AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

T HIS A GREEMENT AND P LAN OF M ERGER (“ Agreement ”) is made and entered into as of September 5, 2009, by and among: C ELL B IOSCIENCES , I NC ., a Delaware corporation (“ Parent ”); A STRO A CQUISITION S UB , I NC ., a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”); and A LPHA I NNOTECH C ORP . , a Delaware corporation (the “ Company ”). Certain capitalized terms used in this Agreement are defined in Exhibit A .

R ECITALS

A. Parent, Merger Sub and the Company intend to effect a merger of Merger Sub into the Company (the “ Merger ”) in accordance with this Agreement and the Delaware General Corporation Law (the “ DGCL ”). Upon consummation of the Merger, Merger Sub will cease to exist, and the Company will become a wholly-owned subsidiary of Parent.

B. Contemporaneously with the execution and delivery of this Agreement, certain stockholders of the Company are entering into Voting Agreements in favor of Parent (the “ Voting Agreements ”) and proxies related thereto.

A GREEMENT

The parties to this Agreement, intending to be legally bound, agree as follows:

 

1.	D ESCRIPTION O F T RANSACTION

1.1 Merger of Merger Sub into the Company. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease. The Company will continue as the surviving corporation in the Merger (the “ Surviving Corporation ”).

1.2 Effects of the Merger. The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL.

1.3 Closing; Effective Time. The consummation of the Merger (the “ Closing ”) shall take place at the offices of Cooley Godward Kronish LLP , 3175 Hanover Street, Palo Alto, California, on a date to be designated by Parent, which shall be no later than the second business day after the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Sections 6 and 7 (other than the conditions which by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of each of such conditions). The date on which the Closing actually takes place is referred to as the “ Closing Date .” A certificate of merger satisfying the applicable requirements of the DGCL shall be duly executed by the Company in connection with the Closing, and, concurrently with or as soon as practicable following the Closing, shall be filed with the Secretary of State of the State of Delaware. The Merger shall become effective at the time of the filing of such certificate of merger with the Secretary of State of the State of Delaware or at such later time as may be specified in such certificate of merger with the mutual consent of Parent and the Company prior to the Closing (the time as of which the Merger becomes effective being referred to as the “ Effective Time ”).

 

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1.4 Certificate of Incorporation and Bylaws; Directors and Officers. At the Effective Time:

(a) the Certificate of Incorporation of the Surviving Corporation shall be amended and restated to conform to the Certificate of Incorporation of Merger Sub as of the date of this Agreement (other than with respect to the name of the Surviving Corporation);

(b) the Bylaws of the Surviving Corporation shall be amended and restated to conform to the Bylaws of Merger Sub as in effect immediately prior to the Effective Time; and

(c) unless otherwise determined by Parent prior to the Effective Time, the directors and officers of the Surviving Corporation shall be the respective individuals who are directors and officers of Merger Sub immediately prior to the Effective Time.

1.5 Conversion of Shares.

(a) At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company:

(i) any shares of Company Common Stock held by the Company or any wholly-owned Subsidiary of the Company (or held in the Company’s treasury) immediately prior to the Effective Time shall be canceled and retired and shall cease to exist, and no consideration shall be paid in exchange therefor;

(ii) except as provided in clause “(i)” above and subject to Sections 1.5(b), 1.5(c) and 1.8, each share of Company Common Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive $1.50 in cash, without interest; and

(iii) each share of the common stock, $0.01 par value per share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation.

The amount of cash consideration per share specified in clause “(ii)” of the preceding sentence (as such amount may be adjusted in accordance with Section 1.5(b)) is referred to as the “ Per Share Merger Price .”

(b) If, during the period commencing on the date of this Agreement and ending at the Effective Time, the outstanding shares of Company Common Stock are changed into a different number or class of shares by reason of any stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction, then the Per Share Merger Price shall be appropriately adjusted.

(c) If any shares of Company Common Stock outstanding immediately prior to the Effective Time are unvested or are subject to a repurchase option, risk of forfeiture or

 

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other condition under any applicable restricted stock purchase agreement or other Contract under which the Company has any rights, then: (i) the Merger Consideration to be paid in exchange for such shares of Company Common Stock will be vested and not subject to the same repurchase option, risk of forfeiture or other condition; and (ii) the holder of such shares of Company Common Stock shall be entitled to receive the Merger Consideration in accordance with Sections 1.5 and 1.7. The Company shall use its reasonable best efforts to cause any such repurchase option, risk of forfeiture or other condition and the Company’s rights to reacquire or repurchase such shares of Company Common Stock to lapse effective as of immediately prior to the Effective Time.

1.6 Closing of the Company’s Transfer Books. At the Effective Time: (a) all shares of Company Common Stock outstanding immediately prior to the Effective Time shall automatically be canceled and retired and shall cease to exist, and all holders of certificates representing shares of Company Common Stock that were outstanding immediately prior to the Effective Time shall cease to have any rights as stockholders of the Company; and (b) the stock transfer books of the Company shall be closed with respect to all shares of Company Common Stock outstanding immediately prior to the Effective Time. No further transfer of any such shares of Company Common Stock shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any shares of Company Common Stock outstanding immediately prior to the Effective Time (a “ Company Stock Certificate ”) is presented to the Payment Agent (as defined in Section 1.7) or to the Surviving Corporation or Parent, such Company Stock Certificate shall be canceled and shall be exchanged as provided in Section 1.7.

1.7 Surrender of Certificates.

(a) On or prior to the Closing Date, Parent shall select a reputable bank or trust company reasonably acceptable to the Company to act as payment agent in the Merger (the “ Payment Agent ”). Within one business day after the Effective Time, Parent shall deposit with the Payment Agent cash sufficient to pay the cash consideration payable pursuant to Section 1.5. The cash amount so deposited with the Payment Agent is referred to as the “ Payment Fund .” The Payment Agent will invest the funds included in the Payment Fund in the manner directed by Parent. Any interest or other income resulting from the investment of such funds shall be the property of, and will be paid promptly to, Parent.

(b) As soon as practicable (and in any event no later than two business days) after the Effective Time, the Payment Agent will mail to the Persons who were record holders of Company Stock Certificates immediately prior to the Effective Time: (i) a letter of transmittal in customary form containing such provisions as Parent or the Payment Agent may reasonably specify and that are reasonably acceptable to the Company prior to the Effective Time (including a provision confirming that delivery of Company Stock Certificates shall be effected, and risk of loss and title to Company Stock Certificates shall pass, only upon delivery of such Company Stock Certificates to the Payment Agent); and (ii) instructions for use in effecting the surrender of Company Stock Certificates in exchange for Merger Consideration. Upon surrender of a Company Stock Certificate to the Payment Agent for exchange, together with a duly executed letter of transmittal and such other customary documents as may be reasonably required by the Payment Agent or Parent: (A) the holder of such Company Stock Certificate shall be entitled to

 

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receive in exchange therefor the dollar amount that such holder has the right to receive pursuant to the provisions of Section 1.5; and (B) the Company Stock Certificate so surrendered shall be canceled. Until surrendered as contemplated by this Section 1.7(b), each Company Stock Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive Merger Consideration as contemplated by Section 1.5. If any Company Stock Certificate shall have been lost, stolen or destroyed, Parent or the Payment Agent may, in its reasonable discretion and as a condition precedent to the payment of any Merger Consideration with respect to the shares of Company Common Stock previously represented by such Company Stock Certificate, require the owner of such lost, stolen or destroyed Company Stock Certificate to provide an appropriate affidavit and to deliver a bond (in such sum as Parent or the Payment Agent may reasonably direct) as indemnity against any claim that may be made against the Payment Agent, Parent or the Surviving Corporation with respect to such Company Stock Certificate.

