AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

EBIX, INC.,

CONFIRMNET CORPORATION,

EBIX SOFTWARE INDIA PRIVATE LIMITED,

CONFIRMNET ACQUISITION SUB, INC.

AND

CRAIG A. IRVING, AS SHAREHOLDERS’ REPRESENTATIVE

DATED AS OF NOVEMBER 1, 2008

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made as of November 1, 2008, by and among EBIX, INC., a Delaware corporation (“ Parent ”); EBIX SOFTWARE INDIA PRIVATE LIMITED , a private limited company formed under the laws of India and a wholly-owned subsidiary of Parent (“ Intermediate Parent ”), CONFIRMNET CORPORATION , a California corporation (the “ Company ”); CONFIRMNET ACQUISITION SUB, INC. , a California corporation and a wholly-owned subsidiary of Intermediate Parent (“ Merger Sub ”); and CRAIG A. IRVING , as the representative of the shareholders of the Company hereunder (the “ Shareholders’ Representative ”). Parent, Intermediate Parent, Merger Sub, the Company and the Shareholders’ Representative are sometimes collectively referred to herein as the “ Parties ” and each individually as a “ Party .” Unless otherwise defined herein, certain terms used in this Agreement with initial capital letters are defined in Appendix A .

WITNESSETH:

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

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

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

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

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

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

ARTICLE I
THE MERGER

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

SECTION 1.2 MERGER CONSIDERATION . The aggregate consideration to be paid by Parent and Intermediate Parent, jointly and severally, under this Agreement at the Closing shall equal $7,354,657, less any adjustments pursuant to Section 1.2(d) hereof, as set forth on the Merger Consideration Certificate (as defined in Section 2.1 ) (the “ Cash Merger Consideration ”) plus the Contingent Merger Consideration (as defined in Section 1.2(b) ) (collectively, the “ Merger Consideration ”), and shall be payable to the holders of Company Capital Stock (collectively, the “ Shareholders ”) in accordance with the provisions of this Agreement and in the manner and in the proportions set forth in the Merger Consideration Certificate as follows:

(a)  Cash Consideration at Closing . The Cash Merger Consideration will be paid in cash at the Closing by wire transfer of immediately available funds to the Shareholders, other than dissenting Shareholders, as directed in the Merger Consideration Certificate.

(b)  Contingent Consideration . Parent and Intermediate Parent, jointly and severally, will pay to the Shareholders contingent consideration in addition to any other amounts payable hereunder as follows (the “ Contingent Merger Consideration ”):

AND

(i) Not later than January 30, 2009 (for the First Earn Out), January 30, 2010 (for the Second Earn Out) and 30 days after the end of the Marsh Earn Out Period (for the Third Earn Out), respectively, Parent shall deliver to each Shareholder a copy of the financial statements of Parent and/or the Surviving Corporation and a certificate showing the calculation of the Contingent Merger Consideration for the applicable period, certified by the Chief Financial Officer of Parent to be a good faith calculation of the Contingent Merger Consideration derived from the accounting records of Parent (the “ Contingent Gross Revenue Certificate ”).

(ii) Parent shall make available to the Shareholders’ Representative copies of all work papers, documents, receipts, invoices and other materials and grant the Shareholders’ Representative or his agent such access to Parent’s personnel and outside auditors during regular business hours as may be necessary or reasonably requested by the Shareholders’ Representative or his agent in his or her review of the Contingent Gross Revenue Certificate or in connection with any dispute or disagreement relating to the determination of the Cash Merger Consideration or the Contingent Merger Consideration. If the Shareholders’ Representative does not timely deliver a Contingent Gross Revenue Certificate Contest Notice (as defined below) in accordance with Section 1.2(b)(iii) , the Contingent Gross Revenue Certificate shall be final and binding on all Parties.

(iii) In the event the Shareholders’ Representative contests any part of the calculation of the Cash Merger Consideration or the Contingent Merger Consideration, as set forth in the Contingent Gross Revenue Certificate, the Shareholders’ Representative shall give Parent written notice of his objections thereto (the “ Contingent Gross Revenue Certificate Contest Notice ”) within 15 days following the delivery of the Contingent Gross Revenue Certificate.

(iv) The Contingent Merger Consideration, as determined by Parent in good faith from its accounting records, shall be timely paid by Parent and Intermediate Parent, jointly and severally, in accordance with this Section 1.2(b) , regardless of Parent’s receipt of any Contingent Gross Revenue Certificate Contest Notice pursuant to Section 1.2(b)(iii) , by wire transfer of immediately available funds, to such accounts for each Shareholder as are set forth in the Merger Consideration Certificate, provided that if the Merger Consideration Certificate fails to identify such an account for any Shareholder, such Shareholder’s portion of the Contingent Merger Consideration shall be paid to the Shareholders’ Representative on behalf and for the benefit of such Shareholder.

(v) During the 30-day period following the delivery of a Contingent Gross Revenue Certificate Contest Notice, Parent and the Shareholders’ Representative shall attempt to resolve in good faith any differences which Parent and the Shareholders’ Representative may have with respect to any matter specified in the Contingent Gross Revenue Certificate Contest Notice.

