AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

Execution Version

AGREEMENT AND PLAN OF MERGER

dated as of

December 15, 2006

by and among

M2M HOLDINGS, INC.,

MAGIC SOFTWARE ACQUISITION CORP.

and

KNOVA SOFTWARE, INC.

AGREEMENT AND PLAN OF MERGER

     This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of December 15, 2006 by and among M2M Holdings, Inc., a Delaware corporation (“ Parent ”), Magic Software Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“ Merger Sub ”), and KNOVA Software, Inc., a Delaware corporation (the “ Company ”).

RECITALS :

     A. The Boards of Directors of each of the Company, Parent and Merger Sub believe it is in the best interests of each company and their respective stockholders that Parent acquire the Company through the statutory merger of Merger Sub with and into the Company (the “ Merger ”) upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), and, in furtherance thereof, have approved this Agreement and the Merger.

     B. Pursuant to the Merger and subject to the terms and conditions hereof, among other things, all of the issued and outstanding shares of capital stock of the Company and all outstanding options, warrants and other rights to receive shares of the Company’s capital stock shall be converted into the right to receive cash.

     C. Concurrently with the execution of this Agreement, and as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, certain stockholders of the Company, who hold in the aggregate approximately 41% of the outstanding capital stock of the Company shall enter into a Voting Agreement in the form attached hereto as Exhibit A (the “ Voting Agreement ”).

     D. The Company, on the one hand, and Parent and Merger Sub, on the other hand, desire to make certain representations, warranties, covenants and other agreements in connection with the Merger.

     NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

ARTICLE I
DEFINITIONS

     1.1. Certain Definitions . As used in this Agreement, the following terms shall have the meanings set forth or as referenced below:

     “ Acquisition Proposal ” means, other than the transactions contemplated by this Agreement, any offer, proposal or inquiry relating to (a) any acquisition or purchase, direct or indirect, of 25% or more of the consolidated assets of the Company and its Subsidiaries or over 25% of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 25% of the consolidated assets of

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the Company, (b) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in such Third Party’s beneficially owning 25% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 25% of the consolidated assets of the Company, or (c) a merger, consolidation, share exchange, business combination, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 25% of the consolidated assets of the Company.

     “ Affiliate ” when used with respect to any specified Person, means any other Person who or that, directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with such specified Person.

     “ Business ” means the business of the Company and its Subsidiaries as conducted on the date hereof, including the Company’s business of providing customer relationship management (CRM) software applications.

     “ Business Day ” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by applicable Law to close.

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

     “ Company 10-K ” means the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

     “ Company Balance Sheet ” means the consolidated balance sheet of the Company as of December 31, 2005, including the footnotes thereto, set forth in the Company 10-K.

     “ Company Common Stock ” means the Common Stock, par value $.01 per share, of the Company.

     “ Company Financial Statements ” means all of the financial statements of the Company and its Subsidiaries included in the Company Reports.

     “ Company Intellectual Property ” means any Intellectual Property that is owned or held by the Company or any of its Subsidiaries or that is being used, or is currently under development for use, in the Business.

     “ Company Option ” means each outstanding option to purchase shares of Company Common Stock under the Company Option Plans.

     “ Company Option Plans ” means the Company’s Amended and Restated 2000 Stock Incentive Plan, as amended and restated on April 15, 2005, and as further amended on June 13, 2006.

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     “ Company Reports ” means all forms, reports, statements, information and other documents (as supplemented and amended since the time of filing) filed or required to be filed by the Company with the SEC since December 31, 2002, including the Company 10-K.

     “ Contract ” means any contract (written or oral), undertaking, commitment, arrangement, plan or other legally binding agreement or understanding.

     “ Control ” means, as to any Person, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. The term “Controlled” shall have a correlative meaning.

     “ Current Company Reports ” means all forms, reports, statements, information and other documents (as supplemented and amended since the time of filing) filed or required to be filed by the Company with the SEC since December 31, 2005, including the Company 10-K.

     “ Employment Agreements ” means any termination or severance agreements, change of control agreements or any other Contracts respecting the terms and conditions of employment of any officer or employee of the Company (but shall exclude the standard offer letter that the Company provides to new employees, a copy of which has been provided to Parent).

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

     “ GAAP ” means generally accepted accounting principles in the United States.

     “ Governmental Authority ” means any U.S. or foreign, federal, state, provincial or local governmental, regulatory or administrative authority, agency or commission or any court, tribunal, judicial or arbitral body and any instrumentality of any of the foregoing.

     “ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination, award or binding agreement issued, promulgated or entered by or with any Governmental Authority.

