AGREEMENT AND PLAN OF MERGER

1.1    The Merger . Upon and subject to the terms and conditions of this Agreement, the Company shall merge with and into the Transitory Subsidiary (with such merger referred to herein as the “Merger”) at the Effective Time (as defined below). From and after the Effective Time, the separate corporate existence of the Company shall cease and the Transitory Subsidiary shall continue as the surviving corporation in the Merger (the “Surviving Corporation”). The “Effective Time” shall be the time at which the Surviving Corporation files a certificate of merger or other appropriate documents prepared and executed in accordance with Section 251(c) of the Delaware General Corporation Law (the “Certificate of Merger”) with the Secretary of State of the State of Delaware. The Merger shall have the effects set forth in Section 259 of the Delaware General Corporation Law.

1.2    The Closing . The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of McGuireWoods LLP in New York, New York, commencing at 9:00 a.m. local time on March 15, 2007, or, if all of the conditions to the obligations of the Parties to consummate the transactions contemplated hereby have not been satisfied or waived by such date, on such mutually agreeable later date up to the Termination Date as soon as practicable (and in any event not later than three business days) after the satisfaction or waiver of all conditions (excluding the delivery of any documents to be delivered at the Closing by any of the Parties) set forth in Article V hereof (the “Closing Date”).

1.3    Actions at the Closing . At the Closing:

(a)    the Company shall deliver to the Buyer and the Transitory Subsidiary the various certificates, instruments and documents referred to in Section 5.2;

(b)    the Buyer and the Transitory Subsidiary shall deliver to the Company the various certificates, instruments and documents referred to in Section 5.3;

(c)    the Surviving Corporation shall file with the Secretary of State of the State of Delaware the Certificate of Merger;

(d)    each of the stockholders of record of the Company immediately prior to the Effective Time (the “Company Stockholders”) shall deliver to the Buyer the certificate(s) representing his, her or its Company Shares (as defined below);

(e)    the Buyer shall deliver certificates for the shares of Buyer Common Stock to each former Company Stockholder in accordance with Section 1.5, and

(f)    the Buyer, the Indemnification Representative and US Bank Trust National Association (the “Escrow Agent”) shall execute and deliver an Escrow Agreement attached hereto as Exhibit B (the “Escrow Agreement”) and the Buyer shall deliver to the Escrow Agent (x) a certificate for the Escrow Shares being placed in escrow on the Closing Date pursuant to Section 1.9 (collectively, the “Escrow Fund”). 

1.4    Additional Action . The Surviving Corporation may, at any time after the Effective Time, take any action, including executing and delivering any document, in the name and on behalf of either the Company or the Transitory Subsidiary, in order to consummate the transactions contemplated by this Agreement.

1.5    Merger Consideration; Conversion of Shares . The aggregate consideration that the Company Stockholders will be entitled to receive by virtue of the Merger shall be the Buyer Common Stock issuable as set forth below (collectively, the “Merger Consideration”).

(a)    Conversion of Shares . At the Effective Time, by virtue of the Merger and without any action on the part of any Party or the holder of any of the following securities:

(i)    Each share of Preferred Stock, $0.001 par value per share, of the Company (“Preferred Shares”; and, together with the Common Shares, the “Company Shares”) issued and outstanding immediately prior to the Effective Time and not converted into Common Shares at the Effective Time (other than Preferred Shares owned beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares, any Preferred Shares held in the Company’s treasury and any Preferred Shares issued in the name of the Escrow Agent pursuant to Section 1.9) shall be converted into and represent the right to receive a number of shares of Buyer Common Stock equal to (x) the liquidation preference per share, including all accrued dividends thereon, for the applicable class or series to which such Preferred Share belongs divided by (y) the Average Pre-Signing Price.

(ii)    Ten percent (10%) of the shares of Buyer Common Stock issuable to each former holder of Preferred Shares shall be subject to the Escrow Agreement pursuant to Section 1.3(f) (the “Preferred Escrow Shares”).

(iii)    Each share of common stock, $0.001 par value per share, of the Company (“Common Shares”) issued and outstanding immediately prior to the Effective Time (after giving effect to the conversion into Common Shares of all outstanding Preferred Shares that have converted into Common Shares prior to the Closing and excluding any Common Shares owned beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares, Common Shares held in the Company’s treasury and any Common Shares issued in the name of the Escrow Agent pursuant to Section 1.9) shall be converted into and represent the right to receive (subject to the provisions of Section 1.9) such number of shares of common stock, $0.001 par value per share, of the Buyer (“Buyer Common Stock”) as is equal to the Basic Common Conversion Ratio (as defined below), (the “Basic Shares”), allocated to the Company Stockholders who are holders of Common Shares immediately prior to the Effective Time (including Common Shares issued upon conversion of Preferred Shares immediately prior to the Effective Time), allocated as follows: (x) 0% of the Basic Shares shall be issued to Aaron Cohen, Jay Gould and Caron Kramer and other employees of the Company named on Schedule 1.5(a)(iii) (the “Managing Shareholders”), allocated among them in the percentages set forth on Schedule 1.5(a)(iii), and (y) 100% of the Basic Shares shall be issued to the Company Stockholders holding Common Shares other than the Managing Shareholders (the “Non-Managing Shareholders”), allocated on a pro rata basis according to the amount of Common Shares held by each such Non-Managing Shareholder in proportion to the aggregate amount of Common Shares held by all Non-Managing Shareholders. 

(iv)    Ten percent (10%) of the Basic Shares issuable to each former holder of Common Shares shall be subject to the Escrow Agreement pursuant to Section 1.3(f) (the “Basic Escrow Shares”).