(vi) If the Parties are unable to agree upon the amount of any Cash Merger Consideration or any Contingent Merger Consideration due hereunder, the Parties shall promptly thereafter cause an independent accountant reasonably satisfactory to Parent and the Shareholders’ Representative (the “ Independent Accountant ”) to review the disputed item(s) and amount(s) as set forth in the Contingent Gross Revenue Certificate Contest Notice for the purposes of calculating the applicable Contingent Merger Consideration due hereunder. In making such determination, such Independent Accountant shall consider only those items or amounts in the calculation of the Contingent Merger Consideration set forth in the Contingent Gross Revenue Certificate Contest Notice. The Independent Accountant shall deliver to Parent and the Shareholders’ Representative, as promptly as practicable (and in any event within 60 days of the Parties’ submission of the matter to the Independent Accountant), a report that explains any discrepancies and sets forth the Independent Accountant’s calculation of the actual Contingent Merger Consideration due hereunder. Such report and the calculations set forth therein shall be final and binding upon the Parties, and shall not be subject to challenge in a court of law or otherwise. In the event that the Independent Accountant concludes that there was an underpayment of Cash Merger Consideration or Contingent Merger Consideration, Parent and Intermediate Parent, jointly and severally, shall immediately pay the amount by which the Cash Merger Consideration or Contingent Merger Consideration was underpaid, together with simple interest thereon at the rate of eight percent (8%) per annum. The costs and expenses of the Independent Accountant shall be initially be paid by Parent and Intermediate Parent, jointly and severally, but if the Independent Accountant concludes that there was no underpayment of the Contingent Merger Consideration, then such costs and expenses shall be paid by the Shareholders, in the form of a deduction from any future payment of Contingent Merger Consideration (with interest thereon at the rate of eight percent (8%) per annum).

(c)  Parent and Intermediate Parent Covenants . In order to provide the Shareholders with a reasonable opportunity to receive the maximum Contingent Merger Consideration pursuant to this Agreement, Parent, Intermediate Parent and their Affiliates, and their respective directors, stockholders, officers, partners, employees, successors and assigns, shall: (i) continue the existence of the Company as a separate legal entity at least through December 31, 2009; (ii) operate the Business as consistent as is reasonably practicable with the Company’s previous operation of the Business; (iii) refrain from diverting or otherwise causing any of the Company’s current prospects or customers to instead do business with other divisions or entities controlled by Parent or its Affiliates, at least through the end of the Marsh Earn Out Period; and (iv) be subject to an express obligation of good faith and fair dealing with respect to the Shareholders, including the Shareholders’ Representative.

(d)  Adjustments to Cash Merger Consideration . Concurrently with the Closing, Parent and Intermediate Parent, jointly and severally, shall wire transfer (i) to California Bank & Trust the amount of all outstanding principal and interest under the Company’s existing line of credit, (ii) to Kevin C. Kinslow $100,000 for services rendered for the benefit of the Shareholders, (iii) any amounts due from the Company to Lester Knight under that certain Letter Agreement dated November 4, 2008 between him and the Company, and (iv) any amounts due from the Company to its counsel Procopio, Cory, Hargreaves & Savitch LLP (“ Procopio ”). The Cash Merger Consideration shall be reduced by the amounts provided for in this Section 1.2(d) , less any funds received or due to the Company for exercised stock options.

(e)  Reimbursement of Business Expenses . The Shareholders’ Representative has incurred business expenses on behalf of the Company in the aggregate amount of $77,843.81, and the Company’s Chief Executive Officer, Lester Knight, has incurred business expenses on behalf of the Company in the aggregate amount of $40,000. Such expenses were incurred on behalf of the Company utilizing their personal credit cards, and have been properly booked as accounts in the Company’s financial statements as of September 30, 2008. Unless the Company has reimbursed these expenses prior to the Closing, Parent and Intermediate Parent, jointly and severally, will, after the Closing, cause such business expenses to be promptly reimbursed.

SECTION 1.3 EFFECTS OF THE MERGER . At the Effective Time, the separate corporate existence of Merger Sub shall cease and the Company, as the Surviving Corporation, shall succeed to and possess all of the properties, rights, powers, privileges, franchises, patents, trademarks, licenses, registrations, and other assets of every kind and description of the Company and Merger Sub, and shall be subject to, and be responsible for, all debts, liabilities, and obligations of the Company and Merger Sub, all without further act or deed, and in accordance with the applicable provisions of the laws of the State of California. Craig Irving, Lester Knight, Ellis “Bud” Gravette, Maximilian von Finck, and Edward Scheinuk shall also cease to be directors, officers and employees of the Surviving Corporation, and upon the Closing Date shall tender resignations in the form of Exhibit A attached hereto (the “ D & O Resignation and Release Agreements ”).

SECTION 1.4 ARTICLES OF INCORPORATION AND BYLAWS . The Articles of Incorporation and Bylaws of Merger Sub shall be the Articles of Incorporation and Bylaws, respectively, of the Surviving Corporation until thereafter changed or amended as provided

therein; provided , however , that the name of the Surviving Corporation shall be “ EBIX BPO Division — San Diego . ”

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

SECTION 1.6 CLOSING; EFFECTIVE TIME.

