Document:

EX-10.1 AGREEMENT AND PLAN OF MERGER

 

EXHIBIT 10.1

Conformed Copy

AGREEMENT AND PLAN OF MERGER

by and among

SUMMEX CORPORATION,

WEBMD HEALTH CORP.,

AND

FFGM, INC.

Dated as of April 13, 2006

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE I
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	CERTAIN DEFINITIONS
	 	 	1	 
	 
	 	 	 	 	 	 
	 

	 	Section 1.1 Defined Terms
	 	 	1	 
	 

	 	Section 1.2 Interpretation
	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE II
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	THE MERGER
	 	 	14	 
	 
	 	 	 	 	 	 
	 

	 	Section 2.1 The Merger
	 	 	14	 
	 

	 	Section 2.2 Outstanding Shares
	 	 	14	 
	 

	 	Section 2.3 Articles of Merger
	 	 	14	 
	 

	 	Section 2.4 Articles of Incorporation
	 	 	14	 
	 

	 	Section 2.5 By-laws
	 	 	14	 
	 

	 	Section 2.6 Officers
	 	 	14	 
	 

	 	Section 2.7 Directors
	 	 	14	 
	 

	 	Section 2.8 Conversion of Shares
	 	 	15	 
	 

	 	Section 2.9 Earn-Out
	 	 	15	 
	 

	 	Section 2.10 Escrow
	 	 	19	 
	 

	 	Section 2.11 Exchange of Certificates
	 	 	19	 
	 

	 	Section 2.12 Withholding Taxes
	 	 	20	 
	 

	 	Section 2.13 FIRPTA
	 	 	20	 
	 

	 	Section 2.14 280G
	 	 	20	 
	 

	 	Section 2.15 Additional Action
	 	 	21	 
	 
	 	 	 	 	 	 
	ARTICLE III
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	CLOSING
	 	 	21	 
	 
	 	 	 	 	 	 
	 

	 	Section 3.1 Closing
	 	 	21	 
	 

	 	Section 3.2 Actions at the Closing
	 	 	21	 
	 
	 	 	 	 	 	 
	ARTICLE IV
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	22	 
	 
	 	 	 	 	 	 
	 

	 	Section 4.1 Due Organization
	 	 	22	 
	 

	 	Section 4.2 Authorization; Validity
	 	 	23	 
	 

	 	Section 4.3 Noncontravention
	 	 	23	 
	 

	 	Section 4.4 Capitalization
	 	 	23	 
	 

	 	Section 4.5 Subsidiaries
	 	 	24	 
	 

	 	Section 4.6 Complete Copies of Materials
	 	 	24	 
	 

	 	Section 4.7 Financial Statements
	 	 	24	 
	 

	 	Section 4.8 Liabilities and Obligations
	 	 	25	 
	 

	 	Section 4.9 Accounts and Notes Receivable
	 	 	25	 
	 

	 	Section 4.10 Permits
	 	 	25	 
	 

	 	Section 4.11 Environmental Matters
	 	 	26	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	 	Section 4.12 Assets
	 	 	26	 
	 

	 	Section 4.13 Real Property
	 	 	27	 
	 

	 	Section 4.14 Real Property Leases
	 	 	27	 
	 

	 	Section 4.15 Customers and Suppliers
	 	 	28	 
	 

	 	Section 4.16 Material Contracts and Commitments
	 	 	28	 
	 

	 	Section 4.17 Insurance
	 	 	31	 
	 

	 	Section 4.18 Labor Matters
	 	 	32	 
	 

	 	Section 4.19 Employee Benefits
	 	 	33	 
	 

	 	Section 4.20 Compliance with Law
	 	 	36	 
	 

	 	Section 4.21 Litigation
	 	 	36	 
	 

	 	Section 4.22 Intellectual Property
	 	 	36	 
	 

	 	Section 4.23 Books and Records
	 	 	40	 
	 

	 	Section 4.24 Taxes
	 	 	40	 
	 

	 	Section 4.25 Absence of Changes
	 	 	43	 
	 

	 	Section 4.26 Bank Accounts; Powers of Attorney
	 	 	43	 
	 

	 	Section 4.27 Unlawful Payments
	 	 	44	 
	 

	 	Section 4.28 HIPAA
	 	 	44	 
	 

	 	Section 4.29 Compliance with Healthcare Laws and Regulations
	 	 	45	 
	 

	 	Section 4.30 Brokers and Agents
	 	 	45	 
	 

	 	Section 4.31 Controls and Procedures
	 	 	45	 
	 

	 	Section 4.32 Disclosure
	 	 	46	 
	 

	 	Section 4.33 Disclaimer of Other Warranties
	 	 	46	 
	 
	 	 	 	 	 	 
	ARTICLE V
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
	 	 	46	 
	 
	 	 	 	 	 	 
	 

	 	Section 5.1 Due Organization
	 	 	47	 
	 

	 	Section 5.2 Authorization; Validity
	 	 	47	 
	 

	 	Section 5.3 No Conflicts
	 	 	47	 
	 

	 	Section 5.4 Parent and Newco Board
	 	 	47	 
	 

	 	Section 5.5 Shareholder Approval
	 	 	47	 
	 
	 	 	 	 	 	 
	ARTICLE VI
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	COVENANTS
	 	 	48	 
	 
	 	 	 	 	 	 
	 

	 	Section 6.1 Access and Information
	 	 	48	 
	 

	 	Section 6.2 Conduct of Business by the Company
	 	 	48	 
	 

	 	Section 6.3 Best Efforts; Further Assurances
	 	 	49	 
	 

	 	Section 6.4 Public Announcements
	 	 	50	 
	 

	 	Section 6.5 Exclusive Dealing
	 	 	51	 
	 

	 	Section 6.6 Newco
	 	 	51	 
	 

	 	Section 6.7 Termination of Certain Agreements
	 	 	51	 
	 

	 	Section 6.8 Notice of Breaches
	 	 	52	 
	 

	 	Section 6.9 AR Damages
	 	 	52	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE VII
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	CONDITIONS TO CLOSING
	 	 	52	 
	 
	 	 	 	 	 	 
	 

	 	Section 7.1 Conditions to the Obligations of Parent and Newco
	 	 	52	 
	 

	 	Section 7.2 Conditions to the Obligations of the Company
	 	 	54	 
	 
	 	 	 	 	 	 
	ARTICLE VIII
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	INDEMNIFICATION
	 	 	54	 
	 
	 	 	 	 	 	 
	 

	 	Section 8.1 General Indemnification
	 	 	54	 
	 

	 	Section 8.2 General Indemnification by Parent and the Surviving
Corporation
	 	 	55	 
	 

	 	Section 8.3 Indemnification Net of Recovery
	 	 	56	 
	 

	 	Section 8.4 Limitation and Survival of Indemnification Obligations
	 	 	56	 
	 

	 	Section 8.5 Survival and Expiration of Representations and Warranties
	 	 	57	 
	 

	 	Section 8.6 Indemnification Procedures
	 	 	58	 
	 

	 	Section 8.7 Remedies Cumulative
	 	 	62	 
	 

	 	Section 8.8 Right to Set-Off
	 	 	62	 
	 

	 	Section 8.9 No Claim Against the Company
	 	 	63	 
	 

	 	Section 8.10 Apportionment
	 	 	63	 
	 
	 	 	 	 	 	 
	ARTICLE IX
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	TERMINATION AMENDMENT AND WAIVER
	 	 	63	 
	 
	 	 	 	 	 	 
	 

	 	Section 9.1 Termination
	 	 	63	 
	 

	 	Section 9.2 Effect of Termination
	 	 	64	 
	 
	 	 	 	 	 	 
	ARTICLE X
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	REPRESENTATIVE OF THE HOLDERS OF COMPANY EQUITY SECURITIES
	 	 	64	 
	 
	 	 	 	 	 	 
	 

	 	Section 10.1 Authorization of Representative
	 	 	64	 
	 
	 	 	 	 	 	 
	ARTICLE XI
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	GENERAL
	 	 	66	 
	 
	 	 	 	 	 	 
	 

	 	Section 11.1 Successors and Assigns
	 	 	66	 
	 

	 	Section 11.2 Entire Agreement
	 	 	66	 
	 

	 	Section 11.3 Counterparts
	 	 	67	 
	 

	 	Section 11.4 Expenses and Fees
	 	 	67	 
	 

	 	Section 11.5 Specific Performance; Remedies
	 	 	67	 
	 

	 	Section 11.6 Notices
	 	 	67	 
	 

	 	Section 11.7 Governing Law and Forum
	 	 	68	 
	 

	 	Section 11.8 Severability
	 	 	69	 
	 

	 	Section 11.9 Absence of Third Party Beneficiary Rights
	 	 	69	 
	 

	 	Section 11.10 Mutual Drafting
	 	 	69	 
	 

	 	Section 11.11 Further Representations
	 	 	69	 
	 

	 	Section 11.12 Amendment; Waiver
	 	 	69	 
	 

	 	Section 11.13 Usage
	 	 	69	 

iii

 

	 	 	 
	Schedules:
	 	 
	 
	 	 
	2.9(f)(v)

	 	Certain Sales
	4.1

	 	Non Indiana Jurisdictions
	4.4(b)

	 	Holders of Capital Stock
	4.4(d)

	 	Holders of SARs
	4.4(e)

	 	Agreements Relating to Sale, Transfer, Registration, or Voting of Capital Stock
	4.7(a)

	 	Deviation of Financial Statements from GAAP
	4.8

	 	Obligations to Shareholders
	4.9

	 	Accounts Receivable
	4.10

	 	Permits
	4.11(d)

	 	Environmental Matters
	4.12(b)

	 	Fixed Assets
	4.14

	 	Leases
	4.15(a)

	 	Customers and Suppliers
	4.15(b)

	 	Customer Disputes
	4.15(c)

	 	Performance Obligations
	4.16(a)(i)

	 	Personal Property Leases
	4.16(a)(ii)

	 	Agreements for Purchase or Sale of Products or Services
	4.16(a)(iii)

	 	Distribution, Franchise, Sales, Commission, Consulting, Agency, or Advertising Agreements
	4.16(a)(iv)

	 	Restrictive Agreements
	4.16(a)(v)&(vi)

	 	Preferred or Exclusive Provider Agreements
	4.16(a)(vii)

	 	Property Options
	4.16(a)(viii)

	 	Commission Arrangements
	4.16(a)(ix)

	 	Joint Venture, Partnership or LLC Agreements
	4.16(a)(x)

	 	Agreements with Security Interest or Guarantee
	4.16(a)(xi)

	 	Agreements for Sale or Acquisition of Assets outside Ordinary Course of Business
	4.16(a)(xii)

	 	Agreements with Governmental Authorities
	4.16(a)(xiii)

	 	Confidentiality Agreements
	4.16(a)(xiv)

	 	Employment or Consulting Agreements
	4.16(a)(xvii)

	 	Indemnification Obligations
	4.16(a)(xviii)

	 	Agreements that could Prohibit or Impair the Conduct of the Business
	4.16(a)(xix)

	 	Geographic, Temporal or Market Restrictions
	4.16(a)(xx)

	 	Hazardous Materials, Environmental Cleanup or Audits
	4.16(a) (xxi)

	 	Pharmaceutical Manufacturer Agreements
	4.16(a) (xxii)

	 	Intellectual Property and Licensing Agreements
	4.16(a) (xxiii)

	 	Other Agreements Outside the Ordinary Course of Business or Involving More than $25,000
	4.17

	 	Insurance
	4.18

	 	Labor Matters
	4.19

	 	Employee Benefits
	4.21

	 	Litigation
	4.22(a)

	 	Intellectual Property Registrations

iv

 

	 	 	 
	4.22 (c)

	 	Ownership Interests or Security Interests Claimed in Intellectual Property
	4.22 (e)

	 	Infringement Notices
	4.22 (g)

	 	Outbound IP Agreements
	4.22(h)

	 	Inbound IP Agreements
	4.22(i)

	 	Company Source Code
	4.22(j)

	 	Authorship Exceptions
	4.22(k)

	 	Open Source Materials
	4.22(m)

	 	Customer Offerings
	4.22(n)

	 	Support and Funding
	4.22(o)

	 	Commitments
	4.24(b)

	 	Closed Tax Years
	4.24(l)

	 	Tax Jurisdictions
	4.24(u)

	 	Tax Basis/NOLs
	4.25

	 	Absence of Changes
	4.26

	 	Bank Accounts; Powers of Attorney
	4.31(b)

	 	Controls and Procedures
	7.1(h)

	 	Aggregate SAR Consideration
	 
	 	 
	Exhibits:
	 	 
	 
	 	 
	Exhibit A

	 	Employment Agreements
	Exhibit B

	 	Principal Shareholders
	Exhibit C

	 	Escrow Agreement
	Exhibit D

	 	Net Funded Indebtedness and Net Working Capital as of December 31, 2005
	Exhibit E

	 	Form of Opinion of Locke Reynolds, LLP
	Exhibit F

	 	Company Services
	Exhibit G

	 	Current Rate Card
	Exhibit H

	 	Payments Pursuant to Section 3.2(g)

v

 

AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of
this 13th day of April, 2006, by and among (i) WebMD Health Corp., a Delaware corporation
(“Parent”); (ii) FFGM, Inc., an Indiana corporation (“Newco”); and (iii) Summex
Corporation, an Indiana corporation (the “Company”).

RECITALS

     WHEREAS, the Company is engaged in the business of providing health management services for
employers and health plans that help employees and plan members to actively manage and reduce
health care costs by developing, implementing and managing comprehensive wellness programs that
identify, assess, and modify behaviors, including a customizable combination of health risk
assessments, personal coaching, and ongoing lifestyle education (the “Business”).

     WHEREAS, the respective Boards of Directors of Parent, Newco and the Company have approved
this Agreement and the Merger (as defined below) on the terms and subject to the conditions set
forth in this Agreement;

     WHEREAS, pursuant to the Merger, shares of Common Stock (as defined below) will be converted
into the Common Stock Consideration (as defined below) in the manner set forth herein;

     WHEREAS, contemporaneously herewith, each of the Persons listed on Exhibit A hereto
have entered into employment agreements with the Company (collectively, the “Employment
Agreements”) that will become effective as of the Closing (as defined below) provided the
respective party thereto is still employed by the Company; and

     WHEREAS, contemporaneously herewith, each of the Persons listed on Exhibit B (each a
“Principal Shareholder” and, collectively, the “Principal Shareholders”) hereto
have entered into certain letter agreements with Parent as of the date hereof, whereby each such
party has agreed to certain covenants with Parent.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual representations,
warranties, covenants and agreements herein contained, the parties hereto, intending to be legally
bound, hereby agree as follows:

Article I

CERTAIN DEFINITIONS

     Section 1.1 Defined Terms. Following is a list of the defined terms used in this Agreement
and the section references where they are defined.

“Accounts Receivable” has the meaning set forth in Section 4.9.

 

 

“Affiliate” means, with respect to any Person, (i) any Person that, directly or indirectly
through one or more entities, controls or is controlled by, or is under common control with, such
Person, or (ii) any director, officer, partner, member or trustee of such Person or (iii) any
Person who is an officer, director, partner, member or trustee of any Person described in clauses
(i) or (ii) of this sentence. As used herein, “controls,” “control” and “controlled” means the
possession, direct or indirect, of the power to direct the management and policies of a Person,
whether through the ownership of 50% or more of the voting interests of such Person, through
contract or otherwise.

“Agreed Amount” means part, but not all, of the Claimed Amount.

“Agreement” has the meaning set forth in the first paragraph of this Agreement.

“Alternative Transaction” means any of the following transactions between or among the
Company and/or its stockholders and any Person other than Parent: (i) the acquisition or purchase
of any capital stock of the Company other than the issuance of restricted stock by the Company in
the Ordinary Course of Business, in an aggregate amount not to exceed 5% of the fully diluted
shares of the Company; (ii) the sale, transfer, license or other disposition of any material assets
or rights of the Company, or (iii) a business combination, change of control or similar transaction
involving the Company.

“Arbitrator” has the meaning set forth in Section 8.6(e).

“AR Damages” has the meaning set forth in Section 6.9.

“Articles of Merger” articles of merger or other appropriate documents prepared and
executed in accordance with Section 23-1-40-5 of the IBCL.

“Audit Firm” has the meaning set forth in Section 2.9(d).

“Base Balance Sheet” means the unaudited consolidated balance sheet of the Company as of
December 31, 2005.

	“Benefit Arrangement” means any arrangement, obligation, custom, or practice, whether or
not legally enforceable, to provide compensation or benefits for services rendered (other than
merely as salary or wages or under a Benefit Plan) to present or former directors, employees,
agents, or independent contractors, including employment or consulting agreements; severance
agreements or pay policies; stay or retention bonuses or compensation; executive, incentive, or
bonus compensation programs or arrangements; sick leave, vacation pay, or paid time off; plant
closing benefits; patent award programs; salary continuation for disability; workers’ compensation;
retirement compensation; deferred compensation; equity and equity-based compensation and equity
purchase plans or programs; executive hospitalization, medical, or life insurance; tuition
reimbursement or scholarship programs; employee discount programs; tax equalization arrangements;
meals, travel, or vehicle allowances; any plans subject to Section 125 of the Code; and any plans
providing benefits or payments in the event of a change in control, change in
ownership or effective control, or sale of a substantial portion (including all or substantially
all) of the assets of any business or portion thereof.

 
“Benefit Arrangement” means any arrangement, obligation, custom, or practice,
whether or
not legally enforceable, to provide compensation or benefits for services rendered (other
than merely as salary or wages or under a Benefit Plan) to present or former directors,
employees, agents, or independent contractors, including employment or consulting agreements;
severance agreements or pay policies; stay or retention bonuses or compensation; executive,
incentive, or bonus compensation programs or arrangements; sick leave, vacation pay, or paid
time off; plant closing benefits; patent award programs; salary continuation for disability;
workers’ compensation; retirement compensation; deferred compensation; equity and equity-based
compensation and equity purchase plans or programs; executive hospitalization, medical, or life
insurance; tuition reimbursement or scholarship programs; employee discount programs; tax
equalization arrangements; meals, travel, or vehicle allowances; any plans subject to Section
125 of the Code; and any plans providing benefits or payments in the event of a change in
control, change in ownership or effective control, or sale of a substantial portion
(including all or substantially all) of the assets of any business or portion thereof.

2

 

“Benefit Plan” has the meaning given in ERISA Section 3(3), together with plans or
arrangements that would be so defined if they were not (i) otherwise exempt from ERISA by that or
another section, (ii) maintained outside the United States, or (iii) individually negotiated or
applicable only to one person.

“Books and Records” means all business records, financial books and records, sales order
files, purchase order files, engineering order files, warranty and repair files, supplier lists,
customer lists, dealer, representative and distributor lists, studies, surveys, analyses,
strategies, plans, forms, designs, diagrams, drawings, specifications, technical data, production
and quality control records and formulations of the Company.

“Business” has the meaning set forth in the Recitals.

“Business Day” means any day other than (a) Saturday or Sunday or (b) any other day on
which banks in New York City, New York are permitted or required to be closed.

“Buyer Indemnification Threshold” has the meaning set forth in Section 8.4(b).

“Buyer Indemnified Party” has the meaning set forth in Section 8.1.

“Cap” has the meaning set forth in Section 8.4(c).

“Certificates” means the outstanding certificates that immediately prior to the Effective
Time represent shares of Common Stock.

“Charter Documents” means, with respect to any Person, its articles of incorporation and
by-laws as amended through the date hereof.

“Claimed Amount” means the amount of any Damages incurred or reasonably expected to be
incurred by the Indemnified Party.

“Claims” has the meaning set forth in Section 8.6.

“Claim Notice” has the meaning set forth in Section 8.6(d).

“Closing” means the consummation of the transactions contemplated pursuant to this
Agreement.

“Closing Date” means the date on which the Closing occurs.

“Closing Common Stock Consideration” means the Purchase Price divided by the number of
Common Shares outstanding immediately prior to the Effective Time,

“Closing SAR Consideration” means with respect to a SAR the amount payable at the Closing
under the SAR Plan in connection with the Merger, based upon the value of the net Common
Stock Consideration payable pursuant to Section 2.8(a) after giving effect to Section 2.10 and
Sections 3.2 (f) and (g).

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

3

 

“Commitments” means the Company’s privacy and security commitments for personally
identifiable information (including, but not limited to, terms and conditions and privacy policies
applicable to such personally identifiable information, which are set forth in Section 4.22(o) of
the Disclosure Schedule).

“Common Shares” means the shares of common stock, without par value, of the Company.

“Common Stock” means, collectively, all the issued and outstanding Common Shares.

“Common Stock Consideration” means the Closing Common Stock Consideration and the Earn-out
Common Stock Consideration.

“Company” has the meaning set forth in the first paragraph of this Agreement.

“Company Benefit Arrangement” means any Benefit Arrangement the Company sponsors or
maintains or with respect to which the Company has or may have any current or future Liability, in
each case with respect to any present or former directors, employees, officers, or agents of, or
service providers to, the Company.

“Company Certificate” means a certificate to the effect that each of the conditions
specified in clauses (a) through (e) (insofar as clause (e) relates to Legal Proceedings involving
the Company) of Section 7.1 is satisfied in all respects.

“Company Equity Securities” means the Common Stock.

“Company Expenses” means the aggregate of (i) the out of pocket expenses paid or payable as
of the Closing by the Company in connection with the consummation of the transactions contemplated
hereby, including to any legal counsel, accountants, investment bankers, or consultants, plus (ii)
any transfer, sale, use, stamp, conveyance, value added, recording, registration, documentary,
filing and other non-income Taxes and administrative fees (including, without limitation, notary
fees) arising in connection with the consummation of this Agreement and the transactions
contemplated hereby and payable by the Company.

“Company Intellectual Property” means the Company Owned Intellectual Property and the
Company Licensed Intellectual Property.

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

“Company Material Adverse Effect” means any material adverse change, event, circumstance or
development with respect to, or material adverse effect on, (i) the business, assets, liabilities,
capitalization, prospects, condition (financial or other), or results of operations of the Company,
taken as a whole, (ii) the ability of Parent to operate the Business immediately after the Closing
or (iii) the ability of the officers of Parent, following the Closing, to certify without
qualification to Parent’s financial statements as they relate to the business or operations
previously conducted by the Company. For the avoidance of doubt, the parties agree that the terms
“material”, “materially” or “materiality” as used in this Agreement with an initial lower case “m”
shall have

4

 

their respective customary and ordinary meanings, without regard to the meaning ascribed
to Company Material Adverse Effect.

“Company Owned Intellectual Property” means all Intellectual Property owned or purported to
be owned by the Company, in whole or in part.

“Company Plan” means any Benefit Plan the Company sponsors or maintains or to which the
Company is obligated to make payments or has or may have any Liability, in each case with respect
to any present or former employees of the Company, and any qualified plan that was terminated on or
after January 1, 1999.

“Company Registrations” means Intellectual Property Registrations that are registered or
filed in the name of the Company, alone or jointly with others.

“Company Revenues” has the meaning set forth in Section 2.9(f).

“Company Securityholders” means holders of Company Equity Securities immediately prior to
the Effective Time.

“Company Services” means those services of the Company set forth on Exhibit F
attached hereto.

“Company Source Code” means the source code for any Software included in the Customer
Offerings or Internal Systems or other confidential information constituting, embodied in or
pertaining to such Software.

“Company Stock Plan” means any stock option plan, stock appreciation rights plan or other
stock or equity-related plan of the Company.

“Customer Offerings” means (a) the services that the Company (i) currently provides or
makes available to third parties, or (ii) has provided or made available to third parties within
the previous six years, or (iii) currently plans to provide or make available to third parties in
the future and (b) the products (including Software and Documentation) that the Company (i)
currently develops, manufactures, markets, distributes, makes available, sells or licenses to third
parties, or (ii) has developed, manufactured, marketed, distributed, made available, sold or
licensed to third parties within the previous six years, or (iii) currently plans to develop,
manufacture, market, distribute, make available, sell or license to third parties in the future. A
true and complete list of all Customer Offerings is set forth in Section 4.22(m) of the Disclosure
Schedule

“Current Rate Card” has the meaning set forth in Section 2.9(f)(viii).

“Damages” has the meaning set forth in Section 8.1(a).

“Dispute” means the dispute resulting if the Indemnifying Party in a Response disputes its
liability for all or part of the Claimed Amount.

“Documentation” means printed, visual or electronic materials, reports, white papers,
documentation, specifications, designs, flow charts, code listings, instructions, user manuals,
frequently asked questions, release notes, recall notices, error logs, diagnostic reports,
marketing materials, packaging, labeling, service manuals and other information describing the use,

5

 

operation, installation, configuration, features, functionality, pricing, marketing or correction
of a product, whether or not provided to end user.

“Earn-out Common Stock Consideration” means the amounts payable with respect to a Common
Share pursuant to Section 2.9, which shall equal (a) the Earn-out Payment, if any, less the
aggregate Earn-out SAR Consideration, divided by (b) the number of Common Shares outstanding
immediately prior to the Effective Time.

“Earn-out Payment” means the amounts, if any, payable pursuant to the terms and conditions
of Section 2.9.

“Earn-out SAR Consideration” means the amounts payable with respect to a SAR pursuant to
Section 2.9, which shall equal (a) the Earn-out Payment, if any, divided by (b) the number of
Common Shares outstanding immediately prior to the Effective Time.

“Effective Time” means the time of the filing of the Articles of Merger in accordance with
the IBCL, which filing shall occur on the Closing Date.

“Employment Agreements” has the meaning set forth in the Recitals.