(c) Any portion of the Payment Fund that remains undistributed to holders of Company Stock Certificates as of the date one year after the Closing Date shall be delivered to Parent upon demand, and any holders of Company Stock Certificates who have not theretofore surrendered their Company Stock Certificates in accordance with this Section 1.7 shall thereafter look only to Parent for satisfaction of their claims for Merger Consideration.

(d) Each of the Payment Agent, Parent and the Surviving Corporation shall be entitled to deduct and withhold from any consideration payable to any holder of any Company Stock Certificate (in his or her capacity as a holder of Company Common Stock) such amounts as are required to be deducted or withheld from such consideration under the Code or any provision of state, local or foreign tax law or under any other applicable Legal Requirement and shall pay such withheld amount to the applicable Governmental Body. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

(e) Neither Parent nor the Surviving Corporation shall be liable to any holder of any Company Stock Certificate or to any other Person with respect to any Merger Consideration delivered to any public official pursuant to any applicable abandoned property law, escheat law or similar Legal Requirement.

1.8 Dissenting Shares.

(a) Notwithstanding anything to the contrary contained in this Agreement, shares of Company Common Stock held by a holder who has made a demand for appraisal of such shares in accordance with Section 262 of the DGCL (any such shares being referred to as “ Dissenting Shares ” until such time as such holder fails to perfect or otherwise loses such holder’s appraisal rights under Section 262 of the DGCL with respect to such shares) shall not be converted into or represent the right to receive Merger Consideration in accordance with Section 1.5, but shall be entitled only to such rights as are granted by the DGCL to a holder of Dissenting Shares.

 

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(b) If any Dissenting Shares shall lose their status as such (through failure to perfect or otherwise), then, as of the later of the Effective Time or the date of loss of such status, such shares shall automatically be converted into and shall represent only the right to receive Merger Consideration in accordance with Section 1.5, without interest thereon, upon surrender of the Company Stock Certificate representing such shares.

(c) The Company shall give Parent: (i) prompt written notice of (A) any demand for appraisal received by the Company prior to the Effective Time pursuant to the DGCL, (B) any withdrawal of any such demand and (C) any other demand, notice or instrument delivered to the Company prior to the Effective Time pursuant to the DGCL; and (ii) the opportunity to participate in all negotiations and proceedings with respect to any such demand, notice or instrument. The Company shall not make any payment or settlement offer prior to the Effective Time with respect to any such demand, notice or instrument unless Parent shall have given its written consent to such payment or settlement offer.

1.9 Treatment of Stock Options and Warrants.

(a) The Company shall use its reasonable best efforts to cause the vesting of each Company Option outstanding immediately prior to the Effective Time to be accelerated in full immediately prior to the Effective Time, and each such Company Option, if not exercised immediately prior to the Effective Time, shall be canceled as of the Effective Time and shall thereafter represent the right to receive, in consideration for such cancellation, an amount in cash equal to the product of: (i) the number of shares of Company Common Stock subject to such Company Option immediately prior to the Effective Time; multiplied by (ii) the amount by which the Per Share Merger Price exceeds the exercise price per share of Company Common Stock subject to such Company Option immediately prior to the Effective Time (it being understood that, if the exercise price payable in respect of such Company Option equals or exceeds the Per Share Merger Price, the amount payable hereunder shall be zero for such Company Option), less any required tax withholding.

(b) The Company shall use its reasonable best efforts to cause each Company Warrant, if not exercised immediately prior to the Effective Time, to be canceled as of the Effective Time and shall thereafter represent the right to receive, in consideration for such cancellation, an amount in cash equal to the product of: (i) the number of shares of Company Common Stock subject to such Company Warrant immediately prior to the Effective Time; multiplied by (ii) the amount by which the Per Share Merger Price exceeds the exercise price per share of Company Common Stock subject to such Company Option immediately prior to the Effective Time (it being understood that, if the exercise price payable in respect of such Company Warrant equals or exceeds the Per Share Merger Price, the amount payable hereunder shall be zero for such Company Warrant).

1.10 Further Action . If, at any time after the Effective Time, any further action is determined by Parent or the Surviving Corporation to be necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession of and to all rights and property of Merger Sub and the Company, then the officers and directors of the Surviving Corporation and Parent shall be fully authorized (in the name of Merger Sub, in the name of the Company and otherwise) to take such action.

 

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2.	R EPRESENTATIONS A ND W ARRANTIES O F T HE C OMPANY

Except as expressly set forth in the applicable Part of the Disclosure Schedule, the Company represents and warrants to Parent and Merger Sub as follows:

2.1 Due Organization and Good Standing; Subsidiaries.

(a) Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and (where such concept is recognized under the laws of the jurisdiction in which it is incorporated) in good standing under the laws of the jurisdiction in which it is incorporated, and has all requisite corporate power and authority necessary to carry on its business as it is now being conducted. The Company and each of its Subsidiaries is duly qualified to do business and is in good standing in each state in which the nature of the business conducted by it makes such qualification necessary, except as would not have a Company Material Adverse Effect.

(b) Part 2.1 of the Disclosure Schedule lists all Subsidiaries of the Company, together with the jurisdiction of organization of each such Subsidiary. All the outstanding shares of capital stock of each Subsidiary of the Company have been duly authorized and validly issued, are fully paid and nonassessable and are owned directly or indirectly by the Company free and clear of all liens, pledges or encumbrances, except for Permitted Encumbrances.

(c) Other than equity interests in the Subsidiaries held by the Company or any of its Subsidiaries, there are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock of or other voting securities or ownership interests in any Subsidiary of the Company, (ii) options, warrants or other rights or arrangements to acquire from the Company or any of its Subsidiaries, or other obligations or commitments of the Company or any of its Subsidiaries to issue, any capital stock of or other voting securities or ownership interests in, or any securities convertible into or exchangeable for any capital stock of or other voting securities or ownership interests in, any Subsidiary of the Company, or (iii) restricted shares, restricted share units, stock appreciation rights, performance shares, contingent value rights, “phantom” stock or similar securities or rights to acquire any capital stock or other voting securities or ownership interests in any Subsidiary of the Company. Except for securities or interests classified as marketable securities or short-term investments under GAAP, as of the date hereof, neither the Company nor any of its Subsidiaries owns any capital stock or other equity interest in, or any interest convertible, exchangeable or excisable for, any such capital stock or other equity interest in, any Person (other than a Subsidiary of the Company).

2.2 Certificate of Incorporation; Bylaws. The Company has delivered or made available to Parent copies of the certificate of incorporation and bylaws of the Company, including all amendments thereto. The Company is not in violation of its certificate of incorporation or bylaws. For purposes of this Agreement, the Company will be deemed to have made available to Parent any document filed or furnished by the Company and publicly available on the SEC’s EDGAR website.

 

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2.3 Capitalization, Etc.

(a) The authorized capital stock of the Company consists of 50,000,000 shares of Company Common Stock. As of September 4, 2009: (i) 10,934,762 shares of Company Common Stock were issued (and not held by the Company as treasury shares) and outstanding; (ii) 4,746 shares of Company Common Stock were held by the Company as treasury shares; (iii) 2,812,939 shares of Company Common Stock were reserved for future issuance pursuant to the Company Stock Plans, of which 1,996,710 shares of Company Common Stock were subject to outstanding options to acquire shares of Company Common Stock from the Company. As of September 4, 2009, 1,529,138 shares of Company Common Stock were subject to outstanding options to acquire shares of Company Common Stock from the Company with an exercise price less than the Per Share Merger Price, which options have an aggregate exercise price of $1,485,018. From September 3, 2009 to the date of this Agreement, the Company has not issued any shares of Company Common Stock other than resulting from the exercise of options reflected in the immediately preceding sentence as outstanding as of September 4, 2009. As of September 4, 2009, the Company has reserved 1,164,991 shares of Company Common Stock for issuance under outstanding Company Warrants.

