AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

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Adtron Corporation | Armor Acquisition Corporation | SMART Modular Technologies, Inc

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Title: AGREEMENT AND PLAN OF MERGER
Governing Law: Arizona Date: 4/4/2008
Industry: Semiconductors Law Firm: Snell Wilmer;Davis Polk Sector: Technology

Exhibit 10.24

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) dated February 12, 2008, is entered into by and among Adtron Corporation, an Arizona corporation (the “ Company ”), SMART Modular Technologies, Inc., a California corporation (“ Buyer ”), Armor Acquisition Corporation, an Arizona corporation and a wholly-owned subsidiary of Buyer (“ Merger Sub ”) and Alan Fitzgerald, as the Equity Holders’ representative (the “ Equity Holders’ Representative ”).

Recitals

WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with Arizona Law, Buyer 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, each of the respective Boards of Directors of the Company, Buyer and Merger Sub (i) has determined that the Merger is fair to and in the best interests of its respective shareholders and has approved this Agreement and the other transactions contemplated hereby and (ii) has recommended the approval and adoption of this Agreement by its respective shareholders in accordance with applicable Law.

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Buyer’s and Merger Sub’s willingness to enter into this Agreement, the Company has obtained the irrevocable approval and adoption of this Agreement and the other transactions contemplated hereby by the shareholders of the Company set forth on Annex I (the “ Major Shareholders ”) pursuant to a written consent in the form of Exhibit B (the “ Written Consent ”) signed by each Major Shareholder.

WHEREAS, prior to the consummation of the Merger, and as a condition and inducement to Buyer’s and Merger Sub’s willingness to enter into this Agreement, the employee of the Company listed on Annex II (the “ Key Employee ”) shall enter into employment agreements, assignment of invention agreements and non-competition and non-solicitation agreements in form satisfactory to Buyer and the Key Employee (the “ Key Employment Agreements ”) with Buyer or an Affiliate of Buyer, which agreements shall be effective as of the Effective Time.

WHEREAS, the Company, Buyer and Merger Sub desire to make certain representations, warranties, covenant, restrictions and other agreements in connection with the Merger.

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants, obligations and agreements contained herein, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, do hereby covenant and agree as follows:

ARTICLE 1

DEFINITIONS

1.1 Definitions . Except as otherwise defined herein, capitalized terms shall have the meanings given in Exhibit A .

ARTICLE 2

THE MERGER

2.1 The Closing; Effect of the Merger .

(a) The consummation of the transactions contemplated by this Agreement (the “ Closing, ” such date, the “ Closing Date ”) will be held at a mutually agreeable location on a date that is no later than three (3) Business Days after the satisfaction or, to the extent permitted, waiver of the last of the conditions to the Merger to be satisfied (excluding conditions that, by their terms, are satisfied at the Closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of such conditions). Immediately following the Closing, the parties hereto will cause a plan of merger (the “ Plan of Merger ”) and articles of merger (the “ Articles of Merger ”) to be delivered for filing to the Arizona Corporation Commission in accordance with Arizona Law. The Merger shall become effective at such time (the “ Effective Time ”) as the Plan of Merger and the Articles of Merger are duly filed or at such other time specified in the Articles of Merger.

(b) At the Effective Time, Merger Sub shall be merged with and into the Company in accordance with Arizona Law, whereupon the separate existence of Merger Sub shall cease, and the Company shall be the surviving corporation (in such capacity, the Company is sometimes referred to herein as the “ Surviving Corporation ”). From and after the Effective Time, the Surviving Corporation shall possess all the rights, privileges, immunities and franchises, of a public as well as a private nature, and be subject to all of the obligations, liabilities, restrictions and disabilities of the Company and Merger Sub (the “ Constituent Corporations ”); all property, real, personal and mixed, and all accounts payable arising in the ordinary course of business and accrued expenses due on whatever account, and all debts, liabilities and duties due to each of the Constituent Corporations shall be taken and deemed to be transferred to and vested in the Surviving Corporation without further act or deed as provided in Section 10-1106 of Arizona Law; and the Surviving Corporation shall be responsible and liable for all liabilities and obligations of each of the Constituent Corporations, in each case in accordance with Arizona Law.

(c) At the Effective Time, (i) the articles of incorporation of the Company in effect at the Effective Time shall be amended to read in its entirety in the form of Annex III , and, as so amended, such articles of incorporation shall be the articles of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms and Arizona Law; and (ii) the bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation (other than any express references to the name of Merger Sub in such bylaws, which shall be amended to refer to the Surviving Corporation) until thereafter amended in accordance with Arizona Law.

(d) From and after the Effective Time, the directors and officers of Merger Sub immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation, each to hold such office in accordance with the provisions of Arizona Law and the articles of incorporation and bylaws of the Surviving Corporation.

2.2 Effect of the Merger on Capital Stock .

(a) At the Effective Time, by virtue of the Merger and without any further action on the part of any party or the holder of any of their respective securities:

(i) except as otherwise provided in Section 2.2(a)(ii) , each issued and outstanding share of Company Stock (other than the Dissenting Shares) shall be converted into the right to receive an amount of cash, without interest, equal to the Per Share Merger Consideration;

(ii) each share of Company Stock held by the Company as treasury stock immediately prior to the Effective Time shall be cancelled, and no consideration shall be delivered in exchange therefor; and

(iii) each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation with the same rights, privileges, immunities and franchises as the shares so converted and shall constitute the only issued and outstanding shares of capital stock of the Surviving Corporation.

(b) Notwithstanding the foregoing, the parties acknowledge and agree that: (i) the Indemnification Escrow Amount shall be deducted from the amount of the Closing Consideration payable to the Equity Holders pursuant to Article 2 , and shall only be payable upon release from the Indemnification Escrow Account in accordance with this Agreement and the Indemnification Escrow Agreement and to the extent not reduced by indemnification payments pursuant to Article 8 ; and (ii) the Holdback Amount shall be deducted from the amount of the Closing Consideration payable to the Equity Holders pursuant to Article 2 , and shall only be payable after resolution of the Final Net Working Capital, in accordance with Section 2.7 .

2.3 Treatment of Stock Options .

(a) Vested Options . At the Effective Time, each outstanding Stock Option that is vested immediately prior to the Effective Time (the “ Vested Options ”) shall be cancelled, and promptly following the Effective Time, Buyer shall pay, or shall cause to be paid, to each holder of such Vested Options an amount in cash (less any applicable withholding tax) determined by multiplying (i) the excess, if any, of (A) the Per Share Closing Consideration over (B) the applicable per share exercise price of such option by (ii) the number of shares of Common Stock such holder could have purchased had such holder exercised such option in full immediately prior to the Effective Time (with respect to each such holder, the “ Per Share Vested Option Consideration ”). For purposes of the payment of the Earnout Consideration in Section 2.9 , a holder of Vested Options shall be considered an “Equity Holder” only if such holder signs an Option Cancellation Agreement in form satisfactory to Buyer and the Company (the “ Option Cancellation Agreements ”) prior to the Closing Date.

(b) Accelerated Options . At the Effective Time, those outstanding Stock Options, or a portion thereof, that were not vested immediately prior to the Effective Time shall become vested as of the Effective Time in accordance with the following schedule:

Percentage of Stock Option Acceleration	Length of Employment Service
50%	Less than 12 months
75%	12 months but less than 24 months
100%	24 months or more

At the Effective Time, each outstanding Stock Option shall be cancelled and, with respect to each outstanding Stock Option that becomes vested pursuant to the above schedule (the “ Accelerated Options ”), following the Effective Time, Buyer shall pay, or shall cause to be paid, each holder of such Accelerated Options an amount in cash (less any applicable withholding tax) determined by multiplying (i) the excess, if any, of (A) the Per Share Closing Consideration over (B) the applicable per share exercise price of such option by (ii) the number of shares of Common Stock such holder could have purchased had such holder exercised the accelerated portion of the option in full immediately prior to the Effective Time (with respect to each such holder, the “ Per Share Accelerated Option Consideration ”). For purposes of the payment of the Earnout in Section 2.9 , a holder of Accelerated Options shall be considered a “Equity Holder” only if such holder (x) signs an Option Acceleration and Cancellation Agreement in form satisfactory to Buyer and the Company (the “ Option Acceleration and Cancellation Agreements ”), and (y) does not voluntarily terminate his or her employment with the Surviving Corporation or Buyer and is not terminated for cause through and including the date the Earnout Consideration (if any) is paid by the Buyer pursuant to Section 2.9 .

