AGREEMENT AND PLAN OF MERGER BY AND AMONG EBIX, INC., CONFIRMNET CORPORATION, EBIX SOFTWARE INDIA PRIVATE LIMITED, CONFIRMNET ACQUISITION SUB, INC. AND CRAIG A. IRVING, AS SHAREHOLDERS’ REPRESENTATIVE DATED AS OF NOVEMBER 1, 2008

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

EBIX, INC.,

CONFIRMNET CORPORATION,

EBIX SOFTWARE INDIA PRIVATE LIMITED,

CONFIRMNET ACQUISITION SUB, INC.

AND

XXXXX X. XXXXXX, AS SHAREHOLDERS’ REPRESENTATIVE

DATED AS OF NOVEMBER 1, 2008

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made as of November 1, 2008, by and among EBIX, INC., a Delaware corporation (“Parent”); EBIX SOFTWARE INDIA PRIVATE LIMITED, a private limited company formed under the laws of India and a wholly-owned subsidiary of Parent (“Intermediate Parent”), CONFIRMNET CORPORATION, a California corporation (the “Company”); CONFIRMNET ACQUISITION SUB, INC., a California corporation and a wholly-owned subsidiary of Intermediate Parent (“Merger Sub”); and XXXXX X. XXXXXX, as the representative of the shareholders of the Company hereunder (the “Shareholders’ Representative”). Parent, Intermediate Parent, Merger Sub, the Company and the Shareholders’ Representative are sometimes collectively referred to herein as the “Parties” and each individually as a “Party.” Unless otherwise defined herein, certain terms used in this Agreement with initial capital letters are defined in Appendix A.

WITNESSETH:

WHEREAS, the Company is engaged in the business of providing insurance business process outsourcing services, mainly in the area of insurance certificates (the “Business”).

WHEREAS, upon the terms and subject to the conditions of this Agreement, Parent, Intermediate Parent and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the “Merger”).

WHEREAS, the respective Boards of Directors or similar governing bodies of Parent, Intermediate Parent, the Company and Merger Sub have each determined that the Merger and the other transactions contemplated hereby are consistent with, and in furtherance of, their respective business strategies and goals.

WHEREAS, the Company, Parent, Intermediate Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

WHEREAS, the Board of Directors of the Company has resolved to recommend the Merger to the holders of the Company Capital Stock, has determined that the Merger Consideration is fair to the holders of such Company Capital Stock, and has resolved to recommend that the holders of each class and series of Company Capital Stock accept the Merger Consideration and approve the Merger upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants of the Parties as hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Parties, intending to be legally bound, hereto hereby agree as follows:

ARTICLE I
THE MERGER

SECTION 1.1 MERGER. In consideration of the payment of the Merger Consideration (as defined in Section 1.2) by Parent and Intermediate Parent, who shall be jointly and severally liable for all obligations under this Agreement, and subject to the terms and conditions hereinafter set forth, (a) Merger Sub shall be merged with and into the Company, at the Effective Time, with the Company being the surviving corporation (the “Surviving Corporation”), in accordance with the laws of the State of California and other applicable Law, and (b) from and after the Effective Time, the Merger shall have all the effects of a merger under the laws of the State of California and other applicable Law.

SECTION 1.2 MERGER CONSIDERATION. The aggregate consideration to be paid by Parent and Intermediate Parent, jointly and severally, under this Agreement at the Closing shall equal $7,354,657, less any adjustments pursuant to Section 1.2(d) hereof, as set forth on the Merger Consideration Certificate (as defined in Section 2.1) (the “Cash Merger Consideration”) plus the Contingent Merger Consideration (as defined in Section 1.2(b)) (collectively, the “Merger Consideration”), and shall be payable to the holders of Company Capital Stock (collectively, the “Shareholders”) in accordance with the provisions of this Agreement and in the manner and in the proportions set forth in the Merger Consideration Certificate as follows:

(a) Cash Consideration at Closing. The Cash Merger Consideration will be paid in cash at the Closing by wire transfer of immediately available funds to the Shareholders, other than dissenting Shareholders, as directed in the Merger Consideration Certificate.

(b) Contingent Consideration. Parent and Intermediate Parent, jointly and severally, will pay to the Shareholders contingent consideration in addition to any other amounts payable hereunder as follows (the “Contingent Merger Consideration”):

•

First Earn Out. A cash consideration equivalent to 2.077 times the Gross Revenue for the three (3) month period beginning October 1, 2008 will be payable to the Shareholders by Parent and Intermediate Parent, jointly and severally (the “First Earn Out”). This cash consideration, in accordance with the Merger Consideration Certificate, will be payable promptly after financial results for the 3-month period beginning at October 1, 2008 are tabulated by Parent (but in no event later than 30 days after the end of calendar year 2008); provided, however, that any consideration payable to the Shareholders by Parent shall be adjusted to reflect the Company’s actual Gross Revenue for the period of January 1, 2008 through September 30, 2008. The cash consideration due under the First Earn Out to Shareholders shall be either increased or decreased by 2.077 times the amount that the Company’s Gross Revenue for January 1, 2008 through September 30, 2008, as determined by Parent, is greater or less than $3,541,000 (the Company’s representation of its Gross Revenue for this period on its Interim Financial Statements).

•

Second Earn Out. A cash consideration equivalent to 1.538 times the incremental increase, if any, of Gross Revenue for the 12-month period beginning January 1, 2009 as compared to the Gross Revenue for the 12-month period beginning January 1, 2008 (excluding, however, any Gross Revenue from Xxxxx & XxXxxxxxx Companies, Inc. or any of its subsidiaries, affiliates or related companies, for certificates of insurance issuance pursuant to the Xxxxx Agreement (as defined below)) will be payable to the Shareholders by Parent and Intermediate Parent, jointly and severally (the “Second Earn Out”). This cash consideration, in accordance with the Merger Consideration Certificate, will be payable promptly after financial results for the 12-month period beginning January 1, 2009 are tabulated by Parent (but in no event later than 30 days after the end of calendar year 2009);

AND

•

Third Earn Out. A cash consideration equivalent to 1 times the Xxxxx Net Revenue for the 12-month period commencing on the first anniversary of the Xxxxx Agreement (as defined below) (the “Xxxxx Earn Out Period”). This cash consideration, in accordance with the Merger Consideration Certificate, will be payable promptly after financial results for the Xxxxx Earn Out Period are tabulated by Parent (but in no event later than 30 days after the end of the Xxxxx Earn Out Period). The “Xxxxx Agreement” means any contracts, agreements or arrangements entered into by Parent, Intermediate Parent and/or the Surviving Corporation and/or any subsidiary, Affiliate or related company of Parent, Intermediate Parent or the Surviving Corporation with Xxxxx & XxXxxxxxx Companies, Inc. or any of its subsidiaries, affiliates or related companies during the two (2) year period after the Closing Date.

(i) Not later than January 30, 2009 (for the First Earn Out), January 30, 2010 (for the Second Earn Out) and 30 days after the end of the Xxxxx Earn Out Period (for the Third Earn Out), respectively, Parent shall deliver to each Shareholder a copy of the financial statements of Parent and/or the Surviving Corporation and a certificate showing the calculation of the Contingent Merger Consideration for the applicable period, certified by the Chief Financial Officer of Parent to be a good faith calculation of the Contingent Merger Consideration derived from the accounting records of Parent (the “Contingent Gross Revenue Certificate”).

(ii) Parent shall make available to the Shareholders’ Representative copies of all work papers, documents, receipts, invoices and other materials and grant the Shareholders’ Representative or his agent such access to Parent’s personnel and outside auditors during regular business hours as may be necessary or reasonably requested by the Shareholders’ Representative or his agent in his or her review of the Contingent Gross Revenue Certificate or in connection with any dispute or disagreement relating to the determination of the Cash Merger Consideration or the Contingent Merger Consideration. If the Shareholders’ Representative does not timely deliver a Contingent Gross Revenue Certificate Contest Notice (as defined below) in accordance with Section 1.2(b)(iii), the Contingent Gross Revenue Certificate shall be final and binding on all Parties.

(iii) In the event the Shareholders’ Representative contests any part of the calculation of the Cash Merger Consideration or the Contingent Merger Consideration, as set forth in the Contingent Gross Revenue Certificate, the Shareholders’ Representative shall give Parent written notice of his objections thereto (the “Contingent Gross Revenue Certificate Contest Notice”) within 15 days following the delivery of the Contingent Gross Revenue Certificate.

(iv) The Contingent Merger Consideration, as determined by Parent in good faith from its accounting records, shall be timely paid by Parent and Intermediate Parent, jointly and severally, in accordance with this Section 1.2(b), regardless of Parent’s receipt of any Contingent Gross Revenue Certificate Contest Notice pursuant to Section 1.2(b)(iii), by wire transfer of immediately available funds, to such accounts for each Shareholder as are set forth in the Merger Consideration Certificate, provided that if the Merger Consideration Certificate fails to identify such an account for any Shareholder, such Shareholder’s portion of the Contingent Merger Consideration shall be paid to the Shareholders’ Representative on behalf and for the benefit of such Shareholder.

(v) During the 30-day period following the delivery of a Contingent Gross Revenue Certificate Contest Notice, Parent and the Shareholders’ Representative shall attempt to resolve in good faith any differences which Parent and the Shareholders’ Representative may have with respect to any matter specified in the Contingent Gross Revenue Certificate Contest Notice.

(vi) If the Parties are unable to agree upon the amount of any Cash Merger Consideration or any Contingent Merger Consideration due hereunder, the Parties shall promptly thereafter cause an independent accountant reasonably satisfactory to Parent and the Shareholders’ Representative (the “Independent Accountant”) to review the disputed item(s) and amount(s) as set forth in the Contingent Gross Revenue Certificate Contest Notice for the purposes of calculating the applicable Contingent Merger Consideration due hereunder. In making such determination, such Independent Accountant shall consider only those items or amounts in the calculation of the Contingent Merger Consideration set forth in the Contingent Gross Revenue Certificate Contest Notice. The Independent Accountant shall deliver to Parent and the Shareholders’ Representative, as promptly as practicable (and in any event within 60 days of the Parties’ submission of the matter to the Independent Accountant), a report that explains any discrepancies and sets forth the Independent Accountant’s calculation of the actual Contingent Merger Consideration due hereunder. Such report and the calculations set forth therein shall be final and binding upon the Parties, and shall not be subject to challenge in a court of law or otherwise. In the event that the Independent Accountant concludes that there was an underpayment of Cash Merger Consideration or Contingent Merger Consideration, Parent and Intermediate Parent, jointly and severally, shall immediately pay the amount by which the Cash Merger Consideration or Contingent Merger Consideration was underpaid, together with simple interest thereon at the rate of eight percent (8%) per annum. The costs and expenses of the Independent Accountant shall be initially be paid by Parent and Intermediate Parent, jointly and severally, but if the Independent Accountant concludes that there was no underpayment of the Contingent Merger Consideration, then such costs and expenses shall be paid by the Shareholders, in the form of a deduction from any future payment of Contingent Merger Consideration (with interest thereon at the rate of eight percent (8%) per annum).

(c) Parent and Intermediate Parent Covenants. In order to provide the Shareholders with a reasonable opportunity to receive the maximum Contingent Merger Consideration pursuant to this Agreement, Parent, Intermediate Parent and their Affiliates, and their respective directors, stockholders, officers, partners, employees, successors and assigns, shall: (i) continue the existence of the Company as a separate legal entity at least through December 31, 2009; (ii) operate the Business as consistent as is reasonably practicable with the Company’s previous operation of the Business; (iii) refrain from diverting or otherwise causing any of the Company’s current prospects or customers to instead do business with other divisions or entities controlled by Parent or its Affiliates, at least through the end of the Xxxxx Earn Out Period; and (iv) be subject to an express obligation of good faith and fair dealing with respect to the Shareholders, including the Shareholders’ Representative.

(d) Adjustments to Cash Merger Consideration. Concurrently with the Closing, Parent and Intermediate Parent, jointly and severally, shall wire transfer (i) to California Bank & Trust the amount of all outstanding principal and interest under the Company’s existing line of credit, (ii) to Xxxxx X. Xxxxxxx $100,000 for services rendered for the benefit of the Shareholders, (iii) any amounts due from the Company to Xxxxxx Xxxxxx under that certain Letter Agreement dated November 4, 2008 between him and the Company, and (iv) any amounts due from the Company to its counsel Xxxxxxxx, Xxxx, Hargreaves & Savitch LLP (“Xxxxxxxx”). The Cash Merger Consideration shall be reduced by the amounts provided for in this Section 1.2(d), less any funds received or due to the Company for exercised stock options.

(e) Reimbursement of Business Expenses. The Shareholders’ Representative has incurred business expenses on behalf of the Company in the aggregate amount of $77,843.81, and the Company’s Chief Executive Officer, Xxxxxx Xxxxxx, has incurred business expenses on behalf of the Company in the aggregate amount of $40,000. Such expenses were incurred on behalf of the Company utilizing their personal credit cards, and have been properly booked as accounts in the Company’s financial statements as of September 30, 2008. Unless the Company has reimbursed these expenses prior to the Closing, Parent and Intermediate Parent, jointly and severally, will, after the Closing, cause such business expenses to be promptly reimbursed.

SECTION 1.3 EFFECTS OF THE MERGER. At the Effective Time, the separate corporate existence of Merger Sub shall cease and the Company, as the Surviving Corporation, shall succeed to and possess all of the properties, rights, powers, privileges, franchises, patents, trademarks, licenses, registrations, and other assets of every kind and description of the Company and Merger Sub, and shall be subject to, and be responsible for, all debts, liabilities, and obligations of the Company and Merger Sub, all without further act or deed, and in accordance with the applicable provisions of the laws of the State of California. Xxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxxxx “Xxx” Xxxxxxxx, Xxxxxxxxxx xxx Xxxxx, and Xxxxxx Xxxxxxxx shall also cease to be directors, officers and employees of the Surviving Corporation, and upon the Closing Date shall tender resignations in the form of Exhibit A attached hereto (the “D & O Resignation and Release Agreements”).

SECTION 1.4 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation and Bylaws of Merger Sub shall be the Articles of Incorporation and Bylaws, respectively, of the Surviving Corporation until thereafter changed or amended as provided

therein; provided, however, that the name of the Surviving Corporation shall be “EBIX BPO Division — San Diego. ”

SECTION 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, in each case, until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualify, as the case may be.

SECTION 1.6 CLOSING; EFFECTIVE TIME.

(a) Closing and Closing Date. Subject to the terms and conditions of this Agreement, the closing of the Merger (the “Closing”) shall take place at 10:00 a.m., local time, on November 24, 2008 (the “Closing Date”) at the offices of Xxxxxxxx, 000 X Xxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000 or at such other time, date or place as the Parties may mutually agree upon in writing.

(b) Effective Time. As soon as practicable after satisfaction or, to the extent permitted hereunder, waiver, of all conditions to the Merger, the Company shall (i) execute a Certificate of Merger in compliance with the requirements of the laws of the State of California (the “Certificate of Merger”), and shall file the Certificate of Merger with the Secretary of State of the State of California in accordance with its Laws, and (ii) make all other filings or recordings and take all such other and further actions as may be required by Law, to make the Merger effective; provided, however, that the Parties shall seek “pre-clearance” of the Certificate of Merger with the Secretary of State of the State of California prior to the Closing. The Merger shall become effective for all purposes under California Law when proper documentation has been filed with the Secretary of State of the State of California.

(c) The Company’s Obligations at Closing. The Company and Shareholders shall deliver to Parent and Intermediate Parent the certificates, agreements, documents and instruments as indicated in Section 8.2.

(d) Parent’s and Intermediate Parent’s Obligations at Closing. At the Closing:

(i) Upon the filing of the Certificate of Merger, Parent and Intermediate Parent, jointly and severally, will pay the Cash Merger Consideration to the Shareholders, in accordance with the terms of this Agreement.

(ii) Parent and Intermediate Parent, jointly and severally, will also deliver to Shareholders the certificates, agreements, documents and instruments as indicated in Section 8.3.

ARTICLE II
CONVERSION OF SHARES; APPOINTMENT OF THE SHAREHOLDERS’ REPRESENTATIVE

SECTION 2.1 CONVERSION OF SHARES OF COMPANY CAPITAL STOCK. At the Effective Time, each holder of issued and outstanding shares of Company Capital Stock, other than such holders who are dissenting Shareholders, shall, subject to the terms and conditions of this Agreement, receive an amount in immediately available funds equal to the amount set forth in a certificate (the “Merger Consideration Certificate”) to be prepared as of the Closing Date and in accordance with the liquidation rights and preferences set forth in the Company’s Articles of Incorporation and signed by the Chief Financial Officer of the Company and the Shareholders’ Representative, which will be binding upon all Shareholders (other than dissenting Shareholders). The Merger Consideration Certificate will also set forth the allocation among the Shareholders of the Contingent Merger Consideration.

SECTION 2.2 DISCLOSURE INFORMATION REGARDING COMPANY CAPITAL STOCK; OPTIONS AND WARRANTS. Each holder of Company Capital Stock will receive (i) pre-Closing disclosure information related to Shareholder approval of the Merger which will highlight the Merger’s impact on Company Capital Stock and include all legally required information regarding dissenting shareholder rights, and (ii) a letter dated as of the Closing Date, signed by the Shareholders’ Representative, acknowledging the Closing of the Merger and confirming the effect on Company Capital Stock. Parent shall have the right to review and comment on both the pre-Merger disclosures and post-Closing letter to the holders of the Company Capital Stock, but the responsibility regarding the content of such communications shall be the sole responsibility of the Company and the Shareholders’ Representative. In addition, the Shareholders’ Representative will take all legally required action to notify all holders of options to purchase shares of Company Capital Stock (the “Options”), if any, and all holders of warrants to purchase shares of Company Capital Stock (the “Warrants”), if any, that such Options and Warrants, if not exercised prior to the Closing Date, will be cancelled and of no further force or effect. The Board of Directors of the Company will take all legally required actions pursuant to any option plan of the Company to terminate such plan and all unexercised options issued and outstanding thereunder as of the Closing Date.

SECTION 2.3 PROCEDURES FOR SHARES NOT SUBMITTED AT CLOSING.

(a) The Company shall mail to each record holder of Company Capital Stock at such holder’s last known address, along with the Company’s pre-Closing disclosure information related to Shareholder approval (as described in Section 2.2), a letter of transmittal (with instructions for its use) containing customary indemnification provisions and substantially in the form attached hereto as Exhibit B (the “Letter of Transmittal”), for such holder to use in surrendering the share certificates or other instruments, if any, which represent such Shareholder’s shares of Company Capital Stock, against payment of the allocable amount of Merger Consideration. No interest will accrue or be paid to the holder of any outstanding share of Company Capital Stock, Warrant or Option.

