AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (“ Agreement ”) is made and entered into as of January 19, 2007, by and among: SBE, INC. , a Delaware corporation (“ Parent ”); COLD WINTER ACQUISITION CORPORATION , a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”); and NEONODE INC. , a Delaware corporation (the “ Company ”). Certain capitalized terms used in this Agreement are defined in EXHIBIT A and EXHIBIT C .

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 shall be merged with and into the Company, Merger Sub will cease to exist, and the Company will become a wholly owned subsidiary of Parent.

B.   It is intended that the Merger qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”).

C.   This Agreement has been approved by the respective boards of directors of Parent, Merger Sub and the Company.

D.   Parent has agreed to sell a substantial portion of its assets to One Stop Systems, Inc. (“ One Stop ”), a Delaware corporation (the “ Disposition ”) pursuant to Agreement for Purchase and Sale of Assets dated January 11, 2007 between Parent and One Stop (the “ One Stop Agreement ”).

E.   The Company plans to issue the New Notes in a private placement (the “ Bridge Note Placement ”).

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

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, the separate existence of Merger Sub shall cease, and the Company will become a wholly owned subsidiary of Parent (the “ Surviving Entity ”).

1.2   Effect 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 transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Hahn & Hessen LLP, 488 Madison Avenue, New York, NY 10022 at 10:00 a.m. on a date to be designated jointly by the Company and Parent (the “ Scheduled Closing Time ”), which shall be no later than two business days after the last condition set forth in Sections 6 and 7 has been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions). The date on which the Closing actually takes place is referred to in this Agreement as the “ Closing Date .” Contemporaneously with or as promptly as practicable after the Closing, a properly executed agreement of merger conforming to the applicable requirements of the DGCL shall be filed with the Secretary of State of the State of Delaware. The Merger shall become effective at the time such agreement of merger is filed with the Secretary of State of the State of Delaware (the “ Effective Time ”).

1.4   Certificate of Incorporation and Bylaws. Unless otherwise determined by mutual written consent of Parent and the Company prior to the Effective Time, immediately upon the Closing:

(a)   the certificate of incorporation of the Surviving Entity shall be amended to be identical to the certificate of incorporation of Merger Sub, except that the name of the Surviving Entity shall be Neonode Inc.; and

(b)   the bylaws of the Surviving Entity shall be amended to be identical to the bylaws of Merger Sub.

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)   each share of Company Common Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive the Applicable Number of shares of Parent Common Stock; and

(ii)   each share of the common stock (par value $0.001 per share) of Merger Sub outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Entity.

(b)   The Applicable Number shall be the quotient obtained by dividing Merger Consideration (as defined below) by Company Shares (as defined below). For the purposes of this formula:

(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 other condition under any applicable restricted stock purchase agreement or other agreement with the Company, then the shares of Parent Common Stock issued in exchange for such shares of Company Common Stock will also be unvested and subject to the same repurchase option, risk of forfeiture or other condition, and the certificates representing such shares of Parent Common Stock may accordingly be marked with appropriate legends.

1.6   Employee Stock Options .

(a)   At the Effective Time, each stock option that is then outstanding under the Company Option Plan, whether vested or unvested (a “ Company Option ”), shall be assumed by Parent in accordance with the terms (as in effect as of the date of this Agreement) of the Company Option Plan and the stock option agreement by which such Company Option is evidenced. All rights with respect to Company Common Stock under outstanding Company Options shall thereupon be converted into rights with respect to Parent Common Stock. Accordingly, from and after the Effective Time, (i) each Company Option assumed by Parent may be exercised solely for shares of Parent Common Stock, (ii) the number of shares of Parent Common Stock subject to each such assumed Company Option shall be equal to the number of shares of Company Common Stock that were subject to such Company Option immediately prior to the Effective Time multiplied by the Applicable Number, rounded down to the nearest whole number of shares of Parent Common Stock, (iii) the per share exercise price for the Parent Common Stock issuable upon exercise of each such assumed Company Option shall be determined by dividing the exercise price per share of Company Common Stock subject to such Company Option, as in effect immediately prior to the Effective Time, by the Applicable Number, and rounding the resulting exercise price up to the nearest whole cent, and (iv) all restrictions on the exercise of each such assumed Company Option shall continue in full force and effect, and the term, exercisability, vesting schedule and other provisions of such Company Option shall otherwise remain unchanged; provided, however , that each such assumed Company Option shall, in accordance with its terms, be subject to further adjustment as appropriate to reflect any stock split, reverse stock split, stock dividend, recapitalization or other similar transaction effected by Parent after the Effective Time; provided further, that in no event shall any assumed Company Option have a term in excess of ten years.

(b)   The Company and Parent shall take all action that may be necessary (under the Company Option Plan and otherwise) to effectuate the provisions of this Section 1.6.

(c)   Promptly following the Closing, Parent will deliver to each holder of an assumed Company Option a written notice setting forth (i) the number of shares of Parent Common Stock subject to such assumed Company Option, and (ii) the exercise price per share of Parent Common Stock issuable upon exercise of such assumed Company Option (the “ Option Assumption Notice ”).

1.7   Company Warrants. All Company Warrants outstanding as of the Effective Time shall be assumed by Parent, and each Company Warrant so assumed by Parent under this Agreement will continue to have, and be subject to, the same terms and conditions set forth in such Company Warrant immediately prior to the Effective Time (including any repurchase rights or vesting provisions), except that (a) each Company Warrant will be exercisable (or will become exercisable in accordance with its terms) for that number of whole shares of Parent Common Stock equal to the product of the number of shares of Company Common Stock that were issuable upon exercise of such Company Warrant immediately prior to the Effective Time multiplied by the Applicable Number, rounded down to the nearest whole number of shares and (b) the per share exercise price for the shares issuable upon exercise of such assumed Company Warrant will be equal to the quotient determined by dividing the exercise price per share of Company Common Stock at which such Company Warrant was exercisable immediately prior to the Effective Time by the Applicable Number, rounded up to the nearest whole cent. As soon as reasonably practicable following the Closing Date, Parent will issue to each person who holds an assumed Company Warrant a document evidencing the foregoing assumption of such Company Warrant by Parent (the “ Warrant Assumption Document ”).

1.8   Closing of the Company’s Transfer Books. At the Effective Time, holders of certificates representing shares of the Company’s capital stock that were outstanding immediately prior to the Effective Time shall cease to have any rights as stockholders of the Company, and the stock transfer books of the Company shall be closed with respect to all shares of such capital stock outstanding immediately prior to the Effective Time. No further transfer of any such shares of the Company’s capital stock shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any of such shares of the Company’s capital stock (a “ Company Stock Certificate ”) is presented to the Surviving Entity or Parent, such Company Stock Certificate shall be canceled and shall be exchanged as provided in Section 1.9.