(a)  Closing and Closing Date . Subject to the terms and conditions of this Agreement, the closing of the Merger (the “ Closing ”) shall take place at 10:00 a.m., local time, on November 24, 2008 (the “ Closing Date ”) at the offices of Procopio, 530 B Street, Suite 2100, San Diego, California 92101 or at such other time, date or place as the Parties may mutually agree upon in writing.

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

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

(d) Parent’s and Intermediate Parent’s Obligations at Closing . At the Closing:

(i) Upon the filing of the Certificate of Merger, Parent and Intermediate Parent, jointly and severally, will pay the Cash Merger Consideration to the Shareholders, in accordance with the terms of this Agreement.

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

ARTICLE II
CONVERSION OF SHARES; APPOINTMENT OF THE SHAREHOLDERS’ REPRESENTATIVE

SECTION 2.1 CONVERSION OF SHARES OF COMPANY CAPITAL STOCK . At the Effective Time, each holder of issued and outstanding shares of Company Capital Stock, other than such holders who are dissenting Shareholders, shall, subject to the terms and conditions of this Agreement, receive an amount in immediately available funds equal to the amount set forth in a certificate (the “ Merger Consideration Certificate ”) to be prepared as of the Closing Date and in accordance with the liquidation rights and preferences set forth in the Company’s Articles of Incorporation and signed by the Chief Financial Officer of the Company and the Shareholders’ Representative, which will be binding upon all Shareholders (other than dissenting Shareholders). The Merger Consideration Certificate will also set forth the allocation among the Shareholders of the Contingent Merger Consideration.

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

SECTION 2.3 PROCEDURES FOR SHARES NOT SUBMITTED AT CLOSING.

(a) The Company shall mail to each record holder of Company Capital Stock at such holder’s last known address, along with the Company’s pre-Closing disclosure information related to Shareholder approval (as described in Section 2.2 ), a letter of transmittal (with instructions for its use) containing customary indemnification provisions and substantially in the form attached hereto as Exhibit B (the “ Letter of Transmittal ”), for such holder to use in surrendering the share certificates or other instruments, if any, which represent such Shareholder’s shares of Company Capital Stock, against payment of the allocable amount of Merger Consideration. No interest will accrue or be paid to the holder of any outstanding share of Company Capital Stock, Warrant or Option.

(b) The Company and the Shareholders’ Representative shall use commercially reasonable efforts to cause each former holder of shares of Company Capital Stock

to surrender such Shareholder’s certificates or other instruments representing such shares to the Company; provided , however , that if any such Shareholder shall be unable to surrender such certificates due to loss, theft, or mutilation thereof, such Shareholder may make a constructive surrender by submitting an affidavit of lost, stolen, or destroyed certificate in the form attached to the Letter of Transmittal.

SECTION 2.4 OPTIONS; WARRANTS.

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

SECTION 2.5 SHAREHOLDERS’ REPRESENTATIVE.

(a)  Appointment . In the event of any required vote of the Shareholders, all Shareholders shall, without any further act of any Shareholder, be deemed to have consented to: (i) the indemnification obligations of the Shareholders under Article IX, (ii) the appointment of Craig A. Irving (or his successor as provided for herein) as their representative for purposes of this Agreement and as attorney-in-fact and agent for and on behalf of each Shareholder (in such capacity, the “ Shareholders’ Representative ”) under the Transaction Documents; and (iii) the indemnification of the Shareholders’ Representative by the Shareholders contemplated hereby. All actions taken by the Shareholders’ Representative under the Transaction Documents shall be binding upon the Shareholders and their successors as if expressly ratified and confirmed in writing by each of them. The appointment of the Shareholders’ Representative and his successors in accordance with the provisions of this Agreement shall be deemed coupled with an interest and shall be irrevocable.

(b)  Scope of Authority . The Shareholders’ Representative is hereby authorized, subject to the provisions of this Section 2.5 , for and on behalf of the Shareholders, and without inquiry of and without additional approval from the Shareholders, to:

(i) employ and obtain the advice of legal counsel, accountants and other professional advisors and incur such other reasonable expenses on behalf of the Shareholders in connection with or arising from the Transaction Documents as the Shareholders’ Representative, in his sole discretion, deems necessary or advisable in the performance of his duties as the Shareholders’ Representative;

(ii) interpret all terms and provisions of the Transaction Documents and make any determinations on behalf of the Shareholders as may be required thereunder;

(iii) initiate legal suits or other proceedings in the name of and on behalf of the Shareholders in respect of any matters that arise from or are related to the Transaction Documents;

(iv) receive all notices, communications and deliveries on behalf of the Shareholders under the Transaction Documents and to receive and accept service of legal process in connection with any suit or proceeding arising under the Transaction Documents;

(v) take all such action as may be necessary after the Closing on behalf of the Shareholders to carry out any of the Transactions contemplated by the Transaction Documents and to authorize any disbursements or payments out of the Expense Account (as defined below); and

(vi) negotiate, compromise, settle, and resolve on behalf of the Shareholders any claims that may arise under the Transaction Documents, and take such other action as may be necessary or appropriate in connection therewith, including without limitation the signing of releases and other documents with respect thereto and the making of payments in connection therewith;

(vii) take such other action on behalf of the Shareholders as the Shareholders’ Representative may deem necessary or appropriate in connection with the administration of his duties under the Transaction Documents and the Transactions contemplated hereby and thereby.

