TABLE OF CONTENTS

		Page
ARTICLE I
THE MERGER		1
	1.01 The Merger	1
	1.02 Closing; Closing Date; Effective Time	2
	1.03 Effect of the Merger	2
	1.04 Certificate of Incorporation and Bylaws	2
	1.05 Directors and Officers	2
	1.06 Merger Consideration	2
	1.07 Cancellation of Shares	3
	1.08 Earn-Out Payments	4
	1.09 Delivery of Merger Consideration	5
	1.10 Fractional Shares	6
	1.11 Cancellation of Treasury Shares	6
	1.12 Common Stock of Merger Sub	6
	1.13 Lost Certificates	6
	1.14 Abandoned Property Laws	7
	1.15 Stock Ledger	7
	1.16 Dissenting Shares	7
	1.17 Appointment of Stockholders’ Representative	7
	1.18 Withholding Taxes	8
	1.19 Certain Defined Terms	9
	1.20 Interpretation	13
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS		13
	2.01 Organization and Power of the Company	13
	2.02 Capitalization	13
	2.03 Authority; Noncontravention	14
	2.04 Transactions with Related Parties	15
	2.05 Brokers and Finders	15
	2.06 Title to Assets; Liens	16
	2.07 Material Contracts	16
	2.08 Intellectual Property	18
	2.09 Litigation	22
	2.10 No Conflict with Other Instruments	22
	2.11 Compliance with Applicable Laws	23
	2.12 Insurance	23
	2.13 Financial Statements	23

 

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	2.14 No Undisclosed Liabilities	24
	2.15 Taxes	24
	2.16 Labor and Employment Contracts; Independent Contractor Agreements	25
	2.17 Labor Relations; Compliance	26
	2.18 Books and Records	26
	2.19 Product Warranties	26
	2.20 Absence of Changes	27
	2.21 Customers; Suppliers	28
	2.22 Environmental Matters	29
	2.23 Employee Benefit Programs	29
	2.24 Accounts Receivable and Accounts Payable	30
	2.25 Certain Payments	31
	2.26 Consents	31
	2.27 Disclosure	31
ARTICLE III
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS		31
	3.01 Ownership of Shares	31
	3.02 Authority	32
	3.03 Enforceability	32
	3.04 Securities Laws Matters	32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		34
	4.01 Organization and Standing of Parent and Merger Sub	34
	4.02 Authority for Agreement; Non-contravention	34
	4.03 No Conflict with Other Instruments	34
	4.04 Consents	35
	4.05 Brokers and Finders	35
	4.06 Operations of Merger Sub	35
	4.07 Capitalization	35
	4.08 Reports and Financial Statements	35
	4.09 Litigation	37
	4.10 Disclosure	37
ARTICLE V
COVENANTS OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS		38
	5.01 Cooperation; Consents	38
	5.02 Advice of Changes	38
	5.03 Maintenance of Business	38
	5.04 Conduct of Business	38

 

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	5.05 Regulatory Approvals	40
	5.06 Necessary Consents	40
	5.07 Litigation	40
	5.08 No Other Negotiations	41
	5.09 Access to Information	41
	5.10 Satisfaction of Conditions Precedent	41
	5.11 Assignment of Copyright and Other Intellectual Property Rights	41
	5.12 Resignations	41
ARTICLE VI
COVENANTS OF PARENT AND MERGER SUB		42
	6.01 Cooperation	42
	6.02 Advice of Changes	42
	6.03 Access to Information	42
	6.04 Satisfaction of Conditions Precedent	42
	6.05 Regulatory Approvals	42
	6.06 Necessary Consents	43
	6.07 Indemnification	43
	6.08 Litigation	43
	6.09 Employees	43
	6.10 Merger Sub	44
	6.11 Rule 144 Sales	44
ARTICLE VII
CONDITIONS TO CLOSING OF THE COMPANY AND THE STOCKHOLDERS		44
	7.01 Escrow Agreement	44
	7.02 Employment Agreements	44
	7.03 Merger Consideration	44
	7.04 Lock-Up Agreement	44
	7.05 Representations and Warranties	44
	7.06 Covenants and Agreements	44
	7.07 Certificates of Secretary	45
	7.08 GlobalSCAPE Consents	45
	7.09 No Proceeding	45
	7.10 Opinion of Counsel	45
	7.11 Payment of Transaction Expenses	45
ARTICLE VIII
CONDITIONS TO CLOSING OF GLOBALSCAPE		45
	8.01 Stockholder Approval	45
	8.02 Company Consents	45

 

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	8.03 Releases	45
	8.04 Escrow Agreement	45
	8.05 Opinion of Counsel	46
	8.06 Certificate of Secretary	46
	8.07 Representations and Warranties	46
	8.08 Intellectual Property Assignments	46
	8.09 Covenants and Agreements	46
	8.10 No Proceeding	46
	8.11 Singer Release	46
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION		46
	9.01 Survival of Representations and Warranties	46
	9.02 Indemnification by the Stockholders	47
	9.03 Indemnification by Parent	47
	9.04 Procedures	47
	9.05 Limitations on Indemnification	48
	9.06 Right of Offset	50
	9.07 Exclusive Remedy	50
	9.08 Effect of Knowledge	50
	9.09 Subrogation	51
ARTICLE X
MISCELLANEOUS		51
	10.01 Continuing Counsel	51
	10.02 Notices	52
	10.03 Enforcement; Venue; Service of Process	54
	10.04 Amendments	54
	10.05 Extension and Waiver	54
	10.06 Expenses	54
	10.07 Mutual Non-Disclosure Agreement	55
	10.08 Section, Article and Other Headings; References	55
	10.09 Counterparts; Facsimile	55
	10.10 Parties in Interest	55
	10.11 No Third Party Beneficiaries	55
	10.12 Exhibits and Schedules	55
	10.13 Entire Agreement	55
	10.14 Legal Invalidity	55
	10.15 Applicable Law	55
	10.16 Confidentiality	56
	10.17 Public Announcement	56

 

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ARTICLE XI
TAX COVENANTS		56
	11.01 Preparation and Filing of Tax Returns	56
	11.02 Transfer Taxes	56
	11.03 Cooperation on Certain Tax Matters	56
ARTICLE XII
TERMINATION OF AGREEMENT		57
	12.01 Prior to Closing	57
	12.02 At the Closing	57
INDEX OF DEFINITIONS		60

 

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AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this “ Agreement ”) is made and entered into as of September 22, 2006, by and among (i) GlobalSCAPE, Inc., a Delaware corporation (“ Parent ”), (ii) GA Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ” and, together with Parent, “ GlobalSCAPE ”), (iii) Availl, Inc., a Delaware corporation (the “ Company ”), (iv) Chuck Shavit, Ellen Ohlenbusch and Craig Randall (together, the “ Principal Stockholders ” and each individually, a “ Principal Stockholder ”), (v) Ronald Lachman (“ Lachman ”) and Lachman Goldman Ventures LLC, a Delaware limited liability company (“ LGV ” and, together with Lachman and the Principal Stockholders, the “ Stockholders ”), and (vi) Chuck Shavit, in his capacity as the Stockholders’ Representative hereunder.