1.9   Exchange of Certificates .

(a)   As soon as practicable after the Effective Time, but in any event no more than ten business days after the Effective Time, Parent will send to the holders of Company Stock Certificates (i) a letter of transmittal in customary form and containing such provisions as Parent may reasonably specify, and (ii) instructions for use in effecting the surrender of Company Stock Certificates in exchange for certificates representing Parent Common Stock. Upon surrender of a Company Stock Certificate to Parent for exchange, together with a duly executed letter of transmittal and such other documents as may be reasonably required by Parent and referenced in the letter of transmittal, the holder of such Company Stock Certificate shall be entitled to receive from Parent, and Parent shall cause such holder to receive, in exchange therefor a certificate representing the number of whole shares of Parent Common Stock that such holder has the right to receive pursuant to the provisions of this Section 1, and the Company Stock Certificate so surrendered shall be canceled. Until surrendered as contemplated by this Section 1.9, each Company Stock Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive upon such surrender, a certificate representing shares of Parent Common Stock (and cash in lieu of any fractional share of Parent Common Stock) as contemplated by this Section 1. If any Company Stock Certificate shall have been lost, stolen or destroyed, Parent may, in its discretion and as a condition precedent to the issuance of any certificate representing Parent Common Stock, require the owner of such lost, stolen or destroyed Company Stock Certificate to provide an appropriate affidavit.

(b)   No dividends or other distributions declared or made with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Company Stock Certificate with respect to the shares of Parent Common Stock represented thereby, and no cash payment in lieu of any fractional share shall be paid to any such holder, until such holder surrenders such Company Stock Certificate in accordance with this Section 1.9 (at which time such holder shall be entitled to receive all such dividends and distributions and such cash payment).

(c)   No fractional shares of Parent Common Stock shall be issued in connection with the Merger, and no certificates for any such fractional shares shall be issued. In lieu of such fractional shares, any holder of capital stock of the Company who would otherwise be entitled to receive a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock issuable to such holder) shall, upon surrender of such holder’s Company Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the average of the closing sale prices of a share of Parent Common Stock as reported on the Nasdaq Capital Market or the OTC Bulletin Board, as applicable, for each of the 10 consecutive trading days immediately preceding the Closing Date.

(d)   Parent and the Surviving Entity shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable to any holder or former holder of capital stock of the Company pursuant to this Agreement such amounts as Parent or the Surviving Entity may be required to deduct or withhold therefrom under the Code or under any provision of state, local or foreign tax law. 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 Entity shall be liable to any holder or former holder of capital stock of the Company for any shares of Parent Common Stock (or dividends or distributions with respect thereto), or for any cash amounts, delivered to any public official pursuant to any applicable abandoned property, escheat or similar law.

(f)   Each certificate for Parent Common Stock, Option Assumption Notice and Warrant Assumption Document shall bear appropriate legends (i) concerning the need for registration or an exemption from registration under the Securities Act prior to transfer of such Parent Common Stock, the Company Options and the Company Warrants; and (ii) the lock-up restrictions reflected in EXHIBIT D .

1.10   Tax Consequences. For federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of Section 368 of the Code. The parties to this Agreement hereby adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. Each party to this Agreement acknowledges that it is responsible for determining the tax consequences of the Merger for itself and for its stockholders and that it has not relied on any other party to this Agreement, or any Representative of any other such party, in making such determination.

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

Except as set forth in this Agreement or on the Company Disclosure Schedule, the Company represents and warrants as set forth below. Unless the context clearly requires otherwise, references in this Section 2 to the Company shall refer both to the Company and the Company’s wholly owned subsidiary, Neonode AB (the “ Subsidiary ”), considered both individually and in the aggregate, such that every representation shall be deemed made with respect to the Company and with respect to the Subsidiary and with respect to the Company and the Subsidiary on an aggregate or consolidated basis. The Company Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered paragraphs contained in this Section 2, and the disclosure in any paragraph shall qualify (a) the disclosure in the corresponding paragraph of this Section 2, and (b) the other paragraphs of this Section 2 to the extent it is clear from the reading of such disclosure that it also qualifies or applies to such paragraphs.

2.1   Due Organization; No Subsidiaries; Etc.  

(a)   The Company is a corporation duly organized, validly existing and in good standing under the laws of the state or country of its incorporation and has all necessary corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used; and (iii) to perform its obligations under all Company Contracts.

(b)   The Company has not conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name, other than the name “Neonode Inc.” and “Neonode AB.”

(c)   The Company is qualified, authorized, registered or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the nature of its activities and of its properties (both owned and leased) makes such qualification, authorization, registration or licensing necessary, except in such jurisdictions where the failure to do so has not had and will not have a Material Adverse Effect on the Company or its business. The Company is in good standing as a foreign corporation in each of the jurisdictions identified in Part 2.1 of the Company Disclosure Schedule.

(d)   The Company does not own any controlling interest in any Entity other than the Subsidiary, a corporation organized under the laws of Sweden, and has never owned, beneficially or otherwise, any shares or other securities of, or any direct or indirect equity interest in, any other Entity. The Company has not agreed and is not obligated to make any future investment in or capital contribution to any Entity, other than the Subsidiary. The Company has not guaranteed and is not responsible or liable for any obligation of any of the Entities, other than the Subsidiary, in which it owns or has owned any equity interest.

2.2   Certificate of Incorporation and Bylaws; Records. The Company has delivered to Parent accurate and complete copies of: (a) the Company’s certificate of incorporation and bylaws or comparable charter documents, including all amendments thereto; (b) the stock records of the Company; and (c) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders of the Company, the board of directors of the Company and all committees of the board of directors of the Company. There have been no formal meetings or other proceedings of the stockholders of the Company, the board of directors of the Company or any committee of the board of directors of the Company that are not reflected in such minutes or other records. There has not been any violation of any of the provisions of the Company’s certificate of incorporation or bylaws, and the Company has not taken any action that is inconsistent in any material respect with any resolution adopted by the Company’s stockholders, the Company’s board of directors or any committee of the Company’s board of directors. The books of account, stock records, minute books and other records of the Company are accurate, up to date and complete in all material respects, and, except as set forth in Part 2.2 of the Company Disclosure Schedule, have been maintained in accordance with prudent business practices.

2.3   Capitalization, Etc.

(a)   The authorized capital stock of the Company consists of: (i) 6,500,000 shares of Common Stock (par value $0.01 per share), of which 2,911,217 shares have been issued and are outstanding on the date of this Agreement. All of the outstanding shares of Company Common Stock have been duly authorized and validly issued, and are fully paid and non-assessable. Part 2.3 of the Company Disclosure Schedule provides an accurate and complete description of the terms of each repurchase option that is held by the Company and to which any of such shares is subject. All of the outstanding shares of the Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable, and are owned beneficially and of record by the Company.