(v)    In addition to the Basic Shares issuable pursuant to Section 1.5(a)(iii), those Persons holding Common Shares issued and outstanding immediately prior to the Effective Time (other than Common Shares owned beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares, Common Shares held in the Company’s treasury and any Common Shares issued in the name of the Escrow Agent pursuant to Section 1.9) shall receive, subject to the terms, conditions and restrictions set forth in Schedule 1.5(a)(v), such number of Shares of Buyer Common Stock (the “Subsequent Shares”) as follows: (x) 80% of the Subsequent Shares shall be issued to the Managing Shareholders, allocated as set forth in Schedule 1.5(a)(iii) and (y) 20% of the Subsequent Shares shall be issued to the Non-Managing Shareholders, allocated on a pro rata basis according to the amount of Common Shares held by each such Non-Managing Shareholder in proportion to the aggregate amount of Common Shares held by all Non-Managing Shareholders.

(vi)    In addition to being subject to the other restrictions on the Subsequent Shares, the first in time to be issued of the Subsequent Shares, in an amount equal to $1,500,000 divided by the Average Pre-Signing Price, issuable to each former holder of Common Shares shall be subject to the Escrow Agreement pursuant to Section 1.3(f) (the “Subsequent Escrow Shares” and together with the Preferred Escrow Shares and the Basic Escrow Shares, the “Escrow Shares”).

(vii)    Each Company Share held in the Company’s treasury immediately prior to the Effective Time, each Company Share owned beneficially by the Buyer or the Transitory Subsidiary and any Company Shares issued in the name of the Escrow Agent pursuant to Section 1.9 shall be cancelled and retired without payment of any consideration therefor.

(viii)    Each share of common stock, $0.001 par value per share, of the Transitory Subsidiary issued and outstanding immediately prior to the Effective Time shall be converted into and thereafter evidence one share of common stock, $0.001 par value per share, of the Surviving Corporation.

(b)    Indebtedness . All indebtedness of the Company evidenced by promissory notes outstanding immediately prior to the Effective Time shall be converted into and represent the right to receive a number of shares of Buyer Common Stock equal to (x) the principal and accrued interest thereon divided by (y) the Average Pre-Signing Price.

1.6    Dissenting Shares .

(a)    For purposes of this Agreement, “Dissenting Shares” means Company Shares held as of the Effective Time by a Company Stockholder who has not voted such Company Shares in favor of the adoption of this Agreement and the Merger and with respect to which appraisal shall have been duly demanded and perfected in accordance with Section 262 of the Delaware General Corporation Law and not effectively withdrawn or forfeited prior to the Effective Time. Dissenting Shares shall not be converted into or represent the right to receive Merger Consideration, unless such Company Stockholder shall have forfeited his, her or its right to appraisal under the Delaware General Corporation Law or properly withdrawn, his, her or its demand for appraisal. If such Company Stockholder has so forfeited or withdrawn his, her or its right to appraisal of Dissenting Shares, then (i) as of the occurrence of such event, such holder’s Dissenting Shares shall cease to be Dissenting Shares and shall be converted into and represent the right to receive the Merger Consideration issuable in respect of such Company Shares pursuant to Section 1.5, and (ii) and shall be exchangeable solely for the right to receive the applicable Merger Consideration.

(b)    The Company shall give the Buyer (i) prompt notice of any written demands for appraisal of any Company Shares, withdrawals of such demands, and any other instruments that relate to such demands received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the Delaware General Corporation Law. The Company shall not, except with the prior written consent of the Buyer, make any payment with respect to any demands for appraisal of Company Shares or offer to settle or settle any such demands.

1.7    Fractional Shares . No certificates or scrip representing fractional Merger Shares shall be issued to former Company Stockholders upon the surrender for exchange of Company Shares or certificates that, immediately prior to the Effective Time, represented Company Shares converted into Merger Shares pursuant to Section 1.5 (including any Company Shares referred to in the last sentence of Section 1.6(a)) (“Certificates”), and Company Stockholders shall not be entitled to any voting rights, rights to receive any dividends or distributions or other rights as a stockholder of the Buyer with respect to any fractional Merger Shares that would have otherwise been issued to such Company Stockholder. In lieu of any fractional Merger Shares that would have otherwise been issued, each Company Stockholder that would have been entitled to receive a fractional Merger Share shall, upon proper surrender of such person’s Certificates, receive a cash payment equal to the closing price per share of the Buyer Common Stock on the OTCBB on the business day immediately preceding the Closing Date, multiplied by the fraction of a share that such Company Stockholder would otherwise be entitled to receive.

1.8    Options and Warrants . 

(a)    As of the Effective Time, the Company’s obligations under all unvested options to purchase Common Shares issued by the Company pursuant to the Company’s stock option plan   (the “Option Plan”) or otherwise (collectively, “Options”) and the Option Plan, insofar as it relates to Options outstanding under such Plan immediately after the Effective Time, shall be assumed by the Buyer. Immediately after the Effective Time, each unvested Option outstanding immediately prior to the Effective Time shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Option at the Effective Time, such number of shares of Buyer Common Stock as is equal to the number of Common Shares subject to the unexercised portion of such Option multiplied by the Basic Common Conversion Ratio (subject to the Lockup Agreement in the form attached hereto as Exhibit C (the “Lockup Agreement”), with any fraction resulting from such multiplication to be rounded down to the nearest whole number). The exercise price per share of each such assumed Option shall be equal to the exercise price of such Option immediately prior to the Effective Time, divided by the Basic Common Conversion Ratio (rounded up to the nearest whole cent). The term, exercisability, vesting schedule, status as an “incentive stock option” under Section 422 of the Code, if applicable, and all of the other terms of the Options shall otherwise remain unchanged.

(b)    Prior to the Closing Date, the Company shall cause the holders of each vested Option outstanding immediately prior to the Effective Time to exercise for cash or by cashless exercise and in each case in accordance with the Option Plan (or if not issued pursuant to the Option Plan, pursuant to the applicable option agreement) all of his or her vested Options, such vested Options to, accordingly, be cancelled, terminated and extinguished immediately prior to the Effective Time in exchange for the underlying amount of Common Shares. The Company shall in its good faith discretion determine the terms of the cashless exercise provisions to be afforded to the holders of Options if and to the extent that Options do not contain cashless exercise provisions, provided, that such provisions shall be in form and substance agreed by the Buyer.

