Document:

exhibit_10.htm

    Exhibit 10.25

     

    * Portions of this exhibit marked
[*] are requested to be treated confidentially.

    

     

    AGREEMENT
AND PLAN OF MERGER

     

    BY
AND AMONG

     

    

     

    HSW
INTERNATIONAL, INC.

    (“PARENT”),

    

    

    DS
NEWCO, INC.

    (“SUB”),

    

    

    DAILY
STRENGTH, INC.

    (“COMPANY”)

     

    AND

     

    DOUGLAS
J. HIRSCH

    (“HOLDER
REPRESENTATIVE”)

    

     

    DATED
AS OF NOVEMBER 26, 2008

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    TABLE
OF CONTENTS

     

    
      	
              ARTICLE
      I DEFINITIONS

            	
              1

            
	 	 	 
	
              1.01

            	
              Certain
      Definitions

            	
              1

            
	
              1.02

            	
              Additional
      Definitions.

            	
              3

            
	
              1.03

            	
              Rules
      of Construction.

            	
              11

            
	 	 	 
	
              ARTICLE
      II TRANSACTIONS AND TERMS OF MERGER

            	
              11

            
	 	 	 
	
              2.01

            	
              Merger.

            	
              11

            
	
              2.02

            	
              Time
      and Place of Closing.

            	
              11

            
	
              2.03

            	
              Effective
      Time.

            	
              11

            
	
              2.04

            	
              Surviving
      Corporation Governing Instruments, Directors and Officers.

            	
              12

            
	
              2.05

            	
              Treatment
      of Capital Stock.

            	
              12

            
	
              2.06

            	
              Exchange
      of Certificates.

            	
              13

            
	
              2.07

            	
              Treatment
      of Company Options.

            	
              14

            
	
              2.08

            	
              Computation
      of Working Capital Adjustment.

            	
              15

            
	
              2.09

            	
              Earn-Out.

            	
              17

            
	
              2.10

            	
              Escrow.

            	
              18

            
	 	 	 
	
              ARTICLE
      III REPRESENTATIONS AND WARRANTIES OF COMPANY

            	
              19

            
	 	 	 
	
              3.01

            	
              Existence
      and Power.

            	
              19

            
	
              3.02

            	
              Authorization;
      Binding Effect.

            	
              19

            
	
              3.03

            	
              Governmental
      Authorization and Consents.

            	
              20

            
	
              3.04

            	
              Non-contravention.

            	
              20

            
	
              3.05

            	
              Capitalization.

            	
              20

            
	
              3.06

            	
              Subsidiaries/Interests.

            	
              21

            
	
              3.07

            	
              Title
      to Properties; Absence of Liens; Sufficiency of Assets.

            	
              21

            
	
              3.08

            	
              Financial
      Statements; Related Information.

            	
              22

            
	
              3.09

            	
              Absence
      of Certain Changes.

            	
              22

            
	
              3.10

            	
              Related
      Person Transactions.

            	
              24

            
	
              3.11

            	
              Material
      Contracts.

            	
              24

            
	
              3.12

            	
              No
      Undisclosed Material Liabilities.

            	
              26

            
	
              3.13

            	
              Litigation.

            	
              26

            
	
              3.14

            	
              Compliance
      with Laws and Orders.

            	
              26

            
	
              3.15

            	
              Permits.

            	
              26

            
	
              3.16

            	
              Intellectual
      Property.

            	
              27

            
	
              3.17

            	
              Taxes.

            	
              30

            
	
              3.18

            	
              Real
      Property.

            	
              31

            
	
              3.19

            	
              Environmental
      Matters.

            	
              32

            
	
              3.20

            	
              Insurance
      Coverage.

            	
              32

            
	
              3.21

            	
              Employee
      Benefit Plans.

            	
              33

            
	
              3.22

            	
              Employees.

            	
              35

            
	
              3.23

            	
              Labor
      Matters.

            	
              35

            

    

    

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

     

    
      	
              3.24

            	
              Books
      and Records.

            	
              36

            
	
              3.25

            	
              Absence
      of Unlawful Payments.

            	
              36

            
	
              3.26

            	
              Bank
      Accounts.

            	
              36

            
	
              3.27

            	
              Effect
      of the Transaction.

            	
              36

            
	
              3.28

            	
              Finders’
      Fees.

            	
              36

            
	 	 	 
	
              ARTICLE
      IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB

            	
              36

            
	 	 	 
	
              4.01

            	
              Existence
      and Power.

            	
              37

            
	
              4.02

            	
              Authorization;
      Binding Effect.

            	
              37

            
	
              4.03

            	
              Governmental
      Authorization and Consents.

            	
              37

            
	
              4.04

            	
              Non-contravention.

            	
              37

            
	
              4.05

            	
              Litigation.

            	
              37

            
	
              4.06

            	
              No
      Prior Activities.

            	
              38

            
	
              4.07

            	
              Finders’
      Fee.

            	
              38

            
	 	 	 
	
              ARTICLE
      V CERTAIN COVENANTS AND AGREEMENTS

            	
              38

            
	 	 	 
	
              5.01

            	
              Actions
      Pending Closing.

            	
              38

            
	
              5.02

            	
              Efforts;
      Consents.

            	
              38

            
	
              5.03

            	
              Access
      to Records.

            	
              39

            
	
              5.04

            	
              Notification
      of Certain Matters.

            	
              40

            
	
              5.05

            	
              Employee
      Matters

            	
              40

            
	
              5.06

            	
              Tax
      Matters.

            	
              41

            
	
              5.07

            	
              Further
      Assurances.

            	
              42

            
	 	 
	
              ARTICLE
      VI CONDITIONS TO CLOSING

            	
              42

            
	 	 	 
	
              6.01

            	
              General
      Conditions.

            	
              42

            
	
              6.02

            	
              Conditions
      to Obligations of Company.

            	
              43

            
	
              6.03

            	
              Conditions
      to Obligations of Parent and Sub.

            	
              43

            
	 	 
	
              ARTICLE
      VII INDEMNIFICATION AND SURVIVAL

            	
              44

            
	 	 	 
	
              7.01

            	
              Survival.

            	
              44

            
	
              7.02

            	
              Indemnification.

            	
              45

            
	
              7.03

            	
              Notice
      of Indemnification Claims.

            	
              46

            
	
              7.04

            	
              Limitations.

            	
              48

            
	
              7.05

            	
              Treatment
      of Indemnification Payments.

            	
              49

            
	
              7.06

            	
              Holder
      Representative.

            	
              49

            
	 	 
	
              ARTICLE
      VIII TERMINATION

            	
              50

            
	 	 	 
	
              8.01

            	
              Termination
      of Agreement.

            	
              50

            
	
              8.02

            	
              Effect
      of Termination.

            	
              51

            
	 	 	 
	
              ARTICLE
      IX MISCELLANEOUS PROVISIONS

            	
              51

            

    

     

     

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

    
      	 	 	 
	
              9.01

            	
              Amendment
      and Modifications.

            	
              51

            
	
              9.02

            	
              Waiver
      of Compliance.

            	
              51

            
	
              9.03

            	
              Expenses.

            	
              51

            
	
              9.04

            	
              Remedies.

            	
              51

            
	
              9.05

            	
              Waiver
      of Jury Trial.

            	
              52

            
	
              9.06

            	
              Notices.

            	
              52

            
	
              9.07

            	
              Governing
      Law.

            	
              53

            
	
              9.08

            	
              Assignment.

            	
              53

            
	
              9.09

            	
              Publicity.

            	
              53

            
	
              9.10

            	
              Counterparts.

            	
              53

            
	
              9.11

            	
              Headings.

            	
              53

            
	
              9.12

            	
              Entire
      Agreement.

            	
              54

            
	
              9.13

            	
              Third
      Parties.

            	
              54

            
	
              9.14

            	
              Representation
      by Counsel; Interpretation.

            	
              54

            
	
              9.15

            	
              Severability.

            	
              54

            
	
              9.16

            	
              Time
      of Essence.

            	
              54

            

    

    

     

    
      	
              Exhibits

            	 
      	 
      
	
              Exhibit
      A *

            	
              –

            	
              Form
      of Voting Agreements

            
	
              Exhibit
      B *

            	
              –

            	
              Form
      of Escrow Agreement

            
	
              Exhibit
      2.04(a)(i) *

            	
              –

            	
              Amended Certificate of
      Incorporation of the Surviving Corporation

            
	
              Exhibit
      2.04(a)(ii) *

            	
              –

            	
              Amended Bylaws of the
      Surviving Corporation

            
	
              Exhibit
      6.03(e) *

            	
              –

            	
              Form
      of Hirsch Noncompetition Agreement

            
	
              Exhibit
      6.03(f) *

            	
              –

            	
              Form
      of Employment Agreement

            
	 	 	 
	
              Schedules

            	 
      	 
      
	
              Schedule
      2.05(c) *

            	
              –

            	
              Funds
      Flow Chart

            
	
              Schedule
      2.06(b) *

            	
              –

            	
              Holders
      of Uncertificated Shares

            
	
              Schedule
      2.09

            	
              –

            	
              Earn-Out
      Payments

            
	
              Schedule
      6.03(c) *

            	
              –

            	
              Conditions
      to Obligations of Parent and Sub – Required
  Consents

            

    

     

    
      *  This
exhibit or schedule has been omitted pursuant to Item 601(b)(2) of Regulation
S-K.  The registrant will furnish supplementally a copy of the omitted
exhibit or schedule to the Securities and Exchange Commission upon
request.

       

    

    
      
        
           

        

        
          -iii-

          
            

          

        

        
           

        

      

    

    

             Agreement
and Plan of Merger

     

    This
Agreement and Plan of Merger (as amended from time to time pursuant to the terms
hereof, this “Agreement”), is made and
entered into as of November 26, 2008, by and among HSW International, Inc.
(“Parent”), a Delaware
corporation, DS NewCo, Inc. (“Sub”), a Delaware corporation,
Daily Strength, Inc. (“Company”), a Delaware
corporation, and Douglas J. Hirsch, in his capacity as Holder Representative (as
hereinafter defined).  Certain terms used in this Agreement are
defined in Article I.

     

    R E C I T A L
S

     

    A. The
respective Boards of Directors of Company, Sub and Parent are of the opinion
that the transactions described herein are in the best interests of the parties
to this Agreement and their respective stockholders.  This Agreement
provides for the acquisition of Company by Parent pursuant to the merger of Sub
with and into Company.  At the effective time of such merger, the
outstanding shares of Company Capital Stock (other than Excluded Shares) shall
be converted into the right to receive the consideration provided
herein.  As a result, Company shall continue to conduct its business
and operations as a wholly owned subsidiary of Parent. The transactions
described in this Agreement are subject to the approval of the stockholders of
Company and the satisfaction of certain other conditions described in this
Agreement.

     

    B. Concurrently
with the execution and delivery of this Agreement, as a condition and inducement
to Parent’s willingness to enter into this Agreement, Douglas J. Hirsch,
Redpoint Ventures III, L.P., and Redpoint Associates III, LLC have executed and
delivered to Parent an agreement in substantially the form of Exhibit A (the “Voting Agreements”), pursuant
to which they have agreed, among other things, subject to the terms of such
Voting Agreements, to vote the shares of Company Capital Stock over which such
Persons have voting power to approve and adopt this Agreement.

     

    NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and for such other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, hereby agree as follows:

     

    ARTICLE
I

    DEFINITIONS

     

    1.01 Certain
Definitions.

     

      Each
of the following terms shall have the meaning given such terms as set forth in
the section of this Agreement set forth below opposite such term:

     

     

    
    

     

    
      	 	
              Defined
      Term                              

            	
              Section

            
	 	
              Agreement

            	
              Preamble

            
	 	
              Certificates

            	
              2.06(a)

            
	 	
              Certificate
      of Merger

            	
              2.03

            
	 	
              Closing

            	
              2.02

            
	 	
              Closing
      Balance Sheet

            	
              2.08(b)

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 Defined
      Term    	 Section
	 	
              Closing
      Date

            	
              2.02

            
	 	
              Closing
      Payments

            	
              2.06(b)

            
	 	
              Company

            	
              Preamble

            
	 	
              Company
      Policy

            	
              3.20

            
	 	
              Company
      Governing Documents

            	
              3.01

            
	 	
              Determination
      Date

            	
              2.08(e)

            
	 	
              Dispute
      Notice

            	
              2.08(c)

            
	 	
              Dissenting
      Stockholder

            	
              2.05(e)

            
	 	
              Dissenting
      Shares

            	
              2.05(e)

            
	 	
              Earnout
      Holdback Amount

            	
              2.09

            
	 	
              Earn-Out
      Payments

            	
              2.09

            
	 	
              Effective
      Time

            	
              2.03

            
	 	
              Employee
      Plan(s)

            	
              3.21(a)

            
	 	
              ERISA

            	
              3.21(a)

            
	 	
              ERISA
      Affiliate

            	
              3.21(a)

            
	 	
              Escrow
      Agreement

            	
              2.10(a)

            
	 	
              Escrow
      Fund

            	
              2.10(a)

            
	 	
              Estimated
      Balance Sheet

            	
              2.08(a)

            
	 	
              Estimated
      Working Capital

            	
              2.08(a)

            
	 	
              Estimated
      Working Capital Adjustment

            	
              2.08(a)

            
	 	
              Excluded
      Shares

            	
              2.05(f)

            
	 	
              Final
      Adjustment Amount

            	
              2.08(e)

            
	 	
              Final
      Balance Sheet

            	
              2.08(e)

            
	 	
              Final
      Working Capital

            	
              2.08(b)

            
	 	
              Financial
      Statements

            	
              3.08(a)

            
	 	
              Holder
      Representative

            	
              7.06(a)

            
	 	
              Indemnification
      Notice

            	
              7.03(a)

            
	 	
              Indemnification
      Objection Notice

            	
              7.03(b)

            
	 	
              Indemnitee(s)

            	
              7.02(a)

            
	 	
              Leased
      Real Property

            	
              3.18(b)

            
	 	
              Majority
      Holders

            	
              7.06(a)

            
	 	
              Material
      Contract

            	
              3.11(a)

            
	 	
              Merger

            	
              2.01

            
	 	
              Parent

            	
              Preamble

            
	 	
              Parent
      Benefit Plans

            	
              5.05

            
	 	
              Permit

            	
              3.15

            
	 	
              Permitted
      Indemnification Claim

            	
              7.03(b)

            
	 	
              Permitted
      Liens

            	
              3.07(a)

            
	 	
              Real
      Property Leases

            	
              3.18(b)

            
	 	
              Related
      Person Agreements

            	
              3.10

            
	 	
              Resolution
      Period

            	
              2.08(c)

            
	 	
              Separate
      Counsel

            	
              7.03(c)

            
	 	
              Sub

            	
              Preamble

            
	 	
              Surviving
      Corporation

            	
              2.01

            
	 	
              Third
      Party Software

            	
              3.16(h)

            

    

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    
      	 	 Defined
      Term	Section
	 	 	 
	 	
              Threshold
      Amount

            	
              7.04(a)

            
	 	
              Transactions

            	
              3.02

            
	 	
              Transition
      Time

            	
              5.05

            

    

     

    
      1.02           Additional
Definitions.  The following terms, when used in this Agreement,
shall have the meanings set forth below:

       

      “Aggregate Outstanding Claim
Value” means the aggregate amount of Losses underlying any
Indemnification Notices delivered by any Indemnitees pursuant to
Article VII.

       

      “Applicable Percentage” means,
with respect to any holder of:

       

      (a)           Company
Common Stock, a ratio, expressed as a percentage, equal to (i) the number of
shares of Company Common Stock held by such holder immediately prior to the
Effective Time, divided by (ii) the
Outstanding Common Stock Number; and

       

      (b)           Company
Series A Preferred, a ratio, expressed as a percentage, equal to the sum of the
number of shares of Company Series A Preferred held by such holder immediately
prior to the Effective Time, divided by (ii) the
Outstanding Preferred Stock Number.

       

      “Affiliate” means, with respect
to any Person, any other Person directly or indirectly controlling, controlled
by or under common control with the first Person, whether by ownership of voting
securities, by contract or otherwise.

       

      “Annual Financial Statements”
means the unaudited consolidated balance sheets of Company at December 31, 2007
and 2006, and the related consolidated statements of income and cash flows of
Company for the years ended December 31, 2007 and 2006.

       

      “Base Common Closing Payment”
means the sum of $1,000,000 minus $48,000
contributed to the Escrow Amount.

       

      “Claim” means any and all
litigation, claims, demands, actions, causes of action, suits, injunctions,
judgments, decrees, settlements, investigations, proceedings (administrative,
arbitral, mediated or otherwise) and audits of any nature.

       

      “Code” means the Internal
Revenue Code of 1986, as amended or any successor federal internal revenue law
enacted in substitution thereto, and the rules and regulations promulgated
thereunder.

       

      “Company Common Stock” means
the common stock, par value $.0001 per share, of Company.

       

      “Company Capital Stock” means
the authorized capital stock of Company, including the Company Common Stock and
the Company Series A Preferred.

       

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

    

     

    “Company Confidential
Information” means any information relating to Company and its business,
employees, assets, liabilities, financial position or results of operations
furnished by Company, either before or after the date hereof, regardless of the
manner or form in which it is furnished, including all notes, analyses,
compilations, studies, forecasts, interpretations or other documents prepared by
Parent or its Representatives which contain, reflect or are based upon, in whole
or in part, such information, but does not include information which: (a) is or
becomes generally available to the public other than as a result of a disclosure
by Parent or its Representatives in violation of this Agreement; (b) was
available to Parent or its Representatives on a non-confidential basis prior to
its disclosure by Company; (c) becomes available to Parent on a non-confidential
basis from a Person (other than Company or its Representatives) who is, to
Parent’s knowledge, not prohibited from disclosing such information to Parent or
its Representatives by a legal, contractual or fiduciary obligation to Company;
or (d) is independently developed by employees of Parent or its Representatives
without reliance on or reference to such information.

     

    “Company Incentive Plan” means
Company’s 2006 Equity Incentive Plan, as amended.

     

    “Company Intellectual Property”
means Owned Intellectual Property and Licensed Intellectual Property,
cumulatively.

     

    “Company Knowledge” means the
actual knowledge, or such knowledge as would or should be obtained after
reasonable inquiry, of any of Doug Hirsch, Lars Nilsen or Paul
Asplund.

     

    “Company Options” means options
outstanding as of a particular date to purchase or otherwise acquire shares of
Company Common Stock, whether vested or unvested or exercisable or
unexercisable, granted pursuant to the Company Incentive Plan.

     

    “Company Series A Preferred”
means the Series A Preferred Stock, par value $.0001 per share, of the
Company.

     

    “Consent” means any consent,
approval, authorization or similar affirmation by any Person under any Contract,
Law or Permit.

     

    “Contract” means any contract
(including subcontracts), agreement, lease or other instrument, obligation,
understanding, undertaking or other arrangement, of any kind, written or oral
(including any amendments and other modifications thereto) to which Company is a
party.

     

    “COTS Software” means
commercial off-the-shelf Software that is readily purchasable or general purpose
third party Software that is installed and used in the operation of the business
of Company without customization or integration (e.g., word processing
Software).

     

    “Damage” means any assessment,
loss, injury, damage, Liability, debt, charge (including any judgment, decree or
settlement which gives rise to any of the foregoing), cost and expense,
including interest, penalties, court costs, reasonable fees and expenses of
counsel, consultants, experts and other professional fees, actually incurred by
a party.

     

    “Debt” means any amount owed
(including, without limitation, unpaid interest and fees thereon) in respect of
borrowed money or capitalized lease obligations; provided, however,
Debt

     

    
      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

    

     

    shall
include any accounts payable that were incurred other than in the ordinary
course of business or that are not more than 30 days past their respective due
dates and any undrawn letters of credit.

     

    “Default” means (a) any
breach or violation of, default under, contravention of, or conflict with, any
Contract, Law or Permit, (b) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of, default under, contravention of, or conflict with, any Contract,
Law or Permit, or (c) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right of any Person
to exercise any remedy or obtain any relief under, to terminate or revoke,
suspend, cancel, or materially modify or change the current terms of, or
renegotiate, or to accelerate the maturity or performance of, or to increase or
impose any Liability under, any Contract, Law or Permit.

     

    “DGCL” means the Delaware
General Corporation Law.

     

    “Disclosure Schedules” means
and refers to the disclosure schedules prepared by Company and delivered to
Parent dated the date hereof and identifying exceptions to the warranties and
representations set forth in, and other disclosure matters required by, Article
III, which has been prepared by Company.  Any disclosure made in any
Section of the Disclosure Schedules is deemed to be referred to on all other
Sections of the Disclosure Schedules to which such matter logically relates and
where such reference would be appropriate and can reasonably be inferred from
the matters disclosed on the first Section to the Disclosure Schedule as if set
forth on such other Sections of the Disclosure Schedules.

     

    “Eligible Claim” any claim for
which an Indemnification Notice is delivered by any Indemnitees pursuant to
Article VII prior to the date on which a relevant Additional Payment is
finally determined pursuant to Section (d) of Schedule 2.09.

     

    “Employment Agreement” means
that Employment Agreement to be entered into at Closing between Company and
Douglas J. Hirsch pursuant to Section 6.03(d).

     

    “Environmental Laws” means any
federal, state, local and foreign law, treaty, judicial decision, regulation,
rule, judgment, order, decree or governmental restriction or requirement or any
Contract with any Governmental Authority, whether now or hereinafter in effect,
relating to the environment or to pollutants, contaminants, wastes or chemicals
or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substances, wastes or materials, including the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. 6901, et seq., the Toxic Substances
Control Act, 15 U.S.C. 2601, et seq., the Occupational, Safety and Health Act,
29 U.S.C. 651, et seq., the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water
Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe Drinking
Water Act, 42 U.S.C. 300f, et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1802 et seq. and the Emergency
Planning and Community Right to Know Act, 42 U.S.C. 11001 et seq., and other comparable
federal, state, local and foreign laws and all rules, regulations and guidance
documents promulgated pursuant thereto or published thereunder.

     

    
      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

    

    

    “Environmental Permits” means
all permits, licenses, franchises, certificates, approvals and other similar
authorizations of Governmental Authorities relating to or required by
Environmental Laws and affecting the business of Company as currently
conducted.

     

    “Escrow Amount” shall mean
$150,000.

