AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

by and among

AUTHENTIDATE HOLDING CORP.

a Delaware corporation

and

PARASCRIPT, LLC

a Wyoming limited liability company

and

PARASCRIPT MANAGEMENT, INC.

a Wyoming corporation

as the Exchange Agent and the Member Representative

and

AHC GROUP INC.

a Delaware corporation

and

AHC MERGER SUB INC.

a Delaware corporation

and

PARASCRIPT MERGER SUB LLC

a Delaware limited liability company

Dated as of August 6, 2008

 

TABLE OF CONTENTS

 

 

A-i

TABLE OF CONTENTS

(continued)

 

 

A-ii

TABLE OF CONTENTS

(continued)

 

 

A-iii

TABLE OF CONTENTS

(continued)

 

 

A-iv

TABLE OF CONTENTS

(continued)

 

 

 

A-v

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (“Agreement”) is dated as of August 6, 2008, by and among Authentidate Holding Corp, a Delaware corporation (“AHC”), Parascript, LLC, a Wyoming limited liability company (“Parascript”), Parascript Management, Inc., a Wyoming corporation (the “Member Representative” or “Exchange Agent”), solely in the role as the Member Representative and Exchange Agent, AHC Group Inc., a Delaware corporation and a wholly owned subsidiary of AHC (“Parent”), AHC Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“AHC Merger Sub”) and Parascript Merger Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent (“Parascript Merger Sub” and, together with AHC Merger Sub, the “Merger Subs”).

RECITALS

WHEREAS, the Boards of Directors of each of AHC, Parent, AHC Merger Sub and Parascript Merger Sub, and the Member Representative have approved this Agreement and deem it advisable and in the best interests of their respective stockholders and members to consummate the transactions contemplated hereby on the terms and conditions set forth herein;

WHEREAS, the combination of AHC and Parascript shall be effected by the terms of this Agreement through the Mergers (as defined in Article 3) in accordance with the Wyoming Limited Liability Company Act (the “WLLCA”), the Delaware Limited Liability Company Act (“DLLCA”) and the Delaware General Corporation Law (“DGCL”);

WHEREAS, as a condition and inducement to AHC’s willingness to enter into this Agreement, AHC and certain members of Parascript (the “Designated Parascript Members”) and certain stockholders of AHC (the “Designated AHC Stockholders”) will enter into and deliver agreements on or before August 18, 2008 in the forms attached as Exhibits 1 and 2 (the “Voting Agreement”) pursuant to which (i) the Designated Parascript Members have agreed, among other things, to vote their Units in favor of adoption of this Agreement and the Mergers (as defined in Section 3.2), and (ii) the Designated AHC Stockholders have agreed, among other things, to vote shares of AHC Common Stock in favor of adoption of this Agreement and the Mergers; and

WHEREAS, for United States Federal income tax purposes, it is intended that the Mergers shall qualify as exchanges within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”), and in the case of the merger of AHC and AHC Merger Sub, as a reorganization within the meaning of Section 368(a) of the Code and the regulations promulgated thereunder.

NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, AHC, Parent, the Merger Subs and Parascript hereby agree as follows:

AGREEMENT

1. DEFINITIONS AND USAGE .

1.1 Definitions . For purposes of this Agreement, the following capitalized terms and variations thereof have the meanings specified or referred to in this Section 1.1:

“ABK Note”—shall mean the promissory note, dated March 17, 2007, in the principal amount of Two Million Four Hundred Fifty Thousand Dollars ($2,450,000) plus any accrued but unpaid interest thereon from Aron Katz in favor of Parascript which is due and payable on December 31, 2008.

 

A-1

“Accounting Firm”—as defined in Section 3.6.7(a)(iii)

“Accounts Receivable”—(a) all trade accounts receivable and other rights to payment from customers of such Person and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of such Person, (b) all other accounts or notes receivable of such Person and the full benefit of all security for such accounts or notes, provided, however, that the ABK Note and the Pearlman Note and any payments due in respect of such Notes shall be excluded from the definition of Accounts Receivable, and (c) any claim, remedy or other right related to any of the foregoing.

“Acquisition Proposal”—means any offer, proposal, inquiry or indication of interest (other than an offer, proposal, inquiry or indication of interest by AHC to Parascript) to enter into any transaction or series of transactions involving (a) any merger, consolidation, share exchange, business combination, issuance of securities, acquisition of securities, tender offer, exchange offer or other similar transaction in which Parascript is a constituent entity; or (b) other than in the Ordinary Course of Business, any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets that constitute or account for 20% or more of the consolidated net revenues, net income or assets of such Person.

“Advisor Fee”—shall mean all payments, fees or other consideration payable pursuant to that certain Agreement dated as of the 18 ^th day of April 2007, by and between the Member Representative in its role as manager of Parascript and Diversified Investors Capital Services of North America, Inc., which payments, fees or other consideration is payable solely by the Member Representative and neither Parent, AHC nor Parascript shall have any liability therefor whatsoever.

“Affiliate Letters”—as defined in Section 9.22.

“AG Shares”—as defined in Section 3.6.2(b)(iii)

“Agreement”—as defined in the first paragraph of this Agreement.

“AHC”—as defined in the first paragraph of this Agreement.

“AHC 401(k) Plan”—as defined in Section 13.1(c).

“AHC Balance Sheet”—as defined in Section 5.4.

“AHC Cafeteria Plan”—as defined in Section 13.1(d).

“AHC Certificate of Merger”—as defined in Section 3.1(b).

“AHC Commercial Contracts”—as defined in Section 5.23(b).

“AHC Common Stock”—AHC’s common stock, par value $0.01 per share.

“AHC Consents”—as defined in Section 10.3.

“AHC Contact”—as defined in Section 15.2(a).

“AHC Copyrights”—as defined in Section 5.23(a)(iii)

“AHC Data Room”—as defined in Section 5.28.

 

A-2

“AHC Employee Plans”—as defined in Section 5.15(a).

“AHC Financial Statements”—as defined in Section 5.4.

“AHC Group”—as defined in Section 6.1.

“AHC Indemnified Person”—as defined in Section 14.2.

“AHC Interim Balance Sheet”—as defined in Section 5.4.

“AHC Intellectual Property Assets”—as defined in Section 5.23.

“AHC Marks”—as defined in Section 5.23(a)(i).

“AHC Material Contract”—as defined in Section 5.19(a).

“AHC Merger”—as defined in Section 3.1(a).

“AHC Merger Consideration”—as defined in Section 3.6.1(b)

“AHC Merger Sub”—as defined in the first paragraph of this Agreement.

“AHC Merger Filing”—as defined in Section 3.1(b).

“AHC Net Names”—as defined in Section 5.23(a)(v).

“AHC Stock Option”—as defined in Section 3.6.5

“AHC Stock Options”—as defined in Section 3.6.5

“AHC Patents”—as defined in Section 5.23(a)(ii).

“AHC SEC Documents”—as defined in Section 5.26.

“AHC Options”—as defined in Section 5.3.

“AHC Stockholder Approval”—means the approval of AHC’s stockholders holding at least a majority of shares of AHC Common Stock.

“AHC Surviving Corporation”—as defined in Section 3.1(a).

“AHC Trade Secrets”—as defined in Section 5.23(a)(iv).

“AHC’s Closing Documents”—as defined in Section 5.2(a).

“Appurtenances”—all privileges, rights, easements, hereditaments and appurtenances belonging to or for the benefit of the Land, including all easements appurtenant to and for the benefit of any Land (a “Dominant Parcel”) for, and as the primary means of access between, the Dominant Parcel and a public way, or for any other use upon which lawful use of the Dominant Parcel for the purposes for which it is presently being used is dependent, and all rights existing in and to any streets, alleys, passages and other rights-of-way included thereon or adjacent thereto (before or after vacation thereof) and vaults beneath any such streets.

 

A-3

“ARS”—shall mean Auction Rate Securities owned by AHC.

“Assumed Value of Parent Common Stock”—as defined in Section 3.6.2(e)

“Auction Rate Securities”—shall mean any debt instruments with a long-term nominal maturity for which the interest rate is reset through periodic auctions or other competitive bidding processes.

“Audit Delivery Date”—shall mean thirty (30) days following Parent’s receipt of audited consolidated financial statements of Parent and its subsidiaries for each of the fiscal years ended June 30, 2009, 2010, 2011 and 2012.

“Balance Sheet”—as defined in Section 4.4.

“Best Efforts”—the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to achieve that result as expeditiously as possible; provided , however , an obligation to use Best Efforts under this Agreement (except as that term is used in Section 7.1 and Section 12.2 of this Agreement) does not require a Person subject to that obligation to take actions that would result in a materially adverse change in the benefits to such Person of this Agreement and the Contemplated Transactions or require the incurring of material expense or liability to obtain such result.

“Breach”—any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant or obligation, in or of this Agreement or any other Contract, or any event which with the passing of time or the giving of notice, or both, would constitute such a breach, inaccuracy or failure.

“Bulk Sales Laws”—as defined in Section 6.9.

“Business Day”—any day other than (a) Saturday or Sunday or (b) any other day on which banks in New York or Colorado are permitted or required to be closed.

“Certificate Amendment”—as defined in Section 7.1(e).

“Closing”—as defined in Section 3.9.

“Closing Cash Payment”—as defined in Section 3.6.2 (b)(i).

“Closing Date”—the date on which the Closing actually takes place.

“Closing Shares”—as defined in Section 3.6.2(b)(ii).

“COBRA”—as defined in Section 4.15(f).

“Code”—means the Internal Revenue Code of 1986, as amended.

“Common Units”—means the Common Units of Parascript.

“Competing Transaction”—shall mean any of the following (other than the transactions contemplated by this Agreement) involving AHC, Parascript, or any of their respective subsidiaries: (i) any merger, consolidation, share exchange, business combination or similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 20% or more of the assets of AHC and its subsidiaries, taken as a whole, or Parascript and its subsidiaries, taken as a whole, (iii) any tender offer or exchange offer for 20% or more of the outstanding shares of capital stock of AHC or 20% or more of the outstanding Units of Parascript or the filing of

 

A-4

a registration statement under the Securities Act in connection therewith; (iv) any Person (other than stockholders of AHC or Members of Parascript as of the date of this Agreement) having acquired beneficial ownership of, or any group (as such term is defined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) having been formed which beneficially owns or has the right to acquire beneficial ownership of, 20% or more of the outstanding shares of capital stock of AHC or 20% or more of the outstanding Units of Parascript; or (v) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

“Confidential Information”—as defined in Section 15.1.

“Consent”—any approval, consent, ratification, waiver or other authorization.

“Contemplated Transactions”—all of the transactions contemplated by this Agreement, including, but not limited to, the Merger and the Certificate Amendment.

“Contract”—any agreement, contract, Lease, consensual obligation, promise or undertaking (whether written or oral and whether express or implied), that is legally binding.

“Damages”—as defined in Section 14.2.

“Designated AHC Stockholders”—as defined in the Recitals to this Agreement.

“Designated Parascript Members”—as defined in the Recitals.

“DGCL”—as defined in the Recitals to this Agreement.

“Disclosing Party”—as defined in Section 15.1(a).

“Disclosure Letter”—means the Initial Disclosure Letter as defined in Section 7.2 or the Supplemental Disclosure Letter as defined in Section 7.3 delivered by Parascript to AHC or by AHC to Parascript.

“Dispute Notice”—as defined in Section 3.6.7 (a)(ii)

“Earn-Out Payment”—as defined in Section 3.6.2(e).

“Earn-Out Resolution Accounting Firm”—as defined in Section 3.6.2(e).

“EBITDA” shall mean, with respect to New Sub and for any fiscal year, the consolidated earnings from operations before interest, taxes, depreciation and amortization, calculated as if New Sub was being operated as a single separate and independent corporation. EBITDA shall be determined in accordance with GAAP, subject to the following adjustments. In determining such EBITDA:

(a) EBITDA shall be computed without regard to “extraordinary items” of gain or loss as that term shall be defined in GAAP;

(b) EBITDA shall include any gains or profits realized from the sale of any assets in the Ordinary Course of Business;

(c) No deduction shall be made for any management fees, general overhead expenses or other intercompany charges, of whatever kind or nature, charged by Parent or AHC to New Sub that are not incurred in the Ordinary Course of Business of New Sub;

“Effective Time”—as defined in Section 3.2(b).