(b)   The Company has reserved 600,000 shares of Company Common Stock for issuance under the Company Option Plan, of which 434,000 shares are reserved for issuance upon exercise of outstanding options. Part 2.3 of the Company Disclosure Schedule accurately sets forth, with respect to each Company Option that is outstanding as of the date of this Agreement: (i) the name of the holder of such Company Option; (ii) the total number of shares of Company Common Stock that are subject to such Company Option and the number of shares of Company Common Stock with respect to which such Company Option is immediately exercisable; (iii) the date on which such Company Option was granted and the term of such Company Option; (iv) the vesting schedule for such Company Option; (v) the exercise price per share of Company Common Stock purchasable under such Company Option; and (vi) whether such Company Option has been designated an “incentive stock option” as defined in Section 422 of the Code. The Company has reserved 2,229,843 shares of Company Common Stock for issuance upon conversion of the Bridge Notes, Petrus Note, Convertible Almi Note and Petrus Interest immediately prior to the Merger and an additional 1,147,421 shares for issuance upon exercise of Company Investor Warrants issuable upon such conversion. The Company has reserved 171,219 shares of Company Common Stock for issuance upon exercise of Existing Warrants. Except as set forth in this Section 2.3(b), there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital stock or other securities of the Company; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of the capital stock or other securities of the Company; (iii) Contract under which the Company is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities; or (iv) except as set forth in Part 2.3(b) of the Company Disclosure Schedule, to the knowledge of the Company, condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares of capital stock or other securities of the Company.

(c)   All outstanding shares of Company Common Stock, all outstanding Company Options and all outstanding Existing Warrants, Bridge Notes, the Petrus Note and the Convertible Almi Note have been issued or granted, and all Company Investor Warrants and shares issuable upon conversion of the Bridge Notes, the Petrus Note and the Convertible Almi Note will be issued or granted, in compliance in all material respects with (i) all applicable securities laws and other applicable Legal Requirements, and (ii) all requirements set forth in applicable Contracts.

(d)   The Company has never repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities of the Company.

(e)   As of the date hereof, the date the Information Statement is delivered to the Company’s stockholders and the Closing Date, each Person that held shares of Company Common Stock immediately prior to the Closing is a resident of the state or foreign country, as the case may be, set forth opposite such Person’s name on Part 2.3(e) of the Company Disclosure Schedule, as such Schedule may be updated from time to time prior to the Closing to reflect any relocations by Company stockholders that may occur.

2.4   Financial Statements .

(a)   The Company has delivered to Parent the following financial statements and notes (collectively, the “ Company Financial Statements ”):

(i)   The unaudited consolidated balance sheets of the Company as of December 31, 2004 and 2005, and the related unaudited income statements, statements of stockholders’ equity and statements of cash flows of the Company for the years then ended; and

(ii)   the unaudited balance sheet of the Company (the “ Unaudited Interim Balance Sheet ”) as of September 30, 2006 (the “ Interim Statement Date ”), and the related unaudited statements of income, cash flows and stockholders’ equity of the Company for the nine months then ended.

(b)   The Company Financial Statements are accurate and complete in all material respects and present fairly the financial position of the Company as of the respective dates thereof and the results of operations and cash flows of the Company for the periods covered thereby. The Company Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods covered (except as permitted by GAAP and except that the financial statements referred to in Section 2.4(a)(ii) do not contain all footnotes required by GAAP and are subject to normal and recurring year-end audit adjustments, which are not expected, individually or in the aggregate, to be material in magnitude).

2.5   Absence of Changes. Except as set forth in Part 2.5 of the Company Disclosure Schedule, since the Interim Statement Date through the date of this Agreement:

(a)   there has not been any Material Adverse Effect on the Company, and, to the knowledge of the Company, no event has occurred that will, or could reasonably be expected to, have a Material Adverse Effect on the Company;

(b)   there has not been any material Damage, or any material interruption in the use of, any of the Company’s assets (whether or not covered by insurance);

(c)   the Company has not declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock, and has not repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities;

(d)   the Company has not sold, issued or authorized the issuance of (i) any capital stock or other security (except for Company Common Stock issued upon the exercise of outstanding Company Options and Company Warrants), (ii) any option or right to acquire any capital stock or any other security (except for Company Options and Company Warrants), or (iii) any other instrument convertible into or exchangeable for any capital stock or other security;

(e)   the Company has not amended or waived any of its rights under, or permitted the acceleration of vesting under, (i) any provision of the Company Option Plan, (ii) any provision of any agreement evidencing any outstanding Company Option, or (iii) any restricted stock purchase agreement;

(f)   there has been no amendment to the Company’s certificate of incorporation or bylaws, and the Company has not effected or been a party to any Acquisition Transaction, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

(g)   the Company has not formed any subsidiary or acquired any equity interest or other interest in any other Entity;

(h)   the Company has not made any capital expenditure which, when added to all other capital expenditures made on behalf of the Company since the Interim Statement Date, exceeds $25,000;

(i)   the Company has not (i) entered into or permitted any of the assets owned or used by it to become bound by any Contract that is or would constitute a Material Company Contract (as defined in Section 2.10(a)), or (ii) amended or prematurely terminated, or waived any material right or remedy under, any such Contract;

(j)   the Company has not (i) acquired, leased or licensed any right or other asset from any other Person, (ii) sold or otherwise disposed of, or leased or licensed, any right or other asset to any other Person, or (iii) waived or relinquished any right, except for immaterial rights or other immaterial assets acquired, leased, licensed or disposed of in the ordinary course of business and consistent with the Company’s past practices;

(k)   the Company has not written off as uncollectible, or established any extraordinary reserve with respect to, any account receivable or other indebtedness, in each case in excess of $10,000;

(l)   the Company has not made any pledge of any of its assets or otherwise permitted any of its assets to become subject to any Encumbrance, except for pledges of immaterial assets made in the ordinary course of business and consistent with the Company’s past practices;

(m)   the Company has not (i) lent money to any Person (other than pursuant to routine travel advances made to employees in the ordinary course of business), or (ii) incurred or guaranteed any indebtedness for borrowed money;

(n)   the Company has not (i) established or adopted any Employee Benefit Plan, or (ii) paid any bonus or made any profit sharing or similar payment to, or materially increased the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, officers or employees;

(o)   the Company has not changed any of its methods of accounting or accounting practices in any respect;

(p)   the Company has not made any Tax election;

(q)   the Company has not commenced or settled any Legal Proceeding;

(r)   the Company has not entered into any material transaction or taken any other material action outside the ordinary course of business or inconsistent with its past practices; and

(s)   the Company has not agreed or committed to take any of the actions referred to in clauses “(c)” through “(r)” above.

2.6   Title to Assets .

(a)   The Company owns, and has good, valid and marketable title to, all assets that are material to the Company’s business and purported to be owned by it, including: (i) all assets reflected on the Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.7 and 2.9 of the Company Disclosure Schedule and all of the Company’s rights under the Contracts identified in Part 2.10 of the Company Disclosure Schedule; and (iii) all other assets reflected in the Company’s books and records as being owned by the Company. Except as set forth in Part 2.6 of the Company Disclosure Schedule, all of said assets are owned by the Company free and clear of any liens or other Encumbrances, except for (x) any lien for current taxes not yet due and payable, and (y) minor liens that have arisen in the ordinary course of business and that do not (in any case or in the aggregate) materially detract from the value of the assets subject thereto or materially impair the operations of the Company.

