibit 2.2.1(b)
(the “Escrow Note”). Parent will have the option of paying the Escrow Note, upon release of the
Escrow Amount, in either cash or Parent Common Stock. Any Parent Common Stock that Parent elects
to use to pay the Escrow Note pursuant to this Section 2.1.1 will be valued based on the average
daily closing share price for Parent Common Stock quoted on The NASDAQ Global Market or similar
quotation service for the ten (10) trading days prior to payment of the Escrow Note The release of
the Escrow Amount will occur promptly following eighteen (18) months from the Closing, and shall be
subject to the terms hereof and of the Escrow Agreement; provided, however, that in the event of
any conflict between this Agreement and the Escrow Agreement, the terms of the Escrow Agreement
will control. The Escrow Agreement shall provide that interest accruing to the Escrow Amount shall
become part of the escrowed funds and that for purposes of distribution, such interest shall follow
the principal amount.




          2.2.2 Employee Retention Pool. At Closing, cash in the aggregate amount as provided on Schedule 2.2.2, which schedule shall be
provided by Company to Parent at least five business days prior to Closing (the “Employee Retention
Pool Amount”, and together with the Escrow Amount, the
“Escrow Amounts”) that would otherwise be
received by holders of Company Shares in accordance with Section 2.1.3 (pro rata based upon the
total consideration to be received by such holder at Closing) will not be distributed to or made
available for holders of Company Shares in accordance with Section 2.1.3 but rather will be
deposited by Parent with, and held by Foster Pepper PLLC or such bank or trust company as
Parent may choose in its discretion, as escrow agent, in an escrow fund (the “Employee Retention
Escrow”) in accordance with the Employee Retention Escrow Agreement substantially in the form
attached hereto as Exhibit 2.2.2 (the “Employee
Retention Escrow Agreement”, and together with the
Escrow Agreement, the “Escrow Agreements”) to fund payments related to the employee retention pool
to be created in accordance with Section 6.8(d). The release to Parent or Company of the portion
of the Employee Retention Pool Amount earned by eligible employees, as listed on Schedule 2.2.2,
who are employed with Parent or Company on the six (6) month anniversary of the Closing or who have
satisfied any other conditions necessary to earn their respective retention bonuses, as specified
on Schedule 2.2.2, plus the employer’s share of FICA (OASDI and Medicare) taxes on such portion
will occur shortly after the six (6) month anniversary of Closing or earlier for eligible employees
terminated prior to the six month anniversary of Closing, with the remaining portion (if any) of
the Employee Retention Pool Amount to be used to pay fees and expenses of the Employee Retention
Escrow or retained under the Employee Retention Escrow Agreement until immediately prior to the
distribution of the Escrow Amount. As soon as practicable after the six (6) month anniversary of
the Closing, or earlier for eligible employees terminated prior to the six month anniversary of
Closing, and Company’s or Parent’s receipt of the applicable funds from the Employee Retention
Escrow, Company or Parent shall pay retention bonuses (less applicable tax withholdings and any
other required withholdings or deductions) to the eligible employees who earned the right to
receive such bonuses and remit the employees’ withheld taxes plus the employer’s share of FICA
taxes to the applicable taxing authority. Immediately prior to the distribution of the Escrow
Amount,



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the remaining Employee Retention Escrow Amount (including any interest accruing thereto but
less any fees and expenses of the Employee Retention Escrow) will be thereupon deposited with the
Disbursing Agent for distribution. For the avoidance of doubt, such remaining Employee Retention
Escrow Amount shall not be available for the securing of indemnification claims, the reimbursement
of fees and expenses, or the funding of payments relating to Net Working Capital. All releases of
the Employee Retention Pool Amount will be subject to the terms hereof and of the Employee
Retention Escrow Agreement; provided further, that in the event of any conflict between this
Agreement and the Employee Retention Escrow Agreement, the terms of the Employee Retention Escrow
Agreement will control.




     2.3 Net Working Capital.




               (a) On the Closing Date, Company will have Net Working Capital that is not less than
$7,000,000 (“Minimum Working Capital”), nor more
than $9,000,000 (“Maximum Working Capital”) To
the extent that Company has Net Working Capital on the Closing Date that is less than the Minimum
Working Capital, such deficiency will be deducted from the Base Amount in accordance with Section
2.1.3 as the “Working Capital Deficit.” To the extent that Company has Net Working Capital on the
Closing Date that is greater than the Maximum Working Capital, such excess will be added to the
Base Amount in accordance with Section 2.1.3 as the
“Working Capital Credit.”



               (b) For purposes of this Agreement, the term “Net Working Capital” means: (i) Total Current
Assets (as defined below) less (ii) all accrued Total Current
Liabilities (as defined below) and less (iii) ALI. “ALI” is defined as $10,000,000
adjusted by amounts described on Schedule 2.3(b)(i). “Fixed assets, net,” “intangible assets,”
deferred tax assets and deferred tax liabilities will be excluded from the determination of Net
Working Capital. For avoidance of doubt, “Total Current Assets” as reflected on the Closing
Balance Sheet will include: (i) cash and cash equivalents; (ii) short-term investments; (iii)
accounts receivable outstanding not more than sixty (60) days from their due date and other
receivables net of doubtful accounts; (iv) inventories (net of allowance for obsolete inventory)
and (v) prepaid expenses and other current assets. “Total Current Liabilities” as reflected on the
Closing Balance Sheet will include: (w) accounts payable; (x) accrued taxes, payroll and benefits;
(y) other “Current Liabilities”; and (z) the current portion (due within twelve (12) months) of any
Debt. Each of the foregoing terms will be determined in accordance with GAAP, as consistently
applied, to the extent described above except as otherwise provided in this Section 2.3(b). “Debt”
means all funded indebtedness, determined without duplication, and includes notes; capitalized
leases; bank term and revolving credit loans; obligations related to drawn letters of credit; bonds
evidencing funded indebtedness; debentures; borrowings from lending institutions other than banks;
subordinated loans and subordinated debt securities with or without stated maturity; bank bills;
bank overdrafts; obligations with respect to the factoring or discounting of accounts receivable
and other instruments; any dividends payable to the holders of Company Shares; and accrued interest
and expense and penalties on any of the foregoing (including prepayment penalties). For the
avoidance of doubt, a sample calculation of Net Working Capital is attached hereto as Schedule
2.3(b)(ii).



               (c) At least thirty (30) business days before the anticipated Closing Date, Company will
prepare, subject to the reasonable approval of Parent, a computation of the pro forma Net Working
Capital and ALI based upon the financial information reflected in the most recent unaudited
month-end balance sheet of the Company (the “Pro Forma Calculations”). Parent will be provided
access to the books and records of the Company as may be reasonably necessary to review the Pro
Forma Calculations.



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               (d) At least three (3) business days before the anticipated Closing Date, Company will
prepare, subject to the reasonable approval of Parent, an unaudited estimated balance sheet of
Company as of the anticipated Closing Date as mutually expected by the parties (the “Preliminary
Closing Balance Sheet”), a computation of the Net Working Capital as of the expected Closing Date
based upon the financial information reflected in the Preliminary Closing Balance Sheet (the
“Preliminary Closing Date NWC”) and a computation of ALI as of the expected Closing Date based upon
the financial information reflected in the Preliminary Closing Balance Sheet (the “Preliminary
Closing Date ALI”). The Preliminary Closing Balance Sheet, the Preliminary Closing Date NWC and
the Preliminary Closing Date ALI calculation will be provided as Schedule 2.3(c) and become a part
of this Agreement. The Preliminary Closing Balance Sheet will be prepared in accordance with GAAP
consistently applied by the Company, except as otherwise provided in Section 2.3(b) above, and will
fairly and accurately present the financial position of Company as of the anticipated Closing Date.
The parties will use the Preliminary Closing Balance Sheet, the Preliminary Closing Date NWC and
the Preliminary Closing Date ALI to calculate the Per Share Amount for purposes of payment at the
Closing in accordance with Section 2.1.3.



               (e) Within thirty (30) days after the Closing Date, Parent will prepare and deliver to the
Shareholders’ Representative an unaudited balance sheet of Company as of the Closing Date,
determined in accordance with GAAP, except as otherwise provided in Section 2.3(b) above, and
which, to the knowledge of Parent, fairly and accurately presents the financial position of Company
as of the date of such balance sheet (the “Proposed Closing Balance Sheet”), along with its
calculation of Net Working Capital as of the Closing Date (“Proposed Closing Date NWC”) and its
calculation of ALI as of the Closing Date (“Proposed Closing Date ALI” ). The Shareholders’
Representative will be provided access to the books and records of the Company as may be reasonably
necessary for the execution of its duties hereunder.



               (f) Within ten (10) days after the delivery by Parent of the Proposed Closing Balance Sheet
and calculation of its Proposed Closing Date NWC and Proposed Closing Date ALI under Section
2.3(e), the Shareholders’ Representative will deliver to Parent a written notice either approving
or objecting to the Proposed Closing Balance Sheet and the accompanying Proposed Closing Date NWC
calculation and Proposed Closing Date ALI (the “Review Notice”). The Review Notice will reasonably
state a description of the Shareholders’ Representative’s differences, if any, with Parent’s
determination of the Proposed Closing Balance Sheet and the Proposed Closing Date NWC and Proposed
Closing Date ALI calculations, together with proposed revisions (such revised Proposed Closing
Balance Sheet being referred to as the “Counter Proposed Closing Balance Sheet”), along with
revisions to the Proposed Closing Date NWC and Proposed Closing Date ALI calculations. A failure
by the Shareholders’ Representative to so deliver the Review Notice to Parent within such period
will be deemed an approval of and agreement with the Proposed Closing Balance Sheet and the
Proposed Closing Date NWC and Proposed Closing Date ALI calculations of Parent, and such Proposed
Closing Balance Sheet and the accompanying Proposed Closing Date NWC and Proposed Closing Date ALI
calculations of Parent will be deemed the Closing Balance Sheet and the final and conclusive
calculation of the Proposed Closing Date NWC (the “Final Closing Date NWC” ) and the Proposed
Closing Date ALI (the “Final Closing Date ALI” ).



               (g) If the Proposed Closing Balance Sheet and the accompanying Proposed Closing Date NWC and
Proposed Closing Date ALI calculation of Parent are disputed by the Shareholders’ Representative in
accordance with this Section 2.3, the Shareholders’ Representative and Parent will negotiate in
good faith in an effort to resolve any differences regarding such determination. If Parent and the
Shareholders’ Representative agree on the Proposed Closing Balance Sheet, Proposed



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Closing Date NWC and Proposed Closing Date ALI, the amount they agree upon will be final, conclusive and binding as
the Final Closing Date NWC and Final Closing Date ALI, but if the objection cannot be resolved by
such negotiation within thirty (30) days after Parent’s receipt of the Review Notice (the
“Reconciliation Deadline”), the Proposed Closing Balance Sheet, the Counter Proposed Closing
Balance Sheet, the Review Notice, and all work papers related thereto (collectively, the
“Determination Materials”), will be submitted to the Seattle, Washington offices of KPMG LLP or of
a nationally recognized accounting firm as Parent and the Shareholders’ Representative may mutually
agree to (which agreement will not be unreasonably withheld or delayed) (the “Accounting
Arbitrator”), which will review the Determination Materials and will determine the Final Closing
Date NWC, which will include a determination of the Final Closing Date ALI. The Accounting
Arbitrator will not undertake any review of any matters not specifically identified by the
Shareholders’ Representative as being in dispute in the Review Notice and may not assign a value to
any item greater than the greatest value for such items claimed by either party or less than the
smallest value for such items claimed by either party, and its determination may not be outside the
range comprised of Parent’s calculation of Proposed Closing Date NWC and Proposed Closing Date ALI
and Shareholders’ Representative’s calculation of Proposed Closing Date NWC and Proposed Closing
Date ALI. The Accounting Arbitrator will make its determination in accordance with GAAP and in
accordance with the provisions herein defining Net Working Capital to the extent they are
inconsistent with GAAP. The Accounting Arbitrator’s decision as to Proposed Closing Date NWC and
Proposed Closing Date ALI as of the Closing Date will be final, conclusive, and binding as the
Final Closing Date NWC and Final Closing Date ALI. The parties will
cause the Accounting Arbitrator to notify the parties in writing of its determination within
thirty (30) days following the receipt of the Determination Materials. The fees and expenses of
the Accounting Arbitrator will be borne equally by Parent and the Shareholders’ Representative (who
shall in turn have recourse to the Escrow Amount for reimbursement of such expenses pursuant to
Section 10.13(c) below). All determinations in accordance with this Section 2.3(g) will be in
writing and will be delivered to the parties hereto.



               (h) If the Final Closing Date NWC (as determined in accordance with Sections 2.3(f) or 2.3(g)
above) is less than the Preliminary Closing Date NWC, then an amount equal to the difference
between (i) the Preliminary Closing Date NWC, and (ii) the Final Closing Date NWC will be paid to
Parent out of the Escrow Amount to the extent the Final Closing Date NWC is less than the Minimum
Working Capital, in accordance with the terms of the Escrow Agreement. Such adjustment will not be
subject to the Threshold Amount (as defined in Section 8.6). If the Final Closing Date NWC is
greater than the Preliminary Closing Date NWC, then Parent will cause the amount equal to the
difference between (i) the Final Closing Date NWC, and (ii) the Preliminary Closing Date NWC, to be
delivered, within ten (10) days after such final determination, to the Disbursing Agent for
disbursement as provided in Section 2.4 below to the extent the Final Closing Date NWC is greater
than the Maximum Working Capital. In addition, if the Preliminary Closing Date NWC is (i) more
than the Maximum Working Capital and the Final Closing Date NWC is less than the Maximum Working
Capital, the amount equal to the difference between the Preliminary Closing Date NWC and the
Maximum Working Capital will be paid to Parent out of the Escrow Amount, or (ii) less than the
Minimum Working Capital and the Final Closing Date NWC is more than the Minimum Working Capital
then Parent will cause the amount equal to the difference between the Preliminary Closing Date NWC
and the Minimum Working Capital to be delivered, within ten (10) days after such final
determination, to the Disbursing Agent for disbursement as provided in Section 2.4 below.



               (i) If the Final Closing Date ALI (as determined in accordance with Sections 2.3(f) or 2.3(g)
above) is less than the Preliminary Closing Date ALI, then an amount equal to the difference
between (i) the Preliminary Closing Date ALI, and (ii) the Final Closing Date ALI will be paid to
Parent out of the Escrow Amount If the Final Closing Date ALI is greater than the Preliminary
Closing Date ALI, then Parent will cause the amount equal to the difference between (i) the Final
Closing



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Date ALI, and (z) the Preliminary Closing Date ALI, to be delivered, within ten (10) days
after such final determination, to the Disbursing Agent for disbursement as provided in Section
2.4.



               (j) Nothing in this Section 2.3 will be deemed to limit the indemnification rights of the
Indemnified Parties in accordance with Article VIII hereof with respect to any breach of any
representation and warranty of this Agreement, including without limitation, a breach of any of the
representations contained in Section 3.1.5.



               (k) For purposes of this Agreement, “Closing Balance Sheet” means the balance sheet of
Company as of the Closing Date determined in accordance with this Section 2.3.



     2.4 Delivery of Consideration.




          2.4.1 Disbursing Agent. Promptly after the Effective Time, Parent will (i) make available to BNY Mellon Shareowner
Services or other bank or trust company as Parent may choose in its discretion (the “Disbursing
Agent”), the shares of Parent Common Stock issuable pursuant to Section 2.1.4, in exchange for
shares of Company Common Stock outstanding immediately prior to the Effective Time less the Escrow Amounts to be contributed therefrom pro rata, and (ii)
deposit with the Disbursing Agent an amount of cash sufficient to pay the aggregate Gross
Distributable Cash Amount and any cash amounts payable under Section 2.1.4, less the Escrow Amounts
to be contributed therefrom pro rata.




          2.4.2 Exchange Procedures. Promptly after the Effective Time, Parent will instruct the Disbursing Agent to pay by check or
wire transfer of same day funds the cash portion of any applicable Conversion Payments, under
Section 2.1 and subject to Section 2.2 hereof, and to send a certificate or certificates (or book
entry) representing the stock portion of any applicable Conversion Payments under Section 2.1.3 and
subject to Section 2.2 hereof to each record holder of Company Shares as of the Effective Time (or
to such broker or institution as any such record holder may designate), other than to those holders
of Appraisal Shares not entitled to payment, as promptly as practicable following (i) the
submission of a Certificate to the Disbursing Agent and a duly executed letter of transmittal (the
“Letter of Transmittal”) by such holder of record, which will specify that risk of loss and title
to the Certificates will pass, only upon proper delivery of such documents to the Disbursing Agent,
and which will be in the form and have such provisions as Parent and Company may reasonably
specify, and (ii) the surrender of the Certificates in exchange for the applicable Conversion
Payment by such holder of record (which Certificates will then be canceled). If any Certificate
has been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the Person
claiming such document to be lost, stolen, or destroyed and, if required by the Surviving
Corporation, the payment of any reasonable fees, and the posting by such Person of a bond, in such
reasonable amount as Parent may direct as indemnity against any claim that may be made against it
with respect to such document, the Disbursing Agent will issue in exchange for such lost, stolen,
or destroyed document, the applicable Conversion Payments to which the holder is entitled under
this Article II.




          2.4.3 No Further Ownership Rights in Company Shares. The applicable Conversion Payment delivered upon surrender in exchange for Company Shares in
accordance with the terms hereof will be deemed to have been delivered in full satisfaction of all
rights pertaining to such Company Shares. After the Effective Time, no further transfers will be
made



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on the stock transfer books of Company of Company Shares issued before the Effective Time.
When the Merger becomes effective, all Company Shares issued before then (other than Appraisal
Shares) will cease to exist, and each Certificate previously representing any such shares will
represent only the right to receive the applicable Conversion Payment as described in Section 2.1.3
subject to the terms of this Agreement. If, after the Effective Time, Certificates are presented
to Surviving Corporation or the Disbursing Agent for transfer, they will be cancelled and exchanged
as provided in this Article II, except as otherwise provided by law.




          2.4.4 Return to Parent. The Disbursing Agent will redeliver or repay to Parent any cash made available to the
Disbursing Agent and not exchanged for Certificates within twelve (12) months after the Effective
Time. After such time any holder of Certificates who has not yet delivered or surrendered such
Certificates to the Disbursing Agent, subject to applicable law, will look as a general creditor
only to Parent for payment of the applicable Conversion Payment. Despite any provision of this
Agreement, to the fullest extent permitted by applicable law, neither Parent, the
Disbursing Agent, Surviving Corporation, the Shareholders’ Representative, nor any other party will
be liable to any holder of Company Shares for any cash delivered to a public official according to
applicable abandoned property, escheat, or similar law.




          2.4.5 Withholding Rights. Parent or the Disbursing Agent will be entitled to deduct and withhold from the applicable
Conversion Payment otherwise payable under this Agreement to any Person (as defined in Section
10.2) who was a holder of Company Shares immediately before the Effective Time, such amounts as
Parent or the Disbursing Agent is required to deduct and withhold with respect to the making of
such payment under the Internal Revenue Code of 1986, as amended (the
“Code”), or any provision of
state, local, or foreign tax law. Any such withheld amounts will be timely paid over to the
appropriate Governmental Entity (as defined in Section 3.1.4). To the extent that amounts are so
withheld by Parent or the Disbursing Agent, such withheld amounts will be treated for all purposes
of this Agreement as having been paid to the holder of the Certificates in respect of which such
deduction and withholding was made by Parent or the Disbursing Agent.




ARTICLE III

REPRESENTATIONS AND WARRANTIES




     3.1 Representations and Warranties of Company. Except as set forth in a correspondingly numbered disclosure schedule delivered by Company to
Parent dated as of the date hereof (the “Company Disclosure Schedule”), Company represents to
Parent and Sub as follows (all references in the subsections of this Section 3.1 to “Company” will
include Company’s subsidiaries except to the extent specifically excluded or except as otherwise
clearly required by the context):



          3.1.1 Organization, Standing, and Power.





               (a) Each of Company and its subsidiaries is an entity duly organized and validly existing
under the laws of its jurisdiction of incorporation or organization. Company has all requisite
corporate power and authority to own, lease, and operate its properties and to carry on its
businesses as now being conducted. Company is duly qualified and in good standing to do business
in each jurisdiction in which the character of the property owned, leased, or operated by it or the
nature of its



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activities makes such qualification necessary (all such jurisdictions are listed in
Section 3.1.1(a) of the Company Disclosure Schedule), except in such jurisdictions in which a
failure to be so organized, existing, or in good standing or to have such corporate power and
authority would not materially impair the ability of Company to consummate the Transactions or
would not result, or reasonably be expected to result, individually or in the aggregate, in a
material adverse effect on the financial condition, business, assets or results of operations of
Company and its subsidiaries, taken as a whole, other than any effect resulting from (1) the
announcement of the Transactions or the proposal thereof or this Agreement and the transactions
contemplated hereby, (2) changes after the date hereof in general economic conditions or the
industry in which the Company operates, provided that the impact of such fact, circumstance, event,
change, effect or occurrence is not disproportionately adverse to the Company, or (3) actions taken
by Company after the date hereof at, and in accordance with the written direction or request of
Parent (“Company Material Adverse Effect”).




               (b) Company has delivered or made available to Parent or its counsel complete and correct
copies of Company’s articles of incorporation, bylaws, stock records and minute books and the
comparable governing instruments and minutes of each of its subsidiaries, in each case, as amended
to the date hereof. The minute books of Company contain correct and complete records of all
material proceedings and actions taken at all meetings of, or effected by written consent of, the
shareholders of Company and its board of directors (and each committee thereof), and the stock
records of Company contain correct and complete records of all original issuances and subsequent
transfers, repurchases, and cancellations of Company’s capital stock. Company is the owner,
directly or indirectly, of all outstanding shares of capital stock of each of its subsidiaries
(other than directors’ qualifying and similar shares, the ownership of which is identified in
Section 3.1.1(b) of the Company Disclosure Schedule) free and clear of all liens, pledges, security
interests, claims, or other encumbrances and all such shares are duly authorized, validly issued,
fully paid, and nonassessable. Section 3.1.1(b) of the Company Disclosure Schedule lists all
subsidiaries of Company, together with each subsidiary’s jurisdiction of incorporation or
formation, the jurisdictions in which it is qualified to conduct business, and its authorized
capitalization. Other than the subsidiaries so listed, Company does not own or control, directly
or indirectly, shares of capital stock of any other corporation, or any interest in any
partnership, joint venture, or other non-corporate business entity or enterprise.