RECITALS

WHEREAS, the Company is engaged in the business of developing, selling, marketing, licensing and distributing wide-area file services products (the “ Business ”);

WHEREAS, the Stockholders are the owners and holders of all of the issued and outstanding capital stock of the Company;

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have approved and declared advisable this Agreement and the merger of Merger Sub with and into the Company;

WHEREAS, to complete such acquisition the respective Boards of Directors of Parent, Merger Sub and the Company have approved the merger of Merger Sub with and into the Company (the “ Merger ”), pursuant to and subject to the terms and conditions of this Agreement; and

WHEREAS, the Directors of the Company have unanimously determined that the Merger is fair to and in the best interest of the stockholders of the Company, approved the Merger and this Agreement and the transactions contemplated hereby, and recommended the approval of the Merger and approval and adoption of this Agreement by the stockholders of the Company;

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements of the parties hereinafter set forth, the parties hereby agree as follows:

ARTICLE I
THE MERGER

1.01         The Merger .  Upon the terms and subject to the conditions of this Agreement and in accordance with the applicable provisions of the Delaware General Corporation Law (the “ DGCL ”), at the Effective Time (as hereinafter defined), 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 to exist and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”).

 

1.02         Closing; Closing Date; Effective Time .  The consummation of the Merger and the closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Foley Hoag LLP, 155 Seaport Boulevard, Boston, Massachusetts 02210, on September 22, 2006 or on such other date as the parties hereto may mutually agree.  The date on which the Closing takes place is referred to herein as the “ Closing Date .”  As promptly as practicable on the Closing Date, the parties hereto shall cause the Merger to be consummated by filing a Certificate of Merger with the Secretary of State of the 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 the filing of the Certificate of Merger, or such later date or time agreed upon by Parent and the Company and set forth in the Certificate of Merger, being the “ Effective Time ”).

1.03         Effect of the Merger .  As of the Effective Time, the Merger shall have the effect set forth in the applicable provisions of the DGCL.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all properties, 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.

1.04         Certificate of Incorporation and Bylaws .  At the Effective Time, the Certificate of Incorporation and Bylaws attached hereto as Schedule 1.04 , shall be the Certificate of Incorporation and the Bylaws of the Surviving Corporation until thereafter amended as provided by law.

1.05         Directors and Officers .  At the Effective Time, the directors and officers of Merger Sub immediately prior to the Effective Time shall become the directors and officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified.

1.06         Merger Consideration .  At the Effective Time, by virtue of the Merger and without any action on the part of any of the parties hereto or their respective stockholders:

(a)            Each share of the Company’s Series A Preferred Stock, par value $0.01 per share (the “ Series A Preferred ”), which is issued and outstanding immediately prior to the Effective Time (other than any shares to be cancelled pursuant to Section 1.11 and any Dissenting Shares (as defined below)), shall be converted into and represent the right to receive in the aggregate, an amount in cash (the “ Series A Per Share Cash Consideration ”) equal to the sum of (i) an amount equal to $300,000 (the “ Liquidation Preference Amount ”) divided by the number of shares of Series A Preferred issued and outstanding immediately prior to the Effective Time (the “ Per Share Liquidation Preference ”); plus (ii) the Cash Pro Rata Portion of a cash amount (the “ Base Cash Merger Consideration ”) equal to (A) $7,350,000 minus (B) the Transaction Expenses, multiplied by the number of shares of Common Stock (as defined below) into which such share of Series A Preferred Stock was convertible immediately prior to the Effective Time; plus (iii) at such time and to the extent it becomes distributable to the Stockholders pursuant to Section 1.08 , the Cash Pro Rata Portion of any Earn-Out Payments, multiplied by the number of shares of Common Stock into which such share of Series A Preferred Stock was convertible immediately prior to the Effective Time.  When used herein, the

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term “ Cash Pro Rata Portion ” means the fraction obtained by dividing one by the sum of (A) the number of shares of common stock, par value $0.01 per share, of the Company (the “ Common Stock ”) issued and outstanding immediately prior to the Effective Time, plus (B) the number of shares of Common Stock issuable upon conversion of the Series A Preferred immediately prior to the Effective Time.  When used herein, the term “ Cash Merger Consideration ” means the sum of the Liquidation Preference plus the Base Cash Merger Consideration plus the Earn-Out Payments, if any.

(b)            Each share of the Company’s Common Stock, which is issued and outstanding immediately prior to the Effective Time (other than any shares to be cancelled pursuant to Section 1.11 and any Dissenting Shares) and held of record by Lachman shall be converted into and represent the right to receive an amount in cash (the “ Common Stock Per Share Cash Consideration ”) equal to the sum of (i) the Cash Pro Rata Portion of a cash amount equal to the Base Cash Merger Consideration; plus (ii) at such time and to the extent it becomes distributable to the Stockholders pursuant to Section 1.08, the Cash Pro Rata Portion of any Earn-Out Payments.

(c)            Each share of Common Stock which is issued and outstanding immediately prior to the Effective Time (other than any shares to be cancelled pursuant to Section 1.11 and any Dissenting Shares) and held of record by a Principal Stockholder shall be converted into and represent the right to receive: (i) an amount in cash equal to the Common Stock Per Share Cash Consideration; plus (ii) the Stock Pro Rata Portion (as defined below) of the Stock Consideration (as defined below) (the “ Per Share Stock Consideration ”).  All of the shares of Parent Common Stock issued pursuant to this Section 1.06(c) shall be subject to Lock-Up Agreements in substantially the form of Exhibit A (each, a “ Lock-Up Agreement ”) hereto.  When used herein, the term “ Stock Pro Rata Portion ” means the fraction obtained by dividing one by the aggregate number of shares of Common Stock issued and outstanding immediately prior to the Effective Time and held by the Principal Stockholders.  When used herein, the term “ Stock Consideration ” means that number of shares of Parent’s common stock, par value $0.001 per share (“ Parent Common Stock ”), equal to $2,000,000 divided by the Closing Stock Price.  When used herein, the term “ Closing Stock Price ” means the average of the closing sale prices per share of Parent Common Stock for the 30 consecutive trading days ending two business days prior to the Closing Date as reported on the OTC Bulletin Board.

(d)            The Stockholders, the Company, Merger Sub and Parent acknowledge and agree that the total consideration to be paid by Merger Sub and Parent to the holders of any and all of the shares of the capital stock of the Company in connection with, and as a result of, the Merger (the “ Total Consideration ”) equals the sum of (x) $7,650,000 payable in cash plus (y) the Stock Consideration plus (z) the Earn-Out Payments, if any, and under no circumstances shall the Merger Consideration be an amount in excess of the Total Consideration.

1.07         Cancellation of Shares .  At the Effective Time, all of the shares of Common Stock and Series A Preferred Stock (collectively, the “ Shares ”) shall no longer be outstanding and shall cease to exist, and each holder of a Certificate (as hereinafter defined) shall cease to have any rights with respect thereto, except the right to receive: (i) the Series A Per Share Cash Consideration, in the case of shares of Series A Preferred Stock, (ii) the Common Stock Per Share Cash Consideration, in the case of shares of Common Stock held by Lachman, and (iii) the

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Common Stock Per Share Cash Consideration and the Per Share Stock Consideration, in the case of shares of Common Stock held by the Principal Stockholders.

1.08         Earn-Out Payments .

(a)            After the Effective Time, Parent shall make the following payments (the “ Earn-Out Payments ”):

(i)             In the event that the Net Revenues of the Surviving Corporation for the three-month period ended September 30, 2006 (the “ Third Quarter ”) equal or exceed $800,000 (the “ Third Quarter Threshold ”), Parent shall pay the Stockholders an aggregate of $50,000 on or before the later of (x) December 1, 2006 and (y) the date that the Net Revenue Calculation is finally determined pursuant to Section 1.08(d) ; and

(ii)            In the event that the Net Revenues of the Surviving Corporation for the three-month period ended December 31, 2006 (the “ Fourth Quarter ”) equal or exceed $1,050,000 (the “ Fourth Quarter Threshold ”), Parent shall pay the Stockholders an aggregate of $50,000 on or before the later of (x) April 15, 2007 and (y) the date that the Net Revenue Calculation is finally determined pursuant to Section 1.08(d) .