(c)  Approval of Shareholders’ Representative Actions . Promptly upon receipt of a Notice of Claim hereunder, the Shareholders’ Representative shall deliver such Notice of Claim to the Shareholders whose ownership of Company Capital Stock represents greater than fifty percent (50%) of the issued and outstanding Company Capital Stock (the “ Majority Holders ”). Notwithstanding anything in this Agreement to the contrary, each Defense Notice shall be based substantially upon the written direction of the Majority Holders and the Shareholders’ Representative may not (i) agree to the defense of any claim, (ii) agree to the settlement of any claims and the making of payments with respect thereto, or (iii) consent to the entry of any judgment with respect thereto, in each case without the prior written approval of the Majority Holders; provided, each Parent Indemnified Party shall be entitled to rely on any and all action taken by the Shareholders’ Representative without any liability to, or obligation to inquire of, any of the Shareholders with respect to whether the Shareholders’ Representative is acting with the prior written approval of the Majority Holders.

(d)  Death, Resignation; Removal . In the event that Craig A. Irving or any successor Shareholders’ Representative dies, becomes unable to perform his or her responsibilities as Shareholders’ Representative or resigns from such position, the Majority Holders shall select another person to fill such vacancy (and shall promptly notify Parent of such substituted Shareholders’ Representative), and such substituted Shareholders’ Representative shall be deemed to be the Shareholders’ Representative for all purposes of the Transaction Documents. Notwithstanding anything to the contrary in this Agreement or any other agreement contemplated hereby, the Majority Holders may at any time, by written notice to the Shareholders’ Representative, remove or replace the Shareholders’ Representative, for any reason and with or without cause, and designate another person to be Shareholders’ Representative for all purposes herein and therein. Promptly following the removal or replacement of the Shareholders’ Representative, the Majority Holders shall provide written notice thereof to Parent.

(e)  No Liability; Indemnification . All decisions and actions by the Shareholders’ Representative, including, without limitation, any agreement between the Shareholders’ Representative and Parent relating to indemnification obligations of the

Shareholders under this Section 2.5(e) , including the defense or settlement of any claims and the making of payments with respect thereto, shall be binding upon all of the Shareholders, and no Shareholder shall have the right to object, dissent, protest or otherwise contest the same. The Shareholders’ Representative shall not be liable for any act done or omitted hereunder as Shareholders’ Representative while acting in good faith and in the exercise of his reasonable judgment as to the best interests of the Shareholders, and the Shareholders’ Representative shall incur no liability to the Shareholders with respect to any action taken or suffered by the Shareholders’ Representative in reliance upon any notice, direction, instruction, consent, statement or other documents believed by him to be genuinely and duly authorized, nor for any other action or inaction with respect to the indemnification or other obligations of the Shareholders under this Section 2.5 , including the defense or settlement of any claims and the making of payments with respect thereto, except to the extent resulting from the Shareholders’ Representative’s own gross negligence or willful misconduct. The Shareholders’ Representative may, in all questions arising under this Agreement or any agreement contemplated hereunder, rely on the advice of counsel, and for anything done, omitted or suffered in good faith by the Shareholders’ Representative shall not be liable to the Shareholders. The Shareholders shall jointly and severally indemnify the Shareholders’ Representative and hold him harmless for any loss, liability or expense incurred by the Shareholders’ Representative arising out of or relating to the Shareholders’ Representative’s actions hereunder so long as the Shareholders’ Representative acted in good faith and without gross negligence or willful misconduct.

(f)  Representative Expenses . The Shareholders acknowledge and agree that the Shareholders’ Representative will incur costs, fees and expenses on behalf of the Shareholders in his capacity as Shareholders’ Representative (“ Representative Expenses ”), which may include, without limitation, professional fees and expenses, indemnity expenses, settlements or judgments and travel and accommodation expenses related thereto, and for which the Shareholders’ Representative shall be held harmless by the Shareholders in accordance with this Section 2.5(f ), provided, however , that no Shareholder shall, subject to Section 2.5(g) , without their prior written consent, be obligated to indemnify or hold harmless the Shareholders’ Representative, or make any additional contribution to the Expense Account, if then fully exhausted, provided, however , that nothing in this Section 2.5(f) shall limit the indemnity obligations of Shareholders pursuant to Section 2.5(e) hereof.