     

    “Escrow Deposit” has the
meaning as set forth in the Escrow Agreement.

     

    “Final Resolution” of a dispute
shall mean when (A) the parties
to the dispute have reached an agreement in writing, (B) a court of
competent jurisdiction shall have entered a final and non-appealable order with
respect to such dispute, or (C) an
arbitration or like panel shall have rendered a final non-appealable
determination with respect to a dispute that the parties have agreed to submit
thereto.

     

    “Governmental Authority” means
any federal, state, municipal, local, foreign or other judicial, administrative,
legislative or regulatory agency, department or commission, tribunal,
arbitration panel, commission or other governmental or quasi-governmental
authority, paristatal agency or dispute-resolving body of competent jurisdiction
or other similar entity (including any branch, department or official
thereof).

     

    “Hazardous Materials” means any
substance, material, liquid or gas defined or designated as hazardous or toxic
(or by any similar term) under any Environmental Law, or any other regulated
material that could result in the imposition of liability under any
Environmental Law, including petroleum products and friable materials containing
more than one percent (1.0%) asbestos by weight.

     

    “Independent Accountant” means
such national or regional accounting firm of good reputation as is mutually
agreed upon by Parent and Company and which shall not be the regular accounting
firm of Parent or Company; provided, however, in the event that Parent and
Company are unable to agree on the Independent Accountant, then Parent and
Company shall each have the right to request the American Arbitration
Association to appoint the Independent Accountant.

     

    “Intellectual Property” means
any and all of the following together with all goodwill therein or associated
therewith, and all rights therein, thereto and thereunder:  (a) United
States and foreign (i) patents and patent applications (including reissues,
divisions, continuations, continuations-in-part, extensions, requests for
continued examination, continued prosecution applications and re-examination
applications), invention disclosures, and utility models (collectively, “Patents”),
(ii) trademarks, service marks, certification marks, trade names, trade
dress, logos, business and product names, slogans, and registrations and
applications for registration thereof (collectively, “Marks”), and
(iii) copyrights and registrations and applications for registration
thereof (collectively, “Copyrights”);
(b) proprietary interests and rights, whether registered or unregistered,
in, under and to maskworks and registrations and applications for registration
thereof, inventions (whether or not patentable), improvements, methods,
processes, procedures, protocols, designs, products and other specifications,
formulae, trade secrets and rights therein, know-how, database rights, data in
and the organization and structure of databases, website content, domain names,
internet protocol address space, Software (including source and object code),
industrial models, confidential, technical and business information,
and

     

    
      
        
           

        

        
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    manufacturing,
engineering and technical drawings and manuals and documentation; (c)
proprietary interests or rights, including moral rights, in, under or to any
similar intangible asset of a technical, business, scientific or creative
nature, including slogans, logos, trade dress and the like; and (d) proprietary
interests or rights in, under or to any documents, Records or other tangible or
electronic media containing or comprising any of the foregoing or any part
thereof.

     

    “Interim Financial Statements”
means Company’s unaudited consolidated balance sheet as of the Recent Balance
Sheet Date, and the related combined consolidated statements of income and cash
flows for the interim period then ended.

     

    “IRS” means the United States
Internal Revenue Service, and any successor agency thereto.

     

    “Law” means any statute, law,
code, ordinance, regulation, rule (including any rule of common law), judgment,
injunction, settlement, award, writ, order or decree or other requirement of any
Governmental Authority.

     

    “Liability” means, with respect
to any Person, any liability or obligation of such Person of any kind, character
or description, whether known or unknown, absolute or contingent, accrued or
unaccrued, disputed or undisputed, liquidated or unliquidated, secured or
unsecured, joint or several, due or to become due, vested or unvested,
executory, determined, determinable or otherwise, and whether or not the same is
required to be accrued on the financial statements of such Person.

     

    “LIBOR” means the six-month
London Interbank Offered Rate as in effect on the Closing Date as reported in
The Wall Street
Journal.

     

    “Licensed Intellectual
Property” means any Intellectual Property that is licensed to Company by
a third party.

     

    “Lien” means, with respect to
any asset, any charge, claim, community or other marital property interest,
condition, equitable interest, lien, option, pledge, security interest,
mortgage, right of way, easement, encroachment, servitude, right of first
option, right of first refusal or similar restriction, including any restriction
on use, voting (in the case of any security or equity interest), transfer,
receipt of income or exercise of any other attribute of ownership.

     

    “Losses” means any loss,
assessment, payment, damage, liability, debt, charge (including any judgment and
decree which gives rise to any of the foregoing), cost and expense, including
interest, penalties, court costs, reasonable attorneys’ fees and
expenses.

     

    “Material Adverse Effect”
means, as to Company, any event, fact, condition, change, circumstance or effect
that is materially adverse to the business, assets, liabilities, properties,
results of operations or condition (financial or otherwise) of Company, taken as
a whole, or on the ability of Company to consummate the
Transactions.

     

    “Open Source Materials” means
Software or other material that is distributed as “free software”, “open source
software” or under similar licensing or distribution models, including the GNU
General Public License, the GNU Lesser General Public License, the Mozilla
Public License,

     

    
      
        
           

        

        
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    the
BSD licenses, the Artistic License, the Netscape Public License, the Sun
Community Source License, and the Sun Industry Standards License and the Apache
License.

     

    “Optionholder” means a Person
who holds a Company Option.

     

    “Outstanding Common Stock
Number” shall equal the sum (without duplication) of the aggregate number
of shares of Company Common Stock (other than Excluded Shares) outstanding
immediately prior to the Effective Time and after giving effect to any timely
exercises of Company Options.

     

    “Outstanding Preferred Stock
Number” shall equal the sum (without duplication) of the aggregate number
of shares of Company Series A Preferred (other than Excluded Shares) outstanding
immediately prior to the Effective Time.

     

    “Owned Intellectual Property”
means any Intellectual Property, or interest therein, that is owned by
Company.

     

    “Person” means an individual,
firm, corporation (including any non-profit corporation), partnership, limited
liability company, joint venture, association, trust, Governmental Authority or
other entity or organization.

     

    “Per Share Common Closing
Consideration” means the quotient obtained by dividing (A) the
sum of (i) the Base Common Closing Payment, plus (ii) the
Estimated Working Capital Adjustment, if any, by (B) the Outstanding Common
Stock Number.

     

    “Recent Balance Sheet” means
the consolidated balance sheet of Company as of the Recent Balance Sheet
Date.

     

    “Recent Balance Sheet Date”
means September 30, 2008.

     

    “Record” means information that
is inscribed on a tangible medium or that is stored in an electronic or other
medium and is retrievable in perceivable form.

     

    “Registered Intellectual
Property” means all patents, registered copyrights, registered
trademarks, and domain names, and all applications for any of the
foregoing.

     

    “Related Person” means (a) with
respect to an individual, each other member of such individual’s Family, any
Person that is directly or indirectly controlled by any one or more members of
such individual’s Family, any Person in which members of such individual’s
Family hold (individually or in the aggregate) a Material Interest, and any
Person with respect to which one or more members of such individual’s Family
serves as a director, officer, partner, member, executor or trustee (or in a
similar capacity), and (b) with respect to a Person other than an individual,
any Person that directly or indirectly controls, is directly or indirectly
controlled by or is directly or indirectly under common control with such
specified Person, any Person that holds a Material Interest in such specified
Person, each Person that serves as a director, officer, partner, member,
executor or trustee of such specified Person (or in a similar capacity), any
Person in which such specified Person holds a Material Interest, and any Person
with respect to which such specified Person serves as a general partner,
manager, or a trustee (or in a similar capacity).  For

     

    
      
        
           

        

        
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    this
purpose, the “Family” of
an individual includes (i) the individual, (ii) the individual’s spouse, (iii)
any other natural person who is related to the individual or the individual’s
spouse within the second degree and (iv) any other natural person who resides
with such individual, and “Material Interest” means
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of voting securities or other voting interests
representing at least ten percent (10%) of the outstanding voting power of a
Person or equity securities or other equity interests representing at least ten
percent (10%) of the outstanding equity securities or equity interests in a
Person.

     

    “Representative” means, with
respect to any Person, its officers, directors, employees, representatives and
agents.

     

    “Requisite Shareholder
Approval” means the approval of the holders of a majority of the of the
shares of Company Common Stock entitled to vote on the matter submitted for
stockholder approval, as provided for in Section 216(2) of the DGCL, voting as a
single class, and the approval of the holders of a majority of the outstanding
shares of Company Series A Preferred entitled to vote on the matter submitted
for stockholder approval, voting as a separate class.

     

    “Retained Amount” has the
meaning as set forth in the Escrow Agreement.

     

    “Software” means all computer
software, including application software, system software and firmware, and all
source code and object code versions thereof, in any and all forms and media,
and all documentation and media constituting, describing or relating to the
above.

     

    “Stockholder” means a holder of
Company Capital Stock.

     

    “Subsidiary” means, with
respect to any Person, any corporation, limited liability company, partnership
or other organization, whether incorporated or unincorporated, (i) of which
such Person or any other Subsidiary of such Person is a general
partner  or managing member or (ii) of which at least a majority
of the stock, member interests, partnership interests, or other equity interests
of which having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries.

     

    “Target” means $131,750, minus an amount equal
to $160,000, plus amounts paid by
Parent pursuant to Section 6.01(d).

     

    “Tax” or “Taxes” means (i) any federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), custom duties, capital stock,
franchise, profits, withholding, social security (or similar excises),
unemployment, disability, ad valorem, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax, impost or duty of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not, by any
Governmental Authority responsible for imposition of any such tax (domestic or
foreign), (ii) liability for the payment of any amount of the type described in
clause (i) as a result of being or having been on or before the Closing Date a
member of an affiliated, consolidated, combined or unitary group, or a party to
any

     

    
      
        
           

        

        
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    agreement
or arrangement, as a result of which liability of Company to a Governmental
Authority is determined or taken into account with reference to the liability of
any other Person, and (iii) liability for the payment of any amount as a result
of being party to any Tax Sharing Agreement or with respect to the payment of
any amount of the type described in (i) or (ii) as a result of any existing
express or implied obligation (including an indemnification
obligation).

     

    “Tax Return” means any return,
declaration, disclosure, election, schedule, estimate, report, claim for refund,
estimates or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment
thereof.

     

    “Tax Sharing Agreement” means
any agreement or arrangement (whether or not written) binding on Company that
provides for the allocation, apportionment, sharing or assignment of any Tax
liability or benefit, or the transfer or assignment of income, revenues,
receipts or gains for the principal purpose of determining any Person’s Tax
liability.

     

    “Transaction Documents” means
this Agreement and each agreement, instrument or document attached hereto as an
exhibit.

     

    “Unresolved Claim” shall mean
an indemnity claim pursuant to Section 2.08 or Article VII, including any Tax
audit or inquiry by any Governmental Authority, (A) for which Parent has
provided a good faith estimate of Losses or Taxes that underlie such indemnity
claim or Tax audit or inquiry, notice in respect of which is delivered to
Company prior to the date on which payments are otherwise required to be made to
former holders of Company Capital Stock under Section 2.09 or distributions made
from the Escrow Fund under Section 2.10 and (B) that is not the subject of a
Final Resolution as of such date.

     

    “Virus” means any technique,
Software, computer instruction, code or device or method, which is designed or
intended to damage, delete, corrupt, impair, gain unauthorized access to or take
over the operation of, or prevent or hinder access to any computer or other
hardware, network, Software, any storage medium or device, data, or database or
which does any of the same (whether by, in whole or part, installing itself,
enabling remote unauthorized access, or altering, erasing, duplicating,
rearranging within or bombarding the computer or other hardware, network,
Software, any storage medium or device, data, or database or otherwise),
including computer viruses, worms, trojan horses, salamis, trap doors, back
doors, spybots, sniffers, botnets, and all other so-called “malware” and any
other similar things of like intent, use or purpose, but excluding any
technique, Software, computer instruction, code or device or method designed for
Company for rendering computer network operations services, information
assurance and cybersecurity technology services relating to information leakage
detection and prevention, insider communications and threat detection,
internet/intranet usage monitoring and external network surveillance,
information operations, computer network attack or computer network
exploitation.

     

    “Working Capital” means the
consolidated current assets of Company set forth on the Estimated Balance Sheet
or Closing Balance Sheet, as applicable (other than assets in respect of Taxes
or Tax attributes), less the consolidated
current Liabilities and Debt of Company set forth on the Estimated Balance Sheet
or Closing Balance Sheet, as applicable, as of the close of business on the
Closing Date and on the basis of the same accounting principles and practices
used by Company in preparing the Recent Balance Sheet; provided that if Working
Capital shall include all

     

    
      
        
           

        

        
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    third-party
fees and expenses (including any bonus and success fees) incurred but not paid
by Company prior to the Closing in connection with the drafting, negotiation,
execution and delivery of the Transaction Agreements and the consummation of the
transactions contemplated herein or therein, including the fees and expenses of
the accountants, lawyers, financial advisors, consultants and other advisors of
Company and its shareholders.

    
       

      1.03           Rules of
Construction.  This
Agreement shall be construed in accordance with the following rules of
construction:

       

      (a)           the
terms defined in this Agreement include the plural as well as the
singular;

       

      (b)           all
references in the Agreement to designated “Articles,” “Sections” and other
subdivisions are to the designated articles, sections and other subdivisions of
the body of this Agreement;

       

      (c)           pronouns
of either gender or neuter shall include, as appropriate, the other pronoun
forms;

       

      (d)           the
words “herein,” “hereof” and “hereunder” and other words of similar import refer
to this Agreement as a whole and not to any particular Article, Section or other
subdivision;

       

      (e)           the
words “includes” and “including” are not limiting; and

       

      (f)           all
references to days shall be deemed to refer to calendar days unless this
Agreement specifically refers to “business days,” in which event Saturdays,
Sundays, federal and New York holidays shall be excluded.

       

      ARTICLE
II

      TRANSACTIONS AND TERMS OF
MERGER

       

      2.01           Merger. 
Subject
to the terms and conditions of this Agreement, at the Effective Time, Sub shall
be merged with and into Company in accordance with the provisions of Section 251
of the DGCL and with the effects provided in Section 259 of the DGCL (the “Merger”).  Company
shall be the surviving corporation (the “Surviving Corporation”)
resulting from the Merger, shall continue to be governed by the Laws of the
State of Delaware, shall become a wholly owned subsidiary of Parent, and the
separate corporate existence of Company with all of its rights, privileges,
immunities, powers and franchises shall continue unaffected by the
Merger.

       

      2.02           Time and Place of
Closing.  The
closing of the Merger (the “Closing”) shall take place at
such time and place as the Parties shall agree, on the date when the Effective
Time is to occur (the “Closing
Date”), which shall be no later than the third business day after
satisfaction or waiver of the conditions set forth in Article VI (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of such conditions), unless another time
or date, or both, are agreed to in writing by the Parties hereto.

       

      2.03           Effective Time. 
Subject
to the terms and conditions of this Agreement, on the

       

    

    
      
        
           

        

        
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      Closing
Date, the Parties will cause a certificate of merger to be filed with the
Secretary of State of the State of Delaware as provided in Section 251 of the
DGCL (the “Certificate of
Merger”).  The Merger shall take effect when the Certificate of
Merger becomes effective (the “Effective
Time”).  Subject to the terms and conditions hereof, unless
otherwise mutually agreed upon in writing by the authorized officers of each
Party, the Parties shall use their reasonable efforts to cause the Effective
Time to occur not later than November 28, 2008.

       

      2.04           Surviving Corporation
Governing Instruments, Directors and Officers.

       

      (a)           At
the Effective Time, (i) the Certificate of Incorporation of the Surviving
Corporation shall be amended to read in form and substance substantially the
same as Exhibit 2.04(a)(i) hereto and
(ii) the Bylaws of the Surviving Corporation shall be amended to read in
form and substance substantially the same as Exhibit 2.04(a)(ii) hereto, in each
case until thereafter changed or amended as provided therein or applicable
Law.

       

      (b)           The
directors of Sub in office immediately prior to the Effective Time, together
with such additional persons as may thereafter be elected, shall serve as the
directors of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation.

       

      (c)           The
officers of Sub in office immediately prior to the Effective Time, together with
such additional persons as may thereafter be elected, shall serve as the
officers of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation.

       

      2.05           Treatment of Capital
Stock.  Subject
to the provisions of this Article II, at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Company, Sub or the
stockholders of any of the foregoing, the shares of the constituent corporations
shall be converted as follows:

       

      (a)           Each
share of capital stock of Parent issued and outstanding immediately prior to the
Effective Time shall remain an issued and outstanding share of capital stock of
Parent and shall not be affected by the Merger.

       

      (b)           Each
share of Sub common stock issued and outstanding immediately prior to the
Effective Time shall cease to be outstanding and shall be converted into one
share of common stock of the Surviving Corporation.

       

      (c)           Each
share of Company Common Stock (other than Excluded Shares) issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for (i) the right to
receive an amount in cash, without interest, equal to the Per Share Common
Closing Consideration and (ii) the contingent right to receive payments as
provided in Sections 2.08(f), 2.09 and 2.10.  Aggregate amounts paid
to the holders of Company Common Stock shall be aggregated and rounded as set
forth on Schedule 2.05(c) (the “Funds Flow
Chart”).

       

      (d)           Each
share of Company Series A Preferred (other than Excluded Shares) issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and

       

    

    
      
        
           

        

        
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    shall
be converted into and exchanged for (i) the right to receive an amount in
cash, without interest, equal to the quotient obtained by dividing (A) the
sum of (i) $2,125,000 minus (ii) $102,000
contributed to the Escrow Fund by (B) the
Outstanding Preferred Stock Number and (ii) the contingent right to receive
payments as provided in Sections 2.08(f), 2.09 and 2.10. Aggregate amounts paid
to the holders of the Company’s Series A Preferred shall be aggregated and
rounded as set forth on the Funds Flow Chart.

    
       

      (e)           Any
holder of shares of Company Capital Stock who perfects, and has not withdrawn or
otherwise forfeited at or prior to the Effective Time, such holder’s dissenters’
rights in accordance with and as contemplated by Section 262 of the DGCL (a
“Dissenting
Stockholder”) shall be entitled to receive only the payment provided by
Section 262 of the DGCL with respect to shares of Company Capital Stock
owned by such Dissenting Stockholder (the “Dissenting Shares”); provided,
that no such payment shall be made to any Dissenting Stockholder unless and
until such Dissenting Stockholder has complied with the applicable provisions of
the DGCL and surrendered to Company the certificate or certificates representing
the Dissenting Shares for which payment is being made.  In the event
that after the Effective Time a Dissenting Stockholder fails to perfect, or
effectively withdraws or loses, his right to appraisal and of payment for his
Dissenting Shares, Parent shall issue and deliver the consideration to which
such holder of shares of Company Capital Stock is entitled under this Article II
(without interest) upon surrender by such holder of the certificate or
certificates represent­ing shares of Company Capital Stock held by
him.  Company shall give Parent (i) prompt notice of any written
demands for appraisal, attempted withdrawals of such demands, and any other
instruments served pursuant to applicable Law received by Company relating to
stockholders’ rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demand for appraisal under the
DGCL.  Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for appraisals
of Dissenting Shares, offer to settle or settle any such demands or approve any
withdrawal of any such demands.

       

      (f)           Each
share of Company Capital Stock issued and outstanding immediately prior to the
Effective Time and owned by any of the parties to this Agreement (other than the
Holder Representative) or their respective Subsidiaries (in each case other than
shares of Company Capital Stock held on behalf of third parties) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
cease to be outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist (the “Excluded
Shares”).

       

      2.06           Exchange of
Certificates.

       

          (a)           At
the Effective Time, all shares of Company Capital Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist as of the Effective Time, and each certificate or electronic book-entry
(collectively, the “Certificates”) previously
representing any such shares of Company Capital Stock (other than Excluded
Shares) shall thereafter represent for all purposes only the right to receive
the consideration provided in Section 2.05.  At the Effective Time,
the stock transfer books of Company shall be closed as to holders of Company
Capital Stock and no transfer of Company Capital Stock by any such holder shall
thereafter be made or recognized.  Any Person who otherwise would be
deemed a Dissenting Stockholder shall not be entitled to receive the applicable
Merger consideration with respect to the shares of Company Capital Stock owned
by such Person unless and until such Person shall have

       

    

    
      
        
           

        

        
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failed
to perfect or shall have effectively withdrawn or lost such holder’s right to
dissent from the Merger under the DGCL.

    
       

      (b)           Within
two (2) days after the Effective Time, Parent shall send to each former holder
of record of shares of Company Capital Stock (other than Excluded Shares)
immediately prior to the Effective Time, transmittal materials for use in
exchanging such holder’s Certificates for the consideration provided in Section
2.05 (which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of such
Certificates to Parent).  Upon the surrender of a Certificate (or
effective affidavit of loss in lieu thereof as provided in Section 2.06(d)) to
Parent in accordance with the terms of such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor cash or a check in the amount (after giving effect to any
required Tax withholdings) of the consideration payable in respect of such
shares pursuant to clause (i) of each of Sections 2.05(c) and 2.05(d)
(collectively, the “Closing
Payments”), and the Certificate so surrendered shall forthwith be
cancelled.  No interest will be paid or accrued on any amount payable
upon due surrender of the Certificates.  In the event of a transfer of
ownership of shares of Company Capital Stock that is not registered in the
transfer records of Company, a check for any cash to be paid upon due surrender
of the Certificate may be paid to such a transferee if the Certificate formerly
representing such shares of Company Capital Stock is presented to Parent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid or are not
applicable.  With respect to those holders of record of Company
Capital Stock (other than Excluded Shares) whose shares are represented in
un-certificated form, Schedule 2.06(b) sets forth a list of each such holder and
the applicable Closing Payment.

       

      (c)           Notwithstanding
the foregoing, neither the Parent nor any Party shall be liable to any former
holder of Company Capital Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar
Laws.

       

      (d)           If
any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and an agreement to indemnify against any claim that may be
made against it with respect to such Certificate, Parent, or the Surviving
Corporation shall, in exchange for the shares of Company Capital Stock
represented by such lost, stolen or destroyed Certificate, pay or cause to be
paid the amounts, if any, deliverable in respect to the shares of Company
Capital Stock formerly represented by such Certificate pursuant to this
Agreement.