(b) The Company and the Shareholders’ Representative shall use commercially reasonable efforts to cause each former holder of shares of Company Capital Stock

to surrender such Shareholder’s certificates or other instruments representing such shares to the Company; provided, however, that if any such Shareholder shall be unable to surrender such certificates due to loss, theft, or mutilation thereof, such Shareholder may make a constructive surrender by submitting an affidavit of lost, stolen, or destroyed certificate in the form attached to the Letter of Transmittal.

SECTION 2.4 OPTIONS; WARRANTS.

Before the Closing Date, the Board of Directors of the Company shall adopt such resolutions or take (or cause the Company to take) such other actions as are required to provide for the cancellation of all Options and Warrants, if any, that remain outstanding immediately prior to the Closing Date.

SECTION 2.5 SHAREHOLDERS’ REPRESENTATIVE.

(a) Appointment. In the event of any required vote of the Shareholders, all Shareholders shall, without any further act of any Shareholder, be deemed to have consented to: (i) the indemnification obligations of the Shareholders under Article IX, (ii) the appointment of Xxxxx X. Xxxxxx (or his successor as provided for herein) as their representative for purposes of this Agreement and as attorney-in-fact and agent for and on behalf of each Shareholder (in such capacity, the “Shareholders’ Representative”) under the Transaction Documents; and (iii) the indemnification of the Shareholders’ Representative by the Shareholders contemplated hereby. All actions taken by the Shareholders’ Representative under the Transaction Documents shall be binding upon the Shareholders and their successors as if expressly ratified and confirmed in writing by each of them. The appointment of the Shareholders’ Representative and his successors in accordance with the provisions of this Agreement shall be deemed coupled with an interest and shall be irrevocable.

(b) Scope of Authority. The Shareholders’ Representative is hereby authorized, subject to the provisions of this Section 2.5, for and on behalf of the Shareholders, and without inquiry of and without additional approval from the Shareholders, to:

(i) employ and obtain the advice of legal counsel, accountants and other professional advisors and incur such other reasonable expenses on behalf of the Shareholders in connection with or arising from the Transaction Documents as the Shareholders’ Representative, in his sole discretion, deems necessary or advisable in the performance of his duties as the Shareholders’ Representative;

(ii) interpret all terms and provisions of the Transaction Documents and make any determinations on behalf of the Shareholders as may be required thereunder;

(iii) initiate legal suits or other proceedings in the name of and on behalf of the Shareholders in respect of any matters that arise from or are related to the Transaction Documents;

(iv) receive all notices, communications and deliveries on behalf of the Shareholders under the Transaction Documents and to receive and accept service of legal process in connection with any suit or proceeding arising under the Transaction Documents;

(v) take all such action as may be necessary after the Closing on behalf of the Shareholders to carry out any of the Transactions contemplated by the Transaction Documents and to authorize any disbursements or payments out of the Expense Account (as defined below); and

(vi) negotiate, compromise, settle, and resolve on behalf of the Shareholders any claims that may arise under the Transaction Documents, and take such other action as may be necessary or appropriate in connection therewith, including without limitation the signing of releases and other documents with respect thereto and the making of payments in connection therewith;

(vii) take such other action on behalf of the Shareholders as the Shareholders’ Representative may deem necessary or appropriate in connection with the administration of his duties under the Transaction Documents and the Transactions contemplated hereby and thereby.

(c) Approval of Shareholders’ Representative Actions. Promptly upon receipt of a Notice of Claim hereunder, the Shareholders’ Representative shall deliver such Notice of Claim to the Shareholders whose ownership of Company Capital Stock represents greater than fifty percent (50%) of the issued and outstanding Company Capital Stock (the “Majority Holders”). Notwithstanding anything in this Agreement to the contrary, each Defense Notice shall be based substantially upon the written direction of the Majority Holders and the Shareholders’ Representative may not (i) agree to the defense of any claim, (ii) agree to the settlement of any claims and the making of payments with respect thereto, or (iii) consent to the entry of any judgment with respect thereto, in each case without the prior written approval of the Majority Holders; provided, each Parent Indemnified Party shall be entitled to rely on any and all action taken by the Shareholders’ Representative without any liability to, or obligation to inquire of, any of the Shareholders with respect to whether the Shareholders’ Representative is acting with the prior written approval of the Majority Holders.

(d) Death, Resignation; Removal. In the event that Xxxxx X. Xxxxxx or any successor Shareholders’ Representative dies, becomes unable to perform his or her responsibilities as Shareholders’ Representative or resigns from such position, the Majority Holders shall select another person to fill such vacancy (and shall promptly notify Parent of such substituted Shareholders’ Representative), and such substituted Shareholders’ Representative shall be deemed to be the Shareholders’ Representative for all purposes of the Transaction Documents. Notwithstanding anything to the contrary in this Agreement or any other agreement contemplated hereby, the Majority Holders may at any time, by written notice to the Shareholders’ Representative, remove or replace the Shareholders’ Representative, for any reason and with or without cause, and designate another person to be Shareholders’ Representative for all purposes herein and therein. Promptly following the removal or replacement of the Shareholders’ Representative, the Majority Holders shall provide written notice thereof to Parent.

(e) No Liability; Indemnification. All decisions and actions by the Shareholders’ Representative, including, without limitation, any agreement between the Shareholders’ Representative and Parent relating to indemnification obligations of the

Shareholders under this Section 2.5(e), including the defense or settlement of any claims and the making of payments with respect thereto, shall be binding upon all of the Shareholders, and no Shareholder shall have the right to object, dissent, protest or otherwise contest the same. The Shareholders’ Representative shall not be liable for any act done or omitted hereunder as Shareholders’ Representative while acting in good faith and in the exercise of his reasonable judgment as to the best interests of the Shareholders, and the Shareholders’ Representative shall incur no liability to the Shareholders with respect to any action taken or suffered by the Shareholders’ Representative in reliance upon any notice, direction, instruction, consent, statement or other documents believed by him to be genuinely and duly authorized, nor for any other action or inaction with respect to the indemnification or other obligations of the Shareholders under this Section 2.5, including the defense or settlement of any claims and the making of payments with respect thereto, except to the extent resulting from the Shareholders’ Representative’s own gross negligence or willful misconduct. The Shareholders’ Representative may, in all questions arising under this Agreement or any agreement contemplated hereunder, rely on the advice of counsel, and for anything done, omitted or suffered in good faith by the Shareholders’ Representative shall not be liable to the Shareholders. The Shareholders shall jointly and severally indemnify the Shareholders’ Representative and hold him harmless for any loss, liability or expense incurred by the Shareholders’ Representative arising out of or relating to the Shareholders’ Representative’s actions hereunder so long as the Shareholders’ Representative acted in good faith and without gross negligence or willful misconduct.

(f) Representative Expenses. The Shareholders acknowledge and agree that the Shareholders’ Representative will incur costs, fees and expenses on behalf of the Shareholders in his capacity as Shareholders’ Representative (“Representative Expenses”), which may include, without limitation, professional fees and expenses, indemnity expenses, settlements or judgments and travel and accommodation expenses related thereto, and for which the Shareholders’ Representative shall be held harmless by the Shareholders in accordance with this Section 2.5(f), provided, however, that no Shareholder shall, subject to Section 2.5(g), without their prior written consent, be obligated to indemnify or hold harmless the Shareholders’ Representative, or make any additional contribution to the Expense Account, if then fully exhausted, provided, however, that nothing in this Section 2.5(f) shall limit the indemnity obligations of Shareholders pursuant to Section 2.5(e) hereof.

(g) Reimbursement of Representative Expenses. Notwithstanding anything to the contrary in this Agreement, if all Merger Consideration has been distributed to the Shareholders, and there are insufficient funds in the Expense Account to satisfy all of the Representative Expenses incurred as of such time, the Shareholders’ Representative shall be entitled to reimbursement for any or all Representative Expenses prior to the disbursements of such funds to the Shareholders. Upon the distribution of all Merger Consideration to the Shareholders and after reimbursement of all Representative Expenses, the Shareholders’ Representative shall deliver, or cause to be delivered, any and all amounts remaining in the Expense Account to the Shareholders according to each Shareholder’s Pro Rata Share with respect to the Company Capital Stock held by such Shareholder.

(h) Compensation of Shareholders’ Representative. In consideration of the Shareholders’ Representative’s continuing obligations under this Agreement, the Shareholders’ Representative shall be compensated in accordance with the following:

(i) From the Effective Time of the Merger, and until the distribution of all Merger Consideration to the Shareholders or the final resolution of a Notice of Claim as herein provided for (the “Compensation Term”), the Shareholders’ Representative shall be paid an amount, equal to the number of hours spent by the Shareholders’ Representative during the Compensation Term performing his obligations as Shareholders’ Representative, multiplied by Two Hundred Dollars ($200). The Shareholders’ Representative shall promptly record all hours so spent, and shall notify the Majority Holders of all such hours together with a brief description of the tasks performed at least on a quarterly basis.

(ii) In connection with all compensation payable to Shareholders’ Representative hereunder, Shareholders’ Representative shall be an independent contractor and not an employee of the Shareholders for federal or state tax purposes. No federal, state or local income tax or payroll tax of any kind shall be withheld or paid by the Shareholders on behalf of the Shareholders’ Representative or any employees or other agents of the Shareholders’ Representative. Shareholders’ Representative understands that he is solely responsible to pay, according to law, his federal and state income taxes and all other required taxes in respect of his compensation hereunder.

(iii) Notwithstanding the foregoing, the compensation provided to the Shareholders’ Representative pursuant to this Section 2.5(h) may be modified or amended with the written consent of the Shareholders’ Representative and the Majority Holders.

(i) Expense Account.

(i) A portion of the Cash Merger Consideration in the amount of One Hundred Fifty Thousand Dollars ($150,000) (the “Expense Deposit”) shall be held in a bank account (the “Expense Account”), which shall be established prior to the Closing Date in the name of Xxxxx X. Xxxxxx, for the benefit of the Shareholders. At any time following the Closing, with the prior written consent of the Majority Holders, some or all of the Expense Deposit may be transferred to a financial institution or an escrow account; provided, however, that any funds so transferred shall be held in the name of the Shareholders’ Representative for the benefit of the Shareholders. Any reference herein to Expense Account shall be deemed to be a reference to any other account or escrow account to which the Expense Deposit is transferred in accordance with the provisions herein.

(ii) Funds held in the Expense Account may be used (1) to compensate the Shareholders’ Representative in accordance with Section 2.5(h) above, (2) to reimburse any and all Representative Expenses incurred by the Shareholders’ Representative as contemplated herein, (3) to satisfy the payment of any professional fees, including, without limitation, legal fees, expenses or disbursements incurred in connection with or arising from any Notice of Claim, and (4) with the prior written consent of the Majority Holders, for such other purposes as the Shareholders’ Representative deems necessary or appropriate in fulfilling the duties of Shareholders’ Representative hereunder. Notwithstanding anything to the contrary in this Agreement or any agreement contemplated hereunder, any check drawn from the Expense Account by the Shareholders’ Representative in an amount of more than Two Thousand Five Hundred Dollars ($2,500) shall also require the signature of either Xxxxx Participation Corp. or Xxxxxx X. Xxxxxxxx, or such other individual as the Majority Holders shall designate.

(iii) As soon as all Merger Consideration has been distributed to the Shareholders in accordance with the terms of this Agreement, and the Shareholders’ Representative has been reimbursed for all Representative Expenses, the Shareholders’ Representative shall promptly cause all funds remaining in the Expense Account to be distributed to the Shareholders as herein contemplated.

(j) Reports to Shareholders. Until such time as the Shareholders have been paid all amounts to which they are entitled under the terms of this Agreement, the Shareholders’ Representative shall, at least quarterly, and at such other times as the Shareholders’ Representative, in his sole discretion, may deem appropriate, provide written reports to the Shareholders regarding the status of the amount of the Expense Account and the Shareholders’ Representatives’ activities on behalf of the Shareholders.

(k) Further Assurances. From time to time, at any other Party’s or Shareholder’s reasonable request and without further consideration, the Shareholders’ Representative shall execute and deliver such additional documents and take all such further lawful action as may be necessary or reasonably desirable to effectuate the provisions of Section 2.5, including without limitation, assigning the funds held in the Expense Account to any successor Shareholders’ Representative.

(l) No Obligations of Parent. None of Parent, Intermediate Parent, Merger Sub, the Company or the Surviving Corporation shall have any obligations to the Shareholders in respect of this Section 2.5.

SECTION 2.6 FURTHER ASSURANCES. Each Party, at the reasonable request of another Party, shall execute and deliver such other instruments and do and perform such other acts and things as may be reasonably necessary for effecting completely the consummation of this Agreement and the transactions contemplated hereby.

ARTICLE III
OTHER AGREEMENTS AND COVENANTS OF THE COMPANY

The Company covenants and agrees with Parent that, at all times from and after the date hereof until the Closing, the Company will comply with (or will arrange for compliance with) all covenants and provisions of this Article III, except to the extent Parent may otherwise consent in writing.

SECTION 3.1 NON-NEGOTIATION. From and after the date of this Agreement until the earlier of (a) the termination of this Agreement, (b) the Closing, or (c) November 24, 2008, the Company agrees that it will not, and will not permit its Affiliates, directors, officers, employees, representatives and other agents, to, directly or indirectly, (1) solicit, initiate, or encourage any Acquisition Proposal, (2) engage in negotiations or discussions concerning, or provide any non-public information to any person or entity in connection with, any Acquisition Proposal or (3) agree to, approve or recommend any Acquisition Proposal. The Company will immediately cease any and all existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. The Company will promptly advise

Parent of the terms of any communications it may receive or become aware of relating to any Acquisition Proposal.

SECTION 3.2 CONDUCT OF BUSINESS. The Company will conduct business only in the ordinary course consistent with past practice. Without limiting the generality of the foregoing, the Company will:

(a) consistent with past practice, use commercially reasonable efforts to (i) preserve intact the present business organization and reputation of the Company, (ii) keep available (subject to dismissals and retirements in the Ordinary Course of Business consistent with past practice) the services of the present officers, employees and consultants of the Company, other than as otherwise set forth in his Agreement, (iii) maintain the assets and properties of the Company in good working order and condition (reasonable wear and tear excepted), (iv) maintain the good will of customers, suppliers, lenders and other Persons to whom the Company sells goods or provides services or with whom the Company otherwise has significant business relationships and (v) continue all current sales, marketing and promotional activities relating to the business and operations the Company;

(b) except to the extent required by applicable Law or to the extent requested by Parent, (i) cause the Books and Records to be maintained in the usual, regular and ordinary manner and (ii) not permit any material change in (A) any pricing, investment, accounting, financial reporting, Inventory, credit, allowance or Tax election or Tax accounting method of the Company, (B) any method of calculating any bad debt, contingency or other reserve of the Company for accounting, financial reporting or Tax purposes or (C) the fiscal year of the Company; and

(c) comply, in all material respects, with all Laws applicable to the business and operations of the Company, and as soon as practicable following receipt thereof to give Parent copies of any written notice or summaries of any oral notice directed to the Company by any Governmental Authority alleging with specificity any violation by the Company of any such Law.

SECTION 3.3 CERTAIN RESTRICTIONS. Without the express written consent of Parent, the Company will refrain from:

(a) amending its Articles of Incorporation or Bylaws (or other comparable corporate charter documents) or taking any action with respect to any such amendment or any reorganization, liquidation or dissolution of the Company;

(b) authorizing, issuing, selling or otherwise disposing of any shares of, or any option, right or warrant to purchase with respect to, capital stock of the Company, or modifying or amending any right of any holder of Company Capital Stock, Option, Warrant, or other right to purchase with respect to Company Capital Stock, except for issuances of shares of capital stock upon the exercise of Options outstanding on the date hereof;

(c) declaring, setting aside or paying any dividend or other distribution in respect of the Company Capital Stock, or directly or indirectly redeeming, purchasing or

otherwise acquiring any shares of, or any option, right or warrant to purchase with respect to, Company Capital Stock not wholly owned by the Company;

(d) except for any payments or transactions permitted or required by the terms of this Agreement or the Transaction Documents and except as set forth on Schedule 5.28 of the Disclosure Schedule, paying or otherwise distributing any funds to Shareholders;

(e) acquiring or disposing of, or incurring any Lien (other than a Permitted Lien) on any assets and properties, other than in the Ordinary Course of Business consistent with past practice, or on any Company Capital Stock;

(f) (i) entering into, amending, modifying, terminating (partially or completely), granting any waiver under or giving any consent with respect to any Permit or Contract of the Company, except in the Ordinary Course of Business consistent with past practice, or (ii) granting any irrevocable powers of attorney;

(g) violating, breaching or defaulting in any material respect, or taking or failing to take any action that (with or without notice or lapse of time or both) would constitute a material violation or breach of, or default under, any term or provision of any Permit or Contract of the Company;

(h) (i) incurring any Indebtedness, or (ii) voluntarily purchasing, canceling or otherwise providing for a complete or partial discharge in advance of a scheduled payment date with respect to, or waiving any right of the Company under, any Indebtedness owing to the Company (other than in the Ordinary Course of Business);

(i) engaging with any Person in any merger, consolidation or similar transaction, sale, disposition or other transfer of ten percent (10%) or more, in the aggregate, of the assets of the Company, or any transaction which is similar in form, substance, purpose or effect to any of the foregoing;

(j) making capital expenditures or commitments for additions to property, plant or equipment constituting capital assets other than in the Ordinary Course of Business;

(k) making any change in the lines of business in which the Company participate or are engaged;

(l) writing off or writing down any of their assets and properties outside the Ordinary Course of Business consistent with past practice;

(m) other than in the Ordinary Course of Business, entering into, amending, modifying or terminating (partially or completely), any Contract that is, or had it been in existence on the date of this Agreement would have been required to be, disclosed in Schedule 5.8(a); or

(n) entering into any agreement to do or engage in any of the foregoing.

SECTION 3.4 MONTHLY FINANCIAL STATEMENTS; REPORTS.

(a) As promptly as practicable and in any event no later than ten (10) Business Days after the end of each calendar month ending after the date hereof and before the Closing Date, the Company will deliver to Parent true and complete copies of the unaudited consolidated balance sheet, and the related unaudited consolidated statements of operations, shareholders’ equity and cash flows of the Company, in each case, as of the end of and for each such calendar month, which financial statements shall be prepared in accordance with GAAP, consistently applied.

(b) As promptly as commercially reasonable, the Company will deliver to Parent true and complete copies of such other financial statements, reports and analyses as may be prepared or received by the Company relating to the business or operations of the Company or as Parent may otherwise reasonably request; provided, that the Company shall not be required to provide to Parent any financial statements, reports or analyses that Parent may otherwise request that the Company does not prepare in the ordinary course consistent with past practice.

SECTION 3.5 EMPLOYEE MATTERS.

(a) Except as may be required by Law, the Company will refrain from directly or indirectly:

(i) making any representation or promise, oral or written, to any officer, employee or consultant of the Company concerning any Employee Benefit Plan, except for statements as to the rights or accrued benefits of any officer, employee or consultant under the terms of any Employee Benefit Plan;

(ii) making any increase in the salary, wages or other compensation of any officer, employee or consultant of the Company except in the Ordinary Course of Business consistent with past practice; or

(iii) adopting, entering into, amending, modifying or terminating (partially or completely) any Employee Benefit Plan except to the extent required by applicable Law and provided Parent consents in writing, or as provided in this Agreement.

