AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

EBIX, INC.

JENQUEST, INC.

IDS ACQUISITION SUB, INC.

AND

ROBERT M. WARD, AS SHAREHOLDERS REPRESENTATIVE

DATED OCTOBER 31, 2007

AGREEMENT AND PLAN OF MERGER

        This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of October 31, 2007, by and among EBIX, INC., a Delaware corporation ( "Parent" ); JENQUEST, INC. , a California corporation (the "Company" ); IDS ACQUISITION SUB, INC. , a California corporation and a wholly owned subsidiary of Parent ( "Merger Sub" ); and Robert M. Ward as the representative of the shareholders of the Company hereunder (the "Shareholders Representative" ). Parent, Merger Sub, the Company and the Shareholders Representative are sometimes collectively referred to herein as the "Parties" and each individually as a "Party." Unless otherwise defined herein, certain terms used in this Agreement with initial capital letters are defined in Appendix A.

WITNESSETH:

         WHEREAS, the Company is engaged in the business of providing insurance business process outsourcing services, mainly in the area of insurance certificates (the "Business" ).

         WHEREAS, upon the terms and subject to the conditions of this Agreement, Parent and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the "Merger" ).

         WHEREAS, the respective Boards of Directors of Parent, the Company and Merger Sub have each determined that the Merger and the other transactions contemplated hereby are consistent with, and in furtherance of, their respective business strategies and goals.

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

         WHEREAS, the Board of Directors of the Company has resolved to recommend the Merger to the holders of the Company Capital Stock, has determined that the Merger Consideration is fair to the holders of such Company Capital Stock, and has resolved to recommend that the holders of each class and series of Company Capital Stock accept the Merger Consideration and approve the Merger upon the terms and subject to the conditions set forth herein.

         NOW, THEREFORE, in consideration of the mutual covenants of the Parties as hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Parties, intending to be legally bound, hereto hereby agree as follows:

ARTICLE I
THE MERGER

        SECTION 1.1    MERGER .    In consideration of the payment of the Merger Consideration (as defined in Section 1.2 ) by Parent, and subject to the terms and conditions hereinafter set forth, (a) Merger Sub shall be merged with and into the Company, at the Effective Time, with the Company being the surviving corporation (the "Surviving Corporation" ), in accordance with the laws of the State of California and other applicable Law, and (b) from and after the Effective Time, the Merger shall have all the effects of a merger under the laws of the State of California and other applicable Law.

        SECTION 1.2    MERGER CONSIDERATION .    The aggregate consideration to be paid by Parent under this Agreement shall equal $10,603,999, less any adjustments pursuant to Section 1.2(c) and Section 1.2(d) hereof as set forth on the Merger Consideration Certificate (the "Cash Merger Consideration" ) plus the Contingent Merger Consideration (as defined in Section 1.2(b) ) (collectively, the "Merger Consideration" ), and shall be payable to the holders of capital stock of the Company (collectively, the "Shareholders" ) in accordance with the provisions of this Agreement and in the

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manner and in the proportions set forth in the Merger Consideration Certificate (as defined in Section 2.1 ) as follows:

•         (a)     Cash Consideration at Closing .    The Cash Merger Consideration (less the Escrow Amount, as defined in and funded in accordance with Section 1.7(a) ) will be payable in cash at Closing by wire transfer of immediately available funds to the Shareholders, other than Dissenting Shareholders, and as directed in the Merger Consideration Certificate.

          (b)     Contingent Consideration .    In the event that either of the 2008 Gross Revenue Target or the 2008 Increased Gross Revenue Target (each, a "Target" ) (as defined below) is met, the amount set forth below with respect to such achieved Target will be payable by Parent to the Shareholders (the "Contingent Gross Revenue Consideration" ) in addition to any other amounts payable hereunder:

  • • •

      $880,000 (less one percent of such amount, which shall be paid to Donaldson Werth & Company) will be payable to the Shareholders in accordance with the Merger Consideration Certificate promptly after financial results for the 12-month period beginning at the Effective Time (but in no event later than 30 days after the end of fiscal year 2008), provided the Company, whether operated as a subsidiary of or a division in the Surviving Corporation generates gross revenues of more than $6,000,000 and less than $7,000,000 in the 12-month period beginning at the Effective Time (the "2008 Gross Revenue Target" );

• • • OR

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      $1,230,000 (less one percent of such amount, which shall be paid to Donaldson Werth & Company) will be payable to the Shareholders in accordance with the Merger Consideration Certificate promptly after financial results for the 12-month period beginning at the Effective Time (but in no event later than 30 days after the end of fiscal year 2008), provided the Company, whether operated as a subsidiary of or a division in the Surviving Corporation generates gross revenues of at least $7,000,000 in the 12-month period beginning at the Effective Time (the "2008 Increased Gross Revenue Target" );

• •           (i)  The Contingent Gross Revenue Consideration shall be determined and paid within 30 days following the end of Parent's 2008 fiscal year by wire transfer of immediately available funds, promptly following the determination of the Contingent Gross Revenue Consideration, to such accounts for each Shareholder as are set forth in the Merger Consideration Certificate.

             (ii)  Not later than November 30, 2008, Parent shall deliver to each Shareholder a copy of the financial statements of Parent and a certificate showing the calculation of the Contingent Gross Revenue Consideration for the period from November 1, 2007 to October 31, 2008, certified by the Chief Financial Officer of Parent to be a good faith calculation of the Contingent Gross Revenue Consideration derived from the accounting records of Parent (the "Contingent Gross Revenue Certificate" ).

            (iii)  Parent shall make available to the Shareholders Representative copies of all work papers, documents, receipts, invoices and other materials and grant the Shareholders Representative such access to Parent's personnel and outside auditors during regular business hours as may be necessary or reasonably requested by the Shareholders Representative in his review of the Contingent Gross Revenue Certificate or in connection with any dispute or disagreement relating to the determination of the Contingent Gross Revenue Consideration. If the Shareholders Representative does not timely deliver a Contingent Gross Revenue Consideration Certificate Contest Notice (as defined below) in accordance with

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    Section 1.2(b)(v) , the Contingent Gross Revenue Consideration Certificate shall be final and binding on all Parties.

            (iv)  In the event the Shareholder Representative contests any part of the calculation of the Contingent Gross Revenue Consideration, as set forth in the Contingent Gross Revenue Consideration Certificate, the Shareholders Representative shall give Parent written notice of his objections thereto (the "Contingent Gross Revenue Consideration Certificate Contest Notice" ) within 15 days following the delivery of the Contingent Gross Revenue Consideration Certificate.

             (v)  During the 30-day period following the delivery of the Contingent Gross Revenue Consideration Certificate Contest Notice, Parent and the Shareholders Representative shall attempt to resolve in writing any differences which Parent and the Shareholders Representative may have with respect to any matter specified in the Contingent Gross Revenue Consideration Certificate Contest Notice. If at the end of the 30-day period, Parent and the Shareholders Representative shall fail to reach a written agreement with respect to all of such matters, then all such matters specified in the Contingent Gross Revenue Consideration Contest Notice with respect to which a written agreement has not been reached shall be resolved in accordance with the provisions set forth in Section 1.2(d)(iii) .

            (vi)  During the 12-month period beginning on the day after the Closing Date, the Company will operate as a separate division or business unit within Parent in accordance with the Company's business practices and policies, including customer retention, as in effect in substantially the same manner as before the Closing.

