AGREEMENT AND PLAN OF MERGER

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

among

BTP ACQUISITION COMPANY, LLC,

IEAC, INC,

and

IMAGE ENTERTAINMENT, INC.

Dated as of March 29, 2007

TABLE OF CONTENTS

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(continued)

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THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of March 29, 2007, is among BTP Acquisition Company, LLC, a Delaware limited liability company (“ Parent ”), IEAC, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), and Image Entertainment, Inc., a Delaware corporation (the “ Company ”).

WHEREAS, the respective boards of directors or managing members, as the case may be, of each of Parent, Merger Sub and the Company have (i) approved and declared advisable this Agreement, the merger of Merger Sub with and into the Company on the terms and subject to the conditions set forth in this Agreement (the “ Merger ”) and the other transactions contemplated hereby and (ii) determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interest of, their respective entities and stockholders or members.

WHEREAS, as an inducement for Parent and Merger Sub to enter into this Agreement, certain of the Company’s Stockholders are executing and delivering support agreements (the “ Support Agreements ”), dated of even date herewith, pursuant to which such Company Stockholders have agreed, subject to the terms thereof, to vote their shares of Company Common Stock in favor of adoption of this Agreement.

WHEREAS, concurrently with the execution of this Agreement, and as a condition to the willingness of the Company to enter into this Agreement, the Fee Guarantee (as defined below) is being executed and delivered to the Company.

WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

ARTICLE I

THE MERGER

SECTION 1.01 Certain Definitions . As used in this Agreement, the following terms shall have the meanings indicated below. Other capitalized terms defined elsewhere in this Agreement and not defined in Section 1.01 shall have the meanings assigned to such terms elsewhere in this Agreement.

(a) “ affiliate ” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person. For purposes of this definition, “ control ” when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.

(b) “ Adjusted Base Net Worth ” means 95% of the adjusted net worth of the Company as of December 31, 2006 (calculated in accordance with Section 1.01 of the Company Disclosure Letter).

(c) “ Adjusted Closing Net Worth ” means the adjusted net worth of the Company as of the Measurement Date (calculated in accordance with the hypothetical calculation in Section 1.01 of the Company Disclosure Letter).

(d) “ beneficial ownership ” or “ beneficially own ” shall have the respective meanings as those terms are used under Section 13(d) of the Exchange Act and the rules and regulations thereunder.

(e) “ Benefit Plan ” means each employee benefit plan, program, arrangement or contract (including, without limitation, any “ employee benefit plan ,” as defined in Section 3(3) of ERISA and any welfare, bonus, deferred compensation, stock bonus, stock purchase, restricted stock, stock option, employment, termination, stay agreement or bonus, retiree medical or life insurance, change-in-control, severance or other employee benefit plan, program, policy, arrangement and contract, whether written or unwritten) which the Company or any of its Subsidiaries maintains, or contributes to, has any obligation to contribute to or has any liability, actual or contingent, with respect to, Section 4069, 4201 or 4212(c) of ERISA or otherwise.

(f) “ Black Scholes Value ” means the value of the Portside Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of closing of the Merger for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of the Portside Warrant as of such date of request and (ii) an expected volatility equal to the greater of 50% and the 100 day volatility obtained from the “HVT” function on Bloomberg as of the day immediately following the public announcement of the Merger.

(g) “ Business ” means, collectively, the businesses of the Company and its Subsidiaries.

(h) “ Business Day ” means any day on which banks are not required or authorized to close in the City of New York or the City of Los Angeles.

(i) “ Charter Documents ” means the Company’s certificate of incorporation and bylaws, in each case as may be amended from time to time.

(j) “ Code ” means the Internal Revenue Service Code of 1986, as amended.

(k) “ Company Board ” means the board of directors of the Company and any committees thereof.

(l) “ Company Common Stock ” means the common stock, par value $.0001 per share, of the Company, together with the associated Company Rights.

(m) “ Company Convertible Note ” means that certain senior convertible note issued to Portside Growth and Opportunity Fund, originally dated as of August 30, 2006, in an original principal amount of Seventeen Million Dollars ($17,000,000), as amended on November 10, 2006.

(n) “ Company Credit Facility ” means the Company’s secured senior revolving credit facility in an aggregate principal amount of up to Twenty-Five Million Dollars ($25,000,000) pursuant to the Amended and Restated Loan and Security Agreement, dated August 10, 2005, between the Company and Wells Fargo Foothill, Inc., as amended by Amendment Number One, dated as of November 3, 2005, as amended by Amendment Number Two, dated as of June 23, 2006, as amended by Amendment Number Three, dated as of August 9, 2006, as amended by Amendment Number Four, dated as of November 13, 2006, as amended by Amendment Number Five, dated as of January 11, 2007, as amended by Amendment Number Six, dated as of January 11, 2007.

(o) “ Company Disclosure Letter ” means the disclosure letter dated March 29, 2007 delivered to Parent by the Company in connection with the execution and delivery of this Agreement (with specific reference to the representations and warranties in Section 3.01 to which the information in such letter relates).

(p) “ Company Equity Incentive Plans ” means the Company’s 2004 Incentive Compensation Plan, 1998 Incentive Plan, 1994 Eligible Directors Stock Option Plan and the Egami Media, Inc. 2005 Incentive Compensation Plan.

(q) “ Company Material Adverse Effect ” means an effect, event, development or change which, individually or in the aggregate with other effects, events, developments or changes, is materially adverse to the business, assets, properties, financial condition, or results of operations of the Company and its Subsidiaries taken as a whole, other than any effect, event, development or change arising out of or resulting from (A) changes or conditions in the U.S. or global economy or capital or financial markets generally, including changes in interest or exchange rates, (B) changes or conditions in the industries in which the Company and its Subsidiaries operate ( provided , that the impact on the Company is not materially disproportionate to the impact on other similarly situated entities), (C) changes in laws (including, without limitation, tax laws and regulatory laws) or general economic conditions ( provided , that the impact on the Company is not materially disproportionate to the impact on other similarly situated entities), (D) changes in GAAP, (E) the execution, announcement of, or compliance with, this Agreement or the consummation of the transactions contemplated herein, including the impact thereof on relationships, contractual or otherwise, with Governmental Entities, customers, suppliers, licensors, distributors, partners or employees, (F) acts of war or acts of terrorism, or (H) any change in the Company’s stock price or trading volume.

(r) “ Company Preferred Stock ” means the preferred stock, par value $.0001 per share, of the Company.

(s) “ Company Rights ” means the preferred stock purchase rights associated with the Company Common Stock pursuant to the Company Rights Agreement.

(t) “ Company Rights Agreement ” means the Rights Agreement, dated as of October 31, 2005, between the Company and Computershare Trust Company, Inc., a Colorado limited purpose trust company, as Rights Agent.

(u) “ Company Stockholders ” means the holders of the outstanding shares of Company Common Stock.

(v) “ Company Stockholder Approval ” means the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock required to adopt this Agreement pursuant to Section 251(c) of the DGCL.

(w) “ Confidentiality Agreement ” means the letter agreement, dated November 22, 2006 between Parent and the Company.

(x) “ DGCL ” means the Delaware General Corporation Law.

(y) “ Dissenting Shares ” means any shares of Company Common Stock that are outstanding immediately prior to the Effective Time, the holders of which shall have properly delivered a written demand for appraisal and otherwise perfected the right to an appraisal of the fair value of such shares of Company Common Stock in accordance with Section 262 of the DGCL.

(z) “ Egami Media ” means Egami Media, Inc., a Delaware corporation and wholly owned subsidiary of the Company.