          3.1.2 Capital Structure.





               (a) The authorized capital stock of Company consists of (i) 10,750,000 shares of stock
consisting of 10,000,000 Company Common Shares, no par value, of which, as of the date hereof,
4,741,128 shares are issued and outstanding, and (ii) 750,000 shares of Preferred Stock, no par
value (“Company Preferred Shares”), 333,334 of which have been designated Series A Convertible
Preferred Stock, none of which as of the date hereof are issued and outstanding. As of the date
hereof, 1,866,500 Company Common Shares are reserved for issuance under the OMAX Corporation 2005
Stock Option Plan, including carryover from the issuance of options for Company Common Shares are
reserved for issuance under the OMAX Corporation 1993 Stock Option Plan (together, the “Incentive
Plans”). Options for 1,494,850 Company Common Shares
(“Company Options”) have been granted and
remain outstanding. All Company Shares, Company Options, and any other securities of Company
outstanding as of the date hereof (collectively referred to as
“Company Securities”), and the
record owners of such securities are as set forth in Section 3.1.2 of the Company Disclosure
Schedule, and no such securities are held by Company in its treasury. True and complete copies of
all Company stock option plans and the forms of any other instruments setting forth the rights of
all Company Securities as of the date hereof have been delivered to Parent or its counsel.



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               (b) All outstanding Company Common Shares are, and Company Shares issued upon exercise of any
Company Options when issued in accordance with the respective terms thereof will be, validly
issued, fully paid, nonassessable, and not subject to any preemptive rights or similar rights under
the WBCA, Company’s articles of incorporation or bylaws, or to any agreement to which Company is a
party or by which Company may be bound. Except for the shares described above issuable in
connection with the exercise of Company Options (all as set forth in Section 3.1.2(a) of the
Company Disclosure Schedule) there are no options, warrants, calls, conversion rights, commitments,
agreements, contracts, understandings, restrictions, equity-linked securities, or rights of any
character to which Company is a party or by which Company may be bound obligating Company to issue
additional shares of the capital stock of Company. Other than as set forth in Section 3.1.2(a)
Company does not have outstanding any bonds, debentures, notes nor does it owe any other indebtedness, the
holders of which (i) have the right to vote (or are convertible or exercisable into securities
having the right to vote) with holders of Company Common Shares on any matter or (ii) are or will
become entitled to receive any payment as a result of the Transactions. Other than as set forth in
Section 3.1.2(a) Company does not have outstanding any restricted stock, restricted stock units,
stock appreciation rights, stock performance awards, dividend equivalents, or other stock-based or
equity-linked securities of a similar nature. There is no agreement or right allowing for the
repurchase or redemption of any capital stock or convertible securities of Company, and Company has
not repurchased any of its capital stock. There are no agreements requiring Company to contribute
to the capital of, or lend or advance funds to, any subsidiaries of Company. Company is not party
to nor to its knowledge is any shareholder of Company a party to, any voting agreement, voting
trust, or similar agreement or arrangement relating to any class or series of its capital stock, or
any agreement or arrangement providing for registration rights with respect to any capital stock or
other securities of Company. There are no accrued and unpaid dividends with respect to any
outstanding shares of Company capital stock. Company does not own or hold the right to acquire any
shares of capital stock or any other security or interest in any other Person.




               (c) All of the issued and outstanding Company Securities have been offered, issued, and sold
by Company in compliance with applicable federal and state securities laws.




               (d) To Company’s knowledge, no shareholder of Company has granted options or other rights to
purchase any Company Securities from such shareholder.



          3.1.3 Authority. Company has all requisite corporate power and authority to execute and deliver this Agreement,
subject to approval of the shareholders of Company to consummate the Transactions. The execution
and delivery by Company of this Agreement and the performance of Company’s obligations hereunder
have been duly and validly authorized by all necessary corporate action on the part of Company,
subject only to approval of the Merger and this Agreement by the shareholders of Company. This
Agreement has been duly executed and delivered by Company and constitutes a valid and binding
obligation of Company enforceable in accordance with its terms, except to the extent that
enforceability may be limited by the effect of (a) any applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights
generally, and (b) general equitable principles, regardless of whether such enforceability is
considered in a proceeding at law or in equity.




          3.1.4 Consents and Approvals; No Violations. Subject to the satisfaction of the conditions in Sections 7.1 and 7.3, the execution and
delivery of this Agreement or any other agreement or document contemplated by this Agreement do
not, and the consummation of the Transactions will not, conflict with or result in any violation
of, or default (with or without notice





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or lapse of time, or both) under, or give rise to a right of termination, cancellation, or
acceleration of any obligation or to loss of a material benefit under, or the creation of a lien,
pledge, security interest, charge, or other encumbrance on assets (any such conflict, violation,
default, right, loss, or creation, a “Violation”) under (a) any provision of the articles of
incorporation or bylaws of Company or the comparable governing instruments of any subsidiary of
Company, or (b) any loan or credit agreement, note, bond, mortgage, indenture, contract, lease, or
other agreement or instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to Company or its properties or assets,
other than, in the case of clause (b), any such Violation that would not result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material Adverse Effect. No
consent, approval, order, or authorization of, or registration, declaration, or filing with or
exemption by, any court, administrative agency, or commission or other governmental authority or
instrumentality, whether domestic or foreign (each a “Governmental Entity”) (collectively any
consents or waivers with respect to Violations under clauses (a) and (b) of the first sentence of
this Section 3.1.4, “Consents”), is required by or with respect to Company in connection with the
execution and delivery of this Agreement or the consummation by Company of the Transactions, except
for Consents, if any, relating to the filing of the Articles of Merger in accordance with the WBCA
and except for such other Consents that if not obtained or made would not result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material Adverse Effect.




          3.1.5 Financial Statements. The (a) audited consolidated balance sheets of Company and its subsidiaries as of December 31,
2006 and December 31, 2007 (the “Balance Sheet Date”) and the related audited consolidated
statements of income, changes in owner’s equity, and cash flow for the 12 months ended December 31,
2005, December 31, 2006 and December 31, 2007, and (b) an unaudited consolidated balance sheet of
Company and its subsidiaries as of December 31, 2008 (the “Interim Balance Sheet Date”), and the
related unaudited consolidated statements of income, changes in owner’s equity, and cash flow for
the year then ended (collectively, the “Financial Statements”) that have been provided to Parent or
will be provided prior to Closing comply in all material respects with all accounting requirements
applicable to Company and its subsidiaries, have been prepared in accordance with generally
accepted accounting principles (“GAAP”) consistently applied (except as may be indicated in the
notes thereto), and fairly present, in all material respects, the consolidated financial position
of Company and its subsidiaries as at the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements, to normal,
recurring audit adjustments not material in scope or amount). There has been no change in
Company’s accounting policies or the methods of making accounting estimates or changes in estimates
that are material to the Financial Statements. Section 3.1.5 of the Company Disclosure Schedule
lists, and Company has delivered to Parent copies of the documentation creating or governing, all
securitization transactions and “off-balance sheet arrangements” (as defined in Item 303(c) of
Regulation S-K promulgated by the SEC) effected by Company or its subsidiaries since the Balance
Sheet Date. There are no material liabilities, claims or obligations of any nature, whether
accrued, absolute, contingent, anticipated or otherwise, whether due or to become due, that are not
reflected in the Financial Statements or the notes thereto. Except as disclosed in the Financial
Statements, neither Company nor its



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subsidiaries is a guarantor or indemnitor of any indebtedness or other liability of any other
Person.




          3.1.6 No Defaults.
Company is not, and has not received notice that it would be with the passage of time, in
default or violation of any term, condition, or provision of (i) the articles of incorporation or
bylaws of Company or any comparable governing instrument of any subsidiary, (ii) any judgment,
decree, or order, or (iii) any loan or credit agreement, note, bond, mortgage, indenture, contract,
agreement, lease, license, or other instrument to which Company is now a party or by which it or
any of its properties or assets may be bound, except with respect to (iii) for Violations that
would not result, or reasonably be expected to result, individually or in the aggregate, in a
Company Material Adverse Effect.




          3.1.7 Litigation.
There is no claim, action, suit, or proceeding pending or, to the knowledge of Company,
threatened, against or affecting Company, any of its officers, directors, or employees, or any of
its properties before any court or arbitrator or any Governmental Entity. There is no
investigation pending or, to the knowledge of Company, threatened against Company, before any
Governmental Entity. Section 3.1.7 of the Company Disclosure Schedule sets forth as of the date
hereof, with respect to any pending action, suit, proceeding, or investigation to which Company is
a party, the forum, the parties thereto, the subject matter thereof, and the amount of damages
claimed, or the nature of any other relief sought.




          3.1.8 No Material Adverse Change.
Since the Balance Sheet Date, there has not been a Company Material Adverse Effect. Except as
contemplated by this Agreement, since the Balance Sheet Date, there has not been:




               (a) any declaration, setting aside, or payment of any dividend or other distribution, stock
split, reclassification, subdivision, or exchange with respect to any Company Shares;



               (b) any amendment of any provision of the articles of incorporation or bylaws of, or of any
term of any outstanding security issued by, Company;



               (c) any incurrence, assumption, or guarantee by Company of any indebtedness for borrowed
money, or any mortgage, pledge, imposition of any security interest, claim, encumbrance, or other
restriction on any of the assets, tangible or intangible, of Company;



               (d) a material change to any tax election or any accounting method, or any settlement or
consent to any claim or assessment relating to taxes incurred, or incurrence of any obligation to
make any payment of, or in respect of, taxes, except in the ordinary course of business, or
agreement to extend or waive the statutory period of limitations for the assessment or collection
of taxes;



               (e) any (i) grant of severance or termination pay to any director, officer, or employee of
Company, (ii) entry into any employment, deferred compensation (based upon the meaning of such term
before the adoption of Code Section 409A), or other similar agreement (or any material amendment to
any such existing agreement) with any director, officer, or employee of Company, (iii) increase in
benefits payable under any existing severance or termination pay policies or employment agreements,
(iv) increase in compensation, bonus, or other benefits payable to directors, officers, or
employees of Company in excess of 4% of total compensation for such individual as of January 1,
2008, in each case other than those required by written contractual agreements, or (v)
acceleration of, or



-26-









 







amendment or change to, the period of exercisability, vesting, or exercise price of options,
restricted stock, stock bonus, or other awards granted under the Incentive Plans (including any
discretionary acceleration of the exercise periods by Company’s board of directors, the
compensation committee of Company’s board of directors, or a committee overseeing the Incentive
Plans as permitted under such plans) or authorization of cash payments in exchange for any options,
warrants, restricted stock, stock bonus, or other awards granted under any of such plans except, in
each case, as may be required under applicable law or the existing terms of the Incentive Plans or
other related agreements;



               (f) any issuance of capital stock or securities convertible into capital stock of Company
(including grants or other issuances of options, warrants, or other rights to acquire capital stock
of Company) other than in accordance with the exercise of Company Options;



               (g) any acquisition or disposition of assets (other than in the ordinary course of business),
any acquisition or disposition of capital stock of any third party, or any merger or consolidation
with any third party;



               (h) any entry by Company into any joint venture, partnership, or limited liability company or
operating agreement with any Person;



               (i) any damage, destruction, or loss (whether or not covered by insurance) affecting Company’s
properties or business that has resulted, or would reasonably be expected to result, individually
or in the aggregate, in a Company Material Adverse Effect;



               (j) any granting by Company of a security interest in or lien on any material property or
assets of Company;



               (k) any cancellation of debt or waiver of any claim or right individually or in the aggregate
in excess of $25,000;



               (l) any capital expenditure or acquisition of any property, plant, and equipment by Company
for a cost in excess of $100,000 in the aggregate;



               (m) any discharge or satisfaction by Company of any lien or encumbrance, or any payment of any
obligation or liability (absolute or contingent) other than current liabilities shown on the
balance sheet included in the Financial Statements as of the Balance Sheet Date and current
liabilities incurred since the Balance Sheet Date in the ordinary course of business;



               (n) any termination, modification, or rescission of, or waiver by Company of rights under, any
existing contract resulting, or reasonably likely to result, individually or in the aggregate, in a
Company Material Adverse Effect;



               (o) any material grant or assignment of Company Intellectual Property;



               (p) any event or condition resulting individually or in the aggregate in a Company Material
Adverse Effect; or



               (q) any agreement, authorization, or commitment, whether in writing or otherwise, to take any
action described in this Section 3.1.8.



-27-









 





          3.1.9 Absence of Undisclosed Liabilities.
Company has no liabilities, obligations, or contingencies (whether absolute, accrued, or
contingent) except (i) liabilities, obligations, or contingencies (each a “Liability” and
collectively, “Liabilities”) that are accrued or reserved against in the consolidated balance sheet
of Company as of the Balance Sheet Date; (ii) additional Liabilities reserved against since the
Balance Sheet Date that (x) have arisen in the ordinary course of business, and (y) are accrued or
reserved against on the books and records of Company; (iii) additional Liabilities incurred since
the Balance Sheet Date that (x) have arisen in the ordinary course of business, and (y) are not
accrued or reserved against on the books and records of Company and none of which, individually or
in the aggregate, are expected to exceed $100,000; (iv) additional Liabilities that are expressly
provided for in any of Company’s contracts that are not required to be reflected in Company’s
financial statements under GAAP; or (v) Liabilities reflecting expenses with respect to any
litigation or dispute between Company and Parent as set forth in Section 3.1.9 (v) of the Company
Disclosure Schedule.




          3.1.10 No Violations.
Company is in compliance with all applicable federal, state, local, or foreign statutes, laws,
ordinances, rules, judgments, orders, and regulations of any Governmental Entity applicable to its
business and operations, except for violations that would not result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse Effect. Neither Company,
nor any Person acting on behalf of Company has, directly or indirectly, on behalf of or with
respect to Company (i) made or received any unreported political contribution, (ii) made or
received any payment that was not legal to make or receive, (iii) created or used any “off-book”
bank or cash account or “slush fund,” or (iv) violated the Foreign Corrupt Practices Act of 1977,
as amended. All permits required to conduct the business of Company as currently conducted have
been obtained, are in full force and effect, and are being complied with, except where the failure
to hold or to be in compliance with such permits would not result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse Effect.




          3.1.11 Certain Agreements.
Except as contemplated by this Agreement, neither the execution and delivery of this Agreement
nor the consummation of the Transactions will (i) result in any payment (including severance,
unemployment compensation, parachute payment, bonus, or otherwise) becoming due to any director,
employee, or independent contractor of Company, from Company under any Plan (as defined in Section
3.1.13), agreement, document, or otherwise, (ii) increase any benefits payable under any Plan,
agreement, or document, or (iii) result in the acceleration of the time of payment or vesting of
any such benefits.




          3.1.12 Employees.
Since the inception of Company (or any predecessor entity, if applicable), Company has been in
compliance with all then applicable laws and regulations respecting employment, termination of
employment, hiring, discrimination in employment, terms and conditions of employment, wages, hours,
and occupational safety and health and employment practices, and has not engaged in any unfair
labor practice. Since the inception of Company (or any predecessor entity, if applicable), Company
has withheld all amounts required by law or by agreement to be withheld from the wages, salaries,
and other payments to its employees, including any common law employees, and is not liable for any
arrears of wages (including commissions, bonuses, or other compensation), or any taxes or any
penalty for failure



-28-









 






to comply with any of the foregoing (or, if any arrears, penalty, or interest were assessed against
Company regarding the foregoing, it has been fully satisfied). Company is not liable for any
payment to any trust or other fund or to any governmental or administrative authority with respect
to unemployment compensation benefits, social security, social benefits, or other benefits or
obligations for employees (other than routine payments to be made in the normal course of business
and consistent with past practice). There are no pending claims against Company under any workers’
compensation plan or policy or for long-term disability. There are no controversies pending or, to
Company’s knowledge, threatened, between Company and any of its employees, or any works council or
similar body, which controversies have or could reasonably be expected to result in an action,
suit, proceeding, claim, arbitration, or investigation before any agency, court, or tribunal,
foreign or domestic, including claims for compensation, severance benefits, vacation time, vacation
pay, or pension benefits, or any other claim pending in any court or administrative agency from any
current or former employee or any other Person arising out of Company’s status as employer or
purported employer or any workplace practices or policies whether in the form of claims for
discrimination, harassment, unfair labor practices, grievances, wage and hour violations, wrongful
discharge, or otherwise. Company is not a party to any collective bargaining agreement or other
labor union contract nor does Company know of any activities or proceedings of any labor union to
organize any employees of Company. Section 3.1.12 of the Company Disclosure Schedule lists all
countries in which a works council or similar employee organization represents employees of
Company. To Company’s knowledge, no employees of Company are or have in the past been in violation
of any term of any employment contract, non-competition agreement, or any restrictive covenant to a
former employer relating to the right of any such employee to be employed by Company because of the
nature of the business conducted by Company or work performed by the employee or to the use of
trade secrets or proprietary information of others. All releases of employment claims in favor of
Company obtained from employees during the three-year period preceding the Effective Date are
effective and binding to release all employment claims for each such employee.




          3.1.13 Employee Benefit Plans.




               (a) Section 3.1.13(a) of the Company Disclosure Schedule lists each employee benefit, equity
incentive plan, or compensation plan or program covering currently active, former, or retired
employees of Company (“Plan”). Company has provided or made available to Parent a copy of each
Plan document (or, if there is no Plan document, a written description), and where applicable, any
related trust agreement, annuity, or insurance contract and, where applicable, the three most
recent annual reports (Form 5500) filed with the U.S. Department of Labor-EBSA, including all
attachments and schedules thereto. To the extent applicable, each Plan complies in all material
respects with the requirements of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and the Code, and any Plan intended to be qualified under Code Section 401(a) or 423 is
so qualified and has been so qualified since its creation, and its related trust is tax-exempt and
has been since its creation. No Plan is covered by Title IV of ERISA or Code Section 412. No
“prohibited transaction,” as defined in ERISA Section 406 or Code Section 4975, has occurred with
respect to any Plan. Each Plan has been maintained and administered in compliance with its terms
and with the requirements prescribed by all statutes, orders, rules, and regulations, including
ERISA and the Code, applicable to such Plans. There are no pending or anticipated claims against
or otherwise involving any of the Plans (excluding claims for benefits incurred in the ordinary
course of Plan activities) and no suit, action, or other litigation has been brought against or
with respect to any Plan. All contributions, reserves, or premium payments to each Plan accrued to
the date hereof have been made or provided for. Company has not incurred any liability



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under Subtitle C or D of Title IV of ERISA with respect to any “single-employer plan,” within
the meaning of ERISA Section 4001(a)(15), currently or formerly maintained by Company, or any
entity that is considered one employer with Company under ERISA Section 4001(a)(14). Company has
not incurred, and will not incur as a result of the Transactions, any withdrawal liability under
Subtitle E of Title IV of ERISA with respect to any “multiemployer plan,” within the meaning of
ERISA Section 4001(a)(3). Company has no obligation for retiree health or life benefits under any
Plan, except as required by applicable law or to avoid excise taxes under Code Section 4980B.
There are no restrictions on the rights of Company to amend or terminate any Plan without incurring
any liability thereunder (other than ordinary administrative expenses) and satisfaction of
applicable notice. There have been no unwritten or unexpected amendments to, written
interpretation of, or announcements (whether or not written) by Company relating to coverage under,
any Plan. No tax under Code Section 4980B (other than a tax that has been fully satisfied) has
been incurred in respect of any Plan that is a group health plan, as defined in Code Section
5000(b)(1). No act or omission has occurred (or will occur as a result of the transactions
contemplated by this Agreement) and no condition exists with respect to any employee benefit plan
(within the meaning of Section 3(3) of ERISA), equity incentive plan, or compensation plan or
program, currently or previously sponsored, contributed to, maintained or administered by the
Company or any subsidiary entity that is or was an ERISA Affiliate of the Company (as defined
below) that would subject the Company (or the assets of any such plan or program) to any fine,
penalty, tax or liability of any kind imposed under ERISA, the Code or other applicable legal
requirements (other than liabilities for benefits accrued under plans or programs for employees of
the Company and their beneficiaries).



               (b) Neither Company nor any entity that is or was considered one employer with Company under
ERISA Section 4001(a)(14) or Code Sections 414(b), (c), or (m) (“ERISA Affiliate”) has ever
maintained, had an obligation to contribute to, contributed to, or had any liability with respect
to any current or former employee benefit plan that is or has been subject to Title IV of ERISA
(including any “multiemployer plan” within the meaning of ERISA Section 4001(a)(3)). No Plan is a
multiple employer welfare arrangement as defined in ERISA Section 3(40).



               (c) All Plans that are subject to the laws of any jurisdiction outside the United States are
in compliance with and have been operated consistent with their terms and all applicable laws
(including relevant tax laws), and the requirements of any trust deed under which they were
established, in all material respects. Section 3.1.13(c) of the Company Disclosure Schedule
identifies all of Company’s employee benefit plans that are subject to the laws of any jurisdiction
outside the United States. With respect to each Plan, no event has occurred, and there exists no
condition or set of circumstances, that would subject Company, directly or indirectly, to any
material liability arising under any applicable laws, including relevant tax laws (including any
liability to or under any such Plan or any indemnity agreement to which Company is a party),
excluding liability for routine benefit claims and funding obligations. With respect to each such
Plan, there are no funded benefit obligations for which the contributions have not been made or
properly accrued and there are no unfunded benefit obligations that have not been accounted for by
reserves, or otherwise properly footnoted, on the Financial Statements.



               (d) No Plan is subject to any ongoing or scheduled audit, investigation, or other
administrative proceeding of the Internal Revenue Service (“IRS”), the U.S. Department of Labor, or
any other federal, state, or local governmental entity.



               (e) No event has occurred or circumstance exists that could result in a material increase in
premium costs of Plans that are insured, or a material increase in benefit costs of such Plans that
are self-insured. For avoidance of doubt, general increases in the cost of medical services or
supplies or prescription pharmaceuticals are not considered events or circumstances to be
considered. Each Plan that provides self-insured benefits is subject to a stop-loss insurance
policy under which the



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Company is an insured party and the Company has complied with all terms of such stop-loss policy
and has timely paid all premiums owing with respect to such stop-loss policy through the date of
this Agreement. The transaction contemplated by this Agreement will not cancel, impair, or reduce
amounts payable under any such stop-loss insurance policy.