“Environmental Law” means mean any Law relating to the environment, occupational health and
safety, or exposure of persons or property to Materials of Environmental Concern, including any
statute, regulation, administrative decision or order pertaining to: (i) the presence of or the
treatment, storage, disposal, generation, transportation, handling, distribution, manufacture,
processing, use, import, export, labeling, recycling, registration, investigation or remediation of
Materials of Environmental Concern or documentation related to the foregoing; (ii) air, water and
noise pollution; (iii) groundwater and soil contamination; (iv) the release, threatened release, or
accidental release into the environment, the workplace or other areas of Materials of Environmental
Concern, including emissions, discharges, injections, spills, escapes or dumping of Materials of
Environmental Concern; (v) transfer of interests in or control of real property which may be
contaminated; (vi) community or worker right-to-know disclosures with respect to Materials of
Environmental Concern; (vii) the protection of wild life, marine life and wetlands, and endangered
and threatened species; (viii) storage tanks, vessels, containers, abandoned or discarded barrels
and other closed receptacles; and (ix) health and safety of employees and other persons. As used
above, the term “release” shall have the meaning set forth in CERCLA.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and all
regulations and rules issued thereunder, or any successor Law.

“ERISA Affiliate” means any Person that is, or at any applicable time was, a member of (1)
a controlled group of corporations (as defined in Code Section 414(b)), (2) a group of trades or
businesses under common control (as defined in Code Section 414(c)), or (3) an affiliated service
group (as defined under Code Section 414(m) or any regulations under Code Section 414(o)), any of
which includes or, within the applicable statutes of limitations, included the Company.

“Escrow Agent” means Wilmington Trust Company.

6

 

“Escrow Agreement” means an escrow agreement in substantially the form attached hereto as
Exhibit C.

“Escrow Amount” means the aggregate amount paid by Parent to the Escrow Agent pursuant to
Section 2.10(a).

“Escrow Fund” means the fund established pursuant to the Escrow Agreement, including the
amount paid by Parent to the Escrow Agent at the Closing pursuant to Section 2.10(a).

“Exploit” means develop, design, test, modify, make, use, sell, have made, used and sold,
import, reproduce, market, distribute, commercialize, support, maintain, correct and create
derivative works of.

“Financial Statements” means:

(a) the consolidated balance sheets and statements of income, changes in shareholders’
equity and cash flows of the Company as of the end of and for each of the last three fiscal
years, and

(b) the Most Recent Balance Sheet and the consolidated statements of income, changes in
shareholders’ equity and cash flows for the 3 months ended as of the Most Recent Balance
Sheet Date.

“First Year Measurement Period” means the twelve-month period beginning on April 1, 2006
and ending on March 31, 2007.

“First Year Minimum” means $8,750,000.

“First Year Target” means $10,000,000.

“GAAP” means generally accepted accounting principles as in effect in the United States on
the date of this Agreement.

“Governmental Authority” means any federal state, local, foreign, governmental or
quasi-governmental entity or municipality or subdivision thereof or any authority, department,
commission, board, bureau, agency, court, tribunal or instrumentality, or any applicable
self-regulatory organization.

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with any Governmental Authority.

“Healthcare Laws” means Laws relating to the provision, administration, and/or payment for
healthcare products or services, including, without limitation, to the extent applicable: (i) rules
and regulations governing the operation and administration of Medicare, Medicaid, or other federal
health care programs; (ii) 42 U.S.C. § 1320a-7(b), commonly referred to as the “Federal
Anti-Kickback Statute,” (iii) 42 U.S.C. § 1395nn, commonly referred to as the “Stark Law,” (iv) 31
U.S.C. §§ 3729-33, commonly referred to as the “False Claims Act” and (v) rules and regulations of
the U.S. Food and Drug Administration.

7

 

“HIPAA Commitments” has the meaning set forth in Section 4.28(a).

“IBCL” means the Indiana Business Corporation Law (as amended from time to time).

“Indemnified Party” has the meaning set forth in Section 8.6(a).

“Indemnifying Party” has the meaning set forth in Section 8.6(a).

“Indemnifying Securityholders” means, collectively, the Company Securityholders receiving
the Common Stock Consideration pursuant to Section 2.8.

“Intellectual Property” shall mean the following subsisting throughout the world:

(a) Patent Rights;

(b) Trademarks and all goodwill in the Trademarks;

(c) copyrights, designs, data and database rights and registrations and applications for
registration thereof, including moral rights of authors;

(d) mask works and registrations and applications for registration thereof and any other
rights in semiconductor topologies under the laws of any jurisdiction;

(e) inventions, invention disclosures, statutory invention registrations, trade secrets and
confidential business information, know-how, manufacturing and product processes and
techniques, research and development information, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and supplier lists
and information, whether patentable or nonpatentable, whether copyrightable or
noncopyrightable and whether or not reduced to practice; and

(f) other proprietary rights relating to any of the foregoing (including remedies against
infringement thereof and rights of protection of interest therein under the laws of all
jurisdictions).

“Intellectual Property Registrations” means Patent Rights, registered Trademarks,
registered copyrights and designs, mask work registrations and applications for each of the
foregoing.

“Internal Systems” shall mean the Software and Documentation and the computer,
communications and network systems (both desktop and enterprise-wide), laboratory equipment,
reagents, materials and test apparatus used by the Company in its business or operations or to
develop, manufacture, fabricate, assemble, provide, distribute, support, maintain or test the
Customer Offerings, whether located on the premises of the Company or hosted at a third party
site. “Internal Systems” does not include mass market, currently available, off-the-shelf software
programs (such as computer operating system software or business application programs for word
processing, e-mail, etc.) that are licensed by the Company pursuant to “shrink wrap” licenses. All
Internal Systems that are material to the business of the Company are listed and described in
Section 4.22(c) of the Disclosure Schedule.

8

 

“Knowledge of the Company” means the actual knowledge of the Principal Shareholders, as
well as any other knowledge which such persons would have possessed had they made reasonable
inquiry of appropriate employees and agents of the Company with respect to the matter in question.

“Law” means any law, order, judgment, rule, code, statute, regulation, requirement,
variance, decree, writ, injunction, award, ruling or ordinance of any Governmental Authority.

“Lease” means any lease or sublease pursuant to which the Company leases or subleases from
another Person any real property.

“Leased Real Property” means the real property leased by the Company as tenant, together
with, to the extent leased by the Company, all buildings and other structures, facilities or
improvements currently located thereon, all fixtures, systems, equipment and items of personal
property of the Company attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing.

“Legal Proceeding” has the meaning set forth in Section 8.6(b)(i).

“Liability” means any direct or indirect liability, indebtedness, guaranty, endorsement,
claim, loss, damage, deficiency, cost, expense, obligation or responsibility, whether accrued,
absolute, contingent, matured, unmatured or otherwise, fixed or unfixed, known or unknown, choate
or inchoate, liquidated or unliquidated, secured or unsecured.

“Materials of Environmental Concern” means any: pollutants, contaminants or hazardous
substances (as such terms are defined under CERCLA), pesticides (as such term is defined under the
Federal Insecticide, Fungicide and Rodenticide Act), solid wastes and hazardous wastes (as such
terms are defined under the Resource Conservation and Recovery Act), chemicals, other hazardous,
radioactive or toxic materials, oil, petroleum and petroleum products (and fractions thereof), or
any other material (or article containing such material) listed or subject to regulation under any
law, statute, rule, regulation, order, Permit, or directive due to its potential, directly or
indirectly, to harm the environment or the health of humans or other living beings.

“Maximum Yearly Earn-out Amount” means $5,000,000.

“Measurement Period” means, collectively, the First Year Measurement Period and the Second
Year Measurement Period.

“Merger” has the meaning set forth in Section 2.1.

“Merger Consideration” means the payments to which Company Securityholders are entitled
pursuant to Section 2.8.

“Most Recent Balance Sheet” shall mean the unaudited consolidated balance sheet of the
Company as of the Most Recent Balance Sheet Date.

“Most Recent Balance Sheet Date” shall mean March 31, 2006.

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“Net Funded Indebtedness” means, as of any date, without duplication, the outstanding
principal amount of, accrued and unpaid interest on and other payment obligations (including any
prepayment premiums payable as of such date if such principal and interest is paid in full as of
such date) arising under any obligations of the Company consisting of (i) indebtedness for borrowed
money or indebtedness issued in substitution or exchange for borrowed money or for the deferred
purchase price of property or services (other than trade payables and accrued expenses arising in
the ordinary course of business but including all seller notes and “earn-out” payments), (ii)
indebtedness evidenced by any note, bond, debenture or other debt security, (iii) obligations under
any interest rate, currency or other hedging agreements, (iv) obligations under conditional sale or
other title retention agreements related to property purchased by the Company (other than accounts
payable and accrued expenses incurred in the ordinary course of business), and (v) all obligations
of any Person other than the Company secured by any Security Interest on property or assets owned
by the Company, whether or not the obligations secured thereby have been assumed by the Company, in
each case, as of such date, excluding any undrawn letters of credit, less (vi) cash and cash
equivalents. Notwithstanding the foregoing, “Net Funded Indebtedness” shall not include any
obligations under operating leases or capital leases. Net Funded Indebtedness of the Company, as of
any date, shall be determined in accordance with GAAP and (A) using the same accounting methods,
policies, practices, and procedures, with consistent classification, judgments, and estimation
methodology, as were used by the Company in preparing the Net Funded Indebtedness as of December
31, 2005, which is attached as Exhibit D hereto, and (B) without giving effect to the transactions
contemplated by this Agreement.

“Net Working Capital” means, as of any date:

Current assets on the balance sheet, excluding cash, minus current liabilities on the
balance sheet, excluding notes payable, calculated as follows:

(I) the sum of (A) client fees receivable, plus (B) preprinted materials inventory,
plus (C) rent deposits, plus (D) prepaid expenses

minus

(II) the sum of (A) accrued expense payable, plus (B) accrued salaries payable, plus
(C) accounts payable, plus (D) income tax payable, plus (E) unearned revenue,

in each case, of the Company, as of such date, as determined in accordance with GAAP and (A)
using the same accounting methods, policies, practices, and procedures, with consistent
classification, judgments, and estimation methodology, as were used by the Company in
preparing the Net Funded Indebtedness and Net Working Capital of the Company as of December
31, 2005, which is attached as Exhibit D hereto, and (B) without giving effect to
the transactions contemplated by this Agreement.

“Newco” has the meaning set forth in the first paragraph of this Agreement.

“Open Source Materials” means all Software, Documentation or other material that is
distributed as “free software”, “open source software” or under a similar licensing or distribution
model,

10

 

including, but not limited to, the GNU General Public License (GPL), GNU Lesser General
Public License (LGPL), Mozilla Public License (MPL), or any other license described by the Open
Source Initiative as set forth on www.opensource.org.

“Ordinary Course of Business” means the ordinary course of business consistent with past
custom and practice (including with respect to frequency and amount).

“Parent” has the meaning set forth in the first paragraph of this Agreement.

“Parent Certificate” means a certificate to the effect that each of the conditions
specified in clauses (a) through (c) (insofar as clause (c) relates to Legal Proceedings involving
Parent or the Newco) of Section 7.2 is satisfied in all respects.

“Parent Material Adverse Effect” has the meaning set forth in Section 5.1.

“Parent Offerings” means, collectively, the products and services offered by Parent to its
customers on the Closing Date.

“Patent Rights” means all patents, patent applications, utility models, design
registrations and certificates of invention and other governmental grants for the protection of
inventions or industrial designs (including all related continuations, continuations-in-part,
divisionals, reissues and reexaminations).

“Performance Obligations” means any performance guarantee, including, but not limited to,
improvements in wellness scores and other agreed measures of improvement, customer service
obligation or implementation deadline of the Company for the benefit of a customer whether set
forth in a customer contract or otherwise.

“Permit” means any permit, license, registration, certificate, order, approval, franchise,
variance or similar right issued by or obtained from any Governmental Entity (including those
issued or required under Environmental Laws and those relating to the occupancy or use of owned or
leased real property).

“Person” means any natural person, corporation, general partnership, limited partnership,
limited liability company, limited liability partnership, proprietorship, trust, union,
association, court, tribunal, agency, government, department, commission, self-regulatory
organization, arbitrator, board, bureau, instrumentality, Governmental Authority or other entity,
enterprise, authority or business organization.

“Principal Shareholders” has the meaning set forth in the Recitals to this Agreement.

“Purchase Price” means $30,000,000 less the aggregate Closing SAR Consideration payable on
all outstanding SARs and the aggregate SAR Taxes payable with respect to such Closing SAR
Consideration, collectively.

“Release” means disposing, discharging, injecting, spilling, leaking, leaching, dumping,
emitting, escaping, emptying, seeping, placing, appearing and the like into or upon any land,
building, surface, subsurface or water or air or otherwise entering into the environment.

11

 

“Release Date” means the date that is eighteen (18) months after the Closing Date.

“Requisite Shareholder Approval” means the unanimous adoption of this Agreement and the
approval of the Merger by the holders of outstanding Company Equity Securities entitled to vote on
this Agreement and the Merger.

“Response” means a written response containing the information provided for in Section
8.6(d).

“SAR” means a stock appreciation right issued under the SAR Plan.

“SAR Consideration” means the Closing SAR Consideration and the Earn-out SAR Consideration,
if any.

“SAR Plan” means the Summex Corporation Stock Appreciation Rights Plan and any prior plans
under which any outstanding SARs have been granted.

“SAR Taxes” means the employer half of FICA Taxes imposed under section 3111 of the Code
with respect to any SAR Consideration paid to each holder of a SAR who is an employee (as defined
in section 3121(b) of the Code) on the date hereof or who received SARs in connection with the
performance of services as an employee.

“Second Year Measurement Period” means the twelve-month period beginning on April 1, 2007
and ending on March 31, 2008.

“Second Year Minimum” means $11,000,000.

“Second Year Target” means $12,500,000.

“Security Interest” means any mortgage, pledge, security interest, encumbrance, charge or
other lien (whether arising by contract or by operation of law), other than (i) mechanic’s,
materialmen’s, and similar liens, (ii) liens arising under worker’s compensation, unemployment
insurance, social security, retirement, and similar legislation and (iii) liens on goods in transit
incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course of
Business of the Company and not material to the Company.

“Shareholder Consent” means the written consent to the Merger by the shareholders of the
Company representing the Requisite Shareholder Approval pursuant to the provisions of the IBCL, the
Company’s articles of incorporation, and bylaws.

“Shareholder Indemnification Threshold” has the meaning set forth in Section 8.4(a).

“Shareholder Indemnified Party” has the meaning set forth in Section 8.2.

“Shareholders’ Representative” has the meaning set forth in Section 10.1(a).

“Shares” has the meaning set forth in Recitals.

12

 

“Sites” means the following Internet websites: summex.com, onwardplus.com, bfwschedule.com,
healthassess.guidanceresources.com, olsn.com, summexhealthmonitor.com, bfwexpress.com,
summexlivewise.com, health.intuneliving.com, and benefitoptionspha.com.

“Software” means computer software code, applications, utilities, development tools,
diagnostics, databases and embedded systems, whether in source code, interpreted code or object
code form.

“Surviving Corporation” has the meaning set forth in Section 2.1.

“Systems” has the meaning set forth in Section 4.22(o).

“Taxes” means any and all taxes, charges, fees, duties, contributions, levies or other
similar assessments or liabilities in the nature of a tax, including, without limitation, income,
gross receipts, corporation, ad valorem, premium, value-added, net worth, capital stock, capital
gains, documentary, recapture, alternative or add-on minimum, disability, estimated, registration,
recording, excise, real property, personal property, sales, use, license, lease, service, service
use, transfer, withholding, employment, unemployment, insurance, social security, national
insurance, business license, business organization, environmental, workers compensation, payroll,
profits, severance, stamp, occupation, windfall profits, customs duties, franchise and other taxes
of any kind whatsoever imposed by the United States of America or any state, local or foreign
government, or any agency or political subdivision thereof, and any interest, fines, penalties,
assessments or additions to tax imposed with respect to such items or any contest or dispute
thereof.

“Tax Returns” shall means any and all reports, returns, declarations, or statements
relating to Taxes, including any schedule or attachment thereto and any related or supporting work
papers or information with respect to any of the foregoing, including any amendment thereof.

“Termination Date” has the meaning set forth in Section 9.1(b).

“Third Party Action” has the meaning set forth in Section 8.6(a).

“Third Party Claim” has the meaning set forth in Section 8.6(b).

“Trademarks” means all registered trademarks and service marks, logos, Internet domain
names, corporate names and doing business designations and all registrations and applications for
registration of the foregoing, common law trademarks and service marks and trade dress.

“Trading Partners” has the meaning set forth in Section 4.29(c).

     Section 1.2 Interpretation. Unless otherwise indicated to the contrary herein by the
context or use thereof: (i) the words, “herein,” “hereto,” “hereof” and words of similar import
refer to this Agreement as a whole and not to any particular Section or paragraph hereof; (ii) the
word “including” means “including, but
not limited to”; (iii) masculine gender shall also include the feminine and neutral genders, and
vice versa; and (iv) words importing the singular shall also include the plural, and vice versa.

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Article II

THE MERGER

     Section 2.1 The Merger. Upon the terms and subject to the conditions of this Agreement, at
the Effective Time, Newco shall, pursuant to the provisions of the IBCL, be merged with and into
the Company (the “Merger”), and the separate corporate existence of Newco shall thereupon
cease in accordance with the provisions of the IBCL. The Company shall be the surviving
corporation in the Merger and shall continue to exist as said surviving corporation under its
present name pursuant to the provisions of the IBCL. The separate corporate existence of the
Company with all its rights, privileges, powers and franchises shall continue unaffected by the
Merger. The Merger shall have the effects specified in the IBCL. From and after the Effective
Time, the Company is sometimes referred to herein as the “Surviving Corporation.”

     Section 2.2 Outstanding Shares.

          (a) As of the date hereof, the number of issued and outstanding shares of capital stock of
Newco is 1,000 shares of common stock.

          (b) As of the date hereof, the number of outstanding shares of capital stock of the Company is
23,140 Common Shares.

     Section 2.3 Articles of Merger. On the Closing Date, the parties hereto shall cause the
Articles of Merger, in accordance with the relevant provisions of the IBCL to be properly executed
and filed in accordance with the IBCL and shall make all other filings or recordings required under
the IBCL. The Merger shall be effective at the Effective Time.

     Section 2.4 Articles of Incorporation. The articles of incorporation of the Surviving
Corporation shall be amended as of the Effective Time in the manner set forth in the Articles of
Merger. Such amended articles of incorporation of the Surviving Corporation shall continue in full
force and effect until further amended in the manner prescribed by the provisions of the IBCL.

     Section 2.5 By-laws. The by-laws of Newco, substantially in the form previously provided
to the Company (but otherwise in form and substance satisfactory to Newco) in effect immediately
prior to the Effective Time shall be the by-laws of the Surviving Corporation until amended in
accordance with applicable law.

     Section 2.6 Officers. The officers of Newco immediately prior to the Effective Time shall
be the officers of the Surviving Corporation and will hold office until their successors are duly
elected or appointed and qualified in the manner provided in the articles of incorporation or
by-laws of the Surviving Corporation or as otherwise provided by law, or until their earlier death,
resignation or removal.

     Section 2.7 Directors. The directors of Newco immediately prior to the Effective Time
shall be the directors of the Surviving Corporation and will serve until their successors are

14

 

duly
elected or appointed and qualified in the manner provided in the articles of incorporation or
by-laws of the Surviving Corporation or as otherwise provided by law, or until their earlier death,
resignation or removal.

     Section 2.8 Conversion of Shares.

          (a) Conversion of Common Stock. As of the Effective Time, by virtue of the Merger and
without any action on the part of any holder thereof or any party hereto, each share of Common
Stock issued and outstanding immediately prior to the Effective Time (other than shares held in the
Company’s treasury) shall be canceled and converted into the right to receive the Closing Common
Stock Consideration, payable in cash to the holder thereof, without interest thereon, and the
Earn-out Common Stock Consideration. Except as provided in Section 2.10, such Closing Common Stock
Consideration will be payable to the respective holder upon surrender of the Certificate formerly
representing such share.

          (b) Treasury Shares. Each share of Common Stock held in the treasury of the Company
immediately prior to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holders thereof, be canceled, retired and cease to exist as of the Effective Time
and no payment shall be made with respect thereto.

          (c) Newco Shares. As of the Effective Time, each share of capital stock of Newco
issued and outstanding immediately prior to the Effective Time shall, without any action on the
part of Newco, be converted on a one-for-one basis into shares of the corresponding class of
capital stock of the Surviving Corporation.

          (d) Holders of Common Shares. From and after the Effective Time, the holders of
Common Shares shall cease to have any rights with respect to such Common Shares, except the right
to receive the Common Stock Consideration with respect to each Common Share.

     Section 2.9 Earn-Out.

          (a) Within 120 days following the end of the First Year Measurement Period:

               (i) If, during the First Year Measurement Period, the Surviving Corporation generates Company
Revenues equal to or greater than the First Year Target, the Maximum Yearly Earn-out Amount shall
be payable by Parent to the Company Securityholders as Earn-out Common Stock Consideration and to
the holders of SARs as Earn-out SAR
Consideration; provided, that any amounts payable pursuant to this Section 2.9 shall
be reduced by the amount of any applicable SAR Taxes.

               (ii) If, during the First Year Measurement Period, the Surviving Corporation generates Company
Revenues equal to or greater than the First Year Minimum but less than the First Year Target, an
additional amount equal to the Maximum Yearly Earn-out Amount multiplied by a fraction, the
numerator of which is excess of the actual Company Revenues generated by the Surviving Corporation
during the First Year Measurement Period over the First Year Minimum and the denominator of which
is $1,250,000, shall be payable by

15

 

Parent to the Company Securityholders as Earn-out Common Stock
Consideration and to the holders of SARs as Earn-out SAR Consideration; provided, that any
amounts payable pursuant to this Section 2.9 shall be reduced by the amount of any applicable SAR
Taxes, and provided further, however, that if, during the First Year Measurement
Period, the Surviving Corporation fails to generate Company Revenues equal to or greater than the
First Year Minimum, Parent will not be obligated to make any payment pursuant to this Section
2.9(a).

          (b) Within 120 days following the end of the Second Year Measurement Period:

               (i) If, during the Second Year Measurement Period, the Surviving Corporation generates Company
Revenues equal to or greater than the Second Year Target, the Maximum Yearly Earn-out Amount shall
be payable by Parent to the Company Securityholders as Earn-out Common Stock Consideration and to
the holders of SARs as Earn-out SAR Consideration; provided, that any amounts payable
pursuant to this Section 2.9 shall be reduced by the amount of any applicable SAR Taxes.

               (ii) If, during the Second Year Measurement Period, the Surviving Corporation generates
Company Revenues equal to or greater than the Second Year Minimum but less than the Second Year
Target, an additional amount equal to the Maximum Yearly Earn-out Amount multiplied by a fraction,
the numerator of which is excess of the actual Company Revenues generated by the Surviving
Corporation during the Second Year Measurement Period over the Second Year Minimum and the
denominator of which is $1,500,000, shall be payable by Parent to the Company Securityholders as
Earn-out Common Stock Consideration and to the holders of SARs as Earn-out SAR Consideration;
provided, that any amounts payable pursuant to this Section 2.9 shall be reduced by the
amount of any applicable SAR Taxes, and provided further, however, that if, during
the Second Year Measurement Period, the Surviving Corporation fails to generate Company Revenues
equal to or greater than the Second Year Minimum, Parent will not be obligated to make any payment
pursuant to this Section 2.9(b).

          (c) During the Measurement Period Parent shall operate the Business in a commercially
reasonable manner and shall not take any action not in good faith the primary purpose of which is
to reduce or eliminate the payment of Earn-out Payment. Notwithstanding the foregoing, it is
agreed and acknowledged that (i) the board of directors of Parent will act consistent with its
fiduciary duties to its shareholders; (ii) Parent will have the power and right to control all
aspects of the Business and the operations of Parent and the Surviving Corporation, including
without limitation, hiring, firing and compensation of employees, the branding, pricing,
discounting and terms of sale of the Company Services, decisions regarding whether,
how and to what extent to market, advertise or promote the Company Services, the making or not
making of capital expenditures, the settlement or not settling of claims and the management of all
litigation and disputes with third parties (including suppliers, customers, competitors, employees,
consultants and agents); (iii) Parent intends to exercise or refrain from exercising such power and
right as it may deem appropriate and in the best overall interests of Parent and its subsidiaries
as a whole taking into account their respective conditions and prospects from time to time (rather
than the respective interests of the Company Securityholders and the holders of SARs in the
Earn-out Payment); (iv) Parent currently has, and may in the future develop or acquire, products
that compete, either directly or indirectly, with the Company Services and may

16

 

make decisions with
respect to such products that adversely effect the Company Services or Company Revenues; and (v)
any of the above actions may materially reduce the Earn-out Payment, if any. Without limiting the
foregoing, during the Measurement Period the Surviving Corporation shall be permitted to sell the
Company Services through its reseller, distributor, or similar agreements existing on the date
hereof and any other such agreements approved by Parent, Company Revenues for which will be
credited in accordance with Section 2.9(f)(ii). In addition and without limiting the foregoing,
if, during the Measurement Period, Parent receives a request for Company Services, Parent may
permit the Surviving Corporation to provide such services. Any Company Revenues associated with
any such Company Services approved by Parent will be credited in accordance with Section
2.9(f)(iii).

