AGREEMENT AND PLAN OF MERGER

 

 

1.15        Principal Shareholder Election; Buyer Elections.

(a)           In the event the Closing Average Price on the Nasdaq Capital Market for the regular trading sessions determined on and including the trading day immediately prior to the scheduled Closing date (the “Election Average Price”) is less than $3.30, then, subject to Buyer’s rights under subsection (b) below, the Principal Shareholder may, by written notice given to the Buyer given after 4:00 p.m. on such trading day immediately preceding the scheduled Closing Date and at or before 10:00 a.m., Boston time on the scheduled Closing date, elect in his sole discretion not to proceed with the Closing.  If the Buyer does not exercise its election right under subsection (b) below following receipt of such notice from the Principal Shareholder, then this Agreement shall be deemed to be terminated and the provisions of Section 8.2 hereof shall apply.

(b)           Notwithstanding the Principal Shareholder’s election under subsection (a) above, in the event the Election Average Price is less than $3.30 but greater than or equal to $3.00, the Buyer may, by written notice to the Principal Shareholder at or before 2:00 p.m., Boston time, on the scheduled Closing date, elect to cause the Closing to occur, in which case all parties shall proceed with the Closing; provided that Buyer, as a condition to its election,

(i)            shall pay as merger consideration to the holders of Company Common Stock the amount of cash and principal amount of Notes (including amounts held in the Escrow Fund) and Adjusted Number of Shares that would have been payable under Section 1.9 hereof if the Last Stock Price were $3.30, and

(ii)           shall pay as additional merger consideration to the holders of Company Common Stock an additional number of shares of Buyer Common Stock in the aggregate equal to:

the difference of (I) (i)  the aggregate number of shares of Buyer Common Stock that would have been payable to the holders of Company Common Stock under Section 1.9 hereof if the Last Stock Price were $3.30, (ii) multiplied by $3.30, minus (II) the aggregate number of shares of Buyer Common Stock that would have been payable to the holders of Company Common Stock under Section 1.9 hereof (disregarding this Section 1.15) at the actual Last Stock Price, multiplied by the actual Last Stock Price, and then (II) dividing that difference by the Last Stock Price, and rounding up to the nearest whole share.

If the Election Average Price is less than $3.00, then the adjustment provided for in this subsection 1.15(b) may only occur with the written consent of the Buyer and the Principal Shareholder, each acting in such party’s sole discretion.  In the event either such consent is not provided, then this Agreement shall be deemed to be terminated and the provisions of Section 8.2 hereof shall apply.

(c)           Without limiting the parties’ rights and obligations under subsections (a) and (b) above, if the Election Average Price is less than $2.00 or in the event the Buyer would be required to issue more than an aggregate 750,000 shares (including shares issuable upon substituted options) hereunder, then the Buyer may, by written notice given to the Principal Shareholder at or before 2:00 p.m., Boston time, on the scheduled Closing date, elect in its sole

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discretion not to proceed with the Closing.  In such event, this Agreement shall be deemed to be terminated, and the provisions of Section 8.2 hereof shall apply.

ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE PRINCIPAL SHAREHOLDER

The Company and the Principal Shareholder jointly and severally represent and warrant to the Buyer that each of the statements contained in this ARTICLE 2 is true and correct as of the date hereof.  For the avoidance of doubt, references in this Agreement to phrases such as “the transactions contemplated hereby,” “the transactions contemplated by this Agreement,” “transactions that are the subject of this Agreement,” “the performance of this Agreement” and other similar phrases shall include, without limitation, both of the Mergers.

2.1          Organization, Power and Standing.   The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, with full corporate power and authority to own, lease and operate its properties and to carry on its business as such business is now conducted and presently proposed to be conducted.  The copies of the articles of organization and by-laws of the Company, each as amended to date (the “ Company Organizational Documents ”), that have been delivered to the Buyer by the Company are complete and correct copies thereof.  The Company has delivered or made available to the Buyer complete and correct copies of the minutes of the meetings (or the written consents in lieu of meetings) of the Company’s Board of Directors (including any committees thereof) and stockholders since inception.  The minute books and stock records of the Company contain complete and correct records of all material proceedings and actions taken at all meetings of, or effected by written consent by, the Board of Directors and stockholders of the Company and the stock records of the Company contain correct and complete records of all original issuances and subsequent transfers, repurchases or cancellations of the Company’s capital stock.

2.2          Power and Authority.   The Company has the corporate power and authority and has taken all action required on its part to permit it to execute and deliver and carry out the terms of this Agreement and the other agreements, instruments and documents of the Company contemplated hereby.  Each of this Agreement and the Merger has been duly and validly approved by the Company’s Board of Directors and stockholders.

2.3          Validity and Enforceability.   This Agreement constitutes, and each other agreement, instrument and document of the Company contemplated hereby will be when executed and delivered by the Company, the valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject, however, to applicable bankruptcy, insolvency and other similar laws affecting the rights and remedies of creditors generally and to general equitable principles.

2.4          Subsidiaries.   The Company has no subsidiaries.  Except as set forth on Schedule 2.4 , the Company does not own or have the right to acquire any equity interest in any

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corporation, limited liability company, partnership, joint venture, trust or other business organization.

2.5          Foreign Qualifications.   Schedule 2.5 sets forth a complete and accurate list of each jurisdiction in which the Company is qualified to do business as a foreign entity or in which the character of the properties owned or leased or the nature of the activities conducted by such entity makes such qualification or licensing necessary, except for any jurisdiction(s) in which the failure so to qualify would not have a Company Material Adverse Effect.