2.4 Payment for Securities .

(a) Paying Agent . Prior to the Effective Time, Buyer shall enter into an agreement with an entity designated by Buyer and reasonably acceptable to the Company to act as agent for the Equity Holders in connection with the Merger (the “ Paying Agent ”) for the purposes of exchanging certificates representing shares of Company Stock (the “ Certificates ”) and shares of Company Stock represented by Vested Options and Accelerated Options, and to receive and distribute the Closing Consideration that the Equity Holders shall become entitled to receive pursuant to this Agreement. On the Closing Date and prior to the filing of the Plan of Merger and the Articles of Merger, Buyer shall deposit, or cause to be deposited, with the Paying Agent, for the benefit of the Equity Holders, for payment in accordance with this Agreement through the Paying Agent, cash in an amount sufficient to permit payment of the aggregate Closing Consideration (less the Indemnification Escrow Amount and the Holdback Amount) (the “ Payment Fund ”). If for any reason (including losses) the Payment Fund is inadequate to pay the amounts to which the Equity Holders shall be entitled under this Agreement, Buyer shall, or shall cause the Surviving Corporation to, promptly deposit additional cash with the Paying Agent sufficient to make all payments required under this Agreement, and Buyer and the Surviving Corporation shall in any event be liable for payment thereof. The Payment Fund shall not be used for any other purpose. The Surviving Corporation shall pay all charges and expenses of the Paying Agent in connection with the exchange of Certificates and Vested Options and Accelerated Options and distribution of the Closing Consideration.

(b) Payment Procedures .

(i) As soon as practicable after the Effective Time, Buyer shall deliver or cause the Paying Agent to deliver to each record holder, as of immediately prior to the Effective Time, of a Certificate, as set forth in the Determination Certificate, a customary letter of transmittal (“ Letter of Transmittal ”) (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent, and which shall be in a customary form and agreed to by Buyer and the Company prior to the Closing) and instructions for use in effecting the surrender of the Certificates, for payment of such holder’s share of the Closing Consideration in accordance with this Article 2 .

(ii) Upon surrender to the Paying Agent of a Certificate, together with the Letter of Transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other customary documents as may be reasonably required by the Surviving Corporation or the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the Per Share Closing Consideration (less such Shareholder’s pro rata portion (in accordance with their Percentage Ownership) of the Indemnification Escrow Amount and the Holdback Amount) for each share formerly represented by such Certificate and such Certificate shall then be cancelled. No interest shall be paid or accrued for the benefit of holders of the Certificates on the Closing Consideration payable in respect of the Certificates. Until surrendered as contemplated by this Section 2.4(b)(ii) each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Closing Consideration as contemplated by this Article 2 .

(iii) Promptly after the Effective Time, the holder of each Vested Option shall be entitled to receive in exchange therefor the Per Share Vested Option Consideration (less such Stock Option Holder’s pro rata portion (in accordance with their Percentage Ownership) of the Indemnification Escrow Amount and the Holdback Amount and less any applicable withholding tax). Each Vested Option shall be deemed at any time after the Effective Time to represent for all purposes only the right to receive Per Share Vested Option Consideration as contemplated by this Article 2 .

(iv) Promptly after the Effective Time, the holder of each Accelerated Option shall be entitled to receive in exchange therefor the Per Share Accelerated Option Consideration (less such Stock Option Holder’s pro rata portion (in accordance with their Percentage Ownership) of the Indemnification Escrow Amount and the Holdback Amount and less any applicable withholding tax). Each Accelerated Option shall be deemed at any time after the Effective Time to represent for all purposes only the right to receive Per Share Accelerated Option Consideration as contemplated by this Article 2 .

(c) No Liability . Neither Buyer nor any of its Affiliates shall be liable to any Equity Holder for any amount paid to a public official pursuant to applicable abandoned property, escheat or similar laws.

(d) Termination of Payment Fund . Any portion of the Payment Fund made available to the Paying Agent pursuant to this Section 2.4 that remains unclaimed by the Equity Holders six (6) months after the Effective Time, shall be returned to Buyer, upon demand, and any such Equity Holder has not exchanged shares of Company Stock or Stock Options, as the case may be, in accordance with this Section 2.4 prior to that time shall thereafter look only to Buyer for delivery of the Closing Consideration, without any interest thereon. Any amounts remaining unclaimed by Equity Holders two (2) years after the Effective Time shall be paid to the appropriate Governmental Authority pursuant to the applicable abandoned property, escheat or similar Law.

(e) Withholding Rights . Each of Buyer, the Paying Agent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign Tax law. If Buyer, the Paying Agent or the Surviving Corporation so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which Buyer or the Surviving Corporation, as the case may be, made such deduction and withholding.

(f) Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by the Surviving Corporation, the entry by such Person into an indemnification agreement in form reasonably satisfactory to Buyer, or the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will deliver, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration due in respect of the shares of Company Stock evidenced by such Certificate, as contemplated by this Article 2 .

2.5 Determination Certificate . On the date that is two (2) Business Days prior to the Effective Time (the “ Determination Date ”) , the Equity Holders’ Representative shall deliver to Buyer and the Paying Agent a certificate in form satisfactory to Buyer and the Equity Holders’ Representative (the “ Determination Certificate ”) setting forth: (i) (A) the name and the wire transfer account information and mailing address (or other delivery instructions reasonably acceptable to Buyer and the Paying Agent) of each Equity Holder, (B) such Equity Holder’s Percentage Ownership, and (C) the aggregate amount of Closing Consideration payable to such Equity Holder in respect of all of the shares of Company Stock, Vested Options and/or Accelerated Options owned by such Equity Holder, together with the amounts to be withheld from the Closing Consideration (x) pursuant to Section 2.4(e) and (y) representing each such Equity Holder’s pro rata portion (in accordance with their Percentage Ownership) of the Indemnification Escrow Amount and the Holdback Amount; (ii) the Debt Repayment Amount; (iii) the Estimated Payroll Tax Amount; (iv) the Estimated Transaction Expenses Amount; and (v) any supporting schedules and other documentation reasonably requested by Buyer or the Paying Agent. Buyer and the Paying Agent may rely on the Determination Certificate for all distributions to the Equity Holders pursuant to Article 2, and shall have no responsibility or liability with respect thereto; provided that the distribution instructions of the Equity Holders’ Representative set forth in the Determination Certificate are followed. From and after the Determination Date, there shall be no further issuances of, or registration of transfers of, shares of Company Stock or Stock Options. If, after the Effective Time, Certificates or Stock Options are presented to the Surviving Corporation, they shall be cancelled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this Article 2 .

2.6 Indemnification Escrow . At the Effective Time, Buyer shall withhold from the Closing Consideration otherwise payable in connection with the Merger an amount of cash equal to the Indemnification Escrow Amount. Prior to or simultaneously with the Effective Time, the Equity Holders’ Representative and Buyer shall enter into the Indemnification Escrow Agreement with the Escrow Agent in mutually acceptable form (the “ Indemnification Escrow Agreement ”). On the Closing Date and prior to the filing of the Plan of Merger and the Articles of Merger, Buyer shall deposit the Indemnification Escrow Amount in the Indemnification Escrow Account to be managed by the Escrow Agent pursuant to the terms of the Indemnification Escrow Agreement. Distributions of any cash from the Indemnification Escrow Amount shall be governed by the terms and conditions of this Agreement and the Indemnification Escrow Agreement (the cash in the Indemnification Escrow Account at any given time, including all accrued interest, being referred to as the “ Escrowed Remainder ”). The Indemnification Escrow Amount shall be withheld from each Equity Holder based on such Person’s Percentage Ownership. Upon the expiration of the Survival Period, the Escrowed Remainder, less any claims pending under Article 8 , shall be paid to the Equity Holders in accordance with such Equity Holder’s Percentage Ownership of the Escrowed Remainder.

2.7 Post-Closing Adjustment to Purchase Price .

(a) After the Effective Time, the Equity Holders’ Representative and Buyer shall cooperate and provide each other access to their respective books, records and employees (and those of the Surviving Corporation) as are reasonably requested in connection with the matters addressed in this Section 2.7 . Within sixty (60) days after the Closing Date, Buyer shall cause to be prepared and delivered to the Equity Holders’ Representative a balance sheet of the Company as of the close of business on the Closing Date (the “ Closing Balance Sheet ”), a certificate based on such Closing Balance Sheet setting forth Buyer’s calculation of the Closing Net Working Capital (the “ Closing Net Working Capital Notice ”) and a certificate setting forth the Payroll Tax Amount and the Transaction Expenses Amount, together with any supporting schedules and other documentation in connection with such certificate reasonably requested from time to time by the Equity Holders’ Representative. The Closing Balance Sheet and the calculation of the Closing Net Working Capital shall be prepared in accordance with the principles set forth in Annex IV .