           (vii)  At the time any Contingent Gross Revenue Consideration is paid to the Shareholders, $120,000 shall be paid concurrently by Parent to Howard Lee Roth.

          (c)     Payment of Certain Indebtedness .    Concurrently with the Closing, the Parent shall make the following wire transfers: (i) $401,001.34 to the Bank of Hemet to repay in full the Company's then outstanding line of credit balance; (ii) $195,000 to Donaldson Werth & Company to pay the broker's fee related to the Merger; and (iii) $50,000 to Pillsbury Winthrop Shaw Pittman LLP to pay the Company's legal fees related to the Merger. The Cash Merger Consideration that otherwise would have been payable on Closing under Section 1.2 has been reduced by the amount of the payments described in this Section 1.2(c) , and such payments will reduce the liabilities of the Company as of immediately prior to the Effective Time for purposes of calculating Closing Date Net Book Value.

          (d)     Adjustment Relating to Closing Date Net Book Value .    

  •           (i)  For purposes of this Agreement, "Closing Date Net Book Value" shall be the Net Book Value of the Company as of immediately prior to the Effective Time.

             (ii)  Within 20 days following the Closing Date, Parent will prepare and deliver to the Shareholders Representative a calculation of Closing Date Net Book Value (the "Parent-Determined Closing Date Net Book Value Calculation" ), which calculation shall be determined consistent with (i) the preparation of the Financial Statements, and (ii) the definition set forth in Appendix A . Parent will make the work papers and back-up materials used in preparing the Parent-Determined Closing Date Net Book Value, as well as the personnel of Parent and the Surviving Corporation with knowledge regarding any underlying matters, available to the Shareholders Representative (and his advisors) at reasonable times and upon reasonable notice.

            (iii)  If the Shareholders Representative shall not deliver to Parent a statement describing any objections to the Parent-Determined Closing Date Net Book Value within 10 Business

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    Days after receipt, then such Parent-Determined Closing Date Net Book Value shall be deemed to be the "Stipulated Closing Date Net Book Value." If, however, the Shareholders Representative shall deliver to Parent a statement describing any objections to the Parent-Determined Closing Date Net Book Value within such 10 Business Day period, then Parent will exercise commercially reasonable efforts to resolve, in good faith, any such objections with the Shareholders Representative. If Parent and the Shareholders Representative reach a resolution of all such objections, then the Parent-Determined Closing Date Net Book Value as modified by such resolution shall be deemed to be the "Stipulated Closing Date Net Book Value." If such a resolution is not reached within 10 Business Days after Parent has received a statement describing the Shareholders Representative's objections to the Parent-Determined Closing Date Net Book Value, then any disputes regarding any accounting-related aspects of the calculation or computation of such Stipulated Closing Date Net Book Value will be submitted promptly to a mutually acceptable independent accounting firm for resolution. Parent, on the one hand, and the Shareholders Representative, on the other hand, may provide the accounting firm, within five Business Days of its selection, with a definitive statement of their position with respect to each unresolved objection. The accounting firm will be provided with access to the books and records of Parent and the Company germane to the Parent-Determined Closing Date Net Book Value. The accounting firm will be asked to resolve any objections on an expedited basis, and shall in any event have no more than 20 Business Days to carry out a review of the unresolved objections. The accounting firm will be asked to prepare a written statement of its determination regarding each unresolved objection, and the Parent-Determined Closing Date Net Book Value as modified by the accounting firm's determination of any Shareholders Representative's unresolved objections shall be deemed to be the "Stipulated Closing Date Net Book Value." The determination of the accounting firm will be conclusive and binding, absent manifest error. If objections are submitted to the accounting firm for resolution as provided in this Section 1.2(d)(iii) and Parent does not prevail, by dollar amount, as to a majority of the objections asserted, then Parent shall pay all of the fees and expenses of the accounting firm. If Parent does prevail, by dollar amount, as to a majority of the objections asserted, then the fees and expenses of the accounting firm shall, for purposes of the Stipulated Closing Date Net Book Value, be treated as a current liability of the Company accrued and actually payable as of the Closing Date, and the Stipulated Closing Date Net Book Value shall be determined accordingly.

            (iv)  In the event that the Stipulated Closing Date Net Book Value is greater than $549,362 (the Net Book Value (which is debt-free) of the Company as of July 31, 2007), then an amount equal to such difference (the "Net Book Value Price Increase" ) shall be immediately paid to the Shareholders, as an addition to the aggregate Merger Consideration. In the event that the Stipulated Closing Date net Book Value is less than the $549,362, then an amount equal to such difference shall be immediately paid out of the Escrow Fund to Parent (the "Net Book Value Price Decrease ") and if the Net Book Value Price Decrease exceeds the Escrow Amount, the Shareholders Representative shall cause the Shareholders to pay to the Parent their proportionate share of such excess, in accordance with the percentages set forth in the Merger Consideration Certificate.

        SECTION 1.3    EFFECTS OF THE MERGER .    At the Effective Time, the separate corporate existence of Merger Sub shall cease and the Company, as the Surviving Corporation, shall succeed to and possess all of the properties, rights, powers, privileges, franchises, patents, trademarks, licenses, registrations, and other assets of every kind and description of the Company and Merger Sub, and shall be subject to, and be responsible for, all debts, liabilities, and obligations of the Company and Merger Sub, all without further act or deed, and in accordance with the applicable provisions of the laws of the State of California. Robert M. Ward and Thomas Wickes shall also cease to be officers or employees of

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the Surviving Corporation, and upon the Closing Date shall tender resignations in the form of Exhibit G attached hereto.

        SECTION 1.4    ARTICLES OF INCORPORATION AND BYLAWS .    The articles of incorporation and bylaws of Merger Sub shall be the articles of incorporation and bylaws, respectively, of the Surviving Corporation until thereafter changed or amended as provided therein; provided , however, that the name of the Surviving Corporation shall be "EBIX BPO Division (formerly Jenquest, Inc.)."

        SECTION 1.5    DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION .    The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, in each case, until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualify, as the case may be.

        SECTION 1.6    CLOSING; EFFECTIVE TIME .    

•         (a)     Closing and Closing Date .    Subject to the terms and conditions of this Agreement, the closing of the Merger (the "Closing" ) shall take place at 10:00 a.m., local time, on November 1, 2007 (the "Closing Date" ) at the offices of Pillsbury Winthrop Shaw Pittman LLP, 12255 El Camino Real, Suite 300, San Diego, CA 92130 or at such other time, date or place as the Parties may mutually agree upon in writing.

          (b)     Effective Time .    As soon as practicable after satisfaction or, to the extent permitted hereunder, waiver, of all conditions to the Merger, the Company shall (i) execute an Agreement of Merger in compliance with the requirements of the laws of the State of California (the "Agreement of Merger" ), and shall file the Agreement of Merger with the Secretary of State of the State of California in accordance with its Laws, and (ii) make all other filings or recordings and take all such other and further actions as may be required by Law, to make the Merger effective; provided , however , that the Parties shall seek "pre-clearance" of the Agreement of Merger with the Secretary of State of the State of California prior to the Closing. The Merger shall become effective for all purposes under California Law when proper documentation has been filed with the Secretary of State of the State of California (the "Effective Time" ).