          (d) Parent shall deliver to the Shareholders’ Representative as soon as practicable, and in
any event no later than forty five (45) days after the end of the each of the First Year
Measurement Period and the Second Year Measurement Period, a schedule setting forth the computation
of the Earn-out Payment, if any, and a copy of all financial information used in making such
computation. Parent’s computation thereof shall be conclusive and binding upon the parties hereto
and on the holders of SARs and the Company Securityholders unless, within fifteen (15) days
following the Shareholders’ Representative’s receipt of such schedule, the Shareholders’
Representative notifies Parent in writing that it disagrees with Parent’s computation. Such notice
shall include a schedule setting forth the Shareholders’ Representative’s computation of the
payment together with a copy of any information, other than that previously provided by Parent,
used in making such computation. If Parent disagrees with the Shareholders’ Representative’s
computation, an officer of Parent shall promptly meet with the Shareholders’ Representative, and
the parties shall attempt in good faith to reach a resolution of such disagreement. If such
disagreement is not resolved within fifteen (15) days after delivery of the Shareholders’
Representative’s notice, Parent shall request its independent auditors or any other nationally
recognized auditing firm selected by Parent (the “Audit Firm”) to compute the amount of the
Earn-out Payment, if any, as promptly as practicable and such computation shall be binding upon the
parties hereto. The expenses of the Audit Firm shall be borne equally by Parent and the
Shareholders’ Representative (which Shareholders’ Representative’s portion may be subtracted from
the Earn-out Payment otherwise payable to the Company Securityholders and to the holders of SARs).
Parent shall not be required to make the Earn-Out Payment, if any, or any portion thereof, to the
Shareholders’ Representative until the period during which the Shareholders’ Representative may
object to the amount of the Earn-out Payment has lapsed or, if properly contested in accordance
with the provisions hereof, the amount of the Earn-out Payment has been agreed upon by the parties
or calculated by the Audit Firm. Notwithstanding any other provision of this Agreement to the
contrary, any dispute arising under this Section 2.9 other than
with respect to the computation of the Earn-out Payment shall exclusively be resolved pursuant
to the procedures set forth in Section 8.6(e).

          (e) The rights of the Company Securityholders and the holders of SARs to their respective
portions the Earn-out Payment, if any, will not be represented by a certificate, are personal to
each Company Securityholder or holder of a SAR (as the case may be) and shall not be transferable
for any reason other than by operation of law, will or the laws of descent and distribution. Any
attempted transfer of such right by any holder thereof (other than as permitted by the immediately
preceding sentence) shall be null and void. No Company Securityholder or

17

 

holder of a SAR shall
have any right, cause of action or other claim against Parent, the Surviving Corporation or any of
their respective Affiliates with respect to the ownership or operation of the Surviving Corporation
or the Business on and after the Closing Date except for the limited right to receive the Earn-out
Payment, if any.

          (f) For the purposes of this Section 2.9 “Company Revenues” means consolidated revenue
from sales of Company Services by Parent or by the Surviving Corporation in accordance with the
terms and conditions of Section 2.9(c), calculated in accordance with GAAP, and shall be subject to
the following additional conditions (whether or not such following items are in accordance with
GAAP):

     (i) “Company Revenues” shall mean the actual invoiced sales recorded on a consolidated basis
as revenues by Parent, its subsidiaries, or the Surviving Corporation under Parent’s normal
accounting policies consistently applied within and across its operating units, from the sale to
third parties, not affiliated with Parent, of Company Services, net of any royalty paid to any
third party, and less the following, as applicable: refunds, discounts, credits, promotional
offerings, insurance, sales and use Taxes, customs duties, and any other governmental Tax or charge
(except income Taxes) imposed on or at the time of the production, importation, use, or sale of the
Company Services, including any value added Taxes (VAT), as adjusted for rebates and refunds. For
conversion of foreign currency to U.S. dollars with respect to sales of Company Services in a
foreign currency, the conversion method and rate shall be the conversion method and rate used by
Parent to convert the applicable sales into U.S. dollars for purposes of the preparation of
Parent’s financial statements, such conversion to be calculated in accordance with GAAP, applied
consistently. The Parties acknowledge and agree that Parent and its subsidiaries (other than the
Surviving Corporation) currently offer, and will continue to offer during the Measurement Period,
services that are similar to those set forth on Exhibit F. Such services offered by Parent
and its subsidiaries (other than the Surviving Corporation) shall not be considered Company
Services for the purposes of determining Company Revenues pursuant to this Section 2.9;

     (ii) 100% of such revenues resulting from sales of Company Services that are made by the
Surviving Corporation through reseller, distributor, or similar agreements to which the Company is
a party and that are in effect on the date hereof shall be counted as Company Revenues;

     (iii) 100% of such revenues resulting from sales of Company Services approved by Parent shall
be counted as Company Revenues;

     (iv) only 50% of such revenues resulting from sales of Company Services to third parties that
are customers of Parent or its subsidiaries as of the date of such sale shall be counted as Company
Revenues regardless of whether such sales are made by (i) Parent or its subsidiaries (other than
the Surviving Corporation), or (ii) the Surviving Corporation;

     (v) except as set forth in Section 2.9(f)(v) of the Disclosure Schedule, if sales of Company
Services are made during the Measurement Period to third parties that are customers of both the
Company and Parent or its subsidiaries as of the date hereof:

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               (A) only 50% of such revenues shall be counted as Company Revenues if such sales are made by
Parent or its subsidiaries (other than the Surviving Corporation); and

               (B) 100% of such revenues shall be counted as Company Revenues if such sales are made by the
Surviving Corporation.

          (vi) only 50% of such revenues resulting from sales of Company Services by Parent or its
subsidiaries (other than the Surviving Corporation) shall be counted as Company Revenues;

          (vii) on any sales of Company Services that are bundled with Parent Offerings, Company
Revenues shall be credited as determined by Parent on an equitable basis in consideration of the
relationship of the value of the Company Services to the total sales price (and after giving effect
to the provisions of paragraphs (iv), (v), and (vi) of this Section 2.9(f)); for the avoidance of
doubt, it is acknowledged and agreed that if, during the Measurement Period, Parent incorporates
any portion or aspect of the Company’s HRA product into the Parent Offerings, no Company Revenues
will be counted as a result revenues resulting from sales of such enhanced Parent Offerings that do
not also include other Company Services;

          (viii) any Company Revenues recognized after the Effective Time which represent sales of
Company Services that are discounted by more than 10% from the Company’s current rate card included
on Exhibit G attached hereto (the “Current Rate Card”) will be excluded from
Company Revenues for purposes of this Section unless approved in advance in writing by Parent in
its sole discretion; and

          (ix) Company Revenues shall not include use for internal purposes of the Company Services or
modifications thereof by Parent or its subsidiaries.

     Section 2.10 Escrow.

          (a) At the Closing, Parent shall deposit with the Escrow Agent $3,000,000 of the aggregate
Merger Consideration otherwise payable pursuant to Section 2.8(a) for the purpose of securing the
indemnification obligations of the Indemnifying Securityholders set forth in this Agreement. The
Escrow Fund shall be held by the Escrow Agent under the Escrow Agreement pursuant to the terms
thereof.

          (b) The adoption of this Agreement and the approval of the Merger by the Company
Securityholders shall constitute approval of the Escrow Agreement and of all of the
arrangements relating thereto, including the placement of the Escrow Fund in escrow and the
appointment of the Shareholders’ Representative.

     Section 2.11 Exchange of Certificates.

          (a) Upon surrender of any Certificates, together with duly executed stock powers, on or prior
to the Closing Date to Parent, Newco or the Surviving Corporation, the holder of each Certificate
shall receive from Parent or the Surviving Corporation on the Closing Date in exchange for each
share of Common Stock, evidenced thereby, the Closing Common

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Stock Consideration to which such
holder is entitled pursuant to Section 2.8, without interest. Each Certificate surrendered
pursuant to this Section 2.11(a) shall be canceled. If payment or delivery is to be made to a
Person other than the Person in whose name a Certificate so surrendered is registered, it shall be
a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise
in proper form for transfer, that the signatures on the certificate or any related stock power
shall be properly guaranteed and that the Person requesting such payment either pay any transfer or
other Taxes required by reason of the payment to a Person other than the registered holder of the
Certificate so surrendered or establish to the satisfaction of Parent and the Surviving Corporation
that such Tax has been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 2.11, each Certificate (other than Certificates canceled pursuant to
Section 2.8(b)) shall represent for all purposes only the right to receive the Merger Consideration
in the form provided for by this Agreement, without interest. Except as provided herein, all cash
paid upon surrender of the Certificates in accordance with this Section 2.11 shall be deemed to
have been paid in satisfaction of all rights pertaining to the shares of Common Stock represented
thereby.

          (b) In the event that any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the registered holder of such lost, stolen or destroyed
Certificate in form and substance acceptable to Parent and Newco, the Surviving Corporation will
pay in exchange for such lost, stolen or destroyed Certificate the Merger Consideration in respect
thereof in the manner set forth in Section 2.8.

     Section 2.12 Withholding Taxes. Notwithstanding any other provision in this Agreement,
Parent, Newco, the Company and the Surviving Corporation shall have the right to deduct and
withhold Taxes from any payments to be made hereunder (including without limitation any payments
made in respect of SARs and any payments to be made pursuant to Section 3.2(g)) if such withholding
is required by law and to collect any necessary Tax forms, including Form W-9 or the appropriate
series of Form W-8, as applicable, or any similar information, from any Company Securityholder and
any other recipient of any payment hereunder. To the extent that amounts are so withheld and paid
to the appropriate taxing authority, such withheld amounts shall be treated for all purposes of
this Agreement as having been delivered and paid to the applicable Company Securityholder or other
recipient of payment in respect of which such deduction and withholding was made.

     Section 2.13 FIRPTA. On or prior to the Closing, the Company shall deliver to Parent (a) a statement certifying that the
Common Stock is not a “U.S. real property interest” and (b) a notice addressed to the Internal
Revenue Service as described in Treasury Regulation Section 1.897-2(h)(2), both in accordance with
Treasury Regulations under Sections 897 and 1445 of the Code and in a form reasonably acceptable to
Parent. The Company authorizes Parent to, and acknowledges that Parent shall, file the
notification and statement with the Internal Revenue Service on behalf of the Company. If Parent
does not receive the statement and/or notice described above on or before the Closing Date, Parent,
Newco, the Company or the Surviving Corporation shall be permitted to withhold from the payments to
be made pursuant to this Agreement any required withholding tax under Section 1445 of the Code.

     Section 2.14 280G. Prior to the Closing Date, the Company shall receive a written waiver
from each “disqualified individual” (within the meaning of Section 280G(c) of the Code)

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of his or her right to any and all payments or other benefits that could be deemed “parachute payments” under
Section 280G(b) of the Code (determined without regard to Sections 280G(b)(4) and 280G(b)(5) of the
Code) if such payments are not approved by the Company Securityholders in a manner that satisfies
the requirements of Section 280G(b)(5)(B) and any regulations (including proposed regulations)
thereunder. After receipt of such written waivers and prior to the Closing Date, the Company shall
solicit shareholder approval of any and all such payments or benefits in a manner that satisfies
the requirements for the exemption under Section 280G(b)(5)(A)(ii) of the Code and any regulations
(including proposed regulations) promulgated thereunder, including the Company’s provision of
adequate disclosure to all Company Securityholders of all material facts concerning all payments
that, in the absence of such shareholder approval, could be classified as “parachute payments” to a
“disqualified individual” under Section 280G of the Code. The Company shall provide such adequate
disclosure to Company Securityholders in a manner that satisfies Section 280G(b)(5)(B)(ii) of the
Code and any regulations (including proposed regulations) promulgated thereunder.

     Section 2.15 Additional Action. The Surviving Corporation may, at any time after the
Effective Time, take any action, including executing and delivering any document, in the name and
on behalf of either the Company or Newco, in order to consummate the transactions contemplated by
this Agreement.

Article III

CLOSING

     Section 3.1 Closing. The Closing shall take place at the offices of Wilmer Cutler
Pickering Hale and Dorr LLP, 1899 Pennsylvania Avenue, NW, Washington, DC 20006 two Business Days
following the satisfaction or waiver of the conditions set forth in Article VII (other than those
conditions that by their terms cannot be satisfied until the Closing), or on such date and time as the Company and
Parent shall mutually agree.

     Section 3.2 Actions at the Closing. At the Closing:

          (a) the Company shall deliver to Parent and Newco the various certificates, instruments and
documents referred to in Section 7.1;

          (b) Parent and Newco shall deliver to the Company the various certificates, instruments and
documents referred to in Section 7.2;

          (c) the Surviving Corporation shall deliver to the Secretary of State of the State of Indiana
for filing the Articles of Merger;

          (d) each Company Securityholder shall deliver to Parent for cancellation the Certificate(s)
representing his, her, or its Company Equity Securities as required pursuant to Section 2.8(a);

          (e) Parent, the Shareholders’ Representative and the Escrow Agent shall execute and deliver
the Escrow Agreement and Parent shall deposit $3,000,000 with the Escrow Agent in accordance with
Section 2.10;

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          (f) Parent or the Surviving Corporation shall pay (and shall treat as part of the Closing
Common Stock Consideration under Section 2.8(a)) the following amounts:

               (i) the sum of $80,000 dollars (subject to adjustment at Closing) to Locke Reynolds LLP, as
attorneys for the Company Securityholders;

               (ii) to Morgan Keegan & Company, Inc. a sum to be specified in writing by the Company as
Morgan Keegan & Company, Inc.’s fee for serving as the Company’s financial advisor with respect to
the Merger; and

               (iii) to Daniel J. Lee, a sum to be specified in writing by the Company;

          (g) Parent shall pay to the Surviving Corporation (and shall treat as part of the Closing
Common Stock Consideration under Section 2.8(a)) the aggregate amount set forth on Exhibit
H attached hereto for payment by the Surviving Corporation to the Persons set forth on such
Exhibit H;

          (h) Parent shall pay to the Surviving Corporation the aggregate Closing SAR Consideration for
payment by the Surviving Corporation to each holder of a SAR plus an amount (as determined by the
Company and approved by Parent) that is sufficient to pay the aggregate SAR Taxes payable with
respect to the Closing SAR Consideration;

          (i) Parent or the Surviving Corporation shall pay (by check or by wire transfer) to each
Company Securityholder the balance of the Closing Common Stock Consideration not paid pursuant to
clauses (e), (f), (g) and (h) above.

Article IV

REPRESENTATIONS AND

WARRANTIES OF THE COMPANY

     To induce Parent and Newco to enter into this Agreement and consummate the transactions
contemplated hereby, the Company represents to Parent and Newco that, except as set forth in the
Disclosure Schedule, the statements contained in this Article IV are true and correct as of the
date of this Agreement and will be true and correct as of the Closing as though made as of the
Closing, except to the extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties will be true and correct as of
such date). The Disclosure Schedule shall be arranged in sections and subsections corresponding to
the numbered and lettered sections and subsections contained in this Article IV. The disclosures
in any section or subsection of the Disclosure Schedule shall qualify only the corresponding
section or subsection in this Article IV.

     Section 4.1 Due Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Indiana. The Company is duly
authorized and qualified to do business under all applicable Laws, to own, lease and operate its
properties and to carry on its business in the places and in the manner as now conducted and
presently planned to be conducted except where the failure to be so authorized or qualified

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individually or in the aggregate, has not had and would not reasonably be expected to have a
Company Material Adverse Effect. Section 4.1 of the Disclosure Schedule contains a complete and
accurate list of each jurisdiction in which the Company is so authorized or qualified to do
business. The Company is in good standing as a foreign corporation in each jurisdiction (other
than the State of Indiana) in which it does business. The Company has delivered to Parent and
Newco true, complete and correct copies of its Charter Documents. The Company is not (either
currently or pending notice or lapse of time, or both) in violation of, in conflict with, or in
default under, any Charter Documents. The minute books of the Company delivered to Parent and
Newco are correct and complete in all material respects.

     Section 4.2 Authorization; Validity. The Company has full legal right and all requisite
corporate power and authority to operate and carry on the Business as presently conducted, and to
execute, deliver and perform this Agreement and the transactions and other agreements and
instruments contemplated hereby. This Agreement has been and all other agreements and instruments
to be executed and delivered by the Company in connection herewith, when executed and delivered by
the Company, shall have been, duly and validly authorized, executed and delivered by the Company.
Without limiting the generality of the foregoing, (A) the Board of Directors of the Company, by the
unanimous vote of all directors (i) determined that the Merger is advisable, fair and in the best
interests of the Company and its shareholders, (ii) adopted this Agreement in accordance with the
provisions of the IBCL, and (iii) directed that this Agreement and the Merger be submitted to the
shareholders of the Company for their adoption and approval and resolved to recommend that the
shareholders of the Company vote in favor of the adoption of this Agreement and the approval of the
Merger, and (B) this Agreement and the Merger has been approved by the Requisite Shareholder
Approval. This Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.

     Section 4.3 Noncontravention. Subject to the filing of the Articles of Merger as required
by the IBCL, neither the execution and delivery by the Company of this Agreement, nor the
consummation by the Company of the transactions contemplated hereby, will (a) conflict with or
violate any provision of the Charter Documents, (b) require on the part of the Company any notice
to or filing with, or any permit, authorization, consent or approval of, any Governmental Entity,
(c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time
or both) a default under, result in the acceleration of obligations under, create in any party the
right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract
or instrument to which the Company is a party or by which the Company is bound or to which any of
their respective assets is subject, (d) result in the imposition of any Security Interest upon any
assets of the Company, or (e) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its properties or assets.

     Section 4.4 Capitalization.

          (a) The authorized capital stock of the Company consists of one million (1,000,000) shares
comprising both Common Shares and Preferred Shares, neither of which are authorized in any fixed
number. As of the date of this Agreement, 23,140 shares were issued and

23

 

outstanding, no shares were held by the Company as treasury stock, and no Preferred Shares were issued and outstanding.

          (b) Section 4.4(b) of the Disclosure Schedule sets forth a complete and accurate list, as of
the date hereof, of the holders of capital stock of the Company, showing the number of shares of
capital stock, and the class or series of such shares, held by each shareholder. All of the issued
and outstanding shares of capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. All of the issued and outstanding shares of capital stock of
the Company have been offered, issued and sold by the Company in compliance with all applicable
federal and state securities laws.

          (c) The Company does not have, and has never had, any Company Stock Plan other than the SAR
Plan.

          (d) No subscription, warrant, option, convertible security or other right (contingent or
otherwise) to purchase or acquire any shares of capital stock of the Company is authorized or
outstanding. The Company has no obligation (contingent or otherwise) to issue any subscription,
warrant, option, convertible security or other such right, or to issue or distribute to holders of any shares of its capital stock any evidences of indebtedness or assets of the
Company. The Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any dividend or to make
any other distribution in respect thereof. Except as set forth in Section 4.4(d) of the Disclosure
Schedule, there are no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Company.

          (e) Except as set forth in Section 4.4(e) of the Disclosure Schedule, there is no agreement,
written or oral, between the Company and any holder of Company Equity Securities, or, to the best
of the Company’s knowledge, among any holders of its securities, relating to the sale or transfer
(including agreements relating to rights of first refusal, co-sale rights or “drag-along” rights),
registration under the Securities Act, or voting, of the capital stock of the Company.

     Section 4.5 Subsidiaries. The Company does not have, and has never had, any direct or
indirect subsidiaries, and does not presently own, of record or beneficially, or control, directly
or indirectly, any capital stock, securities convertible into capital stock or any other equity
interest in any Person, whether active or dormant, nor is the Company, directly or indirectly, a
participant in any joint venture, partnership, limited liability company, trust, association or
other non-corporate entity. There are no trusts or similar entities or instruments of guardianship
or custodianship, whether enforceable or not, in existence for the benefit of the Company.

     Section 4.6 Complete Copies of Materials. The Company has delivered to Parent and Newco
true and complete copies (or with respect to oral agreements, written summaries of the same) of
each contract and other document that has been requested by Parent and Newco or its agents in
connection with this Agreement or that is referred to in the Disclosure Schedule.

     Section 4.7 Financial Statements.

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          (a) The Financial Statements are set forth in Section 4.7(a) of the Disclosure Schedule.
Except as set forth in Section 4.7(a) of the Disclosure Schedule, the Financial Statements (i)
comply as to form in all material respects with applicable accounting requirements, (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout the periods involved and
at the dates involved (except as may be indicated in the notes to such financial statements) and
(iii) fairly present the consolidated financial position of the Company as of the dates thereof and
the consolidated results of its operations and cash flows for the periods indicated, consistent
with the books and records of the Company, except that the interim financial statements are subject
to normal and recurring year-end adjustments which will not be material in amount or effect and do
not include footnotes.

          (b) The Net Funded Indebtedness of the Company was $764,401.49 as of December 31, 2005, as
shown on Exhibit D.

          (c) The Net Working Capital of the Company was $639,343.16 as of December 31, 2005, as shown
on Exhibit D.

          (d) As of the Closing, the Company will have reduced its Net Funded Indebtedness so that its
Net Working Capital as of the Closing minus the remaining Net Funded Indebtedness as of the Closing
is equal to $650,000.

     Section 4.8 Liabilities and Obligations. The Company has no Liabilities except for (a)
those Liabilities reflected on the Most Recent Balance Sheet and (b) those Liabilities incurred
since the date of the Base Balance Sheet in the Ordinary Course of Business and (c) contractual and
other Liabilities incurred in the Ordinary Course of Business which are not required by GAAP to be
reflected on a balance sheet. Without limiting the foregoing, except as set forth in Section 4.8
of the Disclosure Schedule, the Company has no obligations to any of its shareholders or their
Affiliates.

     Section 4.9 Accounts and Notes Receivable. All of the Company’s accounts and notes
receivable (collectively, the “Accounts Receivable”) are reflected properly according to
GAAP on the Most Recent Balance Sheet and represent valid obligations arising from sales actually
made or services actually performed in the Ordinary Course of Business. A complete and accurate
list of the Accounts Receivable reflected on the Most Recent Balance Sheet, showing the aging
thereof, is included in Section 4.9 of the Disclosure Schedule. No portion of the Accounts
Receivable is required or expected to be paid to any Person other than the Company. The Accounts
Receivable are current and collectible net of any reserves specifically applicable thereto shown on
the Most Recent Balance Sheet and, subject to such reserves, shall be collected in full, without
any set-off, within six (6) months after the Closing Date. There is no contest, claim, or right of
set-off with any maker of an Account Receivable relating to the amount or validity of such Account
Receivable.

     Section 4.10 Permits.

          (a) Section 4.10 of the Disclosure Schedule sets forth a list of all Permits issued to or held
by the Company. Such listed Permits are the only Permits that are required for the Company to
conduct the Businesses as presently conducted or as proposed by the Company

25

 

to be conducted. All fees required to be paid in connection with each such listed Permit have been paid. Each such
listed Permit is in full force and effect; the Company is in compliance with the terms of each such
Permit; and, to the Knowledge of the Company, no suspension or cancellation of such Permit is
threatened and there is no basis for believing that such Permit will not be renewable upon
expiration. No Person other than the Company owns or has any proprietary, financial, or other
interest (direct or indirect) in any such listed Permit. The transactions contemplated by this
Agreement will not result in a default under or a breach or violation of or adversely affect the
rights and benefits afforded to the Company under any Permit. Each Permit will continue in full
force and effect immediately following the Closing. The Company has delivered to Parent true,
accurate, and complete copies of all Permits.

          (b) All employees and consultants of the Company providing Customer Offerings, including
telephonically and via the Internet, are licensed in each jurisdiction where such licensing is
required.

     Section 4.11 Environmental Matters.

          (a) The Company has complied with all applicable Environmental Laws. There is no pending or,
to the Knowledge of the Company, threatened civil or criminal litigation, written notice of
violation, formal administrative proceeding, or investigation, inquiry or information request by
any Governmental Entity, relating to any Environmental Law involving the Company.

          (b) The Company has no liabilities or obligations arising from the release of any Materials of
Environmental Concern into the environment.

          (c) The Company is not a party to or bound by any court order, administrative order, consent
order or other agreement between the Company and any Governmental Entity entered into in connection
with any legal obligation or liability arising under any Environmental Law.

          (d) Set forth in Section 4.11(d) of the Disclosure Schedule is a list of all documents
(whether in hard copy or electronic form) that contain any environmental reports, investigations
and audits relating to premises currently or previously owned or operated by the Company (whether
conducted by or on behalf of the Company or a third party, and whether done at the initiative of
the Company or directed by a Governmental Entity or other third party) which were issued or
conducted during the past five years and which the Company has possession of or access to. A
complete and accurate copy of each such document has been provided to the Buyer.

          (e) The Company is not aware of any material environmental liability of any solid or hazardous
waste transporter or treatment, storage or disposal facility that has been used by the Company.

     Section 4.12 Assets.

          (a) The Company is the true and lawful owner, and has good title to, all of the assets
(tangible or intangible) purported to be owned by the Company, free and clear of all

26

 

Security Interests. The Company owns or leases all tangible assets sufficient for the conduct of its
businesses as presently conducted and as presently proposed to be conducted. Each such tangible
asset is free from material defects, has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it presently is used.

          (b) Section 4.12(b) of the Disclosure Schedule lists individually (i) all fixed assets (within
the meaning of GAAP) of the Company having a book value greater than $25,000, indicating the cost,
accumulated book depreciation (if any) and the net book value of each such fixed asset as of the
Most Recent Balance Sheet Date, and (ii) all other assets of a tangible nature of the Company whose
book value exceeds $25,000.

          (c) Each item of equipment, motor vehicle, and other asset that the Company has possession of
pursuant to a lease agreement or other contractual arrangement is in such condition that, upon its
return to its lessor or owner under the applicable lease or contract, the obligations of the
Company to such lessor or owner will have been discharged in full.

     Section 4.13 Real Property. The Company has never owned any real property.