(c)    As soon as practicable after the Effective Time, the Buyer or the Surviving Corporation shall deliver to the holders of non-vested Options that remain outstanding after the Effective Time appropriate notices setting forth such holders’ rights pursuant to such Options, as amended by this Section 1.8, and the agreements evidencing such Options shall continue in effect on the same terms and conditions (subject to the amendments provided for in this Section 1.8 and such notice).

(d)    The Buyer shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Buyer Common Stock for delivery upon exercise of the Options assumed in accordance with this Section 1.8. Within 90 days after the Effective Time, the Buyer shall file a Registration Statement on Form S-8 (or any successor form) under the Securities Act of 1933 (as amended, the “Securities Act”) with respect to all shares of Buyer Common Stock subject to such Options that may be registered on a Form S-8, and shall use its best efforts to maintain the effectiveness of such Registration Statement for so long as such Options remain outstanding.

(e)    The Company shall cause the termination, as of the Effective Time, of all unexpired and exercisable common stock purchase warrants issued by the Company prior to the Closing (the “Warrants”) which remain unexercised immediately prior to the Effective Time.

(f)    The Company shall obtain, prior to the Closing, the consent from each holder of an Option or a Warrant to the amendment (in the case of Options) or termination (in the case of Warrants) of such Option or Warrant pursuant to this Section 1.8 (unless such consent is not required under the terms of the Option Plan or other applicable agreement, instrument or Option grant).

1.9    Escrow . 

(a)    On the Closing Date, the Buyer shall deliver to the Escrow Agent stock certificates (issued in the name of the Escrow Agent or its nominee) representing the Escrow Shares for the purpose of securing the indemnification obligations of the Indemnifying Stockholders (as defined in Section 6.1) set forth in this Agreement. The Escrow Fund shall be held by the Escrow Agent under the Escrow Agreement pursuant to the terms thereof. The Escrow Fund shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any party, and shall be held and disbursed solely for the purposes and in accordance with the terms of the Escrow Agreement.

(b)    The adoption of this Agreement and the approval of the Merger by the Company Stockholders shall constitute approval of the Escrow Agreement and of all of the arrangements relating thereto, including without limitation the placement of the Escrow Shares in escrow and the appointment of the Indemnification Representative.

(c)    Within five (5) days of the date hereof, the Buyer shall deliver to the Escrow Agent $1,500,000 in cash to secure Buyers obligations pursuant to Article VII.

(d)    Within five (5) days of the date hereof, the Company shall deliver to the Escrow Agent $1,750,000 in cash or, a certificate for Company Shares (issued in the name of the Escrow Agent or its nominee) in an amount equal to seven and one-half percent (7.5%) of the then-issued and outstanding shares of capital stock of the Company to secure the Company’s obligations in the event of a termination by the Buyer or the Company pursuant to Article VII. 

1.10    Certificate of Incorporation and By-laws .

(a)    The Certificate of Incorporation of the Transitory Subsidiary shall continue as the Certificate of Incorporation of the Surviving Corporation following the Effective Time.

(b)    The By-laws of the Surviving Corporation immediately following the Effective Time shall be the same as the By-laws of the Transitory Subsidiary immediately prior to the Effective Time.

1.11    No Further Rights . From and after the Effective Time, no Company Shares shall be deemed to be outstanding, and holders of Certificates shall cease to have any rights with respect thereto, except as provided herein or by law.

1.12    Closing of Transfer Books . At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of Company Shares shall thereafter be made. If, after the Effective Time, Certificates are presented to the Buyer or the Surviving Corporation, they shall be cancelled and exchanged for Merger Shares in accordance with Section 1.5, subject to Section 1.9 and to applicable law in the case of Dissenting Shares.

1.13    Basic Shares . In the event that at any time, or from time to time, Basic Shares in excess of those issued at Closing become issuable pursuant to the terms of this Agreement, the Buyer shall promptly issue certificates for such Basic Shares and deliver such certificates to the Company Stockholders.

2.1    Organization, Qualification and Corporate Power . The Company is a corporation duly organized, validly existing and in corporate and tax good standing under the laws of the State of Delaware. The Company is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect (as defined below). The Company has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. The Company has furnished to the Buyer complete and accurate copies of its Certificate of Incorporation and By-laws. The Company is not in default under or in violation of any provision of its Certificate of Incorporation or By-laws. For purposes of this Agreement, “Company Material Adverse Effect” means a material adverse effect on the assets, business, condition (financial or otherwise), results of operations or future prospects of the Company and the Subsidiaries (as defined below), taken as a whole, excluding any changes, events or effects that are attributable to: (i) conditions that materially and adversely affect the general worldwide economy; (ii) conditions that materially and adversely affect the industry in which the Company and the Subsidiaries operate; (iii) any effect arising out of or attributable to the public announcement of the transactions contemplated by this Agreement or (iv) any effect arising out of or attributable to any action taken or failed to be taken by the Company or any of its Subsidiaries at the written request of Buyer or the Transitory Subsidiary.