(b)   Part 2.6 of the Company Disclosure Schedule identifies all assets that are material to the business of the Company and that are being leased or licensed to the Company, in each case, having a value, individually, in excess of $25,000.

2.7   Receivables. Except as set forth in Part 2.7 of the Company Disclosure Schedule, all existing accounts receivable of the Company (including those accounts receivable reflected on the Unaudited Interim Balance Sheet that have not yet been collected and those accounts receivable that have arisen since the Interim Statement Date and have not yet been collected) (i) represent valid obligations of customers of the Company arising from bona fide transactions entered into in the ordinary course of business, and (ii) are current and 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).

2.8   Equipment; Leasehold .

(a)   All material items of equipment and other tangible assets owned by or leased to the Company are adequate for the uses to which they are being put, are in good condition and repair (ordinary wear and tear excepted) and are adequate for the conduct of the Company’s business in the manner in which such business is currently being conducted.

(b)   The Company does not own any real property or any interest in real property, except for the leasehold created under the real property lease identified in Part 2.8 of the Company Disclosure Schedule.

2.9   Intellectual Property .

(a)   For purposes of this Agreement, “ Proprietary Assets ” shall mean all right, title and interest of the Company and the Subsidiaries in and to the following items or types of property: (i) every patent, patent application, trademark (whether registered or unregistered), trademark application, trade name, fictitious business name, service mark (whether registered or unregistered), service mark application, copyright (whether registered or unregistered), copyright application, maskwork, maskwork application, trade secret, know-how, customer list, franchise, system, computer software, computer program, invention, design, blueprint, engineering drawing, proprietary product, technology, proprietary right or other intellectual property right or intangible asset other than goodwill; and (ii) all licenses and other rights to use or exploit any of the foregoing.

(b)   Except as set forth in the Company Disclosure Schedule, each of the Company or its Subsidiaries: has good, valid and marketable title to each of the Proprietary Assets owned by it, free and clear of all liens and other encumbrances; has a valid right to use all Proprietary Assets owned by third parties; and is not obligated to make any payment to any Person for the use of any Proprietary Asset except as set forth in the applicable license agreement. Except as set forth in the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has developed jointly with any other Person any material Proprietary Asset with respect to which such other Person has any rights.

(c)   Each of the Company and its Subsidiaries has taken commercially reasonable and customary measures and precautions to protect and maintain the confidentiality and secrecy of all Proprietary Assets of the Company and its Subsidiaries (except Proprietary Assets whose value would be unimpaired by public disclosure) and otherwise to maintain and protect the value of all Proprietary Assets of the Company and its Subsidiaries. Except as set forth in the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has (other than pursuant to license agreements identified in the Company Disclosure Schedule) disclosed or delivered to any Person, or permitted the disclosure or delivery to any Person of, (i) the source code, or any portion or aspect of the source code, of any Proprietary Asset, (ii) the object code, or any portion or aspect of the object code, of any Proprietary Asset of the Company and its Subsidiaries, except in the ordinary course of its business or (iii) any patent applications (except as required by law).

(d)   To the knowledge of the Company, (i) none of the Proprietary Assets of the Company and its Subsidiaries infringes or conflicts with any Proprietary Asset owned or used by any other Person; (ii) neither the Company nor any Subsidiary is infringing, misappropriating or making any unlawful use of any Proprietary Asset owned or used by any other Person; and (iii) no other Person is infringing, misappropriating or making any unlawful use of, and no Proprietary Asset owned or used by any other Person infringes or conflicts with, any Proprietary Asset of the Company or any of its Subsidiaries.

(e)   Except as set forth in the Company Disclosure Schedule, excluding warranty claims received by Company or any of its Subsidiaries in the ordinary course of business, there has not been any claim by any customer or other Person alleging that any Proprietary Asset of the Company or any of its Subsidiaries (including each version thereof that has ever been licensed or otherwise made available by the Company to any Person) does not conform in all material respects with any specification, documentation, performance standard, representation or statement made or provided by or on behalf of the Company.

(f)   To the knowledge of the Company, the Proprietary Assets of the Company and its Subsidiaries constitute all the Proprietary Assets necessary to enable the Company and its Subsidiaries to conduct their respective businesses in the manner in which such businesses have been and are being conducted. Except as set forth in the Company Disclosure Schedule, (i) neither the Company nor any Subsidiary has licensed any of its Proprietary Assets to any Person on an exclusive, semi-exclusive or royalty-free basis and (ii) neither the Company nor any Subsidiary has entered into any covenant not to compete or contract limiting such entity’s ability to exploit fully any of such entity’s material Proprietary Assets or to transact business in any material market or geographical area or with any Person.

(g)   Except as set forth in the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has at any time received any notice or other communication (in writing or otherwise) of any actual, alleged, possible or potential infringement, misappropriation or unlawful use of, any Proprietary Asset owned or used by any other Person.

2.10   Contracts .

(a)   Part 2.10 of the Company Disclosure Schedule identifies:

(i)   each Company Contract relating to the employment of, or the performance of services by, any employee, consultant or independent contractor;

(ii)   each Company Contract relating to the acquisition, transfer, use, development, sharing or license of any technology or any Intellectual Property or Intellectual Property Right;

(iii)   each Company Contract imposing any restriction on the Company’s right or ability (A) to compete with any other Person, (B) to acquire any product or other asset or any services from any other Person, to sell any product or other asset to or perform any services for any other Person or to transact business or deal in any other manner with any other Person, or (C) develop or distribute any technology;

(iv)   each Company Contract creating or involving any agency relationship, distribution arrangement or franchise relationship;

(v)   each Company Contract relating to the acquisition, issuance or transfer of any securities;

(vi)   each Company Contract relating to the creation of any Encumbrance with respect to any material asset of the Company;

(vii)   each Company Contract involving or incorporating any guaranty of indebtedness, any pledge, any performance or completion bond, any indemnity or any surety arrangement;

(viii)   each Company Contract creating or relating to any partnership or joint venture or any sharing of revenues, profits, losses, costs or liabilities;

(ix)   each Company Contract relating to the purchase or sale of any product or other asset by or to, or the performance of any services by or for, any Related Company Party (as defined in Section 2.18);

(x)   any other Company Contract that contemplates or involves (A) the payment or delivery of cash or other consideration in an amount or having a value in excess of $25,000 in the aggregate, or (B) the performance of services having a value in excess of $25,000 in the aggregate.

(Contracts in the respective categories described in clauses “(i)” through “(x)” above are referred to in this Agreement as “ Material Company Contracts .”)

(b)   The Company has delivered to Parent accurate and complete copies of all written Material Company Contracts identified in Part 2.10 of the Company Disclosure Schedule, including all amendments thereto. Part 2.10 of the Company Disclosure Schedule provides an accurate description of the terms of each Material Company Contract that is not in written form. To the knowledge of the Company, each Material Company Contract is valid and in full force and effect, and is enforceable by 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.