(b) Except for options, warrants, rights, securities and plans referred to in Section 2.3(a) or as set forth in Part 2.3(b) of the Disclosure Schedule, as of the date of this Agreement, there is no: (i) outstanding option, warrant or right to acquire from the Company any shares of the capital stock of the Company; (ii) outstanding security of the Company that is convertible into or exchangeable for any shares of Company Common Stock; or (iii) securities or contractual rights that give any Person the right to receive any economic interest of a nature accruing to the holders of Common Stock.

(c) The Company has delivered or made available to Parent copies of: (A) the Company Stock Plans, which cover the Company Options granted by the Company that are outstanding as of the date of this Agreement; and (B) the forms of all stock option and other award agreements with respect to the Company Stock Plans.

2.4 SEC Filings; Financial Statements.

(a) All registration statements (on a form other than Form S-8), annual, quarterly and periodic reports and definitive proxy statements required to be filed by the Company with the SEC between January 1, 2008 and the date of this Agreement (the “ Company SEC Documents ”) have been so filed. As of the time it was filed with the SEC: (i) each of the Company SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except to the extent corrected: (A) in the case of Company SEC Documents filed or furnished on or prior to the date of this Agreement that were amended or superseded on or prior to the date of this Agreement, by the filing or furnishing of the applicable amending or superseding Company SEC Document on or prior to the date of this Agreement; and (B) in the case of Company SEC Documents filed or furnished after the date of this Agreement that are amended or superseded prior to the Effective

 

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Time, by the filing or furnishing of the applicable amending or superseding Company SEC Document. The Company has made available to Parent copies of all comment letters received by the Company from the SEC since January 1, 2008 and relating to the Company SEC Documents, together with all written responses of the Company thereto sent to the SEC. As of the date of this Agreement, there are no outstanding or unresolved comments in any comment letters received by the Company from the SEC. As of the date of this Agreement, to the Knowledge of the Company, none of the Company SEC Documents is the subject of any ongoing review by the SEC.

(b) The financial statements (including any related notes) contained in the Company SEC Documents fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the consolidated results of operations of the Company and its Subsidiaries for the periods covered thereby in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q, Form 8-K or any successor form under the Exchange Act, and except that unaudited financial statements may not contain footnotes and are subject to year-end adjustments).

(c) As of the date of this Agreement, neither the Company nor any of its Subsidiaries has any liabilities of the type required to be disclosed in the liabilities column of a balance sheet prepared in accordance with GAAP, except for: (i) liabilities disclosed in the financial statements (including any related notes) contained in the Company SEC Documents; (ii) liabilities incurred in the ordinary course of business since the date of the Latest Balance Sheet; and (iii) liabilities that are not material in the aggregate to the Company and its Subsidiaries taken as a whole.

(d) The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).

(e) The Company maintains a system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) (“ Internal Controls ”). The Company had disclosed, as of the date of filing with the SEC its Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, to the Company’s auditors and audit committee of the Company Board, to its Knowledge, (i) all significant deficiencies and material weaknesses in the design or operation of Internal Controls which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Internal Controls.

2.5 Absence of Certain Changes. Between the date of the Latest Balance Sheet and the date of this Agreement, neither the Company nor any of its Subsidiaries has: (a) suffered any Company Material Adverse Effect that has not ceased to be a Company Material Adverse Effect; (b) suffered any loss, damage or destruction to any of its assets with a value in excess of $50,000 in the aggregate; (c) amended its certificate of incorporation or bylaws; (d) incurred any indebtedness for borrowed money or guaranteed any such indebtedness, except in the ordinary course of business; (e) changed, in any material respect, its accounting methods, principles or

 

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practices except as required by changes in GAAP; (f) sold or otherwise transferred any assets with a value in excess of $50,000 in the aggregate, except in the ordinary course of business; (g) declared, set aside or paid any dividend with respect to the outstanding shares of Company Common Stock; (h) changed any material tax election or settled any material tax claims, in each case other than in the ordinary course of business; or (i) entered into any agreement to take any of the actions referred to in clauses “(c)” through “(h)” of this sentence.

2.6 Customers; Distributors and Vendors. Since June 30, 2009, neither the Company nor any of its Subsidiaries had received written notice from any of its material distributors, customers or suppliers indicating that there has been a material adverse change in the relationship between the Company or any of its Subsidiaries and such distributor, customer or supplier. Since June 30, 2009, no Contract between the Company or any of its Subsidiaries and any of their material distributors has been terminated other than as a result of the expiration of the term of any such Contract. There is no existing breach or default on the part of the Company or any of its Subsidiaries of their exclusivity restrictions or obligations under any Contract except to the extent described in Part 2.6 of the Disclosure Schedule.

2.7 Indebtedness; Receivables; Liabilities.

(a) As of August 31, 2009, the Company’s net debt was no more than $2,075,000, which is the amount by which (i) the Company’s aggregate indebtedness for borrowed money outstanding as of such date exceeded (ii) the sum of the Company’s cash, cash equivalents and short-term investments as of such date, determined in accordance with GAAP (applied on a basis consistent with the basis on which the financial statements contained in the Company SEC Documents have been prepared). From August 31, 2009 to the date of this Agreement, the Company has not incurred any indebtedness for borrowed money.

(b) All existing accounts receivable of the Company and its Subsidiaries (including those accounts receivable reflected on the Latest Balance Sheet that have not yet been collected and those accounts receivable that have arisen since June 30, 2009 and have not yet been collected): (i) represent valid obligations of customers of the Company and its Subsidiaries arising from bona fide transactions entered into in the ordinary course of business; and (ii) are current and, to the Company’s Knowledge, will be collected in full when due, without any counterclaim or set off (net of an allowance for doubtful accounts not to exceed $5,000 in the aggregate).

(c) The Company and its Subsidiaries do not have and are not responsible for performing or discharging, any accrued, contingent or other liabilities of any nature, either matured or unmatured, except for: (a) liabilities identified as such on the face of the Latest Balance Sheet; (b) normal and recurring current liabilities that have been incurred by the Company and its Subsidiaries since June 30, 2009 in the ordinary course of business and consistent with past practices; (c) liabilities for performance of obligations of the Company and its Subsidiaries under any Contracts to which the Company and or any of its Subsidiaries is a party, to the extent such liabilities are readily ascertainable (in nature, scope and amount) from the copies of such Contracts made available to Parent prior to the date of this Agreement; (d) liabilities described in Part 2.7(c) of the Disclosure Schedule; and (e) liabilities and obligations under this Agreement.

 

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2.8 IP Rights.