          (c)     The Company's Obligations at Closing .    The Company and Shareholders shall deliver to Parent the certificates, agreements, documents and instruments as indicated in Section 8.2 .

          (d)     Parent's Obligations at Closing .    At the Closing:

  •           (i)  Upon the filing of the Agreement of Merger, Parent will pay the Cash Merger Consideration to the Shareholders, in accordance with the terms of this Agreement.

             (ii)  Parent will also deliver to Shareholders the certificates, agreements, documents and instruments as indicated in Section 8.3 .

        SECTION 1.7    ESCROW ACCOUNT .    

•         (a)     Escrow Fund .    Parent will, prior to the Closing and pursuant to the terms of an Escrow Agreement in the form attached hereto as Exhibit A (the "Escrow Agreement" ), deposit $250,000 (the "Escrow Amount" ) with U.S. Bank National Association (the "Escrow Agent" ) to be held in an interest-bearing escrow account (the "Escrow Account" ). All amounts held in the Escrow Account shall be known collectively as the "Escrow Fund."

          (b)     Retention and Release .    The Escrow Fund shall be held in the Escrow Account for the benefit of Parent and all Shareholders pursuant to the terms of this Agreement pertaining thereto and the Escrow Agreement. Any amounts to be distributed from the Escrow Fund to the

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  Shareholders will be distributable to each of such Shareholders in an amount equal to the Shareholder's Pro Rata Share. Subject to the indemnification rights of Parent described in Article IX, the Escrow Fund shall be distributable as follows:

  •           (i)  On the date which is 10 Business Days after the Net Book Value Price Decrease, if any, has been determined under Section 1.2(d) , the amount of the Net Book Value Price Decrease, if any, shall be distributed to Parent.

             (ii)  The remaining Escrow Fund and any other amounts which shall have been delivered into the Escrow Account shall be distributed to the Shareholders concurrently with the distribution made under Section 1 .7(b)(i) (the "Final Escrow Release Date" ).

          (c)     Non-assignable Interest .    The interests of the Shareholders in the Escrow Fund will not be assignable or transferable by such Shareholders unless and until released pursuant to the terms of the Escrow Agreement.

          (d)     Inability to Deliver .    If the Escrow Agent is not able to deliver any portion of the Escrow Fund to the proper recipient within one year of the date that final distribution of any remaining amount of the Escrow Fund should otherwise have been made pursuant to Section 1.7(b) (or immediately prior to such earlier date on which any payment in respect thereof would otherwise escheat to or become the property of any Governmental Entity), such portion of the Escrow Fund shall be delivered to Parent and the proper recipient shall thereafter look only to Parent, and only as a general creditor, for payment of such recipient's claim for such portion of the Escrow Fund, subject to applicable abandoned property, escheat and similar laws.

ARTICLE II
CONVERSION OF SHARES; APPOINTMENT OF THE SHAREHOLDERS REPRESENTATIVE

        SECTION 2.1    CONVERSION OF SHARES OF COMPANY CAPITAL STOCK .    At the Effective Time, (a) each holder of issued and outstanding shares of Company Capital Stock, other than any Dissenting Capital Stock, shall, subject to the terms and conditions of this Agreement, receive an amount in immediately available funds equal to the amount set forth in a certificate (the "Merger Consideration Certificate" ) to be prepared as of the Closing Date and in accordance with the liquidation rights and preferences set forth in the Company's Articles of Incorporation and signed by the Chief Financial Officer of the Company and the Shareholders Representative, and which will be binding upon all Shareholders (other than Dissenting Shareholders). The Merger Consideration Certificate will also set forth the allocation among the Shareholders of the (i) Escrow Amount to be deposited in accordance with Section 1.7 and deducted from the Cash Merger Consideration to be disbursed at Closing and (ii) the Contingent Merger Consideration.

        SECTION 2.2    DISCLOSURE INFORMATION REGARDING COMPANY CAPITAL STOCK; OPTIONS AND WARRANTS .    Each holder of Company Capital Stock will receive (i) pre-Closing disclosure information related to Shareholder approval of the Merger which will highlight the Merger's impact on Company Capital Stock and include all legally required information regarding dissenting shareholder rights, and (ii) a letter dated as of the Closing Date, signed by the Shareholders Representative, acknowledging the Closing of the Merger and confirming the effect on Company Capital Stock. Parent shall have the right to review and comment on both the pre-Merger disclosures and post-Closing letter to the holders of the Company's Capital Common Stock, but the responsibility regarding the content of such communications shall be the sole responsibility of the Company and the Shareholders Representative. In addition, the Shareholders Representative will take all legally required action to notify all holders of options to purchase shares of Company Capital Stock (the "Options "), if any, and all holders of warrants to purchase shares of Company Capital Stock (the "Warrants" ), if any, that such Options and Warrants, if not exercised prior to the Closing Date, will be cancelled and of no further force or effect. The Board of Directors of the Company will take all legally required actions

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pursuant to any option plan of the Company to terminate such plan and all unexercised options issued and outstanding thereunder as of the Closing Date.

        SECTION 2.3    PROCEDURES FOR SHARES NOT SUBMITTED AT CLOSING .    

•         (a)   Parent shall mail a letter of transmittal (with instructions for its use), substantially in the form attached hereto as Exhibit B (the "Letter of Transmittal" ), to each record holder of Company Capital Stock as of the Effective Time (with a copy to the Shareholders Representative) for such holder to use in surrendering the certificates or other instruments, if any, which represented such Shareholder's shares of Company Capital Stock or, against payment of the allocable amount of Merger Consideration. No interest will accrue or be paid to the holder of any outstanding share of Company Capital Stock, Warrants or Options.

          (b)   As promptly as possible after receipt of such Letter of Transmittal, the Shareholders Representative shall use commercially reasonable efforts to cause each former holder of shares of Company Capital Stock to surrender such Shareholder's certificates or other instruments representing such shares to the Company; provided , however , that if any such Shareholder shall be unable to surrender such certificates due to loss, theft, or mutilation thereof, such Shareholder may make a constructive surrender by submitting an affidavit of lost, stolen, or destroyed certificate in the form attached the Letter of Transmittal.

        SECTION 2.4    OPTIONS; WARRANTS .    

        Before the Closing Date, the Board of Directors of the Company shall adopt such resolutions or take (or cause the Company to take) such other actions as are required to provide for the cancellation of all Options and Warrants, if any, that remain outstanding immediately prior to Closing Date.

        SECTION 2.5    THE SHAREHOLDERS REPRESENTATIVE .    