     Section 4.14 Real Property Leases. Section 4.14 of the Disclosure Schedule lists all
Leases and lists the term of such Lease, any extension and expansion options, and the rent payable
thereunder. The Company has delivered to Parent complete and accurate copies of the Leases. With
respect to each Lease:

          (a) Such Lease is legal, valid, binding, enforceable and in full force and effect;

          (b) Such Lease will continue to be legal, valid, binding, enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing;

          (c) Neither the Company nor, to the Knowledge of the Company, any other party, is in breach or
violation of, or default under, any such Lease, and no event has occurred, is pending or, to the
Knowledge of the Company, is threatened, which, after the giving of notice, with lapse of time, or
otherwise, would constitute a breach or default by the Company or, to the knowledge of the Company,
any other party under such Lease;

          (d) There are no disputes, oral agreements or forbearance programs in effect as to such Lease;

          (e) The Company has not assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold or subleasehold;

          (f) To the Knowledge of the Company, all facilities leased or subleased thereunder are
supplied with utilities and other services adequate for the operation of said facilities; and

27

 

          (g) The Company is not aware of any Security Interest, easement, covenant or other restriction
applicable to the real property subject to such lease which would reasonably be expected to
materially impair the current uses or the occupancy by the Company of the property subject thereto.

     Section 4.15 Customers and Suppliers. (a) Section 4.15(a) of the Disclosure Schedule
sets forth a true and correct list of (a) each customer of the Company during the last full fiscal
year or the interim period through the Most Recent Balance Sheet Date and the amount of revenues
accounted for by such customer during each such period and (b) each supplier that is the sole supplier of any significant
product or service to the Company. Since December 31, 2004, no such customer or supplier has
indicated that it will stop, or decrease the rate of, buying products or supplying products, as
applicable, to the Company. To the Knowledge of the Company, no customer or supplier is reasonably
likely, as a result of the transactions contemplated by this Agreement, to: (x) not trade with or
supply the Company, (y) reduce substantially its trading with or provision of goods or services to
the Company or (z) change the terms and conditions on which it is to prepared trade with or supply
the Company. No unfilled customer order or commitment obligating the Company to process,
manufacture or deliver products or perform services will result in a loss to the Company upon
completion of performance. No purchase order or commitment of the Company is in excess of normal
requirements, nor are prices provided therein in excess of current market prices for the products
or services to be provided thereunder.

          (b) All invoices and collected amounts for customer billings for service fees, software
license fees, hardware or software maintenance fees and any other fees have been calculated
pursuant to fully executed legally binding agreements mutually agreed upon by the Company and the
applicable customer. Section 4.15(b) of the Disclosure Schedule sets forth each occasion in which
a customer of the Company has disputed its fee or charge amount, as well as the amount of any
credit and/or payment made by the Company to settle such dispute.

          (c) The Company as of the date hereof: (i) has met or exceeded every Performance Obligation,
(ii) will meet, or is capable of meeting, all Performance Obligations for the twenty-four (24)
months following the date of this Agreement, including Performance Obligations that will be
effected by future increases in volume requirements, and (iii) is unaware of any material problems
of a nature that could disrupt the operations of the Company, the servicing of its customers or the
sales of its products or services. Section 4.15(c) of the Disclosure Schedule sets forth each
occasion in which the Company has failed to meet a Performance Obligation, as well as the amount of
any credit and/or payment made by the Company in connection with such failed Performance
Obligation.

          (d) The Company’s health management program, including without limitation its Health Monitor
health risk assessment, is based on empirical research and conforms to standards of updating and
accuracy generally accepted within its industry.

          (e) The Company has not received any written (including electronic mail) notice or claim of
inaccuracy regarding any of its health management program.

     Section 4.16 Material Contracts and Commitments.

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          (a) Section 4.16 of the Disclosure Schedule sets forth a true, correct and complete list of
the following agreements (written or oral) to which the Company is a party as of the date of this
Agreement:

               (i) any agreement (or group of related agreements) for the lease of personal property from or
to third parties providing for lease payments in excess of $5,000 per annum or having a remaining
term longer than three (3) months;

               (ii) any agreement (or group of related agreements) for the purchase or sale of products or
for the furnishing or receipt of services (A) which calls for performance over a period of more
than one year, (B) involving annual revenues to the Company of more than $20,000, or (C) in which
the Company has granted “most favored nation” pricing provisions or exclusive marketing or
distribution rights relating to any products or territory or has agreed to purchase a minimum
quantity of goods or services or has agreed to purchase goods or services exclusively from a
certain party;

               (iii) any distribution, franchise, sales, commission, consulting, agency, or advertising
agreement concerning the Business, except for agreements that are cancelable on not more than sixty
(60) days notice by the Company without penalty or increased cost;

               (iv) any agreement (or group of related agreements) concerning the Business containing
covenants restraining or limiting the freedom of the Company or any officer, director, shareholder,
or Affiliate thereof to engage in any line of business or to compete with any Person, including,
without limitation, by restraining or limiting the right to solicit customers or that could, giving
effect to the Merger, restrain or limit the freedom of Parent, the Surviving Corporation or any
officer, director, shareholder or Affiliate thereof to engage in any line of business or compete
with any Person;

               (v) any agreement that provides for the Company to be the exclusive or a preferred provider of
any product or service to any Person or the recipient of any product or service of any Person
during any period of time or that otherwise involve the granting by any Person to the Company of
exclusive or preferred rights of any kind or that could, giving effect to the Merger, so provide
with respect to Parent, the Surviving Corporation or any of their respective Affiliates;

               (vi) any agreement that provides for any Person to be the exclusive or a preferred provider of
any product or service to the Company or the exclusive or a preferred recipient of any product or
service of the Company during any period of time or that otherwise involves the granting by the
Company of exclusive or preferred rights of any kind or that could, giving effect to the Merger, so
provide with respect to Parent, the Surviving Corporation or any of their respective Affiliates;

               (vii) each option with respect to any property, real or personal, used or intended for use in
the Business whether the Company is a grantor or grantee thereunder;

               (viii) each agreement (or group of related agreements) relating to commission arrangements
with individuals other than employees of the Company;

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               (ix) any agreement concerning the establishment or operation of a partnership, joint venture
or limited liability company;

               (x) any agreement (or group of related agreements) under which it has created, incurred,
assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations) or under which it has agreed to the imposition of a Security
Interest on any of its assets, tangible or intangible;

               (xi) any agreement for the disposition of any significant portion of the assets or business of
the Company (other than sales of products in the Ordinary Course of Business) or any agreement for
the acquisition of the assets or business of any other entity (other than purchases of inventory or
components in the Ordinary Course of Business);

               (xii) any agreement with any Governmental Authority to which the Company is a party or by
which its assets are bound, and each agreement with any Person in connection with such Person’s
agreement with any Governmental Authority;

               (xiii) any agreement concerning confidentiality;

               (xiv) any employment or consulting agreement;

               (xv) any agreement currently in effect involving any current or former officer, director or
shareholder of the Company or an Affiliate thereof;

               (xvi) any agreement under which the consequences of a default or termination would reasonably
be expected to have a Company Material Adverse Effect;

               (xvii) any agreement which contains any provisions requiring the Company to indemnify any
other party (excluding indemnities contained in agreements for the purchase, sale or license of
products entered into in the Ordinary Course of Business);

               (xviii) any agreement that could reasonably be expected to have the effect of prohibiting or
impairing the conduct of the business of the Company or the Surviving Corporation or any of its
Affiliates as currently conducted and as currently proposed to be conducted;

               (xix) any agreement under which the Company is restricted from selling, licensing or otherwise
distributing any of its technology or products, or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period of time or any
segment of the market or line of business;

               (xx) any agreement for the cleanup, abatement or other actions in connection with any
Hazardous Material, the remediation of any existing environmental Liabilities, violation of any
Environmental Laws or relating to the performance of any environmental audit or study;

               (xxi) each agreement with a pharmaceutical manufacturer or an agency representing a
pharmaceutical manufacturer;

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               (xxii) any agreement which would entitle any third party to receive a license or any other
right to intellectual property of Parent or any of Parent’s Affiliates following the Closing; and

               (xxiii) any other agreement (or group of related agreements) either involving more than
$25,000 or not entered into in the Ordinary Course of Business.

          (b) The Company has delivered to Parent a complete and accurate copy of each agreement listed
in Section 4.16 or Section 4.22 of the Disclosure Schedule. With respect to each agreement so
listed: (i) the agreement is legal, valid, binding and enforceable and in full force and effect;
(ii) the agreement will continue to be legal, valid, binding and enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing; and (iii) neither the Company nor, to the Knowledge of the
Company, any other party, is in breach or violation of, or default under, any such agreement, and
no event has occurred, is pending or, to the Knowledge of the Company, is threatened, which, after
the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the
Company or, to the Knowledge of the Company, any other party under such agreement.

     Section 4.17 Insurance.

          (a) Section 4.17(a) of the Disclosure Schedule sets forth an accurate list of all insurance
policies carried by the Company, the amounts and types of insurance coverage maintained thereunder
and all insurance loss runs and workmen’s compensation claims received for the past three (3)
policy years. The Company has delivered to Parent and Newco true, complete and correct copies of
all such insurance policies. With respect to each such insurance policy: (i) the policy is legal,
valid, binding and enforceable in accordance with its terms and is in full force and effect, and
(ii) the Company is not in breach or default (including any breach or default with respect to the
payment of premiums or the giving of notice), and no event has occurred which, with notice or the
lapse of time, would constitute a breach or default or permit termination or modification, under
the policy. All premiums payable under all such policies have been paid, and the Company is in
full compliance with the terms of such policies. Such policies of insurance are of the type and in
amounts customarily carried by Persons conducting businesses similar to the Business. There have
been no threatened terminations of, or material premium increases with respect to, any such
policies.

          (b) Except as set forth in Section 4.17(b) of the Disclosure Schedule, there is no claim
pending or, to the Knowledge of the Company, any existing facts which are reasonably likely to
result in a claim under any such policy, and if any of the foregoing have been disclosed, no such
claim or existing facts was questioned, denied or disputed by the underwriter of such policy. The
Company will not be liable for retroactive premiums or similar payments except as set forth in
Section 4.17(b) of the Disclosure Schedule, and the Company is otherwise in compliance in all
material respects with the terms of such policies. The Company has not been denied insurance
coverage at any time during the past five years and no policies have been cancelled or have been
refused to be renewed by the insurer in the past five years except as set forth in Section 4.17(b)
of the Disclosure Schedule. The Company has no knowledge of any threatened termination of or
premium increase with respect to, any such policy except as set forth

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in Section 4.17(b) of the
Disclosure Schedule. Each such policy will continue to be enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in effect immediately
prior to the Closing. The Company has not failed to timely give any notice required or failed to
satisfy any subjectivities under such insurance policies or binders of insurance.

     Section 4.18 Labor Matters. With respect to employees of and services providers to the Company:

          (a) Section 4.18 of the Disclosure Schedule contains a list of (i) all employees of the
Company; (ii) all officers and directors of the Company; (iii) the current annual compensation (and
the portions thereof attributable to salary, bonus, and other compensation respectively) of each
such employee, officer or director as of (A) the date of this Agreement and (B) as of the Closing
Date, and (iv) all employment agreements with any employees, officers, and directors. Each current
or past employee of the Company has entered into a confidentiality/assignment of inventions
agreement with the Company, a copy or form of which has previously been delivered to Parent.
Section 4.18 of the Disclosure Schedule contains a list of all employees of the Company who are a
party to a non-competition agreement with the Company; copies of such agreements have previously
been delivered to Parent. All of the agreements referenced in the two preceding sentences will
continue to be legal, valid, binding and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect immediately prior to the
Closing. All employees of the Company are employed in the United States. All the Company
employees are citizens or permanent residents of the United States. To the Knowledge of the
Company, no key employee or group of employees has any plans to terminate employment with the
Company. The Company has complied with all applicable Laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, including without limitation
any such Laws with respect to employment discrimination, employee classification, workers’
compensation, family and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and has complied with all employment agreements, and no claims,
controversies, investigations, grievances, or suits are pending or, to the Knowledge of the
Company, threatened with respect to such Laws or agreements, either by private individuals or by
Governmental Authorities; all employees are at-will; and the Company has no obligation, contingent
or otherwise, to pay severance benefits.

          (b) No labor union represents or has ever represented the Company’s employees, no collective
bargaining agreement is or has been binding against the Company, nor has the Company experienced
any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes.
The Company has no knowledge of any organizational effort made or threatened, either currently or
within the past two years, by or on behalf of any labor union with respect to employees of the
Company.

          (c) All persons who have performed services for the Company while classified as independent
contractors have satisfied the requirements of Law to be so classified, and the Company has fully
and accurately reported their compensation on IRS Forms 1099 or other applicable Tax forms for
independent contractors when required to do so.

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          (d) To the Knowledge of the Company, no contractor used by or under contract with the Company
is in material violation of any Law relating to labor or employment matters, with respect to any
work such contractor has performed for the Company.

          (e) Any accruals for incentive bonuses to employees of the Company for the fiscal year 2005
are accurately reflected on the Financial Statements and the Most Recent Balance Sheet.

     Section 4.19 Employee Benefits.

          (a) Section 4.19(b) of the Disclosure Schedule contains a complete and accurate list of all
Company Benefit Arrangements and Company Plans. Complete and accurate copies of (i) all Company
Plans and Company Benefit Arrangements that have been reduced to writing, (ii) written summaries of
all unwritten Company Plans and Company Benefit Arrangements, (iii) all related trust agreements,
insurance contracts and summary plan descriptions, and (iv) all annual reports filed on IRS Form
5500 and (for all funded plans) all plan financial statements for the last five plan years for each
Company Plan, have been delivered to the Buyer.

          (b) Each Company Plan and Company Benefit Arrangement has been administered in all material
respects in accordance with its terms and the Company has in all material respects met its
obligations with respect to each Company Plan and Company Benefit Arrangement and has made all
required contributions thereto. The Company is in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the regulations thereunder (including
Code Section 4980B, Subtitle K, Chapter 100 of the Code and ERISA Sections 601 through 608 and
Section 701 et seq.). All filings and reports as to each Company Plan required to have been
submitted to the Internal Revenue Service or to the United States Department of Labor have been
duly submitted. No Company Plan has ever had assets that include securities issued by the Company
or any ERISA Affiliate. The Company does not have and has never had any ERISA Affiliates.

          (c) There are no pending claims (other than routine benefit claims) or lawsuits that have been
asserted or instituted by, against, or relating to, any Company Plans or Company Benefit
Arrangements, nor is there any basis for any such claim or lawsuit. No Company Plans or Company
Benefit Arrangements are or have been under audit or examination (nor has notice been received of a
potential audit or examination) by any domestic or foreign Governmental Authority; and no matters
are pending under the IRS’s Employee Plans Compliance Resolutions System or any successor or
predecessor program.

          (d) All the Company Plans that are intended to be qualified under Section 401(a) of the Code
have received determination letters from the Internal Revenue Service to the effect that such
Company Plans are qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Code Sections 401(a) and 501(a), respectively, no such determination letter has
been revoked and revocation has not been threatened, and no such Company Plan has been amended
since the date of its most recent determination letter or application therefor in any respect, and
no act or omission has occurred, that would adversely affect its qualification or materially
increase its cost. Each Company Plan that is required to

33

 

satisfy Code Section 401(k)(3) or Section
401(m)(2) has been tested for compliance with, and satisfies the requirements of, Code Section
401(k)(3) and Section 401(m)(2) for each plan year ending prior to the Closing Date.

          (e) The Company has never maintained or had any Liability with respect to any Benefit Plan
subject to Section 412 of the Code or Title IV of ERISA (including any multiemployer plan (as
defined in ERISA Section 4001(a)(3)).

          (f) No employee or former employee (or beneficiary of either) of the Company is now, or after
completing additional service or applying at a future date will be, entitled to receive any welfare
benefits beyond retirement or other termination of employment, including, without limitation, death
or medical benefits (whether or not insured), other than as applicable Law requires, and there have
been no written or oral commitments inconsistent with the foregoing. There are no unfunded
obligations under any Company Plan or Company Benefit Arrangement providing benefits after
termination of employment to any employee of the Company (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred compensation, but
excluding continuation of health coverage required to be continued under Section 4980B of the Code
or other applicable law and insurance conversion privileges under state law. The assets of each
Company Plan and Company Benefit Arrangement that is funded are reported at their fair market value
on the books and records of such Company Plan or Company Benefit Arrangement.

          (g) No Company Plan has experienced a termination or partial termination. No act or omission
has occurred and no condition exists with respect to any Company Plan or Company Benefit
Arrangement that would subject the Company to any contractual indemnification or contribution
obligation protecting any fiduciary, insurer or service provider with respect to any Company Plan
or Company Benefit Arrangement, nor will any of the transactions contemplated by this agreement
give rise to such an obligation.

          (h) No Company Plan is funded by, associated with or related to a “voluntary employee’s
beneficiary association” within the meaning of Section 501(c)(9) of the Code.

          (i) Each Company Plan and Company Benefit Arrangement is amendable and terminable unilaterally
by the Company at any time without liability or expense to the Company or such Company Plan or
Company Benefit Arrangement as a result thereof (other than for benefits accrued through the date
of termination or amendment and reasonable administrative expenses related thereto) and no Company
Plan, Company Benefit Arrangement, plan documentation or agreement, summary plan description or
other written communication distributed generally to employees by its terms prohibits the Company
from amending or terminating any such Company Plan or Company Benefit Arrangement. The investment
vehicles used to fund the Company Plans may be changed at any time without incurring a material
sales charge, surrender fee or other similar expense.

          (j) No Company Plan or Company Benefit Arrangement contains any provision or is subject to any
Law that would (a) increase, accelerate, or vest any benefit, (b) require severance, termination or
retention payments, (c) provide any term of employment or compensation guarantee; (d) trigger any
Liabilities (including any obligation to provide a Tax

34

 

gross-up), or (e) measure any values of
benefits on the basis of any of the transactions contemplated by this Agreement. No shareholder,
employee, officer, or director of the Company has been promised or paid any bonus or incentive
compensation related to the transactions contemplated pursuant to this Agreement. There is no
agreement, plan or arrangement under which any person may receive payments from the Company or its
shareholders that may be subject to the Tax imposed by Code Section 4999 or included in the
determination of such person’s “parachute payment” under Code Section 280G. The Company has
provided to Parent such accurate information as Parent would reasonably be expected to need to
enable Parent to calculate any excise tax due under Code Section 4999 as a result of the transactions
contemplated by this Agreement for which the Company or Parent may directly or indirectly become
liable, and the amount of deductions that may be disallowed under Code Section 280G as a result of
the transactions contemplated by this Agreement.

          (k) The Company has not had any Benefit Plan or Benefit Arrangement covering any employee
which plan or arrangement is subject to the Laws of any jurisdiction outside the United States.

          (l) Each Company Plan and Company Benefit Arrangement that is a “nonqualified deferred
compensation plan” (as defined in Code Section 409A(d)(1)) has been operated since January 1, 2005
in good faith compliance with Code Section 409A, IRS Notice 2005-1, and the proposed regulations
under Code Section 409A. No Company Plan or Company Benefit Arrangement that is a “nonqualified
deferred compensation plan” has been materially modified (as determined under Notice 2005-1) after
October 3, 2004. No event has occurred that would be treated by Code Section 409A(b) as a transfer
of property for purposes of Code Section 83. No SAR granted by the Company has a measurement floor
that has been or may be less than the fair market value of the underlying stock as of the date such
SAR was granted or has any feature for the deferral of compensation other than the deferral of
recognition of income until the later of exercise or disposition of such SAR.

          (m) Section 4.19(k) of the Disclosure Schedule sets forth the policy of the Company and any
Subsidiary with respect to accrued vacation, accrued sick time, earned time off, and incentive
bonuses and the amount of such liabilities as of the Most Recent Balance Sheet Date.

          (n) Except for accrued but unpaid salary, wages, bonuses, and employee benefits in the
Ordinary Course of Business consistent with past practices, there are no amounts owing or credit
extended from the Company to any officer, director, or employee of the Company or any member of the
immediate family of any such officer, director, or employee, nor are there any amounts owing or
credit extended from any of such persons to the Company.

          (o) All actions to be taken under this Agreement with respect to equity or equity-based
compensation (A) are permitted by the terms of the applicable Company Benefit Arrangements (or
appropriate consents have been or will be obtained from the affected participants); (B) will be
consistent with material communications to recipients of such compensation; and (C) will comply in
all material respects with applicable Law.

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     Section 4.20 Compliance with Law. The Company is and has at all times been in material
compliance with, and has conducted the Business and owned, used, operated and maintained its
properties, rights and assets (including the Assets) in material compliance with, all applicable
Laws. To the Knowledge of the Company, no claims have been alleged or threatened asserting the
Company’s violation of, Liability for, or potential responsibility under, any Law. The Company has
never conducted any internal investigation with respect to any actual, potential or alleged
material violation of any Law by any director, officer or employee.

     Section 4.21 Litigation. There are no claims, actions, suits, proceedings, arbitrations,
governmental investigations or inquiries pending or, to the Knowledge of the Company, threatened,
against or affecting the Company or any of its assets, rights or properties, or any current or
former officer, director, employee, consultant, agent or shareholder of the Company with respect to
the Company, the Business, or any of the Assets, or seeking to prevent or delay the transactions
contemplated pursuant to this Agreement, and no notice of any claim, action, suit, proceeding,
governmental investigation or inquiry involving or relating to the Company, the Business or any
Asset, whether pending or threatened, has been received by the Company. There are no judgments,
orders, injunctions, decrees, stipulations or awards (whether rendered by a court, administrative
agency or other Governmental Authority, by arbitration or otherwise) against the Company, the
Business, or any Asset.

     Section 4.22 Intellectual Property.

          (a) Company Registrations. Section 4.22(a) of the Disclosure Schedule lists all Company
Registrations, in each case enumerating specifically the applicable filing or registration number,
title, jurisdiction in which filing was made or from which registration issued, date of filing or
issuance, names of all current applicant(s) and registered owners(s), as applicable. All
assignments of Company Registrations to the Company have been properly executed and recorded. To
the Knowledge of the Company, all Company Registrations are valid and enforceable and all issuance,
renewal, maintenance and other payments that are or have become due with respect thereto have been
timely paid by or on behalf of the Company.

          (b) Prosecution Matters. There are no inventorship challenges, opposition or nullity
proceedings or interferences declared, commenced or provoked, or to the Knowledge of the Company
threatened, with respect to any Patent Rights included in the Company Registrations. To the
Knowledge of the Company, the Company has complied with its duty of candor and disclosure to the
United States Patent and Trademark Office and any relevant foreign patent office with respect to
all patent and trademark applications filed by or on behalf of the Company and has made no material
misrepresentation in such applications. The Company has no knowledge of any information that would
preclude the Company from having clear title to the Company Registrations or affecting the
patentability or enforceability of any Company Registrations.

          (c) Ownership; Sufficiency. Each item of Company Intellectual Property will be owned or
available for use by the Surviving Corporation immediately following the Closing on substantially
identical terms and conditions as it was immediately prior to the Closing. Except as set forth in
Section 4.22(c) of the Disclosure Schedule, the Company is the sole and exclusive owner of all
Company Owned Intellectual Property, free and clear of any Security

36

 

Interests and all joint owners
of the Company Owned Intellectual Property are listed in Section 4.22(c) of the Disclosure
Schedule. The Company Intellectual Property constitutes all Intellectual Property necessary (i) to
Exploit the Customer Offerings in the manner so done currently and contemplated to be done by the
Company, (ii) to Exploit the Internal Systems as they are currently used and contemplated to be
used by the Company, and (iii) otherwise to conduct the Company’s business in all material respects in the manner currently conducted and
contemplated to be conducted by the Company.

          (d) Protection Measures. The Company has taken reasonable measures to protect the proprietary
nature of each item of Company Owned Intellectual Property, and to maintain in confidence all trade
secrets and confidential information comprising a part thereof. The Company has complied in all
material respects with all applicable contractual and legal requirements pertaining to information
privacy and security. No complaint relating to an improper use or disclosure of, or a breach in
the security of, any such information has been made or, to the knowledge of the Company, threatened
against the Company. To the Knowledge of the Company, there has been no: (i) unauthorized
disclosure of any third party proprietary or confidential information in the possession, custody or
control of the Company or (ii) material breach of the Company’s security procedures wherein
confidential information has been disclosed to a third person. The Company has actively policed
the quality of all goods and services sold, distributed or marketed under each of its Trademarks
and has enforced adequate quality control measures to ensure that no Trademarks that it has
licensed to others shall be deemed to be abandoned.

          (e) Infringement by Company. None of the Customer Offerings, or the Exploitation thereof by
the Company or by any reseller, distributor, customer or user thereof, or any other activity of the
Company, infringes or violates, or constitutes a misappropriation of, any Intellectual Property
rights of any third party. None of the Internal Systems, or the Company’s past, current or
currently contemplated Exploitation thereof, or any other activity undertaken by them in connection
with the Business, infringes or violates, or constitutes a misappropriation of, any Intellectual
Property rights of any third party. Section 4.22(e) of the Disclosure Schedule lists any
complaint, claim or notice, or threat of any of the foregoing (including any notification that a
license under any patent is or may be required), received by the Company alleging any such
infringement, violation or misappropriation and any request or demand for indemnification or
defense received by the Company from any reseller, distributor, customer, user or any other third
party; and the Company has provided to Parent copies of all such complaints, claims, notices,
requests, demands or threats, as well as any legal opinions, studies, market surveys and analyses
relating to any alleged or potential infringement, violation or misappropriation.

          (f) Infringement of Company Rights. To the Knowledge of the Company, no Person (including,
without limitation, any current or former employee or consultant of the Company) is infringing,
violating or misappropriating any of the Company Owned Intellectual Property or any Company
Licensed Intellectual Property which is exclusively licensed to the Company. The Company has
provided to Parent copies of all correspondence, analyses, legal opinions, complaints, claims,
notices or threats concerning the infringement, violation or misappropriation of any Company Owned
Intellectual Property.