(a) Part 2.8(a) of the Disclosure Schedule sets forth a complete list, along with the jurisdiction and applicable registration or serial number, of all patents, registered marks or trade dress, registered copyrights, registered mask works, registered designs, and registered domain names, along with all pending applications to issue or register the same, owned by the Company or any Subsidiary (the “ Registered IP ”). The Company or one of its Subsidiaries is the sole and exclusive owner of all Registered IP and all Company IP, free of all liens and security interests (other than Permitted Encumbrances). Neither the Company nor any of its Subsidiaries has granted any exclusive license to any such Registered IP or Company IP to any other Person (other than licenses which have expired, have been terminated or are no longer in effect for any other reason). The Registered IP that is issued is valid, subsisting and enforceable and (to the Knowledge of the Company), the Registered IP that is registered but not yet issued is valid, subsisting and enforceable, and, to the Knowledge of the Company as of the date of this Agreement, no action is threatened in writing or pending challenging the validity or enforceability of any Registered IP that is issued or registered. To the Knowledge of the Company, no third party has infringed or misappropriated, or is infringing or misappropriating, any material IP Right of the Company or any Subsidiary.

(b) The Company and each of its Subsidiaries has the right and operational ability to exploit all IP Rights necessary to enable the Company and its Subsidiaries to conduct their business substantially in the manner in which their business is currently being conducted. Neither the Company nor any Subsidiary has infringed, improperly disclosed or misappropriated the IP Rights of any third party. Neither the Company nor any Subsidiary has been the subject of any suit, arbitration or administrative proceeding since January 1, 2007 alleging, or received any other written notices from any third party since January 1, 2007: (i) alleging that the Company or any Subsidiary has infringed, improperly disclosed, misappropriated, converted or otherwise damaged the IP Rights of any third party; or (ii) inviting or demanding that the Company or a Subsidiary take a license in order to avoid the future infringement of IP Rights of a third party.

(c) Neither the Company nor any Subsidiary has entered into, except in the ordinary course of business under standard forms of the Company’s or its Subsidiaries’ Contracts made available to Parent, any written agreement to indemnify, defend or hold harmless any third party for or against any infringement, misappropriation, or other conflict with the IP Rights of any third party. There are no suits or actions pending or, to the Knowledge of the Company, threatened against the Company or any Subsidiary in which it is alleged that the Company or any Subsidiary has infringed, misappropriated or improperly disclosed the IP Rights of any third party.

(d) The Company and its Subsidiaries have taken and are taking the following steps, to the extent that such steps are commercially reasonable and necessary to establish, perfect, and defend their ownership of Registered IP and Company IP or their right to use licensed third party IP Rights: (i) using appropriate patent, trademark and copyright designations on products and in marketing materials; (ii) complying with all legal requirements and all filings, payments, and other actions required to be made or taken to maintain each item of Registered IP in full force and effect; (iii) requiring all employees and contractors who have invented inventions covered by patents owned by the Company or Subsidiary, or were involved in the

 

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development of other Company IP, to assign all rights and interests in such inventions and other Company IP to the Company or relevant Subsidiary; and (iv) taking reasonable steps to protect trade secret and other confidential information, including requiring a non-disclosure agreement before trade secret or other material confidential information is disclosed to a third party. The Company and its Subsidiaries, have complied, in all material respects, with all internal policies, applicable statutes, regulations, orders, and other legal requirements relating to the fair and proper use of personally identifiable information of employees and contractors of the Company and its Subsidiaries. To the Knowledge of the Company, no confidential or trade secret information of the Company, or personally identifiable information in the possession, custody or control of the Company or any Subsidiary has been lost, stolen, or improperly disclosed. All persons identified as inventors in the patents owned by the Company or any Subsidiary have assigned all of their rights in the relevant inventions to the Company, relevant Subsidiary or predecessor in interest thereof.

(e) Except for third party Software commercially available in the market for licensing on standard terms, all Software sold or licensed by Company or its Subsidiaries to the customers of the Company and its Subsidiaries independently or bundled with other components, products or services of Company and its Subsidiaries, is owned entirely and exclusively by the Company or a Subsidiary and is free to be licensed or sold on the terms such Software is licensed or sold. The Company, directly or through its Subsidiaries, is in actual possession of or has necessary control over the source code and object code of all Software owned by the Company or any Subsidiary. Neither the Company nor any Subsidiary has disclosed or licensed to any third party any source code of Software owned by the Company or any Subsidiary except pursuant to written source code escrow agreements containing license and confidentiality terms that reasonably protect the Company’s rights in such Software. Neither the Company nor any of its Subsidiaries is obligated to support or maintain any of the Software except pursuant to agreements that will terminate by their terms or are terminable by the Company (other than for cause) on a periodic basis and that provide for one or more payments to the Company or Subsidiary for the period of such services. No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or could reasonably be expected to, result in the delivery, license, or disclosure of the source code for any Software owned by the Company or any Subsidiary to any other Person. None of the Software owned by the Company or its Subsidiaries and, to the Knowledge of the Company, none of the Software used or licensed by the Company or its Subsidiaries contain any time bomb, virus, worm, trojan horse, back door, drop dead device, or any other code that would intentionally interfere with the normal operation of such Software, or that is intended to allow circumvention of security controls for the same, or that is intended to cause damage to hardware, software or data.

(f) No federal, state, local or other governmental entity, nor any university, college, or academic institution has financially sponsored research and development conducted by the Company or its Subsidiaries, or has rights in Software or IP Rights and purported to be owned by the Company or any Subsidiary. Neither the Company nor any Subsidiary has participated in any standards-setting activities or joined or contributed to any standards-setting or similar organizations that would reasonably be expected to (i) restrict the ability of the Company or any of its Subsidiaries to enforce Company IP or IP Rights purported to be owned by the Company or any Subsidiary, (ii) require or obligate the Company to license to any Person Company IP or IP Rights purported to be owned by the Company or any Subsidiary, or (iii)

 

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restrict the ability of the Company or any of its Subsidiaries to exclude others from using any Software or IP Rights purported to be owned by the Company or any Subsidiary. None of the Software purported to be owned by the Company or any Subsidiary, or incorporated by the Company or any Subsidiary into its products or services contain any open source code or other code or technology which could (i) require the public disclosure, third party distribution, or general licensing of Software or other IP Rights owned by the Company or any Subsidiary, (ii) limit the ability of the Company or a Subsidiary to license or charge fees or royalties for such Software or IP Rights, or (iii) require the Company or a Subsidiary to permit the reverse engineering, decompilation, disassembly, or creation of derivative works based upon of Software owned by the Company or a Subsidiary.

2.9 Title to Assets; Real Property.

(a) The Company or one of its Subsidiaries owns, and has good title to, each of the tangible assets reflected as owned by the Company or its Subsidiaries on the Latest Balance Sheet (except for tangible assets sold or disposed of since that date and except for tangible assets being leased to the Company or one of its Subsidiaries) free of any liens or encumbrances (other than Permitted Encumbrances).

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

(c) Part 2.9(c) of the Disclosure Schedule sets forth a list of all real estate leases pursuant to which the Company or any of its Subsidiaries leases real property (the “ Leased Real Property ”) from any other Person. Neither the Company nor any of its Subsidiaries is a party to any written or oral leases, subleases, licenses, concessions, occupancy agreements or other Contracts granting the right of use or occupancy of the Leased Real Property to any other Person.

(d) The Company or one of its Subsidiaries has a valid and enforceable leasehold interest in each Leased Real Property, free and clear of all liens and encumbrances except for Permitted Encumbrances.