       

      (e)           Each
of Company, the Surviving Corporation and Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any Stockholder such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code and any provision of
applicable Law (including under Section 1445 of the Code, if
applicable).  To the extent that amounts are so withheld by Company,
the Surviving Corporation or Parent, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
Stockholder in respect of which such deduction and withholding was made by
Company, the Surviving Corporation or Parent, as the case may be.

       

          2.07           Treatment of Company
Options.

       

    

    
      
        
           

        

        
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      (a)           The
parties agree that, after the Effective Time, Company will not assume or
continue any or all of the Company Options or substitute similar stock awards
for Company Options outstanding under the Company Incentive Plan.

       

      (b)           With
respect to Company Options held by Optionholders whose Continuous Service (as
defined in the Company Incentive Plan) has not been terminated prior to the
Effective Time, pursuant to Section 11(c) of the Company Incentive Plan, each
such Company Option shall be accelerated in full to a date prior to the
Effective Time as the Board of Directors of Company shall determine and such
Company Options shall terminate if not exercised at or prior to the Effective
Time.  With respect to Company Options held by Optionholders whose
Continuous Service has been terminated prior to the Effective Time, pursuant to
Section 11(c) of the Company Incentive Plan, each such Company Option shall not
be accelerated and such Company Options shall terminate if not exercised at or
prior to the Effective Time.  Each holder of a vested Company Option,
including such Company Options which have been accelerated pursuant to this
Section 2.07(b), shall be given the opportunity to exercise such Company
Options, effective immediately prior to the Effective Time and contingent upon
the Closing, and thereby to become a Stockholder entitled to receive the Merger
consideration in accordance with the provisions
hereof.

       

      (c)           The
Board of Directors of Company shall make such adjustments and amendments to or
make such determinations with respect to Company Options as may be necessary or
appropriate to implement the foregoing provisions of this
Section 2.07.

       

      2.08           Computation of Working
Capital Adjustment.

       

      (a)           On
or prior to the Closing Date, Company will deliver to Parent an estimated
consolidated balance sheet of Company as of the close of business on the Closing
Date (the “Estimated Balance
Sheet”), setting forth its best estimate of the Working Capital of
Company as of the Closing Date (the “Estimated Working Capital”),
as well as a detailed calculation of the Estimated Working Capital Adjustment as
of the Closing Date.  The Estimated Balance Sheet will be prepared on
the basis of the same accounting principles and practices used by Company in the
preparation of the Recent Balance Sheet.  The “Estimated Working
Capital Adjustment” means the sum of (i) the Estimated Working Capital
minus
(ii) the Target.

       

      (b)           As
soon as reasonably practicable after the Closing, but in no event later than
ninety (90) days after the Closing Date, Parent will prepare (or cause to be
prepared) and deliver to the Holder Representative (i) a consolidated
balance sheet of Company as of the close of business on the Closing Date (the
“Closing Balance Sheet”)
and (ii) calculations of the Working Capital of Company as of the Closing
Date (the “Final Working
Capital”) and the Final Adjustment Amount.  The Closing Balance
Sheet will be prepared on the basis of the same accounting principles and
practices used by Company in the preparation of its balance sheet as of July 31,
2008.

       

      (c)           The
Holder Representative then shall have thirty (30) days from receipt of all of
the Closing Balance Sheet, the calculation of the Final Working Capital and the
calculation of the Final Adjustment Amount to give Parent written notice of his
objection to any item or calculation contained in the Closing Balance Sheet,
Final Working Capital or Final Adjustment Amount specifying in reasonable detail
all disputed items and the basis therefor (a “Dispute

       

    

    
      
        
           

        

        
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      Notice”).  If the
Holder Representative concurs with the Closing Balance Sheet, Final Working
Capital and Final Adjustment Amount or otherwise does not give Parent a Dispute
Notice within such thirty (30)- day period, such Closing Balance Sheet shall be
deemed final and conclusive with respect to the determination of the Final
Adjustment Amount and shall be binding on the parties for all purposes under
this Agreement.  If, however, the Holder Representative delivers a
Dispute Notice objecting to any items or calculations contained in the Closing
Balance Sheet, Final Working Capital or Final Adjustment Amount within such
thirty (30)-day period, the Parent and the Holder Representative shall meet
within thirty (30) days following the date of the Dispute Notice (the “Resolution Period”) and shall
attempt in good faith to resolve such objections and any written resolution by
them as to any disputed amount shall be deemed final and conclusive with respect
to the determination of the Final Adjustment Amount and shall be binding on the
parties for all purposes under this Agreement.  Any amounts that were
not timely disputed pursuant to a Dispute Notice (or if so disputed,
subsequently resolved) may not be disputed.  In all events the Closing
Balance Sheet shall be final and binding, except to the extent of those amounts
timely identified in a Dispute Notice as disputed items in accordance with this
paragraph.

       

              (d)           If
Parent and the Holder Representative are unable to resolve any disputes
identified in a timely delivered Dispute Notice within the Resolution Period,
then all amounts and issues remaining in dispute and Parent’s responses thereto
will be submitted by Parent and the Holder Representative for review by the
Independent Accountant.  All parties agree to execute, if requested by
the Independent Accountant, a reasonable engagement letter with respect to the
determination to be made by the Independent Accountant. The Independent
Accountant will determine only those issues still in dispute at the end of the
Resolution Period and the Independent Accountant’s determination will be based
upon and consistent with the terms and conditions of this
Agreement.  The determination by the Independent Accountant will be
based solely on the information contained in the presentations with respect to
such disputed items by Parent and the Holder Representative to the Independent
Accountant and not on the Independent Accountant’s independent
review.  Each of Parent and the Holder Representative will use its
reasonable best efforts to provide its presentations to the Independent
Accountant related to the disputed items as promptly as practicable following
submission to the Independent Accountant of the disputed items, and each such
party will be entitled, as part of its presentation, to respond to the
presentation of the other party and any questions and requests of the
Independent Accountant.  Discovery shall be limited to documents
designated by the Independent Accountant as necessary for it to assess the
proper calculation of the Final Adjustment Amount consistent with this
Agreement.  The Independent Accountant’s determination will be made
within thirty (30) days after its engagement (which engagement will be made no
later than five (5) business days after the end of the Resolution Period), or as
soon thereafter as possible, and will be set forth in a written statement
delivered to the Holder Representative and Parent. The Closing Balance Sheet as
finalized by the Independent Accountant shall be deemed final and conclusive
with respect to the Final Adjustment Amount and shall be binding on Parent and
the Stockholders for all purposes under this Agreement.  In deciding
any matter pursuant to this Section 2.08(d), the Independent Accountant (A) will
be bound by the provisions of this Section 2.08 and (B) may not assign a value
to any item greater than the greatest value for such item claimed by either
Parent or the Holder Representative or less than the smallest value for such
item claimed by Parent or the Holder Representative.  The fees and
expenses of the Independent Accountant in resolving all such objections shall be
borne by (1) Parent in an amount equal to the proportion of the total
disputed amount that the Independent Accountant finds in favor of the Holder
Representative and (2) the Stockholders in an
amount

    

    
       

    

    
      
        
           

        

        
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    equal
to the proportion of the total disputed amount that the Independent Accountant
finds in favor of Parent.  The amount of the fees and expenses of the
Independent Accountant to be paid by the Stockholders will be advanced by Parent
and reimbursed from future Earnout Holdback Amounts.  Except as
provided in the preceding sentence, all other costs and expenses incurred by the
parties in connection with resolving any dispute hereunder before the
Independent Accountant will be borne by the party incurring such cost and
expense.

    
      
         

        (e)           The
term “Final Balance
Sheet” will mean the definitive Closing Balance Sheet agreed to by Holder
Representative and Parent in accordance with Section 2.08(c) or resulting from
the determination made by the Independent Accountant in accordance with Section
2.0(d).  The term “Final Adjustment Amount,”
which may be positive or negative, will mean the difference, if any, between the
Final Working Capital as finally determined and the Estimated Working
Capital.  The date on which the Final Adjustment Amount is finally
determined in accordance with this Section 2.08 is hereinafter referred as
to the “Determination
Date.”

         

        (f)           Upon
final determination of the Final Adjustment Amount in accordance with this
Section 2.08, the Final Adjustment Amount shall be remitted as
follows:

         

        (i)           if
the Final Adjustment Amount is a positive number, then, promptly following the
Determination Date, and in any event within five (5) Business Days of the
Determination Date, Parent shall pay to those Stockholders who were or are
entitled to receive a payment at Closing pursuant to Section 2.05 (c) or (d),
the Final Adjustment Amount, together with interest thereon from the Closing
Date to the date of payment at LIBOR, less any fees owed to any of Company’s
Representatives in connection therewith, in accordance with the
following;  32% of such amounts will paid to  holders of
Company Common Stock, pro rata in accordance with their Applicable Percentage,
and 68% of such amounts will be paid to the holders of Company Series A
Preferred pro rata in accordance with their Applicable Percentage;

         

        (ii)           if
the Final Adjustment Amount is a negative number, then, an amount equal to the
Final Adjustment Amount, together with interest thereon from the Closing Date to
the date of payment at LIBOR, will be deducted, first, from the Escrow Fund and,
if not paid in full from the Escrow Fund, from future Earnout Holdback
Amounts.

         

        2.09           Earn-Out. 
As
additional consideration for Company Capital Stock, Parent shall pay certain
earn-out amounts to those Stockholders who were entitled to receive a Closing
Payment computed in accordance with, and subject to, the provisions of Schedule 2.09 (“Earn-Out Payments”) in
accordance with their Applicable Percentages; provided, that (A) 45% of the
portion of any Earn-Out Payment that is otherwise payable to the holders of
Company Common Stock will be reduced (but not below zero) by the sum of
(i) any unpaid amounts owed to Parent pursuant to Section 2.08(f), plus (ii) the
amount of any indemnification payment owed to any Parent Indemnitees under
Article VII that has not been paid from the Escrow Fund, plus (iii) the
amount, if any, by which any Unresolved Claim exceeds any associated Retained
Amounts, and (B) if the sum described in the preceding clause (A) exceeds
45% of the portion of such Earn-Out Payment that was otherwise payable to the
holders of Company Common Stock, 45% of the portion of any Earn-Out Payment that
is otherwise payable to the holders of Company Series A Preferred will be
reduced (but not below zero) by the amount of such excess.  The
aggregate dollar amount of funds retained under this Section 2.09 related to a
properly asserted

      

    

    
      
        
           

        

        
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      Unresolved
Claim (each an “Earnout
Holdback Amount”)
shall be retained until Final Resolution of such Unresolved Claim, and upon such
Final Resolution any remaining balance of the Earnout Holdback Amount for such
Unresolved Claim, after application of, first, any Retained Amounts and, second,
any Earnout Holdback Amounts to satisfy any amounts required to be paid to
Parent pursuant to Final Resolution of such Unresolved Claim (and in no case
longer than five (5) Business Days from such Final Resolution), shall be
promptly paid to the former holders of Company Capital Stock, in accordance with
their Applicable Percentages, in each case less any amounts required by Law to
be withheld or deducted; provided, however, upon any distribution of Retained
Amounts or Earnout Holdback Amounts after Final Resolution of Unresolved Claims,
the former holders of Series A Preferred shall receive 100% of their Applicable
Percentages of the Earnout Holdback Amount retained pursuant to clause (B) of
the preceding sentence prior to any distribution of the Earnout Holdback Amount
retained pursuant to clause (A) of the preceding sentence to the holders of
Company Common Stock.

       

      2.10           Escrow.

       

      (a)           In
connection with the Closing, for and on behalf of the holders of Company Capital
Stock, Parent shall deliver to SunTrust Bank, N.A., as escrow agent (the “Escrow Agent”), pursuant to an
escrow agreement substantially in the form of Exhibit B (the “Escrow Agreement”) among
Parent, the Holder Representative and the Escrow Agent, an amount of the Base
Purchase Price equal to the Escrow Amount, to be held in a fund (together with
interest and other investment proceeds thereon, the “Escrow Fund”) in accordance
with the terms thereof.

       

      (b)           On
the first anniversary of the Closing Date, the Escrow Agent shall pay to those
Stockholders who were entitled to receive a Closing Payment, in each case less
any amounts required by Law to be withheld or deducted, an aggregate of 50% of
the Escrow Fund, less the sum of (i) any amounts paid out of the Escrow
Fund pursuant to Sections 2.08(f) or Article VII and (ii) the aggregate
dollar amount of any Unresolved Claims, in accordance with the procedures set
forth in Section 2.10(e); provided that, if the aggregate dollar amount of any
Unresolved Claims plus any amounts previously paid out of the Escrow Fund
pursuant to Section 2.08(f) and Article VII would exceed 50% of the Escrow
Fund and Earnout Holdback Amount then held by Parent, the aggregate amount of
the then remaining Escrow Amount shall be retained in the Escrow
Fund.  

       

      (c)           On
the date that is two years after the Closing Date, the Escrow Agent shall pay to
those Stockholders who were entitled to receive a Closing Payment, in each case
less any amounts required by Law to be withheld or deducted, the remainder of
the Escrow Fund, less the aggregate dollar amount of any Retained Amounts, if
any, in accordance with the procedures set forth in Section
2,10(e).

       

      (d)           The
aggregate dollar amount of funds retained under Section 2.10(b) or Section
2.10(c) related to a properly asserted Unresolved Claim shall remain in the
Escrow Fund until Final Resolution of such Unresolved Claim, and upon such Final
Resolution any remaining balance of the Retained Amount for such Unresolved
Claim, after application of such Retained Amount to pay to Parent any amounts
required to be paid pursuant to Final Resolution of such Unresolved Claim, shall
be promptly paid to the former holders of Company Capital Stock in

       

    

    
      
        
           

        

        
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    accordance
with their Applicable Percentages, in each case less any amounts required by Law
to be withheld or deducted.

    
       

      (e)           Payments
pursuant to Section 2.10(b) and 2.10(c) shall be made in the following
manner:

       

      (i)           To
the extent the amounts to be distributed pursuant to Section 2.10(b) or 2.10(c)
represent the Escrow Deposit, 32% of such amounts shall be distributed to
holders of Company Common Stock, pro rata, in accordance with their Applicable
Percentages, and 68% of such amounts shall be distributed to the holders of
Company Series A Preferred, pro rata, in accordance with their Applicable
Percentages; and

       

      (ii)           To
the extent there are any other amounts to be distributed pursuant to 2.10(c),
other than as set forth above, such amounts shall be distributed 32% to holders
of Company Common Stock, pro rata, in accordance with their Applicable
Percentages, and 68% to the holders of Company Series A Preferred, pro rata, in
accordance with their Applicable Percentages.

       

      ARTICLE
III

      REPRESENTATIONS AND
WARRANTIES OF COMPANY

       

      Except
as set forth in the Disclosure Schedules, Company represents and warrants to
Parent and Sub the following matters both as of the date of this Agreement and
as of the Closing Date (except to the extent that a representation or warranty
expressly states that such representation or warranty is made only as of an
earlier date or as of the date of this Agreement):

       

      3.01           Existence and
Power.  Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware.  Company has all power and
authority required to use or own its property and assets that it purports to use
or own and to carry on its business as now conducted.  Company is duly
qualified to do business as a foreign corporation and is in good standing in the
State of California and in each other jurisdiction (if any) where the character
of the property owned or leased by it or the nature of its activities makes such
qualification necessary.  Section 3.01 of the Disclosure Schedules
sets forth a list of those jurisdictions in which Company is so qualified to do
business.  True and complete copies of Company’s amended and restated
certificate of incorporation and bylaws, as currently in full force and effect,
have been provided to Parent (the “Company Governing
Documents”).  Company has delivered to Parent true and complete
copies of all documents filed with any state authority with respect to any
merger, consolidation or reincorporation in which Company has been a
participant, if any.

       

      3.02           Authorization; Binding
Effect.  Company
has all requisite power and authority required to enter into this Agreement and
each other Transaction Document, to perform its obligations hereunder and
thereunder and to consummate the Merger and the other transactions contemplated
hereby and thereby (collectively, the “Transactions”).  The
execution, delivery and performance of this Agreement and the other Transaction
Documents by Company and the consummation by Company of the Transactions have
been duly authorized by all necessary corporate or other action on the part of
Company in accordance with the laws of the State of

    

    
      
        
           

        

        
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      Delaware
other than the approval of the Stockholders in accordance with the DGCL and the
Company Governing Documents.  This Agreement has been duly executed
and delivered to Parent and Sub by Company and constitutes a valid and binding
agreement of Company enforceable against it in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).  All other Transaction Documents delivered at Closing by Company
will be duly and validly executed by Company.  The Board of Directors
of Company, by resolutions duly adopted at a meeting duly called and held or by
a unanimous written consent in lieu of a meeting, has determined that the
Transactions are in the best interests of Company and the Stockholders, has
approved this Agreement and the Merger and authorized the execution of this
Agreement and has recommended to the Stockholders approval and adoption of this
Agreement and the Merger.

       

      3.03           Governmental Authorization
and Consents.  Except
for those Consents, filings or notices set forth in Section 3.03 of the
Disclosure Schedules and Requisite Shareholder Approval no Consent of, filing
with, or notice to, any Governmental Authority, lender, lessor, creditor,
Stockholder or any other Person is required by Company in connection with the
execution, delivery and performance by Company of this Agreement, any other
Transaction Document, or the consummation of the Transactions.

       

      3.04           Non-contravention. 
The
execution and delivery of the Transaction Documents by Company, the performance
by Company of its obligations under the Transaction Documents, and the
consummation of the Transactions do not and will not (i) contravene or conflict
with any of the Company Governing Documents, (ii) assuming compliance with the
matters referred to in Section 3.03, contravene or conflict with any applicable
provision of any Law binding upon or applicable to Company in any material
respect, (iii) assuming compliance with the matters referred to in Section 3.03
and except as set forth in Section 3.04 of the Disclosure Schedules, require
notice, or constitute a Default, under any provision of any Contract binding
upon Company or by which Company’s assets or properties may be bound or subject,
or any Permit held by Company, or (iv) result in the creation or imposition of
any Lien on any of Assets of Company.

       

      3.05           Capitalization.

       

      (a)           The
authorized Company Capital Stock consists of 25,000,000 shares of Company Common
Stock and 5,250,000 shares of Series A Preferred.  As of the date
hereof, 9,943,000 shares of Company Common Stock, and 4,992,704 shares of
Company Series A Preferred have been issued and are outstanding.  All
issued and outstanding shares of Company Capital Stock have been duly authorized
and validly issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights created by statute, the Company
Governing Documents or any Contract to which Company is a party or by which it
is bound, and have been issued in compliance with applicable federal, state and
foreign securities or “blue sky” Laws.  Section 3.05(a) of the
Disclosure Schedules sets forth, as of the date hereof, the name of each holder
of shares of Company Capital Stock and the number of shares of Company Capital
Stock held of record by each such Stockholder.  There are no accrued
or unpaid dividends with respect to any issued and outstanding shares of Company
Capital Stock.  Other than the shares of Company Capital Stock issued
and outstanding as of the date hereof and shares of Company

       

    

    
      
        
           

        

        
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Common
Stock issued after the date hereof upon exercise of Company Options outstanding
as of the date hereof, there are no issued or outstanding shares of Company
Capital Stock.

    
      
         

        (b)           As
of the date hereof, except as set forth in Section 3.05(b) of the Disclosure
Schedule, there are no outstanding options, warrants, calls, rights of
conversion or other rights, agreements, arrangements or commitments of any kind
or character, whether written or oral, relating to the Company Capital Stock to
which Company is a party, or by which it is bound, obligating Company to issue,
deliver or sell, or cause to be issued, delivered or sold, any shares of Company
Capital Stock or any securities or obligations convertible into or exchangeable
for, or giving any Person any right to subscribe for or acquire from Company or
any other Person, any shares of Company Capital Stock and no such convertible or
exchangeable securities or obligations are, or as of the Closing will be,
outstanding, other than shares of Company Common Stock issuable upon conversion
of Company Series A Preferred.

         

        (c)           Except
as set forth in Section 3.05(c) of the Disclosure Schedules, there are
(i) no Contracts relating to the Company Capital Stock to which Company is
a party, or by which it is bound, obligating Company to repurchase, redeem or
otherwise acquire any issued and outstanding shares of Company Capital Stock or
any Company Option, (ii) no outstanding or authorized stock appreciation,
phantom stock or other similar rights with respect to Company, and
(iii) except for the agreements that terminate in accordance with their
terms at or prior to the Effective Time, no other voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect to which
Company is a party, or by which it is bound, with respect to the governance of
Company or the voting or transfer of any shares of Company Capital
Stock.

         

        3.06           Subsidiaries/Interests. 
Company
does not have any Subsidiaries, does not have any equity or membership interest,
minority or otherwise, in any other Person, and does not have any partnership,
joint venture or limited liability company agreement, Contract or right
concerning an equity or partnership interest in another Person.

         

        3.07           Title to Properties; Absence
of Liens; Sufficiency of Assets.

         

        (a)           Company
has indefeasible legal and beneficial title to or sufficient other valid and
enforceable rights to possess and use or, in the case of its leased property and
assets, valid leasehold interests in, all of its assets and properties, free and
clear of all Liens, except (i) as set forth in Section 3.07(a) of the Disclosure
Schedules, (ii) for Liens for Taxes not yet due and payable, and (iii) for Liens
that do not materially detract form the value of the property or asset subject
thereto or materially impair the operations of the Company (collectively, “Permitted
Liens”).   All assets and property owned or leased by
Company are in good operating condition and repair, ordinary wear and tear
excepted, and are usable in the ordinary course of business consistent with
Company’s past practices.

         

        (b)           There
are no Claims affecting Company’s assets or properties pending or, to Company’s
Knowledge, threatened which might materially detract from the value, interfere
with any present use or adversely affect the marketability of any such property
or assets.

         

        (c)           The
assets and property owned or leased by Company constitute all of the assets and
property used or held for use in connection with the business of Company and, to

      

    

    
      
        
        

      

      
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    Company’s Knowledge, constitute all of the assets and property necessary to
conduct such business as currently conducted by Company.