As used herein, “ Company Material Adverse Effect ” shall mean an event, condition, occurrence or circumstance that is reasonably likely to have a material adverse effect on the assets, liabilities, properties, condition (financial or otherwise), business, results of operations or prospects of the Company; provided , however , that in no event shall any of the following be or be taken into account in the determination of whether a Company Material Adverse Effect has occurred: (a) any change resulting from conditions generally affecting any of the industries in which the Company operates or from changes in general business or economic conditions if, in each case, they do not have a disproportionate adverse effect on the Company; or (b) any change resulting from the announcement or pendancy of the transactions contemplated by this Agreement.

2.6          Capitalization.

(a)           The authorized capital stock of Company consists of (i) 10,030,108 shares of capital stock consisting of 5,900,000 shares of Class A Common Stock, of which, as the date hereof, 5,900,000 shares are issued and outstanding, and (ii) 4,130,108 shares of Class B Common Stock, none of which, as of the date hereof, are issued or outstanding.  As of the date hereof, 782,000 shares of Class B Common Stock are reserved for issuance under the 2000 Stock Plan and 3,348,108 shares of Class B Common Stock are reserved for issuance under the 2005 Stock Plan.  Company Options for 494,411 shares of Class B Common Stock have been granted and remain outstanding under the 2000 Stock Plan and Company Options for 280,000 shares of Class B Common Stock have been granted and remain outstanding under the 2005 Stock Plan.  No shares of Class B Common Stock are outstanding as a result of the exercise of Company Options.  The Company has delivered to the Buyer or its counsel true, correct and complete copies of the Stock Plans, as well as of the agreements granting Company Options thereunder.

(b)           Schedule 2.6 sets forth a complete and accurate list of all outstanding shares of capital stock of the Company (the “ Company Shares ”) and the record holders thereof.  All of the Company Shares are duly authorized, validly issued, fully paid and nonassessable.  Except as set forth on Schedule 2.6 , which contains a correct and complete list of each security and record holder and beneficial owner thereof, (i) the Company does not have any other capital stock, equity securities or securities containing any equity features authorized, issued or outstanding, and there are no agreements, options, warrants or other rights existing or outstanding that provide for the sale or issuance of any of the foregoing by the Company; (ii) there are no agreements, written or oral, relating to the acquisition, disposition, voting or registration under applicable securities laws of any security of the Company; (iii) no individual, corporation, partnership, trust, limited liability company, association or other entity (each a “ Person ”) has any right of first offer, right of first refusal, preemptive or co-sale right in

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connection with any offer, sale, resale, transfer or issuance of any security of the Company; and (iv) the Company has not issued any outstanding debt securities or treasury stock.  Except as set forth on Schedule 2.6 , no Person has any equity, rights to equity or claims or causes of action relating to equity with respect to the Company.

(c)           Except as set forth on Schedule 2.6 , none of the shares of the Company’s capital stock are subject to any preemptive rights, or similar rights under the MBCA, the Company Organizational Documents, or any agreement, document or instrument.  Except for the shares of Class B Common Stock issuable upon the exercise of Company Options (all as set forth on Schedule 2.6 ), there are no options, warrants, calls, conversion rights, commitments, agreements, contracts, understandings, restrictions, arrangements or rights of any character to which Company or the Principal Shareholder is a party or by which the Company or the Principal Shareholder may be bound obligating the Company or the Principal Shareholder to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of Company, or obligating Company to grant, extend or enter into any such ownership interest, equity-like award, option, warrant, call, conversion right, commitment, agreement, contract, understanding, restriction, arrangement or right.  The Company does not have outstanding any bonds, debentures, notes or other indebtedness, the holders of which (i) have the right to vote (or are convertible or exercisable into securities having the right to vote) with holders of the Company’s capital stock on any matter or (ii) are or will become entitled to receive any payment as a result of the execution of this Agreement or the completion of the transactions contemplated hereby.  Schedule 2.6 sets forth and identifies each Company Option the vesting of which shall accelerate upon the Closing.  Except as set forth on Schedule 2.6 , there is no agreement or right allowing for the repurchase or redemption of any capital stock or convertible securities of the Company, and the Company has not repurchased any of its capital stock.  The Company does not have outstanding any restricted stock, restricted stock units, stock appreciation rights, stock performance awards, dividend equivalents, or other stock-based or equity-linked securities of a similar nature.  The Company is not party to, nor to its knowledge or to the knowledge of the Principal Shareholder is any stockholder of the Company a party to, any voting agreement, voting trust, or similar agreement or arrangement relating to any class or series of its capital stock, or any agreement or arrangement providing for registration rights with respect to any capital stock or other securities of the Company.  There are no accrued and unpaid dividends with respect to any outstanding shares of the Company’s capital stock.  No Person has the right to acquire or a valid claim to any equity, ownership interest, equity-like award or other security of the Company, or any claim or cause of action relating thereto.  The Company does not own or hold the right to acquire any shares of capital stock or any other security or interest in any other Person.

(d)           All of the issued and outstanding securities of the Company have been offered, issued, and sold by the Company in compliance with applicable federal and state securities laws.

(e)           To the Company’s knowledge and the knowledge of the Principal Shareholder, no stockholder of the Company has granted any option or other right to purchase any securities of the Company from such stockholder.

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2.7          Financial Statements.