“Encumbrance”—any charge, claim, community or other marital property interest, condition, equitable interest, lien, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right

 

A-5

of first option, right of first refusal or similar restriction, including any restriction on use, voting (in the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership.

“ERISA”—the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate”—as defined in Section 4.15(a).

“Exchange Act”—the Securities Exchange Act of 1934, as amended.

“Exchange Agent”—shall mean Parascript Management, Inc.

“Exchange Agent Agreement”—shall mean the agreement entered into by and between Parascript and Parascript Management, Inc., pursuant to which the Exchange Agent shall pay the Merger Consideration in accordance with Section 3.6.2.

“Expense Funds”—as defined in Section 7.4(b).

“Expenses”—shall mean those fees and expenses actually incurred by a party in connection with this Agreement and the transactions contemplated hereby, including fees and expenses of outside counsel, investment bankers, accountants, experts, consultants and other representatives.

“Filed AHC Copyrights”—as defined in Section 5.23(f).

“Filed AHC Marks”—as defined in Section 5.23(e).

“Final AHC Tax Returns”—as defined in Section 13.2(b).

“Filed Parascript Copyrights”—as defined in Section 4.23(f).

“Filed Parascript Marks”—as defined in Section 4.23(e).

“Final Parascript Tax Returns”—as defined in Section 13.2(b).

“GAAP”—generally accepted accounting principles for financial reporting in the United States, applied on a consistent basis in accordance with past practice.

“Gilb Employment Agreement”—as defined in Section 3.10(a).

“Governing Documents”—with respect to any particular entity, (a) if a corporation, the articles or certificate of incorporation and the bylaws; (b) if a general partnership, the partnership agreement and any statement of partnership; (c) if a limited partnership, the limited partnership agreement and the certificate of limited partnership; (d) if a limited liability company, the articles of organization and operating agreement; (e) if another type of Person, any other charter or similar document adopted or filed in connection with the creation, formation or organization of the Person; (f) all equity holders’ agreements, voting agreements, voting trust agreements, joint venture agreements, registration rights agreements or other agreements or documents relating to the organization, management or operation of any Person or relating to the rights, duties and obligations of the equity holders of any Person; and (g) any amendment or supplement to any of the foregoing.

“Governmental Authorization”—any Consent, license, registration or permit issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

 

A-6

“Governmental Body”—any:

(a) nation, state, county, city, town, borough, village, district or other jurisdiction;

(b) federal, state, local, municipal, foreign or other government;

(c) governmental or quasi-governmental authority of any nature (including any agency, branch, department, board, commission, court, tribunal or other entity exercising governmental or quasi-governmental powers); or

(d) multinational organization or body;

(e) body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, or

(f) official of any of the foregoing.

“Ground Lease”—any long-term lease of land in which most of the rights and benefits comprising ownership of the land and the improvements thereon or to be constructed thereon, if any, are transferred to the tenant for the term thereof.

“Ground Lease Property”—any land, improvements and Appurtenances subject to a Ground Lease in favor of such Person.

“Improvements”—all buildings, structures, fixtures and improvements located on the Land or included in Parascript’s assets, including those under construction.

“Indemnification Threshold”—as defined in Section 14.4(a).

“Indemnified Person”—as defined in Section 14.4(a).

“Indemnifying Person”—as defined in Section 14.4(a).

“Initial Disclosure Letter” and “Initial Disclosure Letters”—as defined in Section 7.2.

“Initial Effective Time”—as defined in Section 3.1(b).

“IRS”—the United States Internal Revenue Service and, to the extent relevant, the United States Department of the Treasury.

“Knowledge”—an individual will be deemed to have Knowledge of a particular fact or other matter if that individual is actually aware of that fact or matter, or that individual would reasonably be expected to discover or otherwise become aware of that fact or matter in the course of conducting a reasonable investigation regarding the accuracy of any representation or warranty contained in this Agreement. For purposes of this Agreement, Knowledge of Parascript, Parascript’s Knowledge or Parascript has no Knowledge shall mean solely the Knowledge of Jeffrey Gilb and Aron Katz and the Knowledge of AHC, AHC’s Knowledge or AHC has no Knowledge shall mean solely the Knowledge of O’Connell Benjamin and William Marshall.

“Land”—all parcels and tracts of land in which such Person has an ownership interest.

“Lease”—any Real Property Lease or any lease or rental agreement, license, right to use or installment and conditional sale agreement to which such Person is a party and any other Contract pertaining to the leasing or use of any Tangible Personal Property.

 

A-7

“Legal Requirement”—any applicable federal, state, local, municipal, foreign, international, multinational or other constitution, law, ordinance, principle of common law, code, regulation, statute or treaty, including, without limitation, any environmental law.

“Liability”—with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.

“Loan Agreement”—means the Amended and Restated Loan and Security Agreement between Parascript and Silicon Valley Bank, effective July 25, 2004.

“Manager”—means Parascript Management, Inc., the managing Member of Parascript.

“Material”—means a single event, violation, inaccuracy, circumstance, undertaking, occurrence or other matter which will result in Damages of at least Ten Thousand Dollars ($10,000) to Parascript or AHC.

“Material Adverse Effect”—A single event, violation, inaccuracy, circumstance or other matter will be deemed to have a “Parascript Material Adverse Effect” on Parascript if such single event, violation, inaccuracy, circumstance or other matter had or would reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise), capitalization, assets, liabilities, operations or results of operations of Parascript. A single event, violation, inaccuracy, circumstance or other matter will be deemed to have a “AHC Material Adverse Effect” on AHC if such single event, violation, inaccuracy, circumstance or other matter had or would reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise), capitalization, assets, liabilities, operations or results of operations of AHC; provided that “AHC Material Adverse Effect” shall be deemed to exclude any change in valuation, whether realized or unrealized, from the principal amount or face value of the ARS owned of record or beneficially by AHC or Parent prior to the Effective Time. Notwithstanding the foregoing, no event, violation, inaccuracy, circumstance or other matter which arises out of general economic or industry conditions shall be considered in determining whether a Material Adverse Effect has occurred. For the purposes of this definition, a single event, violation, inaccuracy, circumstance or other matter would have a material adverse effect on such business, condition, capitalization, assets, liabilities, operations or results of operations of Parascript or AHC if such single event, violation, inaccuracy, circumstance or other matter results in Damages of at least Ten Thousand Dollars ($10,000) to Parascript or AHC, as applicable.

“Material AHC Consent”—means any approval, consent, ratification, waiver or other authorization required by a Material AHC Contract.

“Material AHC Contract”—as defined in Section 5.19(a).

“Material Parascript Consent”—means any approval, consent, ratification, waiver or other authorization required by a Material Parascript Contract.

“Material Parascript Contract”—as defined in Section 4.19(a).

“Member” or “Members”—means a Person or the Persons defined as “Members” in Parascript’s Fourth Amended and Restated Operating Agreement, dated as of January 1, 2005, as may be amended or supplemented from time to time, including to add additional Persons as Members of Parascript.

“Member Advances” means the advances on distributions made by Parascript to Members on or after January 1, 2007 and prior to the Closing Date.

 

A-8

“Member Representative”—shall mean Parascript Management, Inc.

“Mergers”—as defined in Section 3.2.

“Merger Consideration”—as defined in Section 3.6(b).

“Merger Subs”—as defined in the first paragraph of this Agreement.

“Negative Net Working Capital”—as defined in Section 3.6.7.

“Net Working Capital”—is (i) the sum of collectible accounts receivable (less any allowances for doubtful accounts and other applicable reserves), and cash and cash equivalents; less (ii) the sum of accounts payable, the outstanding principal amount and accrued interest under the Loan Agreement and accrued expenses (including without limitation all accrued employment related expenses), each as used in the consolidated balance sheet of Parascript and as determined in accordance with GAAP consistent with Parascript’s past practices.

“New Matters”—as defined in Section 7.3.

“New Sub”—as defined in Section 3.6.2(e).

“Noncompetition Agreements”—as defined in Section 3.10(a)(ii).

“Non-Prevailing Party”—as defined in Section 3.6.2(e).

“Note”—as defined in Section 3.6.2(b)(iv)

“Options” shall mean an option to purchase a specified number of Preferred Units pursuant to a written Preferred Unit Option Agreement between Parascript and such option holder, or the Common Unit Option/Issuance Plan.

“Order”—any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Body or arbitrator.

“Ordinary Course of Business”—an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal operations of such Person, including, in the case of Parascript, distributions of cash to its Members.

“Other Matters”—as defined in Section 7.3.

“Parascript”—as defined in the first paragraph of this Agreement.

“Parascript Articles of Merger”—as defined in Section 3.2(b)

“Parascript 401(k) Plan”—as defined in Section 13.1(c).

“Parascript Cafeteria Plan”—as defined in Section 13.1(d).

“Parascript Certificate of Merger”—as defined in Section 3.2(b).

“Parascript Commercial Contracts”—as defined in Section 4.23(b).

 

A-9

“Parascript Consent”—as defined in Section 9.3.

“Parascript Contact”—as defined in Section 15.2.

“Parascript Contract”—any Contract (a) under which Parascript has or may acquire any rights or benefits; (b) under which Parascript has or may become subject to any obligation or liability; or (c) by which Parascript or any of its assets is bound.

“Parascript Copyrights”—as defined in Section 4.23(a)(iii).

“Parascript Data Room contains”—as defined in Section 4.26.

“Parascript Employee Plans”—as defined in Section 4.15(a).

“Parascript Financial Statements”—as defined in Section 4.4.

“Parascript Group”—as defined in Section 8.1.

“Parascript Indemnified Person”—as defined in Section 14.3.

“Parascript Intellectual Property Assets”—as defined in Section 4.23.

“Parascript Interim Balance Sheet”—as defined in Section 4.4.

“Parascript Marks”—as defined in Section 4.23(a)(i).

“Parascript Meeting”—as defined in Section 7.1(f).

“Parascript Member Approval”—means the approval of the holders of 70% of the Common Units and Preferred Units voting together as a single class.

“Parascript Merger”—as defined in Section 3.2(a).

“Parascript Merger Consideration”—as defined in Section 3.6.2(b).

“Parascript Merger Filings”—as defined in Section 3.2(b).

“Parascript Merger Sub”—as defined in the first paragraph of this Agreement.

“Parascript Net Names”—as defined in Section 4.23(a)(v).

“Parascript Options”—as defined in Section 4.3.

“Parascript Patents”—as defined in Section 4.23(a)(ii).

“Parascript Payments”—means (i) the Expense Funds, (ii) a distribution of $1,424,044 owed to certain holders of Units, which distribution was declared as of May, 2006, and never paid to such holders, and (iii) an amount of cash determined by Parascript to be paid to and, as required by applicable law, withheld on behalf of, certain Persons who provide services to Parascript plus any amounts to be paid for Medicare and other Taxes payable by Parascript Merger Subsidiary and/or Parascript Surviving Company to a Governmental Body as a result of such payments.

 

A-10

“Parascript Surviving Company”—as defined in Section 3.2(a).

“Parascript Trade Secrets”—as defined in Section 4.23(a)(iv).

“Parascript’s Closing Documents”—as defined in Section 4.2(a).

“Parent Common Stock”—as defined in Section 2.1.

“Parent Option”—as defined in Section 3.6.5.

“Parent Options”—as defined in Section 3.6.5.

“Part”—a part or section of the Disclosure Letter.

“Pattern Recognition Technology”—shall mean collectively, all processes, methods designs, computer software (including all iterations thereof, in both object and source code formats), interfaces, formats, templates, data, documentation and works of authorship used in the development of Parascript’s pattern recognition technology and comprising or related to those programs and applications of such technology currently under consideration or development as of the date hereof, including, without limitation, Parascript’s stock selection program, Parascript’s breast cancer detection program and the dynamic learning technology currently being developed by Applied Intelligence Solutions, LLC.

“Person”—an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture or other entity or a Governmental Body.

“Plan Year”—as defined in Section 13.1(d).

“Pearlman Note”—shall mean the promissory note, dated February 15, 2007, as amended, in the principal amount of One Hundred Seventy Five Thousand Dollars ($175,000) plus any accrued but unpaid interest thereon from William Pearlman in favor of Parascript, which is due and payable on December 31, 2008.