     

    
      3.08           Financial Statements;
Related Information.

       

      (a)           Section
3.08 of the Disclosure Schedules sets forth true, correct and complete copies of
the Annual Financial Statements and Interim Financial Statements for periods
ending prior to the date hereof (the “Financial
Statements”).  The Financial Statements (i) were prepared
from the books and records of Company and fairly present, in all material
respects, the consolidated financial position of Company as of the dates thereof
and their consolidated results of operations and cash flows for the periods then
ended, (ii) were prepared as historically applied by Company on a consistent
basis (subject in the case of Interim Financial Statements to normal recurring
year-end adjustments and the absence of notes thereto), and (iii) except as
indicated therein, reflect all Claims against and all debts and liabilities of
Company, fixed or contingent, as at the respective dates thereof required to be
reflected or disclosed therein as historically applied by Company on a
consistent basis (subject in the case of Interim Financial Statements to normal
recurring year-end adjustments and the absence of notes thereto).

       

      (b)           Reserves
for warranty claims, liabilities and bad debts on the Financial Statements
reflect all facts and circumstances which were known to the management of
Company as of each date such Financial Statements were prepared and are
sufficient to pay for such warranty claims, liabilities, bad debts, estimates to
complete and amounts payable.  Company does not hold any inventory for
sale.

       

      (c)           Company
has not entered into any off balance sheet financial arrangements, including any
transaction involving a hedge or derivative financial instrument.

       

      3.09           Absence of Certain
Changes.

       

       Since
July 31, 2008, Company has conducted its business in the ordinary course
consistent with past practice and, except as disclosed in Section 3.09 of the
Disclosure Schedules or as otherwise approved by Parent in writing, there has
not been:

       

      (a)           a
Material Adverse Effect and there have been no events, occurrences or
developments which are reasonably likely to result in a Material Adverse
Effect;

       

      (b)           (i)
any declaration, setting aside or payment of any dividend or other distribution
with respect to any shares of capital stock or member interests of Company, (ii)
any repurchase, redemption or other acquisition by Company of any outstanding
shares of capital stock or options of Company, (iii) any grants or issuances of
options or other rights to acquire any capital stock of Company or transfers,
issuances, sales or disposals of any shares of capital stock or rights to
acquire capital stock of Company, or (iv) any recapitalization, reclassification
or like change in the capitalization of Company;

       

      (c)           any
acquisition by Company of material assets, including stock or other equity
interest, from any Person (whether by merger, consolidation or combination or
acquisition of stock or assets) or any sale, lease, license or other disposition
of material assets or property of Company, other than in the ordinary course of
business consistent with past practices;

       

    

    
      
        
        

      

      
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      (d)           any
incurrence (excluding trade payables incurred in the normal course of business),
assumption or guarantee by Company of any indebtedness for borrowed
money;

       

      (e)           any
express creation or assumption by Company of any Lien (other than Permitted
Liens) on any asset;

       

      (f)           any
making of any loan, advance or capital contribution to or investment in any
Person, excluding any advance to any employee not in excess of $10,000
cumulatively made in the ordinary course of business consistent with past
practices relating solely to advancement of payroll, travel and other business
expenses;

       

      (g)           any
condemnation, seizure, damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the assets, properties or business of
Company and, to Company’s Knowledge, no such loss is threatened;

       

      (h)           any
material transaction or commitment made, or any Material Contract entered into,
amended or terminated by Company or any relinquishment by Company of any
Material Contract or other material right, other than those contemplated by this
Agreement;

       

      (i)           any
change in any method of accounting or accounting practice by
Company;

       

      (j)           except
as contemplated under this Agreement, any (i) grant of any severance or
termination pay to any director, officer, employee or independent contractor of
Company except pursuant to the severance policies of Company existing on the
date hereof, (ii) commencement or renewal of any expiring Employee Plan (or
any amendment to any existing Employee Plan) with any director, officer,
employee or independent contractor of Company, except renewals of insurance
coverage in connection with Employee Plans, (iii) entering into of any
Employee Plan with a Person providing for compensation, bonus or other benefits,
(iv) payment of or provision for any bonus, stock option, stock purchase,
profit sharing, deferred compensation, pension, retirement or other similar
payment or arrangement to any director, officer, employee or independent
contractor of Company, except pursuant to such arrangements existing on the date
hereof, (v) material increase in coverage or benefits payable under any
existing Employee Plan, (vi) any other increase in compensation, bonus or
other benefits payable to any director, officer, employee or independent
contractor of Company other than increases in the ordinary course of business
consistent with past practice of Company, or (vii) waiver of or significant
modification to any non-solicitation or non-competition provisions of any
employment agreement or other Contracts.

       

      (k)           any
capital expenditure, or commitment for a capital expenditure, for additions or
improvements to property, plant and equipment in excess of $10,000 individually
or $50,000 in the aggregate;

       

      (l)           except
for capital expenditures and commitments referred to in paragraph (l) above, any
(i) acquisition, lease, license or other purchase of, or (ii) disposition,
assignment, transfer, license or other sale of, any tangible assets or property
or Intellectual Property in one or more transactions, or any commitment in
respect thereof, that involved or involve payments of $5,000 or
more;

      
 

    

    
      
        
        

      

      
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      (m)           a
cancellation, compromise or settlement of any material debt or pending or
threatened claim or waiver or release of any material right of
Company;

       

      (n)           any
material adverse change in Company’s relations with its material customers,
distributors, suppliers or agents;

       

      (o)           any
delay or postponement by Company in the payment of accounts payable and other
liabilities outside the ordinary course of business; or

       

      (p)           any
Contract entered into, other than this Agreement, to take any actions, or cause
to be taken, any of the actions specified in this Section 3.09.

       

      3.10           Related Person
Transactions.  Except
as set forth in Section 3.10 of the Disclosure Schedules, no Related Person of
Company presently or since December 31, 2007: (i) owns or has owned,
directly or indirectly, any interest in (excepting not more than five percent
(5%) stock holdings for investment purposes in securities of publicly held and
traded companies), or is an officer, director, employee or consultant of, any
Person which is, or is engaged in business as, a competitor, lessor, lessee,
customer, distributor, sales agent, or supplier of Company; (ii) owns or has
owned, directly or indirectly, in whole or in part, any tangible or intangible
property that Company uses or the use of which is necessary or desirable for the
conduct of Company’s businesses; (iii) has or had any cause of action or
other Claim whatsoever against, or owes or owed any amount to, Company; or (iv)
on behalf of Company, has made any payment or commitment to pay any commission,
fee or other amount to, or purchase or obtain or otherwise contract to purchase
or obtain any goods or services from, any corporation or other Person of which
any officer, director or manager of Company, or an immediate family member of
the foregoing, is a partner or stockholder (excepting stock holdings solely for
investment purposes in securities of publicly held and traded
companies).  Section 3.10 of the Disclosure Schedules contains a
complete list of all Contracts between Company and any Related Person
(collectively, the “Related
Person Agreements”) entered into on or prior to the date of this
Agreement or contemplated under this Agreement to be entered into before Closing
(other than those Contracts entered into after the date of this Agreement for
which Parent has given its prior written consent pursuant to Section
5.01).  Except as described in Section 3.10 of the Disclosure
Schedules, Company is not a party to any transaction with any Related Person on
other than arm’s-length terms.

       

      3.11           Material
Contracts.

       

      (a)           Section
3.11(a) of the Disclosure Schedules identifies, as of the date of this
Agreement, any agreement to which the Company is a party or by which it is bound
(whether oral or written), (each a “Material
Contract”):

       

      (i)           any
Real Property Lease or lease for personal property;

       

      (ii)           any
Contracts in excess of $10,000 up to an aggregate of $50,000 for the purchase of
materials, Software, supplies, goods, services, equipment or other
assets;

       

    

    
      
        
        

      

      
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      (iii)           any
sales, distribution or other similar agreements in excess of $10,000, up to an
aggregate of $50,000, other than ordinary course purchase
orders,  providing for the sale by Company of materials, supplies,
goods, services, equipment or other assets;

       

      (iv)           any
Contract (i) relating to the acquisition or disposition of any business (whether
by merger, sale of stock, sale of assets or otherwise) or (ii) the sole or
primary purpose of which is Company’s obligation not to disclose the
confidential information of a third Person, other than non-disclosure and
confidentiality agreements entered into in the ordinary course of
business;

       

      (v)           any
Contract under which Company agrees to indemnify any party other than in the
ordinary course of business and any bonds or agreements or guarantees in which
Company acts as surety or guarantor; and

       

      (vi)           any
Employee Plan with Company’s current or former directors, managers, officers,
employees or independent contractors.

       

      (b)           Each
Material Contract constitutes a valid and binding obligation of Company, is in
full force and effect and is enforceable against it and, to
Company’s  Knowledge, each other party thereto, in accordance with its
terms, subject to general equitable principles (regardless of whether such
enforceability is considered in a proceeding at equity or at law), and except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application relating
to creditors’ rights.  Company has paid in full all amounts due under
the Material Contracts which are due and payable or accrued in accordance with
Company’s historical practices, all amounts due to others under the Material
Contracts (and have recognized revenues due from others thereunder in accordance
Company’s historical practices), and have satisfied in full or provided for all
of their liabilities and obligations under the Material Contracts which are due
and payable, except amounts or liabilities disputed in good faith by Company for
which adequate reserves have been set aside.  Neither Company nor, to
Company’s Knowledge, any other party is in material Default under any Material
Contract, and Company has complied in all material respects with all of the
terms and obligations resulting from the termination of any Material
Contract.  Since December 31, 2007, Company has not received any
written notice that Company is in Default under any Material Contract, and, to
Company’s Knowledge, no event or circumstance has occurred that, with notice or
lapse of time or both, would constitute any material Default by
Company.

       

      (c)           Except
as set forth in Section 3.11(c), Company does not intend, and, to Company’s
Knowledge, no other Person intends to terminate (whether for cause or
convenience) or declare a Default under any Material Contract before expiration
of its stated term, if any other than as expressly contemplated by this
Agreement.  Except as set forth in Section 3.11(c)(i) of the
Disclosure Schedules, no Claim for material  Default under any
Material Contract is pending or, to Company’s Knowledge, threatened against
Company.  To Company’s Knowledge, there are no pending renegotiations
of, or outstanding rights to renegotiate any amounts paid or payable under any
Material Contract, and no Person has made a written demand to Company for any
such renegotiation.

    

    
      
        
           

        

        
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      3.12           No Undisclosed Material
Liabilities.  There
are no Liabilities of Company of any kind whatsoever, including any Liability
for Taxes (whether accrued, contingent, absolute, determined, determinable or
otherwise), and, to Company’s Knowledge, there are no existing conditions,
situations or circumstances which reasonably would be expected to result in such
a Liability, other than:

       

      (a)           Liabilities
disclosed or provided for in the Recent Balance Sheet;

       

      (b)           Liabilities
incurred in the ordinary course of business consistent with past practice since
the Recent Balance Sheet Date, which individually or in the aggregate are not
material;

       

      (c)           Liabilities
for Taxes accrued but not yet due and payable;

       

      (d)           Liabilities
disclosed in Section 3.12(d) of the Disclosure Schedules; and

       

      (e)           Liabilities
which are specifically taken into account in determining Working Capital and
reflected in the Estimated Balance Sheet.

       

      3.13           Litigation. 
Except
as set forth in Section 3.13 of the Disclosure Schedules, there is no Claim
pending against or, to Company’s Knowledge, threatened against or affecting
Company or any of their respective officers, directors or managers in their
capacity as such before any Governmental Authority.  Company is not
subject to any judgment, order or decree.  There are no Claims pending
by Company or which Company presently intends to initiate.

       

      3.14           Compliance with Laws and
Orders.  Company
is not in material Default under, has not materially Defaulted, and is not, and
to Company’s Knowledge, has not been, under investigation with respect to or
been threatened to be charged with or given notice of any material Default under
any Law applicable to its business, properties, assets and
operations.  Since December 31, 2007, Company has not received any
written notice from any Governmental Authority to the effect that Company is not
in compliance with any Law applicable to its business, properties, assets and
operations.

       

      3.15           Permits. 
Section
3.15 of the Disclosure Schedules correctly sets forth a list of each material
license, franchise, permit, order, registration, certificate, approval or other
similar authorization of a Governmental Authority affecting, or relating in any
way to, the assets or business of Company (each a “Permit”), and each pending
application for any Permit, together with the name of the Governmental Authority
issuing such Permit or with which such application is
pending.  Company has all Permits required to carry on its business as
now conducted.  Except as set forth in Section 3.15 of the Disclosure
Schedules, (i) the Permits are valid and in full force and effect, (ii) Company
has not or has not been in material Default under, and, to Company’s Knowledge,
no condition exists that, with notice or lapse of time or both, would constitute
a material Default under, any Permit, (iii) no proceeding is pending or, to
Company’s Knowledge, threatened, to revoke or limit any Permit, and (iv) none of
the Permits will be terminated or impaired or become terminable, in whole or in
part, as a result of the Transactions contemplated hereby.  Company is
in compliance in all material respects with the terms of such Permits and, since
December 31, 2007, Company has not received any written notice from any
Governmental Authority to the effect that Company is not in compliance with any
Permit.

       

    

    
      
        
           

        

        
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    3.16           Intellectual
Property.

     

    (a)           Ownership;
Sufficiency.

     

    (i)           Company
Intellectual Property consists of and comprises all of the Intellectual Property
(A) used in or required to conduct the business of Company as conducted
immediately prior to the Effective Time and (B) immediately following the
Effective Time, sufficient for the Surviving Corporation to conduct the business
of Company as conducted immediately prior to the Effective Time and to perform
Company’s obligations under all Contracts to which it is a party, except to the
extent the ability to use or exploit any Company Intellectual Property is
affected by any contract, agreement or covenant by which the Surviving
Corporation or any of its affiliates is bound.

     

    (ii)           Section
3.16(a)(ii) of the Disclosure Schedules contains a complete list of (A) all
Licensed Intellectual Property, Registered Intellectual Property, and Owned
Intellectual Property and (B) all products and services that are distributed,
sold, or licensed by Company as of the date of this
Agreement.  Company owns the entire right, title and interest in the
Owned Intellectual Property, and to Company’s Knowledge all such Owned
Intellectual Property is now valid and enforceable and in full force and effect
at the Effective Time.  To Company’s Knowledge, no Owned Intellectual
Property is subject to any actions or Claims that challenge the validity or
scope of Company’s rights therein.

     

    (iii)           Company
owns all Intellectual Property developed by former and current personnel of
Company (including employees, contract workers, temporary workers and agents)
during and in the course of their employment or contract with or by
Company.

     

    (iv)           Except
as indicated in Section 3.16(a)(iv) of the Disclosure Schedules, all of
Company’s former employees who were involved in the development for Company of
any Intellectual Property, as conducted as of the date of this Agreement, have
executed valid and enforceable agreements that: (A) assign to Company all such
Intellectual Property rights developed by such former employees during and in
the course of their employment by Company and (B) protect the confidential
information of Company and third parties in the possession of Company from
unauthorized use or disclosure.  Except as indicated in Section
3.16(a)(iv) of the Disclosure Schedules, all of Company’s current and former
consultants, contractors, contract workers, temporary workers, agents and other
consultants who have contributed to or participated in the conception, reduction
to practice or development of any Owned Intellectual Property; (x) have been a
party to a valid and enforceable agreement with Company that accords Company
full and exclusive and original ownership of all Intellectual Property developed
by such individuals for the Company; or (y) have executed valid and enforceable
instruments of assignment in favor of Company as assignee, such instruments
conveying to Company effective and exclusive ownership (including a waiver of
any applicable moral rights therein) of all such Intellectual Property; and (z)
have executed valid and enforceable agreements protecting the confidential
information of Company and third parties in the possession of Company from
unauthorized use and disclosure.

     

    (b)           Adverse
Effect.  The execution and delivery of this Agreement and the
Transaction Documents by Company and the consummation by Company of the
Transactions

     

    
      
        
           

        

        
          -27-

          
            

          

        

        
           

        

      

    

     

    contemplated
by this Agreement will neither result, before or after the Closing, in any
termination or loss or impairment of, or give rise to any Lien on, nor require
payment of any fee to any third party owners of, any Company Intellectual
Property.

     

    (c)           Encumbrances.  Company
has not assigned, hypothecated or otherwise encumbered title in and to any of
the Owned Intellectual Property, and Company has not made or entered into any
covenants and agreements not to assert or enforce any Owned Intellectual
Property against, another Person (other than licenses and rights granted
pursuant to the contracts listed in Section 3.16(c) of the Disclosure Schedule
or pursuant to non-exclusive licenses granted to end user customers in the
ordinary course of business).  The Owned Intellectual Property is free
and clear of any Liens (other than licenses and rights granted pursuant to the
contracts listed in Section 3.16(c) of the Disclosure Schedule or pursuant to
non-exclusive licenses granted to end user customers in the ordinary course of
business).  Company is not obligated to pay any further sums to
another Person for or based on the prior use of Company Intellectual
Property.  Company does not have any Contract to pay any former or
current personnel of Company (including employees, contract workers, temporary
workers and agents) any sums for Company’s use of any Owned Intellectual
Property.

     

    (d)           Infringement. To the
Company’s Knowledge, (i) the current operation of the businesses of Company does
not infringe, misappropriate, or violate the terms of license of any
Intellectual Property or Intellectual Property right of any third party, and
(ii) no third party is infringing or has infringed any Owned Intellectual
Property.  Company has not received any notice alleging that the
conduct of Company’s business infringes, misappropriates, or violates the terms
of license of any Intellectual Property or Intellectual Property rights of any
third party. There is no Claim pending or, to Company’s Knowledge, threatened,
in each case against the Company, which challenges the validity, enforceability
or ownership of any Owned Intellectual Property.  Except as disclosed
in Schedule 3.16(d), Company has not been sued at any time for infringing any
Intellectual Property or Intellectual property right of another
Person.  There are no Claims of infringement of Intellectual Property
or Intellectual Property rights pending or, to Company’s Knowledge, threatened
against any Person who would be entitled to indemnification by Company for such
Claims.  Other than pursuant to the contracts listed in Section
3.16(d) of the Disclosure Schedules, Company has not entered into any Contracts
that contain express indemnification provisions obligating Company to indemnify
any other party against any charge that a deliverable delivered by Company to
such party infringes any Intellectual Property or Intellectual Property rights
of another Person.

     

    (e)           Know-How.  Except
as disclosed in Section 3.16(e) of the Disclosure Schedules, there have been no
disclosures by Company to any other Person, other than disclosures to Persons
who are bound to hold such information in confidence pursuant to valid and
enforceable agreements or obligations or otherwise by operation of Law, of any
confidential information that Company holds as a trade secret and that is
material to the operation of the business of Company, the unauthorized public
disclosure of which was, is or could result in a Material Adverse Effect. To
Company’s Knowledge, no material breach or other violation of such
confidentiality agreements or obligations (including, without limitation, any
breach or violation that materially lessens the value of any material trade
secret of Company) exists.

     

    
      
        
           

        

        
          -28-

          
            

          

        

        
           

        

      

    

     

    
      (f)           Protection.  Company
has taken all reasonable measures to (i) protect the proprietary nature of the
Owned Intellectual Property, and has implemented policies therefor, and (ii)
ensure the physical and electronic protection of trade secrets from unauthorized
access, disclosure, use or modification.  To Company’s Knowledge, no
acts or omissions have occurred that would invalidate, reduce or eliminate, in
whole or in part, the enforceability, scope or value of, or Company’s
entitlement to use any material trade secret or other Intellectual Property
referenced in Section 3.16(a), or otherwise impair Company’s business as it is
presently conducted.

       

      (g)           Joint
Ownership.  No Owned Intellectual Property is owned jointly by
Company with a third party where an accounting is due to a joint owner for any
exploitation of such Intellectual Property.

       

      (h)           No Embedded Third Party
Software.  No Owned Intellectual Property contains or requires
to function any Software (“Third Party Software”) that is
owned by or proprietary to any third party, including any Third Party Software
that is a part of, embedded in, linked to (whether by static or dynamic linking)
or otherwise incorporated in or into the Owned Intellectual Property, except for
Third Party Software that is identified as such in (a) a log-on flash screen or
“About” file embedded in the Owned Intellectual Property that is displayed to or
readily accessible by a normal end-user thereof and/or (b) as disclosed in
Section 3.16(h) of the Disclosure Schedules.  For clarity, this
Section 3.16(h), and the term “Third Party Software,” applies to and includes,
COTS Software, Open-Source Materials and any other software or software code
owned by or proprietary to any third party, whether or not separately compliable
or separately available.

       

      (i)           Open-Source
Materials.  Except as disclosed in Section 3.16(i) of the
Disclosure Schedules, Company does not use in its business, and none of the
Software owned, used or distributed by Company incorporates, includes or is
otherwise derived from or dependent upon, any Open Source Materials, and no
Company use of use of any Open Source Materials (i) creates, or purports to
create, material obligations for Company or (ii) grants, or purports to grant,
to any third party, any rights or immunities in any of Company’s Software when
distributed by Company to a third party (including Company using any Open Source
Materials that require, as a condition of use, modification and/or distribution
of such Open Source Materials that other Software incorporated into, derived
from or distributed with such Open Source Materials be disclosed or distributed
in source code form, be licensed for the purpose of making derivative works or
be redistributable at no charge).

       

      (j)           No
Viruses.  All websites owned or operated by the Company are fit
in all material respects for their respective intended purposes and perform in
all material respects as intended.  Except as indicated on Section
3.16(j) of the Disclosure Schedules, Company has used its reasonable efforts and
up-to-date versions of commercially available anti-Virus products and services
to ensure that (i) all Owned Intellectual Property is free of all known Viruses
and (ii) all Owned Intellectual Property does not and shall not contain any
code, feature or function designed to (x) disable the Owned Intellectual
Property or render it incapable of processing data or (y) enable Company or any
third party to (A) discontinue the effective use by the Surviving Corporation of
any such Intellectual Property; (B) access, erase, destroy, corrupt or modify
any data without Parent’s knowledge and consent; or (C) bypass any internal or
external security measure without Parent’s prior knowledge and consent, in each
case, other than any code, feature or function designed for Company for
rendering computer network operations services,

       

    

    
      
        
           

        

        
          -29-

          
            

          

        

        
           

        

      

    

     

    information
assurance and cybersecurity technology services relating to information leakage
detection and prevention, insider communications and threat detection,
internet/intranet usage monitoring and external network
surveillance.  Company shall immediately provide to Parent written
notice in reasonable detail upon becoming aware of the existence of any Virus or
any of the foregoing features or functions contained in Company Intellectual
Property.