•         (a)   By the approval of the Merger at a special meeting of Shareholders or by written consent of the Shareholders, each Shareholder, other than Dissenting Shareholders, will irrevocably authorize and appoint Robert M. Ward as the Shareholders Representative, to serve as his, her or its representative and true and lawful attorney-in-fact and agent to act in his, her or its name, place and stead with respect to all matters under this Agreement. Without limiting the generality of the foregoing, the Shareholders Representative shall be fully and irrevocably authorized and empowered to act, in accordance with this Agreement, for and on behalf of the Shareholders as of the Effective Time as agent and representative for all such Shareholders to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Shareholders Representative by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Shareholders Representative shall not have any duties or responsibilities, except those expressly set forth herein. The Shareholders shall be bound by all actions taken and documents executed by the Shareholders Representative in accordance with this Section 2.5. In performing the functions specified in this Agreement, the Shareholders Representative shall not be liable to the Shareholders in the absence of gross negligence or willful misconduct on the part of the Shareholders Representative. The Shareholders Representative shall be indemnified and held harmless by the Shareholders from and against any loss, liability, or expense incurred without gross negligence, fraud or willful misconduct on the part of the Shareholders Representative and arising out of or in connection with the acceptance or administration of his or her duties hereunder. Such indemnity shall be made, first, to the extent possible out of funds that otherwise are to be distributed from the Escrow Fund to the Shareholders, if any, and, second, directly from the Shareholders in accordance with each Shareholders' pro-rata ownership interest in the Company as set forth in the Merger Consideration Certificate. Any out-of-pocket costs and expenses incurred by the Shareholders Representative in connection with actions taken by the Shareholders

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• Representative pursuant to the terms of this Agreement (including the hiring of legal counsel and the incurring of reasonable legal fees and costs ("Representative Expenses" ) shall be the responsibility of Shareholders.

          (b)   The Shareholders Representative may execute any of his duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Notwithstanding anything in this Agreement to the contrary, in no event shall the Shareholders Representative be authorized or permitted to enter into or agree to any settlement to the extent such settlement provides for the admission of any wrongdoing by, or is otherwise harmful to, a Shareholder or any affiliate thereof, without the prior written consent of such Shareholder.

          (c)   The Shareholders Representative is deemed to be appointed as each Shareholder's attorney-in-fact, with full authority in the place and stead of such Shareholder and in the name of such Shareholder, from time to time in the Shareholders Representative's discretion to take any action and to execute any document or instrument that the Shareholders Representative may deem necessary or advisable to accomplish the purposes of this Agreement, including without limitation:

  •           (i)  to execute, give and receive any notices, agreements, certificates, closing certificates or documents in connection with transactions contemplated by this Agreement;

             (ii)  to negotiate, defend, settle or pay any claims for indemnification under this Agreement; provided , however , that in no event shall the Shareholders Representative settle or pay any claims for Losses (as defined in Section 9.1 ) in excess of the limitations set forth in Section 9.5 ; provided, further, that in no event shall the Shareholders Representative settle or pay any claims for Losses as a result of a Shareholder's breach of any representation or warranty contained in the Letter of Transmittal without the prior written consent of such Shareholder; and

            (iii)  to take any other actions deemed necessary or advisable by the Shareholders Representative in order to carry out the purposes of this Agreement.

          (d)   In the event of the death, incapacity or resignation of the Shareholders Representative, the Shareholders (by a written approval of Shareholders that held a majority of the issued and outstanding Company Capital Stock (on a fully diluted, as converted basis) as of the Closing Date) shall promptly appoint a successor Shareholders Representative to act in accordance with this Section 2.5 and shall provide written notice of such appointment to Parent.

          (e)   The Shareholders Representative is an intended third-party beneficiary of this Agreement.

        SECTION 2.6    FURTHER ASSURANCES .    Each Party, at the reasonable request of another Party, shall execute and deliver such other instruments and do and perform such other acts and things as may be reasonably necessary for effecting completely the consummation of this Agreement and the transactions contemplated hereby.

ARTICLE III
OTHER AGREEMENTS AND COVENANTS OF THE COMPANY

        The Company covenants and agrees with Parent that, at all times from and after the date hereof until the Closing, the Company will comply with (or will arrange for compliance with) all covenants and provisions of this Article III , except to the extent Parent may otherwise consent in writing.

        SECTION 3.1    NON-NEGOTIATION .    From and after the date of this Agreement until the earlier of (a) the termination of this Agreement, (b) the Closing, or (c) November 1, 2007, the Company agrees that it will not, and will not permit its Affiliates, directors, officers, employees, representatives and other agents, including, without limitation, Donaldson Werth & Company, to,

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directly or indirectly, (1) solicit, initiate, or encourage any Acquisition Proposal, (2) engage in negotiations or discussions concerning, or provide any non-public information to any person or entity in connection with, any Acquisition Proposal or (3) agree to, approve or recommend any Acquisition Proposal. The Company will immediately cease any and all existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. The Company will promptly advise Parent of the terms of any communications it may receive or become aware of relating to any Acquisition Proposal.

        SECTION 3.2    CONDUCT OF BUSINESS .    The Company will conduct business only in the ordinary course consistent with past practice. Without limiting the generality of the foregoing, the Company will:

•         (a)   consistent with past practice, use commercially reasonable efforts to (i) preserve intact the present business organization and reputation of the Company, (ii) keep available (subject to dismissals and retirements in the ordinary course of business consistent with past practice) the services of the present officers, employees and consultants of the Company, other than as otherwise set forth in his Agreement, (iii) maintain the assets and properties of the Company in good working order and condition (reasonable wear and tear excepted), (iv) maintain the good will of customers, suppliers, lenders and other Persons to whom the Company sells goods or provides services or with whom the Company otherwise has significant business relationships and (v) continue all current sales, marketing and promotional activities relating to the business and operations the Company;

          (b)   except to the extent required by applicable Law, (i) cause the Books and Records to be maintained in the usual, regular and ordinary manner and (ii) not permit any material change in (A) any pricing, investment, accounting, financial reporting, inventory, credit, allowance or Tax election or Tax accounting method of the Company, (B) any method of calculating any bad debt, contingency or other reserve of the Company for accounting, financial reporting or Tax purposes or (C) the fiscal year of the Company; and

          (c)   comply, in all material respects, with all Laws applicable to the business and operations of the Company, and as soon as practicable following receipt thereof to give Parent copies of any written notice or summaries of any oral notice directed to the Company by any Governmental Authority alleging with specificity any violation by the Company of any such Law.

        SECTION 3.3    CERTAIN RESTRICTIONS .    Without the express written consent of Parent, the Company will refrain from:

•         (a)   amending its certificate or articles of incorporation or by-laws (or other comparable corporate charter documents) or taking any action with respect to any such amendment or any reorganization, liquidation or dissolution of any such corporation;

          (b)   authorizing, issuing, selling or otherwise disposing of any shares of, or any option, right or warrant to purchase with respect to, capital stock of the Company, or modifying or amending any right of any holder of outstanding shares of, or any option, right or warrant to purchase with respect to, capital stock of the Company, except for issuances of shares of capital stock upon the exercise of Options outstanding on the date hereof;

          (c)   declaring, setting aside or paying any dividend or other distribution in respect of the capital stock of the Company, or directly or indirectly redeeming, purchasing or otherwise acquiring any shares of, or any option, right or warrant to purchase with respect to, capital stock of the Company not wholly owned by the Company;

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          (d)   except for any payments or transactions permitted or required by the terms of this Agreement or the Transaction Documents and except as set forth on Schedule 5.28 of the Disclosure Schedule, paying or otherwise distributing any funds to Shareholders;

          (e)   acquiring or disposing of, or incurring any Lien (other than a Permitted Lien) on any assets and properties, other than in the ordinary course of business consistent with past practice, or on any Capital Stock;

          (f)    (i) entering into, amending, modifying, terminating (partially or completely), granting any waiver under or giving any consent with respect to any Permit or Contract of the Company, except in the ordinary course of business consistent with past practice, or (ii) granting any irrevocable powers of attorney;