“Preferred Units”—means the Preferred Units of Parascript.

“Proceeding”—any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal, whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Proxy Agreement”—as defined in Section 9.16 and 10.17.

“Proxy Statement”—as defined in Section 7.1(a).

“Real Property”—the Land and Improvements and all Appurtenances thereto and any Ground Lease Property.

“Receiving Party”—as defined in Section 15.1.

“Record”—information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

 

A-11

“Registration Rights Agreement”—means the Registration Rights Agreement between Parent and the Member Representative substantially in the form attached hereto as Exhibit 3.

“Registration Statement”—as defined in Section 7.1(b).

“Related Person”—

With respect to a particular individual:

(a) each other member of such individual’s Family (as defined below);

(b) any Person that is directly or indirectly controlled by any one or more members of such individual’s Family;

(c) any Person in which members of such individual’s Family hold (individually or in the aggregate) a Material Interest (as defined below); and

(d) any Person with respect to which one or more members of such individual’s Family serves as a director, officer, partner, executor or trustee (or in a similar capacity).

With respect to a specified Person other than an individual:

(a) any Person that directly or indirectly controls, is directly or indirectly controlled by or is directly or indirectly under common control with such specified Person;

(b) any Person that holds a Material Interest in such specified Person;

(c) each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity);

(d) any Person in which such specified Person holds a Material Interest; and

(e) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity).

For purposes of this definition, (a) “control” (including “controlling,” “controlled by,” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by Contract or otherwise, and shall be construed as such term is used in the rules promulgated under the Securities Act; (b) the “Family” of an individual includes (i) the individual, (ii) the individual’s spouse, (iii) any other individual who is related to the individual or the individual’s spouse within the second degree and (iv) any other natural Person who resides with such individual; and (c)”Material Interest” means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least ten percent (10%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least ten percent (10%) of the outstanding equity securities or equity interests in a Person.

“Registration Statement”—as defined in Section 7.1.

“Representative”—with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor, accountant, financial advisor, legal counsel or other representative of that Person.

“Review Period”—as defined in Section 3.6.7 (a)(ii).

“Sarbanes-Oxley Act”—as defined in Section 5.26.

“SEC”—the United States Securities and Exchange Commission.

 

A-12

“Securities Act”—as defined in Section 4.3.

“Silicon Valley Payment”—means the aggregate amount of principal and interest owing to Silicon Valley Bank as of the Effective Time to be repaid by Parascript to Silicon Valley Bank on or before the Closing Date, to the extent required by Silicon Valley Bank.

“Software”—all computer software and subsequent versions thereof, including source code, object, executable or binary code, objects, comments, screens, user interfaces, report formats, templates, menus, buttons and icons and all files, data, materials, manuals, design notes and other items and documentation related thereto or associated therewith.

“Subsidiary”—with respect to any Person (the “Owner”), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation’s or other Person’s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred), are held by the Owner or one or more of its Subsidiaries.

“Supplemental Disclosure Letter” and “Supplemental Disclosure Letters”—as defined in Section 7.3.

“Surviving Companies”—as defined in Section 3.2 (a).

“Tangible Personal Property”—all machinery, equipment, tools, furniture, office equipment, computer hardware, supplies, materials, vehicles and other items of tangible personal property of every kind owned or leased (wherever located and whether or not carried on Parascript’s books), together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component part thereof and all maintenance records and other documents relating thereto.

“Tax”—any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees’ income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Body or payable under any tax-sharing agreement or any other Contract.

“Tax Distribution Amount”—as defined in Section 7.5(a).

“Tax Distribution Statement”—as defined in Section 7.5(a).

“Tax Return”—any return (including any information return), report, statement, schedule, notice, form, declaration, claim for refund or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

“Taxable Income”—as defined in Section 7.5(a).

“Third Party”—a Person that is not a party to this Agreement.

“Third-Party Claim”—any claim against any Indemnified Person by a Third Party, whether or not involving a Proceeding.

 

A-13

“Transfer Agent”—shall mean Continental Stock Transfer & Trust Company, transfer agent of AHC.

“Unit”—a unit of ownership in Parascript, including all issued and outstanding Preferred Units and Common Units.

“Voting Agreement”—as defined in Section 3.10(a)(vi).

“WARN Act”—as defined in Section 4.21(d).

“WLLCA”—as defined in the Recitals to this Agreement.

“Year End Negative Net Working Capital”—as defined in Section 3.6.7 (b)(ii).

“Year End Net Working Capital”—is the Net Working Capital of Parascript as of December 31, 2008.

“Year End Net Working Capital Calculation”—as defined in Section 3.6.7 (a)(i).

1.2 Usage .

(a) Interpretation . In this Agreement, unless a clear contrary intention appears:

(i) the singular number includes the plural number and vice versa;

(ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(iii) reference to any gender includes each other gender;

(iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(v) reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(vi) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

(vii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

(viii) “or” is used in the inclusive sense of “and/or”;

(ix) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding”; and

(x) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

(b) Accounting Terms and Determinations . Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.

 

A-14

(c) Legal Representation of the Parties . This Agreement was negotiated by the parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation hereof.

2. FORMATION OF HOLDING COMPANY AND SUBSIDIARIES .

2.1 Organization of Parent . AHC has caused Parent, a new corporation and a wholly owned subsidiary of AHC, to be organized under the laws of the State of Delaware. The certificate of incorporation and bylaws of Parent contain, and immediately following the Effective Time (as defined in Section 3.2(b)) shall contain, provisions identical to the certificate of incorporation and bylaws of AHC immediately prior to the Effective Time, except as otherwise permitted by Section 251(g)(4) of the DGCL and agreed to by Seller. The authorized capital stock of Parent consists of 100 shares of common stock, par value $0.001 per share (“Parent Common Stock”), all of which shares have been issued to AHC at a price of $0.001 per share.

2.2 Organization of Merger Subsidiaries . Parent has caused to be organized, for the sole purpose of effectuating the Mergers contemplated herein:

(a) AHC Merger Sub, a corporation organized under the laws of the State of Delaware. The authorized capital stock of AHC Merger Sub consists of 100 shares of common stock, par value $0.01 per share, all of which shares are issued to Parent at a price of $0.01 per share; and

(b) Parascript Merger Sub, a limited liability company organized under the laws of the State of Delaware. All of the membership interests of Parascript Merger Sub are issued to Parent.

3. THE MERGERS .

3.1 The AHC Merger .

(a) At the Initial Effective Time, AHC Merger Sub shall be merged with and into AHC (the “AHC Merger”) in accordance with the DGCL, and upon the terms and subject to the conditions set forth in this Agreement, whereupon the separate existence of AHC Merger Sub shall cease and AHC shall be the surviving corporation (the “AHC Surviving Corporation”).

(b) As soon as practicable (and, in any event, within five (5) Business Days after satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Mergers set forth in Articles 10 and 11 other than conditions that by their nature are to be satisfied at the Closing and will in fact be satisfied or waived at the Closing, AHC shall file a certificate of merger (“AHC Certificate of Merger”), certified by the secretary of AHC in accordance with Section 251(g) of the DGCL (the “AHC Merger Filing”), with the Delaware Secretary of State and make all other filings or recordings required by the DGCL in connection with the AHC Merger. The AHC Merger shall become effective at the Initial Effective Time. As used herein, the term “Initial Effective Time” means the time at which the AHC Certificate of Merger is filed and accepted by the Delaware Secretary of State (or any other time indicated and mutually agreed to by AHC and Parascript).

(c) From and after the Initial Effective Time, the separate corporate existence of AHC shall cease and the AHC Surviving Corporation shall possess all the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of AHC and AHC Merger Sub, all as provided under the DGCL.

3.2 The Parascript Merger .

(a) At the Effective Time, Parascript Merger Sub shall be merged with and into Parascript (the “Parascript Merger” and, together with the AHC Merger, the “Mergers”) in accordance with the DLLCA and the WLLCA, and upon the terms and subject to the conditions set forth in this Agreement, whereupon the separate existence of Parascript Merger Sub shall cease and Parascript shall be the surviving limited liability company (the “Parascript Surviving Company” and, together with the AHC Surviving Corporation, the “Surviving Companies”).

 

A-15

(b) Immediately following the Initial Effective Time, Parascript and Parascript Merger Sub shall file a certificate of merger meeting the requirements of the DLLCA (the “Parascript Certificate of Merger”), and shall file articles of merger meeting the requirements of the WLLCA (“Parascript Articles of Merger”), to be properly executed and filed with the Delaware Secretary of State in accordance with the terms of conditions of the DLLCA and the Wyoming Secretary of State in accordance with the terms and conditions of the WLLCA, respectively (the “Parascript Merger Filings”), and make all other filings or recordings required by the DLLCA and the WLLCA, in connection with the Parascript Merger. The Parascript Merger shall become effective at the Effective Time. As used herein, the term “Effective Time” means the time one minute following the Initial Effective Time.

(c) The Parascript Surviving Company shall possess all the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of Parascript and Parascript Merger Sub, as provided under the WLLCA and the DLLCA, respectively.

3.3 Effects of the Mergers . At and after the Effective Time, the Mergers shall have the effects set forth in the applicable provisions of the WLLCA, the DLLCA and the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges and powers of Parascript and Parascript Merger shall vest in the Parascript Surviving Company, and all debts, liabilities and duties of Parascript and Parascript Merger shall attach to the Parascript Surviving Company. Without limiting the generality of the foregoing and subject thereto, at the Initial Effective Time, all the property, rights, privileges and powers of AHC and AHC Merger Sub shall vest in the AHC Surviving Corporation, and all debts, liabilities and duties of AHC and AHC Merger shall attach to the AHC Surviving Corporation.

3.4 Certificate of Incorporation and By-Laws .

(a) The certificate of formation of Parascript Merger Sub that is in effect immediately prior to the Effective Time shall be the certificate of formation of the Parascript Surviving Company, until thereafter changed or amended as provided therein or by applicable law.

(b) The certificate of incorporation of AHC that is in effect immediately prior to the Initial Effective Time shall be the certificate of incorporation of the AHC Surviving Corporation, until thereafter changed or amended as provided therein or by applicable law; provided that the certificate of incorporation of AHC Surviving Corporation shall be amended at the Initial Effective Time as required or permitted by Section 251(g) of the DGCL to reflect the changes mutually agreed to by the parties prior to the Initial Effective Time.

(c) At the Effective Time, the operating agreement of Parascript Merger Sub shall be the operating agreement of Parascript Surviving Company, and, at the Initial Effective Time, the bylaws of AHC shall be the bylaws of the AHC Surviving Corporation, until thereafter changed or amended as provided therein or by applicable law.

(d) The certificate of incorporation and bylaws of Parent in effect immediately after the Initial Effective Time will contain provisions identical to the certificate of incorporation and bylaws of AHC in effect immediately before the Initial Effective Time, in each case other than as required or permitted by Section 251(g) of the DGCL, and the name of Parent immediately after the Initial Effective Time shall be “Authentidate Holding Corp.”.

3.5 Directors and Officers .

(a) From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law (i) the manager of Parascript Merger Sub at the Effective Time shall be the manager of the Parascript Surviving Company; and (ii) the officers of Parascript at the Effective Time shall be the officers of the Parascript Surviving Company.

(b) From and after the Initial Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law (i) the directors of AHC at the Initial Effective Time shall be the directors of AHC Surviving Corporation; and (ii) the officers of AHC at the Initial Effective Time shall be the officers of the AHC Surviving Corporation.

 

A-16

(c) Subject to the provisions of Section 12.3, the directors of Parent immediately before the Initial Effective Time shall be the directors of Parent immediately after the Effective Time, and the officers of Parent immediately before the Initial Effective Time shall be the officers of Parent immediately after the Effective Time. Such directors and officers shall be elected or appointed in the organizational consent of Parent, which shall be entered into immediately before the Initial Effective Time.