     

    
      3.17           Taxes.

       

              (a)           Except
as otherwise set forth in Section 3.17(a) of the Disclosure Schedules, (i)
Company has timely filed all Tax Returns, taking into account any properly
granted extensions of time to file, with the appropriate taxing authorities, and
such Tax Returns are correct and complete in all material respects; (ii) all
Taxes due and owed by Company, at the date hereof (other than Taxes contested in
good faith and for which reserves have been established), whether or not shown
on any Tax Return, have been timely paid taking into account any properly
granted extensions of time to file; (iii) Company has complied with all rules
and regulations relating to the withholding of Taxes and the remittance of
withheld Taxes in connection with any amounts paid or owing to any employee,
independent contractor, creditor, taxing authority, stockholder or other third
party for which Company is responsible; (iv) Company has not waived any statute
of limitations in respect of its Taxes or agreed to any extension of time with
respect to a Tax assessment of deficiency; (v) Company  has not been,
at any time, a “United States Real Property Holding Corporation” within the
meaning of Section 897(c)(2) of the Code; ; (vi) Company has not engaged in any
transaction that the Internal Revenue Service has determined to be a Tax
avoidance transaction and identified by notice, regulation, or other form of
published guidance as a listed transaction, as set forth in Treasury Regulation
Section §1.6011-4(b)(2), and Company has not engaged in a “reportable
transaction,” as set forth in Treasury Regulation Section §1.6011-4(b) or any
similar provision of state, local, or non-U.S. law, including any transaction
that is the same or substantially similar to a listed transaction; (vii) Company
has not submitted a request for a ruling to the IRS or a state tax authority;
(viii) Company has not at any time made, changed or rescinded any express or
deemed election relating to Taxes that is not reflected in any Tax Return; (ix)
Company has not at any time changed any of its methods of reporting income or
deductions for Tax purposes from those employed in the preparation of its Tax
Returns; (x) Company has not been a member of an affiliated group of
corporations within the meaning of Section 1504(a) of the Code that has filed or
at any time was required to file a consolidated federal income tax return for
any taxable period, and Company has not been a member of an affiliated group of
corporations that has filed or at any time was required to file a consolidated,
combined or unitary income tax return under provisions of state, local or
foreign tax Law comparable to Section 1504(a) of the Code for any taxable
period; (xi) Company has no obligation under any Contract with any other Person
with respect to Taxes of such other Person (including pursuant to Treasury
Regulations Section 1.1502-6 or comparable provision of state, local or foreign
tax Law), including any liability for Taxes as a transferee or successor, by
contract or otherwise; (xii) the unpaid Taxes of Company (A) do not exceed the
reserve for Tax liability (excluding any reserve for deferred Taxes established
to reflect temporary difference between book and Tax income) set forth or
included in the Recent Balance Sheet and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of Company in filing its Tax Returns;
(xiii)  no transfer Taxes of any kind will be due and payable by
Company as a result of this Agreement or the Transactions; (xiv) no payments by
Company to employees required under or contemplated by this Agreement will be
non-deductible under Sections 162(a), 162(m) or 280 G of

       

      
        
           

        

        
          -30-

          
            

          

        

        
           

        

      

the
Code or other similar provisions of the Code concerning non-deductibility of
expenses; (xv) Company is not currently the beneficiary of any extension of time
within which to file any Tax Returns; (xvi) there are no liens for Taxes (other
than Taxes not yet due and payable) upon any of the assets of Company; (xvii) to
Company’s Knowledge, no tax authority intends to assess any additional Taxes for
any period for which Tax Returns have been filed; (xviii) to Company’s
Knowledge, no tax audits or administrative or judicial Tax proceedings are
pending or being conducted with respect to Company; (xix) Company has not
received from any taxing authority (including jurisdictions in which Company has
not filed Tax Returns) any (A) notice indicating an intent to open an audit or
other review, (B) request for information related to Tax matters or (C) notice
of deficiency or proposed adjustment for any amount of Tax, proposed, asserted
or assessed by any taxing authority against Company; (xx) Company is not a party
to or bound by any Tax Sharing Agreement (other than (A) commercially reasonable
agreements providing for the allocation or payment of real property Taxes
attributable to real property leased or occupied by Company and (B) commercially
reasonable agreements for the allocation or payment of personal property Taxes,
sales or use Taxes or value added Taxes with respect to personal property
leased, used, owned or sold in the ordinary course of business); (xxi) Company
has not distributed stock of another Person or has had its stock distributed by
another Person in a transaction that was purported or intended to be governed in
whole or in part by Section 355 of the Code; and (xxii) Company has complied
with all requirements of Section 409(A) of the Code, as
applicable.

     

    (b)           Tax
Returns.  Section 3.17(b) of the Disclosure Schedules lists (i)
all Tax Returns filed for taxable periods ended on or after December 31, 2006
for or on behalf of Company, (ii) indicates those Tax Returns that have been
audited, (iii) indicates those Tax Returns that currently are the subject of
audit and (iv) indicates those Tax Returns that must be filed and their due
dates for a Tax period or year commencing before and ending before or after the
Closing Date.  Company has delivered to Parent correct and complete
copies of all income, franchise, sales, use, property, business license and
payroll Tax Returns filed by or on behalf of Company, examination reports and
statements of deficiencies assessed against or agreed to by Company since
December 31, 2006.

     

    3.18           Real
Property.

     

    (a)           Company
does not currently own, or has ever owned, any real property.

     

    (b)           Section
3.18(b) of the Disclosure Schedules sets forth a true, correct and complete list
of all leases, subleases and other agreements (collectively, the “Real Property Leases”) under
which Company uses or occupies or has the right or obligation to use or occupy
or pay rent or other fees for use thereof, now or in the future, any real
property (the land, buildings and other improvements covered by the Real
Property Leases being hereinafter referred to as the “Leased Real
Property”).  Company has heretofore delivered or made available
to Parent true, correct and complete copies of all Real Property Leases,
including all modifications, amendments and supplements thereto.  Each
Real Property Lease is valid, binding and in full force and effect, and as of
the Closing, all amounts currently due and owing pursuant to the Real Property
Leases will have been paid in full.  Company has not, and, to
Company’s Knowledge, no other party is in Default under any Real Property Lease
and, to Company’s Knowledge, no event or circumstance has occurred that, with
notice or lapse of time or both, would constitute any event of default
thereunder.  Since December 31, 2007, Company has not received notice
of, nor to Company’s

     

    
      
        
           

        

        
          -31-

          
            

          

        

        
           

        

      

    

     

    Knowledge,
has there been any threatened Default by any landlord or tenant under any Real
Property Lease or under any subordinate transfer under a Real Property
Lease.  All required Consents of, filings with, or notices to, any
party to any of the Real Property Leases in connection with the Transactions
have been completed or will be completed by the Closing Date. All of the land,
buildings, structures, plants, facilities and other improvements used by Company
in the conduct of its business are included in the Leased Real
Property.

    
       

      (c)           Collectively,
the Leased Real Property is adequate for the operation of the businesses of
Company as presently conducted and, to Company’s Knowledge, there are no
conditions existing or Claims pending or threatened that would materially impair
the adequacy of the Leased Real Property for that purpose.

       

      3.19           Environmental
Matters.

       

      (a)           Except
as identified in Section 3.19(a) of the Disclosure Schedules:

       

      (i)           no
notice, notification, demand, request for information, citation, summons or
order has been received by Company, no penalty has been assessed against Company
and, to Company’s Knowledge, no Claim is pending or threatened by any
Governmental Authority or other Person with respect to any matters relating to
Company and relating to or arising out of any Environmental Law;

       

      (ii)           there
are no liabilities of Company of any kind whatsoever whether accrued,
contingent, absolute, determined, determinable or otherwise, arising under or
relating to any Environmental Law, and, to Company’s  Knowledge, there
are no facts, conditions, situations or set of circumstances that would
reasonably be expected to result in or be the basis for any such
liability;

       

      (iii)           Company
is and has been in compliance with all Environmental Laws in all material
respects, and has obtained and is in compliance with all Environmental Permits
in all material respects; and

       

      (iv)           Company
has never performed or subcontracted for performance any asbestos removal,
repair or abatement activities with respect to any contract, its own facilities
or otherwise.

       

      (b)           There
has been no environmental investigation, study, audit, test, review or other
analysis conducted in relation to the business of Company or any property or
facility now or previously owned, leased or operated by Company which has not
been delivered to Parent prior to execution of this Agreement.

       

      (c)           Company
has not released, disposed of, transported, stored, generated or arranged for
the transportation or disposal of, any Hazardous Materials to, at or upon any
location.

       

      3.20           Insurance
Coverage.  Section
3.20 of the Disclosure Schedules lists all insurance policies and fidelity bonds
relating to the assets, properties, business, operations, employees, officers or
directors of Company or that are otherwise maintained by or with respect to
Company (each a “Company
Policy”) (specifying the insurer, the policy number or covering note
number

       

    

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

     

    with
respect to binders and the limits, including the aggregate limit, if any, of the
insurer’s liability thereunder and the dates such Company Policies have been in
effect), and Company has provided Parent with (or access to) true and complete
copies of all such Company Policies.  Company Policies are in full
force and effect and will remain in effect until the Closing
Date.  There is no Claim by Company pending under any of such
Company’s Policies as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds or in respect of which such
underwriters have reserved their rights.  To Company’s Knowledge,
there are no facts or occurrences of any events that are reasonably likely to
form the basis for any Claim against Company which will not be fully covered by
such policies.  All premiums payable under all such Company Policies
have been timely paid, and Company otherwise has complied in all material
respects with the terms and conditions of all such policies and bonds. Since
December 31, 2007, Company has not received notice of any threatened termination
of, material premium increase with respect to, or material alteration of
coverage under, any Company Policies.

    
       

      3.21           Employee Benefit
Plans.

       

      (a)           Section
3.21(a) of the Disclosure Schedules contains a complete list identifying (i)
each “employee benefit plan,” as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 (“ERISA”) and (ii) each
employment, severance or similar contract, plan, arrangement or policy and each
other plan or arrangement (written or oral) providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, other welfare benefits, workers’ compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits) which is currently maintained, administered, contributed to or
required to be contributed to by Company or any ERISA Affiliate and covers any
director, officer, employee or independent contractor or former director,
officer, employee or independent contractor of Company, or with respect to which
Company or any ERISA Affiliate has any liability, whether direct or indirect,
actual or contingent, formal or informal.  Such plans are referred to
herein individually as an “Employee Plan” and
collectively as the “Employee
Plans.”  For purposes of this Section 3.21, “ERISA Affiliate” of any Person
means any other Person that, together with such Person, would be treated as a
single employer under Section 414 of the Code.

       

      (b)           With
respect to each Employee Plan, Company has delivered to Parent complete copies
of the current plan document and summary plan description, the most recent
determination letter received from the IRS, if any, the Form 5500 Annual Report,
if any, and corresponding summary annual report, for each of the two (2) most
recent years prior to the Closing Date, results of testing for compliance with
all applicable Laws pertaining to coverage, non-discrimination, limitations on
contributions and benefits and on tax deductibility of contributions, and
top-heavy status for each of the three most recent years prior to the Closing
Date, documentation of all actions taken to correct any instances of possible
noncompliance with Laws under voluntary correction procedures of the IRS or
Department of Labor, including self-corrections, within the six years prior
to the Closing Date, and all trust agreements, insurance contracts, and other
funding agreements that implement such Employee Plan.  Company has
delivered to Parent all correspondence since Company’s incorporation to and from
any Governmental Authority that initiated an inquiry, investigation, or audit of
any Employee Plan.

       

    

    
      
        
           

        

        
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      (c)           Neither
Company nor any ERISA Affiliate contributes to or maintains, or has ever
contributed to or maintained, any plan that constitutes or constituted a “multiemployer plan,” as
defined in Section 3(37) of ERISA, or that is or was subject to Title IV of
ERISA.

       

      (d)           Each
Employee Plan which is intended to be qualified under Section 401(a) of the Code
is so qualified and has been so qualified during the period from its adoption to
date, and Company has received a letter or letters from the IRS confirming such
qualification; and each trust forming a part thereof is, and has been since its
formation, exempt from tax pursuant to Section 501(a) of the Code. To Company’s
Knowledge, no event or circumstance has occurred since the date of such
determination that would jeopardize the qualification of any Employee Plan, or
trust related to such a plan that is intended to be qualified under Section
401(a) of the Code.  Each Employee Plan and related trust, if any, has
at all times been maintained, operated, and administered (including the filing
and distribution of all required reports and descriptions) in compliance in all
material respects with its terms and with the requirements prescribed by any and
all Laws, including ERISA and the Code, which are applicable to such Employee
Plan.

       

      (e)           Except
as set forth in Section 3.21(e) of the Disclosure Schedules, the consummation of
the Transactions will not (i) entitle any current or former employee or
independent contractor of Company to severance pay, unemployment compensation or
any payment contingent upon a change in control or ownership of Company, or (ii)
accelerate the time of payment or vesting or trigger any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under,
increase or enhance the amount or benefits payable or provided under, or trigger
any other material obligation pursuant to, any Employee Plan.  There
is no Contract covering any employee or former employee of Company or any ERISA
Affiliate that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to the terms of Section 280G of
the Code.

       

      (f)           Company
does not have any liability with respect to post retirement health, medical or
life insurance benefits or other welfare benefits for retired, former or current
employees, other than pursuant to the terms of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended or similar state law.

       

      (g)           There
has been no amendment to, written interpretation or announcement (whether or not
written) by Company to any current or former employee relating to, or any change
in employee participation or coverage under, any Employee Plan which (i) is not
in material respects in accordance with the written or otherwise preexisting
terms and provisions of such Employee Plan or (ii) would increase materially the
expense of maintaining such Employee Plan above the level of the expense
incurred in respect thereof for the year ending December 31, 2007.

       

      (h)           All
contributions and payments accrued under each Employee Plan or attributable to
the period of service before the Closing Date, other than the spending account
liabilities under any Employee Plan established under Section 125 of the Code,
determined in accordance with prior funding and accrual practices, as adjusted
to include proportional accruals for the period ending at the Closing Date and
for contributions attributable to the period of service before the Closing Date,
have been discharged and paid on or prior to the Closing Date except to the
extent reflected as a liability on the Financial Statements.

    

    

    
      
        
           

        

        
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      (i)           There
is no pending or, to Company’s Knowledge,  threatened or contingent
Claim against Company relating to any Employee Plans, except for Claims for
benefits which are payable in the ordinary course.

       

      (j)           To
Company’s Knowledge, no Employee Plan nor any trust created thereunder, nor any
trustee or administrator thereof, has engaged in a transaction with such
Employee Plan or with a party in interest, as defined in Section 3(14) of ERISA
that constitutes a non-exempt prohibited transaction under Section 406 of ERISA
or Section 4975 of the Code, or that would subject such Employee Plan,
trust, trustee, administrator or party in interest to a penalty imposed by
Title I, Part 5 of ERISA.

       

      3.22           Employees.

       

      (a)           Section
3.22(a) of the Disclosure Schedules sets forth a true and complete list as of
the date of this Agreement of (i) the names, titles, annual salaries, bonus and
other compensation of all current employees, directors and officers of Company
and the wage rates for all non-salaried employees of Company (by classification)
and (ii) the names of, and compensation payable, and independent
contractors or consultants of Company.  Company has not been notified
by any of its employees that such employee intends to resign, retire or
discontinue its relationship with Company as a result of the Transactions or
otherwise within one year after the Closing Date.

       

      (b)           Other
than as set forth in Section 3.22(b) of the Disclosure Schedules, Company is not
a party to any current employment Contract.  To Company’s Knowledge,
no former employee or former independent contractor is in violation of any
material term of any employment or independent contractor agreement,
confidentiality or other proprietary information disclosure agreement or any
other Contract entered into by and between such employee and/or independent
contractor and Company.

       

      (c)           All
of the employees of Company are either United States citizens or are legally
entitled to work in the United States under the Immigration Reform and Control
Act of 1986, as amended, other United States immigration Laws and the Laws
related to the employment of non-United States citizens applicable in the state
in which the employees are employed.

       

      3.23           Labor
Matters.

       

      (a)           Company
is in material compliance with all currently applicable Laws respecting
employment and employment practices, including provisions relating to wages and
hours, safety and health, work authorization, equal employment opportunity,
immigration and the withholding of income taxes, unemployment compensation,
worker’s compensation, employee privacy and right to know and social security
contributions.  Company is not engaged in any unfair labor practice,
and (other than for wages earned in the ordinary course of business during the
payroll period immediately preceding the Closing Date, the liability for payment
of which shall be taken into account in determining Working Capital and
reflected in the Estimated Balance Sheet) there exists no basis for the
assessment of any unpaid wages with respect to any employee.

       

    

    
      
        
           

        

        
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      (b)           There
is no unfair labor practice complaint pending or, to Company’s Knowledge,
threatened against Company before the National Labor Relations Board, Department
of Labor, Equal Employment Opportunity Commission or any other Governmental
Authority.

       

      3.24           Books and
Records.  Company
has maintained Records with respect to its assets and its business and
operations which are true, accurate and complete in all material respects, and
Company is not aware of any material deficiencies in such
Records.  Except as set forth in Section 3.24 of the Disclosure
Schedules, Company does not have any of its primary Records, systems, controls,
data or information which are material to the operation of its business
recorded, stored, maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical or photographic
process, whether or not computerized) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and direct control
of Company.  Company has delivered to Parent true and complete copies
of all Records pertaining to Company’s Board of Directors minutes.

       

      3.25           Absence of Unlawful
Payments.  Neither
(a) Company, nor (b) any director or officer of Company, nor (c) any employee,
agent or other Person acting on behalf of Company (i) has used any corporate or
other funds for unlawful contributions, payments, gifts or entertainment; made
any unlawful expenditures relating to political activity to government officials
or others or established or maintained any unlawful or unrecorded funds; (ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; or violated any provision
of the Foreign Corrupt Practices Act of 1977, as amended; or (iii) has accepted
or received any unlawful contributions, payments, gifts or
expenditures.

       

      3.26           Bank Accounts. 
Set
forth in Section 3.26 of the Disclosure Schedules is a complete list showing the
name and address of each bank or other depository and each lender with which
Company has an account or safe deposit box, the number of any such account or
any such box and the names of all Persons authorized to draw thereon or to have
access thereto.

       

      3.27           Effect of the
Transaction.  Except
as disclosed on Section 3.27, no creditor, employee,  or customer or
other Person having a material business relationship with Company has informed
Company that such Person currently intends to change the relationship because of
this Agreement or because of any of the Transactions contemplated hereby, nor
does Company have Knowledge of any such intent.

       

      3.28           Finders’ Fees. 
Except
as set forth in Section 3.28 of the Disclosure Schedules, no broker, finder,
agent or similar intermediary has acted on behalf of Company in connection with
this Agreement or the Transactions contemplated hereby, and there are no
brokerage commissions, finders’ fees or similar fees or commissions payable by
Company in connection therewith.

       

       

      ARTICLE
IV

      REPRESENTATIONS AND
WARRANTIES OF PARENT AND SUB

       

          Parent and
Sub, jointly and severally, represent and warrant to Company the following
matters both as of the date of this Agreement and as of the Closing Date (except
to the extent that a representation or warranty expressly states that such
representation or warranty is current only as

    

    
      
        
           

        

        
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    of
an earlier date or as of the date of this Agreement):

     

    4.01           Existence and
Power.  Each
of Parent and Sub is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all corporate
powers and all Permits and Consents required to carry on its business as now
conducted, except for those Permits and Consents the absence of which would not
have a material adverse effect on the ability of Parent and Sub to consummate
the Transactions.

     

    4.02           Authorization; Binding
Effect.  Each
of Parent and Sub has all requisite corporate power and corporate authority
required to enter into this Agreement, the Transaction Documents and to perform
its obligations under this Agreement and the Transaction Documents and to
otherwise consummate the Transactions.  The execution and delivery of
this Agreement and the other Transaction Documents by Parent and Sub and the
consummation of the Transactions by Parent and Sub have been duly authorized by
all necessary corporate action on the part of Parent and Sub.  This
Agreement has been duly executed and delivered by Parent and Sub and constitutes
a legal, valid and binding agreement of each of Parent and Sub enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors’ rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).  All other Transaction Documents
delivered at Closing by Parent or Sub will be duly and validly executed by
Parent or Sub and will constitute the legal, valid and binding agreement of
Parent or Sub, as applicable, enforceable against Parent or Sub, as applicable,
in accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors’ rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

     

    4.03           Governmental Authorization
and Consents.  No
Consent of, filing with, or notice to, any Governmental Authority, lender,
lessor, creditor, stockholder or any other Person is required in connection with
the execution, delivery and performance by Parent or Sub of this Agreement and
each of the Transaction Documents to which Parent or Sub is a party, and the
consummation by Parent and Sub of the Transactions.

     

    4.04           Non-contravention. 
The
execution and delivery of this Agreement and the other Transaction Documents by
Parent and Sub, the performance by Parent and Sub of their obligations hereunder
and thereunder and the consummation of the Transactions do not and will not (i)
contravene or conflict with the certificate of incorporation or bylaws of Parent
or Sub, (ii) assuming compliance with the matters referred to in Section
4.03, contravene or conflict with any applicable Law binding upon or applicable
to Parent or Sub in any material respect or (iii) require notice, or constitute
a Default under, any Contract binding upon Parent or Sub, except as would not
have a material adverse effect on the ability of Parent and Sub to consummate
the Transactions.

     

    4.05           Litigation. 
To
Parent’s knowledge, there is no litigation, action, suit, proceeding, or
governmental investigation pending or threatened against Parent or Sub, at law
or in equity or before any federal, state, municipal, local or other
Governmental Authority, which might have a material adverse effect on the
ability of Parent and Sub to consummate the Transactions, nor does

     

    
      
        
          
          

        

        
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        Parent
or Sub know or have reason to know of any grounds for any such litigation,
action, suit, proceeding, or investigation.