(aa) “ Elements ” means all physical elements of or relating to a Film, including all negatives, duplicate negatives, fine grain prints, soundtracks, positive prints (cut-outs and trims excepted), and sound, all video formats (including PAL/NTSC), and other physical properties in connection with a Film and the trailer for such Film, exposed film, developed film, positives, negatives, prints, answer prints, special effects, pre-print materials (including interpositives, negatives, duplicate negatives, internegatives, color reversals, intermediates, lavenders, fine grain master prints and matrices and all other forms of pre-print elements which may be necessary or useful to produce prints or other copies or additional pre-print elements, whether now known or hereafter devised), soundtracks, recordings, audio and video tapes and discs of all types and gauges, cutouts, trims, non-analog recordings and tapes, including without limitation, any video digital recordings and HDTV format recordings, and any and all other physical properties of every kind and nature relating to a Film in whatever state of completion, and all duplicates, drafts, versions, variations and copies of each thereof.

(bb) “ Environmental Laws ” means all Laws relating to the protection of human health, safety, or welfare or the environment, including any emission, discharge, generation, storage, treatment, disposal, abatement, Release, threatened Release, reporting, licensing, permitting, investigation, cleanup, mitigation, remediation, transportation, or other handling of any Hazardous Materials, including the following federal Laws as amended and their state counterparts: (i) the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901, et seq.; the Clean Water Act, 33 U.S.C. §§ 1251, et seq.; the Clean Air Act, 42 U.S.C. §§ 7401, et seq.; and the Toxic Substances Control Act, 15 U.S.C. §§ 2601, et. seq.; and (ii) all other requirements pertaining to protection of air, surface water, groundwater or land and subsurface, natural resources, and related human health, safety, or welfare.

(cc) “ Environmental Liabilities and Costs ” means all damages, natural resource damages, claims, losses, expenses, costs, obligations, and liabilities (collectively, “ Environmental Losses ”) imposed by, under or pursuant to Environmental Laws, including all Environmental Losses related to Remedial Actions, and all fees, compliance costs, disbursements, penalties, fines and expenditures necessary to cause property, the Company, any Subsidiary of the Company or the Business to be in compliance with the requirements of Environmental Laws.

(dd) “ Environmental Permits ” means any federal, state or local permit, license, registration, consent, order, administrative consent order, certificate, approval, waiver or other authorization necessary for the conduct of the Business as currently conducted under any applicable Environmental Law.

(ee) “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

(ff) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(gg) “ Expenses ” means all out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates) paid or incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the transactions contemplated hereby, including (i) any due diligence and valuation costs and expenses, (ii) the preparation, printing, filing and mailing of the Proxy Statement and the solicitation of the Company Stockholder Approval, (iii) the preparation and filing of all applications, notices, registrations, declarations, petitions and filings with any Governmental Entity in connection with the Required Statutory Approvals and (iv) all other matters related to the transactions contemplated hereby.

(hh) “ Fee Guarantee ” means that certain guarantee in favor of the Company, dated as of the date hereof, pursuant to which the payment of the Business Interruption Fee to the Company is being guaranteed if the Company becomes entitled to such payment pursuant to Section 7.02(c) hereof.

(ii) “ Film ” or “ Films ” means such motion pictures (including, features and shorts), television programming, animated programming, Internet programming, direct-to-video programming, direct-to-DVD programming or other filmed, taped or recorded entertainment of any kind or nature, in whatever stage of development, production, completion, abandonment, turnaround or release, in which Company owns or controls any right, title or interest.

(jj) “ Film Rights ” means those rights with respect to any Film, including all “Components” thereof, owned or controlled by Company or its Subsidiaries. For such purpose “Components” shall mean titles, themes, contents, dialogue, characters, plots, characterizations, elements and music (whether or not now known or recognized) including: (a) underlying literary, musical and dramatic and other material and intellectual property associated with or related to or necessary to the exploitation of such Film including copyrights pertaining thereto; (b) sequel, prequel, remake rights and other derivative production rights, including all novelization, merchandising, character, serialization, games and interactive rights; (c) all other allied, ancillary, subsidiary and derivative rights (including theme park rights) throughout the universe related to the Films; (d) all Elements related to the Films; and (e) all contractual and other rights associated with or related to the Films, whether in any media now known or hereafter developed.

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

(ll) “ Governmental Entity ” means any federal, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency or commission or other authority thereof, or any quasi-governmental or private body with legal jurisdiction to exercise any regulatory, judicial, taxing, importing or other governmental authority.

(mm) “ Hazardous Materials ” means any substance that (a) is defined, listed, identified or otherwise regulated under any Environmental Law, or (b) requires investigation, remediation, or other protective measures under such Environmental Law.

(nn) “ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules and regulations promulgated thereunder.

(oo) “ Intellectual Property Right ” means any trademark, service mark, trade name, copyright, patent, software license, other database, invention, trade secret, know-how (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right.

(pp) “ known ,” “ knowingly ” or “ Knowledge ” means, with respect to any party, the actual knowledge of the persons listed on Schedule 1.01(pp) , presuming such persons has completed a reasonable investigation of the matter in question.

(qq) “ Law ” or “ Laws ” means, as applicable, (A) statutes, laws, rules, regulations, ordinances or codes of any Governmental Entity and (B) writs, orders, decisions, injunctions, judgments, awards and decrees of any Governmental Entity.

(rr) “ Letter Agreement ” means that certain expense reimbursement agreement, dated March 8, 2007, by and between the Company and Parent.

(ss) “ Liens ” means all mortgages, liens, pledges, encumbrances, charges and security interests.

(tt) “ Licensors ” mean those persons from which the Company or its Subsidiaries has acquired any right, title or interest in any Film or any Music Product.

(uu) “ Master Recordings ” shall mean the original Recordings of the performances of musical artists as embodied on the original Master Tape, which are owned by , or licensed to, Company.

(vv) “ Master Tapes ” shall mean all original master recording tapes (whether digital or analog) and every recording of sound (by any method and on any substance or material, now known or hereafter developed), whether or not coupled with a visual image, including the following elements : (1) master mix reels (i.e., two-track master mixes on analog tape) recorded and compiled at the mixing studio (i.e., prior to mastering) ; (2) analog and/or digital multitrack tapes (masters and slaves) (including any two, three, four, eight, sixteen, twenty-four and forty-eight track master tapes) with accompanying tone reels (if available); (3) two track mastered and edited tapes (whether on analog reels, digital audio tapes, U-Matic 1630 tape, CD-R or otherwise) with respect to each recording of sound, whether or not coupled with a visual image in a format used or useful in the production or manufacture of Records; (4) computer-based recording storage formats (e.g., ProTools session and audio data files, Exabyte reels, magneto-optical discs, CD-Rs, hard discs, etc.); (5) sample and automation discs (if any); (6) all existing documentation (e.g., console strips, outboard settings, session notes, etc.); and (7) and all acetates and metal or other equivalent parts or reproductions of such master tapes and recordings, and all other materials used or useful in the recording, production or manufacture of Records.

(ww) “ Measurement Date ” shall mean, if the Closing Date is on or before the 22nd of any month, the last day of the second immediately preceding month, and, if the Closing Date is on or after the 23 ^rd of any month, the last day of the immediately preceding month. By way of example only, if the Closing Date is June 22, 2007 then the Measurement Date shall be April 30, 2007 and if the Closing Date is June 23, 2007, then the Measurement Date shall be May 30, 2007.

(xx) “ Musical Compositions ” shall mean that portion of all right, title and interest in and to any musical composition (whether published or unpublished, registered or unregistered) which is owned by or licensed to Company, including, without limitation, all rights to: (a) the exploitation thereof in the form of sheet music, orchestrations, folios, compilations, songbooks and other forms of print; (b) the exploitation thereof as embodied in Records; (c) the inclusion of performances thereof in motion pictures, videotapes and other audiovisual works; and (d) the granting to third parties of the right to perform such musical compositions publicly, world-wide.

