Document:

Exhibit 10.2

EXECUTION COPY

AGREEMENT AND PLAN OF REORGANIZATION

AMONG

ZYGO CORPORATION,

ZMI ACQUISITION CORPORATION

AND

ZEMETRICS, INC.

January 18, 2010

TABLE OF CONTENTS

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE I

 	
 THE MERGER

 	
  

 	
 1

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 1.1

 	
 The Merger

 	
  

 	
 1

 
	
  

 	
 Section 1.2

 	
 Closing;
 Effective Time

 	
  

 	
 1

 
	
  

 	
 Section 1.3

 	
 Effect of
 the Merger

 	
  

 	
 2

 
	
  

 	
 Section 1.4

 	
 Certificate
 of Incorporation; Bylaws

 	
  

 	
 2

 
	
  

 	
 Section 1.5

 	
 Directors
 and Officers

 	
  

 	
 2

 
	
  

 	
 Section 1.6

 	
 Effect on
 Capital Stock

 	
  

 	
 2

 
	
  

 	
 Section 1.7

 	
 Surrender of
 Certificates

 	
  

 	
 4

 
	
  

 	
 Section 1.8

 	
 No Further
 Ownership Rights in Company Capital Stock

 	
  

 	
 6

 
	
  

 	
 Section 1.9

 	
 Repayment of
 Company Debt

 	
  

 	
 6

 
	
  

 	
 Section 1.10

 	
 Taking of
 Necessary Action; Further Action

 	
  

 	
 6

 
	
  

 	
 Section 1.11

 	
 Withholding
 Rights

 	
  

 	
 6

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE II

 	
 REPRESENTATIONS AND WARRANTIES OF COMPANY

 	
  

 	
 7

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 2.1

 	
 Organization,
 Standing and Power

 	
  

 	
 7

 
	
  

 	
 Section 2.2

 	
 Subsidiaries
 and Other Interests

 	
  

 	
 7

 
	
  

 	
 Section 2.3

 	
 Authority

 	
  

 	
 7

 
	
  

 	
 Section 2.4

 	
 Capital
 Structure

 	
  

 	
 8

 
	
  

 	
 Section 2.5

 	
 Financial
 Statements

 	
  

 	
 9

 
	
  

 	
 Section 2.6

 	
 Absence of
 Certain Changes

 	
  

 	
 9

 
	
  

 	
 Section 2.7

 	
 Absence of
 Undisclosed Liabilities

 	
  

 	
 10

 
	
  

 	
 Section 2.8

 	
 Litigation

 	
  

 	
 11

 
	
  

 	
 Section 2.9

 	
 Restrictions
 on Business Activities

 	
  

 	
 11

 
	
  

 	
 Section 2.10

 	
 Intellectual
 Property

 	
  

 	
 11

 
	
  

 	
 Section 2.11

 	
 Interested
 Party Transactions

 	
  

 	
 13

 
	
  

 	
 Section 2.12

 	
 Minute Books

 	
  

 	
 13

 
	
  

 	
 Section 2.13

 	
 Material
 Contracts

 	
  

 	
 13

 
	
  

 	
 Section 2.14

 	
 Title to
 Property

 	
  

 	
 15

 
	
  

 	
 Section 2.15

 	
 Environmental
 Matters

 	
  

 	
 15

 
	
  

 	
 Section 2.16

 	
 Taxes

 	
  

 	
 17

 
	
  

 	
 Section 2.17

 	
 Employee
 Benefit Plans

 	
  

 	
 18

 
	
  

 	
 Section 2.18

 	
 Employee
 Matters

 	
  

 	
 20

 
	
  

 	
 Section 2.19

 	
 Insurance

 	
  

 	
 20

 
	
  

 	
 Section 2.20

 	
 Licenses and
 Permits

 	
  

 	
 20

 
	
  

 	
 Section 2.21

 	
 Compliance
 With Laws

 	
  

 	
 21

 
	
  

 	
 Section 2.22

 	
 Certain
 Business Practices

 	
  

 	
 21

 
	
  

 	
 Section 2.23

 	
 Brokers’ and
 Finders’ Fee

 	
  

 	
 21

 
	
  

 	
 Section 2.24

 	
 Representations
 Complete

 	
  

 	
 21

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE III

 	
 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 	
  

 	
 21

 

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 3.1

 	
 Organization,
 Standing and Power

 	
  

 	
 21

 
	
  

 	
 Section 3.2

 	
 Authority

 	
  

 	
 22

 
	
  

 	
 Section 3.3

 	
 SEC
 Documents; Financial Statements

 	
  

 	
 22

 
	
  

 	
 Section 3.4

 	
 Absence of
 Certain Changes

 	
  

 	
 23

 
	
  

 	
 Section 3.5

 	
 Interim
 Operations of Merger Sub

 	
  

 	
 23

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE IV

 	
 CONDUCT PRIOR TO THE EFFECTIVE TIME

 	
  

 	
 23

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 4.1

 	
 Conduct of
 Business of Company

 	
  

 	
 23

 
	
  

 	
 Section 4.2

 	
 No
 Solicitation

 	
  

 	
 26

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE V

 	
 ADDITIONAL AGREEMENTS

 	
  

 	
 26

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 5.1

 	
 [Reserved.]

 	
  

 	
 26

 
	
  

 	
 Section 5.2

 	
 Approval of
 Company Shareholders

 	
  

 	
 26

 
	
  

 	
 Section 5.3

 	
 Sale of
 Shares Pursuant to Regulation D

 	
  

 	
 26

 
	
  

 	
 Section 5.4

 	
 Access to
 Information

 	
  

 	
 27

 
	
  

 	
 Section 5.5

 	
 Confidentiality

 	
  

 	
 27

 
	
  

 	
 Section 5.6

 	
 Public
 Disclosure

 	
  

 	
 27

 
	
  

 	
 Section 5.7

 	
 Reasonable
 Best Efforts

 	
  

 	
 27

 
	
  

 	
 Section 5.8

 	
 Notice of
 Certain Events

 	
  

 	
 28

 
	
  

 	
 Section 5.9

 	
 Blue Sky
 Laws

 	
  

 	
 29

 
	
  

 	
 Section 5.10

 	
 Listing of
 Additional Shares

 	
  

 	
 29

 
	
  

 	
 Section 5.11

 	
 Employees

 	
  

 	
 29

 
	
  

 	
 Section 5.12

 	
 Expenses

 	
  

 	
 29

 
	
  

 	
 Section 5.13

 	
 Registration
 of Shares of Parent Common Stock Issued in the Merger

 	
  

 	
 29

 
	
  

 	
 Section 5.14

 	
 Indemnification
 and Insurance

 	
  

 	
 32

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE VI

 	
 CONDITIONS TO THE MERGER

 	
  

 	
 32

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 6.1

 	
 Conditions
 to Obligations of Each Party to Effect the Merger

 	
  

 	
 32

 
	
  

 	
 Section 6.2

 	
 Additional
 Conditions to the Obligations of Parent and Merger Sub

 	
  

 	
 33

 
	
  

 	
 Section 6.3

 	
 Additional
 Conditions to Obligations of Company

 	
  

 	
 34

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE VII

 	
 TERMINATION, AMENDMENT AND WAIVER

 	
  

 	
 35

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 7.1

 	
 Termination

 	
  

 	
 35

 
	
  

 	
 Section 7.2

 	
 Effect of
 Termination

 	
  

 	
 35

 
	
  

 	
 Section 7.3

 	
 Amendment

 	
  

 	
 36

 
	
  

 	
 Section 7.4

 	
 Extension,
 Waiver

 	
  

 	
 36

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE VIII

 	
 ESCROW AND INDEMNIFICATION

 	
  

 	
 36

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 8.1

 	
 Escrow Fund

 	
  

 	
 36

 
	
  

 	
 Section 8.2

 	
 Indemnification

 	
  

 	
 36

 
	
  

 	
 Section 8.3

 	
 Escrow
 Period: Release From Escrow

 	
  

 	
 38

 

ii

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 8.4

 	
 Claims Upon
 Escrow Fund

 	
  

 	
 38

 
	
  

 	
 Section 8.5

 	
 Objections
 to Claims

 	
  

 	
 39

 
	
  

 	
 Section 8.6

 	
 Claims by
 Company Indemnitees

 	
  

 	
 39

 
	
  

 	
 Section 8.7

 	
 Shareholders’
 Agent

 	
  

 	
 40

 
	
  

 	
 Section 8.8

 	
 Actions of
 the Shareholders’ Agent

 	
  

 	
 40

 
	
  

 	
 Section 8.9

 	
 Third-Party
 Claims

 	
  

 	
 40

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE IX

 	
 GENERAL
 PROVISIONS

 	
  

 	
 41

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Section 9.1

 	
 Notices

 	
  

 	
 41

 
	
  

 	
 Section 9.2

 	
 Definitions

 	
  

 	
 42

 
	
  

 	
 Section 9.3

 	
 Counterparts

 	
  

 	
 43

 
	
  

 	
 Section 9.4

 	
 Entire
 Agreement; Nonassignability; Parties in Interest

 	
  

 	
 43

 
	
  

 	
 Section 9.5

 	
 Severability

 	
  

 	
 43

 
	
  

 	
 Section 9.6

 	
 Remedies
 Cumulative

 	
  

 	
 43

 
	
  

 	
 Section 9.7

 	
 Governing
 Law

 	
  

 	
 43

 
	
  

 	
 Section 9.8

 	
 Rules of
 Construction

 	
  

 	
 43

 
	
  

 	
 Section 9.9

 	
 Third Party
 Beneficiaries

 	
  

 	
 44

 

iii

Index of Defined Terms

	
  

 	
  

 	
  

 
	
 Defined Term

 	
  

 	
 Section

 
	
  

 	
  

 	
  

 
	
 Acquisition Proposal

 	
  

 	
 4.2(a)

 
	
 Affiliate

 	
  

 	
 9.2(a)

 
	
 Agent Certificate

 	
  

 	
 8.6(a)

 
	
 Agreement

 	
  

 	
 Preamble

 
	
 Arizona Law

 	
  

 	
 1.1

 
	
 Articles of Incorporation

 	
  

 	
 2.1

 
	
 Average Closing Price

 	
  

 	
 1.6(a)(i)(2)

 
	
 Cash Payment Funds

 	
  

 	
 1.7(b)

 
	
 CERLA

 	
  

 	
 2.15(a)(i)

 
	
 Certificate of Merger

 	
  

 	
 1.1

 
	
 Certificates

 	
  

 	
 1.7(c)

 
	
 Closing

 	
  

 	
 1.2

 
	
 Closing Company Debt
 Obligations

 	
  

 	
 1.10

 
	
 Closing Date

 	
  

 	
 1.2

 
	
 COBRA

 	
  

 	
 2.17(e)

 
	
 Code

 	
  

 	
 Recitals

 
	
 Common Merger
 Consideration

 	
  

 	
 1.6(a)(i)(2)

 
	
 Company

 	
  

 	
 Preamble

 
	
 Company Agreements

 	
  

 	
 2.3

 
	
 Company Balance Sheet

 	
  

 	
 2.7

 
	
 Company Balance Sheet Date

 	
  

 	
 2.6

 
	
 Company Capital Stock

 	
  

 	
 Recitals

 
	
 Company Common Stock

 	
  

 	
 Recitals

 
	
 Company Common Stock
 Deemed Outstanding

 	
  

 	
 1.6(a)(i)(3)

 
	
 Company Common Stock
 Subject to Preferred Conversion

 	
  

 	
 1.6(a)(ii)(1)

 
	
 Company Debt

 	
  

 	
 2.7

 
	
 Company Disclosure
 Schedule

 	
  

 	
 II

 
	
 Company Employee Plans

 	
  

 	
 2.17(a)

 
	
 Company Indemnified
 Persons

 	
  

 	
 8.2(c)

 
	
 Company Intellectual Property

 	
  

 	
 2.10(b)

 
	
 Company Preferred Stock

 	
  

 	
 Recitals

 
	
 Company Products

 	
  

 	
 2.10(b)(ii)

 
	
 Company Shareholder

 	
  

 	
 1.6(d)

 
	
 Confidentiality Agreement

 	
  

 	
 5.5

 
	
 Copyrights

 	
  

 	
 2.10(a)(iii)

 
	
 Damages

 	
  

 	
 8.2(b)

 
	
 Delaware Law

 	
  

 	
 1.1

 
	
 Dissenting Shareholder

 	
  

 	
 1.6(e)

 
	
 Dissenting Shares

 	
  

 	
 1.6(e)

 
	
 Effective Time

 	
  

 	
 1.2

 
	
 Environmental Laws

 	
  

 	
 2.15(a)(i)

 
	
 ERISA

 	
  

 	
 2.17(a)

 
	
 ERISA Affiliate

 	
  

 	
 2.17(a)

 
	
 Escrow Agent

 	
  

 	
 8.1(a)

 
	
 Escrow Agreement

 	
  

 	
 6.2(f)

 
	
 Escrow Claim Certificate

 	
  

 	
 8.4

 

i

	
  

 	
  

 	
  

 
	
 Escrow Fund

 	
  

 	
 8.1(a)

 
	
 Escrow Shares

 	
  

 	
 1.7(i)

 
	
 Exchange Act

 	
  

 	
 3.3

 
	
 Exchange Agent

 	
  

 	
 1.7(a)

 
	
 Exchange Fund

 	
  

 	
 1.7(b)

 
	
 Financial Statements

 	
  

 	
 2.5

 
	
 FINRA

 	
  

 	
 3.2

 
	
 GAAP

 	
  

 	
 2.5

 
	
 Governmental Entity

 	
  

 	
 2.3

 
	
 Hazardous Materials

 	
  

 	
 2.15(a)(ii)

 
	
 HIPAA

 	
  

 	
 2.17(e)

 
	
 Holder

 	
  

 	
 5.13(a)

 
	
 Holder Indemnitee

 	
  

 	
 5.13(e)

 
	
 Indemnified Party

 	
  

 	
 5.14(a)

 
	
 Indemnifying Party

 	
  

 	
 5.14(a)

 
	
 Intellectual Property

 	
  

 	
 2.10(a)

 
	
 Investor Representation
 Statement

 	
  

 	
 5.3

 
	
 IRS

 	
  

 	
 2.16(m)

 
	
 Issued Patents

 	
  

 	
 2.10(a)(i)

 
	
 knowledge

 	
  

 	
 9.2(b)

 
	
 Legal Provisions

 	
  

 	
 2.21

 
	
 Liens

 	
  

 	
 2.3

 
	
 material

 	
  

 	
 9.2(c)

 
	
 Material Adverse Effect

 	
  

 	
 9.2(d)

 
	
 Merger

 	
  

 	
 Recitals

 
	
 Merger Consideration

 	
  

 	
 1.6(a)(iii)

 
	
 Merger Sub

 	
  

 	
 Preamble

 
	
 Outstanding Company Common
 Stock

 	
  

 	
 1.6(a)(i)(1)

 
	
 Parent

 	
  

 	
 Preamble

 
	
 Parent Common Stock

 	
  

 	
 1.6(a)(i)

 
	
 Parent Financial
 Statements

 	
  

 	
 3.3

 
	
 Parent Indemnified Persons

 	
  

 	
 8.2(b)

 
	
 Parent Indemnitee

 	
  

 	
 5.13(f)

 
	
 Parent Stock Plans

 	
  

 	
 3.4

 
	
 Parent SEC Documents

 	
  

 	
 3.3

 
	
 Patents

 	
  

 	
 2.10(a)(ii)

 
	
 Patent Applications

 	
  

 	
 2.10(a)(ii)

 
	
 Per Share Common Merger
 Consideration

 	
  

 	
 1.6(a)(i)

 
	
 Per Share Preferred Merger
 Consideration

 	
  

 	
 1.6(a)(ii)

 
	
 Permits

 	
  

 	
 2.21

 
	
 Person

 	
  

 	
 9.2(e)

 
	
 Preferred Merger
 Consideration

 	
  

 	
 1.6(a)(ii)(2)

 
	
 Proceeding

 	
  

 	
 2.8

 
	
 RCRA

 	
  

 	
 2.15(a)(i)

 
	
 Registrable Securities

 	
  

 	
 5.13(a)

 
	
 Registration Indemnified
 Person

 	
  

 	
 5.13(g)

 
	
 Registration Indemnifying
 Person

 	
  

 	
 5.13(g)

 
	
 Registration Statement

 	
  

 	
 5.13(a)

 
	
 Release

 	
  

 	
 2.15(a)(iii)

 
	
 Requested Confidential
 Exhibits

 	
  

 	
 3.3

 
	
 SEC

 	
  

 	
 3.2

 

ii

	
  

 	
  

 	
  

 
	
 Securities Act

 	
  

 	
 1.6(f)

 
	
 Shareholders’ Agent

 	
  

 	
 8.8(a)

 
	
 Subsidiary

 	
  

 	
 9.2(f)

 
	
 Surviving Corporation

 	
  

 	
 1.1

 
	
 Tax(es)

 	
  

 	
 2.16(a)(i)

 
	
 Tax Returns

 	
  

 	
 2.16(a)(ii)

 
	
 Third Party Intellectual
 Property

 	
  

 	
 2.10(c)

 
	
 Trademarks

 	
  

 	
 2.10(a)(iv)

 
	
 U.S. Person

 	
  

 	
 6.2(h)

 
	
 Voting
 Agreement

 	
  

 	
 Recitals

 

iii

AGREEMENT AND PLAN OF REORGANIZATION

          This
AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made and
entered into as of January 18, 2010 by and among Zygo Corporation, a Delaware
corporation (“Parent”), ZMI Acquisition Corporation, a Delaware
corporation (“Merger Sub”) and wholly-owned subsidiary of Parent, and
Zemetrics, Inc., an Arizona corporation (“Company”). 

RECITALS

          A.          The
Boards of Directors of Company, Parent and Merger Sub believe it is in the best
interests of their respective companies and the shareholders of their
respective companies that Company and Merger Sub combine into a single company
through the statutory merger of Company with and into Merger Sub (the “Merger”)
and, in furtherance thereof, have approved the Merger. 

          B.          Pursuant
to the Merger, among other things, the outstanding shares of Company Common
Stock, no par value per share (“Company Common Stock”), and the
outstanding shares of Company Series A Preferred Stock, no par value per share
(“Company Preferred Stock”, and together with the Company Common Stock,
the “Company Capital Stock”) shall be converted into the right to
receive the Merger Consideration upon the terms and subject to the conditions
set forth herein. 

          C.          Company,
Parent and Merger Sub desire to make certain representations and warranties and
other agreements in connection with the Merger. 

          D.         
The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of the Internal Revenue Code of 1986, as
amended (the “Code”), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code. 

