AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

Agreement and Plan of Merger

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Title: AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
Governing Law: California Date: 5/24/2007

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

by and among

DEMANDTEC, INC.,

TP ACQUISITION CORP.,

TRADEPOINT SOLUTIONS, INC.

and

CHARLES MAGOWAN, as

SHAREHOLDERS’ REPRESENTATIVE

Dated as of October 6, 2006

TABLE OF CONTENTS


	Page
ARTICLE I THE MERGER		2
1.1 The Merger		2
1.2 Effective Time; Closing		2
1.3 Effect of the Merger		2
1.4 Articles of Incorporation and Bylaws of the Surviving Corporation		2
1.5 Directors and Officers		3
1.6 Tax-free Reorganization		3

ARTICLE II MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES		3
2.1 Merger Consideration		3
2.2 Exchange of Cash and Certificates		7
2.3 Stock Transfer Books		8
2.4 Company Stock Options; Company Warrants		9
2.5 Securities Laws Issues		9
2.6 Dissenting Shares		9

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY		10
3.1 Organization and Qualification		10
3.2 Articles of Incorporation and Bylaws		10
3.3 No Subsidiaries		11
3.4 Capitalization		11
3.5 Authority Relative to This Agreement		13
3.6 No Conflict; Required Filings and Consents		13
3.7 Permits; Compliance		14
3.8 Financial Statements		14
3.9 Absence of Certain Changes or Events		15
3.10 Absence of Litigation		16
3.11 Employee Benefit Plans; Labor Matters		16
3.12 Contracts		19
3.13 Environmental Matters		21
3.14 Intellectual Property		22
3.15 Taxes		24
3.16 Vote Required		26
3.17 Assets; Absence of Liens and Encumbrances		26
3.18 Owned Real Property		27
3.19 Certain Interests		27
3.20 Insurance Policies		27
3.21 Restrictions on Business Activities		28
3.22 Brokers		28
3.23 Customers and Suppliers		28
3.24 Accounts Receivable; Bank Accounts		28
3.25 Powers of Attorney		28
3.26 Warranties		28
3.27 Books and Records		28
3.28 No Misstatements		29
3.29 409A Compliance		29


	Page
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		29
4.1 Organization and Qualification		29
4.2 Certificate of Incorporation and Bylaws		30
4.3 Capitalization		30
4.4 Authority Relative to This Agreement		30
4.5 No Conflict; Required Filings and Consents		31
4.6 Permits; Compliance		31
4.7 Financial Statements		32
4.8 Absence of Certain Changes or Events		32
4.9 Absence of Litigation		33
4.10 Brokers		33
4.11 Valid Issuance of Parent Shares		33
4.12 Taxes		34
4.13 Compliance		35

ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER		35
5.1 Conduct of Business by the Company Pending the Merger		35
5.2 Litigation		38
5.3 Notification of Certain Matters		38

ARTICLE VI ADDITIONAL AGREEMENTS		38
6.1 Employee Matters		38
6.2 Further Action; Consents; Filings		39
6.3 No Public Announcement		39
6.4 Expenses		40
6.5 Conversion Schedule		40
6.6 Tax Filings		40
6.7 Shareholder Solicitation		40
6.8 Access to Information; Confidentiality		40
6.9 No Solicitation by the Company		41

ARTICLE VII CONDITIONS TO THE MERGER		41
7.1 Conditions to the Obligations of Parent and Merger Sub		41
7.2 Conditions to the Obligations of the Company		44

ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER		44
8.1 Termination		44
8.2 Effect of Termination		45
8.3 Amendment		45
8.4 Waiver		45

ARTICLE IX INDEMNIFICATION		46
9.1 Survival of Representations and Warranties		46
9.2 Indemnification by the Company Series A Preferred Holders and Parent		46
9.3 Recoveries		48
9.4 Indemnification Procedures – Third Party Claims		48
9.5 Indemnification Procedures – Generally		50
9.6 Shareholders’ Representative		53

ARTICLE X GENERAL PROVISIONS		54
10.1 Notices		54


	Page
10.2 Certain Definitions		54
10.3 Severability		55
10.4 Assignment; Binding Effect; Benefit		56
10.5 Incorporation of Exhibits		56
10.6 Specific Performance		56
10.7 Governing Law; Forum		56
10.8 Time of the Essence		56
10.9 Waiver of Jury Trial		56
10.10 Construction and Interpretation		56
10.11 Further Assurances		57
10.12 Headings		57
10.13 Counterparts		57
10.14 Entire Agreement		57


Exhibit A		Form of Shareholder Certificate
Exhibit B		Form of Non-Competition and Non-Solicitation Agreement
Exhibit C		Form of Promissory Note

Schedule I		Schedule of Individuals Entering into Voting Agreements
Schedule II		Schedule of Individuals Entering Into Non-Competition and Non-Solicitation Agreements
Schedule III		Schedule of Individuals Receiving Offer Letters to Be Employed at Closing

iii

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the “ Agreement ”) is made and entered into October 6, 2006, by and among DemandTec, Inc., a Delaware corporation (“ Parent ”), TP Acquisition Corp, a California corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), TradePoint Solutions, Inc., a California corporation (the “ Company ”), and Charles Magowan, as Shareholders’ Representative (as defined in Section 9.6 hereof).