(b) The Company will administer each Employee Benefit Plan, or cause the same to be so administered, in all material respects in accordance with the applicable provisions of the Code, ERISA and all other applicable Laws. The Company will promptly notify Parent in writing of each receipt by the Company (and furnish Parent with copies) of any notice of investigation or administrative proceeding by the IRS, Department of Labor, PBGC or other Person involving any Employee Benefit Plan.

SECTION 3.6 AFFILIATE TRANSACTIONS. Immediately prior to the Closing, all Indebtedness and other amounts owing under Contracts between any Shareholder, any officer, director or Affiliate or employee of any Shareholder or any Affiliate of any of the foregoing (other than the Company), on the one hand, and the Company, on the other hand, will be paid in full. Without Parent’s prior consent, prior to the Closing, the Company will not materially

amend or modify any existing Contract, and will not engage in any transaction which is outside the Ordinary Course of Business.

SECTION 3.7 REGULATORY AND OTHER APPROVALS. The Company will (a) take all commercially reasonable steps necessary and proceed in good faith to (i) obtain all consents, approvals or actions of, to make all filings with and to give all notices to Governmental Authorities or any other Person required of the Company to consummate the transactions contemplated hereby and by the Transaction Documents, and (ii) maintain all material Contracts and Permits in full force and effect (subject to the terms of this Agreement) upon the consummation of the transactions contemplated hereby and by the Transaction Documents, (b) provide such other reasonable information and communications to such Governmental Authorities or other Persons as Parent or such Governmental Authorities or other Persons may reasonably request, and (c) at Parent’s expense, cooperate with Parent as promptly as practicable in obtaining all consents, approvals or actions of, making all filings with and giving all notices to Governmental Authorities or other Persons required of Parent to consummate the transactions contemplated hereby and by the Transaction Documents. The Company will provide prompt notification to Parent when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will notify Parent of any communications (and, unless precluded by Law or by third-party agreement, provide copies of any such communications that are in writing) with any Governmental Authority or other Person regarding any of the transactions contemplated by this Agreement or any of the Transaction Documents.

SECTION 3.8 CONFIDENTIAL INFORMATION. From the date of this Agreement until the earlier of the termination of this Agreement or the Closing, except as required by applicable law or by legal or regulatory process, the Company shall continue its past practices with respect to maintaining the secrecy of and exclusive Company benefit from all confidential matters relating to the Company or the Business; provided, however, that the foregoing shall not preclude the Company from engaging in any communications with its legal or financial advisors, on any matters relating to or arising from the transactions contemplated by this Agreement and the Transaction Documents.

SECTION 3.9 TRANSFER TAXES. Any Transfer Tax, documentary, sales, or use taxes assessed upon or with respect to the Merger and any recording or filing fees with respect thereto shall be borne by Parent.

SECTION 3.10 NOTICE AND CURE. The Company will notify Parent promptly in writing of, and contemporaneously will provide Parent with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance occurring after the date of this Agreement that causes or will cause any covenant or agreement of the Company under this Agreement to be breached or that renders or will render untrue any representation or warranty of the Company contained in this Agreement. The Company also will notify Parent promptly in writing of, and will use all commercially reasonable efforts to cure, before the Closing, any violation or breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, whether occurring or arising before, on or after the date of this Agreement. No notice given pursuant to this Section 3.10 shall have any effect on the

representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained in Section 7.1, but, if Parent and Intermediate Parent close the Merger after receipt of such notice, Parent and Intermediate Parent shall have no right to seek indemnity under Article IX with respect to the matter disclosed in such notice.

ARTICLE IV
OTHER AGREEMENTS AND COVENANTS OF PARENT
AND INTERMEDIATE PARENT

Parent and Intermediate Parent, jointly and severally, covenant and agree with the Company that, at all times from and after the date hereof until the Closing (or for such additional period of time from and after the Closing if, but only if, the express terms of such covenant or provision so require), Parent and Intermediate Parent will comply with all covenants and provisions of this Article IV, except to the extent the Company may otherwise consent in writing.

SECTION 4.1 REGULATORY AND OTHER APPROVALS. Parent and Intermediate Parent, jointly and severally, will (a) take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith and use all commercially reasonable efforts, as promptly as practicable to obtain all consents, approvals or actions of, to make all filings with and to give all notices to Governmental Authorities or any other Person required of Parent or Intermediate Parent to consummate the transactions contemplated hereby and by the Transaction Documents, (b) provide such other information and communications to such Governmental Authorities or other Persons as the Company or such Governmental Authorities or other Persons may reasonably request and (c) cooperate with the Company as promptly as practicable in obtaining all consents, approvals or actions of, making all filings with and giving all notices to Governmental Authorities or other Persons required of the Company to consummate the transactions contemplated hereby and by the Transaction Documents. Parent will provide prompt notification to the Company when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will notify the Company of any communications (and, unless precluded by Law or by third-party agreement, provide copies of any such communications that are in writing) with any Governmental Authority or other Person regarding any of the transactions contemplated by this Agreement or any of the Transaction Documents.

SECTION 4.2 NOTICE AND CURE. Parent and/or Intermediate Parent will notify the Company promptly in writing of, and contemporaneously will provide the Company with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance occurring after the date of this Agreement that causes or will cause any covenant or agreement of Parent or Intermediate Parent under this Agreement to be breached or that renders or will render untrue any representation or warranty of Parent or Intermediate Parent contained in this Agreement. Parent and Intermediate Parent also will notify the Company promptly in writing of, and will use all commercially reasonable efforts to cure, before the Closing, any violation or breach of any representation, warranty, covenant or agreement made by Parent or Intermediate Parent in this Agreement, whether occurring or arising before, on or after the date

of this Agreement. No notice given pursuant to this Section 4.2 shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained in Section 7.2, but if the Shareholders close the Merger after receipt of such notice the Shareholders shall have no right to seek indemnity under Article IX with respect to the matter disclosed in such notice.

SECTION 4.3 ACCESS TO INFORMATION. After the Closing Date and upon reasonable advance notice, Parent and Intermediate Parent will give, or cause to be given, to the Shareholders and their representatives, during normal business hours, such reasonable access to the personnel, properties, titles, Contracts, books, records, files and documents relating to the Company in the possession or control of Parent or Intermediate Parent, including the Books and Records of the Company, and at the expense of a requesting Shareholder, copies of the foregoing, as is necessary to allow the Shareholders to obtain information in connection with the preparation and any audit of any tax returns, any claims, demands, other audits, suits, actions or proceedings by or against the Shareholders, or for any other reasonable purpose, other than, in each case, in connection with any matter with respect to which Parent is adverse to or has a conflict of interest with, any Shareholder; provided, that, in the event that any litigation is pending between the Parties, Parent and Intermediate Parent shall not be required to perform their obligations under this Section 4.3 except with respect to any matter that is not germane to the subject matter of the litigation.

SECTION 4.4 EMPLOYEE TRANSITION MATTERS. From and after the Closing Date, through December 31, 2008, Parent and Intermediate Parent shall cause the Surviving Corporation to keep in place the Employee Benefit Plans maintained by the Company immediately before the Closing. Thereafter, Parent and Intermediate Parent shall, or shall cause the Surviving Corporation, to use commercially reasonable efforts to provide coverage under Employee Benefit Plans maintained by Parent, Intermediate Parent or the Surviving Corporation to the Company’s employees who remain employed on the Closing Date. To the extent commercially reasonable and permitted under applicable Law, Parent and Intermediate Parent will endeavor to have (i) deductibles paid by such continuing employees while employed by the Company recognized by Parent’s provider, and (ii) the provider waive any waiting periods, pre-existing conditions and comparable requirements. Parent and Intermediate Parent shall either continue in place the Company’s retirement plan or permit the Company’s employees who remain employed on the Closing Date to transfer their account balances under the Company’s retirement plan to a retirement plan maintained by Parent or the Surviving Corporation to the extent permitted by the terms of the plans and applicable Law.

SECTION 4.5 INTERMEDIATE PARENT REPRESENTATIVE. Parent and Intermediate Parent have approved Parent to, and Parent is hereby authorized to, give or take any consent, demand, request, waiver, approval, notice or other action which may or must be given taken or made by or on behalf of Intermediate Parent.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure schedule delivered by the Company to Parent at or prior to the execution of this Agreement (the “Disclosure Schedule”) and except as set forth in

any amendment, revision or restatement of such Disclosure Schedule which is delivered to Parent at or prior to the Closing, with any disclosure or exception in the Disclosure Schedule deemed to apply to any representation or warranty to which it is applicable regardless of whether or not such representation or warranty is specifically referenced or cross-referenced, the Company represents and warrants to Parent as follows:

SECTION 5.1 ORGANIZATION, STANDING AND AUTHORITY.

(a) The Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. True, complete and correct copies of the Company’s Articles of Incorporation and Bylaws have been delivered to Parent and such Articles of Incorporation and Bylaws are in full force and effect. The Company has full power and authority to carry on the Business as conducted by it and to own or hold under lease the properties and assets it now owns or holds under lease. Except as set forth in the Disclosure Schedule, the Company is qualified to do business and is in good standing as a foreign corporation or company (as applicable) in all jurisdictions where the nature of the property owned or leased by it, or the nature of its business, makes such qualification necessary and where the absence of such qualification would have a Material Adverse Effect on the business, financial condition or operations of such company, which jurisdictions are listed opposite such company’s name on Schedule 5.1(a) of the Disclosure Schedule.

(b) Except as set forth on Schedule 5.1(b) of the Disclosure Schedule, the Company does not have any Subsidiary.

(c) The name of each director and officer of the Company is set forth opposite the position held by same, on Schedule 5.1(c) of the Disclosure Schedule.

SECTION 5.2 AUTHORIZATION.

(a) The Company has full right, power, capacity and authority to execute and deliver this Agreement and each of the Transaction Documents to be executed and delivered by or on behalf of the Company, to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof.

(b) This Agreement has been, and each of the Transaction Documents to be executed and delivered by or on behalf of the Company will be, duly executed and delivered by the Company and constitutes or, in the case of the Transaction Documents, will constitute when so executed and delivered, the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws or equitable principles of general application to or affecting the enforcement of contractual rights generally, and statutes, rules or procedures and applicable case law limiting the availability or prescribing the procedural requirements for the exercise of remedies.

SECTION 5.3 CAPITALIZATION AND OWNERSHIP.

(a) Schedule 5.3(a) of the Disclosure Schedule sets forth the authorized and issued and outstanding capital stock of the Company, the outstanding Options and Warrants

(both vested and unvested) for Company Capital Stock, and the ownership interest of each Shareholder in the Company. All shares of Company Capital Stock have been validly issued, were issued in compliance with all applicable federal and state securities laws, and are fully paid and non-assessable. Except as set forth on Schedule 5.3(a) of the Disclosure Schedule, all Company Capital Stock has been issued without any options, warrants, rights, calls or other preemptive rights with respect to additional shares of capital stock. Except as set forth on Schedule 5.3(a) of the Disclosure Schedule, no options, warrants, preemptive or other rights to acquire any shares of Company Capital Stock or any debt or equity interest in the Company have been issued or are outstanding. All Options have been granted or issued at fair market value, as determined by the Company’s Board of Directors at the date of grant or issuance using the reasonable application of a reasonable valuation method. All Options and Warrants of the Company, if not exercised prior to the Closing Date, will be terminated as of the Closing Date without any further liabilities to Parent, Intermediate Parent, Merger Sub, or the Company.

(b) Except as set forth on Schedule 5.3(b) of the Disclosure Schedule, the Company is not a party or subject to any agreement or understanding and (other than voting agreements entered into in connection with this Agreement) there is no agreement or understanding between any Persons that affects or relates to the voting or giving of written consents with respect to any securities of the Company or the voting of any securities of the Company by any Shareholder, director or officer of the Company. The Company has no contractual or other obligation to register under the securities laws of any jurisdiction any of its presently outstanding securities or any of its securities that may hereafter be issued.

(c) Except as set forth on Schedule 5.3(c) of the Disclosure Schedule, the Company is not a party or subject to any agreement that grants any rights of refusal, rights of first offer, co-sale or tag-along rights, drag-along rights, registration rights or similar rights with respect to Company Capital Stock.

(d) Each Shareholder is, or on the Closing Date will be, the record owner of the equity interests indicated in Schedule 5.3(a) of the Disclosure Schedule as owned by such Shareholder (or to be owned as of the Closing Date). Except as set forth in Schedule 5.3(a) of the Disclosure Schedule, to the Knowledge of the Company there are no agreements, arrangements, options, warrants, calls, rights or commitments of any character relating to the sale, purchase, redemption or other transfer of the Company Capital Stock held by any Shareholder.

SECTION 5.4 NO CONFLICTS. Except as set forth on Schedule 5.4 of the Disclosure Schedule, to the Knowledge of the Company, neither the execution nor the delivery of this Agreement and the Transaction Documents by the Company, nor the performance by the Company of the transactions contemplated hereby or thereby will:

(a) violate or conflict with or result in a breach of any of the terms, conditions or provisions of the Articles of Incorporation or Bylaws of the Company;

(b) violate any Law;

(c) constitute (with or without notice or lapse of time or both) a default under or otherwise violate any material Permit, Contract, mortgage, note, bond, license or other instrument to which the Company is a party or by which the properties or assets of any of the foregoing are bound;

(d) constitute an event which would permit any party to terminate, or accelerate the maturity of any Indebtedness or other obligation under, any Contract, mortgage, note, bond, license or other instrument to which the Company is a party or by which the properties or assets of any the Company are bound;

(e) result in the creation or imposition of any Lien upon the Company Capital Stock or the assets of the Company; or

(f) require any Permit, authorization, consent, approval, exemption or other action by or notice to any Person, court or administrative or governmental body pursuant to any Laws.

SECTION 5.5 FINANCIAL STATEMENTS. Schedule 5.5 of the Disclosure Schedule contains the following financial statements of the Company (collectively, the “Financial Statements”):

(a) The balance sheet of the Company as of December 31, 2007, and the related statements of income, shareholders’ equity and cash flows for the year then ended (collectively, the “2007 Financial Statements”);

(b) The balance sheets of the Company as of December 31, 2006 and as of December 31, 2005, and the related statements of income, shareholders’ equity and cash flows for the years then ended; and

(c) A balance sheet of the Company as of September 30, 2008 (the “Latest Balance Sheet Date”) and the related statements of income, changes in shareholders’ equity, and cash flow for the nine (9) months then ended (the “Interim Financial Statements”), including in each case, the notes thereto, if any.

The Financial Statements are complete and correct in all material respects, are consistent with the Books and Records, and, other than as set forth on Schedule 5.5 of the Disclosure Schedule, fairly present, in all material respects, the financial condition, assets and liabilities of the Company, taken as a whole, as of their respective dates and the results of operations and cash flows for the periods related thereto in accordance with GAAP (except as may be indicated in the notes thereto and in the case of the Interim Financial Statements, subject to normal year-end adjustments and the absence of footnote disclosure). Since the Latest Balance Sheet Date there has been no change in the Company’s polices on reserves or accrual amounts.

SECTION 5.6 ABSENCE OF UNDISCLOSED LIABILITIES.

(a) The Company does not have any material Liabilities, whether due or to become due (other than the obligation to provide services under contracts with its customers), arising out of transactions entered into on or prior to the date hereof, or any transaction, series of

transactions, action or inaction occurring on or prior to the date hereof, or any state of facts or conditions existing on or prior to the date hereof (regardless of when such liability or obligation is asserted), including, without limitation, Liabilities on account of Taxes or Employee Benefit Plans, or in respect thereof, except as and to the extent clearly and accurately reflected and accrued for or reserved against in, the 2007 Financial Statements and on the Latest Balance Sheet or incurred in the Ordinary Course of Business consistent with past practice since the Latest Balance Sheet Date (none of which is a Liability for breach of contract, breach of warranty, product liability, tort or infringement, or a claim or lawsuit, or an environmental Liability), except to the extent set forth on Schedule 5.6(a) of the Disclosure Schedule.

(b) Except as set forth on Schedule 5.6(b) of the Disclosure Schedule, the Company does not have any Liabilities to any Affiliate.

SECTION 5.7 TANGIBLE PERSONAL PROPERTY. Except as set forth in Schedule 5.7 of the Disclosure Schedule:

(a) Title. The Company is in possession of and has good title to, or valid leasehold interests in or valid rights under Contract to use, all tangible personal property (including, without limitation, all fixtures, leasehold improvements, equipment (including computer hardware and communications equipment), whether or not such equipment constitutes a fixture under applicable Law, office, operating and other supplies, parts, furniture, and other tangible personal property of the Company) used in the Ordinary Course of Business, including all tangible personal property reflected on the balance sheet included in the 2007 Financial Statements and as of the Latest Balance Sheet Date, and tangible personal property acquired since the Latest Balance Sheet Date, other than property disposed of since such date in the Ordinary Course of Business consistent with past practice. All such tangible personal property is free and clear of all Liens, other than Permitted Liens. No Person other than the Company owns or has any right to the use or possession of such tangible personal property other than lessors and licensors of such tangible personal property constituting leasehold interests or licenses.

(b) Condition. All of the assets of the Company are in good condition and repair consistent with industry standards (ordinary wear and tear excepted), and are useable in the Ordinary Course of Business. Except for tangible personal property having a fair market value of less than $3,000, Schedule 5.7(b) of the Disclosure Schedule includes all of the fixed assets of the Company, and each item of tangible personal property owned by the Company and the location thereof. Schedule 5.7(b) of the Disclosure Schedule lists all leases of tangible personal property to which the Company is a party or is bound, and the lessee and location of such leased tangible personal property.

SECTION 5.8 CONTRACTS. Schedule 5.8(a) of the Disclosure Schedule is a correct and complete list of each Contract that requires the Company to pay, or entitles the Company to receive, in the aggregate, $1,000 or more during any twelve (12) month period, all Contracts that restrict any of the Company’s business activity anywhere in the world, and all Contracts that are not terminable by the Company upon not more than thirty (30) days’ prior notice without penalty or payment (each a “Material Contract”). Correct and complete copies of the Material Contracts listed on Schedule 5.8(a) of the Disclosure Schedule have previously been furnished or made available to Parent. Except as set forth on Schedule 5.8(b) of the Disclosure Schedule, the

Company is not in default and to the Company’s Knowledge, no event has occurred which with the giving of notice or the passage of time or both would constitute a default by the Company under any Material Contract and, to the Knowledge of the Company, no event has occurred which with the giving of notice or the passage of time or both would constitute a default by any other party to any such Material Contract. Each of the Material Contracts of the Company is in full force and effect, is valid and enforceable in accordance with its terms, and, to the Knowledge of the Company, is not subject to any claims, charges, set-offs or defenses. Except as set forth on Schedule 5.8(c), all of the Material Contracts of the Company will continue in full force and effect without any change or modification resulting from the consummation of the transactions contemplated by this Agreement, without the necessity of obtaining any consent, approval, novation or waiver of any third party. Except as set forth on Schedule 5.8(d) of the Disclosure Schedule, the Company is not a party to, or bound by the provisions of, any Material Contract (including purchase orders, blanket purchase orders and agreements and delivery orders) that remains executory in whole or in part with any Federal, state, local or foreign Governmental Authority or governmental body. Except as set forth on Schedule 5.8(e) of the Disclosure Schedule, no Material Contract of the Company is required to be treated as a capital lease by GAAP.

