AGREEMENT AND PLAN OF MERGER

Exhibit 10.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

COMMUNICATE.COM, INC.,

COMMUNICATE.COM DELAWARE, INC.,

ENTITY, INC.,

THE FOUNDERS

AND

HARJEET TAGGAR, AS STOCKHOLDER REPRESENTATIVE

MARCH 25, 2008

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AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (the “ Agreement ”) is made and entered into as of March 25, 2008 by and among Communicate.com, Inc., a Nevada corporation (the “ Buyer ”), Communicate.com Delaware, Inc., a Delaware corporation and a wholly-owned subsidiary of the Buyer (the “ Transitory Subsidiary ”), Entity, Inc., a Delaware corporation (the “ Company ”), Harjeet Taggar, Kulveer Taggar and Patrick Collison (each a “Founder” and collectively, the “ Founders ”) and Harjeet Taggar as representative of the shareholders of the Company (the “ Stockholder Representative ”).  

This Agreement contemplates a merger of the Company with and into the Transitory Subsidiary.  In such merger, the stockholders of the Company will receive cash and common stock of the Buyer in exchange for their capital stock of the Company.

The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and this Agreement is intended to constitute a “plan of reorganization” within the meaning of the regulations promulgated under Section 368 of the Code.

Now, therefore, in consideration of the representations, warranties and covenants herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted by the Parties, and intending to be legally bound hereby, the Parties agree as follows.

ARTICLE I
THE MERGER

1.1

The Merger .  Upon and subject to the terms and conditions of this Agreement, the Company shall merge with and into the Transitory Subsidiary at the Effective Time.  From and after the Effective Time, the separate corporate existence of the Company shall cease and the Transitory Subsidiary shall continue as the Surviving Corporation.  The Merger shall have the effects set forth in Section 259 of the Delaware General Corporation Law.

1.2

The Closing .  The Closing shall take place at the offices of Richardson & Patel, LLP in Los Angeles, California, commencing at 9:00 a.m. local time on the Closing Date.

1.3

Actions at the Closing .  At the Closing:

(a)

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

(b)

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

(c)

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

(d)

each of the Company Stockholders shall deliver to the Buyer the certificate(s) representing his, her or its Company Shares;

(e)

the Buyer shall deliver certificates for the Initial Shares to the Stockholder Representative for delivery to the Company Stockholders in accordance with Sections 1.5 and 1.7;

(f)

the Buyer shall wire the Initial Cash to an account designated by the Stockholder Representative for disbursement by the Stockholder Representative to the Company Stockholders in accordance with Sections 1.5 and 1.7; and

(g)

the Buyer shall reserve the Distribution Shares for issuance pursuant to Sections 1.5 and 1.7.

1.4

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

1.5

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

(a)

All of the Common Shares issued and outstanding immediately prior to the Effective Time (other than Common Shares owned beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares and Common Shares held in the Company’s treasury) including shares of Common Stock issuable immediately prior to the Effective Time upon conversion of the Preferred Shares and the conversion of the Notes (defined below), shall be converted into and represent the right to receive in the aggregate (subject to any conditions herein) (i) an amount of cash equal to (A) $2,000,000, minus (B) the Assumed Liabilities set forth in Section 2.6 of the Disclosure Schedule (other than the Advance Amount) and updated by the Founders not less than five business days prior to the Closing, as estimated as of the Closing Date and minus (C) the amounts then due and owing under the Advance Note (as defined below) (the “ Cash Consideration ”) and (ii) such number of shares of Buyer Common Stock as is equal to the following: $3,000,000 divided by the lower of (A) $3.00 per share or (B) the closing price of the Buyer Shares on The Over the Counter Bulletin Board (“ OTC ”) on the business day immediately preceding the Effective Time (the “ Closing Price ”); provided that if the Closing Price of the Buyer Shares on the OTC is below $2.50 per share, the denominator shall be $2.50 (the “ Merger Shares ”).  The Merger Shares shall be divided by the number of outstanding Company Shares immediately prior to the Effective Time (after giving effect to the conversion into Common Shares of all outstanding Preferred Shares and the conversion of the Notes) to yield the number of Merger Shares to be exchanged for each Buyer Common Share outstanding (the “ Common Exchange Ratio ”).  

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(b)

Company Stockholders shall be entitled to receive as of the Closing (i) 34% of the shares of Buyer Common Stock into which their Company Shares are convertible pursuant to this Section 1.5 (the “ Initial Shares ”) and (ii) the Cash Consideration minus $800,000 (the “ Initial Cash ”).  The remaining shares of Buyer Common Stock into which their Company Shares are convertible pursuant to this Section 1.5, rounded to the nearest whole number shall be distributed in the amount of 22% of the shares of Buyer Common Stock on each of the first, second and third anniversary of the Founders’ employment with the Buyer (the “ Distribution Shares ”) and the remaining $800,000 of the total Cash Consideration (the “ Distribution Cash ”), shall be distributed on the first anniversary of the Closing (each a “ Distribution Date ”).  All amounts of Initial Shares, Distribution Shares, Initial Cash, and Distribution Cash shall be distributed pro rata among the Company Stockholders in accordance with Exhibit A .  Notwithstanding the foregoing, the disbursement of the Distribution Shares to each of the Founders shall be subject to the conditions of Section 1.5(b). Any Distribution Shares forfeited as a result of any Founder’s failure to be an employee of Buyer or the Transitory Subsidiary on a Distribution Date as set forth in Section 1.5(b) shall no longer be subject to issuance hereunder and shall no longer be calculated as part of the Distribution Shares for any purposes hereunder. With respect to all other Company Stockholders, the Distribution Shares shall be distributed on the Distribution Dates regardless of whether all or any of the Founders are then employed by the Buyer.

(c)

In addition to, and without limitation of the provisions of Section 1.5(b) above, the Distribution Shares shall be subject to forfeiture with respect to any Founder that is not an employee of Buyer or the Transitory Subsidiary on any Distribution Date and such Founder shall have no right to receive or own such Distribution Shares in such event.  Such Distribution Shares which are forfeited shall be deemed “restricted shares” subject to the restrictions on issuance and delivery to a Founder set forth in these Sections 1.5(b) and (c).  Each Founder has reviewed with the Founder’s own tax advisors the federal, state, local and foreign tax consequences of the Merger and the transactions contemplated by this Agreement.  The Founder is relying solely on such advisors and not on any statements or representations of the Buyer or any of its agents.  The Founder understands that the Founder (and not the Buyer or the Transitory Subsidiary) shall be responsible for any tax liability that may arise as a result of the transactions contemplated by this Agreement.  Each Founder covenants and agrees to file an election form under section 83(b) of the Code as a condition to the Closing, as set forth under Section 5.2(l).   EACH FOUNDER (AND NOT THE BUYER OR ANY OF ITS AGENTS) SHALL BE SOLELY RESPONSIBLE FOR APPROPRIATELY FILING OF THE ELECTION FORM, EVEN IF THE FOUNDER REQUESTS THE BUYER OR ITS AGENTS MAKE THIS FILING ON FOUNDER’S BEHALF.

(d)

Each Company Share held in the Company’s treasury immediately prior to the Effective Time and each Company Share owned beneficially by the Buyer or the Transitory Subsidiary shall be cancelled and retired without payment of any consideration therefor.