          E.          
Concurrent with the execution of this Agreement and as an inducement to Parent
to enter into this Agreement, certain of the affiliates of Company who are
shareholders, officers or directors have on the date hereof entered into an
agreement (the “Voting Agreement”) to vote the shares of Company Capital
Stock owned by such Person to approve the Merger. 

          NOW,
THEREFORE, in consideration of the covenants and representations set forth
herein, and for other good and valuable, consideration, the parties agree as
follows: 

ARTICLE I

THE MERGER

          Section
1.1          The Merger.
At the Effective Time and subject to and upon the terms and conditions of this
Agreement, the Certificate of Merger attached hereto as Exhibit 1.1(a)
(the “Certificate of Merger”), the applicable provisions of the Delaware
General Corporation Law (“Delaware Law”), the Articles of Merger
attached hereto as Exhibit 1.1(b) (the “Articles of Merger”), and
the applicable provisions of the Arizona Business Corporations Act (“Arizona
Law”), the Company shall be merged with and into Merger Sub, the separate
corporate existence of Company shall cease and Merger Sub shall continue as the
surviving corporation. Merger Sub as the surviving corporation after the Merger
is hereinafter sometimes referred to as the “Surviving Corporation.” 

          Section
1.2          Closing;
Effective Time. The closing of the transactions contemplated hereby (the
“Closing”) shall take place as soon as practicable, but no later than two (2)
business days, after the satisfaction or waiver (subject to applicable law) of
each of the conditions set forth in Article VI hereof  

1

(other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the satisfaction or waiver of those conditions),
or at such other time as the parties hereto agree (the “Closing Date”).
The Closing shall take place at the offices of Fulbright & Jaworski L.L.P.,
666 Fifth Avenue, New York, NY 10103, or at such other location as the parties
hereto agree. In connection with the Closing, the parties hereto shall cause
the Merger to be consummated by filing the Certificate of Merger with the
Secretary of State of the State of Delaware and the Articles of Merger,
together with any required certificates, with the Arizona Corporation
Commission, in accordance with the relevant provisions of Delaware Law and
Arizona Law (the latest time of any such filing being the “Effective Time”).

          Section
1.3          Effect of the
Merger. At the Effective Time, the effect of the Merger shall be as
provided in this Agreement, the Certificate of Merger, the Articles of Merger
and the applicable provisions of Delaware Law and Arizona Law. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
all the property, rights, privileges, powers and franchises of Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation. 

          Section
1.4          Certificate
of Incorporation; Bylaws.

          (a)          The
Certificate of Incorporation of Merger Sub in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended in accordance with Delaware Law and such
Certificate of Incorporation, except that Article FIRST thereof shall read as
follows: “The name of the Corporation is Zemetrics, Inc.” 

          (b)         
The Bylaws of Merger Sub in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation until thereafter amended. 

          Section
1.5          Directors and
Officers. The directors and officers of the Surviving Corporation shall be
as set forth on Exhibit 1.5, until the earlier of their resignation or
removal or their respective successors are duly elected or appointed and
qualified, as the case may be. 

          Section
1.6          Effect on
Capital Stock. At the Effective Time, by virtue of the Merger and without
any action on the part of Merger Sub, Company or the holders of any of
Company’s securities: 

          (a)          Conversion
of Company Capital Stock. 

	
  

 	
  

 
	
  

 	
               (i)          Each
 share of Company Common Stock issued and outstanding immediately prior to the
 Effective Time shall be converted and exchanged into the right to receive an
 amount (the “Per Share Common Merger Consideration”) determined by
 dividing the Common Merger Consideration by the Outstanding Company Common
 Stock, payable in shares of Parent’s Common Stock, $.10 par value per share
 (the “Parent Common Stock”), as set forth in this Section 1.6(a). For
 purposes of this Agreement: 

 
	
  

 	
  

 
	
  

 	
                             (1)          “Outstanding
 Company Common Stock” means the total number of shares of Company Common
 Stock issued and outstanding at the Effective Time; 

 
	
  

 	
  

 
	
  

 	
                             (2)          “Common
 Merger Consideration” means the product of (I) $1,940,754, multiplied by
 (II) a fraction, the numerator of which equals the Outstanding Company Common
 Stock and the denominator of which equals the Company Common Stock Deemed
 Outstanding, such amount to payable in shares of Parent Common Stock, with
 the number of shares of Parent Common Stock to be issued determined by
 dividing the amount of Common Merger Consideration by the average of the
 closing prices of Parent Common Stock as reported on the 

 

2

	
  

 	
  

 
	
  

 	
 Nasdaq National Market during the forty (40) trading days ending two
 trading days prior to the Closing Date (the “Average Closing Price”);
 and 

 
	
  

 	
  

 
	
  

 	
                               (3)          “Company
 Common Stock Deemed Outstanding” means the total number of shares of
 Company Common Stock issued and outstanding at the Effective Time (assuming
 the conversion of all Company Preferred Stock into Company Common Stock
 immediately prior to the Effective Time). 

 
	
  

 	
  

 
	
  

 	
                (ii)          Each
 share of Company Preferred Stock issued and outstanding immediately prior to
 the Effective Time shall be converted and exchanged into the right to receive
 an amount (the “Per Share Preferred Merger Consideration”) determined
 by dividing the Preferred Merger Consideration by the Company Common Stock
 Subject to Preferred Conversion, payable in shares of Parent Common Stock, as
 set forth in this Section 1.6(a). For purposes of this Agreement: 

 
	
  

 	
  

 
	
  

 	
                               (1)          “Company
 Common Stock Subject to Preferred Conversion” means the total number of
 shares of Company Common Stock subject to issuance upon conversion of all
 issued and outstanding shares of Company Preferred Stock into Company Common
 Stock (assuming such conversion takes place immediately prior to the
 Effective Time); and 

 
	
  

 	
  

 
	
  

 	
                               (2)          “Preferred
 Merger Consideration” means the product of (I) $1,940,754, multiplied by
 (II) a fraction, the numerator of which equals the Company Common Stock
 Subject to Preferred Conversion and the denominator of which equals the
 Company Common Stock Deemed Outstanding, payable in shares of Parent Common
 Stock, with the number of shares of Parent Common Stock to be issued
 determined by dividing the amount of Preferred Merger Consideration by the
 Average Closing Price. 

 
	
  

 	
  

 
	
  

 	
                (iii)         For
 purposes of this Agreement, “Merger Consideration” means the sum of
 the Common Merger Consideration and the Preferred Merger Consideration. 

 

          (b)          Cancellation
of Company Capital Stock Owned by Parent. At the Effective Time, each share
of Company Common Stock and Company Preferred Stock owned by Parent or any
direct or indirect wholly owned subsidiary of Parent immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof. 

          (c)          Capital
Stock of Merger Sub. Each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall remain outstanding,
unchanged by reason of the Merger, as one hundred (100) fully paid and
nonassessable shares of common stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the Surviving
Corporation. 

          (d)          Fractional
Shares. No fraction of a share of Parent Common Stock will be issued, but
in lieu thereof each holder of shares of Company Capital Stock (“Company
Shareholder”) who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall receive from Parent an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction multiplied by (ii) the Average Closing Price. The fractional share
interests of each Company Shareholder shall be aggregated, so that no Company
Shareholder shall receive cash in respect of fractional share interests in an
amount greater than the value of one full share of Parent Common Stock. 

3

          (e)          Dissenters’
Rights. Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected such holder’s right for appraisal of such shares in accordance with
Arizona Law and who, as of the Effective Time, has not effectively withdrawn or
lost such right to appraisal (“Dissenting Shares”), if any, shall not be
converted into the Merger Consideration but shall instead be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to Arizona Law. Company shall give Parent
prompt notice of any demand received by Company to require Company to purchase
shares of Company Capital Stock, and Parent shall have the right to direct and
participate in all negotiations and proceedings with respect to such demand.
Company agrees that, except with the prior written consent of Parent, or as
required under Arizona Law, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such purchase demand. Each holder
of Dissenting Shares (“Dissenting Shareholder”) who, pursuant to the
provisions of Arizona Law, becomes entitled to payment of the fair value for
shares of Company Capital Stock shall receive payment therefor (but only after
the value therefor shall have been agreed upon or finally determined pursuant
to such provisions). If, after the Effective Time, any Dissenting Shares shall
lose their status as Dissenting Shares, Parent shall issue and deliver, upon
surrender by such shareholder of a certificate or certificates representing
shares of Company Capital Stock, the portion of the Merger Consideration to
which such shareholder would otherwise be entitled under this Section 1.6 less
the portion of the Merger Consideration allocable to such shareholder that has
been deposited in the Escrow Fund pursuant to Section 1.7(i) and Article VIII
hereof. 

          (f)          Certificate
Legends. The shares of Parent Common Stock to be issued pursuant to this
Article I shall not have been registered and shall be characterized as
“restricted securities” under the federal securities laws, and under such laws
such shares may be resold without registration under the Securities Act of
1933, as amended (the “Securities Act”), only in certain limited
circumstances. Each certificate evidencing shares of Parent Common Stock to be
issued pursuant to this Article I shall bear the following legend, in addition
to any legends required by state securities laws: 

	
  

 	
  

 	
  

 
	
  

 	
 “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
 INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
 SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
 REGISTRATION WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN OPINION OF
 LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS
 NOT REQUIRED.” 

 	
  

 

          Section 1.7          
Surrender of Certificates.

          (a)          Exchange
Agent. Continental Stock Transfer & Trust Company shall act as exchange
agent (the “Exchange Agent”) in the Merger.  

          (b)          Parent
to Provide Parent Common Stock and Cash. Promptly after the Effective Time,
Parent shall supply or cause to be supplied to the Exchange Agent for exchange
in accordance with this Article I through such reasonable procedures as Parent
may adopt (i) certificates evidencing the shares of Parent Common Stock
issuable pursuant to Section 1.6(a) in exchange for shares of Company Capital
Stock outstanding immediately prior to the Effective Time, less the number of
shares of Parent Common Stock to be deposited into the Escrow Fund pursuant to
the requirements of Section 1.7(i) and Article VIII and (ii) any cash in lieu
of fractional shares pursuant to Section 1.6(d) (such cash, together with the
shares of Parent Common Stock deposited pursuant to clause (i), the “Exchange
Fund”). The Exchange Fund shall not be used for any purpose except as
expressly provided in this Agreement. 

4

          (c)          Exchange
Procedures. Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each holder of record of a certificate or
certificates (the “Certificates”) which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock, whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 1.6, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon receipt of the Certificates by the Exchange Agent, and
shall be in such form and have such other provisions as Parent may reasonably
specify), (ii) such other customary documents as may be required pursuant to
such instructions, and (iii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration (without interest).
Upon surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by Parent, together with such
letter of transmittal and other documents, duly completed and validly executed
in accordance with the instructions thereto, the holder of such Certificate
shall be entitled to receive in exchange therefor (A) a certificate
representing the number of whole shares of Parent Common Stock less the number
of shares of Parent Common Stock to be deposited in the Escrow Fund on such
holder’s behalf pursuant to Section 1.7(i) and Article VIII hereof, (B) any
dividends or other distributions to which such holder is entitled pursuant to
Section 1.7(d), and (C) cash (without interest) in respect of fractional shares
as provided in Section 1.6(d) and the Certificate so surrendered shall
forthwith be canceled. Until so surrendered, each outstanding Certificate that,
prior to the Effective Time, represented shares of Company Capital Stock will
be deemed from and after the Effective Time, for all corporate purposes, other
than the payment of dividends, to evidence the ownership of the number of full
shares of Parent Common Stock into which such shares of Company Capital Stock
shall have been so converted and an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6. 

          (d)          
Distributions With Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor (without interest) at the time
of such surrender, the amount of any such dividends or other distributions with
a record date after the Effective Time theretofore payable (but for the
provisions of this Section 1.7(d)) with respect to such shares of Parent Common
Stock. 

          (e)          Transfers
of Ownership. At the Effective Time, the stock transfer books of Company
shall be closed and there shall be no further registration of transfers of
Company Common Stock or Company Preferred Stock thereafter on the records of
Company. If any certificate for shares of Parent Common Stock is to be issued
in a name other than that in which the Certificate surrendered in exchange
therefor is registered, it will be a condition of the issuance thereof that the
Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the Person requesting such exchange will have paid
to Parent or any agent designated by it any transfer or other taxes required by
reason of the issuance of a certificate for shares of Parent Common Stock in
any name other than that of the registered holder of the Certificate
surrendered, or established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable. 

          (f)          Termination
of Exchange Fund. Any portion of the Exchange Fund which remains
undistributed to Company Shareholders six months after the Effective Time shall
be delivered to Parent, upon demand, and any Company Shareholders who have not
previously complied with this Section 1.7 shall thereafter look only to Parent
for payment of their claim for the Merger Consideration and any dividends or
distributions with respect to Parent Common Stock. 

5

          (g)          No
Liability. Notwithstanding anything to the contrary in this Section 1.7,
none of the Exchange Agent, Parent, the Surviving Corporation or any party
hereto shall be liable to any Person for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.

          (h)          Dissenting
Shares. The provisions of this Section 1.7 shall also apply to Dissenting
Shares that lose their status as such, except that the obligations of Parent
under this Section 1.7 shall commence on the date of loss of such status and
the holder of such shares shall be entitled to receive in exchange for such
shares the Merger Consideration to which such holder is entitled pursuant to
Section 1.6 hereof. 

          (i)          Escrow.   As
soon as practicable after the Effective Time, and subject to and in accordance
with the provisions of Article VIII hereof, Parent shall cause to be
distributed to the Escrow Agent a certificate or certificates representing the
number of shares of Parent Common Stock to be issued at the Closing determined
by dividing $300,000 by the Average Closing Price (the “Escrow Shares”) (which
certificates shall be registered in the name of the Escrow Agent as nominee for
the holders of Certificates canceled pursuant to this Section 1.7). The Escrow
Shares shall be beneficially owned by such holders and such shares shall be
held in escrow and shall be available to compensate Parent for certain damages
as provided in Article VIII. To the extent not used for such purposes, such
shares shall be released, all as provided in Article VIII hereof. 

          Section
1.8          No Further
Ownership Rights in Company Capital Stock. The Merger Consideration
delivered upon the surrender for exchange of shares of Company Capital Stock in
accordance with the terms hereof (including any dividends, distributions or
cash paid in lieu of fractional shares) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Company Capital
Stock, and there shall be no further registration of transfers on the records
of the Surviving Corporation of shares of Company Capital Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I. 

          Section
1.9          Repayment of
Company Debt. At the Effective Time, all outstanding principal, accrued but
unpaid interest and penalties or premiums, if any, in respect of any Company
Debt listed on Section 1.9 of the Company Disclosure Schedule that is
outstanding immediately prior to the Effective Time (the “Closing Company
Debt Obligations”) shall be repaid and discharged in full in exchange for
the right to receive an amount payable in shares of Parent Common Stock
determined by dividing the Closing Company Debt Obligations by the Average
Closing Price. 

          Section
1.10        Taking of Necessary
Action; Further Action. Each of Parent, Merger Sub and Company will take
all such reasonable and lawful action as may be necessary or desirable in order
to effectuate the Merger in accordance with this Agreement as promptly as
possible. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of Company and Merger Sub,
the officers and directors of Company and Merger Sub are fully authorized in
the name of their respective corporations or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is not
inconsistent with this Agreement. 

          Section
1.11       Withholding Rights. Each
of the Surviving Corporation and Parent shall be entitled, or shall be entitled
to cause the Exchange Agent, to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Capital Stock such amounts as it is required to deduct and
withhold with respect to the making of such payment 

6

under the Code, and the rules and regulations promulgated thereunder,
or any provision of state, local or foreign Tax law. To the extent that amounts
are so withheld by the Surviving Corporation, Parent or the Exchange Agent, as
the case may be, such amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Capital
Stock in respect to which such deduction and withholding was made by the
Surviving Corporation, Parent or the Exchange Agent, as the case may be. 

ARTICLE II 

REPRESENTATIONS AND WARRANTIES OF COMPANY

          Company
represents and warrants to Parent and Merger Sub that the statements contained
in this Article II are true and correct, except as disclosed in a document of
even date herewith and delivered by Company to Parent referring to the
representations and warranties in this Agreement (the “Company Disclosure
Schedule”). The Company Disclosure Schedule will be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II, and the disclosure in any such numbered and lettered section of the Company
Disclosure Schedule shall qualify only the corresponding subsection in this
Article II (except to the extent disclosure in any numbered and lettered
section of the Company Disclosure Schedule is specifically cross-referenced in
another numbered and lettered section of the Company Disclosure Schedule). 

          Section
2.1          Organization,
Standing and Power. Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Company has all requisite corporate power to own, lease and
operate its properties and to carry on its business as now being conducted and
as proposed to be conducted and is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary (all of which jurisdictions are set forth
in Section 2.1 of the Company Disclosure Schedule), except where the failure to
be so qualified and in good standing would not have a Material Adverse Effect
on Company. Company has delivered to Parent a true and correct copy of the
Articles of Incorporation (including all amendments and certificates of
designation thereto, the “Articles of Incorporation”) and Bylaws of Company,
each as amended to date, and the Articles of Incorporation and Bylaws of
Company are in full force and effect. Company is not in violation of any of the
provisions of its Articles of Incorporation or Bylaws. 

          Section
2.2          Subsidiaries
and Other Interests. Company does not have, and has never had, any
Subsidiaries. Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity. 

          Section
2.3          Authority.
Company has all requisite corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Company subject
only to the approval of the Merger by Company’s shareholders as contemplated by
Section 6.1(a). The affirmative vote of the holders of a majority of the shares
of Company’s Common Stock and Company Preferred Stock, voting as a single
class, outstanding on the record date established by Company to vote on the
Merger is the only vote of the holders of any of Company’s Capital Stock
necessary under Arizona Law and the Articles of Incorporation to approve this
Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Company and constitutes the valid and binding
obligation of Company enforceable against Company in accordance with its terms,
except that such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to creditors’ rights
generally, and is subject to general principles of 

7

equity. The execution and delivery of this Agreement by Company does
not, and the consummation of the transactions contemplated hereby will not,
assuming compliance with the matters referred to in the next sentence, require
any consent or other action by any Person under, or conflict with, or result in
any violation of, or default under (with or without notice or lapse of time, or
both), or result in the triggering of any payment or other obligation under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under, or result in the creation of any
pledge, claim, lien, charge, encumbrance or security interest of any kind or
nature whatsoever (collectively, “Liens”) in or upon any of the
properties or assets of Company under, (i) any provision of the Articles of
Incorporation or Bylaws of Company, as amended, or (ii) any mortgage,
indenture, lease, contract or other agreement, obligation, commitment,
arrangement, understanding or instrument (collectively, “Company Agreements”),
or any Legal Provision, Permit, concession, franchise, license, judgment, order
or decree applicable to Company or any of properties or assets. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any supranational, national, state, municipal, local or foreign
government, any instrumentality, subdivision, court, administrative agency or
commission or other authority thereof, or any quasi-governmental or private
body exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority (each, a “Governmental Entity”) is required
by or with respect to Company in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the Certificate of Merger and the Agreement of
Merger, together with the required officers’ certificates, as provided in
Section 1.2; (ii) filings required under Regulation D of the Securities Act;
(iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
laws and the securities laws of any foreign country; and (iv) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on Company and would
not prevent, or materially alter or delay, any of the transactions contemplated
by this Agreement. 

