AGREEMENT AND PLAN OF MERGER AND REORGANIZATION by and among EMBARCADERO TECHNOLOGIES, INC. DSEC MERGER COMPANY, SHC AMBEO ACQUISITION CORP. and Valerie Anderson, as Stockholder Representative Dated as of October 13, 2005

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

by and among

EMBARCADERO TECHNOLOGIES, INC.

DSEC MERGER COMPANY,

SHC AMBEO ACQUISITION CORP.

and

Xxxxxxx Xxxxxxxx, as Stockholder Representative

Dated as of October 13, 2005

TABLE OF CONTENTS


		Page
ARTICLE I. DEFINITIONS		1
Section 1.01	Certain Defined Terms	1

ARTICLE II. THE MERGER		9
Section 2.01	The Merger	9
Section 2.02	Closing	10
Section 2.03	Effective Time	10
Section 2.04	Effect of the Merger	10
Section 2.05	Tax and Accounting Treatment	10
Section 2.06	Certificate of Incorporation; Bylaws; Directors and Officers of Surviving Corporation	10

ARTICLE III. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES		11
Section 3.01	Closing Payment	11
Section 3.02	Conversion of Securities and Related Matters	12
Section 3.03	Capital Stock of Merger Sub	13
Section 3.04	Dissenting Shares	13
Section 3.05	Surrender of Certificates and Agreements	14
Section 3.06	No Further Ownership Rights	14
Section 3.07	Lost, Stolen or Destroyed Certificates	14
Section 3.08	Taking of Further Action	14
Section 3.09	Funds Remaining after Six Months	15
Section 3.10	Escrow Fund	15

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY		16
Section 4.01	Organization and Qualification; Subsidiaries	16
Section 4.02	Certificate of Incorporation and Bylaws; Corporate Books and Records	16
Section 4.03	Capitalization	16
Section 4.04	Authority Relative to this Agreement	18
Section 4.05	No Conflict; Required Filings and Consents	18
Section 4.06	Permits; Compliance with Laws	19
Section 4.07	Financial Statements	19
Section 4.08	Absence of Certain Changes or Events	20
Section 4.09	Accounts Receivable	22
Section 4.10	Customers; Suppliers	23
Section 4.11	Sales and Purchase Order Backlog	23
Section 4.12	Product and Service Warranties	23
Section 4.13	Employee Benefit Plans; Labor Matters	24
Section 4.14	Employees	27
Section 4.15	Material Contracts	27
Section 4.16	Guaranties	28

TABLE OF CONTENTS

(Continued)


		Page
Section 4.17	Litigation	28
Section 4.18	Environmental Matters	28
Section 4.19	Intellectual Property	28
Section 4.20	Taxes	31
Section 4.21	Properties and Assets	32
Section 4.22	Brokers	33
Section 4.23	Certain Business Practices	33
Section 4.24	Interested Party Transactions	33
Section 4.25	Vote Required; Consents	34
Section 4.26	Board Approval	34
Section 4.27	Business Activity Restrictions	34
Section 4.28	Representations Complete	34

ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		35
Section 5.01	Organization and Qualification; Subsidiaries	35
Section 5.02	Authority Relative to this Agreement	35
Section 5.03	No Conflict; Required Filings and Consents	35
Section 5.04	Brokers	36
Section 5.05	Sufficient Funds	36

ARTICLE VI. CONDUCT PRIOR TO CLOSING		36
Section 6.01	Conduct of Business by the Company	36
Section 6.02	Notices of Certain Events	36
Section 6.03	Access to Information; Confidentiality	37
Section 6.04	No Solicitation of Transactions	37
Section 6.05	Further Action; Consents; Filings	38

ARTICLE VII. ADDITIONAL AGREEMENTS		38
Section 7.01	Public Announcements	38
Section 7.02	Stockholder Approval	39

ARTICLE VIII. CONDITIONS TO THE MERGER		39
Section 8.01	Conditions to the Obligations of Each Party to Consummate the Merger	39
Section 8.02	Conditions to the Obligations of the Company	40
Section 8.03	Conditions to the Obligations of Parent	40

ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER		42
Section 9.01	Termination	42
Section 9.02	Effect of Termination	42
Section 9.03	Amendment	43
Section 9.04	Waiver	43
Section 9.05	Expenses	43

TABLE OF CONTENTS

(Continued)


		Page
ARTICLE X. INDEMNIFICATION		43
Section 10.01	Indemnification	43
Section 10.02	Right to Defend; Certain Other Procedures	44
Section 10.03	Limitations on Indemnification	45

ARTICLE XI. THE STOCKHOLDER REPRESENTATIVE		46
Section 11.01	Appointment of the Stockholder Representative	46
Section 11.02	Replacement of Stockholder Representative	47
Section 11.03	Communications; Notices	47
Section 11.04	Agent for Service of Process	48
Section 11.05	Power of Attorney	48
Section 11.06	Limitation on the Stockholder Representative’s Liability, etc.	49

ARTICLE XII. GENERAL PROVISIONS		49
Section 12.01	Survival	49
Section 12.02	Notices	50
Section 12.03	Severability	51
Section 12.04	Assignment; Binding Effect; Benefit	51
Section 12.05	Incorporation of Schedules and Exhibits	51
Section 12.06	Governing Law	51
Section 12.07	Arbitration	52
Section 12.08	Headings	52
Section 12.09	Counterparts	52
Section 12.10	Entire Agreement	52

Exhibit A – Form of Voting Agreement

Exhibit B – Form of Escrow Agreement

Exhibit C – Form of Legal Opinion of Company’s Counsel

Exhibit D – Form of Employment Agreement

iii

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of October 13, 2005, by and among EMBARCADERO TECHNOLOGIES, INC., a Delaware corporation (“Parent”), DSEC MERGER COMPANY, a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), SHC AMBEO ACQUISITION CORP., a Delaware corporation (the “Company”), and Xxxxxxx Xxxxxxxx as the initial Stockholder Representative (as defined in Section 11.01(a)), with reference to the following facts:

RECITALS

A. The boards of directors of Parent, Merger Sub, and the Company have each determined that it is consistent with and in furtherance of their respective long-term business strategies and fair to and in the best interests of their respective stockholders to combine the respective businesses of Parent and the Company by means of a merger (the “Merger”) of Merger Sub with and into the Company upon the terms and subject to the conditions set forth herein and in accordance with the Delaware General Corporation Law (the “DGCL”);

B. Concurrently with the execution of this Agreement, and as a condition and inducement to Parent’s willingness to enter into this Agreement, certain affiliates of the Company are entering into Voting Agreements in substantially the form attached hereto as Exhibit A (“Voting Agreements”);

C. In consideration of the foregoing and the representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.01 Certain Defined Terms

Unless the context otherwise requires, the following terms, when used in this Agreement, shall have the respective meanings specified below (such meanings to be equally applicable to the singular and plural number of the terms so defined, unless the context otherwise requires):

“AAA” shall have the meaning set forth in Section 12.07.

“Accounts Receivable” shall have the meaning set forth in Section 4.09.

“Affiliate” shall have the meaning specified in Rule 144 promulgated under the Securities Act.

“Agreement” shall have the meaning specified in the preamble to this Agreement.

“Base Purchase Price” shall have the meaning specified in Section 3.01(a).

“Business Day” shall mean any day on which banks are not required or authorized by law, regulation or executive order to close in San Francisco, California.

“Cause” shall have the meaning specified in Section 7.03(e).

“Certificates” shall have the meaning specified in Section 3.02(a).

“Certificate of Amendment” shall have the meaning specified in Section 8.03(j).

“Closing” shall have the meaning specified in Section 2.02.

“Closing Payment” shall have the meaning specified in Section 3.01(a).

“Code” shall mean the Internal Revenue Code of 1986, as amended, and all rules and regulations promulgated thereunder.

“Commercial Payables” shall have the meaning set forth in Section 8.03.

“Company” shall have the meaning specified in the preamble to this Agreement.

“Company Benefit Plans” shall have the meaning specified in Section 4.13(a).

“Company Capital Stock” shall mean the Company Common Stock and the Series A.

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

“Company Debt Obligations” shall have the meaning specified in Section 3.01(a)(i).

“Company Disclosure Schedule” shall mean the disclosure schedule delivered by the Company to Parent prior to the execution of this Agreement and forming a part hereof.

“Company Financial Statements” shall have the meaning specified in Section 4.07.

“Company Intellectual Property” shall mean all Intellectual Property necessary for or used in the conduct of the business of the Company as conducted or currently proposed to be conducted, including, without limitation, any tangible or intangible proprietary and non-proprietary information or materials within the Intellectual Property that are or have been used in (including without limitation in the development of) the Company’s business and/or in any product, technology or process (i) currently being or that has been manufactured, published or marketed by the Company or (ii) currently under development for possible future manufacturing, publication, marketing or other use by the Company.

“Company License” shall mean any license, sublicense or other agreement by which the Company has granted rights to any third party to develop, make, have made, use, sell, offer for

sale, have sold, import and have imported any Company Intellectual Property owned or purported to be owned by the Company.

“Company Material Adverse Effect” shall mean any change in or effect on the business of the Company that is, or could reasonably be expected to be, materially adverse to the business, prospects, assets (including intangible assets), liabilities (contingent or otherwise), condition (financial or otherwise) or results of operations of the Company taken as a whole; provided, however, that any general industry change or change to general economic conditions shall not be considered to cause a Company Material Adverse Effect.

“Company Notes” shall have the meaning specified in Section 4.03(d).

“Company Note Holders” shall mean the holders of Company Notes.

“Company Permits” shall have the meaning specified in Section 4.06.

“Company Stockholders” shall have the meaning specified in Section 3.02(b).

“Company Stock Options” shall have the meaning specified in Section 4.03(a).

“Company Stock Option Plan” shall mean the Company’s 2001 Stock Option Plan.

“Company Warrants” shall have the meaning specified in Section 4.03(c).

“Confidentiality Agreement” shall mean the Confidentiality Agreement, dated as of November 9, 2004, between Parent and the Company.

“Debt Repayment Amount” shall have the meaning specified in Section 3.01(a)(i).

“DGCL” shall have the meaning specified in the recitals to this Agreement.

“Dispute” shall have the meaning set forth in Section 12.07.

“Dissenting Shares” shall have the meaning specified in Section 3.04.

“$” shall mean United States Dollars.

“Effective Time” shall have the meaning specified in Section 2.03.

“Encumbrance” means any security interest, pledge, mortgage, lien (including, without limitation, environmental and tax liens), charge, encumbrance, adverse claim, preferential arrangement or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

“Enforceability Exceptions” shall have the meaning specified in Section 4.15(a).

“Environmental Law” shall mean any Law and any enforceable judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to pollution or protection of the environment or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Material, as in effect as of the date hereof.

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

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

“ERISA Affiliate” shall have the meaning specified in Section 4.13(a).

“Escrow Agreement” shall have the meaning specified in Section 3.10.

“Escrow Release Date” shall have the meaning specified in Section 3.10.

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

“Excluded Software” shall mean any computer software and/or rights related to any: (i) ”shrink wrap” or similar widely available commercial end-user licenses or commodity type license, and/or (ii) commercially available off-the-shelf software purchased or licensed for less than a total aggregate cost of $25,000. For purposes of clarification, with respect to subsection (ii) of the preceding sentence, if the cost of off-the-shelf software “A” plus all related licenses for software “A” is $13,000, and the cost of off-the-self software “B” plus all related licenses software “B” is $13,000, software “A” and “B” both shall be deemed Excluded Software.

“Expenses” shall mean, with respect to any party hereto, all out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, experts and consultants to a party hereto and its Affiliates) incurred by such party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of its obligations pursuant to this Agreement and the consummation of the Merger except as otherwise provided herein.

“General Escrow Amount” shall have the meaning specified in Section 3.01(a).

“General Escrow Release Date” shall have the meaning specified in Section 3.10.

“Governmental Entity” shall mean any United States federal, state or local or any foreign governmental, regulatory or administrative authority, agency or commission or any court, tribunal or arbitral body.

“Governmental Order” shall mean any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity.

“Hazardous Material” shall mean (i) any petroleum, petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical, material or substance defined or regulated as toxic or hazardous or as a pollutant or contaminant or waste under any applicable Environmental Law.

“Xxxxxx Xxxxxx” shall have the meaning specified in Section 3.01(a).

“Incentive Amount” shall have the meaning specified in Section 3.01(b).

“Information Statement” shall have the meaning specified in Section 7.02.

“Intellectual Property” shall mean any: (a) United States, international, and foreign patents, patent applications and statutory invention registrations; (b) trademarks, trade names, service marks, trade dress, slogans, logos, domain names, and other source identifiers, including registrations and applications for registration thereof; (c) copyrightable subject matter and copyrights, including copyright registrations and/or applications for copyright registration and any renewal rights therefor; (d) confidential and/or proprietary information, including technology, trade secrets and/or know-how, customer and/or supplier lists, databases and/or business information, which in each case have value and which a reasonably prudent operator of the business of the Company would have maintained in confidence or as a trade secret; and (e) computer software programs or applications in both source and object code form and related technical documentation of such software programs; provided that “Intellectual Property” specifically excludes any (i) rights for which a license is merely implied by the sale of a product, and (ii) Excluded Software.

“IRS” shall mean the United States Internal Revenue Service.

“Knowledge” means, with respect to the Company, the actual knowledge of, or knowledge after reasonable inquiry and investigation by, any of Xxx Xxxxxxxxxx, Xxxxxxx Xxxxxxxx or Xxxxx Xxxx.

“Law” shall mean any federal, state, foreign or local statute, law, ordinance, regulation, rule, code, order, judgment, decree, other requirement or rule of law.

“Leased Properties” shall have the meaning specified in Section 4.21.

“Losses” shall have the meaning specified in Section 10.01.