(e)

Each share of common stock, $.01 par value per share, of the Transitory Subsidiary issued and outstanding immediately prior to the Effective Time shall be converted into and thereafter evidence one share of common stock, $.01 par value per share, of the Surviving Corporation.

1.6

Dissenting Shares .  

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(a)

Dissenting Shares shall not be converted into or represent the right to receive the Cash Consideration and Merger Shares pursuant to the terms of this Agreement, and any such Company Stockholder shall only be entitled to such rights as are granted under the Delaware General Corporation Law.    If such Company Stockholder forfeits or withdraws his, her or its right to appraisal of Dissenting Shares, then (i) as of the occurrence of such event, such holder’s Dissenting Shares shall cease to be Dissenting Shares and shall be converted into and represent the right to receive the Cash Consideration and Merger Shares issuable in respect of such Company Shares pursuant to Section 1.5, and (ii) promptly following the occurrence of such event, the Buyer shall deliver to the Company Stockholder the portion of the Cash Consideration and a certificate representing the Merger Shares to which such holder is then entitled pursuant to Section 1.5.

(b)

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

1.7

Exchange of Shares .  

(a)

Prior to the Closing, the Buyer or the Stockholder Representative shall mail a letter of transmittal in the Buyer’s standard form to each Company Stockholder at the address set forth opposite each such Company Stockholder’s name on Exhibit A .  After receipt of such letter of transmittal, an applicable Investment Representation Letter in the form attached hereto as Exhibit B-1 or B-2 , and any other documents that the Buyer or the Stockholder Representative may reasonably require in order to effect the exchange (the “ Exchange Documents ”), the Company Stockholders will surrender the Certificates to the Stockholder Representative for cancellation together with duly completed and validly executed Exchange Documents.  Upon surrender of a Certificate for cancellation to the Stockholder Representative, or such other agent or agents as may be appointed by the Buyer, together with such Exchange Documents, duly completed and validly executed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive from the Stockholder Representative in exchange therefor, the Cash Consideration and Merger Shares to which such Company Stockholder is entitled pursuant to Section 1.5 hereof and the Certificate so surrendered shall be cancelled.  Until so surrendered, each Certificate outstanding after the Effective Time will be deemed, for all corporate purposes thereafter, to evidence only the right to receive the Cash Consideration and Merger Shares into which such shares of Company Shares shall have been so converted.  No portion of the cash consideration payable pursuant to Section 1.5 will be paid to the holder of any unsurrendered Certificate with respect to Company Shares formerly represented thereby until the holder of record of such Certificate shall surrender such Certificate and the Exchange Documents pursuant hereto.  

(b)

As soon as practicable following the Effective Time, the Stockholder Representative shall deliver the Initial Shares and the Initial Cash to the Company Stockholders in such amount to which such holder is then entitled pursuant to Section 1.5; provided that such Company Stockholder shall have surrendered his, her or its Certificate pursuant to Section 1.7(a) hereof.

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(c)

On the first anniversary of this Agreement or the next business day after the first anniversary of this Agreement, the Buyer shall deliver the Distribution Cash to the Stockholder Representative for disbursement by the Stockholder Representative to the Company Stockholders in such amount to which such holder is then entitled pursuant to Section 1.5.

(d)

On each Distribution Date or the next business day after the applicable Distribution Date, the Buyer shall deliver certificates for the Distribution Shares to the Stockholder Representative for delivery to the Company Stockholders in such amounts to which such holder is ten entitled pursuant to Section 1.5; provided that, with respect to delivery of Distribution Shares to the Founders, such Founder shall be an employee of the Buyer as of the close of business on the first anniversary of this Agreement in accordance with Section 1.5(b) and (c) hereof.

(e)

Notwithstanding anything to the contrary in this Section 1.7, neither the Buyer, the Stockholder Representative, the Surviving Corporation, nor any party hereto shall be liable to a holder of Company Shares for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law.

1.8

Fractional Shares .  No certificates representing fractional Merger Shares shall be issued to Company Stockholders upon the surrender for exchange of Certificates, and such Company Stockholders shall not be entitled to any voting rights, rights to receive any dividends or distributions or other rights as a stockholder of the Buyer with respect to any fractional Merger Shares that would have otherwise been issued to such former Company Stockholders.  In lieu of any fractional Merger Shares that would have otherwise been issued (after aggregating all fractional Merger Shares that would have otherwise been issued), each Company Stockholder that would have been entitled to receive a fractional Merger Share shall, upon proper surrender of such person’s Certificates, receive a cash payment (rounded to the nearest whole cent) equal to the value of the fractional interest, without interest, less the amount of any applicable withholding taxes.

1.9

Adjustments to Common Exchange Ratio.   The Common Exchange Ratio shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Buyer Common Stock), reorganization, recapitalization, reclassification or other like change with respect to Buyer Common Stock or Company Shares occurring on or after the date of this Agreement and prior to the Effective Time.

1.10

Convertible Promissory Notes .  Conditioned upon and immediately prior to the Effective Time, the Company shall cause all principal and interest due and owing under (i) that certain Promissory Note dated August 10, 2007 in the principal amount of $75,000 payable to Paul Buchheit (the “ Buchheit Note ”) and (ii) that certain Promissory Note dated January 8, 2008 in the principal amount of $40,000 payable to Christopher Sacca (the “ Sacca Note ”, and together with the Buchheit Note, the “ Notes ”) to be converted into Company Shares , in accordance with the terms of the Buchheit Note and related Note Purchase Agreement dated August 10, 2007 (the “ Note Purchase Agreement ”) and the Sacca Note dated January 8, 2008, such Notes and the Note Purchase Agreement to be terminated effective as of the Effective Time.    

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1.11

Certificate of Incorporation and By-laws .  

(a)

The Certificate of Incorporation of the Surviving Corporation immediately following the Effective Time shall be the same as the Certificate of Incorporation of the Transitory Subsidiary immediately prior to the Effective Time, except that (i) the name of the corporation set forth therein shall be changed to the name of the Company and (ii) the identity of the incorporator shall be deleted.

(b)

The By-laws of the Surviving Corporation immediately following the Effective Time shall be the same as the By-laws of the Transitory Subsidiary immediately prior to the Effective Time, except that the name of the corporation set forth therein shall be changed to the name of the Company.

1.12

No Further Rights .  The amount of Cash Consideration paid and the number Merger Shares issued in respect of the surrender for exchange of Company Shares in accordance with the terms hereof shall be deemed to be full satisfaction of all rights pertaining to such Company Shares.  From and after the Effective Time, if any Company Shares are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Article I.

1.13

Closing of Transfer Books .  At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of Company Shares shall thereafter be made.  If, after the Effective Time, Certificates are presented to the Buyer, the Surviving Corporation or the Stockholder Representative, they shall be cancelled and exchanged for the Cash Consideration and the Merger Shares in accordance with Section 1.7, subject to Section 1.6 and to applicable law in the case of Dissenting Shares.

1.14

Lost, Stolen or Destroyed Certificates .  In the event any Company Stock Certificate shall have been lost, stolen or destroyed, the Stockholder Representative shall issue in exchange for such lost, stolen or destroyed certificates, upon the making of an affidavit of that fact by the holder thereof, such amount, if any, as may be required pursuant to Section 1.5 hereof.