          Section
2.4          Capital
Structure. The authorized capital stock of Company consists of 10,000,000
shares of Company Common Stock and 5,000,000 shares of Company Preferred Stock,
of which there are designated 1,500,000 shares of Series A Preferred Stock. As
of the date hereof, there were issued and outstanding 1,617,295 shares of
Company Common Stock and 1,497,000 shares of Series A Preferred Stock, convertible
into 1,497,000 shares of Company Common Stock. All of the issued and
outstanding shares of Company Capital Stock are owned, of record and
beneficially, by the persons in the amounts set forth in Section 2.4 of the
Company Disclosure Schedule. No Persons other than the Company Shareholders are
or will be entitled to receive any payment with respect to the Company Capital
Stock. The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of authorized
capital stock of Company are as set forth in its Articles of Incorporation and
all such designations, powers, preferences, rights, qualifications, limitations
and restrictions are valid, binding and enforceable and in accordance with all applicable
corporate laws. All outstanding shares of Company Common Stock and Company
Preferred Stock are duly authorized, validly issued, fully paid and
non-assessable and are free of any Liens other than any those created by or
imposed upon the holders thereof, and are not subject to preemptive rights or
rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of Company or any agreement to which Company is a party or by which it
is bound. Except for the rights created pursuant to this Agreement and the
rights disclosed in the preceding two sentences, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
Company is a party or by which it is bound obligating Company to issue, deliver,
sell, repurchase or redeem or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of Company Capital Stock or obligating Company to
grant, extend, accelerate the vesting of, change the price of, or otherwise
amend or enter into any such option, warrant, call, right, commitment or
agreement. There are no bonds, debentures, notes or other indebtedness of
Company having the right to vote (or convertible into securities having the
right to vote) on any matters on which shareholders of Company may vote. There
are no other contracts, commitments or agreements relating to 

8

voting, purchase or sale of Company Capital Stock (i) between or among
Company and any of its shareholders and (ii) to Company’s knowledge, between or
among any of Company’s shareholders, except for the shareholders delivering the
Voting Agreements. All shares of outstanding Company Common Stock and Company
Preferred Stock were issued in compliance with all applicable federal and state
securities laws. 

          Section
2.5          Financial
Statements. Company has delivered to Parent complete and correct copies of
the unaudited balance sheet and related statements of income and cash flows of
Company as of and for the fiscal years ended September 30, 2009 and 2008 and for
the three-month period ended December 31, 2009 (collectively, the “Financial
Statements”). The Financial Statements have been derived from the books and
records of Company. The Financial Statements are complete and correct in all
material respects and fairly present the financial condition and results of
operations of Company as of the dates and for the periods indicated. During the
period covered by such Financial Statements, Company has conducted no business
other than its current business. All material liabilities and obligations of
Company, whether absolute, accrued, contingent or otherwise, whether direct or
indirect, and whether due or to become due, which existed at the date of such
Financial Statements have been disclosed in the balance sheets included in the
Financial Statements or in notes to the Financial Statements to the extent such
liabilities were required, under United States generally accepted accounting
principles, applied on a consistent basis with prior periods (“GAAP”), to be so
disclosed. Except as set forth in the notes to the Financial Statements, the
liabilities on the latest balance sheet of Company included in the Financial
Statements consist solely of accrued obligations and liabilities incurred by
Company in the ordinary course of business to Persons which are not Affiliates
of Company. The statements of operations included in the Financial Statements
do not contain any material items of special or non-recurring income or other
income not earned, or omit any material item of expense incurred, in each case
in the ordinary course of business except as expressly specified therein.
Company has records that accurately and validly reflect its transactions and
accounting controls sufficient to insure that such transactions are in all material
respects executed in accordance with its management’s general or specific
authorization.  

          Section
2.6        Absence of
Certain Changes. Since September 30, 2009 (the “Company Balance Sheet
Date”), Company has conducted its business in the ordinary course
consistent with past practice, and there has not been: 

	
  

 	
  

 
	
  

 	
           (a)          any
 event, occurrence or development which, individually or in the aggregate, has
 had or reasonably would be expected to have a Material Adverse Effect on Company;
 

 
	
  

 	
  

 
	
  

 	
           (b)          any
 creation or assumption by Company of any Lien on any asset of Company other
 than in the ordinary course of business consistent with past practice; 

 
	
  

 	
  

 
	
  

 	
           (c)          any
 acquisition or disposition of any assets or business of Company other than in
 the ordinary course of business consistent with past practice; 

 
	
  

 	
  

 
	
  

 	
           (d)          any
 agreement, commitment or understanding entered into by Company outside the
 ordinary course of business or providing for total payments by Company in
 excess of $25,000 in any 12 month period with any Person, or modified or
 amended in any material respect the terms of any such existing agreement; 

 
	
  

 	
  

 
	
  

 	
           (e)          any
 revaluing in any material respect any of the assets of Company, including
 without limitation writing down the value of any assets or inventory or
 writing off notes or accounts receivable, other than in the ordinary course
 of business consistent with past practice; 

 

9

	
  

 	
  

 
	
  

 	
            (f)          any
 material change in any method of accounting or accounting principles or
 practice by Company, except for any such change required by reason of a
 change in GAAP; 

 
	
  

 	
  

 
	
  

 	
           (g)          any
 (i) grant of the right to receive any severance, retention or termination pay
 to any current or former director, officer or employee of Company, (ii)
 entering into of any employment, deferred compensation or other similar
 agreement (or any amendment to any such existing agreement) with any current
 or former director, officer or employee of Company, (iii) increase or
 acceleration in vesting or benefits payable under any existing severance or
 termination pay policies or employment agreements or (iv) increase or
 acceleration in vesting or payment of compensation, bonus or other benefits
 payable to current or former directors, officers or employees of Company
 other than, in the case of clause (iv) only, normal increases in
 compensation, bonus or other benefits payable to employees of Company in the
 ordinary course of business consistent with past practice or merit increases
 in salaries of employees at regularly scheduled times in customary amounts
 consistent with past practice; 

 
	
  

 	
  

 
	
  

 	
           (h)          any
 loss or termination of, or any material adverse change in relations with, any
 customer or supplier that, individually or in the aggregate, had resulted or
 may result in a Material Adverse Effect; 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (j)           any
 action which, if it had been taken after the date hereof, would have required
 the consent of Parent under Section 4.1 hereof; or 

 
	
  

 	
  

 
	
  

 	
           (k)          any
 agreement to take any actions specified in this Section 2.6, except for this
 Agreement. 

 

          Section
2.7          Absence of
Undisclosed Liabilities. Company has no obligations or liabilities (whether
pursuant to contracts or otherwise) of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet for the period ended September 30, 2009 (the “Company Balance
Sheet”), (ii) those incurred in the ordinary course of business and not
required to be set forth in the Company Balance Sheet under GAAP, (iii) those
incurred in the ordinary course of business since the Company Balance Sheet
Date and consistent with past practice (none of which is liability for breach
of contract, breach of warranty, tort, infringement claim or lawsuit or a
liability to repay or refund to any Person any amount previously received by
Company) and (iv) those incurred in connection with the execution of this
Agreement. To the knowledge of Company, there are no asserted claims for
indemnification by any Person against Company under any law or agreement or
pursuant to Company’s Articles of Incorporation or Bylaws, and Company is
unaware of any facts or circumstances that might give rise to the assertion of
such a claim against Company thereunder. Section 2.7 of the Company Disclosure
Schedule sets forth a true and complete list of the following in respect of the
Company outstanding as of the date of this Agreement (the “Company Debt”)
to the extent not otherwise reflected on the Company Balance Sheet: (i) all
obligations for borrowed money, whether current, funded, or secured or
unsecured, and every obligation evidenced by bonds, debentures, notes or
similar instruments, (ii) all indebtedness for the deferred purchase price of
assets or services (excluding obligations relating to accounts payable and
trade payables incurred in the ordinary course of business), (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired (even though the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (iv) all
indebtedness secured by a purchase money mortgage or other Lien to secure all
or part of the purchase price of property subject to such mortgage or Lien, (v)
any liability in respect of banker’s acceptances or 

10

letters of credit or similar facilities (other than letters of credit
issued to secure lease obligations or workers compensation claims), and (vi)
any guarantee of any of the foregoing of any other Person. 

          Section
2.8          Litigation.
There is no private or governmental action, suit, proceeding, claim,
arbitration or investigation (collectively, “Proceeding”) pending before
any Governmental Entity, foreign or domestic, or, to the knowledge of Company,
threatened against or affecting Company or any of its properties or officers or
directors (in their capacities as such) or to which Company is a party. There
is no judgment, decree or order against Company or, to the knowledge of
Company, any of its directors or officers (in their capacities as such). No
Governmental Entity has indicated in writing an intention to conduct any audit,
investigation or other review with respect to Company which investigation or
review, if adversely determined, individually or in the aggregate, would have a
Material Adverse Effect on Company. All Proceedings have been timely reported
to all applicable insurance carriers and no reservation of rights or denial of
coverage has been issued by any such carrier. 

          Section
2.9          Restrictions
on Business Activities. There is no agreement, judgment, injunction, order
or decree binding upon Company which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any current or future
business practice of Company, any acquisition of property by Company or the
conduct of business by Company as currently conducted or as proposed to be
conducted by Company. 

          Section
2.10        Intellectual
Property. 

          (a)      
For purposes of this Agreement, “Intellectual Property” means: 

	
  

 	
  

 
	
  

 	
              (i)          all
 issued patents, reissued or reexamined patents, revivals of patents,
 renewals, continuations, utility models, certificates of invention,
 registrations of patents and extensions thereof, regardless of country or
 formal name (collectively, “Issued Patents”); 

 
	
  

 	
  

 
	
  

 	
             (ii)          all
published or unpublished nonprovisional and provisional patent applications,
reexamination proceedings, invention disclosures and records of invention
(collectively “Patent Applications” and, with the Issued Patents, the “Patents”); 

 
	
  

 	
  

 
	
  

 	
            (iii)         all
 copyrights and copyrightable works, including all rights of authorship, use,
 publication, reproduction, distribution, performance transformation, moral
 rights and rights of ownership of copyrightable works, semiconductor
 topography works and mask works, and all rights to register and obtain
 renewals and extensions of registrations, together with all other interests
 accruing by reason of international copyright conventions (collectively, “Copyrights”);
 

 
	
  

 	
  

 
	
  

 	
            (iv)         trademarks,
 registered trademarks, applications for registration of trademarks, service
 marks, registered service marks, applications for registration of service
 marks, logos, trade names, registered trade names and applications for
 registrations of trade names (collectively, “Trademarks”); 

 
	
  

 	
  

 
	
  

 	
            (v)          all
 technology, ideas, inventions, designs, proprietary information,
 manufacturing and operating specifications, know-how, formulae, trade
 secrets, technical data, computer programs, hardware, software and processes;
 and 

 
	
  

 	
  

 
	
  

 	
            (vi)          all
 other intangible assets, properties and rights (whether or not appropriate
 steps have been taken to protect, under applicable law, such other intangible
 assets, properties or rights). 

 

11

          (b)          
With respect to each item of Intellectual Property incorporated into any
product of Company or otherwise used in the business of Company (except “off
the shelf” or other software widely available through regular commercial
distribution channels at a cost not exceeding $10,000 on standard terms and
conditions, as modified for Company’s operations) (“Company Intellectual
Property”), Section 2.10 of the Company Disclosure Schedule lists: 

	
  

 	
  

 
	
  

 	
                 (i)          all
 Issued Patents and Patent Applications, all registered Trademarks and trademark
 applications and all registered Copyrights, including the jurisdictions in
 which each such item of Intellectual Property has been issued or registered
 or in which any such application for such issuance and registration has been
 filed; and 

 
	
  

 	
  

 
	
  

 	
                 (ii)         the
following agreements relating to each of the products of Company (the
“Company Products”) or other Company Intellectual Property: all (A)
agreements granting any right to distribute or sublicense a Company Product
on any exclusive basis, (B) any exclusive licenses of Intellectual Property
to or from Company, (C) agreements pursuant to which the amounts actually
paid or payable under firm commitments to Company are $25,000 or more, (D)
joint development agreements, (E) any agreement by which Company grants any
ownership right to any Company Intellectual Property owned by Company, (F)
any order relating to Company Intellectual Property and (G) any option
relating to any Company Intellectual Property.  

 

          (c)          
Section 2.10 of the Company Disclosure Schedule contains an accurate list of
all licenses, sublicenses and other agreements to which Company is a party and
pursuant to which Company is authorized to use any Intellectual Property owned
by any third party, excluding “off the shelf” or other software at a cost not
exceeding $10,000 and widely available through regular commercial distribution
channels on standard terms and conditions (“Third Party Intellectual
Property”). 

          (d)          
To Company’s knowledge, there is no unauthorized use, disclosure, infringement
or misappropriation of any Company Intellectual Property, including any Third
Party Intellectual Property, by any third party, including any employee or
former employee of Company. Company has not entered into any agreement to
indemnify any other Person against any charge of infringement of any
Intellectual Property. There are no royalties, fees or other payments payable
by Company to any Person by reason of the ownership, use, sale or disposition
of Intellectual Property. 

          (e)          
Company is not in breach of any license, sublicense or other agreement relating
to the Company Intellectual Property or Third Party Intellectual Property
Rights. Neither the execution, delivery or performance of this Agreement or any
ancillary agreement contemplated hereby nor the consummation of the Merger or
any of the transactions contemplated by this Agreement will contravene,
conflict with or result in an infringement on Parent’s right to own or use any
Company Intellectual Property, including any Third Party Intellectual Property.

          (f)          
All Patents, registered Trademarks, registered service marks and registered
Copyrights held by Company are valid and subsisting. All maintenance and annual
fees have been fully paid and all fees paid during prosecution and after
issuance of any patent comprising or relating to such item have been paid in
the correct entity status amounts. Company is not infringing, misappropriating
or making unlawful use of, and has not received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any proprietary
asset owned or used by any third party. There is no Proceeding pending or, to
the knowledge of Company, threatened nor has any written claim or demand been
made, which challenges the legality, validity, enforceability or ownership of
any item of Company Intellectual Property or Third Party Intellectual Property
or alleges a claim of infringement of any Patents, Trademarks, service marks,
Copyrights or violation of any trade secret or other proprietary right of any
third party. Company has not 

12

brought a Proceeding alleging infringement of Company Intellectual
Property or breach of any license or agreement involving Intellectual Property
against any third party. 

          (g)          All
current and former officers and employees of Company have executed and
delivered to Company an agreement (containing no exceptions or exclusions from
the scope of its coverage) regarding the protection of proprietary information
and the assignment to Company of any Intellectual Property arising from
services performed for Company by such Persons, the form of which has been
supplied to Parent. All current and former consultants and independent
contractors to Company involved in the development, modification, marketing and
servicing of Company Products and/or Company Intellectual Property have
executed and delivered to Company an agreement in the form provided to Parent
(containing no exceptions or exclusions from the scope of its coverage)
regarding the protection of proprietary information and the assignment to Company
of any Intellectual Property arising from services performed for Company by
such Persons. To Company’s knowledge,
no employee or independent contractor of Company is in violation of any term of
any patent disclosure agreement or employment contract or any other contract or
agreement relating to the relationship of any such employee or independent
contractor with Company. No current or former officer, director, shareholder,
employee, consultant or independent contractor has any right, claim or interest
in or with respect to any Company Intellectual Property. 

          (h)          Company
has taken all commercially reasonable and customary measures and precautions
necessary to protect and maintain the confidentiality of all Company
Intellectual Property (except such Company Intellectual Property whose value
would be unimpaired by public disclosure) and otherwise to maintain and protect
the full value of all Intellectual Property it owns or uses. All use,
disclosure or appropriation of Intellectual Property not otherwise protected by
patents, patent applications or copyright (“Confidential Information”) owned by
Company by or to a third party has been pursuant to the terms of a written
agreement between Company and such third party. All use, disclosure or
appropriation of Confidential Information not owned by Company has been
pursuant to the terms of a written agreement between Company and the owner of
such Confidential Information, or is otherwise lawful.  

          (i)          Company
is not subject to any Proceeding or outstanding decree, order, judgment or
stipulation restricting in any manner the use, transfer or licensing thereof by
Company, or which may affect the validity, use or enforceability of such
Company Intellectual Property. Company is not subject to any agreement which
restricts in any material respect the use, transfer or licensing by Company of
the Company Intellectual Property or Company Products. 

          Section
2.11          Interested Party Transactions. Except
as disclosed in Section 2.11 of the Company Disclosure Schedule, Company is not
indebted to any director, officer, employee or agent of Company (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such Person is indebted to Company. There have been no
transactions since December 31, 2008 which would require disclosure if Company
were subject to disclosure under Item 404 of Regulation S-K under the
Securities Act. 

          Section
2.12          Minute Books. The minute books of
Company made available to Parent contain a complete and accurate summary of all
meetings of directors and shareholders or actions by written consent since the
time of incorporation of Company, and reflect all transactions referred to in
such minutes accurately in all material respects. 

13

          Section
2.13          Material Contracts.