2.10 Contracts.

(a) Part 2.10(a) of the Disclosure Schedule contains a list of each of the following Contracts that is in force and effect as of the date of this Agreement to which the Company or any of its Subsidiaries is a party: (i) each Contract that would be required to be filed as an exhibit to a Registration Statement on Form S-1 under the Securities Act or an Annual Report on Form 10-K under the Exchange Act (if such registration statement or report was filed by the Company with the SEC on the date of this Agreement); (ii) each Contract that restricts the ability of the Company or any of its Subsidiaries to compete in any geographic area or line of business; (iii) each indemnification or employment Contract with any director or officer of the Company or its Subsidiaries or with any employee or consultant of the Company or its Subsidiaries (other than offer letters with employees providing for at-will employment); (iv) each loan or credit agreement, mortgage, note or other Contract evidencing indebtedness for money borrowed by the Company or any of its Subsidiaries from a third party lender, and each Contract pursuant to which any such indebtedness for borrowed money is guaranteed by the Company or

 

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any of its Subsidiaries; (v) each customer or supply Contract (excluding purchase orders given or received in the ordinary course of business) under which the Company or any Subsidiary of the Company paid to or received from such customer or supplier in excess of $50,000 in fiscal year 2008 or in excess of $50,000 in the six months ended June 30, 2009; (vi) each material “single source” supply Contract pursuant to which goods or materials are supplied to the Company or any Subsidiary of the Company from an exclusive source; (vii) each collective bargaining agreement; (viii) each Real Property Lease; (ix) each lease or rental Contract involving personal property (and not relating primarily to real property) pursuant to which the Company or any of its Subsidiaries is required to make rental payments in excess of $50,000 per year; (x) each Contract relating to a joint venture, partnership or other strategic arrangement, or involving a sharing of costs, profits or losses with another Person; (xi) each Contract with a distributor or sales agent of the Company or any of its Subsidiaries (whether or not exclusive); (xii) each agreement that includes the grant to the Company or any of its Subsidiaries of a license to IP Rights owned by a third party and that is not a standard non-exclusive license agreement for a commercially available product; (xiii) each Contract relating to the merger, consolidation, reorganization or any similar transaction with respect to the Company or any of its Subsidiaries; (xiv) each Contract relating to the acquisition, transfer, or development of any IP Rights entered into by the Company or any of its Subsidiaries; and (xv) each Contract imposing any exclusivity or similar restriction on the Company or any of its Subsidiaries or granting exclusivity to any other Person (each Contract listed in Part 2.10(a) of the Disclosure Schedule being referred to as a “ Material Contract ”). Each of the Material Contracts is valid and binding on the Company or the Subsidiary of the Company that is a party thereto and, to the Knowledge of the Company, each other party thereto, and is in full force and effect, except where such failures to be valid and binding or to be in full force and effect do not constitute a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries is party to any Contract containing “standstill” or similar provisions relating to transactions involving the acquisition, disposition or other transfer of assets or securities of the Company or its Subsidiaries.

(b) There is no existing material breach or default on the part of the Company or any of its Subsidiaries under any Material Contract and, to the Knowledge of the Company, there is no existing breach or default on the part of any other Person under any Material Contract. No event has occurred that, with or without notice or lapse of time, would constitute a material breach or default by the Company or any of its Subsidiaries, or permit termination, material modification or acceleration, under any Material Contract.

(c) The Company has made available to Parent correct and complete copies of each written Material Contract in effect as of the date of this Agreement, together with all amendments and supplements thereto in effect as of the date of this Agreement.

2.11 Compliance with Legal Requirements. The Company and its Subsidiaries are in material compliance with and have complied in a timely manner and in all material respects with all Legal Requirements applicable to their businesses or relating to any of the property owned, leased or used by them (including the Foreign Corrupt Practices Act of 1977, any other Legal Requirements regarding use of funds for political activity or commercial bribery, the Sarbanes-Oxley Act of 2002, Legal Requirements relating to equal employment opportunity, discrimination, occupational safety and health, environmental matters, interstate commerce, anti-kickback, healthcare and antitrust, export control (including those Legal Requirements

 

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administered by the U.S. Department of Commerce and the U.S. Department of State) and asset control (including those Legal Requirements administered by the U.S. Department of the Treasury)).

2.12 Legal Proceedings; Orders.

(a) There is no Legal Proceeding pending (or, to the Knowledge of the Company, threatened in writing) against the Company or any of its Subsidiaries, any present or former executive officer, director or employee of the Company or any of its Subsidiaries relating to his or her actions or inactions in such status or any other Person for whom the Company or any of its Subsidiaries would be liable.

(b) There is no material court order or judgment specific to the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is subject.

2.13 Governmental Authorizations. The Company and its Subsidiaries hold all material Governmental Authorizations necessary to enable them to conduct their businesses in substantially the manner in which such businesses are currently being conducted. The material Governmental Authorizations held by the Company and its Subsidiaries are, in all material respects, valid and in full force and effect. The Company and its Subsidiaries are in compliance with the terms and requirements of such Governmental Authorizations. Between January 1, 2008 and the date of this Agreement, neither the Company nor any of its Subsidiaries has received any written notice from any Governmental Body: (a) asserting any material violation of any term or requirement of any material Governmental Authorization; or (b) notifying the Company or one of its Subsidiaries of the revocation of any material Governmental Authorization.

2.14 Tax Matters.

(a) All material tax returns required to be filed by the Company and its Subsidiaries with any Governmental Entities with respect to taxable periods ending before the Closing Date (including any schedule or attachment thereto or any amendment thereof) (the “ Company Returns ”): (i) have been or will be filed on or before the applicable due date (as such due date may have been or may be extended), and (ii) are, or will be when filed, true and accurate in all material respects. The Company and its Subsidiaries have timely paid or will timely pay any taxes due except to the extent such taxes are being contested in good faith and for which the Company or the appropriate Subsidiary has set aside adequate reserves. The Company has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

(b) The Latest Balance Sheet fully accrues the material liabilities of the Company and its Subsidiaries for taxes with respect to all periods through June 30, 2009 in accordance with GAAP and the unpaid taxes of the Company and its Subsidiaries as of the Closing Date will not exceed by a material amount the reserve for taxes set forth on the Latest Balance Sheet as updated for adjustments due to the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries in filing the Company Returns.

 

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(c) (i) There are no examinations or audits of any Company Return currently underway; (ii) no extension or waiver of the limitation period applicable to any Company Return is in effect; (iii) no Legal Proceeding is pending (or, to the Knowledge of the Company, is being overtly threatened) by any tax authority against the Company or any of its Subsidiaries in respect of any material tax; (iv) there are no material unsatisfied liabilities for taxes with respect to any notice of deficiency or similar document received by the Company or any of its Subsidiaries with respect to any tax (other than liabilities for taxes asserted under any such notice of deficiency or similar document which are being contested in good faith); (v) there are no liens for material taxes (other than Permitted Encumbrances) upon any of the assets of the Company or any of its Subsidiaries; (vi) neither the Company nor any of its Subsidiaries has distributed stock of another corporation, or has had its stock distributed by another corporation, in a transaction that was governed, or purported or intended to be governed, in whole or in part, by section 355 of the Code; and (vii) neither the Company nor any of its Subsidiaries has entered into any transaction defined in Treasury Regulation section 1.6011-4(b). Neither the Company nor any of its Subsidiaries is required to include any adjustment in taxable income for any tax period pursuant to Section 481 or 263A of the Code, and there are no applications pending with any Governmental Body requesting permission for changes in any of the accounting methods of the Company or any of its Subsidiaries for tax purposes. Neither the Company nor any of its Subsidiaries has been a member of any combined, consolidated or unitary group for which it is or will be liable for taxes under principles of or similar to Section 1.1502-6 of the Treasury Regulations.

(d) There is no agreement between the Company or any of its Subsidiaries and any employee or independent contractor of the Company or any of its Subsidiaries that will give rise to any payment that would not be deductible pursuant to Section 280G or Section 162 of the Code. Neither the Company nor any of its Subsidiaries is a party to any material tax indemnity agreement, tax sharing agreement, tax allocation agreement or similar Contract with a third party.