     “ Intellectual Property ” means all intellectual property and other similar proprietary rights in any jurisdiction, whether owned or held for use under license, whether registered or unregistered, including without limitation such rights in and to: (a) trademarks, trade dress, service marks, certification marks, logos and trade names, and the goodwill associated with the foregoing (collectively, “ Trademarks ”); (b) patents and patent applications, and any and all divisions, continuations, continuations-in-part, reissues, continuing patent applications, reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, certificates of invention, certificates of registration and like rights (collectively, “ Patents ”); (c) inventions, invention disclosures, discoveries and improvements, whether or not patentable; (d) writings and other works of authorship, moral rights and mask works (collectively, “ Copyrights ”); (e) trade secrets (including those trade secrets defined in the Uniform Trade Secrets Act and under corresponding foreign statutory Law and common law), business, technical and know-how information, non-public information and confidential information and rights to limit the use or disclosure thereof by any Person (collectively, “ Trade Secrets ”); (f) software, including without limitation data files, source code, object code, application programming interfaces, databases and other software-related

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specifications and documentation (collectively, “ Software ”); (g) registered domain names and uniform resource locators (“ Domain Names ”); and (h) claims, causes of action and defenses relating to the enforcement of any of the foregoing; in each case, including any registrations of, applications to register, and renewals and extensions of, any of the foregoing clauses (a) through (g) with or by any Governmental Authority in any jurisdiction.

     “ International Plan ” means any benefit plan or arrangement that is administered, or contributed to, by the Company or any member of its Controlled Group that covers any current or former employee of the Company or any member of its Controlled Group who is based primarily in a country other than the United States.

     “ IRS ” means the Internal Revenue Service.

     “ Knowledge ,” with respect to the Company, means the knowledge (assuming reasonable due inquiry) of any of the following persons: Bruce Armstrong, Sham Chotai, Frank Lauletta, Thomas Muise and Richard Nieset.

     “ Laws ” means any federal, national, state or local constitution, statute, law, ordinance, regulation, rule, code, injunction, judgment or other Governmental Order, requirement or rule of law.

     “ Liability ” or “ Liabilities ” means any liabilities or obligations of any nature (whether fixed, contingent, potential or otherwise, and whether due or to become due, known or unknown, accrued or unaccrued), and whether presently existing, or arising or asserted at any time hereafter.

     “ Lien ” means any lien (statutory or otherwise), mortgage, pledge, charge, option, hypothecation, collateral assignment, encumbrance, security interest, restriction or similar claim in equity of any kind or nature whatsoever; provided , however , that the term Lien shall not include any Permitted Liens.

     “ Management Retention Plan ” means that certain Management Retention Plan adopted by the Board of Directors of the Company on or about October 30, 2006, as amended through the date hereof.

     “ Material Adverse Effect (or Change) ” means any circumstance, development, effect, event, condition or occurrence (any such item, an “ Effect ”) that (a) has been, or reasonably could be expected to be, material and adverse with respect to the business, condition (financial or otherwise), assets, properties, Liabilities, rights, obligations or operations of the Business or the Company and its Subsidiaries, taken as a whole, or (b) materially impairs or delays, or reasonably could be expected to materially impair or delay, the ability of the Company to consummate the transactions contemplated by this Agreement or to perform its obligations under this Agreement; provided , however , that in no event shall any of the following occurring after the date hereof, alone or in combination, be deemed to constitute, nor be taken into account in determining whether there has been or will be, a Material Adverse Effect (or Change): (i) any change in the Company’s stock price or trading volume, in and of itself ( provided , however , that the exception in this clause shall not in any way prevent or otherwise affect a determination that any change, event, circumstance, development or effect underlying such decrease has resulted in,

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or contributed to, a Material Adverse Effect (or Change)), (ii) any failure by the Company to meet published revenue or earnings projections, in and of itself, (iii) any Effect that results from changes affecting the enterprise software industry or the customer relationship management software market generally (to the extent such Effect is not disproportionate with respect to the Company in any material respect) or the United States economy generally (to the extent such Effect is not disproportionate with respect to the Company in any material respect), (iv) any Effect that results from changes affecting general worldwide economic or capital market conditions (to the extent such Effect is not disproportionate with respect to the Company in any material respect), (v) any Effect resulting from compliance with the terms and conditions of this Agreement, or (vi) any Effect directly attributable to the loss of any individual officer or employee of the Company or any number of officers or employees in the aggregate, other than, in either case, any Effect directly attributable to the loss of any individual or officer identified on Schedule I , which Effect may be taken into account in determining whether there has been or will be, a Material Adverse Effect (or Change).

     “ Permitted Liens ” means (a) mechanic’s and other similar statutory liens that are not material in nature or amount, (b) liens for Taxes or other governmental charges not yet due and payable or which are being contested in good faith, in appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (c) zoning, entitlement, building and other land use regulations, (d) covenants, conditions, restrictions, easements and other similar matters of record affecting title but not adversely affecting current occupancy or use and (e) restrictions on the transfer of securities arising under federal and state securities laws.

     “ Person ” means any individual, corporation, partnership, limited liability company, joint venture, governmental agency or instrumentality, or any other entity.

     “ Representatives ” means, as to any Person, such Person’s officers, directors, employees, auditors, attorneys and financial advisors.

     “ SEC ” means the Securities and Exchange Commission.

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

     “ Subsidiary ” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the Board of Directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.

     “ Taxes ” means all federal, provincial, territorial, state, municipal, local, foreign or other taxes, rates, levies, assessments and other charges, including all income, excise, franchise, gains, capital, real property, goods and services, transfer, value added, gross receipts, windfall profits, severance, ad valorem, personal property, production, sales, use, license, stamp, documentary stamp, mortgage recording, employment, payroll, social security, unemployment, disability, estimated or withholding taxes, and all customs and import duties, in each case imposed by a Taxing Authority, whether disputed or not, and all interest and penalties thereon and additions thereto imposed by any Taxing Authority.