“Material Contracts” shall mean the following contracts and agreements (including, without limitation, oral and informal arrangements) of the Company:

(i) each contract, agreement, invoice, purchase order and other arrangement, for the purchase of inventory, spare parts, other materials or personal property with any supplier or for the furnishing of services to the Company or otherwise related to the business of the Company under the terms of which the Company (A) has paid or is likely to pay or otherwise give consideration of more than $10,000 in the aggregate during the calendar year ending

December 31, 2005, (B) is likely to pay or otherwise give consideration of more than $10,000 in the aggregate over the remaining term of such contract, or (C) cannot be cancelled by the Company without penalty or further payment and without more than 90 days’ notice;

(ii) each contract, agreement, invoice, sales order and other arrangement, for the sale of inventory or other personal property or for the furnishing of services by the Company which: (A) involves or is likely to involve consideration of more than $10,000 in the aggregate during the calendar year ending December 31, 2005, (B) is likely to involve consideration of more than $10,000 in the aggregate over the remaining term of the contract, or (C) cannot be cancelled by the Company without penalty or further payment and without more than 90 days’ notice;

(iii) all broker, distributor, label group, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing consulting and advertising contracts and agreements to which the Company is a party involving the payment of more than $10,000 during the calendar year ending December 31, 2005 and which are not cancelable without penalty or further payment and without more than 90 days’ notice;

(iv) all management contracts, and contracts with independent contractors or consultants (or similar arrangements) to which the Company is a party involving payments in excess of $10,000 per annum and which are not cancelable without penalty or further payment and without more than 30 days’ notice;

(v) all contracts and agreements relating to indebtedness of the Company;

(vi) all Company Licenses and Third Party Licenses;

(vii) all contracts and agreements with any Government Entity to which the Company is a party;

(viii) all contracts and agreements that limit or purport to limit the ability of the Company to compete in any line of business or with any Person or in any geographic area or during any period of time;

(ix) all contracts and agreements between or among the Company and any Affiliate of the Company, including any stockholder agreements;

(x) all contracts and agreements related to employment or post-employment liabilities or benefits or providing benefits under any Company Benefit Plan; and

(xi) all other contracts and agreements, whether or not made in the ordinary course of the business, which are material to the Company or the conduct of its business, or the absence of which would have a Company Material Adverse Effect.

“Merger” shall have the meaning specified in the recitals to this Agreement.

“Merger Agreement” shall have the meaning specified in Section 2.03.

“Merger Sub” shall have the meaning specified in the preamble to this Agreement.

“Net Merger Consideration” shall have the meaning specified in Section 3.01(a).

“Net Merger Consideration Allocation Schedule” shall have the meaning specified in Section 3.02(b).

“Other Transaction” shall have the meaning specified in Section 6.04.

“Parent” shall have the meaning specified in the preamble to this Agreement.

“Parent Indemnitee” shall have the meaning specified Section 10.01.

“Parent Material Adverse Effect” shall mean any change in or effect on the business of Parent that is, or could reasonably be expected to be, materially adverse to the business, prospects, assets (including intangible assets), liabilities (contingent or otherwise), condition (financial or otherwise) or results of operations of Parent; provided, however, that any general industry change or change to general economic conditions shall not be considered to cause a Parent Material Adverse Effect.

“Paying Agent” shall have the meaning specified in Section 3.02(b).

“Permit” shall have the meaning specified in Section 4.06.

“Permitted Encumbrances” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) liens for taxes, assessments and governmental charges or levies not yet due and payable which are not in excess of $10,000 in the aggregate; (b) Encumbrances imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens arising in the ordinary course of business securing obligations that (i) are not overdue for a period of more than 30 days and (ii) are not in excess of $10,000 in the case of a single property or $25,000 in the aggregate at any time; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; and (d) minor survey exceptions, reciprocal easement agreements and other customary encumbrances on title to real property that (i) were not incurred in connection with any indebtedness, (ii) do not render title to the property encumbered thereby unmarketable and (iii) do not, individually or in the aggregate, materially adversely affect the value or use of such property for its current and anticipated purposes.

“Person” or “person” shall mean an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a person as defined in Section 13(d)(3) of the Exchange Act), trust, association, entity or government or political subdivision, agency or instrumentality of a government.

“Reference Balance Sheet” shall mean the balance sheet of the Company for the fiscal year ended December 31, 2004.

“Reference Balance Sheet Date” shall mean December 31, 2004.

“Registered Company Intellectual Property” shall have the meaning set forth in Section 4.08(xxii).

“Regulations” means the Treasury Regulations (including Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Code or other federal tax statutes.

“Representatives” shall have the meaning specified in Section 6.03.

“Rules” shall have the meaning set forth in Section 12.07.

“SEC” shall mean the Securities and Exchange Commission.

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

“Series A” shall mean the Company’s Series A Preferred Stock, $0.001 par value per share, consisting of 780,000 authorized shares.

“Special Coverage Claims” shall mean any claim related to the matters set forth on Schedule 1.01.

“Special Escrow Amount” shall have the meaning specified in Section 3.01(a).

“Special Escrow Release Date” shall have the meaning specified in Section 3.10.

“Stockholder Indemnitor” shall have the meaning specified in Section 10.02(a).

“Stockholder Representative” shall have the meaning specified in Section 11.01(a), including successors appointed under Section 11.02.

“Stockholder Representative Expense Allocation” shall mean an amount, in cash, equal to thirty thousand dollars ($30,000), which amount shall be disbursed to the Stockholder Representative in accordance with Section 3.01(a) as, subject to the further provisions of this Agreement and the Escrow Agreement, a credit against all reasonable, documented out-of-pocket expenses incurred by the Stockholder Representative acting in such capacity under the terms of this Agreement and the Escrow Agreement.

“Software Programs” shall have the meaning specified in Section 4.19(g).

“Subsidiary” shall mean, with respect to any person, any corporation, limited liability company, partnership, joint venture or other legal entity of which such person (either alone or through or together with any other subsidiary of such person) owns, directly or indirectly, a majority of the stock or other equity interests, the holders of which are generally entitled to vote

for the election of the board of directors or other governing body of such corporation or other legal entity.

“Surviving Corporation” shall have the meaning specified in Section 2.01.

“Tax” or “Taxes,” for the purposes of this Agreement, refers to (i) any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities relating to taxes, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise, stamp and property taxes and customs duties, (ii) together with all interest, penalties and additions imposed with respect to such amounts.

“Tax Return” or “Tax Returns,” for the purposes of this Agreement, refers to all federal, state and local and foreign returns, estimates, information statements and reports relating to Taxes.

“Technical Documentation” shall have the meaning specified in Section 4.19(a).

“Terminating Parent Breach” shall have the meaning specified in Section 9.01(f).

“Terminating Company Breach” shall have the meaning specified in Section 9.01(e).

“Third Party License” shall mean any license, sublicense or other agreement by which a third party has granted rights to the Company to develop, make, have made, use, sell, offer for sale, have sold, import and have imported the Company Intellectual Property.

“Transaction Expenses” shall have the meaning specified in Section 3.01(a)(ii).

“U.S. GAAP” shall mean United States generally accepted accounting principles, applied on a consistent basis.

“Voting Agreements” shall have the meaning specified in the Preamble to this Agreement.

ARTICLE II.

THE MERGER

Section 2.01 The Merger

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease

and the Company shall continue as the surviving corporation of the Merger (the “Surviving Corporation”).

Section 2.02 Closing

Unless this Agreement shall have been terminated and the Merger shall have been abandoned pursuant to Section 9.01, and subject to the satisfaction or written waiver of the conditions set forth in Article VIII, the consummation of the Merger shall take place as promptly as practicable (and in any event within three business days) after satisfaction or waiver of the conditions set forth in Article VIII, at a closing (the “Closing”) to be held at the offices of Xxxxxx Xxxxxx LLP, 0000 Xx Xxxxx Xxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx, unless another date, time or place is agreed to by the Company and Parent.

Section 2.03 Effective Time

At the time of the Closing, the parties shall cause the Merger to be consummated by filing an agreement of merger (the “Merger Agreement”) and all other documents required by the DGCL with the Secretary of State of Delaware in such form as required by, and executed in accordance with the relevant provisions of, the DGCL (the date and time of such filing, or such later time as may be agreed to by the parties hereto and specified in the Merger Agreement, being the “Effective Time”).

Section 2.04 Effect of the Merger

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

Section 2.05 Tax and Accounting Treatment

The Merger shall constitute a taxable transaction under the Code, and will be treated as a “purchase” for financial accounting purposes.

Section 2.06 Certificate of Incorporation; Bylaws; Directors and Officers of Surviving Corporation

Unless otherwise agreed by the Company and Parent prior to the Effective Time, at the Effective Time the certificate of incorporation and bylaws of the Merger Sub, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation and bylaws of the Surviving Corporation until thereafter amended as provided by Law and such certificate of incorporation or bylaws. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation until their successors are elected or appointed and qualified or until their resignation or removal; and the directors of Merger Sub

immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation until their successors are elected or appointed and qualified or until their resignation or removal.

ARTICLE III.

CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

Section 3.01 Closing Payment

(a) Closing Payment. At or before the Effective Time, Parent shall transfer in immediately available funds an aggregate amount equal to Six Million Dollars ($6,000,000) (the “Base Purchase Price”) plus the Incentive Amount (as defined in Section 3.01(b)), if applicable (such aggregate amount, the “Closing Payment”), which shall be disbursed to the Persons and in the amounts as follows and as provided in Section 3.02(b): (A) Nine Hundred Thousand Dollars ($900,000) (the “General Escrow Amount”) plus Three Hundred Thousand Dollars ($300,000) (the “Special Escrow Amount”) to the Escrow Agent (as defined in Section 3.10), which shall hold and disburse the General Escrow Amount and Special Escrow Amount in accordance with the terms of the Escrow Agreement; (B) the Debt Repayment Amount to the Persons and in the amounts as set forth in Schedule 3.01(a)(i); (C) the Transaction Expenses to the Persons and in the amounts as set forth in Schedule 3.01(a)(ii); and (D) the balance of the Closing Payment (such amount being the “Net Merger Consideration”) to the Paying Agent for distribution to the Company Stockholders as provided in Section 3.02(b).

(i) Debt Repayment Amount. “Debt Repayment Amount” shall mean the aggregate amount to be delivered by the Company to the holders of all then outstanding Company Notes to satisfy in full the obligations under all such Company Notes and for the release of all Encumbrances on the assets of the Company relating thereto and for the relinquishment of all other rights, priorities, privileges or entitlements related thereto (the “Bridge Obligations”). The portion of the Debt Repayment Amount payable to each Company Note Holder in respect of the Company Notes held by such Company Note Holder shall be as set forth on Schedule 3.01(a)(i) hereto, which schedule lists the name of mailing address of each Company Note Holder and the aggregate amount to be paid to each Company Note Holder to satisfy in full the Bridge Obligations. Immediately prior to Closing, the Company shall update Schedule 3.01(a)(i) hereto to reflect any changes to the aggregate amount of the Debt Repayment Amount and/or the portion of the Debt Repayment Amount payable to each Company Note Holder in respect of the Company Notes held by such Company Note Holder. At the Closing, Parent, on behalf of the Company, shall deliver the appropriate portion of the Debt Repayment Amount in cash to each Company Note Holder in accordance with Schedule 3.01(a)(i) in full payment of the Company Notes and the Company Notes shall be cancelled and any Encumbrances on the assets of the Company relating thereto shall be released. The Company represents and warrants to Parent and Merger Sub that Schedule 3.01(a)(i) hereto correctly identifies the aggregate Debt Repayment Amount, each Person entitled to receive any portion of the Debt Repayment Amount and the portion of the Debt Repayment Amount payable to each such Person.

(ii) Transaction Expenses. “Transaction Expenses” shall mean the Stockholder Representative Expense Allocation and all legal, accounting, investment banking,

financial advisory, brokerage and other fees incurred by the Company (or for which the Company may reimburse others on or before the Closing or may otherwise be obligated to reimburse others or may be or may become liable) in connection with this Agreement, the Merger or any of the transactions contemplated hereby, all of which are listed on Schedule 3.01(a)(ii) hereto. The Company shall deliver to Parent on the date hereof an interim Schedule 3.01(a)(ii) hereto, setting forth all Transaction Expenses incurred to date. Immediately prior to the Closing, the Company shall update Schedule 3.01(a)(ii) hereto to reflect such Transaction Expenses through the Closing. At the Closing, Parent, on behalf of the Company, shall pay the Transaction Expenses in accordance with Schedule 3.01(a)(ii) hereto, as so amended. The Company represents and warrants to Parent and Merger Sub that Schedule 3.01(a)(ii) hereto correctly identifies the aggregate amount of all Transaction Expenses, each Person entitled to receive any portion of the Transaction Expenses and the aggregate amount of Transaction Expenses payable to each such Person.

(b) Incentive Amount. An additional One Hundred Fifty Thousand Dollars ($150,000) (the “Incentive Amount”) shall be included in the Closing Payment transferred by Parent at or before the Effective Time in accordance with Section 3.01(a), provided the Closing occurs on or prior to October 24, 2005. For purposes of clarification, if the Closing occurs after October 24, 2005, the Closing Payment transferred by Parent will include only the Base Purchase Price.

Section 3.02 Conversion of Securities and Related Matters

At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holders of any securities of the Company, the following shall take place:

(a) Consideration for Preferred Stock and Company Common Stock. Upon the terms and subject to the conditions set forth below and throughout this Agreement, each share of Company Common Stock and Series A issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares and securities of the Company owned by Parent or Merger Sub or held in the treasury of the Company) will be cancelled and extinguished by operation of law or otherwise and be converted automatically into the right to receive from Parent, upon surrender of the certificates representing such shares of Series A or Company Common Stock (“Certificates”), cash in the amount set forth below in Section 3.02(b).

(b) Net Merger Consideration. Schedule 3.02(b) (the “Net Merger Consideration Allocation Schedule”) (a) identifies the holders of all shares of Company Common Stock and Series A (the “Company Stockholders”) and (b) lists the portion of the Net Merger Consideration payable to each such Company Stockholder. The Company represents and warrants to Parent and Merger Sub that the Net Merger Consideration Payment Allocation Schedule correctly identifies each Person entitled to receive any portion of the Net Merger Consideration and the portion of the Net Merger Consideration payable to each such Person and that the Net Merger Consideration Allocation Schedule has been prepared in accordance with the DGCL, the Company’s Certificate of Incorporation and Bylaws, and any other contract, agreement or understanding pursuant to which any portion of the Net Merger Consideration may be payable.

Parent shall cause a bank or trust company to be designated by Parent (the “Paying Agent”) to act as disbursing agent for the Net Merger Consideration to be delivered to the Company Stockholders at the Closing or as soon as practicable thereafter upon surrender of Certificates as set forth in Section 3.02(a) and Section 3.05. The Net Merger Consideration shall be distributed to the Company Stockholders in accordance with the Net Merger Consideration Allocation Schedule, subject to applicable withholdings, if any.

Section 3.03 Capital Stock of Merger Sub

Each share of Common Stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares shall continue to evidence ownership of such shares of capital stock of the Surviving Corporation.