(e) For purposes of this Agreement, “tax” or “taxes” shall mean (i) any and all federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind or any charge of any kind in the nature of (or similar to) taxes whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and (ii) any liability for the payment of any amounts of the type described in clause “(i)” of this definition as a result of being a member of an affiliated, consolidated, combined or unitary group for any period, as a result of any tax sharing or tax allocation agreement, arrangement or understanding, or as a result of being liable for another person’s taxes as a transferee or successor, by Contract or otherwise.

 

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2.15 Employee Benefit Plans.

(a) Part 2.15(a) of the Disclosure Schedule sets forth a correct and complete list of all material employee benefit plans, programs, agreements or arrangements, including pension, retirement, profit sharing, deferred compensation, stock option, change in control, retention, equity or equity-based compensation, stock purchase, employee stock ownership, severance pay, vacation, bonus or other incentive plans, medical, vision, dental or other health plans, life insurance plans, and any other employee benefit plans or fringe benefit plans, including “employee benefit plans” as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), in each case, whether oral or written, funded or unfunded, or insured or self-insured, maintained by the Company, or to which the Company contributes or is obligated to contribute thereunder, or with respect to which the Company has or may have any liability (contingent or otherwise), in each case, for or to any current or former employees, directors or officers of the Company and/or their dependents (collectively, the “ Company Plans ”).

(b) The Company has provided or made available to Parent copies of all: material Company Plans (including all amendments and attachments thereto); written summaries of any material Company Plan not in writing; all related trust documents; all insurance contracts or other funding arrangements to the degree applicable for material Company Plans; the most recent annual information filings (Form 5500) and annual financial reports for those Company Plans (where required); the most recent determination letter from the Internal Revenue Service (where required); all material written agreements and contracts relating to each material Company Plan, including administrative service agreements and group insurance contracts; and the most recent summary plan descriptions for the Company Plans (where required) and the most recent actuarial valuation and any subsequent valuation or funding advice (where required).

(c) Each Company Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter (or opinion letter, if applicable) from the IRS stating that such Company Plan is so qualified, and to the Knowledge of the Company, no fact exists that would lead to a revocation of such letter or disqualification of such Company Plan. Each Company Plan is being operated in compliance with its terms and with all applicable Legal Requirements, except where the failure to operate in such compliance would not be material to the Company or any of its Subsidiaries, taken as a whole.

(d) (i) Neither the Company nor any Subsidiary has any actual or contingent liability with respect to any plan subject to Title IV or Part 3 of Title I of ERISA or, in the case of a Company Plan maintained outside of the United States, any similar law; (ii) no Company Plan provides benefits in the nature of health or medical insurance following termination of employment, except as required by Part 6 of Title I of ERISA or similar state law; (iii) all contributions or other amounts required to be paid by the Company or its Subsidiaries between January 1, 2007 and the date of this Agreement with respect to each Company Plan have been paid or accrued in accordance with GAAP; (iv) as of the date of this Agreement, there are no pending or, to the Knowledge of the Company, threatened claims (other than routine claims for benefits) with respect to any Company Plan; (v) as of the date of this Agreement, no Company Plan is (or within the last three years has been) the subject of an audit or investigation by any Governmental Body, or has participated in a voluntary compliance, closing agreement, amnesty,

 

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or similar program sponsored by a Governmental Body; and (vi) there has not been any non-exempt “prohibited transaction” (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Company Plan.

(e) Part 2.15(e) of the Disclosure Schedule discloses: (i) each agreement that provides for the payment of any bonus, severance, unemployment compensation, deferred compensation, forgiveness of indebtedness or golden parachute payment becoming due to any current or former employee under any Company Plan because of this Agreement (or the consummation of the transactions contemplated hereby); (ii) any increase in any material respect of any benefit otherwise payable under any Company Plan; (iii) each agreement that provides for any acceleration in any material respect of the time of payment or vesting of any such benefits under any Company Plan; (iv) any material obligation to fund any trust or other arrangement with respect to compensation or benefits under a Company Plan in each case caused or triggered by the execution and delivery of this Agreement or the consummation of the Merger; or (v) each agreement that provides for any tax “gross-up,” tax indemnification or similar payment based on a tax obligation pursuant to Section 4999 of the Code.

(f) To the Knowledge of the Company, no payment pursuant to any Company Plans or other arrangement between the Company and any “service provider” (as such term is defined in Section 409A of the Code and the proposed United States Treasury Regulations and IRS guidance thereunder), would subject any Person to a tax pursuant to Section 409A of the Code, whether pursuant to the consummation of the Merger, any other transactions contemplated by this Agreement, or otherwise.

(g) The Company and each of its Subsidiaries is in material compliance with all applicable Legal Requirements relating to the employment, employment practices, and terms, conditions and classification of employment (including applicable laws, rules and regulations regarding wage and hour requirements, immigration status, discrimination in employment, employee health and safety, and the Workers’ Adjustment and Retraining Notification Act).

2.16 Labor Matters. There are no collective bargaining agreements, other labor union or foreign work council agreements to which the Company or any of its Subsidiaries is a party, and the Company has no collective bargaining relationship with any labor organization. To the Knowledge of the Company, as of the date of this Agreement, neither the Company nor any of its Subsidiaries is the subject of any Legal Proceeding seeking to compel any of them to bargain with any labor organization as to wages or conditions. To the Company’s Knowledge, since January 1, 2008, neither the Company nor any of its Subsidiaries was the subject of any labor union organizing activity or had any material actual or threatened employee strikes, work stoppages, slowdowns or lockouts.

2.17 Environmental Matters. The Company and each of the Subsidiaries are and have been in compliance with all applicable Environmental Laws, including possessing all material permits, authorizations, licenses, exemptions and other governmental authorizations required for their operations under applicable Environmental Laws, except as has not resulted in and would not reasonably be expected to result in a material liability to the Company or any of its Subsidiaries. There is no pending or, to the Company’s Knowledge, threatened in writing claim, lawsuit or administrative proceeding against the Company or any of the Subsidiaries,

 

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under or pursuant to any Environmental Law. Neither the Company nor any of the Subsidiaries has received written notice from any Person, including any Governmental Body, alleging that the Company or any of the Subsidiaries has been or is in violation or potentially in violation of any applicable Environmental Law or otherwise may be liable under any applicable Environmental Law, which violation or liability is unresolved, except as has not resulted in and would not reasonably be expected to result in a material liability to the Company or any of its Subsidiaries. With respect to the real property that is currently owned, leased or operated by the Company or any of the Subsidiaries, and (to the Knowledge of the Company) with respect to any real property that formerly has been owned, leased or operated by the Company or any of the Company Subsidiaries, there have been no releases of Hazardous Substances on, onto, from, or underneath any of such real property, for which releases the Company or any of its Subsidiaries would have any material liability under Environmental Law. There are no environmental site assessments, environmental investigations, studies, audits, tests, reviews or other analyses conducted by, on behalf of, or which are in the possession of the Company or any of its Subsidiaries, with respect to any property now or formerly owned, operated or leased by the Company or any of its subsidiaries, that have not been made available to Parent or Acquisition Sub prior to the execution of this Agreement. Neither the Company nor any of its Subsidiaries has assumed responsibility for or agreed to indemnify or hold harmless any Person for, any material liability or obligation arising under or relating to Environmental Laws.