(a)           The Company has delivered to the Buyer (a) the unaudited balance sheet of the Company as of December 31, 2004 and December 31, 2005 and statement of income of the Company as of each of the years then ended, together with the notes thereto; and (b) the unaudited balance sheet of the Company as of October 31, 2006 (the “ Balance Sheet ”) and the related statement of income of the Company for the ten-month period then ended, together with the notes thereto (the “ Balance Sheet Date ”) (such financial statements delivered pursuant to clauses (a) and (b) above, collectively, the “ Financial Statements ”).  The Financial Statements and the notes thereto, if any, were prepared in good faith and fairly present, in all material respects, the financial condition and results of operations of the Company for the periods referred to therein, except that no representation is given as to the conformity of the Financial Statements to GAAP.  The Financial Statements were prepared in accordance with and consistent with the books and records of the Company and were prepared on a modified cash basis, in conformity with the Company’s past practices consistently applied throughout the periods indicated (except as otherwise stated therein or in the case of interim unaudited financial statements, subject to year-end adjustments not material in amount or significance).  Schedule 2.7 lists, and the Company and the Principal Shareholder have identified and delivered (or caused to be delivered) to the Buyer, complete and accurate copies of the documentation creating or governing all securitization transactions and all “off-balance sheet arrangements” effected by the Company since January 1, 2004.  “ Affiliate ” shall mean and Person directly or indirectly controlling, controlled by or under common control with that Person where “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by contract or otherwise.

(b)           Prior to the Closing, the Company shall have reviewed with the Buyer the following financial statements to be prepared in accordance with generally accepted accounting principles in effect in the United States (“ GAAP ”):

(i)            the audited balance sheets of the Company as of December 31, 2004 and December 31, 2005 and the related statements of income, stockholders’ equity and cash flows of the Company for each of the fiscal years then ended, together with the notes thereto; and

(ii)           the unaudited balance sheets of the Company as of September 30, 2005 and September 30, 2006 and the related statements of income, stockholders’ equity and cash flows of the Company for each of the ten-month periods then ended, together with the notes thereto (such financial statements, the “ GAAP Financial Statements ”).

As of the Closing, the GAAP Financial Statements shall have been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except that the unaudited financial statements contained therein shall have been prepared in accordance with the rules and regulations of the SEC regarding interim financial reporting and accordingly may not include all of the footnotes required by GAAP for complete financial statements) and shall fairly present the financial condition, results of operation and cash flows of the Company as of the respective dates and for the periods referred to therein and shall be consistent with the books and records of the Company.

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2.8          Absence of Certain Changes.   Since January 1, 2006, except as set forth on Schedule 2.8 :

(a)           there has been no Company Material Adverse Effect;

(b)           the Company has conducted its business in all material respects in the ordinary course consistent with past practice;

(c)           no lien, security interest, mortgage, restriction or encumbrance (collectively, “ Liens ”) has been placed upon any of the Company’s assets, other than Permitted Liens;

(d)           there has been no damage, destruction or casualty loss (other than those covered by insurance) that individually or in the aggregate exceeds $50,000;

(e)           the Company has not lost the employment, services or benefits of any key employee or key consultant; and

(f)            the Company has not:

(i)            acquired or disposed of (by sale, assignment or transfer) any assets, including Intellectual Property, for consideration in excess of $50,000;

(ii)           borrowed or guaranteed any amount that individually or in the aggregate exceeds $50,000;

(iii)          incurred or become subject to any material liabilities, other than liabilities incurred in the ordinary course of business consistent with past practice;

(iv)          made any material investment in, or any material loan to, any other Person;

(v)           declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;

(vi)          made any material capital expenditures or commitments therefor, except in the ordinary course of business;

(vii)         changed any material accounting methods, policies, principles, practices or procedures;

(viii)        paid or satisfied any liabilities other than in the ordinary course of business consistent with past practice and other than prepayments of Indebtedness;

(ix)           made or rescinded any material Tax election;

(x)            issued any shares of the Company’s capital stock or securities convertible into shares of the Company’s capital stock (including grants or other issuances of

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options, warrants or other rights to acquire capital stock of Company) other than pursuant to Company Options set forth on Schedule 2.6 ;

(xi)           (A) granted severance or termination pay (unless required by law) to any director, officer, or employee of Company; (B) entered into any employment, deferred compensation, or other similar agreement (or any material amendment to any such existing agreement) with any director, officer, or employee of Company; (C) increased the benefits payable under any existing severance or termination pay policies or employment agreements; (D) increased the compensation, bonus, or other benefits payable to directors, officers, or employees of Company, in each case other than those required by written contractual agreements; (E) amended or changed the exercise price of any outstanding warrants or other convertible securities; or (F) accelerated, or amended or changed the period of exercisability, vesting, or exercise price of any options, restricted stock, stock bonus, or other awards granted under the Stock Plans (including any discretionary acceleration of the exercise periods by Company’s board of directors or a committee overseeing the Stock Plans as permitted under such plans) or authorized any cash payments in exchange for any options, warrants, restricted stock, stock bonus, or other awards granted under any of such plans; or

(xii)          authorized, agreed or otherwise become committed to do any of the foregoing.

As used herein, “ Permitted Liens ” means (a) such imperfections of title, easements, encumbrances or restrictions that do not materially impair the value or current use of the Company’s assets in a manner which would have a Company Material Adverse Effect; (b) materialmen’s, mechanics’, carriers’, workmen’s, warehousemen’s, repairmen’s and other like Liens arising in the ordinary course of business that secure obligations reflected as liabilities on the Company’s books and records; (c) Liens for property Taxes not yet due and payable; (d) purchase money Liens incurred in the ordinary course of business; (e) Liens securing any indebtedness of the Company; and (f) the Liens listed on Schedule 2.8 .