Section 3.04 Dissenting Shares

(a) Notwithstanding any provision of this Agreement to the contrary, any shares of capital stock of the Company held by a holder who has exercised and perfected appraisal rights for such shares in accordance with the DGCL and who, as of the Effective Time, has not effectively withdrawn or lost such appraisal rights (“Dissenting Shares”), shall not be converted into or represent a right to receive a portion of the Net Merger Consideration pursuant to Section 3.02, but the holder thereof shall only be entitled to such rights as are granted by the DGCL.

(b) Notwithstanding the provisions of subsection (a), if any holder of Dissenting Shares shall effectively withdraw or lose (through failure to perfect or otherwise) such holder’s appraisal rights, then, as of the later of the Effective Time and the occurrence of such event, such holder’s shares shall automatically be converted into and represent only the right to receive a portion of the Net Merger Consideration as provided in Section 3.02, without interest thereon (except for interest payable pursuant to the Escrow Agreement), upon surrender of the Certificate representing such shares.

(c) The Company shall give Parent (i) prompt notice of any written demand for appraisal received by the Company pursuant to the applicable provisions of Delaware law and (ii) the opportunity to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment or offer to make any payment with respect to any such demands or offer to settle any such demands. To the extent that Parent or the Company makes any payment or payments to a holder of Dissenting Shares, which amount has been awarded to the holders of the Dissenting Shares by a final judgment of a court of competent jurisdiction (and which judgment has not been appealed within the requisite period for such an appeal), Parent shall be entitled to recover under the terms of Article X hereof the aggregate amount by which such payment or payments exceed the aggregate Net Merger Consideration that otherwise would have been payable in respect of such shares.

Section 3.05 Surrender of Certificates and Agreements

The Company will use its best efforts to cause all Certificates or agreements evidencing securities of the Company, including all shares of Series A, all shares of Company Common Stock, and all warrants or other rights to acquire securities of the Company, to be surrendered at the Closing for cancellation. Notwithstanding the foregoing, by operation of law, at the Effective Time, all shares of capital stock of the Company shall be automatically converted into, and the holder of such shares shall only be entitled to, the right to receive the applicable portion of the Net Merger Consideration, irrespective of the surrender of Certificates for such shares of capital stock.

Section 3.06 No Further Ownership Rights

All amounts paid upon the surrender for exchange or cancellation, as applicable, of shares of Company Common Stock or Series A in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Company Common Stock and Series A, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Capital Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing Company Common Stock or Series A are presented to the Surviving Corporation for any reason, they shall be cancelled and Parent shall cause the applicable portion of the Net Merger Consideration to be delivered to the person entitled thereto (subject to the provisions of the Escrow Agreement).

Section 3.07 Lost, Stolen or Destroyed Certificates

In the event any Certificates evidencing shares of Company Capital Stock, shall have been lost, stolen or destroyed, Parent shall make payment of such amount, if any, as may be required pursuant to Section 3.02 in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof; provided, however, that Parent may, in its sole discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver an agreement (in form and substance satisfactory to it) to indemnify Parent against any claim that may be made against Parent with respect to the Certificates alleged to have been lost, stolen or destroyed.

Section 3.08 Taking of Further Action

If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub or to vest Parent with a 100% ownership interest in the Surviving Corporation, the officers and directors of the Company and Merger Sub are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary and/or desirable action.

Section 3.09 Funds Remaining after Six Months

At any time following the sixth month after the Effective Time with respect to the Net Merger Consideration, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Company Capital Stock, and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any consideration set forth in Section 3.02 hereof that may be payable upon due surrender of the Certificates or agreements held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of Company Capital Stock for any consideration set forth in Section 3.02 hereof delivered in respect of such Company Capital Stock to a public official pursuant to any abandoned property, escheat or other similar law.

Section 3.10 Escrow Fund

At the Effective Time, Parent shall deliver or cause to be delivered, directly to an escrow agent to be selected prior to the Effective Time (the “Escrow Agent”) the General Escrow Amount and the Special Escrow Amount to be deducted from the Net Merger Consideration and held in an escrow fund pursuant to the terms set forth herein and in an escrow agreement to be entered into by and among Parent, the Company, the Stockholder Representative and the Escrow Agent, substantially in the form attached hereto as Exhibit B (the “Escrow Agreement”). Subject to the terms of this Agreement and the Escrow Agreement, the General Escrow Amount shall be available for a period beginning on the date of the Closing and ending on the date that is eighteen (18) months thereafter (the “General Escrow Release Date”) to satisfy such indemnification obligations of the Company pursuant to Section 10.01 for claims as are made on or prior to the General Escrow Release Date and shall be paid out as provided in the Escrow Agreement. In addition, and subject to the terms of this Agreement and the Escrow Agreement, the Special Escrow Amount shall be available for a period beginning on the date of the Closing and ending on the date that is six (6) months thereafter (the “Special Escrow Release Date”) to satisfy such additional indemnification obligations of the Company pursuant to Section 10.01 for Special Coverage Claims as are made on or prior to the Special Escrow Release Date and shall be paid out as provided in the Escrow Agreement. The adoption of this Agreement and the approval of the Merger by the Company Stockholders will constitute the approval of the Company Stockholders, except any holders of Dissenting Shares, of the Escrow Agreement and of all the arrangements relating thereto, including the placement of the General Escrow Amount and Special Escrow Amount in escrow, the appointment of Xxxxxxx Xxxxxxxx as the initial Stockholder Representative in Article XI and any obligations of, or payments due by, such stockholders under this Agreement or the Escrow Agreement.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub that:

Section 4.01 Organization and Qualification; Subsidiaries

(a) The Company has been duly organized and is validly existing and in good standing under the laws of Delaware, and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals could not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company is duly qualified or licensed to do business, and is in good standing (to the extent applicable) in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary except for such failures to be so qualified, licensed or in good standing that are not reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has no Subsidiaries.

Section 4.02 Certificate of Incorporation and Bylaws; Corporate Books and Records

The Company has provided to Parent true, correct and complete copies of the Company’s certificate of incorporation and bylaws. Such certificate of incorporation and bylaws are in full force and effect. The Company is not in violation of any of the provisions of its certificate of incorporation or bylaws. The minute books of the Company through the date of this Agreement contain, in all material respects, accurate records of all actions taken by the stockholders and the Board of Directors of the Company and all committees of the Board of Directors of the Company since the inception of the Company. Complete and accurate copies of all of the Company’s minute books and of the stock register of the Company have been provided by the Company to Parent.

Section 4.03 Capitalization

(a) The authorized capital stock of the Company consists of 2,000,000 shares of Company Common Stock and 2,000,000 shares of preferred stock. As of the date of this Agreement, (i) 368,283 shares of Company Common Stock are issued and outstanding, (ii) 476,000 shares of Series A are issued and outstanding, and (iii) 300,000 shares of Company Common Stock are reserved for issuance pursuant to the Company Stock Option Plan (each, a “Company Stock Option”). Section 4.03(a) of the Company Disclosure Schedule sets forth a true, complete and correct list of all holders of Company Capital Stock, indicating, with respect to each such holder, the number and type of shares of Company Capital Stock so held as of the date hereof and as of immediately prior to Closing. The Company has no authorized or issued and outstanding capital stock other than the Company Capital Stock described above.

(b) Section 4.03(b) of the Company Disclosure Schedule sets forth a complete and correct list as of the date of this Agreement of (i) the number of Company Stock Options outstanding and the number of shares of Company Common Stock issuable thereunder, (ii) the exercise price of each such outstanding Company Stock Option, (iii) the date of grant and expiration date thereof, (iv) the vesting schedule (including the terms of vesting) of each such

outstanding Company Stock Option, including the extent to which vesting has occurred as of the date hereof and whether (and to what extent) the vesting of such Company Stock Options will be accelerated in any way by the consummation of the transactions contemplated by this Agreement or by the termination of employment or engagement or change in position of any holder thereof following or in connection with the consummation of the Merger, and (v) the grantee or holder of each such option. The Company has provided to Parent a true, complete and correct copy of the Company Stock Option Plan and the forms of all stock option agreements evidencing Company Stock Options and stock issuance agreements evidencing any stock awards and any and all amendments thereto.

(c) Section 4.03(c) of the Company Disclosure Schedule sets forth a complete and correct list as of the date of this Agreement of all holders of outstanding warrants to purchase shares of Company Capital Stock (collectively, the “Company Warrants”), indicating with respect to each Company Warrant, (i) the number of shares of Company Capital Stock and the type of Company Capital Stock issuable thereunder, (ii) the exercise price of each such outstanding Company Warrant, (iii) the date of grant and expiration date thereof and (iv) the vesting schedule (including the terms of vesting), if any, thereof and whether (and to what extent) the vesting of such Company Warrant will be accelerated in any way by the consummation of the transactions contemplated by this Agreement or by the termination of employment or engagement or change in position of any holder thereof following or in connection with the consummation of the Merger. The Company has provided to Parent a true, complete and correct copy of each of the Company Warrants and any and all amendments thereto.

(d) Section 4.03(d) of the Company Disclosure Schedule sets forth a true, complete and correct list of all holders of outstanding notes evidencing indebtedness of the Company (collectively, the “Company Notes”), indicating, with respect to each Company Note, (i) the number of shares of Company Capital Stock and the type of Company Capital Stock into which such Company Note is convertible, (ii) the principal amount thereof, (iii) the interest rate applicable thereto, (iv) date of issuance and date of maturity thereof and (v) whether (and to what extent) the payment terms of such Company Note will be accelerated in any way by the consummation of the transactions contemplated by this Agreement. The Company has provided to Parent a true, complete and correct copy of each of the Company Notes.

(e) The Company Capital Stock, the Company Stock Options, the Company Warrants and the Company Notes collectively shall be referred to herein as the “Company Securities.” Except for the Company Securities set forth in Sections 4.03(a), 4.03(b), 4.03(c) and 4.03(d) of the Company Disclosure Schedule, (i) no capital stock of the Company or any security exchangeable into or exercisable for such capital stock, is issued, reserved for issuance or outstanding and (ii) there are no options, preemptive rights, warrants, calls, rights, commitments or agreements of any character to which the Company is party, or by which the Company is bound, obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of the Company or obligating the Company to grant, extend or accelerate the vesting of or enter into any such option, warrant, call, right commitment or agreement. Except as disclosed in Section 4.03(e) of the Company Disclosure Schedule, (i) there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise

acquire any shares of Company Capital Stock, (ii) there are no stockholder agreements, voting trusts, proxies or similar agreements or understandings to which the Company is a party or is bound or of which the Company is aware and (iii) there are no registration rights or other agreements or understandings to which the Company is a party or by which it is bound with respect to any capital stock of the Company. Except as set forth in Section 4.03(e) of the Company Disclosure Schedule, there are no outstanding contractual obligations of the Company to provide, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any other Person.

(f) All of the outstanding Company Securities are, and all shares of Company Capital Stock reserved for issuance as specified above shall be, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the Certificate of Incorporation or Bylaws of the Company or any agreement to which the Company is a party or otherwise bound. Except as set forth in Section 4.03(f) of the Company Disclosure Schedule, none of the Company Securities have been issued in violation of any federal or state securities laws. There are no declared or accrued and unpaid dividends with respect to any Company Securities.

Section 4.04 Authority Relative to this Agreement

The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this agreement or to consummate such transactions except the approval of the Merger Agreement and the filing and recordation of the Merger Agreement as required by the DGCL. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the other parties hereto, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to Enforceability Exceptions.

Section 4.05 No Conflict; Required Filings and Consents

(a) The execution and delivery of this Agreement by the Company do not, and the performance by the Company of its obligations hereunder and the consummation of the Merger will not, (i) conflict with or violate any provision of the certificate of incorporation or bylaws of the Company, (ii) assuming that all consents, approvals, authorizations and permits described in Section 4.05 of the Company Disclosure Schedule have been obtained and all filings and notifications described in Section 4.05(b) of the Company Disclosure Schedule have been made, conflict with or violate any Law applicable to the Company or to which any property or asset of the Company is bound or affected, or (iii) except as set forth in Section 4.05(a) of the Company Disclosure Schedule, result in any breach of or constitute a default (or an event which, with the

giving of notice or lapse of time or both, could reasonably be expected to become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other Encumbrance on any property or asset of the Company pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation.

(b) Except as described in Section 4.05(b) of the Company Disclosure Schedule, the execution and delivery of this Agreement by the Company do not, and the performance by the Company of its obligations hereunder and the consummation of the Merger will not, require any consent, approval, authorization or permit of, or filing by the Company with or notification by the Company to, any Governmental Entity, except the filing and recordation of the Merger Agreement as required by the DGCL.

Section 4.06 Permits; Compliance with Laws

The Company is in possession of (i) all material franchises, grants, authorizations, licenses, establishment registrations, product listings, permits, easements, variances, exceptions, consents, certificates, identification and registration numbers, approvals and orders of any Governmental Entity (collectively “Permits”) necessary for the Company to own, lease and operate its properties or to produce, store, distribute and market its products or otherwise to carry on its business as it is now being conducted and (ii) agreements from all Governmental Entities having jurisdiction over such facility or facilities that are required to operate the facility or facilities in the manner in which it or they are currently operated (collectively, the “Company Permits”), and no suspension or cancellation of any of the Company Permits is pending or, to the Knowledge of the Company, threatened. The Company is not in conflict with, or in default or violation of, except as would not give rise, individually or in the aggregate, to a Company Material Adverse Effect, (i) any Law applicable to the Company or by which any property or asset of the Company is bound or affected or (ii) any Company Permits. The Company has not received notice from any regulatory authority that enforces the statutory or regulatory provisions of any pending or threatened investigations or surveys, and no such investigations or surveys are pending or, to the Knowledge of the Company, threatened or imminent. There are no actions, proceedings, investigations or surveys pending or, to the Knowledge of the Company, threatened against the Company that could reasonably be expected to result in (i) the loss or revocation of a Company Permit or (ii) the suspension or cancellation of any other Company Permit. Except as set forth in Section 4.06 of the Company Disclosure Schedule, the Company has not received from any Governmental Entity any notification with respect to possible conflicts, defaults or violations of Laws.

Section 4.07 Financial Statements

(a) The Company has provided to Parent (i) audited financial statements for the fiscal years ended December 31, 2004 and December 31, 2003, and (ii) unaudited financial statements for the nine month period ended September 30, 2005 (collectively, the “Company Financial Statements”).