            (a)        Section
2.13 of the Company Disclosure Schedule sets forth a complete list of all
currently effective written or oral: 

	
  

 	
  

 
	
  

 	
           (i)      employment
 contracts, arrangements or policies of Company which may not be immediately
 terminated without penalty (or any augmentation or acceleration of benefits);
 

 
	
  

 	
  

 
	
  

 	
           (ii)      leases,
 sales contracts and other agreements with respect to any property, real or
 personal, of Company, except for leases of personal property involving, on an
 annual basis, less than $25,000 individually and $50,000 in the aggregate; 

 
	
  

 	
  

 
	
  

 	
           (iii)     contracts
 or commitments for capital expenditures or acquisitions in excess of $25,000
 on an annual basis for one project or series of related projects; 

 
	
  

 	
  

 
	
  

 	
           (iv)     agreements,
 contracts, indentures or other instruments relating to the borrowing of
 money, or the guarantee of any obligation (third party or otherwise) for the
 borrowing of money (excluding routine checking account overdraft agreements);
 

 
	
  

 	
  

 
	
  

 	
           (v)      contracts
 or agreements providing for any covenant not to compete by Company or
 otherwise restricting in any way Company’s engaging in any business activity
 (including a description of the businesses to which the covenant not to
 compete applies); 

 
	
  

 	
  

 
	
  

 	
           (vi)      contracts
 or agreements relating to consultancies, professional retentions, agency,
 sales or distributorship arrangements pertaining to Company or its products
 or activities involving total payments within any 12 month period in excess
 of $25,000 and which are not terminable on 30 days’ notice without penalty; 

 
	
  

 	
  

 
	
  

 	
           (vii)     contracts,
 agreements or commitments requiring Company to indemnify or hold harmless any
 Person; 

 
	
  

 	
  

 
	
  

 	
           (viii)    all
 contracts with any customer or supplier activities involving total payments
 within any 12 month period in excess of $25,000 and which are not terminable
 on 30 days’ notice without penalty; 

 
	
  

 	
  

 
	
  

 	
           (ix)      any
 written agreement (or group of related agreements) for the acquisition of
 services, supplies, equipment, inventory, fixtures or other property
 involving more than $25,000 individually and $50,000 in the aggregate; 

 
	
  

 	
  

 
	
  

 	
           (x)       any
 agreement providing for the purchase from a supplier of all or substantially
 all of the requirements of Company of a particular product or service; 

 
	
  

 	
  

 
	
  

 	
           (xi)      any
 agreement, contract, arrangement or understanding with any Affiliate,
 licensee or Company Shareholder; 

 
	
  

 	
  

 
	
  

 	
           (xii)     any
 license or agreement granting or restricting the right of Company to use any
 Intellectual Property; 

 
	
  

 	
  

 
	
  

 	
           (xiii)    any
 partnership, joint venture and similar agreements involving a sharing of
 profits or expenses; 

 

14

	
  

 	
  

 
	
  

 	
           (xiv)      any
 guaranty or suretyship, indemnification or contribution agreement or
 performance bond; and 

 
	
  

 	
  

 
	
  

 	
           (xv)      contracts,
 agreements, arrangements or commitments, other than the foregoing, which
 could reasonably be considered material to Company’s business 

 

True, correct and complete copies of each agreement listed in Section
2.13 of the Company Disclosure Schedule have been delivered to Parent. 

            (b)       With
respect to each Company Agreement (whether or not so listed): (i) the agreement
is legal, valid, binding and enforceable and in full force and effect with
respect to Company, and to Company’s knowledge is legal, valid, binding,
enforceable and in full force and effect with respect to each other party
thereto, in either case subject to the effect of bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and except as the availability of equitable remedies may be limited
by general principles of equity; (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 prior
to the Closing, subject to the effect of bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors’ rights generally and
except as the availability of equitable remedies may be limited by general
principles of equity; (iii) Company has performed all the obligations required
to be performed by it and is entitled to all benefits thereunder; and (iv)
neither Company nor, to Company’s knowledge, any other party is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach of default by Company or, to Company’s knowledge, by any
such other party, or permit termination, modification or acceleration, under
the agreement. Company is not a party to any oral contract, agreement or other
arrangement. 

          Section
2.14          Title to Property. Company has good
and marketable title to all of its properties, interests in properties and
assets, real and personal, reflected in the Company Balance Sheet or acquired
after the Company Balance Sheet Date (except properties, interests in
properties and assets sold or otherwise disposed of since the Company Balance
Sheet Date in the ordinary course of business), or with respect to leased
properties and assets, valid leasehold interests therein, free and clear of all
Liens, except (i) the Lien of current taxes not yet due and payable, (ii) such
imperfections of title, Liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties and (iii) Liens securing debt which is reflected on the Company
Balance Sheet. The plants, property and equipment of Company that are used in
the operation of its business are in all material respects in good operating
condition and repair, subject to normal wear and tear not caused by neglect.
All properties used in the operations of Company are reflected in the Company
Balance Sheet to the extent GAAP requires the same to be reflected. All leases
of real and personal property to which Company is a party are in full force and
effect and are valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy
laws and other similar laws affecting creditors’ rights generally and general
principles of equity, regardless of whether asserted in a proceeding in equity
or at law. True and correct copies of all such leases have been provided to
Parent. Company owns no real property. 

          Section
2.15          Environmental Matters.

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 For purposes of this Agreement: 

 

	
  

 	
  

 
	
  

 	
           (i)          “Environmental
 Laws” shall mean all applicable U.S., state, local and foreign laws,
 statutes, treaties, rules, codes, ordinances, regulations, certificates,
 orders, directives, 

 

15

	
  

 	
  

 
	
  

 	
 interpretations, licenses, permits and other authorizations of any
Governmental Entity and judgments, decrees, injunctions, writs, orders or
like action of any court, arbitrator or other administrative, judicial or
quasi-judicial tribunal or agency of competent jurisdiction, including any
thereof of the European Community or the European Union, having the force of
law and being applicable to Company, dealing with the protection of health,
welfare or the environment, including, without limitation, flood, pollution
or disaster laws and health and environmental protection laws and
regulations, and all other rules and regulations promulgated thereunder and
any provincial, municipal, water board or other local statute, law, rule,
regulation or ordinance relating to public or employee health, safety or the
environment, including all laws relating to Releases into air, water, land or
groundwater, relating to the withdrawal or use of groundwater, and relating
to the use, handling, transportation, manufacturing, introduction into the
stream of commerce or disposal of Hazardous Materials, including, without limitation,
the federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Section 9601, et seq., as amended (“CERCLA”), and the
federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., as amended (“RCRA”).  

 
	
  

 	
  

 
	
  

 	
                 (ii)          “Hazardous
 Materials” shall mean any material, chemical, liquid, gas compound,
 substance, mixture or by-product that is identified, defined, designated,
 listed, restricted or otherwise regulated under Environmental Laws as a
 “hazardous constituent,” “hazardous substance,” “hazardous material,”
 “hazardous waste,” “infectious waste,” “medical waste,” “biomedical waste,”
 “solid waste”, “pollutant” “toxic pollutant” or “contaminant,” or any other
 formulation or terminology intended to classify or identify substances,
 constituents, materials, or wastes by reason of properties that are
 deleterious to the environment, natural resources, worker health and safety,
 or public health and safety, including, without limitation, ignitability,
 corrosivity, reactivity, carcinogenicity, toxicity and reproductive toxicity.
 

 
	
  

 	
  

 
	
  

 	
                 (iii)          “Release”
 shall mean the spilling, leaking, discharging, injecting, emitting and/or
 disposing and placement of a Hazardous Material in any location that poses a
 threat thereof. 

 

         (b)          Company
is and has been in compliance in all material respects with all Environmental
Laws relating to the properties or facilities currently or previously used,
leased or occupied by Company at any time. During the period of ownership or
operation by Company of any of its currently or previously owned, leased or
operated properties, and, to Company’s knowledge, prior to the period of such
ownership or operation, no Hazardous Material has been treated or disposed of,
and there have been no Releases or threatened Releases of Hazardous Material
at, in, on, under or affecting such properties or any contiguous site that may
or will give rise to liability of Company under Environmental Laws. No Company
employee or other Person has claimed that Company is liable for alleged injury
or illness resulting from an alleged exposure to a Hazardous Material. No
civil, criminal or administrative Proceeding is pending or, to Company’s
knowledge, threatened against Company, with respect to Hazardous Materials or
Environmental Laws, and Company is not aware of any facts or circumstances
which could form the basis for assertion of a claim against Company or which
could form the basis for liability of Company, regarding Hazardous Materials or
regarding actual or potential noncompliance with Environmental Laws. Company
has not received any written notice of, or entered into or assumed by contract,
judicial or administrative settlement, or operation of law any indemnification
obligation, order, settlement or decree relating to: (i) any violation of any
Environmental Laws or the institution or pendency of any Proceeding by any
Governmental Entity or any third party in connection with any alleged violation
of Environmental Laws or any Release of Hazardous Materials, (ii) the response
to or remediation of Hazardous Material at or arising from any of Company’s
activities or properties or any other properties or (iii) payment for any
response action relating to or remediation of Hazardous Material at or arising
from any of Company’s properties, activities, or any other properties. 

16

	
  

 	
  

 	
  

 
	
  

 	
 Section 2.16     
Taxes. 

 
	
  

 	
  

 	
  

 
	
  

 	
 (a)           For purposes
 of in this Agreement: 

 
	
  

 	
  

 	
  

 
	
  

 	
                (i)          “Tax”
 and “Taxes” includes any federal, state, local or foreign income,
 gross receipts, capital, franchise, import, goods and services, value added,
 sales and use, estimated, alternative minimum, add-on minimum, sales, use,
 transfer, registration, excise, natural resources, severance, stamp, occupation,
 premium, windfall profit, environmental, customs, duties, real property,
 personal property, capital stock, social security, unemployment, disability,
 payroll, license, employee withholding or other tax of any kind whatsoever,
 including any interest, penalties or additions to tax or additional amounts
 in respect of the foregoing; the foregoing shall include any transferee or
 secondary liability for a Tax and any liability assumed by agreement or
 arising as a result of being (or ceasing to be) a member of any Affiliated
 Group (as defined in Section 1504 of the Code) or being included (or required
 to be included) in any Tax Return relating thereto).

 
	
  

 	
  

 	
  

 
	
  

 	
                (ii)         “Tax
 Returns” means returns, declarations, reports, claims for refund, information
 returns or other documents (including any related or supporting schedules,
 statements or information) filed or required to be filed in connection with
 the determination, assessment or collection of any Taxes of any party or the
 administration of any laws, regulations or administrative requirements
 relating to any Taxes.

 

           (b)          Company
has properly prepared and timely filed all Tax Returns relating to any and all
Taxes concerning or attributable to Company or its operations for any period
ending on or before the Closing Date and such Tax Returns are true and correct
in all material respects and have been completed in accordance with applicable
Legal Provisions. Company has made available to Parent copies of all Tax
Returns filed for all periods since its inception. 

           (c)          Company
has fully and timely paid all Taxes shown to be payable on such Tax Returns
covered by Section 2.16(b). 

           (d)          Company
has no liabilities for unpaid Taxes that have not been accrued for or reserved
on the latest balance sheet included in the Financial Statements, whether
asserted or unasserted, contingent or otherwise, and Company has no knowledge
of any basis for the assertion of any such liability attributable to Company, its
assets or operations. The cash reserves or accruals for Taxes provided in the
books and records of Company with respect to any period for which Tax Returns
have not yet been filed or for which Taxes are not yet due and owing have been
made in accordance with GAAP and are, or prior to the Effective Time, will be,
sufficient for all unpaid Taxes of Company through and including the Effective
Time. Company has no liability for Taxes of any other Person as a transferee,
successor, by contract or otherwise. Company has not executed any agreements or
waivers extending any statute of limitations on or extending the period for the
assessment or collection of any Tax. 

           (e)          Company
is not a party to any Tax-sharing agreement or similar arrangement with any
other party, and Company has not assumed any Tax obligations of, or with
respect to any transaction relating to, any other Person or agreed to indemnify
any other Person with respect to any Tax. 

           (f)           Company’s
Tax Returns have never been audited by a government or taxing authority, nor is
any such audit in process or pending, and Company has not been notified of any
request for such an audit or other examination. No claim has been made by a
taxing authority in a jurisdiction where Company does not file Tax Returns such
that it is or may be subject to taxation by that jurisdiction. 

17

          (g)          Company
has never been a member of an affiliated group of corporations filing a
consolidated federal income tax return. 

          (h)          Company
is not a party to any contract, agreement, plan or arrangement, including but
not limited to the provisions of this Agreement, covering any employee or
former employee of Company that, individually or collectively, could give rise
to the payment of any amount that would not be deductible pursuant to Sections
280G, 464 or 162(m) of the Code by Company or the Surviving Corporation as an
expense under applicable law. 

          (i)           Company
has complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and have duly and
timely withheld from employee salaries, wages and other compensation and have
paid over to the appropriate taxing authorities all amounts required to be so
withheld and paid over for all periods under all applicable laws. 

          (j)           Neither
Company nor any of its Affiliates has taken or agreed to take any action or
knows of any fact or circumstance that could prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code. 

          Section
2.17     Employee Benefit Plans.

          (a)          Section
2.17 of the Company Disclosure Schedule contains a complete and accurate list
of each plan, program, policy, practice, contract, agreement or other
arrangement providing for employment, compensation, retirement, deferred
compensation, loans, severance, separation, relocation, repatriation,
expatriation, visas, work permits, termination pay, performance awards, bonus,
incentive, stock option, stock purchase, stock bonus, phantom stock, stock
appreciation right, supplemental retirement, fringe benefits, cafeteria
benefits or other benefits whether written or unwritten, including, without limitation,
each “employee benefit plan” within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), whether or
not subject to ERISA, which is or has been sponsored, maintained, contributed
to or required to be contributed to by Company or any trade or business
(whether or not incorporated) which is or, at any relevant time, was treated as
a single employer with Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code (an “ERISA Affiliate”), for the benefit of any Person
who performs or who has performed services for Company or with respect to which
Company or any ERISA Affiliate has or may have any liability (including,
without limitation, contingent liability) or obligation (collectively, the “Company
Employee Plans”). 

          (b)          Documents.
Company has furnished to Parent true and complete copies of documents embodying
each of the Company Employee Plans and related plan documents, including
(without limitation) trust documents, group annuity contracts, plan amendments,
insurance policies or contracts, participant agreements, employee booklets,
administrative service agreements, summary plan descriptions, compliance and
nondiscrimination tests for the last three plan years (or such lesser time as
Company has been in existance), standard COBRA forms and related notices,
registration statements and prospectuses, and any material communications with
employees or Governmental Entities relating thereto. With respect to each
Company Employee Plan which is subject to ERISA reporting requirements, Company
has provided copies of the Form 5500 reports filed for the last two plan years.
Company has furnished Parent with the most recent IRS determination letter
issued with respect to each such Company Employee Plan, and nothing has
occurred since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any Company Employee
Plan subject to Code Section 401(a). 

18

          (c)          Compliance.
(i) Each Company Employee Plan has been administered in all material respects
in accordance with its terms and in compliance with the requirements prescribed
by any and all statutes, rules and regulations (including ERISA and the Code),
and Company and each ERISA Affiliate have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or violation of and have no knowledge of any material default or
violation by any other party to, any of the Company Employee Plans; (ii) any
Company Employee Plan intended to be qualified under Section 401(a) of the Code
has since its inception been so qualified and has either obtained from the IRS
a favorable determination letter as to its qualified status under the Code,
including all amendments to the Code which are currently effective, or has time
remaining to apply under applicable Treasury Regulations or IRS pronouncements
for a determination letter and to make any amendments necessary to obtain a
favorable determination letter; (iii) none of the Company Employee Plans
promises or provides retiree medical or other retiree welfare benefits to any
Person; (iv) there has been no “prohibited transaction,” as such term is
defined in Section 406 of ERISA or Section 4975 of the Code, with respect to
any Company Employee Plan: (v) none of Company or any ERISA Affiliate is
subject to any liability or penalty under Sections 4976 through 4980 of the
Code or Title I of ERISA with respect to any Company Employee Plan; (vi) all
contributions required to be made by Company or any ERISA Affiliate to any
Company Employee Plan with respect to all periods prior to the Effective Time
have been fully paid or accrued on the Financial Statements; (vii) with respect
to each Company Employee Plan, no “reportable event” within the meaning of
Section 4043 of ERISA (excluding any such event for which the thirty (30) day
notice requirement has been waived under the regulations to Section 4043 of
ERISA) nor any event described in Section 4062, 4063 or 4041 or ERISA has
occurred; (viii) each Company Employee Plan subject to ERISA has prepared in
good faith and timely filed all requisite governmental reports (which were true
and correct in all material respects as of the date filed) and has properly and
timely filed and distributed or posted all notices and reports to employees
required to be filed, distributed or posted with respect to each such Company
Employee Plan; and (ix) there has been no amendment to, written interpretation
or announcement by Company or any ERISA Affiliate which would materially
increase the expense of maintaining any Company Employee Plan above the level
of expense incurred with respect to that Plan for the most recent fiscal year
included in the Financial Statements. 

          (d)          No
Title IV or Multiemployer Plan. None of Company or any ERISA Affiliate has
ever maintained, established, sponsored, participated in, contributed to, or is
obligated to contribute to, or otherwise incurred any obligation or liability
(including, without limitation, any contingent liability) under any (i)
“multiemployer plan” (as defined in Section 3(37) of ERISA) or (ii) to any
“pension plan” (as defined in Section 3(2) of ERISA) subject to Section 302 or
Title IV of ERISA or Section 412 of the Code. Neither Company nor any ERISA
Affiliate has any actual or potential withdrawal liability (including, without
limitation, any contingent liability) for any complete or partial withdrawal
(as defined in Sections 4203 and 4205 of ERISA) from any multiemployer plan. 

          (e)          COBRA,
FMLA, HIPAA, Cancer Rights. With respect to each Company Employee Plan,
Company has complied in all material respects with (i) the applicable health
care continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”) and the regulations thereunder or any
state law governing health care coverage extension or continuation; (ii) the
applicable requirements of the Family and Medical Leave Act of 1993 and the
regulations thereunder; (iii) the applicable requirements of the Health
Insurance Portability and Accountability Act of 1996 (“HIPAA”); and (iv) the
applicable requirements of the Cancer Rights Act of 1998.  

          (f)          Effect
of Transaction. The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former director, officer,
employee or other service provider of Company or any ERISA Affiliate to
severance benefits or any other payment (including, without limitation,
unemployment compensation, golden parachute, bonus, retention or benefits under
any Company Employee Plan), except as expressly provided in this Agreement or
(ii) accelerate the time of 

19

payment or vesting of any such benefits or increase the amount of
compensation due any such employee or service provider. No benefit payable or
which may become payable by Company pursuant to any Company Employee Plan or as
a result of or arising under this Agreement shall constitute an “excess
parachute payment” (as defined in Section 280G(b)(1) of the Code) which is
subject to the imposition of an excise Tax under Section 4999 of the Code or
the deduction for which would be disallowed by reason of Section 280G of the
Code. Each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
material liability to Parent or the Surviving Corporation (other than ordinary
administration expenses typically incurred in a termination event). 