3.6 Conversion of Securities . At the Effective Time, by virtue of the Mergers and without any action on the part of any party or the holders of any of the following securities:

3.6.1 AHC and AHC Merger Sub . At the Initial Effective Time, by virtue of the AHC Merger and without any action on the part of AHC, Parent, AHC Merger Sub or any holder of any shares of AHC Common Stock:

(a) All shares of AHC Common Stock that are held by AHC as treasury stock or that are owned by AHC, AHC Merger Sub or any other Subsidiary of AHC immediately prior to the Initial Effective Time shall cease to be outstanding and shall be cancelled and retired and shall cease to exist and no consideration shall be delivered in exchange therefor.

(b) Subject to Section 3.6.1(a), each outstanding share of AHC Common Stock issued and outstanding immediately prior to the Initial Effective Time shall be converted into the right to receive from Parent one fully paid and nonassessable share of Parent Common Stock (the “AHC Merger Consideration”). All shares of Parent Common Stock issued pursuant to this Section 3.6.1(b) shall be duly authorized and validly issued and free of preemptive rights, with no personal liability attaching to the ownership thereof.

(c) Each share of AHC Merger Sub common stock issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of AHC Surviving Corporation.

3.6.2 Parascript and Parascript Merger Sub . At the Effective Time, by virtue of the Parascript Merger and without any action on the part of Parascript, Parent, Parascript Merger Sub or any holder of Units:

(a) All Parascript Units that are held by Parascript or that are owned by Parascript, Parascript Merger Sub or any Subsidiary of Parascript immediately prior to the Effective Time, shall cease to be outstanding and shall be cancelled and retired and shall cease to exist and no consideration shall be delivered in exchange therefor.

(b) Subject to Section 3.6.2(a), all of the Units collectively, by virtue of the Parascript Merger and without any action on the part of the holders thereof, shall be converted into the right to receive from AHC or Parent the consideration set forth in this Section 3.6.2(b), after deduction and payment of the Advisor Fee, which Advisor Fee and consideration will be paid to such Person entitled to the Advisor Fee and Unit holders upon the terms and conditions set forth herein and in the Exchange Agent Agreement, and which consideration shall be paid and delivered to the Exchange Agent, at the times provided for below (collectively, the “Parascript Merger Consideration”):

(i) To be paid at Closing, Ten Million Dollars ($10,000,000) in cash (“Closing Cash Payment”); provided , however , that if cash available to Parent and AHC on the Closing Date is less than $10,000,000, then the Closing Cash Payment shall be reduced to the greater of (A) $8,500,000 or (B) $10,000,000 less fifty percent (50%) of any discounts with respect to the ARS (i) realized by the Closing with respect to any ARS sold by Parent or AHC in its sole discretion on or before the Closing Date, and (ii) present but unrealized with respect to any ARS owned by Parent at the Closing; and provided , further , that the amount equal to the difference between (i) $10,000,000 and (ii) Closing Cash Payment shall be added on a dollar for dollar basis to the principal amount of the Note to be issued by Parent pursuant to Section 3.6.2(b)(iv); plus

(ii) At the Closing, 30,000,000 shares of Parent Common Stock (“Closing Shares”); plus

(iii) All of the shares of Authentidate AG (“AG Shares”) owned by AHC or Parent, to be distributed on January 2, 2009; plus

 

A-17

(iv) A promissory note with a Twenty Million Dollar ($20,000,000) aggregate principal amount (as may be increased pursuant to Section 3.6.2(b)(i) above) and an interest rate of 10%, to be issued by Parent on the Closing Date (the “Note”) in the form of Exhibit 3 attached hereto; plus

(v) The Earn-Out Payment (as defined in Section 3.6.2 (e)), to be distributed at the time provided for in Section 3.6.2(e).

Notwithstanding anything herein to the contrary, subject to Section 14.9, the Exchange Agent shall have the right to withhold from payment to the Unit holders any amount of the Parascript Merger Consideration as determined in its sole discretion.

(c) Each share of Parascript Merger Sub common stock issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Parascript Surviving Company.

(d) The Designated Parascript Members, Parent and the Designated AHC Stockholders shall enter into the Proxy Agreement in the form to be mutually agreed upon by the parties thereto prior to the Closing Date which shall have a four year term and provide for the election of directors pursuant to which the board of directors of Parent following the Effective Time shall consist of nine (9) members, including one of whom will be the Chief Executive Officer of Parent, plus four other members nominated by the Member Representative and four members nominated by AHC.

(e) Following the Closing, Parent shall form a new subsidiary to exploit the Pattern Recognition Technology (“New Sub”). The holders of Units immediately prior to the Effective Time shall be entitled to receive additional shares of Parent Common Stock in an aggregate amount equal to the product of (i) ten (10) multiplied by (ii) one-half (1/2) of the sum of (a) the EBITDA of New Sub for its fiscal year 2010, plus (b) the EBITDA of New Sub for its fiscal year 2011, with such product divided by the Assumed Value of Parent Common Stock (the “Earn-Out Payment”). Such additional shares of Parent Common Stock shall be delivered on or before June 1, 2012. For purposes of this Section 3.6.2(e), the “Assumed Value of Parent Common Stock” shall be equal to $3.00. Prior to delivering the Earn-Out Payment to Members under this Section 3.6, AHC shall deliver to the Member Representative, no later than 15 days following the Audit Delivery Date, a schedule setting forth the computation of the Earn-Out Payment and a copy of the financial information used in making such computation. Parent shall provide the Member Representative reasonable access to the officers, employees, books and records of Parent as the Member Representative may reasonably request in order to verify such amounts. Parent’s computation of any payment under this Section 3.6.2 (e) shall be conclusive and binding upon the parties hereto unless, within 30 days following the Member Representative’s receipt of the payment information, the Member Representative notifies Parent in writing that it disagrees with Parent’s computation of the Earn-Out Payment. Such notice shall include a schedule setting forth the Member Representative’s computation of the payment together with a copy of any information used in making such computation. If Parent disagrees with the Member Representative’s computation, the parties shall attempt in good faith to reach a resolution of such disagreement. If such disagreement is not resolved within 15 days after delivery of the Member Representative’s notice, a nationally recognized independent public accounting firm as shall be agreed upon by Parent and the Member Representative in writing (the “ Earn-Out Resolution Accounting Firm ”) shall be directed to compute the amount of the Earn-Out Payment as promptly as practicable and such computation shall be binding upon the parties hereto. The Non-Prevailing Party in any arbitration before the Earn-Out Resolution Accounting Firm shall pay its own expenses incurred with respect to the arbitration and shall pay a percentage of (i) the fees and expenses of the Earn-Out Resolution Accounting Firm plus (ii) the reasonable out-of-pocket expenses (including reasonable attorneys’ fees) of the other party incurred with respect to the arbitration, which percentage shall be calculated by dividing (A) an amount equal to the difference between the Non-Prevailing Party’s determination of the Earn-Out Payment, as submitted to the Earn-Out Resolution Accounting Firm, and the Earn-Out Resolution Accounting Firm’s determination of the Earn-Out Payment by (B) an amount equal to the difference between the parties’ respective determinations of the Earn-Out Payment, as submitted to the Earn-Out Resolution Accounting Firm. The other party shall pay the remainder of the fees and expenses of the Earn-Out Resolution Accounting Firm

 

A-18

and its own expenses not required to be paid by the Non-Prevailing Party hereunder. For purposes of this Section 3.6.2(e), a party is the “ Non-Prevailing Party ” if the Earn-Out Resolution Accounting Firm’s determination of the Earn-Out Payment is closer to the other party’s determination of the Earn-Out Payment, as submitted to the Earn-Out Resolution Accounting Firm, than it is to that party’s determination of the Earn-Out Payment, as submitted to the Earn-Out Resolution Accounting Firm. Parent will not knowingly or willfully take actions that have no reasonable business purpose and the effect of which is to impair or frustrate the achievement of any level of Earn-Out Payment.

(f) The Closing Shares shall be issued first to the Exchange Agent, then the Transfer Agent shall cancel such certificate and issue and deliver certificates representing each former Member’s proportionate Closing Shares directly to the former Members as instructed in writing by the Exchange Agent.

Notwithstanding the foregoing, Parascript Merger Sub and/or the Parent may withhold and pay to any appropriate Governmental Body any amounts from the Parascript Merger Consideration required to be so withheld and paid for applicable Taxes or applicable law. To the extent that amounts are so withheld or paid over to or deposited with the relevant Governmental Body by or on behalf of Parascript Merger Sub and/or Parent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made by or on behalf of Parascript Merger Sub and/or Parent.

(g) At and as of the Effective Time, the holders of Units at the Effective Time shall cease to have any rights as members of Parascript, except the right to receive the Parascript Merger Consideration in accordance with Article III hereof, the Exchange Agent Agreement and such rights, if any, as they may have pursuant to Wyoming law. Except as provided above, until an executed letter of transmittal is submitted by a holder of Units, each such Unit shall, after the Effective Time, represent for all purposes only the right to receive the Parascript Merger Consideration as described above.

3.6.3 Certain Adjustments . If, between the date of this Agreement and the Effective Time, there is a reclassification, recapitalization, stock split, split-up, stock dividend, combination or exchange of shares with respect to, or rights issued in respect of AHC Common Stock, the Parent Common Stock or Parascript Units, the Parascript Merger Consideration shall be appropriately adjusted accordingly to provide to the holders of Parascript Units the same economic effect as contemplated by this Agreement prior to such event.

3.6.4 Effect on Parent Stock . Immediately following the Effective Time, shares of the capital stock of Parent owned by the AHC Surviving Corporation shall be cancelled by Parent without payment therefor.

3.6.5 AHC Stock Options . As of the Initial Effective Time, Parent shall take all such actions as may to necessary to cause each stock option outstanding under any stock option or compensation plan or arrangement of AHC (each, an “AHC Stock Option” and collectively “AHC Stock Options”) that is outstanding immediately prior to the Initial Effective Time, whether or not then vested or exercisable, shall cease to represent a right to acquire AHC Common Stock and shall be converted automatically into an option to purchase the same number of shares of Parent Common Stock (each, a “Parent Option and collectively, “Parent Options”), on substantially the same terms and conditions (including vesting schedule and per share exercise price) as applied to such AHC Option immediately prior to the Effective Time.

3.6.5.1 Parascript Common Unit Options. Each Parascript Common Unit Option granted prior to the Effective Time shall automatically vest in full so that each such Common Unit Option shall, immediately prior to the Effective Time, become fully exercisable for all of the Common Units at the time subject to such Option. Immediately following the Effective Time, all outstanding Common Unit Options shall terminate and cease to be outstanding. Parent will not assume any Common Unit Options.

3.6.5.2 Parascript Preferred Unit Options . Each Parascript Preferred Unit Option granted prior to the Effective Time shall automatically vest in full so that each such Preferred Unit Option shall immediately prior to the Effective Time, become fully exercisable for all of the Preferred Units at the time subject to such Option. Immediately following the Effective Time, all outstanding Preferred Unit Options shall terminate and cease to be outstanding. Parent will not assume any Preferred Unit Options.

 

A-19

3.6.6 No Fractional Shares of Parent Stock . No fractional shares of Parent Common Stock shall be issued in the Parascript Merger. All fractional shares of Parent Common Stock that a holder of Units would otherwise be entitled to receive as a result of the Parascript Merger shall be aggregated and if a fractional share results from such aggregation, such holder shall be entitled to receive, in lieu thereof, an amount in cash, without interest, determined by multiplying such fractional share by the closing price of AHC Common Stock on the trading day immediately preceding the Closing Date. As soon as practicable after the determination of the amount of cash to be paid to such former holders of Units in lieu of any fractional interests, the Exchange Agent shall notify Parent, and Parent shall ensure that there is deposited with the Exchange Agent and shall cause the Exchange Agent to forward such amounts to such former holders of Units in accordance with this Agreement.

3.6.7 Working Capital Adjustment .

(a) Determination of Year End Net Working Capital .

(i) As promptly as practicable after December 31, 2008, but in any event not more than sixty (60) days thereafter, Parent shall deliver to the Exchange Agent a calculation in reasonable detail setting forth Parent’s calculation (the “Year End Net Working Capital Calculation”) of the Net Working Capital of Parascript as of December 31, 2008 (the “Year End Net Working Capital”).