         

        4.06           No Prior
Activities.  Sub
has not incurred nor will it incur any liabilities or obligations, except those
incurred in connection with its organization and with the negotiation of this
Agreement and the performance hereof, and the consummation of the Transactions
contemplated hereby, including the Merger.  Except as contemplated by
this Agreement, Sub has not engaged in any business activities of any type or
kind whatsoever, or entered into any agreements or arrangements with any Person,
or become subject to or bound by any obligation or undertaking.  All
of the issued and outstanding shares of capital stock of Sub are validly issued
and owned by Parent.

         

        4.07           Finders’ Fee. 
No
broker, finder, agent or similar intermediary has acted on behalf of Parent or
Sub in connection with this Agreement or the Transactions contemplated hereby,
and there are no brokerage commissions, finders’ fees or similar fees or
commissions payable by Parent or Sub in connection herewith.

         

        ARTICLE
V

        CERTAIN COVENANTS AND
AGREEMENTS

         

        5.01           Actions Pending
Closing.

         

        (a)           From
the date hereof through the earlier of the Closing or the termination of this
Agreement and except as expressly contemplated by this Agreement, Company agrees
(i) to conduct its business and operations only in the ordinary course and
in substantially the same manner as heretofore conducted, (ii) to use its
reasonable best efforts to preserve its business organizations intact, and to
retain its present officers and key employees, to preserve the goodwill of
customers, suppliers and all other Persons having business relationships with
Company, (iii) to pay its obligations to its creditors in the ordinary
course of business, (iv) to use its reasonable best efforts to maintain and
keep its properties and assets in as good repair and condition as at present,
ordinary wear and tear excepted, (v) to operate its business in all
material respects in compliance with all applicable Laws, (vi) to confer
with Parent concerning operational matters that may have a Material Adverse
Effect, and (vii) to maintain in effect and, when necessary, renew Company
Policies and to confer with Parent prior to making any modifications to the
Company Policies.

         

        (b)           Without
limiting the generality of the foregoing, prior to the Closing, Company shall
not, except as contemplated by this Agreement or as set forth in Section 5.01 of
the Disclosure Schedules, without the prior written consent of Parent, which
consent shall not be unreasonably denied, directly or indirectly take any action
that would cause any of its representations in Section 3.09 to be untrue or
inaccurate at any time or authorize, or commit or agree to take, any such action
or any action that would cause it to fail to satisfy any of the conditions to
Closing set forth in Section 6.03.

         

        5.02           Efforts;
Consents.

         

             (a)           Each
party hereto agrees to use reasonable best efforts, at its own cost and expense,
to take or cause to be taken all actions necessary, proper or advisable to
consummate the Transactions prior to November 28, 2008.  Without
limiting the generality of the foregoing, each

         

      

      
        
          
          

        

        
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      of
the parties hereto shall use reasonable best efforts to obtain all Consents of,
make any filings with, or give any notices to, any Governmental Authority or any
other Person that are or may become necessary for the performance of its
respective obligations pursuant to this Agreement, the other Transactions
Documents and the consummation of the Transactions, and shall cooperate fully in
promptly seeking to obtain, make or give such Consents, filings and notices as
may be necessary for the performance of its respective obligations pursuant to
this Agreement, the other Transaction Documents and the
Transactions.

      
         

        (b)           As
soon as practicable after the date hereof, Company shall take such action as is
reasonably necessary or advisable to obtain the Requisite Shareholder Approval,
which actions shall include duly calling and giving notice of, within ten (10)
business days after the date hereof, and convening and holding a meeting of its
stockholders or, within such ten (10) business day period, seeking action by
written consent to adopt and approve this Agreement in accordance with the
provisions of the DGCL and the Company Governing Documents.  During
the term of this Agreement, the Company’s Board of Directors shall recommend
approval and adoption of this Agreement by the holders of Company Capital Stock
and shall take all lawful action to solicit and obtain the approval of the
holders of Company Capital Stock.

         

        5.03           Access to
Records.

         

        (a)           Prior
to the Closing Date, Parent and Sub shall be entitled, through their employees
and representatives, to make such investigation of the assets, properties,
business and operations of Company and such examination of the books, records
and financial condition of Company as Parent and Sub may request.  Any
such investigation and examination shall be conducted after providing reasonable
prior notice and Company shall cooperate therewith.  In order that
Parent and Sub may have the opportunity to make such business, accounting and
legal review, examination or investigation as it requests of the business and
affairs of Company, Company shall furnish the representatives of Parent and Sub,
during such period, with all such information and copies of such documents as
such representatives may request, shall make available its officers and
employees as such representatives may reasonably request, and shall cause its
officers and employees to, and use its best efforts to cause its consultants,
agents, accountants and attorneys to, cooperate fully with such representatives
in connection with such review and examination.  Between the date of
this Agreement and the Closing Date, as soon as the same are available, Company
will provide Parent with copies of the regularly prepared financial statements
of Company, if any.

         

        (b)           As
soon as practicable after the date hereof, Company will use reasonable best
efforts to cooperate with Parent and engage an Independent Accountant, at
Parent’s cost, to commence an audit of Company’s financial statements for the
year ended December 31, 2007.

         

        (c)           Between
the date of this Agreement and the Effective Time, Parent will not, for a period
of two years, without the prior written consent of Company, disclose any Company
Confidential Information to any Person other than those of its Representatives
who are actively assisting in completion of the Transactions and integration of
the Company’s business or who otherwise need to know such information for the
purpose of assisting in completion of the Transactions and integration of the
Company’s business, unless, upon the advice of counsel to Parent, disclosure is
required to be made pursuant to under the Securities Act of 1933, as
amended,

         

      

      
        
          
            
            

          

          
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        the
Securities Exchange Act of 1934, as amended, the rules of the New York Stock
Exchange or any other relevant securities exchange or other applicable
Law.  In the event that Parent or any of its Representatives are
requested pursuant to, or required by, Law to disclose any Seller Confidential
Information, Parent agrees that it will provide Company with prompt notice of
such request or requirement in order to enable Company, at its sole expense, to
seek an appropriate protective order or other remedy or to waive compliance, in
whole or in part, with the terms hereof.

        
           

          5.04           Notification of Certain
Matters.  Company
shall give immediate notice to Parent if any of the following occurs after the
date of this Agreement and prior to or on the Closing Date: (i) any notice of,
or other communication relating to, a Default, or event which with notice or
lapse of time or both would become a Default, under any Material Contract; (ii)
receipt by Company of any notice or other communication in writing from any
Person alleging that the Consent of such Person is or may be required in
connection with the Transactions contemplated by this Agreement, other than a
Consent disclosed pursuant to Section 3.03 above; (iii) the occurrence or
non-occurrence of any fact or event which could reasonably be expected to cause
any covenant, condition or agreement of Company hereunder not to be complied
with or satisfied; (iv) the commencement or threat of any litigation or
government investigation involving or affecting Company or any of its properties
or assets; (v) the occurrence or non-occurrence of any fact or event that causes
a breach by Company of any provision of this Agreement applicable to it;
(vi) receipt by Company of any notice or other communication from any
Governmental Authority in connection with the Transactions; and (vii) the
occurrence of any fact or event of which it becomes aware that results in the
inaccuracy in any representation or warranty of Company; provided, however,
that, subject to Section 8.02, the delivery of any notice pursuant to this
provision shall not modify any representation or warranty of any party, cure any
breaches thereof or limit or otherwise affect the rights or remedies available
hereunder to Parent or Sub and the failure of Parent or Sub to take any action
with respect to such notice shall not be deemed a waiver of any breach or
breaches to the representations or warranties of Company.  Parent and
Sub shall give immediate notice to Company if any of the following occurs after
the date of this Agreement and prior to or on the Closing Date: (i) receipt by
Parent or Sub of any notice or other communication in writing from any Person
alleging that the Consent of such Person is or may be required in connection
with the Transactions contemplated by this Agreement, other than a Consent
disclosed pursuant to Section 3.03 above; (ii) the occurrence or
non-occurrence of any fact or event which could reasonably be expected to cause
any covenant, condition or agreement of Parent or Sub hereunder not to be
complied with or satisfied; (iii) the commencement or written threat of any
material litigation or government investigation involving or affecting Parent or
Sub or any of its properties or assets; (iv) the occurrence or non-occurrence of
any fact or event that causes, a breach by Parent or Sub of any provision of
this Agreement applicable to it; (v) receipt by Parent or Sub of any notice
or other communication from any Governmental Authority in connection with the
Transactions; (vi) the occurrence of any fact or event of which it becomes
aware that results in the inaccuracy in any representation or warranty of Parent
or Sub or of the Company; provided, however, that, subject to Section 8.02, the
delivery of any notice pursuant to this provision shall not modify any
representation or warranty of any party, cure any breaches thereof or limit or
otherwise affect the rights or remedies available hereunder to Company and the
failure of Company to take any action with respect to such notice shall not be
deemed a waiver of any breach or breaches to the representations or warranties
of Parent or Sub

           

          5.05           Employee
Matters.  After
the expiration of such transition period as Parent may

           

          
            
               

            

            
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determine
(the “Transition Time”),
the employees covered by Company’s Employee Plans at the time of Closing will be
transitioned over to the benefit plans and arrangement of Parent, the Surviving
Corporation or any of their respective Subsidiaries (collectively, “Parent Benefit
Plans”).  For purposes of determining eligibility to
participate, vesting and entitlement to benefits (but not for purposes of
benefit accrual under retirement plans) where length of service is relevant in
the Parent Benefit Plans, Parent shall, and shall cause the Surviving
Corporation or such Subsidiary to, take such actions as are necessary and
appropriate to provide that Company employees as of the Transition Time shall
receive service credit for service with Company and its
Subsidiaries.  Parent and the Surviving Corporation shall
(i) waive all limitations as to preexisting condition exclusions and
waiting periods with respect to participation and coverage requirements
applicable to Company employees as of the Transition Time under any Parent
Benefit Plan that is a welfare benefit plan that such employees may be eligible
to participate in after the Transition Time, other than limitations or waiting
periods that are already in effect with respect to such Company employees and
that have not been satisfied as of the Transition Time under the Company Benefit
Plans that are welfare benefit plans maintained for Company employees
immediately prior to the Transition Time, and (ii) provide each Company
employee as of the Transition Time with credit for any co-payments and
deductibles paid prior to the Transition Time in satisfying any applicable
co-payment, deductible or out-of-pocket requirements under any Parent Benefit
Plan that is a welfare plan that such employees are eligible to participate in
after the Transition Time.  

      

       

      
        5.06             Tax
Matters.

         

        (a)           Periods Ending At or Before
the Effective Time.  Parent shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for Company for all
periods ending on or prior to the Effective Time, which are due after the
Effective Time.  Parent shall provide Holder Representative with a
copy of such Tax Returns at least 30 days prior to the due date for filing such
Tax Returns.  The costs, fees and expenses related to the preparation
of all such Tax Returns for periods prior to the Effective Time shall be
estimated and accrued as a liability of Company for purposes of calculating
Working Capital and shall be payable by Company in accordance with Section
2.08.

         

        (b)           Periods Beginning Before and
Ending After the Closing Date. To the extent that any Tax Returns of
Company relate to any Tax periods which begin before the Closing Date and end
after the Effective Time, Parent shall prepare or cause to be prepared in a
manner consistent with the prior Tax Returns of Company (to the extent that such
prior Tax Returns were prepared in a manner permissible under the applicable Tax
laws) and file or cause to be filed any such Tax Returns.  For
purposes of this Agreement, in the case of any Taxes that are imposed on a
periodic basis and are payable for a taxable period that includes but does not
end at the Effective Time, the portion of such Tax which relates to the portion
of such taxable period ending at the Effective Time shall (i) in the case of any
Taxes other than Taxes based upon or related to income or receipts, be deemed to
be the amount of such Tax for the entire taxable period multiplied by a fraction
the numerator of which is the number of days in the taxable period ending at the
Effective Time and the denominator of which is the number of days in the entire
taxable period, and (ii) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
taxable period ended at the Effective Time.  The costs, fees and
expenses related to the preparation of such Tax Returns shall be borne (i) by
Company, prior to

         

        
          
             

          

          
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the
Effective Time, and (ii) by Parent, after the Effective Time.  Any
credits relating to a taxable period that begins and ends before the Effective
Time shall be taken into account as though the relevant taxable period ended at
the Effective Time.  All determinations necessary to give effect to
the foregoing allocations shall be made in a manner consistent with prior
practice of Company (to the extent that such determinations were made in a
manner permissible under the applicable Tax laws).

       

      (c)           Audits and Contests
Regarding Taxes.  Any party who receives any notice of a
pending or threatened Tax audit, assessment, or adjustment relating to Company,
which may give rise to Liability of another party hereto, shall promptly notify
Parent and the Holder Representative within ten (10) business days of the
receipt of such notice.  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 (including indemnity obligations
hereunder).   The defense of any Tax audit, assessment,
adjustment, or other proceeding relating to Taxes will be governed by the
provisions of Section 7.03(c).

       

      5.07           Further
Assurances.   At
and after the Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name and on behalf
of Company or Sub, any deeds, bills of sale, assignments or assurances and to
take and do, in the name and on behalf of Company or Sub, any other actions and
things to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.

       

      ARTICLE
VI

       

      CONDITIONS TO
CLOSING

       

      6.01           General
Conditions.  The
respective obligations of each party to this Agreement to consummate the
Transactions shall be subject to the following conditions, unless waived in
writing prior to the Closing Date by each party:

       

      (a)           Stockholder
Approval.  The Requisite Shareholder Approval shall have been
obtained.

       

      (b)           Governmental Consents,
Approvals and Waivers.  To the extent required by applicable
Law or Permit, all Consents required to be obtained from, and notices required
to be given to, any Governmental Authority required in order for the parties to
consummate the Transactions shall have been received, obtained or given, as the
case may be, and shall be in full force and effect.

       

      (c)           No Actions or
Orders.  No Law shall have been adopted, promulgated, entered,
enforced or issued (and not repealed, superseded, lifted or otherwise made
inapplicable) by any Governmental Authority which, or Claim shall be pending or
threatened before any court, other Governmental Authority or arbitrator which,
if successful, would (i) enjoin, restrain, or prohibit the consummation of
any of the Transactions or (ii) have the effect of making illegal or
otherwise prohibiting any of the Transactions.

       

      
        
          
          

        

        
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      (d)           Payment of Legal
Fees.  The Company shall have paid all outstanding legal fees
to Cooley Godward Kronish LLP.  Any waiver of this section 6.01(d)
will require the Consent of Cooley Godward Kronish LLP.

       

      6.02           Conditions to Obligations of
Company.  The
obligation of Company to consummate the Transactions shall be subject to the
satisfaction of the following conditions, unless waived in writing prior to the
Closing by Company:

       

      (a)           Representations and
Warranties.  Each of the representations and warranties of
Parent and Sub contained herein that are qualified as to materiality shall be
true and correct, and those not so qualified shall be true and correct in all
material respects, in each case at and as of the Closing Date with the same
force and effect as though made at and as of the Closing Date (except to the
extent a representation or warranty speaks specifically as of an earlier date,
in which case as of such date).

       

      (b)           Covenants.  Parent
and Sub shall have performed, in all material respects, all obligations and
complied, in all material respects, with all covenants required by this
Agreement to be performed or complied with by Parent and Sub on or prior to the
Closing Date.

       

      (c)           Certificates.  Certificates,
in form and substance satisfactory to Company and its legal counsel, of the
Secretary of Parent and Sub certifying and attaching all requisite resolutions
or actions of Parent’s and Sub’s, as applicable, board of directors and
stockholders (for Sub only) approving the execution and delivery of this
Agreement and the consummation of the Transactions and certifying to the
incumbency and signatures of the officers of Parent and Sub executing this
Agreement and any other document relating to the Transactions.

       

      6.03           Conditions to Obligations of
Parent and Sub.  The
obligations of Parent and Sub  to consummate the Transactions shall be
subject to the satisfaction of the following conditions, unless waived in
writing prior to the Closing by Parent:

       

      (a)           Representations.  Each
of the representations and warranties of Company contained herein that are
qualified as to materiality or a Material Adverse Effect (or similar concept)
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, in each case at and as of the Closing Date with the
same force and effect as though made at and as of the Closing Date (except to
the extent a representation or warranty speaks specifically as of an earlier
date, in which case as of such date).

       

      (b)           Covenants.  Company
shall have performed, in all material respects, all obligations and complied, in
all material respects, with all covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.

       

      (c)           Consents.  Company
shall have obtained and provided to Parent each Consent listed in Schedule 6.03(c), if any, each
in form and substance reasonably satisfactory to Parent.

       

      (d)           No Material Adverse
Effect.  There shall not have occurred after the date hereof
any event or events that, individually or in the aggregate, constitute a
Material Adverse Effect.

       

      
        
          
          

        

        
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      (e)           Non-Competition
Agreement.  Douglas J. Hirsch shall have executed and delivered
(or tendered subject only to Closing) to Parent and Sub a noncompetition
agreement in the form of Exhibit 6.03(e);

       

      (f)           Employment
Agreement.  Douglas J. Hirsch shall have executed and delivered
(or tendered subject only to Closing) to Parent and Sub an Employment Agreement,
in substantially the form attached as Exhibit 6.03(f);

       

      (g)           Resignations of
Directors.  Each director of Company shall have executed and
delivered (or tendered subject only to Closing) to Parent resignations from
their positions as directors, effective immediately following the Effective
Time.

       

      (h)           Dissenting
Stockholders.  Company shall not have received notice from
Dissenting Stockholders of their intent to dissent with respect to more than
7.0% of the Company Capital Stock.

       

      (i)           Certificates.  Parent
and Sub shall have received the following:

       

      (i)           a
certificate, in form and substance satisfactory to Parent and its legal counsel
and executed by Company, as to the accuracy of their representations and
warranties as of the date of this Agreement and as of the Closing in accordance
with Section 6.03(a) and as to their compliance with and performance of their
covenants and obligations to be performed or complied with at or before the
Closing in accordance with Section 6.03(b); and

       

      (ii)           certificates,
in form and substance satisfactory to Parent and its legal counsel, of the
Secretary of Company certifying, as complete and accurate as of the Closing,
attached copies of the Company Governing Documents, certifying and attaching all
requisite resolutions or actions of Company’s board of directors and
stockholders approving the execution and delivery of this Agreement and the
consummation of the Transactions and certifying to the incumbency and signatures
of the officers of Company executing this Agreement and any other document
relating to the Transactions.

       

      ARTICLE
VII

       

      INDEMNIFICATION AND
SURVIVAL

       

      

       

      7.01           Survival. 
All
representations and warranties of Company contained in this Agreement or
incorporated herein by reference or in any certificate delivered by a party
pursuant to this Agreement shall (a) survive the Closing, notwithstanding any
investigation made by or on behalf of any party hereto, and (b) be deemed to be
made as of the date hereof and as of the Closing Date (except to the extent that
a representation or warranty expressly states that such representation or
warranty is as of a certain date), in each case, subject to the limitations set
forth in this Section 7.01.  The representations and warranties
contained in or made pursuant to this Agreement and the indemnity obligations
set forth in Section 7.02(a)(i) shall terminate and expire on, and no Claim with
respect thereto may be brought after, the date that is eighteen (18) months
after the Closing Date; provided, however, that (i) the representations,
warranties and related indemnity obligations under Sections 3.01 (Existence and
Power), 3.02 (Authorization; Binding 

       

      
        
          
          

        

        
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      Effect), 3.05
(Capitalization) shall survive until expiration of the respective applicable
statute of limitations for each such item, and (ii) the representations,
warranties and related indemnity obligations under 3.16 (Intellectual Property),
3.17 (Taxes), 3.19 (Environmental Matters), 3.21 (Employee Benefit Plans), and
3.28 (Finders’ Fees)  shall terminate on, and no Claim with respect
thereto may be brought after, the date that is twenty-four (24) months after the
Closing Date.  Except as otherwise expressly provided herein, the
covenants and agreements of the parties contained in this Agreement shall
survive indefinitely the execution and delivery hereof and the consummation of
the Transactions.  Notwithstanding any other provision of this
Agreement, if any Claim for Damages is asserted by any Indemnitee prior to the
termination of the representation, warranty or indemnification obligation
pursuant to this Section 7.01, the indemnity obligations shall continue with
respect to such Claim until the resolution thereof, provided that such asserted
indemnification is identified in writing to the Holder Representative prior to
the expiration of such indemnity.  The right to indemnification or any
other remedy based on warranties, representations, covenants and agreements in
this Agreement shall not be affected by any investigation conducted with respect
to, or any knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant or agreement.  The waiver
of any condition based on the accuracy of any warranty or representation, or on
the performance of or compliance with any covenant or agreements, will not
affect the right to indemnification or any other remedy based on such
warranties, representations, covenants and agreements.

       

      7.02           Indemnification.

       

      (a)           After
the Closing, subject to the limitations and qualifications set forth in this
Article VII, Parent, its Affiliates, including Sub and the Surviving
Corporation, and each of their respective stockholders, trustees, directors,
officers and other Representatives (collectively, the “Indemnitees”) shall be
indemnified and held harmless from and against and in respect of any and all
Claims, Damages and Losses which arise out of, relate to or result from
(i) the inaccuracy in or breach of any representation or warranty made by
Company in this Agreement (including all exhibits and schedules attached hereto,
including the Disclosure Schedules), in any transfer instrument or in any other
agreement, certificate, document, writing or instrument delivered by Company
pursuant to this Agreement, (ii) the breach or non-fulfillment of any
unwaived covenant or agreement made by Company in this Agreement (including all
exhibits and schedules attached hereto, including the Disclosure Schedules), in
any transfer instrument or in any other agreement, certificate, document,
writing or instrument delivered by Company pursuant to this Agreement,
(iii) any amount payable in respect of any Dissenting Share in excess of
the Per Share Common Closing Consideration and any costs and expenses of
defending any Claim involving Dissenting Shares, (iv) any act or omission
of the Holder Representative relating to this Agreement, (v) any
Liabilities in respect of Taxes of Company relating to periods prior to the
Effective Time to the extent not included as a Liability of Company in the
calculation of Working Capital and any cost, fees and expenses related to the
preparation of Tax Returns for such periods to the extent such costs, fees and
expenses exceed the amount accrued as a Liability of Company in the calculation
of Working Capital, (vi) any and all Claims against the Company or any of the
Indemnitees made in connection with or arising out of the matters disclosed in
Section 3.11(b) of the Disclosure Schedules and (vii) enforcing the
indemnity hereunder.  In connection with any exercise by any

       

      
        
          
          

        

        
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      Indemnitee of its rights
hereunder, it shall be entitled to make all claims for indemnification through,
and deal exclusively with, the Holder Representative.