          3.1.14 Real Property; Leases.
Company does not own, and has never owned, real property. Company has made available to
Parent copies of all leases or subleases in effect on the date hereof under which Company leases
(i) real property (as either a tenant, subtenant, or lessor), or (ii) personal property that
requires annual payments in excess of $25,000 with respect to each such lease or sublease of
personal property (in case of either clause (i) or (ii), a “Company Lease”). No default exists
under any Company Lease. No Company Lease is terminable because of the execution of this Agreement
or the consummation of the Transactions. Section 3.1.14 of the Company Disclosure Schedule lists
each Company Lease. Each Company Lease is in full force and effect in accordance with its
respective terms. No consent is required from any party under any Company Lease in connection with
the completion of the Transactions, and Company has not received notice that a party to any Company
Lease intends to cancel, terminate, or refuse to renew any Company Lease or to exercise any option
or other right thereunder, except where the failure to receive such consent, or where such
cancellation, termination, or refusal, would not result, or reasonably be expected to result,
individually or in the aggregate, in a Company Material Adverse Effect.




          3.1.15 Environmental.




               (a) Except as would not result, or reasonably be expected to result, individually or in the
aggregate, in a Company Material Adverse Effect, no Hazardous Material (as defined below) has been
released by Company (except as specifically authorized, such as by permits issued by a Governmental
Entity), onto or under any property occupied by Company or any affiliate of Company, nor, to
Company’s knowledge, has any Hazardous Material migrated beneath such properties.



               (b) Except as would not result, or reasonably be expected to result, individually or in the
aggregate, in a Company Material Adverse Effect, Company has not transported, stored, used,
manufactured, disposed of, released, or exposed its employees or others to, Hazardous Materials
(collectively, “Hazardous Materials Activities”) in violation of any Environmental Law (as defined
below) in effect on or before the Effective Time.



               (c) Company currently holds all environmental approvals, permits, licenses, clearances, and
consents necessary for the conduct of Company’s Hazardous Material Activities and other businesses
of Company as such activities and businesses are currently being conducted (collectively,
“Environmental Permits”), except where the absence of such Environmental Permits would not result,
or reasonably be expected to result, individually or in the aggregate, in a Company Material
Adverse Effect.



               (d) No legal action, proceeding, revocation proceeding, amendment procedure, writ, or
injunction is pending and, to Company’s knowledge, no action, proceeding, revocation proceeding,
amendment procedure, writ, or injunction has been threatened by any Governmental Entity against
Company concerning any Environmental Permit, Hazardous Material, or any Hazardous Materials
Activity of Company. Company has received no written notification that it is or may be liable for
natural resource damages, the investigation or cleanup of Hazardous Materials, or for the response
costs incurred by others in conducting such investigation or cleanup, which, in either case would
not result, or



-31-









 







reasonably be expected to result, individually or in the aggregate, in a Company Material Adverse
Effect. To the knowledge of Company, no fact or circumstance currently exists that is reasonably
likely to involve Company in any material environmental litigation or impose upon Company any
material environmental liability.



               (e) Company has not, either by agreement or (to Company’s knowledge) by operation of law,
assumed or undertaken any liability (including future or contingent liabilities) of another person
or entity under any Environmental Law, including any obligation for investigation, cleanup,
corrective action, or natural resource damages with respect to Hazardous Materials.



               (f) Neither Company nor, to the knowledge of Company, any of its agents, possess copies of any
reports concerning the presence or possible presence of released Hazardous Materials on real
property currently or formerly owned, leased, or occupied by Company, including any environmental
site assessment reports.



               (g) “Hazardous Material” means any substance that any Governmental Entity, in accordance with
applicable federal, state, or local law, has designated to be radioactive, toxic, hazardous, or
otherwise a danger to health or the environment, including PCBs, friable asbestos, petroleum,
urea-formaldehyde, and all substances listed as hazardous substances in accordance with the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste in accordance with the United States Resource Conservation and
Recovery Act of 1976, as amended, and the regulations promulgated in accordance with said laws, but
excluding office and janitorial supplies lawfully used or stored for their intended purposes.



               (h) “Environmental Law” means all applicable foreign, domestic, federal, state, local, or
other laws, regulations, ordinances, or other binding requirements of Governmental Entities, all
applicable orders, judgments, or binding determinations of administrative or judicial authorities,
and any required permit, license, or other authorization, concerning public health and safety,
worker health and safety, and pollution or protection of the environment, including all those
relating to the presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Material.



          3.1.16 Customers and Suppliers.




               (a) As of the date hereof: (i) Company has no material outstanding dispute in excess of
$50,000 that has been communicated orally or in writing, concerning its business operations,
including any Company Technology (as defined in Section 3.1.20) or services with any distributor or
customer who, in the 24 months ended as of the date of this Agreement, was one of the 20 largest
sources of revenues recognized under GAAP for Company during such period (each, a “Significant
Customer”); (ii) Section 3.1.16(a) of the Company Disclosure Schedule lists each Significant
Customer and the percentage of Company’s total revenues such Significant Customer represented
during such period; (iii) Company has not received any oral or written notice from any Significant
Customer that such Significant Customer will not continue as a customer or distributor of Surviving
Corporation after Closing or that such distributor or customer intends to terminate or materially
modify existing agreements with Company or Surviving Corporation; and (iv) no purchaser, reseller,
or distributor of Company’s services has asserted any claims of breach of warranty in excess of
$5,000 with regard to such services nor does Company have any indemnity liability for any such
services to purchasers, resellers, or distributors. To Company’s knowledge, Company could not
reasonably be expected as a result of



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warranty or liability claims against it to be required to modify in any material respect any of
Company’s services that are material to Company.



               (b) As of the date hereof: (i) Company has no material outstanding dispute in excess of
$50,000 that has been communicated orally or in writing, concerning technology, products, or
services provided by any supplier who, in the 24 months ended as of the date of this Agreement, was
(a) one of the ten largest suppliers of technology, products, or services to Company, based on
amounts paid or payable, or (b) provided third-party software used in connection with any Company
Technology, products, or services during such period (each, a “Significant Supplier”); (ii) Section
3.1.16(b) of the Company Disclosure Schedule lists each Significant Supplier; and (iii) Company has
not received any oral or written notice from any Significant Supplier that such supplier will not
continue as a supplier to the Surviving Corporation after the Closing or that such supplier intends
to terminate or materially modify existing agreements with Company or the Surviving Corporation.



               (c) To Company’s knowledge no supplier, distributor, or customer has any interest in any real
or personal, tangible or intangible property, including Company Owned Intellectual Property (as
defined in Section 3.1.20(a)(ii)), used in or pertaining to the business of Company.



          3.1.17 Material Contracts.




               (a) Section 3.1.17 of the Company Disclosure Schedule sets forth all of the following
contracts to which Company is a party as of the date of this Agreement (the “Material Contracts”):



                    (i) any agreement (A) relating to the employment of, or the performance of services by, any
employee, consultant, or other Person other than ordinary course, at-will written or oral offers or
agreements terminable without notice and without the payment of any severance or penalty and other
than employment arrangements required by law, (B) in accordance with which Company is or may become
obligated to make any severance, termination, or similar payment to any current or former employee
or director, other than with respect to agreements listed or described in the Company Disclosure
Schedule as applicable to all Company employees generally, or applicable to all Company employees
in specified jurisdictions outside of the United States, (C) in accordance with which Company is or
may become obligated to make any bonus, commission, or similar payment to any current or former
employee or director, other than with respect to agreements listed or described in the Company
Disclosure Schedule as applicable to all Company employees generally, or applicable to all Company
employees in specified jurisdictions outside of the United States, or (D) in accordance with which
Company may be required to provide, or accelerate the vesting of, any payments, benefits, or equity
rights upon the occurrence of any of the Transactions, other than with respect to the acceleration
of Options pursuant to their terms or pursuant to this Agreement;



                    (ii) any agreement that provides for indemnification of any officer, director, employee, or
agent of Company;



                    (iii) any agreement imposing any restriction on the right or ability of Company, or that,
after consummation of the Merger, would impose a restriction on the right or ability of Parent or
any of its subsidiaries, to compete in any line of business or in any geographic region with any
other Person or to transact business or deal in any other manner with any other Person;



-33-









 





                    (iv) any agreement with a third party in accordance with which Company (A) has paid $100,000
or more during the year ended December 31, 2008, or (B) is obligated to pay $100,000 or more during
the year beginning January 1, 2009;



                    (v) any agreement with a distributor, VAR, reseller, OEM, marketing partner, or Significant
Customer;



                    (vi) any agreement of partnership or joint venture, limited liability company or operating
agreement that would give rise to an obligation on the part of Company to form a joint venture or
to acquire securities of a third party;



                    (vii) any In-Licenses (as defined in Section 3.1.20);



                    (viii) any other contract, agreement, or commitment not otherwise listed in Section 3.1.17 of
the Company Disclosure Schedule, (A) the termination of which would result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material Adverse Effect, or (B)
that, if no required consent regarding the Transactions is obtained, would result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material Adverse Effect or a
material adverse effect on the operation of the business of Company in the same manner as the
business of Company is currently operated;



                    (ix) any union contract or collective bargaining agreement;



                    (x) any material Company Lease;



                    (xi) except for trade indebtedness incurred in the ordinary course of business and except as
disclosed in the Financial Statements, any instrument evidencing or related in any way to
indebtedness for borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise.



               (b) Each Material Contract is in full force and effect and is a valid and binding obligation
of Company, and neither Company nor, to the knowledge of Company, any other party thereto is in
breach of, or default under, any such Material Contract, except for such failures to be in full
force and effect and such breaches and defaults that would not result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse Effect. As of the date
hereof, none of the parties to any of the Material Contracts identified in Section 3.1.17 of the
Company Disclosure Schedule has expressed in writing an intent to terminate or materially reduce
the amount of its business with Company in the future.



               (c) Company acknowledges that it has provided only blank form versions of certain Material
Contracts to Parent or Parent’s counsel in the course of due diligence leading to the execution of
this Agreement. The actual Material Contracts corresponding to such disclosed form versions do not
contain materially different terms than such form versions.



          3.1.18 Taxes.




               (a) For the purposes of this Agreement, the terms “tax” and “taxes” mean all federal, state,
local, and foreign income taxes (including any tax on or based upon net income, gross income,
income as specially defined, earnings, profits or selected items of income, earnings or profits),
capital taxes, gross receipts taxes, environmental taxes, sales taxes, use taxes, ad valorem taxes,
value



-34-









 







added taxes, transfer taxes, franchise taxes, license taxes, withholding taxes or other withholding
obligations, payroll taxes, employment taxes, excise, severance, social security premiums, workers’
compensation premiums, employment insurance or compensation premiums, stamp taxes, occupation
taxes, premium taxes, property taxes, windfall profits taxes, alternative or add-on minimum taxes,
goods and services tax, customs duties or other taxes of any kind whatsoever imposed by any taxing
authority (domestic or foreign) on such entity or for which such entity is responsible, and any
interest, penalties, additional taxes, additions to tax or other amounts imposed with respect to
the foregoing.



               (b) Company has timely filed (or caused to be filed) all federal, state, local, and foreign
tax returns, reports, information statements, and similar statements (“Returns”) required to be
filed, which Returns are true, correct, and complete in all respects. Company has timely paid when
due, or fully accrued in accordance with GAAP on the Financial Statements, all taxes in respect of
all periods (or portions thereof), whether or not any Return reflects such taxes. The unpaid taxes
of Company will not, as of the Closing Date, exceed the reserves for tax liability set forth on the
Closing Balance Sheet. Company has not engaged in any “reportable transaction” within the meaning
of Code Section 6707A(c)(1). Company has not taken any position on any Return that is or would be
subject to penalties under Code Section 6662. Company is not currently the beneficiary of any
extension of time to file any Return that has not yet been filed. All material elections with
respect to taxes made by or with respect to Company are set forth in Section 3.1.18(b) of the
Company Disclosure Schedule. Company has provided to Parent or made available true and correct
copies of all filed Returns and related work papers, all correspondence with any taxing
authorities, any tax planning memoranda, or other material tax data of Company, in each case with
respect to taxes and Returns for which the statute of limitations has not expired.



               (c) No deficiencies or adjustments that remain outstanding for any tax have been claimed,
proposed, assessed, or threatened. No authority in a jurisdiction where Company does not file
Returns has ever made any claim that Company is or may be subject to taxation by that jurisdiction.
Section 3.1.18(c) of the Company Disclosure Schedule accurately sets forth the years for which
Company’s federal, state, local, and foreign Returns have been audited and any years that are the
subject of a pending audit by the IRS or any applicable state, local, or foreign taxing
authorities. Except as so disclosed, Company has not received written notice of any pending or
threatened tax audit or examination and Company has not waived or entered into any other agreement
with respect to any statute of limitation with respect to its taxes or Returns. Section 3.1.18(c)
of the Company Disclosure Schedule sets forth as of the date hereof (i) the tax basis of Company in
its assets, (ii) the current and accumulated earnings and profits of Company, (iii) the amount of
any net operating loss carryover, net capital loss carryover, unused investment credit or other
credit carryover and charitable contribution carryover of Company, and (iv) the amount of any
deferred gain or loss allocable to Company or excess loss account of Company. Section 3.1.18(c) of
the Company Disclosure Schedule sets forth as of the date hereof a list of all joint ventures,
partnerships, limited liability companies, or other business entities (within the meaning of
Treasury Regulation Section 301.7701-3) in which Company has an interest. No consent or agreement
has been made under former Code Section 341(f) by or on behalf of Company or any predecessor
thereof. Company has no interests in real estate that would be subject to any real estate excise,
transfer, or other similar tax because of the consummation of the Transactions.



               (d) There are no liens for taxes upon the assets of Company except for taxes not yet due and
payable. Company has withheld all taxes required to be withheld by it in respect of wages,
salaries, and other payments to all employees, officers, and directors and any taxes required to be
withheld from any other Person and has timely paid all such amounts withheld to the proper taxing
authority. Company is not party to any tax sharing or tax allocation agreements and has not been a
member of any affiliated group of corporations within the meaning of Code Section 1504 (other than
the



-35-









 







group of which Company is currently the common parent). Company has no liability for taxes of any
other Person under Treasury Regulation Section 1.1502-6 (or any similar provisions of state, local
or foreign law) as a transferee or successor, by contract, or otherwise. Company neither has nor
had a “permanent establishment” (as defined in any applicable income tax treaty) in any country
other than the United States. There are no outstanding rulings or requests for rulings from any
taxing authority with respect to Company. Company neither is nor has ever been a “United States
real property holding corporation” within the meaning of Code Section 897. The use of any net
operating loss carryover, net capital loss carryover, unused investment credit, or other credit
carryover of Company is not subject to any limitation in accordance with Code Section 382 or
otherwise.



               (e) Company has not participated in, or cooperated with, an international boycott within the
meaning of Code Section 999. Company is not required to include in income any adjustment in
accordance with Code Section 481(a) (or similar provisions of other law or regulations) in its
current or in any future taxable period, because of a change in accounting method, nor has the IRS
(or other taxing authority) proposed any such change in accounting method. In connection with the
consummation of the Transactions, no payments of money or other property, acceleration of benefits,
or provisions of other rights have or will be made hereunder, under any agreement contemplated by
this Agreement, or under any other agreement or arrangement to which Company is a party that would
be reasonably likely to result in imposition of the sanctions imposed under Code Sections 280G and
4999, determined without regard to whether such payment is reasonable compensation for services
performed or to be performed in the future, and whether or not some other later action or event
would be required to cause such payment, acceleration, or provision to be triggered. Neither
Company, Parent, or any affiliate of Parent will be obligated to pay, or reimburse any individual
for, any excise taxes or similar taxes imposed on any employee or former employee of, or individual
providing services to, Company under Code Section 4999 or any similar provisions as a result of the
consummation of the Transactions, either alone or in connection with any other event. None of the
assets of Company is property that is required to be treated as owned by any other Person in
accordance with the “safe harbor lease” provisions of former Section 168(f)(8) of the Internal
Revenue Code of 1954 as amended and in effect immediately before the enactment of the Tax Reform
Act of 1986 and none of the assets of Company is “tax exempt use property” within the meaning of
Code Section 168(h). None of the assets of Company secures any debt the interest on which is tax
exempt under Code Section 103.



               (f) Company has not constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock qualifying for tax-free treatment under Code Section 355
(i) in the two years before the date of this Agreement, or (ii) in a distribution that could
otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of
Code Section 355(e)) in conjunction with the Transactions.



               (g) All Plans or arrangements to which Company is a party that are “nonqualified deferred
compensation plans” within the meaning of Code Section 409A(d)(1) satisfy the requirements of Code
Sections 409A(a)(2), 409A(a)(3) and 409A(a)(4) and the guidance thereunder and have been operated
in accordance with such requirements.



               (h) No outstanding Company Share is non-transferable and subject to a substantial risk of
forfeiture within the meaning of Section 83 of the Code, and no payment to any holder of Company
Shares of any Conversion Payments in accordance with this Agreement will result in compensation
income to such holder of Company Shares.



          3.1.19 Interests of Officers.
None of Company’s officers, directors or employees has any interest in any property, real or
personal, tangible or intangible, including inventions,


-36-









 







copyrights, trademarks, or trade names, used in the business of Company, nor to the knowledge of
Company does any supplier, distributor, or customer of Company.




          3.1.20 Technology and Intellectual Property Rights.




               (a) Definitions:



                    (i) “Intellectual Property” means any or all of the following and all rights in, arising out
of, or associated therewith: (x) all United States, international, and foreign: (1) patents,
utility models, and applications therefor, and all reissues, divisions, re-examinations, renewals,
extensions, provisionals, continuations and continuations-in-part thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries, including invention
disclosures; (2) all trade secrets and other rights in know-how and confidential or proprietary
information; (3) all mask works and copyrights, registrations and applications therefor, and all
other rights corresponding thereto (including moral rights), throughout the world; (4) all rights
in World Wide Web addresses and domain names and applications and registrations therefor, all trade
names, logos, common law trademarks and service marks, trade dress, trademark and service mark
registrations, and applications therefor, and all goodwill associated therewith throughout the
world; and (5) any similar, corresponding, or equivalent rights to any of the foregoing in (1)
through (4) above, anywhere in the world (items (1) through (5) collectively, “Intellectual
Property Rights”); and (y) any and all of the following: computer software and code, including
software and firmware listings, assemblers, applets, compilers, source code, object code, net
lists, design tools, user interfaces, application programming interfaces, protocols, formats,
documentation, annotations, comments, data, data structures, databases, data collections, system
build software and instructions, design documents, schematics, diagrams, product specifications,
know-how, show-how, techniques, algorithms, routines, works of authorship, processes, prototypes,
test methodologies, supplier and customer lists, trade secrets, materials that document design or
design processes, or that document research or testing (including design, processes, and results);
any media on which any of the foregoing is recorded; and any other tangible embodiments of any of
the foregoing or of Intellectual Property Rights (“Technology”).



                    (ii) “Company Owned Intellectual Property” means all Intellectual Property owned by Company.



                    (iii) “Company Licensed Intellectual Property” means all Intellectual Property owned by third
Persons and licensed to Company. Unless otherwise noted, all references to “Company Intellectual
Property” refer to both Company Owned Intellectual Property and Company Licensed Intellectual
Property.



               (b) Section 3.1.20(b) of the Company Disclosure Schedule lists:



                    (i) all of Company’s registrations and applications for registration for Company Owned
Intellectual Property (including without limitation all patents issued and/or assigned to Company
and all applications for patents filed or held by Company);



                    (ii) all licenses, sublicenses, reseller, distribution, customer, and other agreements or
arrangements in accordance with which any other Person is authorized by Company to have access to,
resell, distribute, or use Company Owned Intellectual Property or to exercise any other right with
regard thereto;



-37-









 





                    (iii) all agreements and licenses in accordance with which Company has been granted a license
to any Company Licensed Intellectual Property (other than license agreements for standard “shrink
wrapped, off-the-shelf” third party Intellectual Property that is otherwise commercially available
for a cost of not more than U.S. $5,000 for a perpetual license for a single user or work station
(or $50,000 in the aggregate for all users and work stations)) where such Company Licensed
Intellectual Property is used by Company in connection with the development, support, or
maintenance of Company’s products, Technology or service offerings (“In-Licenses”);



                    (iv) any obligations of exclusivity (including license rights granted by Company to any third
party in Company Intellectual Property or other exclusivity grants), covenants not to sue,
noncompetition, nonsolicitation, right of first refusal, parity of treatment and/or most favored
nation status, or right of first refusal or negotiation, parity of treatment, or most favored
nation status to which Company is subject and that relate to and/or restrict any Company
Intellectual Property Rights or Company Technology, products or services that are provided using
Company Intellectual Property, including without limitation for each such obligation an
identification of any territorial limitations on such obligation;



                    (v) any grants to Company of exclusivity (including exclusive license rights granted to
Company by any third party in Company Licensed Intellectual Property or other exclusivity grants),
covenants not to sue, noncompetition, nonsolicitation, right of first refusal or negotiation,
parity of treatment, or most favored nation status; and



                    (vi) all current Company products, Technology, and service offerings made commercially
available by Company.



               (c) Company owns free and clear of conditions, liens, pledges, security interests, claims, or
other encumbrances, adverse claims, or other restrictions or any requirement of any past, present,
or future royalty payments, all rights necessary to carry out, or that otherwise are material to,
the current and anticipated future (as contemplated by Company) business of Company and has had all
rights reasonably necessary to carry out, or that otherwise were material to, the business of
Company.



               (d) Company is not, nor as a result of the execution or delivery of this Agreement, or
performance of Company’s obligations hereunder, will Company be, in violation of any license,
sublicense, or other agreement relating to Company Intellectual Property, including any In-License.
Without limiting the foregoing, (i) the “License Agreement” between Aesop, Inc. and Company dated
April 15, 1997 (last signed June 29, 1997), remains in force as of the Effective Date; (ii) Company
has renewed the exclusivity provisions under that agreement at least through the Closing Date and
given any renewal notices required to be given on or before Closing Date to continue such
exclusivity; and (iii) to Company’s knowledge, as of the Closing Date Robomatics, Inc. has not
marketed water-jet cutting equipment utilizing the Aesop technology licensed to Company under that
agreement.



               (e) Neither the (i) use, reproduction, modification, manufacturing, distribution, licensing,
sublicensing, sale, offering for sale, import, or any other exercise of rights in Company Owned
Intellectual Property, (ii) operation of Company’s business, including Company’s provision of
Technology, products or services, nor (iii) the use, reproduction, modification, manufacture,
distribution, licensing, sublicensing, sale, offering for sale or other exploitation of any of
Company’s products, services, or Technology, infringes any Intellectual Property Rights, or any
other intellectual property, proprietary, or personal right, of any Person, or constitutes unfair
competition or unfair trade practice under the laws of the applicable jurisdiction. To the
knowledge of Company, there is no



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unauthorized use, infringement, or misappropriation of any of the Company Owned Intellectual
Property by any third party, employee, or former employee.