(b) Each of the financial statements (including in each any notes thereto) contained in the Company Financial Statements was prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and each presented fairly, in all material respects, the financial position of the Company as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments).

(c) Except as and to the extent set forth or reserved against on the balance sheet of the Company as reported in the Company Financial Statements, including the notes thereto, the Company has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet or in notes thereto prepared in accordance with U.S. GAAP, except for liabilities or obligations incurred in the ordinary course of business consistent with past practice since December 31, 2004.

Section 4.08 Absence of Certain Changes or Events

Since the Reference Balance Sheet Date, except as disclosed in Section 4.08 of the Company Disclosure Schedule, the business of the Company has been conducted in the ordinary course and consistent with past practice. As amplification and not limitation of the foregoing, except as disclosed in Section 4.08 of the Company Disclosure Schedule, since the Reference Balance Sheet Date, the Company has not:

(i) transferred to any person or entity any rights to the Company Intellectual Property other than transfers reasonably necessary to sell or license products in the ordinary course of business consistent with past practice;

(ii) permitted or allowed any of the assets or properties (whether tangible or intangible) of the Company to be subjected to any Encumbrance, other than Permitted Encumbrances and Encumbrances that will be released at or prior to the Closing;

(iii) except in the ordinary course of business consistent with past practice, discharged or otherwise obtained the release of any or paid or otherwise discharged any liability, other than current liabilities reflected on the Reference Balance Sheet and current liabilities incurred in the ordinary course of business consistent with past practice since the Reference Balance Sheet Date;

(iv) made any loan to, guaranteed any indebtedness for borrowed money of, or otherwise incurred any liability for borrowed money on behalf of any Person other than payroll, travel guaranties and other advances made in the ordinary course of business consistent with past practice;

(v) failed to pay any creditor any material amount owed to such creditor when due;

(vi) redeemed any of the capital stock or declared, made or paid any dividends or distributions (whether in cash, securities or other property) to the holders of capital stock of the Company or otherwise;

(vii) made any material changes in the customary methods of operations of the Company, including, without limitation, practices and policies relating to manufacturing, purchasing, inventories, marketing, selling and pricing;

(viii) merged with, entered into a consolidation with or acquired an equity interest in any Person or acquired a substantial portion of the assets or business of any Person or any division or line of business thereof, or otherwise acquired any material assets other than in the ordinary course of business consistent with past practice;

(ix) made any capital expenditure or commitment of any capital expenditure in excess of $10,000 individually or $25,000 in the aggregate;

(x) issued any sales orders or otherwise agreed to make any purchases involving exchanges in value in excess of $10,000 individually or $25,000 in the aggregate;

(xi) sold, transferred, leased, subleased, licensed or otherwise disposed of any material properties or assets, real, personal or mixed (including, without limitation, leasehold interests and intangible assets), other than the sale of inventories and/or sale or licensing of products of in the ordinary course of business consistent with past practice;

(xii) issued or sold any capital stock, notes, bonds or other securities, or any option, warrant or other right to acquire the same, of Company Stock, or any other interest in, the Company;

(xiii) entered into, amended or modified any agreement, arrangement or transaction with any of its directors, officers, employees or stockholders (or with any relative, beneficiary, spouse or Affiliate of such Person);

(xiv) (A) granted any increase, or announced any increase, in the wages, salaries, compensation, bonuses, incentives, pension or other benefits payable by the Company to any of its employees, including, without limitation, any increase or change pursuant to any Plan or (B) established or increased or promised to increase any benefits under any Plan;

(xv) written down or written up (or failed to write down or write up in accordance with and consistent with past practice) the value of any inventories or receivables or revalued any assets of the Company other than in the ordinary course of business consistent with past practice, and in accordance with U.S. GAAP;

(xvi) amended, terminated, cancelled or compromised any material claims of the Company or waived any other rights of substantial value to the Company;

(xvii) made any change in any method of accounting or accounting practice or policy used by the Company, other than such changes required by U.S. GAAP;

(xviii) allowed any Permit or Environmental Permit that relates to the Company or otherwise relates to any asset to lapse or terminate or failed to renew any such Permit or Environmental Permit or any insurance policy that is scheduled to terminate or expire within 45 calendar days of the date of the Closing;

(xix) amended or modified in any material respect, or consented to the termination of, any Material Contract or the Company’s rights thereunder,

(xx) amended or restated the certificate of incorporation or the bylaws (or other organizational documents) of the Company;

(xxi) terminated, discontinued, closed or disposed of any plant, facility or other business operation, or laid off any employees or implemented any early retirement, separation or program providing early retirement window benefits within the meaning of Section 1.401(a)-4 of the Regulations or announced or planned any such action or program for the future;

(xxii) knowingly (A) disclosed to any third party (other than pursuant to an obligation or agreement of non-disclosure and confidentiality) any secret or confidential Company Intellectual Property (except by way of issuance of a patent), or (B) permitted to lapse or go abandoned any issued patent or pending patent application, copyright registration, trademark or service xxxx registration, trade name registration, domain name registration or any other formal registration or certification made or taken with any Governmental Entity pursuant to federal, state, local or foreign laws (or any application relating to any of the foregoing) with respect to the Company Intellectual Property that is owned by or purported to be owned by the Company (collectively, the “Registered Company Intellectual Property”).

(xxiii) made any express or deemed election or settled or compromised any material liability, with respect to Taxes of the Company;

(xxiv) suffered any casualty loss or damage with respect to any of the assets of the Company which in the aggregate have a replacement cost of more than $10,000;

(xxv) suffered any Company Material Adverse Effect; or

(xxvi) agreed, whether in writing or otherwise, to take any of the actions specified in this Section 4.08 or granted any options to purchase, rights of first refusal, rights of first offer or any other similar rights or commitments with respect to any of the actions specified in this Section 4.08, except as expressly contemplated by this Agreement.

Section 4.09 Accounts Receivable

Except as set forth in Section 4.09 of the Company Disclosure Schedule, (a) each account receivable of the Company (collectively, the “Accounts Receivable”) represents a sale made in the ordinary course of business and which arose pursuant to an enforceable contract for a bona fide sale of goods or for services performed, and, except for open sales and purchase orders described in Section 4.11, the Company has performed all of its obligations to produce the goods

or perform the services to which such Accounts Receivable relates, other than amounts recorded as deferred revenue, and (b) no Account Receivable is subject to any claim for reduction, counterclaim, set-off, recoupment or other claim for credit, allowances or adjustments by the obligor thereof, in an amount individually or in the aggregate that would exceed $10,000.

Section 4.10 Customers; Suppliers

(a) Listed in Section 4.10(a) of the Company Disclosure Schedule are the names and addresses of all the customers of the Company which ordered products, equipment, goods and/or services from the Company with an aggregate value of $25,000 or more during the nine month period ended September 30, 2005, and the amount for which each such customer was invoiced during such period. Except as noted in Section 4.10(a) of the Company Disclosure Schedule, the Company has not received any notice or has any reason to believe that any customer therein listed has ceased, or will cease, to use the products, equipment, goods or services of the Company, or has substantially reduced, or will substantially reduce, the use of such products, equipment, goods or services at any time.

(b) Listed in Section 4.10(b) of the Company Disclosure Schedule are the names and addresses of all the suppliers from which the Company ordered raw materials, supplies, merchandise and other goods for the Company (but not including services or advertising) with an aggregate purchase price of $10,000 or more during the nine month period ended September 30, 2005, and the amount for which each such supplier invoiced the Company during such period.

Section 4.11 Sales and Purchase Order Backlog

(a) As of the Reference Balance Sheet Date, open sales orders accepted by the Company totaled $398,059.62, and, as of September 30, 2005, open sales orders accepted by the Company totaled $573,629.89. Section 4.11(a) of the Company Disclosure Schedule lists all sales orders which have been accepted by the Company, and which were open either as of the Reference Balance Sheet Date or as of September 30, 2005.

(b) As of the Reference Balance Sheet Date, open purchase orders issued by the Company totaled $0, and, as of September 30, 2005, open purchase orders issued by the Company totaled $0 Section 4.11(b) of the Company Disclosure Schedule lists all purchase orders exceeding $5,000 per order, which have been issued by the Company, and which were open either as of the Reference Balance Sheet Date or as of the date hereof.

Section 4.12 Product and Service Warranties

The Company has provided Parent with all of its standard written forms of product and service warranties and guarantees utilized by the Company as of the date of this Agreement. Neither the Company nor any of its Affiliates has made any other material warranties (which remain in effect) with regard to products and/or services supplied by the Company.

Section 4.13 Employee Benefit Plans; Labor Matters

(a) Section 4.13(a) of the Company Disclosure Schedule lists (i) all “employee benefit plans” (as defined in Section 3(3) of ERISA) and all bonus, stock option, stock purchase, stock appreciation rights, restricted stock, phantom stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, employee relocation programs, cafeteria benefit (Code Section 125) and dependent care (Code Section 129) plan, and all employment, termination, severance or other contracts or agreements to which the Company or other trade or business (whether or not incorporated), which is treated as a single employer with the Company (an “ERISA Affiliate”) pursuant to Code Section 414(b), (c), (m) or (o) is a party, or with respect to which the Company or any ERISA Affiliate has any obligation, or which are maintained, contributed to or sponsored by the Company or any ERISA Affiliate for the benefit of any current or former employee, officer or director of the Company or any ERISA Affiliate, (ii) each employee benefit plan for which the Company or any ERISA Affiliate could incur liability under Section 4069 of ERISA in the event such plan has been or were to be terminated, (iii) any plan in respect of which the Company or any ERISA Affiliate could incur liability under Section 4212(c) of ERISA and (iv) any contracts, arrangements or understandings between the Company or any of its affiliates and any employee of the Company or of any ERISA Affiliate, including, without limitation, any contracts, arrangements or understandings relating to the sale of the Company (collectively, the “Company Benefit Plans”). With respect to each Company Benefit Plan, the Company has delivered or made available to Parent a true, complete and correct copy of (i) such Company Benefit Plan and the most recent summary plan description related to such Company Benefit Plan, if a summary plan description is required therefor, (ii) each trust agreement or other funding arrangement relating to such Company Benefit Plan, (iii) the annual reports (Form 5500) for such Company Benefit Plan filed with the IRS for the last three (3) plan years, if an annual report is required therefore; (iv) the most recent actuarial report or financial statement relating to such Company Benefit Plan, if an actuarial report is required therefore; and (v) the most recent determination or opinion letter issued by the IRS with respect to such Company Benefit Plan, if it is qualified under Section 401(a) of the Code. Except as disclosed on Section 4.13 (a) of the Company Disclosure Schedule, there are no other employee benefit plans, programs, arrangements or agreements, whether formal or informal, whether in writing or not, to which the Company or any ERISA Affiliate is a party, with respect to which the Company or any ERISA Affiliate has any obligation or which are maintained, contributed to or sponsored by the Company or any ERISA Affiliate for the benefit of any current or former employee, officer or director of the Company or any ERISA Affiliate. Neither the Company nor any ERISA Affiliate has any express or implied commitment (i) to create and incur liability with respect to or cause to exist any other employee benefit plan, program or arrangement, (ii) to enter into any contract or agreement to provide compensation or benefits to any individual or (iii) to modify, change or terminate any Company Benefit Plan, other than with respect to a modification, change or termination required by ERISA or the Code.

(b) None of the Company Benefit Plans is a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) or a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which the Company or any ERISA Affiliate could incur liability under Section 4063 or 4064 of ERISA. None of the Company Benefit Plans

provide for or promise retiree medical, retiree disability or retiree life insurance benefits to any current or former employee, officer or director of the Company or any ERISA Affiliate.

(c) Each Company Benefit Plan has been administered in all material respects in accordance with its terms, and all contributions required to be made under the terms of any of the Company Benefit Plans as of the date of this Agreement have been timely made or have been reflected on the most recent balance sheet filed or incorporated by reference in the Company Financial Statements prior to the date of this Agreement. Except as set forth in Section 4.13(c) of the Company Disclosure Schedule, with respect to the Company Benefit Plans, no event has occurred and, to the Knowledge of the Company, there exists no condition or set of circumstances in connection with which the Company or any ERISA Affiliate could be subject to any liability under the terms of such Company Benefit Plans, ERISA, the Code or any other applicable Law which could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(d) Except as set forth in Schedule 4.13(d) of the Company Disclosure Schedule, the Company, on behalf of itself and all of the ERISA Affiliates, hereby represents that the Company does not sponsor or maintain, nor has it ever sponsored or maintained, a Company Benefit Plan which is or was intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code, a trust established in connection with any Company Benefit Plan which is or was intended to be exempt from federal income taxation under Section 501(a) of the Code, or a trust which is or was intended to be qualified as a voluntary employees’ beneficiary association and to be exempt from federal income taxation under Section 501(c)(9) of the Code.

(e) The Company, on behalf of itself and all of the ERISA Affiliates, hereby represents that, other than as disclosed in Section 4.13(e) of the Company Disclosure Schedule: (i) to the Company’s Knowledge, there has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Company Benefit Plan; (ii) neither the Company nor any ERISA Affiliate has incurred any liability for any penalty or tax arising under Section 4980, 4980B or 6652 of the Code, and, to the Company’s Knowledge, no fact or event exists which could give rise to any such liability; (iii) neither the Company nor any ERISA Affiliate has incurred any liability under Section 502 of ERISA, and, to the Company’s Knowledge, no fact or event exists which could give rise to any such liability; (iv) all contributions, premiums or payments required to be made with respect to any Company Benefit Plan have been made on or before their due dates; (v) all such contributions have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any government entity and, to the Company’s Knowledge, no fact or event exists which could give rise to any such challenge or disallowance; and (vi) each Company Benefit Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to Parent (other than ordinary administrative expenses typically incurred in a termination event). With respect to each Company Benefit Plan subject to ERISA as either an employee pension plan within the meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of Section 3(l) of ERISA, the Company on behalf of itself and all of the ERISA Affiliates hereby represents that all requisite governmental reports (which were true and correct as of the date filed) have been prepared in good faith and timely filed and all notices and reports to employees required to be filed, distributed or posted with respect to each

such Company Benefit Plan have been properly and timely filed and distributed or posted. No suit, administrative proceeding, action or other litigation has been brought, or to the Knowledge of the Company is threatened, against or with respect to any such Company Benefit Plan, including any audit or inquiry by the Internal Revenue Service or United States Department of Labor (other than routine benefits claims).