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     “ Taxing Authority ” means any Governmental Authority responsible for the administration or imposition of any Tax.

     “ Tax Return ” means any returns, statement, report, form, information return or claim for refund relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, in each case filed with a Taxing Authority.

     “ Third Party ” means any Person or group (as defined in Section 13(d)(3) of the Exchange Act) other than Company, Parent, Merger Sub or any Affiliates thereof.

     “ Transaction Documents ” means all of the agreements, documents, instruments and certificates contemplated by this Agreement or to be executed by a party to this Agreement in connection with the consummation of the transactions contemplated by this Agreement.

     “ Uniform Trade Secrets Act ” means the Uniform Trade Secret Act promulgated by the National Conference of Commissioners on Uniform State Laws in 1979, as amended.

     1.2. Cross-References . In addition to the foregoing defined terms, each of the following terms is defined in the Section set forth opposite such term:

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     1.3. Rules of Construction . References in this Agreement to gender include references to all genders, and references to the singular include references to the plural and vice versa. The words “include,” “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation.” Unless the context otherwise requires, references in this Agreement to Articles, Sections and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Unless the context otherwise requires, the words “hereof,” “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References herein to “date hereof,” “date of this Agreement” or similar references shall mean as of December 15, 2006.

ARTICLE II
THE MERGER

     2.1. The Merger . Upon the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub, at the Effective Time, shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”).

     2.2. The Closing . The closing of the transactions contemplated hereby (the “ Closing ”) shall take place (i) on the second Business Day after the satisfaction or waiver of each of the conditions set forth in Article VIII, or (ii) at such other time as the parties hereto agree in writing.

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The Closing shall take place at the offices of Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts, or at such other location as the parties hereto agree in writing. The date on which the Closing occurs is herein referred to as the “ Closing Date .”

     2.3. Effective Time . On the Closing Date, or on such other date as the parties hereto agree in writing, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “ Certificate of Merger ”) with the office of 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 such filing, or if another date and time is specified in such filing, such specified date and time, being the “ Effective Time ”).

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

     2.5. Certificate of Incorporation; Bylaws . At the Effective Time, the Certificate of Incorporation and Bylaws of Merger Sub as in effect immediately prior to the Effective Time shall become the Certificate of Incorporation and Bylaws of the Surviving Corporation; provided, however , that Article I of the Certificate of Incorporation of the Surviving Corporation will be amended at the Effective Time to read: “The name of the corporation is KNOVA Software, Inc.”

     2.6. Directors and Officers . The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation. The officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation.

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

ARTICLE III
CONVERSION OF SECURITIES

     3.1. Conversion of Shares . At the Effective Time, by virtue of the Merger and without the requirement of any action on the part of any holder of capital stock of Parent, Merger Sub or the Company:

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          (a) each share of the Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares cancelled pursuant to Section 3.1(b) and, subject to Section 3.7, Dissenting Shares) shall be cancelled and converted into the right, in accordance with the terms of this Agreement, to receive $5.00 in cash, without interest (the “ Merger Consideration ”), payable to the holder thereof, upon surrender of the certificate formerly representing such share and such other documents as may be reasonably required in the manner provided in Section 3.5;

          (b) any shares of capital stock of the Company held by the Company (or held in the Company’s treasury) as of the Effective Time will be cancelled without any conversion thereof and no payment or distribution shall be made with respect thereto; and

          (c) each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $.001 per share, of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

     3.2. Company Options .

          (a) At the Effective Time, each then-outstanding Company Option, whether vested or unvested, shall be cancelled as follows: (i) in the case of a Company Option having a per share exercise price less than the Merger Consideration, such Company Option shall be cancelled in exchange for the right to receive from the Surviving Corporation for each share of Company Common Stock subject to such Company Option immediately prior to the Effective Time an amount (subject to any applicable withholding Tax) in cash equal to the product of (A) the number of shares of Company Common Stock subject to such Company Option immediately prior to the Effective Time and (B) the amount by which the Merger Consideration exceeds the per share exercise price of such Company Option, or (ii) in the case of a Company Option having a per share exercise price equal to or greater than the Merger Consideration, such Company Option shall be cancelled without the payment of cash or issuance of other securities in respect thereof. The cancellation of a Company Option as provided in the immediately preceding sentence shall be deemed a release of any and all rights the holder thereof had or may have had in respect of such Company Option. The aggregate amount paid or payable in respect of the cancellation of the Company Options as set forth in this Section 3.2(a) is referred to herein as the “ Option Consideration .” Unless provision is made with the Paying Agent, the Surviving Corporation shall, as soon as reasonably practicable after its receipt of a duly executed transmittal letter from each holder of a Company Option entitled to receive Option Consideration hereunder (and in no event more than ten (10) Business Days thereafter) mail to each holder of a Company Option the applicable Option Consideration to which they are due, subject to any applicable withholding Tax.

          (b) Prior to the Effective Time, the Company shall take such actions as may be necessary to give effect to the transactions contemplated by this Section 3.2, including, but not limited to, satisfaction of the requirements of Rule 16b-3(e) under the Exchange Act.