(yy) “ Music Distribution Agreements ” shall mean all agreements relating to the distribution, license or other exploitation of any item or items of Music Product or otherwise in the Music Library or any Records embodying the same.

(zz) “ Music Distribution Rights ” shall mean the rights of the Company, including pursuant to any license, to distribute, license or otherwise exploit any Music Product.

(aaa) “ Music Inventory ” shall mean all Records and all related packaging, all copies of published Musical Compositions (whether in the form of sheet music, orchestrations, folios, compilations, song books or any other form of print), all other physical embodiments of any of the foregoing (other than Master Tapes themselves) all promotional materials (including music videos, promotional Music Products, merchandising or any other similar materials), any other materials created, produced or manufactured pursuant to a Music Agreement (other than Master Recordings), and related products and other readily marketable materials, including raw materials, of a type manufactured by or on behalf of the Company or its Subsidiaries in the ordinary course of business as presently conducted.

(bbb) “ Music Library ” shall mean, for any person, the catalogue of all Music Product owned, held by or licensed to such person.

(ccc) “ Music Product ” shall mean: (i) Master Recordings; (ii) Musical Compositions; and (iii) any and all and all appurtenant rights to the Master Recordings and Musical Compositions.

(ddd) “ NASDAQ ” means the National Association of Securities Dealers Automated Quotations system.

(eee) “ other party ” means, with respect to the Company, Parent and Merger Sub, collectively, and with respect to Parent and Merger Sub, the Company, unless the context otherwise requires.

(fff) “ Parent Material Adverse Effect ” means an effect, event, development, change, occurrence or state of facts which prevents or materially impedes, interferes with, hinders or delays (to a date beyond the Outside Date or the Extended Outside Date (if applicable) (each as defined in Section 7.01(a)(iii) below)) the consummation by Parent and Merger Sub of the Merger, the Financing (as defined in Section 3.02(h) below) and the other transactions contemplated hereby.

(ggg) “ person ” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization, other entity or group (as defined in the Exchange Act).

(hhh) “ Portside Warrant ” means that certain warrant, dated August 30, 2006, as amended, in the name of Portside Growth and Opportunity Fund or its permitted assigns, pursuant to which the holder thereof is entitled to purchase from the Company at the exercise price then in effect One Million (1,000,000) shares of Company Common Stock.

(iii) “ Professional Advisor ” means with respect to any person, any attorney, accountant, investment banker and other advisor and agent.

(jjj) “ Professional Fees ” means all fees and expenses of all Professional Advisors for services rendered in connection with this Agreement and the transactions contemplated hereby, including fees and expenses of Professional Advisors arising out of, relating to or incidental to the discussion, evaluation, financing, negotiation and documentation of the transactions contemplated hereby.

(kkk) “ Proxy Statement ” means, collectively, the preliminary and definitive proxy statements and related proxy solicitation materials files with the SEC (as amended or supplemented from time to time) relating to the Company Stockholder Approval.

(lll) “ Recording ” shall mean any recording of sound, whether or not coupled with a visual image, by any method and on any substance or material, whether now or hereafter known, which is used or useful in the recording, production and/or manufacture of Records or for any other exploitation of sound.

(mmm) “ Records ” shall mean any form of reproduction, distribution, transmission or communication of Recordings (whether or not in physical form) now or hereafter known (including reproductions of sound alone or together with visual images) which is manufactured, distributed, transmitted or communicated primarily for personal use, home use, institutional (e.g., library or school) use, jukebox use, or use in means of transportation, including any computer-assisted media (e.g., CD-ROM, DVD Audio, CD Extra, Enhanced CD) or use as a so-called “ring tone.” For the avoidance of doubt, “Records” shall include the transmission or communication of a Master Recording directly to the consumer regardless of whether previously or subsequently embodied in a physical record configuration by any Person.

(nnn) “ Relativity ” means Relativity Media, LLC, a California limited liability company.

(ooo) “ Relativity Shares ” means, collectively, the 3,400,000 contingently issuable shares of Company Common Stock granted to Relativity pursuant to, and on the terms and conditions of, the Relativity Transaction Documents.

(ppp) “ Relativity Transaction Documents ” means, collectively, the following agreements: (a) that certain Home Video Distribution Agreement, dated as of August 11, 2006, by and between the Company and Relativity; (b) that certain Stock Purchase Agreement, dated as of August 11, 2006, by and between the Company and Relativity; (c) that certain Security Agreement, dated as of August 11, 2006, by and between the Company and Relativity; (d) that certain Stock Pledge, dated as of August 11, 2006, by and between the Company and Relativity; and (e) that certain Stock Release Agreement, dated as of August 11, 2006, by and between the Company and Relativity.

(qqq) “ Release ” means any releasing, spilling, leaching, disposing or other transmission or discharging of Hazardous Materials into the environment (including air, soil, subsurface, surface water and groundwater).

(rrr) “ Remedial Action ” means all actions required by the Environmental Laws to investigate, monitor, clean up, remove, treat or in any other way remediate any Release.

(sss) “ Representatives ” means with respect to any person, any director, officer or employee of, or any investment banker, financial advisor, accountant, attorney or other agent or representative of, such person.

(ttt) “ Returns ” means all federal, state, local and foreign returns, forms, estimates, information statements and reports required to be filed with any Governmental Entity relating to Taxes.

(uuu) “ RSUs ” means restricted stock units entitling the holder thereof to shares of Company Common Stock.

(vvv) “ SEC ” means the Securities and Exchange Commission.

(www) “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(xxx) “ Stockholders’ Meeting ” means a meeting of Company Stockholders (which may be the regular annual meeting, if approved by Parent, such approval not to be unreasonably withheld or delayed) for the purposes of obtaining the Company Stockholder Approval.

(yyy) “ Subsidiary ,” means, when used with respect to Parent, Merger Sub, the Surviving Corporation or the Company, any other person (whether or not incorporated) with respect to which Parent, Merger Sub or the Company, as applicable, directly or indirectly (a) owns or has the power to vote or control more than 50% of any class or series of capital stock or other voting interests of such person or (b) is a general partner, managing member or joint venturer.

(zzz) “ Taxes ” means any and all federal, state, local and foreign taxes, including, without limitation, gross receipts, income, profits, capital, sales, use, license, registration, occupation, value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, assessments, governmental charges and duties and similar amounts together with all interest, penalties and additions imposed with respect to any such amounts.

(aaaa) “ Trading Day ” means any day on which the shares of Company Common Stock are traded on The NASDAQ Global Market, or, if The NASDAQ Global Market is not the principal trading market for the shares of Company Common Stock, then on the principal securities exchange or securities market on which the shares of Company Common Stock are then traded; provided , that “Trading Day” shall not include any day on which the shares of Company Common Stock are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the shares of Company Common Stock are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).

(bbbb) “ Transfer Taxes ” means all stock transfer, real estate transfer, property, documentary, stamp, recording and other similar Taxes incurred in connection with the transactions contemplated by this Agreement.

SECTION 1.02 The Merger . Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub shall be merged with and into the Company at the Effective Time (as defined below). Following the Effective Time, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the corporation surviving the Merger (the “ Surviving Corporation ”) and shall succeed to and assume all of the rights and obligations of the Company and Merger Sub in accordance with the DGCL. As a result of the Merger, the Surviving Corporation shall become a wholly-owned subsidiary of Parent. The effects and consequences of the Merger shall be as set forth in Section 1.05 and the DGCL.