1.15

Advance Note .  Within two business days of the date of this Agreement, Buyer shall tender to the Company the amount of $67,093 to be used by the Company solely for the payment of certain outstanding salary and compensation amounts due the Founders (the “ Advance Amount ”).  The Advance Amount shall be wired to an account designated by the Company in writing.  In consideration for the Advance Amount, the Company and Founders on the date hereof shall execute and deliver to the Buyer an unsecured promissory note in the form of that attached hereto as Exhibit G (the “ Advance Note ”) which Advance Note shall be the joint and several liability of the Founders and the Company to evidence the Advance Amount.  Effective at the Effective Time, the Advance Note shall be deemed canceled and paid in full.  

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1.16

Execution of Agreements . On the date hereof, the Transitory Subsidiary and each of the Founders shall execute and deliver the following agreements: the Founder Employment Agreements, the Secondment Agreements, and the Interim Consulting Agreements.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE FOUNDERS

The Company and each of the Founders represents and warrants to the Buyer that, except as set forth in the Disclosure Schedule, the statements contained in this Article II are true and correct as of the date of this Agreement and will be true and correct as of the Closing as though made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date) and such disclosure is incorporated herein by reference into the representations and warranties.  The Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Article II, it being understood that disclosure made here in with regard to a representation or warranty shall be deemed incorporated in and applicable to each section and subsection to which such disclosure would be reasonable on the face of such disclosure.  

2.1

Organization, Qualification and Corporate Power .  The Company is a corporation duly organized, validly existing and in corporate and tax good standing under the laws of the State of Delaware.  The Company is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction listed in Section 2.1 of the Disclosure Schedule, which jurisdictions constitute the jurisdictions in which the nature of the Company's businesses or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified or in good standing would not have a Company Material Adverse Effect.  The Company has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it.  The Company has furnished to the Buyer complete and accurate copies of its Certificate of Incorporation and by-laws.  The Company is not in default under or in violation of any provision of its Certificate of Incorporation or by-laws.  

2.2

Capitalization .  

(a)

The authorized capital stock of the Company consists of (i) 11,176,000 Common Shares, of which, as of the date of this Agreement, 7,804,285 shares were issued and outstanding and no shares were held in the treasury of the Company, and (ii) 1,176,000 Preferred Shares, of which (A) 1,001,000 shares have been designated as Series A Preferred Stock, of which, as of the date of this Agreement, no shares were issued and outstanding and (B) 175,000 shares have been designated as Series AA Preferred Stock of which, as of the date of this Agreement, 174,074 shares were issued and outstanding.

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(b)

Section 2.2 of the Disclosure Schedule sets forth a complete and accurate list, as of the date of this Agreement, of the holders of capital stock of the Company, showing the number of shares of capital stock, and the class or series of such shares, held by each stockholder and (for shares other than Common Stock) the number of Common Shares (if any) into which such shares are convertible.  Section 2.2 of the Disclosure Schedule also indicates all outstanding Common Shares that constitute restricted stock or that are otherwise subject to a repurchase or redemption right, indicating the name of the applicable stockholder, the vesting schedule (including any acceleration provisions with respect thereto), and the repurchase price payable by the Company.  All of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable.  All of the issued and outstanding shares of capital stock of the Company have been offered, issued and sold by the Company in compliance with all applicable federal and state securities laws.

(c)

Except as set forth in this Section 2.2 or in Section 2.2 of the Disclosure Schedule, (i) no subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any shares of capital stock of the Company is authorized or outstanding, (ii) the Company has no obligation (contingent or otherwise) to issue any subscription, warrant, option, convertible security or other such right, or to issue or distribute to holders of any shares of its capital stock any evidences of indebtedness or assets of the Company, (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or to make any other distribution in respect thereof, and (iv) there are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company. The Company has outstanding two promissory notes, as follows: (i) the Buchheit Note in the principal amount of $75,000.00, and (ii) the Sacca Note in the principal amount of $40,000.00.

(d)

Except as set forth in Section 2.2 of the Disclosure Schedule, there is no agreement, written or oral, between the Company and any holder of its securities, or, to the best of the Company's knowledge, among any holders of its securities, relating to the sale or transfer (including agreements relating to rights of first refusal, co-sale rights or “drag-along” rights), registration under the Securities Act, or voting, of the capital stock of the Company.

2.3

Authorization of Transaction; Advance Note .  The Company has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  The execution and delivery by the Company of this Agreement and, subject to obtaining the Requisite Stockholder Approval, the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company.  Without limiting the generality of the foregoing, the Board of Directors of the Company, at a meeting duly called and held, by the unanimous vote of all directors (i) determined that the Merger is fair and in the best interests of the Company and its stockholders, (ii) adopted this Agreement in accordance with the provisions of the Delaware General Corporation Law, and (iii) directed that this Agreement and the Merger be submitted to the stockholders of the Company for their adoption and approval and resolved to recommend that the stockholders of the Company vote in favor of the adoption of this Agreement and the approval of the Merger.  This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The Company has all requisite power and authority to execute and deliver the Advance Note and to perform its obligations thereunder.  The Advance Note has been duly and validly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

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2.4

Noncontravention .  Subject to the filing of the Certificate of Merger as required by the Delaware General Corporation Law, neither the execution and delivery by the Company of this Agreement, nor the consummation by the Company of the transactions contemplated hereby, will (a) conflict with or violate any provision of the Certificate of Incorporation or By-laws of the Company, (b) require on the part of the Company any notice to or filing with, or any permit, authorization, consent or approval of, any Governmental Entity, (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Company is a party or by which the Company or its assets is subject , (d) result in the imposition of any Security Interest upon any assets of the Company or (e) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or its assets.  

2.5

Subsidiaries .  

(a)

The Company has no subsidiaries.  

(b)

The Company does not control directly or indirectly or have any direct or indirect equity participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association or entity.

2.6

Undisclosed Liabilities .  The Company has no liabilities (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities disclosed to the Buyer in writing, and (b) contractual and other (i) liabilities incurred in the Ordinary Course of Business, (ii) the Assumed Liabilities as of the date of this Agreement set forth on Section 2.6 of the Disclosure Schedule and (iii) legal fees and related expenses incurred in connection with this Agreement and the transactions contemplated hereby.

2.7

Tax Matters .

(a)

The Company has filed on a timely basis all Tax Returns that it was required to file, and all such Tax Returns were complete and accurate in all material respects.  

(b)

The Company has delivered to the Buyer complete and accurate copies of all federal and state income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by the Company since inception.

2.8

Assets .  The Company is the true and lawful owner, and has good title to, all of the assets (tangible or intangible) purported to be owned by the Company, free and clear of all Security Interests.  The Company owns or leases all tangible assets sufficient for the conduct of its businesses as presently conducted and as presently proposed to be conducted.  Each such tangible asset is free from material defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear) and is suitable for the purposes for which it presently is used.  

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2.9

Real Property Leases .  Section 2.9 of the Disclosure Schedule lists all Leases and lists the term of such Lease, any extension and expansion options, and the rent payable thereunder.  The Company has delivered to the Buyer complete and accurate copies of the Leases.  With respect to each Lease:

(a)

such Lease is legal, valid, binding, enforceable and in full force and effect; and

(b)

such Lease will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing.

