Document:

20-F

Exhibit 4.10  

CHECK POINT SOFTWARE
TECHNOLOGIES LTD.  

EMPLOYEE STOCK
PURCHASE PLAN  

as
amended and restated at the 2005 annual stockholders’ meeting  

	I.  	PURPOSE
OF THE PLAN 

        This
Employee Stock Purchase Plan is intended to promote the interests of Check Point Software
Technologies Ltd. by providing eligible employees with the opportunity to acquire a
proprietary interest in the Corporation through participation in a payroll-deduction
based employee stock purchase plan designed to qualify under Section 423 of the Code.  

        Capitalized
terms herein shall have the meanings assigned to such terms in the attached Appendix.  

	 II.  	ADMINISTRATION
OF THE PLAN  

        The
Plan Administrator shall have full authority to interpret and construe any provision of
the Plan and to adopt such rules and regulations for administering the Plan as it may deem
necessary in order to comply with the requirements of Code Section 423. Decisions of the
Plan Administrator shall be final and binding on all parties having an interest in the
Plan. 

	 III.  	SHARES
SUBJECT TO PLAN  

        A.        
          The Shares purchasable under the Plan shall be shares of authorized but
unissued           or reacquired Ordinary Shares, including Ordinary Shares purchased on
the open           market. The maximum number of Ordinary Shares which may be issued over
the term           of the Plan shall not exceed 200,000 (subject to adjustment) shares.  

        B.        
          Should any change be made to the Ordinary Shares by reason of any stock split,
          stock dividend, recapitalization, combination of shares, exchange of shares or
          other change affecting the outstanding Ordinary Shares as a class without the
          Corporation’s receipt of consideration, appropriate adjustments shall be
          made to (i) the maximum number and class of securities issuable under the Plan,
          (ii) the maximum number and class of securities purchasable per Participant on
          any one Purchase Date and (iii) the number and class of securities and the
price           per share in effect under each outstanding purchase right in order to
prevent           the dilution or enlargement of benefits thereunder.  

	 IV.  	PURCHASE
PERIODS  

        A.        
          Ordinary Shares shall be offered for purchase under the Plan through a series
of           purchase periods until such time as (i) the maximum number of Ordinary
Shares           available for issuance under the Plan shall have been purchased or (ii)
the Plan           shall have been sooner terminated.  

1

        B.        
          Each purchase period shall be of such duration (generally not to exceed six (6)
          months) as determined by the Plan Administrator prior to the start date. The
          initial purchase period shall commence on February 1, 1997 and terminate on the
          last business day in July 1997. The next purchase period shall commence on the
          first business day in August 1997, and subsequent purchase periods shall
          commence every six months thereafter or on such other date as designated by the
          Plan Administrator. In no event may a purchase period have a duration in excess
          of twenty-seven (27) months.  

	 V.  	ELIGIBILITY  

        A.        
          Each Eligible Employee shall be eligible to enter a purchase period under the
          Plan on the start date of the Purchase Period, provided he or she remains an
          Eligible Employee on such start date.  

        B.                 To
participate in the Plan for a particular purchase period, the Eligible           Employee
must complete the enrollment forms prescribed by the Plan Administrator
          (including a stock purchase agreement and a payroll deduction authorization
          form) and file such forms with the Plan Administrator (or its designate) on or
          before the start date for the purchase period.  

	 VI.  	PAYROLL
DEDUCTIONS  

        A.        
          The payroll deduction authorized by the Participant for purposes of acquiring
          Ordinary Shares under the Plan may be any multiple of one percent (1%) of the
          Cash Compensation paid to the Participant during the Purchase Period, up to a
          maximum of fifteen percent (15%). The deduction rate so authorized shall
          continue in effect for each subsequent Purchase Period, except to the extent
          such rate is changed in accordance with the following guidelines:  

	 	        (i)        
          The Participant may, at any time during an open trading window of a purchase
          period, reduce his or her rate of payroll deduction to become effective as soon
          as possible after filing the appropriate form with the Plan Administrator. The
          Participant may not, however, effect more than one (1) such reduction per
          Purchase Period. ESPP deductions can be terminated at any time.  

	 	        (ii)        
          The Participant may, prior to the commencement of any new Purchase Period,
          increase the rate of his or her payroll deduction by filing the appropriate
form           with the Plan Administrator. The new rate (which may not exceed the
fifteen           percent (15%) maximum) shall become effective as of the start date of
the           Purchase Period following the filing of such form.  

        B.        
          Payroll deductions shall begin on the first pay day following the start date
for           the Purchase Period and shall (unless sooner terminated by the Participant)
          continue through the pay day ending with or immediately prior to the last day
of           that Purchase Period. The amounts so collected shall be credited to the
          Participant’s book account under the Plan, but no interest shall be paid
on           the balance from time to time outstanding in such account. The amounts
collected           from the Participant shall not be held in any segregated account or
trust fund           and may be commingled with the general assets of the Corporation and
used for           general corporate purposes.  

2

        C.        
          Payroll deductions shall automatically cease upon the termination of the
          Participant’s purchase right in accordance with the provisions of the
Plan.  

        D.        
          The Participant’s acquisition of Ordinary Shares under the Plan on any
          Purchase Date shall neither limit nor require the Participant’s
acquisition           of Ordinary Shares on any subsequent Purchase Date, whether within
the same or a           different offering period.  

	VII.  	PURCHASE
RIGHTS  

             A.       
          Grant of Purchase Right. A Participant shall be granted a separate
          purchase right for each Purchase Period in which he or she participates. The
          purchase right shall be granted on the start date for the Purchase Period and
          shall provide the Participant with the right to purchase Ordinary Shares on the
          Purchase Date for such Purchase Period, upon the terms set forth below. The
          Participant shall execute a share purchase agreement embodying such terms and
          such other provisions (not inconsistent with the Plan) as the Plan Administrator
          may deem advisable. 

        Under
no circumstances shall purchase rights be granted under the Plan to any Eligible Employee
if such individual would, immediately after the grant, own (within the meaning of Code
Section 424(d)) or hold outstanding options or other rights to purchase, Shares possessing
five percent (5%) or more of the total combined voting power or value of all classes of
Shares of the Corporation or any Corporate Affiliate. 

             B.       
          Exercise of the Purchase Right. Each purchase right shall be
          automatically exercised on the Purchase Date and Ordinary Shares shall
          accordingly be purchased on behalf of each Participant (other than any
          Participant whose payroll deductions have previously been refunded in accordance
          with the Termination of Purchase Right provisions below) on each such Purchase
          Date. The purchase shall be effected by applying the Participant’s payroll
          deductions for the Purchase Period ending on such Purchase Date (together with
          any carryover deductions from the preceding Purchase Period) to the purchase of
          whole Ordinary Shares (subject to the limitation on the maximum number of shares
          purchasable per Participant on any one Purchase Date) at the purchase price in
          effect for the Participant for that Purchase Date. 

             C.       
          Purchase Price. The purchase price per share at which Ordinary
          Shares will be purchased on the Participant’s behalf on each Purchase Date
          shall be equal to eighty-five percent (85%) of the lower of (i) the Fair
          Market Value per Ordinary Share on the start date for the Purchase Period or
          (ii) the Fair Market Value per Ordinary Share on that Purchase Date. 

             D.       
          Number of Purchasable Shares. The number of Ordinary Shares
          purchasable by a Participant on each Purchase Date shall be the number of whole
          shares obtained by dividing the amount collected from the Participant through
          payroll deductions during the Purchase Period ending with that Purchase Date
          (together with any carryover deductions from the preceding Purchase Period) by
          the purchase price in effect for the Participant for that Purchase Date.
          However, the maximum number of Ordinary Shares purchasable per Participant on
          any one Purchase Date shall not exceed 1,250 shares, subject to periodic
          adjustments in the event of certain changes in the Corporation’s
          capitalization. 

3

             E.       
          Excess Payroll Deductions. Any payroll deductions not applied to
          the purchase of Ordinary Shares on any Purchase Date because they are not
          sufficient to purchase a whole Ordinary Share shall be held for the purchase of
          Ordinary Shares on the next Purchase Date. However, any payroll deductions not
          applied to the purchase of Ordinary Shares by reason of the limitation on the
          maximum number of shares purchasable by the Participant on the Purchase Date
          shall be promptly refunded. 

             F.       
          Termination of Purchase Right. The following provisions shall
          govern the termination of outstanding purchase rights: 

	 	        (i)                 A
Participant may, at any time prior to the next Purchase Date, terminate his or
          her outstanding purchase right by filing the appropriate form with the Plan
          Administrator (or its designate), and no further payroll deductions shall be
          collected from the Participant with respect to the terminated purchase right.
          Any payroll deductions collected during the Purchase Period in which such
          termination occurs shall, at the Participant’s election, be immediately
          refunded or held for the purchase of shares on the next Purchase Date. If no
          such election is made at the time such purchase right is terminated, then the
          payroll deductions collected with respect to the terminated right shall be
          refunded as soon as possible.  

	 	        (ii)                 The
termination of such purchase right shall be irrevocable, and the Participant
          may not subsequently rejoin the Purchase Period for which the terminated
          purchase right was granted. In order to resume participation in any subsequent
          Purchase Period, such individual must re-enroll in the Plan (by making a timely
          filing of the prescribed enrollment forms) on or before the start date for that
          Purchase Period.  

	 	        (iii)                 Should
the Participant cease to remain an Eligible Employee for any reason           (including
death, disability or change in status) while his or her purchase           right remains
outstanding, then that purchase right shall immediately terminate,           and all of
the Participant’s payroll deductions for the Purchase Period in           which the
purchase right so terminates shall be immediately refunded. However,           should the
Participant cease to remain in active service by reason of an           approved unpaid
leave of absence, then the Participant shall have the election,           exercisable up
until the last business day of the Purchase Period in which such           leave
commences, to (a) withdraw all the funds in the Participant’s payroll
          account at the time of the commencement of such leave or (b) have such funds
          held for the purchase of shares at the end of such Purchase Period. In no
event,           however, shall any further payroll deductions be added to the Participant’s
          account during such leave. Upon the Participant’s return to active
service,           his or her payroll deductions under the Plan shall automatically
resume at the           rate in effect at the time the leave began, provided the
Participant returns to           service prior to the expiration date of the purchase
period in which such leave           began.  

             G.       
          Corporate Transaction. Each outstanding purchase right shall
          automatically be exercised, immediately prior to the effective date of any
          Corporate Transaction, by applying the payroll deductions of each Participant
          for the Purchase Period in which such Corporate Transaction occurs to the
          purchase of whole Ordinary Shares at a purchase price per share equal to
          eighty-five percent (85%) of the lower of (i) the Fair Market Value per
          Ordinary Share on the start date for the Purchase Period in which such Corporate
          Transaction occurs or (ii) the Fair Market Value per Ordinary Share immediately
          prior to the effective date of such Corporate Transaction. However, the
          applicable limitation on the number of Ordinary Shares purchasable per
          Participant shall continue to apply to any such purchase. 

4

        The
Corporation shall use its best efforts to provide at least ten (10)-days prior written
notice of the occurrence of any Corporate Transaction, and Participants shall, following
the receipt of such notice, have the right to terminate their outstanding purchase rights
prior to the effective date of the Corporate Transaction. 

             H.       
          Proration of Purchase Rights. Should the total number of Ordinary
          Shares which are to be purchased pursuant to outstanding purchase rights on any
          particular date exceed the number of shares then available for issuance under
          the Plan, the Plan Administrator shall make a pro-rata allocation of the
          available shares on a uniform and nondiscriminatory basis, and the payroll
          deductions of each Participant, to the extent in excess of the aggregate
          purchase price payable for the Ordinary Shares pro-rated to such individual,
          shall be refunded. 

             I.       
          Assignability. During the Participant’s lifetime, the
          purchase right shall be exercisable only by the Participant and shall not be
          assignable or transferable by the Participant. 

             J.       
          Shareholder Rights. A Participant shall have no shareholder rights
          with respect to the shares subject to his or her outstanding purchase right
          until the shares are purchased on the Participant’s behalf in accordance
          with the provisions of the Plan and the Participant has become a holder of
          record of the purchased shares. 

	VIII.  	ACCRUAL
LIMITATIONS 

             A.       
          No Participant shall be entitled to accrue rights to acquire Ordinary Shares
          pursuant to any purchase right outstanding under this Plan if and to the extent
          such accrual, when aggregated with (i) rights to purchase Ordinary Shares
          accrued under any other purchase right granted under this Plan and (ii) similar
          rights accrued under other employee stock purchase plans (within the meaning of
          Code Section 423) of the Corporation or any Corporate Affiliate, would
          otherwise permit such Participant to purchase more than $25,000 worth of Shares
          of the Corporation or any Corporate Affiliate (determined on the basis of the
          Fair Market Value of such Shares on the date or dates such rights are granted)
          for each calendar year such rights are at any time outstanding. 

             B.       
          For purposes of applying such accrual limitations, the following provisions
          shall be in effect: 

	 	        (i)                 The
right to acquire Ordinary Shares under each outstanding purchase right shall
          accrue in a series of installments on each successive Purchase Date during the
          offering period on which such right remains outstanding.  

5

	 	        (ii)                 No
right to acquire Ordinary Shares under any outstanding purchase right shall
          accrue to the extent the Participant has already accrued in the same calendar
          year the right to acquire Ordinary Shares under one (1) or more other purchase
          rights at a rate equal to $25,000 worth of Ordinary Shares (determined on the
          basis of the Fair Market Value of such Shares on the date or dates of grant)
for           each calendar year such rights were at any time outstanding.  

             C.       
          If by reason of such accrual limitations, any purchase right of a Participant
          does not accrue for a particular Purchase Period, then the payroll deductions
          which the Participant made during that Purchase Period with respect to such
          purchase right shall be promptly refunded. 

             D.       
          In the event there is any conflict between the provisions of this
          Article and one or more provisions of the Plan or any instrument issued
          thereunder, the provisions of this Article shall be controlling. 

	IX.  	EFFECTIVE
DATE AND TERM OF THE PLAN 

             A.       
          The Plan was adopted by the Board on November 24, 1996 and became effective at
          the Effective Time. 

             B.       
          Subject to obtaining approval of the Company’s stockholders at the
          Company’s 2005 annual stockholder meeting, and unless sooner terminated by
          the Board, the Plan shall terminate upon the earliest of (i) the
          last business day in January 2026, (ii) the date on which all shares available
          for issuance under the Plan shall have been sold pursuant to purchase rights
          exercised under the Plan or (iii) the date on which all purchase rights are
          exercised in connection with a Corporate Transaction. No further purchase rights
          shall be granted or exercised, and no further payroll deductions shall be
          collected, under the Plan following its termination. 

	 X.  	AMENDMENT
OF THE PLAN  

        The
Board may alter, amend, suspend or discontinue the Plan at any time to become effective
immediately following the close of any Purchase Period. However, the Board may not,
without the approval of the Corporation’s shareholders, (i) materially increase the
number of Ordinary Shares issuable under the Plan or the maximum number of shares
purchasable per Participant on any one Purchase Date, except for permissible adjustments
in the event of certain changes in the Corporation’s capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the Ordinary Shares
purchasable under the Plan, or (iii) materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for eligibility to
participate in the Plan. 

6

	 XI.  	GENERAL
PROVISIONS  

             A.       
          All costs and expenses incurred in the administration of the Plan shall be paid
          by the Corporation. 

             B.       
          Nothing in the Plan shall confer upon the Participant any right to continue in
          the employ of the Corporation or any Corporate Affiliate for any period of
          specific duration or interfere with or otherwise restrict in any way the rights
          of the Corporation (or any Corporate Affiliate employing such person) or of the
          Participant, which rights are hereby expressly reserved by each, to terminate
          such person’s employment at any time for any reason, with or without cause. 

             C.       
          The provisions of the Plan shall be governed by the laws of Israel without
          resort to Israel’s conflict-of-laws rules. 

7

Schedule A  

Corporations
Participating in
Employee Stock Purchase Plan  

As of the Effective
Time  

Check Point Software
Technologies, Inc. 

APPENDIX  

        The
following definitions shall be in effect under the Plan: 

             A.    
          Board shall mean the Corporation’s Board of Directors. 

             B.    
          Cash Compensation shall mean the (i) regular base salary
          paid to a Participant by one or more Participating Corporations during such
          individual’s period of participation in the Plan, plus (ii) any pre-tax
          contributions made by the Participant to any Code Section 401(k) salary deferral
          plan or any Code Section 125 cafeteria benefit program now or hereafter
          established by the Corporation or any Corporate Affiliate, plus (iii) all of the
          following amounts to the extent paid in cash: overtime payments, bonuses,
          commissions, profit-sharing distributions and other incentive-type payments.
          However, Eligible Earnings shall not include any contributions (other than Code
          Section 401(k) or Code Section 125 contributions) made on the Participant’s
          behalf by the Corporation or any Corporate Affiliate to any deferred
          compensation plan or welfare benefit program now or hereafter established. 

             C.    
          Check Point Subsidiary shall mean Check Point Software
          Technologies, Inc., a Delaware corporation. 

             D.    
          Code shall mean the Internal Revenue Code of 1986, as
          amended. 

             E.    
          Corporate Affiliate shall mean any parent or subsidiary
          corporation of the Corporation (as determined in accordance with Code Section
          424), whether now existing or subsequently established. 

             F.    
          Corporate Transaction shall mean either of the following
          shareholder-approved transactions to which the Corporation is a party: 

	 	        (i)                 a
merger or consolidation in which securities possessing more than fifty percent
          (50%) of the total combined voting power of the Corporation’s outstanding
          securities are transferred to a person or persons different from the persons
          holding those securities immediately prior to such transaction, or  

	 	        (ii)                 the
sale, transfer or other disposition of all or substantially all of the           assets
of the Corporation in complete liquidation or dissolution of the           Corporation.  

             G.    
          Corporation shall mean Check Point Software Technologies
          Ltd., an Israeli corporation, and any corporate successor to all or
          substantially all of the assets or voting shares of Check Point Software
          Technologies Ltd. which shall by appropriate action adopt the Plan. 

             H.    
          Effective Time shall mean February 1, 1997. Any Corporate
          Affiliate which becomes a Participating Corporation after such Effective Time
          shall designate a subsequent Effective Time with respect to its
          employee-Participants. 

A-1

             I.    
          Eligible Employee shall mean any person who is employed by
          Check Point Subsidiary and who is engaged, on a regularly-scheduled basis of
          more than twenty (20) hours per week for more than five (5) months per calendar
          year, in the rendition of personal services as an employee for earnings
          considered wages under Code Section 3401(a). 

             J.    
          Fair Market Value per Ordinary Share on any relevant date
          shall be determined in accordance with the following provisions: 

	 	        (i)                 If
the Ordinary Shares are at the time traded on the Nasdaq National Market,           then
the Fair Market Value shall be the closing selling price per Ordinary Share           on
the date in question, as such price is reported by the National Association           of
Securities Dealers on the Nasdaq National Market or any successor system. If
          there is no closing selling price for the Ordinary Shares on the date in
          question, then the Fair Market Value shall be the closing selling price on the
          last preceding date for which such quotation exists.  

	 	        (ii)                 If
the Ordinary Shares are at the time listed on any Stock Exchange, then the           Fair
Market Value shall be the closing selling price per Ordinary Share on the           date
in question on the Stock Exchange determined by the Plan Administrator to           be
the primary market for the Ordinary Shares, as such price is officially           quoted
in the composite tape of transactions on such exchange. If there is no           closing
selling price for the Ordinary Shares on the date in question, then the           Fair
Market Value shall be the closing selling price on the last preceding date           for
which such quotation exists.  

             K.    
          1933 Act shall mean the Securities Act of 1933, as amended. 

             L.    
          Ordinary Shares shall mean the Corporation’s Ordinary
          Shares, NIS 0.01 nominal value. 

             M.    
          Participant shall mean any Eligible Employee of a
          Participating Corporation who is actively participating in the Plan. 

             N.    
          Participating Corporation shall mean the Check Point
          Subsidiary and such Corporate Affiliate or Affiliates as may be authorized from
          time to time by the Board to extend the benefits of the Plan to their Eligible
          Employees. The Participating Corporations in the Plan as of the Effective Time
          are listed in attached Schedule A. 

             O.    
          Plan Administrator shall mean the committee of two (2) or
          more Board members appointed by the Board to administer the Plan. 

             P.    
          Plan shall mean the Corporation’s Employee Stock
          Purchase Plan, as set forth in this document. 

A-2

             Q.    
          Purchase Date shall mean the last business day of each
          Purchase Period. 

             R.    
          Purchase Period shall mean each successive period within
          the offering period at the end of which there shall be purchased Ordinary Shares
          on behalf of each Participant. 

             S.    
          Stock Exchange shall mean either the Nasdaq National Market
          or the New York Stock Exchange. 

A-320-F

Exhibit 4.11  

AGREEMENT AND PLAN OF
MERGER 

BY AND AMONG 

CHECK POINT SOFTWARE
TECHNOLOGIES, LTD., 

CHECK POINT SOFTWARE TECHNOLOGIES,
INC., 

SEYFERT ACQUISITION
CORPORATION, 

AND 

SOURCEFIRE, INC. 

Dated as of October 5,
2005 

TABLE OF CONTENTS 

			
			
			
			
			
	ARTICLE 1. Definitions 	2  
	  	 	 
	   Section 1.1	Certain Defined Terms	2 
	   Section 1.2	Additional Defined Terms	10 
	 		
	ARTICLE 2. The Merger 	12  
	  	 	 
	   Section 2.1	The Merger	12 
	   Section 2.2	Effective Time	12 
	   Section 2.3	Effect of the Merger	12 
	   Section 2.4	Certificate of Incorporation and Bylaws of the Surviving Corporation	12 
	   Section 2.5	Board of Directors and Officers of the Surviving Corporation	13 
	   Section 2.6	Conversion of Securities	13 
	   Section 2.7	Escrow	17 
	   Section 2.8	Paying Agent; Distribution of the Transaction Consideration	18 
	   Section 2.9	No Further Ownership Rights in Shares of Company Stock	19 
	   Section 2.10	Lost, Stolen or Destroyed Certificates	19 
	   Section 2.11	Dissenting Shares	19 
	   Section 2.12	Withholding	20 
	   Section 2.13	Employee Loans	20 
	   Section 2.14	Additional Consideration	20 
	 
	ARTICLE 3. Representations and Warranties of the Company 	21  
	  	 	 
	   Section 3.1	Organization	21 
	   Section 3.2	Capitalization	21 
	   Section 3.3	Subsidiaries	22 
	   Section 3.4	Authority; No Violation	23 
	   Section 3.5	Financial Statements	24 
	   Section 3.6	Contracts	25 
	   Section 3.7	Intellectual Property	27 
	   Section 3.8	Employee Benefit Matters	33 
	   Section 3.9	Labor and Other Employment Matters	36 
	   Section 3.10	Tax Matters	37 
	   Section 3.11	Legal Proceedings	40 
	   Section 3.12	Compliance with Applicable Law	40 
	   Section 3.13	Environmental Matters	41 
	   Section 3.14	Properties	41 
	   Section 3.15	Insurance	42 
	   Section 3.16	No Broker	42 
	   Section 3.17	Absence of Certain Changes or Events	42 
	   Section 3.18	Sufficiency of and Title to Assets	44 
	   Section 3.19	Potential Conflicts of Interest	44 
	   Section 3.20	Transactions with Affiliates	44 
	   Section 3.21	Governmental Regulation	44 
	   Section 3.22	No Loss of Customers	44 
	   Section 3.23	Books and Records	44 
	   Section 3.24	Takeover Statutes	45 
	 

i

			
			
			
			
			
	ARTICLE 4. Representations and Warranties of Parent, Buyer and Merger Sub. 	45  
	  	 	 
	   Section 4.1	Organization	45 
	   Section 4.2	Authority; No Violation	45 
	   Section 4.3	Consents and Approvals	46 
	   Section 4.4	No Broker	46 
	   Section 4.5	Available Funds	46 
	   Section 4.6	Sufficient Shares Reserved for Option Exercise	46 
	 
	ARTICLE 5. Covenants and Additional Agreements 	47  
	  	 	 
	   Section 5.1	Conduct of Business	47 
	   Section 5.2	Confidentiality and Announcements	50 
	   Section 5.3	Access by Buyer	50 
	   Section 5.4	Notification of Certain Matters	51 
	   Section 5.5	Acquisition Proposals	51 
	   Section 5.6	Company Stockholder Approval	53 
	   Section 5.7	Takeover Statutes	54 
	   Section 5.8	Further Assurances	54 
	   Section 5.9	Employee Matters	54 
	   Section 5.10	Statement of Closing Expenses	55 
	   Section 5.11	Statement of Closing Consideration	55 
	   Section 5.12	Retention Bonuses	56 
	   Section 5.13	Indemnified Directors and Officers	56 
	   Section 5.14	Tax Matters	57 
	   Section 5.15	Assumed Company Options	58 
	 
	ARTICLE 6. Conditions to Closing 	58  
	  	 	 
	   Section 6.1	Conditions to Each Party's Obligations to Effect the Merger	58 
	   Section 6.2	Additional Conditions to the Obligations of the Company to Effect the Merger	59 
	   Section 6.3	Additional Conditions to the Obligations of Parent, Buyer and Merger Sub to Effect the Merger	60 
	 
	ARTICLE 7. Termination 	62  
	  	 	 
	   Section 7.1	Termination	62 
	   Section 7.2	Effect of Termination	63 
	 
	ARTICLE 8. Indemnification 	64  
	  	 	 
	   Section 8.1	Survival of Representations, Warranties and Covenants	64 
	   Section 8.2	Indemnification Obligations of Company Indemnifying Parties	64 
	   Section 8.3	Indemnification Obligations of Buyer Indemnifying Parties	65 
	   Section 8.4	Third-Party Claims	66 
	   Section 8.5	Limitations on Indemnification Obligations	67 
	 

ii

			
			
			
			
			
	ARTICLE 9. Miscellaneous 	70  
	  	 	 
	   Section 9.1	Entire Agreement	70 
	   Section 9.2	Interpretation	70 
	   Section 9.3	Severability	71 
	   Section 9.4	Notices	71 
	   Section 9.5	Binding Effect; Persons Benefiting; No Assignment	72 
	   Section 9.6	Counterparts	73 
	   Section 9.7	WAIVER OF JURY TRIAL	73 
	   Section 9.8	Governing Law	73 
	   Section 9.9	Consent to Jurisdiction	73 
	   Section 9.10	Attorneys' Fees	73 
	   Section 9.11	Joint and Several Liability	73 
	 

iii

Schedule of Exhibits 

			
			
			
			
			
	Exhibit A 	Form of Retention Plan	 
	Exhibit B 	Form of Escrow Agreement
	Exhibit C 	Form of Opinions of Counsels to Parent, Buyer and Merger Sub	 
	Exhibit D 	Schedule of Required Closing Consents, Approvals and Notices	 
	Exhibit E 	Form of Opinions of Counsel to the Company	 
	Exhibit F 	Assignments and Releases	 
			

iv

AGREEMENT AND PLAN OF
MERGER 

        THIS
AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into
as of October 5, 2005 by and among Check Point Software Technologies, Ltd., an Israeli
company (“Parent”), Check Point Software Technologies, Inc., a Delaware
corporation and an affiliate of Parent (“Buyer”), Seyfert Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of Buyer
(“Merger Sub”), and Sourcefire, Inc., a Delaware corporation (the
“Company”). 

RECITALS 

        WHEREAS,
each of the boards of directors of Parent, Buyer, Merger Sub and the Company has approved
and declared advisable the merger of Merger Sub with and into the Company (the
“Merger”) upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the General Corporation Law of the State of Delaware (the
“DGCL”). 

        WHEREAS,
each of the boards of directors of Parent, Buyer, Merger Sub and the Company has
determined that the Merger is in furtherance of, and consistent with, their respective
business strategies and is fair to, and in the best interest of, their respective
stockholders. 

        WHEREAS,
the board of directors of the Company has further determined that this Agreement and the
Merger are advisable, has approved this Agreement and the Merger and has recommended that
its stockholders adopt and approve this Agreement and approve the Merger. 

        WHEREAS,
promptly following the execution and delivery of this Agreement by each of the parties
hereto, the holders of a type and number of shares of capital stock of the Company are
executing and delivering written consents sufficient to adopt and approve this Agreement
and approve the Merger as required under applicable law, the Company’s certificate of
incorporation and bylaws, and any applicable agreements between the Company, on the one
hand, and any holders of its capital stock, on the other hand. 

        WHEREAS,
contemporaneously herewith, and as a condition and inducement to the willingness of each
of the parties hereto to enter into this Agreement, Parent and Buyer are adopting the
Retention Plan attached hereto as Exhibit A (the “Retention Plan”)
and allocating $2.5 million in cash for distribution to certain employees of the Company
in accordance with the terms and conditions set forth therein. 

        NOW,
THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement and intending to be
legally bound hereby, the parties hereto agree as follows: 

ARTICLE 1.

Definitions 

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

        “Affiliate”
shall mean any individual, partnership, corporation, entity or other Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by or is under
common control with the Person specified. 

        “Aggregate
Residual Amount” shall mean an amount equal to (x) the Transaction Consideration,
less (y) the sum of (A) the Aggregate Series A Preference, (B) the Aggregate Series B
Preference and (C) the Aggregate Series C Preference. 

        “Aggregate
Series A Preference” shall mean the product obtained by multiplying
(x) the Series A Liquidation Preference and (y) the aggregate number of
shares of Series A Preferred Stock (including any rights convertible into or
exercisable or exchangeable for, shares of Series A Preferred Stock) issued and
outstanding immediately prior to the Effective Time. 

        “Aggregate
Series B Preference” shall mean the product obtained by multiplying
(x) the Series B Liquidation Preference and (y) the aggregate number of
shares of Series B Preferred Stock (including any rights convertible into or
exercisable or exchangeable for, shares of Series B Preferred Stock) issued and
outstanding immediately prior to the Effective Time. 

        “Aggregate
Series C Preference” shall mean the product obtained by multiplying
(x) the Series C Liquidation Preference and (y) the aggregate number of
shares of Series C Preferred Stock (including any rights convertible into or
exercisable or exchangeable for, shares of Series C Preferred Stock) issued and
outstanding immediately prior to the Effective Time. 

        “Applicable
Law” shall mean, with respect to any Person, any Law applicable to such Person or
its properties or assets. 

        “Assumed
Company Option Exchange Ratio” shall mean that number of Parent Ordinary Shares
derived by dividing (x) the Per Share Residual Amount by (y) the Closing
Measurement Price. 