SECTION 1.03 Closing . The closing of the Merger (the “ Closing ”) shall take place at 8:00 a.m. local time on a date to be specified by the parties hereto, which shall be no later than the tenth Business Day after satisfaction or, to the extent permitted by this Agreement and applicable Law, waiver of the conditions set forth in Article VI of this Agreement (other than those conditions that by their terms are to be satisfied at the Closing, but subject to such satisfaction at the Closing or, to the extent permitted by this Agreement and applicable Law, waiver of those conditions at or prior to the Closing), at the offices of Manatt, Phelps & Phillips, LLP, 11355 West Olympic Blvd., Los Angeles, California 90064, unless another time, date or place is agreed to by Parent and the Company. The date on which the Closing occurs is referred to in this Agreement as the “ Closing Date .”

SECTION 1.04 Effective Time . Subject to the provisions of this Agreement, the parties shall prepare, and on the Closing Date the parties shall cause to be filed with the Delaware Secretary of State, a certificate of merger in accordance with Section 251 of the DGCL (in any such case, the “ Certificate of Merger ”) and shall make all other filings or recordings required under the DGCL to effectuate the Merger. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Delaware Secretary of State, or at such later time as the parties hereto may agree and specify in the Certificate of Merger (the time and date the Merger becomes effective being hereinafter referred to as the “ Effective Time ”).

SECTION 1.05 Effects of the Merger . The Merger shall have the effects set forth in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, immunities, powers, franchises and authority of the Company and Merger Sub will be vested in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation, in each case as contemplated by Section 259 of the DGCL.

SECTION 1.06 Certificate of Incorporation and Bylaws .

(a) At the Effective Time, the certificate of incorporation of the Company shall be amended so as to read in its entirety as is set forth on Exhibit A hereto, and, as so amended, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms or as provided by Law.

(b) At the Effective Time, the bylaws of the Company shall be amended so as to read in their entirety as is set forth on Exhibit B hereto, and, as so amended, shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with their terms or as provided by Law.

SECTION 1.07 Directors . The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation from and after the Effective Time, each to hold office until their respective successors are duly elected and qualified.

SECTION 1.08 Officers. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office until their successors are duly appointed by the board of directors of the Surviving Corporation or a duly authorized committee thereof.

ARTICLE II

EFFECT OF THE MERGER ON THE SECURITIES OF THE
CONSTITUENT CORPORATIONS; EXCHANGE PROCEDURES

SECTION 2.01 Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holders of any of the following securities:

(a)  Capital Stock of Merger Sub . Each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall automatically be converted into and become one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation.

(b)  Cancellation of Treasury Stock and Parent Owned Stock . Each share of Company Common Stock that is owned by the Company as treasury stock immediately prior to the Effective Time and each share of Company Common Stock that is owned by Parent, Merger Sub or any other Subsidiary of Parent (collectively, the “ Canceled Shares ”) immediately prior to the Effective Time shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(c)  Conversion of Company Common Stock . Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (each, a “ Share ” and collectively, the “ Shares ”), but other than the Canceled Shares and any Dissenting Shares (except as provided in paragraph (e) below) (each such Cancelled Share and Dissenting Share, an “ Excluded Share ” and collectively, the “ Excluded Shares ”), shall be converted into the right to receive $4.40 in cash (the “ Per Share Merger Consideration ”), without interest, less any required withholding Taxes in accordance with Section 2.02(h) hereof.

(d)  Cancellation of Shares . At the Effective Time, all Shares shall no longer be outstanding and all Shares shall automatically be canceled and retired and shall cease to exist, and, in the case of book-entry Shares (“ Book-Entry Shares ”), the names of the former registered holders shall be removed from the registry of holders of such Shares, and each holder of a certificate representing any such Shares (each, a “ Certificate ” and collectively, the “ Certificates ”) shall cease to have any rights with respect thereto, except the right to receive the Per Share Merger Consideration, without interest, with respect to each such Share in accordance with, or as otherwise contemplated by, Section 2.02 of this Agreement, or the right to appraisal with respect to the Dissenting Shares, pursuant to subparagraph (e) below.

(e)  Dissenting Shares . Notwithstanding anything in this Agreement to the contrary, Dissenting Shares shall not be converted into or represent the right to receive the Per Share Merger Consideration as provided in this Section 2.01 . At the Effective Time, the Dissenting Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of Dissenting Shares shall be entitled only to such rights as are granted under Section 262 of the DGCL, except that all Dissenting Shares held by persons who fail to perfect or who effectively waive, withdraw or lose their rights as a dissenting stockholder in respect of such Dissenting Shares under Section 262 of the DGCL shall thereupon be deemed to have been converted as of the Effective Time into the right to receive only the Per Share Merger Consideration as provided in this Article II and will no longer be Excluded Shares for purposes of the Agreement. The Company shall give prompt notice and copies to Parent of any demands for appraisal of any Shares, withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company, and Parent shall have the right to participate in and direct all negotiations, settlements and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demands, or agree to do or commit to do any of the foregoing.

(f)  Options . At the Effective Time, each option (each, an “ Option ”) to purchase Company Common Stock granted under the Company Equity Incentive Plans that is outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) shall be cancelled, and the holder thereof shall be entitled to receive at the Effective Time from the Company, or as soon as practicable thereafter (but in no event later than two (2) Business Days after the Effective Time) from the Surviving Corporation, in consideration for such cancellation, only an amount in cash (the “ Option Consideration ”), without interest, equal to the product obtained by multiplying (x) the total number of shares of Company Common Stock issuable upon the exercise in full of such Option by (y) the excess, if any, of the amount of the Per Share Merger Consideration over the exercise price per share of Company Common Stock subject to such Option (with the aggregate amount of such payment rounded up to the nearest cent), and in each case less any required withholding for Taxes in accordance with Section 2.02(h) hereof.

(g)  Restricted Stock Units . At the Effective Time, each RSU that is outstanding immediately prior to the Effective Time (whether vested or unvested) shall be canceled, and the holder thereof shall be entitled to receive at the Effective Time from the Company, or as soon as practicable thereafter (but in no event later than two (2) Business Days after the Effective Time) from the Surviving Corporation, in consideration of such cancellation, an amount in cash (the “ RSU Consideration ”) , without interest , equal to the product of (i) the number of shares of Company Common Stock subject to such RSU and (ii) the Per Share Merger Consideration, and in each case less any required withholding for Taxes in accordance with Section 2.02(h) hereof, but in each case subject to the terms and conditions set forth in the Company Equity Incentive Plans, including the terms and conditions with respect to distributions and timing of payment thereunder and in compliance with Section 409A of the Code.

(h)  Warrants . Other than the Portside Warrantholder (as defined below in subsection (i) ), each holder (each, a “ Warrantholder ”) of a warrant to purchase Company Common Stock (each, a “ Warrant ”) shall only be entitled to receive an amount in cash (the “ Warrant Consideration ”), without interest, equal to the product obtained by multiplying (x) the total number of shares of Company Common Stock issuable upon the exercise in full of such Warrant held by such Warrantholder by (y) the excess, if any, of the Per Share Merger Consideration over the exercise price per share of Company Common Stock under such Warrant (with the aggregate amount of such payment rounded up to the nearest cent), and in each case less any required withholding for Taxes in accordance with Section 2.02(h) hereof. As of the Effective Time, all such Warrants shall no longer be outstanding and shall automatically be canceled and retired and cease to exist and each Warrantholder shall cease to have any rights with respect thereto, except the right to receive the Warrant Consideration, without interest, upon the surrender of the original Warrant to the Paying Agent in accordance with Section 2.02(k) .

(i) Portside Warrant .