          (g)   violating, breaching or defaulting in any material respect, or taking or failing to take any action that (with or without notice or lapse of time or both) would constitute a material violation or breach of, or default under, any term or provision of any Permit or Contract of the Company;

          (h)   (i) incurring any Indebtedness, or (ii) voluntarily purchasing, canceling or otherwise providing for a complete or partial discharge in advance of a scheduled payment date with respect to, or waiving any right of the Company under, any Indebtedness owing to the Company (other than in the ordinary course of business);

          (i)    engaging with any Person in any merger, consolidation or similar transaction, sale, disposition or other transfer of ten percent (10%) or more, in the aggregate, of the assets of the Company, or any transaction which is similar in form, substance, purpose or effect to any of the foregoing;

          (j)    making capital expenditures or commitments for additions to property, plant or equipment constituting capital assets other than in the ordinary course of business;

          (k)   making any change in the lines of business in which the Company participate or are engaged;

          (l)    writing off or writing down any of their assets and properties outside the ordinary course of business consistent with past practice;

          (m)  other than in the ordinary course of business, entering into, amending, modifying or terminating (partially or completely), any Contract that is, or had it been in existence on the date of this Agreement would have been required to be, disclosed in Schedule 5.8(a) ; or

          (n)   entering into any agreement to do or engage in any of the foregoing.

        SECTION 3.4    MONTHLY FINANCIAL STATEMENTS; REPORTS .    

•         (a)   As promptly as practicable and in any event no later than ten (10) Business Days after the end of each calendar month ending after the date hereof and before the Closing Date, the Company will deliver to Parent true and complete copies of the unaudited consolidated balance sheet, and the related unaudited consolidated statements of operations, shareholders' equity and cash flows of the Company, in each case, as of the end of and for each such calendar month, which financial statements shall be prepared in accordance with GAAP, consistently applied.

          (b)   As promptly as commercially reasonable, the Company will deliver to Parent true and complete copies of such other financial statements, reports and analyses as may be prepared or received by the Company relating to the business or operations of the Company or as Parent may otherwise reasonably request; provided, that, the Company shall not be required to provide to Parent any financial statements, reports or analyses that Parent may otherwise request that the Company does not prepare in the ordinary course consistent with past practice.

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        SECTION 3.5    EMPLOYEE MATTERS .    

•         (a)   Except as may be required by Law, the Company will refrain from directly or indirectly:

  •           (i)  making any representation or promise, oral or written, to any officer, employee or consultant of the Company concerning any Employee Benefit Plan, except for statements as to the rights or accrued benefits of any officer, employee or consultant under the terms of any Employee Benefit Plan;

             (ii)  making any increase in the salary, wages or other compensation of any officer, employee or consultant of the Company except in the ordinary course of business consistent with past practice; or

            (iii)  adopting, entering into, amending, modifying or terminating (partially or completely) any Employee Benefit Plan except to the extent required by applicable Law and provided Parent consents in writing, or as provided in this Agreement.

          (b)   The Company will administer each Employee Benefit Plan, or cause the same to be so administered, in all material respects in accordance with the applicable provisions of the Code, ERISA and all other applicable Laws. The Company will promptly notify Parent in writing of each receipt by the Company (and furnish Parent with copies) of any notice of investigation or administrative proceeding by the IRS, Department of Labor, PBGC or other Person involving any Employee Benefit Plan.

          (c)   Parent will not take into consideration as a liability of the Company in calculating the Stipulated Closing Date Net Book Value one week of vacation pay for each employee of the Company that is accrued as of the Effective Time.

        SECTION 3.6    AFFILIATE TRANSACTIONS .    Immediately prior to the Closing, all Indebtedness and other amounts owing under Contracts between any Shareholder, any officer, director or Affiliate or Employee of any Shareholder or any Affiliate of any of the foregoing (other than the Company), on the one hand, and the Company, on the other hand, will be paid in full. Prior to the Closing and except as set forth in Schedule 5.28 of the Disclosure Schedule, the Company will not enter into any Contract or amend or modify any existing Contract, and will not engage in any transaction which is outside the ordinary course of business consistent with past practice, or which is not on an arm's-length basis, with any Shareholder or any such officer, director or Affiliate. This Section 3.6 shall not affect the lease of the Leased Real Property dated April 28, 2000 (the "WWR Lease" )between the Company and WWR Holdings LLC, a California limited liability company ("WWR" ).

        SECTION 3.7    REGULATORY AND OTHER APPROVALS .    The Company will (a) take all commercially reasonable steps necessary and proceed in good faith to (i) obtain all consents, approvals or actions of, to make all filings with and to give all notices to Governmental Authorities or any other Person required of the Company to consummate the transactions contemplated hereby and by the Transaction Documents, and (ii) maintain all material Contracts and Permits in full force and effect (subject to the terms of this Agreement) upon the consummation of the transactions contemplated hereby and by the Transaction Documents, (b) provide such other reasonable information and communications to such Governmental Authorities or other Persons as Parent or such Governmental Authorities or other Persons may reasonably request, and (c) at Parent's expense, cooperate with Parent as promptly as practicable in obtaining all consents, approvals or actions of, making all filings with and giving all notices to Governmental Authorities or other Persons required of Parent to consummate the transactions contemplated hereby and by the Transaction Documents. The Company will provide prompt notification to Parent when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will notify Parent of any communications (and, unless precluded by Law or by third-party agreement, provide copies of any such communications that are in writing) with any Governmental Authority or other Person

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regarding any of the transactions contemplated by this Agreement or any of the Transaction Documents.

        SECTION 3.8    CONFIDENTIAL INFORMATION .    From the date of this Agreement until the earlier of the termination of this Agreement or the Closing, except as required by applicable law or by legal or regulatory process, the Company shall continue its past practices with respect to maintaining the secrecy of and exclusive Company benefit from all confidential matters relating to the Company or the Business; provided , however , that the foregoing shall not preclude the Company from engaging in any communications with its legal or financial advisors, on any matters relating to or arising from the transactions contemplated by this Agreement and the Transaction Documents.

        SECTION 3.9    TRANSFER TAXES .    Any transfer, documentary, sales, or use taxes assessed upon or with respect to Merger and any recording or filing fees with respect thereto shall be borne by Parent.

        SECTION 3.10    NOTICE AND CURE .    The Company will notify Parent promptly in writing of, and contemporaneously will provide Parent with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance occurring after the date of this Agreement that causes or will cause any covenant or agreement of the Company under this Agreement to be breached or that renders or will render untrue any representation or warranty of the Company contained in this Agreement. The Company also will notify Parent promptly in writing of, and will use all commercially reasonable efforts to cure, before the Closing, any violation or breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, whether occurring or arising before, on or after the date of this Agreement. No notice given pursuant to this Section 3.10 shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained in Section 7.1 , but, if Parent closes the Merger after receipt of such notice, Parent shall have no right to seek indemnity under Article IX with respect to the matter disclosed in such notice.

ARTICLE IV
OTHER AGREEMENTS AND COVENANTS OF PARENT

        Parent covenants and agrees with the Company that, at all times from and after the date hereof until the Closing (or for such additional period of time from and after the Closing if, but only if, the express terms of such covenant or provision so require), Parent will comply with all covenants and provisions of this Article IV , except to the extent the Company may otherwise consent in writing.