(b) If the Equity Holders’ Representative objects to Buyer’s determination of Closing Net Working Capital, as set forth in the Closing Net Working Capital Notice, then the Equity Holders’ Representative shall provide Buyer written notice thereof, setting forth the Equity Holders’ Representative’s calculation of such amount, along with reasonable supporting information and calculations, within thirty (30) days after receiving the Closing Net Working Capital Notice. Any such notice of disagreement shall specify those items or amounts as to which the Equity Holders’ Representative disagrees, and the Equity Holders’ Representative shall be deemed to have agreed with all other items and amounts contained in the Closing Balance Sheet and the calculation of Closing Net Working Capital delivered pursuant to Section 2.7(a) . If a notice of disagreement shall be delivered pursuant to this Section 2.7(b) , Buyer and the Equity Holders’ Representative shall, during the twenty (20) days following such delivery, use their commercially reasonable efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, the amount of Closing Net Working Capital, which amount shall not be less than the amount thereof shown in the Closing Net Working Capital Notice nor more than the amount thereof shown in the Equity Holders’ Representative’s calculation delivered pursuant to this Section 2.7(b) . If, after such twenty (20) day period, the Equity Holders’ Representative and Buyer are unable to agree on the Closing Net Working Capital, such parties shall refer such dispute to a firm of independent public accountants (other than an independent accounting firm used by any of Buyer or the Company within the past five (5) years) mutually acceptable to Buyer and Equity Holders’ Representative (the “ Independent Accountants ”), which firm shall, acting as an expert and not as an arbitrator, make a final and binding determination of Closing Net Working Capital on a timely basis and shall promptly notify the Equity Holders’ Representative and Buyer in writing of its resolution. Such final and binding determination of the Closing Net Working Capital (the “ Final Net Working Capital ”) shall become final and binding in accordance with the terms of this Agreement. In making such calculation, the Independent Accountants shall consider only those items or amounts in the Closing Balance Sheet or Buyer’s calculation of Closing Net Working Capital as to which the Equity Holders’ Representative has disagreed, and shall not have the power to modify or amend any term or provision of this Agreement. Buyer shall pay all costs and expenses of such review and report if the difference between Final Net Working Capital and Buyer’s calculation of Closing Net Working Capital delivered pursuant to Section 2.7(a) is greater than the difference between Final Net Working Capital and Equity Holders’ Representative’s calculation of Closing Net Working Capital delivered pursuant to this Section 2.7(b) ; provided that in all other cases, such costs and expenses shall be included in the Transaction Expenses Amount. If the Equity Holders’ Representative does not object to Buyer’s determination of Closing Net Working Capital within the time period and in the manner set forth in this Section 2.7(b) , or if the Equity Holders’ Representative accepts Buyer’s determination of Closing Net Working Capital in writing, then Buyer’s determination of Closing Net Working Capital shall become the Final Net Working Capital and shall become final and binding for all purposes hereunder.

2.8 Holdback; Adjustment of Purchase Price .

(a) Holdback . At the Effective Time, Buyer shall withhold from the Closing Consideration otherwise payable in connection with the Merger an amount of cash equal to the Holdback Amount.

(b) Definitions . For purposes of this Agreement:

“ Minimum Working Capital ” means an amount equal to $1,216,829.

“ Payroll Tax Excess ” means, if the Payroll Tax Amount is less than the Estimated Payroll Tax Amount, the amount of any such difference.

“ Payroll Tax Shortfall ” means, if the Payroll Tax Amount is greater than the Payroll Tax Amount, the amount of any such excess.

“ Transaction Expenses Excess ” means, if the Transaction Expenses Amount is less than the Estimated Transaction Expenses Amount, the amount of any such difference.

“ Transaction Expenses Shortfall ” means, if the Transaction Expenses Amount is greater than the Estimated Transaction Expenses Amount, the amount of any such excess.

“ Working Capital Excess ” means, if the Final Net Working Capital is more than 10% greater than the Minimum Working Capital, amount of any such excess above 110% of the Minimum Working Capital.

“ Working Capital Shortfall ” means, if the Final Net Working Capital is more than 10% less than the Minimum Working Capital, amount of any such difference below 90% of the Minimum Working Capital.

(c) Buyer shall, within five (5) Business Days after Final Net Working Capital is determined pursuant to this Section 2.8 , deliver to the Paying Agent an amount in cash equal to the Holdback Amount, (x) less the sum of (i) any Working Capital Shortfall, plus (ii) any Payroll Tax Shortfall, and plus (iii) any Transaction Expenses Shortfall, and (y) plus the sum of (i) any Working Capital Excess, plus (ii) any Payroll Tax Excess, and plus (iii) any Transaction Expenses Excess, which aggregate amount shall then be distributed by the Paying Agent to the Equity Holders in proportion to each such Equity Holder’s Percentage Ownership. In the event that the sum of the amounts referred to in clause (x) above minus the sum of the amounts amount referred to in clause (y) above is greater than the Holdback Amount, Buyer shall be entitled to recover the amount of such difference by making a claim against the Indemnification Escrow Account. In the event that the aggregate amount delivered to the Paying Agent pursuant to this Section 2.8(c) is less or greater than the Holdback Amount, such difference shall be treated as an adjustment to the Closing Consideration.

(d) Any amounts not paid when required pursuant to this Section 2.8 shall bear interest from the required date of payment to the date of actual payment at a rate that is 2 percentage points (2%) per annum in excess of the prime rate of interest announced publicly by The Wall Street Journal from time to time as the base rate.

2.9 Earnout

(a) Definitions . For purposes of this Agreement:

“ Net Revenues ” means an amount equal to revenues, as calculated in accordance with GAAP and Buyer’s revenue recognition policies as consistently applied, generated in connection with the sale of (i) the Surviving Corporation’s products by the Surviving Corporation’s or Buyer’s sales force to the Surviving Corporation’s Customers or Buyer’s customers, and (ii) the Buyer’s flash-based products by the Surviving Corporation’s or the Buyer’s sales force to the Surviving Corporation’s Customers.

“ Gross Profit ” means an amount equal to Net Revenues less cost of revenues, as calculated in accordance with GAAP and Buyer’s revenue recognition policies as consistently applied, generated by and expended, respectively, in connection with the sale of (i) the Surviving Corporation’s products by the Surviving Corporation’s or Buyer’s sales force to the Surviving Corporation’s Customers or Buyer’s customers, and (ii) the Buyer’s flash-based products by the Surviving Corporation’s or the Buyer’s sales force to the Surviving Corporation’s Customers.

“ EBIT ” means earnings before interest and taxes, as calculated in accordance with GAAP and Buyer’s revenue recognition policies as consistently applied, generated by and expended, respectively, in connection with the sale of (i) the Surviving Corporation’s products by the Surviving Corporation’s or Buyer’s sales force to the Surviving Corporation’s Customers or Buyer’s customers, (ii) the Buyer’s flash-based products by the Surviving Corporation’s or the Buyer’s sales force to the Surviving Corporation’s Customers, and (iii) all Buyer’s products (other than those described in clause (ii) above) by the Surviving Corporation’s or Buyer’s sales force to the Surviving Corporation’s Customers.

“ Surviving Corporation’s Customers ” means customers to whom the Company has sold products prior to the Closing Date and any other customers from whom an RFQ or other sales inquiry documentation is first received by the Company’s or the Surviving Corporation’s sales force.

(b) Earnout Consideration . In addition to the Closing Consideration, Buyer will, in the event of achievement of the applicable targets set forth in this Section 2.9 , pay, or cause to be paid, to the Equity Holders the amounts determined in accordance with this Section 2.9(a) , up to $15,000,000 in the aggregate (collectively, the “ Earnout Consideration ”) as follows:

(i) if the Net Revenues and Gross Profit recognized during calendar year 2008 (the “ Earnout Period ”) equals or exceeds $16,000,000 and $6,400,000, respectively, an amount equal to $10,000,000 x [Gross Profit – $6,400,000] / [$12,200,000 - $6,400,000] (e.g., if Gross Profit = $12,000,000, then $10,000,000 x [$12,000,000 – $6,400,000] / [$12,200,000 - $6,400,000] = $9,655,172.41), but in no event shall the amount payable under this section exceed $10,000,000;

(ii) if the Net Revenues and EBIT recognized during the Earnout Period equals or exceeds $16,000,000 and $2,200,000, respectively, an amount equal to $3,500,000 x [EBIT – $2,200,000] / [$4,200,000 - $2,200,000] (e.g., if EBIT = $4,000,000, then $3,500,000 x [$4,000,000 – $2,200,000] / [$4,200,000 - $2,200,000] = $3,150,000), but in no event shall the amount payable under this section exceed $3,500,000; and

(iii) if the Surviving Corporation achieves the integration goals to be mutually agreed upon by Buyer and the Equity Holders’ Representative after the date hereof, which agreement shall not be unreasonably withheld; provided that the determination of any satisfaction of such goals shall be made by Buyer in its sole discretion, an amount up to $1,500,000.