(i) Pursuant to Section 4(b) of the Portside Warrant, the Company shall deliver a notice to Portside Growth and Opportunity Fund or its permitted assigns (the “ Portside Warrantholder ”) no less than 10 Trading Days prior to the consummation of the Merger stating that (A) upon consummation of the Merger the Company will deliver cash to the Portside Warrantholder in an amount (calculated in accordance with the hypothetical calculation in Section 2.01(i) of the Company Disclosure Letter, the “ Portside Warrant Consideration ”) equal to the Black Scholes Value of the remaining unexercised portion of the Portside Warrant on the date immediately prior to the announcement of the Merger determined using the Black Scholes Option Pricing Model and (B) upon delivery of such cash payment against delivery and surrender of the original Portside Warrant, the Portside Warrant shall no longer be outstanding.

(ii) As of the Effective Time, such Portside Warrant shall no longer be outstanding and shall automatically be canceled and retired and shall expire and cease to exist and the Portside Warrantholder shall cease to have any rights with respect thereto, except the right to receive the Portside Warrant Consideration, without interest, upon the surrender of the original Portside Warrant to the Paying Agent in accordance with Section 2.02(k) .

(j)  Relativity Shares . The Relativity Shares shall be converted into the right to receive an aggregate amount in cash equal to such aggregate amount as calculated on Section 2.01(j) of the Company Disclosure Letter (the “ Relativity Merger Consideration ”), without interest and less any required withholding Taxes in accordance with Section 2.02(h) hereof. As of the Effective Time, all Relativity Shares shall no longer be outstanding or issuable and all Relativity Shares shall automatically be canceled and retired and shall cease to exist, and Relativity shall receive at the Effective Time from the Company, or as soon as practicable thereafter (but in no event later than two Business Days after the Effective Time) from the Surviving Corporation, in consideration of such cancellation, only the Relativity Merger Consideration, without interest.

(k)  Company Convertible Note . The Company Convertible Note shall be converted into the right to receive only an aggregate amount in cash equal to such aggregate amount as calculated on Section 2.01(k) of the Company Disclosure Letter (the “ Convertible Note Consideration ” and, together with the Per Share Merger Consideration, the Option Consideration, the Warrant Consideration, the Portside Warrant Consideration, the RSU Consideration, and the Relativity Merger Consideration, the “ Aggregate Merger Consideration ”), without interest and less any required withholding for Taxes in accordance with Section 2.02(h) hereof. As of the Effective Time, the Company Convertible Note shall no longer be outstanding, and the holder thereof shall receive at the Effective Time from the Company, or as soon as practicable thereafter (but in no event later than two Business Days after the Effective Time) from the Surviving Corporation, in consideration of such cancellation, only the Convertible Note Consideration, without interest.

SECTION 2.02 Exchange of Certificates .

(a)  Paying Agent . Prior to the Effective Time, Parent shall designate a bank or trust company, reasonably acceptable to the Company, to act as paying agent in the Merger (the “ Paying Agent ”) and, prior to the Effective Time, Parent shall enter into an agreement with the Paying Agent (the “ Paying Agent Agreement ”), which Paying Agent Agreement shall provide, among other things, that Parent shall deposit with the Paying Agent, immediately prior to the Effective Time, for the benefit of the holders of Shares (other than the Excluded Shares), immediately available funds in an aggregate amount necessary for the payment of the Per Share Merger Consideration upon surrender of Certificates or Book-Entry Shares pursuant to this Section 2.02 . The cash deposited with the Paying Agent by Parent in accordance with this Section 2.02 shall hereinafter be referred to as the “ Exchange Fund .” The Exchange Fund shall not be used for any other purpose.

(b)  Exchange Procedures for Certificates . No later than five Business Days after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of Shares (other than the Excluded Shares), (i) a letter of transmittal in customary form and mutually agreed upon by Parent and the Company, which shall specify that delivery shall be effected, and risk of loss and title to the Certificates and Book-Entry Shares shall pass, only upon delivery of the Certificates or Book-Entry Shares, as the case may be, to the Paying Agent and (ii) instructions for effecting the surrender of the Certificates (or Affidavits (as defined below) in lieu of any lost, stolen or destroyed Certificates) and Book-Entry Shares in exchange for the Per Share Merger Consideration (the “ Initial Notice ”). Upon surrender of a Certificate (or an Affidavit in lieu thereof) or Book-Entry Share for cancellation to the Paying Agent, together with a duly executed and properly completed letter of transmittal and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate or Book-Entry Share shall be entitled to receive in exchange therefor the amount of cash into which the Shares theretofore represented by such Certificate (or an Affidavit in lieu thereof) or Book-Entry Share shall have been converted by virtue of the Merger pursuant to Section 2.01 , and the Certificate or Book-Entry Share so surrendered shall forthwith be canceled. Until surrendered and exchanged as contemplated by this Section 2.02 , each Certificate and Book-Entry Share shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the Shares shall have been converted pursuant to Section 2.01 . No interest will be paid or will accrue to holders of Certificates or Book-Entry Shares on the cash payable upon the exchange of such Shares.

(c)  No Further Ownership Rights in Company Common Stock . All cash paid upon the surrender of Shares in accordance with the terms of this Section 2.02 shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares surrendered or theretofore represented by such Certificates or Book-Entry Shares. At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers of Shares on the stock transfer books of the Company. If, after the Effective Time, Certificates or Book-Entry Shares are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be canceled and exchanged as provided in this Article II .

(d)  Termination of Exchange Fund . Any portion of the Exchange Fund which remains undistributed 12 months after the Effective Time (including any net profit, interest or other earnings or gains thereon) shall be delivered to the Surviving Corporation (or, to a wholly owned subsidiary of the Surviving Corporation, if the Surviving Corporation so directs (such subsidiary, the “ Designated Subsidiary ”), and any holders of Certificates or Book-Entry Shares who have not theretofore complied with this Article II (such holders, “ Nonclaiming Holders ”) shall thereafter look only to the Surviving Corporation (or such Designated Subsidiary) for payment of their claims for the Per Share Merger Consideration with respect to such Certificates or Book-Entry Shares pursuant to this Article II . The Surviving Corporation shall effect a second notice (the “ Second Notice ”) to Nonclaiming Holders not later than the calendar month that is 57 months after the Effective Date, which will include the same information as set forth in the Initial Notice and shall advise the Nonclaiming Holders that they are entitled to exchange their Shares by responding to the Surviving Corporation (or the Designated Subsidiary) within five years following the Second Notice.

(e)  Investment of the Exchange Fund . The Exchange Fund shall be invested by the Paying Agent as directed by Parent or the Surviving Corporation; provided , however , that such investments shall be in obligations of or guaranteed by the United States of America or any agency or instrumentality thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $1 billion (based on the most recent financial statements of such bank which are then publicly available). Any net profit resulting, interest or other earnings or gains from the Exchange Fund shall be the property of and payable to Parent. To the extent that there are losses with respect to such investments, or the Exchange Fund diminishes for other reasons below the level required to make prompt payments of the Per Share Merger Consideration required pursuant to Section 2.01 above, Parent or the Surviving Corporation shall promptly replace or restore the portion of the Exchange Fund lost through investments or other events so as to ensure that the Exchange Fund is, at all times until its termination in accordance with Section 2.02(d) above, sufficient to make such payments.

(f)  No Liability . None of Parent, Merger Sub, the Company, the Surviving Corporation, the Paying Agent or any of their respective directors, officers, members, managers, employees or agents shall be liable to any person with respect to any Per Share Merger Consideration from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Certificate or Book-Entry Share shall not have been surrendered prior to the time when any cash payable under this Article II in respect of such Certificate or Book-Entry Share would otherwise escheat to or become the property of any Governmental Entity, any such cash in respect of such Certificate shall, to the extent permitted by applicable Law, immediately prior to such time become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto.