(b)            All calculations of the Net Revenues of the Surviving Corporation for the purposes of this Section 1.08 shall be made by Parent in accordance with GAAP, applied on a consistent basis.  For purposes of this Section 1.08, “ Net Revenues ” shall mean gross revenues minus discounts and returns.

(c)            All payments of the Earn-Out Payments, if any, shall be made by corporate check payable to each of the Stockholders.  Each Stockholder shall be entitled to the Cash Pro Rata Portion of any Earn-Out Payment, multiplied by the aggregate number of shares of Common Stock issued and outstanding immediately prior to the Effective Time, plus the number of shares of Common Stock issuable upon conversion of the shares of Series A Preferred issued and outstanding immediately prior to the Effective Time, in each case held of record by such Stockholder.

(d)            On or prior to November 15, 2006 and March 31, 2007, Parent shall prepare a calculation (the “ Net Revenue Calculation ”) of the Net Revenues of the Surviving Corporation for the Third Quarter and the Fourth Quarter, respectively, and deliver such calculation to the Stockholders’ Representative.  The Stockholders’ Representative shall have thirty (30) days to review the Net Revenue Calculation.  During such thirty (30) day period, the Stockholders’ Representative and his representatives and agents (including, without limitation, accountants), shall have full access to the financial records and financial personnel of the Surviving Corporation, and Parent and the Surviving Corporation shall reasonably cooperate with the Stockholders’ Representative and his representatives and agents, and shall assist the Stockholders’ Representative and his representatives and agents, to confirm and verify the accuracy of the information set forth in the Net Revenue Calculation.  Subject to Parent’s and the Surviving Corporation’s compliance with the provisions of this Section 1.08, the failure of the Stockholders’ Representative to object to the Net Revenue Calculation on or prior to the end of such thirty (30) day period, will constitute the acceptance by the Stockholders of the Net

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Revenue Calculation.  If the Stockholders’ Representative delivers a written notice within such thirty (30) day period objecting to the Net Revenue Calculation (the “ Net Revenue Protest Notice ”), the Stockholders’ Representative and Parent shall in good faith attempt to resolve any disagreement with respect to the Net Revenue Calculation during a period of ten (10) days following the delivery of the Net Revenue Protest Notice.  If Parent and the Stockholders’ Representative fail to resolve the disagreement within such ten (10) day period, the items in dispute shall be referred to an accounting firm of national reputation as may be agreed to by Parent and the Stockholders’ Representative (the “ Revenue Arbitrator ”) for final determination as to whether the Third Quarter Threshold or the Fourth Quarter Threshold, as the case may be, has been met, within forty-five (45) days.  In connection with its determination, the Revenue Arbitrator shall use GAAP applied on a consistent basis.  During such forty-five (45) day period, (i) Parent and the Surviving Corporation shall grant the Revenue Arbitrator full access to the Surviving Corporation’s financial records and financial personnel, and shall reasonably cooperate with and assist the Revenue Arbitrator to confirm and verify the accuracy of the information set forth on the Net Revenue Calculation, and (ii) Parent and the Stockholders’ Representative shall be afforded reasonable opportunity to present their respective positions regarding the Net Revenue Calculation.  This provision for arbitration shall be specifically enforceable by Parent and the Stockholders’ Representative, and the determination of the Revenue Arbitrator in accordance with the provisions hereof as to whether the Third Quarter Threshold or the Fourth Quarter Threshold, as the case may be, has been met, shall be final and binding upon Parent and the Stockholders, with no right of appeal therefrom.  The fees and expenses of the Revenue Arbitrator shall be paid by the party (i.e., Parent, on the one hand, or the Stockholders, on the other hand), whose position as to whether the Third Quarter Threshold or the Fourth Quarter Threshold, as the case may be, has not been accepted by the Revenue Arbitrator.  The parties agree that any amounts required to be paid to the Revenue Arbitrator by the Stockholders hereunder, shall be paid out of the Escrow Amount, and Parent and the Stockholders’ Representative shall jointly instruct the Escrow Agent to make such payments.

1.09         Delivery of Merger Consideration .

(a)            At the Effective Time, (i) an amount of $0.79352310 (the “ Series A Per Share Escrow Amount ”) shall be deducted from the Series A Per Share Cash Consideration, and (ii) an amount of $0.08004690 (the “ Common Stock Per Share Escrow Amount ”) shall be deducted from the Common Stock Per Share Cash Consideration, and the total aggregate of such deducted amounts equal to $850,000 (the “ Escrow Amount ”) shall be deposited by Parent with U.S. Bank National Association, a national banking association (the “ Escrow Agent ”) and be subject to the terms of an Escrow Agreement in the form attached hereto as Exhibit B (the “ Escrow Agreement ”).

(b)            At the Effective Time, upon surrender of a certificate representing shares of Common Stock or Series A Preferred (each, a “ Certificate ”) for cancellation to Parent duly endorsed in blank or accompanied by stock powers duly executed in blank, by the holder thereof, the holder of such Certificate shall be entitled to receive in exchange therefor, with respect to each share of Common Stock or Series A Preferred represented by such Certificate:

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(i)             In the case of a share of Series A Preferred, an amount equal to (A) the Per Share Liquidation Amount, plus (B) the Cash Pro Rata Portion of the Base Cash Merger Consideration;

(ii)            In the case of a share of Common Stock held by Lachman,  an amount equal to the Cash Pro Rata Portion of the Base Cash Merger Consideration; and

(iii)           In the case of a share of Common Stock held by a Principal Stockholder, (A) the Per Share Stock Consideration, and (B) an amount equal to the Cash Pro Rata Portion of the Base Cash Merger Consideration.

All cash payments to the Stockholders hereunder shall be made by bank or certified check or by wire transfer of immediately available funds to an account designated in writing by each Stockholder, and the Stock Consideration shall be issued in the respective names of the Principal Stockholders.

1.10         Fractional Shares .  No certificates or scrip representing fractional shares of Parent Common Stock shall be issued pursuant to Section 1.06 upon the surrender for exchange of Certificates.  In lieu of any fractional shares of Parent Common Stock that would have otherwise been issued, each former Principal Stockholder of the Company who would have been entitled to receive a fractional share of Parent Common Stock shall, upon proper surrender of such person’s Certificates, receive a cash payment equal to the Closing Stock Price, multiplied by the fraction of a share that such Principal Stockholder would otherwise be entitled to receive.

1.11         Cancellation of Treasury Shares .  All Shares that immediately prior to the Effective Time are owned by the Company, GlobalSCAPE or any of their respective subsidiaries, or held by the Company in its treasury, shall be cancelled and retired and shall cease to exist and no consideration shall be delivered with respect thereto; provided , that Shares held beneficially or of record by any plan, program or arrangement sponsored or maintained for the benefit of employees of the Company shall not be deemed to be held by the Company regardless of whether the Company has, directly or indirectly, the power to vote or control the disposition of such Shares.

1.12         Common Stock of Merger Sub .  Each share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation and each certificate that immediately prior to the Effective Time represented outstanding shares of common stock of Merger Sub shall be deemed for all purposes to represent the same number of shares of common stock of the Surviving Corporation.