SECTION 5.9 REAL PROPERTY. No real property is owned by the Company. Schedule 5.9 of the Disclosure Schedule lists all real property used or held for use by the Company which is leased by the Company from third parties (the “Leased Real Property”), and indicates the addresses and the owners of the Leased Real Property. The Company is the sole legal and equitable holder of the leasehold interest it holds in the Leased Real Property and possesses a valid leasehold interest thereto, free and clear of all Liens (other than Permitted Liens) that could impair the ability of the Company to realize the benefits of the rights provided to it under any lease, and the right to quiet enjoyment of such Leased Real Property. Accurate and complete copies of all existing lease agreements with respect to the Leased Real Property as of the Closing Date have heretofore been delivered to Parent. The Company has not exercised any option to purchase any parcel of Leased Real Property. The Leased Real Property constitutes the only real property used or occupied by the Company in the conduct of the Business. There are no leases, subleases, licenses, concessions or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of any parcel of the Leased Real Property, or any options or rights of first refusal with respect thereto. Other than as set forth on Schedule 5.9 of the Disclosure Schedule, there are no parties (other than the Company) in possession of the Leased Real Property and the Company enjoys peaceful and undisturbed possession of the Leased Real Property, subject to the terms and conditions of the leases set forth on Schedule 5.9 of the Disclosure Schedule. To the Knowledge of the Company, within the last twelve (12) months, no notice from any Governmental Authority has been received by the Company or has been served upon the Leased Real Property requiring or calling attention to the need for any work, repair, construction, alteration or installation on or in connection with the Leased Real Property. To the Knowledge of the Company, no notice has been received by the Company or has been served upon the Leased Real Property stating that, and the Company has no Knowledge that, the buildings and improvements on the Leased Real Property, or the Business as presently conducted thereon by the Company, are not in compliance with any applicable Law.

SECTION 5.10 LITIGATION. Except as set forth in Schedule 5.10 of the Disclosure Schedule, there is no suit, action, proceeding, investigation, arbitration, mediation, claim or order pending or, to the Knowledge of the Company, threatened against the Company (or pending or, to the Knowledge of the Company, threatened against any of the current or former officers, directors or employees of the Company with respect to their service as an officer, director or employee of the Company) before any court, or before any governmental department, commission, board, agency, or instrumentality; nor, to the Knowledge of the Company, is there any reasonable basis for any such action, proceeding or investigation. Except as set forth in Schedule 5.10 of the Disclosure Schedule, the Company (a) is not subject to any judgment, order or decree of any court or governmental agency; or (b) is not engaged in any legal action in which a claim has been filed to recover monies due it or for damages sustained by it; or (c) has not received any opinion or memorandum or legal advice from counsel to the effect that it is exposed, from a legal standpoint, to any Liability which may be material to its business. Schedule 5.10 of the Disclosure Schedule, also sets forth a complete and correct list and description of all material claims, suits, actions, proceedings and investigations made, filed or otherwise initiated in connection with the Company which have been resolved in the past two (2) years and the resolution thereof.

SECTION 5.11 COMPLIANCE WITH APPLICABLE LAWS. The Company (a) is not, or has not been in the past five (5) years, in violation of any Law, the violation of which would have a Material Adverse Effect the conduct, ownership, use, occupancy or operation of the Business or assets, including, without limitation, regarding any alleged failure to possess any material license, Permit, authorization or other approval, (b) the Company has not received notice of any such material violation, and (c) to the Knowledge of the Company, no facts or circumstances exist which would reasonably be expected to cause the Company to be in any such material violation in the future, except as set forth on Schedule 5.11 of the Disclosure Schedule.

SECTION 5.12 INTELLECTUAL PROPERTY. Schedule 5.12 of the Disclosure Schedule contains a complete and correct list of all patents, patent applications, patent disclosures, registered and unregistered trademarks, registered service marks, registered and unregistered trade names and corporate names, domain names and websites, registered copyrights, and registrations, applications and renewals for any of the foregoing, and software (other than “off-the-shelf” commercial software), which are owned or licensed by the Company, including all registration numbers and dates and jurisdictions of registrations, if applicable, all licenses and other rights granted from or to any third party with respect to any Intellectual Property. Except as set forth on Schedule 5.12 of the Disclosure Schedule, (a) the Company owns and possesses all right, title and interest in and to, or has a valid license to use, all of the Intellectual Property and proprietary rights and information necessary for the operation of the Business as presently conducted by the Company; (b) each item of Intellectual Property owned or used by the Company prior to the Closing will be owned or available for use by the Company on identical terms and conditions immediately subsequent to the Closing; (c) no claim by any third party contesting the validity, enforceability, use or ownership of any Intellectual Property has been asserted against the Company or, to the Knowledge of the Company, is threatened, and, to the Knowledge of the Company, there is no reasonable basis for any such claim; (d) the Company has not received any notices of, nor does the Company have Knowledge of any reasonable basis for, an allegation of any infringement or misappropriation by, any third party with respect to any Intellectual Property, nor has any such Person received any claims of

infringement or misappropriation of any intellectual property of any third party; (e) to the Knowledge of the Company, the Company has not infringed, misappropriated or otherwise violated any intellectual property of any third parties; (f) to the Knowledge of the Company, no other Person is infringing, misappropriating or otherwise violating, or has infringed, misappropriated or otherwise violated, the Intellectual Property; (g) except as set forth on Section 5.12, the Company is not required to pay any fee, royalty or other compensation for the use of any third party intellectual property; and (h) the Company has not granted any exclusive right with respect to any Intellectual Property. All Intellectual Property owned by the Company was created by employees of the Company within the scope of their employment, or by independent contractors who have assigned all of their rights in such Intellectual Property to the Company pursuant to written agreements.

SECTION 5.13 CONDUCT OF BUSINESS. Except as set forth on Schedule 5.13 of the Disclosure Schedule, since December 31, 2007, the Business of the Company has been conducted only in the Ordinary Course of Business consistent with past custom and practice, and the Company has not incurred any Liabilities other than in the Ordinary Course of Business consistent with past custom and practice and there has been no Material Adverse Effect on the Business, or the condition (financial or otherwise), assets, operations, operating results, or the employee or customer relations of the Company, and to the Company’s Knowledge no event has occurred that could reasonably be expected to have such an effect. Without limiting the generality of the foregoing and except as set forth on Schedule 5.13 of the Disclosure Schedule, since December 31, 2007, the Company has not, except in the Ordinary Course of Business consistent with past practice:

(a) sold, assigned or transferred any material asset except for the sale of products in the Ordinary Course of Business, or mortgaged, pledged or subjected any material asset or the Leased Real Property to any Lien (other than Permitted Liens), charge or other restriction;

(b) sold, assigned, transferred, abandoned or permitted to lapse any licenses or Permits, any Intellectual Property or other material intangible assets, or disclosed any material proprietary confidential information to any Person other than as set forth on Schedule 5.13 of the Disclosure Schedule or pursuant to a valid and customary agreement governing non-disclosure, granted any license or sublicense of any rights under or with respect to any Intellectual Property other than in the Ordinary Course of Business consistent with past practice;

(c) except as set forth on Section 5.13(c) of the Disclosure Schedule, made or granted any increase in the compensation of any employee, or amended or terminated any existing employee plan, program, policy or arrangement, including, without limitation, any Employee Benefit Plan, or adopted any new Employee Benefit Plan other than in the Ordinary Course of Business consistent with past practice;

(d) conducted its cash management customs and practices (including, without limitation, the timing of collection of receivables and payment of payables and other current liabilities) and maintained the Books and Records other than in the usual and Ordinary Course of Business consistent with past practice;

(e) made any loans or advances to, or guarantees for the benefit of, or entered into any transaction with any employee, officer, director, shareholder, agent or Affiliates, or paid or otherwise distributed funds to the Company or any Affiliate thereof in an amount in excess of $25,000 in the aggregate;

(f) suffered any extraordinary loss, damage, destruction or casualty loss to the Business or waived any rights of material value, whether or not covered by insurance and whether or not in the Ordinary Course of Business;

(g) changed any pricing, investment, financial reporting, Inventory, credit, allowance, material Tax election, material Tax accounting method or accounting policy or practice, any method of calculating any bad debt, contingency or other reserve for accounting or financial reporting or Tax purposes, or its fiscal year;

(h) declared, set aside or paid any dividend or distribution of cash, capital stock or other property to any shareholder or purchased, redeemed or otherwise acquired any shares of its capital stock, made any other payments to any shareholder or issued any capital stock or granted any other equity (or phantom equity or similar interest) interest or option or right to acquire any capital stock or other equity (or phantom equity or similar) interest other than the Company Capital Stock, the Options and the Warrants;

(i) entered into any other material transaction including but not limited to any merger, acquisition, joint venture, partnership or incurrence of any Indebtedness (other than trade payables incurred and leases entered into in the Ordinary Course of Business consistent with past practice), or formed any other new arrangement for the operation of the Business, other than in the Ordinary Course of Business consistent with past practice;

(j) amended its Articles of Incorporation or Bylaws (or other comparable corporate charter documentation), or engaged in any merger, consolidation reorganization, reclassification, liquidation, dissolution or similar transaction; or

(k) committed to any of the foregoing.

SECTION 5.14 ABSENCE OF QUESTIONABLE PAYMENTS. The Company has not, and none of its respective directors, officers, agents, employees, Affiliates or any other persons acting on their respective behalf has: (a) used or committed to use in violation of any applicable provincial, foreign, federal or state law any corporate funds for unlawful contributions, payments, gifts or entertainment, or made or committed to make any unlawful expenditures relating to political activity to government officials or others or established or maintained any unlawful or unrecorded funds; (b) to the Company’s Knowledge, accepted or received any unlawful contributions, payments, expenditures or gifts; or (c) established or maintained any fund or asset that has not been recorded in the Books and Records as required by GAAP.

SECTION 5.15 INSURANCE. Schedule 5.15 of the Disclosure Schedule is a correct and complete list including policy numbers, carriers, amounts of coverage and expiration dates, of all insurance policies (with respect to liability, property, workers’ compensation, directors’ and officers’ liability or otherwise) of the Company, correct and complete copies of which policies

have previously been delivered to Parent. Such policies are valid, binding and in full force and effect, and the Company is not in default thereunder. Schedule 5.15 of the Disclosure Schedule also contains a list of all pending claims filed by the Company with any insurance company and any instances within the previous five (5) years of a denial of coverage of the Company by any insurance company.

SECTION 5.16 PERMITS. To the Company’s Knowledge, the Company holds all material Permits and approvals of Governmental Authorities necessary for its current conduct, ownership, use, occupancy or operation of its assets, the Business and the Leased Real Property. Except as set forth on Schedule 5.16 of the Disclosure Schedule, upon the Closing, the Company and Parent will hold or will be able to obtain without undue expense or delay all material Permits and approvals of Governmental Authorities necessary for the current conduct, ownership, use or operation of the Company’s assets, the Business and the Leased Real Property. Except as set forth on Schedule 5.16 of the Disclosure Schedule, the Company is and has been in the five (5) years immediately prior to the date hereof in compliance with all material Permits and approvals of Governmental Authorities. None of the Permits or approvals of Governmental Authorities will require the consent, approval, novation or waiver of, or giving of notice to, any governmental entity or other third party in connection with the consummation of the transactions contemplated by this Agreement, and all such Permits and approvals of Governmental Authorities will continue in full force and effect without any change or modification thereto after such consummation.

SECTION 5.17 EMPLOYEE BENEFIT PLANS.

(a) Schedule 5.17(a) sets forth, a complete list of (i) all “employee pension benefit plans” as defined in Section 3(2) of ERISA which the Company or any predecessor that operated the Business of the Company has maintained, made contributions to, or with respect to which has or had any other liability (contingent or otherwise), and (ii) all Employee Benefit Plans other than “employee pension benefit plans” as defined in Section 3(2) of ERISA which the Company or any predecessor that operated the Business of the Company has maintained, made contributions to, or with respect to which has or had any other liability (contingent or otherwise) at any time during the five (5) years prior to the date hereof. Except for the Employee Benefit Plans of the Company described on Schedule 5.17(a), the Company has no liability or to its Knowledge potential liability for any Employee Benefit Plan maintained or contributed to by a current or former Company Plan Affiliate.

(b) The Company has delivered or made available to Parent complete copies of (i) each written Employee Benefit Plan currently maintained by the Company, as amended to the Closing, together with audited financial statements and actuarial reports for the three (3) most recent plan years, if any; (ii) each funding vehicle with respect to each such plan, if any, and any applicable service agreements; (iii) the most recent and any other determination letter, ruling or notice issued by or filed with any Governmental Authority with respect to such plan, if any; (iv) the Form 5500 Annual Report and any PBGC Form 1 for the two (2) most recent plan years, if any; (v) the most recent summary plan description or summary of modifications, if any; and (vi) each other document, explanation or communication which describes any relevant aspect of any such plan that is not disclosed in previously delivered materials. A description of any unwritten Employee Benefit Plans of the Company, including a description of any material terms of such

plan, is set forth in Schedule 5.17(b). Schedule 5.17(b) also sets forth a complete and accurate description, in all material respects, of the Company’s severance practices and lists all employment agreements containing severance provisions. The 401(k) Plan is the only Employee Benefit Plan at any time sponsored or maintained by the Company that is or was intended to be a “qualified plan” under Section 401(a) of the Code. The Company is entitled to rely on an opinion or advisory letter issued by IRS with respect to the qualified status of the 401(k) Plan documents in accordance with IRS Announcement 2001-77. No act or omission has occurred with respect to the 401(k) Plan that could negatively affect the qualified status of the 401(k) Plan.

(c) Other than as set forth on Schedule 5.17(c), each Employee Benefit Plan of the Company has been in material compliance and currently complies in all material respects in form and in operation in all respects with all applicable requirements under ERISA, the Code or any other applicable Law, and in accordance with its terms, and the Company has complied in all material respects with all applicable Law relating to such Employee Benefit Plans. To the Knowledge of the Company, no act or omission has occurred and no condition exists with respect to any Employee Benefit Plan of the Company that could subject the Company to any material fine, penalty or tax imposed under any applicable Law.

(d) Neither the Company nor any predecessor that operated the Business of the Company or any Company Plan Affiliate has at any time participated in or made contributions to or had any other liability with respect to, a plan which is a “multiemployer plan” as defined in Section 4001 of ERISA or Section 3(37) of ERISA, a “multiple employer plan” within the meaning of Code Section 413(c), a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA, a plan which is subject to Title IV of ERISA, or a plan or arrangement applicable to employees located outside the United States.

(e) There are no actions, suits, investigations or claims pending or, actually threatened to the Knowledge of the Company with respect to any Employee Benefit Plan of the Company, or the assets thereof (other than routine claims for benefits). To the Knowledge of the Company, there are no facts which could give rise to any material liability, action, suit, investigation or claim relating to any Employee Benefit Plan of the Company.

(f) Except to the extent not reasonably likely to result in material Liability to the Company, with respect to any Employee Benefit Plan of the Company: (i) there has been no non-exempt “prohibited transaction,” as defined in ERISA and the Code; (ii) no Person has breached any fiduciary obligation; and (iii) no Person otherwise has any liability for any failure to act or comply in connection with the administration or investment of the assets of any such plan.

(g) Except for benefits that do not extend beyond the end of the month of termination of employment under the Company’s fully-insured group health plan(s), no Employee Benefit Plan of the Company provides, at the expense of the Company, medical, health, life insurance or other welfare-type benefits to retirees or former employees, owners or consultants or individuals who terminate (or have terminated) employment with the Company, or the spouses or dependents of any of the foregoing, except for coverage required under Section

4980B of the Code or Part 6 of Subtitle B of Title I of ERISA and similar state law; provided that beneficiaries/covered individuals pay the applicable premiums.

(h) Schedule 5.17(h) contains a complete and accurate list of all Employee Benefit Plans and any other arrangements that will result in any payment, acceleration, vesting or increase in benefits, or transfer of money, property or other consideration on account of or in connection with the transactions contemplated by this Agreement or any subsequent termination of employment and not otherwise contemplated by this Agreement. The Company has no obligation to make “parachute payments,” within the meaning of Code Section 280G(b)(2), that are “contingent,” within the meaning of such Code Section and the Treasury Regulations promulgated thereunder, on the consummation of the transactions contemplated by this Agreement.

(i) Each Employee Benefit Plan of the Company can be amended, terminated or otherwise discontinued at any time in accordance with its terms without material Liability to the Company. To its Knowledge, the Company is in compliance with Code Section 409A.

SECTION 5.18 AFFILIATE TRANSACTIONS. Except (a) for customer relationships conducted on an ordinary arm’s-length basis and (b) as set forth in Schedule 5.18 of the Disclosure Schedule, neither the Company nor any Affiliate of the Company, has any direct or indirect interest (other than an equity interest of less than one percent (1%) of a publicly held company) in any supplier or customer of the Company, or in any Person from whom or to whom the Company has leased any real or personal property, except for transfers of cash, property or rights arising in the Ordinary Course of Business pursuant to and in accordance with the terms of any employment or consulting agreements, complete and correct copies of which have previously been delivered to Parent, or the terms of which have been disclosed in the Disclosure Schedule. Schedule 5.18 of the Disclosure Schedule sets forth the parties to and the date, nature and amount of each transaction involving the transfer of any cash, property or rights to or from the Company from, to or for the benefit of the Company or any Affiliate or former Affiliate of the Company (“Affiliate Transactions”) during the period commencing January 1, 2008 through the date hereof, and any existing commitments of the Company to engage in the future in any Affiliate Transactions.

SECTION 5.19 HEALTH, SAFETY AND ENVIRONMENT.

(a) Compliance; Permits. Except as set forth on Schedule 5.19(a) of the Disclosure Schedule, (i) the Company is and at all times has been in compliance with all material Environmental and Safety Requirements applicable to its assets, the Business, the Leased Real Property and any facilities and operations thereon; (ii) the Company possesses all material Permits required under applicable Environmental and Safety Requirements and relating to its assets, the Business, the Leased Real Property and facilities and operations thereon; and (iii) the Company is and at all times has been in material compliance in respects with all requirements or conditions imposed under such material Permits.