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          (c) The Company Option Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any Subsidiary thereof shall be canceled as of the Effective Time. The Company shall ensure that following the Effective Time no participant in the Company Option Plans or other plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any Subsidiary thereof.

          (d) Prior to the Effective Time, the Company shall deliver to the holders of Company Options notices, in form and substance reasonably acceptable to Parent, setting forth such holders’ rights pursuant to this Agreement.

     3.3. Company Warrants . At the Effective Time, each then-outstanding warrant to purchase capital stock of the Company (each a “ Company Warrant ”) shall be cancelled as follows: (a) in the case of a Company Warrant having a per share exercise price less than the Merger Consideration, such Company Warrant shall be cancelled in exchange for the right to receive from the Surviving Corporation for each share of Company Common Stock subject to such Company Warrant immediately prior to the Effective Time an amount in cash equal to the product of (i) the number of shares of Company Common Stock subject to such Company Warrant immediately prior to the Effective Time and (ii) the amount by which the Merger Consideration exceeds the per share exercise price of such Company Warrant, or (b) in the case of a Company Warrant having a per share exercise price equal to or greater than the Merger Consideration, such Company Warrant shall be cancelled without the payment of cash or issuance of other securities in respect thereof. The cancellation of a Company Warrant as provided in the immediately preceding sentence shall be deemed a release of any and all rights the holder thereof had or may have had in respect of such Company Warrant. The aggregate amount paid or payable in respect of the cancellation of the Company Warrants as set forth in this Section 3.3 is referred to herein as the “ Warrant Consideration .” Unless provision is made with the Paying Agent, the Surviving Corporation shall, as soon as reasonably practicable after its receipt of a duly executed warrant termination agreement from each holder of a Company Warrant entitled to receive consideration hereunder (and in no event more than ten (10) Business Days thereafter) mail to each holder of a Company Warrant the applicable Warrant Consideration to which they are due, subject to any applicable withholding Tax.

     3.4. Company ESPP . Prior to the Effective Time, the Company shall take all actions necessary pursuant to the terms of the Company’s Employee Stock Purchase Plan (the “ Company ESPP ”) to (i) shorten each currently ongoing purchase and/or offering period under the Company ESPP that extends beyond the Effective Time (the “ Current Offerings ”) such that a new purchase date for each such Current Offering shall occur prior to the Effective Time and shares of Company Common Stock shall be purchased by the Company ESPP participants prior to the Effective Time, and (ii) preclude the commencement of any new purchase or offering period. The Company shall take all actions necessary so that the Company ESPP shall terminate immediately prior to the earlier of (A) the Effective Time and (B) the date upon which the Company ESPP terminates by its terms.

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     3.5. Surrender of Certificates .

          (a) Not less than five (5) days prior to the Closing Date, Parent shall designate and enter into an agreement with a bank or trust company reasonably acceptable to the Company to serve as Paying Agent in the Merger (the “ Paying Agent ”). After the Effective Time, Parent shall make available to the Paying Agent on a timely basis, if and when needed for the benefit of the stockholders of the Company and otherwise for payment in accordance with this Article III, sufficient cash necessary for the payment of (i) the Merger Consideration as provided in Section 3.1(a) upon surrender as part of the Merger of certificates formerly representing shares of Company Common Stock in the manner provided in Section 3.1(a) and (ii) at the sole discretion of Parent, the Option Consideration and the Warrant Consideration as provided in Sections 3.2 and 3.3 with respect to the treatment of the Company Options and the Company Warrants. Funds made available to the Paying Agent shall be invested by the Paying Agent as directed by Parent (it being understood that any and all interest or income earned on funds made available to the Paying Agent pursuant to this Agreement shall be turned over to Parent).

          (b) As promptly as practicable after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the “ Company Certificates ”) (i) a letter of transmittal in a form reasonably acceptable to the Company which shall specify that delivery shall be effected, and risk of loss and title to the Company Certificates shall pass, only upon actual delivery of the Company Certificates (or an affidavit of lost certificate and, if required by Parent, an accompanying bond or indemnity as contemplated by Section 0(d)) to the Paying Agent and shall be in such form and have such other provisions as Parent shall reasonably specify, and (ii) instructions for use in effecting the surrender of the Company Certificates in exchange for the Merger Consideration, without any interest thereon. Upon surrender of Company Certificates for cancellation to the Paying Agent, together with a duly executed letter of transmittal and such other documents as the Paying Agent shall reasonably require, the holder of such Company Certificates shall be entitled to receive in exchange therefor a check in the amount of the Merger Consideration for each share of Company Common Stock formerly represented thereby to be mailed within ten (10) Business Days of receipt of such Company Certificate and letter of transmittal, in accordance with Section 3.1(a), and the Company Certificates so surrendered shall be canceled. At the sole discretion of Parent, Parent may make similar arrangements with the Paying Agent for the payment of the Option Consideration and the Warrant Consideration to the holders of the Company Options and the Company Warrants, as the case may be; provided , however , that the payment of the applicable Warrant Consideration shall, in all events, be conditioned upon the holder of the applicable Company Warrant delivering to Parent or the Paying Agent, as applicable, a written termination agreement releasing the Company, Parent and their respective Affiliates from any and all claims the holder thereof may have in respect of such Company Warrant.