1.13         Lost Certificates .  If any Certificate shall have been lost, stolen or destroyed, upon the execution and delivery of an affidavit of that fact by the Stockholder claiming such Certificate to be lost, stolen or destroyed and executing and delivering to GlobalSCAPE a customary agreement to indemnify GlobalSCAPE and the Surviving Corporation against any Claim that may be made against GlobalSCAPE or the Surviving Corporation with respect to such Certificate, subject and pursuant to Article IX , the Surviving Corporation will pay to such Stockholder, in exchange for such lost, stolen or destroyed Certificate, at its own cost and

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expense the Per Share Merger Consideration to be paid in respect of the Shares represented by such Certificate, as contemplated by this Agreement.

1.14         Abandoned Property Laws .  The Surviving Corporation shall not be liable to any holder of a Certificate for any cash properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

1.15         Stock Ledger .  At the Effective Time, the stock ledger of the Company relating to Shares outstanding prior to the Effective Time shall be closed, and there shall be no further registration of transfers of such Shares thereafter on the records of the Company.  At and after the Effective Time, any Certificates (other than Certificates representing Shares to be cancelled pursuant to Section 1.11 and any Dissenting Shares) presented to the Surviving Corporation for any reason shall be converted into the right to receive the consideration set forth in Section 1.06 (the “ Per Share Merger Consideration ”) applicable to the Shares evidenced thereby, which consideration shall be fully paid and satisfied pursuant and in accordance with Article IX .

1.16         Dissenting Shares .  Notwithstanding anything in this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and which are held by stockholders of the Company who do not vote in favor of the Merger and who shall have perfected dissenters’ rights in accordance with the DGCL (the “ Dissenting Shares ”) shall not be converted into or represent the right to receive the Per Share Merger Consideration, unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost such holder’s rights to appraisal under the DGCL.  If any such holder shall have failed to perfect or shall have effectively withdrawn or lost such holder’s rights to appraisal of such Shares under the DGCL, such holder’s Shares shall thereupon be deemed to have been converted into and to have become exchangeable for, at the Effective Time, the right to receive, upon surrender as provided above, the Per Share Merger Consideration for the Certificate or Certificates that formerly evidenced such Shares.

1.17         Appointment of Stockholders’ Representative .

(a)            The Stockholders hereby irrevocably appoint Chuck Shavit as their attorney-in-fact and representative (the “ Stockholders’ Representative ”), with full power and authority to take, for and on behalf of any and all of the Stockholders, all actions necessary, permitted or advisable to effectuate and consummate the Merger and any and all other transactions contemplated by this Agreement and the Transaction Documents (as hereinafter defined) (including the Escrow Agreement), including to undertake the defense or settlement of any Claims for which any Stockholder may be required to indemnify the GlobalSCAPE Indemnity Group (as hereinafter defined), or be indemnified by GlobalSCAPE hereunder, and to take all such other actions provided in this Agreement or in any Transaction Document to be taken by the Stockholders’ Representative (and any other actions reasonably related or ancillary thereto), including the power to execute and deliver the Escrow Agreement and such other documents as may be necessary for the foregoing purposes.  By his execution of this Agreement, Chuck Shavit hereby accepts such appointment and agrees to act as the Stockholders’ Representative hereunder.  Simultaneously with the execution of this Agreement, the Stockholders and the Stockholders’ Representative are entering into a Stockholders’ Representative Agreement (the “ Stockholders’ Representative Agreement ”).  The provisions of

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this Section 1.17 shall apply in addition to and not in lieu of the provisions of the Stockholders’ Representative Agreement.

(b)            Without limiting the provisions of Section 1.17(a) , the Stockholders hereby irrevocably authorize the Stockholders’ Representative to be the recipient of any notice required to be given or made by GlobalSCAPE to any of the Stockholders in connection with this Agreement and the Transaction Documents, and any such notice received by the Stockholders’ Representative shall be deemed for all purposes of this Agreement and the Transaction Documents to have been received by all of the Stockholders.

(c)            All decisions, actions and agreements made or taken (or to be taken) by the Stockholders’ Representative in connection with this Agreement and the Transaction Documents, including any agreement between the Stockholders’ Representative and GlobalSCAPE relating to the Net Asset Schedule or any defense or settlement of any Claims for which any of the Stockholders may be required to indemnify the GlobalSCAPE Indemnity Group hereunder or GlobalSCAPE may be required to indemnify any of the Stockholders Indemnity Group hereunder, shall be binding upon all of the Stockholders, and no Stockholders shall have the right to object, dissent, protest or otherwise contest the same.

(d)            Notwithstanding anything to the contrary herein contained, and without limiting the provisions of the Stockholders’ Representative Agreement, the Stockholders’ Representative shall not be liable to any Stockholder, Parent, Merger Sub, the Company and the Surviving Corporation or to their respective Affiliates, or to any other Person, with respect to any action taken or omitted to be taken by the Stockholders’ Representative in connection with this Agreement and the Transaction Documents or the transactions contemplated hereby and thereby, unless such action or omission results from or arises out of fraud or willful misconduct on the part of the Stockholders’ Representative.

(e)            The provisions of this Section 1.17 shall be binding upon the heirs, executors, administrators, personal representatives, successors and assigns of each of the Stockholders.

1.18         Withholding Taxes .  The Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable to a holder of Shares pursuant to the Merger any stock transfer taxes and such amounts as are required to be withheld under the Internal Revenue Code of 1986, as amended (the “ Code ”), or any applicable provision of state or local law.  To the extent that amounts are so withheld by the Surviving Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of which such deduction and withholding was made by the Surviving Corporation, and the Surviving Corporation shall provide to the holders of such Certificates written notice of the amounts so deducted or withheld.  Notwithstanding the foregoing, no amount shall be withheld or caused to be withheld from any payment of the Cash Merger Consideration made hereunder to a holder of Shares who provides the Surviving Corporation with a properly completed Internal Revenue Service Form W-9 or Substitute Form W-9, or who otherwise provides the Surviving Corporation with appropriate evidence that such Person is exempt from Federal income tax back-up withholding.

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1.19         Certain Defined Terms .  For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below:

(a)            “ Breach ” of a representation, warranty, covenant, obligation, or other provision of this Agreement, the Lock-Up Agreement or the Escrow Agreement will be deemed to have occurred if there is or has been any falsity, inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation or other provision, and the term “ Breach ” shall mean any such falsity, inaccuracy, breach, or failure.

(b)            “ Claim ” shall mean any written claim, suit, action, arbitration, audit, hearing, investigation or litigation (whether civil, criminal, administrative or investigative, at law or in equity).

(c)            “ Company Intellectual Property ” shall mean all Intellectual Property that is currently owned by the Company that is used in the Business.

(d)            “ Contract ” shall mean any loan or credit agreement, bond, debenture, note, mortgage, indenture, lease or other contract, agreement, obligation, commitment, arrangement, understanding, instrument, permit or license, whether oral or written, that is legally binding.

(e)            “ Copyrights ” shall mean, as they exist anywhere in the world, all copyrights, whether registered or unregistered, and any mask works, including all renewals and extensions thereof, copyright registrations and applications for registration thereof.

(f)             “ Database ” shall mean any compilation of data stored electronically or in any other tangible medium and used by the Company in conjunction with any Software used by or marketed, licensed, sublicensed or otherwise sold, rented or distributed by the Company.

(g)            “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the regulations issued pursuant thereto and the rules promulgated thereunder.

(h)            “ GAAP ” shall mean generally accepted accounting principles that are set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accounting and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States of America effective as of the date of this Agreement.

(i)             “ GlobalSCAPE Indemnity Group ” shall mean and include Parent and the Surviving Corporation and their respective directors, officers, and employees.