(g)  Lost Certificates and Warrants . If any Certificate or any original Warrant or Portside Warrant shall have been lost, stolen or destroyed, upon the making of an affidavit (an “ Affidavit ”) of that fact by the person claiming such Certificate, Warrant or Portside Warrant to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, Warrant or Portside Warrant, as the case may be, the Paying Agent shall deliver in exchange for such lost, stolen or destroyed Certificate, Warrant or Portside Warrant, as the case may be, subject to compliance with the other applicable requests for valid surrender, exchange and payment for Shares, Warrants or the Portside Warrant, as applicable, as provided in this Section 2.02 , the applicable Per Share Merger Consideration, Warrant Consideration or Portside Warrant Consideration.

(h)  Withholding Tax . Parent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable to any person pursuant to this Agreement such amounts as may be required to be deducted and withheld under any applicable Law relating to Taxes, and shall promptly remit all withheld amounts to the applicable taxing authority. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the person in respect of whom such deduction and withholding was made.

(i)  Transfer Taxes . If payment of the Per Share Merger Consideration payable to a holder of Shares is to be made to a person other than the person in whose name the applicable Shares are registered, it shall be a condition of payment that any related Certificate surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid all transfer and other Taxes required by reason of the transfer of the Certificate surrendered to a person other than the registered holder or shall have established to the satisfaction of Parent that such Tax either has been paid or is not applicable.

(j)  Certain Adjustments . If, between the date of this Agreement and the Effective Time, the outstanding Shares shall have been changed into a different number or different class by reason of any reclassification, recapitalization, stock split, split-up, combination or exchange of shares or a stock dividend or dividend payable in any other securities shall be declared with a record date within such period, or any similar event shall have occurred, the Aggregate Merger Consideration shall be equitably adjusted to take into account the effects of such event; provided that nothing in this Section 2.02(i) shall be construed to permit the Company to take any action with respect to its securities that is prohibited by the terms of this Agreement, including the restrictions contained in Section 4.01 hereof.

(k)  Exchange Procedure for Warrants . The Paying Agent Agreement shall also provide that Parent shall deposit with the Paying Agent, immediately prior to the Effective Time, for the benefit of the Warrantholders (including the Portside Warrantholder), immediately available funds in an aggregate amount necessary for the payment of the Warrant Consideration (including the Portside Warrant Consideration). Upon the surrender to the Paying Agent of an original Warrant (including the Portside Warrant), the Paying Agent shall pay to such Warrantholder (including the Portside Warrantholder), the Warrant Consideration or the Portside Warrant Consideration (as applicable). The procedures and other provisions set forth in this Section 2.02 (including Section 2.02(g) if any Warrant (including the Portside Warrant) has been lost, stolen or destroyed) shall apply to any surrender of a Warrant (including the Portside Warrant).

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.01 Representations and Warranties of the Company . Except as disclosed in the Company Disclosure Letter, the Company hereby represents and warrants to Parent and Merger Sub, as follows:

(a) Organization .

(i) The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware, and has the requisite corporate power and authority to conduct its business as currently conducted. The Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so in good standing or to have such power and authority has not had and would not reasonably be expected to have a Company Material Adverse Effect. The copies of the Charter Documents, which were previously furnished or made available to Parent, are true, complete and correct copies of such documents as in effect on the date of this Agreement. The Company has made available to Parent complete and correct copies of the minutes (or, in the case of draft minutes, the most recent drafts thereof) of all meetings of the stockholders, the Company Board and each committee of the Company Board, other than those minutes relating to this transaction or any alternatives to this transaction considered by the Board or any matters subject to attorney-client privilege or the disclosure of which is limited by applicable Law. Neither the Company nor any of its Subsidiaries is in violation of its certificate of incorporation, bylaws or other applicable constituent documents.

(ii) Section 3.01(a)(ii) of the Company Disclosure Letter lists each Subsidiary of the Company and the jurisdiction of organization thereof. Each Subsidiary of the Company is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization (to the extent such concept is recognized in such jurisdictions) and has the requisite corporate powers and authority to carry on its business as currently conducted. Each Subsidiary of the Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the

nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing has not had and would not reasonably be expected to have a Company Material Adverse Effect. The copies of the organizational and governing documents of each Subsidiary of the Company, all of which were previously furnished or made available to Parent, are true, complete and correct copies of such documents as in effect on the date of this Agreement. All the outstanding shares of capital stock of, or other equity interests in, each Subsidiary of the Company have been validly issued and are fully paid and nonassessable and are owned, directly or indirectly, beneficially and of record by the Company free and clear of all Liens. Except for its interests in its Subsidiaries, the Company does not own, directly or indirectly, any capital stock of, or other equity interests and is not a participant in, any corporation, partnership, joint venture, association or other person.

(b) Capital Structure.

(i) The authorized capital stock of the Company consists of (A) 100,000,000 shares of Company Common Stock and (B) 25,000,000 shares of Company Preferred Stock. As of the date hereof, (A) 21,576,544 shares of Company Common Stock are issued and outstanding, (B) 3,400,000 shares of Common Stock are classified as Relativity Shares, (C) zero shares of Company Common Stock are held in the treasury of the Company, (D) no shares of Company Preferred Stock are issued or outstanding or held by the Company in its treasury and (E) 4,695,184 shares of Company Common Stock are reserved for future issuance in connection with the Company Incentive Equity Plans (including shares reserved pursuant to issued and outstanding Options and RSUs), the Warrants and the Portside Warrant. All issued and outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid, non-assessable, and were not issued in violation of any preemptive or other right in favor of any person, and no class of capital stock is entitled to preemptive rights. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which Company Stockholders may vote. As of the date of this Agreement, there are no options, warrants, preemptive or other outstanding rights, stock appreciation rights, conversion rights, redemption rights, repurchase rights, agreements, arrangements or commitments of any kind to which the Company or its Subsidiaries is a party, or by which the Company or its Subsidiaries are bound, obligating the Company or its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, any shares of capital stock or other securities of the Company or its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any person a right to subscribe for or acquire, any securities of the Company or its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding other than (u) the Company Rights, (v) 25,920 RSUs issued and outstanding, (w) Options representing the right to purchase 2,428,917 shares of Company Common Stock, (x) Warrants representing the right to purchase 984,284 shares of Company Common Stock, (y) the Portside Warrant representing the right to purchase 1,000,000 shares of Company Common Stock and (z) the Company Convertible Note representing the right to purchase 4,000,000 shares of Company Common Stock. All Options issued by Egami Media pursuant to the Egami Media, Inc. 2005 Incentive Compensation Plan and all Options issued by the Company pursuant to the 1994 Eligible Directors Stock Option Plan have been validly terminated and are no longer outstanding. Section 3.01(b) of the Company Disclosure Letter sets forth each Option, Warrant and RSU, as applicable, the name of the grantee, the date of the grant, the number of shares of Company Common Stock subject to each Option, Warrant or RSU, the exercise price per share of such Option or Warrant and the vesting schedule for such Option, Warrant or RSU. The Company has made available to Parent true and complete copies of the forms of agreement relating to the grant of Options, Warrants and RSUs.

(ii) Each Option (i) was granted in compliance with all applicable Laws and all of the terms and conditions of the Company Equity Incentive Plan pursuant to which it was issued, (ii) has an exercise price per share of Company Common Stock not less than the fair market value of a share of Company Common Stock on the date on which all requisite action constituting an offer of Company Common Stock to the grantee of the Option upon the terms set forth in the Options was completed, and (iii) qualified for the tax and accounting treatment afforded to such Option in the Company’s Returns and the financial statement included in the Company SEC documents, respectively All Options and RSUs may, by their terms, be treated in accordance with Sections 2.01(f) and (g), respectively, of this Agreement, without the consent of the holder thereof or any other person.

(iii) To the Knowledge of the Company, as of the date hereof, the Portside Warrant Consideration is the maximum and only amount payable as a result of the Merger with respect to the Portside Warrant.