2.9          Taxes.

(a)           For purposes of this Agreement, the following definitions shall apply:

(i)            “ Tax ” or “ Taxes ” means (a) all taxes, charges, fees, levies, penalties, additions or other assessments imposed by any foreign, federal, state or local taxing authority, including, but not limited to, income, excise, property, sales, transfer, franchise, payroll, withholding, value added, social security or other taxes, including any interest, penalties or additions attributable thereto; (b) any amounts described in clause (a) above owed by another party for which a taxpayer is liable pursuant to any statute or regulation imposing joint or several liability on taxpayers filing consolidated, combined, unitary or other similar Tax Returns; and (c) any amounts described in clause (a) or (b) above for which a taxpayer is liable pursuant to a tax indemnification agreement, tax sharing agreement, tax allocation agreement or other similar agreement.

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(ii)           “ Tax Returns ” means all reports, estimates, declarations of estimated Tax, information statements and returns relating to Taxes and any schedules attached to or amendments of any of the foregoing.

(iii)          “ Pre-Closing Taxes ” means any Taxes of the Company attributable to any taxable period ending on or before the Closing Date and, with respect to any taxable period that includes but does not end on the Closing Date, the portion of such period that ends on and includes the Closing Date.

(b)           The Buyer has been provided with true and correct copies of the Tax Returns of the Company for tax years 2002, 2003, 2004 and 2005, including any amendments thereto.  All Tax Returns for open periods are true, correct and complete in all material respects.  The Company has paid all Taxes when due regardless of whether shown on such Tax Returns.  All Tax Returns required to be filed by or on behalf of the Company have been duly filed on a timely basis and all Tax Returns required to be filed by the Principal Shareholder in respect of income, assets or other items relating to the Company have been filed on a timely basis.  The Company has no currently effective waiver that would have the effect of extending any applicable statute of limitations in respect of any of its Tax liabilities.  There is no unpaid assessment against the Company of any material Taxes for any fiscal period or any pending or threatened tax examination or audit by any foreign, federal, state or local taxing authority.  All Taxes that the Company is required by law to withhold or to collect for payment have been duly withheld and collected and, to the extent required, paid to the proper governmental entity.  There are no material Tax Liens pending or, to the knowledge of the Company, threatened against the Company or its respective assets or property, other than Permitted Liens.  There are no outstanding Tax sharing agreements among the Company and any other Person.  The charges, accruals and reserves with respect to Taxes of the Company that are set forth on Schedule 2.9 are adequate (determined in accordance with the Company’s past practices) and are at least equal to the Company’s liabilities for Taxes.  Neither the Company nor any of the Company’s stockholders is a foreign person within the meaning of Section 1445 of the Code.

(c)           From the date of its organization through the Closing, the Company has had and will continue to have in effect a valid election to be taxable as an S corporation for federal and applicable state law purposes.

(d)           Except as set forth on Schedule 2.9 , neither the Company nor any subsidiary thereof is a party to any joint venture, partnership or other Contract that could be treated as a partnership for federal income tax purposes.

(e)           Neither the Company nor any subsidiary thereof has filed any consent under Section 341(f) of the Code or agreed to have Section 341(f) of the Code apply to any disposition of any Section (f) asset (as defined in Section 341(f)(2) of the Code).

(f)            Neither the Company nor any subsidiary thereof has been, at any time, a “United States Real Property Holding Corporation” within the meaning of Section 897(c)(2) of the Code.

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(g)           Neither the Company nor any subsidiary thereof has constituted either a “distributing corporation” or a “controlled corporation” in a distribution intended to qualify for tax-free treatment under Section 355 of the Code (i) in the two (2) years prior to the date of this Agreement or (ii) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in connection with the transactions contemplated hereby.

(h)           To the Company’s knowledge, neither the Company nor any subsidiary thereof has engaged in an transaction that is in the same or substantially similar to one of the types of transactions that the Internal Revenue Service has determined to be a Tax avoidance transaction and identified by notice, regulation or other form of published guidance as a listed transaction, as set forth in Treasury Regulation Section 1.6011-4(b)(2).

(i)            Neither the Company nor any subsidiary thereof is required to include any income or gain or exclude any deduction or loss from taxable income as a result of any change in method of accounting under Section 481(c) of the Code, closing agreement under Section 7121 of the Code, deferred intercompany gain or excess loss under Treasury Regulations under Section 1502 of the Code (or, in each case, under any similar provision of applicable law).

(j)            There is no Contract to which the Company or any subsidiary thereof is a party, including the provisions of this Agreement, covering any employee that, individually or collectively, 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.

(k)           Neither the Company nor any subsidiary thereof is a party to any nonqualified deferred compensation plan that fails to meet the requirements of Section 409A(a)(2), (3) and (4) of the Code or is not operated in accordance with such requirements.

(l)            All outstanding Company Options qualify as incentive stock options within the meaning of Section 422 of the Code.

2.10        Personal Property.   The Company has good title to or a valid leasehold, license or other similar interest, free and clear of all Liens, except for Permitted Liens, in its material personal property, inventory, receivables, furniture, machinery and equipment, tangible or otherwise, reflected on the Balance Sheet or used in the Company’s business as of the Balance Sheet Date even if not reflected thereon.  The material equipment and other tangible operating assets of the Company are in adequate operating condition and repair for the uses to which they are currently being put, and none of such assets is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost.  Schedule 2.10 sets forth all of the Company’s personal property or fixed assets having a value of at least $1,500, noting, in each case, whether such asset is owned or leased and, if leased, the applicable lessor and the remaining lease payments.

2.11        Real Property.

(a)           The Company does not own any real property.