(j)             “ Governmental Body ” shall mean any: (i) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign, or other government; (iii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (iv) multi-national organization or body; or (v) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

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(k)            “ Intellectual Property ” shall mean all Copyrights, Internet Assets, Patents, Software, Trade Secrets, Trademarks, Databases, IP Licenses and similar rights throughout the world.

(l)             “ Internet Assets ” shall mean, as they exist anywhere in the world, domain names, Internet addresses and other computer identifiers, web sites, web pages and source code contained therein and for any applications included therein, registrations for any of the foregoing and similar rights and items.

(m)           “ IP Licenses ” shall mean all licenses, sublicenses or distributor agreements including, without limitation, the right to receive royalties or any other consideration relating to Copyrights, Internet Assets, Patents, Software, Trade Secrets, Trademarks and Databases.

(n)            “ IRS ” shall mean the Internal Revenue Service.

(o)            “ Knowledge ” shall mean (a) with respect to the Company, the knowledge of Chuck Shavit, Ellen Ohlenbusch and Craig Randall; and (b) with respect to each Stockholder, the knowledge of such Stockholder.

(p)            “ Legal Requirement ” shall mean any federal, state or local law, statute, legislation, ordinance, code, rule, regulation, decree, award, order, permit, franchise, consent or authorization of, any federal, state, local or other governmental body or agency, department, commission, bureau, board, council, court, magistrate, panel or instrumentality of the United States, any political subdivision thereof or any state or local governmental authority in effect as of the date hereof.

(q)            “ Lien ” shall mean any mortgage, pledge, lien, charge, security interest, encumbrance, restriction, lease, license, easement, liability, or adverse Claim of any nature whatsoever, direct or indirect, whether accrued, absolute, contingent, or otherwise, other than: (a) as reflected in the Financial Statements or in any Schedule to this Agreement, (b) for current Taxes not yet due and payable or that are being contested in good faith or other nondelinquent statutory liens arising other than by reason of any default on the part of the Company, (c) arising under real estate leases to which the Company is a party and that have been disclosed or provided to GlobalSCAPE, (d) incurred in the ordinary course of business, such as carriers’, warehousemen’s, landlords’ and mechanics’ liens and other similar liens arising in the ordinary course of business, (e) on personal property leased under operating leases, (e) incurred or made in connection with workmen’s compensation, unemployment insurance and other social security benefits, or securing the performance of bids, tenders, leases, contracts, statutory obligations, progress payments, surety and appeal bonds and other obligations of like nature, in each case incurred in the ordinary course of business, (f) under Article 2 of the Uniform Commercial Code that are special property interests in goods identified as goods to which a contract refers, (g) under Article 9 of the Uniform Commercial Code that are purchase money security interests, (h) arising under the agreements identified on Schedule 2.07 or under any IP License, and (i) such liens or minor imperfections of title as do not materially detract from the value or current use of the property subject thereto.

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(r)             “ Material Adverse Effect ” shall mean a condition or event which has had, or is reasonably expected to have, a material adverse effect on the business, financial condition, results of operations or earnings of the Company.

(s)            “ Merger Consideration ” shall mean the aggregate of the Per Share Merger Consideration paid to the Stockholders.

(t)             “ Off-the-Shelf Software ” shall mean off-the-shelf software as such term is commonly understood, that is commercially available on a retail basis.

(u)            “ Parent Reports ” shall mean all forms, reports, schedules, statements and other documents required to be filed with or furnished to the SEC by Parent since January 1, 2003.

(v)            “ Patents ” shall mean, as they exist anywhere in the world, patents, patent renewals and renewal rights, extension patents, patent applications and inventions, utility models, designs and improvements described and claimed therein, patentable inventions and other patent rights (including any divisions, continuations, continuations-in-part, reissues, reexaminations, substitutions, renewals, or interferences thereof, whether or not patents are issued on any such applications and whether or not any such applications are modified, withdrawn or resubmitted), including the right to enforce the intellectual property against infringers of the intellectual property for infringement of the intellectual property for the time period prior to the Closing Date; all original and reissued patents which have been or shall be issued in the United States and all foreign countries on such improvements; and specifically including the right to file foreign applications under the provisions of any convention or treaty and claim priority based on such application in the United States including all continuations, continuations-in-part, divisions, reissues and foreign counterparts thereof, and any and all related inventions, original works of authorship, developments, concepts, trade secrets, discoveries, innovations or improvements (whether or not patentable).

(w)           “ Proceeding ” shall mean any action, suit, proceeding, arbitration, order, governmental investigation, inquiry, audit, hearing, investigation, litigation or claim (whether civil, criminal or administrative, at law or in equity) commenced brought, conducted or heard by or before, or otherwise involving any governmental entity or arbitrator.

(x)             “ Product ” shall mean any product designed, developed, duplicated, shipped, sold, marketed, licensed, sublicensed, distributed and/or otherwise introduced into the stream of commerce by or on behalf of the Company or any agent of the Company, including any product sold in the United States by the Company as the distributor or agent or pursuant to any other contractual relationship with a non-U.S. manufacturer.

(y)            “ SEC ” shall mean the Securities and Exchange Commission.

(z)             “ Securities Act ” means the Securities Act of 1933, as amended, and regulations issued pursuant thereto and rules promulgated thereunder.

(aa)          “ Short Tax Period ” means any Tax Period ending on the Closing Date.

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(bb)          “ Software ” shall mean, as they exist anywhere in the world, computer software programs including, without limitation, all source code (whether or not commented), object code, executable code, specifications, designs and documentation related thereto, definitions of files, fields of files, variables, details, parameters, compilation, linking, installation and maintenance specifications, inputs and outputs (including codes and acronyms), algorithms, program descriptions, file descriptions, formats and layouts, report descriptions and layouts, screen descriptions and layouts, graphical and non-graphical user interfaces, input documents, data elements, paper processing flowcharts, computer processing flowcharts, processing narratives, editing rules, password development and encryption or protection rules, telecommunications requirements, glossaries and manual procedures with respect to the aforesaid computer programming.  Software shall include, without limitation, derivative works, customizations, supplemental works, interim works, works in progress and all other intellectual property rights, and portions thereof, with respect to the Software, whether or not fixed in a tangible medium of expression, moral rights, with respect to all computer platforms and configurations known or unknown (e.g. PC, midrange, LAN, WAN, client, server, mini, micro, mainframe), all APIs, DLLs and other programming by which the Software integrates or communicates with other software and/or hardware, firmware or other equipment, together with all concomitant installation, technical, functional or user documentation or specifications (the “ Documentation ”) regardless of the media on which the Documentation is contained.

(cc)          “ Stockholder Indemnity Group ” shall mean the Stockholders and their respective directors, officers, members, managers and employees.

(dd)          “ Tax Period ” shall mean any taxable year or any other period that is treated as a taxable year.

(ee)          “ Tax Return ” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

(ff)            “ Taxes ” shall mean all taxes, levies or other like assessments, charges or fees including, without limitation, income, gross receipts, excise, property, sales, license, payroll and franchise or other governmental taxes (including, without limitation, social security and other similar Taxes), imposed on the Company and/or its business activities by any governmental entity; and such term shall include any interest, penalties or additions or other amounts payable in connection with any Taxes.

(gg)          “ Trade Secrets ” shall mean, as they exist anywhere in the world, know-how, inventions, processes, procedures, databases, confidential business information, concepts, ideas, designs, research or development information, techniques, technical information, specifications, operating and maintenance manuals, engineering drawings, sketches, methods, technical data, discoveries, modifications, extensions, improvements, and other proprietary information and rights (whether or not patentable or subject to copyright, mask work, or trade secret protection).