(iv) The Relativity Merger Consideration is the maximum and only amount payable as a result of the Merger with respect to the Relativity Shares.

(c)  Authority . The Company has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby, subject only, in the case of the consummation of the Merger, to obtaining the Company Stockholder Approval. The execution, delivery and performance of this Agreement and the consummation by the Company of the Merger and of the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no other corporate action on the part of the Company is necessary to authorize the execution, delivery and performance of this Agreement by the Company or to consummate the transactions so contemplated, in each case, subject only to, with respect to the Merger, the Company Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of Parent and Merger Sub, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(d) No Conflicts; Consents and Approvals .

(i) The execution, delivery and performance of this Agreement by the Company do not and will not, as the case may be, and the consummation by the Company of the transactions contemplated hereby, including the Merger, does not or will not (x) conflict with or result in a violation pursuant to any provision of the Charter Documents or any provision of the organizational or governing documents of any Subsidiary of the Company, (y) subject to obtaining or making the consents, approvals, notices, orders, authorizations, registrations, declarations and filings referred to in subparagraph (ii) below, contravene any Law or any order, writ, judgment, injunction, decree, determination or award currently in effect or (z) conflict with or result in a breach of, or default under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries under, any loan or credit agreement, note, bond, mortgage, indenture, lease, license, Benefit Plan, contract, agreement or other instrument, permit or obligation to which the Company or any Subsidiary of the Company is a party or by which the Company or any Subsidiary of the Company or their respective properties or assets are or may be bound except, in the case of clauses (y) and (z) above, as would not reasonably be expected to have a Company Material Adverse Effect.

(ii) Except for (A) compliance with, and filings under, the HSR Act; (B) the filing with the SEC of (i) the Proxy Statement and (ii) such reports and other documents under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (C) the filing of the Certificate of Merger and other appropriate merger documents required by the DGCL to be filed with the Secretary of State of the State of Delaware and the filing of appropriate documents with the relevant authorities of other states in which the Company or its Subsidiaries are qualified to do business; (D) any filings and approvals pursuant to the rules and regulations of the NASDAQ; and (E) applicable requirements, if any, of state securities or “blue sky” Laws; (such items set forth above in clauses (A) through (E) collectively, the “ Required Approvals ”), no consent, approval, notice, order or authorization of, or registration, declaration or filing with, any Governmental Entity, is necessary or required to be obtained or made in connection with the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder or the consummation of the Merger and the other transactions contemplated hereby, other than such items that the failure to make or obtain, as the case may be, would not reasonably be expected to materially delay the consummation of the Merger or result in any material restriction on the conduct of the Business by the Surviving Corporation after the Effective Time or have a Company Material Adverse Effect.

(e)  SEC Reports and Financial Statements . The Company (and each Subsidiary of the Company, if applicable) has filed with the SEC all forms, reports, schedules, statements, exhibits and other documents required to be filed by it since March 31, 2005, pursuant to the Exchange Act or the Securities Act (such forms, reports, schedules, statements, exhibits and other documents, including any financial statements or schedules included therein, are collectively referred to herein as the “ Company SEC Documents ”). The Company SEC Documents, as of their respective dates of filing (giving effect to any subsequently filed amendments or supplements thereto), (x) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (y) complied as to form in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be. The audited consolidated financial statements and the unaudited quarterly financial statements of the Company included in the Company SEC Documents comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto in effect on the date of filing, have been prepared in accordance with GAAP, except as may be indicated in the notes thereto or, in the case of unaudited financial statements as permitted by Form 10-Q and Form 8-K of the SEC, and fairly present (subject, in the case of the unaudited financial statements, to the absence of notes and normal year-end audit adjustments), in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended.

(f) Sarbanes-Oxley .

(i) Since March 31, 2006, (A) neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any Representative of the Company or any of its Subsidiaries has received or otherwise obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls relating to periods after March 31, 2006, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices (except for any of the foregoing received after the date of this Agreement which have no reasonable basis), and (B) to the Knowledge of the Company, no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation, relating to periods after March 31, 2006, by the Company or any of its officers, directors, employees or agents to the Company Board or any committee thereof or to any director or executive officer of the Company.

(ii) Except for such matters as have not had, and would not reasonably be expected to have a Company Material Adverse Effect, the Company is in compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002.

(g)  Absence of Certain Changes or Events . Since March 31, 2006, (i) each of the Company and its Subsidiaries has conducted its business only in the ordinary course, (ii) there has not been any effect, event, development, change, occurrence or state of facts that has had or would reasonably be expected to have a Company Material Adverse Effect, and (iii) neither the Company nor any Subsidiary has taken any action that, if taken after the date hereof would be prohibited by Sections 4.01(ii) , (iii) , (v) , (vi) , (ix) , (x) or (xi) .

(h)  Information Supplied . The Proxy Statement shall not, on each relevant filing date, on the date of mailing to the Company Stockholders and at the time of the Stockholders’ Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent or Merger Sub in writing specifically for inclusion in the Proxy Statement.

(i) Employee Benefit Plans .

(i) Section 3.01(i)(i) of the Company Disclosure Letter sets forth a list of all Benefit Plans. True, complete and correct copies of all such written Benefit Plans have been provided or otherwise made available to Parent.

(ii) With respect to each Benefit Plan, the Company has made available to Parent complete and accurate copies, to the extent applicable, of: (A) the most recent annual report on Form 5500 required to have been filed with the IRS for each Benefit Plan, including all schedules thereto, (B) the most recent determination letter, if any, from the IRS for any Benefit Plan that is intended to qualify under Section 401(a) of the Code, (C) the plan documents and summary plan descriptions, or a written description of the terms of any Benefit Plan that is not in writing, (D) any related trust agreements, insurance contracts, insurance policies or other documents of any funding arrangements, (E) any notices to or from the IRS or any office or representative of the DOL or any similar Governmental Entity relating to any compliance issues in respect of any such Benefit Plan, (F) all material amendments, modifications or supplements to any such document.

(iii) No Benefit Plan is (A) a “defined benefit plan” (as defined in Section 414 of the Code), (B) a “multiemployer plan” (as defined in Section 3(37) of ERISA), (C) a “multiple employer plan” (as defined in Section 4063 or 4064 of ERISA) (in each case under clause (A), (B) or (C) whether or not subject to ERISA) or (D) subject, or at any time has been subject, to Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA.

(iv) Since December 31, 2004, each plan, program, arrangement or agreement which constitutes in any part a nonqualified deferred compensation plan with the meaning of Section 409A of the Code has been operated and maintained, in all material respects, in accordance within the requirements of IRS Notice 2005-1 and a good faith reasonable interpretation of Section 409A of the Code and its purpose with respect to the amounts deferred (within the meaning of Section 409A of the Code) after December 31, 2004.

(v) Except as required by applicable Law, neither the Company nor any of its Subsidiaries has any plan or commitment to amend or establish any new Benefit Plan or to continue or increase any benefits under any Benefit Plan, or to maintain any such benefits or the level of any such benefits generally for any period.

(vi) None of the Company, any of its Subsidiaries, or, to the Knowledge of the Company, any of their respective directors, officers, employees or agents has, with respect to any Benefit Plan, engaged in or been a party to any non-exempt “prohibited transaction,” as such term is defined in Section 4975 of the Code or Section 406 of ERISA, which could reasonably be expected to result, directly or indirectly, in the imposition of a material penalty assessed pursuant to Section 502(i) of ERISA or a material tax imposed by Section 4975 of the Code, in each case applicable to the Company, any of its Subsidiaries or any Benefit Plan or for which the Company or any of its Subsidiaries has any indemnification obligation.