2.2    Capitalization . The capital stock of the Company authorized, issued and outstanding, on a fully-diluted basis, is set forth in Section 2.2 of the Disclosure Schedule. Section 2.2 of the Disclosure Schedule sets forth a complete and accurate list of (i) all stockholders of the Company, indicating the number and class or series of Company Shares held by each stockholder and (for Company Shares other than Common Shares) the number of Common Shares (if any) into which such Company Shares are convertible, (ii) all outstanding Options and Warrants, indicating (A) the holder thereof, (B) the number and class or series of Company Shares subject to each Option and Warrant and (for Company Shares other than Common Shares) the number of Common Shares (if any) into which such Company Shares are convertible, (C) the exercise price, date of grant, vesting schedule and expiration date for each Option or Warrant, and (D) any terms regarding the acceleration of vesting, and (iii) all stock option plans and other stock or equity-related plans of the Company. All of the issued and outstanding Company Shares are, and all Company Shares that may be issued upon exercise of Options or Warrants will be (upon issuance in accordance with their terms), duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights. Other than the Options and Warrants listed in Section 2.2 of the Disclosure Schedule, there are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Company is a party or which are binding upon the Company providing for the issuance or redemption of any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company. There are no agreements to which the Company is a party or by which it is bound with respect to the voting (including without limitation voting trusts or proxies), registration under the Securities Act, or sale or transfer (including without limitation agreements relating to pre-emptive rights, rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Company. To the knowledge of the Company, there are no agreements among other parties, to which the Company is not a party and by which it is not bound, with respect to the voting (including without limitation voting trusts or proxies) or sale or transfer (including without limitation agreements relating to rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Company. All of the issued and outstanding Company Shares were issued in compliance with applicable federal and state securities laws.

2.3    Authorization of Transaction . The Company has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and, subject to the adoption of this Agreement and the approval of the Merger by a majority of the votes represented by the outstanding Company Shares entitled to vote on this Agreement and the Merger (the “Requisite Stockholder Approval”), the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company. Without limiting the generality of the foregoing, the Board of Directors of the Company, at a meeting duly called and held, by the unanimous vote of all directors (i) determined that the Merger is fair and in the best interests of the Company and its stockholders, (ii) adopted this Agreement in accordance with the provisions of the Delaware General Corporation Law, and (iii) directed that this Agreement and the Merger be submitted to the stockholders of the Company for their adoption and approval and resolved to recommend that the stockholders of Company vote in favor of the adoption of this Agreement and the approval of the Merger. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject only to: (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors’ rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law) (collectively, the “Equitable Exceptions”).

2.4    Noncontravention . Subject to the filing of the Certificate of Merger as required by the Delaware General Corporation Law, neither the execution and delivery by the Company of this Agreement, nor the consummation by the Company of the transactions contemplated hereby, will (a) conflict with or violate any provision of the Certificate of Incorporation or By-laws of the Company or the charter, By-laws or other organizational document of any Subsidiary (as defined below), (b) require on the part of the Company or any Subsidiary any filing with, or any permit, authorization, consent or approval of, any court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority or agency (a “Governmental Entity”), (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or to which any of their assets is subject, (d) result in the imposition of any Security Interest (as defined below) upon any assets of the Company or any Subsidiary or (e) violate any material: order, writ, injunction, decree, statute, rule or regulation applicable to the Company, any Subsidiary or any of their properties or assets. For purposes of this Agreement: “Security Interest” means any mortgage, pledge, security interest, encumbrance, charge or other lien (whether arising by contract or by operation of law), other than (i) mechanic’s, materialmen’s, and similar liens, (ii) liens arising under worker’s compensation, unemployment insurance, social security, retirement, and similar legislation, and (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course of Business (as defined below) of the Company and not material to the Company; and “Ordinary Course of Business” means the ordinary course of the Company’s business, consistent with past custom and practice (including with respect to frequency and amount).

2.5    Subsidiaries .

(a)    Section 2.5 of the Disclosure Schedule sets forth: (i) the name of each corporation, partnership, joint venture or other entity in which the Company has, directly or indirectly, an equity interest representing 50% or more of the capital stock thereof or other equity interests therein (individually, a “Subsidiary” and, collectively, the “Subsidiaries”); (ii) the number and type of outstanding equity securities of each Subsidiary and a list of the holders thereof; (iii) the jurisdiction of organization of each Subsidiary; (iv) the names of the officers and directors of each Subsidiary; and (v) the jurisdictions in which each Subsidiary is qualified or holds licenses to do business as a foreign corporation or other entity.

(b)    Each Subsidiary is a corporation duly organized, validly existing and in corporate and tax good standing under the laws of the jurisdiction of its incorporation. Each Subsidiary is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. Each Subsidiary has all requisite power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. The Company has delivered to the Buyer complete and accurate copies of the charter, By-laws or other organizational documents of each Subsidiary. No Subsidiary is in default under or in violation of any provision of its charter, By-laws or other organizational documents. All of the issued and outstanding shares of capital stock of each Subsidiary are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. All shares of each Subsidiary that are held of record or owned beneficially by either the Company or any Subsidiary are held or owned free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), claims, Security Interests, options, warrants, rights, contracts, calls, commitments, equities and demands. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Company or any Subsidiary is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any capital stock of any Subsidiary. There are no outstanding stock appreciation, phantom stock or similar rights with respect to any Subsidiary. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of any Subsidiary.

(c)    The Company does not control directly or indirectly or have any direct or indirect equity participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association which is not a Subsidiary.

2.6    Financial Statements . The Company has provided to the Buyer (a) the unaudited consolidated balance sheets and statements of income, changes in stockholders’ equity and cash flows of the Company as of and for each of the last three fiscal years; and (b) the unaudited consolidated balance sheet and statements of income, changes in stockholders’ equity and cash flows as of and for the nine months ended as of September 30, 2006 (the “Most Recent Balance Sheet Date”). Such financial statements (collectively, the “Financial Statements”) have been prepared on an accrual basis and on a consistent basis throughout the periods covered thereby, fairly present the financial condition, results of operations and cash flows of the Company and the Subsidiaries as of the respective dates thereof and for the periods referred to therein and are consistent with the books and records of the Company and the Subsidiaries; provided , however , that the Financial Statements referred to in clause (b) above are subject to normal recurring year-end adjustments (which will not be material) and do not include footnotes.

2.7    Absence of Certain Changes . Since the Most Recent Balance Sheet Date, (a) there has occurred no event or development which, individually or in the aggregate, has had, or could reasonably be expected to have in the future, a Company Material Adverse Effect, and (b) neither the Company nor any Subsidiary has taken any of the actions set forth in paragraphs (a) through (n) of Section 4.4.