(hh)          “ Trademarks ” shall mean, as they exist anywhere in the world, trademarks, service marks, trade dress, trade names, brand names, designs, logos, or corporate

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names, whether registered or unregistered, and all registrations and applications for registration thereof, and all goodwill related thereto, and the right to recover for past infringement thereof.

1.20         Interpretation .

(a)            Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

(b)            The words “hereof”, “herein”, “hereinafter” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of this Agreement unless otherwise specified.

(c)            The meaning assigned to each term defined herein shall be equally applicable to both the singular and the plural forms of such term, and words denoting any gender shall include all genders.  Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning.

(d)            A reference to any party to this Agreement or any other agreement or document shall include such party’s successors and permitted assigns.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE PRINCIPAL STOCKHOLDERS

Except as set forth in the written disclosure schedules delivered on or prior to the date hereof to GlobalSCAPE, the Company represents and warrants to GlobalSCAPE as follows:

2.01         Organization and Power of the Company .

(a)            The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

(b)            The Company has all requisite power and authority to own, lease and operate its properties, to carry on the Business as now being conducted, to enter into this Agreement and to perform its obligations hereunder.  The Company is duly qualified to do business and is in good standing in all states in which the nature of its business or the character of its properties requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect.

(c)            The Company has no subsidiaries.

2.02         Capitalization .

(a)            Schedule 2.02 sets forth (i) the number of shares of authorized capital stock of each class of the Company’s capital stock, (ii) the number of issued and outstanding shares of each class of the Company’s capital stock, and (iii) the name, address, number of

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Shares (including, in the case of shares of Series A Preferred Stock, the aggregate number of shares of Common Stock into which the shares of Series A Preferred Stock are convertible), Certificate number of the outstanding shares of the Common Stock of the Company (calculated on a fully-diluted basis) owned of record by each Stockholder.  As of the date of this Agreement, the stockholders of the Company set forth on Schedule 2.02 are the record owners of the Shares.  Except for the shares of authorized capital stock issued and outstanding as set forth on Schedule 2.02 , there are no shares of capital stock of the Company issued, reserved for issuance or outstanding.

(b)            All of the outstanding equity securities of the Company have been duly authorized and validly issued and are 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 the DGCL, the Certificate of Incorporation of the Company or any Contract to which the Company is a party or otherwise bound by.  None of the outstanding equity securities or other securities of the Company were issued in violation of the Securities Act or any applicable state securities or “blue sky” laws, rules or regulations.  There are not any bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Shares may vote.  The Company has not granted, and no Person other than the Stockholders hold of record, any equity interest in the Company or any option, warrant, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements, undertakings or other rights of any kind to which the Company is a party or by which the Company is bound (i) obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in the Company, (ii) obligating the Company to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking, except as set forth on Schedule 2.02 or (iii) obligating the Company to repurchase, redeem or acquire any shares of the capital stock of the Company.  The Company does not own or have any Contract to acquire, directly or indirectly, any capital stock, membership interest, partnership interest or joint venture interest in, or any other security issued by, any other Person.  There are no outstanding options, warrants, conversion rights, calls, commitments or other securities of any kind obligating the Company to issue, deliver or sell or cause to be issued, delivered or sold, directly or indirectly, additional shares of capital stock or any other securities convertible into or exercisable for, or evidencing the right to subscribe for any capital stock of the Company, and no authorization therefor has been given.  The Company does not have any outstanding commitment or obligation to repurchase, reacquire or redeem any of the outstanding capital stock of the Company.  Except as set forth on Schedule 2.02 , there is no agreement, written or oral, between the Company and any holder of its securities or between or among any Stockholders, relating to the sale or transfer (including any agreements relating to rights of first refusal, co-sale rights or “drag along” rights), registration under the Securities Act, or voting, of the capital stock of the Company.

2.03         Authority; Noncontravention .

(a)            The Company has the corporate power and authority to execute and deliver this Agreement and to carry out its obligations hereunder and to consummate the

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transactions contemplated hereby.  The execution and delivery by the Company of this Agreement and all other agreements, instruments, and documents that are contemplated to be executed by this Agreement (the “ Transaction Documents ”), and the performance by the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate and other action on the part of the Company necessary to authorize this Agreement or to consummate the transactions contemplated hereby.  When executed and delivered by the Company, the Stockholders, Parent and Merger Sub, this Agreement and the Transaction Documents will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms.

(b)            Except as set forth on Schedule 2.03 , the execution and delivery of this Agreement does not, and the consummation of the Merger and the other transactions contemplated by this Agreement and the Transaction Documents and compliance with the provisions of this Agreement and the Transaction Documents do not and will not, conflict with, or result in any violation or Breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of the Company under, (i) the Certificate of Incorporation or the Bylaws of the Company, (ii) any Contract to which the Company is a party or any of its properties or other assets are subject or (iii) any Legal Requirement applicable to the Company or its properties or other assets, except, in the case of clauses (ii) and (iii) above, as would not have a Material Adverse Effect on the Company.

2.04         Transactions with Related Parties .  Except as set forth on Schedule 2.04 , since January 1, 2006, the Company has not, directly or indirectly, purchased, leased from others, or otherwise acquired any interest in any property or obtained any services from (except for services rendered as a director, officer or employee of the Company), or sold, leased, or otherwise disposed of any interest in any property or furnished any services to, or otherwise transacted business with (except for services rendered as a director, officer or employee of the Company), in the ordinary course of business or otherwise, (i) any stockholder of the Company or (ii) any individual, corporation (including non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or governmental entity (each, a “ Person ”) which, directly or indirectly, alone or together with others, controls, is controlled by or is under common control with, the Company or any officer, director, employee, agent or stockholder of the Company (each, an “ Affiliate ”).  The Company does not owe any amount to, or have any Contract with or commitment to, any of its Affiliates (other than compensation for services rendered in the ordinary course of business not yet due and payable and reimbursement of expenses related thereto), and none of such Affiliates owes any amount to the Company.  No part of the property or assets of any Affiliate is currently being used by the Company in the conduct of the Business.

2.05         Brokers and Finders .  Except as set forth on Schedule 2.05 , neither the Company nor the Stockholders have employed any broker, agent, or finder or incurred any liability for any brokerage fees, agents’ commissions, or finders’ fees in connection with the transactions contemplated by this Agreement.

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2.06         Title to Assets; Liens .

(a)            Other than as set forth on Schedule 2.06(a) or with respect to leased property, the Company has good and marketable title to all of its tangible properties and assets necessary for the conduct of the Company’s business as currently conducted (the “ Assets ”), free and clear of all Liens.  The Company does not own any real property.

(b)            Each of the Real Property Leases (as hereinafter defined) is a valid and subsisting leasehold interest of the Company free of subtenancies and other occupancy rights.  The Company does not lease any personal property.  There is no tangible asset used or required in the conduct of the Business which is not included in the Assets.

(c)            All of the material Assets, taken as a whole, used by the Company in the ordinary course of business are in good operating condition and repair subject to normal wear and tear, are suitable for the purposes used and are reasonably adequate and reasonably sufficient for all current operations of the Company.