(c)   Except as set forth in Part 2.10(c) of the Company Disclosure Schedule:

(i)   the Company has not materially violated or breached, or committed any material default under, any Material Company Contract, and, to the knowledge of the Company, no other Person has materially violated or breached, or committed any material default under, any Material Company Contract;

(ii)   to the knowledge of the Company, 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, (A) result in a violation or breach of any of the material provisions of any Material Company Contract, (B) give any Person the right to declare a default or exercise any remedy under any Material Company Contract, (C) give any Person the right to accelerate the maturity or performance of any Material Company Contract, or (D) give any Person the right to cancel, terminate or modify any Material Company Contract;

(iii)   the Company has never received any written notice or, to the knowledge of the Company, other communication regarding any actual or possible violation or breach of, or default under, any Material Company Contract; and

(iv)   the Company has not knowingly waived any of its material rights under any Material Company Contract.

(d)   No Person is renegotiating, or has a right pursuant to the terms of any Company Contract to renegotiate, any amount paid or payable to the Company under any Material Company Contract or any other material term or provision of any Material Company Contract.

(e)   The Contracts identified in Part 2.10(e) of the Company Disclosure Schedule collectively constitute all of the Contracts necessary to enable the Company to conduct its business in the manner in which its business is currently being conducted,

(f)   Where applicable, Part 2.10(f) of the Company Disclosure Schedule provides an accurate description and breakdown of the Company’s backlog under Material Company Contracts.

(g)   Except as set forth in Part 2.10(g) of the Company Disclosure Schedule, the Company does not, and has never, entered into, bid for, had any interest in or been determined to be noncompliant with any Government Contract. The Company has not made, or participated in any way in, any Government Bid. Neither the Company nor any of its employees has been debarred or suspended from doing business with any Governmental Body, and, to the knowledge of the Company, no circumstances exist that would warrant the institution of debarment or suspension proceedings against the Company or any employee of the Company. The Company has not made any disclosure to any Governmental Body pursuant to any voluntary disclosure agreement.

(h)   Except where the failure to comply has not had a Material Adverse Effect on the Company, the Company has complied with all applicable regulations and other Legal Requirements and with all applicable contractual requirements relating to the placement of legends or restrictive markings on technical data, computer software and other Intellectual Property.

2.11   Liabilities. The Company has no accrued, contingent or other liabilities of any nature, either matured or unmatured (whether or not required to be reflected in financial statements in accordance with GAAP, and whether due or to become due), except for: (a) liabilities identified as such in the “liabilities” column of the Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries that have been incurred by the Company since the Interim Statement Date in the ordinary course of business and consistent with the Company’s past practices; (c) liabilities under Company Contracts in accordance with the terms of such Company Contracts; (d) immaterial liabilities that are not required by GAAP to be disclosed on the Unaudited Interim Balance Sheet; and (e) the liabilities identified in Part 2.11 of the Company Disclosure Schedule.

2.12   Compliance with Legal Requirements. Except as set forth in Part 2.12 of the Company Disclosure Schedule, the Company is, and has at all times been, in compliance with all applicable Legal Requirements, except where the failure to comply with such Legal Requirements has not had and will not have a Material Adverse Effect on the Company. The Company has not received any written notice or, to the knowledge of the Company, other communication from any Governmental Body regarding any actual or possible violation of, or failure to comply with, any Legal Requirement.

2.13   Governmental Authorizations. Part 2.13 of the Company Disclosure Schedule identifies each material Governmental Authorization held by the Company, and the Company has delivered to Parent accurate and complete copies of all Governmental Authorizations identified in Part 2.13 of the Company Disclosure Schedule. The Governmental Authorizations identified in Part 2.13 of the Company Disclosure Schedule are valid and in full force and effect, and collectively constitute all Governmental Authorizations necessary to enable the Company to conduct its business in the manner in which its business is currently being conducted. The Company is, and at all times has been, in substantial compliance with the terms and requirements of the respective Governmental Authorizations identified in Part 2.13 of the Company Disclosure Schedule. The Company has not received any written notice or, to the knowledge of the Company, other communication from any Governmental Body regarding (a) any actual or possible violation of or failure to comply with any term or requirement of any Governmental Authorization, or (b) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Authorization.

2.14   Tax Matters .

(a)   The Company has filed all material Tax Returns that it was required to file under applicable Legal Requirements. All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable Legal Requirements. All Taxes due and owing by the Company (whether or not shown on any Tax Return) have been paid. The Company is not currently the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Company.

(b)   The Company has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party.

(c)   No director or officer (or employee responsible for Tax matters) of the Company expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. No Legal Proceedings with respect to Taxes are pending or being conducted with respect to the Company. The Company has not received from any Governmental Body any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment of or any amount of Tax proposed, asserted, or assessed by any Governmental Body against the Company.

(d)   Part 2.14(d) of the Company Disclosure Schedule lists all Tax Returns filed with respect to the Company for taxable periods ended on or after December 31, 2000, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject to audit. The Company has delivered to Parent correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company filed or received since December 31, 2000.

(e)   The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(f)   The Company has not filed a consent under section 341(f) of the Code concerning collapsible corporations. The Company is not a party to any Contract that has resulted or would reasonably be expected to result, separately or in the aggregate, in the payment of (i) any “excess parachute payment” within the meaning of section 280G of the Code (or any corresponding provisions of state, local or foreign Tax law) and (ii) any amount that will not be fully deductible as a result of section 162(m) of the Code (or any corresponding provisions of state, local or foreign Tax law). 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. The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of section 6662 of the Code. The Company is not a party to or bound by any Tax allocation or sharing agreement. The Company has (A) not been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or (B) no liability for the Taxes of any Person (other than the Company) under regulation 1.1502-6 of the Code (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. The Company has not participated in any “listed transactions” and “reportable transactions” within the meaning of Section 1.6011-4(6) of the United States Treasury Regulations.

(g)   The unpaid Taxes of the Company (A) did not, as of the date of the Unaudited Interim Balance Sheet, exceed the reserve for tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Unaudited Interim Balance Sheet, and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company in filing its Tax Returns. Since the date of the Unaudited Interim Balance Sheet, the Company has not incurred any liability for Taxes arising from extraordinary gains or losses, determined in accordance with GAAP, outside the ordinary course of business.

(h)   The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion there) ending after the Closing Date as a result of any: (A) change in method of accounting for taxable period ending on or prior to the Closing Date; (B) “closing agreement” as described in section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (C) intercompany transactions or any excess loss account described in United States Treasury Regulations under section 1502 of the Code (or any corresponding or similar provisions of state, local or foreign income Tax law); (D) installment sale or open transaction disposition made on or prior to the Closing Date; or (E) prepaid amount received on or prior to the Closing Date.

(i)   The Company has not distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by section 355 or section 361 of the Code.

2.15   Employee and Labor Matters; Benefit Plans .

(a)   Part 2.15(a) of the Company Disclosure Schedule accurately identifies each former employee of the Company who is receiving or is scheduled to receive (or whose spouse or other dependent is receiving or is scheduled to receive) any benefits (whether from the Company or otherwise) relating to such former employee’s employment with the Company and accurately describes such benefits.