(f) To the Company’s Knowledge, the Company is in compliance with the requirements of (i) the Americans With Disabilities Act, (ii) the applicable health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 and the regulations thereunder, (iii) the applicable requirements of the Health Insurance Portability and Accountability Act of 1996 and the regulations thereunder, and (iv) the applicable requirements of the Family Medical and Leave Act of 1993 and the regulations thereunder, or any similar state laws, except to the extent that such non-compliance would not reasonably be expected to have, either individually or in the aggregate, a Company Material Adverse Effect.

(g) Except as set forth in Section 4.13(g) of the Company Disclosure Schedule, the Company is not a party to any collective bargaining or other labor union contract applicable to persons employed by the Company and no collective bargaining agreement is being negotiated by the Company. As of the date of this Agreement, there is no labor dispute, strike or work stoppage against the Company pending or, to the Knowledge of the Company, threatened which may interfere with the business activities of the Company. As of the date of this Agreement, to the Knowledge of the Company, neither the Company, nor any of its representatives or employees has committed any unfair labor practice in connection with the operation of the business of the Company, and there is no charge or complaint against the Company by the National Labor Relations Board or any comparable Governmental Entity pending or threatened in writing.

(h) The Company has delivered to Parent true, complete and correct copies of (i) all employment agreements with officers and all consulting agreements of the Company and each ERISA Affiliate, (ii) all severance plans, agreements, programs and policies of the Company and each ERISA Affiliate with or relating to their respective employees or consultants, and (iii) all plans, programs, agreements and other arrangements of the Company and each ERISA Affiliate with or relating to their respective employees or consultants which contain “change of control” provisions. Except as set forth in Section 4.13(h) of the Company Disclosure Schedule, no payment or benefit which will be made by the Company or any ERISA Affiliate under any Company Benefit Plan or other arrangement will constitute an excess parachute payment under Code Section 280(G)(1). Except as set forth in Section 4.13(h) of the Company Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee or other service provider of the Company or any ERISA Affiliate to severance benefits or any other payment, except as expressly provided by this Agreement, or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or service provider.

(i) There has been no amendment to, written interpretation or announcement (whether or not written) by the Company or any ERISA Affiliate relating to, or change in participation or coverage under, any Company Benefit Plan which would materially increase the

expense of maintaining such Plan above the level of expense incurred with respect to that Plan for the most recent fiscal year included in the Company Financial Statements.

(j) The Company is not delinquent in payments to any of its employees or consultants for any wages, salaries, commissions, bonuses or other direct compensation for any services performed by them to the date hereof or amounts required to be reimbursed to such employees.

(k) Upon termination of the employment of any employees, neither the Company nor Parent nor the Surviving Corporation will by reason of the Merger or anything done prior to the Effective Time be liable to any of such employees for severance pay or any other payments (other than accrued salary, vacation, sick pay or any payments in accordance with the Company’s normal policies or agreements as provided in Section 7.03(b)).

(l) To the Knowledge of the Company, (i) each Company Benefit Plan satisfies the requirements to avoid the consequences set forth in Code Section 409A(a)(1); and (ii) neither the Company nor any of its Subsidiaries has: (x) since October 4, 2004, granted to any person an interest in any Company Benefit Plan which interest has been or, upon the lapse of a substantial risk of forfeiture with respect to such interest, will be subject to the additional tax (including interest) imposed by Code Section 409A(a)(1)(B) or (b)(4)(A); (y) granted to any person an interest in any Company Benefit Plan which interest has been or will be, because of the lapse of a substantial risk of forfeiture with respect to such interest after December 31, 2004 or because such interest is earned after December 31, 2004, subject to the additional tax (including interest) imposed by Code Section 409A(a)(1)(B) or (b)(4)(A), or (z) since October 4, 2004, modified the terms of any Company Benefit Plan in a manner that could cause an interest previously granted under such Company Benefit Plan to become subject to the additional tax (including interest) imposed by Code Section 409A(a)(1)(B) or (b)(4).

Section 4.14 Employees

(a) Section 4.14 of the Company Disclosure Schedule lists the name, place of employment, the current annual salary rates, bonuses, deferred or contingent compensation, pension, accrued vacation, “golden parachute” and other like benefits paid or payable (in cash or otherwise) in 2004 and 2005, the date of employment and job title of each current salaried employee, officer, director, consultant or agent of the Company.

(b) All officers and employees of the Company are under written obligation to the Company to maintain in confidence all confidential or proprietary information acquired by them in the course of their employment and to assign to the Company all inventions made by them within the scope of their employment during such employment pursuant to an agreement in substantially the form previously provided to Parent.

Section 4.15 Material Contracts

(a) Except as disclosed in Section 4.15(a) of the Company Disclosure Schedule, each Material Contract: (i) is legal, valid and binding on the Company and, to the Company’s

Knowledge, the other parties thereto and is in full force and effect in accordance with its terms, except (A) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (B) as limited by general principles of equity, and (C) to the extent that the enforceability of indemnification or other provisions may be limited by applicable laws (the “Enforceability Exceptions”) and (ii) upon consummation of the transactions contemplated by this Agreement, except to the extent that any consents set forth in Section 4.15(a) of the Company Disclosure Schedule are not obtained, shall continue in full force and effect in accordance with its terms without penalty or other adverse consequence. The Company is not in breach of, or default under, any Material Contract, except as disclosed in Section 4.15(a) of the Company Disclosure Schedule.

(b) Except as disclosed in Section 4.15(b) of the Company Disclosure Schedule, to the Knowledge of the Company, no other party to any Material Contract is in breach thereof or default thereunder.

Section 4.16 Guaranties

Except as set forth in Section 4.16 of the Company Disclosure Schedule, the Company is not a party to any guaranty, and no Person is a party to any guaranty for the benefit of the Company.

Section 4.17 Litigation

Except as disclosed in Section 4.17 of the Company Disclosure Schedule, there is no suit, claim, action, proceeding or investigation pending or, to the Knowledge of the Company, threatened against the Company. Except as disclosed in Section 4.17 of the Company Disclosure Schedule, the Company is not subject to any outstanding order, writ, injunction or decree.

Section 4.18 Environmental Matters

Except as disclosed in Section 4.18 of the Company Disclosure Schedule, to the Knowledge of the Company: (i) the Company is in material compliance with all applicable Environmental Laws; (ii) all past noncompliance, if any, of the Company with Environmental Laws or Environmental Permits known to the Company has been resolved without any pending, ongoing or future obligation, cost or liability; and (iii) the Company has not released a Hazardous Material at, or transported a Hazardous Material to or from, any real property owned, leased or occupied by the Company, in violation of any Environmental Law.

Section 4.19 Intellectual Property

(a) Applications and Registrations. Section 4.19(a) of the Company Disclosure Schedule contains a true and complete list of all (i) Registered Company Intellectual Property, and (ii) unregistered trademarks, unregistered service marks, and Internet domain names that are owned or purported to be owned by the Company and that are necessary for or used in the conduct of the business of the Company as conducted or currently proposed to be conducted.

(b) Rights to Company Intellectual Property. Except as set forth in Section 4.19(b) of the Company Disclosure Schedule, the Company either (i) owns, or (ii) possesses valid licenses (subject to the Enforceability Exceptions) or otherwise has the right to use (but not necessarily the exclusive right to use), all of the Company Intellectual Property.

(c) Third Party Claims. Except as set forth in Section 4.19(c) of the Company Disclosure Schedule, to the Knowledge of the Company, none of the business activities conducted or currently proposed to be conducted by the Company infringes or violates or would cause the Company to infringe or violate any Intellectual Property of any person. Except as set forth in Section 4.19(c) of the Company Disclosure Schedule, the Company has not received any charge, complaint, claim, demand or notice (i) challenging the validity, effectiveness or ownership by the Company of any of the Company Intellectual Property owned or purported to be owned by the Company, or (ii) alleging that any of the business activities conducted or currently proposed to be conducted by the Company infringes or will infringe on any Intellectual Property of any person and to the Knowledge of the Company, there are no valid grounds for any bona fide claim of any of the foregoing. Except as set forth in Section 4.19(c) of the Company Disclosure Schedule, to the Knowledge of the Company, all registered, granted or issued patents, trademarks, Internet domain names and copyrights within the Registered Company Intellectual Property are enforceable and subsisting. To the Company’s Knowledge, there is no unauthorized use, infringement or misappropriation of any of the Company Intellectual Property by any third party, employee or former employee.

(d) Royalties. Except as set forth in Section 4.19(d) of the Company Disclosure Schedule, there are no material royalties, fees, honoraria or other payments payable by the Company in the future to any person or entity by reason of the ownership, development, use, license, sale or disposition of the Company Intellectual Property, other than salaries and sales commissions paid to employees and sales agents in the ordinary course of business.

(e) Personnel. Except as set forth in Section 4.19(e) of the Company Disclosure Schedule, all personnel, including employees, consultants and contractors of the Company, who have contributed to or participated in the conception and development of the Company Intellectual Property owned or purported to be owned by the Company, have executed nondisclosure agreements in substantially the same form in all material respects as the form previously made available to Parent and the Merger Sub and either (i) have been a party to “work-for-hire” arrangements or agreements with the Company in accordance with applicable national and state law that, subject to the Enforceability Exceptions, conveyed such personnel’s ownership rights to such Company Intellectual Property to the Company, or (ii) have executed appropriate instruments of assignment in favor or the Company as assignee that, subject to the Enforceability Exceptions, conveyed such personnel’s ownership rights to such Company Intellectual Property to the Company.

(f) Third Party Agreements. Except as set forth in Section 4.19(f) of the Company Disclosure Schedule (and except for any consents required in connection with the Merger), the Company is not, nor as a result of the execution or delivery of this Agreement, or performance of the Company’s obligations hereunder, will the Company be, in breach of any material term of any Company License or Third Party License, nor will the execution or delivery

of this Agreement or performance of the Company’s obligations hereunder cause the material diminution or termination of the Company’s rights to use or forfeiture of any Company Intellectual Property. Section 4.19(f) of the Company Disclosure Schedule sets forth a list of all Company Licenses and Third Party Licenses, and the Company has made available to Parent and the Merger Sub correct and complete copies of all such Company Licenses and Third Party Licenses. Except as set forth in Section 4.19(f) of the Company Disclosure Schedule, all Company Intellectual Property owned or purported to be owned by the Company is free and clear of all Encumbrances (other than Permitted Encumbrances).

(g) Company Software Programs. Section 4.19(g) of the Company Disclosure Schedule contains a true and complete list of all of the Company’s software programs developed and owned or purported to be owned by the Company that are commercially available or are being developed by the Company to be commercially available (the “Software Programs”). Except as set forth in Section 4.19(g) of the Company Disclosure Schedule, the Company owns good and marketable title to such Software Programs free and clear of all Encumbrances (other than Permitted Encumbrances).

(h) Internal Development of Software Programs. Except as set forth in Section 4.19(h) of the Company Disclosure Schedule, all Software Programs have been developed by the Company or the Company’s predecessors in interest without the assistance of consultants, academic institutions or any other third parties not employed by Seller.

(i) Protection. The Company has taken commercially reasonable steps to maintain the source code relating to the Software Programs (which has not been patented) in strict confidence as would a reasonably prudent operator of the business of the Company. Except as set forth in Section 4.19(i) of the Company Disclosure Schedule, the Company has not disclosed the source code relating to the Software Programs (which has not been patented) to any third party.

(j) Third-Party Software. Section 4.19(j) of the Company Disclosure Schedule contains a complete list of software libraries, software systems, compilers and other third-party software within the Company Intellectual Property that are material to and used by the Company in the development of the Software Programs as currently conducted. The Company Disclosure Schedule lists all Third Party Licenses for the use of all such software and, if any such software is not licensed, the basis of the use of such software by the Company. Except as otherwise set forth in Section 4.19(j) of the Company Disclosure Schedule, the Company is not in breach of any material term or condition of the respective Third Party License or other right of use listed on the Company Disclosure Schedule with respect to its use of such software.

(k) Contract Performance. Except as otherwise set forth in Section 4.19(k) of the Company Disclosure Schedule, (i) the Company is not in breach of any material term or condition of any Company License or Third Party License, and (ii) to the Knowledge of the Company, the Company has not taken any action or failed to take any action resulting in valid grounds for any bona fide claim by a third party that the source code relating to the Software Programs be released to such third party from an escrow pursuant to the terms of a Company License.

Section 4.20 Taxes

(a) The Company has timely filed all material Tax Returns required to be filed by it, which Tax Returns are true, correct, and complete in all material respects, and has paid all Taxes required to be paid as shown on such Tax Returns. All state and federal income Tax Returns filed by the Company for taxable periods ended on or after December 31, 2001 have been provided to Parent.

(b) The Company Financial Statements reflect an adequate reserve (which reserve was established in accordance with U.S. GAAP) for all Taxes payable by the Company, accrued through the date of such financial statements. The books and records of the Company reflect an adequate reserve for Taxes not yet due and payable and properly accrued in accordance with U.S. GAAP since the Reference Balance Sheet Date.

(c) Except as set forth in Section 4.20(c) of the Company Disclosure Schedule, the Company (i) has not received any written notice of deficiency or assessment from any Tax or other governmental authority with respect to Taxes of the Company, (ii) is not currently under, or has received notice of commencement of, any audit by any taxing or other governmental authority concerning any Taxes of the Company, (iii) has not received any request for a Tax Return or inquiry as to whether a Tax Return has been filed from any jurisdiction where it does not or has not filed Tax Returns, or (iv) has neither executed any waiver of the statute of limitations in respect of Taxes or received any request for such a waiver. With respect to any asserted deficiency in Taxes not paid by the Company, the Company is contesting such deficiency in good faith and by appropriate procedures and has established adequate reserves in accordance with U.S. GAAP for such Taxes.

(d) There is no lien for Taxes on the assets of the Company, except for inchoate liens for Taxes not yet due and payable.

(e) The Company has not been a member of any affiliated, consolidated, combined, unitary or similar group for purposes of filing Tax Returns with respect to Taxes that may be paid, collected or withheld by or with respect to the Company or paying such Taxes at any time and does not have any liability for the Taxes of any Person (other than the Company) under Treasury Regulation § 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee or successor, by contract or otherwise.

(f) Except as set forth in Section 4.20(f) of the Company Disclosure Schedule, the Company is not a party to or bound by any tax allocation or sharing agreement.

(g) The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any change in method of accounting for a taxable period ending on or prior to the Closing Date, installment sale or open transaction disposition made on or prior to the Closing Date, or prepaid amount received on or prior to the Closing Date.