(b) No Hazardous Materials; No Releases. Other than as set forth on Schedule 5.19(b) of the Disclosure Schedule, except in compliance with all applicable Environmental and Safety Requirements, (i) to the Knowledge of the Company, there are no

Hazardous Materials on, in or under, or emanating from the Leased Real Property or any facilities or operations thereon; (ii) the Company has not generated, manufactured, refined, or, to its Knowledge, transported, treated, stored, handled, disposed, transferred, produced, recycled, or processed any Hazardous Material at the Leased Real Property; and (iii) to the Knowledge of the Company, there has been no Release of any Hazardous Material at, migrating onto or under, or emanating from the Leased Real Property.

(c) No Other Conditions or Liabilities. Except as set forth on Schedule 5.19(c) of the Disclosure Schedule, to the Knowledge of the Company, no conditions exist or have existed with respect to the Company, or its assets, the Business, the Leased Real Property or any facilities or operations thereon and no events or activities have occurred with respect to its assets, the Business, the Leased Real Property or any facilities or operations thereon which could reasonably be expected to interfere in any respect with or prevent continued compliance in all material respects with applicable Environmental and Safety Requirements, give rise to any common law or statutory Liability or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation against or involving the Company, its assets, the Business, the Leased Real Property or any facilities or operations thereon relating to environmental conditions at or resulting from its assets, the Business, the Leased Real Property or any facilities or operations thereon.

SECTION 5.20 EMPLOYEES; SALARIES; PERSONNEL AGREEMENTS, PLANS AND ARRANGEMENTS.

(a) Schedule 5.20(a) of the Disclosure Schedule contains a true, complete and correct list as of the date hereof setting forth (i) the names, hire dates, current compensation rates and job titles of all individuals presently employed by the Company on a salaried basis, (ii) the names, hire dates, current compensation rates and job titles of all individuals presently employed by the Company on an hourly basis, and (iii) the names and total annual compensation for all independent contractors who render material services on a regular basis to the Company. Except as set forth in Schedule 5.20(a) of the Disclosure Schedule, or in the Ordinary Course of Business, no person listed thereon has received any bonus or increase in compensation since the December 31, 2007, nor since that date has there been any promise to the employees listed on Schedule 5.20(a) of the Disclosure Schedule orally or in writing of any bonus or increase in compensation, whether or not legally binding, except for increases in the Ordinary Course of Business consistent with the past compensation practices of the Company, and obligations incurred under existing Employee Benefit Plans or existing collective bargaining agreements of the Company. Except as provided in Schedule 5.20(a) of the Disclosure Schedule, the Company has no Knowledge that any employee of the Company as of the date hereof intends to resign because of the consummation of the transactions contemplated by this Agreement.

(b) Except as listed on Schedules 5.17(a) or 5.20(b) of the Disclosure Schedule, the Company is not a party to or obligated with respect to any (a) outstanding material contracts with current or former employees, agents, consultants, advisers, salesmen, sales representatives, distributors, sales agents, independent contractors, or dealers, or (b) collective bargaining agreements or contracts with any labor union or other representative of employees or any employee benefits provided for by any such agreement. Correct and complete copies of all such documents previously have been furnished or made available to Parent. Except as set forth

in Schedule 5.20(b) of the Disclosure Schedule, no strike, picketing, work stoppage, work slow down, union organizational activity, notice to bargain, allegation, charge or complaint of unfair labor practice, or, to the Knowledge of the Company, employment discrimination or sexual harassment or other similar occurrence has occurred within the past five (5) years. The Company has complied in all material respects with all applicable Laws relating to the employment of labor, including provisions thereof relating to immigration status, wages, hours, equal opportunity, collective bargaining and the payment of social security and other taxes (unless such taxes are reserved for on the Financial Statements) relating to the Company. Except as set forth on Schedule 5.20(b) of the Disclosure Schedule, there are no administrative charges or court complaints pending or, to the Knowledge of the Company, threatened in connection with the Company before the U.S. Equal Employment Opportunity Commission or any state or federal court or agency concerning alleged employment discrimination or any other matters relating to the employment of labor.

(c) Schedule 5.20(c) of the Disclosure Schedule contains a true, complete and correct list of all employee and other fringe benefits and other compensation provided by the Company to the officers and directors of the Company, other than employee and other fringe benefits (i) provided to all employees of the Company, or (ii) otherwise provided under arrangements identified on Schedule 5.17(a).

SECTION 5.21 WORKERS’ COMPENSATION. Schedule 5.21 of the Disclosure Schedule sets forth all expenses, obligations, duties and liabilities relating to any claims by employees and former employees (including dependents and spouses) of the Company or any Company Plan Affiliate currently pending, and the extent of any specific accrual on or reserve therefor set forth on Financial Statements, for (a) costs, expenses and other liabilities under any workers compensation Laws, requirements or programs and (b) any other medical costs and expenses. Except as listed on Schedule 5.21, no employees of the Company are currently on leave due to work related illnesses or injuries.

SECTION 5.22 TAXES. Except as set forth on Schedule 5.22 of the Disclosure Schedule or reserved for on the Financial Statements, all Taxes due and payable by the Company, including, but not limited to, Taxes for which it may be liable by virtue of having been a member of any Affiliated Group, have been paid in full. The liability for Taxes of the Company reflected in the Financial Statements is sufficient in all material respects to provide for all material interest, penalties, assessments or deficiencies (in each case, relating to Taxes) which were due and unpaid as of the ending date of the periods covered by such Financial Statements and the appropriate accrual (in accordance with GAAP) for other material unpaid Taxes not yet due as of such dates. All material Tax Returns that were required to have been filed by the Company have been filed in a timely manner and such returns were complete and correct in all material respects. Any deficiencies proposed in writing as a result of any governmental audits have been paid or settled, and there are no present disputes as to material Taxes payable by the Company. There are no unexpired waivers of any statute of limitations with respect to any Taxes by the Company, and the Company is not a party to any audit or other action or proceedings by any Governmental Authority for the collection or assessment of Taxes. The Company has timely withheld and paid all material Taxes required to be paid or owing with respect to any payment to any officer, shareholder, director, current or former employee, independent contractor or third party. The Company is not a party to or bound by any tax sharing agreement that will have continuing effect

after the Closing Date. The Company is not a “foreign person” within the meaning of Section 1445(f)(3) of the Code. The Company has not been a party to a reportable transaction under the meaning of Treasury Reg. 1.6011-4. Other than with respect to Taxes incurred in or arising out of the Ordinary Course of Business, the Company has no liability for Taxes incurred since the date of the Financial Statements.

SECTION 5.23 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE.

(a) All accounts receivable of the Company reflected on the balance sheets included in the Financial Statements, and all accounts receivable arising subsequent to the date of the Latest Balance Sheet Date, represent sales actually made or services actually performed in the Ordinary Course of Business or legal, valid and binding claims against the respective debtors as to which full performance has been rendered. Unless paid or written off in the Ordinary Course of Business in accordance with past practice prior to the Closing Date, such accounts receivable will be as of the Closing Date collectible consistent with the Company’s past collection practice net or respective reserves against such accounts receivable for returns, allowances, charge backs and bad debts, which such reserves are commercially reasonable and have been determined in accordance with GAAP. Except to the extent reserved against any accounts receivable or as reflected by prepayments or unused credits, no counterclaims or offsetting claims with respect to such accounts receivable are pending or, to the Knowledge of the Company, threatened. Schedule 5.23 of the Disclosure Statement sets forth a description of any security arrangements and collateral securing the repayment or other satisfaction of accounts receivable of the Company. Except as disclosed on Schedule 5.23 of the Disclosure Schedule, all steps reasonably necessary to render all such security arrangements legal, valid, binding and enforceable, and to give and maintain for the Company, as the case may be, a perfected security interest in the related collateral, have been taken.

(b) The accounts payable of the Company reflected on the balance sheets included in the Financial Statements, and all accounts payable arising subsequent to the Latest Balance Sheet Date, arose or will arise from bona fide transactions in the Ordinary Course of Business. The accrued liabilities of the Company have been incurred in the Ordinary Course of Business consistent with past practice.

SECTION 5.24 PRODUCT WARRANTIES. Except as set forth on Schedule 5.24 of the Disclosure Schedule, all products designed, produced, licensed, sold, maintained, serviced or distributed by the Company (the “Products”) at any time on or prior to the date hereof, are in material compliance with all express or implied warranties of the Company, as the case may be, and no material liability exists for replacement thereof, recall or other damages in connection with such sales or deliveries at any time prior to the date hereof (except as may be reflected or reserved for in the Financial Statements). Except as set forth on Schedule 5.24 of the Disclosure Schedule, the Company has not been notified of any claims for and, to the Knowledge of the Company, there are no threatened claims for, any product returns, recalls, warranty obligations or product services relating to any of the Products or services provided by the Company.

SECTION 5.25 CUSTOMERS.

(a) Schedule 5.25 of the Disclosure Schedule is a complete list by aggregate dollar value of sales made or services provided within the current fiscal year-to-date of the Company, to each customer of the Company whose annual purchases exceed, in the aggregate, $1,000. Except as set forth on Schedule 5.25, since January 1, 2008, no such customer has canceled or otherwise terminated or materially and adversely modified, or to the Knowledge of the Company, threatened to cancel or otherwise terminate or materially and adversely modify, its relationship with the Company other than ordinary course expirations and renegotiations. Since January 1, 2008, the Company has not received any notice, nor does the Company have Knowledge, that any such customer (i) intends to cancel or otherwise materially and adversely modify its relationship with the Company on account of the transactions contemplated by this Agreement, the Transaction Documents or otherwise, or (ii) is threatened with bankruptcy or insolvency.

(b) There is no existing material dispute between the Company, on the one hand, and any material customer, supplier, distributor, representative, agent or other contractor on the other hand. The Company has not granted or agreed to provide any sales, trade or product promotion allowances, rebates or similar product promotions or incentives, and the Company has no liability or obligation with respect to any of the foregoing, except in each case as set forth on Schedule 5.25 of the Disclosure Schedule.

SECTION 5.26 BANK ACCOUNTS. Schedule 5.26 of the Disclosure Schedule is a complete and correct list of each bank or financial institution in which the Company has an account, safe deposit box or lockbox, or maintains a banking, custodial, trading or similar relationship, the number of each such account or box, and the names of all persons authorized to draw thereon or having signatory power or access thereto.

SECTION 5.27 BROKERS’ OR FINDERS’ FEE. No agent, broker, investment banker, Person or firm acting on behalf of the Company or the Company, or under the authority thereof, is or will be entitled to any brokers’ or finders’ fee or any other commission or similar fee directly or indirectly from any of the Parties hereto in connection with any of the transactions contemplated hereby.

SECTION 5.28 INDEBTEDNESS; EXPENSES. The Company has no Indebtedness other than as set forth on Schedule 5.28, which schedule sets forth the amounts owing with respect to all Indebtedness of the Company, including any prepayment penalty in connection therewith, and an identification of each lender with respect thereto.

SECTION 5.29 CORPORATE NAMES; BUSINESS LOCATIONS. During the past five (5) years, (a) except as set forth on Schedule 5.29 of the Disclosure Schedule, the Company has not been known as or used any fictitious or trade names, and (b) the Company has not had an office or place of business other than as set forth on Schedule 5.29 of the Disclosure Schedule.

SECTION 5.30 DISCLOSURE. To the Knowledge of the Company, all material facts relating to the Business, the Company, or its assets, condition (financial or otherwise), operations, prospects, employees or customer relations, or the ability of the Company to

consummate the transactions contemplated hereby, have been disclosed to Parent in this Agreement or the Transaction Documents. None of the representations and warranties of the Company set forth in this Agreement, in any of the certificates, schedules, lists, documents, exhibits or other instruments delivered, or to be delivered, to Parent as contemplated by any provision hereof (including, without limitation, the Transaction Documents), to the Knowledge of the Company, contains any untrue statement of material fact or omits to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.

SECTION 5.31 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations and warranties contained in this Article V, neither the Company nor any Person acting, or purporting to act, on behalf of the Company has made any representations or warranties to Parent with respect to the execution and delivery of this Agreement, the transactions contemplated hereby, or the Business of the Company, notwithstanding the delivery or disclosure to the Company of any documentation, reports or other information with respect to any one or more of the foregoing.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT
AND INTERMEDIATE PARENT

Parent and Intermediate Parent, jointly and severally, hereby represent and warrant to the Company:

SECTION 6.1 ORGANIZATION. Each of Parent and Intermediate Parent is duly organized, validly existing and/or in good standing under the laws of the jurisdiction of organization. Each of Parent and Intermediate Parent has full power and authority to carry on its business as conducted by it and to own or hold under lease the properties and assets it now owns or holds under lease. Each of Parent and Intermediate Parent is duly qualified to do business and is in good standing as a foreign corporation or company (as applicable) in all jurisdictions where the nature of the property owned or leased by it, or the nature of its business, makes such qualification necessary and where the absence of such qualification could have a Material Adverse Effect on the validity or enforceability of this Agreement or the Transaction Documents or the consummation of the transactions contemplated hereby or thereby.

SECTION 6.2 AUTHORIZATION.

(a) Each of Parent and Intermediate Parent has full power, right and authority to enter into and perform its obligations under this Agreement and each of the Transaction Documents to which it is a party. The execution, delivery and performance by each of Parent and Intermediate Parent of this Agreement and each of the Transaction Documents to which it is a party have been duly and properly authorized by all requisite action in accordance with applicable law and with their respective organizational documents. Each Person executing this Agreement and each of the Transaction Documents to be executed and delivered by or on behalf of each of Parent and Intermediate Parent has the power and authority to execute and deliver this Agreement and each of such Transaction Documents, to consummate the transactions

contemplated hereby and thereby and to cause each of Parent and Intermediate Parent to perform its obligations hereunder and thereunder.

(b) This Agreement has been duly executed and delivered by each of Parent and Intermediate Parent and constitutes the legal, valid and binding obligations of each of Parent and Intermediate Parent, enforceable against each of Parent and Intermediate Parent in accordance with its terms. Each of the Transaction Documents to be executed and delivered by or on behalf of each of Parent and Intermediate Parent will be duly executed and delivered by each of Parent and Intermediate Parent, and when so executed and delivered, will be the legal, valid and binding obligation of each of Parent and Intermediate Parent, enforceable against each of Parent and Intermediate Parent in accordance with its terms.

SECTION 6.3 NO CONFLICTS. Neither the execution and delivery of this Agreement and the Transaction Documents by each of Parent and Intermediate Parent, nor the performance by each of Parent and Intermediate Parent of the transactions contemplated hereby or thereby, will:

(a) violate or conflict with or result in a breach of any of the terms, conditions or provisions of the organizational or other governing documents of Parent or Intermediate Parent;

(b) violate or conflict with or result in a breach of any Law or conflict with or result in the breach of any of the terms, conditions or provisions thereof;

(c) constitute (with or without notice or lapse of time or both) a default under or otherwise violate any material Permit, Contract, mortgage, note, bond, license or other instrument to which Parent or Intermediate Parent is a party or by which the properties or assets of Parent or Intermediate Parent are bound;

(d) constitute an event which would permit any party to terminate, or accelerate the maturity of any Indebtedness or other obligation under, any Contract, mortgage, note, bond, license or other instrument to which Parent or Intermediate Parent is a party or by which the properties or assets of Parent or Intermediate Parent are bound;

(e) result in the creation or imposition of any Lien upon the assets of Parent or Intermediate Parent; or

(f) require any Permit, authorization, consent, approval, exemption or other action by or notice to or filing with any Person, court or administrative or governmental body pursuant to any Laws.

SECTION 6.4 BROKERS’ OR FINDERS’ FEES. No agent, broker, investment banker, Person or firm (i) has acted on behalf of Parent and Intermediate Parent or under the authority thereof, in connection with, or (ii) will be entitled to any brokers’ or finders’ fee or any other commission or similar fee as a result of, any of the transactions contemplated hereby.

SECTION 6.5 FINANCIAL STATEMENTS.

(a) Parent has previously made available to the Company (through the SEC’s XXXXX filing system) copies of its Annual Report on Form 10-K for the year ended December 31, 2007, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008 (collectively, the “Disclosure Materials”) and the financial statements contained therein (collectively, the “Parent Financial Statements”). Subject, in the case of any unaudited Parent Financial Statements, to normal year-end adjustments and the absence of footnote disclosure, Parent Financial Statements fairly present, in conformity with GAAP (except as may be indicated in the notes thereto), the consolidated financial position of Parent as of the dates thereof, and cash flows and changes in financial position for the periods then ended.

SECTION 6.6 LITIGATION. There are no proceedings or investigations pending or, to the Knowledge of Parent or Intermediate Parent, threatened, against Parent or Intermediate Parent, or any of its properties or assets which would have a Material Adverse Effect on Parent or Intermediate Parent or would prevent or delay the consummation of the transactions contemplated hereby or by the Transaction Documents. Neither Parent nor Intermediate Parent is subject to any outstanding order, judgment, injunction or decree which would have a Material Adverse Effect on any Party or its financial condition, business, prospects or operations, or which would prevent or delay the consummation of the transactions contemplated hereby or by the Transaction Documents.

SECTION 6.7 GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LEGAL REQUIREMENTS; TAXES.

(a) Each of Parent and Intermediate Parent holds all governmental authorizations necessary for the lawful conduct of its businesses, except where the failure to so hold a governmental authorization would not, individually or in the aggregate, have a Material Adverse Effect. Each of Parent and Intermediate Parent is in compliance with the terms of any such governmental authorizations, except where the failure to so comply would not have a Material Adverse Effect.

(b) Except as disclosed in the Disclosure Materials, each of Parent and Intermediate Parent is, and, at all times since January 1, 2006, has been, in compliance with all applicable Laws, except where the failure to so comply with such Laws has not had and could not reasonably be expected to have a Material Adverse Effect. No proceeding, investigation or review by any Governmental Authority with respect to the Parent or Intermediate Parent is pending or, to the Knowledge of the Parent or Intermediate Parent, threatened, nor, to the Knowledge of the Parent or Intermediate Parent, has any Governmental Authority indicated an intention to conduct the same, other than, in each case, those which Parent reasonably believes will not have a Material Adverse Effect.

(c) Each of Parent and Intermediate Parent has duly filed all Tax Returns that it was required to file and paid all Taxes that were due and owing. To the Knowledge of each of Parent and Intermediate Parent, there is no pending dispute with any taxing relating to any of such Tax Returns and each of Parent and Intermediate Parent has no Knowledge of any proposed liability for any Tax to be imposed upon its properties or assets.

SECTION 6.8 ENVIRONMENTAL MATTERS. Except as disclosed in the Disclosure Materials, each of Parent and Intermediate Parent is in compliance with all applicable Environmental and Safety Requirements, which compliance includes the possession by each of Parent and Intermediate Parent of all material authorizations of Governmental Authorities required under applicable Environmental and Safety Requirements, and compliance with the terms and conditions thereto, except where the failure to comply with such Environmental and Safety Requirements or to posses or comply with such authorizations of Governmental Authorities would not have a Material Adverse Effect.