(i) exclusion of any additional depreciation, amortization or other expense resulting from the write-up of any asset and any amortization of goodwill or other intangibles relating to the transactions contemplated by this Agreement, including for any federal or state income tax purposes;

(ii) exclusion of all transaction costs of Buyer with respect to or arising out of consummation of the transaction contemplated by this Agreement (including, without limitation, all costs and expenses of arbitrators, accountants, the Paying Agent, legal counsel and financial advisors of Buyer);

(iii) exclusion of all losses in respect of which any Buyer Indemnitee has been actually paid pursuant to a claim for indemnification against the Equity Holders pursuant to Section 8.1;

(iv) exclusion of charges against earnings or resulting from significant changes in accounting principles that are not required by GAAP; and

(v) exclusion of any retention bonuses or other incentive arrangements, in each case, implemented by Buyer at or after the Effective Time.

(d) Earnout Protection Provisions . During the Earnout Period unless otherwise approved in writing by Equity Holders’ Representative, Buyer agrees to:

(i) use reasonable commercial efforts to cause the Surviving Corporation to operate consistent with past practices, provided such practices are reasonable and customary in the Surviving Corporation’s industry, and in accordance with the operating budget(s) prepared by the Surviving Corporation and approved in writing by Buyer (the “ Earnout Budget ”);

(ii) leave with the Surviving Corporation at least an amount of working capital necessary operate in the ordinary course and in accordance with the Earnout Budget;

(iii) provide such marketing, research and other information resources, personnel and facilities as the Surviving Corporation may reasonably request to support the Surviving Corporation’s budgeted growth, so long as such requests are consistent with the Earnout Budget;

(iv) use commercially reasonable efforts to cause the Surviving Corporation to preserve its relationships with respect to customers, suppliers, contractors, employees and others having business dealings with the Surviving Corporation;

(v) not increase the level of the Surviving Corporation’s general and administrative expenses due to any “home office” or other similar corporate overhead charge imposed by Buyer (in excess of similar expenses previously paid or incurred by the Surviving Corporation);

(vi) use reasonable commercial efforts to maintain the Surviving Corporation as a separate entity and not combine, consolidate or merge it, or liquidate it, or, except in the ordinary course of business, sell or otherwise dispose of its assets; and

(vii) maintain a system for tracking the Net Revenues, Gross Profits and EBIT for purposes of the calculation of the Earnout Consideration.

(e) Disputes and Payments .

(i) No later than sixty (60) days after the end of the Earnout Period, Buyer shall deliver to the Equity Holders’ Representative a statement setting forth Buyer’s good faith calculation of the Net Revenues, Gross Profits, EBIT and the proposed Earnout Consideration (the “ Proposed Earnout Statement ”);

(ii) After receipt of the Proposed Earnout Statement, the Equity Holders’ Representative may request, and Buyer will provide to the Equity Holders’ Representative and its accountants and other representatives, upon reasonable notice, reasonable access during normal business hours to, or copies of, as the Equity Holders’ Representative or such accountants and other representatives shall reasonably request, the information (including the books and records of the Surviving Company), data, and work papers used in connection with the calculation of Net Revenues, Gross Profits, EBIT and the Earnout Consideration and the preparation of the Proposed Earnout Statement, and will make its and the Surviving Corporation’s personnel and accountants reasonably available to the Equity Holders’ Representative and its accountants and other representatives to discuss any such information, data, or work papers.

(iii) The Equity Holders’ Representative shall have sixty (60) days from the date that the Equity Holders’ Representative receives the Proposed Earnout Statement (the “ Earnout Dispute Period ”) to notify Buyer, in writing, as to whether the Equity Holders’ Representative (i) agrees with the Proposed Earnout Statement or (ii) disagrees with such calculations, identifying with reasonable detail the items with which the Equity Holders’ Representative disagrees (an “ Earnout Dispute Notice ”).

(iv) If the Equity Holders’ Representative fails to deliver an Earnout Dispute Notice to Buyer during the Earnout Dispute Period, the Proposed Earnout Statement and the Earnout Consideration shall be deemed to be final and correct and shall be binding upon each of the parties hereto.

(v) If the Equity Holders’ Representative delivers an Earnout Dispute Notice to Buyer during the Earnout Dispute Period, Buyer and the Equity Holders’ Representative shall, for a period of twenty (20) days from the date the Earnout Dispute Notice is delivered to Buyer (the “ Earnout Resolution Period ”), use their respective good faith efforts to amicably resolve the items in dispute. Any items so resolved by them shall be deemed to be final and correct as so resolved and shall be binding upon each of the parties hereto.

(vi) If Buyer and the Equity Holders’ Representative are unable to resolve all of the items in dispute during the Earnout Resolution Period, then either the Equity Holders’ Representative or Buyer may refer the items remaining in dispute (the “ Remaining Earnout Disputes ”) to the Independent Accountants. Such referral shall be made in writing to the Independent Accountants, copies of which shall concurrently be delivered to the non-referring party hereto. The referring party shall furnish the Independent Accountants, at the time of such referral, with copies of the Proposed Earnout Statement and the Earnout Dispute Notice. The parties shall also furnish the Independent Accountants with such other information and documents as the Independent Accountants may reasonably request in order for them to resolve the Remaining Earnout Disputes. The parties hereto shall also, within ten (10) days of the date the Remaining Earnout Disputes are referred to the Independent Accountants, provide the Independent Accountants with a written notice (an “ Earnout Position Statement ”) describing in reasonable detail their respective positions on the Remaining Earnout Disputes (copies of which shall concurrently be delivered to the other party hereto). If any party fails to timely deliver its Earnout Position Statement to the Independent Accountants, the Independent Accountants shall resolve the Remaining Earnout Disputes solely upon the basis of the information otherwise provided to them. The Independent Accountants shall resolve all Remaining Earnout Disputes in a written determination to be delivered to each of the parties hereto within thirty (30) days after such matter is referred to them. The decision of the Independent Accountants as to the Remaining Earnout Disputes shall be final and binding upon the parties hereto (except to correct manifest clerical or mathematical errors) and shall not be subject to judicial review. The fees and disbursements of the Independent Accountants shall be apportioned between Buyer and the Equity Holders based on the total dollar value of disputed exceptions resolved in favor of each such party, with each such party bearing such percentage of the fees and disbursements of the Independent Accountants as the aggregate disputed exceptions resolved against that party bears to the total dollar value of all disputed exceptions considered by the Independent Accountants.

(vii) Within three (3) Business Days following the date on which the Earnout Consideration is finally determined pursuant to this Agreement (whether through failure of the Equity Holders’ Representative to timely deliver an Earnout Dispute Notice, agreement of the parties, or final determination of any Remaining Earnout Disputes by the Independent Accountants), Buyer shall pay, or cause to be paid, to the Equity Holders the Earnout Consideration in proportion to each such Equity Holder’s Percentage Ownership.

2.10 Dissenting Shares . Notwithstanding Section 2.2 , any shares of Company Stock outstanding immediately prior to the Effective Time and held by a Shareholder immediately prior to the Effective Time who has not voted in favor of adoption of this Agreement or consented thereto in writing and who has demanded appraisal for such shares in accordance with Arizona Law and who has not failed to perfect, withdrawn or otherwise lost the right to appraisal under Arizona Law (collectively, the “ Dissenting Shares ”) shall not be converted into a right to receive the Merger Consideration. If, after the Effective Time, any holder of Dissenting Shares fails to perfect, withdraws or loses the right to appraisal, such shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Consideration. The Company shall give Buyer prompt notice of any demands received by the Company prior to the Closing Date for appraisal of shares of Company Stock, and Buyer shall have the right to participate in all negotiations and proceedings with respect to such demands. Except with the prior written consent of Buyer, the Company shall not make any payment with respect to, or offer to settle or settle, any such demands. Notwithstanding the foregoing, Dissenting Share Payments paid or incurred prior to the Closing Date are referred to herein as “ Pre-Closing Dissenting Share Payments ” and shall be deducted from the Merger Consideration. Dissenting Share Payments paid or incurred after the Closing Date are referred to herein as “ Post-Closing Dissenting Share Payments ” which Buyer shall be entitled to recover under the terms of Article 8 .