               (f) Company has not received written notice of any claims (i) challenging the validity,
effectiveness or ownership by Company of any Company Owned Intellectual Property, or (ii) that any
of the actions described in Section 3.1.20(e)(i), (ii) or (iii) above infringes, or will infringe
on, any third party Intellectual Property Right or constitutes unfair competition or unfair trade
practices under the laws of the applicable jurisdiction, nor, to the knowledge of Company, are
there any valid grounds for any bona fide claim of any such kind.



               (g) No parties other than Company possess any current or contingent rights of any kind to any
source code included in Company Owned Intellectual Property, nor has Company granted any current or
contingent rights of any kind to any source code that is part of any Company Licensed Intellectual
Property.



               (h) Section 3.1.20(h) of the Company Disclosure Schedule lists all parties who have created
any material portion of, or otherwise have any rights in or to, Company Owned Intellectual Property
other than employees of Company who meet all of the following requirements: (i) their work in any
Company product, Technology, or service was created by them entirely within the scope of their
employment by Company, (ii) their copyrightable work product in any Company product, Technology, or
service is owned by Company as a work made for hire under U.S. copyright law, and (iii) any
inventions of such employees that are included or implemented in any Company product, Technology,
or service have been assigned to Company under Company’s standard form employee invention
assignment agreement.



               (i) Company has secured from all current and former non-employee consultants and contractors
of Company who have created any material portion of, or otherwise have any rights in or to, any
Company Owned Intellectual Property, valid and enforceable written assignments to Company of any
such consultants’ and contractors’ contribution or rights therein and Company has provided true and
complete copies of such assignments or licenses to Parent.



               (j) Company has taken commercially reasonable steps to protect rights in confidential
information (both of Company and that of third Persons that Company has received under an
obligation of confidentiality). Company has obtained legally binding written agreements from all
employees and third parties with whom Company has shared its confidential information or
confidential information that Company is obligated to treat as confidential and that require those
employees and third parties to keep such information confidential.



               (k) Company is in compliance in all material respects with all applicable laws, rules,
regulations, and Company contractual obligations governing the collection, interception, storage,
receipt, purchase, sale, transfer and use (“Collection and Use”) of personal, consumer, or customer
information, including name, address, telephone number, electronic mail address, social security
number, bank account number or credit card numbers (collectively, “Customer Information”).
Company’s Collection and Use of such Customer Information are in accordance in all material
respects with Company’s privacy policy as published on its website or any other privacy policies
presented to consumers or customers and to which Company is bound or otherwise subject and any
contractual obligations of Company to its customers regarding privacy. Company does not use in
connection with the provision of its Technology, products or services or collect or receive social
security numbers or credit card numbers. Company takes commercially reasonable steps to protect the
confidentiality, integrity and security of its software, databases, systems, networks and Internet
sites and all information stored or contained therein or transmitted thereby from unauthorized or
improper Collection and Use. The



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execution or delivery of this Agreement or any other agreement or document contemplated by this
Agreement, or the performance of Company’s obligations hereunder or thereunder, will not materially
violate any such applicable law, rule, or regulation or any of Company’s privacy policies or any
contractual obligation of Company governing the Collection and Use of Customer Information.



               (l) Section 3.1.20(l)(i) of the Company Disclosure Schedule identifies all licenses entered
into by Company with regard to any third party source code. Section 3.1.20(l)(ii) of the Company
Disclosure Schedule identifies all such licenses that may not be assigned to Parent.



               (m) No Company software or software used in any Company Technology, product or service
(including Company software under development) has been, is, or, upon consummation of the Merger,
will be, in whole or in part, governed by an Excluded License. For purposes of this Agreement, an
“Excluded License” is any license that requires, as a condition of modification or distribution of
software subject to the Excluded License, that (i) such software and/or other software combined or
distributed with such software be disclosed or distributed in source code form, or (ii) such
software and/or other software combined or distributed with such software and any associated
intellectual property be licensed on a royalty free basis (including for the purpose of making
additional copies or derivative works).



               (n) Company has not incorporated into any Company software or software used in any Company
product, Technology, or service any code, modules, utilities, or libraries that are covered in
whole or in part by a license that triggers the discontinuance of some or all license rights if
certain patent enforcement suits are brought by Company.



               (o) Company has not incorporated into any Company software or software used in any Company
product, Technology, or service any code, modules, utilities, or libraries that are covered in
whole or in part by a license that requires that Company give attribution for its use of such code,
modules, utilities, or libraries.



               (p) Company has not participated in any standards-setting organizations or activities that
would affect the proprietary nature of any Company Intellectual Property or restrict the ability of
Company to enforce, license or exclude others from using any Company Intellectual Property.



               (q) The Merger will not give rise to, any Company obligations of exclusivity (including
exclusive license rights granted by Company to any third party in Company Intellectual Property or
other exclusivity grants), covenants not to sue, non-competition, non-solicitation, right of first
refusal or negotiation, parity of treatment, most favored nation status, or other material
restriction on the operation of Company’s business.



               (r) The Merger will not give rise to or cause under any agreements relating to Company
Intellectual Property (i) a right of termination under, or a breach of, or any loss or change in
the rights or obligations of Company, (ii) an obligation to pay any royalties or other amounts to
any third Person in excess of those that Company is otherwise obligated to pay absent a Merger, or
(iii) Parent’s granting to any third party any right to or with respect to any of Parent’s
Intellectual Property.



               (s) Company is not under any contractual obligation (i) to include any Company Licensed
Intellectual Property in any Company product, Technology, or service, or (ii) to obtain a third
party’s approval of any Company product, Technology, or service at any stage in the development,
licensing, distribution, or sale of that product, Technology, or service.



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               (t) Company has no obligation to perform services for any third party other than (i) customer
support and maintenance services for those customers listed in Section 3.1.20(t)(i) of the Company
Disclosure Schedule, and (ii) professional services for those customers listed in Section
3.1.20(t)(ii) of the Company Disclosure Schedule.



               (u) All granted or issued patents and all mask works, registered trademarks, and copyright
registrations held by Company at any time, are valid, enforceable, and subsisting. Section
3.1.20(u) of the Company Disclosure Schedule accurately identifies and describes each filing,
payment, and action that must be made or taken on or before the date that is 120 days after the
date of this Agreement in order to maintain each such item of Company Owned Intellectual Property
in full force and effect.



               (v) Company has not exported or re-exported its products, services, or Technology, directly or
indirectly, in violation of law either to: (i) any countries that are subject to U.S., Canadian,
or European Union export restrictions or export restrictions of any other jurisdiction in which
Company operates or is otherwise subject; or (ii) any end-user who Company knows or has reason to
know will utilize them in the design, development, or production of nuclear, chemical, or
biological weapons; and Company has complied with all end-user, end-use, and destination
restrictions issued by the U.S., Canada, the European Union, and any other jurisdiction to which
Company operates or is subject.



               (w) The Company software or software used in any Company Technology, product or service: (i)
has sufficiently documented source code enabling a reasonably skilled software developer to
understand, modify, compile and otherwise utilize all aspects of the related Technology without
reference to other sources of information; (ii) is complete; (iii) is free from known material
defects or deficiencies, errors in design, and operating defects; (iv) to Company’s knowledge, does
not require a material upgrade or replacement within the 12-month period after the Closing Date and
none are planned; and (v) does not contain any disabling mechanisms or protection features which
are designed to disrupt or prevent the use of the Company Technology, product or service, including
computer viruses, time locks or any code, instruction or device that may be used without authority
to access, modify, delete or damage any of the Company software or any system or equipment on which
any of the Company software is installed or in connection with which it may operate.



          3.1.21 Vote Required.
The affirmative vote of the holders of a majority of the outstanding Company Common Shares
(the “Company Shareholder Approval”) voting together as a single class at a shareholder meeting or
in accordance with a written consent is the only vote of the holders of Company’s capital stock
necessary to approve this Agreement and the consummation of the Transactions.




          3.1.22 Brokers’ and Other Fees.
Neither Company nor its shareholders, directors, officers, or employees has employed any
investment banker, broker, finder, or other intermediary that has been retained by, or is
authorized to act on behalf of, Company that would be entitled to any fee or commission from
Company, Parent, or any of Parent’s affiliates in connection with or upon consummation of the
Transactions.




          3.1.23 Change of Control.
With regard to any Company Options granted under the Incentive Plans that do not presently
provide for automatic acceleration of vesting upon a change of control, Company shall take action
to make such options exercisable or vested immediately prior to Closing. Section 3.1.23 of the
Company Disclosure Schedule sets forth the number of Company Common Shares that are subject to
options, warrants, or awards that are not


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exercisable or vested before the Effective Time and that are subject to partial or complete
acceleration of vesting or exercisability as a result of the Merger or termination of any
employment or contractor arrangement, the name of the Person who holds such option, warrant, or
other award, and the applicable percentage of acceleration of the vesting or exercisability.




          3.1.24 Complete Copies of Materials.
Company has delivered or made available to Parent or its counsel true and complete copies of
each document listed in the Company Disclosure Schedule.




          3.1.25 Board Recommendation.
Company’s board of directors has unanimously (i) determined that this Agreement and the
Transactions, including the Merger, are advisable and in the best interests of Company and its
shareholders, (ii) approved and adopted this Agreement and the Transactions, including the Merger,
and (iii) subject to the other terms and conditions of this Agreement, resolved to recommend the
Merger and approval and adoption of this Agreement and each of the Transactions by Company’s
shareholders, and, as of the date of this Agreement, none of such actions by Company’s board of
directors has been amended, rescinded, or modified.




          3.1.26 Insurance.
Company has made available to Parent or its counsel a copy of all insurance policies and all
self-insurance programs and arrangements relating to the business, assets, and operations of
Company. All premiums due and payable under all such policies have been paid and Company is
otherwise in compliance with the terms of such policies and bonds. As of the date of this
Agreement, there has been no threatened termination of, or premium increase with respect to, any
such policies.




          3.1.27 Accounts Receivable.
All of the accounts receivable shown on the consolidated balance sheet of Company as of the
Interim Balance Sheet Date have been collected or are current and collectible in the aggregate
recorded amounts thereof (less the allowance for doubtful accounts also appearing in such balance
sheet and net of returns and payment discounts allowable by Company’s policies) and can reasonably
be anticipated to be paid in full without outside collection efforts within 90 days of the due
date, and are not subject to counterclaims or setoffs.




          3.1.28 Personal Property.
As of the date hereof Company has good and marketable title, free and clear of all title
defects, security interests, pledges, options, claims, liens, encumbrances, and restrictions of any
nature whatsoever (including leases, chattel mortgages, conditional sale contracts, purchase money
security interests, collateral security arrangements, and other title or interest-retaining
agreements) to all inventory, receivables, furniture, machinery, equipment, and other personal
property, tangible or otherwise, reflected on the consolidate balance sheet of Company as of the
Interim Balance Sheet Date or used in Company’s business as of the Interim Balance Sheet Date even
if not reflected thereon. Section 3.1.28 of the Company Disclosure Schedule lists (i) all computer
equipment and (ii) all other personal property having a depreciated book value of $5,000 or more
currently used by Company in the conduct of its business, and all such equipment and property, in
the aggregate, is in good operating condition and repair, reasonable wear and tear excepted.




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          3.1.29 Guarantees and Suretyships.
Company has no powers of attorney outstanding, (other than those issued in the ordinary course
of business with respect to tax matters). Company has no obligations or liabilities (absolute or
contingent) as guarantor, surety, cosigner, endorser, co-maker, indemnitor, or otherwise with
respect to the obligations or liabilities of any Person.




          3.1.30 Certain Transactions.
Except for (a) relationships with Company as an officer, director, or employee (and
compensation by Company in consideration of such services) and (b) relationships with Company as
holders of Company Securities, none of the directors, officers, or holders of 5% or more of the
Company Shares, or any member of any of their families, is presently a party to, or was a party to
during the year preceding the date of this Agreement, any transaction with Company, including any
contract, agreement, or other arrangement (i) providing for the furnishing of services to or by,
(ii) providing for rental of real or personal property to or from, or (iii) otherwise requiring
payments to or from, any such person or any corporation, partnership, trust, or other entity in
which any such person has or had a 5% or more interest (as a shareholder, partner, beneficiary, or
otherwise) or is or was a director, officer, employee, or trustee.




          3.1.31 Government Contracts.




               (a) “Government Contracts” means any agreement, commitment, undertaking, or arrangement of any
kind with a government agency, government prime contractor, government grant recipient, or
higher-tier government subcontractor to which Company is a party as of the date of this Agreement.



               (b) Company is in compliance with all legal requirements of all Government Contracts.



               (c) Company has not, in obtaining or performing any Government Contract, violated any material
aspect or provision of any of the following: (i) the Federal Acquisition Regulation or any
applicable agency supplement thereto; (ii) any state procurement law or regulation; and (iii) any
other applicable procurement law or regulation.



               (d) To the knowledge of Company, there are not and have not been any irregularities,
misstatements, or omissions relating to any Government Contracts, including certifications.



               (e) Company is not undergoing, and has not undergone, any audit of any Government Contract,
and Company has no knowledge of any basis for any impending audit, arising under or relating to any
Government Contract, except for routine audits conducted during the ordinary course of business.



               (f) Company has taken adequate steps to ensure that its right, title and interest in
inventions, technical data, computer software, and copyrightable material developed under any
Government Contract have been retained and protected.



          3.1.32 Disclosure.
No representation or warranty made by Company in this Agreement, nor any document, written
information, financial statement, certificate, or exhibit prepared and furnished or to be prepared
and furnished by Company or its Representatives (as



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defined in Section 4.1.3) under this Agreement, or in connection with the Transactions, including
information supplied by Company for inclusion in the Registration Statement on Form S-4 of Parent
(or such other or successor form as shall be appropriate, the “Registration Statement”) pursuant to
which the shares of Parent Common Stock to be issued in the Merger will be registered with the
Securities and Exchange Commission (“SEC”) , when read together in their entirety, contains as of
the date hereof or will contain, at the time the Registration Statement is declared effective by
the SEC or upon the consummation of the Merger any untrue statement of a material fact, or omits as
of the date hereof or will omit upon the consummation of the Merger to state a material fact
necessary to make the statements or facts contained herein or therein, not misleading, in light of
the circumstances under which they were made.



          3.1.33 Reliance.
Company makes the foregoing representations and warranties with the knowledge and expectation
that Parent and Sub are placing reliance thereon.




     3.2 Representations and Warranties of Major Shareholders. Each Major Shareholder
represents and warrants, severally but not jointly, to and for the benefit of Parent and Sub as
follows:



          3.2.1 Authority.
Each Major Shareholder has full power and authority to execute and deliver this Agreement and
all other documents and agreements to be executed by such Major Shareholder as contemplated
hereunder, and to perform his, her, or its obligations hereunder and thereunder. This Agreement
and all other documents and agreements to be executed by Major Shareholder as contemplated
hereunder constitutes the valid and legally binding obligations of such Major Shareholder
enforceable against each in accordance with their terms, except as such enforcement may be limited
by bankruptcy, insolvency, moratorium, or other similar laws affecting or relating to the
enforcement of creditors’ rights generally and general principles of equity.




          3.2.2 Voting Agreements. Except as contemplated by this Agreement, each Major Shareholder is not a party to any voting
agreement, voting trust, or similar agreement or arrangement relating to any class or series of its
capital stock, or any agreement or arrangement providing for registration rights with respect to
any capital stock or other securities of Company.




          3.2.3 Non-Contravention; Consents.
The execution and delivery of this Agreement, and all other documents and agreements to be executed
by the Major Shareholders as contemplated by this Agreement, and the consummation of the
Transactions will not, conflict with, or result in any Violation of (i) any injunction, judgment,
order, decree, ruling, charge, or other restriction of any Governmental Entity to which a Major
Shareholder is subject, or (ii) any agreement, contract, lease, license, instrument, or other
arrangement to which a Major Shareholder is a party, or by which it is bound, or to which any of
its Company Securities are subject. No Major Shareholder was, is, or will be required to make a
filing with, give any notice to, or to obtain any consent from, any Person or any Governmental
Entity in connection with the execution and delivery of this Agreement or any other agreement or
document contemplated by this Agreement or the consummation or performance of any of the
Transactions.




          3.2.4 Reliance. Each Major Shareholder makes the foregoing representations and warranties with the knowledge and
expectation that Parent and Sub are placing reliance thereon.





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     3.3 Representations and Warranties of Parent and Sub.
Parent and Sub represent to Company as follows:



          3.3.1 Organization; Standing and Power.
Each of Parent and Sub is a corporation duly organized and validly existing and in good standing,
as applicable, under the laws of its jurisdiction of incorporation or organization. Each of Parent
and Sub has all requisite corporate power and authority to own, lease, and operate its properties
and to carry on its businesses as now being conducted, and is duly qualified to do business in each
jurisdiction in which the character of the property owned, leased, or operated by it or the nature
of its activities makes such qualification necessary, except in such jurisdictions in which a
failure to so qualify would not result, or be reasonably expected to result, individually or in the
aggregate, in a material adverse effect on the financial condition, business, assets, or results of
operations of Parent, Sub and either of their subsidiaries, taken as a whole, or that would
materially impair the ability of Parent or Sub to consummate the Transactions (“Parent Material
Adverse Effect”).



          3.3.2 Authority.
Each of Parent and Sub has all requisite corporate power and authority to execute and deliver
this Agreement, to consummate the Transactions. The execution and delivery by Parent and Sub of
this Agreement and the performance of Parent’s and Sub’s respective obligations hereunder have been
duly and validly authorized by all necessary corporate action on the part of Parent and Sub, as
applicable. This Agreement has been duly executed and delivered by Parent and Sub and constitutes
a valid and binding obligation of Parent and Sub enforceable in accordance with its terms, except
to the extent that enforceability may be limited by the effect of (i) any applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of
creditors’ rights generally, and (ii) general equitable principles, regardless of whether such
enforceability is considered in a proceeding at law or in equity.



          3.3.3 Consents and Approvals; No Violations.
Subject to satisfaction of the conditions set forth in Sections 7.1 and 7.2, the execution and
delivery of this Agreement do not, and the consummation of the Transactions will not, conflict with
or result in any Violation of (a) any provision of the restated articles of incorporation or bylaws
of Parent or the articles of incorporation or bylaws of Sub, or (b) any loan or credit agreement,
note, bond, mortgage, indenture, contract, lease, or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule, or
regulation applicable to Parent or Sub or their respective properties or assets, other than, in the
case of (b), any such Violation that would not result, or reasonably be expected to result,
individually or in the aggregate in a Parent Material Adverse Effect. No Consent is required by or
with respect to Parent or Sub in connection with the execution and delivery of this Agreement by
Parent or Sub or the consummation by Parent and Sub of the Transactions, except for the filing of
the Articles of Merger in accordance with the WBCA, the filing with the SEC and NASD of the
Registration Statement, the filing of a Form 8-K with the SEC and NASD within the statutory period
following the date of this Agreement, any filings as may be required under applicable state
securities laws, the securities laws of any foreign country, or under the rules and
regulations of The NASDAQ Global Market, and except for such other Consents that if not obtained
would not result, or reasonably be expected to result, in a Parent Material Adverse Effect.



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          3.3.4 Disclosure.
No representation or warranty made by Parent or Sub, nor any document, written information,
statement, financial statement, certificate, or exhibit prepared and furnished or to be prepared
and furnished by Parent or its Representatives under this Agreement, when read together in their
entirety, contains upon the date hereof or will contain upon the consummation of the Merger any
untrue statement of a material fact, or omits upon the date hereof or will omit upon the
consummation of the Merger to state a material fact necessary to make the statements or facts
contained herein or therein, not misleading, in light of the circumstances under which they were
made.



          3.3.5 SEC Reports.
Parent has filed all reports and other documents with the SEC required to be filed or
furnished by Parent since April 30, 2007 (such documents, together with any current reports filed
during such period by Parent with the SEC on a voluntary basis on Form 8-K, the (“Parent SEC
Reports”). As of their respective filing dates, the Parent SEC Reports (i) complied in all
material respects with, to the extent in effect at the time of filing, the applicable requirements
of the Securities Act and the Exchange Act and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they were made, not
misleading.



          3.3.6 Compliance with Law.
Except as would not, individually or in the aggregate, materially impair the ability of Parent
or Sub to consummate the transactions contemplated hereby, neither Parent nor any of its
Subsidiaries is in violation of, or in default under, any Law, in each case, applicable to Parent
or any of its Subsidiaries or any of their respective assets and properties.



          3.3.7 Operations of Sub.
Sub was formed solely for the purpose of engaging in the transactions contemplated hereby and
has not owned any assets, engaged in any business activities or conducted any operations other than
in connection with the transactions contemplated hereby.



          3.3.8 Proxy Materials.
None of the information supplied by Parent or Sub for inclusion in the proxy materials
distributed by Company will, at the date such materials are first mailed to shareholders of the
Company or at the time of the Company Special Meeting of Shareholders, contain any untrue statement
of a material fact or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading.



          3.3.9 Brokers or Finders.
No investment banker, broker, finder, consultant or intermediary other than Houlihan Lokey
Howard & Zukin Capital, Inc. and Cascadia Capital, LLC, the fees and expenses of which will
be paid by Parent, is entitled to any investment banking, brokerage, finder’s or similar fee or
commission in connection with this Agreement or the transactions contemplated hereby based upon
arrangements made by or on behalf of Parent or any of its Subsidiaries.



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          3.3.10 Acquiring Person.
None of Parent, Sub or their respective Affiliates is or ever has been, with respect to the
Company, an “acquiring person”, or an “affiliate” or “associate” of an “acquiring person” (as such
terms are defined in Chapter 23B.19 of the WBCA). Sub will not be, with respect to the Company
after the Merger, an “affiliate or associate” of an “acquiring person” (as such terms are defined
in Chapter 23B.19 of the WBCA).



          3.3.11 Reliance.
Parent makes the foregoing representations and warranties with the knowledge and expectation
that Company is placing reliance thereon.