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(b)           Schedule 2.11(b) describes each interest in real property leased by the Company, including the lessor of such leased property, the monthly rent due on such lease, the expiration date of such lease, and any renewal rights thereunder, and identifies each lease or any other arrangement under which such property is leased, including amendments, supplements and modifications thereto (each, a “ Lease ” and the property covered thereby, the “ Leased Real Property ”).  The Company enjoys peaceful and quiet possession of its Leased Real Property and has not received any written notice from any landlord asserting the existence of a material default under any such Lease or been informed in writing that the lessor under any such Lease has taken action or, to the knowledge of the Company, threatened to terminate the Lease before the expiration date specified in the Lease.  The Leases are in full force and effect, and the Company holds a valid and existing leasehold interest under each such Lease.  The Company has delivered or made available to the Buyer complete and accurate copies of each of the Leases.  Neither the Company, nor, to the Company’s knowledge, any other party thereto, is in breach or default of any payment obligation under, or is otherwise in breach or default in any material respect under, any of such Leases.

(c)           The Leased Real Property constitutes all of the real property (or interests in real property) currently used in the conduct of the business of the Company.

2.12        Intellectual Property.

(a)           As used herein “ Intellectual Property ” means all, and all rights in or associated with, (i) patents, patent applications, patent disclosures and similar rights in inventions; (ii) trademarks, service marks, trade dress, trade names and corporate names (in each case, whether registered or unregistered) and registrations and applications for registration thereof, together, to the extent applicable, with all of the goodwill associated therewith; (iii) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof; (iv) computer software data, databases and documentation thereof; (v) trade secrets and other confidential information (including, without limitation, ideas, formulae, compositions, know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information), and (vi) domain names.  As used herein, “ Company Intellectual Property ” means Intellectual Property owned or used by the Company.

(b)           Schedule 2.12 hereto contains a list of all material Company Intellectual Property included in clauses (i), (ii), (iii), (iv) (excluding “off-the-shelf” or “shrink wrap” software programs or products) and (vi) of the definition of Intellectual Property that the Company owns and has registered with a governmental or other appropriate authority, or with respect to which the Company has filed an application for such a registration, except for any Company Intellectual Property that has been abandoned by the Company in the ordinary course of business.  Schedule 2.12 also contains a list of all of the Company’s current products and any products in development and expected to be ready for release to customers in the next three (3) months.  Schedule 2.12 also contains a list of all material licenses granted (x) by the Company to any third party with respect to any owned Company Intellectual Property and (y) by any third party to the Company with respect to any Company Intellectual Property (excluding “off-the-

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shelf” or “shrink wrap” programs or products).  All material Company Intellectual Property is currently in compliance with all formal legal requirements and is valid and subsisting.

(c)           Except as set forth on Schedule 2.12 , (i) the Company has not received any written notices of infringement or misappropriation from any third party with respect to any third party Intellectual Property; (ii) the Company is not violating any Intellectual Property of any other person; and (iii) to the Company’s knowledge, no third party is infringing on any Company Intellectual Property owned by the Company.

(d)           Except as set forth on Schedule 2.12 , the Company has not embedded any open source, copyleft or community source code in any of its products generally available or in development, including but not limited to any libraries or code licensed under any version of the General Public License, Lesser General Public License or any similar license arrangement.

(e)           All Intellectual Property that is Company Intellectual Property owned by Company was created solely by either (i) employees of the Company or (ii) by third parties, and in each case such employee or third party has validly and irrevocably assigned all of their rights, including Intellectual Property rights therein, to the Company, and no third party owns or has any rights to any Intellectual Property that is Company Intellectual Property owned by Company.  The Company has in its records and has made available to the Buyer true and correct copies of the forms for such assignments.

2.13        Computer Programs.

(a)           Definition of Computer Programs.  “ Computer Program(s) ” means (i) any and all computer programs (consisting of sets of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result) and portions thereof, and (ii) all associated data and compilations of data, regardless of their form or embodiment.  “ Computer Programs ” shall include, without limitation, all source code, object code, natural language code, all versions, all screen displays and designs, all component modules, all descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, and all documentation, including without limitation user manuals and training materials, relating to any of the foregoing.

(b)           List of Computer Programs .  Schedule 2.13 includes a list and brief description of the Computer Programs (other than generally available commercial off-the-shelf Computer Programs used internally by the Company in accordance with the applicable license agreement) that are in whole or in part owned, licensed, distributed, copied, modified, displayed, sublicensed or otherwise used by the Company in connection with the operation of its business as now conducted or as now proposed to be conducted in its written business documents (such Computer Programs being referred to herein as the “ Company Software ”), identifying with respect to each such Computer Program whether it is owned or licensed by the Company. 

(c)           Software Contracts.   Each and every Computer Program included in whole or in part in the Company Software is either: (i) owned by the Company; (ii) currently in the public domain or otherwise available for use, modification and distribution by the Company without a license from or the approval or consent of any third party; or (iii) licensed or otherwise

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used by the Company pursuant to the terms of a valid, binding written agreement (“ Software Contract ”).  Schedule 2.13 identifies all Software Contracts and classifies each such Software Contract under one or more of the following categories: (A) license to use third party software; (B) development contract, work-for-hire agreement, or consulting agreement; (C) distributor, dealer or value-added reseller agreement; (D) license or sublicense to a third party (including agreements with end-users); (E) maintenance, support or enhancement agreement; or (F) other.  No Software Contract creates, or purports to create, obligations or immunities with respect to any Intellectual Property Rights of the Company, including but not limited to, obligations requiring the disclosure or distribution of all or a portion of the source code for any Company Software.

(d)           At the time of shipment or downloading of Company Software to Company customers or licensees, no portion of Company Software:

(i)            sold or licensed by the Company directly or indirectly to end users contained, on the date of shipment by the Company;

(ii)           currently for sale or license directly or indirectly to end users contains; and,

(iii)          other than that specified in the preceding (i) and (ii) in this sentence, to the knowledge of the Company contains;

any software routines or hardware components designed to permit unauthorized access; to disable or erase software, hardware or data; or to perform any other similar actions.  The Company uses industry standard methods to detect and prevent viruses and other code covered by the preceding sentence (and subsequently to correct or remove such viruses) that may be present in Company Software at the time of shipment or downloading of Company Software to Company customers or licensees.  Company Software does not include or install any spyware, adware, or other similar software which monitors the use of any remote computer without the knowledge and express consent of the users of such remote computer at the time of shipment or downloading of Company Software to Company customers or licensees.