2.8    Undisclosed Liabilities . None of the Company and its Subsidiaries has any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the balance sheet referred to in clause (b) of Section 2.6 (the “Most Recent Balance Sheet”), (b) liabilities which have arisen since the Most Recent Balance Sheet Date in the Ordinary Course of Business and (c) contractual and other liabilities incurred in the Ordinary Course of Business which are not required by United States generally accepted accounting principles (“GAAP”) to be reflected on a balance sheet.

2.9    Tax Matters .

(a)    For purposes of this Agreement, the following terms shall have the following meanings:

(i)    “Taxes” means all taxes, charges, fees, levies or other similar assessments or liabilities, including without limitation income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof.

(ii)    “Tax Returns” means all reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with Taxes.

(iii)    “Affiliated Group” means a group of corporations with which the Company or any Subsidiary has filed (or was required to file) consolidated, combined, unitary or similar Tax Returns.

(iv)    “Affiliated Period” means any period in which the Company or a Subsidiary was a member of an Affiliated Group.

(b)    Each of the Company and the Subsidiaries has filed on a timely basis all Tax Returns that it was required to file, and all such Tax Returns were complete and accurate in all material respects. Neither the Company nor any Subsidiary is or has ever been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns, other than a group of which only the Company and the Subsidiaries are or were members. Each of the Company and the Subsidiaries has paid on a timely basis all Taxes that were due and payable. The unpaid Taxes of the Company and the Subsidiaries for tax periods through the Most Recent Balance Sheet Date do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Most Recent Balance Sheet. Neither the Company nor any Subsidiary has any actual or potential liability for any Tax obligation of any taxpayer (including without limitation any affiliated group of corporations or other entities that included the Company or any Subsidiary during a prior period) other than the Company and the Subsidiaries. All Taxes that the Company or any Subsidiary is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Entity.

(c)    The Company has delivered to the Buyer complete and accurate copies of all federal income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by the Company or any Subsidiary prior to the Effective Time. The federal income Tax Returns of the Company and each Subsidiary have been audited by the Internal Revenue Service (“IRS”) or are closed by the applicable statute of limitations for all taxable years through the taxable year specified in Section 2.9(c) of the Disclosure Schedule. No examination or audit of any Tax Return of the Company or any Subsidiary by any Governmental Entity is currently in progress or, to the knowledge of the Company, threatened or contemplated. Neither the Company nor any Subsidiary has been informed by any jurisdiction that the jurisdiction believes that the Company or Subsidiary was required to file any Tax Return that was not filed. Neither the Company nor any Subsidiary has waived any statute of limitations with respect to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency.

(d)    Neither the Company nor any Subsidiary: (i) is a “consenting corporation” within the meaning of Section 341(f) of the Code, and none of the assets of the Company or the Subsidiaries are subject to an election under Section 341(f) of the Code; (ii) has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (iii) except as set forth on Section 2.9(d) of the Disclosure Schedule, has made any payments, is obligated to make any payments, or is a party to any agreement that could obligate it to make any payments that may be treated as an “excess parachute payment” under Section 280G of the Code; (iv) has any actual or potential liability for any Taxes of any person (other than the Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of federal, state, local, or foreign law), or as a transferee or successor, by contract, or otherwise; or (v) is or has been required to make a basis reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).

(e)    None of the assets of the Company or any Subsidiary: (i) is property that is required to be treated as being owned by any other person pursuant to the provisions of former Section 168(f)(8) of the Code; (ii) is “tax-exempt use property” within the meaning of Section 168(h) of the Code; or (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code.

(f)    Neither the Company nor any Subsidiary has undergone a change in its method of accounting resulting in an adjustment to its taxable income pursuant to Section 481 of the Code.

(g)    No state or federal “net operating loss” or any capital losses or credits of the Company or any Subsidiary determined as of the period underlying any Tax Return of the Company prior to the Closing Date is subject to limitation on its use pursuant to the Code or Treasury Regulations thereunder (including without limitation Section 382 of the Code) or relevant provisions of state law as a result of any “ownership change” within the meaning of Section 382(g) of the Code or comparable provisions of any state law or any other change in the ownership of stock of the Company or any Subsidiary occurring prior to the Closing Date.

(h)    Neither the Company nor any Subsidiary has at any time participated in any "reportable transaction" within the meaning of Treasury Regulation Sections 1.6011-(b), made any disclosure or protective disclosure pursuant to section 6011 of the Code or the Treasury Regulations thereunder, or received any communication from the IRS or any state or local taxing authority with respect to any transaction which the IRS or any such state or local taxing authority has asserted is or may be a "reportable transaction."

2.10    Assets . Each of the Company and the Subsidiaries owns or leases all tangible assets necessary for the conduct of its businesses as presently conducted. Each such material tangible asset is free from material defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear) and is suitable for the purposes for which it presently is used. No asset of the Company or any Subsidiary (tangible or intangible) is subject to any Security Interest.

2.11    Owned Real Property . Neither the Company nor any Subsidiary or any of their respective predecessor entities owns, or at any time owned, any real property.

2.12    Real Property Leases . Section 2.12 of the Disclosure Schedule lists all real property leased or subleased to or by the Company or any Subsidiary and lists the term of such lease, any extension and expansion options, and the rent payable thereunder. The Company has delivered to the Buyer complete and accurate copies of the leases and subleases listed in Section 2.12 of the Disclosure Schedule. With respect to each lease and sublease listed in Section 2.12 of the Disclosure Schedule:

(a)    the lease or sublease is legal, valid, binding, enforceable and in full force and effect;

(b)    the lease or sublease will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing;

(c)    neither the Company nor any Subsidiary nor, to the knowledge of the Company, any other party, is in breach or violation of, or default under, any such lease or sublease, and no event has occurred, is pending or, to the knowledge of the Company, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the Company or any Subsidiary or, to the knowledge of the Company, any other party under such lease or sublease;

(d)    neither the Company nor any Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold; and

(e)    the Company is not aware of any Security Interest, easement, covenant or other restriction applicable to the real property subject to such lease, except for recorded easements, covenants and other restrictions which do not materially impair the current uses or the occupancy by the Company or a Subsidiary of the property subject thereto.