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          (g) Outbound IP Agreements. Section 4.22(g) of the Disclosure Schedule identifies each
license, covenant or other agreement pursuant to which the Company has assigned, transferred,
licensed, distributed or otherwise granted any right or access to any person, or covenanted not to
assert any right, with respect to any past, existing or future Company Intellectual Property.
Except as described in Section 4.22(g) of the Disclosure Schedule, the Company has not agreed to
indemnify any person against any infringement, violation or

          misappropriation of any Intellectual Property rights with respect to any Customer Offerings or
any third party Intellectual Property rights. Except as set forth in Section 4.22(g) of the
Disclosure Schedule, the Company is not a member of or party to any patent pool, industry standards
body, trade association or other organization pursuant to the rules of which it is obligated to
license any existing or future Intellectual Property to any Person.

          (h) Inbound IP Agreements. Section 4.22(h) of the Disclosure Schedule identifies (i) each item
of Company Licensed Intellectual Property and of Internal Systems and the license or agreement
pursuant to which the Company Exploits them (excluding currently-available, off the shelf software
programs that are licensed by the Company pursuant to “shrink wrap” licenses, the total fees
associated with which are less than $2,500) and (ii) each agreement, contract, assignment or other
instrument pursuant to which the Company has obtained any joint or sole ownership interest in or to
each item of Company Owned Intellectual Property. No third party inventions, methods, services,
materials, processes or Software are included in or required to Exploit the Customer Offerings or
Internal Systems, except as specifically set forth in Section 4.22(h) of the Disclosure Schedule.
None of the Customer Offerings or Internal Systems includes “shareware,” “freeware” or other
Software or other material that was obtained by the Company from third parties other than pursuant
to the license agreements listed in Section 4.22(h) of the Disclosure Schedule.

          (i) Source Code. The Company has not licensed, distributed or disclosed, and knows of no
distribution or disclosure by others (including its employees and contractors) of, the Company
Source Code to any Person, except pursuant to the agreements listed in Section 4.22(i) of the
Disclosure Schedule, and the Company has taken all reasonable physical and electronic security
measures to prevent disclosure of such Company Source Code. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time, or both) will, or
would reasonably be expected to, nor will the consummation of the transactions contemplated hereby,
result in the disclosure or release of such Company Source Code by the Company, its escrow
agent(s), or any other person to any third party.

          (j) Authorship. Except as set forth in Section 4.22(j) of the Disclosure Schedule, all of the
Software and Documentation comprising, incorporated in or bundled with the Customer Offerings or
Internal Systems have been designed, authored, tested and debugged by regular employees of the
Company within the scope of their employment or by independent contractors of the Company who have
executed valid and binding agreements expressly assigning all right, title and interest in such
copyrightable materials to the Company, waiving their non-assignable rights (including moral
rights) in favor of the Company and its permitted assigns and licensees, and have no residual claim
to such materials.

          (k) Open Source Code. Section 4.22(k) of the Disclosure Schedule lists all Open Source
Materials that the Company has utilized in any way in the Exploitation of Company

38

 

Offerings or Internal Systems and describes the manner in which such Open Source Materials have been utilized,
including, without limitation, whether and how the Open Source Materials have been modified and/or
distributed by the Company. Except as specifically disclosed in Section 4.22(k) of the Disclosure
Schedule, the Company has not (i) incorporated Open Source Materials into, or combined Open Source
Materials with, the Customer Offerings; (ii) distributed Open Source Materials in conjunction with
any other software developed or distributed by the Company; or (iii) used Open Source Materials that create, or purport to create, obligations
for the Company with respect to the Customer Offerings or grant, or purport to grant, to any third
party, any rights or immunities under Intellectual Property rights (including, but not limited to,
using any Open Source Materials that require, as a condition of Exploitation of such Open Source
Materials, that other Software incorporated into, derived from or distributed with such Open Source
Materials be (x) disclosed or distributed in source code form, (y) licensed for the purpose of
making derivative works, or (z) redistributable at no charge or minimal charge).

          (l) Employee and Contractor Assignments. Each employee of the Company and each independent
contractor of the Company has executed a valid and binding written agreement expressly assigning to
the Company all right, title and interest in any inventions and works of authorship, whether or not
patentable, invented, created, developed, conceived and/or reduced to practice during the term of
such employee’s employment or such independent contractor’s work for the Company, and all
Intellectual Property rights therein, and has waived all moral rights therein to the extent legally
permissible.

          (m) Quality. The Customer Offerings and the Internal Systems are free from significant
defects in design, workmanship and materials. The Customer Offerings conform in all material
respects to the written Documentation and specifications therefor, and the Internal Systems conform
in all material respects to any written Documentation and specifications therefor. The Customer
Offerings and the Internal Systems do not contain any disabling device, virus, worm, back door,
Trojan horse or other disruptive or malicious code that may or are intended to impair their
intended performance or otherwise permit unauthorized access to, hamper, delete or damage any
computer system, software, network or data. The Company has not received any warranty claims,
contractual terminations or requests for settlement or refund due to the failure of the Customer
Offerings to meet their specifications or otherwise to satisfy end user needs or for harm or damage
to any third party except as set forth in Section 4.22(m) of the Disclosure Schedule.

          (n) Support and Funding. Except as set forth in Section 4.22(n), the Company has neither
sought, applied for nor received any support, funding, resources or assistance from any federal,
state, local or foreign governmental or quasi-governmental agency or funding source in connection
with the Exploitation of the Customer Offerings, the Internal Systems or any facilities or
equipment used in connection therewith.

          (o) Commitments. With respect to the Commitments:

               (i) the Company has collected personally identifiable information only in accordance with, and
is in material compliance with, its Commitments;

39

 

               (ii) the Company has been and currently is in material compliance with all Laws relating to
privacy, security, and security breach notification requirements applicable to the Sites and the
software, hardware, networks, databases, and records (collectively, “Systems”) used in the
operation of, and in providing services through, the Sites;

               (iii) the Company has not received inquiries from the Federal Trade Commission or any other
federal or state governmental agencies regarding the Commitments;

               (iv) the Company has not received any written (including electronic mail) complaints from any
website user regarding Commitments, or compliance with the Commitments; and

               (v) the Commitments have not been rejected by any applicable certification organization which
has reviewed such Commitment or to which any such Commitment has been submitted.

               (vi) the execution, delivery and performance of this Agreement complies with and can be
effectuated in accordance with the Commitments and with all Laws described in paragraph (ii) above;

               (vii) the Company has adopted reasonable measures, including administrative, physical, and
technical measures, to protect the confidentiality, security, availability and integrity of
personally identifiable information maintained, processed or transmitted by or through the Sites or
Systems;

               (viii) the Company has adopted procedures for identifying and responding to breaches of
security of personally identifiable information, including but not limited to procedures for
notifying persons whose personally identifiable information is accessed or acquired by unauthorized
persons; and

               (ix) to the Knowledge of the Company, the Company has not experienced any such breach of
security of personally identifiable information maintained, processed or transmitted by the
Company.

     Section 4.23 Books and Records. The Company has made and kept (and given Parent access to)
the Books and Records, which, in reasonable detail, accurately and fairly reflect the activities of
the Company. The Company has not engaged in any transaction, maintained any bank account or used
any corporate funds except as reflected in its normally maintained Books and Records.

     Section 4.24 Taxes.

          (a) The Company has properly filed on a timely basis all Tax Returns that it was required to
file, and all such Tax Returns are true, correct and complete. The Company is not and never has
been a member of a group of corporations with which it has filed (or been required to file)
consolidated, combined or unitary Tax Returns. The Company has paid on a timely basis all Taxes
that were due and payable. The unpaid Taxes of the Company for Tax periods through the Most Recent
Balance Sheet Date do not exceed the accruals and reserves for

40

 

Taxes (excluding accruals and
reserves for deferred Taxes established to reflect timing differences between book and Tax income)
set forth on the Most Recent Balance Sheet and all unpaid Taxes of the Company for all Tax periods
or portions thereof commencing after the Most Recent Balance Sheet Date arose in the Ordinary
Course of Business and are of a type and amount commensurate with Taxes attributable to prior
similar periods. The Company (i) has no actual or potential liability under Treasury Regulations
Section 1.1502-6 (or any comparable or
similar provision of federal, state, local or foreign law), as a transferee or successor,
pursuant to any contractual obligation, or otherwise for any Taxes of any Person other than the
Company and (ii) is not a party to or bound by any Tax indemnity, Tax sharing, Tax allocation or
similar agreement. All Taxes that the Company was required by law to withhold or collect have been
duly withheld or collected and, to the extent required, have been properly paid to the appropriate
Governmental Entity.

          (b) The Company has delivered or made available to Parent (i) complete and correct copies of
all Tax Returns of the Company relating to Taxes for all taxable periods for which the applicable
statute of limitations has not yet expired and (ii) complete and correct copies of all private
letter rulings, revenue agent reports, information document requests, notices of proposed
deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements,
pending ruling requests and any similar documents submitted by, received by, or agreed to by or on
behalf of the Company relating to Taxes for all taxable periods for which the statute of
limitations has not yet expired. The federal income Tax Returns of the Company have been audited
by the Internal Revenue Service or are closed by the applicable statute of limitations for all
taxable years through the taxable year specified in Section 4.24(b) of the Disclosure Schedule. No
examination or audit of any Tax Return of the Company by any Governmental Entity is currently in
progress or, to the Knowledge of the Company, threatened or contemplated. The Company has not been
informed by any jurisdiction that the jurisdiction believes that the Company was required to file
any Tax Return that was not filed. The Company has not (x) waived any statute of limitations with
respect to Taxes or agreed to extend the period for assessment or collection of any Taxes, (y)
requested any extension of time within which to file any Tax Return, which Tax Return has not yet
been filed, or (z) executed or filed any power of attorney with any taxing authority.

          (c) Except for payments for which the Company obtains waivers and shareholder approval
satisfying the requirements of Section 280G(b)(5)(A)(ii) of the Code prior to Closing as described
in Section 2.14, the Company has not made any payment, is not obligated to make any payment, and is
not a party to any agreement that could obligate it to make any payment that may be treated as an
“excess parachute payment” under Section 280G of the Code (without regard to Sections 280G(b)(4)
and 280G(b)(5) of the Code). The Company is not and has not been required to make any basis
reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section
1.337(d)-2(b).

          (d) None of the assets of the Company (i) is property that is required to be treated as being
owned by any other Person pursuant to the provisions of former Section 168(f)(8) of the Internal
Revenue Code of 1954, (ii) is “tax-exempt use property” within the meaning of Section 168(h) of the
Code, (iii) directly or indirectly secures any debt the interest on which is tax exempt under
Section 103(a) of the Code or (iv) is subject to a lease under Section 7701(h) of the Code or under
any predecessor section.

41

 

          (e) There are no adjustments under Section 481 of the Code (or any similar adjustments under
any provision of the Code or the corresponding foreign, state or local Tax laws) that are required
to be taken into account by the Company in any period ending after the Closing Date by reason of a
change in method of accounting in any taxable period or portion
thereof ending on or before the Closing Date or as a result of the consummation of the
transactions contemplated by this Agreement.

          (f) There is no limitation on the utilization by the Company of its net operating losses,
built-in losses, Tax credits, or similar items under Sections 382, 383 or 384 of the Code or
comparable provisions of foreign state or local law (other than any such limitation arising as a
result of the consummation of the transactions contemplated by this Agreement).

          (g) The Company (i) is not a “consenting corporation” within the meaning of former Section
341(f) of the Code, and none of the assets of the Company are subject to an election under former
Section 341(f) of the Code and (ii) has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(l)(A)(ii) of the Code.

          (h) The Company has never participated in an international boycott as defined in Section 999
of the Code.

          (i) The Company is not a party to a lease that is treated as a “Section 467 rental agreement”
within the meaning of Section 467(d) of the Code.

          (j) The Company has not distributed to its shareholders or security holders stock or
securities of a controlled corporation, nor has stock or securities of the Company been
distributed, in a transaction to which Section 355 of the Code applies (i) in the two (2) years
prior to the date of this Agreement or (ii) in a distribution that could otherwise constitute part
of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code)
that includes the transactions contemplated by this Agreement.

          (k) The Company does not own any interest in an entity, and is not a party to any contractual
arrangement, that is characterized as a partnership for federal income Tax purposes.

          (l) Section 4.24(l) of the Disclosure Schedule sets forth each jurisdiction (other than United
States federal) in which the Company files, is required to file or has been required to file a Tax
Return or is or has been liable for any Taxes on a “nexus” basis and each jurisdiction that has
sent notices or communications of any kind requesting information relating to the Company’s nexus
with such jurisdiction.

          (m) The Company does not own any interest in a passive foreign investment company within the
meaning of Sections 1291 through 1297 of the Code.

          (n) The Company has not incurred (or been allocated) an “overall foreign loss” as defined in
Section 904(f)(2) of the Code that has not been previously recaptured in full as provided in
Sections 904(f)(1) and/or 904(f)(3) of the Code.

42

 

          (o) The Company is not a party to a gain recognition agreement under Section 367 of the Code.

          (p) The Company will not be required to include any item of income in, or exclude any item of
deduction from, taxable income for any period (or any portion thereof) ending after the Closing
Date as a result of any (i) deferred intercompany gain or any excess loss account described in
Treasury Regulations under Section 1502 of the Code (or any corresponding provision of state, local
or foreign Tax law), (ii) closing agreement as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign Tax law) executed on or prior to the
Closing Date, (iii) installment sale or other open transaction disposition made on or prior to the
Closing Date or (iv) prepaid amount received on or prior to the Closing Date.

          (q) There are no liens or other encumbrances with respect to Taxes upon any of the assets or
properties of the Company, other than with respect to Taxes not yet due and payable.

          (r) No Company Securityholder holds any Common Stock that is non-transferable and subject to a
substantial risk of forfeiture within the meaning of Section 83 of the Code with respect to which a
valid election under Section 83(b) of the Code has not been made.

          (s) The Company is not and never has been a party to a transaction or agreement that is in
conflict with the Tax rules on transfer pricing in any relevant jurisdiction.

          (t) The Company has not engaged or participated in any “reportable transaction” as defined in
Treasury Regulation section 1.6011-4(b) or any analogous provision of state or local law.

          (u) Section 4.24(u) of the Disclosure Schedule sets forth the following information with
respect to the Company as of the most recent practicable date: (i) the basis in its assets and (ii)
the amount of any net operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to it.

          (v) The Company is a “small business corporation” within the meaning of Section
280G(b)(5)(A)(i) of the Code.

     Section 4.25 Absence of Changes. Since December 31, 2004:

          (a) there has occurred no event or development which, individually or in the aggregate, has
had, or could reasonably be expected to have in the future, a Company Material Adverse Effect, and

          (b) the Company has not taken any of the actions set forth in paragraphs (a) through (n) of
Section 6.2.

     Section 4.26 Bank Accounts; Powers of Attorney. Section 4.26 of the Disclosure Schedule
sets forth a true and complete list of all bank accounts, safe deposit boxes and lock boxes of the
Company, including, with respect to each such account
and lock box, the names in

43

 

which such accounts or boxes are held and identification of all Persons
authorized to draw thereon or have access thereto. Section 4.26 of the Disclosure Schedule also
sets forth the name of each Person holding a general or special power of attorney from the Company
and a description of the terms of such power. Other than the Persons listed on Section 4.26 of the
Disclosure Schedule, no Person holds any power of attorney or similar authority from the Company.

     Section 4.27 Unlawful Payments. Neither the Company, any director, officer, shareholder,
employee, agent or representative of the Company, nor any Person associated with or acting for or
on behalf of the Company, has directly or indirectly (i) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person, private or public,
regardless of what form, whether in money, property, or services (A) to obtain favorable treatment
for the Company or the Business or to secure Contracts, (B) to pay for favorable treatment for the
Company or the Business or for Contracts secured, (C) to obtain special concessions for the Company
or the Business or for special concessions already obtained, or (D) in violation of any legal
requirement, or (ii) established or maintained any fund or asset that has not been recorded in the
Books and Records.

     Section 4.28 HIPAA.

          (a) The Company complies with and has implemented all such measures required for it to comply
with its obligations as a Covered Entity for its “Health Plan” and as a Business Associate as
agreed upon with any “Covered Entity” (as such capitalized terms are defined in HIPAA and the
regulations promulgated thereunder), including without limitation, the privacy and security
regulations (45 C.F.R. 160 and 164) and the transaction and code set regulations (45 C.F.R. 162)
promulgated under HIPAA. The Company is not a Covered Entity other than for its “Health Plan.”
With respect to any HIPAA regulatory requirements, including any contractual privacy and security
commitments for “Protected Health Information” (as that term is defined in the HIPAA privacy and
security regulations), for which the Company’s (including any Affiliates) compliance or its
customers’ compliance with HIPAA is required (collectively, the “HIPAA Commitments”),

               (i) the Company is in material compliance with the HIPAA Commitments;

               (ii) the transactions contemplated by this Agreement will not violate any of the HIPAA
Commitments;

               (iii) the Company has not received written inquiries from the U.S. Department of Health and
Human Services or any other Governmental Authority regarding the Company’s compliance with the
HIPAA Commitments; and

               (iv) the HIPAA Commitments have not been rejected by any applicable certification organization
which has reviewed such HIPAA Commitments or to which any such HIPAA Commitment has been submitted.

44

 

          (b) The Company has either entered into or made reasonable and good faith efforts to enter
into appropriate valid, written Business Associate agreements with all customers that are Covered
Entities and with all contractors, agents, vendors, suppliers, and service providers that are
Business Associates of the Company.

     Section 4.29 Compliance with Healthcare Laws and Regulations.

          (a) Without limiting the generality of any other representation or warranty made by the
Company herein, the Company is conducting and has conducted its business and operations in
compliance in all material respects with, and neither the Company nor any of its officers,
directors or employees has engaged in any activities that would constitute a violation of any
applicable Healthcare Law.

          (b) The Company has not received any written notice or communication from any Governmental
Authority alleging noncompliance with any Healthcare Laws; there is no civil, criminal or
administrative action, suit, demand, claim, complaint, hearing, investigation, notice, demand
letter, warning letter, proceeding or request for information related to noncompliance with, or
otherwise involving, any Healthcare Laws pending against the Company; the Company has no material
liability (whether actual or contingent) for failure to comply with any Healthcare Laws; there has
not been any material violation of any Healthcare Laws by the Company in its submissions or reports
to any Governmental Entity that could reasonably be expected to require investigation, corrective
action or enforcement action; the Company has not been debarred or excluded from participation in
Medicare, Medicaid, or any other federal or state healthcare program; and the Company has
maintained, in all material respects, all records required under any Healthcare Laws.

          (c) Any remuneration (including, without limitation, a “discount or reduction in price,” as
referenced in 42 U.S.C. § 1320a-7b(b)(3)(A)) exchanged between the Company and its customers,
contractors, or other entities with which it has a business relationship (together, “Trading
Partners”) has at all times been commercially reasonable and represents the fair market value
for rendered services or purchased items. No remuneration exchanged between the Company and its
Trading Partners has taken into account, either directly or indirectly, the volume or value of any
referrals or any other federal health care program business generated between the Company and such
Trading Partners.

     Section 4.30 Brokers and Agents. The Company has engaged Morgan Keegan & Company, Inc. to
act as the Company’s exclusive financial advisor with respect to the transactions contemplated by
this Agreement. Under a letter agreement made on or about December 20, 2005 with Daniel J. Lee,
one of the Company’s directors, the Company is obligated to pay a fee to Mr. Lee upon the closing
of the transactions to be consummated hereunder. Mr. Lee’s fee is equal to one quarter of one
percent of the total net proceeds after all transaction costs from the transactions. The Company
has not employed any other broker, finder or agent in connection with the transactions contemplated
by this Agreement.

     Section 4.31 Controls and Procedures.

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          (a) The Company maintains accurate books and records reflecting its assets and liabilities and
maintains proper and adequate internal control over financial reporting which provide assurance
that (i) transactions are executed with management’s authorization, (ii) transactions are recorded
as necessary to permit preparation of the consolidated financial statements of the Company and to
maintain accountability for the Company’s consolidated assets, (iii) access to assets of the
Company is permitted only in accordance with management’s authorization, (iv) the reporting of
assets of the Company is compared with existing assets at regular intervals and (v) accounts, notes
and other receivables and inventory were recorded accurately, and proper and adequate procedures
are implemented to effect the collection thereof on a current and timely basis.

          (b) The Company has not, since July 30, 2002, extended or maintained credit, arranged for the
extension of credit, modified or renewed an extension of credit, in the form of a personal loan or
otherwise, to or for any director or executive officer of the Company. Section 4.31(b) of the
Disclosure Schedule identifies any loan or extension of credit maintained by the Company to which
the second sentence of Section 13(k)(1) of the Exchange Act would apply.

     Section 4.32 Disclosure. No representation or warranty by the Company contained in this
Agreement, and no statement contained in the Disclosure Schedule or any other document, certificate
or other instrument delivered or to be delivered by or on behalf of the Company pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading. The Company has disclosed
to Parent and Newco all material information relating to the business of the Company or the
transactions contemplated by this Agreement.

     Section 4.33 Disclaimer of Other Warranties. Except to the extent that this Article IV
contains a specific representation by the Company, the Company makes no warranty to Parent or
Newco.

Article V

REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO

     To induce the Company to enter into this Agreement and consummate the transactions
contemplated hereby, Parent and Newco represent to the Company that, except as set forth in the
Disclosure Schedule, the statements contained in this Article V are true and correct as of the date
of this Agreement and will be true and correct as of the Closing as though made as of the Closing,
except to the extent such representations and warranties are specifically made as of a particular
date (in which case such representations and warranties will be true and correct as of such date).

     Section 5.1 Due Organization. Each of Parent and Newco is a corporation duly organized and
validly existing under the Laws of the state of its incorporation and is duly authorized and
qualified to do business under all applicable Laws, to own, lease and operate its properties, and
to carry on its business in the places and in the manner as now conducted except where the failure
to be so authorized or qualified could not reasonably be expected to prevent,

46

 

materially delay or
materially impair the ability of Parent and Newco to consummate the Merger (a “Parent Material
Adverse Effect”). Parent is in good standing under the laws of the state of its incorporation.

     Section 5.2 Authorization; Validity. Each of Parent and Newco has full legal right and all
requisite corporate power and authority to operate and carry on its business as presently
conducted, and to execute, deliver and perform this Agreement and the transactions and other
agreements and instruments contemplated by this Agreement. This Agreement and all other agreements
and instruments executed and delivered by each of Parent and Newco in connection herewith have been
duly and validly authorized, executed and delivered by Parent and Newco. This Agreement and the
transactions and other agreements and instruments contemplated hereby have been duly approved by
each of Parent and Newco and constitute the valid and binding obligations of Parent and Newco,
respectively, enforceable in accordance with their respective terms, except as may be limited by
the Enforeceability Exceptions.

     Section 5.3 No Conflicts. The execution, delivery and performance by Parent and Newco of
this Agreement and all other agreements and instruments contemplated hereby and the consummation of
the transactions contemplated hereby and thereby will not:

          (a) conflict with, result in a breach or violation of, or require any consent, approval or
authorization under, such entity’s articles of incorporation, certificate of incorporation, or
by-laws.

          (b) other than such as would not, individually or in the aggregate, have a Parent Material
Adverse Effect, conflict with, result in a default under, give any Person a right of termination,
cancellation, acceleration, suspension or revocation under, result in the loss of a material
benefit to such entity under, or require any consent, approval or authorization under, any
document, agreement or other instrument to which such entity is a party or by which any of its
properties, rights or assets are bound;

          (c) violate any Law to which such entity or any of its properties, rights or assets are
subject or by which such entity or any of its properties, rights or assets are bound; or

          (d) constitute an event which, after notice or lapse of time or both, would result in any
conflict, breach, violation, default, requirement, loss, creation or imposition of any Security
Interest, termination or impairment or similar event described in Section 5.3(a) through (c).

     Section 5.4 Parent and Newco Board. The respective boards of directors of Parent and
Newco, by unanimous written consent, have approved the execution of this Agreement.

     Section 5.5 Shareholder Approval. Parent, as the sole stockholder of Newco, has approved
this Agreement and the transactions contemplated hereby by written consent in lieu of a special
meeting of stockholders, and no other stockholder vote, approval or consent of any holder of
capital stock of each of Parent and Newco is required or necessary to consummate the Merger.

47

 

Article VI

COVENANTS

     Section 6.1 Access and Information.

          (a) From the date hereof, Parent and Newco shall be entitled to make or cause to be made such
reasonable investigation of the Company and the financial and legal condition thereof, as Parent
and Newco deem reasonably necessary or advisable during normal business hours and upon advance
notice, and the Company shall cooperate with any such investigation. Parent and Newco agree to use
reasonable efforts to conduct any such inquiries with sensitivity to the Company’s interests in
preserving its relationships with its employees, customers and suppliers.

          (b) From the date hereof, the Company shall reasonably cooperate with any reasonable request
by Parent, which request is made by Parent in order to assist it in complying with the
Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder, in connection with the
transactions contemplated hereby.