        SECTION 4.1    REGULATORY AND OTHER APPROVALS .    Parent will (a) take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith and use all commercially reasonable efforts, as promptly as practicable to obtain all consents, approvals or actions of, to make all filings with and to give all notices to Governmental Authorities or any other Person required of Parent to consummate the transactions contemplated hereby and by the Transaction Documents, (b) provide such other information and communications to such Governmental Authorities or other Persons as the Company or such Governmental Authorities or other Persons may reasonably request and (c) cooperate with the Company as promptly as practicable in obtaining all consents, approvals or actions of, making all filings with and giving all notices to Governmental Authorities or other Persons required of the Company to consummate the transactions contemplated hereby and by the Transaction Documents. Parent will provide prompt notification to the Company when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will notify the Company of any communications (and, unless precluded by Law or by third-party agreement, provide copies of any such communications that are in writing) with any

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Governmental Authority or other Person regarding any of the transactions contemplated by this Agreement or any of the Transaction Documents.

        SECTION 4.2    NOTICE AND CURE .    Parent will notify the Company promptly in writing of, and contemporaneously will provide the Company with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance occurring after the date of this Agreement that causes or will cause any covenant or agreement of Parent under this Agreement to be breached or that renders or will render untrue any representation or warranty of Parent contained in this Agreement. Parent also will notify the Company promptly in writing of, and will use all commercially reasonable efforts to cure, before the Closing, any violation or breach of any representation, warranty, covenant or agreement made by Parent in this Agreement, whether occurring or arising before, on or after the date of this Agreement. No notice given pursuant to this Section 4.2 shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained in Section 7.2 , but if the Shareholders close the Merger after receipt of such notice the Shareholders shall have no right to seek indemnity under Article IX with respect to the matter disclosed in such notice.

        SECTION 4.3    ACCESS TO INFORMATION .    After the Closing Date and upon reasonable advance notice, Parent will give, or cause to be given, to the Shareholders and their representatives, during normal business hours, such reasonable access to the personnel, properties, titles, contracts, books, records, files and documents relating to the Company in the possession or control of Parent, including the books and records of the Company, and at the expense of a requesting Shareholder, copies of the foregoing, as is necessary to allow the Shareholders to obtain information in connection with the preparation and any audit of any tax returns, any claims, demands, other audits, suits, actions or proceedings by or against the Shareholders, or for any other reasonable purpose, other than, in each case, in connection with any matter with respect to which Parent are adverse to or have a conflict of interest with, any Shareholder; provided, that, in the event that any litigation is pending between the Parties, Parent shall not be required to perform its obligations under this Section 4.4 except with respect to any matter that is not germane to the subject matter of the litigation.

        SECTION 4.4    EMPLOYEE TRANSITION MATTERS .    

•         (a)   From and after the Closing Date, through December 31, 2007, Parent shall cause the surviving corporation to keep in place the employee benefit plans maintained by the Company immediately before the Closing. Thereafter, Parent shall, or shall cause the Surviving Corporation, to use commercially reasonable efforts to provide coverage under employee benefit plans maintained by Parent or Surviving Corporation to the Company's employees who remain employed on the Closing Date. To the extent commercially reasonable and permitted under applicable Law, Parent will endeavor to have (i) deductibles paid by such continuing employees while employed by the Company recognized by Parent's provider, and (ii) the provider waive any waiting periods, pre-existing conditions and comparable requirements.

          (b)   Parent shall either continue in place the Company's retirement plan or permit the Company's employees who remain employed on the Closing Date to transfer their account balances under the Company's retirement plan to a retirement plan maintained by Parent or the Surviving Corporation to the extent permitted by the terms of the plans and applicable law.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        Except as set forth in the Disclosure Schedule delivered by the Company to Parent at or prior to the execution of this Agreement and except as set forth in any amendment, revision or restatement of

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such Disclosure Schedule which is delivered to Parent at or prior to the Closing, the Company represents and warrants to Parent as follows:

        SECTION 5.1    ORGANIZATION, STANDING AND AUTHORITY .    

•         (a)   The Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. True, complete and correct copies of the Company's Articles of Incorporation and Bylaws have been delivered to Parent and such Articles of Incorporation and Bylaws are in full force and effect. The Company has full power and authority to carry on the Business as conducted by it and to own or hold under lease the properties and assets it now owns or holds under lease. The Company is duly qualified to do business and is in good standing as a foreign corporation or company (as applicable) in all jurisdictions where the nature of the property owned or leased by it, or the nature of its business, makes such qualification necessary and where the absence of such qualification would have a Material Adverse Effect on the business, financial condition or operations of such company, which jurisdictions are listed opposite such company's name on Schedule 5.1(a) of the Disclosure Schedule.

          (b)   The Company does not have any Subsidiary.

          (c)   The name of each director and officer of the Company is set forth opposite the position held by same, on Schedule 5.1(c) of the Disclosure Schedule.

        SECTION 5.2    AUTHORIZATION .    

•         (a)   The Company has full right, power, capacity and authority to execute and deliver this Agreement and each of the Transaction Documents to be executed and delivered by or on behalf of the Company, to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof.

          (b)   This Agreement has been, and each of the Transaction Documents to be executed and delivered by or on behalf of the Company will be, duly executed and delivered by the Company and constitutes or, in the case of the Transaction Documents, will constitute when so executed and delivered, the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws or equitable principles of general application to or affecting the enforcement of contractual rights generally, and statutes, rules or procedures and applicable case law limiting the availability or prescribing the procedural requirements for the exercise of remedies.

        SECTION 5.3    CAPITALIZATION AND OWNERSHIP .    

•         (a)    Schedule 5.3(a) of the Disclosure Schedule sets forth the authorized and issued and outstanding capital stock of the Company, the outstanding Options and Warrants (both vested and unvested) for Company Capital Stock, and the ownership interest of each Shareholder in the Company. All shares of issued and outstanding capital stock of the Company have been duly and validly issued, were issued in compliance with all applicable federal and state securities laws, and are fully paid and non-assessable. Except as set forth on Schedule 5.3(a) of the Disclosure Schedule, all shares of capital stock of the Company have been issued without any options, warrants, rights, calls or other preemptive rights with respect to additional shares of capital stock. Except as set forth on Schedule 5.3(a) of the Disclosure Schedule, no Options, Warrants, preemptive or other rights to acquire any shares of Company Capital Stock or any debt or equity interest in the Company have been issued or are outstanding. Any Options have been granted or issued at fair market value, as determined by the Company's Board of Directors at the date of grant or issuance using the reasonable application of a reasonable valuation method. All Options

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• and Warrants of the Company, if any, if not exercised prior to the Closing Date, will be terminated as of the Closing Date without any further liabilities to Parent, Merger Sub, or the Company.

          (b)   Except as set forth on Schedule 5.3(b) of the Disclosure Schedule, the Company is not a party or subject to any agreement or understanding and (other than voting agreements entered into in connection with this Agreement) there is no agreement or understanding between any Persons that affects or relates to the voting or giving of written consents with respect to any securities of the Company or the voting of any securities of the Company by any Shareholder, director or officer of the Company. The Company has no contractual or other obligation to register under the securities laws of any jurisdiction any of its presently outstanding securities or any of its securities that may hereafter be issued.