(ii) The Exchange Agent shall have thirty (30) days after delivery of the Year End Net Working Capital Calculation (the “Review Period”) to review the Year End Net Working Capital Calculation. If the Exchange Agent does not agree with the Year End Net Working Capital Calculation, the Exchange Agent shall, within the Review Period, deliver to Parent a written notice (a “Dispute Notice”) setting forth (i) the amount the Exchange Agent believes is the correct Year End Net Working Capital, and (ii) a reasonably detailed explanation of the basis of the Exchange Agent’s calculation of such amounts. If the Exchange Agent indicates in writing that the Exchange Agent does not dispute the Year End Net Working Capital Calculation, or if the Exchange Agent fails to deliver a Dispute Notice to Parent within the Review Period, the Year End Net Working Capital as shown on the Year End Net Working Capital Calculation shall deemed final and binding on the parties.

(iii) If a Dispute Notice shall be timely delivered by the Exchange Agent to Parent, the Exchange Agent and Parent shall, within thirty (30) days after such delivery, promptly and in good faith attempt to resolve the matters set forth therein and agree in writing upon the final amount of the Year End Net Working Capital. If the parties are unable to resolve the matters in dispute within that 30-day resolution period, then such parties shall agree on an independent accounting firm (the “Accounting Firm”) to resolve such matters as soon as reasonably practicable. The Exchange Agent and Parent shall each execute and deliver such retention agreements as the Accounting Firm may reasonably require in connection with its services pursuant to this section.

(iv) The Accounting Firm shall be instructed to promptly review the applicable provisions of this Agreement and shall only consider those items in Parent’s calculation of Year End Net Working Capital that are expressly identified as items of dispute in the Dispute Notice (and such matters that are necessarily connected therewith according to proper accounting rules and procedures). The Accounting Firm shall, as promptly as practicable, deliver to Parent and the Exchange Agent a report setting forth any adjustments to such disputed items necessary to make such items conform to the requirements of this Section 3.6.7, and setting forth its determination of the Year End Net Working Capital. The determination of the Accounting Firm with respect to such matters shall be final, conclusive and binding upon the parties and not subject to appeal on any ground.

(v) With respect to any dispute and/or resolution pursuant to this Section 3.6.7, the Exchange Agent and Parent shall each pay and be responsible for their own respective costs and expenses, including, without limitation, the fees and expenses of their respective legal, accounting and other advisors, and one-half of the fees and expenses of the Accounting Firm.

 

A-20

(b) Year End Payment Adjustment .

(i) In the event the Year End Net Working Capital is greater than $4,000,000, no Year End Payment Adjustment shall be payable and the Year End Net Working Capital shall become final and binding upon the parties.

(ii) In the event the Year End Net Working Capital is less than $4,000,000 (the “Year End Negative Net Working Capital”), the principal amount of the Note shall be deemed to be automatically reduced by (A) the Year End Negative Net Working Capital on the date the Year End Net Working Capital shall become final and binding upon the parties, and (B) the amount of any interest accrued on such reduced principal amount.

(c) Silicon Valley Payment. In the event that (i) the Silicon Valley Payment is repaid on or before the Closing Date, and (ii) the Year End Net Working Capital is greater than $4,000,000, then upon the final determination of the Year End Net Working Capital pursuant to this Section 3.6.7, Parent shall pay, or cause to be paid, to the Exchange Agent the Silicon Valley Payment to the extent that such payment would not cause the Year End Net Working Capital to be less than $4,000,000 immediately following such payment.

3.6.8 Withholding Rights .

(a) Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Units such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax Law. To the extent that amounts are so withheld or paid over to or deposited with the relevant Governmental Body by or on behalf of Parent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made by or on behalf of Parent.

(b) To the extent that any member of Parascript is subject to withholding on any compensation relating to the Merger, such withholding shall be made by the Parent and shall reduce the Parascript Merger Consideration accordingly. The Exchange Agent shall then be authorized to sell or exchange any portion of the Parascript Merger Consideration necessary to enable the Exchange Agent to make, as nearly as possible, the payments described in Sections 3.6.2(b) and 3.6.2(c), treating the withheld amounts as payments made to the member with respect to which the withholding was required. To the extent that an amount withheld with respect to a member of Parascript exceeds the amount that such member would be entitled to currently under Section 3.6.2(b) or 3.6.2(c), such amount shall be treated as a loan to such member, with such loan to be repaid out of the first payment pursuant to Section 3.6.2(b) or 3.6.2(c) to which such member would otherwise be entitled.

3.6.9 Further Assurances . At and after the Effective Time, the officers and directors of Parent, the AHC Surviving Corporation or the Parascript Surviving Company, as applicable, shall be authorized to execute and deliver, in the name and on behalf of the AHC Surviving Corporation, AHC Merger Sub or AHC, or the Parascript Surviving Company, Parascript Merger Sub or Parascript, any deeds, bills of sale, assignments or assurances and to take and to take and do, in the name of and on behalf of the AHC Surviving Corporation, AHC Merger Sub or AHC, or the Parascript Surviving Company, Parascript Merger Sub or Parascript, any other actions and things necessary to vest, perfect or confirm of record or otherwise in Parent, the AHC Surviving Corporation or the Parascript Surviving Company, as applicable, as result of, or in connection with the Mergers or otherwise carry out the purposes of this Agreement.

3.7 Exchange of Units .

(a) After the Effective Time, each former Member of Parascript shall be entitled, upon surrender of the letter of transmittal described in Section 3.7(b), to receive such Member’s portion of the Closing Shares (and if applicable from time to time the Parascript Merger Consideration provided for in Section 3.6.2 (f)) from Parent and AHC through such reasonable procedures as Parent and AHC may adopt (including but not limited to those set forth in this Agreement and the Exchange Agent Agreement).

 

A-21

(b) Promptly after the Effective Time and no later than ten (10) Business Days after the Effective Time, Parent and AHC shall deliver to the Exchange Agent who shall deliver to each former Member of Parascript (i) two letters of transmittal in the forms to be mutually agreed upon by the parties hereto prior to the Closing Date and completed in a manner approved by the Exchange Agent, and (ii) instructions for use in effecting the surrender of the letters of transmittal in exchange for such former Member’s portion of the Closing Cash Payment and such Member’s Closing Shares, which instructions shall be approved by Parent, AHC and the Exchange Agent. Promptly after receipt of such letters of transmittal by a Member, such Member shall surrender to the Exchange Agent executed letters of transmittal for each of the Closing Cash Payment and Closing Shares. Upon surrender by a Member of the executed letters of transmittal and after the Effective Time, such Member shall be entitled to receive in exchange therefor such Member’s portion of the Parascript Merger Consideration in accordance with Section 3.6.2 and the Exchange Agent Agreement. Except with respect to such Member’s proportionate principal amount of the Note, no interest shall accrue or be payable with respect to any Merger Consideration which any person shall be so entitled to receive from time to time after the Effective Time.

(c) Prior to the Effective Time (and from time to time after the Effective Time), the Board of Directors of Parent and AHC shall reserve for issuance a sufficient number of shares of Parent Common Stock for the purpose of issuing its shares to the Members in accordance herewith.

3.8 Closing of Transfer Books . From and after the Effective Time, the transfer books of Parascript shall be closed and no transfer of Units shall thereafter be made. From and after the Effective Time, the holders of certificates evidencing ownership of Units outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Units, except as otherwise provided for in this Agreement or by applicable Legal Requirements.

3.9 Closing . Upon the terms and subject to the conditions set forth herein, the closing of the Mergers (the “Closing”) will take place on the date on which the Initial Effective Time and Effective Time occurs, unless this Agreement has been theretofore terminated pursuant to its terms or unless another time or date is agreed to in writing by the parties hereto. The Closing shall be held at the offices of Becker & Poliakoff LLP at 45 Broadway, 11 ^th Floor, New York, NY 10006, unless another place is agreed to in writing by the parties hereto. Subject to the provisions of Article 10.17, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section 3.9 will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement. In such a situation, the Closing will occur as soon as practicable, subject to Article 10.17.

3.10 Closing Obligations . In addition to any other documents to be delivered under other provisions of this Agreement, at the Closing:

(a) Parascript shall deliver to Parent and AHC:

(i) The employment agreement of Jeffrey Gilb executed by Parent, AHC, Parascript and Jeffrey Gilb on or prior to the date of filing with the SEC of the definitive proxy statement and Registration Statement but which shall be effective only as of the Closing Date in the form to be mutually agreed upon by Parent, AHC, Parascript and Jeffrey Gilb (the “Gilb Employment Agreement”);

(ii) noncompetition agreements in the form to be mutually agreed upon by the parties thereto and executed on or before the Closing Date by the Designated Parascript Members and Alexander Filatov (the “Noncompetition Agreements”);

(iii) the Exchange Agent Agreement in the form to be mutually agreed upon by the parties thereto and executed on or before the Closing Date by Parascript and the Member Representative;

(iv) a certificate executed by Parascript as to the accuracy of its representations and warranties as of the date of this Agreement and as of the Closing in accordance with Section 9.1, and as to its

 

A-22

compliance with and performance in all material respects of its covenants and obligations to be performed or complied with at or before the Closing in accordance with Section 9.2;

(v) a certificate of the Secretary of Parascript certifying, as complete and accurate as of the Closing and attaching all requisite resolutions or actions of Parascript’s Members or shareholders approving (A) the execution and delivery of this Agreement and the consummation of the Contemplated Transactions, and (B) the incumbency and signatures of the officers of Parascript executing this Agreement and any other document relating to the Contemplated Transactions;

(vi) the Voting Agreement with Designated Parascript Members executed by Parascript, the Katz Family Limited Partnership, The Pearlman Family Limited Partnership, the Pachikov Kondratieva Family LLC and Parascript Management, Inc. and effective as of August 18, 2008 in the form attached hereto as Exhibit 1 ;

(vii) the Voting Agreement with Designated AHC Stockholders executed by Parascript and effective as of August 18, 2008 in the form attached hereto as Exhibit 2; and

(viii) the Proxy Agreement executed by the Designated Parascript Members, Parascript and Designated AHC Stockholders.

(b) Parent and AHC shall deliver to the Exchange Agent for the benefit of the former Members of Parascript:

(i) the Closing Cash Payment in accordance with Section 3.6.2(b)(iii);

(ii) the Closing Shares;

(iii) the Note; and

(iv) the Registration Rights Agreement.

(c) Parent and AHC shall deliver to Parascript:

(i) a certificate executed by AHC as to the accuracy of AHC’s representations and warranties as of the date of this Agreement and as of the Closing in accordance with Section 10.1 and as to its compliance with and performance of AHC’s covenants and obligations to be performed or complied with at or before the Closing in accordance with Section 10.2;

(ii) a certificate of the Secretary of AHC certifying, as complete and accurate as of the Closing, and attaching all requisite resolutions or actions of AHC’s board of directors and stockholders, as applicable, approving (A) the execution and delivery of this Agreement and the consummation of the Contemplated Transactions, (B) the AHC Name Change, (C) the incumbency and signatures of the officers of AHC executing this Agreement and any other document relating to the Contemplated Transactions and (D) accompanied by the requisite documents for amending the relevant Governing Documents of AHC required to effect the AHC Name Change in form sufficient for filing with the appropriate Governmental Body;

(iii) evidence reasonably satisfactory to Parascript as to the formation of New Sub and the contribution of the Pattern Recognition Technology and the related assets thereto;

(iv) the Exchange Agent Agreement executed by Parent and AHC;

(v) the Registration Rights Agreement executed by Parent and AHC;

(vi) the Voting Agreement with Designated Parascript Members executed by Parent and AHC;

(vii) the Voting Agreement with Designated AHC Stockholders executed by Parent, AHC and certain directors and officers of AHC; and

(viii) the Proxy Agreement executed by Parent and AHC.

 

A-23

(d) Parascript shall assign to the Exchange Agent the ABK Note and the Pearlman Note, which notes shall be held by the Exchange Agent for the benefit of the Parascript Members pursuant to the Exchange Agent Agreement.

3.11 Stock Options and Warrants . At or prior to the Effective Time, Parascript will terminate any and all outstanding stock option plans or similar plans and any stock options, warrants, other instruments convertible into or exercisable for Units of Parascript, or similar rights issued thereunder. At the Effective Time, no stock options, warrants, other instruments convertible into or exercisable for Units of Parascript, or similar rights issued thereunder will remain outstanding.