(g)  Reimbursement of Representative Expenses . Notwithstanding anything to the contrary in this Agreement, if all Merger Consideration has been distributed to the Shareholders, and there are insufficient funds in the Expense Account to satisfy all of the Representative Expenses incurred as of such time, the Shareholders’ Representative shall be entitled to reimbursement for any or all Representative Expenses prior to the disbursements of such funds to the Shareholders. Upon the distribution of all Merger Consideration to the Shareholders and after reimbursement of all Representative Expenses, the Shareholders’ Representative shall deliver, or cause to be delivered, any and all amounts remaining in the Expense Account to the Shareholders according to each Shareholder’s Pro Rata Share with respect to the Company Capital Stock held by such Shareholder.

(h)  Compensation of Shareholders’ Representative . In consideration of the Shareholders’ Representative’s continuing obligations under this Agreement, the Shareholders’ Representative shall be compensated in accordance with the following:

(i) From the Effective Time of the Merger, and until the distribution of all Merger Consideration to the Shareholders or the final resolution of a Notice of Claim as herein provided for (the “ Compensation Term ”), the Shareholders’ Representative shall be paid an amount, equal to the number of hours spent by the Shareholders’ Representative during the Compensation Term performing his obligations as Shareholders’ Representative, multiplied by Two Hundred Dollars ($200). The Shareholders’ Representative shall promptly record all hours so spent, and shall notify the Majority Holders of all such hours together with a brief description of the tasks performed at least on a quarterly basis.

(ii) In connection with all compensation payable to Shareholders’ Representative hereunder, Shareholders’ Representative shall be an independent contractor and not an employee of the Shareholders for federal or state tax purposes. No federal, state or local income tax or payroll tax of any kind shall be withheld or paid by the Shareholders on behalf of the Shareholders’ Representative or any employees or other agents of the Shareholders’ Representative. Shareholders’ Representative understands that he is solely responsible to pay, according to law, his federal and state income taxes and all other required taxes in respect of his compensation hereunder.

(iii) Notwithstanding the foregoing, the compensation provided to the Shareholders’ Representative pursuant to this Section 2.5(h) may be modified or amended with the written consent of the Shareholders’ Representative and the Majority Holders.

(i) Expense Account .

(i) A portion of the Cash Merger Consideration in the amount of One Hundred Fifty Thousand Dollars ($150,000) (the “Expense Deposit”) shall be held in a bank account (the “Expense Account”), which shall be established prior to the Closing Date in the name of Craig A. Irving, for the benefit of the Shareholders. At any time following the Closing, with the prior written consent of the Majority Holders, some or all of the Expense Deposit may be transferred to a financial institution or an escrow account; provided, however , that any funds so transferred shall be held in the name of the Shareholders’ Representative for the benefit of the Shareholders. Any reference herein to Expense Account shall be deemed to be a reference to any other account or escrow account to which the Expense Deposit is transferred in accordance with the provisions herein.

(ii) Funds held in the Expense Account may be used (1) to compensate the Shareholders’ Representative in accordance with Section 2.5(h) above, (2) to reimburse any and all Representative Expenses incurred by the Shareholders’ Representative as contemplated herein, (3) to satisfy the payment of any professional fees, including, without limitation, legal fees, expenses or disbursements incurred in connection with or arising from any Notice of Claim, and (4) with the prior written consent of the Majority Holders, for such other purposes as the Shareholders’ Representative deems necessary or appropriate in fulfilling the duties of Shareholders’ Representative hereunder. Notwithstanding anything to the contrary in this Agreement or any agreement contemplated hereunder, any check drawn from the Expense Account by the Shareholders’ Representative in an amount of more than Two Thousand Five Hundred Dollars ($2,500) shall also require the signature of either Elton Participation Corp. or Edward B. Scheinuk, or such other individual as the Majority Holders shall designate.

(iii) As soon as all Merger Consideration has been distributed to the Shareholders in accordance with the terms of this Agreement, and the Shareholders’ Representative has been reimbursed for all Representative Expenses, the Shareholders’ Representative shall promptly cause all funds remaining in the Expense Account to be distributed to the Shareholders as herein contemplated.

(j)  Reports to Shareholders . Until such time as the Shareholders have been paid all amounts to which they are entitled under the terms of this Agreement, the Shareholders’ Representative shall, at least quarterly, and at such other times as the Shareholders’ Representative, in his sole discretion, may deem appropriate, provide written reports to the Shareholders regarding the status of the amount of the Expense Account and the Shareholders’ Representatives’ activities on behalf of the Shareholders.

(k)  Further Assurances . From time to time, at any other Party’s or Shareholder’s reasonable request and without further consideration, the Shareholders’ Representative shall execute and deliver such additional documents and take all such further lawful action as may be necessary or reasonably desirable to effectuate the provisions of Section 2.5 , including without limitation, assigning the funds held in the Expense Account to any successor Shareholders’ Representative.

(l)  No Obligations of Parent . None of Parent, Intermediate Parent, Merger Sub, the Company or the Surviving Corporation shall have any obligations to the Shareholders in respect of this Section 2.5 .