2.10

Intellectual Property .

(a)

Section 2.10 of the Disclosure Schedule lists each patent, patent application, copyright registration or application therefor, mask work registration or application therefor, and trademark, service mark and domain name registration or application therefore, and any and all websites of the Company.

(b)

The Company owns or has the right to use all Company Intellectual Property.  Each item of Company Intellectual Property will be owned or available for use by the Buyer immediately following the Closing on substantially identical terms and conditions as it was immediately prior to the Closing.  The Company has taken all reasonable measures to protect the proprietary nature of each item of Company Intellectual Property, and to maintain in confidence all trade secrets and confidential information, that it owns or uses.  No other person or entity has any rights to any of the Company Intellectual Property owned by the Company (except pursuant to agreements or licenses specified in Section 2.10 of the Disclosure Schedule), and, to the knowledge of the Company, no other person or entity is infringing, violating or misappropriating any of the Company Intellectual Property and the Intellectual Property is not infringing, violating or misappropriating the intellectual property or other rights of any other person.

(c)

Section 2.10 of the Disclosure Schedule identifies each license or other agreement pursuant to which the Company has licensed, distributed or otherwise granted any rights to any third party with respect to, any Company Intellectual Property.  Except as described in Section 2.10 of the Disclosure Schedule, the Company has not agreed to indemnify any person or entity against any infringement, violation or misappropriation of any Intellectual Property rights.

2.11

Contracts .

(a)

Section 2.11 of the Disclosure Schedule lists the following agreements (written or oral) to which the Company is a party as of the date of this Agreement (other than the Advance Note):

(i)

any agreement (or group of related agreements) for the lease of personal property from or to third parties providing for lease payments in excess of $25,000 per annum or having a remaining term longer than 6 months;

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(ii)

any agreement (or group of related agreements) for the purchase or sale of products or for the furnishing or receipt of services (A) which calls for performance over a period of more than one year, (B) which involves more than the sum of $25,000, or (C) in which the Company has exclusive rights relating to any products, services or territory;

(iii)

any agreement concerning the establishment or operation of a partnership, joint venture or limited liability company;

(iv)

any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including capitalized lease obligations) involving more than $25,000 or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;

(v)

any agreement for the disposition of any significant portion of the assets or business of the Company (other than sales of products in the Ordinary Course of Business) or any agreement for the acquisition of the assets or business of any other entity (other than purchases of inventory or components in the Ordinary Course of Business.

(b)

The Company has delivered to the Buyer a complete and accurate copy of each agreement listed in the Disclosure Schedules.  With respect to each agreement so listed:  (i) the agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) the Company is not in breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the Company, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the Company, to the knowledge of the Company, any other party under such agreement.

2.12

Powers of Attorney .  There are no outstanding powers of attorney executed on behalf of the Company.

2.13

Insurance .  Section 2.13 of the Disclosure Schedule lists each insurance policy (including fire, theft, casualty, comprehensive general liability, workers compensation, business interruption, environmental, product liability and automobile insurance policies and bond and surety arrangements) to which the Company is a party, all of which are in full force and effect.  Such insurance policies are of the type and in amounts customarily carried by organizations conducting businesses or owning assets similar to those of the Company.   Each such policy will continue to be enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing.

2.14

Litigation .  There is no Legal Proceeding which is pending or has been threatened in writing against the Company which (a) seeks either damages in excess of $25,000 or equitable relief or (b) in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement. There are no judgments, orders or decrees outstanding against the Company.

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2.15

Employees . Section 2.15 of the Disclosure Schedule contains a list of all employees of the Company.  Each current or past employee of the Company has entered into a confidentiality/assignment of inventions agreement with the Company, a copy or form of which has previously been delivered to the Buyer.  

2.16

Brokers’ Fees .  Each of the Founders and the Company has no any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

2.17

Books and Records. Financial Records .  The minute books and other similar records of the Company contain complete and accurate records of all actions taken at any meetings of the Company’s stockholders, Board of Directors or any committee thereof and of all written consents executed in lieu of the holding of any such meeting.  The books and records of the Company accurately reflect in all material respects the assets, liabilities, business, financial condition and results of operations of the Company and have been maintained in accordance with good business and bookkeeping practices.  Section 2.17 of the Disclosure Schedule contains a list of all bank accounts and safe deposit boxes of the Company and the names of persons having signature authority with respect thereto or access thereto.

2.18

Disclosure .  To the actual knowledge of the Company and the Founders, no representation or warranty by the Company contained in this Agreement, and no statement contained in the Disclosure Schedule or any other document, certificate or other instrument delivered or to be delivered by or on behalf of the Company pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading.  The Company has disclosed to the Buyer all material information relating to the business of the Company or the transactions contemplated by this Agreement.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY

Each of the Buyer and the Transitory Subsidiary represents and warrants to the Company that the statements contained in this Article III are true and correct as of the date of this Agreement and will be true and correct as of the Closing as though made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date):

3.1

Organization, Qualification and Corporate Power .  Each of the Buyer and the Transitory Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation.  The Buyer is duly qualified to conduct business and is in corporate and good standing under the laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified or in good standing would not have a Buyer Material Adverse Effect.  The Buyer has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it.  The Buyer has furnished or made available to the Company complete and accurate copies of its Certificate of Incorporation and By-laws.  

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3.2

Authorization of Transaction .  Each of the Buyer and the Transitory Subsidiary has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder and thereunder.  The execution and delivery by the Buyer and the Transitory Subsidiary of this Agreement and the consummation by the Buyer and the Transitory Subsidiary of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Buyer and Transitory Subsidiary, respectively.  This Agreement has been duly and validly executed and delivered by the Buyer and the Transitory Subsidiary and constitutes a valid and binding obligation of the Buyer and the Transitory Subsidiary, enforceable against them in accordance with its terms.

3.3

Noncontravention .  Subject to compliance with the applicable requirements of the Securities Act and any applicable state and Federal securities laws, and the filing of the Certificate of Merger as required by the Delaware General Corporation Law, neither the execution and delivery by the Buyer or the Transitory Subsidiary of this Agreement nor the consummation by the Buyer or the Transitory Subsidiary of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of the charter or By-laws of the Buyer or the Transitory Subsidiary, (b) require on the part of the Buyer or the Transitory Subsidiary any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (c) conflict with, result in breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party any right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Buyer or the Transitory Subsidiary is a party or by which either is bound or to which any of their assets are subject, or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Buyer or the Transitory Subsidiary or any of their properties or assets.

3.4

Reports and Financial Statements .   The Buyer Reports constitute all of the documents required to be filed by the Buyer under Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the SEC from November 15, 2007 through the Closing Date.  The Buyer Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder when filed.  All Buyer Reports filed with the SEC prior to the Closing Date will comply in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder when filed. As of their respective dates, the Buyer Reports did not and will not (as the case may be) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  The audited financial statements and unaudited interim financial statements of the Buyer included in the Buyer Reports (i) complied or will comply (as the case may be) as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto when filed, (ii) were prepared or will be prepared (as the case may be) in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated therein or in the notes thereto, and in the case of quarterly financial statements, as permitted by Form 10-QSB under the Exchange Act), and (iii) fairly present or will fairly present (as the case may be) the consolidated financial condition, results of operations and cash flows of the Buyer as of the respective dates thereof and for the periods referred to therein.