       

      (b)           Subject
to the limitations set forth in this Article VII, and except for claims based
upon a finding of fraud or intentional misrepresentation, the Indemnitees shall
be entitled to indemnification under this Agreement only to the extent of the
aggregate amount of the Escrow Fund and any Earnout Holdback Amounts pursuant to
Section 2.09 and the sole source of payment for any claim by an indemnified
party pursuant to this Article VII or any other claim arising out of or
related to this Agreement shall be the aggregate amount of the Escrow Fund and
the Earnout Holdback Amounts pursuant to Section 2.09.  The exercise
of such right of setoff by Parent in good faith, whether or not ultimately
determined to be justified, will not constitute a breach of this Agreement.
Neither the exercise of nor the failure to exercise such right of setoff will
constitute an election of remedies or limit Parent or any other Indemnitee in
any manner in the enforcement of any other remedies that may be available to
them.  Except for Claims based upon a finding of fraud, intentional
misrepresentation or demanding equitable remedies  the indemnification
provisions set forth in this Article VII shall be the Indemnitees’ sole and
exclusive remedy for all Claims, Losses and Damages arising hereunder by Parent,
its Affiliates, Sub and the Surviving Corporation, and Parent, its Affiliates,
Sub and the Surviving Corporation hereby waive, for and on behalf of all of such
indemnitees, any and all other remedies, whether at law or in equity, that are
otherwise available to the Indemnitees, or any of them, arising out of this
Agreement and the transactions contemplated hereby; provided, however, that
notwithstanding the foregoing, nothing in this Agreement shall eliminate the
ability of a party hereto to apply for equitable remedies to enforce the other
party’s or parties’ obligations under this Agreement.

       

      7.03           Notice of Indemnification
Claims.

       

      (a)           Notice of
Claims.  If (i) a Claim is made by a third party against any
Indemnitee, (ii) the Indemnitee believes in good faith that such party has
experienced or incurred Damages, and (iii) the Indemnitee believes in good faith
that it may be entitled to indemnification under Section 7.02, then such
Indemnitee shall give to the Holder Representative, as agent for the
Stockholders, written notice of such Claim or Damages (“Indemnification Notice”) as
soon as reasonably practicable.  If a Claim relates to an action filed
by a third party, such notice will be given by the Indemnitee to the Holder
Representative promptly but in no event more than thirty (30) days after the
Indemnitee has received written notice of such Claim (provided that failure to
give such notice shall not limit the Holder Representative’s indemnification
obligation hereunder except to the extent that the delay in giving, or failure
to give, the notice adversely affects the Holder Representative’s ability to
defend against the Claim).  The Indemnification Notice will describe
with reasonable specificity the nature of the Claim, a good faith estimate of
the Damages and the basis for the Damages associated therewith.

       

      (b)           Procedure in Event of
Indemnification Claim.  Subject to the limitations in Section
7.04, if an Indemnitee desires to assert an indemnification claim pursuant to
Section 7.02, the Indemnitee promptly shall provide an Indemnification Notice to
the Holder Representative in accordance with the procedures set forth in Section
7.03(a).  If the Holder Representative within thirty (30) days after
receipt of the Indemnification Notice does not object to the propriety of the
indemnification claims described as being subject to indemnification pursuant to
Section 7.02 or the amount of Damages asserted in the Indemnification Notice,
the indemnification claims

       

      
        
           

          
            
              
              

            

            
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          described in the Indemnification
Notice shall be deemed final and binding (a “Permitted
Indemnification Claim”).  If the Holder Representative contests
the propriety of an indemnification Claim described on the Indemnification
Notice and/or the amount of Damages associated with such Claim, then the Holder
Representative shall deliver to the Indemnitee a written notice detailing with
reasonable specificity all then known objections the Indemnitee has with respect
to the indemnification claims contained in the Indemnification Notice (“Indemnification
Objection Notice”).  If the Holder Representative and the
Indemnitee are unable to resolve the disputed matters described in the
Indemnification Objection Notice within fifteen (15) business days after the
date the Indemnitee received the Indemnification Objection Notice, the disputed
matters will be resolved by litigation in an appropriate court of competent
jurisdiction. Any undisputed indemnification claims contained in the
Indemnification Notice shall be deemed to be final and binding and shall
constitute a Permitted Indemnification Claim.  If Final Resolution of
the litigation results in all or any portion of an indemnification claim
properly being subject to indemnification pursuant to Section 7.02, such claim
or portion thereof shall be final and binding and shall constitute a Permitted
Indemnification Claim.

        

         

      

      (c)           Defense of Third Party
Claims.  An Indemnitee against whom a third party Claim is made
shall give the Holder Representative prompt notice of such Claim in accordance
with Section 7.03(a) so that the Holder Representative shall have an opportunity
to defend such Claim, at the Holder Representative’s sole expense and with
counsel selected by the Holder Representative and reasonably satisfactory to the
Indemnitee; provided, that such Indemnitee at all times also shall have the
right to participate fully in or, if the Holder Representative consents (such
consent not to be unreasonably withheld), to assume control of such defense at
its sole expense and the Holder Representative will cooperate fully with the
Indemnitee; provided, further, that if the Indemnitee undertakes the sole
defense of such Claim, it shall defend such Claim in good faith, shall apprise
the Holder Representative from time to time as the Indemnitee deems appropriate
of the progress of such defense and shall not consent to the entry of any
judgment or enter into any settlement except with the written consent of the
Holder Representative (which consent shall not be unreasonably withheld,
conditioned or delayed).  In addition, the Indemnitee will have the
right to employ one law firm as counsel, together with a separate local law firm
in each applicable jurisdiction (each, “Separate Counsel”), to
represent the Indemnitee in any action or group of related actions if, in the
Indemnitee’s reasonable judgment at any time, either a conflict of interest
between the Indemnitee and the Holder Representative exists with respect to such
Claim or there may be defenses available to the Indemnitee that are different
from or in addition to those available to the Holder Representative, and in that
event (i) the reasonable fees and expenses of such Separate Counsel will be paid
by the Escrow Fund or Earnout Holdback Amounts and (ii) each of the Holder
Representative and the Indemnitee will have the right to conduct its own defense
of such claim.  Failure of the Holder Representative to give an
Indemnitee written notice of its election to defend such claim within twenty
(20) days after receipt of notice thereof shall be deemed a waiver by the Holder
Representative of its right to defend such Claim.  If the Holder
Representative shall elect not to assume the defense of such Claim (or if the
Holder Representative shall be deemed to have waived its right to defend such
Claim), the Indemnitee against whom such Claim is made shall have the right, but
not the obligation, to undertake the sole defense of, and at the expense of, the
Escrow Fund or Earnout Holdback Amounts (including the payment of the
Indemnitees’ reasonable attorneys’, accountant and expert fees); provided,
however, that if the Indemnitee undertakes the sole defense of such Claim, and
at the expense of the Escrow Fund or Earnout Holdback Amounts, it shall defend
such Claim in good faith and shall apprise the Holder 

       

      
        
          
          

        

        
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      Representative from time
to time. and in no event, shall the Indemnitee consent to the entry of any
judgment or enter into any settlement (except with the prior written consent of
the Holder Representative, which consent shall not be unreasonably withheld,
conditioned or delayed).  The Holder Representative, in the defense of
such Claim, shall not consent to the entry of any judgment or enter into any
settlement (except with the prior written consent of the Indemnitee, which shall
not be unreasonably withheld, conditioned or delayed) which includes any
admission of liability by, on behalf of or with respect to any indemnified party
or which does not include as an unconditional term thereof the giving by the
claimant to all the Indemnitees against whom such Claim is made or
indemnification is provided of a general release from all past, present and
future liability in respect of, relating to or arising from such Claim or the
alleged acts or omissions on which such Claim is based (which release shall
exclude only any obligations incurred in connection with any such settlement) or
which contains any limitation, restriction, sanction or restriction on the
conduct, or conduct of any business, by any such Indemnitee.

       

      7.04           Limitations.

       

      (a)           An
indemnified party shall not be entitled to indemnification under
Section 7.02(a), except if and to the extent that the aggregate Losses
incurred by the Indemnified Parties exceeds the sum of $15,000 (the “Threshold Amount”), and, if
and when the aggregate amount of Losses for which the Indemnified Parties may
recover under Section 7.02(a), exceeds the Threshold Amount, then such
Indemnified Parties shall be entitled to indemnification for Losses in excess of
such amount.  The limitations set forth in this Section 7.04(a) shall
not apply to (A) any Claims related to an inaccuracy or breach of any
representation or warranty contained in Sections 3.01 (Existence and Power),
3.02 (Authorization; Binding Effect), 3.17 (Taxes), or 3.28 (Finders’ Fees), or
(B) any Claims based on a finding of fraud or intentional
misrepresentation.

       

      (b)           THE
INDEMNIFICATION PROVISIONS IN THIS ARTICLE VII SHALL BE ENFORCEABLE REGARDLESS
OF WHETHER THE INDEMNIFIABLE DAMAGES ARE BASED UPON PAST, PRESENT OR FUTURE
ACTS, CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE,
FRAUDULENT TRANSFER ACT, ENVIRONMENTAL LAW, OR PRODUCTS LIABILITY, SECURITIES OR
OTHER LAW) AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM
INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE CONCURRENT, CONTRIBUTORY
OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING INDEMNIFICATION OR THE SOLE OR
CONCURRENT STRICT LIABILITY IMPOSED UPON THE PERSON SEEKING
INDEMNIFICATION.  THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE VII
ARE NOT INTENDED TO AFFECT AN INDEMNITEE’S OBLIGATION TO USE COMMERCIALLY
REASONABLE EFFORTS TO MITIGATE DAMAGES WITH RESPECT TO ANY CLAIM.

       

      7.05           Treatment of Indemnification
Payments.

       

        Any
indemnity payments to or from the Stockholders, or to or from Parent pursuant to
this Agreement shall be treated by the parties as purchase consideration
adjustments for all Tax purposes.

       

      7.06           Holder
Representative.

       

      
        
          
          

        

        
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      (a)           The
parties have agreed that it is desirable to designate a representative for the
Stockholders to act as their true and lawful attorney-in-fact, for them in their
name and on their behalf (the “Holder Representative”), to
exercise the powers set forth below.  This power of attorney shall not
be terminated or otherwise affected by the disability of any
Stockholder.  This power of attorney shall terminate only when the
duties of the Holder Representative have been fully performed or upon
resignation as provided below.  The parties have designated Douglas J.
Hirsch as the initial Holder Representative, and approval of this Agreement by
the holders of Company Capital Stock shall constitute ratification and approval
of such designation on behalf of all Stockholders.  The Holder
Representative may resign at any time, and the Holder Representative may be
removed by the vote of Persons that collectively owned shares constituting more
than a majority of the outstanding shares of Company Capital Stock immediately
prior to the Effective Time (“Majority
Holders”).  In the event that the Holder Representative has
resigned or been removed, a new Holder Representative shall be appointed by the
Majority Holders, such appointment to become effective upon the written
acceptance thereof by the new Holder Representative.

       

      (b)           The
Holder Representative shall have such powers and authority as are necessary to
carry out the functions assigned to it under this Agreement, including the
power, from and after the Effective Time, (i) to give and accept notice in
accordance with this Agreement and any other Transaction Document or other
agreement or document entered into in connection with the Transactions, whether
prior to, on or after the Closing, (ii) to execute any other Transaction
Documents or agreement or document entered into in connection with the
Transactions, whether prior to, on or after the Closing, (iii) to waive any
provisions of any such agreements, (iv) to conduct, control and cooperate with
respect to the defense of any litigation described in this Agreement, (v) to
settle disputes between the parties and (vi) to perform the other duties
required of the Holder Representative under this Agreement and any other
Transaction Document to which the Holder Representative is a
party.  The Holder Representative will have no liability to Parent,
Sub, Company, the Surviving Corporation or the Stockholders with respect to
actions taken or omitted to be taken in its capacity as Holder Representative,
except with respect to the Holder Representative’s gross negligence or willful
misconduct.  The Holder Representative will at all times be entitled
to rely on any directions received from the Majority Holders; provided, however,
that the Holder Representative shall not be required to follow any such
direction, and shall be under no obligation to take any action in its capacity
as Holder Representative, unless the Holder Representative is holding funds
delivered to it under this Section 7.06(b) and/or has been provided with
other funds, security or indemnities which, in the sole determination of the
Holder Representative, are sufficient to protect the Holder Representative
against the Losses which may be incurred by the Holder Representative in
responding to such direction or taking such action.  The Holder
Representative shall be entitled to engage such counsel, experts and other
agents and consultants as it shall deem necessary in connection with exercising
its powers and performing its function hereunder and (in the absence of bad
faith on the part of the Holder Representative) shall be entitled to
conclusively rely on the opinions and advice of such Persons.  Any
expenses incurred by the Holder Representative with respect to the foregoing
shall be reimbursed out of the distributions to be made to the Stockholders
pursuant to Sections 2.08 and 2.09, or such other mechanism established by the
Holder Representative for the benefit of the Stockholders for such
purpose.

       

      
        
          
          

        

        
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      (c)           Neither
Parent, the Surviving Corporation nor any of their Affiliates shall be liable in
any way to the Indemnitees or to the Holder Representative, based on any act or
omission of the Holder Representative relating to this Agreement.

       

      (d)           Except
with respect to claims for specific performance, fraud or intentional
misrepresentation the sole and exclusive recourse against the Stockholders
pursuant to this Agreement shall be the Escrow Fund and Earnout Holdback
Amounts.

       

      ARTICLE
VIII

       

      TERMINATION

       

      8.01           Termination of
Agreement.

       

        This
Agreement may be terminated at any time prior to the Closing Date as follows and
in no other manner:

       

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

       

      (b)           by
either Company or Parent, by written notice to the other party, if any
Governmental Authority with jurisdiction over such matters shall have issued an
order permanently restraining, enjoining or otherwise prohibiting the Merger or
any other Transactions, and such order shall have become final and unappealable;
provided, however, that the terms of this Section 8.01(b) shall not be
available to any party unless such party shall have used its commercially
reasonable efforts to oppose any such order or to have such order vacated or
made inapplicable to the Merger or other Transactions to which such order
relates;

       

      (c)           by
Company or Parent if, at a meeting of Stockholders duly called and convened for
the purpose of voting on the approval and adoption of this Agreement, the
Requisite Shareholder Approval is not obtained;

       

      (d)           by
Company or Parent, by written notice to the other party, if the Merger shall not
have been consummated on or before November 28, 2008.

       

      (e)           by
Parent, by written notice to Company, in the event (i) that any representation
or warranty of Company contained herein that is qualified by materiality or
Material Adverse Effect (or similar concept) is not true and correct, or if not
so qualified, is not true and correct in all material respects, or (ii) of a
material breach by Company of any covenant of Company contained in this
Agreement, in either case which cannot be or has not been cured within ten (10)
days after the giving of written notice to Company of such inaccuracy or breach;
or

       

      (f)           by
Company, by written notice to Parent, in the event (i) that any representation
or warranty of Parent or Sub contained herein that is qualified by materiality
or Material Adverse Effect (or similar concept) is not true and correct, or if
not so qualified, is not true and correct in all material respects, or (ii) of a
material breach by Parent or Sub of any covenant or agreement of Parent or Sub
contained in this Agreement, in either case which cannot be or has not been
cured within ten (10) days after the giving of written notice to Parent of such
inaccuracy or breach.

       

      8.02           Effect of
Termination.

       

        If
this Agreement is terminated pursuant to Section 8.01, (i) this Agreement
shall forthwith become void and have no further force or effect, and
(ii) the 

       

      
        
          
          

        

        
          -50-

          
            

          

        

        
          
          

        

      

       

      parties shall have no
liability under this Agreement, provided that termination is not based on a
willful material breach of any agreement or covenant set forth in this
Agreement, in which event the terminating party will be entitled to exercise any
and all remedies available under law or for such
breach.  Notwithstanding the foregoing, the obligations of the parties
contained in this Section 8.02, Section 5.03(c) and Section 9.03 shall survive
any such termination.

       

      ARTICLE
IX

       

      MISCELLANEOUS
PROVISIONS

       

      9.01           Amendment and
Modifications.  This
Agreement may be amended, modified and supplemented only by the written
agreement of all of the parties hereto which states that it is intended to be a
modification of this Agreement.

       

      9.02           Waiver of
Compliance.  Any
failure of a party hereto to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the benefits thereof
only by a written instrument signed by the party granting such
waiver.  No delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.  Unless otherwise provided,
the rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies which the parties hereto may otherwise have at law or in
equity.  Whenever this Agreement requires or permits consent by or on
behalf of a party, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this
Section 9.02.

       

      9.03           Expenses. 
All
costs and expenses (including all fees and disbursements of counsel, financial
advisors and accountants) incurred in connection with the negotiation and
preparation of this Agreement, the performance of the terms hereof and the
consummation of the transactions contemplated hereby, shall be paid by the
respective party incurring such costs and expenses, whether or not the Closing
shall have occurred.  If the Closing occurs excluding amounts paid by
Parent pursuant to Section 6.01(d), Company shall have paid in full prior to the
Closing or, to the extent not previously paid, accrued in full on the Closing
Balance Sheet, and estimated on the Estimated Balance Sheet, all of its fees and
expenses incurred in connection with this Agreement, the performance of the
terms hereof and the consummation of the Transactions contemplated
hereby.

       

      9.04           Remedies. 
To
the maximum extent permitted by Law, except as otherwise specifically provided
by this Agreement, all rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available
under applicable Law.

       

      9.05           Waiver of Jury
Trial.  EACH
PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE, IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY

       

      
        
          
          

        

        
          -51-

          
            

          

        

        
          
          

        

      

       

      HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE TRANSACTION DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  EACH PARTY HERETO
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES
SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 9.05.

       

      
        9.06           Notices. 
All
notices, requests, demands and other communications required or permitted
hereunder shall be in writing to:

         

        
          	 
      	
                  (a)

                	
                  Parent
      or Sub:

                	
                  HSW
      International, Inc.

                
	 
      	 
      	 
      	
                  One
      Capital City Plaza

                
	 
      	 
      	 
      	
                  3350
      Peachtree Road, Suite 1600

                
	 
      	 
      	 
      	
                  Atlanta,
      GA 30326

                
	 
      	 
      	 
      	
                  Attention:  General
      Counsel

                
	 
      	 
      	 
      	
                  Telephone:  (404)
      760-4347

                
	 
      	 
      	 
      	
                  Facsimile:  (404)
      974-2748

                
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  With
      a copy to:

                	
                  Alston
      & Bird LLP

                
	 
      	 
      	 
      	
                  950
      F Street NW

                
	 
      	 
      	 
      	
                  Washington,
      DC  20004

                
	 
      	 
      	 
      	
                  Attention:  David
      E. Brown, Jr.

                
	 
      	 
      	 
      	
                  Telephone:  (202)
      756-3345

                
	 
      	 
      	 
      	
                  Facsimile:  (202)
      756-3333

                

        

        

        or
to such other Person or address as Parent shall furnish to Company or the Holder
Representative in writing.

         

        
          	 
      	
                  (b)

                	
                  Company
      or the Holder

                	
                  Douglas
      J. Hirsch

                
	 
      	 
      	
                  Representative:

                	
                  12121
      Wilshire Boulevard, Suite 1100

                
	 
      	 
      	 
      	
                  Los
      Angeles, CA 90025

                
	 
      	 
      	 
      	
                  Telephone:
      310 869 0900

                
	 
      	 
      	 
      	
                  Facsimile:

                
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  With
      a copy to:

                	
                  Cooley
      Godward Kronish LLP

                
	 
      	 
      	 
      	
                  Five
      Palo Alto Square

                
	 
      	 
      	 
      	
                  3000
      El Camino Real

                
	 
      	 
      	 
      	
                  Palo
      Alto, CA 94306-2155

                
	 
      	 
      	 
      	
                  Attention:
      Jim Fulton

                
	 
      	 
      	 
      	
                  Telephone:
      (650) 843-5103

                
	 
      	 
      	 
      	
                  Facsimile:
      (650) 849 - 7400

                

        

      

       

      
        
          
          

        

        
          -52-

          
            

          

        

        
          
          

        

      

      

      or
to such other Person or address as Company or the Holder Representative shall
furnish to Parent in writing.

       

      Notices
will be deemed given (a) three (3) business days after being mailed by certified
or registered United States mail, postage prepaid, return receipt requested, (b)
on the first business day after being sent, prepaid, by nationally recognized
overnight courier that issues a receipt or other confirmation of delivery, (c)
when received (to the extent receipt is confirmed by telephone) if sent by
facsimile transmission or email or (d) at the time delivered by
hand.

       

      9.07           Governing Law. 
This
Agreement and the legal relationship among the parties hereto shall be governed
and construed under the laws of the State of Delaware.

       

      9.08           Assignment. 
This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, but neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent of
the other parties; provided, that, subject to the conditions and terms set forth
herein, each of Parent and the Surviving Corporation may assign its rights and
obligations under this Agreement to any Person that succeeds to substantially
all of its assets and liabilities.

       

      9.09           Publicity. 
Between
the date of this Agreement and the Closing Date no party shall make or issue, or
cause to be made or issued, any announcement or written statement concerning
this Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior written consent of the other parties (such
consent not to be unreasonably withheld), except for any announcement or written
statement required to be made by Law (including securities Laws of any
jurisdiction and rules and regulations of any applicable stock exchange) in
which case the party required to make such announcement, whenever practicable,
shall consult with the other parties concerning the timing and content of such
announcement before such announcement is made.  After the Closing
Date, Parent may make any press release or other public announcement concerning
the Transactions, this Agreement and the other Transaction
Documents.

       

      9.10           Counterparts. 
This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.  The exchange of copies of this Agreement
and of signature pages by facsimile transmission shall constitute effective
execution and delivery of this Agreement as to the parties and may be used in
lieu of the original Agreement for all purposes. Signatures of the parties
transmitted by facsimile shall be deemed to be their original signatures for all
purposes.

       

      9.11           Headings. 
The
headings of the Sections and Articles of this Agreement are inserted for
convenience only and shall not constitute a part hereof or affect in any way the
meaning or interpretation of this Agreement.