          (c) Promptly following the date that is twelve (12) months after the Effective Time, the Paying Agent shall deliver to Parent all cash and any documents in its possession relating to the transactions described in this Agreement, and the Paying Agent’s duties shall terminate. Thereafter, each holder of a Company Certificate shall thereafter look only to Parent for payment of the Merger Consideration and may surrender such Company Certificate to the Surviving Corporation or Parent and (subject to applicable abandoned property, escheat and

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similar laws) receive in exchange therefor the Merger Consideration, without any interest thereon. Notwithstanding the foregoing, none of the Paying Agent, Parent, Merger Sub, the Company or the Surviving Corporation shall be liable to a holder of shares of Company Common Stock for any amounts delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws.

          (d) If any Company Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Company Certificate to be lost, stolen or destroyed, the Paying Agent (or if more than twelve (12) months after the Effective Time, the Surviving Corporation), shall issue in exchange for such lost, stolen or destroyed Company Certificate, the Merger Consideration deliverable in respect thereof determined in accordance with this Article III. When authorizing such issuance in exchange therefor, the Board of Directors of the Surviving Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Company Certificate to deliver to the Paying Agent (or if more than twelve (12) months after the Effective Time, the Surviving Corporation) a bond in such amount as the Surviving Corporation may reasonably request, or the execution and delivery by such Person of an indemnity agreement in such form as the Surviving Corporation may direct, in each case as indemnity against any claim that may be made against the Surviving Corporation with respect to the Company Certificate alleged to have been lost, stolen or destroyed.

          (e) Except as required by law, no dividends or other distributions with respect to capital stock of the Surviving Corporation with a record date after the Effective Time shall be paid to the holder of any unsurrendered Company Certificate.

          (f) All cash paid in respect of the surrender for exchange of shares of Company Common Stock in accordance with the terms hereof shall be deemed to be in full satisfaction of all rights pertaining to such shares of Company Common Stock. If, after the Effective Time, Company Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article III.

          (g) The Surviving Corporation (and/or any of its Affiliates) shall be entitled to deduct and withhold from the amounts otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock or any holders of Company Options and Company Warrants, such amounts as the Surviving Corporation (and/or any of its Affiliates) is required to deduct and withhold with respect to the making of such payment under the Code, or any applicable Law, including any provision of state, local or foreign Tax law. To the extent that amounts are so withheld by the Surviving Corporation and/or any of its Affiliates, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock, or the holder of Company Options or Company Warrants, with respect to which such deduction and withholding was made.

     3.6. Closing of the Company’s Transfer Books . At and after the Effective Time, holders of Company Certificates shall cease to have any rights as stockholders of the Company, except for the right to receive the Merger Consideration pursuant to Section 3.1(a). At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of shares

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of Company Common Stock which were outstanding immediately prior to the Effective Time shall thereafter be made.

     3.7. Dissenting Shares . (a) Notwithstanding any provision of this Agreement to the contrary, any shares of Company Common Stock issued and outstanding immediately prior to the Effective Time that are held by a stockholder who has exercised and perfected appraisal rights for such shares in accordance with DGCL and who, as of the Effective Time, has not effectively withdrawn or lost such appraisal rights (“ Dissenting Shares ”), shall not be converted into or represent a right to receive the consideration for Company Common Stock pursuant to Section 3.1, but the holder thereof shall only be entitled to such rights as are granted by the DGCL.

          (b) Notwithstanding the provisions of subsection (a), if any holder of Dissenting Shares shall effectively withdraw or lose (through failure to perfect or otherwise) his or her appraisal rights, then, as of the later of Effective Time and the occurrence of such event, such holder’s shares of Company Common Stock shall automatically be converted into and represent only the right to receive the consideration for Company Common Stock to which such stockholder would otherwise be entitled under Section 3.1, without interest thereon, upon surrender of the certificate representing such shares.

          (c) The Company shall give Parent (i) prompt notice of its receipt of any written demands for appraisal of any shares of Company Common Stock, withdrawals of such demands and any other instruments relating to the Merger served pursuant to Section 262 of the DGCL and received by the Company and (ii) the opportunity to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any such demands or offer to settle or settle any such demands.

     3.8. Certain Adjustments . Notwithstanding the restrictions contained in Section 6.2, in the event that the Company changes the number of shares of Common Stock, or securities convertible or exchangeable into or exercisable for shares of Common Stock, issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other similar transaction, the Merger Consideration and any other dependent items shall be proportionately adjusted to reflect such change.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company hereby represents and warrants to Parent and Merger Sub that the statements contained in this Article IV are true and correct, except as expressly set forth on the Disclosure Schedule attached hereto (the “ Disclosure Schedule ”) or as disclosed in the Current Company Reports (to the extent it is reasonably apparent that any such disclosure set forth in the Current Company Reports would qualify the representations and warranties contained herein).

     4.1. Existence and Power . The Company is a corporation duly formed, validly existing and in good standing under the Laws of its jurisdiction of incorporation, and has all

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corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except as would not reasonably be expected to have a Material Adverse Effect. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except such jurisdictions where the failure to be so qualified or licensed or in good standing would not reasonably be expected to have a Material Adverse Effect. Set forth on Section 4.1 of the Disclosure Schedule is a complete list of all of the addresses at which the Company maintains any offices or any material property or assets. The Company has heretofore delivered or made available (including through the SEC’s EDGAR system) to Parent true and complete copies of the Certificate of Incorporation and Bylaws of the Company as currently in effect.