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3.5

Buyer Common Stock .  The shares of Buyer Common Stock to be issued pursuant to Article I of this Agreement have been duly authorized and when issued and delivered in accordance with the terms of this Agreement will have been validly issued and will be fully paid and non-assessable and the issuance thereof is not subject to any preemptive or other similar right.

3.6

Absence of Material Adverse Change .  Since September 30, 2007, there has not occurred any Buyer Material Adverse Effect.

3.7

Litigation .  Except as disclosed in the Buyer Reports, as of the date of this Agreement, there is no Legal Proceeding which is pending or, to the Buyer’s knowledge, threatened against the Buyer or any subsidiary of the Buyer which, if determined adversely to the Buyer or such subsidiary, could have, individually or in the aggregate, a Buyer Material Adverse Effect or which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement.

ARTICLE IV
COVENANTS

4.1

Closing Efforts .  Each of the Parties shall use its Reasonable Best Efforts to take all actions and to do all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement, including using its Reasonable Best Efforts to ensure that (i) its representations and warranties remain true and correct in all material respects through the Closing Date and (ii) the conditions to the obligations of the other Parties to consummate the Merger are satisfied.

4.2

Governmental and Third-Party Notices and Consents .  

(a)

Each Party shall use its Reasonable Best Efforts to obtain, at its expense, all waivers, permits, consents, approvals or other authorizations from Governmental Entities, and to effect all registrations, filings and notices with or to Governmental Entities, as may be required for such Party to consummate the transactions contemplated by this Agreement and to otherwise comply with all applicable laws and regulations in connection with the consummation of the transactions contemplated by this Agreement.  

(b)

The Company shall use its Reasonable Best Efforts to obtain, at its expense, all such waivers, consents or approvals from third parties, and to give all such notices to third parties, as are listed in the Disclosure Schedule.

4.3

Stockholder Approval .

(a)

The Company and each of the Founders shall use its Reasonable Best Efforts to obtain, as promptly as practicable, the Requisite Stockholder Approval, either at a special meeting of stockholders or pursuant to a written stockholder consent, all in accordance with the applicable requirements of the Delaware General Corporation Law.  

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In connection with such special meeting of stockholders or written stockholder consent, the Company shall provide to its stockholders the Disclosure Statement, which shall include (A) a summary of the Merger and this Agreement, and (B)  a statement that appraisal rights are available for the Company Shares pursuant to Section 262 of the Delaware General Corporation Law and a copy of such Section 262.  The Company agrees not to distribute the Disclosure Statement until the Buyer has had a reasonable opportunity to review and comment on the Disclosure Statement. If the Requisite Stockholder Approval is obtained by means of a written consent, the Company shall send, pursuant to Sections 228 and 262(d) of the Delaware General Corporation Law, a written notice to all stockholders of the Company that did not execute such written consent informing them that this Agreement and the Merger were adopted and approved by the stockholders of the Company and that appraisal rights are available for their Company Shares pursuant to Section 262 of the Delaware General Corporation Law (which notice shall include a copy of such Section 262), and shall promptly inform the Buyer of the date on which such notice was sent.

(b)

The Company, acting through its Board of Directors, shall include in the Disclosure Statement the unanimous recommendation of its Board of Directors that the stockholders of the Company vote in favor of the adoption of this Agreement and the approval of the Merger.

(c)

The Company shall ensure that the Disclosure Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading (provided that the Company shall not be responsible for the accuracy or completeness of any information concerning the Buyer or the Transitory Subsidiary furnished by the Buyer in writing for inclusion in the Disclosure Statement).

(d)

The Buyer shall ensure that any information furnished by the Buyer to the Company in writing for inclusion in the Disclosure Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

(e)

Each of the Founders agree (i) to vote all Company Shares that are beneficially owned by him, her or it in favor of the adoption of this Agreement and the approval of the Merger, (ii) not to vote any Company Shares in favor of any other acquisition (whether by way of merger, consolidation, share, exchange, stock purchase or asset purchase) of all or a majority of the outstanding capital stock or assets of the Company and (iii) otherwise to use his, her or its Reasonable Best Efforts to obtain the Requisite Stockholder Approval.

4.4

Operation of Business .  Except as contemplated by this Agreement, during the period from the date of this Agreement to the Closing, the Company shall conduct its operations in in compliance with all applicable laws and regulations and, to the extent consistent therewith, use its Reasonable Best Efforts to preserve intact its current business organization, keep its physical assets in good working condition, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it to the end that its goodwill and ongoing business shall not be impaired in any material respect.  

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Notwithstanding the foregoing, it is agreed and understood by Buyer that (i) the business of the Company prior to the Closing Date will not be operated in a manner consistent with its operating history and that the majority of the Company’s operations will be suspended or wound down in order for the Founders to perform under the Interim Consulting Agreements; and (ii) the Company will be structuring and implementing a bonus plan or similar arrangement with Mr. Phil Kast based upon prior commitments of the Company to Mr. Kast.  Without limiting the generality of the foregoing, prior to the Closing, the Company shall not without the written consent of the Buyer:

(a)

issue or sell any stock or other securities of the Company or any rights to acquire any such stock or other securities (except pursuant to the conversion of Preferred Shares outstanding on the date hereof or the conversion of the Notes), or amend any of the terms of (including the vesting of) any restricted stock agreements, or repurchase or redeem any stock or other securities of the Company (except from former employees, directors or consultants in accordance with agreements providing for the repurchase of shares at their original issuance price in connection with any termination of employment with or services to the Company) ¹ ;

(b)

split, combine or reclassify any shares of its capital stock; or declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock;

(c)

create, incur or assume any indebtedness (including obligations in respect of capital leases) other than the Advance Note; assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity; or make any loans, advances or capital contributions to, or investments in, any other person or entity;

(d)

acquire, sell, lease, license or dispose of any assets or property, other than purchases and sales of assets in the Ordinary Course of Business;

(e)

mortgage or pledge any of its property or assets or subject any such property or assets to any Security Interest;

(f)

amend its charter, by-laws or other organizational documents;

(g)

make or commit to make any capital expenditure in excess of $25,000 in the aggregate;

(h)

institute or settle any Legal Proceeding; or

(i)

agree in writing or otherwise to take any of the foregoing actions.

4.5

Access to Information . The Company shall permit representatives of the Buyer to have full access (at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company) to all premises, properties, financial, tax and accounting records, contracts, other records and documents, and personnel, of or pertaining to the Company.

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4.6

Notice of Breaches .

(a)

From the date of this Agreement until the Closing, the Company shall promptly deliver to the Buyer supplemental information concerning events or circumstances occurring subsequent to the date hereof which would render any representation, warranty or statement in this Agreement or the Disclosure Schedule inaccurate or incomplete in any material respect at any time after the date of this Agreement until the Closing.  

(b)

From the date of this Agreement until the Closing, the Buyer shall promptly deliver to the Company supplemental information concerning events or circumstances occurring subsequent to the date hereof which would render any representation or warranty in this Agreement inaccurate or incomplete in any material respect at any time after the date of this Agreement until the Closing.   No such supplemental information shall be deemed to avoid or cure any misrepresentation or breach of warranty or constitute an amendment of any representation or warranty in this Agreement.