(b)   Except to the extent provided in the Swedish Employment Protection Act, the employment of each of the Company’s employees is terminable by the Company at will. The Company has delivered to Parent accurate and complete copies of all employee manuals and handbooks, disclosure materials, policy statements and other materials relating to the employment of the current and former employees of the Company.

(c)   To the knowledge of the Company:

(i)   no Key Employee of the Company intends to terminate his employment with the Company;

(ii)   no Key Employee of the Company has received an offer to join a business that may be competitive with the Company’s business ; and

(iii)   no Key Employee of the Company is a party to or is bound by any confidentiality agreement, noncompetition agreement or other Contract (with any Person) that may have an adverse effect on: (A) the performance by such Key Employee of any of his duties or responsibilities as a Key Employee of the Company; or (B) the Company’s business or operations .

(d)   Except as set forth in Part 2.15(d) of the Company Disclosure Schedule, the Company is not a party to or bound by any employment agreement or any union Contract, collective bargaining agreement or similar Contract.

(e)   Except as set forth in Part 2.15(e) of the Company Disclosure Schedule: the Company is not engaged, and the Company has never been engaged, in any unfair labor practice of any nature; there has never been any slowdown, work stoppage, labor dispute or union organizing activity, or any similar activity or dispute, affecting the Company or any of its employees; no event has occurred, and no condition or circumstance exists, that might directly or indirectly give rise to or provide a basis for the commencement of any such slowdown, work stoppage, labor dispute or union organizing activity or any similar activity or dispute; there are no actions, suits, claims, labor disputes or grievances pending or, to the knowledge of the Company, threatened, or reasonably anticipated relating to any labor, safety or discrimination matters involving any Company Key Employee, including, without limitation, charges of unfair labor practices or discrimination complaints.

(f)   Except as set forth on Part 2.15(f) of the Company Disclosure Schedule, none of the current or former independent contractors of the Company could be reclassified as an employee. There are no, and at no time have there been any, independent contractors who have provided services to the Company or any Company Affiliate for a period of six consecutive months or longer. The Company has never had any temporary or leased Key Employees. No independent contractor of the Company is eligible to participate in any Company Employee Plan other than the Company Option Plan.

(g)   Part 2.15(g) of the Company Disclosure Schedule contains an accurate and complete list as of the date hereof of each Company Employee Plan and each Company Employee Agreement. The Company does not intend nor has it committed to establish or enter into any new Company Employee Plan or Company Employee Agreement, or to modify any Company Employee Plan or Company Employee Agreement (except to conform any such Company Employee Plan or Company Employee Agreement to the requirements of any applicable Legal Requirements, in each case as previously disclosed to Parent in writing or as required by this Agreement).

(h)   The Company has delivered to Parent: (i) correct and complete copies of all documents setting forth the terms of each Company Employee Plan and each Company Employee Agreement, including all amendments thereto and all related trust documents; (ii) all material written Contracts relating to each Company Employee Plan, including administrative service agreements and group insurance Contracts; (iii) all written materials provided to any Company Employee relating to any Company Employee Plan and any proposed Company Employee Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events that would result in any liability to the Company or any Company Affiliate; (iv) all correspondence to or from any Governmental Body relating to any Company Employee Plan; (v) all insurance policies in the possession of the Company or any Company Affiliate pertaining to fiduciary liability insurance covering the fiduciaries for each Company Employee Plan. The Company has no Company Employee Plan subject to ERISA or the Code.

(i)   The Company and each of the Company Affiliates have performed all obligations required to be performed by them under each Company Employee Plan and are not in default or violation of, and the Company has no knowledge of any default or violation by any other party to, the terms of any Company Employee Plan, and each Company Employee Plan has been established and maintained substantially in accordance with its terms and in substantial compliance with all applicable Legal Requirements. There are no claims or Legal Proceedings pending, or, to the knowledge of the Company, threatened, or reasonably anticipated (other than routine claims for benefits), against any Company Employee Plan or against the assets of any Company Employee Plan. Except as set forth in Part 2.15(i) of the Company Disclosure Schedule, each Company Employee Plan can be amended, terminated or otherwise discontinued after the Closing upon fewer than 90 days’ notice, without liability to Parent, the Company or any Company Affiliate (other than ordinary administration expenses). There are no audits, inquiries or Legal Proceedings pending or, to the knowledge of the Company, threatened by any Governmental Body with respect to any Company Employee Plan. Neither the Company nor any Company Affiliate has ever incurred any penalty or tax with respect to any Company Employee Plan. The Company and each Company Affiliate has made all contributions and other payments required by and due under the terms of each Company Employee Plan.

(j)   Neither the Company nor any Company Affiliate has ever maintained, established, sponsored, participated in, or contributed to any pension plan or multiemployer employee benefit plan. The fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance, or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide in full for the accrued benefit obligations, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to and obligations under such Foreign Plan, and no transaction contemplated by this Agreement shall cause any such assets or insurance obligations to be less than such benefit obligations.

(k)   No Company Employee Plan provides (except at no cost to the Company or any Company Affiliate), or reflects or represents any liability of the Company or any Company Affiliate to provide, retiree life insurance, retiree health benefits or other retiree employee welfare benefits to any Person for any reason, except as may be required by COBRA or other applicable Legal Requirements. Other than commitments made that involve no future costs to the Company or any Company Affiliate, neither the Company nor any Company Affiliate has ever represented, promised or contracted (whether in oral or written form) to any Company Key Employee (either individually or to Company Key Employees as a group) or any other Person that such Company Key Employee(s) or other person would be provided with retiree life insurance, retiree health benefit or other retiree employee welfare benefits, except to the extent required by applicable Legal Requirements.

(l)   Except as set forth in Part 2.15(l) of the Company Disclosure Schedule, and except as expressly required or provided by this Agreement, neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Employee Plan, Company Employee Agreement, trust or loan that will or may result (either alone or in connection with any other circumstance or event) in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Company Employee.

(m)   Except as set forth in Part 2.15(m) of the Company Disclosure Schedule, the Company and each of the Company Affiliates: (i) are, and at all times have been, in substantial compliance with all applicable Legal Requirements respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Company Employees; (ii) have withheld and reported all amounts required by applicable Legal Requirements or by Contract to be withheld and reported with respect to wages, salaries and other payments to Company Employees; (iii) are not liable for any arrears of wages or any taxes or any penalty for failure to comply with the Legal Requirements applicable of the foregoing; and (iv) are not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Body with respect to unemployment compensation benefits, social security or other benefits or obligations for Company Employees (other than routine payments to be made in the normal course of business and consistent with past practice). There are no pending or, to the knowledge of the Company, threatened or reasonably anticipated claims or Legal Proceedings against the Company or any Company Affiliate under any worker’s compensation policy or long-term disability policy.

(n)   To the knowledge of the Company, no stockholder nor any Company Key Employee is obligated under any Contract or subject to any judgment, decree, or order of any court or other Governmental Body that would interfere with such Person’s efforts to promote the interests of the Company or that would interfere with the business of the Company or any Company Affiliate. Neither the execution nor the delivery of this Agreement, nor the carrying on of the business of the Company or any Company Affiliate as presently conducted nor any activity of such stockholder or Company Key Employees in connection with the carrying on of the business of the Company or any Company Affiliate as presently conducted will, to the knowledge of the Company, conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default under, any Contract under which any of such stockholders or Company Key Employees is now bound.