     4.2. Corporate Authorization . (a) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company’s corporate powers and, except for the required approval of the Company’s stockholders in connection with the consummation of the Merger, have been duly authorized by all necessary corporate action on the part of the Company. The affirmative vote of the holders of a majority of the outstanding shares of the Company Common Stock is the only vote of the holders of any of the Company’s capital stock necessary in connection with the consummation of the Merger (the “ Company Stockholder Approval ”). Assuming the due authorization, execution and delivery hereof by Parent and Merger Sub, this Agreement constitutes a valid and binding agreement of the Company, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing.

          (b) At a meeting duly called and held, the Company’s Board of Directors has unanimously determined that this Agreement and the transactions contemplated hereby are fair to and in the best interests of the Company’s stockholders, unanimously approved and adopted this Agreement and the transactions contemplated hereby and unanimously resolved (subject to Section 6.4) to recommend approval and adoption of this Agreement by its stockholders (such recommendation, the “ Company Board Recommendation ”).

     4.3. Subsidiaries .

          (a) Except for the Subsidiaries of the Company identified in the Current Company Reports, the Company does not own, directly or indirectly or through nominees, any capital stock of or any other equity interest in, or control, directly or indirectly, any other Person or any Subsidiary, and the Company is not, directly or indirectly, a party to, member of or participant in any partnership, joint venture or similar business entity. Each Subsidiary of the Company is duly organized, validly existing and in good standing under the Laws of its jurisdiction of formation. Each Subsidiary of the Company has the full corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each Subsidiary of the Company is duly qualified or licensed to do business and is in good standing as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership, leasing, holding or use of its properties makes such qualification necessary,

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except such jurisdictions where the failure to be so qualified or licensed or in good standing would not reasonably be expected to have a Material Adverse Effect. The Company has delivered or made available a true and correct copy of each such Subsidiary’s Certificate of Incorporation and Bylaws (or other comparable organizational documents), each as amended to date and in full force and effect on the date hereof, to Parent and no amendments thereto are pending. None of the Company’s Subsidiaries has violated its Certificate of Incorporation or Bylaws or any of its organizational documents in any material respect. Section 4.3 of the Disclosure Schedule lists every jurisdiction in which each of the Company’s Subsidiaries has facilities, maintains an office or has a current employee.

          (b) Except as set forth in Section 4.3 of the Disclosure Schedule , all of the outstanding capital stock of, or other ownership interests in, each Subsidiary of the Company is owned by the Company, directly or indirectly, free and clear of any Lien. There are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any other Subsidiary or (ii) options or other rights to acquire from the Company or any of its Subsidiaries, or obligation on the part of the Company or any of its Subsidiaries to issue, any capital stock, voting securities or other ownership interests in, or any securities convertible into or exchangeable for any capital stock, voting securities or ownership interests in, any of the Company’s Subsidiaries (the items in clauses (i) and (ii) being referred to collectively as the “ Subsidiary Securities ”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities. All outstanding shares of capital stock of each such Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable.

     4.4. Governmental Authorization . The execution, delivery and performance by the Company of this Agreement and each of the Transaction Documents to which the Company is a party require no action by or in respect of, or filing with, any Governmental Authority, other than (a) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company does business, (b) compliance with any applicable requirements of the Securities Act, the Exchange Act, and any other applicable U.S. state or federal securities laws and (c) any actions or filings the absence of which would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

     4.5. Non-Contravention . The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not (a) contravene in any material respect, conflict with, or result in any violation or breach of any provision of the Certificate of Incorporation or Bylaws of the Company, (b) assuming compliance with the matters referred to in Section 4.4 and subject to obtaining the Company Stockholder Approval, contravene, conflict with or result in a material violation or breach of any provision of any Law, (c) except as set forth on Section 4.5 of the Disclosure Schedule , require any material consent or other action by any Person under, constitute a material default, or an event that, with or without notice or lapse of time or both, would constitute a material default under, or cause or permit the termination, cancellation, acceleration or other change of any material right or obligation or the loss of any material benefit to which the Company or any of its Subsidiaries is entitled, under any provision of any material Contract or other material instrument

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binding upon the Company or any of its Subsidiaries or any material license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of the Company and its Subsidiaries or (d) result in the creation or imposition of any Lien on any material asset of the Company or any of its Subsidiaries.

     4.6. Company Capital Structure .

          (a) The authorized capital stock of the Company consists of 50,000,000 shares of Company Common Stock, of which, as of the date hereof, 8,923,823 shares are issued and outstanding. All outstanding shares of Company Common Stock (i) are duly authorized, validly issued, fully paid and non-assessable and are not subject to preemptive rights created by statute, the Company’s Certificate of Incorporation or Bylaws or any Contract to which the Company is a party or by which it is bound, and (ii) have been offered, sold and delivered by the Company in compliance in all material respects with all applicable Laws. There are no declared or accrued but unpaid dividends with respect to any shares of Company Common Stock.