          (c)   Except as set forth on Schedule 5.3(c) of the Disclosure Schedule, the Company is not a party or subject to any agreement that grants any rights of refusal, rights of first offer, co-sale or tag-along rights, drag-along rights, registration rights or similar rights with respect to Company Capital Stock.

          (d)   Each Shareholder is, or on the Closing Date will be, the record owner of the equity interests indicated in Schedule 5.3(a) of the Disclosure Schedule as owned by such Shareholder (or to be owned as of the Closing Date). Except as set forth in Schedule 5.3(a) of the Disclosure Schedule, to the knowledge of the Company there are no agreements, arrangements, options, warrants, calls, rights or commitments of any character relating to the sale, purchase, redemption or other transfer of the Capital Stock held by any Shareholder.

        SECTION 5.4    NO CONFLICTS .    Except as set forth on Schedule 5.4 of the Disclosure Schedule, neither the execution and delivery of this Agreement and the Transaction Documents by the Company nor the performance by the Company of the transactions contemplated hereby or thereby will:

•         (a)   violate or conflict with or result in a breach of any of the terms, conditions or provisions of the articles of incorporation or bylaws of the Company;

          (b)   violate any Law;

          (c)   constitute (with or without notice or lapse of time or both) a default under or otherwise violate any material Permit, Contract, mortgage, note, bond, license or other instrument to which the Company is a party or by which the properties or assets of any of the foregoing are bound;

          (d)   constitute an event which would permit any party to terminate, or accelerate the maturity of any Indebtedness or other obligation under, any Contract, mortgage, note, bond, license or other instrument to which the Company is a party or by which the properties or assets of any the Company are bound;

          (e)   result in the creation or imposition of any Lien upon the Company Capital Stock or the assets of the Company; or

          (f)    require any Permit, authorization, consent, approval, exemption or other action by or notice to any Person, court or administrative or governmental body pursuant to any Laws.

        SECTION 5.5    FINANCIAL STATEMENTS .     Schedule 5.5 of the Disclosure Schedule contains the following financial statements of the Company (collectively, the "Financial Statements" ):

•         (a)   The balance sheet of the Company as of December 31, 2006, and the related statements of income, shareholders' equity and cash flows for the year then ended (collectively, the "2006 Financial Statements" );

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•         (b)   The balance sheets of the Company as of December 31, 2005 and as of December 31, 2004, and the related statements of income, shareholders' equity and cash flows for the years then ended; and

          (c)   A balance sheet of the Company as of September 30, 2007 (the "Latest Balance Sheet Date" ) and the related statements of income, changes in shareholders' equity, and cash flow for the nine (9) months then ended (the "Interim Financial Statements" ), including in each case, the notes thereto, if any.

        The Financial Statements are complete and correct in all material respects, are consistent with the Books and Records, and, other than as set forth on Schedule 5.5 of the Disclosure Schedule, fairly present, in all material respects, the financial condition, assets and liabilities of the Company, taken as a whole, as of their respective dates and the results of operations and cash flows for the periods related thereto in accordance with GAAP (except as may be indicated in the notes thereto and in the case of the Interim Financial Statements, subject to normal year-end adjustments and the absence of footnote disclosure). Since the Latest Balance Sheet Date there has been no change in the Company's polices on reserves or accrual amounts.

        SECTION 5.6    ABSENCE OF UNDISCLOSED LIABILITIES .    

•         (a)   The Company does not have any material Liabilities, whether due or to become due (other than the obligation to provide services under contracts with its customers), arising out of transactions entered into on or prior to the date hereof, or any transaction, series of transactions, action or inaction occurring on or prior to the date hereof, or any state of facts or conditions existing on or prior to the date hereof (regardless of when such liability or obligation is asserted), including, without limitation, Liabilities on account of Taxes or Employee Benefit Plans, or in respect thereof, except as and to the extent clearly and accurately reflected and accrued for or reserved against in, the 2006 Financial Statements and on the Latest Balance Sheet or incurred in the ordinary course of business consistent with past practice since the Latest Balance Sheet Date (none of which is a Liability for breach of contract, breach of warranty, product liability, tort or infringement, or a claim or lawsuit, or an environmental liability), except to the extent set forth on Schedule 5.6(a) of the Disclosure Schedule.

          (b)   Except as set forth on Schedule 5.6(b) of the Disclosure Schedule, the Company does not have any Liabilities to any Affiliate.

        SECTION 5.7    TANGIBLE PERSONAL PROPERTY .    Except as set forth in Schedule 5.7 of the Disclosure Schedule:

•         (a)     Title .    The Company is in possession of and has good title to, or valid leasehold interests in or valid rights under Contract to use, all tangible personal property (including, without limitation, all fixtures, leasehold improvements, equipment (including computer hardware and communications equipment), whether or not such equipment constitutes a fixture under applicable Law, office, operating and other supplies, parts, furniture, and other tangible personal property of the Company) used in the conduct of the Business by the Company as presently conducted, including all tangible personal property reflected on the balance sheet included in the 2006 Financial Statements and as of the Latest Balance Sheet Date, and tangible personal property acquired since the Latest Balance Sheet Date, other than property disposed of since such date in the ordinary course of business consistent with past practice. All such tangible personal property is free and clear of all Liens, other than Permitted Liens. No Person other than the Company owns or has any right to the use or possession of such tangible personal property other than lessors and licensors of such tangible personal property constituting leasehold interests or licenses.

          (b)     Condition .    All of the assets of the Company are in good condition and repair consistent with industry standards (ordinary wear and tear excepted), and are useable in the ordinary course

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• 
  

  of business. Except for tangible personal property having a fair market value of less than $10,000, Schedule 5.7(b) of the Disclosure Schedule includes all of the fixed assets of each of the Company, and each item of tangible personal property owned by the Company and the location thereof. Schedule 5.7(b) of the Disclosure Schedule lists all leases of tangible personal property to which the Company is a party or is bound, and the lessee and location of such leased tangible personal property.

        SECTION 5.8    CONTRACTS .     Schedule 5.8(a) of the Disclosure Schedule is a correct and complete list of each material Contract of the Company, including but not limited to, all Contracts that require the Company to pay, or entitle the Company to receive, in the aggregate, $10,000 or more during any twelve (12) month period, all Contracts that restrict any of the Company's business activity anywhere in the world, and all Contracts that are not terminable by the Company upon not more than thirty (30) days' prior notice without penalty or payment (each a "Material Contract" ). Correct and complete copies of the Material Contracts listed on Schedule 5.8(a) of the Disclosure Schedule have previously been furnished or made available to Parent, excluding purchase orders or sales of products in the ordinary course of business on customary terms valued at less than $10,000 in the aggregate and terminable without penalty upon notice of thirty (30) days or less, all material terms and provisions of each oral Contract of the Company are described on Schedule 5.8(a) of the Disclosure Schedule. Except as set forth on Schedule 5.8(b) of the Disclosure Schedule, the Company is not in default and no event has occurred which with the giving of notice or the passage of time or both would constitute a default by the Company under any Material Contract and, to the knowledge of the Company, no event has occurred which with the giving of notice or the passage of time or both would constitute a default by any other party to any such Material Contract. Each of the Material Contracts of the Company is in full force and effect, is valid and enforceable in accordance with its terms, and, to the knowledge of the Company, is not subject to any claims, charges, set-offs or defenses. Except as set forth on Schedule 5.8(c) , all of the Material Contracts of the Company will continue in full force and effect without any change or modification resulting from the consummation of the transactions contemplated by this Agreement, without the necessity of obtaining any consent, approval, novation or waiver of any third party. Except as set forth on Schedule 5.8(d) of the Disclosure Schedule, the Company is not a party to, or bound by the provisions of, any Material Contract (including purchase orders, blanket purchase orders and agreements and delivery orders) that remains executory in whole or in part with any Federal, state, local or foreign Governmental Authority or governmental body. Except as set forth on Schedule 5.8(e) of the Disclosure Schedule, no Material Contract of the Company is required to be treated as a capital lease by GAAP.