2.14        Warranty Obligations.   Schedule 2.14 sets forth a list of all currently effective forms of written warranties, guarantees and written warranty policies of the Company in respect of any of the Company’s products or services, as well as the duration of each such warranty obligation.  The Company has delivered to the Buyer or its counsel true and correct copies of all such warranty obligations prior to the execution of this Agreement.

2.15        Material Contracts.   Schedule 2.15 hereto sets forth for the Company a list of all of the following contracts and agreements in effect on the date of this Agreement, except those that will be terminated at or prior to the Closing:

(a)           contracts that provide for annual payments by the Company of more than $50,000 within any twelve month period from and after the date hereof;

(b)           agreements, contracts, indentures and other instruments of the Company relating to the borrowing of money or to mortgaging, pledging or otherwise placing a Lien on

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any asset of the Company, other than Permitted Liens, or the guaranty of any obligation for the borrowing of money, in each case in excess of $50,000;

(c)           contracts that materially limit the ability of the Company to engage in any line of business in any geographic area, compete with any other Person or otherwise materially limit the method of conducting or the scope of their businesses;

(d)           any contract, agreement, arrangement or other instrument involving annual payments to the Company and in excess of $50,000;

(e)           employment, severance, retention and deferred compensation agreements or arrangements involving the payment of at least $50,000 annually by Company;

(f)            contracts of the Company with any officer, director or Affiliate of the Company;

(g)           collective bargaining agreement or other contract with any union, labor organization, employee group or similar entity;

(h)           stock purchase, stock option, phantom stock or similar plan;

(i)            lease or agreement under which the Company is lessee of or holds or operates any personal property owned by any other party that involves payments in excess of $50,000 in any twelve month period;

(j)            joint venture, affiliation or partnership agreements and any other agreements that provide for the sharing of profits and losses; or

(k)           any other contracts, agreements or instruments that are material to the Company.

All of the foregoing, including amendments, supplements and modifications thereto, are herein called “ Material Contracts .”  The Company has made available to the Buyer true and correct copies of all Material Contracts.  Each Material Contract is valid and in full force and effect.  The Company and, to the knowledge of the Company, each other party thereto, have performed all material obligations required to be performed by them thereunder.  The Company is not in breach or default under any material provision of any Material Contract.  To the knowledge of the Company, no third party is in breach or default under any material provision of any Material Contract.  The Merger will not give rise to or otherwise result in (i) a right of termination under, or a breach of, or any loss or change in the rights or obligations of Company under any Material Contracts or any agreements relating to Company Intellectual Property; (ii) an obligation under any Material Contracts or any agreements relating to Company Intellectual Property on the Company to pay any royalties or other amounts to any third party in excess of those that Company is otherwise obligated to pay absent a Merger, or (iii) the Buyer’s granting to any third party any right to or with respect to any of the Buyer’s Intellectual Property.

2.16        Litigation.   Except as disclosed on Schedule 2.16 , there is no claim, action, arbitration, investigation, suit, or proceeding (each an “ Action ”) pending or, to the knowledge of

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the Company, threatened against or affecting the Company, any of its officers, directors or employees, or any of its properties before any court or arbitrator or any federal, state, municipal or other court, tribunal, governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign (each, a “ Governmental Authority ”) and there is no basis for any of the foregoing.  There is no investigation pending or, to the knowledge of the Company, threatened against the Company, before any Governmental Authority and no basis for any of the foregoing.  Schedule 2.16 sets forth, as of the date hereof, with respect to any pending Action to which Company is a party, the forum, the parties thereto, the subject matter thereof, and the amount of damages claimed, or the nature of any other relief sought.  The Company is not subject to any outstanding judgment, order or decree of any Governmental Authority other than any such Action, judgment, order or decree that would not have a Company Material Adverse Effect.

2.17        No-Conflict; Required Consents and Approvals.   Except as set forth on Schedule 2.17 , the Company’s execution, delivery and performance of this Agreement, consummation of the Mergers and the other transactions contemplated hereby and the other agreements, instruments and documents of the Company contemplated hereby do not, and will not result in any violation of, constitute a default under, conflict with or result in any breach of, or result in the termination or cancellation of, or create in any party the right to terminate or cancel the rights or entitlements under (a) the Company Organizational Documents; (b) any Material Contract; (c) any Authorization; or (d) any law, statute, regulation, rule, ordinance, judgment, decree or order applicable to the Company, except as would not have a Company Material Adverse Effect.  Except as set forth on Schedule 2.17 and except for the filing of the Articles of Merger and the filings required with the Commonwealth of Massachusetts and the State of Delaware to effect the LLC Merger, no consent, order, approval, authorization, declaration or filing from or with any Governmental Authority or any third party is required on the part of the Company for or in connection with the execution, delivery and performance of this Agreement by the Company or the consummation of the transactions contemplated hereby by the Company.

2.18        Licenses and Permits.   Schedule 2.18 hereto sets forth a list of all licenses, permits and authorizations of governmental authorities held by the Company that are material to the business of the Company (except for licenses, permits and authorizations relating to Environmental Laws, as to which Section 2.22 only applies) (collectively, the “ Authorizations ”).  The Authorizations represent all Authorizations required for the Company to conduct its business as currently conducted and proposed to be conducted in all material respects and, all such Authorizations are in full force and effect and the business of the Company is being operated in compliance in all material respects therewith.  To the knowledge of the Company, no Governmental Authority has threatened the suspension or cancellation of any Authorization, except where such threatened suspension or cancellation relates to such items of noncompliance that the Company believes will be remedied within applicable cure periods.  The Authorizations will remain in effect following the Closing and the consummation of the Merger and the other transactions contemplated by this Agreement.