3.12 Transaction Structure . Upon the mutual agreement of the parties, the parties may, with the approval of their respective boards of directors or managers or Member Representative, at any time prior to mailing the Proxy Statement, change the method of effecting the combination of Parascript and AHC contemplated hereby (including without limitation, the provisions of this Article 3). This Agreement and related documents will be appropriately amended in order to reflect any such revised transaction, if applicable.

4. REPRESENTATIONS AND WARRANTIES OF PARASCRIPT . Subject to disclosures and information contained in the Parascript Disclosure Letter, Parascript and Member Representative represent and warrant to AHC as follows:

4.1 Organization and Good Standing .

(a) The Parascript Data Room contains a list of Parascript’s jurisdiction of organization and any other jurisdictions in which it is qualified to do business as a foreign limited liability company. Parascript is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Wyoming, with full limited liability company power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under the Parascript Contracts. Parascript is duly qualified to do business as a foreign limited liability company and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification except where the failure to so qualify would not have a Parascript Material Adverse Effect.

(b) The Parascript Data Room contains copies of the Governing Documents of Parascript, as currently in effect. Except as disclosed in Part 4.1(b), Parascript has no Subsidiary and does not own any shares of capital stock or other securities of any other Person.

4.2 Enforceability; Authority; No Conflict .

(a) This Agreement constitutes the legal, valid and binding obligation of Parascript, enforceable against Parascript in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting creditor’s rights generally and by general principles of equity. Upon the execution and delivery by Parascript of the Exchange Agent Agreement, and each other agreement to be executed or delivered by Parascript at the Closing (collectively, the “Parascript’s Closing Documents”), each of Parascript’s Closing Documents will constitute the legal, valid and binding obligation of Parascript, enforceable against Parascript in accordance with its terms. Parascript has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and Parascript’s Closing Documents and to perform its obligations under this Agreement and Parascript’s Closing Documents, and such action has been duly authorized by all necessary action by Parascript’s Members and Manager. Except for the required approval of Parascript’s Members in connection with the consummation of the Parascript Merger, all necessary action on the part of Parascript has been obtained. The affirmative vote of the holders of 70% of the Parascript Units is the only vote of the holders of any of Parascript’s Units in connection with the consummation of the transactions contemplated by this Agreement.

 

A-24

(b) Except as set forth in Part 4.2(b), neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time):

(i) Breach any provision of any of the Governing Documents of Parascript or any resolution adopted by the Manager or the Members of Parascript;

(ii) Breach or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions, or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which each Parascript, or any of its assets, may be subject, except where such Breach or challenge would not have a Parascript Material Adverse Effect;

(iii) Contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Parascript or that otherwise relates to the assets or the business of Parascript, except where such contravention, conflict, violation, revocation, withdrawal, suspension, cancellation, termination or modification would not have a Parascript Material Adverse Effect;

(iv) Breach any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate or modify, any Material Parascript Contract;

(v) Result in the imposition or creation of any Material Encumbrance upon or with respect to any of Parascript’s assets; or

(c) Except as set forth in Part 4.2(c), Parascript is not required to give any notice to or obtain any Material Parascript Consent in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

4.3 Capitalization . The authorized equity securities of Parascript consist of 14,000,000 Units, consisting of 4,000,000 Common Units and 10,000,000 Preferred Units, of which 205,000 Common Units, 9,846,724 Preferred Units, and 100,000 options to buy Preferred Units and 40,000 options to buy Common Units (together, the “Parascript Options”) are issued and outstanding on the date hereof. Other than for the Parascript Options, there are no Contracts relating to the issuance, sale or transfer of any equity securities or other securities of Parascript. None of the outstanding equity securities of Parascript was issued in violation of the Securities Act of 1933, as amended (the “Securities Act”), or any other Legal Requirement.

4.4 Financial Statements . The Parascript Data Room contains copies of: (a) audited balance sheets of Parascript as of December 31, 2004, and the related audited statements of income, changes in Members’ equity and cash flows for the fiscal year then ended, including the notes thereto together with the report thereon of Mayer Hoffman McCann P.C., independent certified public accountants; (b) audited consolidated balance sheets of Parascript as of December 31 for each of the years 2005, 2006 and 2007 and the related audited consolidated statements of income, changes in Member’s equity and cash flows for each of the fiscal years then ended, including in each case the notes thereto together with the report thereon of Anton Collins Mitchell LLP and Mayer Hoffman McCann P.C., as applicable, independent certified public accountants; and (c) an unaudited consolidated balance sheet of Parascript as of March 31, 2008 (the “Parascript Interim Balance Sheet”) and the related unaudited consolidated statements of income, changes in Members’ equity, and cash flows for the three (3) months then ended (collectively, the “Parascript Financial Statements”). The Parascript Financial Statements fairly present in all material respects (and the financial statements delivered pursuant to Section 6.8 will fairly present in all material respects) the financial condition and the results of operations, changes in Members’ equity and cash flows of Parascript as at the respective dates of and for the periods referred to in the Parascript Financial Statements, all in accordance with GAAP in all material respects. The Parascript Financial Statements reflect and the financial statements delivered pursuant to Section 6.8 will reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes to such financial

 

A-25

statements. The Parascript Financial Statements have been prepared from and are in accordance with the accounting Records of Parascript. The Parascript Data Room contains copies of all management letters from Parascript’s auditors to Parascript’s Manager since January 1, 2004, together with copies of all responses thereto.

4.5 Books and Records . The books of account and other financial Records of Parascript, all of which have been made available to AHC, are complete and correct in all material respects and represent actual, bona fide transactions and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. The minute books or equivalent records of Parascript, all of which have been made available to AHC, contain accurate and complete Records of all properly called meetings of, or actions taken by, the Members, the Manager and committees of Parascript, and no properly called meeting of any such Members, Manager or committee has been held for which minutes or equivalent records have not been prepared or are not contained in such minute books or equivalent records.

4.6 Sufficiency of Assets . Except as set forth in Part 4.6, the assets owned, leased or licensed by Parascript constitute all of the material assets, tangible and intangible, of any nature whatsoever, that are, to Parascript’s Knowledge, necessary to operate Parascript’s business in the manner presently operated by Parascript.

4.7 Description of Leased Real Property . Part 4.7 contains the correct street address of all real property leased by Parascript and an accurate description by location of the name of lessor, the date of lease, a brief description of any rights to renew or extend the term and the term expiration date of all such real property leases, including any amendments thereof or options to renew thereon.

4.8 Title to Assets; Encumbrances . Parascript owns good and transferable title to all of the assets purported to be owned by Parascript, subject to all Liabilities and Encumbrances thereon, except where failure to own such title would not have a material adverse effect on Parascript.

4.9 Condition of Assets .

(a) Parascript owns no Real Property. Use of the Real Property leased by Parascript for the various purposes for which it is presently being used by Parascript is permitted by the terms of the lease agreement related and, to Parascript’s Knowledge, all Legal Requirements pertaining thereto.

(b) The Tangible Personal Property owned by Parascript taken as a whole is in good repair and good operating condition, ordinary wear and tear excepted and, to the Knowledge of Parascript, is suitable for immediate use by AHC in its Ordinary Course of Business. To the Knowledge of Parascript, no item of material Tangible Personal Property owned by Parascript is in need of repair or replacement other than as part of routine maintenance in the Ordinary Course of Business of Parascript.

4.10 Accounts Receivable . All Accounts Receivable that are reflected on the Parascript Balance Sheet or the Parascript Interim Balance Sheet or on the accounting Records of Parascript as of the Closing Date represent or will represent valid obligations arising from sales actually made or services actually performed by Parascript in Parascript’s Ordinary Course of Business. Except as set forth on Part 4.10 and to the extent paid prior to the Closing Date, such Accounts Receivable of Parascript are or will be as of the Closing Date current net of the respective reserves shown on the Parascript Balance Sheet or the Parascript Interim Balance Sheet (which reserves are calculated consistent with past practice). There is no contest, claim, defense or right of setoff, under any Parascript Contract with any account debtor of an Account Receivable of Parascript relating to the amount or validity of such Account Receivable. The Parascript Data Room contains a listing and aging of all Accounts Receivable as of the date of the Parascript Interim Balance Sheet.

4.11 Inventories . Other than immaterial quantities of Parascript’s products held for sale in CD-ROM form, Parascript has no inventories as that term is used in GAAP.

4.12 No Undisclosed Liabilities . Except as set forth in Part 4.12, to the Knowledge of Parascript, Parascript has no Liabilities except for Liabilities reflected or reserved against in the Parascript Balance Sheet or the Parascript Interim Balance Sheet and current Liabilities incurred in the Ordinary Course of Business of Parascript since the date of the Parascript Interim Balance Sheet.

 

A-26

4.13 Taxes .

(a) Tax Returns Filed and Taxes Paid . Parascript is a partnership for federal income tax purposes and has not elected to be treated as other than a partnership for such purposes. Parascript has filed or caused to be filed on a timely basis all Tax Returns and all reports with respect to Taxes that are or were required to be filed by Parascript pursuant to applicable Legal Requirements, except where the failure to so file would not have a Parascript Material Adverse Effect. Except as set forth in Part 4.13(a), all Tax Returns and reports filed by Parascript are true, correct and complete in all material respects. Parascript has paid, or made provision for the payment of, all material Taxes that have or may have become due for all periods covered by the Tax Returns or otherwise, or pursuant to any assessment received by Parascript, except such Taxes, if any, as are being contested in good faith. Except as provided in Part 4.13(a), Parascript currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made or is expected to be made by any Governmental Body in a jurisdiction where Parascript does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Encumbrances on any of Parascript’s assets that arose in connection with any failure (or alleged failure) to pay any Tax and Parascript has no Knowledge of any basis for assertion of any claims attributable to Taxes which, if adversely determined, would result in any such Encumbrance except as provided in Part 4.13(a).

(b) Delivery of Tax Returns and Information Regarding Audits and Potential Audits . The Parascript Data Room contains copies and a list of all of Parascript’s Tax Returns filed since January 1, 2004. The federal and state income or franchise Tax Returns of Parascript have been audited by the IRS or relevant state tax authorities or are closed by the applicable statute of limitations for all taxable years through January 1, 2004. The Parascript Data Room contains a list of all Tax Returns of Parascript that have been audited after January 1, 2004 or are currently under audit and accurately describes any deficiencies or other amounts that were paid or are currently being contested. No undisclosed deficiencies are expected to be asserted with respect to any such audit. All deficiencies proposed as a result of such audits have been paid, reserved against, settled or are being contested in good faith by appropriate proceedings as described in Part 4.13(b). The Parascript Data Room contains copies of any examination reports, statements or deficiencies or similar items with respect to such audits. Except as provided in Part 4.13(b), to the Knowledge of Parascript, no Governmental Body is likely to assess any additional taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Taxes of Parascript claimed or raised by any Governmental Body in writing. Parascript has not extended the applicable statute of limitations on any Tax Return. Except as described in Part 4.13(b), Parascript has not given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of Parascript or for which Parascript may be liable.

(c) Specific Potential Tax Liabilities and Tax Situations .

(i) Withholding . Except as provided in Part 4.13(c)(i), to Parascript’s Knowledge, all material Taxes that Parascript is or was required by Legal Requirements to withhold, deduct or collect have been duly withheld, deducted and collected and, to the extent required, have been paid to the proper Governmental Body or other Person except where the failure to do so would not have a Parascript Material Adverse Effect on.

(ii) Tax Sharing or Similar Agreements . There is no tax sharing agreement, tax allocation agreement, tax indemnity obligation or similar written or unwritten agreement, arrangement, understanding or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other arrangement relating to Taxes) that will require any payment by Parascript.

(iii) Substantial Understatement Penalty . Parascript has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662, except where the failure to do so would not have a Parascript Material Adverse Effect.

 

A-27

(d) Proper Accrual . The charges, accruals and reserves with respect to Taxes on the Records of Parascript are adequate (determined in accordance with GAAP) and are at least equal to Parascript’s liability for Taxes. There exists no proposed tax assessment or deficiency against Parascript except as disclosed in the Parascript Interim Balance Sheet or in Part 4.13(d).