4.7

Exclusivity .  

(a)

The Company shall not, and the Company shall require each of its officers, directors, employees, representatives and agents not to, directly or indirectly, (i) initiate, solicit, encourage or otherwise facilitate any inquiry, proposal, offer or discussion with any party (other than the Buyer) concerning any merger, reorganization, consolidation, recapitalization, business combination, liquidation, dissolution, share exchange, sale of stock, sale of material assets or similar business transaction involving the Company, or any division of the Company, (ii) furnish any non-public information concerning the business, properties or assets of the Company, or any division of the Company to any party (other than the Buyer) or (iii) engage in discussions or negotiations with any party (other than the Buyer) concerning any such transaction.  

(b)

The Company shall immediately notify any party with which discussions or negotiations of the nature described in paragraph (a) above were pending that the Company is terminating such discussions or negotiations.  If the Company receives any inquiry, proposal or offer of the nature described in paragraph (a) above, the Company shall, within one business day after such receipt, notify the Buyer of such inquiry, proposal or offer, including the identity of the other party and the terms of such inquiry, proposal or offer.  

4.8

Expenses .  Except as set forth in Article VI, each of the Parties shall bear its own costs and expenses (including legal and accounting fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby; provided, however, that if the Merger is consummated, the Buyer shall pay or reimburse the legal fees and related expenses of the Company and the Founders in connection with the Merger.

4.9

Interim Consulting. On the date hereof, each of the Founders, Mr. Kast and Mr. Collins and the Transitory Subsidiary shall execute and deliver the Interim Consulting Agreement in the form of Exhibit C hereto providing for the services of each such person in favor of the Buyer pending the Closing and the effectiveness of the Founder Employment Agreements, and the Employment Agreements and the Secondment Agreements.

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4.10

Tax Matters.  The Parties hereby adopt this Agreement as a “plan of reorganization” within the meaning of Section 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations, and each of the Buyer, the Transitory Subsidiary and the Company shall report the Merger as a reorganization within the meaning of Section 368(a) of the Code unless otherwise required pursuant to a final determination within the meaning of Section 1313(a) of the Code.  The Company acknowledges that it and the Company Stockholders are relying on their own tax advisors in connection with the Merger, this Agreement and the other transactions and agreements contemplated hereby.

ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER

5.1

Conditions to Each Party’s Obligations .  The respective obligations of each Party to consummate the Merger are subject to the satisfaction of the following conditions:

(a)

the Requisite Stockholder Approval shall have been obtained.

(b)

no Legal Proceeding shall be pending or threatened wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of the transactions contemplated by this Agreement, or (ii) cause the transactions contemplated by this Agreement to be rescinded following consummation.

(c)

No law shall have been enacted, enforced or deemed applicable to the Merger or any other transactions contemplated by this Agreement that has the effect of making the Merger or any other transactions contemplated by this Agreement illegal.

(d)

Any and all filings, clearances, consents, approvals, orders and other authorizations of Governmental Entities that are necessary to consummate the Merger and any other transactions contemplated by this Agreement under applicable law shall have been made, obtained or received.

5.2

Conditions to Obligations of the Buyer and the Transitory Subsidiary .  The obligation of each of the Buyer and the Transitory Subsidiary to consummate the Merger is subject to the satisfaction (or waiver by the Buyer) of the following additional conditions:

(a)

the number of Dissenting Shares shall not exceed 5% of the number of outstanding Common Shares as of the Effective Time (calculated after giving effect to the conversion into Common Shares of all outstanding Preferred Shares and the Notes);

(b)

the Company shall have obtained at its own expense (and shall have provided copies thereof to the Buyer) all of the waivers, permits, consents, approvals or other authorizations, and effected all of the registrations, filings and notices which are required on the part of the Company;

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(c)

the representations and warranties of the Company and each of the Founders set forth in this Agreement that are qualified as to materiality shall be true and correct in all respects, and all other representations and warranties of the Company and the Founders set forth in this Agreement shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing as though made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties shall be true and correct as of such date);

(d)

the Company and each of the Founders shall have performed or complied with in all material respects its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing;

(e)

the Company shall have delivered to the Buyer and the Transitory Subsidiary the Company Certificate;

(f)

each of the Company Stockholders shall have executed and delivered to the Buyer an applicable Investment Representation Letter ;

(g)

the Buyer shall have received copies of the resignations, effective as of the Closing, of each director and officer of the Company (other than any such resignations which the Buyer designates, by written notice to the Company, as unnecessary);

(h)

the Buyer shall have received a certificate of good standing of the Company in its jurisdiction of organization and the various foreign jurisdictions in which it is qualified, and certified charter documents, certificates as to the incumbency of officers and the adoption of authorizing resolutions;

(i)

each of the Founders shall have executed and delivered in favor of the Transitory Subsidiary the applicable Founder Employment Agreement, the Secondment Agreement, and shall have delivered the Option Agreement, to which he is to be a party immediately upon the Closing;

(j)

each of Mr. Brian Collins and Mr. Phillip Kast shall have executed and delivered in favor of the Transitory Subsidiary  the Employment Agreement to which he is to be a party immediately upon the Closing;

(k)

the Company shall have delivered to the Buyer, not less than five business days prior to the Closing Date, a form of an amended Section 2.6 of the Disclosure Schedule updated in writing by the Founders, setting forth the Assumed Liabilities estimated as of the Closing Date;

(l)

each Founder shall have duly filed an election form with the Internal Revenue Service under Section 83(b) of the Code; and

(m)

the Company shall have terminated the agreements listed on Section 2.11(a)(ii) of the Disclosure Schedule immediately prior to the Closing.

5.3

Conditions to Obligations of the Company .  The obligation of the Company to consummate the Merger is subject to the satisfaction of the following additional conditions:

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(a)

the representations and warranties of the Buyer and the Transitory Subsidiary set forth in this Agreement that are qualified as to materiality shall be true and correct in all respects, and all other representations and warranties of the Buyer and the Transitory Subsidiary set forth in this Agreement shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing as though made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties shall be true and correct as of such date);

(b)

each of the Buyer and the Transitory Subsidiary shall have performed or complied with in all material respects its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing;

(c)

the Buyer shall have delivered to the Company the Buyer Certificate;

(d)

the Transitory Subsidiary shall have executed and delivered the Founder Employment Agreements, the Secondment Agreements and the the Buyer shall have executed and delivered the Option Agreements in favor of the Founders;

(e)

the Transitory Subsidiary shall have executed and delivered the Employment Agreements on behalf of Mr. Collins and Mr. Kast; and

(f)

the Company shall have received certificates of good standing of the Buyer and the Transitory Subsidiary in their jurisdiction of organization, and certified charter documents, certificates as to the incumbency of officers and the adoption of authorizing resolutions.