(vii) No Benefit Plan that is a “welfare benefit plan” within the meaning of Section 3(1) of ERISA provides benefits to former employees of the Company or its Subsidiaries, other than pursuant to Section 4980B of the Code or any similar state, local or foreign law.

(viii) Each Benefit Plan that is intended to be “qualified” under Section 401 and/or 501(a)(9) of the Code has received a favorable determination letter from the IRS to such effect and, to the Knowledge of the Company, no fact, circumstance or event has occurred or exists since the date of such determination letter that would reasonably be expected to materially and adversely affect the qualified status of any such Benefit Plan.

(ix) No deduction for federal income tax purposes has been nor is any such deduction expected by the Company to be disallowed for remuneration paid or payable by the Company or any of its Subsidiaries by reason of Section 162(m) of the Code including by reason of the transactions contemplated hereby.

(x) Except where failure to comply would not have a Company Material Adverse Effect, each Benefit Plan maintained by the Company and any Subsidiary of the Company has been operated and administered in compliance with its terms and applicable Law.

(xi) The execution of this Agreement and the consummation of the Merger, either by themselves or in conjunction with any other event, will not constitute an event under any Benefit Plan that will or may result in any material payment, acceleration, termination, forgiveness of indebtedness, vesting, distribution, or material increase in compensation or benefits or obligation to fund benefits with respect to any employee of the Company or any Subsidiary of the Company. All contributions and other payments required to be made by the Company or its Subsidiaries to any pension plan with respect to any period ending before the Closing Date have been made or reserves adequate for such contributions or other payments have been or will be set aside therefor and have been or will be reflected in financial statements.

(xii) There are no existing (or, to the Knowledge of the Company, threatened) lawsuits, claims or other controversies, other than claims for information or benefits in the normal course, with respect to any Benefit Plan. Neither the Company nor any Significant Subsidiary has incurred, nor reasonably expects to incur, any material liability under Title IV of ERISA (other than liability for premium payments to the Pension Benefit Guaranty Corporation arising in the ordinary course).

(xiii) Neither the Company nor any of its Subsidiaries will, as a result of the transactions contemplated by this Agreement, be obligated to make any payment or provide any benefit for which no deduction would be permitted by reason of Section 280G of the Code.

(j)  Litigation . There is no suit, claim, action, proceeding, criminal prosecution, audit, arbitration, mediation or investigation (a “ Dispute Proceeding ”) pending before any Governmental Entity or arbitration panel or, to the Knowledge of the Company, threatened against the Company or any Subsidiary of the Company or any of their respective properties or any of their respective officers, employees or directors in their capacity as such, except for any such Dispute Proceeding as has not had and would not reasonably be expected to have a Company Material Adverse Effect. The Company Disclosure Letter sets forth all Dispute Proceedings (i) where the amount in controversy for which the Company may be responsible or liable exceeds fifty thousand dollars ($50,000), (ii) seeks material injunctive relief or otherwise seeks to enjoin the business or operations of the Company, or (iii) seeks to impose any legal restraint on or prohibition against or limit the Surviving Corporation’s ability to operate the business of the Company and its Subsidiaries substantially as operated immediately prior to the date of this Agreement. Neither the Company nor any of its Subsidiaries is subject to any outstanding order, writ, injunction or decree that has had or would reasonably be expected to have a Company Material Adverse Effect.

(k) Compliance with Laws; Permits .

(i) Each of the Company and its Subsidiaries is and since March 31, 2006 has been in material compliance with all Laws applicable to it.

(ii) Other than with respect to Environmental Laws, which are governed by Section 3.01(m), each of the Company and its Subsidiaries holds all material permits, licenses, variances, exemptions, orders, authorizations, consents, franchises and approvals of all Governmental Entities necessary for it to own, lease and operate its properties and assets or to carry on its business as it is now being conducted in compliance with applicable Laws (the “ Company Permits ”), and all such Company Permits are in full force and effect in all material respects. Each of the Company and its Subsidiaries is in material compliance with the terms of the Company Permits. To the Knowledge of the Company, no suspension or cancellation of any Company Permit is pending or threatened.

(l) Tax Matters .

(i) Each of the Company and its Subsidiaries has timely filed all material Returns required to be filed by it with any Tax authority prior to the date hereof. To the Knowledge of the Company, all such Returns are true, correct and complete in all material respects. Each of the Company and its Subsidiaries has paid all Taxes shown to be due on such Returns.

(ii) All material Taxes that each of the Company and its Subsidiaries is required by Law to withhold or collect have been duly withheld or collected, and have been timely paid over to the proper Governmental Entities to the extent due and payable.

(iii) Each of the Company and its Subsidiaries is not delinquent in the payment of any Tax nor is there any Tax deficiency outstanding, proposed or assessed against the Company or its Subsidiaries, nor has the Company or its Subsidiaries executed any unexpired waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax.

(iv) To the Knowledge of the Company, no audit or other examination of any Return of the Company or its Subsidiaries by any Tax authority is presently in progress. Neither the Company nor its Subsidiaries has been notified of any request for such an audit or other examination.

(v) No adjustment relating to any Returns filed by the Company or its Subsidiaries has been proposed in writing, formally or informally, by any Tax authority to the Company, its Subsidiaries or any representative thereof.

(vi) The Company and each of its Subsidiaries has established (or has had established on its behalf) in accordance with GAAP an adequate accrual for all Taxes (including Taxes that are not yet due or payable) through the end of the last period for which the Company and its Subsidiaries ordinarily record items on their respective books, and regardless of whether the liability for such Taxes is disputed. The Company has made available to Parent and Merger Sub complete and accurate copies of all material income, franchise, and foreign Tax Returns, and any amendments thereto, filed by or on behalf of the Company or any of its Subsidiaries, subsequent to December 31, 2002.

(vii) There are no material Liens on the assets of the Company or any of its Subsidiaries relating or attributable to Taxes, other than Liens for Taxes not yet due and payable.

(viii) The Company and its Subsidiaries have not executed any closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof, or any similar provision of state or local law.

(ix) Each of the Company and its Subsidiaries has disclosed on its Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code or any similar provision of state or local law.

(x) Neither the Company nor any of its Subsidiaries has (i) ever been a party to a Contract or inter-company account system in existence under which the Company or any of its Subsidiaries has, or may at any time in the future have, an obligation to contribute to the payment of any portion of a Tax (or pay any amount calculated with reference to any portion of a Tax) of any group of corporations of which the Company or any of its Subsidiaries is or was a part (other than a group the common parent of which is the Company) and (ii) any Liability for Taxes of any person (other than the Company or any of its Subsidiaries) under Treasury regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee or successor, by contract or otherwise.

(xi) No written claim has been made during the past five years by any appropriate Governmental Entity in a jurisdiction where neither the Company nor any of its Subsidiaries filed Tax Returns that it is or may be subject to any material taxation by that jurisdiction.

(xii) Neither the Company nor any of its Subsidiaries has participated or engaged in transactions that constitute “reportable transactions” as such term is defined in Treasury Regulation Section 1.6011-4(b)(1) (other than such transactions that have been properly reported or are not yet required to have been reported), or transactions that constitute “listed transactions” as such term is defined in Treasury Regulation Section 1.6011-4(b)(2).

(xiii) Neither the Company nor any of its Subsidiaries has agreed or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of state, local or foreign law by reason of a change in accounting method initiated by it or any other relevant party and neither the Company nor any of its Subsidiaries has any Knowledge that the appropriate Governmental Entity has proposed any such adjustment or change in accounting method, nor is any application pending with any appropriate Governmental Entity requesting permission for any changes in accounting methods that relate to the business or assets of the Company or any of its Subsidiaries.

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

(xv) The Company is not a United States Real Property Holding Corporation within the meaning of Section 897(c)(2)