(e) Tax Treatment . Neither Parascript nor the Member Representative nor any of their respective Affiliates has taken or agreed to take any action, or is aware of any fact or circumstance that would be reasonably likely to prevent the exchanges of Parascript Units and AHC Common Stock for Parent Common Stock pursuant to the Mergers, taken together, from qualifying as exchanges described in Section 351 of the Code.

4.14 No Material Adverse Change . To the Knowledge of Parascript, since the date of the Parascript Balance Sheet, there has not been any material adverse change in the business, operations, assets, results of operations or condition (financial or other) of Parascript, and no event has occurred or circumstance exists within the control of Parascript that would result in such a material adverse change.

4.15 Employee Benefits . For the purposes of this Section 4.15, a reference to Parascript will also include Manager and/or Member Representative, as appropriate.

(a) The Parascript Data Room contains a list of all of Parascript’s “employee benefit plans” as defined by Section 3(3) of ERISA, all specified fringe benefit plans as defined in Section 6039D of the Code, and all other bonus, incentive-compensation, deferred-compensation, profit-sharing, stock-option, stock-appreciation-right, stock-bonus, stock-purchase, employee-stock-ownership, savings, severance, change-in-control, supplemental-unemployment, layoff, salary-continuation, retirement, pension, health, life-insurance, disability, accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit or welfare plan, and any other employee compensation or benefit plan, agreement, policy, practice, commitment, contract or understanding (whether qualified or nonqualified, subject to ERISA or not, defined under Section 3(3) of ERISA or not, currently effective or terminated, written or unwritten) and any trust, escrow or other agreement related thereto that (i) is maintained or contributed to by Parascript or any other corporation, entity or trade or business controlled by, controlling or under common control with Parascript (within the meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA) (“ERISA Affiliate”) or has been maintained or contributed to in the last six (6) years by Parascript or any ERISA Affiliate, or that Parascript or any ERISA Affiliate has committed to implement, establish, adopt or contribute to in the future (other than Parascript Employee Plans implemented or established pursuant to this Agreement) or with respect to which Parascript or any ERISA Affiliate has or may have any liability, and (ii) provides benefits, or describes policies or procedures applicable to any current or former director, officer, employee or service provider of Parascript or any ERISA Affiliate, or the dependents of any thereof, regardless of how (or whether) liabilities for the provision of benefits are accrued or assets are acquired or dedicated with respect to the funding thereof (collectively the “Parascript Employee Plans”). Such list identifies as such any Parascript Employee Plan that is a plan intended to meet the requirements of Section 401(a) of the Code. Such list also sets forth a complete and correct list of all ERISA Affiliates of Parascript during the last six (6) years.

(b) Except as disclosed in Part 4.15(b), neither Parascript nor its ERISA Affiliates are or have ever maintained or been obligated to contribute to a multiple employer plan (as defined in Section 413(c) of the Code), a multiemployer plan (as defined in Section 3(37) of ERISA), a defined benefit pension plan (as defined in Section 3(35) of ERISA) subject to Title IV of ERISA, a Benefit Plan subject to the minimum funding standards under Section 302 of ERISA or Section 412 of the Code, a Benefit Plan that owns employer stock or a Benefit Plan that is funded, in whole or in part, through a voluntary employees’ beneficiary association exempt from Tax under Section 501(c)(9) of the Code.

(c) The Parascript Data Room contains copies of (i) the documents comprising each Parascript Employee Plan (or, with respect to any Parascript Employee Plan which is unwritten, a detailed written description of eligibility, participation, benefits, funding arrangements, assets and any other matters which

 

A-28

relate to the obligations of Parascript or any ERISA Affiliate); (ii) all trust agreements, insurance contracts or any other funding instruments related to the Parascript Employee Plans; (iii) all rulings, determination letters, no-action letters or advisory opinions from the IRS, the U.S. Department of Labor or any other Governmental Body that pertain to each Parascript Employee Plan and any open requests therefor; (iv) the most recent financial reports (audited and/or unaudited) and the annual reports filed with any Governmental Body with respect to the Parascript Employee Plans during the current year and each of the three preceding years; (v) all contracts with third-party administrators, investment managers, consultants and other independent contractors that relate to any Parascript Employee Plan, and (vi) all summary plan descriptions, summaries of material modifications and memoranda, employee handbooks and other written communications regarding the Parascript Employee Plans.

(d) Except as disclosed in Part 4.15(d), full payment has been made of all amounts that are required under the terms of each Parascript Employee Plan to be paid as contributions with respect to all periods prior to and including the last day of the most recent fiscal year of such Parascript Employee Plan ended on or before the date of this Agreement and all periods thereafter prior to the Closing Date. Parascript has paid in full all required insurance premiums, subject only to normal retrospective adjustments in the ordinary course, with regard to the Parascript Employee Plans for all policy years or other applicable policy periods ending on or before the Closing Date.

(e) Neither Parascript nor any ERISA Affiliate has any liability and no facts or circumstances exist that would give rise to any liability (either directly or as a result of indemnification), and the Contemplated Transactions will not result in any liability, (i) for any excise tax imposed by Section 4971 through Section 4980B, Section 4999, Section 5000 or any other Section of the Code, (ii) any penalty under Section 502(i), Section 502(l), Part 6 of Title I or any other provision of ERISA, (iii) any excise taxes, penalties, damages or equitable relief as a result of any prohibited transaction, breach of fiduciary duty or other violation under ERISA, the Code or any other applicable law. No Parascript Employee Plan has been completely or partially terminated.

(f) Parascript has, at all times, complied, and currently complies, in all material respects with the applicable continuation requirements for its welfare benefit plans, including (i) Section 4980B of the Code (as well as its predecessor provision, Section 162(k) of the Code) and Sections 601 through 608, inclusive, of ERISA, and any similar state law, which provisions are hereinafter referred to collectively as “COBRA” and (ii) any applicable state statutes mandating health insurance continuation coverage for employees.

(g) Except as provided in Part 4.15(g), the form of all Parascript Employee Plans is in material compliance with the applicable terms of ERISA, the Code, and any other applicable laws, including the Americans with Disabilities Act of 1990, the Family Medical Leave Act of 1993 and the Health Insurance Portability and Accountability Act of 1996, and such plans have been operated in material compliance with such laws and the written Parascript Employee Plan documents. Neither Parascript nor any fiduciary of any Parascript Employee Plan has committed a material violation of the requirements of Section 404 of ERISA. Each Parascript Employee Plan has been maintained, operated, and administered in material compliance with its terms and any related documents or agreements and the applicable provisions of ERISA, the Code and any other applicable laws, including, but not limited to, rules and regulations promulgated by the Department of Labor, the PBGC and the Department of Treasury. All required reports and descriptions of the Parascript Employee Plans (including Internal Revenue Service Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of Material Modifications) have been (when required) timely filed with the IRS, the U.S. Department of Labor or other Governmental Body and distributed as required, and all notices required by ERISA or the Code or any other Legal Requirement with respect to the Parascript Employee Plans have been appropriately given. No Parascript Employee Plan is presently under audit or examination (nor has notice been received of a potential audit or examination) by the IRS, the U.S. Department of Labor or any other Governmental Body, and no matters are pending with respect to a Parascript Employee Plan under the IRS Voluntary Correction Program, Audit Closing Agreement Program, or other similar programs.

 

A-29

(h) Each Parascript Employee Plan that is intended to be qualified under Section 401(a) of the Code is either a prototype plan entitled to rely on the opinion letter issued by the IRS as to the qualified status of such Parascript Employee Plan under Section 401(a) of the Code to the extent provided in Revenue Procedure 2005-16 or has received a favorable determination letter from the IRS, and, to the Knowledge of Parascript, no circumstances exist that will result in a Parascript Material Adverse Effect as a result of such reliance or would result in revocation of any such favorable determination letter. Each trust created under any Parascript Employee Plan has been determined to be exempt from taxation under Section 501(a) of the Code, and Parascript is not aware of any circumstance that will or would result in a revocation of such exemption. With respect to each Parascript Employee Plan, to the Knowledge of Parascript, no event has occurred or condition exists that will or would give rise to a loss of any intended material tax consequence or to any material Tax under Section 511 of the Code.

(i) Except as disclosed to AHC on Part 4.15(i), any Parascript Employee Plan that is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code): (A) has been operated since January 1, 2005 through December 31, 2007 in good faith compliance in all material respects with Section 409A of the Code, IRS Notice 2005-1, and the proposed regulations under Section 409A of the Code; (B) has been operated since January 1, 2008 in compliance with Treasury Regulations issued under Section 409A of the Code; (C) has not been materially modified (as determined under the proposed regulations) after October 3, 2004, if it was in effect prior to January 1, 2005; (D) has not participated in a transaction that would be treated by Section 409A(b) of the Code as a transfer of property for purposes of Section 83 of the Code; and (E) does not have a stock option, equity unit option, or stock appreciation right granted under the Parascript Employee Plan with an exercise price or measurement floor that has been or may be less than the fair market value of the underlying stock or equity units (as the case may be) as of the date such option or stock appreciation right was granted or has any feature for the deferral of compensation other than the deferral of recognition of income until the later of exercise or disposition of such option or stock appreciation right.

(j) There is no material pending or, to Parascript’s Knowledge, threatened, Proceeding (other than routine claims for benefits in Parascript’s Ordinary Course of Business) relating to any Parascript Employee Plan, nor is there any basis for any such Proceeding.

(k) Parascript has maintained workers’ compensation coverage as required by applicable state law through purchase of insurance and not by self-insurance or otherwise except as disclosed to AHC on Part 4.15(k).

(l) Except as required by Legal Requirements, the consummation of the Contemplated Transactions will not (i) entitle any current or former employee of Parascript to severance pay, unemployment compensation or any other payment, benefit or award or (ii) accelerate the time of vesting or the time of payment, or increase the amount, of compensation due to any director, employee, officer, former employee or former officer of Parascript. There are no contracts or arrangements providing for payments that could subject any person to liability for tax under Section 4999 of the Code. No contribution, premium payment or other payment has been or will be made in support of any Parascript Employee Plan that is in excess of the allowable deduction for federal income Tax purposes for the year with respect to which the contribution was made or will be made (whether under Section 162, Section 280G, Section 404, Section 419, Section 419A of the Code or otherwise).

(m) Except for the continuation coverage requirements of COBRA or death benefits under the Parascript Employee Plans, Parascript has no obligations or potential liability for benefits to employees, former employees or their respective dependents following termination of employment or retirement under any of the Parascript Employee Plans that are Employee Welfare Benefit Plans (as defined in Section 3(1) of ERISA).

(n) Except as necessary to implement the Contemplated Transaction, none of the Contemplated Transactions will result in an amendment, modification or termination of any of the Parascript Employee Plans. No written representations have been made to any employee or former employee of Parascript

 

A-30

promising or guaranteeing any employer payment or funding for the continuation of medical, dental, life or disability coverage for any period of time beyond the end of the current plan year (except to the extent of coverage required under COBRA). No written representations have been made to any employee or former employee of Parascript concerning the employee benefits of AHC.

4.16 Compliance with Legal Requirements; Governmental Authorizations . Except as set forth in Part 4.16(a):

(i) Parascript is, and at all times since January 1, 2004, has been, in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets, except where non-compliance would reasonably be expected not to have a Parascript Material Adverse Effect;

(ii) To the Knowledge of Parascript, no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) may constitute or result in a material violation by Parascript of, or a failure on the part of Parascript to comply with, any Legal Requirement or (B) may give rise to any material obligation on the part of Parascript to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and

(iii) Parascript has not received, at any time since January 1, 2004, any written notice or other written communication from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement or (B) any actual, alleged, possible or potential obligation on the part of Parascript to undertake, or to bear all or any portion of the cost of, any remedial action of any nature.