2.13    Intellectual Property .

(a)    Each of the Company and the Subsidiaries owns or has the right to use all Intellectual Property (as defined below) necessary (i) to provide the services provided by the Company or the Subsidiaries to other parties, (together, the “Customer Deliverables”) and (ii) to operate the internal systems of the Company or the Subsidiaries that are material to its business or operations, including, without limitation, computer hardware systems, software applications and embedded systems (the “Internal Systems”; the Intellectual Property owned by or licensed to the Company or the Subsidiaries and incorporated in or underlying the Customer Deliverables or the Internal Systems is referred to herein as the “Company Intellectual Property”). Each item of Company Intellectual Property will be owned or available for use by the Surviving Corporation immediately following the Closing on substantially identical terms and conditions as it was immediately prior to the Closing. The Company or the appropriate Subsidiary has taken all reasonable measures to protect the proprietary nature of each item of Company Intellectual Property. To the knowledge of the Company, except for the works of authorship uploaded by the Company’s users to the websites hosted by the Company or in the course of services provided by the Company and works that are the subject of alleged copyright infringement as alleged in the Record Label Litigation (as defined in Section 2.18), (a) no other person or entity has any rights to any of the Company Intellectual Property owned by the Company or a Subsidiary (except pursuant to agreements or licenses specified in Section 2.13(c) of the Disclosure Schedule), (b) no Company Intellectual Property infringes the rights of any other Person, and (c) no other person or entity is infringing, violating or misappropriating any of the Company Intellectual Property. For purposes of this Agreement, “Intellectual Property” means all (i) patents and patent applications, (ii) copyrights and registrations thereof, (iii) mask works and registrations and applications for registration thereof, (iv) computer software, data and documentation, (v) trade secrets and confidential business information, whether patentable or unpatentable and whether or not reduced to practice, know-how, manufacturing and production processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, (vi) trademarks, service marks, trade names, domain names and applications and registrations therefor and (vii) other proprietary rights relating to any of the foregoing. Section 2.13(a) of the Disclosure Schedule lists each patent, patent application, copyright registration or application therefor, mask work registration or application therefor, and trademark, service mark and domain name registration or application therefor of the Company or any Subsidiary.

(b)    None of the Customer Deliverables, or the marketing, distribution, provision or use thereof by the Company, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any person or entity. None of the Internal Systems, or the use thereof by the Company, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any person or entity. Section 2.13(b) of the Disclosure Schedule lists any complaint, claim or notice, or written threat thereof, received by the Company or any Subsidiary alleging any such infringement, violation or misappropriation; and the Company has provided to the Buyer complete and accurate copies of all written documentation in the possession of the Company or any Subsidiary relating to any such complaint, claim, notice or threat. The Company has provided to the Buyer complete and accurate copies of all written documentation in the Company’s possession relating to claims or disputes known to the Company concerning any Company Intellectual Property.

(c)    Section 2.13(c) of the Disclosure Schedule identifies each license or other agreement (or type of license or other agreement) pursuant to which the Company or a Subsidiary has licensed, distributed or otherwise granted any rights to any third party with respect to, any Company Intellectual Property.

(d)    Section 2.13(d) of the Disclosure Schedule identifies each item of Company Intellectual Property that is owned by a party other than the Company or a Subsidiary, and the license or agreement pursuant to which the Company or a Subsidiary uses it (excluding off-the-shelf software programs licensed by the Company pursuant to “shrink wrap” licenses).

(e)    Neither the Company nor any Subsidiary has disclosed the source code for any of the software owned by the Company or a Subsidiary (the “Software”) or other confidential information constituting, embodied in or pertaining to the Software to any person or entity, except pursuant to the agreements listed in Section 2.13(e) of the Disclosure Schedule, and the Company has taken reasonable measure to prevent disclosure of such source code.

(f)    All of the copyrightable materials (including Software) except for works of authorship uploaded to any Company websites by the Company’s users thereof in the course of using the Company’s websites or other services (“ Customer Provided Content ”) incorporated in or bundled with the Customer Deliverables have been created by employees of the Company or a Subsidiary within the scope of their employment by the Company or a Subsidiary or by independent contractors of the Company or a Subsidiary who have executed agreements expressly assigning all right, title and interest in such copyrightable materials to the Company or a Subsidiary. No portion of such copyrightable materials was jointly developed with any third party.

(g)    To the knowledge of the Company, the Customer Deliverables and the Internal Systems are free from significant defects or programming errors and conform in all material respects to the written documentation and specifications therefor.

2.14    Contracts .

(a)    Section 2.14(a) of the Disclosure Schedule lists the following agreements (written or oral) to which the Company or any Subsidiary is a party as of the date of this Agreement:

(i)    any agreement (or group of related agreements) for the lease of personal property from or to third parties providing for lease payments in excess of $10,000 per annum or having a remaining term longer than one year;

(ii)    any agreement (or group of related agreements) for the purchase or sale of products or for the furnishing or receipt of services (A) which calls for performance over a period of more than one year, (B) which involves more than the sum of $10,000, or (C) in which the Company or any Subsidiary has granted licensing rights, “most favored nation” pricing provisions or marketing or distribution rights relating to any products or services or territory or has agreed to purchase a minimum quantity of goods or services or has agreed to purchase goods or services exclusively from a certain party;

(iii)    any agreement establishing a partnership or joint venture;

(iv)    any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including capital lease obligations but not including trade payables incurred in the Ordinary Course of Business) involving more than $10,000 or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;

(v)    any agreement by which the Company is bound by any noncompetition or nondisclosure covenant other than nondisclosure agreements entered into in the Ordinary Course of Business;

(vi)    any employment or consulting agreement between the Company or any Subsidiary and any employee or consultant;

(vii)    any material agreement involving any current officer, director or stockholder of the Company or any affiliate (an “Affiliate”), as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), thereof not otherwise disclosed pursuant to this Section 2.14;

(viii)    any agreement under which the consequences of a default or termination would reasonably be expected to have a Company Material Adverse Effect;

(ix)    any agreement which contains any provisions requiring the Company or any Subsidiary to indemnify any other party thereto (excluding indemnities contained in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business); and

(x)    any other agreement (or group of related agreements) either involving more than $10,000 or not entered into in the Ordinary Course of Business.