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

ARTICLE III
OTHER AGREEMENTS AND COVENANTS OF THE COMPANY

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

SECTION 3.1 NON-NEGOTIATION . From and after the date of this Agreement until the earlier of (a) the termination of this Agreement, (b) the Closing, or (c) November 24, 2008, the Company agrees that it will not, and will not permit its Affiliates, directors, officers, employees, representatives and other agents, to, directly or indirectly, (1) solicit, initiate, or encourage any Acquisition Proposal, (2) engage in negotiations or discussions concerning, or provide any non-public information to any person or entity in connection with, any Acquisition Proposal or (3) agree to, approve or recommend any Acquisition Proposal. The Company will immediately cease any and all existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. The Company will promptly advise

Parent of the terms of any communications it may receive or become aware of relating to any Acquisition Proposal.

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

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

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

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

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

(a) amending its Articles of Incorporation or Bylaws (or other comparable corporate charter documents) or taking any action with respect to any such amendment or any reorganization, liquidation or dissolution of the Company;

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

(c) declaring, setting aside or paying any dividend or other distribution in respect of the Company Capital Stock, or directly or indirectly redeeming, purchasing or

otherwise acquiring any shares of, or any option, right or warrant to purchase with respect to, Company Capital Stock not wholly owned by the Company;

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

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

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

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

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

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

(j) making capital expenditures or commitments for additions to property, plant or equipment constituting capital assets other than in the Ordinary Course of Business;

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

(l) writing off or writing down any of their assets and properties outside the Ordinary Course of Business consistent with past practice;

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

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

SECTION 3.4 MONTHLY FINANCIAL STATEMENTS; REPORTS.

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

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

SECTION 3.5 EMPLOYEE MATTERS .

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

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

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

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

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

SECTION 3.6 AFFILIATE TRANSACTIONS . Immediately prior to the Closing, all Indebtedness and other amounts owing under Contracts between any Shareholder, any officer, director or Affiliate or employee of any Shareholder or any Affiliate of any of the foregoing (other than the Company), on the one hand, and the Company, on the other hand, will be paid in full. Without Parent’s prior consent, prior to the Closing, the Company will not materially

amend or modify any existing Contract, and will not engage in any transaction which is outside the Ordinary Course of Business.

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

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

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

SECTION 3.10 NOTICE AND CURE . The Company will notify Parent promptly in writing of, and contemporaneously will provide Parent with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance occurring after the date of this Agreement that causes or will cause any covenant or agreement of the Company under this Agreement to be breached or that renders or will render untrue any representation or warranty of the Company contained in this Agreement. The Company also will notify Parent promptly in writing of, and will use all commercially reasonable efforts to cure, before the Closing, any violation or breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, whether occurring or arising before, on or after the date of this Agreement. No notice given pursuant to this Section 3.10 shall have any effect on the

representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained in Section 7.1 , but, if Parent and Intermediate Parent close the Merger after receipt of such notice, Parent and Intermediate Parent shall have no right to seek indemnity under Article IX with respect to the matter disclosed in such notice.

ARTICLE IV
OTHER AGREEMENTS AND COVENANTS OF PARENT
AND INTERMEDIATE PARENT

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

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

SECTION 4.2 NOTICE AND CURE . Parent and/or Intermediate Parent will notify the Company promptly in writing of, and contemporaneously will provide the Company with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance occurring after the date of this Agreement that causes or will cause any covenant or agreement of Parent or Intermediate Parent under this Agreement to be breached or that renders or will render untrue any representation or warranty of Parent or Intermediate Parent contained in this Agreement. Parent and Intermediate Parent also will notify the Company promptly in writing of, and will use all commercially reasonable efforts to cure, before the Closing, any violation or breach of any representation, warranty, covenant or agreement made by Parent or Intermediate Parent in this Agreement, whether occurring or arising before, on or after the date

of this Agreement. No notice given pursuant to this Section 4.2 shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained in Section 7.2 , but if the Shareholders close the Merger after receipt of such notice the Shareholders shall have no right to seek indemnity under Article IX with respect to the matter disclosed in such notice.

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

SECTION 4.4 EMPLOYEE TRANSITION MATTERS . From and after the Closing Date, through December 31, 2008, Parent and Intermediate Parent shall cause the Surviving Corporation to keep in place the Employee Benefit Plans maintained by the Company immediately before the Closing. Thereafter, Parent and Intermediate Parent shall, or shall cause the Surviving Corporation, to use commercially reasonable efforts to provide coverage under Employee Benefit Plans maintained by Parent, Intermediate Parent or the Surviving Corporation to the Company’s employees who remain employed on the Closing Date. To the extent commercially reasonable and permitted under applicable Law, Parent and Intermediate Parent will endeavor to have (i) deductibles paid by such continuing employees while employed by the Company recognized by Parent’s provider, and (ii) the provider waive any waiting periods, pre-existing conditions and comparable requirements. Parent and Intermediate Parent shall either continue in place the Company’s retirement plan or permit the Company’s employees who remain employed on the Closing Date to transfer their account balances under the Company’s retirement plan to a retirement plan maintained by Parent or the Surviving Corporation to the extent permitted by the terms of the plans and applicable Law.