2.18 Insurance. Since January 1, 2008, the Company has not received any written communication notifying the Company of any: (a) cancellation or invalidation of any material insurance policy held by the Company (except with respect to policies that have been replaced with similar policies); (b) refusal of any coverage or rejection of any material claim under any material insurance policy held by the Company; or (c) material adjustment in the amount of the premiums payable with respect to any insurance policy held by the Company. There is no pending material claim by the Company under any insurance policy held by the Company.

2.19 Transactions with Affiliates. To the Knowledge of the Company, since the date of the Company’s last proxy statement filed with the SEC, no event has occurred that would be required to be reported by the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.

2.20 Authority; Binding Nature of Agreement. The Company has the requisite corporate power and authority to enter into and to perform its obligations under this Agreement. The Company Board as of the date of this Agreement has duly adopted resolutions by which such Company Board has: (a) determined that the Merger is advisable and fair to and in the best interests of the Company and its stockholders; (b) authorized and approved the execution, delivery and performance of this Agreement and approved the Merger; and (c) resolved to make the Company Board Recommendation and directed that this Agreement be submitted for consideration by the Company’s stockholders at the Company Stockholders’ Meeting (as defined in Section 5.2(a)). The execution and delivery of this Agreement by the Company and the consummation by the Company of the Merger have been duly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement other than, with respect to the Merger, and assuming the accuracy of Parent’s representations and warranties in Section 3.6, the Required Stockholder Vote and the filing of the appropriate merger documents as required by the

 

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DGCL. This Agreement has been duly executed and delivered on behalf of the Company and, assuming the due authorization, execution and delivery of this Agreement by Parent and Merger Sub, constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

2.21 Vote Required. Assuming the accuracy of Parent’s representations and warranties in Section 3.6, the affirmative vote of the holders of a majority of the shares of Company Common Stock outstanding on the record date for the meeting of stockholders of the Company described in Section 5.2 (the “ Required Stockholder Vote ”) is the only vote of the holders of any class or series of the Company’s capital stock necessary to adopt this Agreement.

2.22 Non-Contravention; Consents. Except as listed on Part 2.22 of the Disclosure Schedule, the execution and delivery of this Agreement and the performance of its obligations hereunder by the Company and the consummation by the Company of the Merger will not: (a) cause a violation of any of the provisions of the certificate of incorporation or bylaws of the Company or any of its Subsidiaries; (b) cause a violation by the Company or any of its Subsidiaries of any Legal Requirement applicable to the business of the Company or any of its Subsidiaries; (c) constitute a breach or violation of, cause a default on the part of the Company or any of its Subsidiaries under, result in the termination or expiration of, result in a material alteration of the terms of or result in a loss of rights or options under any Material Contract; or (d) result in any entitlement to or acceleration of any right to any payment or vesting owed by the Company or any of its Subsidiaries under any Material Contract; except, in the case of clauses “(b)”, “(c)” and “(d)” of this sentence, as would not in the aggregate reasonably be expected to result in (i) a material liability to the Company or its Subsidiaries, (ii) any damages or other relief that would reasonably be expected to be material to Parent or the Company or its Subsidiaries or (iii) a prohibition or limitation in any material respect on Parent’s ability to vote, transfer, receive dividends with respect to or otherwise exercise ownership rights with respect to any of the stock of the Surviving Corporation. Except as may be required by the Exchange Act, the DGCL or applicable antitrust or competition laws, neither the Company nor any of its Subsidiaries is required to make any filing with or to obtain any Consent from any Person in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the Merger.

2.23 Board Approvals; Anti-Takeover. As of the date of this Agreement, the Company Board recommends that the Company’s stockholders vote to adopt this Agreement at the Company Stockholders’ Meeting (such recommendation that the Company’s stockholders vote to adopt this Agreement being referred to as the “ Company Board Recommendation ”). Assuming the accuracy of Parent’s representations and warranties in Section 3.6, the Company Board has taken all action necessary to render Section 203 of the DGCL inapplicable to the execution and delivery of this Agreement and the performance of the Company’s obligations hereunder and the Merger.

2.24 Opinion of Financial Advisor. The Company Board has received the opinion of Seven Hills Group LLC to the effect that, as of the date of such opinion and subject to various qualifications and assumptions, the Per Share Merger Price is fair, from a financial point of view,

 

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to the holders of shares of Company Common Stock (other than as set forth in such opinion). The Company will provide a signed copy of the opinion to Parent solely for informational purposes after receipt thereof by the Company.

2.25 Brokers; Transaction Expenses.

(a) No broker, finder or investment banker (other than BroadOak Partners, LLC) is entitled to any brokerage, finder’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.

(b) Part 2.25(b) of the Disclosure Schedule provides an accurate and complete breakdown of: (i) all unpaid Transaction Expenses incurred by or on behalf of the Company and its Subsidiaries on or prior to September 3, 2009; and (ii) a good faith estimate of all Transaction Expenses that are or will become payable on or prior to the Effective Time. From September 3, 2009 to the date of this Agreement, the Company has not incurred any Transaction Expenses except as set forth in Part 2.25(b) of the Disclosure Schedule.

2.26 Proxy Statement. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and, on the date filed with the SEC and on the date first published, sent or given to the Company’s stockholders, the Proxy Statement will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to any information supplied by Parent or Acquisition Sub for inclusion in the Proxy Statement.

 

3.	R EPRESENTATIONS AND W ARRANTIES OF P ARENT AND M ERGER S UB

Parent and Merger Sub represent and warrant to the Company as follows:

3.1 Due Organization and Good Standing. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, and has all requisite corporate power and authority necessary to carry on its business as it is now being conducted. Each of Parent and Merger Sub is not in violation of any provisions of its Certificate of Incorporation or Bylaws.

3.2 Authority; Binding Nature of Agreement.

(a) Parent has the requisite corporate power and authority to enter into and to perform its obligations under this Agreement. The execution and delivery of this Agreement by Parent have been duly authorized by all necessary corporate action on the part of Parent. This Agreement has been duly executed and delivered on behalf of Parent and, assuming the due authorization, execution and delivery of this Agreement by the Company and Merger Sub, constitutes the valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

 

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(b) Merger Sub has the requisite corporate power and authority to enter into and to perform its obligations under this Agreement. The execution and delivery of this Agreement by Merger Sub have been duly authorized by all necessary corporate action on the part of Merger Sub. Prior to the Effective Time, Parent, as the sole stockholder of Merger Sub, will vote the shares of Merger Sub stock in favor of the adoption of this Agreement, as and to the extent required by applicable Legal Requirements, including the DGCL. This Agreement has been duly executed and delivered on behalf of Merger Sub and, assuming the due authorization, execution and delivery of this Agreement by the Company and Parent, constitutes the valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

3.3 Non-Contravention. The execution and delivery of this Agreement and the performance of its obligations hereunder by the Company and the consummation by the Company of the Merger will not: (a) cause a violation of any of the provisions of the certificate of incorporation or bylaws of Parent or Merger Sub or (b) cause a violation by Parent or Merger Sub of any Legal Requirement applicable to the business of Parent or Merger Sub, except in each case for any violation that will not have a material adverse effect on the ability of Parent or Merger Sub to consummate the Merger.

3.4 No Legal Proceedings Challenging the Merger. As of the date of this Agreement, (a) there is no Legal Proceeding pending against Parent or Merger Sub challenging the Merger or the other Contemplated Transactions, and (b) to Parent’s Knowledge no Legal Proceeding has been threatened against Parent or Merger Sub challenging the Merger or the other Contemplated Transactions.