        “Benefit
Arrangement” shall mean any employment, consulting, severance or other similar
contract, arrangement or policy (written or oral) and each plan, arrangement, program,
agreement or commitment (written or oral) providing for insurance coverage (including,
without limitation, any self-insured arrangements), workers’ compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including, without limitation, any “voluntary
employees’ beneficiary association” as defined in Section 501(c)(9) of the
Code providing for the same or other benefits) or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock purchases or
other forms of equity or incentive compensation or post-retirement insurance, compensation
or benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(b) is entered into, maintained, contributed to or required to be contributed to, as
the case may be, by the Company or any ERISA Affiliate or under which the Company or any
ERISA Affiliate has or may incur any liability, and (c) covers any current or former
employee, director or consultant of the Company or any ERISA Affiliate (with respect to
their relationship with such any entity). 

2

        “Business
Day” shall mean any day that is not a Saturday, a Sunday or other day on which
banks are required or authorized by Law to be closed in the United States or Israel. 

        “Cause”
shall mean (i) an indictment of a felony or a crime involving moral turpitude; (ii)
participation in an act or acts of dishonesty in an individual’s capacity as a
service provider to Buyer or the Surviving Corporation; (iii) intentional, or grossly
negligent action or inaction resulting in, damage to any property of the Buyer or the
Surviving Corporation; or (iv) a material and continuing breach of an
individual’s obligations to the Buyer or the Surviving Corporation set forth in any
written agreement between such individual and the Buyer or the Surviving Corporation or
any written policy of the Buyer or the Surviving Corporation applicable to similarly
situated employees (including any applicable employee handbook, code of conduct and/or
insider trading restrictions) after written notice from the employer specifying the nature
of the breach and demanding that such breach be remedied (unless such breach by its nature
cannot be cured, in which case notice and an opportunity to cure shall not be required). 

        “CERCLA”
shall mean the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq. 

        “Closing
Measurement Price” shall mean the average of the closing prices for Parent
Ordinary Shares on the NASDAQ National Market as reported in The Wall Street
Journal for the five (5) consecutive Trading Days ending on the second
(2nd) Trading Day prior to the Closing Date. 

        “COBRA”
shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. 

        “Code”
shall mean the Internal Revenue Code of 1986, as amended. 

        “Common
Stock” shall mean the common stock, $0.001 par value per share, of the Company. 

        “Company”
shall have the meaning set forth in the Preamble to this Agreement. 

        “Company
Business” shall mean the business and operations of the Company or any of its
Subsidiaries in the manner currently being conducted by the Company or any of its
Subsidiaries. 

        “Company
Business Employee” shall mean any employee or director of the Company or any of
its Subsidiaries. 

        “Company
Business Independent Contractor” shall mean any natural person who is an
independent contractor of the Company or any of its Subsidiaries. 

        “Company
Certificate of Incorporation” shall mean the Company’s certificate of
incorporation, as in effect immediately prior to the Effective Time. 

3

        “Company
Material Adverse Effect” shall mean a material adverse effect on the business,
assets, liabilities, financial condition, results of operations or prospects of the
Company and its Subsidiaries, taken as a whole, or on the ability of the Company to
consummate the Merger pursuant to the terms hereof or comply with its obligations
hereunder; provided, however, that in no event shall any changes, events,
occurrences, violations, inaccuracies, circumstances, developments or effects that are
caused by or result from the following, in and of itself, be deemed to have or constitute
a Company Material Adverse Effect: (i) conditions affecting the industries in which the
Company or its Subsidiaries participates, provided that such changes, events, occurrences,
violations, inaccuracies, circumstances, developments or effects do not disproportionately
affect the Company or its Subsidiaries in any material respect, (ii) conditions affecting
the U.S. economy as a whole or foreign economies as a whole in any countries where the
Company or its Subsidiaries have material operations, provided that such changes, events,
occurrences, violations, inaccuracies, circumstances, developments or effects do not
disproportionately affect the Company or its Subsidiaries in any material respect, (iii)
the announcement or pendency of this Agreement or the transactions contemplated hereby,
(iv) any action taken (or failure to take any action required by this Agreement) by
Parent, Buyer or Merger Sub, or (v) acts of war or terrorism, escalation of hostilities,
natural disasters, acts of God or similar calamity or crisis. 

        “Company
Options” shall mean any and all options issued by the Company to purchase shares
of Common Stock under any Company stock option plan or agreement. 

        “Company
Stock” shall mean the Preferred Stock and the Common Stock. 

        “Company Warrants”
shall mean any and all warrants issued by the Company to purchase any shares of Series A
Preferred Stock. 

        “Contracts”
shall mean all written or oral contracts, agreements, evidences of indebtedness,
guarantees, leases and executory commitments to which the Company or any of its
Subsidiaries is a party or by which any of the Company’s or any of its
Subsidiaries’ properties or assets are bound. 

        “Court
Order” shall mean any judgment, decision, consent decree, injunction, ruling or
order of any federal, state or local court or Governmental Authority that is binding on
any Person or its property under any Applicable Law relating to such Person or its
property. 

        “Employee
Plans” shall mean all Benefit Arrangements, Multiemployer Plans, Pension Plans
and Welfare Plans. 

        “Encumbrance”
shall mean any lien, pledge, mortgage, security interest, claim, charge, easement,
limitation, commitment, encroachment, restriction (other than a restriction on
transferability imposed by federal or state securities Laws) or other encumbrance of any
kind or nature whatsoever (whether absolute or contingent). 

        “Environmental
Laws” shall mean any and all federal, state, local and foreign statutes, laws,
regulations, ordinances or rules in existence relating to the effect of the environment or
Substances on human health; or emissions, discharges or releases of Substances into the
environment, including, without limitation, ambient air, surface water, groundwater or
land; or otherwise relating to the handling of Substances or the investigation, clean-up
or other remediation or analysis thereof. 

        “Environmental
Permit” shall mean any permit, approval, identification number, license and other
authorization required under any applicable Environmental Law. 

        “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended. 

4

        “ERISA
Affiliate” shall mean any entity which is (or at any relevant time was) a member
of a “controlled group of corporations” with, under “common control”
with, or a member of an “affiliated service group” with, or otherwise required
to be aggregated with, the Company as set forth in Section 414(b), (c), (m) or (o) of
the Code. 

        “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC thereunder. 

        “Exon-Florio
Act” shall mean the Exon-Florio Act of 1988, as amended.  

        “Expiration
Date” shall mean the date that is fifteen (15) months after the Closing Date.  

        “Fully
Diluted Share Number” shall mean the fully diluted number of shares of Common
Stock issued and outstanding immediately prior to the Effective Time after giving full
effect to the exercise, conversion or exchange, directly or indirectly, into shares of
Common Stock of all then outstanding options, warrants, Preferred Stock and other rights
to acquire Common Stock, whether or not then vested and exercisable. 

        “GAAP”
shall mean generally accepted accounting principles, as applied in the United States. 

        “Goldman
Sachs Fee” shall mean all fees and expenses paid or payable by the Company and
its Subsidiaries to Goldman, Sachs & Co. and its Affiliates in connection with
any of the transactions contemplated in this Agreement or the Escrow Agreement, including
any amounts payable pursuant to that certain engagement letter by and between the Company
and Goldman, Sachs & Co. dated August 7, 2005. 

        “Governmental
Authority” shall mean any United States or foreign government, any state or other
political subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, including the SEC
or any other United States or foreign government authority, agency, department, board,
commission or instrumentality of the United States, any state of the United States or any
political subdivision thereof or any foreign jurisdiction, and any court, tribunal or
arbitrator(s) of competent jurisdiction, and any United States or foreign governmental or
non-governmental self-regulatory organization, agency or authority (including the NYSE and
the NASD). 

        “HSR
Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. 

        “Intellectual
Property” shall mean all United States and foreign: (i)  trademarks, service
marks, trade names and any applications (including intent to use applications) to
register, or registrations for, any of the foregoing (collectively,
“Trademarks”); (ii)  patents and patent applications (including any
continuations, continuations-in-part, divisionals, reissues, renewals and applications,
including provisional applications, for any of the foregoing ) (collectively
“Patents”); (iii) copyrights, works of authorship, and mask works
and any registrations or applications therefor (collectively
“Copyrights”); (iv) Trade Secrets (as defined in
Section 3.7.5); and (v)  internet domain names and universal resource
locators (URLs) and the rights associated or arising out of either of the foregoing
(collectively, “Domain Names”). 

5

        “Knowledge”
of the Company shall mean (i) the actual knowledge of Wayne Jackson, Todd Headley, Tom
McDonough and Martin Roesch, and (ii) the knowledge that any of the persons listed in the
foregoing clause (i) would be reasonably expected to have in the ordinary conduct of their
duties and responsibilities assuming that such persons had conducted their respective
duties and responsibilities (including, without limitation, in connection with the
negotiation and preparation of this Agreement and the Company Disclosure Schedule) in the
manner that a reasonable person would conduct such duties and responsibilities under
similar circumstances. 

        “Law”
shall mean any domestic or foreign federal, state or local statute, law (whether statutory
or common law), ordinance, rule, administrative interpretation, regulation, order, writ,
injunction, directive, judgment, decree, or other legal requirement or binding arbitration
award or finding (including those of the NASD, NYSE or any other self-regulatory
organization). 

        “Multiemployer
Plan” shall mean any “multiemployer plan,” as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute to, or
maintained, administered, contributed to or was required to contribute to, or under which
the Company or any ERISA Affiliate may incur any liability and (b) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect to their
relationship with any such entity). 

        “NIS”
shall mean New Israeli Shekels. 

        “Non-Disclosure
Agreement” shall mean that certain letter agreement dated as of August 25,
2005, by and between Parent and the Company, as the same may be amended from time to time
by the parties. 

        “Parent
Material Adverse Effect” shall mean a material adverse effect on the ability of
Parent, Buyer or Merger Sub to consummate the Merger pursuant to the terms hereof or
comply with its obligations hereunder; provided, however, that in no event shall
any changes, events, occurrences, violations, inaccuracies, circumstances, developments or
effects that are caused by or result from the following, in and of itself, be deemed to
have or constitute a Parent Material Adverse Effect: (i) conditions affecting the
industries in which Parent or its Subsidiaries participates, provided that such changes,
events, occurrences, violations, inaccuracies, circumstances, developments or effects do
not disproportionately affect Parent or its Subsidiaries in any material respect, (ii)
conditions affecting the U.S. economy as a whole, or foreign economies as a whole in any
countries where Parent or its Subsidiaries have material operations, provided that such
changes, events, occurrences, violations, inaccuracies, circumstances, developments or
effects do not disproportionately affect the Parent or its Subsidiaries in any material
respect, (iii) the announcement or pendency of this Agreement or the transactions
contemplated hereby, (iv) any action taken (or failure to take any action required by this
Agreement) by the Company, or (v) acts of war or terrorism, escalation of hostilities,
natural disasters, acts of God or similar calamity or crisis. 

        “Parent
Ordinary Shares” shall mean the ordinary shares of Parent, NIS 0.01 nominal
value. 

6

        “Pension
Plan” shall mean any “employee pension benefit plan” as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company or
any ERISA Affiliate maintains, administers, contributes to or is required to contribute
to, or, within the five (5) years prior to the Closing Date, maintained, administered,
contributed to or was required to contribute to, or under which the Company or any ERISA
Affiliate may incur any liability (including, without limitation, any contingent
liability) and (b) covers any employee or former employee of the Company or any ERISA
Affiliate (with respect to their relationship with any such entity). 

        “Per
Share Residual Amount” shall mean the amount derived by dividing (x) the
Aggregate Residual Amount by (y) the Fully Diluted Share Number. 

        “Permitted
Encumbrances” shall mean any (i) mechanics liens, materialmen’s liens and
similar Encumbrances arising or incurred in the ordinary course of business with respect
to any amounts not yet due and payable or which are being contested in good faith through
appropriate proceedings and which are not, individually or in the aggregate, material to
the Company or any of its Subsidiaries and do not interfere in any material respect with
the use of any of the Company’s assets, (ii) Encumbrances for Taxes or other
governmental charges not yet due and payable, (iii) Encumbrances that are listed on the
Company Disclosure Schedule securing rental payments under capital lease agreements to
which the Company or its Subsidiaries are a party, (iv) Encumbrances and restrictions on
the underlying fee interest in any leased real property (including easements, covenants,
rights of way and similar restrictions of record) that do not materially interfere with
the present uses of such real property, (v) Encumbrances securing the Company’s
obligations under its credit facility with Silicon Valley Bank, (vi) purchase money
security interests arising in the ordinary course of business, and (vii) Encumbrances
specifically described on the Company Disclosure Schedule. 

        “Person”
shall mean any individual, corporation, company, partnership (limited or general), limited
liability company, joint venture, association, trust or other business entity. 

        “Personal
Element” shall mean a natural person’s full name (or last name if associated
with an address), telephone number, e-mail address, Unique Identifying Number, photograph,
or any other information, alone or in combination, that allows the identification of a
natural person. 

        “Preferred
Stock” shall mean the preferred stock, $0.001 par value per share, of the
Company. 

        “Pro
Rata Share” shall mean, with respect to each Stockholder, the percentage of the
aggregate Escrow Cash withheld from each Stockholder pursuant to Section 2.8.3. 

        “Recent
Accelerated Option Value” shall mean the amount of cash consideration payable
pursuant to Section 2.6 in respect of the aggregate number of shares of
Company Stock issuable upon the exercise in full of all Company Option(s) (if any) granted
by the Company after August 15, 2005 that contain any vesting acceleration provisions
triggered in whole or in part by the Merger or any other transactions contemplated in this
Agreement (other than any such Company Options granted by the Company with Buyer’s
prior consent), less the aggregate exercise price thereof. 

        “SEC”
shall mean the United States Securities and Exchange Commission, and any successor
thereto. 

        “Securities
Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations of the SEC thereunder. 

7

        “Series
A Conversion Number” shall mean a fraction, the numerator of which is $3.05, and
the denominator of which is $1.0167. 

        “Series
A Liquidation Preference” shall mean the amount to which each share of
Series A Preferred Stock is entitled upon consummation of the Merger pursuant to the
first sentence of Section 2(a) of Article V(C) of the Company Certificate of
Incorporation. 

        “Series A
Preferred Stock” shall mean the Series A Convertible Preferred Stock, $0.001
par value per share, of the Company. 

        “Series
B Liquidation Preference” shall mean the amount to which each share of
Series B Preferred Stock is entitled upon consummation of the Merger pursuant to the
first sentence of Section 2(a) of Article V(C) of the Company Certificate of
Incorporation. 

        “Series B
Preferred Stock” shall mean the Series B Convertible Preferred Stock, $0.001
par value per share, of the Company. 

        “Series
C Liquidation Preference” shall mean the amount to which each share of
Series C Preferred Stock is entitled upon consummation of the Merger pursuant to the
first sentence of Section 2(a) of Article V(C) of the Company Certificate of
Incorporation. 

        “Series C
Preferred Stock” shall mean the Series C Convertible Preferred Stock, $0.001
par value per share, of the Company. 

        “Software”
shall mean individually each, and collectively all, of the computer programs, including
interfaces and any embedded software programs or applications, owned or licensed by the
Company or otherwise included as an asset of the Company under this Agreement, including
as to each program, the processes and routines used in the processing of data, the object
code, source code (as to third-party source code, when rights to the source code may be
obtained), tapes, disks, and all improvements, modifications, enhancements, versions and
releases relating thereto. 

        “Stockholders”
shall mean the Holders of shares of Company Stock as of immediately prior to the Effective
Time. 

        “Subsidiary”
of a Person shall mean any other Person more than 50% of the voting stock (or of any other
form of other voting or controlling equity interest in the case of a Person that is not a
corporation) of which is beneficially owned by the Person directly or indirectly through
one or more other Persons. 

        “Substances”
shall mean any “hazardous substance,” “hazardous waste,”
“pollutant,” “contaminant” or “toxic substance,” as defined
by CERCLA, the Resources Conservation and Recovery Act, 42 U.S.C. Section 6901
et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the
Clean Air Act, 42 U.S.C. Section 7401 et seq., or the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., and regulations promulgated
thereunder, or any analogous state and local Laws and regulations; petroleum, petroleum
products, byproducts or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls. 

8

        “Takeover
Statute” shall mean any “fair price,” “moratorium,”
“control share acquisition” or other similar anti-takeover statute or regulation
enacted under state or federal Laws in the United States including Section 203 of the
DGCL. 

        “Tax”
or, collectively, “Taxes” shall mean (i) any and all U.S. federal,
state, local and non-U.S. taxes, and similar assessments and other governmental charges,
duties, impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect to such
amounts, (ii) any liability for the payment of any amounts of the type described in
clause (i) of this definition as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period, and (iii) any liability for
the payment of any amounts of the type described in clauses (i) or (ii) of this
definition as a result of any express or implied obligation to indemnify any other person
or as a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a predecessor
or transferor entity. 

        “Tax
Return” shall mean any return, declaration, report, claim for refund, or
information return or statement relating to Taxes required to be filed with a Taxing
Authority, including any schedule or attachment thereto, and including any amendment
thereof. 

        “Taxing
Authority” shall mean any government or any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body having jurisdiction over the
assessment, determination, collection or other imposition of Taxes. 

        “Trading
Day” shall mean any day on which the NASDAQ National Market is open and available
for at least five (5) hours for the trading of securities. 

        “Transaction
Consideration” shall mean $222.5 million in cash, less the sum of
(x) the Goldman Sachs Fee, (y) Excess Company Transaction Expenses (if any), and
(z) the Recent Accelerated Option Value (if any). 

        “Treasury
Regulations” shall mean the regulations promulgated under the Code. 

        “Unique
Identifying Number” shall mean an identifier uniquely associated with a Person
such as a social security number, driver’s license number, passport number or
customer number, but excluding an identifier which is randomly or otherwise assigned so
that it cannot reasonably be used to identify the person. 

        “User
Data” shall mean, to the extent collected or acquired by or on behalf of the
Company: (w) all data related to impression and click-through activity of users, including
user identification and associated activities at a web site as well as pings and activity
related to closed loop reporting and all other data associated with a user’s behavior
on the Internet, including without limitation all e-mail lists or other user information
acquired by the Company directly or indirectly from a third party that collected such
information, (x) all data that contains a Personal Element, (y) known, assumed
or inferred information or attributes about a user or identifier, and (z) all
derivatives and aggregations of (w), (x) and (y), including user profiles. 

        “Warrantholders”
shall mean the Holders of Company Warrants. 

9

        “Welfare
Plan” shall mean any “employee welfare benefit plan” as defined in
Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which the Company or
any ERISA Affiliate may incur any liability and (b) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their relationship with
any such entity). 

	 	        Section
1.2  Additional Defined Terms. Each of the following terms is defined in the
Section set forth opposite such term:  

	TERM 	SECTION 
	 	
		
		
		
	280G Payments	Section 5.6.2
	401(k) Plan	Section 5.9.2
	Accounts Receivable	Section 3.5.2
	Acquisition Proposal	Section 5.5.1
	Aggregate Outstanding Claims	Section 2.7.2.1
	Agreement	Preamble
	Audited Company Financial Statements	Section 3.5.1
	Benefit Plan Enrollment Date	Section 5.9.1
	Buyer	Preamble
	Buyer Benefit Plan	Section 5.9.1
	Buyer Indemnified Parties	Section 8.2.1
	Certificate of Merger	Section 2.2
	Certificates	Section 2.8.2
	Closing	Section 2.1.2
	Closing Date	Section 2.1.2
	Company Assets	Section 3.18
	Company Disclosure Schedule	Article 3
	Company Dissenting Shares	Section 2.11
	Company Inbound License Agreement	Section 3.7.6.1
	Company Indemnifying Parties	Section 8.2.1
	Company Indemnified Parties	Section 8.3.1
	Company Insurance Policies	Section 3.15
	Company Outbound License Agreement	Section 3.7.6.2
	Company Owned Copyrights	Section 3.7.4.1
	Company Owned Intellectual Property	Section 3.7
	Company Owned Patents	Section 3.7.3.3
	Company Software	Section 3.7.12
	Company Transaction Expenses	Section 5.10
	Content	Section 3.7.7
	Copyrights	Section 1.1 (See Intellectual Property)
	Deductible Amount	Section 8.5.2
	Development	Section 5.4
	Disqualified Individuals	Section 5.6.2
	D&O Policy	Section 5.13.2
	DGCL	Recitals
	Domain Names	Section 1.1 (See Intellectual Property)
	Effective Time	Section 2.2
	Election Notice	Section 2.6.7.2
	Employment Agreements	Recitals
	Escrow Account	Section 2.7.1.1

10

	TERM 	SECTION 
	 	
	Escrow Agent	Section 2.7.1.1
	Escrow Agreement	Section 2.7.1.1
	Escrow Cash	Section 2.7.1.1
	Excess Company Transaction Expenses	Section 5.10
	Holder	Section 2.6
	Indemnification Notice	Section 8.3.3
	Indemnified Officers and Directors	Section 5.13.3
	Investment Company Act	Section 3.21
	Losses	Section 8.2.1
	Major Customers	Section 3.22
	Maximum Annual Premium	Section 5.13.2
	Merger	Recitals
	Merger Sub	Preamble
	Outside Date	Section 7.1.3
	Parent	Preamble
	Patents	Section 1.1 (See Intellectual Property)
	Paying Agent	Section 2.8.1
	Permits	Section 3.12.1
	Privacy Policies	Section 3.7.15.1
	Proceedings	Section 3.11
	Resolved Claim Notice	Section 8.3.2
	Restricted Shares	Section 2.6.8
	Retained Company Employee	Section 5.9.1
	Retained Escrow Cash	Section 2.7.2.1
	Retention Plan	Recitals
	Scheduled Contracts	Section 3.6
	Statement of Closing Consideration	Section 5.11
	Statement of Closing Expenses	Section 5.10
	Stockholder Consent	Section 3.4.3
	Stockholder Representative	Section 8.5.7.1
	Surviving Corporation	Section 2.1.1
	Tax Sharing Agreement	Section 3.10.6
	Termination Fee	Section 7.2.2
	Third-Party Claim	Section 8.4.1
	Threshold Amount	Section 8.5.1
	Trademarks	Section 1.1 (See Intellectual Property)
	Trade Secrets	Section 3.7.5.1
	Transmittal Letter	Section 2.8.2
	Unaudited Company Balance Sheet	Section 3.5.1
	Unaudited Company Financial Statements	Section 3.5.1
	Unvested Company Option	Section 2.6.7.1
	Vested Company Options	Section 2.6.7.2

11

ARTICLE 2. 

The Merger 

	 	        Section
2.1 The Merger.  

	 	        Section 2.1.1
 Merger of the Company into Merger Sub. Upon the terms and subject to satisfaction
or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL,
at the Effective Time, Merger Sub shall be merged with and into Company. As a result of
the Merger, the separate corporate existence of Merger Sub shall cease and the Company
shall continue as the surviving corporation of the Merger (the “Surviving Corporation”).  

	 	        Section 2.1.2
Closing. Unless this Agreement shall have been terminated pursuant to Section 7.1
of this Agreement, and subject to the satisfaction (or, to the extent permitted by this
Agreement, the waiver) of each of the conditions set forth in Article 6 of this
Agreement, the consummation of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Wilson Sonsini Goodrich Rosati, Professional
Corporation, One Market, Spear Tower, Suite 3300, San Francisco, California 94105, at
10:00 a.m., Pacific time, as soon as practicable following the satisfaction (or, to the
extent permitted by this Agreement, the waiver) of each of the conditions set forth in
Article 6 of this Agreement (and in any event, within two (2) Business Days
thereafter), or at such other date, time and place as Buyer and the Company shall
mutually agree in writing (the exact date on which the Closing takes place being referred
to as the “Closing Date”).  

	 	        Section 2.2
Effective Time. Subject to the terms and conditions set forth in this Agreement,
on the Closing Date and at the Closing, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger (the “Certificate of Merger”)
with the Secretary of State of the State of Delaware, in such mutually agreeable form as
required by, and executed in accordance with the relevant provisions of, the DGCL (the
date and time of such filing, or if another date and time is specified in such filing,
such specified date and time being referred to as the “Effective Time”).  

	 	        Section 2.3
Effect of the Merger. At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, at the Effective Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the Surviving Corporation.  

	 	        Section
2.4  Certificate of Incorporation and Bylaws of the Surviving Corporation.  

	 	        Section 2.4.1
At the Effective Time, the certificate of incorporation of the Company as in effect
immediately prior to the Effective Time shall be amended to read in its entirety to
reflect the terms and provisions of the certificate of incorporation of Merger Sub as in
effect immediately prior to the Effective Time and, as so amended, shall be the
certificate of incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and Applicable Law.  

	 	        Section 2.4.2
At the Effective Time, the bylaws of Merger Sub as in effect immediately prior to the
Effective Time shall become the bylaws of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof, the certificate of incorporation of
the Surviving Corporation and Applicable Law.  

12

	 	        Section
2.5  Board of Directors and Officers of the Surviving Corporation.  

	 	        Section 2.5.1
The board of directors of Merger Sub immediately prior to the Effective Time shall be the
board of directors of the Surviving Corporation at the Effective Time, each to hold
office in accordance with the certificate of incorporation of the Surviving Corporation.  

	 	        Section 2.5.2
The officers of Merger Sub immediately prior to the Effective Time shall be the officers
of the Surviving Corporation at the Effective Time, each to hold office in accordance
with the certificate of incorporation and bylaws of the Surviving Corporation.  

	 	        Section 2.6
Conversion of Securities. At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Buyer, Merger Sub, the Company or the holders
of any of the following securities (each, a “Holder”):  

	 	        Section 2.6.1
Shares of Common Stock of Merger Sub. Each share of common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall automatically be
converted into and thereafter represent one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation such that immediately following the
Effective Time, Buyer will be the sole and exclusive owner of all capital stock of the
Surviving Corporation.  

	 	        Section 2.6.2
Shares of Series A Preferred Stock. Subject to the terms of this Agreement
(including Section 2.7), each share of Series A Preferred Stock outstanding
immediately prior to the Effective Time (other than any shares of Series A Preferred
Stock held in the treasury of the Company immediately prior to the Effective Time, which
shares shall be cancelled and extinguished without any payment being made in respect
thereof, or any Company Dissenting Shares) shall be converted into the right to receive
an amount in cash (without interest) equal to the sum of (x) the Series A Liquidation
Preference and (y) the product obtained by multiplying (i) the Per Share Residual Amount
by (ii) the Series A Conversion Number (the “Per Share Series A Consideration”).
All shares of Series A Preferred Stock converted pursuant to this Section 2.6.2
shall no longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist after the Effective Time.  

	 	        Section 2.6.3
Shares of Series B Preferred Stock. Subject to the terms of this Agreement
(including Section 2.7), each share of Series B Preferred Stock outstanding
immediately prior to the Effective Time (other than any shares of Series B Preferred
Stock held in the treasury of the Company immediately prior to the Effective Time, which
shares shall be cancelled and extinguished without any payment being made in respect
thereof, or any Company Dissenting Shares) shall be converted into the right to receive
an amount in cash (without interest) equal to the sum of (x) the Series B Liquidation
Preference and (y) the Per Share Residual Amount. All shares of Series B Preferred
Stock converted pursuant to this Section 2.6.3 shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist after the Effective
Time.  

13

	 	        Section 2.6.4
 Shares of Series C Preferred Stock. Subject to the terms of this Agreement
(including Section 2.7), each share of Series C Preferred Stock outstanding
immediately prior to the Effective Time (other than any shares of Series C Preferred
Stock held in the treasury of the Company immediately prior to the Effective Time, which
shares shall be cancelled and extinguished without any payment being made in respect
thereof, or any Company Dissenting Shares) shall be converted into the right to receive
an amount in cash (without interest) equal to the sum of (x) the Series C Liquidation
Preference and (y) the Per Share Residual Amount. All shares of Series C Preferred
Stock converted pursuant to this Section 2.6.4 shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist after the Effective
Time.  

	 	        Section 2.6.5
 Shares of Common Stock. Subject to the terms of this Agreement (including Section
2.7), each share of Common Stock outstanding immediately prior to the Effective Time
(other than any shares of Common Stock held in the treasury of the Company immediately
prior to the Effective Time, which shares shall be cancelled and extinguished without any
payment being made in respect thereof, or any Company Dissenting Shares) shall be
converted into the right to receive an amount in cash (without interest) equal to the Per
Share Residual Amount. All shares of Common Stock converted pursuant to this Section 2.6.5
shall no longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist after the Effective Time.  

	 	        Section 2.6.6
Company Warrants.  

	 	        Section 2.6.6.1
None of Parent, Buyer or Merger Sub shall assume any Company Warrants in connection with
the Merger or any other transaction contemplated by this Agreement.  

	 	        Section 2.6.6.2 Subject
to the terms of this Agreement (including Section 2.7), at the Effective Time, each
Company Warrant that is issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without the need for any further action on the part of
the Holder thereof (except as expressly provided herein), be converted into and represent
the right to receive an amount of cash, without interest, equal to the product obtained
by multiplying (x) the number of shares of Series A Preferred Stock issuable upon the
exercise in full of such Company Warrant by (y) (A) Per Share Series A Consideration less (B)
the exercise price per share attributable to such Company Warrant. The amount of cash
each Warrantholder is entitled to receive for the Company Warrants held by such
Warrantholder shall be rounded to the nearest cent and computed after aggregating cash
amounts for all Company Warrants held by such Warrantholder. As soon as practicable (and
in no event more than five (5) calendar days) following the Closing, Parent or Buyer
shall pay to each Holder of a Company Warrant the amounts required to be paid to any such
Holder in accordance with this Section 2.6.6.2.  

	 	        Section 2.6.6.3 The
Company shall use all commercially reasonable efforts to satisfy all notice or other
obligations under any Contracts evidencing or relating to any Company Warrants in order
to effectuate the intent of this Section 2.6.6.  

14

	 	        Section 2.6.7
Company Options.  