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company . The Company hereby represents and warrants to Buyer that, subject to Section 11.19, except as set forth in the Company Disclosure Schedule:

(a) Organization, Existence and Good Standing . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Arizona. The Company is duly qualified as a foreign corporation, and is in good standing, under the laws of all jurisdictions where the nature of its business or the nature or location of its assets requires such qualification and where the failure to so qualify would, individually or in the aggregate, have a Material Adverse Effect.

(b) Consents . No notice to, or consent, authorization, order or approval of, or filing or registration with, any Governmental Authority or other Person (including any approvals of the U.S. Government, including, without limitation, the Department of Defense, the Air Force and the National Aeronautics and Space Administration, or any other agencies, departments or instrumentalities thereof) is required by the Company in connection with the consummation by the Company of the transactions contemplated by this Agreement or any other document, certificate or instrument to be executed by the Company pursuant to or in connection with this Agreement (collectively, the “ Company Documents ”).

(c) Power and Authority . The Company has all necessary power and authority to carry on its business as such business is now being conducted.

(d) Authorization .

(i) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that enforcement may be affected by Laws relating to bankruptcy, reorganization, insolvency and creditors’ rights and by the availability of injunctive relief, specific performance and other equitable remedies. Each Company Document to be executed by the Company, when executed and delivered by the Company, will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement may be affected by Laws relating to bankruptcy, reorganization, insolvency and creditors’ rights and by the availability of injunctive relief, specific performance and other equitable remedies.

(ii) At a meeting duly called and held, or by unanimous written consent, the Company’s Board of Directors has unanimously (A) determined that the Merger is fair to and in the best interests of the shareholders of the Company, (B) approved and adopted this Agreement and the transactions contemplated hereby, and (C) resolved to recommend approval and adoption of this Agreement by the shareholders of the Company.

(iii) The affirmative vote of the holders of a majority of the outstanding shares of Company Stock or the unanimous written consent of all of the outstanding shares of Company Stock is the only vote or written consent of the holders of any of the Company’s capital stock necessary in connection with the adoption of this Agreement and the consummation of the Merger (the “ Shareholder Approval ”).

(iv) The Written Consents delivered concurrently with the execution of this Agreement constitute the valid and effective approval and adoption of this Agreement and the other transactions contemplated hereby by the Major Shareholders. The Written Consents are and will be as of the Closing in full force and effect.

(e) Conflicts Under Organizational Documents or Laws . Neither the execution and delivery of this Agreement, the Company Documents, nor the consummation of the transactions contemplated hereby or thereby, will conflict with or result in a breach of (i) any of the terms, conditions or provisions of the articles of incorporation and bylaws of the Company or any resolution adopted by the Company’s Board of Directors or any committee thereof, or (ii) any applicable statute, law (statutory, common or otherwise), ordinance, rule, regulation, mandate, order, writ, injunction, judgment, decree, ruling, charge, or other requirement of, or any agreement with, any Governmental Authority (each, a “ Law ”).

(f) Conflicts Under Contracts . Neither the Company nor any of its Subsidiaries is party to, or bound by, any unexpired, undischarged or unsatisfied contract under the terms of which either the execution and delivery of this Agreement or the Company Documents, or the consummation by the Company of the transactions contemplated hereby or thereby, will, with or without notice or lapse of time or both, be a breach, default or an event of acceleration, or cause any other change of any right or obligation or the loss of any benefit to which the Company or any of its Subsidiaries is entitled under any provision of any agreement or other instrument binding upon the Company or any of its Subsidiaries or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of the Company or any of its Subsidiaries, will require any consent thereunder, will be grounds for termination, modification or cancellation thereof, or will result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries.

(g) Equity Interests . The Company does not hold or beneficially own and has never held or beneficially owned any direct or indirect equity interest (whether it be common or preferred stock or any comparable ownership interest in any Person that is not a corporation), or any subscriptions, options, warrants, rights, calls, convertible securities or other agreements or commitments for any such equity interest, in any Person.

(h) Organizational Documents . True and complete copies of the articles of incorporation and bylaws of the Company, in each case, as amended and currently in full force and effect, all material stock records, and the corporate minute books of the Company have been made available to Buyer prior to the date hereof. The Company is not in violation of any of the provisions of its articles of incorporation or bylaws. The minutes of the Company made available to counsel for Buyer contain complete and accurate records of all actions taken, and summaries of all meetings held, by the shareholders of the Company, the board of directors of the Company (and any committees thereof) since January 1, 2002 until the date hereof.

(i) Capitalization .

(i) The authorized capital stock of the Company consists of (a) 10,000,000 shares of Class A Common Stock, (b) 2,000,000 shares of Class B Common Stock, non-voting, and (c) 1,000,000 shares of Preferred Voting Stock. As of the date hereof, there are issued and outstanding 3,786,250 shares of Class A Common Stock, no shares of Class B Common Stock, and no shares of Company preferred stock. Section 3.1(i)(i) of the Company Disclosure Schedule sets forth each holder of shares of Company Stock as of the date hereof, and the number of shares of each class of Company Stock held thereby. All of the issued and outstanding shares of Company Stock have been validly issued, are fully paid and nonassessable.

(ii) The Company has reserved 2,000,000 shares of Class B Common Stock and 2,000,000 shares of Class A Common Stock for issuance to employees, directors and consultants pursuant to the Company’s stock option plans, of which 163,750 shares of Class A Common Stock and 0 shares of Class B Common Stock are outstanding pursuant to option exercises through the date hereof, 1,409,249 shares of Class A Common Stock and 901,225 shares of Class B Common Stock shares are subject to outstanding unexercised options as of the date hereof and 427,001 shares of Class A Common Stock and 1,098,775 shares of Class B Common Stock remain available for future grant as of the date hereof. Section 3.1(i)(ii) of the Company Disclosure Schedule sets forth, as of the date hereof, the holders of all of the outstanding Stock Options and the number of Stock Options held by each such holder, the vesting schedule for each such Stock Option, whether such Stock Option is an “ incentive stock option, ” within the meaning of Section 422 of the Code, or a nonqualified stock option and the exercise price for each such Stock Option. All Stock Options may, by their terms, be treated in accordance with Article 2 .

(iii) Section 3.1(i)(ii) of the Company Disclosure Schedule sets forth, the Percentage Ownership of each Equity Holder.

(iv) Except as set forth in this Section 3.1(i) and Section 3.1(i) of the Company Disclosure Schedule, there are no other shares of capital stock or other securities of the Company authorized or outstanding, and there are no outstanding subscriptions, options, warrants, rights (including preemptive rights), calls, convertible securities, restricted shares, restricted share units, stock appreciation rights, performance shares, contingent value rights, “ phantom ” stock or similar securities or rights that are derivative of or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock or other voting securities or ownership interests in the Company or other agreements or commitments of any character, relating to the issued or unissued capital stock or other securities of the Company obligating the Company to issue any securities of any kind. There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock or other securities of the Company. There are no voting trusts, proxies or other similar agreements or understandings with respect to the voting of any shares of capital stock or other securities of the Company. There are no declared or accrued unpaid dividends with respect to any shares of capital stock or other securities of the Company.

(j) Financial Statements . Section 3.1(j) of the Company Disclosure Schedule contains true and complete copies of the Financial Statements. The Financial Statements present fairly in conformity with GAAP applied on a consistent basis (except that the Financial Statements do not include footnotes), the financial position of the Company as of the dates thereof and the consolidated results of operations and cash flows of the Company for the periods covered thereby. The Company maintains accurate books and records reflecting its assets and liabilities in all material respects and maintains proper and adequate internal accounting controls which provide reasonable assurance that (i) transactions are executed with management’s authorization and (ii) transactions are recorded as necessary to permit preparation of the financial statements of the Company (including the Financial Statements) in conformity with GAAP.

(k) Title to Assets . The Company has good title to, or in the case of leased assets, a valid leasehold interest in, its assets, free and clear of any Liens, except for Permitted Liens. The foregoing shall not apply to Intellectual Property (which is dealt with exclusively in Section 3.1(x) ) or Leased Real Estate (which is dealt with exclusively in Section 3.1(w) ).

(l) Taxes .

(i) Each of the Company and its Subsidiaries has timely filed all Returns required to be filed on or before the date hereof, and has timely paid, withheld and remitted all Taxes shown thereon as owing. As of the time of filing, the Returns were true and complete. No extension of time within which to file any Return has been requested by the Company or any of its Subsidiaries or granted.