          Section
2.18     Employee Matters. Section 2.18 of the
Company Disclosure Schedule contains a list of the names of all employees
(including, without limitation part-time, temporary and inactive employees),
leased employees, independent contractors and consultants of Company, their
respective salaries or wages, other compensation and dates of employment and
positions. Company is in compliance in all material respects with all currently
applicable Legal Provisions respecting terms and conditions of employment
including, without limitation, applicant and employee background checking,
immigration laws, discrimination laws, verification of employment eligibility,
employee leave laws, classification of workers as employees and independent
contractors, wage and hour laws, and occupational safety and health laws. There
are no claims pending, or, to Company’s knowledge, reasonably expected or
threatened, against Company under any workers’ compensation or long term
disability plan or policy. Company has no material unsatisfied obligations to
any employees, former employees or qualified beneficiaries pursuant to COBRA,
HIPAA or any state law governing health care coverage extension or
continuation. Company is not a party to any collective bargaining agreement or
other labor union contract, nor does Company know of any activities or
proceedings of any labor union to organize its employees. Company has provided
all employees with all wages, benefits, relocation benefits, stock options,
bonuses and incentives and all other compensation which became due and payable
through the date of this Agreement. Company has not instituted any “freeze” of,
or delayed or deferred the grant of, any cost-of-living or other salary
adjustments for any of its employees. 

          Section
2.19     Insurance. Company carries property,
liability, workers’ compensation and such other types of insurance pursuant to
the insurance policies listed and briefly described in Section 2.19 of the
Company Disclosure Schedule (collectively, the “Insurance Policies” and
each individually, an “Insurance Policy”). The Insurance Policies cover
such risks and contain such policy limits, types of coverage and deductibles as
are, in Company’s judgment, adequate to insure fully (subject to the
deductibles and retention amounts described in Section 2.19 of the Company
Disclosure Schedule) against risks to which Company and its employees,
business, properties and other assets may be exposed in the operation of the
business as currently conducted. Section 2.19 of the Company Disclosure
Schedule set forth a list of all claims under any Insurance Policy in excess of
$50,000 per occurrence filed by or on behalf of Company since January 1, 2008.
There is no material claim pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All of the Insurance Policies are valid and enforceable
policies, all premiums due and payable under all such policies and bonds have
been paid and Company is otherwise in compliance in all material respects with
the terms of such policies and bonds. Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies. 

          Section
2.20     Licenses and Permits. Company has
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant or other authorization of a Governmental Entity (i)
pursuant to which Company currently operates or holds any interest in any of
its properties or (ii) that is required for the operation of Company’s business
or the holding of any such interest (collectively, “Permits”), all of
which are listed (with expiration dates, if applicable) on Schedule 2.20 of the
Company Disclosure Schedule, and all of such Permits are in full force and
effect except where the failure to obtain 

20

or have any such authorizations could not reasonably be expected to
have a Material Adverse Effect on Company. No Permit is subject to revocation
or forfeiture by virtue of any existing circumstances, there is no Proceeding
pending or, to the knowledge of Company, threatened to modify or revoke any
Permit, and no Permit is subject to any outstanding order, decree, judgment,
stipulation or, to the knowledge of Company, investigation that would
reasonably be likely to materially adversely affect such Permit. 

          Section
2.21     Compliance With Laws. Company has
complied in all material respects with, is not in violation in any material
respect of and has not received any notices of violation with respect to, any
federal state, local or foreign statute, law, regulation, judgment, order or
decree of any Government Entity (collectively, “Legal Provisions”) with
respect to the ownership or operation of its business. No investigation or
review by any Governmental Entity (including without limitation any audit or
similar review by any federal, foreign, state or local taxing authority) with
respect to Company is pending or, to the knowledge of Company, threatened, nor
has any Governmental Entity indicated in writing to Company an intention to
conduct the same. 

          Section
2.22     Certain Business Practices. Neither
Company nor, to the knowledge of Company, any director, officer, agent or
employee of Company has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or
(iii) made any other unlawful payment. 

          Section
2.23     Brokers’ and Finders’ Fee. No broker,
finder or investment banker is entitled to brokerage or finders’ fees or
agents’ commissions or investment bankers’ fees or any similar charges in
connection with the Merger, this Agreement or any transaction contemplated
hereby. 

          Section
2.24     Representations Complete. None of the
representations or warranties made by Company herein or in any Schedule or
Exhibit hereto, including the Company Disclosure Schedule, or certificate
furnished by Company pursuant to this Agreement or any written statement
furnished to Parent pursuant hereto or in connection with the transactions
contemplated hereby, when all such documents are read together in their
entirety, contains, or will contain at the Effective Time, any untrue statement
of a material fact, or omits, or will omit at the Effective Time, to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
There is no fact (other than matters of a general economic or political nature
that do not affect Company uniquely) known to Company that has not been
disclosed by Company to Parent that might reasonably be expected to have or
result in a Material Adverse Effect on Company or adversely affect the ability
of Company to conduct its business after the Closing as currently conducted and
as currently proposed to be conducted. 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

          Parent and
Merger Sub represent and warrant to Company that the statements contained in
this Article III are true and correct. 

          Section
3.1    Organization, Standing and Power. Each of
Parent and Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each of
Parent and Merger Sub has the corporate power to own its properties and to
carry on its business as now being conducted and as proposed to be conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified and in good standing would
have a Material Adverse Effect on Parent. Parent has delivered a true and
correct copy of 

21

the Certificate of Incorporation and Bylaws of Parent and Merger Sub,
each as amended to date, to Company. Neither Parent nor Merger Sub is in
violation of any of the provisions of its Certificate of Incorporation or
Bylaws. 

          Section
3.2     Authority. Parent and Merger Sub have
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Parent and Merger Sub. This Agreement has been duly executed and delivered by
Parent and Merger Sub and constitutes the valid and binding obligations of
Parent and Merger Sub, enforceable against each of Parent and Merger Sub in
accordance with its terms, except that such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors’ rights generally, and is subject to general principles of equity.
The execution and delivery of this Agreement do not and the consummation of the
transactions contemplated hereby will not, assuming compliance with the matters
referred to in the next sentence, require any consent or other action by any
Person under, or conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or result in the triggering
of any payment or other obligation under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under, or result in the creation of any Lien in or upon any of the
properties or assets of Parent or any of its Subsidiaries under, (i) any
provision of the Certificate of Incorporation or Bylaws of Parent or any of its
Subsidiaries, as amended, or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or their properties or assets.
No consent, approval, order or authorization of or registration, declaration or
filing with any Governmental Entity is required by or with respect to Parent or
any of its Subsidiaries in connection with the execution and delivery of this
Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger and the Articles of Merger, together with the required
officers’ certificates, as provided in Section 1.2, (ii) filings required under
Regulation D of the Securities Act, (iii) the filing of a Form 8-K with the
Securities and Exchange Commission (“SEC”) and the Financial Industry
Regulatory Authority (“FINRA”), (iv) any filings as may be required under applicable
state securities laws and the securities laws of any foreign country, (v) the
filing with the Nasdaq National Market of a Notification Form for Listing of
Additional Shares with respect to the shares of Parent Common Stock issuable in
the Merger, (vi) filings required to perform its obligations under Section
5.13, (vii) those that may be required solely by reason of Company’s (as
opposed to any third party’s) participation in the transactions contemplated by
this Agreement, and (viii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Parent and would not prevent, materially alter or
delay any of the transactions contemplated by this Agreement.  

          Section
3.3     SEC Documents; Financial Statements.
Parent has made available to Company or its counsel through EDGAR a true and
complete copy of each statement, report, registration statement (with the
prospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement and other filing filed with the SEC by Parent since
January 1, 2009, and, prior to
the Effective Time, Parent will have made available to Company or its counsel
through EDGAR true and complete copies of any additional documents filed with
the SEC by Parent prior to the Effective Time (collectively, the “Parent SEC
Documents”). In addition, Parent has made available to Company all exhibits
to the Parent SEC Documents filed prior to the date hereof which are (i)
requested by Company and (ii) are not available in complete form through EDGAR
(“Requested Confidential Exhibits”) and will promptly make available to
Company all Requested Confidential Exhibits to any additional Parent SEC
Documents filed prior to the Effective Time. As of their respective filing
dates, the Parent SEC Documents complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the 

22

“Exchange Act”), and the Securities Act and none of the Parent
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed Parent
SEC Document prior to the date hereof. The financial statements of Parent,
including the notes thereto, included in the Parent SEC Documents (the “Parent
Financial Statements”), complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited statements included in Quarterly Reports
on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Parent Financial
Statements fairly present the consolidated financial condition and operating
results of Parent and its Subsidiaries at the dates and during the periods
indicated therein (subject, in the case of unaudited statements, to normal,
recurring year-end adjustments). 

          Section
3.4     Absence of Certain Changes. Since
September 30, 2009, Parent has conducted its business in the ordinary course
consistent with past practice, and there has not been: (i) any event,
occurrence or development which, individually or in the aggregate, has had or
reasonably would be expected to have a Material Adverse Effect on Parent; (ii)
any change in accounting methods or practices by Parent or any revaluation by
Parent of any of its assets; (iii) any material contract entered into by
Parent, other than in the ordinary course of business, as provided to Company
or disclosed in the Parent SEC Documents, or any material amendment or
termination of, or default under, any material contract to which Parent is a
party or by which it is bound; or (iv) any negotiation or agreement by Parent
or any of its Subsidiaries to do any of the things described in the preceding
clauses (i) through (iii) (other than negotiations with Company and its
representatives regarding the transactions contemplated by this Agreement). 

          Section
3.5     Interim Operations of Merger Sub.
Merger Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted its operations only as contemplated by this Agreement. 

ARTICLE IV

CONDUCT PRIOR TO THE EFFECTIVE TIME

          Section
4.1     Conduct of Business of Company. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Company agrees (except
to the extent expressly contemplated by this Agreement or as consented to in
writing by Parent), to carry on its business in the usual regular and ordinary
course in substantially the same manner as heretofore conducted, and in
compliance in all material respects with all applicable Legal Provisions, to
pay or perform its obligations when due and to use all reasonable efforts to
preserve intact its present business organizations, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees and others having
business dealings with it to the end that its goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Without limiting the foregoing,
except as expressly contemplated by this Agreement or the Company Disclosure
Schedule, Company shall not do, cause or permit any of the following, without
the prior written consent of Parent: 

          (a)          Charter
Documents. Cause or permit any amendments to its Articles of Incorporation
or Bylaws; 

          (b)          Dividends;
Changes in Capital Stock. (i) Declare or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, (ii) split, combine or reclassify any of its capital stock,
(iii) issue or authorize the issuance of any other securities in 

23

respect of, in lieu of or in substitution for shares of its capital
stock, or repurchase or otherwise acquire, directly or indirectly, any shares
of its capital stock except from former employees, directors and consultants in
accordance with agreements providing for the repurchase of shares in connection
with any termination of service to it or (iv) adopt a plan or agreement of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of Company; 

          (c)          Material
Contracts. Enter into any contract or commitment, or violate, amend or
otherwise modify or waive any of the terms of any of its contracts, other than
in the ordinary course of business consistent with past practice; 

          (d)          Issuance
of Securities. Issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible into or exchangeable for,
or subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it to issue any such shares or other
convertible or exchangeable securities; 

          (e)          Intellectual
Property. Transfer to any Person any rights to its Intellectual Property
other than in the ordinary course of business consistent with past practice; 

          (f)          Exclusive
Rights. Enter into or amend any agreements pursuant to which any other party is
granted marketing or other rights of any type or scope with respect to any of
Company Products or Company Intellectual Property;  

          (g)          Dispositions.
Sell, lease, license or otherwise dispose of or encumber any of its properties
or assets except in the ordinary course of business consistent with past
practice;  

          (h)          Indebtedness.
Incur any indebtedness for borrowed money or guarantee any such indebtedness,
issue or sell any debt securities or warrants or other rights to acquire any
debt securities of Company, guarantee any debt securities of another Person,
enter into any “keep well” or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing;  

          (i)          Agreements.
Enter into, terminate or amend, in a manner which will adversely affect the
business of Company, (i) any agreement involving an obligation to pay or the
right to receive $25,000 or more, (ii) any agreement relating to the license,
transfer or other disposition or acquisition of Intellectual Property rights or
rights to market or sell Company Products or (iii) any other agreement which is
material to the business or prospects of Company or would be required to be
disclosed pursuant to Section 2.13 hereunder;  

          (j)          Payment
of Obligations. Pay, discharge or satisfy, in an amount in excess of $25,000 in
the aggregate, any claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise) arising other than in the ordinary
course of business, other than the payment, discharge or satisfaction of
liabilities reflected or reserved against in the Financial Statements;  

          (k)          Capital
Expenditures. Make any capital expenditures, capital additions or capital
improvements other than as expressly set forth in Company’s capital expenditure
budget previously delivered to Parent;  

          (l)          Insurance.
Materially reduce the amount of any insurance coverage provided by existing
insurance policies;  

24

          (m)          Termination
or Waiver. Terminate or waive any right of substantial value, other than in
the ordinary course of business; 

          (n)          Employee
Benefit Plans; New Hires; Pay Increase. Amend any Company Employee Plan
except to the extent required by applicable law, adopt any plan, contract or
arrangement that would constitute a Company Employee Plan, take any action to
fund or in any other way secure the payment of compensation or benefits under
any Company Employee Plan, hire any new officer level employee, pay any special
bonus, special remuneration or special noncash benefit (except payments and
benefits made pursuant to written agreements outstanding on the date hereof),
or increase the benefits, salaries or wage rates of its employees except in the
ordinary course of business consistent with past practice; 

          (o)          Severance
Arrangements. (i) Grant any severance or termination pay or benefits (A) to
any current or former director or officer or (B) to any other employee except
payments made pursuant to written agreements outstanding on the date hereof and
disclosed on the Company Disclosure Schedule, or (ii) increase in any manner
the severance or termination pay of any current or former director, officer or
employee; 

          (p)          Acquisitions.
Acquire or agree to acquire by merging or consolidating with, or by purchasing
a substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof, make any investment in any other Person or otherwise acquire
or agree to acquire any assets which are material, individually or in the
aggregate, to its business; 

          (q)          Taxes.
Make or change any election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any amendment to a Tax Return, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
material claim or assessment in respect of Taxes; 

          (r)          Accounting
Matters. Except as required by GAAP, (i) make any change in accounting
methods, practices or principles or (ii) accelerate any income, postpone any
expense or reverse any reserve, except on a basis consistent with past
practice; 

          (s)          Revaluation.
Revalue any of its assets, including without limitation writing down the value
of inventory or writing off notes or accounts receivable other than in the
ordinary course of business; or 

          (t)          Other.
Agree or commit to take any of the actions described in Sections 4.1(a) through
(s) above, or take or agree or commit to take any action that would (i) make
any representation and warranty of Company hereunder inaccurate in any respect
at, or as of any time prior to, the Effective Time (or, in the case of
representations and warranties that are not qualified by reference to the term
“Material Adverse Effect” and/or taken as a whole, or derivatives or variations
of such terms, inaccurate in any material respect at, or as of any time prior
to, the Effective Time) or (ii) that would reasonably be expected to prevent,
impair or materially delay the ability of Company or Parent to consummate the
transactions contemplated by this Agreement. 

          Without
limiting the generality of the foregoing, Company shall deliver to Parent a
copy of any income or franchise Tax Return required to be filed by Company
prior to the Effective Time no later than thirty (30) days prior to the due
date for the filing thereof, which returns shall be prepared in a manner
consistent with prior practice unless otherwise required by applicable Legal
Provisions. Parent shall be entitled to review and comment on any such Tax
Returns prior to the due date for filing, and Company shall any changes to such
Tax Returns reasonably requested by Parent. 

25

          Section
4.2          No
Solicitation. 

          (a)          From
and after the date of this Agreement until the Effective Time, Company shall
not, directly or indirectly through any officer, director, employee,
representative or agent of Company or otherwise, (i) solicit, initiate or
encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, any offer or proposal for, or any indication of interest
in, (A) a merger or other business combination involving Company, (B) the
acquisition of any equity interest in, or a substantial portion of the assets
of, or (C) any similar transaction the effect of which would be reasonably
likely to prohibit, restrict or delay consummation of the Merger or which would
be reasonably be expected to materially dilute the benefits to Parent of the
transactions contemplated hereby (any of the foregoing being referred to in
this Agreement as an “Acquisition Proposal”), (ii) engage or participate
in negotiations or discussions concerning, or provide any non-public
information to any Person or entity relating to, any Acquisition Proposal, or
(iii) agree to, enter into, accept, approve or recommend any Acquisition
Proposal. Company will, and will cause the other Persons listed in the first
sentence of this Section 4.2 to,
immediately cease and cause to be terminated all discussions and negotiations,
if any, that have taken place prior to the date hereof with any parties with
respect to any Acquisition Proposal and, to the extent within its power, to
recover or cause to be destroyed all information concerning Company in the
possession of such Persons and their affiliates, representatives and advisors.
Without limiting the generality of the foregoing, the parties hereto understand
and agree that any violation of the restrictions of this Section 4.2 by any
officer, director, employee, investment banker, consultant or other agent of
Company shall be deemed to be a breach of this Section 4.2 by Company. 

          (b)          Company
shall notify Parent immediately (and no later than 24 hours) after receipt by
Company (or its advisors) of any Acquisition Proposal or any request for
nonpublic information in connection with an Acquisition Proposal or for access
to the properties, books or records of Company by any Person or entity that
informs Company that it is considering making, or has made, an Acquisition
Proposal. Such notice shall be made orally and in writing and shall indicate in
reasonable detail the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact. 

ARTICLE V 

ADDITIONAL AGREEMENTS

          Section
5.1          [Reserved.] 

          Section
5.2          Approval of
Company Shareholders. Company shall promptly after the date hereof take all
action necessary in accordance with Arizona Law and its Articles of
Incorporation and Bylaws to convene a meeting of Company Shareholders or to
obtain the written consent of Company Shareholders approving the Merger as soon
as practicable. Company shall use its reasonable best efforts to solicit from
all Company Shareholders written consents in favor of the Merger and shall take
all other action necessary or advisable to secure the vote or consent of
Company Shareholders required to effect the Merger. 

          Section
5.3          Sale of
Shares Pursuant to Regulation D. The parties hereto acknowledge and agree
that the shares of Parent Common Stock issuable to Company Shareholders
pursuant to Section 1.6 hereof shall constitute “restricted securities” under
the Securities Act. The certificates of Parent Common Stock shall bear the
legends set forth in Section 1.6(f). It is acknowledged and understood that
Parent is relying on certain written representations made by each Company
Shareholder. Company will use its reasonable best efforts to cause each Company
Shareholder to execute and deliver to Parent an Investor Representation
Statement in the form attached hereto as Exhibit 5.3 (the “Investor
Representation Statement”). 

26

          Section 5.4          Access
to Information. 

          (a)          Each
party shall afford the other party and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of such party’s properties,
contracts, commitments, books and records and (ii) all other information
concerning the business, properties and personnel of such party and its
Subsidiaries as the other party may reasonably request. 