ARTICLE IV

COVENANTS OF COMPANY




     All references in the subsections of this Article IV to “Company” includes Company’s
subsidiaries except to the extent specifically excluded or except as otherwise clearly required by
the context. During the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Company agrees (except as expressly
contemplated by this Agreement, or with Parent’s prior written consent) that:



     4.1 Conduct of Business.



          4.1.1 Ordinary Course — Cooperation . Company will carry on its business in the
ordinary course consistent with past practice, will continue to observe its obligations to comply
with the requirements of all applicable laws and regulations, and will use commercially reasonable
efforts to: preserve intact its present business organization; keep available the services of its
present officers, consultants, and employees; and maintain satisfactory relationships with
licensors, licensees, customers, suppliers, contractors, distributors, and others having business
relationships with it. Company will promptly notify Parent of any event or occurrence or emergency
not in the ordinary course of business of Company that would result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse Effect.
Company will (with reasonable business expediency) advise and consult in good faith with
Parent before it takes any action to:



               (a) grant any severance or termination pay to any officer, director, or employee of Company
that will be fully paid or fully accrued on the Closing Balance Sheet, other than those made in
Company’s ordinary course of business and consistent with past practices and to the extent required
by law, or by Company’s existing severance plans and agreements as disclosed in the Company
Disclosure Schedule;



               (b) transfer to any third Person ownership of Company Intellectual Property Rights other than
in conjunction with the sales of Company products or services in the ordinary course of business;



               (c) except as contemplated by Company Disclosure Schedule 4.1.1(c), declare, set aside, or pay
any dividend or other distribution with respect to any shares of capital stock of Company that will
be fully paid or fully accrued on the Closing Balance Sheet;



               (d) incur, assume, or guarantee any indebtedness for borrowed money that is included in the
calculation of Net Working Capital, including any extensions or successor agreements in
substitution thereof, other than draw-downs in the ordinary course of business on lines of credit
existing as of the date of this Agreement;



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               (e) commence a lawsuit other than: (i) for the routine collection of bills; or (ii) in such
cases where Company in good faith determines that failure to commence a suit would result in a
material impairment of a valuable aspect of Company’s business;



               (f) extend an offer of employment to a candidate for an officer position of vice president or
above or any position with annual compensation in excess of $100,000;



               (g) accelerate the vesting of Company stock options, as permitted under the Company’s stock
option plans for options outstanding as of the date of this Agreement;



               (h) except as contemplated by Company Disclosure Schedule 4.1.1(h), adopt or pay, accelerate,
or accrue salary or other payments or benefits or promise or make discretionary employer
contributions to, under, or with respect to any pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, group insurance, severance pay, retirement, or other employee
benefit plan, agreement, or arrangement, or any employment or consulting agreement with or for the
benefit of any Company director, officer, employee, agent, or consultant, whether past or present,
or amend any such existing plan, agreement, or arrangement, in each case such as will not result in
any obligation, debt or agreement existing after the Closing Date;



               (i) breach, modify, amend, or terminate any of Company’s Material Contracts, or waive,
release, or assign any rights or claims under any of Company’s Material Contracts, except as
expressly required by this Agreement or except in the ordinary course of business;



               (j) enter into any Material Contract or any other contract that would require Company to
expend a sum in excess of $100,000 but no greater than $200,000, except in the ordinary course of
business;



               (k) except as contemplated by Company Disclosure Schedule 4.1.1(k), adopt or amend any
employee benefit plan or employee stock purchase or employee stock option plan or grant agreement
(other than amendments required by law or to comply with the Code or as requested by Parent under
Section 6.8(c)), or enter into any employment contract, pay any special bonus or special
remuneration to any director, officer, consultant, or employee, or increase the salaries or wage
rates or fringe benefits (including rights to severance or indemnification) of its directors,
officers, consultants, or employees other than increases as required by law, or make any change in
its existing borrowing or lending arrangements for or on behalf of any of such Persons under an
employee benefit plan or otherwise such as will not result in any obligation, debt or agreement
existing after the Closing Date;



               (l) except as contemplated by Company Disclosure Schedule 4.1.1(l), pay or make any accrual or
arrangement for payment of any pension, retirement allowance, or other employee benefit under any
existing plan, agreement, or arrangement to any officer, director, or employee or pay or
agree to pay or make any accrual or arrangement for payment to any officers, directors, or
employees of Company or any amount relating to unused vacation days, such as will not result in any
obligation, debt or agreement existing after the Closing Date;



               (m) make any capital expenditure in excess of $100,000 but no greater than $200,000, such as
will not result in any obligation, debt or agreement existing after the Closing Date; or



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               (n) except as required or permitted under this Agreement, knowingly take any action that would
or is reasonably likely to make any representation or warranty of Company contained in this
Agreement inaccurate,.



          4.1.2 Ordinary Course — Approval.
In addition to the notice provisions of Section 4.1.2, Company will not, without the prior
written consent of Parent, which consent will not be unreasonably withheld:



               (a) grant any severance or termination pay to any officer, director, or employee of Company
that will not be fully paid or fully accrued on the Closing Balance Sheet, other than those made in
Company’s ordinary course of business and consistent with past practices and to the extent required
by law, or by Company’s existing severance plans and agreements as disclosed in the Company
Disclosure Schedule;



               (b) declare, set aside, or pay any cash dividend or other cash distribution with respect to
any shares of capital stock of Company that will not be fully paid or fully accrued on the Closing
Balance Sheet, or pay any other dividend or distribution with respect to any shares of capital
stock of Company, or repurchase, redeem, or acquire any outstanding shares of capital stock or
other equity securities of, or other ownership interests in, Company, or effect any stock split
(forward or reverse), combination or reclassification, or otherwise change its capitalization or
capital structure in any manner from the way it existed on the date hereof;



               (c) incur, assume, or guarantee any indebtedness for borrowed money that is not reflected in
the calculation of Net Working Capital, other than draw-downs in the ordinary course of business on
lines of credit existing as of the date of this Agreement;



               (d) transfer to any third Person ownership of Company Intellectual Property Rights which is
not in the ordinary course of business;



               (e) amend any material provision of the articles of incorporation or bylaws of Company, or any
term of any outstanding security issued by Company;



               (f) change any method of accounting or accounting practice by Company, except for any such
change required by reason of a change in GAAP or with prior agreement with Company’s auditor;



               (g) assign, transfer, dispose of, or license assets of Company, grant any license of any
assets of Company, or acquire or dispose of capital stock of any third party or merge or
consolidate with any third party in each case other than in the ordinary course of business;



               (h) enter into any joint venture, partnership, limited liability company, or operating
agreement with any Person;



               (i) grant or issue any capital stock, securities convertible into capital stock of Company,
restricted stock, restricted stock units, stock appreciation rights, stock options, warrants, or
other equity rights;



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               (j) commence a lawsuit pertaining to the Company’s intellectual property, or settle,
compromise, or otherwise terminate any litigation, claim, investigation, or other settlement
negotiation with any third Person;



               (k) fail to keep in full force insurance policies covering Company’s properties and assets
under substantially similar terms and conditions as Company’s current policies;



               (l) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization (other than the Merger);



               (m) acquire or agree to acquire by merging or consolidating with, or by purchasing any equity
interest in or a portion of the assets of, or by any other manner, any business or any corporation,
partnership, association, or other business organization or division thereof, or otherwise acquire
or agree to acquire any assets;



               (n) except as contemplated by Company Disclosure Schedule 4.1.2(n), adopt or pay, accelerate,
or accrue salary or other payments or benefits or promise or make discretionary employer
contributions to, under, or with respect to any pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, group insurance, severance pay, retirement, or other employee
benefit plan, agreement, or arrangement, or any employment or consulting agreement with or for the
benefit of any Company director, officer, employee, agent, or consultant, whether past or present,
or amend any such existing plan, agreement, or arrangement, in each case such as would result in
any obligation, debt or agreement existing after the Closing Date, or which is not in the ordinary
course of business or as required by law;



               (o) enter into any Material Contract or any other contract that would require Company to
expend a sum greater than $200,000, except in the ordinary course of business;



               (p) except as contemplated by Company Disclosure Schedule 4.1.2(p), adopt or amend any
employee benefit plan or employee stock purchase or employee stock option plan or grant agreement
(other than amendments required by law or to comply with the Code or as requested by Parent under
Section 6.8(c)), or enter into any employment contract, pay any special bonus or special
remuneration to any director, officer, consultant, or employee, or increase the salaries or wage
rates or fringe benefits (including rights to severance or indemnification) of its directors,
officers, consultants, or employees other than increases as required by law, or make any change in
its existing borrowing or lending arrangements for or on behalf of any of such Persons under an
employee benefit plan or otherwise such as would result in any obligation, debt or agreement
existing after the Closing Date;



               (q) except as contemplated by Company Disclosure Schedule 4.1.2(q), pay or make any accrual or
arrangement for payment of any pension, retirement allowance, or other employee benefit under any
existing plan, agreement, or arrangement to any officer, director, or employee or pay or agree to
pay or make any accrual or arrangement for payment to any officers, directors, or employees of
Company or any amount relating to unused vacation days, such as would result in any obligation,
debt or agreement existing after the Closing Date, and other than in the ordinary course of
business consistent with past practice and except as required by law;



               (r) make any capital expenditure in excess of $200,000, or such as would result in any
obligation, debt or agreement existing after the Closing Date;



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               (s) grant rights or licenses to Company Intellectual Property to any standards organization or
to any third Person in compliance with the requirements of any standards organization, or use or
incorporate any intellectual property from any standards organization in Company’s software or
software used in any Company product, Technology, or service;



               (t) authorize, commit, or agree to take any of the foregoing actions except as otherwise
permitted by this Agreement; or



               (u) except as required or permitted under this Agreement, knowingly take any action that would
or is reasonably likely to (i) result in any of the conditions to the Merger in Article VII not
being satisfied, or (ii) impair the ability of Company to consummate the Merger in accordance with
the terms of this Agreement.



          4.1.3 Exclusivity; Acquisition Proposals.



               (a) Unless and until this Agreement has been terminated by either party in accordance with
Section 9.1 hereof, Company agrees that it will not (and will use its commercially reasonable
efforts to ensure that none of its officers, directors, agents, employees, or affiliates, or any
investment banker, financial advisor, attorney, accountant, or other advisor, agent, or
representative (collectively, “Representatives”)) take or cause or permit any Person to take,
directly or indirectly, any of the following actions with any party other than Parent and its
designees: (i) solicit, encourage, initiate, or participate in any negotiations, inquiries, or
discussions with respect to any offer or proposal to acquire all or any significant part of
Company, its business, assets, or capital shares, whether by merger, consolidation, other business
combination, purchase of capital stock purchase of assets, license (but excluding non-exclusive
licenses entered into in the ordinary course of business), lease, tender or exchange offer, or
otherwise (each of the foregoing, a “Restricted Transaction”); (ii) disclose, in connection with a
Restricted Transaction, any nonpublic information to any Person other than Parent or its
Representatives concerning Company’s business or properties or afford to any Person other than
Parent or its Representatives access to its properties, books, or records, except as required by
law or in accordance with a governmental request for information; (iii) enter into or execute any
agreement relating to a Restricted Transaction; or (iv) make or authorize any public statement,
recommendation, or solicitation in support of any Restricted Transaction or any offer or proposal
relating to a Restricted Transaction other than with respect to the Merger. If Company is
contacted by any third party expressing an interest in discussing a Restricted Transaction, Company
will promptly, but in no event later than 24 hours following Company’s knowledge of such contact,
notify Parent in writing of such contact and the identity of the party so contacting Company and
any information conveyed to Company by such third party in connection with such contact or relating
to such Restricted Transaction, and will promptly, but in no event later than 24 hours, advise
Parent of any material modification or proposed modification thereto.



               (b) Neither the board of directors of Company nor any committee thereof will directly or
indirectly (i) (A) withdraw (or amend or modify in a manner adverse to Parent), or publicly propose
to withdraw (or amend or modify in a manner adverse to Parent), the approval, recommendation, or
declaration of advisability by the board of directors of Company or any such committee thereof of
this Agreement, the Merger, or the Transactions, or (B) recommend, adopt, or
approve, or propose publicly to recommend, adopt, or approve, any Acquisition Proposal (any
action described in this clause (i) being referred to as a “Change of Recommendation”) or (ii)
approve or recommend, or publicly propose to approve or recommend, or allow Company or any
subsidiary of Company to execute or enter into, any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement, or other similar agreement, arrangement, or understanding (X)
constituting or



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related to, or that is intended to or could reasonably be expected to lead to, any
Acquisition Proposal or (Y) requiring it to abandon, terminate, or fail to consummate the Merger or
any other transaction contemplated by this Agreement.



               (c) The obligation of Company to call, give notice of, convene, and hold a shareholders’
meeting will not be limited or otherwise affected by the commencement, disclosure, announcement, or
submission to it of any Acquisition Proposal.



               (d) “Acquisition Proposal” means any inquiry, proposal, or offer from any Person relating to,
or that could reasonably be expected to lead to a Restricted Transaction.



     4.2 Breach of Representations and Warranties; Notification; Access to Information.



               (a) Despite anything in this Agreement to the contrary, from the date hereof to the earlier of
the Effective Time or the termination of this Agreement in accordance with Section 9.1, Company
will (i) confer with Parent and its respective Representatives, at such times as they may request,
about appropriate operational and integration matters to the extent permitted by law, (ii) in the
event of, and promptly after becoming aware of, the occurrence of or the pending or threatened
occurrence of any event that would cause or constitute a breach of any of the representations and
warranties in Section 3.1, give detailed written notice thereof to Parent and use commercially
reasonable efforts to promptly remedy any such material breach or inaccuracy, and (iii) promptly
notify Parent of any change in the normal course of any business, operations, or financial
condition of Company or its assets or properties, or any emergency related thereto. Without
limiting the generality of the foregoing, Company will promptly notify Parent of (A) any
discussions or actions (of any type, preliminary or otherwise) relating to bankruptcy of Company,
(B) any complaints, investigations, or hearings (or communications indicating that any complaints,
investigations, or hearings may be contemplated) of any Governmental Entity (for which Company has
received written or oral notice), (C) any loss of or damage to any material property owned by
Company, (D) any change in material existing relationships with outside third parties (for which
Company has received written or oral notice), (E) the institution or threat of any litigation that
could affect Company, (F) the failure of Company to comply with or satisfy any covenant, condition,
or agreement to be complied with or satisfied by it in accordance with this Agreement, or (G) any
other matter that could result, individually or in the aggregate, in a Company Material Adverse
Effect.



               (b) Company will, subject to applicable law, afford Parent and its respective Representatives
reasonable access during normal business hours during the period before the Effective Time to (i)
Company’s properties, books, contracts, commitments, communications (including e-mail), and
records, and (ii) all other information concerning the business, properties, and personnel of
Company, as Parent may reasonably request that is necessary to complete the transaction and prepare
for an orderly transition of operations after the Effective Time. Company agrees to provide to
Parent and its Representatives copies of monthly internal financial statements within 30 days of
completion of such month. No information or knowledge obtained in any investigation in accordance
with this Section 4.2 will affect or be deemed to modify any representation or warranty in this
Agreement or the conditions to
the obligations of Parent to consummate the Merger. Company will permit Parent’s
Representatives to meet with the officers of Company responsible for the financial statements and
internal controls of Company and its subsidiaries to discuss such matters as Parent may deem
reasonably necessary or appropriate to satisfy its obligations under Section 302 and 906 of the
Sarbanes-Oxley Act of 2002 and any rules and regulations relating thereto.



     4.3 Consents and Notices.
Company will promptly apply for or otherwise seek, and use commercially reasonable efforts to
obtain, all Consents and to provide all notices set forth in



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Company Disclosure Schedule 4.3
(without the expenditure of any out-of-pocket payments to a third party to obtain such third
party’s consent or approval), and make all filings, required with respect to Company for the
consummation of the Merger.



     4.4 Commercially Reasonable Efforts.
Company will use commercially reasonable best efforts in good faith to, and the Major
Shareholders will use their commercially reasonable best efforts in good faith to cause Company to,
effect the Transactions and to fulfill and cause to be fulfilled the conditions to Closing under
this Agreement as promptly as practicable and otherwise to enable consummation of the Transactions.



     4.5 Notice to Holders of Company Shares.
Company will promptly comply with the shareholder notice requirements of the WBCA.



     4.6 Tax Returns.
Except as set forth in Company Disclosure Schedule 4.6, before the Closing Date, Company will
properly and timely file or cause to be filed all Returns with respect to Company and any of its
subsidiaries for all taxable periods that have ended before the Closing Date and will pay (or cause
any applicable subsidiaries to pay) all taxes required to be paid for such periods. All such
Returns will be prepared consistent with past practice, and will be subject to approval of Parent,
which will not be unreasonably withheld. Company will (i) notify Parent promptly if Company
receives written notice of any tax audit, the assessment of any tax, the assertion of any tax lien,
or any request, notice, or demand for taxes by any taxing authority, (ii) provide Parent a
description of any such matter in reasonable detail (including a copy of any written materials
received from the taxing authority), and (iii) take no action with respect to such matter without
the consent of Parent, which will not be unreasonably withheld. Company will not (v) amend any
Return previously filed, (w) incur any obligation to make any payment of, or in respect of, any
taxes, except in the ordinary course of business, (x) make or revoke any tax election that may
affect Company, (y) agree to extend or waive the statutory period of limitations for the assessment
or collection of any tax, or (z) enter into any agreement or settlement with respect to any tax,
without the prior advisement and consultation of Parent.



     4.7 Intellectual Property.
Company will not incorporate any software that is subject to an Excluded License into any part
of any Company software or service; use any software that is subject to an Excluded License in
whole or in part in the development of any Company software or services in a manner that may
subject the software, services, or content available therefrom, in whole or in part, to an Excluded
License; or combine or distribute Company software or services (including any content available
therefrom) with any software that is subject to an Excluded License.



     4.8 Parachute Payments.
Before the Effective Time, Company will submit to all Persons entitled to vote (within the
meaning of the Treasury Regulations under Code Section 280G) the material facts concerning all
payments that Parent reasonably believes, in the absence of shareholder approval of such payments,
would be “parachute payments” as defined in Code Section 280G(b)(2) (“Parachute Payments”), in form
and substance reasonably satisfactory to Parent and its counsel, which will satisfy all
requirements of the WBCA and Code Section 280G(b)(5)(B) and the Treasury Regulations thereunder,
and Company will solicit the consent of holders of Company Shares to the Parachute Payments.
Company’s board of



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directors will recommend approval of the Parachute Payments, unless Company’s
board of directors believes in good faith, after consultation with Company’s counsel, that such
recommendation would be inconsistent with the fiduciary duties of Company’s board of directors
under applicable law.



     4.9 Deliveries.
Company will deliver to Parent (i) as promptly as practicable after the execution of this
Agreement, audited balance sheets of Company as of December 31, 2008 and the related audited
statements of income, changes in owner’s equity, and cash flow for the 12 months then ended; (ii)
an unaudited balance sheet of Company as of month-end for the month immediately preceding the month
of Closing (or as of month-end for the month that is 2 months preceding the month of Closing if
Closing occurs on any of the first 10 business days of a month) (in either case, the “Pre-Closing
Balance Sheet Date”), and the related unaudited statements of income, changes in owner’s equity,
and cash flow from the period from January 1, 2009 until the Pre-Closing Balance Sheet Date; (iii)
the Preliminary Closing Balance Sheet no later than three business days before the anticipated
Closing Date; and (iv) all minute books of Company and its subsidiaries before Closing.



     4.10 Shareholder Approval.
Company will take all action, and the Major Shareholders will use their best efforts to cause
Company to take all action, necessary in accordance with the WBCA and Company’s articles of
incorporation and bylaws to solicit consent or to hold and convene a special meeting of the
shareholders of the Company to be held as soon as practicable to submit this Agreement, the Merger,
and related matters for the consideration and approval of the shareholders of the Company.



     4.11 Option Agreements.
As soon as practicable (and in no event later than 30 days prior to Closing), the Company
shall amend those grant agreements governing Company Options as shall be mutually identified by
Company and Parent, to provide that such Company Options shall only become vested and exercisable
immediately prior to a Change in Control, as defined under Code Section 409A and the Treasury
regulations and available guidance issued thereunder. The Company shall take all actions necessary
for such amendments to be enforceable, including, without limitation, obtaining the written consent
of each affected option holder to the amendment to his or her option grant agreement.



ARTICLE V

COVENANTS OF PARENT




     During the period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Parent agrees (except as expressly
contemplated by this Agreement or with Company’s prior written consent, which will not be
unreasonably withheld) that:



     5.1 Breach of Representations and Warranties.
In the event of, and promptly after becoming aware of, the occurrence of or the pending or
threatened occurrence of any event that would cause or constitute a breach of any of the
representations and warranties set forth in Section 3.3, Parent will give detailed notice thereof
to Company and will use commercially reasonable efforts to prevent or promptly remedy such breach
or inaccuracy.



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     5.2 Commercially Reasonable Efforts.
Parent will use commercially reasonable best efforts in good faith to effect the Transactions
and to fulfill and cause to be fulfilled the conditions to Closing under this Agreement as promptly
as practicable and otherwise to enable consummation of the Transactions, including the obtaining of
sufficient available funds (through existing credit arrangements or otherwise) on terms
satisfactory to Parent, and reserving sufficient authorized and unissued Parent Common Stock to pay
the Conversion Payment when payable.



ARTICLE VI

ADDITIONAL AGREEMENTS




     In addition to the foregoing, Parent and Company each agree to take the following actions
after the execution of this Agreement.



     6.1 Non-Disclosure Agreement.
Company and Parent agree that the Non-Disclosure Agreement by and among Company and Parent
dated October 24, 2007 (“Non-Disclosure Agreement”), the Agreement on Confidentiality of Settlement
Communications between Company and Parent dated October 24, 2007 (“Settlement Communications
Agreement”) and any supplements and addendums to those agreements subsequently executed, will
continue in full force and effect and will be applicable to all Confidential Information (as
defined in the Non-Disclosure Agreement) and Settlement Communications (as defined in the
Settlement Communications Agreement) exchanged in connection with this Agreement and the
Transactions.



     6.2 Legal Conditions to the Merger.
Subject to Section 9.1(c), each of Parent, Sub, and Company (a) will take all reasonable actions
necessary to comply promptly with all legal requirements that may be imposed on it with respect to
the Merger and will promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon the other, and (b) will take, and will cause
its respective subsidiaries to take, all reasonable actions to obtain (and to cooperate with the
other parties in obtaining) any consent, approval, order, or authorization of, or any exemption by,
any Governmental Entity, or other third party, required to be obtained or made by Company or Parent
or their respective subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.