SECTION 4.5 INTERMEDIATE PARENT RE PRESENTATIVE . Parent and Intermediate Parent have approved Parent to, and Parent is hereby authorized to, give or take any consent, demand, request, waiver, approval, notice or other action which may or must be given taken or made by or on behalf of Intermediate Parent.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure schedule delivered by the Company to Parent at or prior to the execution of this Agreement (the “ Disclosure Schedule ”) and except as set forth in

any amendment, revision or restatement of such Disclosure Schedule which is delivered to Parent at or prior to the Closing, with any disclosure or exception in the Disclosure Schedule deemed to apply to any representation or warranty to which it is applicable regardless of whether or not such representation or warranty is specifically referenced or cross-referenced, the Company represents and warrants to Parent as follows:

SECTION 5.1 ORGANIZATION, STANDING AND AUTHORITY.

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

(b) Except as set forth on Schedule 5.1(b) of the Disclosure Schedule, the Company does not have any Subsidiary.

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

SECTION 5.2 AUTHORIZATION.

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

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

SECTION 5.3 CAPITALIZATION AND OWNERSHIP.

(a)  Schedule 5.3(a) of the Disclosure Schedule sets forth the authorized and issued and outstanding capital stock of the Company, the outstanding Options and Warrants

(both vested and unvested) for Company Capital Stock, and the ownership interest of each Shareholder in the Company. All shares of Company Capital Stock have been validly issued, were issued in compliance with all applicable federal and state securities laws, and are fully paid and non-assessable. Except as set forth on Schedule 5.3(a) of the Disclosure Schedule, all Company Capital Stock has been issued without any options, warrants, rights, calls or other preemptive rights with respect to additional shares of capital stock. Except as set forth on Schedule 5.3(a) of the Disclosure Schedule, no options, warrants, preemptive or other rights to acquire any shares of Company Capital Stock or any debt or equity interest in the Company have been issued or are outstanding. All Options have been granted or issued at fair market value, as determined by the Company’s Board of Directors at the date of grant or issuance using the reasonable application of a reasonable valuation method. All Options and Warrants of the Company, if not exercised prior to the Closing Date, will be terminated as of the Closing Date without any further liabilities to Parent, Intermediate Parent, Merger Sub, or the Company.

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

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

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

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

(a) violate or conflict with or result in a breach of any of the terms, conditions or provisions of the Articles of Incorporation or Bylaws of the Company;

(b) violate any Law;

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

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

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

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

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

(a) The balance sheet of the Company as of December 31, 2007, and the related statements of income, shareholders’ equity and cash flows for the year then ended (collectively, the “ 2007 Financial Statements ”);

(b) The balance sheets of the Company as of December 31, 2006 and as of December 31, 2005, and the related statements of income, shareholders’ equity and cash flows for the years then ended; and

(c) A balance sheet of the Company as of September 30, 2008 (the “ Latest Balance Sheet Date ”) and the related statements of income, changes in shareholders’ equity, and cash flow for the nine (9) months then ended (the “ Interim Financial Statements ”), including in each case, the notes thereto, if any.

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

SECTION 5.6 ABSENCE OF UNDISCLOSED LIABILITIES.

(a) The Company does not have any material Liabilities, whether due or to become due (other than the obligation to provide services under contracts with its customers), arising out of transactions entered into on or prior to the date hereof, or any transaction, series of

transactions, action or inaction occurring on or prior to the date hereof, or any state of facts or conditions existing on or prior to the date hereof (regardless of when such liability or obligation is asserted), including, without limitation, Liabilities on account of Taxes or Employee Benefit Plans, or in respect thereof, except as and to the extent clearly and accurately reflected and accrued for or reserved against in, the 2007 Financial Statements and on the Latest Balance Sheet or incurred in the Ordinary Course of Business consistent with past practice since the Latest Balance Sheet Date (none of which is a Liability for breach of contract, breach of warranty, product liability, tort or infringement, or a claim or lawsuit, or an environmental Liability), except to the extent set forth on Schedule 5.6(a) of the Disclosure Schedule.

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

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

(a)  Title . The Company is in possession of and has good title to, or valid leasehold interests in or valid rights under Contract to use, all tangible personal property (including, without limitation, all fixtures, leasehold improvements, equipment (including computer hardware and communications equipment), whether or not such equipment constitutes a fixture under applicable Law, office, operating and other supplies, parts, furniture, and other tangible personal property of the Company) used in the Ordinary Course of Business, including all tangible personal property reflected on the balance sheet included in the 2007 Financial Statements and as of the Latest Balance Sheet Date, and tangible personal property acquired since the Latest Balance Sheet Date, other than property disposed of since such date in the Ordinary Course of Business consistent with past practice. All such tangible personal property is free and clear of all Liens, other than Permitted Liens. No Person other than the Company owns or has any right to the use or possession of such tangible personal property other than lessors and licensors of such tangible personal property constituting leasehold interests or licenses.