	 	        Section 2.6.7.1
Unvested Options. The Company and Buyer shall use all commercially reasonable
efforts to provide that, at the Effective Time, the Company’s 2002 Stock Incentive
Plan and each Company Option that is outstanding, unvested, unexercised and unexpired
immediately prior to the Effective Time (each, an “Unvested Company Option”)
shall be assumed by Buyer. Each Unvested Company Option so assumed by Buyer shall
continue to have, and be subject to, the same terms and conditions as set forth in any
stock option plan and/or Contract pursuant to which such Unvested Company Option was
granted and issued, in each case, as in effect immediately prior to the Effective Time,
except that (i) each such Unvested Company Option shall become exercisable in
accordance with its terms for that number of Parent Ordinary Shares equal to the product
obtained by multiplying (x) the number of shares of Common Stock that were issuable
upon the exercise in full of such Unvested Company Option immediately prior to the
Effective Time by (y) the Assumed Company Option Exchange Ratio, rounded down to the
nearest whole number of Parent Ordinary Shares, and (ii) the per share exercise
price for the Parent Ordinary Shares issuable upon exercise of each such Unvested Company
Option assumed shall be equal to the quotient obtained by dividing (x) the exercise price
per share of Common Stock at which such Company Option was exercisable immediately prior
to the Effective Time by (y) the Assumed Company Option Exchange Ratio, rounded up
to the nearest whole cent. Following the assumption of such Unvested Company Options, all
references to the Company in any such Unvested Company Options and the Company’s
2002 Stock Incentive Plan shall be deemed to refer to Buyer. The conversion of any such
assumed Unvested Company Options which are “incentive stock options” within the
meaning of Section 422 of the Code into options to purchase Parent Ordinary Shares
shall be made so as not to constitute a “modification” of such Company Options
within the meaning of Section 424 of the Code; provided, however, that none
of Parent, Buyer or Merger Sub make any representations, warranties or other guarantees
to the Holders of any assumed Unvested Company Options that any such assumed Unvested
Company Options will continue to qualify as “incentive stock options” within
the meaning of Section 422 of the Code following the assumption of such Unvested Company
Options in accordance with the terms hereof.  

	 	        Section 2.6.7.2 Vested
Options. At the Effective Time, subject to the terms of this Agreement (including
Section 2.7), each Company Option that is outstanding, vested, exercisable and unexpired
immediately prior to the Effective Time (after giving full effect to any acceleration of
vesting triggered solely by the consummation of the transactions contemplated by this
Agreement (including, without limitation, the Merger) (the “Vested Company Options”)
shall, by virtue of the Merger and without any action on the part of the Holder of any
such Vested Company Options, be cancelled and converted into and represent the right to
receive an amount of cash, without interest, equal to the product obtained by multiplying
(x) the number of shares of Common Stock subject to a Vested Company Option by (y) (A)
the Per Share Residual Amount, less(B) the exercise price per share attributable
to such Vested Company Option, unless on or before the date that is five (5) days prior
to the Closing Date (as determined by Buyer and the Company in good faith) the Holder of
any such Vested Company Option delivers to Buyer and the Company a written request, in
form and substance reasonably acceptable to Buyer and the Company (an “Election
Notice”), that such Vested Company Option be assumed by Buyer. In the event that
Buyer and the Company shall receive an Election Notice with respect to any Vested Company
Option, (i) such Vested Company Option shall be assumed by Buyer in the same manner and
under the same terms and conditions set forth in Section 2.6.7.1 hereof with respect
to Unvested Company Options and (ii) Buyer and the Company shall use all commercially
reasonable efforts to provide for such assumption (including, without limitation, by
making any necessary amendments to the 2002 Stock Incentive Plan and obtaining any
necessary consents from the Holders of such Vested Company Options). The amount of cash
each Holder of Vested Company Options is entitled to receive for the Vested Company
Options held by such holder shall be rounded down to the nearest cent and computed after
aggregating cash amounts for all Vested Company Options held by such Holder. Any amount
paid pursuant to this Section 2.6.7.2 in respect of Vested Company Options shall be
subject to any applicable Taxes required to be withheld with respect to such payment. At
least two weeks prior to the anticipated Closing Date, the Company shall cause a form of
Election Notice to be provided to each Holder of a Vested Company Option. Buyer shall use
commercially reasonable efforts to assist the Company in respect of such delivery and
shall provide to the Company for inclusion in such Election Notice any necessary
information concerning Parent, Buyer, the Parent Ordinary Shares and such other
information as may be necessary or desirable in connection therewith. As soon as
practicable (and in no event more than five (5) calendar days) following the Closing,
Parent or Buyer shall pay to each Holder of Vested Company Options the amounts (if any)
required to be paid to any such Holder in accordance with this Section 2.6.7.2.  

15

	 	        Section 2.6.8
Restrictions on Shares of Company Stock. If any shares of Company Stock
outstanding immediately prior to the Effective Time are unvested or are subject to a
repurchase option, substantial risk of forfeiture or other similar condition (in each
case giving effect to any acceleration of vesting or lapse of such option, risk or
condition due to the consummation of the Merger and the transactions contemplated by this
Agreement) under any applicable restricted stock purchase agreement or other similar
agreement with the Company (“Restricted Shares”), then the portion of
the Transaction Consideration issued in exchange for such Restricted Shares will also be
unvested and subject to the same repurchase option, substantial risk of forfeiture or
other similar condition. The Company shall use commercially reasonable efforts to ensure
that, from and after the Effective Time, Buyer is entitled to exercise any such
repurchase option or other right set forth in any such restricted stock purchase
agreement or other agreement. Subject to the last sentence of this Section 2.6.8,
after the Effective Time, Parent or Buyer shall pay the Transaction Consideration to
which such Restricted Shares are entitled in accordance with the vesting schedule
applicable to the Restricted Shares, subject to applicable withholdings for Taxes.
Notwithstanding the foregoing, the amount of cash contributed to the Escrow Account on
behalf of any Stockholder holding Restricted Shares pursuant to Section 2.7 shall be
contributed from that portion that is vested or otherwise unrestricted and free from a
repurchase option, risk of forfeiture or other condition under any applicable restricted
stock purchase agreement or other agreement with the Company. To the extent that the
vested or unrestricted cash payable to any Stockholder pursuant to this Agreement is less
than the amount of Escrow Cash to be contributed to the Escrow Account on behalf of such
Stockholder pursuant to this Agreement, the restricted cash amounts contributed to the
Escrow Account on behalf of such Stockholder shall vest or otherwise become free from a
repurchase option, risk of forfeiture or other condition under any applicable restricted
stock purchase agreement or other agreement with the Company in priority to other cash
amounts otherwise receivable by such Stockholder pursuant to this Agreement and no
payment shall be made to such Stockholder unless and until all of the cash amounts
contributed to the Escrow Account on behalf of such Stockholder has vested and is
otherwise free from a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with the Company.  

16

	 	        Section 2.6.9
Proper Allocation; Maximum Transaction. Consideration. The allocation and
distribution of Transaction Consideration to the Holders of the issued and outstanding
shares of Company Stock described in this Article 2 is intended to reflect the allocation
of Transaction Consideration contemplated by the terms and conditions of the Company
Certificate of Incorporation (including, without limitation, Subsections 2(a) and 2(b) of
Article V(C) thereof). Notwithstanding the foregoing or anything to the contrary set
forth in this Agreement, under no circumstances will the sum of the following exceed the
Transaction Consideration: (x) the aggregate amount of all cash consideration payable to
Holders of Company Stock, Company Options and Company Warrants issued and outstanding
immediately prior to the Effective Time pursuant to this Agreement, (y) the value of all
Company Options assumed pursuant hereto (calculated based on the difference derived from
subtracting the aggregate exercise prices of the Company Options from the aggregate Per
Share Residual Amount that would have been payable on such underlying shares of Company
Common Stock if such shares had been outstanding immediately prior to the Effective
Time), and (z) the aggregate exercise prices of all Company Options and Company Warrants
assumed by Buyer or cancelled pursuant hereto. In the event that the parties hereto
determine that (i) the allocation and distribution of Transaction Consideration to the
Holders of issued and outstanding Company Stock described in this Article 2 is
inconsistent with the allocation of Transaction Consideration contemplated by the Company
Certificate of Incorporation in any respect, or (ii) the sum of the amounts referenced
above in clauses (x), (y) and (z) exceed the Transaction Consideration, then in any such
case the parties shall work together in good faith to amend the terms of this Agreement
to appropriately reflect the parties’ intentions.  

	 	        Section
2.7 Escrow. 

	 	        Section 2.7.1
Escrow Cash. 

	 	        Section 2.7.1.1 To
provide funds for the satisfaction of any claims for indemnification made by Buyer
pursuant to Article 8 of this Agreement, Parent or Buyer shall deliver an amount in
cash equal to the product obtained by multiplying (x) the aggregate cash amounts payable
pursuant to Section 2.6 to the Stockholders, by (y) 0.10 (the “Escrow Cash”)
to an escrow account (the “Escrow Account”) to be established with a
third party escrow agent reasonably satisfactory to Parent, Buyer and the Company (the
“Escrow Agent”), to be held by the Escrow Agent pursuant to the terms of
an escrow agreement substantially in the form attached hereto as Exhibit B (the
“Escrow Agreement”).  

	 	        Section 2.7.1.2 During
the period in which the Escrow Cash is retained in the Escrow Account, the Escrow Cash
shall be held for the benefit of the Stockholders, but Buyer shall be treated as the
owner of the Escrow Cash for Tax purposes until released to such Stockholders. All
interest or other income earned from the investment of Escrow Cash shall be retained in
the Escrow Account as additional Escrow Cash.  

	 	        Section 2.7.2
Release of Escrow Cash. 

	 	        Section 2.7.2.1  As
soon as practicable (and in no event more than five (5) calendar days) following the
Expiration Date, the Escrow Agent shall promptly distribute to the former Stockholders,
at their respective addresses and in proportion to their respective Pro Rata Shares set
forth on the Statement of Closing Consideration, any Escrow Cash initially deposited in
the Escrow Account pursuant to this Section 2.7 (plus any interest or income accrued
or earned thereon), less (x) any amount of Escrow Cash paid to the
Stockholder Representative pursuant to Section 8.5.7.6 and the Stockholder Representative
Agreement, (y) the amount of any Escrow Cash recovered by any Buyer Indemnified Parties
prior to the Expiration Date pursuant to Section 8.3 hereof, and (z) an amount
of Escrow Cash which the Escrow Agent shall retain equal to the aggregate amount of
indemnification claims in U.S. Dollars made by any Buyer Indemnified Parties pursuant to
Section 8.2 hereof which shall be outstanding and unresolved (the “Aggregate
Outstanding Claims”), or, in the event that the Aggregate Outstanding Claims
exceed the remaining amount of Escrow Cash, all remaining Escrow Cash (such amount of
retained Escrow Cash, as well as any such amount of retained Escrow Cash as it may be
further reduced after the Expiration Date by distributions to the Stockholders and
recoveries by any Buyer Indemnified Parties pursuant to Section 8.3 hereof, the
“Retained Escrow Cash”).  

17

	 	        Section 2.7.2.2 In
the event and to the extent that, following the Expiration Date, any outstanding
indemnification claim made by any Buyer Indemnified Parties prior to the Expiration Date
pursuant to Section 8.2 hereof is resolved against any Buyer Indemnified Parties,
the Escrow Agent shall thereupon promptly (and in no event more than five (5) calendar
days thereafter) deliver to the Stockholders, at their respective addresses and in
proportion to their respective Pro Rata Shares set forth on the Statement of Closing
Consideration, an amount of the Retained Escrow Cash corresponding to the amount of the
outstanding indemnification claim resolved against any Buyer Indemnified Parties, unless
the remaining Aggregate Outstanding Claims would exceed the Retained Escrow Cash after
such distribution, in which case such cash shall not be distributed to the extent
necessary so that the Retained Escrow Cash would equal the remaining Aggregate
Outstanding Claims.  

	 	        Section
2.8 Paying Agent; Distribution of the Transaction Consideration. 

	 	        Section 2.8.1
Paying Agent. At the Closing, pursuant to a Paying Agent Agreement in form and
substance reasonably satisfactory to Parent, Buyer and the Company, Parent or Buyer shall
irrevocably (subject to the right to receive interest) deposit with a third party paying
agent (the “Paying Agent”) selected prior to the Closing by Parent and
Buyer (with the consent of the Company, which shall not be unreasonably withheld) for the
benefit of the Stockholders for exchange in accordance with Section 2.6, by wire
transfer of immediately available funds, an amount in cash sufficient to pay all amounts
payable in respect of shares of Company Stock pursuant to Article 2 of this Agreement
(the “Exchange Fund”). The Paying Agent shall, pursuant to this Article
2 and the Paying Agent Agreement, deliver the portion of the Transaction Consideration
contemplated to be paid pursuant to the Statement of Closing Consideration out of the
Exchange Fund to the Stockholders. The Exchange Fund shall not be used for any other
purpose. The fees and expenses of the Paying Agent shall be paid by the Company to the
extent such fees and expenses exceed the interest, dividends or other income earned with
respect to investments made in the Exchange Fund.  

	 	        Section 2.8.2
Distribution of Transmittal Letter. As soon as practicable (and in no event more
than five (5) calendar days) following the Effective Time, Buyer shall cause the Paying
Agent to mail to each record holder of certificates evidencing Company Stock (the “Certificates”)
a letter of transmittal in customary form (which (A) shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass to Buyer, only upon
delivery of the Certificates to the Paying Agent, (B) shall require the Stockholders (as
a condition to receiving the consideration contemplated hereby) to (i) ratify and approve
the appointment of the Stockholder Representative on the terms and subject to the
conditions set forth in this Agreement and in the Stockholder Representative Agreement,
and (ii) consent and agree to be irrevocably bound by the indemnification obligations of
the Company Indemnified Parties hereunder, and (C) shall be in such form and have such
other provisions as Parent, Buyer and the Company shall mutually agree prior to the
Closing) (the “Transmittal Letter”) and instructions for such holder’s
use in effecting the surrender of the Certificates and the exercise of the rights of such
holder to obtain its share of the Transaction Consideration.  

18

	 	        Section 2.8.3
Delivery of Certificates; Payment of Transaction Consideration. Upon surrender to
the Paying Agent of any Certificates for cancellation, together with a duly executed and
completed Transmittal Letter, the holder of such Certificate shall be entitled to receive
in exchange therefor the portion of the Transaction Consideration to which such holder is
entitled pursuant to Section 2.6 of this Agreement, less (i) such holder’s
pro rata portion of the Escrow Cash based on the proportion of the aggregate cash
consideration payable to each Holder of Company Stock pursuant to Section 2.6 in
exchange for shares of Company Stock (it being understood that such Escrow Cash shall not
be deposited with the Paying Agent and no deduction from the Exchange Fund shall be made
in respect thereof), (ii) any amounts to be deducted pursuant to Section 2.12 to cover
applicable withholding taxes, and (iii) any amounts to be deducted pursuant to Section
2.13 in payment of principal and accrued interest under any outstanding loans from the
Company to such holder.  

	 	        Section 2.8.4
Cancellation of Company Stock. Upon surrender of each Certificate and delivery by
the Paying Agent of the portion of the Transaction Consideration to be delivered in
exchange therefor, such Certificate shall forthwith be cancelled. Until so surrendered,
each Certificate (other than Certificates representing Company Dissenting Shares) shall
be deemed for all corporate purposes to evidence only the right to receive upon such
surrender the portion of the Transaction Consideration into which the Company Stock
represented thereby shall have been converted in accordance with the terms and upon the
conditions of this Agreement.  

	 	        Section 2.9
No Further Ownership Rights in Shares of Company Stock. The portion of the
Transaction Consideration delivered upon the surrender for exchange of Company Stock in
accordance with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such shares of Company Stock, and there shall be no further
registration of transfers of Company Stock which were outstanding immediately prior to
the Effective Time on the records of the Surviving Corporation. If, after the Effective
Time, the Certificates are presented to the Paying Agent the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in this Article 2.  

	 	        Section 2.10
Lost, Stolen or Destroyed Certificates. In the event any Certificates shall have
been lost, stolen or destroyed, Buyer shall cause the Paying Agent to issue in exchange
for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, such portion of the Transaction Consideration as may be
required pursuant to Section 2.6 of this Agreement; provided, however,that
Buyer may, in its sole discretion and as a condition precedent to the Paying Agent’s
issuance thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver an indemnity or bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Buyer and/or the Paying Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.  

19

	 	        Section 2.11
Dissenting Shares. Any holder of shares of Company Stock issued and outstanding
immediately prior to the Effective Time with respect to which appraisal rights, if any,
are available by reason of the Merger pursuant to Section 262 of the DGCL who has
neither voted in favor of the adoption of this Agreement nor consented thereto in writing
and who complies with Section 262 of the DGCL (including the timely making of
requisite demand thereunder) (“Company Dissenting Shares”) shall not be
entitled to receive any portion of the Transaction Consideration pursuant to this Article 2,
unless such holder fails to perfect, effectively withdraws or loses its appraisal rights
under the DGCL. Such holder shall be entitled to receive only such rights as are granted
under Section 262 of the DGCL. If any such holder fails to perfect, effectively
withdraws or loses such appraisal rights under the DGCL, such Company Dissenting Shares
shall thereupon be deemed to have been converted as of the Effective Time into the right
to receive that portion of the Transaction Consideration to which such shares of Company
Stock are entitled pursuant to this Article 2, without interest. The Company shall
give Buyer prompt notice of any demands for appraisal pursuant to Section 262 of the
DGCL received by the Company, withdrawals of any such demands and any other documents or
instruments received by the Company in connection therewith, in each case to the extent
received prior to Closing. Buyer shall have the right to participate in (but not control)
all negotiations and proceedings with respect to any such demands. The Company shall not,
except with the prior written consent of Buyer, make any payment with respect to, or
settle or offer to settle, any such demands, or agree to do any of the foregoing.  

	 	        Section 2.12
Withholding. Any of Parent, Buyer, Merger Sub or the Escrow Agent shall be
entitled to deduct and withhold from any consideration otherwise payable pursuant to this
Agreement such amounts as it may be required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of applicable Tax Law. To the
extent that amounts are so withheld or paid over to or deposited with the relevant Taxing
Authority by Buyer, such amounts shall be treated for all purposes of this Agreement as
having been paid to the applicable Person in respect of which Buyer made such deduction
and withholding.  

	 	        Section 2.13
Employee Loans. In the event that any Stockholder or Holder of Company Options to
be cancelled pursuant hereto has an outstanding loan from the Company or any of its
Subsidiaries as of the Effective Time relating to Company Stock or Company Options, the
cash amounts otherwise payable to such Stockholder or Holder of Company Options pursuant
to this Article 2 shall be reduced by an amount equal to the outstanding principal and
accrued interest of such loans in satisfaction of the obligation to pay such principal
and accrued interest.  

	 	        Section 2.14
Additional Consideration. In the event that (i) the employment of one or more
Holders of Company Options assumed by Buyer pursuant hereto is terminated (i) without
Cause or (ii) any other performance related reasons, in each case, as determined with
consent of Eyal Desheh and Wayne Jackson (or, in the event that Wayne Jackson shall no
longer be employed by the Buyer, the Surviving Corporation or any Affiliate of either of
them, such other officer of the Company as of the date hereof then having the most senior
role with Parent) (it being understood that the withholding of such consent shall not, in
and of itself, have any bearing on any employment decisions made by Buyer and its
Affiliates) within nine (9) months after the Effective Time, and (ii) the aggregate value
of all Parent Ordinary Shares (determined by reference to the Closing Measurement Price)
otherwise issuable upon the exercise of then unvested and unexercised assumed Company
Options held by such Holders exceeds $750,000, then as soon as practicable (and in no
event more than five (5) calendar days) following the nine (9) month anniversary date of
the Effective Time, Parent or Buyer shall pay to the Stockholders in proportion to their
respective Pro Rata Shares an amount in cash equal to the aggregate value of the Parent
Ordinary Shares (determined by reference to the Closing Measurement Value) issuable upon
the exercise of all such assumed Company Options held by such terminated Holders that
were unvested and unexercised at the time of termination of each such Holder or that were
vested upon such termination but unexercised within the requisite post-termination
exercise period, if any, and forfeited or terminated.  

20

ARTICLE 3. 

Representations and
Warranties of the Company 

        As
a material inducement to Parent, Buyer and Merger Sub to enter into this Agreement, except
as set forth in the disclosure schedule delivered by the Company to Buyer simultaneously
with the execution of this Agreement (the “Company Disclosure Schedule”),
which shall be read together with the applicable sections of this Agreement and shall not
be an independent document, and the exceptions contained in each section of which shall
qualify the representations or warranties in the correspondingly numbered section of this
Agreement as well as all other sections of this Agreement to which the applicability of
such exception is reasonably apparent on the face of the disclosure (without reference to
the underlying documents referenced therein unless such referenced documents are attached
to the Company Disclosure Schedule), the Company hereby represents and warrants to Buyer
as follows: 

	 	        Section 3.1
Organization. The Company is a corporation, duly incorporated, validly existing
and in good standing under the Laws of the State of Delaware, and each of its
Subsidiaries is a corporation or other business entity duly organized, validly existing
and in good standing under the Laws of its jurisdiction of organization as set forth on
Section 3.1of the Company Disclosure Schedule. The Company has the corporate
power and authority, and each of its Subsidiaries has the corporate or other applicable
power and authority, and each possesses all material governmental franchises, licenses,
permits and authorizations and approvals necessary to carry on their respective
businesses substantially in the manner as they are now being conducted and to own, lease
and operate all of their respective properties and assets. Section 3.1 of the
Company Disclosure Schedule sets forth a true, correct and complete list of each
jurisdiction in which the Company and any of its Subsidiaries is qualified to do business
as a foreign corporation or other entity. Each of the Company and its Subsidiaries is
duly licensed or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and assets owned,
leased or operated by it makes such qualification or licensing necessary except in
jurisdictions where the failure of such license or qualification would not have a Company
Material Adverse Effect. The copies of the Company Certificate of Incorporation and the
Company’s bylaws and each of its Subsidiaries’ organizational documents
delivered by the Company to Buyer prior to the execution of this Agreement are accurate,
complete and correct copies of such instruments as in effect on the date hereof.  

	 	        Section 3.2
Capitalization. 

	 	        Section 3.2.1
Authorized, Issued and Outstanding Capital Stock. The authorized capital stock of
the Company consists of (i) 35,000,000 shares of Common Stock and (ii) 15,031,658
shares of Preferred Stock, of which (x) 2,495,410 shares have been designated as
Series A Preferred Stock, (y) 7,132,205 shares have been designated as Series B
Preferred Stock and (z) 5,404,043 shares have been designated Series C
Preferred Stock. As of the date of this Agreement, there are issued and outstanding
5,512,882 shares of Common Stock, 2,475,410 shares of Series A Preferred Stock,
7,132,205 shares of Series B Preferred Stock and 5,404,043 shares of Series C
Preferred Stock. Except for Series A Preferred Stock which is convertible into a
number of shares of Common Stock per share of Series A Preferred Stock equal to the
Series A Conversion Number, all Preferred Stock is convertible into Common Stock on a
one-for-one basis. As of the date of this Agreement, the Company has no other capital
stock authorized, issued or outstanding. Section 3.2.1 of the Company
Disclosure Schedule sets forth, as of the date hereof, the name and address of each
Holder of shares of Company Stock, as well as the number of shares of Common Stock and
each series of Preferred Stock held by each such Holder.  

21

	 	        Section 3.2.2
Company Options. As of the date of this Agreement, 4,162,909 shares of Common
Stock are reserved for issuance upon the exercise of outstanding Company Options. Section 3.2.2 of
the Company Disclosure Schedule sets forth, as of the date hereof, the name of each
Holder of Company Options, as well as the number of Company Options held by each such
Holder, the number of shares of Common Stock for which each such Company Option is
exercisable, the vesting schedule for each such Company Option and the price per share of
Common Stock for which each such Company Option is exercisable (without taking into
account whether or not such Company Option is in fact exercisable on the date hereof).
The Company has delivered or made available to Buyer true, accurate and complete copies
of each plan or agreement pursuant to which any Company Option has been granted,
including any and all amendments thereto.  

	 	        Section 3.2.3
Company Warrants. As of the date of this Agreement, 20,000 shares of Series A
Preferred Stock are reserved for issuance upon exercise of outstanding Company Warrants.
Section 3.2.3 of the Company Disclosure Schedule sets forth the name of each
Warrantholder, as well as the number of Company Warrants held by each such Warrantholder,
the number of shares class and series of Company Stock for which such Company Warrant is
exercisable, the vesting schedule (if applicable) for each such Company Warrant and the
price per share of each class and series of Company Stock for which each such Company
Warrant is exercisable (without taking into account whether or not such Company Warrant
is in fact exercisable on the date hereof). The Company has delivered to Buyer true,
accurate and complete copies of each Company Warrant, including any and all amendments
thereto (if any).  

	 	        Section 3.2.4
No Other Capital Stock, Company Options or Company Warrants. Except for the
Company Options and Company Warrants referred to above, as of the date hereof, there are
no outstanding options, warrants, convertible securities or rights of any kind to
purchase or otherwise acquire any shares of capital stock or other securities of the
Company. Except for the aggregate of 4,162,909 shares of Common Stock reserved for
issuance upon exercise of outstanding Company Options, 20,000 shares of Series A
Preferred Stock reserved for issuance upon exercise of outstanding Company Warrants and
19,962,478 shares of Common Stock reserved for issuance upon conversion of outstanding
shares of Preferred Stock, no shares of capital stock of the Company are reserved for
issuance as of the date hereof.  

	 	        Section 3.2.5
No Other Agreements. There are no outstanding contractual obligations between the
Company and any of its security holders (i) restricting the transfer of; (ii) affecting
the voting rights of; (iii) requiring the repurchase, redemption or disposition of,
or containing any right of first refusal with respect to; (iv) requiring the
registration or sale of or (v) granting any preemptive or antidilutive right with
respect to, any shares of Common Stock, Preferred Stock or any capital stock of, or other
equity interests in, the Company.  

	 	        Section 3.2.6
Valid Issuances. All of the issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and nonassessable
and are free of any preemptive rights in respect thereto. All outstanding securities of
the Company have been issued in compliance with all applicable state and federal
securities Laws. The stock ledgers and related records that have been delivered or made
available by the Company to Buyer are complete and accurate.  

22

	 	        Section 3.3
Subsidiaries. Section 3.3 of the Company Disclosure Schedule lists
each Subsidiary of the Company. Each of the Company’s Subsidiaries is wholly owned
by the Company. All of the outstanding shares of capital stock of, or other equity
interests in, each such Subsidiary of the Company have been validly issued and are fully
paid and nonassessable and such shares or interests are owned directly by the Company,
free and clear of all Encumbrances and free of any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other ownership interests (other than
restrictions pursuant to federal and state securities Laws). Except for the capital stock
or other ownership interests of each of its Subsidiaries and investments of cash in money
market or similar funds in the ordinary course of business, the Company does not
beneficially own directly or indirectly any capital stock, membership interest,
partnership interest, joint venture interest or other equity interest in any Person.  

	 	        Section 3.4
Authority; No Violation. 

	 	        Section 3.4.1
The Company has full corporate power and authority to execute and deliver this Agreement
and the Escrow Agreement to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Escrow Agreement to which the Company is
a party and the consummation of the transactions contemplated hereby and thereby have
been duly and validly approved by all requisite corporate action on the part of the
Company, and following receipt of the Stockholder Consent, no other corporate proceedings
on the part of the Company are necessary to approve this Agreement or the Escrow
Agreement to which the Company is a party or to authorize or consummate the transactions
contemplated hereby or thereby. This Agreement and the Escrow Agreement to which the
Company is a party have been duly and validly executed and delivered by the Company and
(assuming the due authorization, execution and delivery of this Agreement and the Escrow
Agreement to which the Company is a party by each of the other parties hereto and
thereto) constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as the enforceability thereof
may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium or
similar Laws relating to or affecting the rights of creditors generally and the
availability of equitable relief (whether in proceedings at law or in equity).  

	 	        Section 3.4.2
Neither the execution and delivery by the Company or any of its Affiliates of this
Agreement or the Escrow Agreement to which the Company or any of its Affiliates is a
party nor the consummation by the Company or any of its Affiliates of any of the
transactions contemplated hereby or thereby, nor compliance by the Company or any of its
Affiliates with any of the terms or provisions hereof or thereof, will (i) subject
to obtaining the Stockholder Consent, violate any provision of the Certificate of
Incorporation, charter or bylaws or comparable organizational documents of the Company or
any of its Subsidiaries, (ii) violate, conflict with any Applicable Law to which the
Company or any of its Subsidiaries or any of their respective properties, contracts or
assets are subject, (iii) except for consents, approvals, notices to or filings,
declarations or registrations under the HSR Act and the Exon-Florio Act, and the filing
of the Certificate of Merger with the Secretary of State of Delaware, require the consent
or approval of, or notice to, or filings, declarations or registrations with any
Governmental Authority, (iv) violate or conflict with in any material respect,
result in a material breach of any provision of, or the loss of any material benefit
under, constitute a material default (or an event which, with or without notice or lapse
of time, or both, would constitute a material default) under, result in the termination
of or a right of termination or cancellation under, accelerate or result in a right of
acceleration of the performance required by, result in the creation of any Encumbrance
upon the Preferred Stock, the Common Stock or any Encumbrance upon the properties,
contracts or assets of the Company or any of its Subsidiaries under, or require any
notice, approval, waiver or consent under, any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation and to which
the Company or any of its Subsidiaries is a party, or by which the Company or any of its
Subsidiaries or any of their respective properties or assets may be bound or affected, or
(v) except as a result of restrictions, limitations or requirements imposed upon the
Surviving Corporation by or through Parent or Buyer, otherwise prevent the Surviving
Corporation from continuing the Company Business immediately following the Closing or
using the material Company Assets immediately following the Closing in substantially the
same manner in which the Company conducted the Company Business or used the Company
Assets immediately prior to the Closing.  

23

	 	        Section 3.4.3
The only votes or consents of any class or series of the Company’s capital stock
necessary to effect the transactions contemplated in this Agreement under Applicable Law,
the Company Certificate of Incorporation and bylaws and any Contracts between the
Company, on the one hand, and any of its Stockholders, on the other hand, are votes or
consents to adopt this Agreement and approve the Merger by the holders of: (a) a
majority in voting power of the outstanding shares of Company Stock, voting together as a
single class on an as-converted to Common Stock basis, and (b) at least (i)
two-thirds (2/3) of the outstanding Series A Preferred Stock, (ii) sixty
percent (60%) of the outstanding Series B Preferred Stock, and (iii) a majority of
the outstanding Series C Preferred Stock, voting or consenting as separate classes
(collectively, the “Stockholder Consent”).  

	 	        Section 3.4.4
Subject to Section 5.5.2 and Section 5.5.3, the Company’s board of directors (i) determined
that this Agreement and the Merger are advisable and fair to, and in the best interests
of, the Company and its stockholders, (ii) approved, subject to stockholder
approval, this Agreement and the Merger, and (iii) determined, subject to the terms
of this Agreement, to recommend that the stockholders adopt this Agreement and approve
the Merger, by a unanimous vote of the members of the Company’s board of directors.  