SECTION 6.9 NO INSOLVENCY. Neither Parent nor Intermediate Parent is and will be, after giving effect to the transactions contemplated hereby, insolvent within the meaning of 11 U.S.C. Section 101(32) or similar laws of any jurisdiction. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated hereby with actual intent to hinder, delay or defraud either present or future creditors of Parent or Intermediate Parent. At the Effective Time, Parent or Intermediate Parent will have sufficient funds to enable it to consummate the transactions contemplated hereby.

SECTION 6.10 SEC REPORTS. Parent has made all filings required by it under the Exchange Act (the “SEC Reports”). Each of the SEC Reports was, at the time of its filing, in substantial compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements contained therein (including the notes thereto), as of their respective filing dates, 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 therein, in light of the circumstances under which they were made, not misleading.

SECTION 6.11 DISCLOSURE. None of the representations and warranties of Parent and Intermediate Parent set forth in this Agreement, in any of the certificates, schedules, lists, documents, exhibits or other instruments delivered, or to be delivered, to the Company as contemplated by any provision hereof (including, without limitation, the Transaction Documents), to the Knowledge of Parent and Intermediate Parent, contains any untrue statement of material fact or omits to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. The Disclosure Materials do not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

SECTION 6.12 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations and warranties contained in this Article VI, neither Parent, Intermediate Parent nor any Person acting, or purporting to act, on behalf of Parent or Intermediate Parent makes any representations or warranties to the Company with respect to the execution and delivery of this Agreement, the transactions contemplated hereby, or the business of Parent and Intermediate Parent, notwithstanding the delivery or disclosure to the Company of any documentation, reports or other information with respect to any one or more of the foregoing.

ARTICLE VII
CONDITIONS PRECEDENT TO THE CLOSING; TERMINATION

SECTION 7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT. The obligations of Parent under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction, at or prior to the Closing, of all of the following conditions, any one or more of which may be waived in whole or in part in writing in the sole discretion of Parent.

(a) No Breach of Covenants; True and Correct Representations and Warranties. There shall have been no material breach by the Company in the performance of any of the obligations herein to be performed thereby in whole or in part prior to the Closing under this Agreement and the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing (except for representations or warranties that are made by their terms as of a specified date, which shall be true and correct in all material respects as of the specified date), and the Company shall deliver to Parent a certificate of a duly appointed officer of the Company stating the foregoing is true and correct.

(b) Delivery of Documents. Parent shall have received all documents and other items to be delivered thereby under Section 8.2 of this Agreement.

(c) No Legal Obstruction; Regulatory Consent. No suit, action or proceeding by any third party or Governmental Authority with respect to the transactions contemplated hereby shall be pending or threatened in writing and no order shall have been entered in any such suit, action or proceeding that would have the effect of (i) making any of the transactions contemplated by this Agreement or the Transaction Documents illegal, (ii) otherwise preventing the consummation of such transactions or (iii) imposing limitations on such transactions and/or the ability of any party hereto to perform its obligations hereunder or operate the Business or the Company after the Closing. All consents, approvals and actions of, filings with and notices to any Governmental Authority and any other third party necessary to permit Parent, Intermediate Parent and the Company to perform their obligations under this Agreement and the Transaction Documents and to consummate the transactions contemplated hereby and thereby shall have been duly obtained, made or given, in form and substance reasonably satisfactory to Parent.

(d) No Material Adverse Effect. There shall be no credible claim of material infringement of the Intellectual Property of the Company which is necessary for the operation of the Business (the “Necessary IP”) as presently conducted by the Company and no temporary restraining order or preliminary or permanent injunction shall have been entered by any Governmental Authority against the Company prohibiting the Company from using such Necessary IP, nor shall there have been any order, event or occurrence that individually or in the aggregate with any other order, event or occurrence prohibits the Company from performing its obligations hereunder or under the Transaction Documents. In addition, no material act of fraud by the Company shall have occurred in connection with the transactions contemplated by this Agreement.

(e) Payoff Letters and Lien Releases. Parent shall have received the payoff letters with respect to the Indebtedness, if any, of the Company set forth on Schedule 7.1(e), and evidence reasonably satisfactory to Parent of the release of the Liens set forth on Schedule 7.1(e), if any, on any assets securing such Indebtedness.

(f) Resignations of Directors and Chief Executive Officer. All members of the Board of Directors and the Chief Executive Officer of the Company shall have tendered, effective as of the Closing, their resignations as such. The Company shall have used commercially reasonable efforts to obtain executed Resignation and Release Agreements from each such Person substantially in the form of the D&O Resignation and Release Agreement attached hereto as Exhibit A.

(g) Shareholder Documents. The Company shall have received, and delivered to Parent evidence thereof in accordance with Section 8.2(c), the approval of the requisite Shareholders, as required under the Company’s Articles of Incorporation and Bylaws and under the California General Corporation Law, authorizing the execution and delivery of the Transaction Documents to which the Company is a party and the performance of the transactions to be performed by the Company as contemplated hereby and thereby. Shareholders representing not less than ninety-five percent (95%) of the issued and outstanding Company Capital Stock shall have delivered executed complete Letters of Transmittal, together with stock powers, original stock certificates or lost stock certificate affidavits for the Company Capital Stock held by such holders to be exchanged for Merger Consideration in accordance with the terms hereof, along with stock certificates duly endorsed or accompanied by such other instruments of conveyance as may be reasonably acceptable to Parent and its counsel (other than immaterial errors or omissions that the Parties reasonably expect to resolve promptly following the Closing), and free and clear of any pledges, liens, restrictions, charges, encumbrances, and rights or interests of any other party thereto. The Company shall have used commercially reasonable efforts to obtain releases signed by each of the Shareholders of any and all claims against the Company, and Parent arising from such Shareholder’s ownership of Company Capital Stock.

(h) Merger Consideration Certificate and Cash Requirement Certificate. The Company will deliver to Parent the Merger Consideration Certificate and all supporting documentation with respect thereto, if any.

(i) Options and Warrants. The Company’s Board of Directors shall have taken such actions as may be required, if any, to provide for the treatment of all unexercised and outstanding Options and Warrants as described in Section 2.2 of this Agreement.

(j) Certificates Now. Parent shall have received certification from the California Secretary of State that Certificates Now, a California corporation (C2036340), an Affiliate of the Company is in good standing with the State of California.

(h) Xxxxx X. Xxxxxxx Consulting Agreement. The Company, the Shareholders’ Representative and Xxxxx X. Xxxxxxx shall reach an agreement, subject to the approval of the Parent, modifying the Consulting Services Agreement dated October 5, 2008 between the Company and Xxxxx X. Xxxxxxx in a manner that ends all of the Company’s

obligations to Xxxxx X. Xxxxxxx as of the Closing and states that such obligations shall be those of the Shareholders’ Representative.

SECTION 7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The obligations of the Company under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction, at or prior to the Closing, of all the following conditions, any one or more of which may be waived in whole or in part in writing in the sole discretion of the Company.

(a) No Breach of Covenants; True and Correct Representations and Warranties. There shall have been no material breach by Parent or Intermediate Parent in the performance of any of the obligations herein to be performed thereby in whole or in part prior to the Closing under this Agreement and the representations and warranties of Parent and Intermediate Parent contained in this Agreement shall be true and correct in all material respects as of the date hereof and the Closing (except for representations or warranties that are made by their terms as of a specified date, which shall be true and correct in all material respects as of the specified date), and each of Parent and Intermediate Parent shall deliver to the Company a certificate of a duly appointed officer of Parent and Intermediate Parent stating the foregoing is true and correct.

(b) Delivery of Documents and Consideration. The Company shall have received all items to be delivered thereby under Section 8.3 of this Agreement.

(c) No Legal Obstruction; Regulatory Consent. No suit, action or proceeding by any third party or Governmental Authority with respect to the transactions contemplated hereby shall be pending or threatened in writing and no order shall have been entered in any such suit, action or proceeding that would have the effect of (i) making any of the transactions contemplated by this Agreement or the Transaction Documents illegal, (ii) otherwise preventing the consummation of such transactions or (iii) imposing limitations on such transactions and/or the ability of any party hereto to perform its obligations hereunder or operate the Business, the Company after the Closing. All consents, approvals and actions of, filings with and notices to any Governmental Authority or other Person necessary to permit Parent, Intermediate Parent and the Company to perform their obligations under this Agreement and the Transaction Documents and to consummate the transactions contemplated hereby and thereby shall have been duly obtained, made or given.

(d) No Material Adverse Effect. There shall there have been no occurrence or series of occurrences that individually or in the aggregate prohibit Parent from performing its obligations hereunder or under the Transaction Documents, including the payment of the Contingent Merger Consideration.

(e) Shareholder Documents. The Company shall have received the approval of the requisite Shareholders, as required under the Company’s Articles of Incorporation and Bylaws and under the California General Corporation Law, authorizing the execution and delivery of the Transaction Documents to which the Company is a party and the performance of the transactions to be performed by the Company as contemplated hereby and thereby. Shareholders representing not less than ninety-five percent (95%) of the issued and outstanding

Company Capital Stock shall have delivered executed complete Letters of Transmittal, together with stock powers, original stock certificates or lost stock certificate affidavits for the Company Capital Stock held by such holders to be exchanged for Merger Consideration in accordance with the terms hereof, along with stock certificates duly endorsed or accompanied by such other instruments of conveyance as may be reasonably acceptable to the Company and its counsel (other than immaterial errors or omissions that the Parties reasonably expect to resolve promptly following the Closing), and free and clear of any pledges, liens, restrictions, charges, encumbrances, and rights or interests of any other party thereto.

SECTION 7.3 TERMINATION.

(a) Termination of Agreement. This Agreement may be terminated and abandoned at any time prior to the consummation of the Closing under the following described circumstances:

(i) upon the mutual written consent of Parent and the Company;

(ii) by Parent, if the Closing shall not have occurred on or before December 5, 2008 (unless due to a breach or default by Parent hereunder); or

(iii) by the Company, if the Closing shall not have occurred on or before December 5, 2008 (unless due to a breach or default by the Company hereunder).

(b) Effect of Termination. If this Agreement is terminated pursuant to this Section 7.3, this Agreement shall become null and void, and all rights and obligations of the Parties hereunder shall terminate without any liability of any party to any other party, except for a breach of this Agreement; provided, however, that the provisions contained in Section 11.8 and Section 11.9 shall survive termination of this Agreement; provided, further, that the rights and obligations of the Parties pursuant to the Non-Disclosure Agreement dated June 3, 2008 shall survive termination of this Agreement. Notwithstanding any other provision in this Agreement to the contrary, upon termination of this Agreement pursuant to Section 7.3(a)(ii), the Company will remain liable to Parent for any breach of this Agreement by the Company existing at the time of such termination, and upon termination of this Agreement pursuant to Section 7.3(a)(iii), Parent will remain liable to the Company for any breach of this Agreement by Parent existing at the time of such termination, and the Company or Parent, as the case may be, may seek such remedies, including damages and fees of attorneys, against the other with respect to any such breach as are provided in this Agreement or as are otherwise available at law or in equity.

ARTICLE VIII
CLOSING

SECTION 8.1 TIME AND PLACE. The transactions contemplated by this Agreement shall be consummated as provided in Section 1.6 of this Agreement.

SECTION 8.2 DELIVERIES OF THE COMPANY. At the Closing, the Company will deliver or cause to be delivered to Parent, the items referred to in Section 7.1 above simultaneously with the following items:

(a) Corporate Documents. Articles of Incorporation of the Company, certified by the Secretary of State of the Company’s formation as of a recent date, and the Bylaws of the Company, certified by the secretary of the Company, as in effect at the Closing.

(b) Certificates of Good Standing. Certificates of Good Standing, dated as of a recent date, with respect to the Company, issued by the Secretary of State of the state of its formation and by the Secretary of State of each jurisdiction in which the Company is qualified to do business as a foreign corporation.

(c) Resolutions. A copy of the resolutions of the Board of Directors and Shareholders of the Company certified by the secretary thereof as having been duly and validly adopted and in full force and effect, authorizing the execution and delivery of the Transaction Documents to which the Company is a party and the performance of the transactions to be performed by the Company as contemplated hereby and thereby.

All documents delivered to Parent shall be in form and substance reasonably satisfactory to Xxxxxxx Xxxxxx, P.A., counsel for Parent.

SECTION 8.3 DELIVERIES OF PARENT AND INTERMEDIATE PARENT. At the Closing, Parent and Intermediate Parent will deliver to the Company the following items.

(a) Certified Organizational Documents. The Certificate of Incorporation of Parent, certified by the Secretary of State of the State of Delaware as of a recent date, and a copy of the charter documents of Intermediate Parent, certified by the state of organization of Intermediate Parent.

(b) Certificates of Good Standing. Certificates of Good Standing, as of a recent date, with respect to each of Parent and Intermediate Parent, issued by the Secretary of State or other governing body, of the state of its formation.

(c) Resolutions. A copy of the resolutions of the Board of Directors of Parent and Intermediate Parent, certified by the secretary thereof as having been duly and validly adopted and in full force and effect, authorizing the execution and delivery of this Agreement and the Transaction Documents to which such entity is a party and the performance of the transactions contemplated hereby and thereby.

(d) Cash Merger Consideration. The Cash Merger Consideration by wire transfer as provided in Section 1.6 of this Agreement and in accordance with the Merger Consideration Certificate.

All documents delivered to the Company shall be in form and substance reasonably satisfactory to Xxxxxxxx, Xxxx, Hargreaves & Savitch LLP, counsel for the Company.

ARTICLE IX
INDEMNIFICATION

SECTION 9.1 INDEMNIFICATION BY THE INDEMNIFYING SHAREHOLDERS FOR BREACH BY THE COMPANY. Subject to the limitations set

forth in Section 9.5, the Shareholders’ Representative and Xxxxx Participation Corp. (the “Indemnifying Shareholders”), severally and not jointly, shall indemnify Parent and its Affiliates, and its respective directors, stockholders, officers, partners, employees, agents, lenders, representatives, successors and assigns (the “Parent Indemnified Parties”) and save and hold each of them harmless from and against and pay on behalf of or reimburse the Parent Indemnified Parties as and when incurred upon showing reasonable evidence thereof, for any and all liabilities, claims, actions, assessments, losses, costs, damages, deficiencies, Taxes, fines or expenses (whether or not arising out of third party claims), including, without limitation, interest, penalties, attorneys’ fees actually incurred and all amounts paid in investigation, defense or settlement of any of the foregoing (collectively, “Losses”) which any Parent Indemnified Party may suffer, sustain or become subject to, in connection with, incident to, resulting from or arising out of or in any way relating to or by virtue of, directly or indirectly:

(a) any breach of any representation or warranty made by the Company in this Agreement, including, without limitation, Article V hereof (after giving effect to any disclosure made by Company in the Disclosure Schedule), including the schedules and exhibits, certificates or other instruments or documents furnished to Parent by the Company specifically required in connection herewith (after giving effect to any disclosure made by the Company in the Disclosure Schedule);

(b) any nonfulfillment or breach of any covenant or agreement on the part of the Company under this Agreement or other instruments or documents delivered by the Company as specifically required in connection herewith, including, without limitation, the Transaction Documents;

(c) any liability to dissenting Shareholders, in excess of the amount of Merger Consideration, which liability is agreed upon in writing by the Shareholders’ Representative as properly due and owing to such dissenting Shareholders and which would otherwise have been paid to such Shareholders pursuant to the terms of this Agreement;

(d) any Losses resulting from any fraudulent misrepresentation contained herein;

(e) any Taxes assessed by any governmental taxing authority against the Company relating to taxable periods prior to the Closing Date, as determined under Section 10.2;

provided, however, that the foregoing indemnification will not apply to any Losses to the extent they are based upon or arise out of (i) any breach of this Agreement by Parent, or (ii) bad faith, gross negligence or willful misconduct on the part of Parent or any of the Parent Indemnified Parties.

SECTION 9.2 INDEMNIFICATION BY PARENT. Parent and its Affiliates, on behalf of themselves and their respective successors and assigns, hereby agrees to, jointly and severally, indemnify the Shareholders and their respective Affiliates, shareholders, directors, officers, partners, employees, agents, representatives, successors and permitted assigns (the “Shareholder Indemnified Parties”) and save and hold each of them harmless from and against and pay on behalf of or reimburse the Shareholder Indemnified Parties as and when incurred for

any and all Losses which any Shareholder Indemnified Party may suffer, sustain or become subject to, in connection with, incident to, resulting from or arising out of or in any way relating to or by virtue of, directly or indirectly:

(a) any breach of any representation or warranty made by Parent, Intermediate Parent or Merger Sub in this Agreement, including the schedules and exhibits, certificates or other instruments or documents furnished to the Company by Parent, Intermediate Parent or Merger Sub in connection herewith;

(b) any nonfulfillment or breach of any covenant or agreement on the part of Parent, Intermediate Parent or Merger Sub under this Agreement or other instruments or documents delivered by Parent or Merger Sub as specifically required in connection herewith, including, without limitation, the Transaction Documents, furnished to the Company by Parent or Merger Sub;

(c) any claim for payment of fees, expenses or other Liabilities owed to Parent’s, Intermediate Parent’s or Merger Sub’s legal or financial professionals or any broker or finder in connection with the origin, negotiation, execution or consummation of this Agreement based upon any alleged agreement between the claimant and Parent, Intermediate Parent or Merger Sub, or any Affiliate of any of the foregoing;

(d) any Losses resulting from any fraudulent misrepresentation contained herein or in any other Transaction Documents; or

(e) any Losses resulting from the operation of the Business after the Closing Date; or

(f) any Losses arising out of or directly resulting from the inclusion of Intermediate Parent as a party to this Agreement and the transactions contemplated hereby;

provided, however, that the foregoing indemnification will not apply to any Losses to the extent they are based upon or arise out of (i) any breach of this Agreement by the Shareholders, or (ii) bad faith, gross negligence or willful misconduct on the part of the Shareholder Indemnified Parties.

SECTION 9.3 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. In the event that, subsequent to the Closing, any person or entity entitled to indemnification under this Agreement (an “Indemnified Party”) receives notice of the assertion of any claim or of the commencement of any action or proceeding by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement (including, but not limited to any Governmental Authority) (a “Third Party Claim”) against such Indemnified Party, against which a party to this Agreement is required to provide indemnification under this Agreement (an “Indemnifying Party”), the Indemnified Party shall give written notice (a “Third Party Claim Notice”) regarding such claim to the Indemnifying Party within 20 Business Days after learning of such claim, unless the notice relates to commencement of an action or proceeding, in which case such notice shall be given as soon as practicable, and at least 15 Business Days prior to any response required by applicable Law or tribunal rule. The Indemnifying Party shall have the right, upon written notice to the Indemnified Party (the “Defense Notice”) within 15 Business

Days after receipt from the Indemnified Party of a Third Party Claim Notice, which notice by the Indemnifying Party shall specify the counsel it will appoint to defend such claim (“Defense Counsel”), to conduct at its expense the defense against such claim in its own name, or if necessary in the name of the Indemnified Party; provided, however, that the Indemnified Party shall have the right to approve the Defense Counsel, which approval shall not be unreasonably withheld, conditioned or delayed.