2.19        Compliance with Laws.   The Company is, and the businesses of the Company are being conducted, in compliance with all foreign, federal, state or local statutes, laws,

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ordinances, judgments, decrees, orders or governmental rules and regulations applicable to them in all material respects (except as to Environmental Laws, as to which Section 2.24 only applies).

2.20        Employees, Consultants and Compensation.

(a)           Except as described on Schedule 2.20 hereto, (i) no employees of the Company are represented by any union or similar labor organization, and (ii) neither the Company has not experienced any labor strike, slowdown, stoppage, grievance, labor arbitration, claim of unfair labor practices or organizational effort at any time during the last five (5) years, nor to the knowledge of the Company are any such activities or actions currently threatened against the Company.

(b)           Schedule 2.20 sets forth (i) a true and correct list of the name, current annual salary, target bonus and commission arrangement of each officer or employee of the Company and (ii) any other form of compensation (other than salary, bonuses or customary benefits) paid or payable by the Company to each such person for the current fiscal year.  Schedule 2.20 also sets forth a true and correct list of the name and current compensation arrangement of each consultant or independent contractor presently providing services to the Company or who has provided services to the Company in the last twelve months, as well as the title of the agreement under which such services are provided.

(c)           The Company is in compliance, in all material respects, with the Federal Fair Labor Standards Act and all applicable federal, state and local laws relating to employment discrimination, employee welfare and labor standards.

(d)           The Company is in compliance, in all material respects, with the Federal Occupational Safety and Health Act, the regulations promulgated thereunder and all other applicable federal, state and local laws relating to the safety of employees or the workplace or relating to the employment of labor, including, without limitation, any provisions thereof relating to wages, bonuses, collective bargaining, equal pay and the payment of social security and similar payroll taxes.  Except as provided in Schedule 2.20 and except for routine claims brought by individual employees that will not result in any material liability, no proceedings are pending before any federal, state, municipal or other court, governmental, regulatory or administrative body or agency, or private arbitration tribunal relating to labor or employment matters, and the Company has not received any notice from any Governmental Authority of any pending investigation by any such body or agency or, to the knowledge of the Company, threatened material claim by any such body or agency or other third party relating to labor or employment matters.

(e)           The Company has not incurred any liability under the Worker Adjustment and Restraining Notification Act (the “ WARN Act ”) or similar state laws with respect to their respective employees.

(f)            Schedule 2.20 lists all current employee manuals, handbooks, employment policy statements, employment agreements and other materials relating to the employment of the Company’s current employees.

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(g)           All present and former employees of the Company have entered into and delivered to the Company the Company’s form of nondisclosure, assignments of inventions and noncompetition agreement in substantially the form provided to the Buyer and its counsel, except that administrative personnel have entered into and delivered to the Company the Company’s form of nondisclosure and assignments of invention agreement in substantially the form provided to the Buyer and its counsel.

(h)           There are no material term employment, guaranteed bonus or commission or severance agreement to which the Company is a party or to which the Company is bound.

(i)            No employee, contractor, executive, shareholder or option holder has or shall have any Action or basis therefor against the Company, or shall have made, asserted or threatened such an Action or demand, and the Company shall have given Buyer prompt written notice of any asserted or threatened Action.

2.21        Benefit Plans.

(a)           Schedule 2.21 hereto sets forth all employee benefit plans and arrangements (including, but not limited to, plans described in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) maintained by the Company for the benefit of its current or former employees, or with respect to which the Company has any liability (including, but not limited to, liabilities arising from affiliation under Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the “ Code ”), or Section 4001 of ERISA) (the “ Benefit Plans ”).

(b)           With respect to each Benefit Plan, the Company has made available to the Buyer true and complete copies of:  (i) any and all plan documents and agreements; (ii) any and all outstanding summary plan descriptions and material modifications thereto; (iii) the two most recent annual reports, if applicable; (iv) the two most recent annual and periodic accounting of plan assets, if applicable; and (v) the most recent determination letter received from the Internal Revenue Service (the “ Service ”), if applicable.  Since the date of the foregoing Benefit Plan documents, there has not been any material change in the assets or liabilities of any of the Benefit Plans or any change in their terms and operations that could reasonably be expected to affect or alter the tax status or materially affect the cost of maintaining such Benefit Plan.  Each of the Benefit Plans can be amended, modified or terminated by the Company within a period of 30 days, without payment of any additional compensation or amount or the additional vesting or acceleration of any such benefits, except to the extent that such vesting is required under the Code upon the complete or partial termination of any Benefit Plan intended to be qualified within the meaning of Section 401(a) of the Code.  Each Benefit Plan that is intended to be “qualified” within the meaning of Section 401(a) of the Code has been determined by the IRS to be so qualified, and nothing has occurred which could be expected to adversely affect such qualified status.  The Company does not have any other ERISA Affiliates.  For these purposes, “ ERISA Affiliate ” means any entity which is under common control with the Company within the meaning of Section 414 of the Code;

(c)           Except as set forth on Schedule 2.21 , with respect to each Benefit Plan:  (i) such plan has been administered in accordance with its terms and all applicable laws in all

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material respects; (ii) no breach of fiduciary duty has occurred with respect to which any fiduciary of any Benefit Plan, including, without limitation the Company or any officer, director or employee thereof, or any Benefit Plan, reasonably could be expected to be liable in any material respect; (iii) no material disputes are pending or, to the knowledge of the Company, threatened; and (iv) no “prohibited transaction” (within the meaning of either Section 4975(c) of the Code or Section 406 of ERISA) has occurred with respect to which the Company or any Benefit Plan reasonably could be expected to be liable for any tax, penalty or other liability.