	 	        Section 3.5
Financial Statements. 

	 	        Section 3.5.1
Section 3.5.1 of the Company Disclosure Schedule sets forth true, correct and
complete copies of (i) the unaudited balance sheet of the Company and its
Subsidiaries as of August 31, 2005 (the “Unaudited Company Balance Sheet”)
and the related statements of income and changes in stockholders’equity for the nine
months ended August 31, 2005 (the statements referred to in this clause (i)
(including the Unaudited Company Balance Sheet), the “Unaudited Company Financial
Statements”; and (ii) the audited balance sheets of the Company and its
Subsidiaries as of December 31, 2004, 2003 and 2002 and the related statements of
income and changes in Stockholders’ equity for the fiscal years ended December 31,
2004, 2003 and 2002 (the statements referred to in this clause (ii) (including the
balance sheets), the “Audited Company Financial Statements”). The
Unaudited Company Financial Statements and the Audited Company Financial Statements
present fairly, in all material respects, the financial position of the Company and its
Subsidiaries as of the respective dates thereof and the results of the Company’s
operations for the fiscal periods therein set forth. Each of the Audited Company
Financial Statements and the Unaudited Company Financial Statements have been prepared in
accordance with both the Company’s past practice and GAAP consistently applied
throughout such fiscal periods.  

	 	        Section 3.5.2
Section 3.5.2 of the Company Disclosure Schedule sets forth a true, correct
and complete itemization of the accounts receivable (including aging) of the Company as
of August 31, 2005 (the “Accounts Receivable”). The Accounts Receivable
represent bona fide claims against debtors for sales, services performed or other
charges arising on or before the respective dates of recording thereof, and all of the
goods delivered and services performed which gave rise to the Accounts Receivable were
delivered or performed in accordance with applicable orders, Contracts or customer
requirements in all material respects. All Accounts Receivable have been billed in
accordance with the past practice of the Company consistently applied. The reserve for
doubtful accounts reflected on the Unaudited Company Balance Sheet was established in
accordance with GAAP.  

24

	 	        Section 3.5.3
There are no material claims against the Company to return any products by reason of
alleged over shipments, defective products or otherwise, or of products in the hands of
customers under a written agreement that such merchandise would be returnable. No
outstanding purchase commitment of the Company presently is materially in excess of the
normal, ordinary and usual requirements of the Company Business.  

	 	        Section 3.5.4
Each of the Company and its Subsidiaries maintains, in all material respects, accurate
books and records reflecting its assets and liabilities and maintains a system of
internal accounting controls which are sufficient in all material respects to provide
reasonable assurance that (i) transactions are executed with management’s
authorization; (ii) transactions are recorded as necessary to permit preparation of
the consolidated financial statements of the Company in accordance with GAAP and to
maintain accountability for the Company’s consolidated assets; (iii) access to
the Company’s assets is permitted only in accordance with management’s
authorization; (iv) the reporting of the Company’s assets is compared with
existing assets at regular intervals; (v) accounts, notes and other receivables and
inventory are recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis and (vi) there are
adequate procedures regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets. As of the date of this Agreement, (i) there
are no significant deficiencies or material weaknesses in the design or operation of the
Company’s internal control over financial reporting which is reasonably likely to
adversely affect the Company’s ability to record, process, summarize and report
financial data and (ii) there has been no fraud, whether or not material, that
involved management or other employees of the Company or any of its Subsidiaries who have
a significant role in the Company’s internal controls over financial reporting.  

	 	        Section 3.5.5
The Company has no liabilities or obligations of any kind or nature (whether known or
unknown, absolute, accrued, contingent or otherwise) other than (i) those
liabilities and obligations that are set forth in the Company Disclosure Schedule, (ii)
those liabilities and obligations reflected or adequately reserved for in the Unaudited
Company Balance Sheet, (iii) those liabilities and obligations not required by GAAP to be
reflected or reserved for in a balance sheet or the related footnotes thereto prepared in
accordance with GAAP, and (iv) those current liabilities and obligations incurred in
the ordinary course of business since August 31, 2005 or incurred in connection with the
Merger and the other transactions contemplated hereby.  

	 	        Section 3.6
Contracts. 

	 	        Section 3.6.1
Section 3.6.1 of the Company Disclosure Schedule contains a complete and
accurate list of the following Contracts to which the Company or any of its Subsidiaries
is a party as of the date hereof (all Contracts actually listed or required to be to
listed (whether or not actually listed) in Section 3.6.1, Section 3.7 or
Section 3.9 of the Company Disclosure Schedule being referred to herein as
the “Scheduled Contracts”):  

25

	 	        Section 3.6.1.1 any
employment management, consulting or severance Contract or other arrangement with any of
the Company Business Employees or Company Business Independent Contractors (other than
offer letters and employee invention and proprietary rights assignment agreements and
option agreements, in each case, in substantially the Company’s standard forms
previously provided to Buyer and other than the Employee Plans listed on Section 3.8.1 of
the Company Disclosure Schedules);  

	 	        Section 3.6.1.2 any
Contract or Employee Plan, any of the benefits of which could be increased, or the
vesting of benefits of which could be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement;  

	 	        Section 3.6.1.3 any
Contract that includes any noncompetition or nonsolicitation covenant or any exclusive
dealing or similar arrangement that limits the ability of the Company of any of its
Subsidiaries or any of their Affiliates to compete (geographically or otherwise) in any
line of business;  

	 	        Section
3.6.1.4   any customer Contract providing for payments to the Company in excess of
$250,000; 

	 	        Section
3.6.1.5   any Contract conferring an interest in real property, owned or leased; 

	 	        Section
3.6.1.6   any Contract providing for capital expenditures commitments after the date
hereof in excess of    $50,000; 

	 	        Section 3.6.1.7 any
Contract relating to the disposition or acquisition of assets or any interest in any
business enterprise, in each case, outside the ordinary course of the Company’s
business;  

	 	        Section 3.6.1.8 any
mortgages, indentures, guarantees, loans or credit agreements, security agreements or
other agreements or instruments relating to the borrowing of money, extension of credit
or security interest (other than employee expense advances made in the ordinary course of
business);  

	 	        Section 3.6.1.9 any
pending purchase order or contract for the purchase of materials involving in excess of
$50,000;  

	 	        Section 3.6.1.10 any
Contract that involves payments based on profits or revenues of the Company or any of its
Subsidiaries;  

	 	        Section
3.6.1.11  any powers of attorney granted by the Company; 

	 	        Section
3.6.1.12  any Contract containing any price protection, "most favored nation" or similar
provisions; 

	 	        Section
3.6.1.13  any partnership, joint venture, strategic alliance or similar Contract; 

	 	        Section 3.6.1.14 any
Contract to which an Affiliate of the Company is a party, other than Contracts relating
to the acquisition or ownership of equity securities of the Company or relating to an
Affiliate of the Company’s employment or service relationship with the Company; or  

26

	 	        Section 3.6.1.15
any development Contract or original equipment manufacturer Contract.  

	 	        Section 3.6.2
Each of the Scheduled Contracts is a legal, valid and binding obligation of the Company
or its Subsidiaries (assuming the due authorization, execution and delivery by the other
parties thereto) and is in full force and effect and enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar Laws relating to or affecting creditors generally
and by the availability of equitable remedies (whether in proceedings at law or in
equity).  

	 	        Section 3.6.3
Neither the Company nor any of its Subsidiaries has received written notice of
cancellation of or default under or intent to cancel or call a default under any of the
Scheduled Contracts.  

	 	        Section 3.6.4
The Company and each of its Subsidiaries has performed all obligations required to be
performed by it to date under the Scheduled Contracts, except for nonperformance that
would not result in a material breach of, or material default under, any such Scheduled
Contracts and except for nonperformance which has been remedied or cured, and, to the
Knowledge of the Company, there exists no event or condition which with or without notice
or lapse of time or both would be a material breach or a material default on the part of
the Company or any of its Subsidiaries or, to the Knowledge of the Company, on the part
of any other party to such Scheduled Contracts.  

	 	        Section 3.6.5
The Company has delivered or made available to Parent true, correct and complete copies
of all of the Scheduled Contracts.  

	 	        Section 3.7
Intellectual Property. 

	 	        Section 3.7.1
Generally. Section 3.7.1 of the Company Disclosure Schedule sets
forth a complete and accurate list of all Intellectual Property that is the subject of
any application or registration filed in the United States or in any foreign jurisdiction
(including: (i) registered trademarks and service marks and applications therefor; (ii)
patents and patent applications (including any continuations, continuations-in-part,
divisionals, reissues, renewals, applications and provisional applications for any of the
foregoing); (iii) copyright and mask work registrations and applications; and (iv)
registered Domain Names and Universal Resource Locators) in each case owned by the
Company, in whole or in part, including jointly with others (such schedule specifying if
such Intellectual Property is owned jointly) (all of the foregoing, the “Registered
Company Intellectual Property” and, together with all other Intellectual
Property owned or purported to be owned by the Company, the “Company Owned
Intellectual Property”). Section 3.7.1 of the Company Disclosure
Schedule also lists for each item of Registered Company Intellectual Property the known
status of any actions (including the payment of fees) that must be taken within 120 days
of the date hereof with respect to the registration of maintenance of such Registered
Company Intellectual Property. Section 3.7.1 of the Company Disclosure
Schedule lists all third-party Intellectual Property with respect to which the
Company has been granted an exclusive license or the right or obligation to enforce the
intellectual property rights of the third-party licensor.  

27

	 	        Section 3.7.2
Trademarks. 

	 	        Section 3.7.2.1 All
Trademarks of the Company for which an application for trademark registration (including
any intent to use application) has been filed are currently in compliance with all legal
requirements applicable to trademarks in the jurisdiction in which the application was
filed, other than any requirement that, if not satisfied, would not result in a
cancellation of any such application or registration or otherwise adversely affect the
use, ownership, exclusivity, or priority of the Trademark in question in the field of use
specified in the application. No registered Trademark of the Company or Trademark of the
Company with respect to which an application for registration has been filed, has been or
is now involved in any opposition or cancellation proceeding in the United States Patent
and Trademark Office. To the Company’s Knowledge, there has been no prior use of any
Trademark of the Company by any third party that confers upon said third party superior
rights in any such Trademark in such Trademark’s field of use.  

	 	        Section 3.7.2.2 The
Company is the owner of all right, title and interest in and to all of the Trademarks
that are Registered Company Intellectual Property, in each case free and clear of any and
all Encumbrances (other than Permitted Encumbrances), covenants, conditions and
restrictions or other adverse claims or interests of any kind or nature, and the Company
has not received any written notice or claim or, to the Knowledge of the Company, any
oral notice or claim, challenging the Company’s complete and exclusive ownership of
such Trademarks or suggesting that any other Person has any claim of legal or beneficial
ownership with respect thereto. There is no agreement, decree, arbitral award or other
provision or contingency which obligates the Company to grant licenses in future
Trademarks of the Company.  

	 	        Section 3.7.3
Patents. 

	 	        Section 3.7.3.1 All
Patents of the Company are currently in compliance with legal requirements (including
payment of filing, examination, and maintenance fees and proofs of working or use) other
than any requirement that, if not satisfied, would not result in a revocation or lapse or
otherwise adversely affect the issuance or ownership, of the Patent in question. The
Company has not taken any action or failed to take any action (including a failure to
disclose known material prior art in connection with the prosecution of any Patent), or
used or enforced (or failed to use or enforce) any of the Patents in a manner that would
result in the abandonment of any of the Patents.  

	 	        Section 3.7.3.2 No
Patent of the Company has been or is now involved in any interference, reissue,
reexamination or opposing proceeding in the United States Patent and Trademark Office or
any foreign patent office and, to the Knowledge of the Company, no such action has been
threatened. To the Knowledge of the Company, there is no patent of any Person that claims
the same subject matter as any Patent of the Company and, to the Knowledge of the
Company, no prior art, that invalidates any claim of any Patent of the Company.  

28

	 	        Section 3.7.3.3 The
Company is the owner of all right, title and interest in and to all of the Patents owned
by, assigned to, filed in the name of Company or any Company employee while an employee
of the Company (except those Patents with respect to which ownership rights are retained
by company employees pursuant to such employees’ employment or assignment of
inventions agreements, copies of which have been made available to Buyer) (“Company
Owned Patents”), in each case free and clear of any and all Encumbrances (other
than Permitted Encumbrances), covenants, conditions and restrictions or other adverse
claims or interests of any kind or nature (other than the rights of users to use Company
Owned Patents as part of their use of the Company’s products pursuant to ordinary
course customer, reseller and other license agreements), and the Company has not received
any written or oral notice or claim challenging the Company’s complete and exclusive
ownership of the Patents or suggesting that any other Person has any claim of legal or
beneficial ownership with respect thereto. There is no agreement, decree, arbitral award
or other provision or contingency which obligates the Company to grant licenses in any
Company Owned Patents. Company has not assigned or transferred any Patents that were
Company Owned Patents to any third Person.  

	 	        Section 3.7.3.4 To
the Knowledge of the Company, the inventions disclosed in the Patents of the Company may
be practiced by the Company without infringing any other Patents owned by any Person.  

	 	        Section 3.7.4
Copyrights. 

	 	        Section 3.7.4.1 The
Company is the owner of all right, title and interest in and to each of the Copyrights
used by the Company other than those as to which the rights being exercised by the
Company have been licensed from another Person (collectively, “Company Owned
Copyrights”), free and clear of any and all Encumbrances (other than Permitted
Encumbrances), covenants, conditions and restrictions or other adverse claims or
interests of any kind or nature (other than the rights of users to use Company Owned
Copyrights pursuant to ordinary course customer, reseller and other license agreements),
and the Company has not received any notice or claim (whether written or oral)
challenging the Company’s complete and exclusive ownership of such Company Owned
Copyrights or suggesting that any other Person has any claim of legal or beneficial
ownership with respect thereto. Company has not assigned or transferred any Copyrights
that were Company Owned Copyrights to any third Person.  

	 	        Section 3.7.4.2 The
Company has not received any notice or claim (whether written or oral) challenging or
questioning the validity or enforceability of any of the Company Owned Copyrights or
indicating an intention on the part of any Person to bring a claim that any Company Owned
Copyright is invalid, is unenforceable or has been misused and, to the Knowledge of the
Company, no Company Owned Copyright otherwise has been challenged or threatened in any
way.  

	 	        Section 3.7.4.3 The
Company has not taken any action or, to the Knowledge of the Company, failed to take any
action (including a failure to disclose required information to the United States
Copyright Office in connection with any registration of a registered copyright
therewith), or used or enforced (or failed to use or enforce) any of the Company Owned
Copyrights, in each case in a manner that would result in the unenforceability of any of
the Company Owned Copyrights. The Company has taken all reasonable steps to protect the
Company’s rights in and to the Company Owned Copyrights, in each case in accordance
with standard industry practice. To the Knowledge of the Company, no other Person has
infringed or is infringing any of the Company Owned Copyrights.  

29

	 	        Section 3.7.5
Trade Secrets. 

	 	        Section 3.7.5.1 The
Company has taken reasonable steps in accordance with normal industry practice to protect
its rights in confidential information and proprietary information, including any
formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives
independent economic value, actual or potential, from not being generally known to the
public or to other Persons who can obtain economic value from its disclosure or use; and
(2) is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy (collectively, “Trade Secrets”).  

	 	        Section 3.7.5.2 Without
limiting the generality of Section 3.7.5.1, the Company enforces a policy of
requiring each relevant employee, consultant and contractor to execute proprietary
information, confidentiality and assignment agreements substantially in the Company’s
standard forms that assign to the Company all rights to any Intellectual Property
relating to the Company Business that are developed by the employees, consultants or
contractors, as applicable, and that otherwise appropriately protect the Intellectual
Property of the Company, and, except under confidentiality obligations and in connection
with the release of distribution of products, there has been no disclosure by the Company
of its confidential information or Trade Secrets; nor have any actions been taken by the
Company which would affect the Company’s ability to obtain U.S. or, to the Knowledge
of the Company, foreign protection for the Company’s inventions.  

	 	        Section 3.7.6
License Agreements. 

	 	        Section 3.7.6.1 Section 3.7.6.1 of
the Company Disclosure Schedule sets forth a complete and accurate list of all
license agreements granting to the Company any right to use or practice any rights under
any material third party Intellectual Property (collectively, the “Company
Inbound License Agreements”), (other than “off-the-shelf” shrink wrap
software commercially available on reasonable terms to any Person for a license fee of no
more than $100,000, but including all such agreements that are otherwise material to
Company, indicating for each the title and the parties thereto.  

	 	        Section 3.7.6.2 Section 3.7.6.2 of
the Company Disclosure Schedule sets forth a complete and accurate list of all
license agreements (other than shrinkwrap or “click through” end user license
agreements entered into in the ordinary course of the Company Business and in a form
provided by Company to Buyer) currently in effect and providing for annual payments to
the Company in excess of $250,000 under which the Company has granted licenses of
Software or other rights to use or practice any rights under any Company Owned
Intellectual Property (indicating for each the title and parties thereto) and the Company’s
current forms of license agreements (indicating for each the title of such form
agreement) used by the Company in the ordinary course under which the Company grants
licenses of Software or grants other rights in or to use or practice any rights under any
Company Owned Intellectual Property (collectively, the “Company Outbound License
Agreements”).  

	 	        Section 3.7.6.3 There
is no outstanding or, to the Knowledge of the Company, threatened dispute or disagreement
with respect to any Company Inbound License Agreement or any Company Outbound License
Agreement. Correct and complete executed copies of all Company Inbound License Agreements
and Company Outbound License Agreements have been made available to Buyer.  

30

	 	        Section 3.7.7
Domain Names. The Company is the sole owner of the Domain Name registrations, and
all such Domain Names are currently registered by the Company, as sole owner, with an
ICANN accredited registrar or other registrar, as applicable, and the registration fees
are paid through the date(s) listed on Section 3.7.7 of the Company
Disclosure Schedule. The Company is the owner of, or has sufficient rights to display,
all content displayed on the Internet site associated with each of the Domain Names
(collectively, the “Content”), and no consent, license or approval from
any third party is required in connection with the sale or transfer of the ownership of
the Domain Names and the continued use of the Content by Buyer or the Surviving
Corporation. To the Knowledge of the Company, no facts or circumstances exist which could
reasonably form the basis of a challenge relating to Buyer’s unencumbered use of the
Domain Names, or any part thereof.  

	 	        Section 3.7.8
Ownership; Sufficiency of Intellectual Property Assets. The Company owns or
possesses adequate licenses or other rights to use, free and clear of Encumbrances
(except, in the case of licenses from third parties, the interests of such licensing
parties and except for Permitted Encumbrances), all Intellectual Property used in the
conduct of the Company Business and the manufacture, sale and license of the Company’s
products. The Company Owned Intellectual Property, including the Company Registered
Intellectual Property identified in Section 3.7.1 of the Company Disclosure
Schedule, together with the Company’s rights granted to it under the Company Inbound
License Agreements, constitute all the Intellectual Property rights used in or necessary
to the operation of the Company Business.  

	 	        Section 3.7.9
No Infringement by the Company. The operation of the Company Business including
all products used, manufactured, marketed, sold or licensed by the Company, and all
Intellectual Property used in the conduct of the Company Business as currently conducted,
do not, and will not following the Closing when conducted in the same manner as conducted
prior to the Closing, infringe upon, violate or constitute the unauthorized use of any
rights owned or controlled by any third party, including any Intellectual Property of any
third party. No litigation is now, or since incorporation of Company has been, pending
and no notice or other claim has been received by the Company, (A) alleging that the
Company has engaged in any activity or conduct that infringes upon, violates or
constitutes the unauthorized use of the Intellectual Property rights of any third party,
including any contamination or misappropriation of trade secrets claims, or (B) challenging
the ownership, use, validity or enforceability of any Intellectual Property owned or
exclusively licensed by or to the Company.  

	 	        Section 3.7.10
No Infringement by Third Parties. To the Knowledge of the Company, no third party
is misappropriating, infringing, diluting or violating any Intellectual Property owned or
exclusively licensed by the Company, and no claims for any of the foregoing have been
brought against any third party by the Company. The Company has taken reasonable steps in
accordance with normal industry practice to protect its Intellectual Property.  

	 	        Section 3.7.11
Assignment; Change of Control. The execution, delivery and performance by the
Company of this Agreement, the Escrow Agreement and each of the other documents
contemplated hereby or thereby to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, will not result in (i) the loss or
impairment of, or give rise to any right of any third party to terminate, any of the
Company’s rights to own any of its Intellectual Property or rights under any Company
Inbound License Agreement or Company Outbound License Agreement, nor require the consent
of any Governmental Authority or third party in respect of any such Intellectual Property
or (ii) the purported grant by Buyer to any third Person of rights to use Buyer’s
own Intellectual Property.  

31

	 	        Section 3.7.12
Software. The Software owned or purported to be owned by the Company or
distributed by the Company as a Company product (“Company Software”)
was: (i) developed by employees of the Company within the scope of their employment;
(ii) developed by independent contractors who have assigned their rights to the
Company pursuant to written agreements; or (iii) otherwise acquired by the Company
from a third party who assigned all Intellectual Property rights in the Company Software
to the Company. None of the Company Software, or any party thereof, is, in whole or in
part, subject to the provisions of any open source or quasi-open source license agreement
(including, for example, the GNU, GPL or LGPL licenses). The Company has made no
submission or suggestion and is not subject to any agreement with standards bodies or
other entities which would obligate the Company to grant licenses to or otherwise impair
its control of its Intellectual Property. Except for the warranties and indemnities
contained in those contracts and agreements set forth in Section 3.7.12 of
the Company Disclosure Schedules or this Agreement, warranties and indemnities in the
Company’s standard customer and reseller agreements, and warranties implied by law,
the Company has not given any warranties or indemnities relating to products or
technology sold or services rendered by the Company.  

	 	        Section 3.7.13
Encryption Technology. The Company Business as currently conducted complies with
all U.S. Applicable Laws, rules and regulations regarding encryption technology,
including, without limitation, the import and export thereof.  

	 	        Section 3.7.14
Performance of Existing Products. The Company’s existing and currently
manufactured and marketed products substantially perform the functions described in
their published end user documentation, and the Company has not been notified, either
verbally or in writing, that such products do not perform as set forth above, and to the
Knowledge of the Company, there are no material defects or errors with respect to such
products. To the extent that the Company’s products have not been launched, the
Company has fully disclosed to Buyer in writing all material known technical problems or
concerns associated with such products that affect the prospective performance of the
Company’s products.  

	 	        Section 3.7.15
Use of User Data. 

	 	        Section 3.7.15.1 The
Company’s use, license, sublicense and sale of any User Data collected from users at
any website operated by the Company or its Affiliates and any co-branded websites which
the Company manages have complied in all material respects with the Company’s
applicable published privacy policy at the time such User Data was collected
(collectively, the “Privacy Policies”), excluding any violation that, if
disclosed, would not reasonably be expected to result in a material claim against the
Company.  

	 	        Section 3.7.15.2 The
Company is in compliance in all material respects with all U.S. Applicable Laws and
contractual obligations binding on the Company that relate to or govern the compilation,
use and transfer of User Data.  

	 	        Section 3.7.15.3 There
is no Proceeding (including any audit or investigation) pending or, to the Knowledge of
the Company, threatened, by any Person or any U.S. Governmental Authority involving the
use, disclosure or transfer of any User Data by the Company, nor, to the Knowledge of the
Company, has the Company been contacted by any U.S. Governmental Authority regarding the
use, disclosure or transfer of any User Data by the Company.  

	 	        Section 3.7.15.4 None
of the Privacy Policies or any law or regulation restricts, or limits or prohibits the
transfer of User Data to Buyer and its Affiliates as contemplated by this Agreement or
otherwise limit Parent, Buyer or the Surviving Corporation succeeding to all rights and
privileges of Company with respect to such User Data (it being understood that, following
such transfer, such User Data will remain subject to the applicable use limitations set
forth in such Privacy Policies).  

32

	 	        Section 3.7.15.5 To
the Knowledge of the Company, no Person has obtained unauthorized access to User Data
stored on the computer systems owned and operated by the Company (including, without
limitation, any User Data contained in any hard copy printouts), nor has there been any
other unauthorized acquisition of material computerized data of the Company (including,
without limitation, any data contained in any hard copy printouts) that has compromised
the security, confidentiality or integrity of any User Data maintained by the Company in
any material manner.  

	 	        Section 3.8
Employee Benefit Matters. 

	 	        Section 3.8.1
Section 3.8.1 of the Company Disclosure Schedule contains a complete list of
Employee Plans which cover or have covered employees of the Company. The Company has made
true and complete copies of each of the following documents available to Parent and Buyer
prior to the date hereof: (i) each Employee Plan (and, if applicable, related trust
agreements, annuity contracts or other funding instruments) which covers or has covered
employees of the Company (with respect to their relationship with the Company) and all
amendments thereto, all current summary plan descriptions, the most recent summary of
material modifications (as defined in ERISA) and all written interpretations and
descriptions thereof which the Company generally distributes to participants therein and
a complete description of any material Employee Plan which is not in writing except that
any severance policy, program or agreement shall be described in full, (ii) the most
recent determination letter or opinion letter issued by the Internal Revenue Service with
respect to each Pension Plan and each voluntary employees’ beneficiary association
as defined under Section 501(c)(9) of the Code (other than a Multiemployer Plan)
which covers or has covered employees of the Company (with respect to their relationship
with the Company), (iii) for the three (3) most recent plan years, Annual Reports on
Form 5500 Series with all schedules and attachments required to be filed with any
governmental agency for each Pension Plan or Welfare Plan which covers or has covered
employees of the Company (with respect to their relationship with the Company), (iv) a
description of complete age, salary, service and related data as of the last day of the
last plan year for employees and former employees of the Company, (v) a description
setting forth the amount of any liability of the Company as of the Closing Date for
payments more than thirty (30) calendar days past due with respect to any Welfare Plan
and (vi) all correspondence to or from any Governmental Authority related to any
specific Employee Plan.  

	 	        Section 3.8.2
Pension Plans.  

	 	        Section 3.8.2.1 No
Employee Plan is or was at any time subject to Title IV or Part 3 of Title I of ERISA or
Section 412 of the Code and neither the Company nor any ERISA Affiliate is subject
to any liability under Title IV or Part 3 of Title I of ERISA.  

	 	        Section 3.8.2.2 Each
Pension Plan and each related trust agreement, annuity contract or other funding
instrument which covers or has covered employees or former employees of the Company (with
respect to their relationship with the Company) which has been operated as a qualified
plan (i) has received a favorable opinion letter from the Internal Revenue Service
stating that such Pension Plan is qualified under the provisions of Code Sections 401(a),
and (ii) to the Knowledge of the Company, has been so qualified during the period
from its adoption to date.  

33

	 	        Section 3.8.2.3 Each
Pension Plan and each related trust agreement, annuity contract or other funding
instrument which covers or has covered employees or former employees of the Company (with
respect to their relationship with the Company) currently complies in all material
respects and has been maintained in compliance in all material respects with its terms
and, both as to form and in operation, with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such plans, including,
without limitation, ERISA and the Code.  

	 	        Section
3.8.3 Multiemployer Plans. Neither the Company nor any ERISA Affiliate has any
liability with respect to a Multiemployer Plan. 

	 	        Section 3.8.4
Welfare Plans. 

	 	        Section 3.8.4.1 Each
Welfare Plan which covers or has covered employees or former employees of the Company
(with respect to their relationship with the Company) currently complies in all material
respects and has been maintained in compliance in all material respects with its terms
and, both as to form and operation, with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Welfare Plan,
including, without limitation, ERISA and the Code.  

	 	        Section 3.8.4.2 Except
as required by COBRA, none of the Company, any ERISA Affiliate or any Welfare Plan has
any present or future obligation to make any payment to, or with respect to any present
or former employee, officer, consultant, or director of the Company or any ERISA
Affiliate pursuant to, any retiree medical benefit plan, or other retiree Welfare Plan,
and no condition exists which would prevent the Company or an ERISA Affiliate from
amending or terminating any such benefit plan or such Welfare Plan without liability or
cost to the Company or any ERISA Affiliate (other than routine administrative expenses).  

	 	        Section 3.8.4.3 Each
Welfare Plan which covers or has covered employees or former employees of the Company
(with respect to their relationship with the Company) and which is a “group health
plan,” as defined in Section 607(1) of ERISA, presently complies in all
material respects with and has been operated in compliance in all material respects with
provisions of COBRA and the Health Insurance Portability and Accountability Act of 1996,
as amended.  

	 	        Section 3.8.4.4 The
insurance policies or other funding instruments, if any, for each Welfare Plan provide
coverage for each employee, consultant, independent contractor or retiree of the Company
or any of its Subsidiaries (and, if applicable, their respective dependents) who has been
advised by the Company, whether through an Employee Plan or otherwise, that he or she is
covered by such Welfare Plan.  

	 	        Section 3.8.5
Benefit Arrangements. Each Benefit Arrangement which covers or has covered
employees or former employees of the Company (with respect to their relationship to the
Company) presently complies and has been maintained in compliance in all material
respects with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations which are applicable to such Benefit Arrangement,
including, without limitation, the Code. The employment of all persons presently employed
or retained by the Company is terminable at will. To the Company’s Knowledge, no
amounts payable under any Benefit Arrangements are or will be included in income for any
current or former Company Business Employee by operation of Code Section 409A.  

34

	 	        Section 3.8.6
Unrelated Business Taxable Income; Unpaid Contributions. No Employee Plan (or
trust or other funding vehicle pursuant thereto) has incurred any liability under Code
Section 511. Neither the Company nor any ERISA Affiliate has any liability for
unpaid contributions under Section 515 of ERISA with respect to any Employee Plan.  

	 	        Section 3.8.7
Fiduciary Duties and Prohibited Transactions. To the Knowledge of the Company,
neither the Company nor any plan fiduciary of any Welfare Plan or Pension Plan which
covers or has covered employees or former employees of the Company or any ERISA Affiliate
has engaged in, or has any liability in respect of, any transaction in violation of
Sections 404 or 406 of ERISA (and not exempt under ERISA Section 408 and the
regulations issued thereunder) or any “prohibited transaction,” as defined in
Section 4975(c)(1) of the Code, or has otherwise violated the provisions of Part 4
of Title I, Subtitle B of ERISA so as to create any liability of the Company or
any of its Subsidiaries or any Employee Plan. To the Knowledge of the Company, the
Company has not participated in a violation of Part 4 of Title I, Subtitle B
of ERISA by any plan fiduciary of any Welfare Plan or Pension Plan, and the Company and
its Subsidiaries have not been assessed any civil penalty under Section 502(l) of
ERISA.  