          (b)          Subject
to compliance with applicable law, from the date hereof until the Effective
Time, each of Parent and Company shall confer on a regular and frequent basis
with one or more representatives of the other party to report operational
matters of materiality and the general status of ongoing operations. 

          (c)          No
information or knowledge obtained in any investigation pursuant to this Section
5.4 shall affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the Merger. 

          Section
5.5          Confidentiality.
The parties acknowledge that Parent and Company have previously executed a
non-disclosure agreement dated January 5, 2010 (the “Confidentiality
Agreement”), which Confidentiality Agreement is hereby incorporated herein
by reference and shall continue in full force and effect in accordance with its
terms. 

          Section
5.6          Public
Disclosure. Unless otherwise permitted by this Agreement, Parent and
Company shall consult with each other before issuing any press release or
otherwise making any public statement (including any broadly issued statement
or announcement to Company employees) or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by Legal Provisions or by
obligations pursuant to any listing agreement with any national securities
exchange. 

          Section
5.7          Reasonable
Best Efforts. 

          (a)          Subject
to the terms and conditions of this Agreement, each party will use its
reasonable best efforts in good faith to take, or cause to be taken, all
actions and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable under
applicable Legal Provisions to consummate the Merger and the other transactions
contemplated by this Agreement, including using reasonable best efforts to
accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions to Closing to be satisfied, (ii) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from, or
to avoid an action or Proceeding by, any Governmental Entity, (iii) the
obtaining of all necessary consents, approvals or waivers from third parties (provided that if obtaining any such
consent, approval or waiver would require any action other than the payment of
a nominal amount, such action shall be subject to the consent of Parent, not to
be unreasonably withheld), (iv) the defending of any Proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry
out the purposes of, this Agreement. Company shall give Parent the opportunity
to participate, on an advisory basis, in the defense of any shareholder
litigation against Company and/or its directors relating to the transactions 

27

contemplated by this Agreement. Each party shall also refrain from
taking, directly or indirectly, any action contrary or inconsistent with the
provisions of this Agreement, including action that would impair such party’s
ability to consummate the Merger and the other transactions contemplated
hereby. 

          (b)          Without
limiting the generality of this Section 5.7, Parent and Company shall together,
or pursuant to an allocation of responsibility to be agreed between them,
coordinate and cooperate (i) in determining whether any action by or in respect
of, or filing with, any Governmental Entity is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement, and (ii) in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such actions,
consents, approvals or waivers. 

          Section
5.8          Notice of
Certain Events. 

	
  

 	
  

 
	
  

 	
 (a)          Company
 and Parent shall promptly notify each other of: 

 
	
  

 	
  

 
	
  

 	
                (i)          any
 notice or other communication from any Person alleging that the consent of
 such Person is or may be required in connection with the transactions
 contemplated by this Agreement; 

 
	
  

 	
  

 
	
  

 	
                (ii)         any
 notice or other communication from any Governmental Entity in connection with
 the transactions contemplated by this Agreement; 

 
	
  

 	
  

 
	
  

 	
                (iii)        any
 Proceedings commenced or, to its knowledge, threatened against, relating to
 or involving or otherwise affecting it which relate to the consummation of
 the transactions contemplated by this Agreement; 

 
	
  

 	
  

 
	
  

 	
                (iv)        any
 event or occurrence not in the ordinary course of business of its business or
 which could have a Material Adverse Effect; 

 
	
  

 	
  

 
	
  

 	
                (v)         its
 obtaining knowledge of the occurrence, or failure to occur, of any event
 which occurrence or failure to occur will be likely to cause (A) any
 representation or warranty made by it (and, in the case of Parent, made by
 Merger Sub) contained in this Agreement that is qualified as to materiality
 becoming untrue or inaccurate in any respect or any such representation of
 warranty that is not so qualified becoming untrue or inaccurate in any
 material respect, (B) the failure of it (and, in the case of Parent, by Merger
 Sub) to comply with or satisfy in any material respect any covenant,
 condition or agreement to be complied with or satisfied by it under this
 Agreement and (C) any fact or development which would result in the failure
 of any condition hereto not to be satisfied; 

 
	
  

 	
  

 
	
  

 	
                (vi)        the
 failure by it to perform, or comply with, in any material respect any of its
 obligations, covenants, or agreements contained in this Agreement; or 

 
	
  

 	
  

 
	
  

 	
                (vii)       Company
 obtaining knowledge of a material breach by Parent, or Parent obtaining
 knowledge of a material breach by Company, of their respective
 representations, warranties or covenants hereunder of which the breaching
 party has not already given notice pursuant to clauses (v) or (vi) above. 

 

28

          (b)          Company
shall promptly notify Parent of any notice of, or other communications relating
to, a default or event that, with notice or lapse of time or both, would become
a default, received by it subsequent to the date of this Agreement, under any
Company Agreement. 

          (c)          No
notification under this Section 5.8 shall affect the representations,
warranties or obligations of the parties or the conditions to the obligations
of the parties hereunder, or limit or otherwise affect the remedies available
hereunder to the party receiving such notice. 

          Section
5.9            Blue Sky Laws.
Parent shall take such steps as may be necessary to comply with the securities
and blue sky laws of all jurisdictions which are applicable to the issuance of
the Parent Common Stock in connection with the Merger. Company shall use its
commercially reasonable efforts to assist Parent as may be necessary to comply
with the securities and blue sky laws of all jurisdictions which are applicable
in connection with the issuance of Parent Common Stock in connection with the
Merger. 

          Section
5.10          Listing of
Additional Shares. Prior to the Effective Time, Parent shall file with the
Nasdaq National Market a Notification Form for Listing of Additional Shares
with respect to the shares of Parent Common Stock issuable in the Merger. 

          Section
5.11          Employees.
Company will use reasonable commercial efforts in consultation with Parent to
retain existing employees of Company through the Effective Time and following
the Merger. Company shall use its reasonable efforts (i) to cause each of such
employees set forth in Sections 5.11(a) and (b) of the Company Disclosure
Schedule to execute an offer letter substantially in the form attached hereto
as Exhibit 5.11(a), (ii) to cause each such employees set forth in
Section 5.11(a) of the Company Disclosure Schedule to execute a Non-Disclosure
and Assignment of Inventions Agreement and a Non-Solicitation Agreement, each
substantially in the forms set forth as Exhibit 5.11(b), and (iii) to
cause each such employee set forth in Section 5.11(b) of the Company Disclosure
Schedule to execute a Non-Disclosure and Assignment of Inventions Agreement
substantially in the form set forth as Exhibit 5.11(c). 

          Section
5.12          Expenses.
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense; provided that any out-of-pocket
expenses incurred by Company in excess of $50,000 for fees and expenses of
legal counsel plus any other expenses, including, without limitation, fees and
expenses of financial advisors and accountants, if any, shall be an obligation
of Company’s Shareholders. If Parent or Company receives any invoices for
amounts in excess of said amounts, it may pay such fees; provided, however,
that such payment shall, if not promptly reimbursed by Company Shareholders at
Parent’s request, constitute “Damages” recoverable under the Escrow Agreement
and such Damages shall not be subject to the escrow threshold set forth in
Section 8.2(d). 

          Section
5.13          Registration
of Shares of Parent Common Stock Issued in the Merger. 

          (a)          Parent
shall use its reasonable commercial efforts to cause the Shares of Parent
Common Stock issued in the Merger (including Escrow Shares) (the “Registrable
Securities”) to be registered under the Securities Act so as to permit the
resale thereof, and in connection therewith shall use its reasonable commercial
efforts to prepare and file a registration statement under the Securities Act
(the “Registration Statement”) with the SEC as soon as practicable after
the Effective Time, in the case of the shares issued in the Merger, as soon as
practicable after the issuance thereof, and shall use its reasonable commercial
efforts to cause the Registration Statement to become effective as soon as
possible after the filing thereof; provided, however, that each holder of
Registrable Securities (“Holder”) shall provide all such information and
materials to Parent and take all such action as may be required in order to
permit Parent 

29

to comply with all applicable requirements of the SEC and to obtain any
desired acceleration of the effective date of such Registration Statement. Such
provision of information and materials is a condition precedent to the
obligations of Parent pursuant to this Section 5.13. The offering made pursuant
to such registration shall not be underwritten. 

          (b)          Parent
shall (i) prepare and file with the SEC the Registration Statement in
accordance with Section 5.13(a) hereof with respect to the shares of
Registrable Securities and shall use all reasonable commercial efforts to cause
the Registration Statement to remain effective for a period ending on the first
to occur of (A) the date all of the shares registered thereunder and not
previously sold by the Holders may be sold under Rule 144 in one three-month
period (assuming compliance by the Holders with the provisions thereof) or (B)
one (1) year after the Effective Time; (ii) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
securities proposed to be registered in the Registration Statement until the
termination of effectiveness of the Registration Statement; and (iii) furnish
to each Holder such number of copies of any prospectus (including any amended
or supplemented prospectus) in conformity with the requirements of the
Securities Act, and such other documents, as each Holder may reasonably request
in order to effect the offering and sale of the Registrable Securities to be
offered and sold, but only while Parent shall be required under the provisions
hereof to cause the Registration Statement to remain current. 

          (c)          Parent
shall pay all of the out-of-pocket expenses, other than underwriting discounts
and commissions and fees and expenses of counsel for the Holders, if any,
incurred in connection with any registration of Registrable Securities pursuant
to this Section 5.13, including, without limitation, all registration and
filing fees, printing expenses, transfer agents’ and registrars’ fees and the
fees and disbursements of Parent’s outside counsel and independent accountants.

          (d)          To
the fullest extent permitted by law, the Parent will indemnify, defend, protect
and hold harmless each selling Holder, each underwriter of Parent Common Stock
being sold by such Holders pursuant to this Section 5.13, each Person, if any,
who controls any such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act and their respective affiliates, officers,
directors, partners, successors and assigns (each a “Holder Indemnitee”)
against all actions, claims, losses, damages, liabilities and expenses to which
they or any of them become subject under the Securities Act, the Exchange Act
or under any other statute or at common law or otherwise and, except as
hereinafter provided, will promptly reimburse each such Holder Indemnitee for
any legal or other expenses reasonably incurred by them or any of them in
connection with investigating or defending any actions, whether or not
resulting in any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of material fact in any Registration Statement and any
prospectus filed pursuant to Section 5.13 or any post-effective amendment
thereto or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or any violation by the Parent of any rule or
regulation promulgated under the Securities Act, the Exchange Act or any Legal
Provision applicable to the Parent and relating to action or inaction required
of the Parent in connection with such registration; provided, however, that the
Parent shall not be liable to any such Holder Indemnitee in respect of any
claims, losses, damages, liabilities and expenses resulting from any untrue
statement or alleged untrue statement, or omission or alleged omission, made in
reliance upon and in conformity with information furnished in writing to the
Parent by such Holder Indemnitee specifically for use in connection with such
registration statement and prospectus or post-effective amendment. 

          (e)          To
the fullest extent permitted by law, each selling Holder of Registrable
Securities registered in accordance with Section 5.13 will indemnify the
Parent, each Person, if any, who controls the Parent within the meaning of the
Securities Act or the Exchange Act, each underwriter of Parent 

30

Common Stock and their respective affiliates, officers, directors,
partners, successors and assigns (each a “Parent Indemnitee”) against
any actions, claims, losses, damages, liabilities and expenses to which they or
any of them may become subject under the Securities Act, the Exchange Act or
under any other statute or at common law or otherwise, and, except as
hereinafter provided, will promptly reimburse each Parent Indemnitee for any
legal or other expenses reasonably incurred by them or any of them in
connection with investigating or defending any actions, whether or not
resulting in any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact in any Registration Statement and
any prospectus filed pursuant to Section 5.13 or any post-effective amendment
thereto, or any omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, which untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with information
furnished in writing to the Parent by such Holder specifically for use in
connection with such registration statement, prospectus or post-effective
amendment; provided, however, that the obligations of each such selling Holder
hereunder shall be limited to an amount equal to the proceeds to such Holder
from the sale of such Holder’s Registrable Securities as contemplated herein. 

          (f)          Each
Person entitled to indemnification under this Section 5.13 (a “Registration
Indemnified Person”) shall give notice to the party required to provide
indemnification (the “Registration Indemnifying Person”) promptly after
such Registration Indemnified Person has actual knowledge of any claim as to
which indemnity may be sought and shall permit the Registration Indemnifying
Person to assume the defense of any such claim and any litigation resulting
therefrom, provided that counsel for the Registration Indemnifying Person who
conducts the defense of such claim or any litigation resulting therefrom shall
be approved by the Registration Indemnified Person (whose approval shall not
unreasonably be withheld), and the Registration Indemnified Person may
participate in such defense at such party’s expense (unless the Registration
Indemnified Person has reasonably concluded that there may be a conflict of
interest between the Registration Indemnifying Person and the Registration
Indemnified Person in such action, in which case the fees and expenses of one
counsel for such Registration Indemnified Person(s) shall be at the expense of
the Registration Indemnifying Person), and provided further that the failure of
any Registration Indemnified Person to give notice as provided herein shall not
relieve the Registration Indemnifying Person of its obligations under this
Section 5.13 except to the extent the Registration Indemnifying Person is
materially prejudiced thereby. No Registration Indemnifying Person, in the
defense of any such claim or litigation, shall (except with the consent of each
Registration Indemnified Person) consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Registration Indemnified Person of
a release from all liability in respect to such claim or litigation. Each
Registration Indemnified Person shall furnish such information regarding itself
or the claim in question as a Registration Indemnifying Person may reasonably
request in writing and as shall be reasonably required in connection with the
defense of such claim and litigation resulting therefrom. 

          (g)          In
order to provide for just and equitable contribution to joint liability under
the Securities Act in any case in which the Parent or any Holder makes a claim
for indemnification pursuant to this Section 5.13 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding that this Section 5.13 provides for indemnification, in such
case, then the Parent and such Holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion as is appropriate to reflect the relative fault of
the Parent on the one hand and of the Holder on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations or, if the
allocation provided herein is not permitted by applicable law, in such
proportion as shall be permitted by applicable law and reflect as 

31

nearly as possible the allocation provided herein. The relative fault
of the Parent on the one hand and of the Holder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Parent on the one hand or
by the Holder on the other, and each party’s relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission; provided, however, that in any such case (i) no Holder will be
required to contribute any amount in excess of the proceeds received by such
Holder from the sale of Registrable Shares pursuant to the Registration
Statement; and (ii) no Person guilty of fraudulent misrepresentation within the
meaning of Section 11(f) of the Securities Act will be entitled to contribution
from any Person or entity who was not guilty of such fraudulent
misrepresentation. 

          Section
5.14          Indemnification
and Insurance. 

          (a)          From
and after the Effective Time, the Surviving Corporation will fulfill, assume
and honor in all respects the obligations of Company pursuant to Company’s
Articles of Incorporation and any indemnification agreement between Company and
any of Company’s directors and officers existing and in force as of the
Effective Time. 

          (b)          The
obligations of Parent and the Surviving Corporation under this Section 5.14 are
subject to the conditions that each Indemnified Party shall comply with the
reasonable requests of the Indemnifying Party and Parent in defending or
settling any action hereunder and that any Indemnified Party shall approve any
proposed settlement of any such action if (i) such settlement involves no
finding or admission of any liability by any Indemnified Party and (ii) the
sole relief provided in connection with such settlement is monetary damages
that are paid in full by the Indemnifying Party. 

ARTICLE VI 

CONDITIONS TO THE MERGER

          Section
6.1          Conditions to
Obligations of Each Party to Effect the Merger. The respective obligations
of each party to this Agreement to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by agreement of all the parties hereto: 

          (a)          Shareholder
Approval. This Agreement and the Merger shall be approved and adopted by
the Company Shareholders by the requisite vote under Arizona Law, the Company’s
Articles of Incorporation and Company’s Bylaws. 

          (b)          No
Injunctions or Restraints: Illegality. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be and remain in effect, nor
shall any Proceeding brought by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking any of the foregoing be
pending, which would have a Material Adverse Effect on either Parent or on
Parent combined with the Surviving Corporation after the Effective Time, nor
shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal. 

          (c)          Governmental
Approval. Parent, Company and Merger Sub and their respective Subsidiaries
shall have timely obtained from each Governmental Entity all approvals, waivers
and consents, if any, necessary for consummation of or in connection with the
Merger and the several transactions contemplated hereby, including such
approvals, waivers and consents as may be required 

32

under the Securities Act and under state securities or “blue sky” laws,
other than filings and approvals relating to the Merger or affecting Parent’s
ownership of Company or any of its properties if failure to obtain such
approval, waiver or consent would not have a Material Adverse Effect on Parent
after the Effective Time. 

          (d)          Escrow
Agreement. Parent, Merger Sub, Company, Escrow Agent and the Shareholders’
Agent shall have entered into the Escrow Agreement contemplated by Article VIII
in substantially the form attached hereto as Exhibit 6.1(d) (“Escrow
Agreement”). 

          Section
6.2          Additional
Conditions to the Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Parent: 

          (a)          Accuracy
of Representations and Warranties. Each of the representations and
warranties of Company in this Agreement that is expressly qualified by a
reference to materiality shall be true and correct in all respects as so
qualified, and each of the representations and warranties of Company in this
Agreement that is not so qualified shall be true and correct in all material
respects, each as of the date when made and at and as of the Closing, except
for such changes as are permitted by this Agreement and except to the extent a
representation or warranty speaks only as of an earlier date, which shall be
true and correct as of such date. 

          (b)          Performance
of Obligations. Company shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the Closing. 

          (c)          Certificate
of Officers. Parent and Merger Sub shall have received a certificate
executed on behalf of Company by the president of Company certifying that the
conditions set forth in Section 6.2(a), (b) and (f) have been satisfied. 

          (d)          Third
Party Consents. All consents or approvals of non-Governmental Entities
required to be obtained in connection with the Merger and the other
transactions contemplated by this Agreement shall have been obtained and shall
be in full force and effect, except where the failure to obtain such consents
or approvals individually or in the aggregate would not have a Material Adverse
Effect on Company. 

          (e)          No
Governmental Litigation. There shall not be pending or threatened any suit,
action or proceeding by any Governmental Entity, and neither Parent nor Company
shall have received any communication from any Governmental Entity in which
such Governmental Entity indicates the probability of commencing any Proceeding
or taking any other action, (i) challenging the acquisition by Parent or Merger
Sub of any shares of Company Common Stock, seeking to restrain or prohibit the
consummation of the Merger, or seeking to place limitations on the ownership of
shares of Company Common Stock (or shares of common stock of the Surviving
Corporation) by Parent or Merger Sub or seeking to obtain from Company, Parent
or Merger Sub any damages that are material in relation to Company, (ii)
seeking to prohibit or materially limit the ownership or operation by Company,
Parent or any of Parent’s Subsidiaries of any material portion of any business
or of any assets of Company, Parent or any of Parent’s Subsidiaries, or to
compel Company, Parent or any of Parent’s Subsidiaries to divest or hold
separate any material portion of any business or of any assets of Company,
Parent or any of Parent’s Subsidiaries, as a result of the Merger or (iii)
seeking to prohibit Parent or any of its Subsidiaries from effectively
controlling in any material respect the business or operations of Company. 