(b)    The Company has delivered to the Buyer a complete and accurate copy of each agreement listed in Section 2.13 or Section 2.14 of the Disclosure Schedule. With respect to each agreement so listed: (i) the agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) neither the Company nor any Subsidiary nor, to the knowledge of the Company, any other party, is in material breach or material violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the Company, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a material breach or material default by the Company or any Subsidiary or, to the knowledge of the Company, any other party under such contract.

2.15    Accounts Receivable . All accounts receivable of the Company and the Subsidiaries reflected on the Most Recent Balance Sheet are valid receivables subject to no setoffs or counterclaims and are current and collectible (within 90 days after the date on which it first became due and payable), net of the applicable reserve for bad debts on the Most Recent Balance Sheet. All accounts receivable reflected in the financial or accounting records of the Company that have arisen since the Most Recent Balance Sheet Date are valid receivables subject to no setoffs or counterclaims and are collectible (within 90 days after the date on which it first became due and payable), net of a reserve for bad debts in an amount proportionate to the reserve shown on the Most Recent Balance Sheet.

2.16    Powers of Attorney . There are no outstanding powers of attorney executed on behalf of the Company or any Subsidiary.

2.17    Insurance . Section 2.17 of the Disclosure Schedule lists each insurance policy (including fire, theft, casualty, general liability, workers compensation, business interruption, environmental, product liability and automobile insurance policies and bond and surety arrangements) to which the Company or any Subsidiary is a party. Such insurance policies are of the type and in amounts customarily carried by organizations conducting businesses or owning assets similar to those of the Company and the Subsidiaries. There is no material claim pending under any such policy as to which coverage has been questioned, denied or disputed by the underwriter of such policy. All premiums due and payable under all such policies have been paid, neither the Company nor any Subsidiary may be liable for retroactive premiums or similar payments, and the Company and the Subsidiaries are otherwise in compliance in all material respects with the terms of such policies. The Company has no knowledge of any threatened termination of, or material premium increase with respect to, any such policy. Each such policy will continue to be enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing.

2.18    Litigation .   Other than the Copyright infringement lawsuits described as UMG Recordings, Inc., et al v. Bolt, Inc., et al, USDC Case No. CV06-Q6577-AHM, pending in the Federal District Court for the Central District of California and all comparable claims that may be made by any major or independent record labels or publishers (together, the “Record Label Litigation”) and Net.Present.com, Inc. v. Bolt, Inc., pending in the Superior Court o the State of California (the “Zeocast Litigation”), as of the date of this Agreement, there is no action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity or before any arbitrator which is pending or has been threatened in writing against the Company or any Subsidiary (a “Legal Proceeding”) which (a) seeks either damages in excess of $10,000 or equitable relief, (b) in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement, or (c) if determined adversely to the Company or such Subsidiary, would have, individually or in the aggregate, a Company Material Adverse Effect.

2.19    Warranties . No product or service manufactured, sold, leased, licensed or delivered by the Company or any Subsidiary is subject to any guaranty, warranty, right of return, right of credit or other indemnity other than (i) the applicable standard terms and conditions of sale or lease of the Company or the appropriate Subsidiary, which are set forth in Section 2.19 of the Disclosure Schedule and (ii) manufacturers’ warranties for which neither the Company nor any Subsidiary has any liability. Section 2.19 of the Disclosure Schedule sets forth the aggregate expenses incurred by the Company and the Subsidiaries in fulfilling their obligations under their guaranty, warranty, right of return and indemnity provisions during each of the fiscal years and the interim period covered by the Financial Statements; and the Company does not know of any reason why such expenses should significantly increase as a percentage of sales in the future.

2.20    Employees .

(a)    Section 2.20(a) of the Disclosure Schedule contains a list of all employees of the Company and each Subsidiary whose annual rate of compensation exceeds $50,000 per year, along with the position and the annual rate of compensation of each such person. Section 2.20(a) of the Disclosure Schedule contains a list of all current and past employees of the Company or any Subsidiary who are a party to non-competition, confidentiality and/or assignments of inventions agreements with the Company or any Subsidiary; copies of such agreements have previously been delivered to the Buyer. To the knowledge of the Company, no key employee or group of employees has any plans to terminate employment with the Company or any Subsidiary.

(b)    Neither the Company nor any Subsidiary is a party to or bound by any collective bargaining agreement, nor has any of them experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. The Company has no knowledge of any organizational effort made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to employees of the Company or any Subsidiary.

2.21    Employee Benefits .

(a)    For purposes of this Agreement, the following terms shall have the following meanings:

(i)    “Employee Benefit Plan” means any “employee pension benefit plan” (as defined in Section 3(2) of ERISA), any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and any other written or oral plan, agreement or arrangement involving direct or indirect compensation, including without limitation insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation or other benefits.

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

(iii)    “ERISA Affiliate” means any entity which is a member of (1) a controlled group of corporations (as defined in Section 414(b) of the Code), (2) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (3) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes or included the Company or a Subsidiary.