(d)           Except as set forth on Schedule 2.21 , neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will (i) result in any payment (including severance, unemployment compensation, parachute payment, bonus or otherwise) becoming due to any director, employee or independent contractor of the Company; (ii) accelerate the time of payment or vesting under any Benefit Plan or (iii) increase the amount of compensation or benefits due to any individual under any Benefit Plan.

(e)           None of the Benefit Plans is, nor the Company has ever maintained, had an obligation to contribute to, or incurred any other obligation with respect to (i) a plan subject to Title IV of ERISA, Section 412 of the Code, or Title I, Subtitle B, Part 3 of ERISA, (ii) a “multiemployer plan,” as defined in Section 3(37) of ERISA, (iii) a “multiple employer plan,” as defined in ERISA or the Code or (iv) except as set forth on Schedule 2.21 , a funded welfare benefit plan, as defined in Section 419 of the Code.  Except as set forth on Schedule 2.21 , there are no trusts or similar funding vehicles with respect to any Benefit Plan that is a welfare plan (within the meaning of Section 3(1) of ERISA).

(f)            Except as set forth on Schedule 2.21 , the Company has no obligation to provide any deferred compensation, pension or non-pension benefits to any individual, including, without limitation, any retired or other former employee or director (or any beneficiary thereof), except for health benefits as specifically required by the continuation coverage provisions of federal or state law as applied to any Benefit Plan that is a group health plan (as defined in Section 601 et seq. of ERISA) or pension benefits payable from any Benefit Plan, which are intended to be qualified within the meaning of Section 401(a) of the Code.  All plans, agreements and other arrangements maintained or entered into by the Company for any service provider that are “deferred compensation” subject to Section 409A of the Code comply with the requirements of that Section or can be timely amended to comply with that Section.

(g)           The Company has classified all individuals who perform services for it correctly, in accordance with the terms of each Benefit Plan, ERISA, the Code and all other applicable laws, as common law employees, independent contractors or leased employees, except where the failure to do so would not reasonably be expected to result, individually or in the aggregate, in a material liability for the Company.

2.22        Insurance.   Schedule 2.22 contains an accurate and complete list of all insurance policies owned, held by or applicable to the Company, including the name of the insurer, the amounts of coverage provided by such policies, the annual premiums thereof and a list of any claims made by the Company thereunder or under any predecessor policies.  All such policies are valid and in full force and effect, and no notice of denial of coverage, cancellation or termination

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has been received with respect to any such policies.  All premiums due and payable under such policies have been paid and the Company is otherwise in compliance with the terms of such policies.  Such policies will remain in effect after the Closing, and the applicable limits under such policies have not been exhausted.  The Company has made available to the Buyer copies of all insurance policies or self-insurance programs and arrangements relating to the business, assets and operations of the Company.

2.23        Brokers.   The Company has not dealt with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement, and the Company is not under any obligation to pay any broker’s fee, finder’s fee, commission or other similar amount in connection with the transactions contemplated by this Agreement.

2.24        Compliance with Environmental Laws.   Except as set forth on Schedule 2.24 :

(a)           All of the Company’s current operations are in material compliance with all Environmental Laws (as hereinafter defined).

(b)           The Company’s use, handling, manufacture, treatment, processing, storage, generation, release, discharge, transportation and disposal of medical or biohazardous material and Hazardous Substances (as hereinafter defined) in their current operations comply with, and have not created material liability under, applicable Environmental Laws.

(c)           The Company has obtained all material permits, licenses and authorizations required under applicable Environmental Laws, and the current operations of the Company are in material compliance with the terms and conditions of any required permits, licenses and authorizations.

(d)           There are no pending or, to the knowledge of the Company, threatened material Environmental Claims against the Company.

As used herein, the following terms shall have the meanings indicated below:

“ Environmental Laws ” shall mean all foreign, federal, state and local statutes, regulations, rules, codes and ordinances relating to medical or biohazardous materials, pollution, the use, treatment, storage, transportation or disposal of Hazardous Substances or the discharge of materials into the Environment.

“ Environment ” shall mean soil, surface waters, groundwaters, land, surface or subsurface strata and ambient air.

“ Hazardous Substances ” shall mean any substance which is a “hazardous substance,” “hazardous waste,” “toxic substance,” “toxic waste,” “pollutant,” “contaminant” or words of similar import under any Environmental Law, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.) and the Clean Air Act (42 U.S.C. §7401 et seq.), and including, without limitation, which contains polychlorinated biphenyl or gasoline, diesel fuel or other petroleum hydrocarbons or volatile organic compounds.

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“ Environmental Claim ” shall mean any notice, litigation, proceeding, order, directive, summons, complaint or citation from any governmental authority relating to Environmental Laws or Hazardous Substances, or medical or biohazardous materials.

2.25        Affiliated Transactions.   Except as set forth on Schedule 2.25 , no officer, director or Affiliate of the Company or, to the Company’s knowledge, any individual in such officer’s or director’s immediate family, is a party to any agreement, contract or commitment or has within the past twelve months engaged in any material transaction with the Company or has any material interest in any property used by the Company.  Except as set forth on Schedule 2.25 , no employee of the Company is a member of the Principal Shareholder’s immediate family.

2.26        Undisclosed Liabilities.  Except as set forth on Schedule 2.26 , the Company has no liabilities, obligations, inde