	 	        Section 3.8.8
Litigation. There is no action, order, writ, injunction, judgment or decree
outstanding or claim (other than routine claims for benefits), suit, litigation,
proceeding, arbitration proceeding, governmental audit or investigation relating to or
seeking benefits under any Employee Plan that is pending or, to the Knowledge of the
Company, anticipated or threatened against the Company, any ERISA Affiliate or any
Employee Plan.  

	 	        Section 3.8.9
No Amendments. Except for the Retention Plan, neither the Company nor any ERISA
Affiliate has announced to employees, former employees, consultants or directors an
intention to create, or otherwise created, a legally binding commitment to adopt any
additional Employee Plan which is intended to cover employees or former employees of the
Company (with respect to their relationship with the Company) or to amend or modify any
existing Employee Plan which covers or has covered employees or former employees of the
Company or any of its Subsidiaries (with respect to their relationship with the Company
or any of its Subsidiaries).  

	 	        Section 3.8.10
Unpaid Contributions. Neither the Company nor any ERISA Affiliate has any
liability for unpaid contributions under Section 515 of ERISA with respect to any
Multiemployer Plan.  

	 	        Section 3.8.11
Insurance Contracts. No Employee Plan holds as an asset of any Employee Plan any
interest in any annuity contract, guaranteed investment contract or any other investment
or insurance contract issued by an insurance company that is the subject of bankruptcy,
conservatorship or rehabilitation proceedings.  

	 	        Section 3.8.12
No Acceleration or Creation of Rights. Neither the execution and delivery of this
Agreement or the Escrow Agreement by the Company nor the consummation of the transactions
contemplated hereby or thereby would reasonably be expected to result, either by itself
or in combination with the satisfaction of any other conditions precedent in addition to
the consummation of such transactions (e.g., a post-Closing termination of
employment), in the acceleration or creation of any rights of any person to benefits
under any Employee Plan (including, without limitation, the acceleration of the vesting
or exercisability of any stock options, the acceleration of the vesting of any restricted
stock, the acceleration of the accrual or vesting of any benefits under any Pension Plan
or the acceleration or creation of any rights under any severance, parachute or change in
control agreement). No amounts payable to any Company Business Employee in connection
with the Merger or any other transactions contemplated hereby, either upon consummation
of the Merger or as a result of the satisfaction of any other conditions precedent in
addition to the consummation of such transactions (e.g., a post-Closing
termination of employment), will be considered “parachute payments” pursuant to
Section 280G of the Code.  

35

	 	        Section 3.8.13
No Other Material Liability. To the Knowledge of the Company, no event has
occurred in connection with which the Company, any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (other than the
payment of benefits under the terms of such Employee Plan) (A) under any statute,
regulation or governmental order relating to any Employee Plan or (B) pursuant to
any obligation of the Company to indemnify any person against liability incurred under
any such statute, regulation or order as they relate to the Employee Plans.  

	 	        Section 3.9
Labor and Other Employment Matters. 

	 	        Section 3.9.1
Section 3.9.1 of the Company Disclosure Schedule sets forth a complete and
accurate list (giving name, job title, credited service, current annual compensation
(including a separate statement of base salary for the 2005 calendar year and bonus paid
for the 2004 calendar year for each individual (other than bonuses under the Retention
Plan))) of each Company Business Employee. Each Company Business Employee who is a member
of management is in good standing with the Company. Neither the Company nor any of its
Subsidiaries is or has ever been delinquent (except to the extent such delinquency has
been fully remedied or cured) in payments to any current or former Company Business
Employees or current or former Company Business Independent Contractors for any wages,
salaries, commissions, bonuses or other similar direct compensation for any services
performed for it or amounts required to be reimbursed to such employee. The Company and
each of its Subsidiaries are in compliance in all material respects with all Applicable
Law respecting labor, employment, immigration, fair employment practices, terms and
conditions of employment, workers’ compensation, occupational safety, plant
closings, wages and hours. The Company and each of its Subsidiaries has withheld all
amounts required by Applicable Laws or by agreement to be withheld from the wages,
salaries, and other payments to employees, and neither the Company nor any of its
Subsidiaries is liable for any arrears of wages or any penalty for failure to comply with
any of the foregoing. Neither the Company nor any of its Subsidiaries is liable for any
payment to any trust or other fund or to any Governmental Authority, with respect to
unemployment compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the ordinary course of business and
consistent with past practice).  

	 	        Section 3.9.2
There are no pending claims against the Company or any of its Subsidiaries under any
workers’compensation plan or policy or for long-term disability. Neither the Company
nor any of its Subsidiaries is bound by or subject to (and none of their respective
assets or properties are bound by or subject to) any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the Knowledge of the Company, has sought to represent any of the
employees, representatives or agents of the Company or any of its Subsidiaries. There is
no strike or other labor dispute involving the Company or any of its Subsidiaries pending
or, to the Knowledge of the Company, threatened. The Company has not, during the three
year period prior to the date of this Agreement, received any demand letters pursuant to
Applicable Law, civil rights charges, suits, drafts of suits, administrative claims of or
from any of its employees. There are no claims pending or, to the Knowledge of the
Company, threatened, between the Company or any of its Subsidiaries and any current or
former Company Business Employees or current or former Company Business Independent
Contractors, which controversies have or could reasonably be expected to result in an
action, suit, proceeding, claim, arbitration or investigation before any Governmental
Authority.  

36

	 	        Section 3.9.3
As of the date hereof, to the Knowledge of the Company, no current or former Company
Business Employees or current or former Company Business Independent Contractors are in
violation of any term of any employment contract, non-disclosure agreement,
noncompetition agreement, or any restrictive covenant to a former employer relating to
the right of any such employee to be employed by the Company or any of its Subsidiaries
because of the nature of the business conducted or presently proposed to be conducted by
the Company or any of its Subsidiaries or to the use of trade secrets or proprietary
information of others. To the Knowledge of the Company, no current or former Company
Business Employees or current or former Company Business Independent Contractors are or
have ever been in violation of any term of any employment contract, non-disclosure
agreement, noncompetition agreement, or any restrictive covenant relating to the Company
Business.  

	 	        Section 3.9.4
No Company Business Employees or Company Business Independent Contractors have given
notice to the Company or any of its Subsidiaries that any such Person intends to
terminate his or her employment with the Company or any of its Subsidiaries. The Company
and each of its Subsidiaries are in compliance with all Laws concerning the
classification of employees and independent contractors and have properly classified all
such Persons for purposes of participation in the Employee Plans.  

	 	        Section 3.10
Tax Matters. 

	 	        Section 3.10.1
Filing of Tax Returns. The Company and each of its Subsidiaries have filed with
the appropriate Taxing Authorities all Tax Returns required to have been filed. All such
Tax Returns have been prepared in accordance with Applicable Law and are complete and
accurate in all respects. All Taxes required to have been paid by the Company and each of
its Subsidiaries have been paid, whether or not shown on any Tax Returns. None of the
Company nor any of its Subsidiaries is currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where the Company or its Subsidiaries do not file Tax Returns that any of
them is or may be subject to taxation by that jurisdiction.  

	 	        Section 3.10.2
Payment of Taxes. The unpaid Taxes of the Company and its Subsidiaries did not, as
of the date of the Unaudited Company Financial Statements, exceed the reserve for Tax
liability (excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Unaudited Company
Balance Sheet (rather than in any notes thereto). Since the date of the Unaudited Company
Financial Statements, the Company and its Subsidiaries have not incurred any liability
for Taxes outside the ordinary course of business (other than those incurred in
connection with the Merger and the other transactions contemplated hereby) or otherwise
inconsistent with past custom and practice.  

37

	 	        Section 3.10.3
Audits, Investigations or Claims. No deficiencies for Taxes of the Company or any
of its Subsidiaries have been claimed, proposed or assessed by any Taxing Authority which
has not since been finally resolved by payment of such Taxes or agreement with the
relevant Taxing Authority, with no unpaid liability for any such Taxes or under any such
agreement. There are no pending or, to the Knowledge of the Company, threatened audits,
assessments or other proceedings for or relating to any liability for Taxes payable by
the Company or any of its Subsidiaries, and there are no matters under discussion with
any Taxing Authority, or known to the Company with respect to Taxes that are likely to
result in an additional liability for Taxes of the Company or any of its Subsidiaries.
The Company has delivered or made available to Buyer complete and accurate copies of
federal, state and local income Tax Returns and, to the extent specifically requested by
Buyer, all other Tax Returns filed by the Company, its Subsidiaries and their respective
predecessors since the relevant entity’s inception, and complete and accurate copies
of all examination reports and statements of Tax owed arising out of audits or
proceedings asserting or assessing Tax liabilities against the Company, any of its
Subsidiaries or any of their respective predecessors in respect of an alleged failure of
the Company, any of its Subsidiaries or any of their respective predecessors to timely
file Tax Returns or pay Taxes otherwise due. None of the Company, any of its Subsidiaries
or any of their respective predecessors has waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency which is currently effective, nor has any request been made in writing for any
such extension or waiver that was not executed as requested and for which the relevant
period for assessment has not since expired. No power of attorney (other than powers of
attorney authorizing employees of the Company or any of its Subsidiaries to act on behalf
of the Company or any of its Subsidiaries, as applicable) with respect to any Taxes has
been executed or filed with any Taxing Authority that is currently in force.  

	 	        Section 3.10.4
Liens. There are no Encumbrances for Taxes (other than Encumbrances for Taxes not
yet due and payable) on any Company Assets or any assets of the Company’s
Subsidiaries. There are no existing circumstances which reasonably may be expected to
result in the assertion of any claim for Taxes for periods through the Closing Date that,
if adversely determined, would result in any Encumbrances for Taxes on the assets of the
Company or any of its Subsidiaries (other than Encumbrances for Taxes not yet due and
payable).  

	 	        Section 3.10.5
Tax Elections. All material elections with respect to Taxes which would have
continuing effect for taxable periods of the Company, any of its Subsidiaries or their
respective successors for which Tax Returns have not yet been filed, to the extent such
elections are not shown on or in the Tax Returns that have been delivered or made
available to Buyer, are set forth on Section 3.10.5 of the Company Disclosure
Schedule. Neither the Company nor any of its Subsidiaries (i) has consented at any
time pursuant to former Section 341(f)(1) of the Code to have the provisions of
former Section 341(f)(2) of the Code apply to any disposition of the assets of the
Company; (ii) has agreed, or is required, to make any adjustment pursuant to Section 481(a) of
the Code to its income for any taxable period for which a Tax Return has not been filed
by reason of a change in accounting method; (iii) has made an election, or is
required, to treat any of its assets as owned by another Person pursuant to the
provisions of former Section 168(f) of the Internal Revenue Code of 1954 or as
tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168
of the Code; (iv) has acquired or owns any assets that directly or indirectly secure
any debt the interest on which is tax exempt under Section 103(a) of the Code;
(v) has made or will make a consent dividend election under Section 565 of the
Code; (vi) has elected at any time to be treated as an S corporation within the
meaning of Sections 1361 or 1362 of the Code; or (vii) made any of the
foregoing elections or is required to apply any of the foregoing rules under any
comparable state or local Tax provision.  

38

	 	        Section 3.10.6
Tax Sharing Agreements. None of the Company or any of its Subsidiaries is a party
to any agreement that obligates the Company or its Subsidiaries to make payments with
respect to Taxes imposed on another Person (including agreements providing for an
allocation of responsibility for or satisfaction of Taxes jointly owed by the Company or
its Subsidiaries and any other Person and reimbursement of Taxes imposed on another
Person, but excluding agreements that were not entered into for the primary purpose of
allocating risk or responsibility for Tax liability and in which the provisions relating
to Taxes are of a nature typical of similar agreements) (a “Tax Sharing Agreement”).  

	 	        Section 3.10.7
Other Entity Liability. Neither the Company nor any of its Subsidiaries has ever
been a member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which is the Company). Neither the Company nor
any of its Subsidiaries has any liability for the Taxes of any Person (other than Taxes
of the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, or foreign Law, and including any arrangement
for group relief within a jurisdiction or similar arrangement), whether as a transferee
or successor, by contract, or otherwise.  

	 	        Section 3.10.8
Withholding. The Company and each of its Subsidiaries have withheld all Taxes
required to have been withheld in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and has paid over to
the relevant Taxing Authority all such withheld Taxes to the extent required to have been
paid over.  

	 	        Section 3.10.9
USRPHC.The Company has never been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.  

	 	        Section 3.10.10
Partnerships, Single Member LLCs, CFCs, PHCs and PFICs. Neither the Company nor
any of its Subsidiaries (i) is a partner for Tax purposes with respect to any joint
venture, partnership, or other arrangement or contract which could be treated as a
partnership for Tax purposes, (ii) owns a single member limited liability company
which is treated as a disregarded entity, (iii) is a stockholder of a “controlled
foreign corporation” as defined in Section 957 of the Code, (iv) is a
“personal holding company” as defined in Section 542 of the Code, and (v) is
a “passive foreign investment company” within the meaning of Section 1297
of the Code.  

	 	        Section 3.10.11
Permanent Establishment. Neither the Company nor any of its Subsidiaries has or
has had a permanent establishment in any foreign country, as defined in any applicable
Tax treaty or convention between the United States of America and such foreign country.  

	 	        Section 3.10.12
Disallowance of Interest Deductions. None of the outstanding indebtedness of the
Company or any of its Subsidiaries constitutes indebtedness with respect to which any
interest deduction is subject to disallowance under Sections 163(i) or 163(l) or 279
of the Code.  

	 	        Section 3.10.13
International Boycotts. Neither the Company nor any of its Subsidiaries has
participated in or is participating in an international boycott within the meaning of
Section 999 of the Code.  

39

	 	        Section 3.10.14
Tax Shelters. Neither the Company nor any of its Subsidiaries has participated in
any “reportable transaction” within the meaning of Treasury Regulations Sections 1.6011-4(b)(1)
that was, is, or, to the Knowledge of the Company, will ever be required to be disclosed
by the Company or any of its Subsidiaries pursuant to Treasury Regulation Section
1.6011-4, and no Tax Return of the Company or its Subsidiaries has contained a disclosure
statement under Section 6662 of the Code.  

	 	        Section 3.10.15
Spin-Offs. Neither the Company nor any of its Subsidiaries has distributed the
stock of any corporation in a transaction intended to satisfy the requirements of Section 355
of the Code since April 16, 1997, and the stock of each of the Company and any of
its Subsidiaries has not been distributed in a transaction intended to satisfy the
requirements of Section 355 of the Code since April 16, 1997.  

	 	        Section 3.10.16
Deductibility of Payments. To the Knowledge of the Company, there is no Contract,
plan or arrangement covering any employee or former employee of the Company or any of its
Subsidiaries (with respect to such employee’s relationship with the Company or any
of its Subsidiaries, as applicable) that , in connection with the Merger or any other
transactions contemplated hereby, either upon the consummation of the Merger or as a
result of the satisfaction of any other conditions precedent in addition to the
consummation of such transactions (e.g., a post-Closing termination of
employment), requires the payment by the Company or any of its Subsidiaries of any amount
that is a “parachute payment” pursuant to Section 280G of the Code.  

	 	        Section 3.11
Legal Proceedings. There are no legal, administrative, arbitral or other
proceedings (including disciplinary proceedings), legal claims, suits, actions or
governmental or regulatory investigations of any nature (collectively, “Proceedings”)
that are pending or, to the Knowledge of the Company, threatened (i) against the
Company, any of its Subsidiaries, any of the Company Assets or the Company Business or
that challenge the validity or propriety of the transactions contemplated by this
Agreement or the Escrow Agreement; (ii) involving any of the Company’s or any
of its Subsidiaries’ products; or (iii) challenging the Company’s or any
of its Subsidiaries’ right to use any products owned or licensed by any of the
Company’s or its Subsidiaries’ vendors. There is no injunction, order,
judgment, decree or regulatory restriction naming the Company imposed upon the Company or
any of its Subsidiaries or any of the Company Assets or the Company Business.  

	 	        Section 3.12
Compliance with Applicable Law.  

	 	        Section 3.12.1
The Company and each of its Subsidiaries holds, and at all times has held (except where
any failure has been cured or remedied), all material licenses, franchises, decrees,
permits and authorizations required under Applicable Law (collectively, “Permits”)
for the lawful ownership, operation and use of the Company Assets and the conduct of the
Company Business under and pursuant to, and has complied with each in all material
respects, and none of the Company or any of its Subsidiaries is in default under any
Applicable Law relating to the Company or any of its Subsidiaries or any of their
respective assets, properties or operations in any material respect, and there are no
outstanding material violations of any of the above, and none of the Company nor any of
its Subsidiaries has received notice asserting any such violation. The Company and each
of its Subsidiaries have been and are in compliance with all Permits.  

	 	        Section 3.12.2
No Governmental Authority has initiated, and no Governmental Authority has provided
notice to the Company sufficient to give the Company Knowledge of any threatened
proceeding or investigation into the business or operations of the Company or any of its
Subsidiaries or any of their respective officers, directors or employees in their
capacity as such with the Company or any of its Subsidiaries. There is no material
unresolved deficiency, violation or exception claimed or asserted by any Governmental
Authority with respect to any examination of any of the Company or any of its
Subsidiaries.  

40

	 	        Section 3.12.3
Neither the Company, any of its Subsidiaries nor any predecessor nor, to the Knowledge of
the Company, any agent, employee or other Person associated with or acting on behalf of
the Company or any of its Subsidiaries or any predecessor has, directly or indirectly,
used any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback
or other similar unlawful payment.  

	 	        Section 3.13
Environmental Matters. The Company and each of its Subsidiaries (v) are in
compliance with all, and are not subject to any material liability, in each case with
respect to any, applicable Environmental Laws, (w) hold or have applied for
Environmental Permits materially necessary to conduct their current operations, and (x) are
in material compliance with their respective Environmental Permits. Neither the Company
nor any of its Subsidiaries has received any notice, demand, claim or request for
information alleging that the Company or any of its Subsidiaries may be in violation of,
or liable under, any Environmental Law. Neither the Company nor any of its Subsidiaries
(y) has entered into or agreed to any consent decree or order or is subject to any
judgment, decree or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment, remediation,
removal or cleanup of Substances and, to the Knowledge of the Company, no investigation,
litigation or other proceeding is pending or, to the Knowledge of the Company, threatened
with respect thereto, or (z) is an indemnitor in connection with any threatened or
asserted claim against the Company or any of its Subsidiaries by any third-party
indemnitee for any liability under any Environmental Law or relating to any Substances.
Neither the Company nor any of its Subsidiaries has, at any time, disposed of,
discharged, emitted or released any amount of any Substance so as to contaminate any
soil, groundwater, surface water, air or building materials of any property in a manner
which would legally require remediation, investigation or similar response activity. No
Substances are present as a result of the actions or omissions of the Company or its
Subsidiaries, or, to the Knowledge of the Company, as a result of any actions of any
third party or otherwise, in, on or under any property that the Company has at any time
owned, operated, occupied or leased, including the land and the improvements, ground
water and surface water thereof so as to give rise to any liability or clean-up
obligation of the Company or its Subsidiaries under any Environmental Laws. To the
Knowledge of the Company, of the real property owned or leased by the Company or any of
its Subsidiaries is listed or, proposed for listing on the “National Priorities List” under
CERCLA, as updated through the date hereof, or any similar state or foreign list of sites
requiring investigation or cleanup.  

	 	        Section 3.14
Properties. Neither the Company nor its Subsidiaries owns any real property nor
has either ever owned any real property. The Company and each of its Subsidiaries have
good and valid title to, or valid leasehold or license interests in, all of its
properties and assets, free and clear of all Encumbrances other than Permitted
Encumbrances. All such assets and properties, other than assets and properties in which
the Company or any of its Subsidiaries has a leasehold interest, license or other rights,
are free and clear of all Encumbrances. Each of the Company and its Subsidiaries has
complied in all material respects with the terms of all leases of real property to which
it is a party and under which it is in occupancy, and all such leases are in full force
and effect. Each of the Company and its Subsidiaries enjoys quiet possession under all
such leases. Section 3.14 of the Company Disclosure Schedule sets forth a
complete list of all real property and interests in real property owned or leased by the
Company and a true and complete list of all personal property, equipment and fixtures
(other than items or categories of items having a book value of less than $50,000
individually) owned by the Company, all of which personal property, equipment and
fixtures are in operating condition, normal wear and tear excepted.  

41

	 	        Section 3.15
Insurance. Section 3.15 of the Company Disclosure Schedule includes a
list of all policies of fire, liability, product liability, workmen’s compensation,
health and other forms of insurance presently in effect with respect to the Company
Business (the “Company Insurance Policies”), including the named
insured(s) and all beneficiaries thereunder, true and complete copies of which have been
delivered or made available to Buyer prior to the date hereof. All Company Insurance
Policies are valid, outstanding and enforceable policies (subject to Applicable Law) and
provide insurance coverage for the Company Assets and operation of the Company Business,
of the kinds, in the amounts and against the risks required to comply in all material
respects with Applicable Law relating to the Company and/or any contractual or other
obligations, and such policies provide insurance coverage against the types of risks of
the sort normally insured by similar businesses of similar size and nature. Neither the
Company nor any of its Subsidiaries has been refused any insurance with respect to any
aspect of the operations of its business that would otherwise be customarily provided to
a similarly situated business, nor has its coverage been limited below customary limits
for a company of the size and nature of the Company by any insurance carrier to which it
has applied for insurance or with which it has carried insurance. No notice of
cancellation or termination has been received by the Company from its insurer with
respect to any such policy. The activities and operations of the Company and each of its
Subsidiaries have been conducted in a manner so as to conform in all material respects to
all applicable provisions of the Company Insurance Policies.  

	 	        Section 3.16
No Broker. No broker, finder, investment banker, financial advisor or other
similar Person has acted for or on behalf of, or is entitled to any broker’s, finder’s,
advisory, opinion or similar fee or other similar commission from, the Company or any of
its Affiliates in connection with this Agreement, the Escrow Agreement or the
transactions contemplated hereby or thereby. The Company has heretofore provided to Buyer
a complete copy of all agreements between the Company and any broker, finder, investment
banker, financial advisor or similar other Person pursuant to which such Person would be
entitled to any such payment relating to the transactions contemplated by this Agreement
or the Escrow Agreement.  

	 	        Section 3.17
Absence of Certain Changes or Events. From August 31, 2005 through the date
hereof, there has not been or occurred any:  

	 	        Section 3.17.1
Company Material Adverse Effect or any event or development that would, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse Effect;  

	 	        Section 3.17.2
failure to operate the Company Business in the ordinary course so as to use all
commercially reasonable efforts (i) to preserve the Company Business intact and (ii) to
preserve the goodwill of employees, suppliers, customers and others having business
relations with the Company or its Subsidiaries (except where the Company believes it
necessary or desirable to terminate employment or business relations);  

42

	 	        Section 3.17.3
(i) resignation or termination of any key employee or independent contractor, officer or
manager, (ii) any increase in the rate of compensation (whether in cash, stock, or other
equity instruments) payable or to become payable to any officer or manager of the Company
(other than general, regularly-scheduled reviews), including, without limitation, the
making of any loan (other than expense or sales commission advances in the ordinary
course of business consistent with past practice) to, or the payment, grant or accrual
of, any bonus, incentive compensation, service award or other similar benefit to, any
such Person, or (iii) the adoption, addition to, or modification of, any Employee Plan,
or (iv) any contribution to any Employee Plan other than contributions made in the
ordinary course of business consistent with past practice, except, in the case of clauses
(ii), (iii) and (iv), for the adoption of the Retention Plan;  

	 	        Section 3.17.4
sale, assignment, license or transfer of, or the imposition of any Encumbrance (other
than Permitted Encumbrances) on, any of the Company Assets, tangible or intangible,
singly or in the aggregate, other than sales and licenses of products and services in the
ordinary course of business and consistent with past practice;  

	 	        Section 3.17.5
new Scheduled Contracts, or extensions, modifications, terminations or renewals thereof,
except for Scheduled Contracts entered into, modified or terminated in the ordinary
course of business and consistent with past practice;  

	 	        Section 3.17.6
change in accounting methods or practices by the Company (other than as required by
Applicable Law, GAAP or a Governmental Authority) revaluation by the Company of any of
the Company Assets, including writing off or establishing reserves with respect to
inventory, notes or accounts receivable (other than for which adequate reserves have been
previously established or other than in the ordinary course of business consistent with
past practice);  

	 	        Section 3.17.7
damage, destruction or loss (whether or not covered by insurance) adversely affecting any
material, tangible Company Assets;  

	 	        Section 3.17.8
declaration, setting aside or payment of any dividend or distribution in respect of any
capital stock of the Company or any redemption, purchase or other acquisition of any
equity securities of the Company other than repurchases made below the then current fair
market value pursuant to, and in accordance with, pre-existing restricted stock
agreements, stock option agreements or other equity compensation plans or similar
agreements;  

	 	        Section 3.17.9
failure to pay any material obligation of the Company when due or promptly thereafter;  

	 	        Section 3.17.10
cancellation of any indebtedness or waiver of any rights of substantial value to the
Company, except in the ordinary course of business and consistent with past practice;  

	 	        Section 3.17.11
indebtedness incurred by the Company for borrowed money or any commitment to borrow money
entered into by the Company, or any loans made or agreed to be made by the Company (other
than expense or sales commission advances to Company Business Employees in the ordinary
course of business consistent with past practice);  

	 	        Section 3.17.12
acquisition of any equity interest in any other Person (other than investments of cash in
money market or similar funds); or  

43

	 	        Section 3.17.13
agreement by the Company directly or indirectly to do any of the foregoing.  

	 	        Section 3.18
Sufficiency of and Title to Assets. The Company owns, all right, title and
interest in and to, or has a valid right to use, all of the properties, assets and rights
of any kind, whether tangible or intangible, real or personal (including, without
limitation, the Company’s Intellectual Property), necessary to enable the Company to
conduct the Company Business (the “Company Assets”), free and clear of
any Encumbrances other than Permitted Encumbrances. The Company has sole right, title and
interest in and to all of the assets on the Unaudited Company Balance Sheet, free and
clear of any Encumbrances (other than Permitted Encumbrances), other than assets disposed
of, transferred, sold or otherwise eliminated in the ordinary course of business
consistent with past practice since August 31, 2005.  

	 	        Section 3.19
Potential Conflicts of Interest. No director or officer of the Company or any of
its Subsidiaries has any claim against, or owes any amount to, the Company, except for
claims for salary, commissions, accrued vacation pay, unreimbursed expenses and accrued
benefits under Employee Plans.  

	 	        Section 3.20
Transactions with Affiliates. The Company is not a party to any Contract (other
than employment Contracts entered into in the ordinary course of business) or pending
transaction with any of its directors, officers or, to the Knowledge of the Company,
other Affiliate, or any corporation, partnership or other business association in which
any employee director or officer has a material financial interest. The Company is not a
party to any Scheduled Contract with any non-employee director or Company Affiliate or
any corporation, partnership or other business association in which such non-employee
director or Company Affiliate has a material financial interest. None of the Stockholders
provides any material services to the Company or its Subsidiaries other than in such
Stockholder’s capacity as an employee of the Company.  

	 	        Section 3.21
Governmental Regulation. The Company is not an “investment company” within
the meaning of the Investment Company Act of 1940, as amended (the “Investment
Company Act”), which is required to be registered under the Investment Company
Act in order to engage in the transactions described in Section 7 of that Act. The
Company is not a “broker” or “dealer” within the meaning of the
Exchange Act. The Company does not act as investment adviser or subadviser to any “investment
company,” as defined in the Investment Company Act, which is registered under such
Act.  

	 	        Section 3.22
No Loss of Customers. Section 3.22 of the Company Disclosure Schedule
contains a complete and accurate list of the Company’s top 20 customers during
calendar year ended December 31, 2004, as measured by revenues received by the Company
during such period (the “Major Customers”). Since December 31, 2004
through the date hereof, the Company has not suffered cancellations or non-renewals from
any Major Customer. Since December 31, 2004 through the date hereof, there has been
no material adverse change in the business relationship of the Company with any Major
Customer, and neither the Company nor any of its Subsidiaries has received any written or
oral communication regarding the intention of any Major Customer to terminate its
relationship with the Company or any of its Subsidiaries.  

44

	 	        Section 3.23
Books and Records. The Company has made and kept (and given Buyer access to) its
true, correct and complete books and records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of the Company Business in all material
respects. The minute books of the Company and its Subsidiaries previously delivered to
Buyer accurately and adequately reflect all action previously taken by the stockholders,
board of directors and committees of the board of directors of the Company and its
Subsidiaries. The copies of the stock book records of the Company previously delivered to
Buyer in connection with Buyer’s due diligence are true, correct and complete, and
accurately reflect all transactions effected in the Company’s equity securities
through and including the date hereof. The Company has not engaged in any material
transaction, maintained any bank account or used any corporate funds except for
transactions, bank accounts and funds which have been and are reflected in the Company’s
books and records.  

	 	        Section 3.24
Takeover Statutes. The Company’s board of directors has taken all actions
necessary to ensure that the restrictions applicable to business contained in Section 203
of the DGCL are inapplicable to the execution, delivery and performance of this Agreement
and the Escrow Agreement and to the consummation of the Merger and the transactions
contemplated hereby and thereby. As of the date thereof, no other Takeover Statute
applies to or purports to apply to the Merger, this Agreement and the Escrow Agreement or
the transactions contemplated hereby and thereby.  

ARTICLE 4. 

Representations and Warranties of Parent, Buyer and Merger Sub 

        As
a material inducement to the Company to enter into this Agreement, each of Parent, Buyer
and Merger Sub hereby represents and warrants to the Company as follows: 

	 	        Section 4.1
Organization. Parent is a company, duly organized and validly existing under the
Laws of Israel. Buyer is a corporation, duly organized, validly existing and in good
standing under the Laws of the State of Delaware. Merger Sub is a corporation, duly
organized, validly existing and in good standing under the Laws of the State of Delaware.
Merger Sub has not conducted any business other than in connection with the negotiation
and execution of this Agreement and the Escrow Agreement and the consummation of the
transactions contemplated hereby and thereby.  

	 	        Section
4.2 Authority; No Violation. 