3.5 Activities of Merger Sub. Merger Sub was formed solely for the purpose of effecting the Merger and the other Contemplated Transactions. Merger Sub has engaged in no activities other than those contemplated by this Agreement and has no liabilities other than those contemplated by this Agreement.

3.6 Ownership of Company Common Stock. Neither Parent nor any of Parent’s Subsidiaries directly or indirectly owns, and at all times since January 1, 2006 neither Parent nor any of Parent’s Subsidiaries directly or indirectly has owned, beneficially or otherwise, any shares of Company Common Stock or any securities, contracts or obligations convertible into or exercisable or exchangeable for shares of Company Common Stock.

3.7 Financing. As of the Effective Time, Parent will have sufficient cash, available lines of credit or other sources of readily available funds to enable it to pay all amounts required to be paid as Merger Consideration in the Merger.

3.8 Proxy Statement. None of the information to be supplied by or on behalf of Parent to the Company specifically for inclusion in the Proxy Statement will, at the time the Proxy Statement is mailed to the stockholders of the Company or at the time of the Company Stockholders’ Meeting (or any adjournment or postponement thereof), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.

 

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4.	C ERTAIN C OVENANTS O F T HE C OMPANY

4.1 Access and Investigation. Subject to the Confidentiality Agreement, during the period commencing on the date of this Agreement and ending at the Effective Time (the “ Pre-Closing Period ”), the Company shall at reasonable times and upon reasonable notice, and shall cause its Representatives of the Company to: (a) provide Parent and Parent’s Representatives with reasonable access during normal business hours to the Company’s Representatives, personnel, books, records, tax returns, material operating and financial reports, work papers and other documents and information relating to the Company and its Subsidiaries; (b) provide Parent and Parent’s Representatives with such copies of the books, records, tax returns, work papers and other documents and information relating to the Company and its Subsidiaries, and with such additional financial, operating and other data and information regarding the Company and its Subsidiaries, as Parent may reasonably request; and (c) permit Parent’s officers and other employees to meet, upon reasonable notice and during normal business hours, with the chief financial officer and other officers and managers of the Company responsible for the Company’s financial statements and the internal controls of the Company and its Subsidiaries to discuss such matters as Parent may reasonably deem necessary or appropriate. During the Pre-Closing Period, Parent shall promptly provide the Company with copies of any notice, report or other document filed with or sent to any Governmental Body on behalf of any of Parent or Merger Sub in connection with the Merger or any of the other Contemplated Transactions.

4.2 Operation of the Company’s Business.

(a) During the Pre-Closing Period, unless Parent has given its prior written consent or as set forth in Part 4.2(a) of the Disclosure Schedule: (i) the Company shall use commercially reasonable efforts to conduct, and to cause each of its Subsidiaries to conduct, its business and operations in the ordinary course and in accordance with past practices in all material respects; (ii) the Company shall use commercially reasonable efforts to, and to cause each of its Subsidiaries to, (A) conduct its business and operations in compliance in all material respects with all applicable Legal Requirements and the material requirements of all Material Contracts, (B) preserve intact its current business organization, (C) keep available the services of its current officers and other employees and (D) maintain its relations and goodwill with suppliers, customers, landlords, creditors, licensors, licensees, employees and other Persons with which it material business relationships; (iii) the Company shall keep in full force all material insurance policies and shall renew any Existing D&O Policies (as defined in Section 5.5(b)) that expire during the Pre-Closing Period upon the same terms as in effect on the date of this Agreement; (iv) the Company shall properly withhold and remit to the appropriate Governmental Body all withholding taxes; and (v) the Company shall promptly notify Parent in writing of any Legal Proceeding that is commenced, or, to the Company’s Knowledge, threatened in writing, against the Company or any of its Subsidiaries or, to the Company’s Knowledge, any director, officer or key employee of the Company.

 

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(b) During the Pre-Closing Period, except as set forth in Part 4.2(b) of the Disclosure Schedule, as specifically contemplated by this Agreement or with the prior written consent of Parent, the Company shall not and shall not permit any of its Subsidiaries to:

(i) declare, accrue, set aside or pay any dividend or make any other distribution in respect of any shares of capital stock, or repurchase, redeem or otherwise reacquire any shares of capital stock or other securities (other than repurchases of unvested securities in connection with the termination of service providers);

(ii) sell, issue, grant or authorize the sale, issuance or grant of: (A) any capital stock or other security; (B) any option, call, warrant or right to acquire any capital stock or other security; or (C) any instrument convertible into or exchangeable for any capital stock or other security, except that the Company may issue shares of Company Common Stock upon the valid exercise of Company Options or Company Warrants outstanding as of the date of this Agreement;

(iii) amend or waive any of its rights under, or permit the acceleration of the vesting under (other than as contemplated by Section 1.9(a)), any provision of (A) any of the Company Stock Plans, (B) any Company Option or any agreement evidencing or relating to any outstanding stock option, (C) any restricted stock purchase agreement or (D) any other Contract evidencing or relating to any equity award (whether payable in cash or stock), except as required by applicable Legal Requirements;

(iv) amend or permit the adoption of any amendment to its certificate of incorporation or bylaws or other charter or organizational documents, or effect or become a party to any merger, consolidation, share exchange, business combination, amalgamation, recapitalization, reclassification of shares, stock split, reverse stock split, division or subdivision of shares, consolidation of shares or similar transaction;

(v) form any Subsidiary or acquire any equity interest or other interest in any other Entity other than the purchase, in the ordinary course of business consistent with past practices, of marketable securities that would be classified as short-term investments on the Company’s balance sheet;

(vi) make any capital expenditure (except for purchases of demonstration equipment or a capital expenditure that: (A) is in the ordinary course of business and consistent with past practices; (B) does not exceed $10,000 individually; and (C) when added to all other capital expenditures made on behalf of the Company and its Subsidiaries since the date of this Agreement, does not exceed $50,000 in the aggregate);

(vii) enter into or become bound by, or permit any of the assets owned or used by it to become bound by, any Material Contract (other than entering into distribution agreements in the ordinary course of business), or amend or terminate, or waive or exercise any material right or remedy under, any Material Contract (other than amending, modifying or terminating distribution agreements in the ordinary course of business);

(viii) acquire, lease or license any right or other asset from any other Person or sell or otherwise dispose of, or lease or license, any right or other asset to any other

 

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Person (except in each case for assets (that are not material individually or in the aggregate) acquired, leased, licensed or disposed of by the Company in the ordinary course of business and consistent with past practices), or waive or relinquish any material right;

(ix) other than in the ordinary course of business consistent with past practices, write off as uncollectible, or establish any extraordinary reserve with respect to, any receivable or other indebtedness;

(x) make any pledge of any of its assets or permit any of its assets to become subject to any liens or encumbrances, except for Permitted Encumbrances;

(xi) make a loan to any Person except for advances made to its employees in the ordinary course of business consistent with past practice pursuant to the Company’s policies in order to defray routine travel expenses;

(xii) without limiting the ability of the Company and its Subsidiaries to pay or accrue in accordance with applicable Legal Requirements its obligations for payroll taxes incurred in the ordinary course of business and in accordance with past practices, incur or guarantee any indebtedness;

(xiii) establish, adopt, enter into or amend (except as may be required by applicable Legal Requirements) any Company Plan, pay any bonus or make any profit-sharing or similar payment to, or increase the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, officers or other employees, except that the Company may amend the Company Plans to the extent required by applicable Legal Requirements;

(xiv) hire or promote any employee (except in order to fill a non-officer position vacated due to an employee’s resignation after the date of this Agreement, which position provides for the same level of compensation as that paid to the for