       

      9.12           Entire
Agreement.  This
Agreement, including the exhibits and schedules hereto, the Disclosure Schedules
and the other documents and certificates delivered pursuant to the terms hereof,
set forth the final, complete and exclusive agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and supersede
all prior agreements, 

       

      
        
          
          

        

        
          -53-

          
            

          

        

        
          
          

        

      

       

      promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party
hereto.

       

      9.13           Third Parties. 
Except
as specifically set forth or referred to herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any Person
other than the parties hereto or their successors and assigns any rights or
remedies under or by reason of this Agreement except as expressly set forth
herein or in the Transaction Documents.

       

      9.14           Representation by Counsel;
Interpretation.  Company
and the Holder Representative, on the one hand, and Parent and Sub, on the other
hand, each acknowledge that such parties have been represented by counsel in
connection with this Agreement and the Transactions.  Accordingly, any
rule of law or any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the party that drafted it has no
application and any such right is expressly waived.  The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the intent
of Company, the Holder Representative, Parent and Sub.

       

      9.15           Severability. 
In
case any one or more of the provisions contained herein shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such provision
or provisions shall be ineffective only to the extent of such invalidity,
illegality or unenforceability, without invalidating the remainder of such
provision or provisions or the remaining provisions of this Agreement, and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein, unless such a
construction would be unreasonable.

       

      9.16           Time of
Essence.  With
regard to all dates and time periods set forth or referred to in this Agreement,
time is of the essence.

       

      

       

      [REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

       

      
        
           

        

        
          -54-

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.

       

      

       

      HSW
INTERNATIONAL, INC.

       

       

      By: /s/ Bradley T.
Zimmer                                                  

       

      Name:  Bradley
T. Zimmer

       

      Title:  Executive
Vice President & General Counsel

       

      

       

      DS
NEWCO, INC.

       

       

      By:  /s/ Bradley T.
Zimmer                                                  

       

      Name:  Bradley
T. Zimmer

       

      Title:  Secretary

       

      

       

      DAILY
STRENGTH, INC.

       

       

      By:  /s/ Douglas J.
Hirsch                                                

       

      Name:  Douglas
J. Hirsch

       

      Title:  Chief
Executive Officer

       

      

       

      

                                                                      DOUGLAS J. HIRSCH, as Holder
Representative

       

      

       

      

       

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        SCHEDULE
2.09

         

        EARN-OUT
PAYMENTS

         

        Capitalized
terms used, but not defined, in this Schedule 2.09 shall have the meanings
ascribed to such terms in the Merger Agreement to which this Schedule 2.09 is
appended.

         

        (a)           For
purposes of this Schedule 2.09, the following terms shall have the following
meanings:

         

        “Additional Payment” means,
after achieving each Level, (i) $425,000 in respect of the holders of Company
Series A Preferred and (ii) $280,000 in respect of the holders of Company Common
Stock.

         

        “Combined Page Views” means,
for any full calendar month, the combined Page Views of any Subject Websites and
the Surviving Corporation’s website www.dailystrength.org.

         

        “Earn-Out Period” means the
period following the Closing Date and prior to the second anniversary of the
Closing Date.

         

        “Eligible Earn-Out Recipient”
means those Stockholders who were entitled to receive a Closing
Payment.

         

        “Maximum Amount Payable” means
with respect to (i) the holders of Company Series A Preferred, in respect of the
aggregate amount of all Additional Payments assessed, $2,125,000 and (ii) the
holders of Company Common Stock, in respect of the aggregate amount of all
Additional Payments assessed, $1,400,000.

         

        “Level” means each of Levels 1,
2, 3, 4 and 5 set forth in the definition of Page View Target.

         

        “Page Views” means a request by
a human web user unaffiliated with the Surviving Corporation to load a page of a
website, as measured by Omniture or a similar measurement system.

         

        “Page View Target” means each
of the following:

        
 

        
          	 
      	
                  (i)

                	
                  [*]
      million or more Page Views to reach Level 1;

                
	 
      	
                  (ii)

                	
                  [*]
      million or more Page Views to reach Level 2;

                
	 
      	
                  (iii)

                	
                  [*]
      million or more Page Views to reach Level 3;

                
	 
      	
                  (iv)

                	
                  [*]
      million or more Page Views to reach Level 4;
and

                

        

         

         

        [*] Confidential treatment requested; certain information omitted and filed
separately with the SEC.

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	 
      	
                  (v)

                	
                  [*]
      million or more Page Views to reach Level
5.

                

        

      

       

      
        “Subject Website” means: (i)
any HSWI website, or section thereof (for example, a community channel of a
website), that the Surviving Corporation or Douglas J. Hirsch is managing, and
that has been so designated in writing in the form as set forth in Schedule
2.09(i); or (ii) the webpages incorporating technology developed by the
Surviving Corporation of any HSWI health-focused websites, including any
health-focused website that (a) is owned by any Subsidiary of HSWI, or (b) HSWI
has at least twenty percent (20%) equity or financial interest.

         

        (b)           General.  Subject
to Parent’s right to offset a portion of each Earn-Out Payment as set forth in
Section 2.09, the Stockholders will be entitled to receive Earn-Out Payments in
accordance with this Schedule 2.09.   If, in any two separate
months during the Earn-Out Period, the Combined Page Views exceeds a Page View
Target, Parent will pay the holders of Company Series A Preferred and the
holders of the Company Common Stock their respective Additional Payment for
achieving the corresponding Level; provided, that the aggregate
amount of all such Additional Payments shall not exceed the Maximum Amount
Payable; provided,
further, that once an
Additional Payment has been made in respect of a Level, no future Additional
Payment will be assessable or payable in respect of such Level.

         

        For
example, if during the Earn-Out Period the Combined Page Views exceed [*]
million in any two separate months, Additional Payments will be made in respect
of both Levels 1 and 2, and no future Additional Payments in respect of Levels 1
and 2 will assessable or payable again, regardless of performance in subsequent
months.  Subsequently, if in two separate calendar months during the
Earn-Out Period the Combined Page Views exceed [*] million, Additional Payments
will be made in respect of Level 3, but no Additional Payment will be assessable
or payable in respect of Levels 1 and 2.

         

        Any
Additional Payment required to be made by Parent to the Stockholders shall be
made by Parent to the Stockholders in accordance with this Schedule 2.09 and
their Applicable Percentages.

         

        (c)           Additional Payment
Certificate.  Within ten (10) Business Days following the end
of the second full calendar month that has resulted in a Level being reached,
Parent will deliver to the Holder Representative a certificate, together with
reasonable supporting documentation (each, an “Additional Payment
Certificate”), setting forth the calculation of the applicable Additional
Payment.

         

        (d)           Payment of Additional
Payments.  Subject to Parent’s right to offset a portion of
each Earn-Out Payment as set forth in Section 2.09, within five (5) Business
Days after the earlier of (i) receipt by Parent of the Holder Representative’s
written acceptance of the Additional Payment Certificate and (ii) resolution of
any dispute with respect to the Additional Payment Certificate, each as provided
in (e) below, Parent shall pay to the Stockholders in accordance with their
Applicable Percentage, the Additional Payment set forth in such Additional
Payment Certificate.

         

        [*] Confidential treatment requested; certain information omitted and
filed separately with the SEC.

         

        
          
            
            

          

          
            -2-

            
              

            

          

          
            
            

          

        

         

        (e)           Dispute
Procedure.

         

        (i)           The
Holder Representative shall have a period of up to thirty (30) days from the
delivery of each Additional Payment Certificate to deliver a written notice (a
“Dispute
Notice”) to Parent disagreeing with any calculation or amount in such
Additional Payment Certificate and setting forth a calculation of the applicable
Additional Payment and specifying the items or amounts as to which the Holder
Representative disagrees, together with the materials presented therewith and
the work papers used in the preparation thereof.  The Holder
Representative and his legal and accounting advisors shall have reasonable
access to all relevant books and records and employees of Parent and the
Surviving Corporation to the extent required to complete his review of the
Earn-Out Calculation; provided, that such access
shall not unreasonably disrupt the personnel and operations of Parent or the
Surviving Corporation, as the case may be. If no Dispute Notice is received by
Parent on or prior to the close of business on the last day of such 30-day
period, the Additional Payment Certificate and the calculation of the Additional
Payment shall be deemed accepted by the Holder Representative on behalf of all
Stockholders.  If any such Dispute Notice is timely provided, Parent
and the Holder Representative shall use their commercially reasonable efforts
for a period of thirty (30) days (or such longer period as they may mutually
agree) to resolve any disagreements with respect to the calculation of any
Additional Payment. If, at the end of such period, they are unable to resolve
such disagreement(s), then an independent accounting or consulting firm of
recognized national standing as may be mutually selected by Parent and the
Holder Representative (the “Arbiter”) shall
resolve any remaining disagreements.

         

        (ii)           The
Holder Representative shall have the right to request from time to time (but no
more frequently than every other calendar month) an accounting of all Page Views
(an “Accounting”), which
will be provided to the Holder Representative as soon as reasonably practicable
following any such request, but in no event longer than fifteen (15) days from
the date of such request.  In the event that the Holder Representative
disagrees with any such Accounting, the Holder Representative will have a period
of up to thirty (30) days from the delivery of such Accounting to deliver a
Dispute Notice to Parent disagreeing with such Accounting and specifying in
detail the items or amounts as to which the Holder Representative disagrees,
together with the materials presented therewith and the work papers used in the
preparation thereof.  The Holder Representative and his legal advisors
shall have reasonable access to all relevant books and records and employees of
Parent and the Surviving Corporation to the extent required to complete his
review of the Accounting; provided, that such access
shall not unreasonably disrupt the personnel and operations of Parent or the
Surviving Corporation, as the case may be.  If any such Dispute Notice
is provided, Parent and the Holder Representative shall use their commercially
reasonable efforts for a period of thirty (30) days (or such longer period as
they may mutually agree) to resolve any disagreements with 

         

        
          
            
            

          

          
            -3-

            
              

            

          

          
            
            

          

        

         

        respect to the Accounting.
If, at the end of such period, they are unable to resolve such disagreement(s),
then the Arbiter shall resolve any remaining disagreements.

         

        (iii)           The
Arbiter shall review those items remaining in dispute as promptly as
practicable, but in any event within thirty (30) days of the date on which such
dispute is referred to the Arbiter, based solely on written submissions to the
Arbiter by the Holder Representative and Parent and not on its independent
review of the Additional Payment Certificate or Accounting, as the case may
be, and shall determine whether and to what extent (if any) the Additional
Payment or Accounting requires adjustment.  The fees and expenses
relating to the work performed by the Arbiter shall be borne pro rata by Parent
on one hand and by the Holder Representative on the other hand in inverse
proportion to the allocation made by the Arbiter of the amount of the unresolved
items, in the aggregate, between Parent and the Holder Representative, such that
the party with whom the Arbiter agrees more closely pays a lesser proportion of
the fees and expenses.  Any amounts to be paid by the Holder
Representative to Parent shall be paid from the Escrow Fund or, if the Escrow
Fund is exhausted, any Earn-Out Payments.  The determination of the
Arbiter shall be set forth in a written statement delivered to the Holder
Representative and Parent and shall be final, conclusive and binding on the
parties.

         

        (f)           Upon
final determination of an Additional Payment (whether due to agreement by Parent
and the Holder Representative or determination by the Arbiter), Parent shall,
subject in all respects to the limitations set forth in Article VII and Section
2.09, within five (5) Business Days of such determination pay the Additional
Payment to the Eligible Earn-Out Recipients.  Each Eligible Earn-Out
Recipient shall be entitled to receive his, her or its Applicable Percentage of
the Additional Payment in the same manner as the payment of the Closing
Payments.

         

        (g)           Parent
shall notify the Holder Representative not later than three (3) Business Days
after the final determination of the Additional Payment if Parent has applied
any portion of such Additional Payment by off-set pursuant to Section 2.09 or if
Parent asserts a right to retain all or any portion of such Additional Payment
pursuant to Section 2.09, in each case together with Parent’s good faith
calculation, in reasonable detail, of the amounts of such off-sets or Retained
Amount.  Subject to the limitations set forth in Article VII and
Section 2.09, any Retained Amounts shall be available to satisfy, by off-set,
only Eligible Claims and only to the extent such Eligible Claims are not
satisfied out of the Escrow Fund.  Following final resolution of each
Eligible Claim, Parent shall first seek reimbursement from the Escrow Fund, in
accordance with the terms of the Escrow Agreement.  If the amount owed
in respect of a resolved Eligible Claim is not reimbursed in full from the
Escrow Fund, Parent shall, subject to the limitations set forth in Article VII
and Section 2.09, apply any remaining Retained Amount that may be used to
satisfy such resolved Eligible Claim as an off-set to satisfy the remaining
unpaid amount of such resolved Eligible Claim until the entire Retained Amount
is either applied to satisfy resolved Eligible Claims or is distributed to
Eligible Earn-Out Recipients as provided below.  After satisfaction in
full of a resolved Eligible 

         

        
          
            
            

          

          
            -4-

            
              

            

          

          
            
            

          

        

         

        Claim
(whether from the Escrow Fund, Retained Amounts or a combination thereof),
Parent shall reassess in good faith the Aggregate Outstanding Claim Value of any
remaining Eligible Claims and if the remaining amount of the Escrow Fund and any
previous Retained Amounts available to pay such Eligible Claims exceeds the
lesser of (i) the reassessed Aggregate Outstanding Claim Value or (ii) the
maximum amount that Parent could recover, taking into account the limitations
set forth in Article VII (such excess, after deduction of any fees owed to the
Surviving Corporation representatives in connection therewith, the “Distributable
Excess”), Parent shall pay the Distributable Excess to Eligible Earn-Out
Recipients in accordance with Section 2.09 within ten (10) days after the
determination.  Each Eligible Earn-Out Recipient shall be entitled to
receive his, her or its Applicable Percentage of each Distributable Excess of an
Additional Payment and such payment shall be delivered to such Eligible Earn-Out
Recipients in the same manner as the payment of the Closing Payments and subject
to Section 2.09.

         

        (h)           During
the Earn-Out Period, subject to the fiduciary duties of the Board, and so long
as he is employed by the Company and not in default under the Employment
Agreement, Douglas J. Hirsch shall maintain all management responsibility and
authority over the internal operations, personnel, and product development of
the Company (the “Authority”) within the
specifications in the Budget (as defined in the Employment Agreement); provided, that if Douglas J.
Hirsh is no longer providing services to Parent or a Parent Affiliate, the
Authority shall be granted to an individual who is reasonably acceptable to a
majority of the Stockholders (excluding shares owned by Douglas J.
Hirsch).   Parent shall be liable for all Damages resulting from
a breach of the covenant in the preceding sentence.

         

        
 

         

        

        -5-ex_10-1.htm

    
      

      

    

    Exhibit
10.1

     

    JOINDER
AGREEMENT

     

     

    
       

      This JOINDER AGREEMENT (the “Joinder Agreement”)
is made as of the 2nd day of
December, 2008 by and among  BERRY PETROLEUM COMPANY, a Delaware
corporation (“Borrower”), WELLS
FARGO BANK, NATIONAL ASSOCIATION, individually and as LC Issuer, Swing Line
Lender and Administrative Agent (in such capacity, “Administrative
Agent”), and CALYON NEW YORK BRANCH (“New Lender”).

       

      RECITALS

       

      Borrower,
Administrative Agent, LC Issuer, Swing Line Lender and the Lenders named therein
are parties to that certain Amended and Restated Credit Agreement dated as of
July 15, 2008 (as amended to the date hereof and as otherwise amended,
supplemented, restated, increased, extended or otherwise modified from time to
time, the “Credit
Agreement”).  All terms used herein and not otherwise defined
shall have the same meaning given to them in the Credit Agreement.

      

      Pursuant
to Section 2.10
of the Credit Agreement, Borrower has the right to cause from time to time an
increase in the Commitments and the Aggregate Commitment by adding to the Credit
Agreement, subject to the approval of the Administrative Agent, LC Issuer and
Swing Line Lender, an additional Lender which is an Eligible Assignee; provided
however (i) no Default shall exist, (ii) no such increase shall result
in the Aggregate Commitments exceeding $1,250,000,000, and (iii) no such
increase shall be in an amount less than $5,000,000.

      

      AGREEMENT

       

      1. Borrower
and New Lender hereby agree that, from and after the date hereof, New Lender
shall have the Commitment as set forth on the attached Supplement to
Schedule 1.  By its execution and delivery of this Joinder
Agreement, New Lender hereby assumes all of the rights and obligations of a
Lender under the Credit Agreement to the extent of such
Commitment.  Such Commitment of New Lender shall represent an increase
in the Commitments and the Aggregate Commitment pursuant to Section 2.10 of the
Credit Agreement.

       

      2. Administrative
Agent, LC Issuer, Swing Line Lender and Borrower hereby consent to and approve
the Commitment of New Lender and such resulting increase in the Aggregate
Commitment pursuant to Section 2.10 of the
Credit Agreement.

       

      3. New
Lender hereby represents and warrants as follows: (a) it has full power and
authority, and has taken all action necessary to execute and deliver this
Joinder Agreement, to consummate the transactions contemplated hereby and to
become a Lender under the Credit Agreement, (b) it meets all requirements of an
Eligible Assignee under the Credit Agreement (subject to receipt of any consents
that may be required under the Credit Agreement), (c) from and after the
Increase Effective Date (hereinafter defined), it shall, to the extent of its
Commitment, be bound by the provisions of the Credit Agreement as a Lender
thereunder, and, to the extent of its Commitment, shall have the obligations of
a Lender thereunder, (d) it has

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      4. received
a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 6.2 (a) and (b)
thereof, as applicable, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Joinder Agreement on the basis of which it has made such analysis and
decision independently and without reliance on Administrative Agent or any other
Lender, and (e) if it is a Foreign Lender, attached to this Joinder Agreement is
any documentation required to be delivered by it pursuant to the terms of the
Credit Agreement, duly completed and executed by New Lender; and agrees that (1)
it will, independently and without reliance on Administrative Agent, or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (2) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

       

      5. This
Joinder Agreement shall be effective on the date (the “Increase Effective
Date”) that (i) Borrower and New Lender each execute a counterpart
hereof and deliver the same to Administrative Agent, (ii) Administrative Agent,
LC Issuer and Swing Line Lender execute and deliver a counterpart hereof and
(iii) each of the conditions to the increase in the Aggregate Commitment in
Section 2.10 of
the Credit Agreement shall have occurred.  From and after the Increase
Effective Date, New Lender shall be a “Lender” under the Loan
Documents.

       

      6. Upon any
increase in the Aggregate Commitment pursuant to Section 2.10,
Lenders have authorized Administrative Agent and Borrower to make non-ratable
borrowings and prepayments of the Loans, and if any such prepayment would result
in payments being due under Section 3.4, Borrower shall
pay any such required amounts in order to keep the outstanding Loans ratable
with any revised Percentage Shares arising from the Commitment under this
Joinder Agreement.  On the Increase Effective Date, New Lender shall
make a Loan for the account of Borrower to the extent necessary to implement
such provisions of Section 2.10 of the Credit
Agreement.

       

      7. Borrower
(a) represents and warrants that, on and as of the Increase Effective Date,
before and after giving effect to the increase in Aggregate Commitment resulting
hereunder, (i) the representations and warranties contained in Article V of the
Credit Agreement and the other Loan Documents made by it are true and correct in
all material respects on and as of the Increase Effective Date, except to the
extent that such representations and warranties specifically refer to an earlier
date, in which case they are true and correct in all material respects as of
such earlier date, and (ii) no Default exists.  Borrower hereby
certifies that attached hereto is a true and correct copy of resolutions of the
Board of Directors of Borrower authorizing the increase in the Commitments and
the Aggregate Commitment as set forth in this Joinder Agreement.

       

      8. Borrower
hereby (i) consents to the provisions of this Joinder Agreement and the
transactions contemplated herein and (ii) agrees that all of its respective
obligations and covenants thereunder shall remain unimpaired by the execution
and delivery of this Joinder Agreement and the other documents and instruments
executed in connection herewith.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      9. This
Joinder Agreement may not be amended, changed, waived or modified, except by a
writing executed by the parties hereto.

       

      10. This
Joinder Agreement embodies the entire agreement among New Lender, Borrower, LC
Issuer, Swing Line Lender and Administrative Agent with respect to the subject
matter hereof and supersedes all other prior arrangements and understandings
relating to the subject matter hereof.

       

      11. This
Joinder Agreement may be executed in any number of counterparts each of which
shall be deemed to be an original.  Each such counterpart shall become
effective when counterparts have been executed by all parties
hereto.  Delivery of an executed counterpart of this Joinder Agreement
by telecopier shall be effective as delivery of a manually executed counterpart
of this Joinder Agreement.

       

      12. This
Joinder Agreement shall be binding upon and inure to the benefit of New Lender
and Borrower and their respective successors and permitted assigns, except that
neither party may assign or transfer any of its rights or obligations hereunder
without the prior written consent of the other party.

       

      13. This
Joinder Agreement shall be governed by, and construed in accordance with, the
laws of the State of California.

       

      Borrower
shall execute and deliver to New Lender, as of the Increase Effective Date, a
Note in the form attached to the Credit Agreement to evidence the Commitment of
New Lender.

       

      

       

      [remainder
of page is intentionally left blank.]

      

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      IN WITNESS WHEREOF,
Administrative Agent, LC Issuer, Swing Line Lender,  Borrower and New
Lender have executed this Joinder Agreement as of the date shown
above.

      

      

      WELLS
FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, LC Issuer and Swing
Line Lender

      

      

      By:                                                      

      Name:

      Title:

      

      

      

      

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      CALYON
NEW YORK BRANCH, as New Lender

      

      

      By:                                                      

      Name:

      Title:

      

      

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      BERRY
PETROLEUM COMPANY,

      as
Borrower

      

      

      By:                                                      

      Name:

           Title:

      

      

      

      

      

      

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      SUPPLEMENT TO SCHEDULE
1

      OF THE CREDIT
AGREEMENT

      

      

       

      

      
        	
                 

                Lender

                 

              	
                 

                Percentage Share

              	
                 

                Commitment

              
	
                Calyon
      New York Branch

              	
                6.26043405676

              	
                $75,000,000

              

      

      

      

      
        
           

        

        
          7

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