(b) The Parascript Data Room contains a complete and accurate list of each Governmental Authorization that is held by Parascript or that otherwise relates to such Parascript’s business or its assets. Each such Governmental Authorization is valid and in full force and effect. Except as set forth in Part 4.16(b):

(i) Parascript is, and at all times since January 1, 2004, has been, in material compliance with all of the terms and requirements of each such Governmental Authorization, except where non-compliance would not have a Parascript Material Adverse Effect;

(ii) to the Knowledge of Parascript, no event has occurred or circumstance exists that would (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to materially comply with any term or requirement of any such Governmental Authorization, except where such violation or non-compliance would not have a Parascript Material Adverse Effect or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any such Governmental Authorization, except where such revocation, withdrawal, suspension, cancellation, termination or modification would not have a Parascript Material Adverse Effect;

(iii) Parascript has not received, at any time since January 1, 2004, any written notice or other written communication from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Governmental Authorization or (B) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of or modification to any Governmental Authorization;

(iv) to the Knowledge of Parascript, all applications required to have been filed for the renewal of such Governmental Authorizations have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been duly made on a timely basis with the appropriate Governmental Bodies, except where failure to so file would not have a Parascript Material Adverse Effect; and

 

A-31

(v) Such Governmental Authorizations collectively constitute, in all material respects, the Governmental Authorizations necessary to permit Parascript to lawfully conduct and operate its business in the manner in which it currently conducts and operates such business and to permit Parascript to own and use the its assets in the manner in which it currently owns and uses such assets.

4.17 Legal Proceedings; Orders .

(a) Except as set forth in Part 4.17(a), there is no pending or, to the Knowledge of Parascript, threatened Proceeding:

(i) by or against Parascript that may have a Parascript Material Adverse Effect; or

(ii) that challenges, or that would have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Contemplated Transactions.

To Parascript’s Knowledge, no event has occurred or circumstance exists that is reasonably likely to give rise to or serve as a reasonable basis for the commencement of any such Proceeding. Parascript has delivered to AHC copies of all pleadings, correspondence and other documents relating to any Proceeding listed in Part 4.17(a). There are no Proceedings listed or required to be listed in Part 4.17(a) that would have a Material Adverse Effect on the business, operations, or condition of Parascript.

(b) Except as set forth in Part 4.17(b):

(i) there is no Order to which Parascript, its business or any of its assets is subject; and

(ii) to the Knowledge of Parascript, no officer, Member, Manager, or employee of Parascript is subject to any Order that prohibits such officer, Member, Manager, agent or employee from engaging in or continuing any conduct, activity or practice relating to the business of Parascript.

(c) Except as set forth in Part 4.17(c):

(i) Parascript is, and, at all times since January 1, 2004, has been in material compliance with all of the terms and requirements of each Order to which it or any of its assets is or has been subject;

(ii) to the Knowledge of Parascript, no event has occurred or circumstance exists that is reasonably likely to constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which Parascript or any of its assets is subject which would result in a Parascript Material Adverse Effect; and

(iii) Parascript has not received, at any time since January 1, 2004, any written notice or other written communication from any Governmental Body or any other Person regarding any actual, alleged, possible or potential violation of, or failure to comply with, any term or requirement of any Order to which Parascript or any of its assets is or has been subject.

4.18 Absence of Certain Changes and Events . Except as set forth in Part 4.18 and except for the actions taken related to the Contemplated Transactions, since the date of the Parascript Balance Sheet, Parascript, has conducted its business only in the Ordinary Course of Business and there has not been any:

(a) change in Parascript’s authorized capital;

(b) amendment to the Governing Documents of Parascript;

(c) payment (except in its Ordinary Course of Business, including monthly cash advances to certain Members) or increase by Parascript of any bonuses, salaries or other compensation to any Member, Manager, officer or employee or entry into any employment, severance or similar Contract with any Member, Manager, officer or employee;

(d) adoption of, amendment to or increase in the payments to or benefits under, any Parascript Employee Plan;

 

A-32

(e) damage to or destruction or loss of any material Asset, whether or not covered by insurance;

(f) entry into, termination of or receipt of notice of termination of (i) any material license, distributorship, dealer, sales representative, joint venture, credit or similar Contract to which Parascript is a party, or (ii) any Contract or transaction involving total remaining payments by Parascript of at least One Hundred Thousand Dollars ($100,000);

(g) sale (other than sales in its Ordinary Course of Business), or other disposition of any Asset or property of Parascript (including the Parascript Intellectual Property Assets) or the creation of any Encumbrance on any Asset other than sales of assets or property of Parascript which would not have a Parascript Material Adverse Effect;

(h) resolution, termination or waiver of any claims or rights with a value to Parascript in excess of One Hundred Thousand Dollars ($100,000);

(i) indication in writing by any customer of an intention to discontinue or change the terms of its relationship with Parascript, which discontinuation or change would have a Parascript Material Adverse Effect;

(j) material change in the accounting methods used by Parascript; or

(k) to Parascript’s Knowledge, Contract by Parascript to do any of the foregoing.

4.19 Contracts; No Defaults .

(a) Part 4.19(a) contains an accurate and complete list, and the Parascript Data Room contains, accurate and complete copies, of the following Contracts which are referred to herein as “Material Parascript Contracts”:

(i) each Parascript Contract that involves a remaining obligation of performance of services or delivery of goods or materials by Parascript of an amount or value certain to be in excess of One Hundred Thousand Dollars ($100,000) per year;

(ii) each Parascript Contract that involves performance of services or delivery of goods or materials to Parascript of an amount or value in excess of One Hundred Thousand Dollars ($100,000);

(iii) each Parascript Contract that was not entered into in its Ordinary Course of Business and that involves expenditures or receipts of Parascript certain to be in excess of One Hundred Thousand Dollars ($100,000);

(iv) each Parascript Contract affecting the ownership of, leasing of, title to, use of or any leasehold or other interest in any real or personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than One Hundred Thousand Dollars ($100,000) and with a term of less than one year);

(v) each Parascript Contract with any labor union or other employee representative of a group of employees relating to wages, hours and other conditions of employment;

(vi) each Parascript Contract (however named) involving a sharing of profits, losses, costs or liabilities by Parascript with any other Person;

(vii) each Parascript Contract containing covenants that in any way purports to restrict Parascript’s business activity or limits the freedom of Parascript to engage in any line of business or to compete with any Person;

(viii) each Parascript Contract providing for payments to or by any Person based on sales, purchases or profits, other than direct payments for goods;

(ix) each power of attorney of Parascript that is currently effective and outstanding;

 

A-33

(x) each Parascript Contract entered into other than in its Ordinary Course of Business that contains or provides for an express undertaking by Parascript to be responsible for consequential damages;

(xi) each Parascript Contract for capital expenditures in excess of One Hundred Thousand Dollars ($100,000);

(xii) each written warranty, guaranty and/or other similar undertaking with respect to contractual performance extended by Parascript other than in its Ordinary Course of Business; and

(xiii) each amendment, supplement and modification (whether oral or written) in respect of any of the foregoing.

Part 4.19(a) sets forth the parties to each Material Parascript Contract, the effective date of each Material Parascript Contract, the term of each Material Parascript Contract, and the goods or services to which each Material Parascript Contract relates.

(b) Except as set forth in Part 4.19(b), no Member has or may acquire any rights under, and no Member has or may become subject to any obligation or liability under, any Material Parascript Contract that relates to the business of Parascript or any of its assets.

(c) Except as set forth in Part 4.19(c):

(i) each Material Parascript Contract identified or required to be identified in Part 4.19(a) has not been orally modified (other than as described in Part 4.19(c)), and is in full force and effect and is valid and enforceable in accordance with its terms except, as to any party other than Parascript, as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and

(ii) each such Material Parascript Contract identified or required to be identified in Part 4.19(a) shall not require the consent of any other Person as a result of the Contemplated Transactions.

(d) Except as set forth in Part 4.19(d):

(i) Parascript is, and at all times since January 1, 2004, has been, in compliance with all material terms and requirements of each Material Parascript Contract;

(ii) to the Knowledge of Parascript, each other Person that has any obligation or liability under any Material Parascript Contract is, and at all times since January 1, 2004, has been, in full compliance with all material terms and requirements of such Material Parascript Contract;

(iii) to the Knowledge of Parascript, no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a Breach of, or give Parascript or any other Persons the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate or modify, any Material Parascript Contract, except where the occurrence of such event or existence of such circumstance would not have a Parascript Material Adverse Effect;

(iv) to the Knowledge of Parascript, no event has occurred or circumstance exists under or by virtue of any Material Parascript Contract that (with or without notice or lapse of time) would cause the creation of any Encumbrance affecting any of Parascript’s assets which would have a Parascript Material Adverse Effect; and

(v) Parascript has not given to or received from any other Person, at any time since January 1, 2004, any written notice or other written communication regarding any actual, alleged, possible or potential violation or Breach of, or default under, any Parascript Material Contract.

 

A-34

(e) There are no renegotiations of, written requests to renegotiate or outstanding rights to renegotiate any material amounts paid or payable to Parascript under any Parascript Material Contracts, except for such Parascript Material Contracts renegotiated, or to be renegotiated in the Ordinary Course of Business.

(f) Each Parascript Contract relating to the sale, design, manufacture or provision of products or services by Parascript has been entered into in the Ordinary Course of Business of Parascript and has been entered into without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement.

4.20 Insurance .

(a) The Parascript Data Room contains:

(i) copies of all current policies of insurance (and correspondence relating to coverage thereunder) to which Parascript is a party or under which Parascript is or has been covered at any time since January 1, 2004 a list of which is included in Part 4.20(a); and

(ii) copies of all pending applications by Parascript for policies of insurance.

(b) Part 4.20(b) describes:

(i) any self-insurance arrangement by or affecting Parascript, including any reserves established thereunder and description of loss experience for all claims that were self insured, including the number and aggregate cost of such claims;

(ii) any Contract or arrangement, other than a policy of insurance, for the transfer or sharing of any risk to which Parascript is a party or which involves the business of Parascript; and

(iii) all obligations of Parascript to provide insurance coverage to Third Parties (for example, under Leases or service agreements) and identifies the policy under which such coverage is provided.

(c) Part 4.20(c) sets forth, by year, for the current policy year and each of the three (3) preceding policy years a summary of the loss experience for an amount in excess of Five Hundred Thousand Dollars ($500,000) under each policy of insurance. Such summary includes the name of claimant, description of the policy by insurer, type of insurance, and period of coverage and amount and brief description of the claim.

(d) Except as set forth in Part 4.20(d):

(i) to the Knowledge of Parascript, all policies of insurance to which Parascript is a party or that provide coverage to Parascript are valid, outstanding and enforceable and are sufficient for compliance with all Legal Requirements;

(ii) Parascript has not received (A) any refusal of coverage or any notice that a defense will be afforded with reservation of rights or (B) any written notice of cancellation or any other written indication that any policy of insurance is no longer in full force or effect or that the issuer of any policy of insurance is not willing or able to perform its obligations thereunder;

(iii) Parascript has paid all premiums due, and has otherwise performed all of its obligations, under each policy of insurance to which it is a party; and

(iv) to the Knowledge of Parascript, Parascript has given notice to the insurer of all claims that may be insured thereby.

4.21 Employees . For the purposes of this Section 4.21 a reference to Parascript will also include the Manager, as appropriate.

(a) The Parascript Data Room contains a list of the following information for Parascript’s ten (10) most highly compensated employees, including executive officers and all persons nominated or chosen to become such:

(i) positions and offices currently held;

 

A-35

(ii) a brief description of each executive officer’s business experience during the past five years;

(iii) any family relationships among executive officers and directors;

(iv) any legal proceedings (including any bankruptcy petition filed by or against any business of which an executive officer was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time) material to an evaluation of such executive officer’s ability or integrity;

(v) annual compensation which shall include total annual salary and bonus for the last completed fiscal year;

(vi) perquisites and other personal benefits, securities or property;

(vii) above-market or preferential earnings on restricted stock, options, SARS or deferred compensation paid during the fiscal year or payable during that period but deferred at the election of the named employee; and

(viii) any amounts reimbursed during the fiscal year for the payment of taxes.

(b) Part 4.21(a) contains a list of all retired employees of Parascript receiving any retirement benefits from plans or arrangements maintained by Parascript and the amounts thereof.

(c) Part 4.21(b) states the number of employees terminated by Parascript since January 1, 2007, and contains a complete and accurate list of the following information for each employee of Parascript who has been terminated or laid off, or whose hours of work have been reduced by more than fifty percent (50%) by Parascript, in the six (6) months prior to the date of this Agreement: (i) the date of such termination, layoff or reduction in hours; (ii) the reason for such termination, layoff or reduction in hours; and (iii) the location to which the employee was assigned, if applicable.

(d) Parascri