     Section 6.2 Conduct of Business by the Company. Except as contemplated by this Agreement,
during the period from the date hereof to the Closing, the Company shall conduct its operations in
the Ordinary Course of Business and in compliance with all applicable Law and, to the extent
consistent therewith, use its reasonable best efforts to preserve intact its current business
organization, keep its physical assets in good working condition, keep available the services of
its current officers and employees and preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and ongoing business shall not
be impaired in any material respect. Without limiting the generality of the foregoing, prior to
the Closing, the Company shall not, without the written consent of Parent:

          (a) issue or sell any stock or other securities of the Company or any options, warrants or
rights to acquire any such stock or other securities, or repurchase or redeem any stock or other
securities of the Company (except from former employees, directors or consultants in accordance
with agreements providing for the repurchase of shares at their original issuance price in
connection with any termination of employment with or services to the Company);

          (b) split, combine or reclassify any shares of its capital stock; or declare, set aside or pay
any dividend or other distribution (whether in cash, stock or property or any combination thereof)
in respect of its capital stock;

          (c) create, incur or assume any indebtedness (including obligations in respect of capital
leases); assume, guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or entity;

          (d) enter into, adopt, amend, or terminate any Benefit Plan or Benefit Arrangement or (except
for normal increases in the Ordinary Course of Business for employees who are not officers)
increase in any manner the compensation or fringe benefits of, or materially

48

 

modify the employment
terms of, its employees generally or individually, or pay any bonus or other benefit to its
employees or hire any new officers or (except in the Ordinary Course of Business) any new
employees;

          (e) acquire, sell, lease, license or dispose of any assets or property, other than purchases
and sales of assets in the Ordinary Course of Business;

          (f) mortgage or pledge any of its property or assets or subject any such property or assets to
any Security Interest;

          (g) discharge or satisfy any Security Interest or pay any obligation or liability other than
in the Ordinary Course of Business;

          (h) amend its Charter Documents;

          (i) change its accounting methods, principles or practices, except insofar as may be required
by a generally applicable change in GAAP, or make any new elections, or changes to any current
elections, with respect to Taxes;

          (j) enter into, amend, terminate, take or omit to take any action that would constitute a
violation of or default under, or waive any rights under, any contract or agreement of a nature
required to be listed in Section 4.14, Section 4.16 or Section 4.22 of the Disclosure Schedule;

          (k) make or commit to make any capital expenditure in excess of $25,000 per item or $100,000
in the aggregate;

          (l) institute or settle any Legal Proceeding;

          (m) take any action or fail to take any action permitted by this Agreement with the knowledge
that such action or failure to take action would result in (i) any of the representations and
warranties of the Company set forth in this Agreement becoming untrue or (ii) any of the conditions
to the Merger set forth in Article VII not being satisfied; or

          (n) agree in writing or otherwise to take any of the foregoing actions.

Without limiting the foregoing, from the date hereof to the Closing, the Company will not take any
action or omit to take any action, or agree to take or omit to take any action, without the written
consent of Parent (which written consent shall not be unreasonably withheld), which would result in
the entry by the Company into any contract with a customer or prospective customer which would be
reasonably expected to result in aggregate payments by such customer to the Company in excess of
$100,000 in the first 12 months of such contract.

     Section 6.3 Best Efforts; Further Assurances.

          (a) Subject to the terms and conditions herein provided, each of the parties hereto shall use
its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable laws and

49

 

regulations to
consummate and make effective the transactions contemplated by this Agreement. The Company shall
use its reasonable best efforts to obtain, at its sole expense, all such waivers, consents or
approvals from Governmental Authorities or third parties and to give all such notices to
Governmental Authorities and third parties, as are required to be listed in Section 4.3 of the
Disclosure Schedule. Each party shall bear its own costs incurred in connection with obtaining
such consents. Notwithstanding anything to the contrary in this Agreement, Parent shall not be
obligated to sell or dispose of or hold separately (through a trust or otherwise) any assets or
businesses of Parent, the Company or their respective Affiliates, or otherwise restrict the conduct
of the businesses of Parent, the Company or their respective Affiliates.

          (b) In the event any claim, action, suit, investigation or other proceeding by any
Governmental Authority or other Person is commenced which questions the validity or legality of the
Merger or any of the other transactions contemplated hereby or seeks damages in connection
therewith, the parties agree, subject to reasonable business judgment, to cooperate and use
reasonable best efforts to defend against such claim, action, suit, investigation or other
proceeding and, if an injunction or other order is issued in any such action, suit or other
proceeding, to use reasonable best efforts to have such injunction or other order lifted, and to
cooperate reasonably regarding any other impediment to the consummation of the transactions
contemplated hereby.

          (c) The Company shall give prompt written notice to Parent and Newco of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would cause any representation or
warranty of the Company contained in the Merger Documents to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or that will result in the
failure to satisfy any of the conditions specified in Article VII and such written notice shall
specify the representation or warranty so breached (provided that such notice shall not be deemed
to cure the breach of any such representation or warranty or amend and/or supplement the section of
the Disclosure Schedule related to such representation or warranty) and (ii) any failure of the
Company to comply with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under the Merger Documents.

          (d) Parent or Newco shall give prompt written notice to the Company of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would cause any representation or
warranty of Parent or Newco contained in the Merger Documents to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or
that will result in the failure to satisfy any of the conditions specified in Article VII and
such written notice shall specify the representation or warranty so breached (provided that such
notice shall not be deemed to cure the breach of any such representation or warranty or amend
and/or supplement the section of the Disclosure Schedule related to such representation or
warranty) and (ii) any failure of Parent or Newco to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by either of them under the Merger Documents.

     Section 6.4 Public Announcements. The timing and content of the initial announcement of
this Agreement or the Merger to the financial community, government agencies, employees or the
general public shall be mutually agreed upon in advance by the Company and Parent; provided
that each party hereto may make any such announcement which it in good faith believes, based on
advice of counsel, is necessary or advisable in connection with

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any requirement of law or
regulation, it being understood and agreed that each party shall promptly provide the other parties
hereto with copies of any such announcement. Thereafter, Parent and the Company shall consult with
each other before issuing, and shall provide each other with the opportunity to review and comment
upon, all announcements regarding any aspect of this Agreement or the Merger to the financial
community, government agencies, employees or the general public; provided that each party
hereto may make any such announcement which it in good faith believes, based on advice of counsel,
is necessary or advisable in connection with any requirement of law or regulation, it being
understood and agreed that each party shall promptly provide the other parties hereto with copies
of any such announcement.

     Section 6.5 Exclusive Dealing. During the period from the date of this Agreement through
the Closing Date or the termination of this Agreement pursuant to Section 9.1, the Company shall
not enter into an agreement with respect to any Alternative Transaction or consummate an
Alternative Transaction; solicit, initiate, encourage or accept any inquiries, proposals or offers
from any Person with respect to an Alternative Transaction; participate in any discussions,
conversations, negotiations or other communications with any Person with respect to an Alternative
Transaction; furnish any information to any Person in connection with an Alternative Transaction;
or otherwise assist, facilitate or encourage the making of, or cooperate in any way regarding, any
proposal or offer by any Person with respect to an Alternative Transaction. In addition, the
Company hereby agrees to cease and terminate immediately, and to cause its representatives and
agents to cease and terminate immediately, any existing negotiations or discussions with respect to
an Alternative Transaction and to request the return or destruction of any confidential information
previously provided to third parties in connection with such discussions.

     Section 6.6 Newco. The Parent will take all action necessary (a) to cause Newco to perform
its obligations under this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement and (b) to ensure that, prior to the Effective Time, Newco shall not
conduct any business or make any investments other than as specifically contemplated by this
Agreement and
will not have any assets (other than a de minimis amount of cash paid to Newco for the issuance of
its stock to Parent).

     Section 6.7 Termination of Certain Agreements. Prior to the Closing, the Company shall
terminate at no cost or expense to the Company, and deliver or cause to be delivered to Parent
evidence reasonably satisfactory to Parent of the termination of:

          (a) the Company’s 401(k) Plan, effective as of the day prior to the Effective Time, and any
other Company Benefit Plans or Company Benefit Arrangements requested by Parent;

          (b) to the extent requested by Parent, each agreement to which any current or former officer,
shareholder, employee or Affiliate of the Company, or any Affiliate of any of the foregoing, is a
party.

     Section 6.8 Notice of Breaches. From the date of this Agreement until the Closing, the
Company shall promptly deliver to Parent supplemental information concerning events or
circumstances occurring subsequent to the date hereof which would render any representation,

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warranty or statement in this Agreement or the Disclosure Schedule inaccurate or incomplete at any
time after the date of this Agreement until the Closing. No such supplemental information shall be
deemed to avoid or cure any misrepresentation or breach of warranty or constitute an amendment of
any representation, warranty or statement in this Agreement or the Disclosure Schedule.

     Section 6.9 AR Damages. Within a reasonable time following the six-month anniversary of
the Closing Date Parent or the Surviving Corporation will provide the Shareholders’ Representative
with a schedule setting forth any Damages incurred by Parent as a result of the non-collection of
any Accounts Receivable set forth in Section 4.9 of the Disclosure Schedule (the Damages set forth
on such schedule being the “AR Damages”). Parent and the Surviving Corporation agree that
they shall not make any indemnification claim pursuant to Article VIII of this Agreement with
respect to the AR Damages until the Business Day prior to the Release Date; provided that
if the Surviving Corporation collects any amount of Accounts Receivable included as AR Damages
prior to the Release Date, the amount such of AR Damages shall be reduced on a dollar for dollar
basis equal to the amount of Accounts Receivable so collected by the Surviving Corporation.

Article VII

CONDITIONS TO CLOSING

     Section 7.1 Conditions to the Obligations of Parent and Newco. The obligation of each of
Parent and Newco to consummate the Merger shall be subject to the fulfillment at or prior to the
Closing of each of the following conditions, any and all of which may be waived in whole or in
part, to the extent permitted by applicable Law:

          (a) the Company shall have obtained at its own expense (and shall have provided copies thereof
to Parent) all of the waivers, permits, consents, approvals or other authorizations, and effected
all of the registrations, filings and notices, referred to in Section 6.3(a) which are required on
the part of the Company;

          (b) the representations and warranties of the Company set forth in the first sentence of
Section 4.1 and in Sections 4.2 and 4.4 and any representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall be true and correct in all
respects, and all other representations and warranties of the Company set forth in this Agreement
shall be true and correct in all material respects, in each case as of the date of this Agreement
and as of the Closing as though made as of the Closing, except to the extent such representations
and warranties are specifically made as of a particular date (in which case such representations
and warranties shall be true and correct as of such date);

          (c) the Company shall have performed or complied with its agreements and covenants required to
be performed or complied with under this Agreement as of or prior to the Closing;

          (d) audited versions of the Financial Statements as of December 31, 2005 and for the fiscal
years then ended, accompanied by an unqualified opinion of J. H. Cohn, LLP, shall have been
delivered to Parent, and such audited Financial Statements shall not differ in any

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material respect
from the Financial Statements for the same period included in Section 4.7 of the Disclosure
Schedule;

          (e) no Legal Proceeding shall be pending or threatened wherein an unfavorable judgment, order,
decree, stipulation or injunction could (i) prevent consummation of the transactions contemplated
by this Agreement, (ii) cause the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) have, individually or in the aggregate, a Company Material Adverse
Effect, and no such judgment, order, decree, stipulation or injunction shall be in effect;

          (f) the Company shall have delivered to Parent and Newco the Company Certificate;

          (g) the Company shall have received from each holder of Company Equity Securities the
Certificates representing all of the Company Equity Securities owned by such holder;

          (h) the Company shall have provided to Parent a true and complete schedule of the aggregate
SAR Consideration payable as a result of the Merger;

          (i) Parent shall have received copies of the resignations, effective as of the Closing, of
each director and officer of the Company (other than any such resignations which the Buyer
designates, by written notice to the Company, as unnecessary);

          (j) Parent shall have received from counsel to the Company an opinion in substantially the
form attached hereto as Exhibit E, addressed to Parent dated as of the Closing Date;

          (k) Parent shall have received from the Company the certificate required by Section 2.13;

          (l) Each of the Employment Agreements and each of the Principal Shareholder Agreements shall
have become effective;

          (m) Parent, the Escrow Agent and the Shareholders’ Representative shall have entered into the
Escrow Agreement;

          (n) Parent shall have received such other certificates and instruments (including certificates
of existence of the Company in its jurisdiction of organization and certificates of good standing
in the various foreign jurisdictions in which it is qualified, certified Charter Documents,
certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it
shall reasonably request in connection with the Closing;

          (o) Parent shall have received the minute books and charter documents of the Company;

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          (p) Parent shall have received a release in form and substance satisfactory to Parent from
each of the Persons to receive a payment pursuant to Section 3.2(f) or Section 3.2(g); and

          (q) Parent shall have received from the Company documentary evidence satisfactory to Parent
showing (i) that the Company has complied with Section 2.14 and (ii) whether shareholder approval
satisfying the requirements of Section 280G(b)(5)(A)(ii) of the Code was obtained for those
payments or benefits for which such approval was solicited in accordance with Section 2.14.

     Section 7.2 Conditions to the Obligations of the Company. The obligations of the Company
to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Closing of each of the following conditions, any and all of which may be waived
in whole or in part by the Company to the extent permitted by applicable law:

          (a) the representations and warranties of Parent and Newco set forth in the first sentence of
Section 5.1 and in Section 5.2 and any representations and warranties of Parent and Newco set forth
in this Agreement that are qualified as to materiality shall be true and correct in all respects,
and all other representations and warranties of Parent and Newco set forth in this Agreement shall
be true and correct in all material respects, in each case as of the date of this Agreement and as
of the Closing as though made as of the Closing, except to the extent such representations and
warranties are specifically made as of a particular date (in which case such representations and
warranties shall be true and correct as of such date);

          (b) each of Parent and Newco shall have performed or complied with its agreements and
covenants required to be performed or complied with under this Agreement as of or prior to the
Closing;

          (c) no Legal Proceeding shall be pending or threatened wherein an unfavorable judgment, order,
decree, stipulation or injunction could (i) prevent consummation of the transactions contemplated
by this Agreement or (ii) cause the transactions contemplated by this Agreement to be rescinded
following consummation, and no such judgment, order, decree, stipulation or injunction shall be in
effect;

          (d) Parent shall have delivered to the Company the Parent Certificate; and

          (e) the Company shall have received such other certificates and instruments (including
certificates of existence or good standing of Parent and Newco in their jurisdictions of
organization, certified charter documents, certificates as to the incumbency of officers and the
adoption of authorizing resolutions) as it shall reasonably request in connection with the Closing.

Article VIII

INDEMNIFICATION

     Section 8.1 General Indemnification. The Company (prior to the Effective Time) and, after
the Effective Time, each of the Indemnifying Securityholders, jointly and severally,

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covenant and
agree to indemnify, defend, protect and hold harmless, Parent, Newco and the Surviving Corporation
and each of their respective officers, directors, employees, stockholders, representatives,
assigns, successors and Affiliates (each a “Buyer Indemnified Party” and together the
“Buyer Indemnified Parties”) from, against, and in respect of:

          (a) all Liabilities, losses, claims, damages, punitive damages, causes of action, lawsuits,
administrative proceedings (including informal proceedings), investigations, audits, demands,
assessments, adjustments, judgments, settlement payments, deficiencies, Taxes, penalties, fines,
interest (including interest from the date of such damages), diminution in value and costs and
expenses (including reasonable attorneys’ fees and disbursements of every kind, nature and
description) (collectively, “Damages”) suffered, sustained, incurred or paid by any of the
Buyer Indemnified Parties in connection with, constituting, resulting from or arising out of,
directly or indirectly:

               (i) any misrepresentation, breach or inaccuracy of any representation or warranty of the
Company set forth in this Agreement or any other agreement or instrument furnished by the Company
to Parent pursuant to this Agreement;

               (ii) any nonfulfillment or breach of any covenant or agreement on the part of Company or the
Company Securityholders set forth in this Agreement or any other agreement or instrument furnished
by the Company to Parent pursuant to this Agreement;

               (iii) any Company Expenses;

               (iv) any Taxes of the Company or for which the Company is or becomes liable for any taxable
period or portion thereof ending on or before the Closing Date;

               (v) the acts and omissions of the Shareholders’ Representative (other than Damages arising
solely from Claims brought by the Shareholders’ Representative on behalf of the Company
Securityholders on or after the Closing Date in the Shareholders’ Representative’s capacity as
agent for the Company Securityholders); or

               (vi) any claim by a shareholder or former shareholder of the Company, or any other person or
entity, seeking to assert, or based upon: (i) ownership or rights to ownership of any shares of
stock of the Company; (ii) any rights of a shareholder (other than the right to receive the Merger
Consideration pursuant to this Agreement), including any option, preemptive rights or rights to
notice or to vote; (iii) any rights under the articles of incorporation or by-laws of the Company;
(iv) any claim that his, her or its shares were wrongfully repurchased by the Company; or (v) any
claim relating to any SAR, the exercise thereof or the SAR Plan.

     (b) any and all Damages incident to any of the foregoing or to the enforcement of this Section
8.1.

     Section 8.2 General Indemnification by Parent and the Surviving Corporation. Parent and
the Surviving Corporation each covenant and agree to indemnify, defend, protect and

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hold harmless
each Company Securityholder (individually, a “Shareholder Indemnified Party” and
collectively, the “Shareholder Indemnified Parties”) from and against:

     (a) all Damages suffered, sustained, incurred or paid by any of the Shareholder Indemnified
Parties in connection with, resulting from or arising out of, directly or indirectly:

               (i) any misrepresentation, breach or inaccuracy of any representation or warranty of Parent or
Newco set forth in this Agreement; or

               (ii) any nonfulfillment or breach of any covenant or agreement on the part of Parent or Newco
set forth in this Agreement.

     Section 8.3 Indemnification Net of Recovery. No Indemnified Party has any obligation to
pursue any insurance claim or claim for indemnity or other similar payment from any third party
with respect to any Damages. However, all Damages shall be computed net of any insurance proceeds
and any indemnity or other similar payment actually recovered by the Indemnified Party or any of
its Affiliates with respect to such Damages. If an Indemnified Party receives insurance proceeds
or any indemnity or other similar payment from a third party after the date on which an
Indemnifying Party has paid such indemnification claim, then not later than five (5) days after
receiving such insurance proceeds or any indemnity or other similar payment, the Indemnified Party
shall reimburse the Indemnifying Party in an amount equal to the lesser of (a) the insurance
proceeds or indemnity or other similar
payment received by the Indemnified Party or (b) the Damages previously paid by the Indemnifying
Party to the Indemnified Party with respect to that indemnification claim.

     Section 8.4 Limitation and Survival of Indemnification Obligations.

          (a) Notwithstanding the above, there shall be no liability for indemnification under Section
8.1(a)(i) unless the aggregate amount of Damages thereunder exceeds $100,000 (the “Shareholder
Indemnification Threshold”), at which time the Indemnifying Securityholders will be obligated
to indemnify the Buyer Indemnified Parties with respect to the aggregate amount of all such Damages
described in Section 8.1(a)(i) and not just amounts in excess of $100,000; provided,
however, that the Shareholder Indemnification Threshold shall not apply to any fraudulent
misrepresentation or the misrepresentation, breach or inaccuracy of any representation or warranty
made by the Company in any of the following sections: Section 4.1 (due organization), 4.2
(authorization; validity), 4.4 (capitalization), 4.7(b) (Net Funded Indebtedness), 4.7(c) (Net
Working Capital), 4.7(d) (Closing Net Funded Indebtedness) 4.11 (environmental matters), 4.18
(labor matters), 4.19 (employee benefits), 4.22 (intellectual property) and 4.24 (Taxes).

          (b) Notwithstanding the above, there shall be no liability for indemnification under Section
8.2(a)(i) unless the aggregate amount of Damages thereunder exceeds $100,000 (the “Buyer
Indemnification Threshold”), at which time Parent or Newco will be obligated to indemnify the
Shareholder Indemnified Parties with respect to the aggregate amount of all Damages described in
Section 8.2(a)(i) and not just amounts in excess of $100,000; provided, however, that the Buyer
Indemnification Threshold shall not apply to the misrepresentation,

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breach or inaccuracy of any
representation or warranty made by Parent or Newco in Section 5.2 (authorization; validity).

          (c) The indemnification obligations under Section 8.1(a)(i) shall be limited to an aggregate
amount equal to (A) with respect to any Indemnifying Securityholder other than the Principal
Shareholders, his, her or its pro rata share of the Escrow Amount, and (B) with respect to each of
the Principal Shareholders, the sum of the amounts paid with respect to his, her or its Company
Equity Securities under Section 2.8 above or with respect to his, her or its SAR under the SAR
Plan, including his, her or its pro rata share of the Escrow Amount (as applicable pursuant to the
foregoing clauses (A) and (B), the “Cap”); provided, however, that the Cap
shall not apply to any fraudulent misrepresentation or the misrepresentation, breach or inaccuracy
of any representation or warranty made by the Company in any of the following sections: Section 4.1
(due organization), 4.2 (authorization; validity), 4.4 (capitalization), 4.7(c) (Funded
Indebtedness), 4.7(d) (Net Working Capital), 4.19 (employee benefit plans), 4.22 (intellectual
property) and 4.24 (Taxes).

          (d) The Escrow Agreement is intended to secure the indemnification obligations of the
Indemnifying Securityholders under this Agreement. However, the rights of the Buyer Indemnified
Parties under this Article VIII shall not be limited to the Escrow Fund nor shall the Escrow
Agreement be the exclusive means for the Buyer Indemnified Parties to enforce such rights;
provided that the Buyer Indemnified Parties shall not attempt to collect any Damages
directly from the Indemnifying Securityholders unless there are no remaining funds held in escrow
pursuant to the Escrow Agreement.

          (e) The indemnification obligations of Parent or Newco under Section 8.2(a)(i) shall be
limited to an amount equal to the Escrow Amount.

          (f) The indemnification obligations under Section 8.1(a)(i) and Section 8.2(a)(i) shall
survive the Closing and shall terminate on the expiration date of the representation or warranty to
which such obligation relates.

          (g) Notwithstanding anything to the contrary herein, the right of any party hereto to
indemnification, payment of Damages or other remedies will not be affected in any way by any
investigation conducted or knowledge (whether actual, constructive or imputed) acquired at any time
by such party with respect to the accuracy or inaccuracy of or compliance with or performance of,
any representation, warranty, covenant, agreement or obligation or by the waiver of any condition.

          (h) Notwithstanding anything to the contrary herein, for purposes solely of this Article VIII,
each representation or warranty made by the Company (whether made herein or in or any other
agreement or instrument furnished by the Company to Parent pursuant to this Agreement) is made
without any qualifications or limitations as to materiality (including without limitation any
qualifications or limitations made by reference to a Company Material Adverse Effect) and, without
limiting the foregoing, the words “material” and words of similar import shall be deemed deleted
from any such representation or warranty.

     Section 8.5 Survival and Expiration of Representations and Warranties.

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          (a) The representations and warranties of Parent or Newco shall survive the Closing and shall
expire on the later to occur of (x) the Release Date or (y) the final resolution of Claims pending
with respect to such representations and warranties as of such date. The representations and
warranties of the Company (whether made herein or in any other document, agreement or instrument
delivered in connection herewith) shall survive the Closing and shall expire on the later of the
following:

     (i) except as to representations and warranties specified in clause (ii), (iii), or (iv) of
this sentence, the Release Date; or

     (ii) with respect to Sections 4.1 (due organization), 4.2 (authorization; validity), and 4.4
(capitalization), and other provisions relating to the title to the Company Equity Securities,
indefinitely; or

     (iii) with respect to Section 4.22(o) (Commitments), on the date that is eighteen (18) months
after the Release Date; or

     (iv) with respect to representations and warranties contained in Sections 4.19 (employee
benefit plans) and 4.24 (Taxes) on the date that is six (6) months after the expiration of the
longest applicable federal, state, local or foreign statute of limitation (including extensions
thereof).

          (b) All covenants of the parties (whether made herein or in any other agreement or document
contemplated hereby), including the obligations set forth in Section 8.1
and Section 8.2, shall survive the Closing, continue in effect and expire in accordance with
their respective terms.

          (c) Notwithstanding anything to the contrary herein, any Claim alleging any misrepresentation,
breach or inaccuracy of any representation or warranty made prior to the expiration period shall
survive with respect to the applicable representation or warranty until final resolution of such
Claim and payment of any Damages associated therewith.

     Section 8.6 Indemnification Procedures. All claims for indemnification under this Article
VIII (“Claims”) shall be asserted and resolved as follows:

          (a) Notice of Third Party Actions. A Person entitled to indemnification hereunder the
“Indemnified Party”) shall give written notification to the Person obligated to provide
indemnification pursuant to Section 8.1 or 8.2 (the “Indemnifying Party”) of the
commencement of any suit or proceeding by a third Person against the Indemnified Party (a
“Third Party Action”). Such notification shall be given within 20 days after receipt by
the Indemnified Party of notice of such Third Party Action, and shall describe in reasonable detail
(to the extent known by the Indemnified Party) the facts constituting the basis for such Third
Party Action and the amount of the claimed damages; provided, however, that no
delay or failure on the part of the Indemnified Party in so notifying the Indemnifying Party shall
relieve the Indemnifying Party of any liability or obligation hereunder except to the extent of any
Damage or Liability caused by or arising out of such failure.