(h) Except as set forth in Section 4.20(h) of the Company Disclosure Schedule, (i) no closing agreement, written ruling, or determination letter with respect to Taxes, or any equivalent written decision from a foreign jurisdiction, has been received from, and no closing or other similar agreement has been executed with, any Tax or other governmental authority that will be binding upon the Company after the Closing and (ii) no power of attorney has been given by or with respect to the Company to any Person with respect to Taxes that will be binding upon the Company.

(i) The Company is not a party to any contract, agreement, plan or arrangement, including but not limited to the provisions of this Agreement, covering any employee or former employee of the Company that could give rise to the payment of any amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.

(j) The Company has properly withheld all amounts required to be withheld on amounts paid to employees or to other Persons located or incorporated outside of the United States and has paid the appropriate amounts withheld to the proper governmental authorities.

(k) The Company has not filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the Company.

(l) The Company has not been a party to a transaction intended to qualify under Section 355 of the Code (whether as distributing or distributed company) within the last five years.

Section 4.21 Properties and Assets

(a) The Company has good and marketable title to the properties and assets reflected on the Reference Balance Sheet of the Company other than nonmaterial properties and assets disposed of in the ordinary course of business consistent with past practice since the date of the Reference Balance Sheet, and all such properties and assets are free and clear of Encumbrances, except Permitted Encumbrances. Such properties and assets constitute all of the assets necessary to conduct the Company’s business substantially in the same manner as it has been conducted prior to the date hereof.

(b) The Company does not own any real properties. Section 4.21(b) of the Company Disclosure Schedule sets forth a complete and accurate list of the real properties leased by the Company (the “Leased Properties”). The Company has good and marketable leasehold title to the Leased Properties set forth in Section 4.21(b) of the Company Disclosure Schedule, free and clear of all claims, tenants and occupants except for Permitted Encumbrances and as set forth in Section 4.21(b) of the Company Disclosure Schedule. Complete and accurate copies of all leases or other agreements relating to the Leased Properties have been delivered to Parent and there have been no material changes or amendments to such leases or agreements since they were delivered. The Company is the lawful owner of all improvements and fixtures located at the Leased Properties, free and clear of all Encumbrances except for Permitted Encumbrances. Each lease or other agreement relating to the Leased Properties is a valid and subsisting agreement,

without any default of the Company thereunder and, to the Company’s Knowledge, without any default thereunder of the other party thereto, and such leases and agreements give the Company the right to use or occupy, as the case may be, all real properties as are sufficient and adequate to operate its business as it is currently being conducted. Except as set forth in Section 4.21(b) of the Company Disclosure Schedule, the possession of such property by the Company has not been disturbed nor has any claim relating to the Company’s title to or possession of such property been asserted against the Company.

Section 4.22 Brokers

Except as set forth in Section 4.22 of the Company Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger based upon arrangements made by or on behalf of the Company.

Section 4.23 Certain Business Practices

To the Company’s Knowledge, neither the Company, nor any of its directors, officers, agents or employees of the Company (in their capacities as such) has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii) consummated any transaction, made any payment, entered into any agreement or arrangement or taken any other action in violation of Section 1128B(b) of the Social Security Act, as amended, or (iv) made any other unlawful payment.

Section 4.24 Interested Party Transactions

(a) Except as set forth in Section 4.24(a) of the Company Disclosure Schedule, since January 1, 2003 no executive officer, director or greater than 5% stockholder of the Company has engaged in any business dealings with the Company.

(b) Except for normal compensation received as employees or directors, no officer or, to the Knowledge of the Company, director or greater than 5% stockholder of the Company, and no entity known by the Company to be controlled by any officer, director or greater than 5% stockholder of the Company (other than Parent) is directly or indirectly engaged in business as a competitor, lessor, lessee, customer or supplier of the Company; owns directly or indirectly any interest (excepting no more than 1% stockholdings for investment purposes in securities of publicly held companies) in any Person that is directly or indirectly engaged in business as a competitor, lessor, lessee, franchisee, customer or supplier of the Company; or is an officer, director, employee or consultant of any such person.

(c) Except for normal compensation received as employees or directors, no officer, director or, to the Knowledge of the Company, greater than 5% stockholder of the Company, and no entity known by the Company to be controlled by any officer, director or greater than 5% stockholder of the Company:

(i) owns directly or indirectly, in whole or in part, any material tangible or intangible property that the Company uses;

(ii) has any cause of action or other claim whatsoever against, or owes any amount to, the Company, except for claims in the ordinary course of business, such as for accrued vacation pay, and similar matters in agreements existing on the date hereof; or

(iii) has made any payment or commitment to pay any commission, fee or other amount to, or purchase or obtain or otherwise contract to purchase or obtain any goods or services from, any Person of which any officer or director of the Company is a partner or stockholder (excepting no more than one percent stockholdings for investment purposes in securities of publicly-held companies).

Section 4.25 Vote Required; Consents.

The affirmative vote or consent of the Holders of a majority of each of (i) the Company Capital Stock, voting together as if a single class on an as-converted basis, and (ii) the Series A voting as a separate class, are the only votes of the holders of any of the Company’s Capital Stock necessary to approve this Agreement and the Merger and the transactions contemplated hereby.

Section 4.26 Board Approval

The Board of Directors of the Company has unanimously (i) approved this Agreement and the Merger and all transactions contemplated hereby and (ii) determined that the Merger is in the best interests of the Company Stockholders and is on terms and conditions that are fair to such stockholders.

Section 4.27 Business Activity Restrictions

Except as set forth in Section 4.27 of the Company Disclosure Schedule, there is no agreement (noncompetition or otherwise), commitment, judgment, injunction, order or decree to which the Company or to the Knowledge of the Company any officer, employee or consultant of the Company is a party or that otherwise is binding upon the Company or to the Knowledge of the Company such officer, employee or consultant that has or reasonably could be expected to have the effect of materially prohibiting or impairing any business practice of the Company, any acquisition of property (tangible or intangible) by the Company, or the conduct of business by the Company. The Company has not entered into any agreement under which the Company is restricted from selling, licensing or otherwise distributing any of its technology or products to, or providing services to, customers or potential customers or any class of customers, in any geographic area, during any period of time or in any segment of the market or line of business.

Section 4.28 Representations Complete

None of the representations or warranties made by the Company herein or in any Schedule hereto, including the Company Disclosure Schedule, or certificate furnished by the Company pursuant to this Agreement, when all such documents are read together in their

entirety, contains or will contain at the Effective Time any untrue statement of a material fact, or omits or will omit at the Effective Time to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub hereby jointly and severally represent and warrant to the Company that:

Section 5.01 Organization and Qualification; Subsidiaries

Each of Parent and Merger Sub has been duly organized and is validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals are not reasonably expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Each of Parent and Merger Sub is duly qualified or licensed to do business, and is in good standing (to the extent applicable), in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that is not reasonably expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

Section 5.02 Authority Relative to this Agreement

Parent and Merger Sub have all necessary corporate power and authority to execute and deliver this Agreement, to perform their respective obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or to consummate such transactions. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes the legal, valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms.

Section 5.03 No Conflict; Required Filings and Consents

(a) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance by Parent and Merger Sub of their obligations hereunder and the consummation of the Merger will not, (i) conflict with or violate any provision of the organizational documents of Parent or Merger Sub, or (ii) assuming that all consents, approvals, authorizations and permits described in Section 5.03(b) have been obtained and all filings and notifications described in Section 5.03(b) have been made, conflict with or violate any Law

applicable to Parent or by which any property or asset of Parent or Merger Sub is bound or affected.

(b) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance by Parent and Merger Sub of their respective obligations hereunder and the consummation of the Merger will not, require any consent, approval, authorization or permit of, or filing by Parent or Merger Sub with or notification by Parent or Merger Sub to, any Governmental Entity, except the filing and recordation of the Merger Agreement as required by the DGCL.

Section 5.04 Brokers

No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger based upon arrangements made by or on behalf of Parent.

Section 5.05 Sufficient Funds

Parent has sufficient funds available to purchase all the Company Capital Stock and to pay the Net Merger Consideration.

ARTICLE VI.

CONDUCT PRIOR TO CLOSING

Section 6.01 Conduct of Business by the Company

(a) The Company agrees that, between the date of this Agreement and the Effective Time, except as set forth in Section 6.01 of the Company Disclosure Schedule or as expressly contemplated by any other provision of this Agreement, unless Parent shall otherwise agree in writing, (x) the business of the Company shall be conducted only in, and the Company shall not take any action except in, the ordinary course of business consistent with past practice and (y) the Company shall use all reasonable efforts to keep available the services of such of the current officers, significant employees and consultants of the Company and to preserve the current relationships of the Company with such of the corporate partners, customers, suppliers and other persons with which the Company has significant business relations in order to preserve substantially intact its business organization.

(b) Except as described in Section 6.01(b) of the Company Disclosure Schedule, the Company covenants and agrees that, prior to the Closing, without the prior written consent of Parent (which will not be unreasonably withheld or delayed), the Company will not do any of the things enumerated in Section 4.08(i)-(xxvi).

Section 6.02 Notices of Certain Events

The Company agrees to give prompt notice to Parent, but in any event within two Business Days, of (i) any notice or other communication from any person alleging that the consent of such person is or may be required in connection with the Merger, (ii) any notice or

other communication from any Governmental Entity in connection with the Merger, (iii) any actions, suits, claims, investigations or proceedings commenced or, to its Knowledge, threatened against, relating to or involving or otherwise affecting the Company that relate to the consummation of the Merger, (iv) the occurrence of a default or event that, with the giving of notice or lapse of time or both, will become a default under any Company Material Contract, and (v) any change that could reasonably be expected to have a Company Material Adverse Effect or to delay or impede the ability of the Company to perform its obligations pursuant to this Agreement and to effect the consummation of the Merger.

Section 6.03 Access to Information; Confidentiality

(a) From the date of this Agreement to the Effective time, the Company shall (i) provide to Parent (and its officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives (collectively, “Representatives”)) access at reasonable times upon reasonable prior notice to its officers, employees, agents, properties, offices and other facilities and to the books and records thereof, and (ii) furnish promptly such information concerning its business, properties, contracts, assets, liabilities and personnel as the other party or its Representatives may reasonably request. No investigation conducted pursuant to this Section 6.03 shall affect or be deemed to modify any representation or warranty made in this Agreement.

(b) The parties hereto shall comply with, and shall cause their respective Representatives to comply with, all of their respective obligations under the Confidentiality Agreement with respect to the information disclosed pursuant to this Section 6.03.

Section 6.04 No Solicitation of Transactions

The Company shall not directly or indirectly, and shall instruct its officers, directors, employees, subsidiaries, agents or advisors or other representatives (including, without limitation, any investment banker, attorney or accountant retained by it), not to, directly or indirectly, solicit, initiate or knowingly encourage (including by way of furnishing nonpublic information), or take any other action to facilitate, any inquiries or the making of any proposal or offer (including, without limitation, any proposal or offer to the Company Stockholders) that constitutes, or may reasonably be expected to lead to, a transaction involving a change of control of the Company, the sale of any of the Company’s assets, a merger, consolidation or reorganization of or with the Company or any other party, the sale of any of the Company’s stock or other similar transaction (collectively, “Other Transaction”), or enter into or maintain or continue discussions or negotiate with any person in furtherance of such inquiries or to obtain an Other Transaction, or agree to or endorse any Other Transaction, or authorize or permit any of the officers, directors or employees of the Company, or any investment banker, financial advisor, attorney, accountant or other representative retained by the Company, to take any such action. The Company shall notify Parent promptly, and in no event later than two Business Days after receipt, if any proposal or offer, or any inquiry or contact with any person with respect thereto, regarding an Other Transaction is made. The Company immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to an Other Transaction. The Company shall not release any third party from, or waive

any provision of, any confidentiality agreement to which it is a party. The Company shall use all reasonable efforts to ensure that its officers, directors, employees, subsidiaries, agents and advisors or other representatives (including, without limitation, any investment banker, attorney or accountant retained by it) are aware of the restrictions described in this Section 6.04.

Section 6.05 Further Action; Consents; Filings

(a) Upon the terms and subject to the conditions hereof, each of the parties hereto shall use all reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under applicable law or otherwise to consummate and make effective the Merger, (ii) obtain from Governmental Entities any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by Parent, Merger Sub, the Company or the Surviving Corporation in connection with the authorization, execution and delivery of this Agreement and the consummation of the Merger and (iii) make all necessary filings, and thereafter make any other required or appropriate submissions, with respect to this Agreement and the Merger required under any applicable Law. The parties hereto shall cooperate and consult with each other in connection with the making of all such filings, including by providing copies of all such documents to the non-filing parties and their advisors prior to filing, and none of the parties shall file any such document if any of the other parties shall have reasonably objected to the filing of such document.

(b) Each of the parties hereto shall promptly give (or cause their respective Subsidiaries to give) any notices regarding the Merger, this Agreement or the transactions contemplated hereby or thereby to third parties required under applicable law or by any contract, license, lease or other agreement to which it or any of its subsidiaries is bound, and use, and cause its subsidiaries to use, all reasonable efforts to obtain any third party consents required under any such contract, license, lease or other agreement in connection with the consummation of the Merger or the other transactions contemplated by this Agreement.

ARTICLE VII.

ADDITIONAL AGREEMENTS

Section 7.01 Public Announcements

Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the Merger and shall not issue any such press release or make any such public statement without the prior written approval of the other (which will not be unreasonably withheld or delayed), except to the extent required by applicable law or any listing agreement with a national securities exchange or national securities system in which case the issuing party shall use all reasonable efforts to consult with the other parties before issuing any such release or making any such public statement.

Section 7.02 Stockholder Approval

Promptly after the date of this Agreement, the Company shall take all action necessary in accordance with the DGCL and its Certificate of Incorporation and Bylaws to call, give notice of, convene and hold a meeting of the Company Stockholders to consider and vote upon or to solicit consent in writing regarding the adoption and approval of this Agreement and the Merger and the consummation of the transactions contemplated hereby, including without limitation, the delivery to the Company Stockholders of an information statement (the “Information Statement”) which shall not, on the date the Information Statement is mailed to the Company Stockholders or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Information Statement shall be subject to review and reasonable approval by Parent and include information regarding the Company, the terms of the Merger and this Agreement and the unanimous recommendation of the Board of Directors of the Company in favor of the Merger and this Agreement and the transactions contemplated hereby. The Company shall use its reasonable best efforts to solicit from the Company Stockholders proxies or consents in favor of the Merger and shall take all other action necessary or advisable to secure the vote or consent of the Company Stockholders required to effect the Merger.