     6.3 Proxy Statement and Registration Statement.
As promptly as practicable after the execution of this Agreement, Company and Parent shall
prepare, and (i) Company shall distribute to the shareholders of the Company, a proxy statement and
materials relating to the adoption of this Agreement by the shareholders of Company, and (ii)
Parent shall file with the SEC, the Registration Statement. As promptly as practicable following
receipt of SEC comments thereon and with the cooperation of Company, Parent shall file with the SEC
amendments to the Registration Statement which comply in form with applicable SEC requirements, and
shall use all commercially reasonable efforts to cause the Registration Statement to become
effective as soon thereafter as practicable. Parent will notify Company promptly of the receipt of
any comments from the SEC or its staff and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration Statement or for additional
information. Whenever any event occurs that is required to be set forth in an



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amendment or
supplement to the Registration Statement and/or the proxy statement and related materials, Each
party shall promptly inform the other of such occurrence and cooperate in filing with the SEC or
its staff or any other government officials, and/or mailing to shareholders of Company, such
amendment or supplement. The proxy statement of Company shall solicit the adoption of this
Agreement by the shareholders of Company and shall include the approval of this Agreement and the
Merger by the Board of Directors of Company and the recommendation of the Board of Directors of
Company to Company’s shareholders that they vote in favor of the adoption of this Agreement.
Company and Parent agree to cooperate and provide information and disclosure as required for the
completion of the proxy statement and Registration Statement.



     6.4 Officers and Directors.
Parent will cause the Surviving Corporation to maintain Company’s existing indemnification
provisions (including with respect to advancement of expenses) as of the date hereof with respect
to present and former directors, officers, employees, and agents of Company and all other Persons
who may presently serve or have served at Company’s request as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other enterprise (collectively,
the “Indemnified Parties”) for all expenses, judgments, fines, and amounts paid in settlement by
reason of actions or omissions or alleged actions or omissions occurring at or before the Effective
Time to the fullest extent permitted or required under applicable law and Company’s articles of
incorporation and bylaws in effect as of the date of this Agreement (to the extent consistent with
applicable law), for a period of five years after the Effective Time, as well as any rights to
indemnification and advancement of expenses provided in employment agreements or indemnification
agreements between Company and any Indemnified Parties, and will cause Surviving Corporation to
perform (and guarantees that Surviving Corporation will perform) its obligations under such
indemnification provisions and agreements in accordance with their respective terms. The
provisions of this Section 6.4 are
for the benefit of, and will be enforceable by, each of the Indemnified Parties, their heirs, and
their Representatives.



     6.5 Expenses.
All costs and expenses incurred in connection with this Agreement and the Transactions will be
paid by the party incurring such expense.



     6.6 Additional Agreements.
In case at any time after the Effective Time any further action is reasonably necessary or
desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities, and franchises of Company or
Sub, the proper officers and directors of each corporation that is a party to this Agreement will
take all such action.



     6.7 Public Announcements.
Neither Parent nor Company will make any public announcement concerning this Agreement and the
Transactions without the prior written consent of the other party, and will furnish to the other
party all releases before publication. Promptly following the receipt of the Federal Trade
Commission’s approval of the Merger, Parent will distribute a public announcement substantially in
the form attached hereto as Exhibit 6.7(a). Promptly following the execution of this Agreement,
Parent will distribute a public announcement substantially in the form attached hereto as Exhibit
6.7(b). Nothing in this Agreement will prevent Company or Parent at any time from furnishing any
information to any Governmental Entity or from issuing any release, each as required by law, in
which circumstance



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Company or Parent, as applicable will make commercially reasonable efforts to
consult with Parent or Company as applicable in advance to the extent practicable and in any event
will notify Parent or Company as applicable as soon as practicable. Neither Parent nor Company
will make any communication to customers or announcements to its employees with respect to the
Transactions without the prior written consent of Parent or Company, as applicable.



     6.8 Employee Matters.



               (a) Company will cooperate with regard to the recruitment and hiring of employees by Parent or
continuing employment with Company. Company will present offers of continued employment to such
employees of Company as are designated by Company prior to Closing. Such offers will be in a form
acceptable to Parent and will be presented in a manner and at times acceptable to Parent, provided
that offers will be made to the Company executives set forth on Company Disclosure Schedule 6.8
substantially in the forms attached hereto as Exhibit 6.8(a). Except as expressly agreed to in
writing by Sub or Parent, no specific terms and conditions of employment, including terms and
conditions pertaining to length of employment, are guaranteed. Company will use commercially
reasonable efforts to assist Parent with its recruitment efforts and to satisfy the requirements of
Section 7.2.6 before Closing.



               (b) Company will cooperate with Parent to develop appropriate communications to Company
employees regarding the Transactions and a transition plan in contemplation of Closing, including
delivering other notices to employees as requested by Parent and which are reasonably acceptable to
Company.



               (c) (i) At Parent’s request and immediately before the Effective Time, Company will terminate
or cause to be terminated any or all of the Plans set forth in Section 3.1.13 of the Company
Disclosure Schedule that are intended to be qualified within the meaning of Code Section 401(a),
with such termination to be effective before the Effective Time. Additionally, at Parent’s
request, and before the Effective Time, Company will terminate or cause to be terminated or amend
or cause to be amended any or all other employee benefit plans, policies, and arrangements set
forth in Section 3.1.13 of the Company Disclosure Schedule, at the time and in such manner as
Parent may direct, with Parent having sole and exclusive authority to determine the continuation,
amendment, or termination of such plans in accordance with applicable federal and state laws. Any
continuation, amendment or termination under this subsection (i) shall not be effective until
immediately prior to the Effective Time (with the effectiveness of such amendment or termination
being conditioned upon the occurrence of Closing).



                    (ii) In the event that Company, pursuant to Parent’s request, terminates or causes to be
terminated prior to the Effective Time any or all of the Plans or other employee benefit plans,
policies, and arrangements as described in subsection (i) above, then Parent shall take all
reasonable action so that employees of Company shall be entitled to participate in the Parent
Benefit Plans (as defined in subparagraph (iii) below) that are of a similar type as such
terminated Company plans to the same extent as similarly-situated employees of Parent as of the
Effective Time (it being understood that inclusion of the employees of Company in the Parent
Benefit Plans may occur at different times with respect to different plans), provided that nothing
contained herein shall require Parent to make any grants to any former employee of Company under
any discretionary equity compensation plan of Parent or to establish new Parent Benefit Plans that
do not exist at the time such Company plans are terminated, and subject to the other limitations
set forth in subsection (iii) below. Each of



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Company and Parent acknowledge and agree that all
provisions contained within this Section 6.8(c)(ii) with respect to employees are included for the
sole benefit of Company and Parent and shall not create any right (a) in any other person,
including, any current participant in any Parent Benefit Plans or Company benefit plans or any
beneficiary thereof or (b) to continued employment with Company, Parent or any of their respective
affiliates.



                    (iii) In the event Parent does not have Company terminate or amend any or all Company Plans or
other employee benefit plans, policies, and arrangements as set forth in (i) above, then as soon as
Parent determines, in its sole discretion, that such actions are administratively practicable,
Parent shall take all reasonable action so that employees of Company shall be entitled to
participate in each comparable employee benefit plan, program or arrangement of Parent of general
applicability (the “Parent Benefit Plans”) to the same extent as similarly-situated employees of
Parent (it being understood that inclusion of the employees of Company in the Parent Benefit Plans
may occur at different times with respect to different plans), provided that coverage shall be
continued under the corresponding benefit plans of Company until such employees are permitted to
participate in the comparable Parent Benefit Plan and provided further, however, that nothing
contained herein shall require Parent to make any grants to any former employee of Company under
any discretionary equity compensation plan of Parent. Parent shall use commercially reasonable
efforts to cause each Parent Benefit Plan in which employees of Company are eligible to participate
to recognize, for purposes of determining eligibility to participate in the vesting of benefits
under the Parent Benefit Plans, the service of such employees with Company to the same extent as
such service was credited for such purpose by Company, provided, however, that
such service shall not be recognized to the extent that such recognition would result in a
duplication of benefits. At such time as employees of Company become eligible to participate in a
medical, dental or health plan of Parent, Parent shall use commercially reasonable efforts to cause
each such plan to (a) waive any preexisting condition limitations to the extent such conditions are
covered under the applicable medical, health or dental plans of Parent, (b) provide full credit
under such plans for any deductibles, co-payment and out-of-pocket expenses incurred by the
employees and their beneficiaries during the portion of the calendar year prior to such
participation and (c) waive any waiting period limitation or evidence of insurability requirement
which would otherwise be applicable to such employee on or after the Effective Time to the extent
such employee had satisfied any similar limitation or requirement under an analogous Plan prior to
the Effective Time. Nothing in this Agreement (including this Section 6.8) will be deemed to (i)
require Parent to establish an employee benefit plan; (ii) limit or otherwise affect the right of
Parent to modify or terminate any Parent Benefit Plan without establishing a replacement plan, in
each case as Parent may determine in its sole discretion; (iii) require Parent to provide employee
benefits to any former employee of the Company after such employee’s employment with Company or
Parent has terminated; or (iv) incur material additional costs to obtain waivers or recognition
from any insurance carrier or benefit plan administrator. Each of Company and Parent acknowledge
and agree that all provisions contained within this Section 6.8(c)(iii) with respect to employees
are included for the sole benefit of Company and Parent and shall not create any right (x) in any
other person, including, without limitation, any third party beneficiary rights or any right in any
current participant in any Parent Benefit Plans or Company benefit plans or any beneficiary thereof
or (y) to continued employment with Company, Parent or any of their respective affiliates.



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                    (d) As set forth in Section 2.2.2 above, Parent agrees to designate the Employee Retention
Pool Amount for (i) retention bonuses for certain Company employees selected by Company after
consultation with Parent, (ii) fees and expenses of the Employee Retention Escrow, and (iii) the
employer’s share of FICA (OASDI and Medicare) taxes on such retention bonuses. The initial
allocation of the portion of the Employee Retention Pool Amount that is left after taking into
account the estimated amount of the employer’s share of FICA taxes on the bonuses and fees and
expenses of the Employee Retention Escrow (“Initial Bonus Allocation”) among such employees will be
at Company’s discretion after consultation with Parent. The retention bonuses will be subject to
certain conditions and retention requirements determined by Company after consultation with Parent.
Each such employee will have the opportunity to earn the amount allocated for that individual
should he or she meet the requirements contained in Exhibit 2.2.2. In the event that any
individual employee does not earn the amounts allocated to him or her due to his or her failure to
meet applicable conditions or retention requirements, such amounts (plus the portion of the
Employee Retention Pool Amount allocated for the estimated employer’s share of FICA on such amount,
“FICA Allocation”) will not be paid or reallocated to other employees. Any bonus amounts that are
not earned as of the six-month anniversary of the Closing plus the FICA Allocation on such unearned
amounts will remain in the Employee Retention Escrow until such time as the Escrow Amount is to be
distributed, at which time such amounts shall be paid to the Escrow Agent under the Escrow
Agreement pursuant to Section 2.2.2 above and the terms of the Employee Retention Escrow Agreement.



     6.9 Additional Payments. Parent agrees to pay, within five business days following the
Effective Time, those fees and expenses of litigation as set forth in Section 3.1.9(v) of the
Company Disclosure Schedule.



     6.10 Escrow Note.
Contemporaneous with the Closing, Parent shall deposit the duly executed Escrow Note or shares of
Parent Common Stock equal to the Escrow Amount with the Escrow Agent.



ARTICLE VII

CONDITIONS PRECEDENT




     7.1 Conditions to Each Party’s Obligation to Effect the Merger.
The respective obligations of each party to consummate the Merger are subject to the
satisfaction, or to the extent permitted by applicable law, the written waiver at or before the
Effective Time, of each of the following conditions:



          7.1.1 Shareholder Approval.
This Agreement and the Transactions will have received Company Shareholder Approval.



          7.1.2 Registration Statement.
The Registration Statement shall have been declared effective by the SEC, and no stop orders
or injunctions shall have been filed with respect to such Registration Statement, and all requisite
filings and approvals shall have been made and obtained from the NASD and The NASDAQ Global Market,
as appropriate.



          7.1.3 Consents.
Other than the filing of the Articles of Merger with the Secretary of State of Washington, all
Consents, third party consents, and notices that are legally required to be obtained or provided
for the consummation of the Merger and the Transactions,



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including those listed on Schedule 4.3,
will have been satisfied, filed, occurred, or been obtained, in accordance with the terms and
conditions of all applicable agreements other than such Consents and third party consents as Parent
and Company agree Company and Parent will not seek or obtain.



          7.1.4 No Order.
No Governmental Entity of competent jurisdiction will have enacted, issued, promulgated,
enforced, or entered any statute, rule, regulation, executive order, decree, injunction, or other
order (whether temporary, preliminary, or permanent) that (i) is in effect, and (ii) has the effect
of making the Merger illegal or otherwise prohibiting consummation of the Merger (which illegality
or prohibition would have a material impact on Company if the Merger were consummated
notwithstanding such statute, rule, regulation, executive order, decree, injunction, or other
order).



          7.1.5 No Material Adverse Effect.
Parent shall have concluded that the completion of the Transactions will not have a Parent Material
Adverse Effect, including the Company.



     7.2 Conditions of Obligations of Parent and Sub.
The obligations of Parent and Sub to consummate the Merger are further subject to the
satisfaction or waiver at or before the Effective Time of each of the following conditions:



          7.2.1 Representations and Warranties of Company.
The representations and warranties of Company in this Agreement will be true and correct in
all respects on the date hereof and as of the Closing Date with the same force and effect as if
made on the Closing Date, except to the extent the failure of such representations and warranties
of Company to be true and correct has not resulted, individually or in the aggregate, in a Company
Material Adverse Effect (and except that those representations and warranties which address matters
only as of a particular date will have been true and correct only on such date), it being
understood that, for purposes of determining the accuracy of such representations and warranties,
all materiality qualifications and other qualifications based on the word “material” in such
representations and warranties will be disregarded. Parent and Sub will have received a certificate
with respect to the foregoing signed on behalf of Company by the Chief Executive Officer and the
Chief Financial Officer of Company.



          7.2.2 Performance of Obligations of Company.
Company will have performed in all material respects all agreements and covenants required to
be performed by it under this Agreement before the Closing Date. Parent will have received a
certificate signed on behalf of Company by the Chief Executive Officer and the Chief Financial
Officer of Company to such effect.



          7.2.3 No Company Material Adverse Effect.
From the date of this Agreement until the Closing Date, there has been no change, event,
circumstance, development, or effect that resulted, individually or in the aggregate, in a Company
Material Adverse Effect, and Parent will have received a certificate to that effect signed on
behalf of Company by the Chief Executive Officer and the Chief Financial Officer of Company.



          7.2.4 Legal Action.
There will not be pending any action, proceeding, or other application brought by any
Governmental Entity: (i) challenging or seeking to restrain or



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prohibit the consummation of the
Transactions, or seeking to obtain any material damages in connection therewith; or (ii) seeking to
prohibit or impose any material limitations on Parent’s or Surviving Corporation’s ownership or
operation of all or any portion of Company’s business or to compel Parent or Surviving Corporation
to dispose of or hold separate all or any material portion of the assets of Company as a result of
the Transactions.



          7.2.5 Resignations.
Parent will have received the resignations of all of the officers and directors of Company as
officers and directors and any subsidiaries thereof as Parent shall designate (which resignations,
other than the right to serve as an officer or director, will not impair the rights of any officer
or director as employees of the Surviving Corporation).



          7.2.6 Certain Employees.
As of immediately before Closing, (a) each individual set forth in Company Disclosure Schedule
7.2.6 who is offered employment with Parent or continued employment with Company with Parent’s
approval will have received (and executed, as applicable) an offer and employee agreement in the
form provided by Parent and an employee proprietary information and nondisclosure agreement in the
form provided by Parent, and (b) each individual set forth on Schedule 6.8 will have executed an
offer and employment agreement as provided in Section 6.8(a), and each individual in (a) and (b)
above will not have taken any action or expressed any intent to terminate or modify such
acceptance, and will have in place all certifications, clearances, and authorizations required to
perform the duties of the specified position.



          7.2.7 Noncompetition Agreement.
Each individual set forth on Schedule 6.8 will have executed a non-competition and
non-solicitation agreement with Parent in the form attached hereto as Exhibit 7.2.7, and will not
have taken any action or expressed any intent to terminate or modify such agreement.



          7.2.8 Termination of Certain Agreements. All agreements set forth in Company
Disclosure Schedule 7.2.8 will have been terminated by the parties thereto.



          7.2.9 Amendment of Certain Agreements. All agreements set forth in Company Disclosure
Schedule 7.2.9 will have been amended as provided in such schedule, and such amendments will be in
full force and effect.



          7.2.10 Opinion of Counsel.
Parent will have received an opinion dated as of the Closing Date of Foster Pepper PLLC reasonably
satisfactory to Parent, substantially in the form attached hereto as Exhibit 7.2.10. Parent will
also have received an opinion dated as of the Closing Date from Foster Pepper PLLC, reasonably
satisfactory to Parent and upon which Parent can rely under U.S. Treasury Department Circular 230,
opining as to whether the exercise of options in April 2008 and the exercise of any options
immediately prior to Closing, which are intended by the Company to be incentive stock options may
be properly reported as incentive stock options (within the meaning of Code Section 422).



          7.2.11 Assignment of Rights to Company Intellectual Property.
Company and the employees, independent contractors (including former employees and independent
contractors) and customers of Company will have executed such assignments and other documentation
as



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may be reasonably requested by Parent to effectively transfer or confirm the transfer of all
right, title, and interest to Company Intellectual Property to Company and/or Parent as its
successor.



          7.2.12 Escrow Agreements.
Shareholders’ Representative and BNY Mellon Shareowner Services will have executed and
delivered each of the Escrow Agreements.



          7.2.13 Deliveries.
Company will have made the deliveries required by Section 4.9.



          7.2.14 Appraisal Rights.
Not more than five percent (5%) of the holders of Company Shares that are outstanding on the
record date for the determination of those shares entitled to vote for or against the Merger will
have demanded and perfected appraisal rights, and not effectively withdrawn or lost such appraisal
rights.



          7.2.15 Company Option Holders.
Company shall have amended those designated Company Options in accordance with Section 4.11
above, and all holders of Company Options will have provided Parent with written consent to the
exercise of each of their respective Company Options in exchange for the right to receive the
Conversion Payment for such Company Options as set forth in Section 2.1.3 hereof, and such consents
will be in full force and effect.



          7.2.16 FIRPTA Certificate.
Company will have delivered to Parent a duly authorized and executed certificate stating that
no interest in the Company is a United States real property interest within the meaning of Section
897 of the Code, which certificate (and delivery thereof) will comply in all respects with the
requirements set forth in Treasury Regulation Sections 1.1445-2(c)(3) and 1.897-2(h).



          7.2.17 Shareholders’ Agreements.
Each of the agreements of even date herewith, entered into between Parent, Company, each of
the Major Shareholders and such other shareholders of the Company as necessary to provide
agreements representing a majority of the outstanding shares of the Company, shall be in full force
and effect.



     7.3 Conditions of Obligation of Company.
The obligation of Company to consummate the Merger is subject to the satisfaction, or to the
extent permitted by applicable law, the written waiver at or before the Effective Time of each of
the following conditions:



          7.3.1 Representations and Warranties of Parent and Sub.
The representations and warranties of Parent and Sub contained in this Agreement will be true
and correct in all respects on the date hereof and as of the Closing Date with the same force and
effect as if made on the Closing Date, except to the extent the failure of such representations and
warranties of Company to be true and correct has not resulted, individually or in the aggregate, in
a Company Material Adverse Effect (and except that those representations and warranties which
address matters only as of a particular date will have been true and correct only on such date),
except, individually or in the aggregate, as does not constitute a Parent Material Adverse Effect
at the Closing Date (it being understood that, for purposes of determining the accuracy of such
representations and warranties, all “Material Adverse Effect” and materiality qualifications and



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other qualifications based on the word “material” in such representations and warranties will be
disregarded). Company will have received a certificate with respect to the foregoing signed on
behalf of Parent, with respect to the
representations and warranties of Parent, by an authorized officer of Parent and a certificate
with respect to the foregoing signed on behalf of Sub, with respect to the representations and
warranties of Sub, by an authorized officer of Sub.



          7.3.2 Performance of Obligations of Parent and Sub.
Parent and Sub will have performed all agreements and covenants required to be performed by
them under this Agreement before the Closing Date, and Company will have received a certificate
signed on behalf of Parent and Sub by an authorized officer of Parent and Sub to such effect.



          7.3.3 Escrow Agreements.
Parent and BNY Mellon Shareowner Services will have executed and delivered each of the Escrow
Agreements.



ARTICLE VIII

INDEMNIFICATION




     8.1 Indemnification Relating to Agreement.
Subject to the limitations set forth in this Article VIII, the holders of the Company Shares
and Company Options jointly and severally (except as to those matters described in Section
8.5(b)(i) and (ii) below, as to which matters the indemnification obligations hereunder shall be
several and not joint for any amounts in excess of the then-available Escrow Amount) will defend,
indemnify, and hold Parent and Surviving Corporation harmless from and against, and reimburse
Parent and Surviving Corporation with respect to, any and all losses, damages, liabilities, claims,
judgments, settlements, fines, costs, and expenses (including reasonable attorneys’ fees)
(“Indemnifiable Amounts”) of every nature whatsoever incurred by Parent and Surviving Corporation
by reason of or arising out of or in connection with (i) any breach, or any claim (including claims
by parties other than Parent) that if true, would constitute a breach of any representation or
warranty of Company in this Agreement (as modified by the Company Disclosure Schedule as of the
date hereof) or in any certificate or other document delivered to Parent in accordance with this
Agreement, (ii) the failure, partial or total, of Company to perform any agreement or covenant
required by this Agreement to be performed by it, (iii) any Working Capital Deficit adjustment to
the extent not paid in accordance with Section 2.3 and (iv) all taxes of Company relating to all
taxable periods ended on or before the Closing Date and the portion of taxes of Company
attributable to the portion of any Straddle Period beginning as of the first day of such Straddle
Period and ending as of the end of the Closing Date (a “Pre-Closing Period”) (calculated in the
manner set forth in Section 8.3(c) (Straddle Period)), other than taxes on income recognized or
accrued by Company after January 2009 in respect of obligations of Parent not paid in March 2009;
in each case of (i) and (ii) above, without giving effect to any “materiality” limitations or
references to “material adverse effect” set forth therein. The availability of the Escrow Amount
to indemnify Parent will be determined without regard to any right to indemnification to which any
holder of any interest in the Escrow Amount may have in his or her capacity as an officer,
director, employee, agent, or any other capacity of Company and no such holder will be entitled to
any indemnification from Company or Surviving Corporation for amounts paid hereunder. Any payment
to Parent in
accordance with this Article VIII will be treated for tax purposes as an adjustment to the
consideration for the Company Common Shares.