	 	        Section 4.2.1
Each of Parent, Buyer and Merger Sub has full power and authority to execute and deliver
this Agreement and the Escrow Agreement to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the Escrow Agreement
to which each of Parent, Buyer and Merger Sub is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of each of Parent, Buyer and Merger Sub, and no other
corporate proceedings on the part of Parent, Buyer or Merger Sub is necessary to approve
this Agreement or the Escrow Agreement to which either is a party or authorize or
consummate the transactions contemplated hereby and thereby. This Agreement and the
Escrow Agreement to which each of Parent, Buyer or Merger Sub is a party have been duly
and validly executed and delivered by each of Parent, Buyer and Merger Sub (assuming the
due authorization, execution and delivery of this Agreement and the Escrow Agreement by
the other parties hereto and thereto) constitute valid and binding obligations of each of
Parent, Buyer and Merger Sub, enforceable against each of Parent, Buyer and Merger Sub in
accordance with their terms, except as the enforceability thereof may be subject to or
limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to
or affecting the rights of creditors generally and the availability of equitable relief
(whether in proceedings at law or in equity).  

45

	 	        Section 4.2.2
Neither the execution and delivery of this Agreement or the Escrow Agreement to which it
is a party by each of Parent, Buyer and Merger Sub nor the consummation by Parent, Buyer
or Merger Sub of the transactions contemplated hereby or thereby to be performed by
Parent, Buyer or Merger Sub, nor compliance by Buyer or Merger Sub with any of the terms
or provisions hereof or thereof, will (i) violate any provision of the
organizational documents of Parent, Buyer or Merger Sub, (ii) (x) violate, conflict
with or require any notice, filing, consent, waiver or approval under any Applicable Law
to which Parent, Buyer, Merger Sub or any of their respective Subsidiaries or any of
their respective properties, contracts or assets are subject, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with or without notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate or result in a right of acceleration of the
performance required by, result in the creation of any Encumbrance upon the properties,
contracts or assets of Parent, Buyer or Merger Sub under, or require any notice,
approval, waiver or consent under, any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Buyer, Merger Sub or
any of their respective Subsidiaries is a party, or by which Buyer, Merger Sub or any of
their respective Subsidiaries, or any of their respective properties or assets, may be
bound or affected.  

	 	        Section 4.3
Consents and Approvals. Except for the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and such filings as are required to be
made under the HSR Act, the Exon-Florio Act and any antitrust or similar regulatory
filings in any foreign jurisdiction, no consents or approvals of or filings or
registrations with any Governmental Authority or any third party are necessary in
connection with the execution and delivery by Parent, Buyer or Merger Sub of this
Agreement and the Escrow Agreement to which either is a party or the consummation by
Parent, Buyer or Merger Sub of the transactions contemplated hereby or thereby.  

	 	        Section 4.4
No Broker. No broker, finder investment banker, financial advisor or other similar
Person has acted for or on behalf of, or is entitled to any broker’s, finder’s,
advisory, opinion or similar fee or other commission from, Parent, Buyer, Merger Sub or
any of their respective Subsidiaries in connection with this Agreement, the Escrow
Agreement or the transactions contemplated hereby or thereby.  

	 	        Section 4.5
Available Funds. Parent and Buyer together have available to them, and Parent will
make available to Buyer, all funds necessary to satisfy all of Parent’s and Buyer’s
obligations under this Agreement and in connection with the transactions contemplated
hereby.  

	 	        Section 4.6
Sufficient Shares Reserved for Option Exercise. Parent has duly authorized and
reserved for issuance a sufficient number of Parent Ordinary Shares under its stock
option plans for issuance to the Holders of Company Options that are assumed pursuant to
this Agreement. The Parent Ordinary Shares underlying such assumed Company Options, when
issued in accordance with the terms and conditions of the assumed Company Options, will
be duly authorized, validly issued, fully paid and nonassessable.  

46

ARTICLE 5. 

Covenants and
Additional Agreements 

	 	        Section 5.1
Conduct of Business. Commencing with the execution and delivery of this Agreement
and continuing until the earlier to occur of the Effective Time and termination of this
Agreement in accordance with its terms, the Company shall carry on the operation of the
Company Business in the ordinary course and substantially in accordance with past
practice and shall use its commercially reasonable efforts not to take any action
inconsistent with the provisions of this Agreement. Commencing with the execution and
delivery of this Agreement and continuing until the earlier to occur of the Effective
Time and termination of this Agreement in accordance with its terms, except as expressly
set forth in this Agreement, the Company shall use its commercially reasonable efforts,
in a manner consistent with its past practices, to maintain the present character and
quality of the Company Business, including, without limitation, its present operations,
physical facilities, working conditions, goodwill and relationships with lessors,
licensors, suppliers, customers, employees and independent contractors. Commencing with
the execution and delivery of this Agreement and continuing until the earlier to occur of
the Effective Time and termination of this Agreement in accordance with its terms,
without limiting the generality of the foregoing, unless specifically consented to by
Buyer in advance in writing or by e-mail (which consent shall not be unreasonably
withheld), except as expressly set forth in or contemplated by this Agreement or the
Retention Plan, the Company and its Subsidiaries shall not:  

	 	        Section 5.1.1
incur any indebtedness for borrowed or purchase money or letters of credit (other than in
the ordinary course of business consistent with past practice under existing lines of
credit), or assume, guarantee, endorse (other than endorsements for deposit or collection
in the ordinary course of business), or otherwise become responsible for obligations of
any other Person in excess of $10,000 in the aggregate;  

	 	        Section 5.1.2
issue (except pursuant to Company Options outstanding on the date of this Agreement and
disclosed on Section 3.2.2 of the Company Disclosure Schedule,
Company Warrants outstanding on the date of this Agreement and disclosed on Section 3.2.3 of
the Company Disclosure Schedule and upon the conversion of shares of Preferred Stock
issued and outstanding on the date of this Agreement) or commit to issue any shares of
its capital stock or any other securities or any securities convertible into shares of
its capital stock or any other securities, including, without limitation, any options to
acquire capital stock (other than options issued to new hires in the ordinary course of
business and in amounts consistent with past practices);  

	 	        Section 5.1.3
except as may be necessary or desirable in connection with  Section 2.6.7 hereof or
obtaining the approval referenced in  Section 5.6.2 hereof, amend, waive or modify
any terms of any Company Option or Company Warrant, including, without limitation, by
directly or indirectly increasing or reducing the per share exercise price or the number
of shares of Common Stock subject to any Company Option or Company Warrant;  

	 	        Section 5.1.4
other than the payment of accrued but unpaid dividends to the holders of Preferred Stock
as part of the aggregate consideration paid by Buyer hereunder in compliance with the
terms of the Company Certificate of Incorporation, declare, set aside, make, pay or incur
any obligation to pay any dividend or distribution on its capital stock (whether payable
in cash, stock, property or a combination thereof) or enter into any voting agreement
with respect to its capital stock;  

47

	 	        Section 5.1.5
reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly
or indirectly, any of its capital stock, other equity interests or securities (other than
repurchases made at or below then current fair market value pursuant to, and in
accordance with, pre-existing restricted stock agreements, stock option agreements or
under other equity compensation plans or similar agreements in effect on the date
hereof);  

	 	        Section
5.1.6     make any change to the Company's Certificate of Incorporation or the Company's
bylaws; 

	 	        Section 5.1.7
mortgage, pledge or otherwise encumber (other than through the involuntary imposition of
Permitted Encumbrances solely of a nature described in clauses (i), (ii), (v) or (vi) of
the definition of “Permitted Encumbrances” set forth herein) any Company Assets
or sell, transfer, license or otherwise dispose of any Company Assets except for (i) the
non-exclusive license of Intellectual Property or (ii) the sale of inventory to
customers, in the case of the matters referred to in the foregoing clauses (i) and (ii),
in the ordinary course of business and consistent with the Company’s past practice;  

	 	        Section 5.1.8
make or commit to make any loan to any Person (other than expense and sales commission
advances to Company employees in the ordinary course of business consistent with past
practice);  

	 	        Section 5.1.9
cancel, release or assign any material indebtedness owed to it or any material claims or
rights held by it or waive any rights of material value to the Company; provided that for
purposes of this sentence, any amount equal to, or in excess of $50,000, individually or
in the aggregate, shall be deemed to be material;  

	 	        Section 5.1.10
make any (i) investment or commitment of a capital nature either by purchase of stock or
securities, other than investments of cash in money market or similar funds, (ii)
contributions to capital, (iii) business or product line acquisitions, or (iv) by the
purchase of any property or assets of any other Person, other than (A) the purchase of
inventory in the ordinary course of business consistent with past practice or (B) in
accordance with the Company’s present operating plan attached to Section 5.1.10 of
the Company Disclosure Schedule;  

	 	        Section 5.1.11
adopt a plan of partial or complete liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization (other than the Merger) or
otherwise permit its corporate existence to be suspended, lapsed or revoked;  

	 	        Section 5.1.12
unless otherwise permitted by the express provisions of Section 5.1.1 – Section
5.1.23, inclusive, (i) enter into any Contract that would have been a Scheduled Contract
if it had been executed prior to the date hereof, (ii) terminate any Scheduled Contract
or any Contract described in the immediately preceding clause (i), or (iii) make any
change in or waive or exercise any right under any Scheduled Contract or any Contract
described in the immediately preceding clause (i);  

	 	        Section 5.1.13
other than in the ordinary course of business consistent with past practice, (i) enter
into or modify any employment Contract, (ii) change the status, title or
responsibilities, including without limitation, termination or promotion, of any officer
of the Company, or promote any Company Business Employee (who is not an officer as of the
date of this Agreement) to an officer position; (iii) pay any compensation to or for
any Company Business Employee, officer or director other than in the ordinary course of
business and pursuant to existing employment arrangements; (iv) approve or adopt any
commission, bonus, retention or similar plan or target, (v) pay or agree to pay any
bonus, incentive compensation, service award, severance, “stay bonus” or other
like benefit, (vi) enter into or modify any other Employee Plan, or (vii) modify
any Employee Plan (provided, however, that for this clause (vii), the Retention
Plan shall not be modified except to allocate awards thereunder with Buyer’s
approval notwithstanding anything to the contrary); provided, however, that
notwithstanding the foregoing, for retention purposes, the Company may increase the
annual compensation payable to any employees of the Company in amounts that do not exceed
the amounts set forth in Section 5.1.13 of the Company Disclosure Scheduled;  

48

	 	        Section 5.1.14
make any change in any method of accounting or accounting practice other than as required
by GAAP, Applicable Law or any Governmental Authority;  

	 	        Section 5.1.15
file any material Tax Return or any material amendment to a material Tax Return, make or
change any election in respect of Taxes, adopt or change any material accounting method
in respect of Taxes, enter into any Tax Sharing Agreement or any closing agreement with a
Taxing Authority, settle or compromise any claim, notice, audit report or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;  

	 	        Section 5.1.16
(i) prepay any long-term debt, or pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise) (except in the
ordinary course of business consistent with past practice or as necessary and with Buyer’s
consent in order to comply with Section 6.3.12), (ii) willfully accelerate or
delay the collection of notes or accounts receivable in advance of or beyond their
regular due dates or the dates on which the same would have been collected in the
ordinary course of business consistent with past practice; (iii) willfully delay or
accelerate the payment of any account payable in advance of its due date or the date such
liability would have been paid in the ordinary course of business consistent with past
practice, (iv) vary the Company’s inventory practices in any material respect from
the Company’s past practices or (v) fail to pay any material obligation of the
Company when due;  

	 	        Section 5.1.17
Change the accounting methods or practices by the Company or revalue any of the Company
Assets, including writing off or establishing reserves with respect to inventory, notes
or accounts receivable (other than for which adequate reserves have been previously
established) other than as required by GAAP, Applicable Law or any Governmental
Authority;  

	 	        Section 5.1.18
write up, write down or write off the book value of any Company Assets, except for
depreciation and amortization in accordance with GAAP consistently applied;  

	 	        Section 5.1.19
other than (i) the payment of the Goldman Sachs Fee and the out-of-pocket legal,
accounting and similar advisory fees and expenses set forth in the Statement of Closing
Expenses, and (ii) except as permitted by clause (iv) of Section 5.1.10, make any
individual cash payment in excess of $10,000, other than payments made in the ordinary
course of business consistent with past practice (including, without limitation, payments
for Taxes due and payments to the Company’s suppliers in the ordinary course of
business) or consistent with the Company’s plan attached hereto as Section 5.1.19 of
the Company Disclosure Schedule;  

49

	 	        Section 5.1.20
waive, release, assign, settle or compromise any material claims or settle any
Proceeding;  

	 	        Section 5.1.21
do any other act or fail to take any action, that would cause any representation or
warranty of the Company in this Agreement that is currently true to be or become untrue
in any material respect that is not in the ordinary course of business consistent with
past practice;  

	 	        Section 5.1.22
take any action regarding any Registered Company Intellectual Property, other than (i)
filing continuations for existing patent applications or completing or renewing
registrations of existing patents, domain names, trademarks or service marks in the
ordinary course of business and (ii) the enforcement of rights under, and the filing and
maintenance of, Patents, Trademarks, Copyrights and applications therefor in the ordinary
course of business;  

	 	        Section 5.1.23
grant any rights in Intellectual Property except in the ordinary course of business and
consistent with past practice; or  

	 	        Section 5.1.24
directly or indirectly take, agree to take or otherwise permit to occur any of the
actions described in  Section 5.1.1 through  Section 5.1.23, inclusive.  

	 	        Section 5.2
Confidentiality and Announcements.  

	 	        Section 5.2.1
The parties to this Agreement hereby agree to be bound by and comply with the provisions
set forth in the Non-Disclosure Agreement, the provisions of which (other than the
eleventh and twelfth paragraphs thereof, which are terminated and superseded hereby) are
hereby incorporated herein by reference. Effective upon, and only upon the earlier of (i)
the Closing or (ii) the termination date set forth in the seventeenth paragraph of the
Non-Disclosure Agreement, the parties obligations under the Non-Disclosure Agreement
shall terminate.  

	 	        Section 5.2.2
Subject to  Section 5.2.1 of this Agreement, the parties hereto shall consult with
each other as to the form, substance and timing of any press release or other public
disclosure related to this Agreement or the transactions contemplated hereby and no such
press release or other public disclosure shall be made without the consent of the other
parties hereto, which consent shall not be unreasonably withheld or delayed; provided,
however, that the parties may make such disclosure to the extent (i) such
disclosure is compelled by legal process (by interrogatories, subpoena, civil
investigative demand or similar process) or (ii) such disclosure is required, based
upon the written advice of counsel, pursuant to the requirements of any Applicable Law
(including without limitation the Securities Act, the Exchange Act or, in the case of
Buyer only, any rule or regulation promulgated by any national stock exchange or the
NASDAQ National Market).  

	 	        Section 5.3
Access by Buyer. Subject to the terms of the Non-Disclosure Agreement, commencing
with the execution and delivery of this Agreement and continuing until the earlier to
occur of the Effective Time and termination of this Agreement in accordance with its
terms, the Company shall, and shall cause each of its directors, officers, employees and
representatives to, afford Buyer and its representatives reasonable access upon
reasonable notice and at all reasonable times to the Company Business for the purpose of
inspecting the same, and to its directors, officers, employees and representatives,
properties, books and records, Contracts and Company Assets, and shall furnish Buyer and
its representatives, upon reasonable notice and in a timely manner, all financial,
operating and other data and information as Buyer or its Affiliates, through their
respective representatives, may reasonably request. Notwithstanding anything to the
contrary in this Agreement, nothing learned by, discovered by or otherwise disclosed to
Parent, Buyer or any of their Affiliates or representatives pursuant to this  Section 5.3
shall amend or modify any representation or warranty of the Company in this Agreement in
any manner or adversely affect the rights and remedies of Parent and Buyer under this
Agreement and Applicable Law.  

50

	 	        Section 5.4
Notification of Certain Matters. Commencing with the execution and delivery of
this Agreement and continuing until the earlier to occur of the Effective Time and
termination of this Agreement in accordance with its terms, the Company shall give prompt
notice to Buyer of (i) the occurrence, or failure to occur, of any event after the
date hereof that would cause any representation or warranty of the Company contained in
this Agreement or in any Escrow Agreement to which it is a party to be untrue or
inaccurate in any material respect and (ii) any failure of the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder (each, a “Development”); provided, however,
that such disclosure shall not be deemed to amend or modify any representation or
warranty of the Company in this Agreement in any manner or adversely affect the rights
and remedies of Parent and Buyer under this Agreement and Applicable Law. The Company
shall promptly notify Buyer of any Development that occurs before the Closing that would
reasonably be expected to result in a Company Material Adverse Effect, to materially
adversely affect the ability of the Company to consummate any of the transactions
contemplated by this Agreement or the Escrow Agreement.  

	 	        Section 5.5
Acquisition Proposals.  

	 	        Section 5.5.1
Subject to the terms of Section 5.5.2 and Section 5.5.3, commencing with the execution
and delivery of this Agreement and continuing until the earlier to occur of the Effective
Time and termination of this Agreement in accordance with its terms, the Company shall
not, and shall not authorize or knowingly permit any of its directors, officers,
employees, agents or other representatives to, directly or indirectly: (i) solicit,
encourage, initiate, substantively review (except as may be permitted by the DGCL) or
participate in any negotiations or discussions with respect to any offer or proposal
(formal or informal, oral, written or otherwise) to acquire all or any part of the
Company, whether by purchase of assets, exclusive license, joint venture formation,
purchase of stock, business combination or otherwise (other than (A) discussions with
Parent and Buyer regarding this Agreement, the Merger and the other transactions
contemplated hereby, and (B) discussions with current and former Company Business
Employees or any Holders of Company Warrants outstanding on the date hereof or granted
after the date hereof in accordance with the terms of this Agreement regarding the
exercise and termination of any Company Options and Company Warrants) (an “Acquisition
Proposal”), (ii) disclose any information not customarily disclosed to any
Person concerning the Company and which the Company believes would be used for the
purposes of formulating any Acquisition Proposal, (iii) assist, cooperate with,
facilitate or encourage any Person to make any Acquisition Proposal (directly or
indirectly), or (iv) agree to, enter into a Contract regarding, approve, recommend
or endorse any transaction involving, any Acquisition Proposal. Commencing with the
execution and delivery of this Agreement and continuing until the earlier to occur of the
Effective Time and termination of this Agreement in accordance with its terms, the
Company shall notify Buyer promptly of any proposal or offer (formal or informal, oral,
written or otherwise), or any inquiry or contact with any Person with respect thereto,
regarding any Acquisition Proposal, such notice to include the identity of the Person
proposing such Acquisition Proposal and the terms thereof, and shall keep Buyer apprised,
on a current basis, of the status of any such Acquisition Proposal and of any
modifications to the terms thereof. Subject to the terms of Section 5.5.2 and Section
5.5.3, the Company shall immediately cease and cause to be terminated any and all
existing activities, discussions or negotiations with any Persons conducted prior to the
execution and delivery of this Agreement with respect to any Acquisition Proposal.  

51

	 	        Section 5.5.2
Notwithstanding the provisions of Section 5.5.1 hereof, the Company may, in response to
an unsolicited proposal for an Acquisition Proposal made after the date of this Agreement
and prior to the Company’s receipt of the Stockholder Consent, which did not result
from a knowing breach of Section 5.5.1 and which the Company’s board of directors
determines, in good faith, after consultation with outside legal counsel and financial
advisors, is or would reasonably be expected to lead to a Superior Proposal (as defined
below), and subject to compliance with the last sentence of Section 5.5.1, (i) furnish
information with respect to Company to the Person making such Acquisition Proposal and
its officers, directors, employees, investment bankers, attorneys or other advisors or
representatives (“Advisors”) pursuant to a customary confidentiality
agreement not less restrictive of the other party than the Non-Disclosure Agreement, and
(ii) participate in discussions or negotiations with such person and its Advisors
regarding such Acquisition Proposal; provided, however, that notwithstanding the
foregoing or anything to the contrary in this Agreement, the parties hereto agree that
the terms of this Section 5.5.2 shall have no further force or effect whatsoever upon the
Company’s receipt of the Stockholder Consent and, in furtherance thereof, the
Company hereby irrevocably waives any rights to enforce or seek to enforce or invoke the
terms of this Section 5.5.2 immediately upon its receipt of the Stockholder Consent.  

	 	        Section 5.5.3
If the Company’s board of directors receives a Superior Proposal after the date of
this Agreement and prior to the Company’s receipt of the Stockholder Consent, which
Superior Proposal was not knowingly solicited by the Company in violation of Section
5.5.1, and as a result thereof the Company’s board of directors determines, in good
faith, after consultation with outside legal counsel and financial advisors, that the
Company is required to take the applicable action described in the following clauses (i),
(ii) or (iii) in order to fulfill their fiduciary duties to the Company’s
stockholders, the Company’s board of directors may (i) terminate this Agreement
pursuant to clause (ii) of Section 7.1.7, (ii) change or modify its recommendation to the
Stockholders with respect to this Agreement, the Merger and the transactions contemplated
hereby, and/or (iii) recommend such Superior Proposal to the Stockholders and may
authorize the Company immediately thereafter to enter into an agreement with respect to
such Superior Proposal, but only (x) at a time that is not less than 48 hours after the
Company’s delivery to Buyer of written notice advising Buyer that the Company’s
board of directors is prepared to approve a Superior Proposal, identifying the person
making such Superior Proposal and otherwise complying with this Section 5.5.3 and (y)
after taking into full account any proposal by Buyer to amend the terms or conditions of
the Merger and this Agreement. For purposes of this Agreement, the term “Superior
Proposal” shall mean any Acquisition Proposal to acquire all or substantially
all of the equity securities, or all or substantially all of the assets, of the Company,
pursuant to a tender or exchange offer, a merger, a consolidation, a liquidation or
dissolution, a recapitalization, a sale of all or substantially all of its assets or
otherwise, which the Company’s board of directors determines in good faith, after
consultation with outside legal counsel and its financial advisors, if completed on the
terms proposed, would be more favorable to the Stockholders than the Merger, taking into
account (i) all of the terms and conditions of such proposal and this Agreement
(including any proposal by Buyer to amend the terms of the Merger) and (ii) such other
factors (in addition to price) as the Company’s board of directors reasonably
considers to be relevant (including, for example, legal, regulatory, and timing factors);
provided, however, that notwithstanding the foregoing or anything to the contrary
in this Agreement, the parties hereto agree that the terms of this Section 5.5.3 shall
have no further force or effect whatsoever upon the Company’s receipt of the
Stockholder Consent and, in furtherance thereof, the Company hereby irrevocably waives
any rights to enforce or seek to enforce or invoke the terms of this Section 5.5.3
immediately upon its receipt of the Stockholder Consent.  

52

	 	        Section 5.5.4
Nothing contained in this Section 5.5 shall prohibit the Company from making any
disclosure to its Stockholders if, in the reasonable good faith judgment of the Company’s
board of directors, after consultation with outside counsel, the Company’s board of
directors determines that it is required to make such disclosure to its stockholders in
order to satisfy its fiduciary duties under Applicable Law.  

	 	        Section 5.6
Company Stockholder Approval.  

	 	        Section 5.6.1
The Company shall use its best efforts to obtain the Stockholder Consent immediately
following the execution of this Agreement. Promptly upon obtaining the Stockholder
Consent, the Company shall prepare and, as soon as reasonably practicable, send to all
Holders of Company Stock on the record date for the Stockholders Consent who did not
execute such Stockholder Consent the notices required pursuant to Sections 228 and 262 of
the DGCL. Such materials submitted to the Company’s stockholders in connection with
such Stockholder Consent shall be subject to review and comment (not to be unreasonably
withheld or delayed) by Buyer and, with respect to the notice required by Section 262 of
the DGCL, shall include an information statement regarding the Company, Parent and Buyer,
the terms of this Agreement and the Merger and the unanimous recommendation of the Company’s
board of directors that the Company’s stockholders vote their shares in favor of the
adoption of this Agreement and the approval of the Merger and the other transactions
contemplated by this Agreement and the Escrow Agreement (the “Information
Statement”). Each party agrees that information supplied by such party for
inclusion in the Information Statement will not, on the date the Information Statement is
first sent or furnished to the Stockholders contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the circumstances
under which they are made, not false or misleading. The parties shall update, amend and
supplement the Information Statement from time to time as may be required by Applicable
Laws.  

	 	        Section 5.6.2
Promptly following the execution and delivery of this Agreement, the Company shall use
commercially reasonable efforts to determine those persons who may constitute “disqualified
individuals” within the meaning of Section 280G of the Code whose receipt of
payments that are contingent on the change of ownership that will result from
consummation of the Merger (the “280G Payments”) may cause them to
receive “excess parachute payments” within the meaning of Section 280G of the
Code. The Company shall consult in good faith with Parent and Buyer in connection with
such determination and shall permit Parent and Buyer to review the work papers of the
Company and any advisors retained to assist the Company in making its determination. The
disqualified individuals who are determined by the Company, after consultation with
Parent and Buyer, to be the prospective recipients of excess parachute payments in
connection with the Merger shall be referred to herein as the “Disqualified
Individuals”. The Company shall use commercially reasonable efforts to procure a
binding agreement from each Disqualified Individual pursuant to which each such
Disqualified Individual agrees to waive his or her right to receive an amount of his or
her 280G Payments that will be sufficient to cause his or her remaining 280G payments not
to be parachute payments in the event that the Company stockholders fail to approve the
payments placed at risk pursuant to such waivers. In the event that the Company procures
one or more waivers of any 280G Payments, the Company shall promptly submit (in a manner
reasonably satisfactory to Buyer) the 280G Payments subject to such waivers for approval
by the Company’s stockholders by the requisite vote under Applicable Law, so that,
if approved, such 280G Payments shall not be deemed to be “parachute payments”pursuant
to Section 280G of the Code. The Company shall keep Parent and Buyer reasonably informed
of the status and results of such stockholder submission and vote and the outcome
thereof.  

53

	 	        Section 5.7
Takeover Statutes. If any Takeover Statute is or may become applicable to the
Merger or any of the other transactions contemplated by this Agreement and the Escrow
Agreement, the board of directors of the Company shall grant such approvals and take such
actions as are necessary so that the Merger and such other transactions contemplated by
this Agreement and the Escrow Agreement may be consummated as promptly as practicable on
the terms set forth in this Agreement and the Escrow Agreement and otherwise act to
eliminate the effects of any Takeover Statute on the Merger and any of the other
transactions contemplated by this Agreement and the Escrow Agreement.  

	 	        Section 5.8
Further Assurances. Upon the terms and subject to the conditions contained in this
Agreement, the parties hereby agree, in each case both before and after the Closing, (i) to
use all commercially reasonable efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement and the Escrow Agreement,
including obtaining such consents, approvals and notices set forth in, or otherwise
required to be in, Section 3.4 of the Company Disclosure Schedule, (ii)  to execute
any documents, instruments or conveyances of any kind which may be reasonably necessary
or advisable to carry out any of the transactions contemplated hereunder and thereunder
and (iii) to cooperate, to the extent practicable, with each other in connection
with the foregoing. Without limiting the generality of the foregoing, the parties agree
to use their respective commercially reasonable efforts (A) to promptly seek to
obtain any necessary consents (including, without limitation, the making, promptly after
the date hereof, of all filings required to be made under the HSR Act, the Exon-Florio
Act and/or with any Governmental Authority with respect to this Agreement, the Escrow
Agreement, the Merger and the other transactions contemplated hereby and thereby), (B) to
give all notices to, and make all registrations and filings with third parties, including
submissions of information requested by Governmental Authorities and (C) to fulfill
all other conditions to this Agreement. Notwithstanding the foregoing, (y) no material
amendment or modification shall be made to any Contract to obtain any required consent
without the prior written consent of Buyer and (z) no party hereto or any of their
respective Affiliates shall be required to sell, transfer, divest or otherwise dispose of
any of its respective business, assets or properties in connection with this Agreement,
the Escrow Agreement, the Merger or any of the other transactions contemplated hereby or
thereby in connection with obtaining such consents or making such filings. Each party
shall deliver customary closing certificates and representations for the purpose of
facilitating delivery of the opinions of counsel contemplated by this Agreement.  

	 	        Section 5.9
Employee Matters. 

	 	        Section 5.9.1
As soon as practicable following the Effective Time, Buyer may (unless Buyer elects
in its discretion to maintain comparable Employee Plans of the Company) enroll those
current Company Business Employees who will be retained by the Surviving Corporation
following the Closing (each a “Retained Company Employee”) in Buyer’s
“employee benefit plans” as defined in Section 3(3) of ERISA or other
plans, arrangements or agreements providing benefits to employees (or to any dependent or
beneficiary thereof) of Buyer, including, without limitation, all incentive, bonus,
deferred compensation, vacation, holiday, cafeteria, medical, disability, stock purchase,
stock option plans, policies, programs, practices or arrangements (each a “Buyer
Benefit Plan”). The date of Buyer’s enrollment of Retained Company
Employees in the Buyer Benefit Plans may vary with respect to each Buyer Benefit
Plan, but shall hereafter be referred to with respect to each Buyer Benefit Plan as the
“Benefit Plan Enrollment Date.” During the period between the Effective
Time and the Benefit Plan Enrollment Date, if any, for a Buyer Benefit Plan, each
Retained Company Employee shall remain enrolled in the relevant Company Benefit Plans.  

54

	 	        Section 5.9.2
Unless Buyer and the Company agree otherwise in writing, the board of directors of the
Company shall adopt resolutions terminating, effective at least one (1) day prior to the
Closing Date but contingent on Closing, any Employee Plan which is intended to meet the
requirements of Section 401(k) of the Code (each such Employee Plan, a “401(k)
Plan”). At the Closing, the Company shall provide Buyer (i) executed
resolutions of the board of directors of the Company authorizing such termination and (ii) an
executed amendment to each such 401(k) Plan intended to assure compliance with all
applicable requirements of the Code and regulations thereunder. The form of such
resolutions and amendment shall be subject to prior reasonable approval of Buyer, and the
Company shall take any such reasonable steps to terminate the 401(k) Plan as Buyer may
direct.  

	 	        Section 5.9.3
Buyer shall use commercially reasonable efforts to provide that each of the Retained
Company Employees (i) shall receive benefits comparable to similarly situated employees
of Buyer or Parent and (ii) shall be credited with their years of service with the
Company for purposes of eligibility to participate and vesting in any Buyer benefit plans
intended to be qualified under Section 401(a) of the Code, (iii) subject to any
limitations set forth in Buyer’s benefit plans, or applicable to such plans under
Applicable Law, shall not be subject to any exclusions for pre-existing conditions under
such plans, and (iv) shall be permitted to carry over any vacation leave accrued as of
the Closing Date (not to exceed 240 hours for each individual Retained Company Employee,
subject to Applicable Law) under the Company’s vacation leave policy.  