ARTICLE VI
INDEMNIFICATION

6.1

Indemnification by the Indemnifying Stockholders .  The Indemnifying Stockholders shall indemnify the Buyer in respect of, and hold it harmless against, any and all Damages incurred or suffered by the Surviving Corporation or the Buyer or any Affiliate thereof resulting from, relating to or constituting:

(a)

any breach, as of the date of this Agreement or as of the Closing Date, of any representation or warranty of the Company contained in this Agreement or any other agreement or instrument furnished by the Company to the Buyer pursuant to this Agreement;

(b)

any failure to perform any covenant or agreement of the Company contained in this Agreement or any agreement or instrument furnished by the Company to the Buyer pursuant to this Agreement;

(c)

any failure of any Company Stockholder to have good, valid and marketable title to the issued and outstanding Company Shares issued in the name of such Company Stockholder, free and clear of all Security Interests; or

(d)

any claim by a stockholder or former stockholder of the Company, or any other person or entity, seeking to assert, or based upon:  (i) ownership or rights to ownership of any shares of stock of the Company; (ii) any rights of a stockholder (other than the right to receive the Merger Shares pursuant to this Agreement or appraisal rights under the applicable provisions of the Delaware General Corporation Law), including any option, preemptive rights or rights to notice or to vote; (iii) any rights under the Certificate of Incorporation or By-laws of the Company; or (iv) any claim that his, her or its shares were wrongfully repurchased by the Company.

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6.2

Indemnification by the Buyer .  The Buyer shall indemnify the Indemnifying Stockholders in respect of, and hold them harmless against, any and all Damages incurred or suffered by the Indemnifying Stockholders resulting from, relating to or constituting:

(a)

any breach, as of the date of this Agreement or as of the Closing Date, of any representation or warranty of the Buyer or the Transitory Subsidiary contained in this Agreement or any other agreement or instrument furnished by the Buyer or the Transitory Subsidiary to the Company pursuant to this Agreement; or

(b)

any failure to perform any covenant or agreement of the Buyer or the Transitory Subsidiary contained in this Agreement or any agreement or instrument furnished by the Buyer or the Transitory Subsidiary to the Company pursuant to this Agreement.

6.3

Indemnification Claims .  An Indemnified Party shall deliver a Claim Notice to the Indemnifying Party within a reasonable period of time after becoming aware of any Damages that the Indemnified Party has paid, sustained, incurred or accrued, or reasonably anticipates it will have to pay, sustain, incur or accrue, which the Indemnified Party shall have determined has given or could give rise to a claim for indemnification under Section 6.1 or 6.2 hereof, as applicable.  It is agreed that no delay on the part of the Indemnified Party in notifying any Indemnifying Party of a claim will relieve the Indemnifying Party.  If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim or the estimated amount of Damages described in such Claim Notice, or fails to notify the Indemnified Party within 20 days after delivery of such Claim Notice by the Indemnified Party whether the Indemnifying Party disputes the claim or the estimated amount of Damages described in such notice, the estimated Damages in the amount specified in the Indemnified Party’s notice will be conclusively deemed a liability of the Indemnifying Party and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party.  In case the Indemnifying Party delivers a written Dispute, the Indemnified Party and the Indemnifying Party shall attempt in good faith to agree upon the rights of the respective parties with respect to each of such Claim Notice.  If the Indemnified Party and the Indemnifying Party should so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties and the Indemnifying Party shall pay the amount set forth in such memorandum to the Indemnified Party.  If the Indemnifying Party and Indemnifying Party are unable to resolve such Dispute within 30 days after delivery of the notice of Dispute, then the Indemnifying Party and the Indemnified Party will submit the Dispute to arbitration in accordance with Section 6.3.

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6.4

Resolution of Disputes .  If no such agreement can be reached after good faith negotiation and prior to 30 days after delivery of a written Dispute, either the Indemnified Party or the Indemnifying Party may demand arbitration of the matter unless the amount of the Damages that are at issue is the subject of a pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained or reasonably ascertainable or both parties agree to arbitration, and in either such event the matter shall be settled by arbitration conducted by one arbitrator mutually agreeable to the Indemnified Party and the Indemnifying Party.  Any such arbitration shall be held in Los Angeles County, California, under the Commercial Rules then in effect and all issues arising in the arbitration shall be governed by California substantive and procedural law.  The arbitrator shall determine how all expenses relating to the arbitration shall be paid, including the respective expenses of each party, the fees of each arbitrator and the administrative fee of the AAA.  The arbitrator shall set a limited time period and establish procedures designed to reduce the cost and time for discovery while allowing the parties an opportunity, adequate in the sole judgment of the arbitrator to discover relevant information from the opposing parties about the subject matter of the Dispute.  The arbitrator shall rule upon motions to compel or limit discovery and shall have the authority to impose sanctions, including attorneys’ fees and costs, to the same extent as a competent court of law or equity, should the arbitrator determine that discovery was sought without substantial justification or that discovery was refused or objected to without substantial justification.  The decision of the arbitrator as to the validity and amount of any claim in such notice of Dispute delivered pursuant to Section 6.2 shall be final, binding, and conclusive upon the parties to this Agreement.  Such decision shall be set forth in a written reasoned award (an “ Arbitration Award ”) which shall set forth the award, judgment, decree or order awarded by the arbitrator.  Within 30 days of a decision of the arbitrator requiring payment by one party to another, such party shall make the payment to such other party.  Judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction.

6.5

Third Party Claims .  An Indemnified Party shall give written notification to the Indemnifying Party of the commencement of any Third Party Action.  Such notification shall be given within 20 days after receipt by the Indemnified Party of notice of such Third Party Action, and shall describe in reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis for such Third Party Action and the amount of the claimed damages; provided, however, that no delay or failure on the part of the Indemnified Party in so notifying the Indemnifying Party shall relieve the Indemnifying Party of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such failure.  Within 20 days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such Third Party Action with counsel reasonably satisfactory to the Indemnified Party; provided that (i) the Indemnifying Party may only assume control of such defense if (A) it acknowledges in writing to the Indemnified Party that any damages, fines, costs or other liabilities that may be assessed against the Indemnified Party in connection with such Third Party Action constitute Damages for which the Indemnified Party shall be indemnified pursuant to this Article VI and (B) the  claim for Damages is less than or equal to the amount of Damages for which the Indemnifying Party is liable under this Article VI and (ii) the Indemnifying Party may not assume control of the defense of Third Party Action involving criminal liability or in which equitable relief is sought against the Indemnified Party.  If the Indemnifying Party does not, or is not permitted under the terms hereof to, so assume control of the defense of a Third Party Action, the Indemnified Party shall control such defense.  The Indemnifying Party may participate in such defense at its own expense.  The Indemnified Party shall keep the Indemnifying Party advised of the status of such Third Party Action and the defense thereof and shall consider in good faith recommendations made by the Indemnifying Party with respect thereto.  The Indemnifying Party shall furnish the Indemnified Party with such information as it may have with respect to such Third Party Action (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the Indemnified Party in the defense of such Third Party Action.  

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The fees and expenses of counsel to the Indemnified Party with respect to a Third Party Action shall be considered Damages for purposes of this Agreement if (i) the Indemnified Party controls the defense of such Third Party Action pursuant to the terms of this Section 6.3(a) or (ii) the Indemnifying Party assumes control of such defense and the Indemnified Party reasonably concludes that the Indemnifying Party and the Indemnified Party have conflicting interests or different defenses available with respect to such Third Party Action.  The Indemnifying Party shall not agree to any settlement of, or the entry of any judgment arising from, any Third Party Action without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld, conditioned or delayed.  The Indemnified Party shall not agree to any settlement of, or the entry of any judgment arising from, any such Third Party Action without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, conditioned or delayed.