33

          (f)          No
Material Adverse Change. No event, occurrence or development shall have
occurred since the date of this Agreement and be continuing which has had or
would be reasonably likely to result in any change, effect, event, occurrence
or state of facts (or any development that has had or is reasonably likely to
have any change or effect) that, individually or in the aggregate, has had or
would have a Material Adverse Effect on Company. 

          (g)          Investor
Representation Statement; Number of Shareholders. Each of Company’s
shareholders shall have delivered to Parent a signed Investor Representation
Statement and each such Statement shall be in full force and effect, and there
shall be no more than thirty-five (35) Company Shareholders who are (i) U.S.
persons as defined under Regulation S under the Securities Act (“U.S. Person”)
and (ii) not “accredited investors” as defined in Rule 501 under the Securities
Act. 

          (h)          Purchaser
Representative. There shall be a Purchaser Representative (as defined in
Regulation D under the Securities Act), reasonably satisfactory to Parent,
representing each holder of Company Capital Stock who is a U.S. Person and not
an “accredited investor” as defined in Rule 501 under the Securities Act, and
such Purchaser Representative shall have executed and delivered documentation
reasonably satisfactory to Parent. 

          (i)          Offer
Letters and Non-Competition and Non-Solicitation Agreements. The employees
set forth in Sections 5.11(a) and (b) of the Company Disclosure Schedule shall
have executed an offer letter substantially in the form attached hereto as Exhibit
5.11(a), the employees set forth in Section 5.11(a) of the Company
Disclosure Schedule shall have executed a Non-Disclosure and Assignment of
Inventions Agreement and a Non-Solicitation Agreement, each substantially in
the forms set forth as Exhibit 5.11(b), and the employees set forth in
Section 5.11(b) of the Company Disclosure Schedule shall have executed a
Non-Disclosure and Assignment of Inventions Agreement substantially in the form
set forth as Exhibit 5.11(c). 

          (j)          Closing
Company Debt Obligations. The Closing Company Debt Obligations shall have
been repaid and discharged in full in accordance with Section 1.9. 

          (k)          Opinion.
Counsel for Company shall have delivered to Parent an opinion in substantially
the form attached hereto as Exhibit 6.2(k).  

          (l)          Termination
of Consulting Agreement. The Consulting Agreement, dated May 15, 2009, by
and between Dr. Andreas Luttge and Company shall have been terminated and be of
no further force and effect. 

          (m)          Assignment
of Inventions Agreement. Dr. Andreas Luttge and Dusty Clark shall have executed
an assignment of inventions and intellectual property agreement in form
reasonably satisfactory to Parent. 

          Section
6.3          Additional
Conditions to Obligations of Company. The obligations of Company to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, by
Company: 

          (a)          Accuracy
of Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub in this Agreement that is expressly
qualified by a reference to materiality shall be true and correct in all
respects as so qualified, and each of the representations and warranties of
Parent and Merger Sub in this Agreement that is not so qualified shall be true
and correct in all material respects, each as of the date when made and at and
as of the Closing, except for such changes as are permitted by 

34

this Agreement and except to the extent a representation or warranty
speaks only as of an earlier date, which shall be true and correct as of such
date. 

          (b)          Performance
of Obligations. Parent and Merger Sub shall have performed and complied in
all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by them as of the Closing.

          (c)          Certificate
of Officers. Company shall have received a certificate executed on behalf
of Parent and Merger Sub by an authorized officer of Parent and Merger Sub,
respectively, certifying that the conditions set forth in Sections 6.3(a), (b)
and (d) have been satisfied. 

          (d)          No
Material Adverse Change. No event, occurrence or development shall have
occurred since the date of this Agreement and be continuing which has had or
would be reasonably likely to result in any change, effect, event, occurrence
or state of facts (or any development that has had or is reasonably likely to
have any change or effect) that, individually or in the aggregate, has had or
would have a Material Adverse Effect on Parent. 

          (e)          Nasdaq
Listing. The Parent Common Stock to be issued in the Merger shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance. 

ARTICLE VII 

TERMINATION, AMENDMENT AND WAIVER

          Section
7.1          Termination.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with
the Merger by the Company Shareholders (with respect to Sections 7.1(b), (c)
and (d), by written notice by the terminating party to the other party): 

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

          (b)          by
either Parent or Company if the Merger shall not have been consummated by the
date that is thirty (30) days from the date hereof, provided, however, that the
right to terminate this Agreement under this Section 7.1(b) 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 before such date; 

          (c)          by
either Parent or Company if a court of competent jurisdiction or other
Governmental Entity shall have issued a nonappealable final order, decree or
ruling or taken any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, except if the party
relying on such order, decree or ruling or other action has not complied with
its obligations under this Agreement; 

          (d)          by
either Parent or Company if they are not in material breach of their obligations
under this Agreement and if there has been a breach of any representation,
warranty, covenant or agreement on the part of the other party set forth in
this Agreement, which breach (i) causes the conditions set forth in Section 6.1
or 6.2 (in the case of termination by Parent) or Section 6.1 or 6.3 (in the
case of termination by Company) not to be satisfied and (ii) shall not have
been cured within twenty (20) business days following receipt by the breaching
party of written notice of such breach from the other party. 

          Section
7.2          Effect of
Termination. In the event of termination of this Agreement as provided in
Section 7.1, there shall be no liability or obligation on the part of Parent,
Company, Merger Sub or 

35

their respective officers, directors or stockholders, except to the
extent that such termination results from the breach by a party of any of its
representations, warranties or covenants set forth in this Agreement; provided
that the provisions of Section 7.1 shall remain in full force and effect and
survive any termination of this Agreement. 

          Section
7.3          Amendment.
This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger to the Company
Shareholders; provided, however,
that after any such approval, there shall be made no amendment that by law
requires further approval by the Company Shareholders without such approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto. 

          Section
7.4          Extension,
Waiver. At any time prior to the Effective Time, the parties hereto, to the
extent legally allowed, may (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive, to the extent permitted by
applicable law, compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shay be valid only if set forth in a written instrument signed on behalf
of such party. 

ARTICLE VIII 

ESCROW AND INDEMNIFICATION

          Section
8.1          Escrow Fund. 

          (a)          At
the Closing, the Escrow Shares shall be registered in the name of, and be
deposited with The Bank of Utah (or other institution selected by Parent with
the reasonable consent of Company) as escrow agent (the “Escrow Agent”),
such deposit and any deposit pursuant to Section 8.1(b) to constitute the “Escrow
Fund” and to be governed by the terms set forth herein and in the Escrow
Agreement. The Escrow Fund shall be available to compensate Parent pursuant to
the indemnification obligations of the Company Shareholders. 

          (b)          Dividends,
whether paid in cash, shares of Parent Common Stock or other securities, and
other distributions of any kind declared with respect to the Escrow Shares
shall be deposited with the Escrow Agent pursuant to Section 8.1(a) hereof and
shall be part of the Escrow Fund. Each Company Shareholder will have voting rights
with respect to the Escrow Shares deposited in the Escrow Fund with respect to
such shareholder so long as such Escrow Shares are held in escrow, and Parent
will take all reasonable steps necessary to allow the exercise of such rights.
While the Escrow Shares remain in the Escrow Agent’s possession pursuant to
this Agreement, the Company Shareholders will retain and will be able to
exercise all other incidents of ownership of said Escrow Shares which are not
inconsistent with the terms and conditions of this Agreement. 

          Section
8.2          Indemnification.

          (a)          Survival
of Representations and Warranties. All representations and warranties made
by Company, Parent or Merger Sub herein, or in any certificate, schedule or
exhibit delivered pursuant hereto, shall survive the Closing and continue in
full force and effect until the date that is fifteen (15) days after the
completion of the audit of Parent’s financial statements for such first fiscal
year ending after the Effective Time (such period, the “General Survival
Period”); provided, however, that the representations and warranties
contained in Sections 2.10, 2.16 and 2.17 shall survive until 30 days after the
expiration of 

36

the applicable statute of limitations period and any extensions thereof
and the representations and warranties contained in Section 2.4 shall survive
indefinitely.

          (b)          Indemnification
by Company Shareholders. Subject to the limitations set forth in this
Article VIII, the Company Shareholders will indemnify and hold harmless Parent
and the Surviving Corporation and its respective officers, directors, agents,
attorneys and employees, and each Person, if any, who controls or may control
Parent or the Surviving Corporation within the meaning of the Securities Act
(hereinafter “Parent Indemnified Persons”) from and against any and all
losses, costs, damages, liabilities and expenses arising from claims, demands,
actions, causes of action, including, without limitation, legal fees, (collectively,
“Damages”) incurred or sustained by Parent Indemnified Persons as a
result of:

	
  

 	
  

 
	
  

 	
               (i)          any
 inaccuracy or breach of, or any claim by a third party alleging facts that,
 if true, would mean Company has breached, any representation or warranty by
 Company contained herein or under any other agreement executed and delivered
 by the parties in furtherance of the transactions described herein (without
 regard to any materiality qualifier contained in such representation or
 warranty); or 

 
	
  

 	
  

 
	
  

 	
               (ii)         a
 breach by Company of any covenant or other agreement contained herein or
 under any other agreement executed and delivered by the parties in
 furtherance of the transactions described herein.

 

Except as provided in the next paragraph, the sole recourse of the
Parent Indemnified Persons shall be against the Escrow Fund and claims against
the Escrow Fund shall be the sole and exclusive remedy of Parent Indemnified
Persons for any Damages hereunder.

                        Nothing
in this Agreement shall limit the liability in amount or otherwise (i) of
Company for any breach of any representation, warranty or covenant if the
Merger does not close, (ii) of any Company Shareholder in connection with any
breach by such shareholder of any representation or covenant in the Investor
Representation Statement or Voting Agreement delivered pursuant hereto or (iii)
of Company or any Company Shareholder with respect to fraud, criminal activity
or intentional breach of any covenant contained in this Agreement. 

          (c)          Indemnification
by Parent and Merger Sub. Subject to the limitations set forth in this
Article VIII, Parent hereby agrees to indemnify, defend and hold harmless the
Company Shareholders and their respective officers, directors, agents,
attorneys and employees (hereinafter “Company Indemnified Persons”) from
and against any and all Damages incurred or sustained by Company Indemnified
Persons as a result of:

	
  

 	
  

 
	
  

 	
               (i)          any
 inaccuracy or breach of, or any claim by a third party alleging facts that,
 if true, would mean Parent or Merger Sub has breached, any representation or
 warranty by it contained herein or under any other agreement executed and
 delivered by the parties in furtherance of the transactions described herein
 (without regard to any materiality qualifier contained in such representation
 or warranty); or 

 
	
  

 	
  

 
	
  

 	
               (ii)         a
 breach by Parent or Merger Sub of any covenant or other agreement contained
 herein (other than the covenants and agreements set forth in Section 5.13,
 which are specifically covered in Section 5.13) or under any other agreement
 executed and delivered by the parties in furtherance of the transactions
 described herein.

 

37

The sole recourse of the Company Indemnified Persons from any Damages
shall be indemnification under this Article VIII. The aggregate indemnification
obligations of Parent and Merger Sub hereunder shall not exceed the Escrow
Fund, provided however that there shall be no limitation on liability of Parent
or Merger Sub for (i) any breach of any representation, warranty or covenant if
the Merger does not close or (ii) fraud, criminal activity or intentional
breach of any covenant contained in this Agreement.

          (d)          Threshold
for Claims. No claim for Damages arising out of any misrepresentation or
breach of the representations and warranties shall be made under Article VIII
unless the aggregate of Damages exceeds $50,000 for which claims are made
hereunder by the Company Indemnified Persons or Parent Indemnified Persons, as
the case may be, in which case the Company Indemnified Person or Parent
Indemnified Person, as the case may be, shall be entitled to seek compensation
for all Damages without regard to the limitation set forth in this Section
8.2(d). 

          Section
8.3          Escrow
Period: Release From Escrow. 

          (a)          As
promptly as practicable after end of the General Survival Period, the Escrow
Agent shall release from escrow to the Company Shareholders their pro rata
portion of the Escrow Fund remaining; provided, however, that a portion of the
Escrow Fund which, in the reasonable judgment of Parent, subject to the
objection of the Shareholders’ Agent, is necessary to satisfy any unsatisfied
claims specified in any Escrow Claim Certificate theretofore delivered to the
Escrow Agent on or prior to the last day of the General Survival Period with
respect to facts and circumstances existing on or prior to such date, shall
remain in the Escrow Fund until such claims have been resolved. Any portion of
the Escrow Fund retained pursuant to the proviso in the first sentence of this
Section 8.3(a) shall be released to Company Shareholders or released to Parent
(as appropriate) promptly upon resolution of each specific indemnification
claim involved. Escrow Shares shall be released to the respective Company
Shareholders in proportion to their respective share of the Merger
Consideration. Parent will take such action as may be necessary to cause such
certificates to be issued in the names of the appropriate Persons. Certificates
representing Escrow Shares so issued that are subject to resale restrictions
under applicable securities laws will bear a legend to that effect. No
fractional shares shall be released and delivered from Escrow to the Company
Shareholders. In lieu of any fraction of an Escrow Share to which a Company
Shareholder would otherwise be entitled, such holder will receive from Parent
an amount of cash (rounded to the nearest whole cent) equal to the product of
such fraction multiplied by the average of the closing prices of Parent Common
Stock as reported on the Nasdaq National Market during the forty (40) trading
days ending two (2) trading days prior to the date such shares are released
from the Escrow Fund. 

          (b)          No
Escrow Shares or any beneficial interest therein may be pledged, sold, assigned
or transferred, including by operation of law, by any Company Shareholder or be
taken or reached by any legal or equitable process in satisfaction of any debt
or other liability of any such shareholder, prior to the delivery to such
shareholder of his pro rata portion of the Escrow Shares by the Escrow Agent as
provided herein. 

          (c)          The
Escrow Agent is hereby granted the power to effect any transfer of Escrow
Shares contemplated by this Agreement. Parent will cooperate with the Escrow
Agent in promptly issuing stock certificates to effect such transfers. 

          Section
8.4          Claims Upon
Escrow Fund. Upon receipt by the Escrow Agent on or before the last day of
the General Survival Period of a certificate signed by any officer of Parent
(an “Escrow Claim Certificate”) stating that with respect to the
indemnification obligations of the Company Shareholders set forth in Section
8.2, Damages exist and specifying in reasonable detail the individual items of
such Damages included in the amount so stated, the date each such item was
paid, properly accrued or arose, and the nature of the misrepresentation,
breach of warranty, covenant or claim to which such item is 

38

related, the Escrow Agent shall, subject to the provisions of this
Article VIII, deliver to Parent out of the Escrow Fund, as promptly as
practicable, shares of Parent Common Stock valued at the average of the closing
prices of Parent Common Stock as reported on the Nasdaq National Market during
the forty (40) trading days ending two (2) trading days prior to the date such
shares of Parent Common Stock are delivered to Parent.

          Section
8.5          Objections to
Claims. 

          (a)          At
the time of delivery of any Escrow Claim Certificate to the Escrow Agent, a
duplicate copy of such Escrow Claim Certificate shall be delivered to the
Shareholders’ Agent and for a period of thirty (30) days after such delivery,
the Escrow Agent shall make no delivery of Parent Common Stock and/or cash
pursuant to Section 8.4 hereof unless the Escrow Agent shall have received
written authorization from the Shareholders’ Agent to make such delivery. After
the expiration of such thirty (30) day period, the Escrow Agent shall make
delivery of the Parent Common Stock and/or cash in accordance with Section 8.4
hereof, provided that no such payment or delivery may be made if the
Shareholders’ Agent shall object in a written statement to the claim made in
the Escrow Claim Certificate, and such statement shall have been delivered to
the Escrow Agent and to Parent prior to the expiration of such thirty (30) day
period; and provided further that if Shareholders’ Agent shall only object to a
portion of the claim, the Escrow Agent shall pay to Parent the uncontested
portion of the claim. 

          (b)          In
case the Shareholders’ Agent shall so object in writing to any claim or claims
by Parent made in any Escrow Claim Certificate, which objection shall state in
reasonable detail the basis for such objection, Parent shall have thirty (30)
days to respond in a written statement to the objection of the Shareholders’
Agent. If after such thirty (30) day period there remains a dispute as to any
claims, the Shareholders’ Agent and Parent shall attempt in good faith for
sixty (60) days to agree upon the rights of the respective parties with respect
to each of such claims. If the Shareholders’ Agent and Parent should so agree,
a memorandum setting forth such agreement shall be prepared and signed by both
parties and shall be furnished to the Escrow Agent. The Escrow Agent shall be
entitled to rely on any such memorandum and shall distribute the Parent Common
Stock or other property from the Escrow Fund in accordance with the terms
thereof. 

          Section
8.6          Claims by
Company Indemnitees. 

          (a)          Subject
to the provisions of this Article VIII, upon receipt by Parent of a certificate
signed by the Shareholders’ Agent (an “Agent Certificate”) that with
respect to the indemnification obligations of Parent and Merger Sub set forth
in Section 8.2, Damages exist and specifying in reasonable detail the
individual items of Damages included in the amount so stated, the date each
item was paid or properly accrued or arose, and the nature of the
misrepresentation, breach of warranty or covenant or other claim to which such
item is related, the Parent shall, subject to the provisions of this Article
VIII, deliver to the Shareholders’ Agent as promptly as practicable cash,
shares of Parent Common Stock, or a combination thereof, equal to such Damages;
provided that in the event Parent elects to issue shares of Parent Common Stock
it shall deliver an undertaking to Shareholders’ Agent to register such shares
for resale under the Securities Act in accordance with Section 5.13 hereof; and
provided further that Parent shall issue shares of Parent Common Stock to the
extent Parent reasonably determines that the payment in cash Stock will
jeopardize the treatment of the Merger as a reorganization under Section 368(a)
of the Code. 

          (b)          Parent
shall have thirty (30) days after delivery of an Agent Certificate to object to
any claim or claims made by such Agent Certificate in a written statement
delivered to Shareholders’ Agent, which objection shall state in reasonable
detail the basis for such objection. In case Parent shall so object in writing
to any claim or claims made by the Shareholders’ Agent in the Agent Certificate,
the 

39

Shareholders Agent shall have thirty (30) days to respond in a written
statement to the objection of Parent. If after such thirty (30) day period
there remains a dispute as to any claims, the Shareholders’ Agent and Parent
shall attempt in good faith for sixty (60) days to agree upon the rights of the
respective parties with respect to each of such claims. If the Shareholders’
Agent and Parent should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties. Parent shall, if agreed in such
memorandum, make payment for claims or other disposition as agreed in such
memorandum and such performance shall satisfy all of Parent’s obligations as to
such claim.