(ii) With respect to all amounts in respect of Taxes imposed upon the Company or any of its Subsidiaries or for which the Company or any of its Subsidiaries is liable to any Taxing Authority for all taxable periods or portions of periods ending on or before the Closing Date, all applicable Tax laws have been complied with and all amounts required to be paid by the Company or any of its Subsidiaries to any such Taxing Authority have been timely paid, withheld and remitted.

(iii) No issues have been raised and no claim, audit, action, suit, proceeding or investigation is currently pending or Threatened by any Taxing Authority in connection with any Tax or Tax Asset. All deficiencies asserted or assessments made as a result of any examinations of Returns previously filed by the Company or any of its Subsidiaries have been paid, or are reflected as a liability in the Financial Statements, or are being contested and an adequate reserve therefor has been established and reflected as a liability in the Financial Statements. The charges, accruals and reserves for Taxes with respect to the Company or any of its Subsidiaries reflected on the books of the Company (excluding any provision for deferred income taxes reflecting either differences between the treatment of items for accounting and income tax purposes or carryforwards) are adequate to cover Tax liabilities accruing through the end of the last period for which the Company ordinarily records items on its books. Since the end of the last period for which the Company ordinarily records items on its books, neither the Company nor any of its Subsidiaries has engaged in any transaction, or taken any other action, other than in the ordinary course of business. All information set forth in the Financial Statements (including the notes thereto) relating to Tax matters is true and complete. No adjustment that would increase the Tax liability, or reduce any Tax Asset, of the Company or any of its Subsidiaries has been made, proposed or threatened by a Taxing Authority during any audit of a Pre-Closing Tax Period which could reasonably be expected to be made, proposed or threatened in an audit of any subsequent Pre-Closing Tax Period or Post-Closing Tax Period. There are no requests for rulings or determinations in respect of any Tax or Tax Asset pending between the Company or any of its Subsidiaries and any Taxing Authority.

(iv) Neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Returns or agreed to any extension of time with respect to Tax assessment or deficiency and neither the Company nor any of its Subsidiaries is delinquent in the payment of any Tax. All Returns filed with respect to Tax years of the Company or any of its Subsidiaries through the Tax year ended December 31, 2003 (in respect of federal corporate income tax) and the Tax year ended December 31, 2002 (in respect of Arizona corporate income tax) have been examined and closed or are Returns with respect to which the applicable period for assessment under applicable law, after giving effect to extensions or waivers, has expired. No adjustment that would increase the Tax liability, or reduce any Tax Asset, of the Company or any of its Subsidiaries has been made, proposed or threatened by a Taxing Authority during any audit of a Pre-Closing Tax Period which could reasonably be expected to be made, proposed or threatened in an audit of any subsequent Pre-Closing Tax Period or Post-Closing Tax Period. During the two-year period ending on the date hereof, none of the Company, nor any Affiliate of the Company has made or changed any tax election, changed any annual tax accounting period, or adopted or changed any method of tax accounting (to the extent that any such action may materially affect the Company or any of its Subsidiaries), nor has it, to the extent it may affect or relate to the Company or any of its Subsidiaries, filed any amended Return, entered into any closing agreement, settled any Tax claim or assessment, or surrendered any right to claim a Tax refund, offset or other reduction in Tax liability.

(v) None of the Returns have been audited and no Returns currently are the subject of audit. The Company has delivered to Buyer correct and complete copies of all federal Income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by Company or any of its Subsidiaries since January 1, 2005.

(vi) Neither the Company nor any of its Subsidiaries is party to or bound by any tax indemnity, tax sharing or tax allocation agreement that would provide for the allocation, apportionment, sharing or assignment of any Tax liability or benefit, or the transfer or assignment of income, revenues, receipts, or gains for the purpose of determining any person’s Tax liability. Neither the Company nor any of its Subsidiaries has been a member of an affiliated, consolidated, combined or unitary group. Neither the Company nor any of its Subsidiaries has entered into any agreement or arrangement with any Taxing Authority with regard to the Tax liability of the Company or any of its Subsidiaries affecting any Tax period for which the applicable statute of limitations, after giving effect to extensions or waivers, has not expired.

(vii) No jurisdiction where the Company or any of its Subsidiaries does not currently file Returns has asserted that the Company or any of its Subsidiaries is or may be liable for Tax in such jurisdiction.

(viii) Neither the Company nor any of its Subsidiaries is a party to any understanding or arrangement described in Section 6662(d)(2)(C)(ii) of the Code, or in a “ reportable transaction ” within the meaning of Treasury Regulations Section 1.6011-4. During the two-year period ending on the date hereof, neither the Company nor any of its Subsidiaries was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code. Neither the Company nor any of its Subsidiaries has participated in or cooperated with an international boycott within the meaning of Section 999 of the Code and has not been requested to do so in connection with any transaction or proposed transaction.

(ix) Neither the Company nor any of its Subsidiaries will be required to include any adjustment in taxable income for any Post Closing Tax Period under Section 481(c) of the Code (or any similar provision of the Tax laws of any jurisdiction) as a result of a change in method of accounting for a Pre Closing Tax Period. No Tax Asset of the Company or any of its Subsidiaries is currently subject to a limitation under Section 382 or Section 383 of the Code. Neither the Company nor any of its Subsidiaries will be required to include for a Post-Closing Tax Period taxable income attributable to income economically realized in a Pre-Closing Tax Period, including any income that would be includible in a Post-Closing Tax Period as a result of the installment method or the look-back method (as defined in Section 460(b) of the Code).

(x) Neither the Company nor any of its Subsidiaries owns an interest in real property in any jurisdiction in which a Tax is imposed, or the value of the interest is reassessed, on the transfer of an interest in real property and which treats the transfer of an interest in an entity that owns an interest in real property as a transfer of the interest in real property.

(xi) Except as set forth on Section 3.1(l)(xi) of the Company Disclosure Schedule, no election has been made under Treasury Regulations Section 301.7701-3 or any similar provision of Tax law to treat the Company or any Affiliate of the Company as an association, corporation or partnership. The Company is not disregarded as an entity for Tax purposes.

(xii) Notwithstanding anything in this Agreement to the contrary, the Company makes no representation or warranty hereunder with respect to any deferred Tax Asset.

(m) Conduct of Business . Since the Financial Statements Date, the business of the Company and any of its Subsidiaries has been conducted in the ordinary course consistent with past practices and, except as set forth in Section 3.1(m) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has:

(i) created, incurred, assumed or suffered to exist any indebtedness for borrowed money or guarantees thereof, other than trade payables incurred in the ordinary course of business;

(ii) incurred any capital expenditures or any obligations or liabilities in respect thereof, except for those contemplated by the capital expenditure budget for the Company that is attached to Section 3.1(m)(ii) of the Disclosure Schedule (the “ Capex Budget ”) including those purchased in advance of when they were budgeted to be purchased;

(iii) created or incurred any Lien on any material asset;

(iv) sold, leased or transferred any of its property, except (1) for sales of its inventory and transfers of cash in payment of the Company’s liabilities, all in the usual and ordinary course of business, and (2) as otherwise permitted by this Agreement;

(v) waived any material right other than in the ordinary course of business;

(vi) made any loan, advance or capital contributions to or investment in any Person, except for reasonable advances to employees and consultants for travel and business expenses in the ordinary course of business consistent with past practices;

(vii) paid or delayed payment of accounts payable, or collected or delayed collection of accounts receivable, in each case other than in the ordinary course of business consistent with past practices;

(viii) changed any method of accounting or accounting principles or practice, except for any such change required by reason of a concurrent change in GAAP;

(ix) made any material change in pricing set or charged to its customers or in pricing set or charged by its vendors;

(x) (A) granted or increased any severance or termination pay to (or amendment to any existing arrangement with) any current or former director, officer, employee or independent contractor of the Company or any of its Subsidiaries, (B) increased any benefits payable under any existing severance or termination pay policies or employment agreements, (C) entered into any employment, deferred compensation, severance, retention, change in control, tax gross-up, special bonus, stay bonus or other similar agreement or arrangement (or amendment of any such existing agreement) with any current or former director, officer, employee or independent contractor of the Company or any of its Subsidiaries, (D) established, adopted or amended (except as required by Applicable Law) any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any current or former director, officer, employee or independent contractor of the Company or any of its Subsidiaries, (E) increased any compensation, bonus or other benefits payable to any current or former director, officer, employee or independent contractor of the Company or any of its Subsidiaries, (F) granted any stock option, restricted stock or any other stock-based award to any current or former director, officer, employee or independent contractor of the Company or any of its Subsidiaries, (G) accelerated and/or cashed out any outstanding Stock Option, or (H) engaged in hiring or termination practices that are not in the ordinary course of business consistent with past practices;

(xi) settled, or offered or proposed to settle, any material litigation, investigation, arbitration, proceeding or other claim involving or against the Company or any of its Subsidiaries;

(xii) entered into any transaction or made any commitment with any Affiliate of the Company, other than the payment of employee compensation or expense reimbursements in the ordinary course of business consistent with past practices;

(xiii) entered into any agreement to do any of the things described in the preceding clauses (other than negotiations with Buyer and its representatives regarding the transactions contemplated by this Agreement); or

(xiv) otherwise suffered any Material Adverse Effect.