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          (b) Indemnification by the Company or Indemnifying Securityholders of Third Party
Actions. The obligations and liabilities of the Company or the Indemnifying Securityholders
with respect to a Third Party Action for which a Buyer Indemnified Party is entitled to
indemnification pursuant to this Article VIII will be subject to the following terms and
conditions:

               (i) The Indemnifying Securityholders will have the right, but not the obligation, to defend
against, direct the defense of, or settle any such Third Party Action and any related action, suit,
proceeding, claim, arbitration or investigation before any Governmental Authority or before any
arbitrator or mediator (a “Legal Proceeding”) and with counsel reasonably acceptable to the
Buyer Indemnified Party. The Buyer Indemnified Party may participate in such defense with counsel
of its own choosing, provided that the Indemnifying Securityholders will not, following
written notice of its election to defend against and direct the defense of any such Third Party
Action, be liable to the Buyer Indemnified Party under this Article VIII for any fees of other
counsel or any other expenses with respect to the defense of such Legal Proceeding incurred by the
Buyer Indemnified Party in connection with the defense of such Legal Proceeding unless the Buyer
Indemnified Party determines in good faith that the Buyer Indemnified Party has available to it one
or more defenses or counterclaims that are inconsistent with those of the Indemnifying
Securityholders. If the Indemnifying Securityholders assume the defense of a Third Party Action,
no compromise, discharge or settlement of, or admission of liability in connection with, such
claims may be effected by the Company or Indemnifying Securityholders unless (x) there is no
finding or admission of any
violation of law or any violation of the rights of any Person and no effect on any other
claims that may be made against the Buyer Indemnified Party, and (y) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Securityholders.

               (ii) Notwithstanding the provisions of Section 8.6(b)(i), if:

                    (A) the Indemnifying Securityholders fail or refuse to undertake the defense of such Third
Party Action within ten (10) days after delivery of written notification to the Indemnifying
Securityholders of the commencement of such Third Party Action or if the Indemnifying
Securityholders later withdraw from such defense, or

                    (B) the Third Party Action involves any Governmental Authority as a party thereto, criminal
liability, or any Third Party Action in which equitable relief is sought against the Buyer
Indemnified Party, the Buyer Indemnified Party will have the right to undertake the defense of such claim with counsel
of its own choosing, with the Company or Indemnifying Securityholders responsible for the costs and
expenses of such defense and bound by any determination made in such Third Party Action or any
compromise or settlement effected by the Buyer Indemnified Party.

          (c) Indemnification by Parent and Surviving Corporation of Third Party Actions. The
obligations and liabilities of Parent and Newco hereunder with respect to a Third Party Action for
which the Company Securityholders are entitled to indemnification pursuant to this Article VIII
will be subject to the following terms and conditions.

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                    (i) The Parent and Surviving Corporation will have the right, but not the obligation, to
defend against and to direct the defense of any such Third Party Action and any related Legal
Proceeding at their sole cost and expense and with counsel of their choosing (subject to the
approval of the Shareholders’ Representative, which will not be unreasonably withheld or delayed)
and the Shareholders’ Representative will reasonably cooperate in the defense thereof. The Company
Securityholders may participate in such defense with counsel of their own choosing,
provided that Parent or Surviving Corporation will not, following written notice of its
election to defend against and direct the defense of any such Third Party Action, be liable to the
Company Securityholders under this Article VIII for any fees of other counsel or any other expenses
with respect to the defense of such Legal Proceeding incurred by the Company Securityholders in
connection with the defense of such Legal Proceeding unless the Shareholders’ Representative
determines in good faith that the Company Securityholders have available to them one or more
defenses or counterclaims that are inconsistent with those of Parent and/or Surviving Corporation.
If Parent or Surviving Corporation assumes the defense of a Third Party Action, no compromise,
discharge or settlement of, or admission of liability in connection with, such claims may be
effected by Parent or Surviving Corporation without the written consent of the Shareholders’
Representative (which consent will not be unreasonably withheld or delayed) unless (x) there is no
finding or admission of any violation of law or any violation of the rights of any Person and no
effect on any other claims that may be made against the Company Securityholders, and (y) the sole
relief provided is monetary damages that are paid in full by Parent and/or Surviving Corporation.
The Parent and Surviving Corporation will have
no liability with respect to any compromise or settlement of such claims effected without its
written consent (which consent will not be unreasonably withheld or delayed).

                    (ii) Notwithstanding the provisions of Section 8.6(c)(i), if Parent or Surviving Corporation
fails or refuses to undertake the defense of such Third Party Action within 10 days after delivery
of written notification to Parent and Surviving Corporation of the commencement of such Third Party
Action or if Parent and/or Surviving Corporation later withdraws from such defense, the
Shareholders’ Representative will have the right to undertake the defense of such claim with
counsel of its own choosing, with Parent and/or Surviving Corporation responsible for the costs and
expenses of such defense and bound by any determination made in such Third Party Action or any
compromise or settlement effected by the Shareholders’ Representative.

          (d) (i) In order to seek indemnification under this Article VIII, an Indemnified Party shall
deliver to the Indemnifying Party a written notification (“Claim Notice”) which contains
(i) a description of the Damages incurred or reasonably expected to be incurred by the Indemnified
Party and the Claimed Amount of such Damages, to the extent then known, (ii) a statement that the
Indemnified Party is entitled to indemnification under Article VIII for such Damages and a
reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount of such
Damages.

               (ii) Within 20 days after delivery of a Claim Notice, the Indemnifying Party shall deliver to
the Indemnified Party a Response, in which the Indemnifying Party shall: (x) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which case the Response
shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Claimed
Amount, by check or by wire transfer (provided, that if a

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Buyer Indemnified Party is the
Indemnified Party and is seeking to enforce such Claim pursuant to the Escrow Agreement, the
Indemnified Party shall deliver to the Escrow Agent, within three days following delivery of the
Response, a written notice executed by both parties instructing the Escrow Agent to disburse the
Claimed Amount to the Buyer Indemnified Party)), (y) agree that the Indemnified Party is entitled
to receive the Agreed Amount (in which case the Response shall be accompanied by a payment by the
Indemnifying Party to the Indemnified Party of the Agreed Amount, by check or by wire transfer
(provided, that if a Buyer Indemnified Party is the Indemnified Party and is seeking to
enforce such Claim pursuant to the Escrow Agreement, the Indemnified Party shall deliver to the
Escrow Agent, within three days following delivery of the Response, a written notice executed by
both parties instructing the Escrow Agent to disburse the Agreed Amount to the Buyer Indemnified
Party)), or (z) dispute that the Indemnified Party is entitled to receive any of the Claimed
Amount.

               (iii) During the 30-day period following the delivery of a Response that reflects a Dispute,
the Indemnifying Party and the Indemnified Party shall use good faith efforts to resolve the
Dispute. If the Dispute is not resolved within such 30-day period, the Indemnifying Party and the
Indemnified Party shall discuss in good faith the submission of the Dispute to binding arbitration,
and if the Indemnifying Party and the Indemnified Party agree in writing to submit the Dispute to
such arbitration, then the provisions of Section 8.6(e) shall become effective with respect to such
Dispute. The provisions of this Section 8.6(e) shall not obligate the Indemnifying Party and the
Indemnified Party to submit to arbitration or any other
alternative dispute resolution procedure with respect to any Dispute, and in the absence of an
agreement by the Indemnifying Party and the Indemnified Party to arbitrate a Dispute, such Dispute
shall be resolved in a state or federal court sitting in New York.

          (e) If, as set forth in Section 8.6(d), the Indemnified Party and the Indemnifying Party agree
to submit any Dispute to binding arbitration, the arbitration shall be conducted by a single
arbitrator (the “Arbitrator”) in accordance with the Commercial Rules in effect from time
to time and the following provisions:

               (i) In the event of any conflict between the Commercial Rules in effect from time to time and
the provisions of this Agreement, the provisions of this Agreement shall prevail and be
controlling.

               (ii) The parties shall commence the arbitration by jointly filing a written submission with
the Indianapolis, Indiana, office of the AAA (or office closest thereto if such office is then no
longer in existence) in accordance with Commercial Rule 5 (or any successor provision).

               (iii) No depositions or other discovery shall be conducted in connection with the arbitration.

               (iv) Not later than 30 days after the conclusion of the arbitration hearing, the Arbitrator
shall prepare and distribute to the parties a writing setting forth the arbitral award and the
Arbitrator’s reasons therefor. Any award rendered by the Arbitrator shall be final, conclusive and
binding upon the parties, and judgment thereon may be entered and

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enforced in any court of
competent jurisdiction, provided that the Arbitrator shall have no power or authority to
grant injunctive relief, specific performance or other equitable relief.

               (v) The Arbitrator shall have no power or authority, under the Commercial Rules or otherwise,
to (x) modify or disregard any provision of this Agreement, including the provisions of this
Section 8.6(e), or (y) address or resolve any issue not submitted by the parties.

               (vi) In connection with any arbitration proceeding pursuant to this Agreement, each party
shall bear its own costs and expenses, except that the fees and costs of the AAA and the
Arbitrator, the costs and expenses of obtaining the facility where the arbitration hearing is held,
and such other costs and expenses as the Arbitrator may determine to be directly related to the
conduct of the arbitration and appropriately borne jointly by the parties (which shall not include
any party’s attorneys’ fees or costs, witness fees (if any), costs of investigation and similar
expenses) shall be shared equally by the Indemnified Party and the Indemnifying Party.

          (f) The parties hereto shall treat all payments under this Article VIII as an adjustment to
the Purchase Price hereunder, unless a final determination (within the meaning of Section 1313 of
the Code) causes any such payment not to be treated as an adjustment.

Notwithstanding the other provisions of this Section 8.6, if a third party asserts (other than by
means of a lawsuit) that an Indemnified Party is liable to such third party for a monetary or other
obligation which may constitute or result in Damages for which such Indemnified Party may be
entitled to indemnification pursuant to this Article VIII, and such Indemnified Party reasonably
determines that it has a valid business reason to fulfill such obligation, then (i) such
Indemnified Party shall be entitled to satisfy such obligation, without prior notice to or consent
from the Indemnifying Party, (ii) such Indemnified Party may subsequently make a claim for
indemnification in accordance with the provisions of this Article VIII, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Article VIII, for any such
Damages for which it is entitled to indemnification pursuant to this Article VIII (subject to the
right of the Indemnifying Party to dispute the Indemnified Party’s entitlement to indemnification,
or the amount for which it is entitled to indemnification, under the terms of this Article VIII).

     Section 8.7 Remedies Cumulative. The remedies set forth in this Article VIII are
cumulative and shall not be construed to restrict or otherwise affect any other remedies that may
be available to any Indemnified Party under any other agreement or pursuant to statutory or common
law. If any fact, circumstance or event gives rise to a claim pursuant to multiple sections or
provisions of this Agreement or any Schedule, agreement, certificate or other document delivered in
connection herewith, the party asserting such claim shall have the right, at its sole discretion,
to assert its claim pursuant to any or all such sections or provisions, and shall be entitled to
each and every remedy available pursuant to each and every section or provision pursuant to which
such party elects, at its sole discretion, to assert such claim.

     Section 8.8 Right to Set-Off. Parent and the Surviving Corporation shall have the right,
but not the obligation, to set off, in whole or in part, against any obligation either of them

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owes
to any Company Securityholder, amounts owed to any Buyer Indemnified Party by any Company
Securityholders pursuant to this Agreement.

     Section 8.9 No Claim Against the Company. Each Company Securityholder waives any right of
contribution or other similar right against the Company arising out of the representations,
warranties, covenants and agreements contained in this Agreement and agrees that any claim of any
Buyer Indemnified Party, whether for indemnity or otherwise, may be asserted directly against the
Company Securityholders, without any need for any claim against, or joinder of, the Company.

     Section 8.10 Apportionment. In the case of any Taxes that are payable for a taxable period
that includes (but does not end on) the Closing Date, the portion of such Taxes that relates to the
portion of such taxable period ending on the Closing Date shall (a) in the case of any real
property, personal property or other ad valorem Taxes be deemed to be the amount of such Tax for
the entire taxable period multiplied by a fraction the numerator of which is the number of days in
the taxable period
ending on the Closing Date and the denominator of which is the number of days in the entire taxable
period, and (b) in the case of any other Tax be deemed equal to the amount that would be payable if
the relevant taxable period ended on the Closing Date based on a closing of the books as of the
close of business on the Closing Date.

Article IX

TERMINATION AMENDMENT AND WAIVER

     Section 9.1 Termination.

This Agreement may be terminated and the Merger may be abandoned at any time, notwithstanding the
approval thereof by the shareholders of the Company at any time prior to Closing:

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

          (b) by either the Company or Parent and Newco, if the Merger shall not have been consummated
on or before the date 90 days after the date of this Agreement (the “Termination Date”),
unless extended by written agreement of the parties hereto; provided, however, that
the right to terminate this Agreement and abandon the Merger under this paragraph shall not be
available to any party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Merger to occur on or prior to such date;

          (c) by either Parent or Newco or the Company, if any Governmental Authority shall have issued
an order, decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have become final and
nonappealable;

          (d) by Parent by giving written notice to the Company in the event the Company is in breach of
any representation, warranty or covenant contained in this Agreement, and such breach (i)
individually or in combination with any other such breach, would cause the

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conditions set forth in
Section 7.1 not to be satisfied and (ii) is not cured within 20 days following delivery by Parent
to the Company of written notice of such breach; or

          (e) by the Company by giving written notice to Parent in the event Parent or Newco is in
breach of any representation, warranty or covenant contained in this Agreement, and such breach (i)
individually or in combination with any other such breach, would cause the conditions set forth in
Section 7.2 not to be satisfied and (ii) is not cured within 20 days following delivery by the
Company to Parent of written notice of such breach.

     Section 9.2 Effect of Termination. If this Agreement is terminated pursuant to Section 9.1
hereof, all rights and obligations of the parties hereunder shall terminate and no party shall have
any liability to the other party, except for obligations of the parties hereto in Sections 6.5 and
11.4, which shall survive the termination of this Agreement; provided that, termination
shall not affect the liability of either party to the other party for any willful breach of this
Agreement.

Article X

REPRESENTATIVE OF THE HOLDERS OF COMPANY EQUITY SECURITIES

     Section 10.1 Authorization of Representative.

          (a) James R. McKneight (the “Shareholders’ Representative”) is hereby appointed,
authorized and empowered to act as the exclusive agent and attorney-in-fact to act on behalf of
each Company Securityholder in connection with and to facilitate the consummation of the
transactions contemplated hereby, which shall include the power and authority:

               (i) to execute and deliver such waivers and consents in connection with this Agreement and the
consummation of the transactions contemplated hereby and thereby as the Shareholders’
Representative, in its sole discretion, may deem necessary or desirable;

               (ii) to enforce and protect the rights and interests of the Company Securityholders arising
out of or under or in any manner relating to this Agreement, and each other agreement, document,
instrument or certificate referred to herein or therein or the transactions provided for herein or
therein (including, without limitation, in connection with any and all claims for indemnification
brought under Article VIII hereof), and to take any and all actions which the
Shareholders’ Representative believes are necessary or appropriate under this Agreement for and on
behalf of the Company Securityholders, including, without limitation, asserting or pursuing any
claim, action, proceeding or investigation (a “Claim”) against Parent, Newco and/or Surviving
Corporation, defending any Third Party Actions or Claims by the Buyer Indemnified Parties,
consenting to, compromising or settling any such Claims, conducting negotiations with Parent,
Surviving Corporation and their respective representatives regarding such Claims, and, in
connection therewith, to (A) assert any claim or institute any action, proceeding or investigation;
(B) investigate, defend, contest or litigate any claim, action, proceeding or investigation
initiated by Parent, the Surviving Corporation or any other person, or by any federal, state or
local Governmental Authority against any of the Company Securityholders, and receive process on
behalf of any or all Company Securityholders in any

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such claim, action, proceeding or investigation
and compromise or settle on such terms as the Shareholders’ Representative shall determine to be
appropriate, and give receipts, releases and discharges with respect to, any such claim, action,
proceeding or investigation; (C) file any proofs of debt, claims and petitions as the Shareholders’
Representative may deem advisable or necessary; and (D) file and prosecute appeals from any
decision, judgment or award rendered in any such action, proceeding or investigation, it being
understood that the Shareholders’ Representative shall not have any obligation to take any such
actions, and shall not have any liability for any failure to take any such actions;

               (iii) to refrain from enforcing any right of the Company Securityholders arising out of or
under or in any manner relating to this Agreement or any other agreement, instrument or document in
connection with the foregoing; provided, however, that no such failure to act on
the part of the Shareholders’ Representative, except as otherwise provided in this Agreement, shall
be deemed a waiver of any such right or interest by the Company Securityholders unless such waiver
is in writing signed by the waiving party; and

               (iv) to make, execute, acknowledge and deliver all such other agreements, guarantees, orders,
receipts, endorsements, notices, requests, instructions, certificates, stock powers, letters and
other writings, and, in general, to do any and all things and to take any and all action that the
Shareholders’ Representative, in its sole and absolute discretion, may consider necessary or proper
or convenient in connection with or to carry out the transactions contemplated by this Agreement
and all other agreements, documents or instruments referred to herein or executed in connection
herewith.

          (b) the Shareholders’ Representative shall not be entitled to any fee, commission or other
compensation for the performance of its services under this Article X. In connection with this Agreement
and any instrument, agreement or document relating hereto or thereto, and in exercising or failing
to exercise all or any of the powers conferred upon the Shareholders’ Representative hereunder (i)
the Shareholders’ Representative shall incur no responsibility whatsoever to any Company
Securityholders by reason of any error in judgment or other act or omission performed or omitted
hereunder or any such other agreement, instrument or document, excepting only responsibility for
any act or failure to act which represents willful misconduct, and (ii) the Shareholders’
Representative shall be entitled to rely on the advice of counsel, public accountants or other
independent experts experienced in the matter at issue, and any error in judgment or other act or
omission of the Shareholders’ Representative pursuant to such advice shall in no event subject the
Shareholders’ Representative to liability to any Company Securityholders. Company Securityholders
shall indemnify, pro rata based upon such holder’s share of the number of Common Shares outstanding
as of immediately prior to the Closing (on a fully-diluted basis as of the Effective Time), the
Shareholders’ Representative against all losses, damages, liabilities, claims, obligations, costs
and expenses, including reasonable attorneys’, accountants’ and other experts’ fees and the amount
of any judgment against them, of any nature whatsoever (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened or any claims whatsoever), arising out of or in connection with
any claim, investigation, challenge, action or proceeding or in connection with any appeal thereof,
relating to the acts or omissions of the Shareholders’ Representative hereunder or otherwise. The
foregoing indemnification shall not apply in the event of any action or proceeding which

65

 

finally
establishes liability of the Shareholders’ Representative hereunder as a result of its willful
misconduct. In the event of any indemnification hereunder, upon written notice from the
Shareholders’ Representative to the Company Securityholders as to the existence of a deficiency
toward the payment of any such indemnification amount, each Company Securityholders shall promptly
deliver to the Shareholders’ Representative full payment of his or her ratable share of the amount
of such deficiency based upon such holder’s share of the number of Common Shares outstanding as of
immediately prior to the Closing (on a fully-diluted basis as of the Effective Time).

          (c) All of the indemnities, immunities and powers granted to the Shareholders’ Representative
under this Agreement shall survive the Effective Date and/or any termination of this Agreement.

          (d) Parent and Surviving Corporation shall have the right to rely upon all actions taken or
omitted to be taken by the Shareholders’ Representative pursuant to this
Agreement all of which actions or omissions shall be legally binding upon the Company
Securityholders.

          (e) The grant of authority provided for herein (i) is coupled with an interest and shall be
irrevocable and survive the death, incompetence, incapacity, bankruptcy or liquidation of any
Company Securityholders; and (ii) shall survive the consummation of the Merger.

          (f) Should the Shareholders’ Representative resign or be unable to serve, the Shareholders’
Representative shall appoint a single substitute agent to take on the responsibility of the
representative hereunder, whose appointment shall be effective on the date of the Shareholders’
Representative’s resignation or incapacity.

Article XI

GENERAL

     Section 11.1 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned without the prior written consent of the other parties hereto (except
by operation of Law) and shall be binding upon and shall inure to the benefit of the parties
hereto, and their respective successors, heirs and legal representatives; provided,
however, that notwithstanding the foregoing, each of Parent and/or the Surviving
Corporation may assign any or all of its rights, obligations or Liabilities hereunder to any of its
Affiliates, and provided further that each such entity may assign any or all of its
rights, obligations or Liabilities under this Agreement to any party that merges with or acquires
all or substantially all of the stock of such entity or substantially all of the assets of such
entity to which this Agreement relates. Any attempted assignment in violation of the provisions
hereof shall be null and void and have no effect.

     Section 11.2 Entire Agreement. This Agreement and all other agreements contemplated hereby
sets forth the entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Any and all previous agreements and understandings between or among the
parties regarding the subject matter hereof, whether written or oral, are superseded

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by this
Agreement. The Disclosure Schedule is incorporated herein by this reference and expressly made a
part hereof.

     Section 11.3 Counterparts. This Agreement may be executed in multiple counterparts and any
party hereto may execute any such counterpart, each of which when executed and delivered shall be
deemed to be an original and all of which counterparts taken together shall constitute but one and
the same instrument.

     Section 11.4 Expenses and Fees. Parent and Newco will pay and be solely responsible for
all of the fees, expenses and disbursements of Parent and Newco and their agents, representatives,
brokers, finders, financial advisors, accountants and counsel incurred in connection with this
Agreement and the
transactions contemplated hereby, including negotiation, legal, travel and due diligence expenses.
The Company Securityholders (and not the Company) will be solely responsible for, and shall pay (or
if paid by the Company prior to the Closing, reimburse the Company for) all Company Expenses that
are not paid out of the Common Stock Consideration under Section 3.2(f), Section 3.2(g), Section 3.2(h), or Section 3.2(i) above.

     Section 11.5 Specific Performance; Remedies. Each party hereto acknowledges that the other
parties will be irreparably harmed and that there will be no adequate remedy at law for any
violation by any party of any of the covenants or agreements contained in this Agreement. It is
accordingly agreed that, in addition to any other remedies which may be available upon the breach
of any such covenants or agreements, each party hereto shall have the right to injunctive relief to
restrain a breach or threatened breach of, or otherwise to obtain specific performance of, the
other parties’ covenants and agreements contained in this Agreement.

     Section 11.6 Notices. Any notice, request, claim, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing and shall be
deemed given if delivered personally or sent by facsimile (with confirmation of receipt), by
registered or certified mail, postage prepaid, or by nationally recognized courier service, as
follows:

     If to Parent or Newco to:

WebMD Health Corp.

111 Eighth Ave.

New York, NY 10011

Facsimile: (212) 624-3773

Attention: General Counsel

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

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Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02109

Facsimile: (617) 526-5000

Attention: Jeffrey A. Stein, Esq.

     If to the Company to:

Summex Corporation

7602 Woodland Drive, Suite 300

Indianapolis, IN 46278

Attention: James R. McKneight, CFO

(317) 713-3939 (phone)

(317) 713-3950 (Fax)

     with a required copy to:

Locke Reynolds LLP

201 N. Illinois Street, Suite 1000

P.O. Box 44961

Indianapolis, IN 46244-0961

For overnight courier deliveries, omit P.O. Box and use ZIP 46204

Attention: Rex E. Bennett, Michael T. Bindner or Jeffrey S. Dible

(317) 237-3800 (phone)

(317) 237-3900 (Fax)

or to such other address as the person to whom notice is to be given may have specified in a notice
duly given to the sender as provided herein. Such notice, request, claim, demand, waiver, consent,
approval or other communication shall be deemed to have been given as of the date so delivered,
telefaxed, mailed or dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.

     Section 11.7 Governing Law and Forum. This Agreement shall be governed by, and all
disputes, claims or controversies (including without limitation, all disputes and claims arising
under Article VIII) relating to, arising out of, or in connection with this
Agreement, including any question regarding its formation, existence, validity, enforceability,
performance, interpretation, breach, or termination, shall be resolved in accordance with the laws
of the State of New York without regard to its conflict of laws rules (other than Section 5-1401
and Section 5-1402 of the General Obligations Law of the State of New York). In the event that a
dispute, claim or controversy relating to, arising out of, or in connection with this Agreement is
not the subject of a claim for specific performance pursuant to Section 11.5 or subject to arbitration
pursuant to Section 8.6 (including, without limitation, as incorporated into Section 2.9) of this Agreement, such dispute, claim or controversy shall be
subject to the exclusive jurisdiction of the New York courts and no others. The parties hereby
consent to the jurisdiction of the above-designated courts and to the service of process by
registered mail, return receipt requested, or by any other manner provided by the laws of the State
of New York.

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     Section 11.8 Severability. If any provision of this Agreement or the application thereof
to any Person or circumstances is held invalid or unenforceable in any jurisdiction, the remainder
hereof, and the application of such provision to such Person or circumstances in any other
jurisdiction, shall not be affected thereby, and to this end the provisions of this Agreement shall
be severable.

     Section 11.9 Absence of Third Party Beneficiary Rights. No provision of this Agreement is
intended, nor will be interpreted, to provide or to create any third party beneficiary rights or
any other rights of any kind in any client, customer, Affiliate, shareholder, officer, director,
employee or partner of any party hereto or any other Person, other than the parties hereto, the
Buyer Indemnified Parties and the Shareholder Indemnified Parties.

     Section 11.10 Mutual Drafting. This Agreement is the mutual product of the parties hereto,
and each provision hereof has been subject to the mutual consultation, negotiation and agreement of
each of the parties, and shall not be construed for or against any party hereto.

     Section 11.11 Further Representations. Each party to this Agreement acknowledges and
represents that it has been represented by its own legal counsel in connection with the
transactions contemplated by this Agreement, with the opportunity to seek advice as to its legal
rights from such counsel. Each party further represents that it is being independently advised as
to the tax consequences of the transactions contemplated by this Agreement and is not relying on
any representation or statements made by any other party as to such tax consequences.

     Section 11.12 Amendment; Waiver. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of the parties hereto.
Any extension or waiver by any party of any provision hereto shall be valid only if set forth in an
instrument in writing signed on behalf of such party.