          Section
8.7          Shareholders’
Agent.

          (a)          Matt
Boston shall be constituted and appointed as agent (“Shareholders’ Agent”) for and on behalf of the Company Shareholders to give and receive notices and
communications, to authorize delivery to Parent of the Parent Common Stock
and/or cash from the Escrow Fund in satisfaction of claims by Parent, to object
to such deliveries, to make claims on behalf of the Company Shareholders
pursuant to Section 8.6, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to, such claims, and to take all actions
necessary or appropriate in the judgment of the Shareholders’ Agent for the
accomplishment of the foregoing. Such agency may be changed by the holders of a
majority in interest of the Escrow Fund from time to time upon not less than 10
days’ prior written notice to Parent. No bond shall be required of the
Shareholders’ Agent, and the Shareholders’ Agent shall receive no compensation
for his services. Notices or communications to or from the Shareholders’ Agent
shall constitute notice to or from each of the Company Shareholders.

          (b)          The
Shareholders’ Agent shall not be liable for any act done or omitted hereunder
as Shareholder’ Agent while acting in good faith and in the exercise of
reasonable judgment and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith. The Company
Shareholders shall severally indemnify the Shareholders’ Agent and hold him
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholders’ Agent and arising out
of or in connection with the acceptance or administration of his duties
hereunder.

          Section
8.8          Actions of
the Shareholders’ Agent. A decision, act, consent or instruction of the
Shareholders’ Agent shall constitute a decision of all Company Shareholders and
shall be final, binding and conclusive upon each such Company Shareholder, and the
Escrow Agent and Parent may rely upon any decision, act, consent or instruction
of the Shareholders’ Agent as being the decision, act, consent or instruction
of each and every such Company Shareholder. The Escrow Agent and Parent are
hereby relieved from any liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction of the Shareholders’
Agent.

          Section
8.9          Third-Party
Claims. In the event Parent becomes aware of a third-party claim which
Parent believes may result in a demand against the Escrow Fund, Parent shall
notify the Shareholders’ Agent of such claim, and the Shareholders’ Agent and
the Company Shareholders shall be entitled, at their expense, to participate in
any defense of such claim with the consent of Parent, which shall not be
unreasonably withheld. Parent shall have the right in its sole discretion to
settle any such claim. In the event that the Shareholders’ Agent has consented
to any such settlement, the Shareholders’ Agent shall have no power or
authority to object under Section 8.5 or any other provision of this Article
VIII to the amount of any claim by Parent against the Escrow Fund for indemnity
with respect to such settlement.

40

ARTICLE IX

GENERAL PROVISIONS

          Section
9.1          Notices. All notices and other communications hereunder shall be in writing and shall be
deemed duly delivered if delivered personally (upon receipt), or three (3)
business days after being mailed by registered or certified mail, postage
prepaid (return receipt requested), or one (1) business day after it is sent by
commercial overnight courier service, or upon transmission, if sent via
facsimile (with confirmation of receipt) to the parties at the following
address (or at such other address for a party as shall be specified by like
notice):

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 if to Parent
 or Merger Sub, to:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Zygo Corporation

 
	
  

 	
  

 	
  

 	
 Laurel Brook Road

 
	
  

 	
  

 	
  

 	
 Middlefield, CT 06455

 
	
  

 	
  

 	
  

 	
 Attention: Chairman of the
 Board of Directors

 
	
  

 	
  

 	
  

 	
 Fax: (860) 347-8372

 
	
  

 	
  

 	
  

 	
 Tel: (860) 347-8506

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

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

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Fulbright & Jaworski,
 L.L.P.

 
	
  

 	
  

 	
  

 	
 666 Fifth Avenue

 
	
  

 	
  

 	
  

 	
 New York, NY 10103

 
	
  

 	
  

 	
  

 	
 Attention: Paul Jacobs,
 Esq.

 
	
  

 	
  

 	
  

 	
                Sheldon
 G. Nussbaum, Esq.

 
	
  

 	
  

 	
  

 	
 Fax: (212) 318-3400

 
	
  

 	
  

 	
  

 	
 Tel: (212) 318-3000

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 if to
 Company, to:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Zemetrics, Inc.

 
	
  

 	
  

 	
  

 	
 3708 East Columbia Street,
 Suite 110

 
	
  

 	
  

 	
  

 	
 Tucson, AZ 85714-3413 

 
	
  

 	
  

 	
  

 	
 Attention: Matt Boston

 
	
  

 	
  

 	
  

 	
 Fax: (520) 901-6529

 
	
  

 	
  

 	
  

 	
 Tel: (520) 202-4399

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

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

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Hecker & Muehlebach,
 PLLC

 
	
  

 	
  

 	
  

 	
 405 W. Franklin

 
	
  

 	
  

 	
  

 	
 Tucson, AZ 85701

 
	
  

 	
  

 	
  

 	
 Attention: Lawrence M.
 Hecker

 
	
  

 	
  

 	
  

 	
 Fax: (520) 798-3803

 
	
  

 	
  

 	
  

 	
 Tel: (520) 620-0405

 
	
  

 	
  

 	
  

 	
  

 

41

	
  
 	
  
 	
  
 	
  
 
	
  
 	
 (c)
 	
 if to
 Shareholders’ Agent, to:
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
  
 	
  
 	
 Matt Boston
 
	
  
 	
  
 	
  
 	
 c/o Zemetrics, Inc.
 
	
  
 	
  
 	
  
 	
 3708 East Columbia Street,
 Suite 110
 
	
  
 	
  
 	
  
 	
 Tucson, AZ 85714-3413
 
	
  
 	
  
 	
  
 	
 Fax: (520) 901-6529
 
	
  
 	
  
 	
  
 	
 Tel: (520) 202-4399
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
  
 	
  
 	
 with a copy to (which
 shall not constitute notice):
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
  
 	
  
 	
 Hecker & Muehlebach,
 PLLC
 
	
  
 	
  
 	
  
 	
 405 W. Franklin
 
	
  
 	
  
 	
  
 	
 Tucson, AZ 85701
 
	
  
 	
  
 	
  
 	
 Attention: Lawrence M.
 Hecker
 
	
  
 	
  
 	
  
 	
 Fax: (520) 798-3803
 
	
  
 	
  
 	
  
 	
 Tel: (520) 620-0405
 

          Section
9.2          Definitions. For
purposes of this Agreement:

          (a)          an
“Affiliate” of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person;

          (b)          any
reference to a party’s “knowledge” means such party’s actual knowledge
after reasonable inquiry of officers, directors and other employees of such
party reasonably believed to have knowledge of such matters

          (c)          any
reference to any event, change, condition or effect being “material”
with respect to any entity or group of entities means any material event,
change, condition or effect related to the financial condition, properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of such entity or group of entities;

          (d)          
“Material Adverse Effect” means, with respect to any Person, any change,
effect, event, occurrence or state of facts (or any development that has had or
is reasonably likely to have any change or effect) that is materially adverse
to the business, financial condition, results of operations or prospects of
such Person and its Subsidiaries, taken as a whole, or which would prevent or
materially delay the consummation of the transactions contemplated hereby;
provided, however, none of the following shall be deemed in themselves, either
alone or in combination, to constitute, and none of the following shall be
taken into account in determining whether there has been a Material Adverse
Effect: (i) any change in the market price or trading volume of the capital stock
of such Person after the date hereof, (ii) changes, events or occurrences in
the United States securities markets which are not specific to such Person,
(iii) any adverse change, event, development or effect arising from or relating
to general business or economic conditions which is not specific to such Person
and its Subsidiaries, (iv) any failure by such Person to meet internal
forecasts or projections or published revenue or earnings predictions for any
period ending (or for which revenues or earnings are released) on or after the
date of this Agreement, and (vi) any adverse change, event, development or
effect arising from or relating to any change in GAAP;

          (e)          
“Person” means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and

          (f)          
“Subsidiary” of any Person means, with respect to such Person, any
corporation, partnership, joint venture or other legal entity of which such Person
(either alone or through or together with any other subsidiary), owns, directly
or indirectly, 50% or more of the stock or other equity interests

42

the holders of which are generally entitled to vote for the election of
the Board of Directors or other governing body of such corporation or other
legal entity.

          Section
9.3          Counterparts.
This Agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.

          Section
9.4          Entire
Agreement; Nonassignability; Parties in Interest. This Agreement and the
documents and instruments and other agreements specifically referred to herein
or delivered pursuant hereto, including the Exhibits, the Schedules, including
the Company Disclosure Schedule, (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any
termination of this Agreement or the Closing, in accordance with its terms, (b)
except as set forth in Section 9.9, are not intended to confer upon any other
Person any rights or remedies hereunder, and (c) shall not be assigned by
operation of law or otherwise without the written consent of the other party.

          Section
9.5          Severability.
In the event that any provision of this Agreement, or the application thereof
becomes or is declared by a court of competent jurisdiction to be illegal, void
or unenforceable, the remainder of this Agreement will continue in full force
and effect and the application of such provision to other Persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.

          Section
9.6          Remedies
Cumulative. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.

          Section
9.7          Governing Law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware applicable to parties residing in
Delaware, without regard applicable principles of conflicts of law.

          Section
9.8          Rules of
Construction. The captions in this Agreement, including but not limited to
specific section number references included in the Disclosure Schedules, are
for convenience of reference only and shall not limit or otherwise affect any
of the terms or provisions hereof. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word “including” shall mean including without limitation. Any reference in this
Agreement to a “day” or number of “days” (without the explicit qualification of
“business”) shall be interpreted as a reference to a calendar day or number of
calendar days. If any action or notice is to be taken or given on or by a
particular calendar day, and such calendar day is not a business day, then such
action or notice shall be deferred until, or may be taken or given on, the next
business day. References to the term “business day” shall mean any day which is
not a Saturday, Sunday or day on which banks in New York, New York are
authorized or required by law to close. The disclosure of any matter in the
Disclosure Schedules hereto shall expressly not be deemed to constitute an
admission by Company, Parent or Merger Sub, or to otherwise imply, that any
such matter is material for the purposes of this Agreement. The mere listing
(or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or

43

warranty made herein (unless the representation or warranty has to do
with the existence of the document or other item itself). The parties have
participated jointly, and have been represented by counsel, in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. The parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation, warranty
or covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the party has not breached shall not detract from
or mitigate the fact that the party is in breach of the first representation,
warranty or covenant.

          Section
9.9          Third Party
Beneficiaries. The directors and officers and option holders of Company
shall be third party beneficiaries as to provisions herein (Sections 5.13 and
5.14, as applicable) intended to benefit them.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

44

          IN WITNESS
WHEREOF, Company, Parent and Merger Sub have caused this Agreement to be
executed and delivered by each of them or their respective officers thereunto
duly authorized, all as of the date first written above. 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 ZEMETRICS, INC

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 	
 /s/ MATT BOSTON

 
	
  

 	
  

 	 

 
	
  

 	
  

 	
  

 	
 Name:  Matt
 Boston

 
	
  

 	
  

 	
  

 	
 Title:
    President

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 ZYGO CORPORATION

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 	
 /s/ BRUCE W. WORSTER

 
	
  

 	
  

 	 

 
	
  

 	
  

 	
  

 	
 Name:  Bruce W.
 Worster

 
	
  

 	
  

 	
  

 	
 Title:    Chairman
 of the Board

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 ZMI ACQUISITION
 CORPORATION

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 	
 /s/ BRUCE W. WORSTER

 
	
  

 	
  

 	 

 
	
  

 	
  

 	
  

 	
 Name:  Bruce W.
 Worster

 
	
  

 	
  

 	
  

 	
 Title:    Director

 

[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]Exhibit 10.3

ZYGO CORPORATION

STOCK OPTION AGREEMENT

AGREEMENT, made as of the 18th day of January, 2010, by and between Zygo Corporation, a Delaware corporation (the “Company”), and Dr. CHRIS L. KOLIOPOULOS (the “Optionee”).

W I T N E S S E T H:

WHEREAS, as an inducement to Optionee’s agreement to become President and Chief Executive Officer of the Company, the Company desires to grant to the Optionee, and the Optionee desires to accept, an option to purchase shares of common stock, $.10 par value, of the Company (the “Common Stock”) upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

1.          The Company hereby grants to the Optionee an option to purchase 250,000 shares of Common Stock at an exercise price per share of $10.83.  This option is not intended to be treated as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 

2.          Notwithstanding anything to the contrary contained herein, unless sooner terminated, this option shall expire if and to the extent it is not exercised within ten years from the date hereof.

3.          Subject to the provisions hereof and Optionee’s Executive Employment Agreement dated January 18, 2010 (the “Employment Agreement”), this option shall become exercisable in accordance with the following schedule based upon the period of the Optionee’s continuous employment or other service with the Company or any one or more of its subsidiaries, affiliates or associated entities (collectively with the Company, the “Company Group”) following the date hereof:

     

	 
	 
	 
	 
	 

	
    Period of
Continuous
Service
	 	
      Incremental
Percentage
Exercisable
	 	
      Cumulative
Percentage
Exercisable

	
    Less than 1 year
	 	 
	 	
      0
	
       %
	 
	 	 
	 	
      0
	
       %
	 

	
    1 year
	 	 
	 	
      25
	
       %
	 
	 	 
	 	
      25
	
       %
	 

	
    2 years
	 	 
	 	
      25
	
       %
	 
	 	 
	 	
      50
	
       %
	 

	
    3 years
	 	 
	 	
      25
	
       %
	 
	 	 
	 	
      75
	
       %
	 

	
    4 years or more
	 	 
	 	
      25
	
       %
	 
	 	 
	 	
      100
	
       %
	 

     

4.          This option may be exercised by written notice to the Company stating the number of full shares with respect to which it is being exercised, and accompanied by payment of the exercise price for the number of shares so purchased and payment or arrangement for payment of any federal, state or local income or other taxes incurred by reason of the exercise and required to be withheld by the Company.  The exercise price shall be payable by cash or check or, if the Committee in its sole and absolute 

 

	
             
 	
            - 1 -
 

 

 

discretion so permits, payment  may also be made in whole or in part (a) by means of any cashless exercise procedure approved by the Committee, if the Common Stock is publicly traded, (b) in the form of unrestricted shares of Common Stock which, (i) in the case of shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the shares of Common Stock as to which such option shall be exercised, (c) in any other form of consideration approved by the Committee and permitted by applicable law, or (d) in any combination of the foregoing.

5.          Upon a termination of the Optionee’s employment or other service with the Company Group for any reason other than a termination by the Company Group for Cause (as defined in the Employment Agreement), then (a) that portion of this option, if any, which is not then exercisable shall terminate, and (b) unless sooner terminated under the terms hereof, that portion of this option, if any, which is then exercisable shall remain exercisable for the ninety (90) day period  commencing on the date of such termination and, to the extent not exercised during such period, shall thereupon terminate. If, pursuant to the Employment Agreement, the Optionee’s employment is terminated for any reason other than by the Company for Cause or by the Optionee
without Good Reason (as defined in the Employment Agreement), Optionee shall become fully vested in the option. If Optionee’s employment is terminated by the Company for Cause (or if such termination occurs at a time when grounds for a termination for Cause exist), this option (whether or not otherwise exercisable) shall thereupon terminate and cease to be exercisable.

6.          The Company’s obligation to sell and deliver shares upon the exercise of this option is subject to such compliance with federal and state laws, rules and regulations applying to the authorization, issuance or sale of securities as the Committee deems necessary or advisable. The Company shall be entitled to postpone the time of delivery of certificates for shares of its Common Stock for such additional time as the Company shall deem necessary or desirable to enable it to (a) file a registration statement under the Securities Act of 1933, as amended, with respect to the shares of Common Stock which may be purchased under this option, or (b) comply with the listing requirements of any securities exchange upon which the Common Stock may be listed.

7.          This option is not assignable or transferable except upon the Optionee’s death to a beneficiary designated by the Optionee in a manner acceptable to the Committee or, in the absence of a surviving designated beneficiary, pursuant to the Optionee’s will or by the laws of descent and distribution.  This option is exercisable during the Optionee’s lifetime only by the Optionee.  In the event of any attempt by the Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of this option or any right hereunder, except as provided for herein, or in the event of any levy of any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate this option by notice to the Optionee and
it shall thereupon become null and void.

8.          Nothing contained in this Agreement shall confer upon the Optionee any right with respect to the continuation of the Optionee’s employment or other service with 

 

	
             
 	
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any one or more of the Company Group or interfere in any way with the right of the Company Group at any time to terminate such employment or other service or to increase or decrease, or otherwise adjust, the other terms and conditions of the Optionee’s employment or other service with the Company Group.

9.          Neither the Optionee nor any person entitled to exercise the Optionee’s rights in the event of death shall have any of the rights of a stockholder with respect to the shares subject to this option, except to the extent that certificates for such shares shall have been issued upon the exercise of this option as provided for herein.

10.        This option is intended to be an inducement grant under NASDAQ Listing Rule 5635(c)(4) and is not intended to be granted pursuant to the Company’s Equity Incentive Plan, as amended (the “Plan”). Notwithstanding the preceding sentence, this option will be governed by the terms and conditions of the Plan, including, without limitation, the provisions of Section 11 of the Plan, as if the option had been granted pursuant to the Plan.  The Optionee agrees to be bound by the terms and conditions of this Agreement and the Plan (a copy of which the Optionee acknowledges receipt of) and any future amendments to the Plan which do not adversely affect the Optionee’s rights hereunder.  The provisions of the Plan are hereby incorporated by reference and
shall govern if and to the extent that there are inconsistencies between the provisions of the Plan and this Agreement.  In the event that any controversy shall arise with respect to the nature, scope or extent of any one or more rights conferred by this Agreement, the determination of the Committee of the rights of the Optionee shall be final, binding and conclusive upon the Optionee and any other person who shall assert any right based upon this Agreement.

11.        This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its principles of conflicts of law.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and may not be modified, other than as provided in the Plan, except by written instrument executed by the parties.

 

[SIGNATURE PAGE FOLLOWS]

 

 

	
             
 	
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IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.

ZYGO CORPORATION

By:  /s/ BRUCE W. WORSTER                

Name:  Bruce W. Worster

Title:  Chair, Board of Directors

 

            /s/ CHRIS KOLIOPOULOS          

Dr. Chris L. Koliopoulos

 

 

 

Signature Page – Dr. Koliopoulos Option Agreement

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