(b)  Condition . All of the assets of the Company are in good condition and repair consistent with industry standards (ordinary wear and tear excepted), and are useable in the Ordinary Course of Business. Except for tangible personal property having a fair market value of less than $3,000, Schedule 5.7(b) of the Disclosure Schedule includes all of the fixed assets of the Company, and each item of tangible personal property owned by the Company and the location thereof. Schedule 5.7(b) of the Disclosure Schedule lists all leases of tangible personal property to which the Company is a party or is bound, and the lessee and location of such leased tangible personal property.

SECTION 5.8 CONTRACTS . Schedule 5.8(a) of the Disclosure Schedule is a correct and complete list of each Contract that requires the Company to pay, or entitles the Company to receive, in the aggregate, $1,000 or more during any twelve (12) month period, all Contracts that restrict any of the Company’s business activity anywhere in the world, and all Contracts that are not terminable by the Company upon not more than thirty (30) days’ prior notice without penalty or payment (each a “ Material Contract ”). Correct and complete copies of the Material Contracts listed on Schedule 5.8(a) of the Disclosure Schedule have previously been furnished or made available to Parent. Except as set forth on Schedule 5.8(b) of the Disclosure Schedule, the

Company is not in default and to the Company’s Knowledge, no event has occurred which with the giving of notice or the passage of time or both would constitute a default by the Company under any Material Contract and, to the Knowledge of the Company, no event has occurred which with the giving of notice or the passage of time or both would constitute a default by any other party to any such Material Contract. Each of the Material Contracts of the Company is in full force and effect, is valid and enforceable in accordance with its terms, and, to the Knowledge of the Company, is not subject to any claims, charges, set-offs or defenses. Except as set forth on Schedule 5.8(c) , all of the Material Contracts of the Company will continue in full force and effect without any change or modification resulting from the consummation of the transactions contemplated by this Agreement, without the necessity of obtaining any consent, approval, novation or waiver of any third party. Except as set forth on Schedule 5.8(d) of the Disclosure Schedule, the Company is not a party to, or bound by the provisions of, any Material Contract (including purchase orders, blanket purchase orders and agreements and delivery orders) that remains executory in whole or in part with any Federal, state, local or foreign Governmental Authority or governmental body. Except as set forth on Schedule 5.8(e) of the Disclosure Schedule, no Material Contract of the Company is required to be treated as a capital lease by GAAP.

SECTION 5.9 REAL PROPERTY . No real property is owned by the Company. Schedule 5.9 of the Disclosure Schedule lists all real property used or held for use by the Company which is leased by the Company from third parties (the “ Leased Real Property ”), and indicates the addresses and the owners of the Leased Real Property. The Company is the sole legal and equitable holder of the leasehold interest it holds in the Leased Real Property and possesses a valid leasehold interest thereto, free and clear of all Liens (other than Permitted Liens) that could impair the ability of the Company to realize the benefits of the rights provided to it under any lease, and the right to quiet enjoyment of such Leased Real Property. Accurate and complete copies of all existing lease agreements with respect to the Leased Real Property as of the Closing Date have heretofore been delivered to Parent. The Company has not exercised any option to purchase any parcel of Leased Real Property. The Leased Real Property constitutes the only real property used or occupied by the Company in the conduct of the Business. There are no leases, subleases, licenses, concessions or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of any parcel of the Leased Real Property, or any options or rights of first refusal with respect thereto. Other than as set forth on Schedule 5.9 of the Disclosure Schedule, there are no parties (other than the Company) in possession of the Leased Real Property and the Company enjoys peaceful and undisturbed possession of the Leased Real Property, subject to the terms and conditions of the leases set forth on Schedule 5.9 of the Disclosure Schedule. To the Knowledge of the Company, within the last twelve (12) months, no notice from any Governmental Authority has been received by the Company or has been served upon the Leased Real Property requiring or calling attention to the need for any work, repair, construction, alteration or installation on or in connection with the Leased Real Property. To the Knowledge of the Company, no notice has been received by the Company or has been served upon the Leased Real Property stating that, and the Company has no Knowledge that, the buildings and improvements on the Leased Real Property, or the Business as presently conducted thereon by the Company, are not in compliance with any applicable Law.

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

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

SECTION 5.12 INTELLECTUAL PROPERTY . Schedule 5.12 of the Disclosure Schedule contains a complete and correct list of all patents, patent applications, patent disclosures, registered and unregistered trademarks, registered service marks, registered and unregistered trade names and corporate names, domain names and websites, registered copyrights, and registrations, applications and renewals for any of the foregoing, and software (other than “off-the-shelf” commercial software), which are owned or licensed by the Company, including all registration numbers and dates and jurisdictions of registrations, if applicable, all licenses and other rights granted from or to any third party with respect to any Intellectual Property. Except as set forth on Schedule 5.12 of the Disclosure Schedule, (a) the Company owns and possesses all right, title and interest in and to, or has a valid license to use, all of the Intellectual Property and proprietary rights and information necessary for the operation of the Business as presently conducted by the Company; (b) each item of Intellectual Property owned or used by the Company prior to the Closing will be owned or available for use by the Company on identical terms and conditions immediately subsequent to the Closing; (c) no claim by any third party contesting the validity, enforceability, use or ownership of any Intellectual Pr