     Section 11.13 Usage. The defined terms herein shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. All references herein to “Articles”,
“Sections” and “Exhibits” shall be deemed to be references to Articles and Sections of and Exhibits
to, this Agreement unless the context shall otherwise require. All Exhibits attached hereto shall
be deemed incorporated herein as if set forth in full herein and, unless otherwise defined therein,
all terms used in any Exhibit shall have the meaning ascribed to such term in this Agreement. The
words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without
limitation.” Unless otherwise expressly provided herein, any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all attachments thereto
and instruments incorporated therein. Unless otherwise expressly provided, wherever the consent of
any Person is required or permitted herein, such consent may be withheld in such Person’s sole
discretion.

[SIGNATURE PAGES TO FOLLOW]

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
written above.

	 	 	 	 	 
	 	WEBMD HEALTH CORP.

 	 
	 	By:  	/s/ Douglas W. Wamsley
 	 
	 	Name:  	Douglas W. Wamsley 	 
	 	Title:  	Executive Vice President 	 
	 
	 	FFGM, INC.

 	 
	 	By:  	/s/ David J. Schlanger
 	 
	 	Name:  	David J. Schlanger 	 
	 	Title:  	Treasurer 	 
	 
	 	SUMMEX CORPORATION

 	 
	 	By:  	/s/ J. Robert Plankenhorn
 	 
	 	Name:  	J. Robert Plankenhorn 	 
	 	Title:  	President & Chief Executive Officer 	 
	 

70<PAGE>
                                                                    EXHIBIT 10.1

                    GENERAL RELEASE AND SEPARATION AGREEMENT

     Simmons Bedding Company (previously named Simmons Company), a corporation
incorporated under the laws of the State of Delaware ("Company"), and Simmons
Company (previously named THL Bedding Holding Company), a corporation
incorporated under the laws of the State of Delaware ("Holdings") (collectively
Company and Holdings are referred to herein as "Simmons"), and Rhonda C. Rousch
("Executive") hereby enter into this General Release and Separation Agreement
("Separation Agreement"), contracting and agreeing as follows:

1.   SEPARATION DATE AND EMPLOYMENT AGREEMENT. The parties agree that
Executive's last day of employment with Company is March 31, 2006 (the
"Separation Date"). Executive acknowledges and agrees that except as
specifically set forth below, the Employment Agreement dated as of December 19,
2003 among Holdings, Company and Executive, as the same was amended and
supplemented by that certain Supplement to Employment Agreement (the
"Supplement") effective as of December 7, 2005 (together, the "Employment
Agreement") is terminated. Executive further agrees that effective as of the
Separation Date, she hereby resigns from all officer and director positions with
Simmons and any of its subsidiaries and affiliates and agrees to sign any
letters or other documents on or after such date effecting such resignations.

2.   CONSIDERATION PERIOD. Executive acknowledges that Executive was given this
Separation Agreement to consider on April 5, 2006 and that Executive has
twenty-one (21) days to consider whether to sign this Separation Agreement.
Executive is hereby advised to consult a lawyer before signing this Separation
Agreement.

3.   EFFECTIVE DATE. Executive may accept this Separation Agreement only by
signing, initialing and dating this Separation Agreement in the spaces provided
and delivering the Separation Agreement to Simmons Bedding Company, Attention:
Kristen K. McGuffey, Senior Vice President and General Counsel, One Concourse
Parkway, Suite 800, Atlanta, Georgia 30328, no later than Company's normal close
of business on the later of (a) the twenty-second (22nd) day following
Executive's receipt of this Separation Agreement or (b) if the twenty-second
(22nd) day following receipt is a Saturday, Sunday or legal holiday in the State
of Georgia, the next day that is not a Saturday, Sunday or legal holiday. Time
is of the essence as it pertains to this Section 3. The "Effective Date" of this
Separation Agreement shall be seven (7) days after the date on which Executive
signs and delivers the Separation Agreement pursuant to this Section, so long as
Executive has not revoked the Separation Agreement pursuant to Section 4 below.

4.   REVOCATION. Executive may revoke this Separation Agreement at any time
within seven (7) days after signing and delivering it to Simmons by notifying
Simmons Bedding Company, Attention: Kristen K. McGuffey, Senior Vice President
and General Counsel, One Concourse Parkway, Suite 800, Atlanta, Georgia 30328,
in writing of Executive's decision to revoke.

5.   SEPARATION BENEFITS. Provided that Executive satisfies the conditions of
this Separation Agreement and does not revoke this Separation Agreement, Company
will do the following:

     (a)   Pay to Executive her unpaid salary through the Separation Date. Such
amount will be paid at the next regular pay period after the Separation Date.

     (b)   Pay to Executive the Annual Bonus due for fiscal year 2006, if any,
in accordance with Section 3.2 of her Employment Agreement as if Executive had
been employed for all of fiscal year 2006. Such amount will be paid to Executive
when the Company makes payment of other executive bonuses for fiscal year 2006.

     (c)   Pay to Executive the gross amount of $570,000, which equals two (2)
years of Executive's current salary of $285,000 per year. This amount, less
legal deductions, will be paid in accordance with Executive's current pay
schedule for a period from April 1, 2006 through March 31, 2008 (the "Severance
Pay Period") provided that the first payment shall not be made until after the
expiration of the revocation period, and which first payment will include any
missed payments between the first payment due date and the expiration of the
revocation period.
<PAGE>
     (d)  (i)   Executive and Executive's Dependents (as defined below) may
continue to participate in the Company's medical, dental and vision plans at the
same level of participation that was in effect immediately prior to the
Separation Date through the earlier of (i) March 31, 2008, or (ii) the date on
which the Executive commences other employment in connection with which the
Executive elects to receive, in her sole discretion, medical, dental and vision
benefits substantially comparable to those made available by the Company
(including self employment or engaging in an enterprise as a sole proprietor or
partner). Executive shall continue to pay for such coverage at the same rate or
rates that apply from time to time to active employees for comparable coverage.
Notwithstanding the foregoing, if the benefit plan for which Executive is
currently enrolled is no longer offered by Simmons, then Executive through March
31, 2008 will be eligible to participate in any plan offered to then-current
Simmons' associates. Executive must pay Executive's portion by deductions from
Executive's severance payments. The 18 month period during which benefits under
the Consolidated Omnibus Budget Reconciliation Act (aka COBRA) are available to
Executive and her Dependants shall begin on the Separation Date and run
concurrently with the benefits available under this Section 5(d)(i).

          (ii)   After March 31, 2008, but only until the date Executive
commences employment in connection with which the Executive elects to receive,
in her sole discretion, medical, dental and vision benefits substantially
comparable to those made available by the Company (including self employment or
engaging in an enterprise as a sole proprietor or partner), Executive may elect
at any time to participate in any medical, dental and vision plan of the Company
at any level of coverage offered to then-current Simmons associates for
Executive and Executive's enrolled and qualified spouse as of the Separation
Date for the rest of their natural lives (so long as such person remains a
spouse of the Executive) by paying the current full group premium cost plus an
administrative fee, such fee not to exceed the administrative fee charged by the
Company with respect to COBRA coverage. To elect coverage, Executive shall
notify Simmons in writing on or before March 31, 2008 in a letter addressed to
Simmons Bedding Company, Attention: Corporate Benefits Department, One Concourse
Parkway, Suite 800, Atlanta, Georgia 30328 (or such other address of which
Simmons notifies Executive in writing) and thereafter Executive shall make the
monthly payments in accordance with the payment instructions below. The
obligation of Simmons to provide medical, dental and vision coverage to
Executive's enrolled and qualified spouse as of the Separation Date pursuant
hereto shall not be eliminated or otherwise diminished in any manner by reason
of the death of the Executive.

          (iii)   Beginning with 2007, the new medical, dental and vision rates
will be communicated to the Executive before December 31 of the prior year.
Executive is required to complete all necessary forms required during the open
enrollment period each year. Further, if Executive discontinues her coverage
under the Company's medical, dental or vision plans at any time, she will no
longer be entitled to any of the benefits described in this Section 5(d) with
respect to such plan after such date.

          (iv)   After the Severance Pay Period expires, all payments shall be
made by sending a check made payable to Simmons Bedding Company by the 1st of
each month to Simmons Bedding Company, Attention: Corporate Benefits Department,
One Concourse Parkway, Suite 800, Atlanta, Georgia 30328 (or such other address
of which Simmons notifies Executive in writing). If Simmons has not received
Executive's check in the full amount by the 5th of each month, then all benefits
for Executive and Executive's enrolled and qualified spouse as of the Separation
Date will be immediately cancelled. If Executive elects to receive, in her sole
discretion, any other insurance coverage providing medical, dental and vision
benefits substantially comparable to those made available by the Company, she
shall promptly notify Simmons of the effective date thereof in a letter
addressed to Simmons Bedding Company, Attention: Legal Department, One Concourse
Parkway, Suite 800, Atlanta, Georgia 30328 (or such other address of which
Simmons notifies Executive in writing).

          (v)   As used herein, a "Dependent" is a dependent of Executive
enrolled and qualified in Simmons' medical, dental and/or vision plans
immediately prior to the Separation Date and will only continue to be a
"Dependent" hereunder for as long as he or she continues to be qualified as
outlined in the applicable health plan documents. Simmons reserves the right
from time to time to require proof from Executive that Executive's Dependents
are still considered qualified under the applicable health plan documents.

          (vi)   Except as set forth in clause (g) below, nothing contained
herein shall give Executive any rights to any other Simmons sponsored benefits,
including without limitation, long term disability, short term disability, and
retirement contributions, except as permitted under those plans for retired
associates.

                                       2
<PAGE>
     (e)   Pay all verified and approved expense reports submitted by Executive
to Company within two (2) weeks of the Separation Date in accordance with
Company's current policies, practices and procedures.

     (f)   Provide an employment reference. Executive must direct all reference
requests to the Chief Executive Officer of Simmons Bedding Company.

     (g)   Pay all premiums through November 1, 2006 on life insurance policy
no. 76110207

     (h)   Pay for an executive physical exam for Executive with Dr. Charles
Taylor consistent with the current executive physical exam program offered to
other executives.

     (i)   Pay the 2006 fees for David Cooksey's financial consulting services
to Executive consistent with the current benefit offered to other senior
managers and executives. Such payment shall be treated as additional
compensation to you in accordance with the Company's historical practices.

     (j)   Executive agrees that if Executive subsequently engages in activities
prohibited by Section 10 below, then the Company may thereafter immediately
terminate and shall not be required to continue on behalf of the Executive or
her dependents and beneficiaries any compensation provided for in this Section 5
other than those benefits that the Company may be required to maintain for the
Executive under applicable law. Except as expressly provided in this Section
5(j), the Company's obligation to pay all compensation to Executive provided for
in this Section 5 shall be absolute, and shall not be eliminated or otherwise
diminished in any manner by reason of Executive's hereafter commencing other
employment or self-employment, or otherwise.

6.   REPURCHASE OF SHARES.

     (a)   Class A Shares.
           --------------

  (i) Until such date as the audited financial statements for fiscal year 2006
are available (the "Threshold Date"), Holdings shall not exercise its rights
(the "Class A Call Right") pursuant to Section 3.5(b)(i) of the Securityholders
Agreement dated as of December 19, 2003 among Executive, Holdings and the other
parties thereto (the "SH Agreement") to repurchase the 5,233.50 Class A shares
that Executive currently owns. After the Threshold Date, Holdings' exercise of
the Class A Call Right shall be in its sole discretion and in accordance with
the applicable provisions of the SH Agreement.

  (ii) In the event of any exercise by Holdings of the Class A Call Right, then
upon the Board of Directors' determination of the current Fair Market Value (as
defined in the SH Agreement) of the Class A shares, Holdings agrees to provide
Executive an affidavit signed by the Executive Vice President and Chief
Financial Officer of Holdings which (i) identifies the ranges of the stock value
for the Class A stock as determined by the outside third party who does such
valuations on behalf of Holdings and (ii) states that the Board determination of
the current Fair Market Value was consistent with past practices in making such
determinations. Executive agrees that such information is considered
Confidential Information under the terms of the Supplement and represents and
warrants that she will not disclose to any third party or use for her own
benefit or gain the information provided in the affidavit with the only
exception being that this information may be disclosed to her attorneys at
Rogers & Hardin LLP who represented her in the negotiation of this Separation
Agreement.

  (iii) Notwithstanding any provisions in the SH Agreement or otherwise to the
contrary, Executive hereby waives any and all rights pursuant to Section
3.5(a)(i) of the SH Agreement to cause Holdings to purchase the Class A Shares
owned by Executive.

                                       3
<PAGE>
     (b)   Class B Shares.
           --------------

          (i)   Pursuant to Section 2(b) and 3(a) of the Senior Manager Amended
and Restated Restricted Stock Agreement dated as of April 1, 2006 by and between
Executive and Holdings (the "RSA"), the vesting of Executive's Restricted Class
B stock has terminated, and Holdings may now, or at such later date, as the case
may be, exercise the following rights:

          (A)   With respect to Executive's 10,753.69 Class B shares that have
vested as of the Separation Date, Holdings shall not exercise its rights (the
"Class B Call Right") pursuant to Section 3(a) of the RSA to repurchase such
shares until the Threshold Date. After the Threshold Date, Holdings' exercise of
such Class B Call Right shall be in its sole discretion and in accordance with
the applicable provisions of the RSA.

          (B)   For the portion, if any, of Executive's 3,046.88 Class B shares
that may become Vested Shares pursuant to Section 2(b) of the RSA if Holdings
meets the performance requirements for fiscal year 2006 as set forth in Section
2(a)(i)(A) of the RSA (it being expressly acknowledged and agreed that
notwithstanding any language in said Section 2(b) to the contrary, a portion of
said Class B shares will become vested shares in accordance with said Section
2(a)(i)(A) of the RSA in any case in which less than, but at least 90% of, the
Target EBITDA is met for fiscal year 2006), Holdings may, in its sole
discretion, exercise its right to repurchase any such vested shares on a date
that is no earlier than 180 days after such shares become vested. For the
portion, if any, of these shares that do not vest pursuant to the performance
requirements for 2006, then Holdings will repurchase these unvested shares at
Executive's original purchase price of one penny per share within thirty (30)
days of the Measurement Date in 2007.

          (C)   For all Class B shares that have vested or that do vest pursuant
to Section 6(b)(i)(A) and (B) above, Executive and Simmons agree that,
notwithstanding any terms previously agreed to by the parties, such vested
shares will be repurchased by Holdings at the then current Fair Market Value (as
defined in the RSA) at the time of such repurchase as determined by the Board of
Directors of Simmons.

          (D)   Holdings hereby exercises its right to repurchase 43,552.43 of
the Executive's unvested Class B shares at Executive's original purchase price
of one penny per share, or $435.52, which amount will be paid within thirty (30)
days of the Effective Date of this Separation Agreement. These shares shall be
deemed repurchased upon payment by Simmons to Executive.

(ii) In the event of any exercise by Holdings of the Class B Call Right, then
     upon the Board of Directors' determination of the current Fair Market Value
     (as defined in the RSA) of the Class B shares, Holdings agrees to provide
     Executive an affidavit signed by the Executive Vice President and Chief
     Financial Officer of Holdings which (i) identifies the ranges of the stock
     value for the Class B stock as determined by the outside third party who
     does such valuations on behalf of Holdings and (ii) states that the Board
     determination of the current Fair Market Value was consistent with past
     practices in making such determinations. Executive agrees that such
     information is considered Confidential Information under the terms of the
     Supplement and represents and warrants that she will not disclose to any
     third party or use for her own benefit or gain the information provided in
     the affidavit with the only exception being that this information may be
     disclosed to her attorneys at Rogers & Hardin LLP who represented her in
     the negotiation of this Separation Agreement.

     Executive further agrees that the obligations of Holdings to make payments
     pursuant to Sections 6(a) and 6(b) above are subject to there being no Cash
     Deferral Condition existing (as such term is defined in Section 3(d) of the
     RSA and Section 3.5(a)(iv) of the SH Agreement).

                                       4
<PAGE>
7.   RELEASE.

     (a)   Subject to Executive's right to revoke this Separation Agreement as
stated above, by signing this Separation Agreement, Executive gives up and
releases Simmons, each subsidiary and affiliate of Company or Holdings, or both;
and their respective employee welfare benefit plans, employee retirement benefit
plans, successors and assigns (including, in their representative capacities,
all present and former shareholders, directors, officers, partners, fiduciaries,
agents, representatives and employees of those companies and other entities)
(collectively the "Released Parties") from and promises never to sue or lodge
any charge or complaint whether as a named plaintiff, class member, or otherwise
against the Released Parties with respect to any and all rights and claims that
Executive may have against the Released Parties, including without limitation
any and all rights and claims to or for attorneys' fees, whether or not
Executive presently is aware of such rights or claims or suspects them to exist.
These rights and claims include, but are not limited to, any and all rights and
claims which Executive may have under, or arising out of, Title VII of the Civil
Rights Act of 1964, as amended; the Americans with Disabilities Act, as amended;
the Age Discrimination in Employment Act of 1967, as amended; and any other
federal, state or local statute, ordinance, executive order, or common law.
Executive specifically releases any and all claims of/for discrimination on the
basis of age, gender, race, national origin, religion and/or retaliation. These
rights and claims also include, but are not limited to, any and all rights and
claims that Executive may have under any agreement or contract (other than this
Separation Agreement). This release includes any and all claims that might exist
at the time Executive executes this Separation Agreement, whether known or
unknown to Executive. These rights and claims do not include any rights or
claims which arise after the date on which Executive signs and delivers this
Separation Agreement to Company or any vested rights Executive has (if any)
under any retirement benefit plan sponsored by Company, and do not include any
rights or claims (including, without limitation, any claims for indemnification)
existing under this Separation Agreement.

     (b)   Executive further gives up and releases [        ] its successors and
assigns (including all present and former shareholders, directors, officers,
partners, fiduciaries, agents, representatives and employees of those companies
and other entities) (collectively the "[        ] Released Parties") from and
promises never to sue or lodge any charge or complaint whether as a named
plaintiff, class member, or otherwise against the [        ]Released Parties
with respect to any and all rights and claims that Executive may have against
the [        ] Released Parties relating to her employment with Company or her
investments in Holdings, including without limitation any and all rights and
claims to or for attorneys' fees, whether or not Executive presently is aware of
such rights or claims or suspects them to exist.

     (c)   The Company and Holdings give up and release Executive from and
promise never to sue or lodge any charge or complaint whether as a named
plaintiff, class member, or otherwise against the Executive with respect to any
and all rights and claims that the Company or Holdings may have against the
Executive, including without limitation any and all rights and claims to or for
attorneys' fees, whether or not the Company or Holdings presently is aware of
such rights or claims or suspects them to exist. These rights and claims also
include, but are not limited to, any and all rights and claims that the Company
or Holdings may have under any agreement or contract (other than this Separation
Agreement, the SH Agreement, RSA, and the Employment Agreement, but in each case
only with respect to any ongoing obligations thereunder). This release includes
any and all claims that might exist at the time the Company and Holdings execute
this Separation Agreement, whether known or unknown to the Company or Holdings.
These rights and claims do not include any rights or claims which arise after
the date on which the Company and Holdings sign and deliver this Separation
Agreement, and do not include any rights or claims existing under this
Separation Agreement, the SH Agreement, RSA, and the Employment Agreement, but
in each case only with respect to any ongoing obligations thereunder.

8.   FALSE CLAIMS REPRESENTATIONS, COOPERATION AND PROMISES: Executive has
disclosed to Company any and all information Executive has concerning any
conduct involving Simmons or any affiliate that Executive has any reason to
believe may be unlawful. Executive promises to cooperate fully with Simmons in
any investigation Simmons or any affiliate undertakes into matters occurring
during Executive's employment with Simmons or any affiliate. Executive agrees
that, as and when requested by Simmons, Executive will fully cooperate with
Simmons or any affiliate in effecting a smooth transition of Executive's
responsibilities to others. Executive will promptly and fully cooperate with
Simmons or any affiliate and its representatives in any dispute, litigation,
arbitration, administrative or similar proceeding with respect to claims arising
from events occurring or alleged to have occurred during her employment with
Simmons. If Executive is contacted as a potential witness to any claim or in any

                                       5
<PAGE>
litigation, Executive will notify Simmons of any such contact or request within
two (2) days after learning of it and will permit Simmons to take all steps it
deems to be appropriate, if any, to prevent Executive's involvement, or to be
present during any such discussions. This section does not prohibit Executive's
participation as a witness to the extent otherwise legally required, but does
require that Executive provide Simmons with notice and the opportunity to object
and/or participate. Before Executive discloses any Simmons' information or
engages in any other activity that could possibly violate the promises Executive
has made herein, Executive promises that Executive will discuss Executive's
proposed actions with the Senior Vice President and General Counsel at (770)
392-2502, who will advise Executive in writing whether the proposed actions
would violate these promises.

9.   NO ADMISSION. This Separation Agreement does not constitute an admission by
the Released Parties of any liability to Executive, and Executive understands
and agrees that the Released Parties deny any liability to Executive.

10.  OBLIGATIONS AND RESTRICTED ACTIVITIES. In consideration of the benefits as
set forth herein, and other good and valuable consideration, the adequacy of
which Executive acknowledges, Executive, intending to be legally bound, agrees
to continue to be bound by the obligations and restrictions as set forth in
Sections 2, 4, 5 and 6 of the Supplement and terms shall remain binding and
enforceable during the periods set forth therein. Defined terms as used in those
Sections 2, 4, 5 and 6 of the Supplement shall have the specific meanings as
defined in Section 2 of the Supplement.

11.  GENERAL

     (a)   The Company agrees to pay Rogers & Hardin LLP up to $5,000 for its
services to Executive in negotiating this Separation Agreement. Such payment
will be made upon receipt of an itemized invoice identifying the attorneys who
provided such services, the services performed and the amount of time and the
date such services were performed, which invoice shall be provided to the
General Counsel for Simmons. The payment will be made within 45 days of the
receipt of such invoice but in no case earlier than the Effective Date of this
Separation Agreement.

     (b)   Executive shall be entitled to indemnification to the fullest extent
provided by Delaware law and Simmons' organizational documents as now in effect
against any expense (including, without limitation, attorneys' fees), fine,
penalty, liability or damages incurred by Executive in connection with any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, in which she currently is or hereafter becomes involved as a
result of her employment with Simmons and performance of duties pursuant to her
Employment Agreement. Simmons hereby represents and warrants that all corporate
action has been taken, and all approvals and consents have been obtained, as may
be necessary for Simmons to extend full indemnification to Executive after the
Separation Date including, without limitation, continuing to fund Executive's
defense of any currently ongoing action, suit or proceeding.

     (c)   This Separation Agreement contains the entire agreement of Simmons
with Executive and replaces all prior and contemporaneous agreements,
communications and understandings, whether written or oral, with respect to
Executive's employment with Company and its termination and all related matters,
including the Employment Agreement, excluding only Executive's rights and
obligations, if any, that survive the Employment Agreement as specifically set
forth above. The parties further agree that no amendment or modification of this
Separation Agreement shall be valid or binding upon any of them unless made in
writing and signed by all parties hereto. Except to the extent expressly set
forth herein, the Separation Agreement does not affect ongoing rights and
obligations of the parties under the SH Agreement, RSA and any related
agreements concerning Class A or Class B stock held by Executive after the
Effective Date.

     (d)   This Separation Agreement shall be binding upon and inure to the
benefits of the parties hereto and their respective heirs, representatives,
successors, transferees and assigns forever. This Separation Agreement shall not
be assignable by Executive but shall be freely assignable by Simmons, provided
that any assignment by Simmons shall expressly provide that (i) the assignee
affirmatively assumes all the obligations, duties and responsibilities imposed
upon Simmons pursuant to this Separation Agreement and (ii) Simmons is not in
any manner relieved of any such obligations, duties or responsibilities
hereunder.

                                       6
<PAGE>
     (e)   Simmons and Executive intend for every provision of the Separation
Agreement to be fully enforceable. If a court with jurisdiction of this
Separation Agreement determines that all or part of any provision of this
Separation Agreement is unenforceable for any reason, Simmons and Executive
intend for each remaining provision and part to be fully enforceable as though
the unenforceable provision or part had not been included in this Separation
Agreement.

     (f)   This Separation Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without regard to the conflict
of laws principles thereof, except with respect to (i) Section 10 of this
Separation Agreement, which shall expressly be governed by and construed in
accordance with the choice of law provisions of the Supplement, and (ii) Section
11(b) of this Separation Agreement, which shall be construed in accordance with
Delaware law as provided therein.

     (g)   This Separation Agreement may be executed in any number of
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.

12.  EXECUTIVE'S FULL REVIEW. Executive acknowledges that Executive has read
this entire Separation Agreement, that Executive fully understands its meaning
and effect, that Executive's counsel has answered any questions Executive may
have, that no promises or representations have been made to Executive by any
person to induce Executive to enter into this agreement other than the express
terms set forth herein, and that Executive has voluntarily signed this
Separation Agreement.

                       [SIGNATURES ON THE FOLLOWING PAGE]

                                       7
<PAGE>
     IN WITNESS WHEREOF, Executive and a duly authorized representative of
Company and Holdings have signed this Separation Agreement to be effective as
provided herein.

                             Simmons Bedding Company

                             By:  /s/ William S. Creekmuir         Date: 4/10/06
                                ----------------------------------      --------
                             Name:  William S. Creekmuir
                             Title: Executive Vice President, CFO,
                                    Assistant Treasurer & Assistant Secretary

                             Simmons Company

                             By: /s/ William S. Creekmuir          Date: 4/10/06
                                ----------------------------------      --------
                             Name:  William S. Creekmuir
                             Title: Executive Vice President, CFO,
                                    Assistant Treasurer & Assistant Secretary

                             Executive

                             /s/ Rhonda C. Rousch                   Date: 4/7/06
                             ----------------------------------          -------
                             Rhonda C. Rousch

                                       8

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