2.16   Environmental Matters. The Company is in compliance in all material respects with all applicable Environmental Laws, which compliance includes the possession by the Company of all permits and other Governmental Authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof. The Company has not received any written notice or, to the knowledge of the Company, other communication, whether from a Governmental Body, citizens group, employee or otherwise, that alleges that the Company is not in compliance with any Environmental Law, and, to the knowledge of the Company, there are no circumstances that may prevent or interfere with the Company’s compliance with any Environmental Law in the future. To the knowledge of the Company, no current or prior owner of any property leased or controlled by the Company has received any notice or other communication (in writing or otherwise), whether from a Government Body, citizens group, employee or otherwise, that alleges that such current or prior owner or the Company is not in compliance with any Environmental Law. There are no Governmental Authorizations currently held by the Company pursuant to Environmental Laws. This Section 2.16 contains the sole and exclusive representation and warranty of the Company with respect to the Company’s compliance with Environmental Laws.

2.17   Insurance. Except as set forth in Part 2.17 of the Company Disclosure Schedule, each insurance policy currently maintained by, at the expense of or for the benefit of the Company is in full force and effect. The Company has never received any notice or other communication regarding any actual or possible (a) cancellation or invalidation of any insurance policy, (b) refusal of any coverage or rejection of any claim under any insurance policy, or (c) material adjustment in the amount of the premiums payable with respect to any insurance policy.

2.18   Related Party Transactions. No Related Company Party has any direct or indirect interest in any material asset used in or otherwise relating to the business of the Company. No Related Company Party is, or has at any time been, indebted to the Company. Except as set forth in Part 2.18 of the Company Disclosure Schedule, no Related Party has entered into, or has had any direct or indirect financial interest in, any Material Company Contract, transaction or business dealing involving the Company. To the knowledge of the Company, no Related Company Party is competing, or has at any time competed, directly or indirectly, with the Company. Except as set forth in Part 2.18 of the Company Disclosure Schedule, no Related Company Party has any claim or right against the Company (other than rights under Company Options and rights to receive compensation for services performed as an employee of the Company). (For purposes of the Section 2.18 each of the following shall be deemed to be a “ Related Company Party ”: (a) each individual who is, or who has at any time since incorporation of the Company been, an officer of the Company; (b) each member of the immediate family of each of the individuals referred to in clause “(a)” above; and (c) any trust or other Entity (other than the Company) in which any one of the individuals referred to in clauses “(a)” and “(b)” above holds (or in which more than one of such individuals collectively hold), beneficially or otherwise, a material voting, proprietary or equity interest.)

2.19   Legal Proceedings; Orders .

(a)   There is no pending Legal Proceeding, and (to the knowledge of the Company) no Person has threatened to commence any Legal Proceeding: (i) that involves the Company or any of the assets owned or used by the Company or any Person whose liability the Company has or may have retained or assumed, either contractually or by operation of law; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Merger or any of the other transactions contemplated by this Agreement. To the knowledge of the Company, no event has occurred, and no claim, dispute or other condition or circumstance exists, that will, or that could reasonably be expected to, give rise to or serve as a basis for the commencement of any such Legal Proceeding.

(b)   There is no order, writ, injunction, judgment or decree of any Governmental Body to which the Company, or any of the assets owned or used by the Company, is subject. To the knowledge of the Company, no officer or other Key Employee of the Company is subject to any such order, writ, injunction, judgment or decree that prohibits such officer or other Key Employee from engaging in or continuing any conduct, activity or practice relating to the Company’s business.

2.20   Authority; Binding Nature of Agreement. The Company has the absolute and unrestricted right, power and authority to enter into and to perform its obligations under this Agreement; and the execution, delivery and performance by the Company of this Agreement have been duly authorized by all necessary action on the part of the Company, its board of directors and its stockholders . This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

2.21   Non Contravention; Consents. Neither the execution, delivery or performance of this Agreement or any of the other agreements referred to in this Agreement, nor the consummation of the Merger or any of the other transactions contemplated by this Agreement, will directly or indirectly (with or without notice or lapse of time):

(a)   contravene, conflict with or result in a violation of (i) any of the provisions of the Company’s certificate of incorporation or bylaws, or (ii) any resolution adopted by the Company’s stockholders, the Company’s board of directors or any committee of the Company’s board of directors;

(b)   contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the transactions contemplated by this Agreement or to exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ, injunction, judgment or decree to which the Company, or any of the assets owned or used by the Company, is subject;

(c)   contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Company or that otherwise relates to the Company’s business or to any of the assets owned or used by the Company;

(d)   except as set forth in Part 2.21(d) of the Company Disclosure Schedule, contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any Material Company Contract, or give any Person the right to (i) declare a default or exercise any remedy under any Material Company Contract, (ii) accelerate the maturity or performance of any Material Company Contract, or (iii) cancel, terminate or modify any Material Company Contract; or

(e)   result in the imposition or creation of any lien or other Encumbrance upon or with respect to any asset owned or used by the Company (except for minor liens that will not, in any case or in the aggregate, materially detract from the value of the assets subject thereto or materially impair the operations of the Company).

Except as described in Section 2.22 and Section 4.3, the Company is not and will not be required to make any filing with or give any notice to, or to obtain any Consent from, any Person in connection with (i) the execution, delivery or performance of this Agreement or any of the other agreements referred to in this Agreement, or (ii) the consummation of the Merger or any of the other transactions contemplated by this Agreement.

2.22   Vote Required. The affirmative vote of the holders of a majority of the shares of Company Common Stock outstanding as of the date hereof is the only vote of the holders of any class or series of the Company’s capital stock necessary to adopt this Agreement and approve the Merger and the other transactions contemplated by this Agreement.

2.23   Brokers. No broker, investment banker, financial advisor or other person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Company or any of its stockholders.

2.24   No Other Representations. Notwithstanding anything to the contrary contained in this Agreement, it is the explicit intent of each party hereto that none of the Company or its Representatives or stockholders are making any representation or warranty whatsoever, express or implied, except those representations and warranties contained in this Agreement (including any schedule or exhibit attached hereto) and in any certificate delivered pursuant hereto.

2.25   Full Disclosure. This Agreement (when read together with the Company Disclosure Schedule) does not, and the Company Closing Certificate (as defined in Section 6.4(c)) when read together with any disclosure provided by or on behalf of the Company under Section 5.10, will not, (i) contain any representation, warranty or information that is false or misleading with respect to any material fact, or (ii) omit to state any material fact, in each case necessary in order to make the representations, warranties and information contained in this Agreement (including the Company Disclosure Schedule), in light of the circumstances under which such representations, warranties and information were provided, not false or misleading.