        SECTION 5.9    REAL PROPERTY .    No real property is owned by the Company. Schedule 5.9 of the Disclosure Schedule lists all real property used or held for use by the Company which is leased by the Company from third parties (the "Leased Real Property" ), and indicates the addresses and the owners of the Leased Real Property. The Company is the sole legal and equitable holder of the leasehold interest it holds in the Leased Real Property and possesses a valid leasehold interest thereto, free and clear of all Liens (other than Permitted Liens) that could impair the ability of the Company to realize the benefits of the rights provided to it under any lease, and the right to quiet enjoyment of such Leased Real Property. Accurate and complete copies of all existing lease agreements with respect to the Leased Real Property as of the Closing Date have heretofore been delivered to Parent. The Company has not exercised any option to purchase any parcel of Leased Real Property. The Leased Real Property constitutes the only real property used or occupied by the Company in the conduct of the Business. There are no leases, subleases, licenses, concessions or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of any parcel of the Leased Real Property, or any options or rights of first refusal with respect thereto. Other than as set forth on Schedule 5.9 of the Disclosure Schedule, there are no parties (other than the Company) in possession of the Leased Real Property and the Company enjoys peaceful and undisturbed possession of the Leased Real Property, subject to the terms and conditions of the leases set forth on Schedule 5.9

17

of the Disclosure Schedule. To the knowledge of the Company, within the last twelve (12) months, no notice from any Governmental Authority has been received by the Company or has been served upon the Leased Real Property requiring or calling attention to the need for any work, repair, construction, alteration or installation on or in connection with the Leased Real Property. To the knowledge of the Company, no notice has been received by the Company or has been served upon the Real Property stating that, and the Company has no knowledge that, the buildings and improvements on the Leased Real Property, or the Business as presently conducted thereon by the Company, are not in compliance with any applicable Law.

        SECTION 5.10    LITIGATION .    Except as set forth in Schedule 5.10 of the Disclosure Schedule, there is no suit, action, proceeding, investigation, arbitration, mediation, claim or order pending or, to the knowledge of the Company, threatened against the Company (or pending or, to the knowledge of the Company, threatened against any of the current or former officers, directors or employees of the Company with respect to their service as an officer, director or employee of the Company) before any court, or before any governmental department, commission, board, agency, or instrumentality; nor, to the knowledge of the Company, is there any reasonable basis for any such action, proceeding or investigation. Except as set forth in Schedule 5.10 of the Disclosure Schedule, the Company (a) is not subject to any judgment, order or decree of any court or governmental agency; (b) is not engaged in any legal action in which a claim has been filed to recover monies due it or for damages sustained by it; or (c) has not received any opinion or memorandum or legal advice from counsel to the effect that it is exposed, from a legal standpoint, to any Liability which may be material to its business. Schedule 5.10 of the Disclosure Schedule, also sets forth a complete and correct list and description of all material claims, suits, actions, proceedings and investigations made, filed or otherwise initiated in connection with the Company which have been resolved in the past two (2) years and the resolution thereof.

        SECTION 5.11    COMPLIANCE WITH APPLICABLE LAWS .    The Company (a) is not, or has not been in the past five (5) years, in violation of any Law the violation of which would have a Material Adverse Effect the conduct, ownership, use, occupancy or operation of the Business or assets, including, without limitation, regarding any alleged failure to possess any material, license, Permit, authorization or other approval, (b) the Company has not received notice of any such material violation, and (c) no facts or circumstances exist which would reasonably be expected to cause the Company to be in any such material violation in the future, except as set forth on Schedule 5.11 of the Disclosure Schedule.

        SECTION 5.12    INTELLECTUAL PROPERTY .     Schedule 5.12 of the Disclosure Schedule contains a complete and correct list of all patents, patent applications, patent disclosures, registered and unregistered trademarks, registered service marks, registered and unregistered trade names and corporate names, domain names and websites, registered copyrights, and registrations, applications and renewals for any of the foregoing, and software (other than "off-the-shelf" commercial software), which are owned or licensed by the Company, including all registration numbers and dates and jurisdictions of registrations, if applicable, all licenses and other rights granted from or to any third party with respect to any Intellectual Property. Except as set forth on Schedule 5.12 of the Disclosure Schedule, (a) the Company owns and possesses all right, title and interest in and to, or has a valid license to use, all of the intellectual property and proprietary rights and information necessary for the operation of the Business as presently conducted by the Company; (b) each item of Intellectual Property owned or used by the Company prior to the Closing will be owned or available for use by the Company on identical terms and conditions immediately subsequent to the Closing; (c) no claim by any third party contesting the validity, enforceability, use or ownership of any Intellectual Property has been asserted against the Company or, to the knowledge of the Company, is threatened, and, to the knowledge of the Company, there is no reasonable basis for any such claim; (d) the Company has not received any notices of, nor does the Company have knowledge of any reasonable basis for, an allegation of any infringement or

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misappropriation by, any third party with respect to any Intellectual Property, nor has any such Person received any claims of infringement or misappropriation of any intellectual property of any third party; (e) to the knowledge of the Company, the Company has not infringed, misappropriated or otherwise violated any intellectual property of any third parties; (f) to the knowledge of the Company, no other Person is infringing, misappropriating or otherwise violating, or has infringed, misappropriated or otherwise violated, the Intellectual Property; (g) except as set forth on Section 5.12 the Company is not required to pay any fee, royalty or other compensation for the use of any third party intellectual property; and (h) the Company has not granted any exclusive right with respect to any Intellectual Property. All Intellectual Property owned by the Company was created by employees of the Company within the scope of their employment, or by independent contractors who have assigned all of their rights in such Intellectual Property to the Company pursuant to written agreements.

        SECTION 5.13    CONDUCT OF BUSINESS .    Except as set forth on Schedule 5.13 of the Disclosure Schedule, since December 31, 2006, the Business of the Company has been conducted only in the ordinary course of business consistent with past custom and practice, and the Company has not incurred any liabilities other than in the ordinary course of business consistent with past custom and practice and there has been no Material Adverse Effect on the Business (other than those affecting the economy generally or the Company's industry in particular), or the condition (financial or otherwise), assets, operations, operating results, employees or customer relations of the Company, and no event has occurred that could reasonably be expected to have such an effect. Without limiting the generality of the foregoing and except as set forth on Schedule 5.13 of the Disclosure Schedule, since December 31, 2006, the Company has not, except in the ordinary course of business consistent with past practice:

•         (a)   sold, assigned or transferred any material asset except for the sale of products in the ordinary course of business, or mortgaged, pledged or subjected any material asset or the Leased Real Property to any Lien (other than Permitted Liens), charge or other restriction;

          (b)   sold, assigned, transferred, abandoned or permit