	 	        Section 5.10
Statement of Closing Expenses. Not later than three (3) Business Days prior to the
Closing Date, the Company shall provide to Buyer an itemized list (the “Statement
of Closing Expenses”) of (i) the Goldman Sachs Fee, (ii) all (A)
out-of-pocket legal, accounting and other similar advisory fees and expenses of the
Company incurred by the Company in connection with the negotiation and preparation of
this Agreement and the consummation of the transactions contemplated hereby (other than
the Goldman Sachs Fee) and (B) termination fees and expenses paid or payable to Silicon
Valley Bank in connection with the termination of the Company’s credit facility with
Silicon Valley Bank in connection with the transactions contemplated hereby (the items in
this clause (ii), “Company Transaction Expenses”), and (iii) the
Recent Accelerated Option Value. Any Company Transaction Expenses in excess of $550,000
shall be deemed “Excess Company Transaction Expenses.” Parent, Buyer and
Merger Sub shall pay any expenses related to the filings made by such parties under the
HSR Act and the Exon-Florio Act. Except as expressly provided otherwise in this
Agreement, the parties shall each bear their respective direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement and the
Escrow Agreement and the consummation of the Merger and the other transactions
contemplated hereby and thereby.  

55

	 	        Section 5.11
Statement of Closing Consideration.  No later than three (3) Business Days
prior to the Closing Date, the Company shall provide to Buyer a statement (the “Statement
of Closing Consideration”) setting forth the following information as of
immediately prior to the Effective Time: (i) the names, addresses and, if reasonably
requested, taxpayer identification numbers of each Holder, (ii) the type and number of
shares of Company Stock held by each such Holder, (iii) the number of Company Options
held by each such Holder, (iv) the number and type of Company Warrants held by each such
Holder, (iv) each such Holder’s allocation of Transaction Consideration and Escrow
Cash, which shall be in accordance with Article 2 hereof and the terms and conditions of
the Company Certificate of Incorporation, and (v) (A) in the case of Company Options to
be assumed by Buyer at the Closing pursuant to this Agreement, the number of shares of
Company Stock issuable upon the exercise in full of each such assumed Company Option
immediately prior to the Effective Time and the respective pre-Closing exercise prices
thereof, or (B) in the case of Vested Company Options to be cancelled pursuant to this
Agreement, the amount of cash to be paid in respect of each such Vested Company Option.  

	 	        Section 5.12
Retention Bonuses.  Promptly following the execution and delivery of this
Agreement and prior to the Closing, Parent, Buyer and the Company shall work together in
good faith to allocate the $2.5 million in cash set aside under the Retention Plan among
the Company Business Employees who accept offers of employment with Parent or Buyer in
connection with the Merger and the other transactions contemplated hereby, subject only
to being employed by Parent or one of its Subsidiaries on the payment date of such
bonuses.  

	 	        Section 5.13
Indemnified Directors and Officers.  

	 	        Section 5.13.1
For a period of no less than six (6) years following the Effective Time, the certificate
of incorporation and bylaws of the Surviving Corporation shall contain provisions no less
favorable with respect to indemnification of, and advancement of expenses to, present and
former directors and officers of the Company than those set forth in the Company
Certificate of Incorporation and the Company’s bylaws on the date of this Agreement,
which provisions shall not be amended, repealed or otherwise modified for a period of six
(6) years from the Closing Date in any manner that would adversely affect the rights
thereunder of the individuals who immediately prior to the Closing are present or former
directors or officers of the Company, unless such modification is required after the
Closing by Applicable Law.  

	 	        Section 5.13.2
Parent, Buyer or the Surviving Corporation shall maintain in effect for six (6) years
following the Effective Time, if available, the current directors’ and officers’ liability
insurance policy (the “D&O Policy”) maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions that are not less favorable) with respect
to matters occurring prior to the Effective Time; provided, however, that in no
event shall Parent, Buyer or the Surviving Corporation be required to expend in the
aggregate an amount per year in excess of 200% of the current annual premium paid by the
Company (which annual premium is set forth on Section 5.13.2of the Company
Disclosure Schedule) for such D&O Policy (such 200% amount, the “Maximum
Annual Premium”); and provided, further, that if the aggregate premiums
of such insurance coverage exceed such amount, Parent, Buyer and the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage available
for a cost not exceeding the Maximum Annual Premium. Prior to the Effective Time,
notwithstanding anything to the contrary in this Agreement, the Company may purchase a
six-year “tail” prepaid policy on the D&O Policy on terms and conditions no
less advantageous than the D&O Policy, provided that the amount paid by the Company
for such “tail” policy shall not exceed 200% of the Maximum Annual Premium. In
the event that the Company purchases such a “tail” policy prior to the
Effective Time, Parent, Buyer and the Surviving Corporation shall maintain such “tail”policy
in full force and effect and continue to honor their respective obligations thereunder,
in lieu of all other obligations of Parent, Buyer and the Surviving Corporation under the
first sentence of this  Section 5.13.2 for so long as such “tail” policy
shall be required to be maintained in full force and effect.  

56

	 	        Section 5.13.3
Each of Parent and Buyer agrees that it shall, and shall cause the Surviving Corporation
and its Subsidiaries to, jointly and severally, indemnify each Person who is now, or has
been at any time prior to the date hereof, a director or officer of the Company or of any
of its Subsidiaries, and each of their successors and assigns (the “Indemnified
Officers and Directors”), with respect to any claim, liability, loss, damage,
judgment, fine, penalty, amount paid in settlement or compromise, cost or expense
(including reasonable fees and expenses of legal counsel), against any of the Indemnified
Officers and Directors in his or her capacity as a officer or director of the Company or
its Subsidiaries, whenever asserted or claimed, based in whole or in part on, or arising
in whole or in part out of, any facts or circumstances occurring at or prior to the
Effective Time whether commenced, asserted or claimed before or after the Effective Time,
including liability arising under Applicable Law and including any liability arising out
of or pertaining to the transactions contemplated by this Agreement, in each case to the
same extent as provided in the Company’s bylaws or the Company Certificate of
Incorporation or any other applicable contract or agreement in effect on the date of this
Agreement. In the event of any claim, liability, loss, damage, judgment, fine, penalty,
amount paid in settlement or compromise, cost or expense described in the preceding
sentence, Parent, Buyer and the Surviving Corporation shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Officers and Directors promptly after
statements are received in advance of settlement, judgment or other resolution thereof to
such Indemnified Officers and Directors upon request for reimbursement of documented
expenses reasonably incurred, provided the applicable Indemnified Officers and Directors
provide an undertaking to repay all advanced expenses if it is finally judicially
determined that such Indemnified Officers and Directors are not entitled to
indemnification.  

	 	        Section 5.13.4
If Parent, Buyer or the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or substantially all of its properties and assets to any Person, then, and in
each such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of Parent, Buyer or the Surviving Corporation, as the case may be,
shall assume the obligations set forth in this Section 5.13.  

	 	        Section 5.13.5
The rights of each of the Indemnified Officers and Directors under this Section 5.13
shall be in addition to any rights such Person may have under the Company Certificate of
Incorporation, bylaws or similar organizational documents of the Company or any of its
Subsidiaries, or under Applicable Law or under any agreement of any of the Indemnified
Officers and Directors with the Company or any of its Subsidiaries (which agreements
shall survive the Merger). These rights shall survive consummation of the Merger and are
intended to benefit, and shall be enforceable by, each of the Indemnified Officers and
Directors.  

	 	        Section 5.14
Tax Matters. 

	 	        Section 5.14.1
Buyer shall prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and its Subsidiaries for all periods ending on or prior tot he Closing
Date which are filed after the Closing Date, including amended Tax Returns. Buyer shall
permit the Holder Representative to review and comment on each such Tax Return described
in the preceding sentence prior to filing.  

57

	 	        Section 5.14.2
The parties agree, upon request, to use reasonable efforts to obtain any certificate or
other document from any Governmental Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could otherwise be imposed with respect to a
taxable period (or portion thereof) ending on or before the Closing Date. Buyer and the
Holder Representative shall cooperate, and cause their representatives and Affiliates to
cooperate, as and to the extent reasonably requested by any other party hereto in
connection with the preparation and filing of Tax Returns as provided herein and any
audit, litigation or other proceeding with respect to Taxes or otherwise. Such
cooperation shall include the provision of records and information which are reasonably
relevant to any such Tax Return, audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Buyer and the Company shall (i)  retain
all books and records with respect to Company Taxes (including Tax Returns) relating to
any taxable period beginning before the Closing Date until the expiration of the statute
of limitations for assessment of Taxes for such respective taxable period, and (ii) give
the Holder Representative reasonable written notice prior to transferring, destroying or
discarding any books and records of the Company and, if another party so requests, allow
the Holder Representative to take possession of such books and records.  

	 	        Section 5.15
Assumed Company Options. 

	 	        Section 5.15.1
As soon as practicable after the Effective Time, Buyer shall deliver to each Holder of a
Company Option an appropriate notice setting forth such holder’s rights pursuant
thereto after giving effect to the adjustments required by Section 2.6.7. Buyer shall
take all corporate action necessary to duly authorize and reserve for issuance a
sufficient number of Parent Ordinary Shares for delivery upon exercise of such assumed
Company Options pursuant to the terms of this Agreement.  

	 	        Section 5.15.2
As soon as reasonably practicable following the Effective Time, but in any event within
five (5) Business Days thereafter, Parent shall prepare and file with the SEC a
registration statement on Form S-8 (or on such other registration statement form as may
be required under Applicable Law) to register the sale of Parent Ordinary Shares issuable
upon the exercise of all Company Options assumed by Buyer pursuant to this Agreement, and
Parent shall cause such registration statement(s) to become and remain effective until
the later of (i) the date on which all such assumed Company Options are no longer
outstanding, and (ii) the date on which all such Parent Ordinary Shares issued pursuant
to the outstanding assumed Company Options are freely tradable or tradable pursuant to
Rule 144 of the Securities Act without being subject to the volume restrictions thereof.  

ARTICLE 6.  

Conditions to Closing  

	 	        Section 6.1
Conditions to Each Party’s Obligations to Effect the Merger. The respective
obligations of each party hereto to consummate the transactions provided for hereby are
subject to the satisfaction, on or prior to the Closing Date, of each of the following
conditions:  

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	 	        Section 6.1.1
The waiting period applicable to the Merger under the HSR Act and any waiting period
applicable to the Merger under the Exon-Florio Act shall have been terminated or shall
have expired, all approvals under antitrust regulatory filings in any jurisdiction that
shall be necessary or jointly determined by Buyer and the Company to be reasonably
desirable shall have been obtained, and there shall be no pending commitment by Parent,
Buyer, the Company or any of their respective Subsidiaries to any Governmental Authority
(which commitment was requested or required by such Governmental Authority) not to close
the transactions contemplated hereby.  

	 	        Section 6.1.2
No Proceeding by any Governmental Authority shall have been instituted and remain pending
which questions the validity or legality of the transactions contemplated hereby and
which would reasonably be expected to adversely affect the Company, the Company Business
or the Company Assets in any material respect if the transactions contemplated hereby are
consummated.  

	 	        Section 6.1.3
There shall not be any Applicable Law or Court Order in effect that enjoins or makes the
transactions contemplated hereby illegal or otherwise prohibited.  

	 	        Section 6.1.4
Any governmental or regulatory notices or approvals required under any Applicable Law to
carry out the transactions contemplated by this Agreement shall have been obtained and
the parties shall have complied in all material respects with all Applicable Laws
applicable to the transactions contemplated by this Agreement.  

	 	        Section 6.1.5
The Stockholder Consent shall have been obtained.  

	 	        Section 6.2
Additional Conditions to the Obligations of the Company to Effect the Merger. The
obligations of the Company to consummate the transactions provided for hereby are subject
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by the Company:  

	 	        Section 6.2.1
(i) The representations and warranties of Parent, Buyer and Merger Sub set forth in this
Agreement that are qualified by reference to the word “material” or the phrase
“Parent Material Adverse Effect” shall have been true and correct in all
respects as of the date hereof (other than such representations and warranties that speak
as of a specific date, which shall have been true and correct as of such date), and the
representations and warranties of Parent, Buyer and Merger Sub set forth in this
Agreement that are not so qualified by reference to the word “material” or the
phrase “Parent Material Adverse Effect” shall have been true and correct in all
material respects as of the date hereof (other than such representations and warranties
that speak as of a specific date, which shall have been true and correct in all material
respects as of such date), and (ii) the representations and warranties of Parent, Buyer
and Merger Sub set forth in this Agreement shall be true and correct in all material
respects at and as of the Closing Date as if made on and as of the Closing Date (other
than such representations and warranties that speak as of a specific date, which shall
have been true and correct in all material respects as of such date).  

	 	        Section 6.2.2
Each of Parent, Buyer and Merger Sub shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement and each Escrow
Agreement to which it is a party to be performed or complied with by it on or prior to
the Effective Time.  

	 	        Section 6.2.3
Parent, Buyer and the Escrow Agent shall have executed and delivered a copy of the Escrow
Agreement to the Company and to the Stockholder Representative.  

59

	 	        Section 6.2.4
Wilson Sonsini Goodrich & Rosati, Professional Corporation or Naschitz, Brandes & Co.,
counsel for Parent, Buyer and Merger Sub, shall have delivered to the Company a legal
opinion or opinions, dated as of the Closing Date, substantially in the form attached
hereto as Exhibit C.  

	 	        Section 6.3
Additional Conditions to the Obligations of Parent, Buyer and Merger Sub to Effect the
Merger. The respective obligations of Parent, Buyer and Merger Sub to consummate the
transactions provided for hereby are subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which may be waived by Parent,
Buyer and Merger Sub:  

	 	        Section 6.3.1
(i) The representations and warranties of the Company set forth in this Agreement that
are qualified by reference to the word “material” or the phrase “Company
Material Adverse Effect” shall have been true and correct in all respects as of the
date hereof (other than such representations and warranties that speak as of a specific
date, which shall have been true and correct as of such date), and the representations
and warranties of the Company set forth in this Agreement that are not so qualified by
reference to the word “material” or the phrase “Company Material Adverse
Effect” shall have been true and correct in all material respects as of the date
hereof (other than such representations and warranties that speak as of a specific date,
which shall have been true and correct in all material respects as of such date), and
(ii) the representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects at and as of the Closing Date as if made on
and as of the Closing Date (other than such representations and warranties that speak as
of a specific date, which shall have been true and correct in all material respects as of
such date); provided, however, that solely for purposes of this clause (ii) of
this Section 6.3.1, the representations and warranties of the Company set forth in this
Agreement shall be deemed to be true and correct “in all material respects” at
and as of the Closing Date (or, if applicable, on another specific date) if any and all
inaccuracies in such representations and warranties as of the Closing Date (or, if
applicable, such specific date) would not be reasonably expected to result in Losses for
which the Buyer Indemnified Parties are entitled to indemnification pursuant to Article 8
that exceed six million dollars ($6,000,000) in the aggregate.  

	 	        Section 6.3.2
The Company shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement and each Escrow Agreement to which it is a party
to be performed or complied with by it on or prior to the Effective Time.  

	 	        Section 6.3.3
Each of the written employment agreements between the Company and each of Wayne Jackson,
Tom McDonough and Martin Roesch that are in effect on the date hereof and have been
delivered to Parent and Buyer prior to the date hereof shall remain in full force and
effect.  

	 	        Section 6.3.4
The Company shall have received all consents and approvals of, and made all notices to,
the third parties set forth on Exhibit D hereto.  

	 	        Section 6.3.5
The Company shall have delivered a certificate, dated as of the Closing Date and executed
by the Chief Executive Officer and Chief Financial Officer, as to the fulfillment of each
of the conditions set forth in  Section 6.3.1,  Section 6.3.2,  Section 6.3.8
and  Section 6.3.10 of this Agreement.  

60

	 	        Section 6.3.6
The Stockholder Representative shall have executed and delivered a copy of the Escrow
Agreement to Parent, Buyer and the Escrow Agent.  

	 	        Section 6.3.7
Morrison &Foerster LLP, counsel for the Company, shall have delivered a legal opinion
to Parent and Buyer, dated as of the Closing Date, substantially in the form attached
hereto as Exhibit E.  

	 	        Section 6.3.8
Since the date of this Agreement, no Company Material Adverse Effect shall have occurred
or arisen and no events or developments shall have occurred or arisen that would,
individually or in the aggregate, reasonably be expected to have a Company Material
Adverse Effect.  

	 	        Section 6.3.9
The Company shall have delivered certified organizational documents and certificates of
good standing for the Company issued by (x) the Secretary of State of the State of
Delaware and (y) the Secretary of State of each state in which the Company is
qualified to do business as a foreign corporation, in each case dated not more than five
(5) Business Days prior to the Closing Date.  

	 	        Section 6.3.10
There shall have been no (i) actual litigation, proceeding or claim against Parent,
Buyer, Merger Sub or the Company seeking to prohibit or calling into question the Merger
or any other transaction contemplated by this Agreement, or (ii) any actual or
threatened litigation, proceeding or claim brought by third parties in respect of the
Company Owned Intellectual Property that would be reasonably likely to have a Company
Material Adverse Effect.  

	 	        Section 6.3.11
No more than three percent (3%) of the shares of Common Stock (calculated on both an
as-converted and a fully-diluted basis) as of the Closing Date shall be Company
Dissenting Shares.  

	 	        Section 6.3.12
The Company shall have obtained binding payoff letters from Silicon Valley Bank, in a
form reasonably acceptable to Parent and Buyer, in respect of the loans set forth in Section 6.3.12 of
the Company Disclosure Schedule.  

	 	        Section 6.3.13
On or prior to the Closing Date, the Company shall have delivered to Buyer a form of
notice to the Internal Revenue Service in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2) and in form and substance reasonably acceptable to
Buyer along with written authorization for Buyer to deliver such notice form to the
Internal Revenue Service on behalf of the Company upon the Closing of the Merger.  

	 	        Section 6.3.14
The person set forth on Exhibit F shall have executed and delivered an irrevocable
assignment and release in favor of the Company, Parent and Buyer in respect of the
matters set forth on Exhibit F, and such individual shall not have taken any
action to revoke, rescind or otherwise repudiate his assignment and release.  

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ARTICLE 7.  

Termination  

	 	        Section
7.1       Termination.  This Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time: 

	 	        Section
7.1.1     by mutual written consent of Parent, Buyer, Merger Sub and the Company; 

	 	        Section 7.1.2
by Parent, Buyer and Merger Sub, on the one hand, or the Company, on the other hand, if
(i) any court of competent jurisdiction or other Governmental Authority shall have
issued a final order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other
action is or shall have become non-appealable, or (ii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the Merger by
any Governmental Authority that would make consummation of the Merger illegal or
otherwise prohibited;  

	 	        Section 7.1.3
by Parent, Buyer and Merger Sub, on the one hand, or the Company, on the other hand, if the
Merger has not been consummated by December 31, 2005 (the “Outside Date”);
provided, however, that, if the Merger is not consummated on or before December
31, 2005 solely by reason of the failure of the condition set forth in  Section 6.1.1
to be satisfied on or before such date, the Outside Date shall be February 15, 2006; provided
further, however, that no party hereto may terminate this Agreement pursuant to this
Section 7.1.3 if such party’s material breach of any of its obligations under this
Agreement shall have been the principal reason that the Merger shall not have been
consummated on or before the applicable Outside Date;  

	 	        Section 7.1.4
by Parent, Buyer and Merger Sub if (w) none of them is in material breach of its
obligations under this Agreement at the time of such termination, (x) there shall have
been (i) a material breach of any representation or warranty of the Company set
forth in this Agreement, or (ii) a material breach by the Company of any of its
covenants or agreements set forth in this Agreement, (y) in the case of (x)(i) above, in
a manner that would cause the condition set forth in  Section 6.3.1 not to be
satisfied at the time of such breach, or in the case of (x)(ii) above, in a manner that
would cause the condition set forth in  Section 6.3.2 not to be satisfied at the
time of such breach, and (z) if such applicable breach described in (i) or (ii) of clause
(x) above is of a nature that can be cured, the Company has not cured such breach or
event within ten (10) Business Days after written notice by Parent, Buyer or Merger Sub
thereof.  

	 	        Section
7.1.5     by Parent, Buyer and Merger Sub if there has occurred a Company Material
Adverse Effect; 

	 	        Section 7.1.6
by Parent, Buyer and Merger Sub if the Stockholder Consent shall not have been obtained
promptly (and in any event within one (1) hour) following the execution and delivery of
this Agreement by the parties hereto (provided that such termination right shall
automatically expire at such time as the Stockholder Consent shall have been obtained);  

62

	 	        Section 7.1.7
by the Company if (i) it is not in material breach of its obligations under this
Agreement at the time of such termination and (x) if there shall have been (A) a
material breach of any representation or warranty of any of Parent, Buyer or Merger Sub
set forth in this Agreement or (B) a material breach by any of Parent, Buyer or
Merger Sub of any of their respective covenants or agreements set forth in this
Agreement, (y) in the case of (x)(A) above, in a manner that would cause the condition
set forth in  Section 6.2.1 not to be satisfied at the time of such breach or in the
case of (x)(B) above, in a manner that would cause the condition set forth in  Section 6.2.2
not to be satisfied at the time of such breach and (z) if such applicable breach
described in (A) or (B) of clause (x) above is of a nature that can be cured, Parent,
Buyer or Merger Sub, as applicable, has not cured such breach or event within ten (10)
Business Days after written notice by the Company thereof, or (ii) subject to the terms
of clause (ii) of Section 7.2.2, pursuant to and in accordance with Section 5.5.3 for the
purpose of pursuing a Superior Proposal previously received by the Company and not
withdrawn at the time of such termination; provided, however, that notwithstanding
the foregoing or anything to the contrary in this Agreement, the parties hereto agree
that the termination rights set forth in this clause (ii) shall have no further force or
effect whatsoever upon the Company’s receipt of the Stockholder Consent and, in
furtherance thereof, the Company hereby irrevocably waives any rights to enforce or seek
to enforce or invoke the termination rights set forth in this clause (ii) immediately
upon its receipt of the Stockholder Consent; and  

	 	        Section 7.1.8
by the Company if there has occurred a Parent Material Adverse Effect.  

	 	        Section 7.2
Effect of Termination. 

	 	        Section 7.2.1
Notwithstanding anything to the contrary in this Agreement, in the event of the
termination and abandonment of this Agreement pursuant to  Section 7.1, this
Agreement shall forthwith become void and have no effect and there shall be no liability
on the part of any party hereto or its Affiliates, directors, officers or stockholders
except as set forth in the Non-Disclosure Agreement and  Section 5.10, this  Section 7.2
and  Article 9 hereof, each of which shall survive the termination of this
Agreement. Nothing contained in this  Section 7.2 shall relieve any party from
liability for any willful or intentional breach of this Agreement.  

	 	        Section 7.2.2
The Company shall pay Buyer a cash fee of $8.9 million (the “Termination Fee”),
(i) by wire transfer of immediately available funds to an account designated in writing
by Buyer within one (1) Business Day after satisfaction of all conditions to such payment
referenced in this clause (i) of this  Section 7.2.2, in the event that (A) Parent
or Buyer terminates this Agreement pursuant to  Section 7.1.4, and (B) following the
date hereof and prior to such termination, an Acquisition Proposal shall have been
publicly announced or shall have become publicly known, and (C) within twelve (12) months
following such termination of this Agreement, either a Company Acquisition (as defined
below) is consummated, or the Company enters into a letter of intent or binding contract
providing for a Company Acquisition and such Company Acquisition is later consummated, or
(ii) by wire transfer of immediately available funds to an account designated in writing
by Buyer and as a condition precedent to the validity of such termination by the Company,
in the event that the Company terminates this Agreement pursuant to Section 5.5.3 and
clause (ii) of Section 7.1.7. For purposes of this Agreement, a “Company
Acquisition” shall mean any of the following transactions or a series of related
transactions having any of the following effects (other than the transactions
contemplated by this Agreement): (A) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the Company
pursuant to which the stockholders of Company immediately preceding such transaction hold
less than fifty percent (50%) of the aggregate equity interests in the surviving or
resulting entity of such transaction; (B) a sale or other disposition by the Company of
assets representing in excess of fifty percent (50%) of the aggregate fair market value
of the Company’s business immediately prior to such sale; or (C) the acquisition by
a person or group (including by way of a tender offer or an exchange offer or issuance by
the Company), directly or indirectly, of beneficial ownership or a right to acquire
beneficial ownership of shares representing in excess of fifty percent (50%) of the
voting power of the then outstanding shares of capital stock of the Company.  

63

	 	        Section 7.2.3
The parties acknowledge that the agreements contained in this  Section 7.2 are an
integral part of the transactions contemplated by this Agreement and that, without such
agreements, the parties would not enter into this Agreement. If the Company fails to
promptly pay to Buyer the Termination Fee if and when it becomes due hereunder, the
Company shall pay the costs and expenses (including reasonable legal fees and expenses)
in connection with any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of any unpaid fee at the
publicly announced prime rate of Bank of America, N.A. plus five percent per annum,
compounded quarterly, from the date the Termination Fee was originally required to be
paid.  

	 	        Section 7.2.4
The parties agree and acknowledge that, notwithstanding anything to the contrary in this
Agreement, the Termination Fee shall be deemed liquidated damages in respect of any
breach or obligation hereunder. To the extent that the Termination Fee is paid by the
Company and accepted by Buyer, Buyer shall not be entitled to exercise any other rights
it may have under this Agreement or otherwise.  

ARTICLE 8. 

Indemnification 

	 	        Section 8.1
Survival of Representations, Warranties and Covenants. All of the representations
and warranties of the Company set forth in this Agreement or in any certificate or other
instrument executed and delivered by the Company at the Closing (including, for this
purpose, the Statement of Closing Expenses and the Statement of Closing Consideration) in
connection with this Agreement and the consummation of the transactions contemplated
hereby shall survive the Closing and any investigation conducted by Parent, Buyer, their
Affiliates and representatives until the Expiration Date. All representations and
warranties of Parent, Buyer and Merger Sub set forth in this Agreement shall survive the
Closing until the Expiration Date. All covenants or other agreements contained in this
Agreement shall survive the Closing in accordance with their respective terms.  

	 	        Section
8.2       Indemnification Obligations of Company Indemnifying Parties. 

	 	        Section 8.2.1
From and after the Effective Time, each Stockholder (the “Company Indemnifying
Parties”) shall, severally in proportion to their respective Pro Rata Shares and
not jointly, indemnify and hold Parent, Buyer, the Company and each of their
Subsidiaries, and each of their respective officers, directors, employees, members,
stockholders, agents and representatives (the “Buyer Indemnified Parties”),
harmless from and against all losses, damages, liabilities, claims, demands, obligations,
deficiencies, payments, judgments, settlements, costs and expenses of any nature
whatsoever (including, without limitation, the costs and expenses of any and all
investigations, actions, suits, proceedings, demands, assessments, judgments, orders,
settlements and compromises relating thereto, and reasonable attorneys’, accountants’,
experts’ and other fees and expenses incurred in connection therewith) (“Losses”)
paid, suffered, sustained or incurred by any Buyer Indemnified Parties, resulting from,
arising out of, or due to, directly or indirectly, any of the following: (i) (A) any
inaccuracies or misrepresentations in, or breaches of, any representation or warranty of
the Company (x) contained in this Agreement (when read together with the applicable
disclosures on the Company Disclosure Schedule) as of the date of this Agreement, or (y)
contained in the certificate delivered by the Company pursuant to Section 6.3.5, and (B)
any inaccuracies in any representation or warranty of the Company contained in this
Agreement (when read together with the applicable disclosures in the Company Disclosure
Schedule) as of the Closing Date as if such representations and warranties had been made
at and as of the Closing Date (other than representations and warranties that speak as of
a specific date, which must only be accurate as of such date, rather than the Closing
Date); provided, however, that, the parties hereto acknowledge and understand that
solely for the purposes of this clause (i)(B), (x) the Company shall not be deemed to be
actually making any representations and warranties on or as of the Closing Date, and
indemnity liability under this clause (i)(B) shall be imposed only by reason of the
comparison of the representations and warranties made in this Agreement on the date
hereof (read together with the applicable disclosure on the Company Disclosure Schedule)
with the facts, events and occurrences in existence on the Closing Date, and (y) no Buyer
Indemnified Party shall have any claim for fraud or willful misrepresentation arising out
of this clause (i)(B); (ii) any breaches or non-fulfillments of any covenant or other
agreement of the Company contained in this Agreement or the Escrow Agreement; (iii) any
payments made to a holder of Company Dissenting Shares in excess of that portion of the
Transaction Consideration to which such Stockholder was entitled under  Section 2.6
hereof (but for the fact that such Company Stock was deemed Company Dissenting Shares;
(iv) the matters set forth in (A) Section 8.2.1(iv)(A) of the Company Disclosure
Schedule, and (B) Section 8.2.1(iv)(B) of the Company Disclosure Schedule; (v) any
inaccuracies in the Statement of Closing Expenses; and(vi)any inaccuracies
in the Statement of Closing Consideration.  

64

	 	        Section 8.2.2
For the purpose of this  Article 8 only, when determining the amount of Losses
suffered as a result of (i) any inaccuracy or misrepresentation in, or any breach of, any
representation or warranty of the Company, whether as of the date hereof or as of the
Closing Date, or (ii) any breach or non-fulfillment of any covenant or other agreement of
the Company, but not for determining whether any such inaccuracy, misrepresentation,
breach or non-fulfillment has occurred, any representation, warranty, agreement or
covenant given or made by the Company that is qualified in scope as to materiality or
“Company Material Adverse Effect” shall be deemed to be made or given without
such qualification.  

	 	        Section 8.2.3
The Company Indemnifying Parties shall not have any right of contribution from Parent,
Buyer, the Company, the Surviving Corporation or their Affiliates with respect to any
Loss claimed by a Buyer Indemnified Party under Section 8.2.1; provided, however,
that nothing in this Section 8.2.3 shall limit, restrict or otherwise impair the rights
of any Indemnified Officers and Directors under the terms of Section 5.13.  

	 	        Section
8.3 Indemnification Obligations of Buyer Indemnifying Parties. 

	 	        Section 8.3.1
From and after the Effective Time, each of Parent, Buyer and Merger Sub (the “Buyer
Indemnifying Parties”) shall jointly and severally indemnify and hold each
Stockholder, and each of their respective officers, directors, employees, members,
stockholders, agents and representatives (the “Company Indemnified Parties”),
harmless from and against all Losses paid, suffered, sustained or incurred by any Company
Indemnified Party resulting from, arising out of, or due to, directly or indirectly, any
of the following: (i) any (A) inaccuracy or misrepresentation in, or breach of, any
representation or warranty of any of Parent, Buyer or Merger Sub contained in this
Agreement as of the date hereof, and (B) any inaccuracy or misrepresentation in, or
breach of, any representation or warranty of Parent, Buyer and Merger Sub contained in
this Agreement as of the Closing Date as if such representations and warranties had been
made at and as of the Closing Date; and (ii) any breach or non-fulfillment of any
covenant or other agreement of any of Parent, Buyer or Merger Sub contained in this
Agreement or the Escrow Agreement.  