(d)            Schedule 2.06(d) attached hereto sets forth a true and complete list of all real property leases (collectively, the “ Real Property Leases ”) (i) to which the Company is a party and (ii) into which the Company has agreed to enter into or has an option to enter into, or into which the Company will have agreed to enter into or will have an option to enter into, as the case may be, prior to the Closing Date, in each case specifying the name of the lessor or sublessor, the lease term, the basic annual rent payable with respect thereto, and any purchase options exercised or exercisable by the Company.  Except as set forth on Schedule 2.06(d) , the Company enjoys peaceful possession under each of the Real Property Leases and each of the Real Property Leases is binding and enforceable on the Company and, to the Knowledge of the Company, valid and in full force and effect.  Neither the Company nor, to the Knowledge of the Company, any other party to any of the Real Property Leases has materially Breached any of the Real Property Leases or is in material default thereunder and no material Breach of or material default by the Company under any of the Real Property Leases has occurred. Consummation of the Merger will not result in the termination of any of the Real Property Leases, and immediately after the Closing, all of the Real Property Leases will continue in full force and effect without the imposition of any additional obligation on the Surviving Corporation resulting from the Merger.

2.07         Material Contracts .  Schedule 2.07 attached hereto sets forth a complete and correct list of all of the following types of contracts and other agreements (whether written or oral) to which the Company is a party or by which the Company or the Assets are bound, and all amendments or modifications thereto:

(a)            All sales agency, VAR, OEM, re-seller or distributorship agreements or franchises or agreements providing for the services of an independent contractor to which the Company is a party or by which the Company is bound;

(b)            All contracts, agreements, commitments or licenses pursuant to which the Company licenses to or from third parties Company Intellectual Property (other than license agreements and support contracts entered into in the ordinary course of business, copies of which, to the extent the Company was able to locate the same, were made available to Parent);

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(c)            All loan agreements, indentures, mortgages, pledges, conditional sale or title retention agreements, security agreements, equipment obligations, guaranties, leases or lease purchase agreements to which the Company is a party or by which the Company is bound;

(d)            All contracts, agreements and commitments, whether or not fully performed, in respect of the issuance, sale or transfer of the capital stock, bonds or other securities of the Company or pursuant to which the Company or pursuant to which the Company has acquired any substantial portion of the Business or the Assets;

(e)            All contracts, agreements, commitments, or other legally binding understandings or arrangements to which the Company is a party or by which the Company or any of its properties are bound or affected, but excluding (i) purchase and sales orders and commitments (including license agreements and support contracts, copies of which, to the extent the Company was able to locate the same, were made available to Parent) made in the ordinary course of business, (ii) contracts entered into in the ordinary course of business or involving payments or receipts by the Company of less than $20,000 in the case of any single contract, and (iii) contracts entered into in the ordinary course of business that are terminable by the Company on 30 days’ notice without any penalty or consideration or involving payments or receipts by the Company of less than $20,000 in the case of any single contract;

(f)             All collective bargaining agreements, employment and consulting agreements, executive compensation plans, bonus plans, deferred compensation agreements, employee pension plans or retirement plans, employee stock options or stock purchase plans and group life, health and accident insurance and other employee benefit plans, agreements, arrangements or commitments, including, without limitation, all Employee Programs and any associated contracts or agreements and any holiday, vacation and other bonus practices, to which the Company is a party or is bound;

(g)            All contracts and other agreements for sale of any material Asset or for the grant to any Person of any preferential rights to purchase any material Asset;

(h)            All joint venture, partnership and alliance agreements;

(i)             All confidentiality or non-disclosure agreements, but only to the extent the Company was able to locate same;

(j)             All joint development, outsourced development, independent contractor or software consultant agreements;

(k)            All contracts (i) containing any so-called “most favored nation” provisions or any similar provision requiring the Company to offer a third party terms or concessions at least as favorable as those offered to one or more other parties or (ii) containing any so-called “change of control” provisions;

(l)             All contracts and other agreements with clients, customers or any other Person for the sharing of fees or for the rebating of charges or purchase price;

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(m)           All contracts and other agreements containing covenants of the Company or the Principal Stockholders pertaining to the right to compete or not compete in any line of business or similarly restricting the Company’s ability to conduct business with any Person or in any geographical area, or covenants of any Person (other than any present or past officer, employee or consultant of the Company) not to compete with the Company in any line of business or restricting such Person’s ability to conduct business or in any geographical area;

(n)            All Real Property Leases and personal property leases;

(o)            All contracts for the development of Software;

(p)            All contracts with Development Personnel referred to in Section 2.08(f) ;

(q)            All contracts that grant joint ownership rights to the Company and any other Person as to any Intellectual Property; and

(r)             All contracts that grant any current, executory or escrow rights in any source code for Software to any Person.

Except as provided in Schedule 2.07 , all of the contracts, agreements, non-competition agreements, non-disclosure agreements, leases, licenses and commitments required to be listed on Schedule 2.07 attached hereto (the “ Material Contracts ”), are valid and binding, enforceable in accordance with their respective terms, in full force and effect and are not subject to termination or modification by any other party thereto as a result of the consummation of the Merger.  Except as disclosed in Schedule 2.07 attached hereto, (i) there is not under any of the Material Contracts any existing material Breach or default by the Company or, to the Knowledge of the Company, by another party thereto (or, to the Knowledge of the Company, condition or event that with the expiration of any applicable grace period or the giving of notice would constitute a material Breach or default by the Company or another party thereto), that would result in a right to accelerate or loss of rights, (ii) no written notice of termination or, to the Knowledge of the Company, written indication of any intention to terminate has been given by any party to any of the Material Contracts, and (iii) the Company is not providing any additional products or services, without charge, to any customer covered by any of the Material Contracts.  Accurate and complete copies of all of the Material Contracts (together with any and all amendments thereto) have been delivered to Parent; provided, however, that with respect to (i) purchase and sales orders commitments with customers entered into in the ordinary course of business, (ii) license and support contracts with customers entered into in the ordinary course of business, and (iii) confidentiality and non-disclosure agreements, the Company only represents and warrants that it has delivered or made available to Parent copies to the extent the Company could locate the same.

2.08          Intellectual Property .

(a)            Schedule 2.08(a) lists all of the Company’s registered Patents, pending patent applications, Trademarks and Internet domain names.  All of the Company Intellectual Property is free and clear of all Liens.  The Company has not pledged its licenses to Off-the-Shelf Software as collateral for any obligation to a third party.  The Company owns or has the right to use, make, prepare derivative works from, publicly display, publicly perform, reproduce,

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distribute, have made, sell, offer to sell, import (but solely to the extent that any of the Company Intellectual Property is imported), license, sublicense and otherwise exploit such Company Intellectual Property owned by the Company and refrain from undertaking any of the foregoing activities, without payment due or accruing after the Effective Time to any Person (excepting payments for maintenance or renewal of registered Company Intellectual Property).  The Company has the right to use as currently used by the Company the Off-the-Shelf Software licensed by the Company, without payment due or accruing after the Effective Time to any Person (excepting payments for maintenance, annual license fees or similar payments related to the Off-the-Shelf Software).  Upon consummation of the Merger, the Surviving Corporation will own the Company Intellectual Property, free and clear of all Liens, and will have the rights consistent with the rights arising in such Company Intellectual Property under applicable law to use, make, prepare derivative works from, publicly display, publicly perform, reproduce, distribute, have made, sell, offer to sell, import (solely to the extent that any of the Company Intellectual Property is imported), license, sublicense and otherwise exploit such Company Intellectual Property and refrain from undertaking any of the foregoing activities, without payment due or accruing after the Effective Time to any Person (excepting payments for maintenance or renewal of registered Company Intellectual Property).