Except as set forth in this Agreement or the Parent Disclosure Schedule, Parent and Merger Sub jointly and severally represent and warrant to the Company as set forth below. The Parent Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered paragraphs contained in this Section 3, and the disclosure in any paragraph shall qualify (a) the disclosure in the corresponding paragraph of this Section 3, and (b) the other paragraphs of this Section 3 to the extent it is clear from the reading of such disclosure that it also qualifies or applies to such paragraphs.

3.1   Due Organization .

(a)   Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has all necessary corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; and (ii) to own and use its assets in the manner in which its assets are currently owned and used.

(b)   Parent is qualified, authorized, registered or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the nature of its activities and of its properties (both owned and leased) makes such qualification, authorization, registration or licensing necessary, except in such jurisdictions where the failure to do so has not had and will not have a Material Adverse Effect on Parent or its business. Parent is in good standing as a foreign corporation in each of the jurisdictions identified in Part 3.1 of the Parent Disclosure Schedule.

(c)   Other than Merger Sub and LAN Media Corporation, Parent does not own any controlling interest in any Entity and has never owned, beneficially or otherwise, any shares or other securities of, or any direct or indirect equity interest in, any other Entity. Parent has not agreed and is not obligated to make any future investment in or capital contribution to any Entity. Parent has not guaranteed and is not responsible or liable for any obligation of any of the Entities in which it owns or has owned any equity interest. Merger Sub and LAN Media Corporation do not own any assets that are material to Parent on a consolidated basis and conduct no business.

3.2   Certificate of Incorporation and Bylaws; Records. Parent has made available to the Company accurate and complete copies of: (a) the certificates of incorporation and bylaws or comparable charter documents of Parent and Merger Sub, including all amendments thereto; and (b) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders of Parent and Merger Sub, the boards of directors of Parent and Merger Sub and all committees of the boards of directors of Parent and Merger Sub. There have been no formal meetings or other proceedings of the stockholders of Parent and Merger Sub, the boards of directors of Parent and Merger Sub or any committee of the boards of directors of Parent and Merger Sub that are not reflected in such minutes or other records. There has not been any violation of any of the provisions of Parent’s and Merger Sub’s respective certificates of incorporation or bylaws, and neither Parent nor Merger Sub has taken any action that is inconsistent in any material respect with any resolution adopted by Parent’s and Merger Sub’s stockholders, Parent’s and Merger Sub’s boards of directors or any committee of Parent’s and Merger Sub’s boards of directors. The books of account, stock records, minute books and other records of Parent and Merger Sub are accurate, up to date and complete in all material respects, and, except as set forth in Part 3.2 of the Parent Disclosure Schedule, have been maintained in accordance with prudent business practices.

3.3   Capitalization, Etc.  

(a)   The authorized capital stock of Parent consists of: (i) 25,000,000 shares of Common Stock (par value $0.001 per share), of which 11,101,554 shares have been issued and are outstanding on the date of this Agreement and (ii) 2,000,000 shares of convertible preferred stock (par value $0.001 per share), of which no share has been issued and is outstanding. All of the outstanding shares of Parent Common Stock have been duly authorized and validly issued, and are fully paid and non-assessable. Part 3.3 of the Parent Disclosure Schedule provides an accurate and complete description of the terms of each repurchase option that is held by Parent and to which any of such shares is subject. All of the outstanding shares of Merger Sub have been duly authorized and validly issued, are fully paid and nonassessable, and are owned beneficially and of record by Parent.

(b)   Parent has reserved 4,528,950 shares of Parent Common Stock for issuance under the Parent Option Plans, of which 2,983,287 shares are reserved for issuance upon exercise of outstanding options. Parent has reserved 1,030,000 shares of Parent Common Stock for issuance upon exercise of the Parent Warrants. Part 3.3(b) of the Parent Disclosure Schedule accurately sets forth, with respect to each Parent Option and Parent Warrant that is outstanding as of the date of this Agreement: (i) the name of the holder of such Parent Option or Parent Warrant; (ii) the total number of shares of Parent Common Stock that are subject to such Parent Option or Parent Warrant and the number of shares of Parent Common Stock with respect to which such Parent Option or Parent Warrant is immediately exercisable; (iii) the date on which such Parent Option or Parent Warrant was granted and the term of such Parent Option or Parent Warrant; (iv) the vesting schedule for such Parent Option; (v) the exercise price per share of Parent Common Stock purchasable under such Parent Option or Parent Warrant; and (vi) whether such Parent Option has been designated an “incentive stock option” as defined in Section 422 of the Code. Except as set forth in this Section 3.3(b) and in Section 5.14, other than this Agreement, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital stock or other securities of Parent; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of the capital stock or other securities of Parent; (iii) Contract under which Parent is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities; or (iv) to the knowledge of Parent, condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares of capital stock or other securities of Parent.

(c)   All outstanding shares of Parent Common Stock, all outstanding Parent Options and all outstanding Parent Warrants have been issued or granted, and the warrants described in Section 5.14 will be granted, in compliance in all material respects with (i) all applicable securities laws and other applicable Legal Requirements, and (ii) all requirements set forth in applicable Contracts.

(d)   Since October 31, 2005, Parent has not repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities of Parent.

3.4   SEC Filings; Financial Statements .

(a)   Parent has made available to the Company, by directing the Company to the SEC’s online EDGAR database, each report, registration statement and definitive proxy statement filed by Parent with the SEC since November 1, 2004 (the “ Parent SEC Documents ”). Since November 1, 2004, Parent has timely made all filings with the SEC required under the applicable requirements of the Securities Act or the Exchange Act. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing): (i) each of the Parent 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 Parent 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.

(b)   The consolidated financial statements contained in the Parent SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared 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 and (in the case of unaudited statements) as permitted by Form 10-Q of the SEC, and except that unaudited financial statements may not contain footnotes as permitted by Form 10-Q and the Exchange Act, and are subject to year-end audit adjustments; and (iii) are accurate and complete in all material respects and present fairly the consolidated financial position of Parent and its subsidiaries as of the respective dates thereof and the consolidated results of operations of Parent and its subsidiaries for the periods covered thereby.

3.5   Absence of Changes. Except as set forth in Part 3.5 of the Parent Disclosure Schedule, or as set forth in the Parent SEC Documents, and except as may otherwise be specifically contemplated by this Agreement or the One Stop Agreement, since July 31, 2006 through the date of this Agreement:

(a)   there has not been any Material Adverse Effect on Parent, and, to the knowledge of Parent, no event has occurred that will, or could reasonably be expected to, have a Material Adverse Effect on Parent;

(b)   there has not been any material Damage, or any material interruption in the use of, any of Parent’s assets (whether or not covered by insurance);

(c)   Parent has not repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities and, except in compliance with Section 5.2(d), has not declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock, and;

(d)   Parent has not sold, issued or authorized the issuance of (i) any capital stock or other security (except for Parent Common Stock issued under, or upon exercise of options granted under, the Parent Option Plans), (ii) any option or right to acquire any capital stock or any other security (except for options granted under the Parent Option Plans and as set forth in Section 5.14), or (iii) any other instrument convertible into or exchangeable for any capital st