(n) No Undisclosed Material Liabilities . There are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that could reasonably be expected to result in such a liability or obligation, other than (i) liabilities or obligations disclosed and provided for in the Balance Sheet, (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practices since the Financial Statements Date that, individually or in the aggregate, are not material to the Company or any of its Subsidiaries, and (iii) liabilities directly incurred under the terms of this Agreement.

(o) Contracts . Section 3.1(o) of the Company Disclosure Schedule contains a list of the following material undischarged, unexpired or unsatisfied written agreements to which the Company or any of its Subsidiaries is a party:

(i) agreements for the employment of any employee;

(ii) consulting agreements providing for annual cash compensation thereunder in excess of $25,000;

(iii) collective bargaining agreements;

(iv) leases or subleases, whether as lessee or sublessee, lessor or sublessor, of personal property, where the lease or sublease provides for an annual rent in excess of $25,000 which cannot be cancelled by the Company without payment or penalty upon notice of sixty (60) days or less;

(v) agreements for the purchase or license of materials, supplies, goods, services, equipment or other tangible or intangible assets expressly providing for (or which would reasonably be expected to result in) either annual payments by the Company or any of its Subsidiaries of $25,000 or more or aggregate payments by the Company or any of its Subsidiaries of $50,000 or more;

(vi) sales, rental, distribution or other similar agreements providing for the sale, rental or distribution by the Company or any of its Subsidiaries of materials, supplies, goods, services, equipment or other tangible or intangible assets expressly providing for (or which would reasonably be expected to result in) either annual payments to the Company or any of its Subsidiaries of $25,000 or more or aggregate payments to the Company or any of its Subsidiaries of $50,000 or more;

(vii) agreements restricting in any manner the right of the Company or any of its Subsidiaries to compete with any other Person or in any line of business or in any area, restricting the Company’s right to sell to or purchase from any other Person, or restricting the right of any other Person to compete with the Company or any of its Subsidiaries;

(viii) agreements containing a “ most favored nation ” or similar provision or providing for minimum purchase or sale obligations;

(ix) agreements between the Company or any of its Subsidiaries and any of its Affiliates;

(x) agreements of alliance, agency, representation, distribution, marketing or franchise which cannot be cancelled by the Company without payment or penalty upon notice of sixty (60) days or less;

(xi) loan or credit agreements, pledge agreements, promissory notes, security agreements, mortgages, debentures, indentures, letters of credit and guaranties;

(xii) surety or indemnification agreements;

(xiii) consulting, services, development or collaboration agreements or other agreements for development of products, technologies and/or services for the Company or any of its Subsidiaries;

(xiv) partnership agreements and joint venture agreements;

(xv) agreements, contracts or commitments relating to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise);

(xvi) agreements relating to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset);

(xvii) agreements (including any prime contract, subcontract, teaming agreement or arrangement, joint venture, basic ordering agreement, letter contract, purchase order, delivery order, change order or other arrangement of any kind in writing) (A) between the Company or any of its Subsidiaries and (x)any Governmental Authority (acting on its own behalf or on behalf of another country or international organization), (y) any prime contractor to any Governmental Authority or (z) any subcontractor with respect to any contract described in clauses (x) or (y) above, (B) financed by any Governmental Authority, or (C) subject to the rules and regulations of any Governmental Authority concerning procurement;

(xviii) agreements or plans, including, without limitation, any stock option plan, stock appreciation rights plan or stock purchase plan, Company securities or debt instruments, or any undertaking, promise or other obligation, written or oral, of the Company to issue any securities, the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement;

(xix) any shareholders agreement or similar agreement with or among any shareholders of the Company, including any agreement that provides for preemptive rights or imposes any limitation or restriction on Company Stock, including any restriction on the right of a shareholder to vote, sell or otherwise dispose of such Company Stock; and

(xx) any other agreements that provide for the receipt or expenditure of more than $50,000 on an annual basis, except agreements for the purchase or sale of goods or rendering of services in the ordinary course of business and leases or subleases of real property (which are dealt with exclusively in Section 3.1(w) ).

Each of the agreements, contracts, plans, leases, arrangements or commitments disclosed in Section 3.1(o) of the Disclosure Schedule, or required to be disclosed pursuant to this Section 3.1(o) or which would have been required to be so disclosed had it been in existence as of the date of this Agreement (each, a “ Contract ”) is a valid and binding agreement of the Company, is in full force and effect and is enforceable against the Company and, to the Knowledge of the Company, the other parties thereto, except as enforceability may be affected by Laws relating to bankruptcy, reorganization, insolvency and creditors’ rights and by the availability of injunctive relief, specific performance and other equitable remedies. With respect to each Contract, there exists no (x) default or event of default by the Company or any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto, or (y) event, occurrence or condition that, with the giving of notice or the lapse of time, would give rise to a default or event of default by the Company or any of its Subsidiaries or, to the Knowledge of the Company, and other party thereto. No Person is renegotiating, or has a right (absent any default or breach of a Contract) pursuant to the terms of any Contract to renegotiate, any material amount paid or payable to the Company or any of its Subsidiaries under any Contract or any other material term or provision of any Contract. Neither the Company n or any of its Subsidiaries has received any written or verbal indication of an intention to terminate any Contract by any of the parties thereto. True and complete copies of each such Contract has been available to Buyer prior to the date hereof.

(p) Permits . The Company possesses all material Permits (other than Environmental Permits) that are required in order for the Company or any of its Subsidiaries to conduct its business as presently conducted. All such Permits are in full force and effect, the Company is in compliance with and no condition exists that with notice or lapse of time or both would constitute a default under, all such Permits, and none of such Permits will be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated hereby.

(q) Employee Benefit Plans .

(i) Section 3.1(q)(i) of the Disclosure Schedule contains a correct and complete list identifying each Benefit Plan which is sponsored, maintained, administered, contributed to by the Company or any Affiliate thereof and covers any current of former employee, director or independent contractor of the Company or any of its Subsidiaries or with respect to which the Company or any of its Subsidiaries has any liability. Copies of each Benefit Plan and any amendments thereto have been made available to Buyer prior to the date hereof, and copies of, to the extent applicable, any related trust or funding agreements or insurance policies, amendments thereto, prospectuses or summary plan descriptions relating thereto and the most recent annual report (Form 5500 including, if applicable, Schedule B thereto) and tax return (Form 990) prepared in connection therewith have been made available to Buyer prior to the date hereof.

(ii) Neither the Company nor any of its Affiliates nor any predecessor thereof does now, or did prior to the date hereof, sponsor, maintain or contribute to any plan subject to Title IV of ERISA.

(iii) Neither the Company nor any of its Affiliates contributes to any multiemployer plans within the meaning of Section 4001(a)(3) of ERISA.

(iv) No transaction prohibited by Section 406 of ERISA or Section 4975 of the Code has occurred with respect to any employee benefit plan or arrangement which is covered by Title I of ERISA, which transaction has or will cause the Company or any of its Subsidiaries to incur any material liability under ERISA, the Code or otherwise, excluding transactions effected pursuant to and in compliance with a statutory or administrative exemption.

(v) No events have occurred with respect to any Benefit Plan that could result in payment or assessment of any material excise Taxes.

(vi) Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code either has received a favorable determination letter from the IRS or is entitled to rely on a favorable opinion letter issued to the prototype sponsor by the IRS and has been so qualified during the period since its adoption, and no event has occurred since the date of such determination that would materially adversely affect such qualification. Each trust created under any such Benefit Plan is exempt from tax under Section 501(a) of the Code and has been so exempt since its creation. Copies of the most recent determination letter of the Internal Revenue Service relating to each such Benefit Plan have been made available to Buyer. Each Benefit Plan has been maintained in material compliance with its terms and with the requirements prescribed by all applicable law, including ERISA and the Code, and there is no action, suit, investigation, audit or proceeding pending against or involving or, to the Knowledge of the Company, threatened against or involving, any Benefit Plan before any court or arbitrator or any state, federal or local governmental body, agency or official other than routine claims for benefits.