ARTICLE VIII.

CONDITIONS TO THE MERGER

Section 8.01 Conditions to the Obligations of Each Party to Consummate the Merger

The obligations of the parties hereto to consummate the Merger, or to permit the consummation of the Merger, are subject to the satisfaction or, if permitted by applicable Law, waiver of the following conditions:

(a) no court of competent jurisdiction shall have issued or entered any order, writ, injunction or decree, and no other Governmental Entity shall have issued any order, which is then in effect and has the effect of making the Merger illegal or otherwise prohibiting its consummation; and

(b) any waiting period (and any extension thereof) applicable to the consummation of the Merger under any applicable competition, merger control or similar Law shall have expired or been terminated.

Section 8.02 Conditions to the Obligations of the Company

The obligations of the Company to consummate the Merger, or to permit the consummation of the Merger, are subject to the satisfaction or, if permitted by applicable Law, waiver of the following further conditions:

(a) each of the representations and warranties of Parent contained in this Agreement that is qualified by materiality shall be true, complete and correct on and as of the Effective Time as if made at and as of the Effective Time (other than representations and warranties which address matters only as of a certain date which shall be true, complete and correct as of such certain date) and each of the representations and warranties that is not so qualified shall be true, complete and correct in all material respects on and as of the Effective Time as if made at and as of the Effective Time (other than representations and warranties which address matters only as of a certain date which shall be true, complete and correct in all material respects as of such certain date), in each case except as contemplated or permitted by this Agreement, and the Company shall have received a certificate of an authorized officer of Parent to such effect;

(b) Parent shall have performed or complied in all material respects with all material agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time and the Company shall have received a certificate of an authorized officer of Parent to that effect;

(d) Parent and the Escrow Agent shall have executed and delivered the Escrow Agreement.

Section 8.03 Conditions to the Obligations of Parent

The obligations of Parent to consummate the Merger, or to permit the consummation of the Merger, are subject to the satisfaction or, if permitted by applicable Law, waiver of the following further conditions:

(a) each of the representations and warranties of the Company contained in this Agreement that is qualified by materiality shall be true, complete and correct on and as of the Effective Time as if made at and as of the Effective Time (other than representations and warranties which address matters only as of a certain date which shall be true, complete and correct as of such certain date) and each of the representations and warranties that is not so qualified shall be true, complete and correct in all material respects on and as of the Effective Time as if made on and as of such date (other than representations and warranties which address matters only as of a certain date which shall be true, complete and correct in all material respects as of such certain date), in each case except as contemplated or permitted by this Agreement, and Parent shall have received a certificate of the President of the Company to such effect;

(b) the Company shall have performed or complied in all material respects with all material agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time and Parent shall have received a certificate of an authorized officer of the Company to that effect;

(d) there shall not be pending any action, proceeding, claim or counterclaim which seeks to or would, or any order, decree or injunction (whether preliminary, final or appealable) which would, require Parent to hold separate or dispose of any of the stock or assets of the Company or impose material limitations on the ability of Parent to control in any material respect the business, assets or operations of either Parent or the Company;

(e) the directors and officers of the Company in office immediately prior to the Effective Time shall have resigned as directors and officers of the Company effective as of the Effective Time;

(f) the Company shall have obtained all consents, approvals, authorizations and permits described in Section 4.15(a) of the Company Disclosure Schedule;

(g) Parent shall have received the legal opinion of Holland & Xxxx LLP, legal counsel to the Company, in substantially the form attached hereto as Exhibit C;

(h) each of the individuals listed on Schedule 8.03(h) shall have executed and delivered to Parent an employment agreement in substantially the form attached hereto as Exhibit D;

(i) each Company Warrant that is outstanding immediately prior to the Closing shall have been exercised prior to the Closing and Parent shall have received a certificate from the President of the Company to that effect;

(j) each Company Stock Option that is outstanding immediately prior to the Closing shall have been exercised prior to the Closing and Parent shall have received a certificate from the President of the Company to that effect;

(k) the Company Stockholders holding at least 90% of the Company Capital Stock (on an as-converted basis) shall have duly approved and adopted this Agreement and the Merger and the transactions contemplated hereby, and such approval shall be in full force and effect;

(l) a certificate of the Secretary of the Company, dated as of the Closing Date, in form and substance reasonably satisfactory to Parent certifying as to (a) true and complete copies of the Company’s Certificate of Incorporation and Bylaws, (b) true and complete copies of the resolutions of the Company’s Board of Directors and the Company Stockholders authorizing the transactions contemplated hereby, and (c) the incumbency and signatures of the officers of the Company executing this Agreement and the other agreements, instruments and other documents executed by or on behalf of the Company pursuant to this Agreement or otherwise in connection with the transactions contemplated hereby; and

(m) since the date hereof, there has not occurred any change, development, event, situation or other circumstance that has had or could reasonably be expected to have a Company Material Adverse Effect.

ARTICLE IX.

TERMINATION, AMENDMENT AND WAIVER

Section 9.01 Termination

This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, notwithstanding any requisite adoption and approval of this Agreement, as follows:

(a) by mutual written consent duly authorized by the boards of directors of each of Parent and the Company;

(b) by either Parent or the Company, if the Effective Time shall not have occurred on or before forty (40) days following the execution of this Agreement by the parties hereto; provided, however, that the right to terminate this Agreement under this Section 9.01(b) shall not be available to any party whose failure to fulfill an obligation under this Agreement has been the cause of the failure of the Merger to occur on or before such date;

(c) by either Parent or the Company, if any Governmental order, writ, injunction or decree preventing the consummation of the Merger shall have been entered by any court of competent jurisdiction and shall have become final and nonappealable;

(d) by Parent, upon a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company shall have become untrue, incomplete or incorrect, in either case such that the conditions set forth in Section 8.03 would not be satisfied (a “Terminating Company Breach”); and

(e) by the Company, upon breach of any representation, warranty, covenant or agreement on the part of Parent set forth in this Agreement, or if any representation or warranty of Parent shall have become untrue, incomplete or incorrect, in either case such that the conditions set forth in Section 8.02 would not be satisfied (a “Terminating Parent Breach”).

Section 9.02 Effect of Termination

In the event of termination of this Agreement pursuant to Section 9.01, this Agreement shall forthwith become void, there shall be no liability under this Agreement on the part of any party hereto or any of its Affiliates or any of its or their officers or directors, and all rights and obligations of each party hereto shall cease, provided, however, that nothing herein shall relieve any party hereto from liability for the willful or intentional breach of any of its representations and warranties or the willful or intentional breach of any of its covenants or agreements set forth this Agreement.

Section 9.03 Amendment

This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective boards of directors at any time prior to the Effective Time; provided, however, after the approval of this Agreement by the Company Stockholders, no amendment may be made, except such amendments that have received the requisite stockholder approval and such amendments as are permitted to be made without stockholder approval under the DGCL. This Agreement may not be amended except by instrument in writing signed by the parties hereto.

Section 9.04 Waiver

At any time prior to the Effective Time, any party hereto may (a) extend the time for or waive compliance with the performance of any obligation or other act of any other party hereto or (b) waive any inaccuracy in the representations and warranties of any other party contained herein or in any document delivered pursuant hereto. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby.

Section 9.05 Expenses

Except as explicitly provided herein, all Expenses incurred by the Company in connection with this Agreement and the Merger shall be paid by the Company, and all Expenses incurred by Parent or Merger Sub in connection with this Agreement and the Merger shall be paid by Parent, in each case whether or not the Merger is consummated.

ARTICLE X.

INDEMNIFICATION

Section 10.01 Indemnification

Subject to the limitations set forth in Section 10.03, Parent, Merger Sub, the Surviving Corporation and their Affiliates, officers, directors, stockholders, agents, representatives, advisors, successors and assigns (collectively, “Parent Indemnitees”) will be indemnified for and held harmless against and in respect of any and all claims, losses, damages (including incidental and consequential damages), expenses (including court costs, the costs of any investigation, expert witnesses and preparation, and reasonable attorneys’ fees), obligations and liabilities, whether or not involving third party claims (collectively, “Losses”), which, directly or indirectly, arise or result from or are incident or related to (i) the inaccuracy of any representation or breach of any warranty of the Company under this Agreement or the other agreements to be entered into by the Company in connection with this Agreement; or (ii) any default or failure of the Company’s commitments or obligations under this Agreement or such other agreements; or (iii) any act or omission of the Company which otherwise constitutes a breach of this Agreement or such other agreements; or (iv) any failure by the Company to comply with the federal securities laws or the securities or blue sky laws of any other applicable jurisdiction prior to the Closing; or (v) any indemnification agreement between the Company and any of its directors or officers; or (vi) state and local sales and use taxes paid by Parent or the Surviving Corporation following the

Closing in respect of sales made by the Company prior to the Closing; (vii) any Special Coverage Claim or (viii) any claim related to those matters set forth on Schedule 10.01 attached hereto. Except as specifically provided herein, the indemnification available to Parent Indemnitees for the recovery of Losses shall not exceed the General Escrow Amount. The indemnification available to Parent Indemnitees for the recovery of any and all Losses which, directly or indirectly, arise or result from or are incident or related to any Special Coverage Claim shall not exceed an amount equal to the Special Escrow Amount plus the General Escrow Amount. Consummation of the Merger will not be deemed or construed to be a waiver of any right or remedy of Parent Indemnitees, nor will this Section or any other provision of this Agreement be deemed or construed to be a waiver of any ground of defense by the Company Stockholders. For purposes of this Article X, any Losses suffered or sustained by the Company or the Surviving Corporation following the Closing or to which the Company or the Surviving Corporation following the Closing may be subject will be deemed to be suffered or sustained by Parent Indemnitees. The Company Stockholders will not be entitled to contribution from, or recovery against, the Surviving Corporation with respect to any liability of the Company Stockholders for Losses under this Agreement.

Section 10.02 Right to Defend; Certain Other Procedures

(a) The Parent Indemnitees will promptly notify the Stockholder Representative, on behalf of the Company Stockholders, except any holders of Dissenting Shares (collectively, the “Stockholder Indemnitors”), of the existence of any claim, demand, cause of action or other matter (collectively, a “Claim”) involving Losses, or potential Losses, for which the Parent Indemnitees may be entitled to indemnification. The Stockholder Indemnitors shall be entitled to assume the defense of any such Claim with counsel reasonably satisfactory to the Parent Indemnitees. If the Stockholder Indemnitors do not assume the defense of any Claim, the Parent Indemnitees shall be entitled to defend the same with counsel of the Parent Indemnitees’ selection, and the Stockholder Indemnitors will provide reasonable cooperation to the Parent Indemnitees in the defense of such Claim. In either case, the Stockholder Indemnitors shall bear the reasonable expense of such counsel; provided, however, that if, within 30 days following notice of a Claim, the Parent Indemnitees fail to defend such Claim, or if, at any time after assuming defense of such Claim, the Parent Indemnitees fail to continue to defend it in good faith, then the Stockholder Representative, on behalf of the Stockholder Indemnitors, shall have the right, but not the obligation, to undertake the defense of, and to compromise or settle (exercising reasonable business judgment) such Claim on behalf, for the account, and at the risk and expense of the Stockholder Indemnitors. The Parent Indemnitees will use all commercially reasonable efforts to notify the Stockholder Representative, on behalf of all Stockholder Indemnitors, within 30 days of the date that Parent’s senior management receives actual notice of a Claim; provided, however, that the failure to give timely notice required by this Section 10.02(a) will not relieve the Stockholder Indemnitors of their obligations under this Agreement, unless such failure resulted in actual, material and irreparable detriment to the Stockholder Indemnitors with respect to the Claim (and then such relief will only apply to remedy such irreparable detriment).

(b) Notwithstanding anything in Section 10.02(a) to the contrary, if Parent Indemnitees have any Claim involving Losses, or potential Losses, for which the Parent

Indemnitees may be entitled to indemnification that does not involve liability or potential liability to any third party, the Stockholder Representative has 30 days, after having been given written notice from Parent Indemnitees describing the existence and general nature of such Claim to dispute such. If the Stockholder Representative does not send written notice to Parent Indemnitees within such 30-day period that disputes such Claim, the amount of such Claim will be conclusively deemed a liability of the Stockholder Indemnitors.

(c) Nothing in this Agreement will prevent a Parent Indemnitee from making a claim under this Agreement or the Escrow Agreement for any potential or contingent Claim, provided that it notifies the Stockholder Representative, setting forth the general basis for any such potential or contingent Claim and the estimated amount thereof to the extent then feasible, and provided further that, if a potential or contingent Claim involves potential liability to a third party, such Parent Indemnitee has reasonable grounds to believe that such Claim will be made.

(d) In the event that the Stockholder Representative objects to any Claim made by a Parent Indemnitee, the Stockholder Representative and Parent Indemnitee will attempt, in good faith, to agree on the rights of the Stockholder Indemnitors and Parent Indemnitee with respect to each such Claim. If the Stockholder Representative and Parent Indemnitee do so agree, and such agreement includes the release of some or all of the General Escrow Amount and/or Special Escrow Amount to a Parent Indemnitee, then the Stockholder Representative and Parent Indemnitee will each sign joint written instructions to the Escrow Agent so instructing the Escrow Agent, and the Escrow Agent will be entitled to rely on such written instructions and distribute such General Escrow Amount and/or Special Escrow Amount in accordance with the terms of such instructions. Subject to Section 10.03, and after the Escrow Release Date, if such agreement includes any payment to be made by the Stockholder Indemnitors to Parent Indemnitee, such Stockholder Indemnitors will immediately reimburse Parent Indemnitee for the full amount of the agreed upon payment. If no agreement can be reached after good faith negotiation, or in any event at any time fourteen days after the Stockholder Representative notifies the Parent Indemnitee of the dispute, either Parent Indemnitee or the Stockholder Representative may initiate arbitration with respect to such Claim in accordance with Section 4 of the Escrow Agreement.

(e) Except as set forth in Section 10.03 and as otherwise set forth in this Section 10.02, the provisions of this Agreement, and the Escrow Agreement will not restrict or impair in any respect the rights or remedies otherwise available to Parent Indemnitees against the Company Stockholders at law or in equity, which rights and remedies will be cumulative and in addition to any other available remedies.