(b)    Section 2.21(b) of the Disclosure Schedule contains a complete and accurate list of all Employee Benefit Plans maintained, or contributed to, by the Company, any Subsidiary or any ERISA Affiliate. Complete and accurate copies of (i) all Employee Benefit Plans which have been reduced to writing, (ii) written summaries of all unwritten Employee Benefit Plans, (iii) all related trust agreements, insurance contracts and summary plan descriptions, and (iv) all annual reports filed on IRS Form 5500 and (for all funded plans) all plan financial statements for the last three plan years for each Employee Benefit Plan, have been delivered to the Buyer. Each Employee Benefit Plan has been administered in all material respects in accordance with its terms and each of the Company, the Subsidiaries and the ERISA Affiliates has in all material respects met its obligations with respect to such Employee Benefit Plan and has made all required contributions thereto. The Company, each Subsidiary, each ERISA Affiliate and each Employee Benefit Plan are in compliance in all material respects with the currently applicable provisions of ERISA and the Code and the regulations thereunder (including without limitation Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and Section 701 et seq. of ERISA). All filings and reports as to each Employee Benefit Plan required to have been submitted to the IRS or to the United States Department of Labor have been duly submitted.

(c)    There are no Legal Proceedings (except claims for benefits payable in the normal operation of the Employee Benefit Plans and proceedings with respect to qualified domestic relations orders) against or involving any Employee Benefit Plan or asserting any rights or claims to benefits under any Employee Benefit Plan that could give rise to any material liability.

(d)    Except for Employee Benefit Plans using prototype or other plan documents which are pre-approved by the IRS, all the Employee Benefit Plans listed on Section 2.21(b) of the Disclosure Schedule that are intended to be qualified under Section 401(a) of the Code have received determination letters from the IRS to the effect that such Employee Benefit Plans are qualified and the plans and the trusts related thereto are exempt from federal income taxes under Section 501(a) of the Code, no such determination letter has been revoked and revocation has not been threatened, and no act or omission has occurred, that would adversely affect its qualification or materially increase its cost. All of the Employee Benefit Plans listed on Section 2.21(b) of the Disclosure Schedule that are intended to be qualified under Section 401(a) of the Code, and that have not received determination letters from the IRS, use plan and trust documents that have been pre-approved by the IRS, evidenced by the IRS’s issuance of an opinion letter to the sponsor of such plan and trust documents. Copies of each such determination letter and opinion letter have previously been delivered to the Buyer. Each Employee Benefit Plan listed on Section 2.21(b) of the Disclosure Schedule which is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for compliance with, and satisfies the requirements of, Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to the Closing Date.

(e)    Neither the Company, any Subsidiary, nor any ERISA Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.

(f)    At no time has the Company, any Subsidiary or any ERISA Affiliate been obligated to contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).

(g)    There are no material unfunded obligations under any Employee Benefit Plan listed on Section 2.21(b) of the Disclosure Schedule providing benefits after termination of employment to any employee of the Company or any Subsidiary (or to any beneficiary of any such employee), including but not limited to retiree health coverage and deferred compensation, but excluding severance benefits identified in Section 2.21(g) of the Disclosure Schedule, continuation of health coverage required to be continued under Section 4980B of the Code or other applicable law and insurance conversion privileges under state law. The assets of each Employee Benefit Plan listed on Section 2.21(b) of the Disclosure Schedule which is funded are reported at their fair market value on the books and records of such Employee Benefit Plan.

(h)    To the knowledge of the Company, no act or omission has occurred and no condition exists with respect to any Employee Benefit Plan listed on Section 2.21(b) of the Disclosure Schedule that would subject the Company, any Subsidiary or any ERISA Affiliate to (i) any material fine, penalty, tax or liability of any kind imposed under ERISA or the Code or (ii) any contractual indemnification or contribution obligation protecting any fiduciary, insurer or service provider with respect to any such Employee Benefit Plan.

(i)    No Employee Benefit Plan listed on Section 2.21(b) of the Disclosure Schedule is funded by, associated with or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code.

(j)    Each Employee Benefit Plan listed on Section 2.21(b) of the Disclosure Schedule may be amended or terminated by the Company or by a Subsidiary or an ERISA Affiliate, as the case may be, at any time without liability, except as set forth in such plan and described in Section 2.21(j) of the Disclosure Schedule or as required by law, to the Company or any Subsidiary or ERISA Affiliate as a result thereof and no summary plan description or other written communication distributed generally to employees with respect to any such Employee Benefit Plan by its terms prohibits the Company, any Subsidiary or any ERISA Affiliate from amending or terminating such Employee Benefit Plan.

(k)    Section 2.21(k) of the Disclosure Schedule discloses each: (i) agreement with any stockholder, director, executive officer or other key employee of the Company or any Subsidiary (A) the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company or any Subsidiary of the nature of any of the transactions contemplated by this Agreement, (B) providing any term of employment or compensation guarantee or (C) providing severance benefits or other benefits after the termination of employment of such director, executive officer or key employee; (ii) agreement, plan or arrangement under which any person may receive payments from the Company or any Subsidiary that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person’s “parachute payment” under Section 280G of the Code; and (iii) agreement or plan binding the Company or any Subsidiary, including without limitation any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan, severance benefit plan or other Employee Benefit Plan listed on Section 2.21(b) of the Disclosure Schedule, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement.

(l)    Section 2.21(l) of the Disclosure Schedule sets forth the policy of the Company and any Subsidiary with respect to accrued vacation, accrued sick time and earned time off and the amount of such liabilities as of December 31, 2006.

2.22    Environmental Matters .

(a)    Except as would have a Company Material Adverse Effect, each of the Company and the Subsidiaries has complied with all applicable Environmental Laws (as defined below). There is no pending or, to the knowledge of the Company, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Company or any Subsidiary. For purposes of this Agreement, “Environmental Law” means any federal, state or local law, statute, rule or regulation or the common law relating to the environment or occupational health and safety, including without limitation any statute, regulation, administrative decision or order pertaining to (i) treatment, storage, disposal, generation and transportation of industrial, toxic or hazardous materials or substances or solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release or threatened release into the environment of industrial, toxic or hazardous materials or substances, or solid or hazardous waste, including without limitation emissions, discharges, injections, spills, escapes or dumping of pollutants, contaminants or chemicals; (v) the protection of wild life, marine life and wetlands, including without limitation all endanger