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     8.2 Third Party Claims.



               (a) If any third party shall notify Parent with respect to any matter (a “Third-Party Claim”)
which may give rise to a claim for indemnification against any other party hereto (the
“Indemnifying Party”) under this Article VII, then Parent shall promptly (and in any event within
30 business days after receiving notice of the Third-Party Claim) notify each Indemnifying Party
thereof in writing.



               (b) Any Indemnifying Party will have the right at any time to assume and thereafter conduct
the defense of the Third-Party Claim with counsel of his or its choice reasonably satisfactory to
Parent; provided, that the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third-Party Claim without the prior written consent
of the Parent (not to be withheld unreasonably).



               (c) If the Indemnifying Party assumes the defense of such claim or litigation resulting
therefrom, Parent shall be entitled to participate in the defense of the claim, but Parent shall
bear the fees and expenses of any additional counsel retained by it to conduct its defense unless
any of the following shall apply: (i) the employment of such counsel shall have been authorized in
writing by the Indemnifying Party or (ii) the Indemnifying Party’s legal counsel shall advise the
Indemnifying Party in writing, with a copy to Parent, that there is a conflict of interest that
would make it inappropriate under applicable standards of professional conduct to have common
counsel. If clause (i) or (ii) in the immediately preceding sentence is applicable, then Parent
may employ separate counsel at the reasonable expense of the Indemnifying Party to represent
Parent, but in no event shall the Indemnifying Party be obligated to pay the costs and expenses of
more than one such separate counsel for any one complaint, claim, action or proceeding in any one
jurisdiction.



               (d) Unless and until an Indemnifying Party assumes the defense of the Third-Party Claim as
provided in this Section 8.2, however, Parent may defend against the Third-Party Claim in any
manner it reasonably and in good faith may deem appropriate.



     8.3 Tax Contests.



               (a) To the extent Taxes paid by the Company for the Pre-Closing Period (other than those items
identified in Schedule 8.6) are not reserved for and reflected in the Final Working Capital, the
Company shall be entitled to withdraw from the Escrow Amount, without defense, at or prior to the
filing of the Return, the amount due in excess of the reserve.



               (b) Parent shall prepare and file, or shall cause to be prepared and filed, all Returns
required to be filed by or with respect to the Company, other than those Returns described under
Section 4.6.



               (c) For purposes of Section 8.1(iv), in the case of any taxable period that includes but does
not end on the Closing Date (a “Straddle Period”), the amount of any taxes based on or measured by
income or receipts of Company deemed to relate to a Pre-Closing Period will be determined based on
an interim closing of the books as of the close of business on the Closing Date, and the amount of
other taxes of Company for a Straddle Period which relate to a Pre-Closing Period will 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 total number of days in such Straddle Period.



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               (d) Parent, the Company and the Shareholders’ Representative shall cooperate fully, as and to
the extent reasonably requested, in connection with the preparation and filing of Returns pursuant
to this Section 8.3 and any audit, investigation, litigation or other proceeding with respect to
Taxes that may be instituted after the Closing Date. Shareholders’ Representative shall control
the conduct, through counsel of Shareholders’ Representative’s own choosing at his expense (which
expense shall be reimbursable from the Escrow Amount), of any audit or administrative or judicial
proceeding involving any asserted Tax liability of the Company (any such audit or proceeding
relating to an asserted Tax liability referred to herein as a “Tax Contest”) relating solely to
Pre-Closing Periods (except that Parent shall control any Tax Contest with respect to taxes on
income recognized or accrued by Company after January 2009 in respect of obligations of Parent not
paid in March 2009), but Parent shall have the right to participate in any such Tax Contest at its
own expense and, with the written consent of the Shareholders’ Representative, and at its expense,
may assume control of the conduct of such Tax Contest. If Shareholders’ Representative fails to
assume control of the conduct of any such Tax Contest within a reasonable period following the
receipt by any party of notice of such Tax Contest, Parent shall have the right to assume control
of such Tax Contest and shall be able to settle, compromise and/or concede such Tax Contest in its
sole discretion. Parent shall exercise the same level of client advocacy, diligence and continuity
of tax positions as Parent maintains for its own tax matters prior to the merger.



               (e) (i) From and after the Closing Date, the holders of the Company Shares and Company Options
shall indemnify and hold Parent harmless from and against and shall compensate and reimburse Parent
for any and all Losses (which will not be subject to any dollar threshold) arising out of or in
connection with any and all Taxes of the Company for all Pre-Closing Periods, or which relate to an
event or transaction occurring on or before the Closing Date, to the extent such Losses exceed the
amount, if any, reserved for and reflected in the Final Working Capital.



                    (ii) In the event that any of the Parent or the Surviving Corporation pays or receives a
request by a taxing authority to pay any Taxes relating to or arising from Pre-Closing Periods,
Parent shall notify the Shareholders’ Representative of any such payments or requests for payment.
Parent shall receive from the Escrow Amount amounts equal to such payments or requests for payment
no later than twenty (20) business days after the Shareholders’ Representative receives such
notification, unless the Shareholders’ Representative timely elects to contest any such Tax in
accordance herewith, in which case Parent shall not receive any reimbursement for any such Tax that
it is required to pay until the conclusion of such contest.



                    (iii) If any third party notifies the Shareholders’ Representative of the existence of any
audit, litigation or other proceeding relating to Taxes of the Company for a Pre-Closing Period (a
“Third-Party Tax Claim”), the Shareholders’ Representative shall give notice to Parent within
fifteen (15) days of the notice of the Third-Party Tax Claim. The Shareholders’ Representative
covenants and agrees not to settle or otherwise dispose of any Third-Party Tax Claim, if such claim
shall have adverse Tax consequences to Parent, without first obtaining written consent from Parent
of such settlement or disposition.



               (f) To the extent the Company receives an expense deduction as a result of the exercise of
Company Options pursuant to Section 2.1.3(b), and such deduction results in a tax loss for such
taxable period, the loss will, at Parent’s option, be applied as a tax loss carry-back to prior tax
periods, and the prior federal tax returns of the Company will be so amended at Parent’s option to
the extent permitted under the Code. Tax receivables derived from the carryback of a net operating
loss calculated at Closing, where such net operating loss carryback relates to the expense
deduction described in the preceding sentence, will not be included as a part of Current Assets for
purposes of determining Net Working Capital. The parties agree to treat any indemnification
payment made pursuant to Section 8.3(e)



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and this Article VIII, as the case may be, as an adjustment to the consideration for the
Merger for federal, state, local and foreign income Tax purposes. 




     8.4 Binding Effect. The indemnification provisions in this Article VIII are an integral part of this Agreement and
Merger in the absence of which Parent would not have entered into this Agreement.



     8.5 Time Limit.



               (a) The representations, warranties, covenants, and agreements of Company and Major
Shareholders set forth in this Agreement will survive Closing and will continue for eighteen (18)
months thereafter (the “Termination Date”), at which time all representations and warranties will
expire.



               (b) Despite Section 8.5(a), no time limit will apply (other than the date that is 30 days
after the expiration of the applicable statute of limitations period) for indemnification arising
from: (i) fraud, willful breach, or intentional misrepresentation by Company or the holders of
Company Shares; (ii) any breaches of representations and warranties in Sections 3.1.2 (Capital
Structure) and Sections 3.1.3 and 3.2.1 (Authority). Despite the above, no representation,
warranty, covenant, or agreement will expire to the extent Parent has provided to the Shareholders’
Representative written notice of Parent’s claim for indemnification in accordance with the terms of
the Escrow Agreement before the expiration of the applicable survival period.



     8.6 Limitations. Despite any other provision in this Article VIII, with respect indemnification under Section
8.1(i) Parent and Surviving Corporation will be entitled to indemnification thereunder only:



               (a) if the aggregate Indemnifiable Amounts exceed $500,000 (the “Threshold Amount”); if and
when the aggregate Indemnifiable Amounts exceed the Threshold Amount, Parent will be entitled to be
indemnified for all Indemnifiable Amounts in excess of the Threshold Amount; and



               (b) in an aggregate amount up to the Escrow Amount.


Provided, however, that the limitations of this Section 8.6 do not apply to, and any calculation of
the Threshold Amount as it relates to other Indemnifiable Amounts will not include, Indemnifiable
Amounts arising out of (i) fraud, willful breach, or intentional misrepresentation by Company or
the holders of Company Shares or Company Options; (ii) any breaches of representations and
warranties in Sections 3.1.2 (Capital Structure) and Sections 3.1.3 and 3.2.1 (Authority); and
(iii) any taxes of Company as described in Section 8.1(iv) and any breaches of representations and
warranties in Section 3.1.18 (Taxes) and by reason of or arising out of or in connection with those
matters identified in Schedule 8.6 attached hereto.




     8.7 Contribution. Holders of Company Shares will have no right of contribution from the Surviving Corporation
for liabilities for such holders’ obligations under this Article VIII.



     8.8 Exclusive Remedy. With the exception of (a) claims based upon fraud, willful breach, or intentional
misrepresentation, (b) claims under Section 8.1(iv), (c) claims arising out



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of breaches of the representations and warranties in Section 3.1.2 (Capital Structure), Sections 3.1.3 and 3.2.1
(Authority) and Section 3.1.18 (Taxes), from and after the Effective Time, resort to
indemnification under this Article VIII will be the exclusive right and remedy of Parent and
Surviving Corporation for Indemnifiable Amounts or other damages under this Agreement (it being
understood that nothing in this Section 8.8 or elsewhere in this Agreement will affect Parent’s or
Surviving Corporation’s rights to equitable remedies to the extent available).




ARTICLE IX

TERMINATION, AMENDMENT, AND WAIVER




     9.1 Termination. Despite anything in this Agreement to the contrary, this Agreement may be terminated and the
Transactions abandoned at any time before the Effective Time:



               (a) by mutual written consent of Parent and Company, duly authorized by Parent and by the
board of directors of Company;



               (b) by either Parent or Company (provided that the terminating party is not then in material
breach of any representation, warranty, covenant, or agreement contained in this Agreement) if (i)
there has been a material breach by the non-terminating party of any representation, warranty,
covenant, or agreement as set forth in the Agreement that results in the closing conditions in
Article VII in the terminating party’s favor not being capable of being met by the date set forth
in Section 9.1(d) below or (ii) if any representation or warranty of the non-terminating party is
or has been untrue or inaccurate such that, in the aggregate, such untruths or inaccuracies would
result, or reasonably be expected to result, in a Company Material Adverse Effect or a material
adverse effect on a party’s ability to consummate the Transactions; provided, however, that if in
each case such breach is curable, then this Agreement may not be terminated under this Section
9.1(b) until the earlier of (i) 30 days after delivery of written notice of such untruth or
inaccuracy or breach, or (ii) the date on which the non-terminating party ceases to exercise
commercially reasonable efforts to cure such untruth or inaccuracy or breach;



               (c) by either Parent or Company if any permanent injunction or other order of a court or other
competent authority preventing the Merger will have become final and not subject to appeal; or



               (d) by Parent in its sole discretion at any time on or prior to August 15, 2009 (the “Outside
Date”), or by either Parent or Company if the Merger has not been consummated by the Outside Date.



     9.2 Effect of Termination. In the event of termination of this Agreement by either Company or Parent as provided in
Section 9.1, this Agreement will become void and have no effect, and there will be no liability or
obligation on the part of Parent, Sub, or Company, or their respective officers or directors,
except that (i) the provisions of Sections 6.1 (Non-Disclosure Agreement), 6.7 (Public
Announcements), 9.2 (Effect of Termination), 10.6 (Governing Law), 10.10 (Specific Performance),
10.12 (Submission to Jurisdiction), and 10.13 (Shareholders’ Representative) and the Non-Disclosure
Agreement will survive any such termination and abandonment, and (ii) no party will be released or relieved from any liability arising from the willful breach by such party of any of its
representations, warranties, covenants, or agreements as set forth in this Agreement.



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     9.3 Liquidated Damages. In the event that the transactions contemplated by this Agreement are not consummated by the
Outside Date, Parent will deliver to Company on the next business day a $4,000,000 principal amount
unsecured 2% promissory note with a maturity of four years in the form attached hereto as Exhibit
9.3 (such promissory note, the “Liquidated Damages”). Upon delivery of the Liquidated Damages, all
parties to this Agreement will be deemed to have released all claims against any other party to
this Agreement arising or that could arise out of the negotiation, execution, or performance of
this Agreement.



ARTICLE X

GENERAL PROVISIONS




     10.1 Notices. All notices, requests, demands, or other communications required or permitted to be given
under this Agreement will be in writing and deemed given upon: (i) personal delivery, (ii)
confirmed delivery by a standard overnight courier or when delivered by hand, (iii) when mailed in
the United States by certified or registered mail, postage prepaid, addressed at the following
addresses (or at such address for a party as will be specified by notice given hereunder), or (iv)
transmitter’s confirmation of a receipt of a facsimile transmission:






	 	 	 
	     (a) if to Parent or Sub, to:

	 	Flow International Corporation

23500 64th Avenue South

Kent, WA 98032

Attention: John Leness, General Counsel

Facsimile No.:  (253) 813-3285
	 
	 	 
	           With a copy to:

	 	K&L Gates llp


925 Fourth Avenue, Suite 2900

Seattle, WA 98104-1158

Attention: Robert S. Jaffe

Facsimile No.: 206-623-7022
	 
	 	 
	     (b) if to Company, to:

	 	OMAX Corporation

21409 72nd Ave. South

Kent, WA 98032

Attention: James O’Connor

Facsimile No.: (253) 872-6190
	 
	 	 
	           With a copy to:

	 	Foster Pepper PLLC

1111 Third Avenue

Seattle, WA 98101-3299

Attention: Robert Diercks

Facsimile No.: 206-447-9700






-68-









 







	 	 	 
	     (c) if to Shareholders’ Representative to:

	 	John B. Cheung

John B. Cheung, Inc.

4905 Somerset Dr. S.E.

Bellevue, WA 98006

Telephone No.: 425-641-4688






     10.2 Interpretation. For purposes of this Agreement, “subsidiary” or “subsidiaries” means with respect to any
Person, any entity or entities of which securities or other ownership interests having voting power
sufficient to elect a majority of its board of directors or other governing body are at any time
directly or indirectly owned by such Person. For purposes of this Agreement, “Person” means an
individual, corporation, partnership, association, limited liability company, trust, estate,
organization, or other entity. The words “include,” “includes,” and “including” when used in this
Agreement will be deemed in each case to be followed by the words “without limitation.” The table
of contents and headings contained in this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this Agreement. The “knowledge of” or other
derivations of “know” in this Agreement with respect to a party will mean the knowledge of the
executive officers of such party, after the exercise of reasonable inquiry and investigation by
such executive officers. As used in this Agreement, the term “affiliate” has the meaning set forth
in Rule 12b-2 promulgated under the Exchange Act. As used in this Agreement, the term “business
day” means any day other than a Saturday, Sunday, or a day on which banking institutions in
Seattle, Washington are permitted or obligated by law to be closed for regular banking business.
The respective parties hereto and their attorneys have negotiated this Agreement and the language
hereof will not be construed for or against either party, as drafter. A reference to a section,
schedule, or an exhibit will mean a section in, or schedule or exhibit to, this Agreement unless
otherwise explicitly set forth.



     10.3 Counterparts. This Agreement may be executed (i) in one or more partially or fully executed counterparts,
each of which will be deemed an original and will bind the signatory, but all of which together
will constitute the same instrument, and (ii) by facsimile. The execution and delivery of a
Signature Page — Agreement and Plan of Merger, in the form annexed to this Agreement, by any party
hereto who will have been furnished the final form of this Agreement will constitute the execution
and delivery of this Agreement by such party.



     10.4 Miscellaneous. This Agreement, the Non-Disclosure Agreement, and the documents referred to in this Agreement
(i) constitute the entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (ii) is not intended to confer upon any other Person any
rights or remedies hereunder (except as otherwise expressly provided in this Agreement and except
that Section 6.4 is for the benefit of the Indemnified Parties); and (iii) will not be assigned by
operation of law or otherwise except as otherwise specifically provided.



     10.5 No Joint Venture. Nothing in this Agreement will be deemed or construed as creating a joint venture or
partnership between any of the parties hereto. No party is by virtue of



-69-









 




this Agreement authorized as an agent, employee, or legal representative of any other party. No party will have the power to
control the activities and operations 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. No party will hold itself out as having any
authority or relationship in contravention of this Section 10.5.




     10.6 Governing Law. This Agreement will be governed in all respects, including validity, interpretation, and
effect, by the laws of the State of Washington, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.



     10.7 Amendment. Except as may otherwise be provided in this Agreement, any provision of this Agreement may be
amended or modified by the parties hereto before the Closing Date, if, and only if such amendment
or modification is in writing and signed on behalf of each of the parties hereto; provided that
after the approval of this Agreement by the shareholders of Company, no such amendment will be made
except as allowed under applicable law.



     10.8 Extension, Waiver. At any time before the Effective Time, any party hereto may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and warranties in this Agreement
or in any document delivered pursuant hereto made to such party, and (iii) waive compliance with
any of the agreements, covenants, or conditions in this Agreement for the benefit of such party.
Any agreement on the part of a party hereto to any such extension or waiver will be valid only if
set forth in an instrument in writing and signed by the party against whom the waiver is to be
effective.



     10.9 Successors and Assigns. This Agreement will not be assigned by any of the parties hereto (whether by operation of law
or otherwise) without the prior written consent of the other parties, except that Sub may assign,
in its sole discretion and without the consent of any other party, any or all of its rights,
interests, and obligations hereunder to (a) Parent, or (b) Parent and one or more direct or
indirect wholly-owned subsidiaries of Parent. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their
respective successors and assigns.



     10.10 Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give
rise to irreparable harm for which money damages would not be an adequate remedy and accordingly
the parties agree that, in addition to any other remedies, each will be entitled to enforce the
terms of this Agreement by a decree of specific performance without the necessity of proving the
inadequacy of money damages as a remedy.



     10.11 Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being
enforced by any 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 are not affected in any manner materially adverse to any party
hereto. 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



-70-









 




this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable
manner.




     10.12 Submission to Jurisdiction. All actions and proceedings arising out of or relating to this Agreement will be heard and
determined exclusively in any Washington state or federal court sitting in King County. The
parties hereto hereby (a) submit to the exclusive jurisdiction of any state or federal court
sitting in King County for the purpose of any action arising out of or relating to this Agreement
brought by any party hereto, and (b) irrevocably waive, and agree not to assert by way of motion,
defense, or otherwise, in any such action, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune from attachment or
execution, that the action is brought in an inconvenient forum, that the venue of the action is
improper, or that this Agreement or the Transactions may not be enforced in or by any of the
above-named courts.



     10.13 Shareholders’ Representative.



               (a) By virtue of the Company Shareholder Approval, and without any further act of any holder
of Company Shares, the holders of Company Shares will be deemed to have appointed John B. Cheung,
Inc. (previously defined as the Shareholders’ Representative) as agent and attorney-in-fact for
each holder of Company Shares (except such shareholders, if any, holding Appraisal Shares) for all
matters relating to this Agreement, including to give and receive notices and communications; to
bind the holders of Company Shares to the terms of the Escrow Agreements; to authorize delivery of
cash and the exercise of the Escrow Note from the Escrow Amount in satisfaction of claims by Parent
or Surviving Corporation; to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of courts and awards
of arbitrators with respect to such claims; and to take all actions necessary or appropriate in the
judgment of the Shareholders’ Representative for the accomplishment of the foregoing.



               (b) The Shareholders’ Representative may be changed by the holders of Company Shares from time
to time upon not less than 30 days’ prior written notice to Parent, provided that holders of a
majority interest of the Escrow Amount agree to such removal of John B. Cheung, Inc. and any
successors thereto and to the identity of the substituted agent. A Shareholders’ Representative may
resign at any time upon giving at least 30 days’ written notice to the holders of interest in the
Escrow Account, except that no such resignation will become effective until the appointment of a
successor Shareholders’ Representative. Upon resignation of a Shareholders’ Representative or a
successor Shareholders’ Representative thereto, the holders of a majority interest of the Escrow
Amount will agree on a successor Shareholders’ Representative thereto within 30 days after
receiving such notice. If holders of a majority interest of the Escrow Amount fail to agree upon a
successor Shareholders’ Representative within such time, the resigning Shareholders’ Representative
will have the right to appoint a successor Shareholders’ Representative, or if a Shareholders’
Representative is not designated within 45 days after receipt of the initial notice, Parent will designate a successor Shareholders’ Representative.
Any successor Shareholders’ Representative will execute and deliver an instrument accepting such
appointment and, without further acts, will be vested with all the rights, powers, and duties of
the predecessor Shareholders’ Representative as if originally named as Shareholders’ Representative
and thereafter the resigning Shareholders’ Representative will be discharged from any further
duties and liability under this Agreement. No bond will be required of any Shareholders’
Representative, and no Shareholders’ Representative will receive compensation for his or her
services. Notices or communications to or from the Shareholders’ Representative will constitute
notice to or from each of the holders of interest of the Escrow Amounts for all matters relating to
this Agreement.



-71-









 





               (c) The Shareholders’ Representative will not be liable for any act done or omitted hereunder
as the Shareholders’ Representative while acting in good faith. Holders of Company Shares on whose
behalf the Escrow Amounts are contributed will severally indemnify the Shareholders’ Representative
and hold the Shareholders’ Representative harmless against all loss, liability, or expense incurred
without bad faith or willful misconduct on the part of such Shareholders’ Representative and
arising out of or in connection with the acceptance or administration of such Shareholders’
Representative’s duties hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Shareholders’ Representative. The Shareholders’ Representative will be entitled to
the advance and reimbursement of costs and expenses incurred by or on behalf of the Shareholders’
Representative in the performance of their duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Shareholders’ Representative, in accordance with the
terms of the Escrow Agreements.



               (d) A decision, act, consent, or instruction of the Shareholders’ Representative relating to
this Agreement will constitute a decision of the holders of Company Shares and will be final,
binding, and conclusive upon each such holder. Parent, and all other persons entitled to
indemnification under the Escrow Agreements or any other document or agreement entered into in
connection herewith or therewith (the “Indemnified Persons”), may rely upon any such decision, act,
consent, or instruction of the Shareholders’ Representative as being the decision, act, consent, or
instruction of the holders of Company Shares. Parent and all other Indemnified Persons are hereby
relieved from any liability to any person for any acts done by them in accordance with such
decision, act, consent, or instruction of the Shareholders’ Representative.