(a) In the event that the Indemnifying Party shall fail to give the Defense Notice within said 15-Business Day period, it shall be deemed to have elected not to conduct the defense of the subject claim, and in such event the Indemnified Party shall have the right to conduct the defense in good faith and to compromise and settle the claim in good faith with the consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed) and the Indemnifying Party will be liable for all reasonable costs, expenses, settlement amounts or other Losses paid or incurred in connection therewith but only upon the terms and conditions of this Article IX; provided, however, that the Indemnified Party shall keep the Indemnifying Party informed of all material developments and events relating to such claim or proceeding.

(b) In the event that the Indemnifying Party does deliver a Defense Notice and thereby elects to conduct the defense of the subject claim, the Indemnifying Party shall be entitled to have the exclusive control over said defense settlement of the subject claim and the Indemnified Party will cooperate with and make available to the Indemnifying Party such assistance and materials as it may reasonably request, all at the expense of the Indemnifying Party, and the Indemnified Party shall have the right at its expense to participate in the defense assisted by counsel of its own choosing; provided, however, that any fees or costs incurred by the Indemnified Party while engaging in such participation shall not be included within the calculation of its Losses for purposes of its entitlement to indemnification under this Section 9.3. In such an event, the Indemnifying Party will not settle the subject claim without the prior written consent of the Indemnified Party, which consent will not be unreasonably withheld, conditioned or delayed).

(c) Without the prior written consent of the Indemnified Party which may be withheld for any reason or no reason, the Indemnifying Party will not enter into any settlement of any Third Party Claim or cease to defend against such claim after assuming the defense of such claim, if pursuant to or as a result of such settlement or cessation, (i) injunctive relief or specific performance would be imposed against the Indemnified Party, (ii) such settlement or cessation would lead to liability or create any financial or other obligation on the part of the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder, or (iii) such settlement or cessation will not result in a full release of the Indemnified Party with respect to such claim.

(d) Notwithstanding Section 9.2(b), the Indemnifying Party shall not be entitled to control, but may participate in, and the Indemnified Party shall be entitled to have sole control over, the defense or settlement of any claim (i) that seeks a temporary restraining order, a preliminary or permanent injunction or specific performance against the Indemnified Party, (ii) that involves criminal allegations against the Indemnified Party, (iii) that if unsuccessful, would set a precedent that would materially interfere with, or have a Material Adverse Effect on, the

business or financial condition of the Indemnified Party, or (iv) that imposes liability on the part of the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder. In such an event, the Indemnifying Party will still have all of its obligations hereunder provided that the Indemnified Party will not settle the subject claim without the prior written consent of the Indemnifying Party, which consent will not be unreasonably withheld, conditioned or delayed.

(e) Any final judgment entered or settlement agreed upon in the manner provided herein shall conclusively be deemed to be an obligation with respect to which the Indemnified Party is entitled to prompt indemnification hereunder.

(f) A failure by either Party to give timely, complete or accurate notice as provided in this Section 9.3 will not affect the rights or obligations of any Party hereunder except and only to the extent that, as a result of such failure, any Party entitled to receive such notice was deprived of its right to recover any payment under its applicable insurance coverage or was otherwise directly and materially prejudiced as a result of such failure to give timely notice.

SECTION 9.4 PROCEDURES FOR NON-THIRD PARTY CLAIMS. In the event any Party should have a claim against another Party hereunder which does not involve a Third Party Claim (a “Direct Claim”), the Party making a claim (the “Claiming Party”) shall promptly transmit to such other Party (the “Notified Party”) within 30 days of the Claiming Party’s knowledge or possession of sufficient facts upon which such Direct Claim may be based a written notice (the “Direct Claim Notice,” and together with a Third Party Claim Notice, a “Notice of Claim”) describing in reasonable detail the basis of the Claiming Party’s request for payment under this Agreement. If the Notified Party does not notify (the “Direct Claim Defense Notice”) the Claiming Party in writing within 20 Business Days from its receipt of the Direct Claim Notice that Notified Party disputes such Direct Claim, the Direct Claim specified in the Direct Claim Notice shall be deemed a liability of Notified Party hereunder. If Notified Party has timely disputed such Direct Claim, as provided above, such dispute shall be resolved by litigation as provided in Section 11.9 and Section 11.10 hereof.

SECTION 9.5 CERTAIN LIMITATIONS ON REMEDIES.

(a) Survival. All representations and warranties of the Parties hereto contained in or arising out of this Agreement or otherwise in connection herewith shall survive the Closing hereunder and shall continue in full force and effect for 12 months after the Closing Date, except the warranties and representations contained in Section 5.1, Section 5.2, Section 5.3, Section 5.4, Section 5.12 and Section 5.22 and Section 6.1, Section 6.2, Section 6.3 and Section 6.4 shall survive until the earliest of (i) the expiration of all applicable statutes of limitations (including any amendments extending said statutes), (ii) the final payment of any Contingent Merger Consideration, and (iii) 24 months after the Closing Date. Notwithstanding anything herein to the contrary, indemnification for any claim for which written notice as provided in this Article IX has been timely given prior to the expiration of the representation and warranty upon which such claim is based as provided herein shall not expire, and such claim for indemnification may be pursued, until the final resolution of such claim in accordance with the provisions of this Article IX. Except as otherwise provided in this Section 9.5, the Parties

specifically intend that the applicable statutes of limitations be superseded and replaced by the Parties’ agreement herein.

(b) Limitations on Indemnifying Shareholders’ Indemnification. Notwithstanding anything to the contrary set forth in this Agreement:

(i) the Indemnifying Shareholders shall not be liable to the Parent Indemnified Parties under Section 9.1(a) (other than as a result of any breach of any representation or warranty contained in Section 5.1, Section 5.2, Section 5.3, and Section 5.22) unless and until the Losses incurred by all Parent Indemnified Parties as a result thereof exceed, in the aggregate, $60,000 (the “Basket Amount”); provided, however, that in the event that such Losses exceed the Basket Amount, the Indemnifying Shareholders shall only be liable to indemnify any Parent Indemnified Party for all Losses incurred in excess of the Basket Amount. Notwithstanding the foregoing, the Basket Amount shall not apply to any breach of any representation or warranty contained in Section 5.1, Section 5.2, Section 5.3 or Section 5.22, and the Basket Amount shall not apply to any Losses resulting from any fraudulent misrepresentation;

(ii) the indemnification provided for in Section 9.1(a) shall not apply to the extent that the Losses at issue may be reflected in an adjustment to the Merger Consideration;

(iii) any Losses as to which the indemnification provided for in Section 9.1(a) may apply shall be determined net of any actual recovery (whether by way of payment, discount, credit, off-set, tax benefit, counterclaim or otherwise) received by a Parent Indemnified Parties from a third party (including any insurer or taxing authority) less any current or prospective cost associated with receiving such recovery;

(iv) prior to the Effective Time, no Shareholder shall have any liability to any Parent Indemnified Parties in respect of this Agreement, the Merger or the other transactions and arrangements contemplated hereby;

(v) from and after the Effective Time, no Shareholder shall have any liability to any Parent Indemnified Parties in respect of this Agreement, the Merger or the other transactions and arrangements contemplated hereby except as expressly provided in Section 9.1; provided, however, that the total amount of such liability shall be limited in the aggregate, as of any time from and after the Effective Time, to $1,125,000 except in the case of any claim based on fraudulent misrepresentation, in which case the total amount of such liability in the aggregate shall not exceed the Merger Consideration.

(c) Limitation on Parent’s Indemnification. Notwithstanding anything to the contrary set forth in this Agreement (but subject to the terms of this Section 9.5(c), neither Parent nor Intermediate Parent shall be liable to any Shareholder Indemnified Parties under Section 9.2(a) unless the amount of Losses incurred by all Shareholder Indemnified Parties exceeds in the aggregate the Basket Amount; provided, however, that in the event that such Losses exceed the Basket Amount, Parent shall only be liable to indemnify the applicable Shareholder Indemnified Parties for all Losses incurred in excess of the Basket Amount up to, and not

exceeding, the Merger Consideration (the “Parent Liability Cap”). Notwithstanding the foregoing, the Basket Amount shall not apply to any breach of any representation or warranty contained in Section 6.1, Section 6.2, Section 6.3, Section 6.5, or Section 6.9, and the Basket Amount shall not apply to any Losses in connection with fraudulent misrepresentation.

(d) Mechanics of Set Off. Subject to compliance with this Article IX and the limitations provided herein, any Contingent Merger Consideration shall be decreased, and Parent may withhold any Contingent Merger Consideration due and payable, by the amount necessary to satisfy all or part of any claim for indemnity made pursuant to this Agreement, for which written notice has been provided to the Shareholders’ Representative at least 21 days prior to such payment. Upon final resolution of all claims, Parent shall remit the balance remaining, if any, of the withheld Contingent Merger Consideration including interest thereon to the Shareholders in accordance with the Merger Consideration Certificate if such claims are resolved and fully settled for an amount less than the amount withheld from the above payments.

SECTION 9.6 INSURANCE PROCEEDS. If any Losses related to a claim by an indemnified party are covered by one or more third party insurance policies held by the indemnified party and the indemnified party actually receives a full or partial recovery under such insurance policies (the “Insurance Proceeds”), the indemnified party shall be entitled to recover from the indemnifying party only the amount by which such Losses exceed the Insurance Proceeds (and shall refund any amounts previously received from the indemnifying party equal to the Insurance Proceeds). Except as set forth in the next sentence, nothing in this Section 9.6 shall require any Party to seek recovery under any insurance policy. The Parties agree that if the applicable insurance policy is a policy held by the Company prior the Closing, then the applicable indemnified party shall use commercially reasonable efforts to seek recovery under such policy.

SECTION 9.7 EXCLUSIVITY OF REMEDY. Notwithstanding any provision of this Agreement to the contrary, the Parties’ sole recourse following the Closing for any breach of any representation, warranty, agreement or covenant contained herein, or for any Losses or any other matters arising under this Agreement or the transaction contemplated hereby shall be the recovery of indemnification payments under this Article IX.

ARTICLE X
TAX MATTERS

SECTION 10.1 TAX RETURNS. All Tax Returns required to be filed after the Closing Date with respect to the Company that relate to any tax period (or portion thereof) beginning on or before the Closing Date will be filed or caused to be filed by the Shareholders’ Representative when due (taking into account any extension of a required filing date). Any such Tax Return shall, to the extent allowed by law, be prepared in a manner consistent with the Company’s past practice. The Shareholders’ Representative shall deliver any such Tax Returns that include a taxable period ending after the Closing Date to Parent for Parent’s review at least 15 Business Days prior to the due date (including extensions) of such Tax Return. If Parent within 10 Business Days after delivery of such Tax Return notifies the Shareholders’ Representative in writing that it objects to any items in such Tax Return that relate to a Tax liability of Parent, any reasonable comments of Parent that relate to such disputed items shall be incorporated by the

Shareholders’ Representative. Parent shall timely pay or cause to be paid timely on behalf of the Company any Taxes (whether or not reflected on such Tax Returns) that relate to any Tax period (or portion thereof) beginning on or after the Closing Date (as determined pursuant to Section 10.2).

SECTION 10.2 TAX ALLOCATIONS. For purposes of this Agreement, (a) in the case of any taxable period that includes (but does not end on) the Closing Date, the amount of any Taxes based on or measured by income or receipts of the Company for the pre-Closing Tax period shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the taxable period of any partnership or other pass-through entity in which Company holds a beneficial interest shall be deemed to terminate at such time) and (b) in the case of any Taxes that are imposed on any other basis and are payable for a taxable period that includes (but does not end on) the Closing Date, the portion of such Tax which relates to the portion of such taxable period ending on the Closing Date shall (x) in the case of any real and personal property Taxes, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in the entire taxable period, and (y) in the case of any other Tax, be deemed equal to the amount which would be payable if the relevant taxable period ended on the Closing Date. Any credits relating to a taxable period that begins before and ends after the Closing Date shall be taken into account as though the relevant taxable period ended on the Closing Date. All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with prior practice of the Company.

SECTION 10.3 REFUNDS AND TAX BENEFITS. Any Tax refunds that are received by Parent, its Affiliates or the Company, and any amounts credited against Tax to which any of the foregoing become entitled, that relate to any period prior to the Closing Date shall be for the account of the Shareholders, and Parent shall pay over to the Shareholders’ representative any such refund or the amount of any such credit within 30 days after receipt or entitlement thereto.

SECTION 10.4 TAX PROCEEDINGS. For the period of time beginning with the Closing Date and ending on the date the final payment of any Contingent Merger Consideration, if any taxing authority conducts any audit or investigation relating to the Company for any taxable period (or portion thereof) beginning prior to the Closing Date, the Shareholders’ Representative, along with Parent, will have to represent the Company in such audit or investigation and to provide any response required in connection therewith.

SECTION 10.5 COOPERATION ON TAX MATTERS. Parent agrees to furnish or cause to be furnished to the Shareholders’ Representative, upon request, as promptly as practicable, such information relating to the Company (including access to Books and Records) as is reasonably necessary for the filing of all Tax Returns, the making of any election related to Taxes, the preparation for any audit by any taxing authority, and the prosecution or defense of any claim, suit or proceeding relating to any Tax Return. Parent shall retain all Books and Records with respect to Taxes pertaining to the Company until the applicable period for assessment under applicable law (giving effect to any and all extensions or waivers) has expired, and to abide by or cause the abidance with all record retention agreements entered into with any Taxing Authority. Parent agrees to cause the Company to give the Shareholders’ Representative

reasonable notice prior to transferring, discarding or destroying any such Books and Records relating to Tax matters and, if the Shareholders’ Representative so requests, the Company shall allow the Shareholders’ Representative to take possession of such Books and Records. Parent shall cooperate with the Shareholders’ Representative in the conduct of any audit or other proceeding related to Taxes involving the Company for any tax period (or portion thereof) ending on or before the close of business on the Closing Date and Parent, and after the Closing the Company, each shall execute and deliver such powers of attorney and other documents as are necessary to carry out the intent of this Section 10.5.

ARTICLE XI
MISCELLANEOUS

SECTION 11.1 NOTICES, CONSENTS, ETC. Any notices, consents or other communications required or permitted to be sent or given hereunder by any of the Parties shall in every case be in writing and shall be deemed properly served if (a) delivered personally, (b) sent by registered or certified mail, in all such cases with first class postage prepaid, return receipt requested, (c) delivered by a recognized overnight courier service, or (d) sent by facsimile transmission to the Parties at the addresses as set forth below or at such other addresses as may be furnished in writing.

(a) If to the Company to:

ConfirmNet Corporation
0000 Xxxxxx Xxx Xxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Chairman of the Board
Facsimile: (000) 000-0000

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

Xxxxxxxx, Xxxx, Hargreaves & Savitch LLP
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000

(b) If to the Shareholders’ Representative:

Xxxxx X. Xxxxxx
c/o Xxxxxx Xxxxxx
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000

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

Xxxxxxxx, Xxxx, Hargreaves & Savitch LLP
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000

If to Parent to:

Ebix, Inc.
0 Xxxxxxxxx Xxxx., Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000

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

Xxxxxxx Xxxxxx, P.A.
0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Facsimile: (000) 000-0000

If to Intermediate Parent to:

Ebix, Inc.
0 Xxxxxxxxx Xxxx., Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000

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

Xxxxxxx Xxxxxx, P.A.
0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Facsimile: (000) 000-0000

Date of service of such notice shall be (w) the date such notice is personally delivered, (x) five (5) Business Days after the date of mailing if sent by certified or registered mail, (y) one (1) Business Day after date of delivery to the overnight courier if sent by overnight courier or (z) the next succeeding Business Day after transmission by facsimile (provided a confirmation of delivery is emitted by such machine upon transmission).

SECTION 11.2 NO THIRD PARTY BENEFICIARY. The terms and provisions of this Agreement are intended solely for the benefit of each Party hereto and their respective successors or permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person other than the Shareholders’ Representative and any Person entitled to indemnity under Article IX.

SECTION 11.3 INVALID PROVISIONS. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any Party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance here from and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

SECTION 11.4 AMENDMENT AND WAIVER. This Agreement may be amended, or any provision of this Agreement may be waived, provided that any such amendment or waiver will be binding on any Party only if such amendment or waiver is set forth in a writing executed by such Party. The waiver by any Party hereto of a breach of any provision of this Agreement shall not operate or be construed as a continuing waiver or as a waiver of any other breach.

SECTION 11.5 FILES AND REPRESENTATION. Parent and Intermediate Parent acknowledge and agree that the documents and papers in the client files of Xxxxxxxx and any other law firm that may have represented the Company (collectively, the “Firms”) relating to this Agreement and the transactions contemplated thereby will, upon the Closing, be owned by the Shareholders, and shall be held by the Firms for the benefit of the Shareholders. The documents and papers in the Firms’ client files will not be provided to the Surviving Corporation, Parent, its Affiliates or their successors or assigns following the Closing. The documents and papers in the Firms’ client files subject to this Section 11.5 will include all notes, memoranda and correspondence between the Firms, the Shareholders, the Company and its officers, directors and other agents regarding this Agreement and the related transactions, and all attorney work-product in connection with this Agreement and related transactions, but will exclude corporate and stock records that customarily are kept in a minute book. After the Closing, Xxxxxxxx may be requested to represent one or more of the Shareholders following the Closing in connection with post-closing matters related to this Agreement and related transactions or other matters unrelated to this Agreement or the related transactions (the “Post-Closing Matters”). In representing one or more of the Shareholders in connection with the Post-Closing Matters, certain conflicts of interest will arise, in that the interests and objectives of such Shareholders, on the one hand, and the Surviving Corporation, Parent, MergerSub and the Intermediate Parent on the other hand, will diverge on certain issues and may involve actual or potential conflicts of interest. Each of the Parties is agreeable and consents to Xxxxxxxx’x representation of one or more Shareholders in connection with the Post-Closing Matters.

SECTION 11.6 FURTHER ASSURANCES. Each Party will execute all documents and take such other actions as any other Party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Agreement.

SECTION 11.7 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, including counterparts bearing a facsimile signature copy, each of which shall be deemed an original but all of which together shall constitute one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties hereto and delivered to the other. The Parties hereto intend that a facsimile signature copy on this Agreement shall have the same force and effect as an original signature.

SECTION 11.8 EXPENSES. Each of the Parties hereto shall pay all costs and expenses incurred or to be incurred by it in connection with the transactions contemplated hereby.

SECTION 11.9 GOVERNING LAW; VENUE; SERVICE OF PROCESS. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of California. The Parties hereto hereby submit to the exclusive jurisdiction of any state or federal court located in the State of California over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby, and further agree that venue for all such matters shall lie exclusively in such court. The Parties hereto hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have, including, but not limited to, any claim of forum non conveniens, to venue in the courts located in the State of California. Each of the Parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

SECTION 11.10 SPECIFIC PERFORMANCE. The Parties hereto acknowledge that irreparable damage would result if this Agreement and the Transaction Documents were not specifically enforced, and they therefore consent that the rights and obligations of the Parties hereto under this Agreement or the Transaction Documents may be enforced by a decree of specific performance issued by a court of competent jurisdiction. Such remedy shall, however, not be exclusive and shall be in addition to any other remedies which any Party may have under this Agreement, the Transaction Documents or otherwise.