          (b) The Company Option Plans have been duly authorized, approved and adopted by the Company’s Board of Directors and its stockholders and are in full force and effect. The Company has reserved a total of 2,909,497 shares of Company Common Stock for issuance under the Company Option Plans, of which (i) 2,352,200 shares are issuable, as of the date hereof, upon the exercise of outstanding, unexercised Company Options, (ii) 441,155 shares are available for grant but have not yet been granted pursuant to the Company Option Plans, and (iii) 116,142 shares have been issued and are outstanding pursuant to the prior exercise of stock options or other stock rights granted pursuant to the Company Option Plans. All outstanding Company Options have been offered, issued and delivered by the Company in compliance in all material respects with all applicable Laws and with the terms and conditions of the Company Option Plans. Section 4.6(b) of the Disclosure Schedule sets forth, as of the date hereof: (i) for each outstanding Company Option, the name of the record holder of such Company Option, the number of shares of Company Common Stock subject to such option, the exercise price of such option and the vesting schedule for such option, including the extent vested to the date of this Agreement and (ii) for each outstanding Company Warrant, the name of the record holder of such Company Warrant, the number of shares of Company Common Stock subject to such warrant and the exercise price of such Company Warrant.

          (c) Except for the Company Options and the Company Warrants set forth on Section 4.6(b) of the Disclosure Schedule and as set forth on Section 4.6(c) of the Disclosure Schedule , there are no options, warrants, calls, rights, convertible securities, commitments or agreements of any character, written or oral, to which the Company or any of its Subsidiaries is a party, or by which the Company or any of its Subsidiaries is bound, obligating the Company or any of its Subsidiaries to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any Company Common Stock or any capital stock or equity interest of such Subsidiary or obligating the Company or any of its Subsidiaries to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or other similar rights with respect to the Company or any of its Subsidiaries.

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          (d) Except as set forth in Section 4.6(d) of the Disclosure Schedule , (i) there are no voting trusts, proxies, or other agreements or understandings with respect to the voting stock of the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party, by which the Company or any of its Subsidiaries is bound, or of which the Company has Knowledge, and (ii) there are no agreements or understandings to which the Company or any of its Subsidiaries is a party, by which the Company or any of its Subsidiaries is bound, or of which the Company has Knowledge relating to the registration, sale or transfer (including agreements relating to rights of first refusal, “co-sale” rights, “drag-along” rights or registration rights) of any Company Common Stock, or any other investor rights, including, without limitation, rights of participation (i.e., pre-emptive rights), co-sale, voting, first refusal, board observation, visitation or information or operational covenants (the items described in clauses (i) and (ii) being, collectively, the “ Rights Agreements ”). With respect to all Rights Agreements (other than Rights Agreements that are registration rights agreements as identified on Section 4.6(d) of the Disclosure Schedule and the Voting Agreement), such Rights Agreements shall terminate and be of no further force or effect at or prior to the Effective Time. With respect to the Rights Agreements that are registration rights agreements as identified on Section 4.6(d) of the Disclosure Schedule , from and after the Effective Time, no party thereto shall have the right to cause the Surviving Corporation to file a registration statement under the Securities Act or otherwise effect the registration under the Securities Act of any shares of capital stock of the Surviving Corporation.

     4.7. Company Reports; Financial Statements .

          (a) Except as set forth on Section 4.7(a) of the Disclosure Schedule , the Company has timely filed all Company Reports required to be filed with the SEC on or prior to the date hereof and will timely file all Company Reports required to be filed with the SEC after the date hereof and prior to the Effective Time. No Subsidiary of the Company is subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act. Each Company Report has complied, or will comply as the case may be, in all material respects with the applicable requirements of the Securities Act, and the rules and regulations promulgated thereunder, or the Exchange Act, and the rules and regulations promulgated thereunder, as applicable, each as in effect on the date so filed. None of the Company Reports (including any financial statements or schedules included or incorporated by reference therein) contained or will contain, as the case may be, when filed (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of mailing, respectively) any untrue statement of a material fact or omitted or omits or will omit, as the case may be, to state a material fact required to be stated or incorporated by reference therein or necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading.

          (b) Each of the Chief Executive Officer and Chief Financial Officer of the Company has made all certifications required by Rules 13a-14 and 15d-14 under the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act with respect to the applicable Company Reports filed prior to the date hereof (collectively, the “ Certifications ”) and the statements contained in such Certifications are accurate in all material respects as of the filing thereof.

          (c) All of the Company Financial Statements comply in all material respects with applicable requirements of the Exchange Act and have been prepared in accordance with

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GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company at the respective dates thereof and the consolidated results of its operations and changes in cash flows for the periods indicated (subject, in the case of unaudited statements, to normal year-end audit adjustments consistent with GAAP).

          (d) The Company and its Subsidiaries have implemented and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. The Company has implemented and maintains disclosure controls and procedures (as defined in Rule 13-15(e) of the Exchange Act) designed to ensure that information relating to the Company, including its consolidated Subsidiaries, required to be disclosed in the reports the Company files or submits under the Exchange Act is made known to the Chief Executive Officer and the Chief Financial Officer of the Company by others within those entities.

          (e) The Company is, and since enactment of the Sarbanes-Oxley Act has been, in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act.