(b)            The Company has the right pursuant to the IP Licenses (but only to the extent such rights are expressly granted by the terms of such IP Licenses, and in any event subject to all the terms and restrictions of such IP Licenses) to use, make, prepare derivative works from, publicly display, publicly perform, reproduce, distribute, have made, sell, offer to sell, import (but solely to the extent that any of the Company Intellectual Property is imported), license, sublicense and otherwise exploit the Intellectual Property subject to the IP Licenses and refrain from undertaking any of the foregoing activities, in the manner in which such Intellectual Property has been employed by the Company and without payment due or accruing after the Effective Time to any Person except as set forth in such IP Licenses (but solely to the extent that each such IP License has been delivered to Parent prior to Closing or, in the case of end user license agreements executed by customers of the Company, the applicable form of license agreement has been delivered to Parent prior to Closing) or in Schedule 2.08(b) .  Upon consummation of the Merger, subject to the Surviving Corporation paying applicable license fees and royalties with respect to IP Licenses (as set forth in Section 2.08(k)) and Off-the-Shelf Software and obtaining all consents required with respect to the IP Licenses at the Closing, the Surviving Corporation will have such rights to the Off-the-Shelf Software and pursuant to the IP Licenses (but only to the extent such rights are expressly granted by the terms of such IP Licenses, and in any event subject to all the terms and restrictions of such IP Licenses) that the Company had immediately prior to the Effective Time.

(c)            Schedule 2.08(c) sets forth a list of all registrations, issuances, filings and applications for any Company Intellectual Property filed by the Company in the five (5) year period prior to the date hereof, specifying as to each item, as applicable: the nature of the item, including the title; the owner of the item; the jurisdictions in which the item is issued or registered or in which an application for issuance or registration has been filed; and the issuance, registration, or application numbers and dates.

(d)            Schedule 2.08(d) sets forth a list of all IP Licenses under which the Company is a (i) licensee or (ii) licensor, distributor or reseller, except, in each case (A) for IP

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Licenses relating to Off-the-Shelf Software, and (B) license and support agreements with customers of the Company, and all such IP Licenses have been delivered or made available to Parent.  The Company has performed all obligations imposed on it pursuant to such IP Licenses where a failure to perform such obligation has caused, or could reasonably be expected to cause, a Material Adverse Effect.  The Company has made all payments required under all, and has not Breached any, IP Licenses and, to the Knowledge of the Company there is not any other party thereto, in Breach of, or default thereunder, nor is there, to the Knowledge of the Company, any event that with notice or lapse of time or both would constitute a default thereunder where such Breach or default has caused, or could reasonably be expected to cause, a Material Adverse Effect.  All of such IP Licenses are valid, enforceable, and in full force and effect.  Subject to all consents required with respect to such IP Licenses or except as set forth in Schedule 2.08(d) , (i) such IP Licenses will continue to be valid, enforceable and in full force and effect immediately after the Effective Time and (ii) the transactions contemplated hereby and by the Transaction Documents will not result in the termination of, or otherwise require the consent of any party to, any such IP License.

(e)            The Company owns all right title and interest in all Company Intellectual Property and has entered into licenses to all Off-the-Shelf Software used by the Company.  The Company has taken reasonable precautions under the circumstances to protect the secrecy and confidentiality and value of its Trade Secrets and the proprietary nature and value of the Company Intellectual Property.  None of the Company’s Trade Secrets, the value of which is contingent upon maintenance of confidentiality thereof, has been disclosed to any employee, representative or agent of the Company or any other Person not obligated to maintain such Trade Secret in confidence pursuant to a confidentiality agreement or understanding entered into with the Company, except as required by the applicable patent office pursuant to the filing of a patent application by the Company.

(f)             Each present employee, officer or consultant of the Company (collectively, the “ Development Personnel ”) who developed any material part of any material Product or any Intellectual Property that is part of such Product has executed a valid and enforceable agreement with the Company that is substantially in the form of the Company’s standard employee agreement, a copy of which is attached to Schedule 2.08(f) , or in such other form a copy of which has been delivered or made available to Parent.  To the Knowledge of the Company, none of the Development Personnel has made any written Claim against the Company of ownership or moral rights (including, without limitation, copyrights or patent rights) regarding the Company Intellectual Property.   Set forth on Schedule 2.08(f) is a listing of any past employee, consultant, contractor or affiliate who made a material contribution to the development of the Company Intellectual Property who has not assigned such Intellectual Property to the Company.

(g)            To the Knowledge of the Company, no former employer of any employees of the Company has made a written Claim against the Company that such employee or the Company is utilizing or infringing upon Intellectual Property of such former employer.

(h)            It is not necessary for the Business as currently conducted to use any Intellectual Property owned by any present or past Affiliate of the Company or any other Person, except for any Intellectual Property subject to IP Licenses or Off-the-Shelf Software.

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(i)             To the Knowledge of the Company, none of the Intellectual Property created by the Company or whose ownership has been purchased, by corporate merger, asset acquisition or otherwise by the Company, that constitutes products or services owned and used, developed, sold, licensed, imported or otherwise exploited by the Company infringes upon or otherwise violates any Intellectual Property rights of any Person.  To the Knowledge of the Company, the Company’s use of Intellectual Property licensed by it pursuant to IP Licenses (other than those relating to Off-the-Shelf Software) that constitutes products or services owned and used, developed, sold, licensed, imported or otherwise exploited by the Company does not infringe upon or otherwise violate any Intellectual Property rights of any Person.  To the Knowledge of the Company, no Person is infringing upon or otherwise violating the Intellectual Property owned by the Company.

(j)             There are no Claims pending or, to the Knowledge of the Company, threatened, in writing (i) contesting the right of the Company to use, copy, distribute, prepare derivative works, make, have made, sell, offer to sell, import, license, sublicense or otherwise exploit any of the Company’s products or services currently or previously made, had made, sold, offered for sale, licensed, imported (solely to the extent that such product or service is imported),  or made available to any person or (ii) opposing or attempting to cancel or invalidate any of the Company’s rights in or to any Company Intellectual Property.

(k)            The Company is not party to or bound by any license or other agreement requiring the payment by the Company of a royalty or license payment over $10,000 due or accruing after the date hereof, excluding such licenses or other agreements relating to Off-the-Shelf Software.

(l)             The Company is not bound by any non-competition or similar agreement that would be binding upon the Surviving Corporation after completion of the transactions contemplated by this Agreement and the Transaction Documents.

(m)           All Software constituting a product currently licensed or service provided (other than customer support services) by the Company and all third party computer programming delivered with or otherwise a part of any such Software, is listed on Schedule 2.08(m) .  The Company has all right, title and interest to or license rights to such Software and all third party computer programming delivered with or otherwise a part of any such Software and possesses necessary to grant the licenses contained in the Company’s standard end user license.  Such Software performs in substantial conformance with its concomitant standard user and technical documentation, and the Company has made available to Parent the most current bug list and enhancement list for such Software.  No Claims have been made by the Company or, to the Knowledge of the Company, by any licensee of such Software, with respect to such Software or Documentation under any insurance coverage including, but not limited to, errors and omissions insurance.

(n)            Schedule 2.08(n) lists all material software of others (“ Third Party Software ”) that is necessary in order for the Company’s proprietary Software to perform in accordance with its standard documentation.

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(o)            No copies of the source code for Company’s proprietary Software has been provided to any Person other than employees and consultants of the Company who are bound by confidentiality obligations to the Company, except for the Parent in conjunction with the transactions contemplated herein.  The Company has not licensed any Person the right to use any Trademark of the Company except for rights to use the same granted to distributors, and sales agents in connection with the licensing of the Company Software.

(p)            The Company has made available to Parent a record or copy of the substance of all of the written and verbal complaints documented in its tracking systems and correspondence from any customer regarding the performance of the Company’s proprietary Software or the Documentation wh