SECTION 11.11 RECOVERY OF ATTORNEY’S FEES. In the event of any litigation between the Parties hereto relating to this Agreement or the Transaction Documents, the prevailing party shall be entitled to recover its attorney’s fees and costs (including court costs) from the non-prevailing party; provided, that if both parties prevail in part, the attorney’s fees and costs shall be awarded by the court in such manner as it deems equitable to reflect the relative amounts and merits of the Parties’ claims.

SECTION 11.12 HEADINGS. The subject headings of Articles and Sections of this Agreement are included for purposes of convenience only and shall not affect the construction or interpretation of any of its provisions.

SECTION 11.13 ASSIGNMENT. This Agreement will be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, but will not be assignable or delegable by any Party hereto, without the prior written consent of the other parties hereto; provided, however, that nothing in this Agreement shall or is intended to limit the ability of Parent to assign its rights under this Agreement, in whole or in part, to any lender or lenders to Parent as security for borrowings, at any time whether in connection with the Closing or following the Closing Date.

SECTION 11.14 ENTIRE AGREEMENT. This Agreement, the Preamble and all the Schedules (including the Disclosure Schedules) and Exhibits attached to this Agreement (all of which shall be deemed incorporated in the Agreement and made a part hereof), and the Transaction Documents set forth the entire understanding of the Parties with respect to the subject matter hereof and supersede all prior agreements, written or oral, of the Parties hereto, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the Parties hereto. Notwithstanding the foregoing, any existing agreements among the Parties hereto regarding the confidentiality or nondisclosure of confidential information shall remain in full force and effect until the Closing in accordance with their terms.

SECTION 11.15 INTERPRETATIVE MATTERS. Unless the context otherwise requires, (a) all references to Articles, Sections, Schedules or Exhibits are to Articles, Sections, Schedules or Exhibits contained in or attached to this Agreement, (b) each accounting term not otherwise defined in this Agreement has the meaning assigned to it in accordance with GAAP, (c) words in the singular or plural include the singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine, feminine and neuter and (d) the use of the word “including” in this Agreement shall be by way of example rather than limitation.

SECTION 11.16 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the Parties hereto to express their mutual intent, and no rule of strict construction will be applied against any Party hereto.

SECTION 11.17 PUBLICITY. The Parties agree that they shall not issue any announcement or press release relating, directly or indirectly, to the transactions contemplated hereby unless such announcement or release is mutually agreed to by each of the Parties hereto. Notwithstanding the foregoing, each Party may release such information that is required of them pursuant to any Law; provided, that such releasing party (prior to such release) immediately informs the other Parties hereto regarding the requirement and content of such release.

[Signatures on following page]

IN WITNESS WHEREOF, the Parties have executed this Agreement and Plan of Merger as of the date first above written.


		PARENT:

		EBIX, INC., a Delaware corporation

		By:		/s/ Xxxxx Xxxxx

				Name: Xxxxx Xxxxx
				Title: President & CEO

		INTERMEDIATE PARENT:

		EBIX SOFTWARE INDIA PRIVATE LIMITED, a private limited company formed under the laws of India

		By:		/s/ Xxxxx Xxxxx

				Name: Xxxxx Xxxxx
				Title: CEO

		COMPANY:

		CONFIRMNET CORPORATION, a California corporation

		By:		/s/ Xxxxx X. Xxxxxx

				Name: Xxxxx X. Xxxxxx
				Title: Chairman of the Board

		MERGER SUB:

		CONFIRMNET ACQUISITION SUB, INC., a California corporation

		By:

				Name:
				Title:


		SHAREHOLDERS’ REPRESENTATIVE, solely in his capacity as such:

		/s/ Xxxxx X. Xxxxxx

		XXXXX X. XXXXXX, an individual

APPENDIX A

DEFINITIONS

In addition to the capitalized terms defined elsewhere in this Agreement, the following capitalized terms shall have the meanings specified in this Appendix A.

“2007 Financial Statements” is defined in Section 5.5(a).

“Acquisition Proposal” means any proposal relating to a possible (1) merger, consolidation or similar transaction involving the Company, (2) sale, lease or other disposition, directly or indirectly, by merger, consolidation, share exchange or otherwise, of any assets of the Company representing, in the aggregate, fifty percent (50%) or more of the assets of such entity on a consolidated basis, (3) issuance, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase or securities convertible into, such securities) representing fifty percent (50%) or more of the votes attached to the outstanding securities of the Company, (4) liquidation, dissolution, or other similar type of transaction with respect to the Company or (5) transaction which is similar in form, substance or purpose to any of the foregoing transactions.

“Affiliate” means, with respect to any Person, any other Person: (i) which owns, directly or indirectly, more than ten percent (10%) of the voting or economic interests in such Person; (ii) in which such Person owns, directly or indirectly, more than ten percent (10%) of the voting or economic interests; or (iii) in which more than ten percent (10%) of the voting or economic interests are owned, directly or indirectly, by a Person who has a relationship with such Person described in clause (i) or (ii) above. In addition, any Person who is a shareholder, director or executive officer of the Company shall be deemed an “Affiliate” thereof.

“Affiliated Group” means an affiliated group as defined in Section 1504 of the Code (or analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law).

“Affiliate Transactions” is defined in Section 5.18.

“Agreement” is defined in the introductory paragraph.

“Basket Amount” is defined in Section 9.5(b).

“Books and Records” means all books and records of the Company, including, but not limited to, all records, files, papers, sales and purchase correspondence, books of account and financial and employment records, whether in tangible or digital form.

“Business” is defined in the recitals.

“Business Day” means a day other than Saturday, Sunday or a public holiday on which banks are closed under the laws of the States of Georgia or California.

“Cash Merger Consideration” is defined in Section 1.2(a).

APPENDIX A-1

“Certificate of Merger” is defined in Section 1.6(b).

“Claiming Party” is defined in Section 9.4.

“Closing” is defined in Section 1.6(a).

“Closing Date” is defined in Section 1.6(a).

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

“Company” is defined in the introductory paragraph.

“Company Capital Stock” means all of the Company’s outstanding stock, collectively, the Company’s Series A Preferred Stock, Series B Preferred Stock, and Common Stock,

“Company Plan Affiliate” means the Company, its predecessors, and any other Person who constitutes or has constituted all or part of a controlled group or has been or is under common control with, or whose employees were or are treated as employed by, the Company, and/or any predecessor or any of them, under Section 414 of the Code or Section 4001 of ERISA.

“Contingent Gross Revenue Certificate” is defined in Section 1.2(b)(i).

“Contingent Gross Revenue Certificate Contest Notice” is defined in Section 1.2(b)(iii).

“Contingent Merger Consideration” is defined in Section 1.2(b).

“Contract(s)” means any agreements, contracts, commitments, purchase orders, licenses and leases, whether written or oral, to which the Company is a party or by which the Company is bound.

“D&O Resignation and Release Agreements” is defined in Section 1.3.

“Defense Counsel” is defined in Section 9.3.

“Defense Notice” is defined in Section 9.3.

“Direct Claim” is defined in Section 9.4.

“Direct Claim Defense Notice” is defined in Section 9.4.

“Direct Claim Notice” is defined in Section 9.4.

“Disclosure Materials” is defined in Section 6.5(a).

“Disclosure Schedule” is defined in the introductory paragraph to Article V.

“EBIX BPO Division — San Diego” is defined in Section 1.4.

APPENDIX A-2

“Effective Time” is defined in Section 1.6(b).

“Employee Benefit Plan” means any of the following (whether written, unwritten or terminated): (A) any employee welfare benefit plan, as defined in Section 3(1) of ERISA, including, but not limited to, any medical plan, life insurance plan, short-term or long-term disability plan, dental plan, or sick leave plan; (B) any “employee pension benefit plan,” as defined in Section 3(2) of ERISA, including, but not limited to, any excess benefit, top hat or deferred compensation plan or any nonqualified deferred compensation or retirement plan or arrangement or any qualified defined contribution or defined benefit plan; or (C) any other plan, policy, program, arrangement or agreement which provides employee benefits or benefits to any current or former employee, dependent, beneficiary, director, independent contractor or like person, including, but not limited to, any severance agreement or plan, personnel policy, vacation time, holiday pay, tuition reimbursement program, service award, moving expense reimbursement programs, tool allowance, safety equipment allowance, material fringe benefit plan or program, bonus or incentive plan, equity appreciation, stock option, restricted stock, stock bonus or deferred bonus plan, salary reduction, change-of-control or employment agreement or consulting agreement.

“Environmental and Safety Requirements” means any Law that is related to (i) pollution, contamination, cleanup, preservation, protection, reclamation or remediation of the environment, (ii) health or safety, (iii) the Release or threatened Release of any Hazardous Material, including investigation, study, assessment, testing, monitoring, containment, removal, remediation, response, cleanup, abatement, prevention, control or regulation of such Release or threatened Release or (iv) the management of any Hazardous Material, including the manufacture, generation, formulation, processing, labeling, use, treatment, handling, storage, disposal, transportation, distribution, re-use, recycling or reclamation of any Hazardous Material; and includes the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6091 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Clean Water Act (33 U.S.C. § 7401 et seq.), the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), the Toxic Substance Control Act (15 U.S.C. § 2601 et seq.) and the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.).

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

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Financial Statements” is defined in Section 5.5.

“Firms” is defined in Section 11.5.

“First Earn Out” is defined in Section 1.2(b).

“GAAP” means U.S. generally accepted accounting principles consistently applied as interpreted and applied by the Company on a consistent basis as described in Schedule 5.5 of the Disclosure Schedule.

APPENDIX A-3

“Governmental Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country, or any domestic or foreign state, province, county, city or other political subdivision.

“Gross Revenue” means those revenues realized by the Company or, as applicable, the Surviving Corporation, from the Business, as determined in accordance with GAAP.

“Hazardous Material” means (i) hazardous substances, as defined by the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq.; (ii) hazardous wastes, as defined by the Resource Conservation and Xxxxxxxx Xxx, 00 X.X.X. §0000 et seq.; (iii) petroleum, including without limitation, crude oil or any fraction thereof which is liquid at standard conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute); (iv) radioactive material, including, without limitation, any source, special nuclear, or by product material as defined in 42 U.S.C. §2011 et seq.; (v) asbestos that is friable or reasonably likely to become friable; (vi) polychlorinated biphenyls; (vii) microbial matter, biological toxins, mycotoxins, mold or mold spores; and (viii) other material, substance or waste to which liability or standards of conduct may be imposed under any applicable Environmental and Safety Requirements.

“Indebtedness” means with respect to any Person (i) all obligations of such Person for borrowed money, whether current or funded, secured or unsecured, (ii) all obligations of such Person for the deferred purchase price of any property or services (other than trade accounts payable arising in the ordinary course of the business of such Person), (iii) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of a default may be limited to repossession or sale of such property), (iv) all obligations of such Person 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) all obligations under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable as lessee, (vi) any obligation of such Person in respect of bankers’ acceptances or letters of credit, (vii) any obligations secured by liens on property acquired by such Person, whether or not such obligations were assumed by such Person at the time of acquisition of such property, (viii) all obligations of a type referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii) above which is directly or indirectly guaranteed by such Person or which it has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a credit against loss, and (ix) any re-financings of any of the foregoing obligations.

“Indemnified Party” is defined in Section 9.3.

“Indemnifying Party” is defined in Section 9.3.

“Indemnifying Shareholders” is defined in Section 9.1.

“Independent Accountant” is defined in Section 1.2(b)(vi).

“Insurance Proceeds” is defined in Section 9.6.

APPENDIX A-4

“Intellectual Property” means all intellectual property and other proprietary rights and information of the Company, including but not limited to all patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); all trademarks, service marks, trade dress, trade names and corporate name including, without limitation, the name “ConfirmNet”, and the name “CertificatesNow”, all registered and unregistered statutory and common law copyrights; all registrations, applications and renewals for any of the foregoing; all trade secrets, confidential information, ideas, formulae, compositions, know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, improvements, proposals, technical and computer data, documentation and software, financial, business and marketing plans; cost and pricing information, all supplier lists and related information; all domain names and web sites; sales data and plans; all customer accounts, lists, files, programs, plans, data and related information.

“Interim Financial Statements” is defined in Section 5.5(c).

“Intermediate Parent” is defined in the introductory paragraph.

“Inventory” means all raw materials, work-in-process and finished goods inventory of the Company.

“Knowledge” means the actual knowledge of the executive officers and members of the board of directors of the representing party or such knowledge that such individuals would be deemed to have as the result of his or her position and duties on behalf of the representing party.

“Latest Balance Sheet Date” is defined in Section 5.5(c).

“Law(s)” means the common or civil law of any state, or any provision of any foreign, federal, state or local law, statute, rule, regulation, order, permit, judgment, injunction, decree or other decision of any court or other tribunal or governmental entity or agency legally binding on the relevant party or its properties.

“Leased Real Property” is defined in Section 5.9.

“Letter of Transmittal” is defined in Section 2.3(a).

“Liability” or “Liabilities” means Indebtedness, liabilities or obligations of any nature (whether accrued, absolute, contingent, direct, indirect, known, unknown, perfected, inchoate, unliquidated or otherwise, whether due or to become due).

“Liens” means any claims, liens, charges, rights, restrictions, options, preemptive rights, mortgages, deeds of trust, hypothecations, assessments, pledges, encumbrances, claims of equitable interest or security interests of any kind or nature whatsoever.

“Losses” is defined in Section 9.1.

“Xxxxx Agreement” is defined in Section 1.2(b).

APPENDIX A-5

“Xxxxx Earn Out Period” is defined in Section 1.2(b).

“Xxxxx Net Revenue” means the gross revenues realized by Parent and/or the Surviving Corporation and/or any of their respective subsidiaries, Affiliates or related companies, or any successors or assigns thereof, derived, resulting from or attributable to the Xxxxx Agreement, less any expenses incurred directly attributable to servicing the Xxxxx Agreement, as determined in accordance with GAAP.

“Material Adverse Effect” means, when used in connection with an entity, any change, event, violation, inaccuracy, circumstance or effect (any such item, an “Effect”), individually or when taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Material Adverse Effect, that is materially adverse to the business, assets, financial condition or results of operations of such entity taken as a whole with its subsidiaries; provided, however, that in no event shall any of the following, alone or in combination, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been or will be, a Material Adverse Effect on any entity: (A) any Effect resulting from compliance with the terms and conditions of this Agreement; or (B) any Effect that results from changes affecting any of the industries in which such entity operates generally or the United States or worldwide economy generally (which changes in each case do not disproportionately affect such entity in any material respect).

“Material Contract” is defined in Section 5.8.

“Merger” is defined in the recitals.

“Merger Consideration” is defined in Section 1.2.

“Merger Consideration Certificate” is defined in Section 2.1.

“Merger Sub” is defined in the introductory paragraph.

“Necessary IP” is defined in Section 7.1(d).

“Notice of Claim” is defined in Section 9.4.

“Notified Party” is defined in Section 9.4.

“Options” is defined in Section 2.2.

“Ordinary Course of Business” means any action that is consistent with the past practices of such Company and is taken in the ordinary course of the normal day-to-day operations of such Company.

“Parent” is defined in the introductory paragraph.

“Parent Financial Statements” is defined in Section 6.5(a).

“Parent Indemnified Parties” is defined in Section 9.1.

APPENDIX A-6

“Parent Liability Cap” is defined in Section 9.5(c).

“Party” and “Parties” is defined in the introductory paragraph.

“Permits” means all permits, licenses, certifications, approvals and authorizations by or of, or registrations with, any Governmental Authority, including but not limited to, vehicle and business licenses.

“Permitted Liens” means any (a) inchoate mechanics’, carriers’, workers’ and other similar Liens arising in the Ordinary Course of Business that are not delinquent and that in the aggregate are not material in amount and do not interfere with the present use of the assets to which they apply; and (b) inchoate Liens for current Taxes and assessments not yet due and payable.

“Person” means any individual, sole proprietorship, general partnership, limited partnership, limited liability company, joint venture, trust, unincorporated association, corporation, entity or government (whether federal, state, county, city or otherwise, including, without limitation, any instrumentality, division, agency or department thereof).

“Post-Closing Matters” is defined in Section 11.5.

“Xxxxxxxx” is defined in Section 1.2(d).

“Products” is defined in Section 5.24.

“Release” shall mean any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping into the indoor or outdoor environment.

“SEC” means the U.S. Securities and Exchange Commission.

“SEC Reports” is defined in Section 6.10.

“Second Earn Out” is defined in Section 1.2(b).

“Securities Act” means the United States Securities Act of 1933, as amended.

“Shareholder Indemnified Parties” is defined in Section 9.2.

“Shareholder’s Pro Rata Share” means, with respect to any Shareholder, a fraction the numerator of which is the Cash Merger Consideration actually paid to such Shareholder and the denominator of which is the aggregate Cash Merger Consideration actually paid to all Shareholders.

“Shareholders” is defined in Section 1.2.

“Shareholders’ Representative” is defined in the introductory paragraph.

APPENDIX A-7

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association or other entity of which securities or other ownership interests representing more than fifty percent (50%) of the ordinary voting power are, at the time as of which any determination is being made, owned or controlled by such Person or one or more Subsidiary of such Person or by such Person and one or more Subsidiary of such Person.

“Surviving Corporation” is defined in Section 1.1.

“Target” is defined in Section 1.2(b).

“Tax” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, 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 or other withholding, or other tax, of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing.

“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 or administrative requirements relating to any Taxes.

“Third Party Claim” is defined in Section 9.3.

“Third Party Claim Notice” is defined in Section 9.3.

“Transaction Documents” means each of the agreements, documents, certificates and instruments being delivered pursuant to this Agreement.

“Transfer Tax” means any stamp or other sales, transfer, use, value added, excise or similar transaction Tax imposed under the Laws of the United States or any state, country or municipality or other subdivision thereof, arising as a result of the consummation of any of the transactions contemplated hereby.

“Warrants” is defined in Section 2.2.

APPENDIX A-8

EXHIBITS

Exhibit A — Form of D&O Resignation and Release Agreement

Exhibit B — Form of Letter of Transmittal

SCHEDULES

Disclosure Schedules

Schedule 7.1(e) Indebtedness to be Paid at Closing

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Table of Contents

AGREEMENT AND PLAN OF MERGER BY AND AMONG EBIX, INC., CONFIRMNET CORPORATION, EBIX SOFTWARE INDIA PRIVATE LIMITED, CONFIRMNET ACQUISITION SUB, INC. AND CRAIG A. IRVING, AS SHAREHOLDERS’ REPRESENTATIVE DATED AS OF NOVEMBER 1, 2008

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