(vii) Neither the Company nor any of its Subsidiaries has any current or projected liability in respect of post-employment or post-retirement health or medical or life insurance benefits for retired, former or current officers or employees of the Company or any of its Subsidiaries, except as required to avoid excise tax under Section 4980B of the Code.

(viii) All contributions and payments accrued under each Benefit Plan, determined in accordance with prior funding and accrual practices, as adjusted to include proportional accruals for the period ending as of the date hereof, have been discharged and paid on or prior to the date hereof except to the extent reflected as a liability on the Balance Sheet.

(ix) No Benefit Plan exists that, as a result of the transactions contemplated by this Agreement (whether alone or in connection with other events), could result in the payment to any current or former employee, director or independent contractor of the Company or any of its Subsidiaries of any money or other property or could result in the acceleration or provision of any other rights or benefits to any current or former employee, director or independent contractor of the Company or any of its Subsidiaries.

(x) No payment, right or benefit as a result of the transactions contemplated by this Agreement (whether alone or in connection with other events) would constitute a “parachute payment” within the meaning of Section 280G of the Code.

(xi) Each Benefit Plan which is a nonqualified deferred compensation plan, within the meaning of Section 409A of the Code, maintained by the Company on or after January 1, 2005, has been operated in good faith compliance with the requirements of Section 409A of the Code (or an available exemption therefrom). Since January 1, 2005, no stock options have been granted by the Company or any of its Subsidiaries with an exercise price of less than the fair market value of the underlying stock as of the date such option was granted.

(r) Employees. Section 3.1(r) of the Disclosure Schedule sets forth a true and complete list of all employees of the Company or any of its Subsidiaries (the “ Employees ”) together with their respective positions, locations, annual salaries, bonuses and other compensation information. To the Company’s Knowledge, none of the Employees has indicated that he or she intends to resign or retire as a result of or in connection with the transactions contemplated by this Agreement. No Employee is represented by any union, works council or other labor organization or is covered under any union, collective bargaining or similar labor agreement. There are no labor negotiations in process with any labor union relating to the Employees and, to the Knowledge of the Company, there are no efforts in process by any labor union to organize any of the Employees. There is currently no labor strike, slowdown or stoppage relating to any of the Employees pending or, to the Knowledge of the Company. There is no unfair labor practice complaint pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries before the National Labor Relations Board or similar, non-U.S., state or local body. Each of the Company and any of its Subsidiaries has complied in all material respects with all applicable Laws relating to labor and employment, including without limitation those relating to wages, hours, collective bargaining, unemployment compensation, worker’s compensation, equal employment opportunity, age and disability discrimination, immigration control, employee classification, information privacy and security, payment and withholding of taxes, and continuation coverage with respect to group health plans.

(s) Litigation and Claims . There is no litigation, claim, proceeding, suit or investigation by or before any Governmental Authority or arbitrator pending or, to the Knowledge of the Company, Threatened against the Company or any of its Subsidiaries with respect to or affecting the operations, business, properties or assets of the Company or any of its Subsidiaries, or directors, officers or representatives (in their capacity as such) of the Company or any of its Subsidiaries or with respect to the consummation of the transactions contemplated hereby.

(t) Decrees, Orders or Awards . Neither the Company nor any of its Subsidiaries is a party to, or bound by, any decree, order, judgment or award of any Governmental Authority with respect to or affecting the Company’s operations, business, properties or assets.

(u) Compliance with Laws . Except for Environmental Laws (which are exclusively provided for in Section 3.1(u) ), neither the Company nor any of its Subsidiaries is in material violation of, or materially delinquent with respect to, and to the Knowledge of the Company, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any Law to which the Company or any of its Subsidiaries, or their respective operations, business or assets are subject including 21 C.F.R. 820.

(v) Environmental Matters .

(i) Each of the Company and any of its Subsidiaries has been and is in compliance with all applicable Environmental Laws and Environmental Permits.

(ii) Each of the Company and any of its Subsidiaries possesses all Environmental Permits which are required for the operation of its business; such Environmental Permits are valid and in full force and effect and will not be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated hereby.

(iii) No notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed and no investigation, action, claim, suit, proceeding or review is pending, or to the Company’s Knowledge, threatened by any Governmental Authority or other Person with respect to any matters relating to the Company or any of its Subsidiaries and relating to or arising out of any Environmental Law or Hazardous Substance.

(iv) There are no liabilities or obligations of or relating to the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, arising under or relating to any Environmental Law or Hazardous Substance, and there are no facts, conditions, situations or set of circumstances which could reasonably be expected to result in or be the basis for any such liability or obligation.

(v) No polychlorinated biphenyls, radioactive material, lead, asbestos or asbestos containing material, incinerator, sump, surface impoundment, lagoon, landfill, septic, wastewater treatment or other disposal system or underground storage tank (active or inactive) is or has been present at, on or under any property now or previously owned, leased or operated by the Company or any of its Subsidiaries.

(vi) No Hazardous Substance has been Released at, on or under any property now or previously owned, leased or operated by the Company or any of its Subsidiaries.

(vii) No property now or previously owned, leased or operated by the Company or any of its Subsidiaries or any property to which the Company or any of its Subsidiaries has, directly or indirectly, transported or arranged for the transportation of any Hazardous Substances is listed or, to the Company’s Knowledge, proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar federal, state or foreign list of sites requiring investigation or clean up.

(viii) There has been no environmental investigation, study, audit, test, review or other analysis conducted of which the Company has Knowledge in relation to the current or prior business of the Company or any of its Subsidiaries or any property or facility now or previously owned, leased or operated by the Company or any of its Subsidiaries which has not been delivered to Buyer at least 10 days prior to the date hereof.

(ix) The consummation of the transactions contemplated in this Agreement shall not trigger any requirement for any action, consent or approval, registration, remedial action, or filing under any Environmental Law or Environmental Permit.

(x) For purposes of this Section, the terms “ Company ” and “ Subsidiaries ” shall include any entity which is, in whole or in part, a predecessor of the Company or any of its Subsidiaries.

(w) Leased Real Estate .

(i) Neither the Company nor any of its Subsidiaries owns any real property.

(ii) Section 3.1(w)(ii) of the Disclosure Schedule contains a list of all street addresses of the Leased Real Estate, which list is true and complete in all material respects.

(iii) All Leased Real Estate is leased to the Company pursuant to written leases, complete copies of which have been previously delivered to Buyer, and all of which are enforceable against the Company and, to the Knowledge of the Company, the other parties thereto, except as enforceability may be affected by Laws relating to bankruptcy, reorganization, insolvency and creditors’ rights and by the availability of injunctive relief, specific performance and other equitable remedies. With respect to each such lease, there exists no (i) default or event of default by the Company or any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto, or (ii) event, occurrence or condition that, with the giving of notice or the lapse of time, would give rise to a default or event of default by the Company or any of its Subsidiaries or, to the Knowledge of the Company, and other party thereto. The Disclosure Schedule sets forth a description of any consent or approval required of any counterparty under the terms of any such lease for the consummation of the transactions contemplated by this Agreement. To the Knowledge of the Company, the Leased Real Estate is not subject to any leases, subleases or tenancies of any kind, except for the Company’s leases. The Leased Real Estate constitutes all real property and improvements used in the conduct of its business.

(iv) There are no developments affecting any Leased Real Estate pending or, to the Knowledge of the Company threatened, which might materially detract from the value, materially interfere with any present or intended use of any such property or assets. Such real property, and its continued use, occupancy and operation as currently used, occupied and operated, does not constitute a nonconforming use under all applicable building, zoning, subdivision and other land use and similar Law. The plants, buildings, structures and equipment owned by the Company or any of its Subsidiaries have no material defects, are in good operating condition and repair and have been reasonably maintained consistent with standards generally followed in the industry (giving due account to the age and length of use of same, ordinary wear and tear excepted), are adequate and suitable for their present and intended uses and, in the case of plants, buildings and other structures (including the roofs thereof), are structurally sound. None of the structures on any such owned or leased real property encroaches upon real property of another Person, and no structure of any other Person substantially encroaches upon any of such owned or leased real property.

(x) Intellectual Property .

(i) For purposes of this Agreement, “ Intellectual Property ” means (A) patents and all proprietary rights associated therewith, (B) trademarks, service marks, trade names, trade dress, domain names, brand names, certification marks, corporate names and other indications of origin, together with all goodwill related to the foregoing, (C) copyrights and designs and all rights associated therewith and the underlying works of authorship, (D) all inventions, processes, formulae, methods, schematics, drawings, blue prints, technology, Software, discoveries, ideas and improvements, (E) all registrations of any of the foregoing and all applications the

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