Section 10.03 Limitations on Indemnification

(a) Except as set forth in the last sentence of this Section 10.03(a), neither the Company nor any of the Company Stockholders shall have any liability under this Agreement, including but not limited to under Section 10.01, unless the aggregate amount of Losses otherwise subject to the indemnification obligations thereunder exceeds $50,000 (the “Basket”), in which case Parent Indemnitees shall be entitled to indemnification for the entire amount of any such Losses up to the General Escrow Amount in the aggregate, except as may be limited by

this Section 10.03. Notwithstanding the above, the Basket shall not apply to Losses arising out of or related to any Special Coverage Claims or those matters set forth on Schedule 10.01, and Parent Indemnitees shall be entitled to indemnification for the full amount of any Losses arising out of or related to any Special Coverage Claim or those matters set forth on Schedule 10.01, subject to the limitations set forth elsewhere in this Article X.

(b) The indemnification obligations and remedies set forth in this Article X are intended to be the sole and exclusive remedy of the parties with respect to the matters for which indemnification may be sought hereunder.

(c) Losses subject to indemnification under this Article X shall be reduced by the amount of any insurance proceeds actually paid to the party entitled to indemnification in respect of such Losses.

(d) If and to the extent that any Parent Indemnitee suffers or incurs any Losses for which it is entitled to indemnification under this Agreement, except for Losses arising out of or related to Special Coverage Claims, the sole and exclusive remedy of such Parent Indemnitee shall be to seek to obtain such indemnification from the General Escrow Amount during the period up to and including the General Escrow Release Date. For Losses arising out of or related to Special Coverage Claims, the sole and exclusive remedy up until the Special Escrow Release Date for any Parent Indemnitee to seek to obtain indemnification under this Agreement shall be the Special Escrow Amount plus the General Escrow Amount. For Losses arising out of or related to Special Coverage Claims, the sole and exclusive remedy following the Special Escrow Release Date and up to and including the General Escrow Release Date for any Parent Indemnitee to seek to obtain indemnification under this Agreement shall be the General Escrow Amount.

ARTICLE XI.

THE STOCKHOLDER REPRESENTATIVE

Section 11.01 Appointment of the Stockholder Representative

(a) The adoption of this Agreement and the approval of the Merger by the Company Stockholders will constitute the approval of the Company Stockholders, except any holders of Dissenting Shares, of the designation and irrevocable appointment of Xxxxxxx Xxxxxxxx as the initial agent, attorney-in-fact and representative (the “Stockholder Representative”) of all the Company Stockholders, for purposes of this Agreement and the Escrow Agreement, and through whom all actions on behalf of the Company Stockholders relating to this Agreement and the Escrow Agreement (including those actions as are required, authorized or contemplated by the foregoing Article X with respect to indemnification and escrow) will be made or directed, and that the Stockholder Representative will be the only person authorized to take any action so required on behalf of the Company Stockholders. The Company Stockholders will be bound by any and all actions taken on their behalf by the Stockholder Representative.

(b) By signing this Agreement, Xxxxxxx Xxxxxxxx hereby accepts and acknowledges her appointment as the initial Stockholder Representative and agrees to perform the duties required of the Stockholder Representative under this Agreement and the Escrow Agreement.

Section 11.02 Replacement of Stockholder Representative

(a) The Stockholder Representative may resign at any time. Upon such resignation, the Stockholder Representative shall use reasonable efforts to appoint a new Stockholder Representative to replace such resigning Stockholder Representative with the same powers and duties as such resigning Stockholder Representative; provided that such newly appointed Stockholder Representative shall have been a Company Stockholder immediately prior to the Effective Time; and provided, further, that the resigning Stockholder Representative shall account to the Company Stockholders and the Escrow Agent for all out-of-pocket expenses incurred or reasonably expected to be incurred as a result of acting as the Stockholder Representative and shall promptly transfer any remaining portion of the Stockholder Representative Expense Allocation to the Escrow Agent for prompt disbursement to the replacement Stockholder Representative when appointed.

(b) If the Stockholder Representative or any successor shall die, or become unable to act as the Stockholder Representative or resign and is unable to appoint a Company Stockholder who is willing to serve, a replacement shall promptly be appointed by a written instrument signed by Stockholders holding a majority of the Company Capital Stock, on an as-converted to common-stock basis, provided that such newly appointed Stockholder Representative shall have been a Company Stockholder immediately prior to the Effective Time.

(c) The appointment of the Stockholder Representative is otherwise irrevocable by the Company Stockholders, except that a successor to the Stockholder Representative may be appointed by a written instrument signed by Stockholders holding a majority of the Company Capital Stock, on an as-converted to common-stock basis.

(d) Upon such appointment of any such successor to the Stockholder Representative, such successor will immediately give written notice of his or her appointment to Parent and the Escrow Agent (along with a certified copy of the written instrument showing such successor’s appointment) and thereafter (i) such successor will be deemed to be the Stockholder Representative for purposes of this Agreement and the Escrow Agreement; and (ii) all of the terms, provisions and obligations of this Agreement and the Escrow Agreement will automatically (without any action on the part of such successor or further notice to any party) be binding upon and inure to the benefit of such successor. The choice of a successor Stockholder Representative appointed in any manner permitted above is final and binding upon all of the Company Stockholders.

Section 11.03 Communications; Notices

Parent and the Escrow Agent are entitled to rely upon any communication or writings given or executed by the Stockholder Representative as binding all of the Company Stockholders

and their successors, assigns, heirs, legal representatives, affiliates and spouses, and Parent and the Escrow Agent will not be bound or put on notice by any communications from any Company stockholder or other person (other than the Stockholder Representative acting as such). All notices to be sent to the Company Stockholders pursuant to this Agreement or the Escrow Agreement will be addressed to the Stockholder Representative. Any notice so sent will be deemed notice to all of the Company Stockholders. The adoption of this Agreement and the approval of the Merger by the Company Stockholders will constitute the authorization of the Company Stockholders, except any holders of Dissenting Shares, to the Stockholder Representative accepting notice on behalf of the Company Stockholders pursuant to this Section 11.03.

Section 11.04 Agent for Service of Process

The Stockholder Representative is hereby irrevocably appointed as the lawful agent of the Company Stockholders and their successors, assigns, heirs, legal representatives, affiliates and spouses to receive and forward on their behalf service of all necessary processes in any action, suit, or proceeding arising under or in any way relating to this Agreement, the Escrow Agreement or any related document, any of the transactions contemplated hereby or thereby or any of the subject matter hereof and that may be brought against any of the Company Stockholders or any of their successors, assigns, heirs, legal representatives, affiliates or spouses in any court. Such service of process or notice received by the Stockholder Representative will have the same force and effect as if served upon the Company Stockholders or their respective successors, assigns, heirs, legal representative, affiliates or spouses.

Section 11.05 Power of Attorney

The adoption of this Agreement and the approval of the Merger by the Company Stockholders will constitute the approval of the Company Stockholders, except any holders of Dissenting Shares, of the appointment of the Stockholder Representative as the true and lawful attorney-in-fact of the Company Stockholders and their successors, assigns, heirs, legal representatives, affiliates or spouses, with full power in such stockholders’ (or successors’, assigns’, heirs’, legal representatives’, Affiliates’ or spouses’) names and on such stockholders’ (or the successors’, assigns’, heirs’, legal representatives’, Affiliates’ or spouses’) behalf to act according to the terms of this Agreement and the Escrow Agreement in the absolute discretion of the Stockholder Representative, and in general to do all things and to perform all acts, including executing and delivering the Escrow Agreement and all other agreements, certificates, receipts, instructions and other instruments contemplated by or deemed advisable in connection with this Agreement or the Escrow Agreement. This power of attorney and all authority hereby conferred is granted subject to the interest of the other stockholders of the Company and in consideration of the mutual covenants and agreements made herein, and is irrevocable and will not be terminated by any act of any Company Stockholder or by operation of law, whether by death or any other event.

Section 11.06 Limitation on the Stockholder Representative’s Liability, etc.

The Stockholder Representative will not be liable to the other Company Stockholders for any action taken, suffered or omitted by the Stockholder Representative in good faith and reasonably believed by the Stockholder Representative to be authorized or within the discretion of the rights or powers conferred upon the Stockholder Representative by this Agreement, or the Escrow Agreement, except to the extent of the Stockholder Representative’s own gross negligence, recklessness or willful misconduct. The Stockholder Representative may consult with competent and responsible legal counsel selected by him, and he will not be liable for any action taken or omitted by him in good faith in accordance with the advice of such counsel. The adoption of this Agreement and the approval of the Merger by the Company Stockholders will constitute the agreement of the Company Stockholders, except any holders of Dissenting Shares (and such Company Stockholders’ successors, assigns, heirs, legal representatives, affiliates or spouses) to severally and not jointly indemnify, defend and hold the Stockholder Representative harmless as to any and all liability incurred and amounts paid, in excess of the Stockholder Representative Expense Allocation, by the Stockholder Representative to the Escrow Agent under Section 8 of the Escrow Agreement as a result of any action taken by a Company Stockholder against the Escrow Agent.

ARTICLE XII.

GENERAL PROVISIONS

Section 12.01 Survival

The representations, warranties, covenants and agreements of the parties contained in or made pursuant to this Agreement (including the Schedules and Exhibits incorporated into this Agreement) will survive the consummation of the transactions contemplated by this Agreement (subject, in the case of such representation and warranties of the Company, to the time limits set forth in the following sentence), and will in no way be affected by any investigation of the subject matter thereof made by or on behalf of any Parent Indemnitees (as defined in Section 10.01). Claims for indemnification by Parent Indemnitees with respect to (i) all of the representations and warranties of the Company, other than all of the representations and warranties contained in Sections 3.01, 3.02 and 4.03 and all of the representations and warranties as to taxes and tax matters (including all of the representations and warranties contained in Section 4.20), may be made at any time on or prior to the date that is eighteen (18) months from the date of the Closing; (ii) all of the representations and warranties of the Company contained in Sections 3.01, 3.02 and 4.03 may be made at any time, without limitation; and (iii) all of the representations and warranties of the Company as to environmental matters, taxes and tax matters (including all the representations and warranties contained in Section 4.20) may be made at any time prior to 30 days after the expiration of the statute of limitation that applies or would apply to the subject matter of any claim by a third person for which indemnification is sought. The waiver of any condition to the consummation of this Agreement by Parent or Merger Sub will not affect the Parent Indemnitees’ rights to indemnification, payment of Losses or other remedies based on such representations, warranties, covenants and agreements. Nothing in this Section 12.01 will affect the obligations and indemnities of the parties with respect to the covenants and agreements that are contained in this Agreement (including the Schedules and

Exhibits that are incorporated into this Agreement) that are permitted or required to be performed, in whole or in part, after the Closing.

Section 12.02 Notices

All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by telecopy or facsimile, by registered or certified mail (postage prepaid, return receipt requested) or by a nationally recognized courier service to the respective parties at following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 12.02).

(a) If to Parent, Merger Sub or, after the Effective Time, the Company

Embarcadero Technologies, Inc.

000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx

Xxx Xxxxxxxxx, XX 00000

Telephone: (000) 000-0000

Telecopy: (000) 000-0000

Attention: Xxxxxxx Xxxx, President and Chief Executive Officer

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

Xxxxxx Xxxxxx LLP

0000 Xx Xxxxx Xxxxxxx Xxxxx, 0xx Xxxxx

Xxx Xxxxx, XX 00000-0000

Telephone: (000) 000-0000

Telecopy: (000) 000-0000

Attention: Xxxxxxx Xxxxxxxx

(b) If to the Company:

SHC Ambeo Acquisition Corp.

0000 Xxxxx Xxxxx Xxxx., Xxxxx 000

Xxxxxxxx Xxxxxxx, XX 00000

Telephone: (000) 000-0000

Telecopy: (000) 000-0000

Attention: President

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

Holland & Xxxx LLP

000 00xx Xxxxxx, Xxxxx 0000

Xxxxxx, Xxxxxxxx 00000

Telephone: 000-000-0000

Telecopy: 000-000-0000

Attention: Xxxx X. Xxxxxx

Xxxxxxx Xxxxxxxx

00 Xxxxxxxxxx Xxxxx

Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000

Telephone: 000-000-0000

Section 12.03 Severability

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Merger is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner to the fullest extent permitted by applicable Law in order that the Merger may be consummated as originally contemplated to the fullest extent possible.

Section 12.04 Assignment; Binding Effect; Benefit

Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties hereto; provided, however, that Parent may assign its rights, interests and obligations hereunder to any subsidiary of Parent or any successor entity (which assignment shall not relieve Parent of any of its obligations hereunder). Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.

Section 12.05 Incorporation of Schedules and Exhibits

The Company Disclosure Schedule and all Schedules and Exhibits attached hereto and referred to herein are hereby incorporated herein and made a part of this Agreement for all purposes as if fully set forth herein.

Section 12.06 Governing Law

This agreement shall be governed by, and construed and enforced in accordance with, the laws of the state of California (without reference to conflicts of law principles).

Section 12.07 Arbitration

Any claim, dispute or controversy of any nature arising out of or in connection with this Agreement, or the negotiation, execution, delivery, performance, nonperformance or breach thereof (collectively, a “Dispute”) shall be resolved by arbitration before a single arbitrator administered by the American Arbitration Association (the “AAA”) in accordance with its then applicable Commercial Arbitration Rules (the “Rules”), and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be selected by the parties from a list provided by the AAA in accordance with the Rules. Any arbitration shall be held in San Francisco, California.

Section 12.08 Headings

The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 12.09 Counterparts

This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

Section 12.10 Entire Agreement

This Agreement (including the Company Disclosure Schedule and other Schedules) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. No addition to or modification of any provision of this Agreement shall be binding upon any party hereto unless made in writing and signed by all parties hereto.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.


PARENT

Embarcadero Technologies, Inc.

By:		/s/ Xxxxxxx Xxxx
Name:		Xxxxxxx Xxxx
Title:		President and Chief Executive Officer


MERGER SUB

DSEC Merger Company

By:		/s/ Xxxxxxx Xxxx
Name:		Xxxxxxx Xxxx
Title:		President


COMPANY

SHC Ambeo Acquisition Corp.

By:		/s/ Xxxxx X. Xxxx
Name:		Xxxxx X. Xxxx
Title:		Chief Operating Officer

STOCKHOLDER REPRESENTATIVE

/s/ Xxxxxxx Xxxxxxxx

Xxxxxxx Xxxxxxxx

SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION by and among EMBARCADERO TECHNOLOGIES, INC. DSEC MERGER COMPANY, SHC AMBEO ACQUISITION CORP. and Valerie Anderson, as Stockholder Representative Dated as of October 13, 2005

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