          (f) The Company has adopted a code of ethics, as defined by Item 406(b) of Regulation S-K promulgated under the Exchange Act, for senior financial officers, applicable to its principal financial officer, comptroller or principal accounting officer, or persons performing similar functions. The Company has promptly disclosed, as required by Section 406(b) of Sarbanes-Oxley Act, any change in or waiver of the Company’s code of ethics. To the Knowledge of the Company, there have been no violations of provisions of the Company’s code of ethics.

          (g) There are no outstanding loans or other extensions of credit made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3(a)(7) under the Exchange Act) or director of the Company. The Company has not, since the enactment of the Sarbanes-Oxley Act, taken any action prohibited by Section 402 of the Sarbanes-Oxley Act applicable to the Company.

          (h) There are no Liabilities of the Company or any of its Subsidiaries of any kind whatsoever, whether or not accrued and whether or not contingent or absolute, that are material to the Company, other than (i) Liabilities disclosed and provided for in the Company Balance Sheet or in the notes thereto; (ii) Liabilities incurred in the ordinary course of business consistent with past practice since December 31, 2005; (iii) Liabilities incurred on behalf of the Company under this Agreement; or (iv) Liabilities that would not reasonably be expected to have a Material Adverse Effect.

     4.8. Disclosure Documents . None of the information supplied by the Company for inclusion in the proxy statement or any amendment or supplement thereto (the “ Proxy Statement ”) to be sent to the stockholders of the Company in connection with their meeting to consider this Agreement and the Merger (the “ Company Stockholders’ Meeting ”), at the time the Proxy Statement or any amendment or supplement thereto is first mailed to the stockholders of the Company and at the time of the Company Stockholders’ Meeting, will contain any untrue

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statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

     4.9. Absence of Certain Changes . Since the date of the Company Balance Sheet, except as set forth on Section 4.9 of the Disclosure Schedule , the Company has conducted its business in the ordinary course consistent with past practices, and there has not been any:

          (a) event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company;

          (b) amendment to the Company’s Certificate of Incorporation or Bylaws;

          (c) split, combination or reclassification of any outstanding shares of the Company’s capital stock or repurchase, redemption or other acquisition of any shares of the Company’s capital stock or the declaration or payment of any dividends on such shares;

          (d) formation of any material Subsidiary or acquisition of any material equity interest in any other Person;

          (e) adjustment or change in the price or other change in the terms of any options, warrants or convertible securities of the Company (including the Company Options and Company Warrants);

          (f) sale, lease, license or other disposition of any material subsidiary or any material amount of assets, securities or property by the Company or any of its Subsidiaries, except (i) pursuant to existing Contracts and (ii) in the ordinary course consistent with past practice;

          (g) acquisition or Contract to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, any business or any corporation, partnership, joint venture, association or other business organization or division thereof;

          (h) capital expenditure or other expenditures outside the ordinary course of business or inconsistent with past practices, in excess of $100,000 in the aggregate;

          (i) payments outside the ordinary course of business for purposes of settling any dispute;

          (j) transaction entered into between the Company, on the one hand, and any stockholder, officer, director or employee of the Company or any Affiliate or family member of such Person, on the other hand, outside of the ordinary course of business;

          (k) other than between the Company and its Subsidiaries, incurrence of any indebtedness for borrowed money or the guarantee of any such indebtedness in excess of $100,000 in the aggregate;

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          (l) adoption or material amendment of any Employee Plan, the entering into of any Employment Agreement or any increase in the compensation or fringe benefits of any director, officer or employee (except for normal increases in compensation and payment of year-end bonuses made in the ordinary course of business that are consistent with past practices or as may be required by applicable Law);

          (m) changing by the Company or any of its Subsidiaries of any material Tax election, or making, changing, or revocation by the Company or any of its Subsidiaries of any material Tax sharing arrangement or Tax agreement with any Taxing Authority; or

          (n) Contract entered into by the Company, or amended by the Company, pursuant to which any other Person is granted exclusive marketing or any other exclusive rights in, or to Intellectual Property, of any type or scope, with respect to the Business.

     4.10. Properties .

          (a) The Company does not own any real property. The Company leases or subleases all real property used in the Business. Section 4.10(a) of the Disclosure Schedule describes all real property leased or subleased by the Company (the “ Real Property ”), specifying the name of the lessor or sublessor, the lease term and basic annual rent.

          (b) The Company has good and valid title to, or a valid leasehold interest in, all of its tangible personal property and assets reflected in the Company Balance Sheet (except for personal property sold since the date of the Company Balance Sheet in the ordinary course of business consistent with past practice). Except as disclosed in Section 4.10(b) of the Disclosure Schedule , all material properties and assets reflected in the Company Balance Sheet are free and clear of all Liens. All leases of personal property are (i) valid, binding and enforceable in accordance with their respective terms, except as such enforceability may be limited by (x) applicable insolvency, bankruptcy, reorganization, moratorium or other similar laws affecting creditors’ rights generally, and (y) applicable equitable principles (whether considered in a proceeding at law or in equity) and (ii) there does not exist under any such lease any material breach by the Company or any event known to the Company that with notice or lapse of time or both, would constitute a material default.

     4.11. Litigation . Except as disclosed in Section 4.11 of the Disclosure Schedule , there is no material action, suit, investigation or proceeding pending against, or, to the Knowledge of the Company, threatened against or affecting, the Company or any