6.6

Stockholder Representative .  Mr. Harjeet Taggar, in his capacity as Stockholder Representative, is hereby designated and appointed as the agent and attorney in fact for and on behalf of the Company Stockholder and to take all actions that are specifically mandated by the terms of this Agreement. The Stockholder Representative may not be removed unless holders of two thirds of the Company Shares agree to such removal and to the identity of the substituted Stockholder Representative.  Notwithstanding the foregoing, a vacancy in the position of Stockholder Representative may be filled by the holders of a majority of the Company Shares.  No bond shall be required of the Stockholder Representative, and the Stockholder Representative shall not receive any compensation for his services.  The Stockholder Representative shall not be liable to the Company Stockholders for any act done or omitted hereunder as Stockholder Representative while acting in good faith and in the exercise of reasonable judgment.  The Company Stockholders shall indemnify the Stockholder Representative and hold the Stockholder Representative harmless against any loss, liability or expense incurred without gross negligence or bad faith on the part of the Stockholder Representative and arising out of or in connection with the acceptance or administration of the Stockholder Representative’s duties hereunder.  

6.7

Survival of Representations and Warranties .  All representations and warranties that are covered by the indemnification agreements in Section 6.1and Section 6.2 shall (a) survive the Closing and (b) shall expire on the date eighteen  (18) months following the Closing Date, except that (i) the representations and warranties set forth in Sections 2.1, 2.2, 2.3, 3.1, 3.2 and 3.3 shall survive the Closing without limitation and (ii) the representations and warranties set forth in Section 2.7 shall survive until 30 days following expiration of all statutes of limitation applicable to the matters referred to therein.  

6.8

Limitations .

(a)

Notwithstanding anything to the contrary herein, the aggregate liability of the Indemnifying Stockholders for Damages under this Article VI shall not exceed $5,000,000; provided that in no event will any Indemnifying Stockholder be liable under this Article VI hereof for any amounts in excess of the amount of Cash Consideration and the value of the Merger Shares on the Closing Date received pursuant to this Agreement in respect of such Indemnifying Stockholder’s Company Shares.

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(b)

Notwithstanding anything to the contrary herein, the aggregate liability of the Buyer for Damages under this Article VI shall not exceed $5,000,000.

(c)

Except with respect to claims based on fraud, after the Closing, the rights of the Indemnified Parties under this Article VI shall be the exclusive remedy of the Indemnified Parties with respect to claims resulting from or relating to any misrepresentation, breach of warranty or failure to perform any covenant or agreement contained in this Agreement.

(d)

No Indemnifying Stockholder shall have any right of contribution against the Company or the Surviving Corporation with respect to any breach by the Company of any of its representations, warranties, covenants or agreements.

(e)

Indemnified Parties may not recover Damages under this Article VI unless and until the aggregate amount of Damages for which the Indemnified Parties seek to recover exceeds $100,000 (the “ Basket Amount ”), in which case the Indemnified Parties shall be entitled to recover the full amount of such Damages.

ARTICLE VII
TERMINATION

7.1

Termination of Agreement .  The Parties may terminate this Agreement prior to the Closing (whether before or after Requisite Stockholder Approval), as provided below:

(a)

the Parties may terminate this Agreement by mutual written consent;

(b)

the Buyer may terminate this Agreement by giving written notice to the Company in the event the Company or any Founder is in breach of any representation, warranty or covenant contained in this Agreement, and such breach, individually or in combination with any other such breach, (i) would cause the conditions set forth in clauses (c) or (d) of Section 5.2 not to be satisfied and (ii) is not cured within 20 days following delivery by the Buyer to the Company of written notice of such breach;

(c)

the Company may terminate this Agreement by giving written notice to the Buyer in the event the Buyer or the Transitory Subsidiary is in breach of any representation, warranty or covenant contained in this Agreement, and such breach, individually or in combination with any other such breach, (i) would cause the conditions set forth in clauses (a) or (b) of Section 5.3 not to be satisfied and (ii) is not cured within 20 days following delivery by the Company to the Buyer of written notice of such breach;

(d)

any Party may terminate this Agreement by giving written notice to the other Parties at any time after the stockholders of the Company have voted on whether to approve this Agreement and the Merger in the event this Agreement and the Merger failed to receive the Requisite Stockholder Approval;

(e)

the Buyer may terminate this Agreement by giving written notice to the Company if the Closing shall not have occurred on or before May 22, 2008; and

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(f)

the Buyer may terminate this Agreement if, notwithstanding the execution and delivery of the Founder Employment Agreements, (i) any one or more of the Founders refuse or is unable to commence full time employment with the Buyer immediately upon the Closing Date; or (ii) all three Founders are unable to commence full time employment with the Buyer immediately upon the Closing Date, except if such inability derives from hospitalization, death or an immigration barrier which cannot be overcome with the reasonable efforts of the Buyer and such Founder within thirty days after the Closing Date.

7.2

Effect of Termination .  If any Party terminates this Agreement pursuant to Section 7.1, all obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party for willful breaches of this Agreement). Any and all confidentiality provisions and agreements concerning this Agreement or contained herein, shall survive the termination of this Agreement.

ARTICLE VIII
DEFINITIONS

For purposes of this Agreement, each of the following terms shall have the meaning set forth below.

“ AAA ” shall mean the American Arbitration Association.

“ Affiliate ” shall mean any affiliate, as defined in Rule 12b-2 under the Securities Exchange Act of 1934.

“ Assumed Liabilities ” means the liabilities of the Company set forth on Schedule 2.6 hereto and as verified as of the Closing Date.

“ Buyer ” shall have the meaning set forth in the first paragraph of this Agreement.

“ Buyer Certificate ” shall mean a certificate to the effect that each of the conditions specified in clauses (a) and (b) of Section 5.3 is satisfied in all respects.

“ Buyer Common Stock ” shall mean the shares of common stock, $.001 par value per share, of the Buyer.

“ Buyer Material Adverse Effect ” shall mean any material adverse change, event, circumstance or development with respect to, or material adverse effect on, the business, assets, liabilities, capitalization, prospects, condition (financial or other), or results of operations of the Buyer.  For the avoidance of doubt, the parties agree that the terms “material”, “materially” or “materiality” as used in this Agreement with an initial lower case “m” shall have their respective customary and ordinary meanings, without regard to the meaning ascribed to Buyer Material Adverse Effect.

“ Buyer Reports ” shall mean (a) the Buyer’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006, as filed with SEC, and (b) all other reports filed by the Buyer under Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the SEC since November 15, 2007 through the Closing.

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“ Certificate of Merger ” shall mean the certificate of merger or other appropriate documents prepared and executed in accordance with Section 251(c) of the Delaware General Corporation Law.

“ Certificates ” shall mean stock certificates that, immediately prior to the Effective Time, represented Company Shares converted into Merger Shares pursuant to Section 1.5 (including any Company Shares referred to in the last sentence of Section 1.6(a)).

“ Claim Notice ” shall mean written notification which contains (i) a description of the Damages incurred or reasonably expected to be incurred by the Indemnified Party and the amount of such Damages, to the extent then known, (ii) a statement that the Indemnified Party is entitled to indemnification under Article VI for such Damages and a reasonable e