[remainder of page intentionally blank]




-72-









 








SIGNATURE PAGE— SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER




     IN WITNESS WHEREOF, Parent, Sub, Company, the Major Shareholders, and the Shareholders’
Representative have signed or caused their respective duly authorized officers to sign this
Agreement, all as of the date first written above.



	 	 	 	 	 
	 	FLOW INTERNATIONAL CORPORATION

 	 
	 	By  	
/s/ Charles M. Brown	 
	 	  	
Charles M. Brown	 
	 	 	Its 	President
	 	 	 	 
	 



	 	 	 	 	 
	 	ORANGE ACQUISITION CORPORATION

 	 
	 	By  	/s/ John S. Leness
	 
	 	  	John S. Leness
	 
	 	 	Its 	President
	 	 	 	 
	 



	 	 	 	 	 
	 	

OMAX CORPORATION

 	 
	 	By  	/s/ John B. Cheung
 	 
	 	  	John B. Cheung
 	 
	 	 	Its 	 
	 	 	 	 
	 
	 	SHAREHOLDERS’ REPRESENTATIVE

 	 
	 	John B. Cheung, Inc.
 	 
	 
	 	/s/ John B. Cheung	 
	 	 	 
	 



(signature page continues)




 









 








SIGNATURE PAGE—SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER




	 	 	 	 	 
	 	PUGET PARTNERS, L.P. 
Major Shareholder	 
	 
	 	By:  	
John B. Cheung Inc.	 
	 	 	Its 	General Partner



	 	 	 	 	 
	 	By  	/s/ John B. Cheung
	 
	 	 	Its 	President



	 	 	 	 	 
	 	  	/s/ John B. Cheung
 	 
	 	  	John B. Cheung
 	 
	 	 	Major Shareholder
	 
	 	/s/ James M. O’Conner
 	 
	 	James M. O’Conner	 
	 	Major Shareholder	 
	 
	 	/s/ John H. Olsen
 	 
	 	John H. Olsen	 
	 	Major Shareholder	 


-74-









 








FLOW INTERNATIONAL CORPORATION




ORANGE ACQUISITION CORPORATION




OMAX CORPORATION




SHAREHOLDERS OF OMAX CORPORATION




SHAREHOLDERS’ REPRESENTATIVE




SECOND AMENDED AND RESTATED




AGREEMENT AND PLAN OF MERGER




Dated as of September 9, 2008

Amended November 10, 2008

Amended and Restated [•], 2009





 











 





TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE I THE MERGER	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	1.1	 	 	Effective Time of the Merger
	 	 	11	 
	 	1.2	 	 	Closing
	 	 	11	 
	 	1.3	 	 	Effects of the Merger
	 	 	11	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE II EFFECT OF THE MERGER; DELIVERY OF CONSIDERATION	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	2.1	 	 	Effect on Capital Stock
	 	 	12	 
	 	2.1.1	 	 	Capital Stock of Sub
	 	 	12	 
	 	2.1.2	 	 	Cancellation of Company Shares
	 	 	12	 
	 	2.1.3	 	 	Conversion of Company Securities
	 	 	12	 
	 	2.1.4	 	 	Stock Consideration
	 	 	14	 
	 	2.1.5	 	 	Contingent Consideration
	 	 	15	 
	 	2.1.6	 	 	Appraisal Rights
	 	 	16	 
	 	2.2	 	 	Escrow
	 	 	16	 
	 	2.2.1	 	 	Escrow Amount
	 	 	16	 
	 	2.2.2	 	 	Employee Retention Pool
	 	 	17	 
	 	2.3	 	 	Net Working Capital
	 	 	18	 
	 	2.4	 	 	Delivery of Consideration
	 	 	21	 
	 	2.4.1	 	 	Disbursing Agent
	 	 	21	 
	 	2.4.2	 	 	Exchange Procedures
	 	 	21	 
	 	2.4.3	 	 	No Further Ownership Rights in Company Shares
	 	 	21	 
	 	2.4.4	 	 	Return to Parent
	 	 	22	 
	 	2.4.5	 	 	Withholding Rights
	 	 	22	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	3.1	 	 	Representations and Warranties of Company
	 	 	22	 
	 	3.1.1	 	 	Organization, Standing, and Power
	 	 	22	 
	 	3.1.2	 	 	Capital Structure
	 	 	23	 
	 	3.1.3	 	 	Authority
	 	 	24	 
	 	3.1.4	 	 	Consents and Approvals; No Violations
	 	 	24	 
	 	3.1.5	 	 	Financial Statements
	 	 	25	 
	 	3.1.6	 	 	No Defaults
	 	 	26	 
	 	3.1.7	 	 	Litigation
	 	 	26	 
	 	3.1.8	 	 	No Material Adverse Change
	 	 	26	 
	 	3.1.9	 	 	Absence of Undisclosed Liabilities
	 	 	28	 
	 	3.1.10	 	 	No Violations
	 	 	28	 
	 	3.1.11	 	 	Certain Agreements
	 	 	28	 
	 	3.1.12	 	 	Employees
	 	 	28	 
	 	3.1.13	 	 	Employee Benefit Plans
	 	 	29	 
	 	3.1.14	 	 	Real Property; Leases
	 	 	31	 
	 	3.1.15	 	 	Environmental
	 	 	31	 
	 	3.1.16	 	 	Customers and Suppliers
	 	 	32	 
	 	3.1.17	 	 	Material Contracts
	 	 	33	 
	 	3.1.19	 	 	Taxes
	 	 	34	 
	 	3.1.19	 	 	Interests of Officers
	 	 	36	 
	 	3.1.20	 	 	Technology and Intellectual Property Rights
	 	 	37	 
	 	3.1.21	 	 	Vote Required
	 	 	41	 
	 	3.1.22	 	 	Brokers’ and Other Fees
	 	 	41	 
	 	3.1.23	 	 	Change of Control
	 	 	41	 
	 	3.1.24	 	 	Complete Copies of Materials
	 	 	42	 
	 	3.1.25	 	 	Board Recommendation
	 	 	42	 
	 	3.1.26	 	 	Insurance
	 	 	42	 






 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 	3.1.27	 	 	Accounts Receivable
	 	 	42	 
	 	3.1.28	 	 	Personal Property
	 	 	42	 
	 	3.1.29	 	 	Guarantees and Suretyships
	 	 	43	 
	 	3.1.30	 	 	Certain Transactions
	 	 	43	 
	 	3.1.31	 	 	Government Contracts
	 	 	43	 
	 	3.1.32	 	 	Disclosure
	 	 	43	 
	 	3.1.33	 	 	Reliance
	 	 	44	 
	 	3.2	 	 	Representations and Warranties of Major Shareholders
	 	 	44	 
	 	3.2.1	 	 	Authority
	 	 	44	 
	 	3.2.2	 	 	Voting Agreements
	 	 	44	 
	 	3.2.3	 	 	Non-Contravention; Consents
	 	 	44	 
	 	3.2.4	 	 	Reliance
	 	 	44	 
	 	3.3	 	 	Representations and Warranties of Parent and Sub
	 	 	45	 
	 	3.3.1	 	 	Organization; Standing and Power
	 	 	45	 
	 	3.3.2	 	 	Authority
	 	 	45	 
	 	3.3.3	 	 	Consents and Approvals; No Violations
	 	 	45	 
	 	3.3.4	 	 	Disclosure
	 	 	46	 
	 	3.3.4	 	 	SEC Reports
	 	 	46	 
	 	3.3.46	 	 	Compliance with Law
	 	 	46	 
	 	3.3.47	 	 	Operations of Sub
	 	 	46	 
	 	3.3.48	 	 	Proxy Materials
	 	 	46	 
	 	3.3.49	 	 	Brokers or Finders
	 	 	46	 
	 	3.3.4	 	 	Acquiring Person
	 	 	47	 
	 	3.3.11	 	 	Reliance
	 	 	47	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IV COVENANTS OF COMPANY	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	4.1	 	 	Conduct of Business
	 	 	47	 
	 	4.1.1	 	 	Ordinary Course
	 	 	47	 
	 	4.1.1	 	 	Ordinary Course
	 	 	49	 
	 	4.1.3	 	 	Exclusivity; Acquisition Proposals
	 	 	51	 
	 	4.2	 	 	Breach of Representations and Warranties; Notification; Access to Information
	 	 	52	 
	 	4.3	 	 	Consents and Notices
	 	 	52	 
	 	4.4	 	 	Commercially Reasonable Efforts
	 	 	53	 
	 	4.5	 	 	Notice to Holders of Company Shares
	 	 	53	 
	 	4.6	 	 	Tax Returns
	 	 	53	 
	 	4.7	 	 	Intellectual Property
	 	 	53	 
	 	4.8	 	 	Parachute Payments
	 	 	53	 
	 	4.9	 	 	Deliveries
	 	 	54	 
	 	4.10	 	 	Shareholder Approval
	 	 	54	 
	 	4.10	 	 	Option Agreements
	 	 	54	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE V COVENANTS OF PARENT	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	5.1	 	 	Breach of Representations and Warranties
	 	 	54	 
	 	5.2	 	 	Commercially Reasonable Efforts
	 	 	55	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VI ADDITIONAL AGREEMENTS	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	6.1	 	 	Non-Disclosure Agreement
	 	 	55	 
	 	6.2	 	 	Legal Conditions to the Merger
	 	 	55	 
	 	6.4	 	 	Proxy Statement and Registration Statement
	 	 	55	 
	 	6.4	 	 	Officers and Directors
	 	 	56	 
	 	6.5	 	 	Expenses
	 	 	56	 
	 	6.6	 	 	Additional Agreements
	 	 	56	 
	 	6.7	 	 	Public Announcements
	 	 	56	 
	 	6.8	 	 	Employee Matters
	 	 	57	 
	 	6.9	 	 	Additional Payments
	 	 	59	 
	 	6.10	 	 	Escrow Note
	 	 	59	 






 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VII CONDITIONS PRECEDENT	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	7.1	 	 	Conditions to Each Party’s Obligation to Effect the Merger
	 	 	59	 
	 	7.1.1	 	 	Shareholder Approval
	 	 	59	 
	 	7.1.2	 	 	Registration Statement
	 	 	59	 
	 	7.1.3	 	 	Consents
	 	 	59	 
	 	7.1.4	 	 	No Order
	 	 	60	 
	 	7.1.5	 	 	No Material Adverse Effect
	 	 	60	 
	 	7.2	 	 	Conditions of Obligations of Parent and Sub
	 	 	60	 
	 	7.2.1	 	 	Representations and Warranties of Company
	 	 	60	 
	 	7.2.2	 	 	Performance of Obligations of Company
	 	 	60	 
	 	7.2.3	 	 	No Company Material Adverse Effect
	 	 	60	 
	 	7.2.4	 	 	Legal Action
	 	 	60	 
	 	7.2.5	 	 	Resignations
	 	 	61	 
	 	7.2.6	 	 	Certain Employees
	 	 	61	 
	 	7.2.7	 	 	Noncompetition Agreement
	 	 	61	 
	 	7.2.8	 	 	Termination of Certain Agreements
	 	 	61	 
	 	7.2.9	 	 	Amendment of Certain Agreements
	 	 	61	 
	 	7.2.10	 	 	Opinion of Counsel
	 	 	61	 
	 	7.2.11	 	 	Assignment of Rights to Company Intellectual Property
	 	 	61	 
	 	7.2.12	 	 	Escrow Agreements
	 	 	62	 
	 	7.2.13	 	 	Deliveries
	 	 	62	 
	 	7.2.14	 	 	Appraisal Rights
	 	 	62	 
	 	7.2.15	 	 	Company Option Holders
	 	 	62	 
	 	7.2.16	 	 	FIRPTA Certificate
	 	 	62	 
	 	7.2.17	 	 	Shareholders’ Agreements
	 	 	62	 
	 	7.3	 	 	Conditions of Obligation of Company
	 	 	62	 
	 	7.3.1	 	 	Representations and Warranties of Parent and Sub
	 	 	62	 
	 	7.3.2	 	 	Performance of Obligations of Parent and Sub
	 	 	63	 
	 	7.3.3	 	 	Escrow Agreements
	 	 	63	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VIII INDEMNIFICATION	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	8.1	 	 	Indemnification Relating to Agreements
	 	 	63	 
	 	8.2	 	 	Third Party Claims
	 	 	64	 
	 	8.3	 	 	Tax Contests
	 	 	64	 
	 	8.4	 	 	Binding Effect
	 	 	66	 
	 	8.5	 	 	Time Limit
	 	 	66	 
	 	8.6	 	 	Limitations
	 	 	66	 
	 	8.7	 	 	Contribution
	 	 	66	 
	 	8.8	 	 	Exclusive Remedy
	 	 	66	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IX TERMINATION, AMENDMENT, AND WAIVER	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	9.1	 	 	Termination
	 	 	67	 
	 	9.2	 	 	Effect of Termination
	 	 	67	 
	 	9.2	 	 	Liquidated Damages
	 	 	68	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE X GENERAL PROVISIONS	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	10.1	 	 	Notices
	 	 	68	 
	 	10.2	 	 	Interpretation
	 	 	69	 
	 	10.3	 	 	Counterparts
	 	 	69	 
	 	10.4	 	 	Miscellaneous
	 	 	69	 
	 	10.5	 	 	No Joint Venture
	 	 	69	 
	 	10.6	 	 	Governing Law
	 	 	70	 
	 	10.7	 	 	Amendment
	 	 	70	 
	 	10.8	 	 	Extension, Waiver
	 	 	70	 
	 	10.9	 	 	Successors and Assigns
	 	 	70	 






 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 	10.10	 	 	Specific Performance
	 	 	70	 
	 	10.11	 	 	Severability
	 	 	70	 
	 	10.12	 	 	Submission to Jurisdiction
	 	 	71	 
	 	10.13	 	 	Shareholders’ Representative
	 	 	71	 






 









 






LIST OF EXHIBITS AND SCHEDULES




	 	 	 
	Exhibit 2.1.5

	 	Form of Interim Election form
	Exhibit 2.2.1(a)

	 	Form of Escrow Agreement
	Exhibit 2.2.1(b)

	 	Form of Escrow Note
	Exhibit 2.2.2

	 	Form of Employee Retention Escrow Agreement
	Exhibit 2.3(a)

	 	Sample Net Working Capital adjustment calculations
	Exhibits 6.7(a) and (b)

	 	Form of Public Announcements
	Exhibit 6.8(a)

	 	Forms of Employment Agreement
	Exhibit 7.2.7

	 	Form of Non-Competition and Non-Solicitation Agreement
	Exhibit 7.2.10

	 	Form of Opinion of Counsel
	Exhibit 9.3

	 	Form of Liquidated Damages Note
	 
	 	 
	Company Disclosure Schedule
	Schedule 2.1

	 	Pro Forma Calculations
	Schedule 2.1.3

	 	Transaction fees and expenses
	Schedule 2.2.2

	 	Employee Retention Pool Amount
	Schedule 2.3(b)(i)

	 	ALI calculation
	Schedule 2.3(b)(ii)

	 	Sample Net Working Capital calculation
	Schedule 2.3(c)

	 	Preliminary Closing Balance Sheet
	Schedule 4.1.1(c)

	 	Dividends
	Schedule 4.1.1(h)

	 	Salary and/or Benefit Increases
	Schedule 4.1.1(k)

	 	Amendments to Benefit Plans
	Schedule 4.1.1(l)

	 	Payments under Benefit Plans
	Schedule 4.1.2(n)

	 	Salary and/or Benefit Increases Resulting in Post-Closing Obligations
	Schedule 4.1.2(p)

	 	Amendments to Benefit Plans Resulting in Post-Closing Obligations
	Schedule 4.1.2(q)

	 	Payments under Benefit Plans Resulting in Post-Closing Obligations
	Schedule 4.3

	 	Required Consents
	Schedule 4.6

	 	Tax Returns
	Schedule 6.8

	 	Executives Receiving Offers from Company
	Schedule 7.2.6

	 	Certain Employees
	Schedule 7.2.8

	 	List of Agreements to be Terminated
	Schedule 7.2.9

	 	List of Agreements to be Amended
	Schedule 8.6

	 	Escrow Limitation Carve-Outs






 









 






INDEX OF DEFINED TERMS




	 	 	 	 	 
	Accounting Arbitrator
	 	 	9	 
	Acquisition Proposal
	 	 	41	 
	affiliate
	 	 	59	 
	Agreement
	 	 	1	 
	ALI
	 	 	8	 
	Appraisal Shares
	 	 	6	 
	Articles of Merger
	 	 	1	 
	Average Share Price
	 	 	5	 
	Balance Sheet Date
	 	 	15	 
	Base Cash Amount
	 	 	4	 
	business day
	 	 	59	 
	Certificate
	 	 	3	 
	Change of Recommendation
	 	 	41	 
	Closing
	 	 	1	 
	Closing Balance Sheet
	 	 	10	 
	Closing Date
	 	 	1	 
	Closing Date NWC
	 	 	9	 
	Closing Share Price
	 	 	5	 
	Code
	 	 	12	 
	Collection and Use
	 	 	29	 
	Company
	 	 	1	 
	Company Common Shares
	 	 	3	 
	Company Disclosure Schedule
	 	 	12	 
	Company Intellectual Property
	 	 	27	 
	Company Lease
	 	 	20	 
	Company Licensed Intellectual Property
	 	 	27	 
	Company Material Adverse Effect
	 	 	12	 
	Company Options
	 	 	4	 
	Company Options
	 	 	13	 
	Company Owned Intellectual Property
	 	 	27	 
	Company Preferred Shares
	 	 	13	 
	Company Securities
	 	 	13	 
	Company Shareholder Approval
	 	 	31	 
	Company Shares
	 	 	2	 
	Consents
	 	 	14	 
	Conversion Payment
	 	 	2	 
	Counter Proposed Closing Balance Sheet
	 	 	9	 
	Customer Information
	 	 	29	 
	Debt
	 	 	8	 
	Determination Materials
	 	 	9	 
	Disbursing Agent
	 	 	10	 
	Effective Time
	 	 	1	 
	Employee Retention Escrow
	 	 	7	 
	Employee Retention Escrow Agreement
	 	 	7	 
	Employee Retention Pool Amount
	 	 	7	 
	Environmental Law
	 	 	22	 
	Environmental Permits
	 	 	21	 
	ERISA
	 	 	19	 
	Escrow Agreement
	 	 	6	 
	Escrow Agreements
	 	 	7	 
	Escrow Amount
	 	 	6	 
	Escrow Amounts
	 	 	7	 
	Escrow Note
	 	 	6	 
	Excluded License
	 	 	29	 
	Expenses
	 	 	4	 
	FICA Allocation
	 	 	48	 
	Final Closing Date NWC
	 	 	9	 
	Financial Statements
	 	 	15	 
	GAAP
	 	 	15	 
	Government Contracts
	 	 	33	 
	Governmental Entity
	 	 	14	 
	Gross Distributable Cash Amount
	 	 	4	 
	Gross Distributable Contingent Consideration
	 	 	4	 
	Gross Distributable Stock Consideration
	 	 	4	 
	Hazardous Material
	 	 	21	 
	Hazardous Materials Activities
	 	 	21	 
	Incentive Plans
	 	 	13	 
	include
	 	 	59	 
	includes
	 	 	59	 
	including
	 	 	59	 
	Indemnifiable Amounts
	 	 	53	 
	Indemnified Parties
	 	 	46	 
	Indemnified Persons
	 	 	62	 
	Indemnifying Party
	 	 	53	 
	Initial Bonus Allocation
	 	 	48	 
	In-Licenses
	 	 	27	 
	Intellectual Property
	 	 	26	 
	Intellectual Property Rights
	 	 	26	 
	Interim Balance Sheet Date
	 	 	15	 
	IRS
	 	 	20	 
	know
	 	 	59	 
	knowledge of
	 	 	59	 
	Letter of Transmittal
	 	 	11	 
	Liabilities
	 	 	17	 
	Liability
	 	 	17	 
	Major Shareholders
	 	 	1	 
	Material Contracts
	 	 	22	 
	Maximum Working Capital
	 	 	8	 
	Merger
	 	 	1	 
	Minimum Working Capital
	 	 	8	 
	Net Working Capital
	 	 	8	 
	Non-Disclosure Agreement
	 	 	45	 
	Option Consideration
	 	 	4	 
	Outside Date
	 	 	57	 
	Parachute Payments
	 	 	43	 
	Parent
	 	 	1	 
	Parent Benefit Plans
	 	 	47	 
	Parent Common Stock
	 	 	4	 
	Parent Material Adverse Effect
	 	 	35	 
	Parent SEC Reports
	 	 	35	 
	Participating Common Stock Equivalents
	 	 	4	 
	PCSEs
	 	 	4	 






 









 






	 	 	 	 	 
	Per Share Consideration
	 	 	4	 
	Per Share Contingent Consideration
	 	 	4	 
	Per Share Stock Consideration
	 	 	4	 
	Person
	 	 	59	 
	Plan
	 	 	19	 
	Pre-Closing Balance Sheet Date
	 	 	44	 
	Pre-Closing Period
	 	 	53	 
	Preliminary Closing Balance Sheet
	 	 	8	 
	Preliminary Closing Date NWC
	 	 	9	 
	Proposed Closing Balance Sheet
	 	 	9	 
	Reconciliation Deadline
	 	 	9	 
	Registration Statement
	 	 	33	 
	Representatives
	 	 	41	 
	Restricted Transaction
	 	 	41	 
	Returns
	 	 	24	 
	Review Notice
	 	 	9	 
	SEC
	 	 	33	 
	Settlement Communications Agreement
	 	 	45	 
	Shareholders’ Representative
	 	 	1	 
	Significant Customer
	 	 	22	 
	Significant Supplier
	 	 	22	 
	Straddle Period
	 	 	54	 
	Sub
	 	 	1	 
	subsidiaries
	 	 	59	 
	subsidiary
	 	 	59	 
	Surviving Corporation
	 	 	2	 
	Surviving Corporation Common Stock
	 	 	2	 
	tax
	 	 	24	 
	Tax Contest
	 	 	55	 
	taxes
	 	 	24	 
	Technology
	 	 	27	 
	Termination Date
	 	 	56	 
	Third-Party Claim
	 	 	53	 
	Third-Party Tax Claim
	 	 	55	 
	Threshold Amount
	 	 	56	 
	Total Current Assets
	 	 	8	 
	Total Current Liabilities
	 	 	8	 
	Violation
	 	 	14	 
	WBCA
	 	 	1	 
	without limitation
	 	 	59	 
	Working Capital Credit
	 	 	8	 
	Working Capital Deficit
	 	 	8