65

	 	        Section 8.3.2
For the purpose of this  Article 8 only, when determining the amount of Losses
suffered as a result of (i) any inaccuracy or misrepresentation in, or any breach of, any
representation or warranty of Parent, Buyer and Merger Sub, whether as of the date hereof
or as of the Closing Date, or (ii) any breach or non-fulfillment of any covenant or other
agreement of Parent, Buyer and Merger Sub, but not for determining whether any such
inaccuracy, misrepresentation, breach or non-fulfillment has occurred, any
representation, warranty, agreement or covenant given or made by Parent, Buyer or Merger
Sub that is qualified in scope as to materiality or “Parent Material Adverse Effect” shall
be deemed to be made or given without such qualification.  

	 	        Section 8.3.3
Indemnification Claim Procedures. In the event that a Buyer Indemnified Party
wishes to make an indemnification claim under this  Article 8, such Buyer
Indemnified Party shall provide written notice of such claim (an “Indemnification
Notice”) to the Escrow Agent and the Stockholder Representative, to the extent
that such indemnification claim will be recovered solely from the Escrow Cash in the
Escrow Account, and to the Stockholder Representative and all Company Indemnifying
Parties, to the extent that such indemnification claim will be recovered directly from
any Company Indemnified Parties. In the event that a Company Indemnified Party wishes to
make an indemnification claim under this  Article 8, such Company Indemnified Party
shall provide an Indemnification Notice to Parent and Buyer. Any such Indemnification
Notice shall, to the extent practicable, set forth in reasonable detail the basis for the
indemnification claim and a good faith determination of the estimated amount of the
indemnification claim. No recovery in respect of any such indemnification claim shall be
permitted unless and until the validity of such indemnification claim is finally
resolved, either by mutual agreement of the parties or by a court of competent
jurisdiction. In the event that a Buyer Indemnified Party is entitled to recover Losses
hereunder as a result of the final resolution of the validity of an indemnification
claim, such Buyer Indemnified Party and the Stockholder Representative shall provide
written notice (a “Resolved Claim Notice”) of such recovery to the
Escrow Agent if and to the extent that such indemnification claim will be satisfied and
paid with Escrow Cash. Within five (5) calendar days after receipt of a Resolved Claim
Notice, the Escrow Agent shall deliver to the applicable Buyer Indemnified Parties an
amount of Escrow Cash equal to the amount of such recovery, and each Company Indemnifying
Party shall be deemed to have contributed its Pro Rata Share of the amounts set forth in
the Resolved Claim Notice to such payment.  

	 	        Section
8.4 Third-Party Claims. 

	 	        Section 8.4.1
In the event that any Buyer Indemnified Party wishes to make an indemnification claim
under this Article 8 in respect of, arising out of or involving a claim made by any third
party (which for this purpose shall included written notification of the commencement of
any audit by any Taxing Authority) (a “Third-Party Claim”) against such
Buyer Indemnified Party, promptly following receipt by such Buyer Indemnified Party of
written notice of the Third-Party Claim, such Buyer Indemnified Party shall provide
written notice thereof to the Stockholder Representative to the extent that such Buyer
Indemnified Party intends to seek indemnification from the Escrow Account in respect of
such Third Party Claim; provided, however, that failure to give such
notification shall not limit or otherwise affect the indemnification rights provided
hereunder except to the extent the Company Indemnifying Parties shall have been actually
and materially prejudiced as a result of such failure. In the event that any Company
Indemnified Party wishes to make an indemnification claim under this Article 8 in respect
of, arising out of or involving a Third Party Claim against such Company Indemnified
Party, promptly following receipt by such Company Indemnified Party of written notice of
the Third-Party Claim, such Company Indemnified Party shall provide written notice
thereof to Parent and Buyer; provided, however, that failure to give such
notification shall not limit or otherwise affect the indemnification rights provided
hereunder except to the extent the Buyer Indemnifying Parties shall have been actually
and materially prejudiced as a result of such failure.  

66

	 	        Section 8.4.2
The Company Indemnifying Parties shall not be entitled to assume and control the defense
of any Third-Party Claim against any Buyer Indemnified Party, and the Buyer Indemnifying
Parties shall not be entitled to assume and control the defense of any Third Party Claims
against the Company indemnified Parties. The parties each agree to consult with and to
keep the other parties hereto informed on a regular basis regarding the status of any Tax
audit or proceeding to the extent that such audit or proceeding could affect a liability
of such other parties or the Stockholders (including indemnity obligations hereunder). No
settlement of any Third Party Claim against a Buyer Indemnified Party effected without
the prior consent of the Stockholder Representative shall be determinative of whether the
Buyer Indemnified Parties are entitled to indemnification hereunder with respect thereto
or the amount of Losses paid, suffered, sustained or incurred by the Buyer Indemnified
Parties in respect thereof. No settlement of any Third Party Claim against a Company
Indemnified Party effected without the prior consent of Parent and Buyer shall be
determinative of whether the Company Indemnified Parties are entitled to indemnification
hereunder with respect thereto or the amount of Losses paid, suffered, sustained or
incurred by the Company Indemnified Parties in respect thereof.  

	 	        Section 8.5
Limitations on Indemnification Obligations. 

	 	        Section 8.5.1
Except in the case of fraud or willful misrepresentation in connection with this
Agreement and the transactions contemplated hereby, from and after the Effective Time,
the Company Indemnifying Parties shall not be obligated to indemnify any Buyer
Indemnified Party pursuant to clause (i)(A) of  Section 8.2.1 unless and until the
aggregate amount of all Losses paid, suffered, incurred or sustained by the Buyer
Indemnified Parties under this Agreement exceeds $750,000 (the “Threshold Amount”),
whereupon the Buyer Indemnified Parties shall be entitled to recover pursuant to such
clause (i)(A) the amount of all such Losses in excess of $375,000; provided, however,
that the Threshold Amount limitation set forth in this  Section 8.5.1 shall not
apply to Losses arising out of breaches of the representations and warranties of the
Company set forth in  Section 3.1,  Section 3.2,  Section 3.4,  Section 3.7,
 Section 3.10 and  Section 3.16, and any Losses arising out of any breaches of
such representations and warranties shall not be taken into account for purposes of
determining whether the Buyer Indemnified Parties have incurred Losses in excess of the
Threshold Amount.  

	 	        Section 8.5.2
From and after the Effective Time, the Company Indemnifying Parties shall not be
obligated to indemnify any Buyer Indemnified Party pursuant to clause (i)(B) or clause
(iv)(B) of  Section 8.2.1 unless and until the aggregate amount of all Losses paid,
suffered, incurred or sustained by the Buyer Indemnified Parties under such clauses of
this Agreement exceeds $2,000,000 (the “Deductible Amount”), whereupon
the Buyer Indemnified Parties shall be entitled to recover pursuant to such clauses
(i)(B) and (iv)(B) only the amount in excess of the Deductible Amount.  

67

	 	        Section 8.5.3
Except in the case of fraud or willful misrepresentation in connection with this
Agreement and the transactions contemplated hereby, or in the case of any claim arising
out of a breach of the representations and warranties set forth in  Section 3.2,
from and after the Effective Time, the Company Indemnifying Parties shall not be
obligated to indemnify the Buyer Indemnified Parties pursuant to clauses (i) – (v)
of  Section 8.2.1 (but specifically excluding clause (vi) of  Section 8.2.1)
for any amounts in excess of the amounts held in the Escrow Account at the time any such
indemnification obligation is paid to the Buyer Indemnified Parties, and the funds held
in the Escrow Account shall be the Buyer Indemnified Parties sole recourse and remedy for
any indemnification claims arising hereunder.  

	 	        Section 8.5.4
Except in the case of fraud or willful misrepresentation in connection with this
Agreement and the transactions contemplated hereby, from and after the Effective Time,
the Company Indemnifying Parties shall not be obligated to indemnify the Buyer
Indemnified Parties pursuant to clause (i) – (v) of  Section 8.2.1 (but
specifically excluding clause (vi) of  Section 8.2.1) for any indemnification claim
that is made after the Expiration Date; provided, however, that such obligations
shall not terminate with respect to any item as to which a Buyer Indemnified Party shall
have, before the Expiration Date, previously made a bona fide claim by delivering
a notice of such indemnification claim pursuant to this Article 8.  

	 	        Section 8.5.5
Except in the case of fraud or willful misrepresentation in connection with this
Agreement and the transactions contemplated hereby, from and after the Effective Time,
the indemnification provisions set forth in this Article 8 shall be the sole and
exclusive recourse and remedy of the Buyer Indemnified Parties and the Company
Indemnified Parties for any breach or violation of this Agreement and any claims or
Losses arising out of the transactions contemplated hereby, and Parent, Buyer, Merger Sub
and the Surviving Corporation (on behalf of all Buyer Indemnified Parties), on the one
hand, and the Company (on behalf of all Company Indemnified Parties), on the other hand,
hereby irrevocably waive any and all other remedies they may have against the Company
Indemnifying Parties or the Buyer Indemnifying Parties, as the case may be, from and
after the Effective Time, in respect of any and all such Losses arising under this
Agreement and the transactions contemplated hereby and thereby.  

	 	        Section
8.5.6 No Limitations. 

	 	        Section 8.5.6.1
Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement
shall limit the liability of any party hereto for any Losses arising out of fraud or
willful misrepresentation in connection with this Agreement and the transactions
contemplated hereby.  

	 	        Section 8.5.6.2
Notwithstanding anything to the contrary in this Agreement, subject to the terms of
Section 7.2, nothing in this Agreement shall limit the rights and remedies of the parties
hereto prior to the Effective Time of the Merger.  

	 	        Section 8.5.6.3
Notwithstanding anything to the contrary in this Agreement, from and after the Effective
Time, nothing in this Agreement shall limit the liability of any Company Indemnifying
Party for any Losses arising out of (i) a breach of the representations and warranties of
the Company set forth in Section 3.2, and (ii) the matters described in clause (vi) of
Section 8.2.1; provided, however, that notwithstanding the foregoing, the Company
Indemnifying Party shall not be obligated to indemnify the Buyer Indemnified Parties for
any amounts in excess of the amounts held in the Escrow Account at the time of any
indemnification claim is paid unless and until the Escrow Cash has been fully exhausted
or reserved for payment in respect of any previously submitted indemnification claims.  

68

	 	        Section 8.5.6.4
Notwithstanding anything to the contrary in this Agreement, subject to the terms of
Section 7.2, nothing in this Agreement shall limit the rights of any party hereto to
apply for equitable remedies to enforce the other party or parties’ obligations
hereunder (it being understood and hereby agreed that, from and after the Effective Time,
any suit for equitable remedies shall be limited to a suit to specifically enforce the
terms and provisions of this Article 8 and Article 9).  

	 	        Section 8.5.6.5
Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement
shall limit the rights of the Buyer Indemnified Parties or the Company Indemnified
Parties, as the case may be, to bring and recover a claim for indemnification under this
Article 8 notwithstanding the fact that any such party had knowledge of the breach, facts
or circumstances giving rise to the Losses forming the basis for such indemnification
claim prior to the Effective Time or otherwise waived any conditions to the consummation
of the Merger related thereto.  

	 	        Section 8.5.7
Stockholder Representative. 

	 	        Section 8.5.7.1 Tim
Guleri shall be appointed and constituted the “Stockholder Representative” under
a Stockholder Representative Agreement by and among Parent, Buyer, the Company and the
Stockholder Representative, in customary form and substance reasonably acceptable to, and
mutually agreed upon prior to the Closing by, Parent, Buyer and the Company (the “Stockholder
Representative Agreement”), and as such shall serve as agent for, and have all
powers as attorney-in-fact of, each Company Indemnifying Party, to (i) negotiate, settle
and compromise indemnification claims by any Buyer Indemnified Parties pursuant to this
 Article 8 solely to the extent that such indemnification claims would be satisfied
and payable out of the Escrow Cash, (ii) authorize the release of Escrow Cash in
connection therewith, (iii) give and receive notices of communications in respect
thereof, (iv) comply with orders of courts with respect thereto, and (v) take all actions
necessary or appropriate in the judgment of the Stockholder Representative in connection
with the foregoing. By virtue of the adoption of this Agreement and the approval of the
Merger by the Stockholders, each Stockholder (regardless of whether such Stockholder
votes in favor of the adoption of this Agreement and the approval of the Merger, whether
at a meeting or by written consent in lieu thereof) shall be deemed to have appointed the
Stockholder Representative, effective from and after the Effective Time, to serve in the
foregoing capacity.  

	 	        Section 8.5.7.2 If
the Stockholder Representative elects to resign as Stockholder Representative for any
reason, the Stockholder Representative shall notify Parent and Buyer of its intent to
resign, which shall be effective 20 Business Days after such notice. The Company
Indemnifying Parties shall, with the written consent of the Holders of a
majority-in-interest of the Escrow Cash then remaining in the Escrow Account, appoint a
successor Stockholder Representative and notify the Parent and Buyer within five (5)
Business Days after such appointment.  

	 	        Section 8.5.7.3 Notice
or communications to or from the Stockholder Representative pursuant to this  Section 8.5.7
shall constitute notice to or from each of the Company Indemnifying Parties with an
interest in the Escrow Cash at the time of such notice.  

	 	        Section 8.5.7.4 A
decision, act, consent or instruction of the Stockholder Representative pursuant to this
 Section 8.5.7 shall constitute a decision, act, consent or instruction of each and
all of the Indemnifying Parties with an interest in the Escrow Cash at such time, and
shall be final, binding and conclusive upon each and all of such Company Indemnifying
Parties, and Parent and Buyer shall be entitled to rely upon any decision, act, consent
or instruction of the Stockholder Representative as being the decision, act, consent or
instruction of each and all such Company Indemnifying Parties, and Parent and Buyer shall
be relieved from any liability to any such Company Indemnifying Parties (or any other
Person) for any acts done by it in accordance with such decision, act, consent or
instruction.  

69

	 	        Section 8.5.7.5 The
Stockholder Representative shall promptly notify each Company Indemnifying Party in the
event of any decision, act, consent or instruction of the Stockholder Representative
pursuant to this  Section 8.5.7. The Stockholder Representative shall have no
liability to any party hereto, any Buyer Indemnified Party or any Company Indemnifying
Party in connection with actions taken hereunder. Each Company Indemnifying Party,
jointly and severally, with right of contribution among them, shall indemnify and hold
harmless the Stockholder Representative with respect to any claim, loss, damage and
liability against such Stockholder Representative (including, without limitation,
reasonable attorneys’ fees and costs) arising from any decision, act, consent or
instruction of such Stockholder Representative pursuant to this  Section 8.5.7,
unless and to the extent that such claim arises from such Stockholder Representative’s
gross negligence or willful misconduct.  

	 	        Section 8.5.7.6 The
Stockholder Representative shall be entitled to receive reimbursement from the Company
Indemnifying Parties for any and all reasonable expenses, charges, liabilities and debts
(including, without limitation, reasonable attorneys’ fees and costs), incurred by
the Stockholder Representative from and after the Closing in the performance or discharge
of its rights and obligations under this Agreement. The Stockholder Representative shall
be entitled to collect up to an aggregate of $200,000 of such reimbursement amount
(including any expenses incurred in connection with the defense of any indemnity claims
made by the Buyer Indemnified Parties pursuant to this Article 8), as and when such
expenses, charges, liabilities and debts are actually incurred and paid, from the Escrow
Cash pursuant to the terms of the Escrow Agreement.  

ARTICLE 9. 

Miscellaneous 

	 	        Section 9.1
Entire Agreement. This Agreement (including the Company Disclosure Schedule, any
other exhibits, schedules, certificates, lists and documents referred to herein, and any
documents executed by the parties simultaneously herewith or pursuant thereto), the
Escrow Agreement and the Non-Disclosure Agreement (as amended hereby) constitute the
entire agreement of the parties hereto, except as provided herein, and supersedes all
prior agreements and understandings, written and oral, among the parties with respect to
the subject matter hereof. Each party hereto, in entering into this Agreement, is relying
only on the representations, warranties, covenants and agreements contained herein and in
the Escrow Agreement and is not relying upon any other representations, warranties,
covenants or agreements (written or oral) made by any other party or any other party’s
Affiliates, officers, directors, stockholders, agents, attorneys or representatives.  

	 	        Section 9.2
Interpretation. When a reference is made in this Agreement to Sections, Exhibits
or Schedules, such reference shall be to a Section of or an Exhibit or a Schedule to this
Agreement unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words “include,”“includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation.” The phrases “the date of this Agreement,” “the
date hereof” and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to the date set forth in the first paragraph of this Agreement.
This Agreement and the Escrow Agreement were the products of extensive drafting, review,
negotiation and acceptance by and among the parties. Each of the parties was represented
by counsel or had the opportunity to seek counsel in the course of negotiations.
Accordingly, the parties agree that there shall be no presumption against any party with
regard to any ambiguity or uncertainty in the Agreement or the Escrow Agreement, and no
party shall be deemed to be the draftsman of such agreements.  

70

	 	        Section 9.3
Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broadly as is enforceable.  

	 	        Section 9.4
Notices. Unless otherwise provided herein, all notices and other communications
hereunder shall be in writing and shall be deemed given if (a) delivered in person,
(b) transmitted by telecopy (with written confirmation of transmission), (c) mailed
by certified or registered mail (return receipt requested) (in which case such notice
shall be deemed given on the third (3rd) day after such mailing) or (d) delivered
by an express courier (with written confirmation of receipt) to the parties at the
following addresses (or at such other address for a party as shall be specified by like
notice):  

	 	
If
to Parent, Buyer or Merger Sub at any time, or to the Company after the Closing Date, to: 

	 	
Check
Point Software Technologies, Inc.       
                     800 Bridge Parkway
                  
         Redwood City, CA  94065                            
Facsimile:
(650) 649-1975           
                 Attention: General Counsel 

	 	
With
copies (which shall not constitute notice) to: 

	 	
Wilson
Sonsini Goodrich & Rosati, Professional Corporation      
                      650 Page
Mill Road                         
   Palo Alto, California  94304
                
           Facsimile:   (650) 493-6811
            
               Attention:   Jeffrey D. Saper, Esq.
               
                 Steven Liu, Esq. 

	 	
Wilson
Sonsini Goodrich & Rosati, Professional Corporation    
                        One
Market, Spear Tower, Suite 3300         
                   San Francisco, California
 94105        
                    Facsimile:   (415) 947-2099
            
               Attention:   Michael S. Ringler, Esq. 

	 	
and 

71

	 	
Naschitz,
Brandes & Co.                
            5 Tuval Street         
                   Tel
Aviv 67897 Israel              
              Facsimile:   +972-3-623-5005
              
             Attention:   Aaron M. Lampert, Esq. 

	 	
If
to the Company before the Closing Date, to: 

	 	
Sourcefire,
Inc.                   
         9770 Patuxent Woods Drive
                
           Columbia, Maryland  21046
                 
          Facsimile:   (703) 991-2435
                  
         Attention:   Chief Executive Officer 

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

	 	
Morrison
& Foerster LLP                 
           1650 Tysons Boulevard, Suite 300
                   
        McLean, Virginia 22102     
                       Facsimile:
  (703) 760-7777            
                Attention:   Thomas J. Knox, Esq.
                     
                  Lawrence T. Yanowitch, Esq. 

	 	
If
to the Stockholder Representative, to the address and facsimile number set forth in the
                  Stockholder Representative Agreement entered into in connection with
the transactions                   contemplated hereby. 

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

	 	
Morrison
& Foerster LLP        
                    1650 Tysons Boulevard, Suite 300
                
           McLean, Virginia 22102           
                 Facsimile:
  (703) 760-7777       
                     Attention:   Thomas J. Knox, Esq.
                        
                 Lawrence T. Yanowitch, Esq. 

	 	        Section 9.5
Binding Effect; Persons Benefiting; No Assignment. This Agreement shall inure to
the benefit of and shall be binding upon the parties hereto and their respective
successors and permitted assigns. No provision of this Agreement is intended or shall be
construed to confer upon any entity or Person other than the parties hereto and their
respective successors and permitted assigns any right, remedy or claim under or by reason
of this Agreement or any part hereof, except that (i) the provisions of  Section 8.2
through  Section 8.4 shall be for the benefit of, and shall be enforceable by, the
Company Indemnified Parties and the Buyer Indemnified Parties, (ii) the provisions of
 Section 5.13 shall be for the benefit of, and shall be enforceable by, the
Indemnified Officers and Directors, and (iii) the provisions of  Article 8
shall be enforceable by the Stockholder Representative in accordance with the terms of
the Stockholder Representative Agreement. This Agreement may not be assigned by any of
the parties hereto; provided, however, that Buyer may assign all or part of its
rights under this Agreement and delegate all or part of its obligations under this
Agreement to (i) a wholly owned Subsidiary of Buyer, in which event all of the
rights and powers of Buyer and remedies available to Buyer under this Agreement shall
extend to and be enforceable by such Subsidiary or (ii) any Person who acquires
Buyer, whether by way of merger or the purchase of all of Buyer’s outstanding
capital stock or substantially all of Buyer’s assets, provided further in the case
of the foregoing clauses (i) and (ii), the Buyer shall remain fully and primarily
obligated hereunder. In the event of any such assignment and delegation, the term “Buyer” as
used in this Agreement shall be deemed to refer to such Subsidiary or successor of Buyer,
as the case may be, where reference is made with respect to actions to be taken with
respect to the transactions contemplated by this Agreement and the Escrow Agreement, and
shall be deemed to include both Buyer and such Subsidiary or successor of Buyer, as the
case may be, where appropriate.  

72

	 	        Section 9.6
Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall constitute one
and the same agreement, it being understood that all of the parties need not sign the
same counterpart.  

	 	        Section 9.7
WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  

	 	        Section 9.8
Governing Law. This Agreement, the legal relations between the parties and the
adjudication and the enforcement thereof, shall be governed by and interpreted and
construed in accordance with the substantive laws of the State of California without
regard to applicable choice of law provisions thereof.  

	 	        Section 9.9
Consent to Jurisdiction. Each of the parties hereto hereby irrevocably and
unconditionally submits to the jurisdiction of any state court of the State of California
and any federal court sitting in San Francisco, California or San Jose, California and
irrevocably agrees that all actions or proceedings arising out of or relating to this
agreement or the transactions contemplated hereby or in aid or arbitration or for
enforcement of an arbitral award shall be litigated exclusively in such courts. Each of
the parties hereto agrees not to commence any legal proceedings related hereto except in
such courts. Each of the parties hereto irrevocable waives any objection which he or it
may now or hereafter have to the laying of the venue of any such proceeding in any such
court and hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.  

	 	        Section 9.10
Attorneys’Fees. If any proceeding relating to this Agreement or the Escrow
Agreement or the enforcement of any provision hereof or thereof is brought against any
party to this Agreement, the prevailing party in such suit or proceeding shall be
entitled to recover its reasonable attorneys’ fees, costs and disbursements incurred
in the course of such proceeding, in addition to any other relief to which the prevailing
party may be entitled.  

	 	        Section 9.11
Joint and Several Liability. The covenants, agreements and obligations of Parent
and Buyer (and the liability of Parent and Buyer for any breach thereof) arising under
this Agreement shall be joint and several.  

[Signature Page
Follows] 

73

        IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first above written. 

			CHECK POINT SOFTWARE
 TECHNOLOGIES, LTD.

By: 
——————————————

Name:
Title:

			CHECK POINT SOFTWARE
 TECHNOLOGIES, INC.

By: 
——————————————

Name:
Title:

			SEYFERT ACQUISITION CORPORATION

By: 
——————————————

Name:
Title:

			SOURCEFIRE, INC.

By: 
——————————————

Name:
Title:

[Signature Page of
Agreement and Plan of Merger]  

EXHIBIT A 

Form of Retention Plan 

EXHIBIT B 

Form of Escrow Agreement 

EXHIBIT C 

         Form
of Opinions of Wilson Sonsini Goodrich & Rosati, Professional Corporation

[Subject to appropriate
qualifications, including, without limitation, the exclusion of any opinion with respect
to the HSR Act, the Exon-Florio Act, any United States federal or state securities laws or
any non-United States laws.] 

         1.       
          Each of Buyer and Merger Sub is a corporation organized and existing under the
          General Corporation Law of the State of Delaware, with corporate power and
          authority to enter into the Merger Agreement and the Escrow Agreement and
          perform its respective obligations thereunder. 

         2.       
          Each of Buyer and Merger Sub is validly existing and in good standing under the
          laws of the State of Delaware. 

         3.       
          The execution, delivery and performance of the Merger Agreement and the Escrow
          Agreement have been duly authorized by all necessary corporate action of Buyer
          and Merger Sub, and the Merger Agreement and the Escrow Agreement have been duly
          executed and delivered by Buyer and Merger Sub. 

         4.       
          Each of the Merger Agreement and the Escrow Agreement constitute legally valid
          and binding obligations of each of Buyer and Merger Sub, enforceable against
          each of Buyer and Merger Sub in accordance with its respective terms. 

         5.       
          The execution and delivery of the Merger Agreement by Buyer and Merger Sub did
          not, and the consummation of the Merger by Buyer and Merger Sub on the date
          hereof does not: (i) violate the provisions of the certificate of
          incorporation or bylaws of Buyer or Merger Sub; (ii) violate any federal or
          California statute, rule or regulation applicable to Buyer or Merger Sub or
          (iii) require any consents, approvals or authorizations to be obtained by
          Buyer or Merger Sub, or any registrations, declarations or filings to be made by
          Buyer or Merger Sub, under any federal or California statute, rule or regulation
          applicable to Buyer or Merger Sub that have not been obtained or made. 

Form of Opinions of
Naschitz, Brandes & Co. 

[Subject to appropriate
qualifications, including, without limitation, the exclusion of any opinion with respect
to the laws of any jurisdiction other than Israel.] 

         1.       
          Parent is a company under the laws of Israel, with corporate power and authority
          to enter into the Merger Agreement and the Escrow Agreement and perform its
          obligations thereunder. 

         2.       
          Based solely on certificates from public officials, we confirm that Parent is
          validly existing under the laws of Israel. 

         3.       
          The execution, delivery and performance of the Merger Agreement and the Escrow
          Agreement have been duly authorized by all necessary corporate action of Parent,
          and the Merger Agreement and the Escrow Agreement have been duly executed and
          delivered by Parent. 

         4.       
          The execution and delivery of the Merger Agreement by Parent did not, and the
          consummation of the Merger by Parent on the date hereof does not:
          (i) violate the provisions of the organizational documents of Parent;
          (ii) violate any Israeli statute, rule or regulation applicable to Parent,
          or (iii) require any consents, approvals or authorizations to be obtained
          by Parent, or any registrations, declarations or filings to be made by Parent,
          under any Israeli statute, rule or regulation applicable to Parent that have not
          been obtained or made. 

EXHIBIT D 

Schedule of Required
Closing Consents, Approvals and Notices 

Consent and approval to the
consummation of the Merger and the other transactions contemplated hereby from Liberty
Property Limited Partnership (or any successor in interest thereto) under that certain
lease by and between the Company and Liberty Property Limited Partnership, dated January
28, 2005 (as amended by Amendment No. 1 thereto, dated February 22, 2005) for the
Company’s headquarters located at 9770 & 9780 Patuxent Woods Drive, Columbia,
Maryland 21046. 

EXHIBIT E 

Form of Opinions of
Morrison & Foerster LLP 

[Subject to appropriate
qualifications, including, without limitation, the exclusion of any opinion with respect
to the HSR Act, the Exon-Florio Act, any United States federal or state securities laws or
any non-United States laws.] 

         1.       
          The Company is a corporation under the General Corporation Law of the State of
          Delaware, with corporate power and authority to enter into the Merger Agreement
          and perform its obligations thereunder. 

         2.       
          The Company is validly existing and in good standing under the laws of the State
          of Delaware. 

         3.       
          The authorized capital stock of the Company consists of (i) 35,000,000
          shares of Common Stock and (ii) 15,031,658 shares of Preferred Stock, of
          which (x) 2,495,410 shares have been designated as Series A Preferred
          Stock, (y) 7,132,205 shares have been designated as Series B Preferred
          Stock and (z) 5,404,043 shares have been designated Series C Preferred
          Stock. To our knowledge, based solely on the corporate records of the Company,
          as of immediately prior to the Effective Time, there are issued and outstanding
          [—] shares of Common Stock, [—] shares of Series A Preferred
          Stock, 7,132,205 shares of Series B Preferred Stock and 5,404,043 shares of
          Series C Preferred Stock. To our knowledge, based solely on the corporate
          records of the Company, except as set forth on the Company Disclosure Schedule,
          as of immediately prior to the Effective Time, except as set forth in Exhibit A
          hereto, there are no other outstanding shares of capital stock of the Company or
          options, warrants, convertible securities or rights of any kind to purchase or
          otherwise acquire any shares of capital stock or other securities of the
          Company. 

         4.       
          The execution, delivery and performance of the Merger Agreement have been duly
          authorized by all necessary corporate action of the Company, and the Merger
          Agreement has been duly executed and delivered by the Company. 

         5.       
          The Merger Agreement constitutes a legally valid and binding obligation of the
          Company, enforceable against the Company in accordance with its terms. 

         6.       
          The execution and delivery of the Merger Agreement by the Company did not, and
          the consummation of the Merger by the Company on the date hereof does not:
          (i) violate the provisions of the certificate of incorporation or bylaws of
          the Company; (ii) violate any federal or Delaware statute, rule or
          regulation applicable to the Company; or (iii) require any consents,
          approvals or authorizations to be obtained by the Company, or any registrations,
          declarations or filings to be made by the Company, under any federal or Delaware
          statute, rule or regulation applicable to the Company that have not been
          obtained or made. 

         7.       
          To our knowledge, the Company is not party to any pending litigation other than
          as set forth on Section 3.11 of the Company Disclosure
          Schedule or on Exhibit A hereto. 

EXHIBIT F 

Schedule of Closing
Assignments and Releases 

	Persons 	Intellectual Property Rights 
	 	 
	Martin Roesch	All intellectual property rights of Martin Roesch

in (i) the inventions listed on Exhibit 1 of the

Employee Proprietary Information, Inventions, and

Non-Competition Agreement, dated October 31, 2002

and effective July 1, 2002, between the Company and

Martin Roesch and (ii) the Domain Names listed in

Section 3.7.1(iv) of the Company Disclosure

Schedule.

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