Recitals

A. Upon the terms and subject to the conditions of this Agreement and in accordance with the California General Corporation Law (the “ CGCL ”), Parent and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the “ Merger ”);

B. The Board of Directors of the Company has (i) determined that the Merger is fair to, and in the best interests of, the Company and its shareholders, (ii) unanimously approved and adopted this Agreement, the Merger, and the other transactions contemplated by this Agreement, and (iii) unanimously recommend that the shareholders of the Company approve and adopt this Agreement and the Merger;

C. The holders of at least 98% of the outstanding shares of Company Common Stock (as defined below), the holders of at least 98% of the outstanding shares of Company Series A Preferred Stock (as defined below), and the holders of at least 98% of the outstanding shares of Company Series A1 Preferred Stock (as defined below) and the holders of at least 75% of the outstanding shares of the Company voting together as a class have approved this Agreement and the Merger;

D. The Boards of Directors of each of Parent and Merger Sub have (i) determined that the Merger is consistent with and in furtherance of the long-term business strategy of Parent and fair to, and in the best interests of, Parent, Merger Sub and their respective shareholders and (ii) approved and adopted this Agreement, the Merger, and the other transactions contemplated by this Agreement;

E. Pursuant to the Merger, each outstanding share of Company Stock (other than Dissenting Shares, as defined below) shall be converted into the right to receive shares of Parent’s authorized common stock, par value $0.001 per share (“ Parent Common Stock ”), at the rate determined in this Agreement, and, where applicable, such other forms of consideration further described herein;

F. As a condition and inducement to Parent’s and Merger Sub’s entering into this Agreement and incurring the obligations set forth herein, concurrently with the execution and delivery of this Agreement, those shareholders of the Company listed on Schedule I are entering into a voting agreement with Parent (a “ Voting Agreement ”), dated the date hereof and in a form acceptable to Parent;

G. As a condition to Parent’s consummation of the Merger, each of the shareholders of the Company (the “ Company Shareholders ”) is executing and delivering to Parent a Shareholder Certificate substantially in the form attached hereto as Exhibit A (a “ Shareholder Certificate ”);

H. Concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s willingness to enter into this Agreement, each individual listed on Schedule II is entering into a Non-Competition and Non-Solicitation Agreement substantially in the form attached hereto as Exhibit B (a “ Non-Competition and Non-Solicitation Agreement ”); and

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub, the Company and the Shareholders’ Representative hereby agree as follows:

ARTICLE I

THE MERGER

1.1 The Merger . Upon the terms of this Agreement and subject to the conditions set forth in this Agreement, and in accordance with the CGCL, at the Effective Time (as defined in Section 1.2), Merger Sub shall be merged with and into the Company (the “ Reverse Merger ”). As a result of the Reverse Merger, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation of the Reverse Merger (the “ Surviving Corporation ”). As soon as reasonably practicable following the consummation of the Reverse Merger, but in any event within sixty (60) days thereafter, the Company shall be merged (the “ Second-Step Merger ”) with and into Parent or a wholly-owned, first-tier subsidiary of Parent that is not, for federal income tax purposes, recognized as an entity separate from Parent. Following the Second-Step Merger, the separate corporate existence of the Company shall cease and Parent or its wholly-owned subsidiary, as the case may be, shall continue as the surviving entity in such merger. The Reverse Merger is referred to herein as the “ Merger .”

1.2 Effective Time; Closing . The consummation of the transactions contemplated by this Agreement (other than the Second-Step Merger) shall take place at a closing (the “ Closing ”) to be held on the second business day following satisfaction or waiver of the conditions set forth in Article VII hereof (the “ Closing Date ”) at such place and time as the parties may agree. The parties hereto shall cause the Merger to be consummated by (i) filing an Agreement of Merger (the “ Agreement of Merger ”) with the Secretary of State of the State of California in such form as is required by, and executed in accordance with, the relevant provisions of the CGCL and (ii) making all other filings and recordings required under the CGCL. The term “ Effective Time ” means the date and time of the filing of the Agreement of Merger (or such later time as may be agreed by each of the parties hereto and specified in the Agreement of Merger).

1.3 Effect of the Merger . At and after the Effective Time, the Merger shall have the effects as set forth in the applicable provisions of the CGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of each of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

1.4 Articles of Incorporation and Bylaws of the Surviving Corporation .

(a) At the Effective Time, the Articles of Incorporation of the Company as the Surviving Corporation shall be amended and restated to read the same as the Articles of Incorporation of Merger Sub as in effect immediately prior to the Effective Time, except that Section 1 of the Articles of Incorporation of the Surviving Corporation, instead of reading the same as Section 1 of the Articles of Incorporation of Merger Sub, shall read as follows: “The name of this corporation is TradePoint Solutions, Inc.”

(b) At the Effective Time, the Bylaws of the Company as the Surviving Corporation shall be amended and restated to read the same as the Bylaws of Merger Sub as in effect

immediately prior to the Effective Time, except that all references to Merger Sub in the Bylaws of the Surviving Corporation shall be changed to refer to TradePoint Solutions, Inc.

1.5 Directors and Officers . The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified.

1.6 Tax-free Reorganization . For federal income tax purposes, the parties intend that the Reverse Merger with the Second-Step Merger constitute an integrated transaction that collectively or seriatim qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and will use commercially reasonable efforts to have it so qualify; provided, however, that none of the parties makes any representation or warranty that the Merger will so qualify.

ARTICLE II

MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES

2.1 Merger Consideration .

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

(i) each share of common stock of the Company (“ Company Common Stock ”) issued and outstanding immediately prior to the Effective Time (other than any shares of Company Common Stock to be canceled pursuant to Section 2.1(a)(vi) and any Dissenting Shares (as defined in Section 2.6)) shall be converted into the right to receive such number of shares of Parent Common Stock equal to the Common Exchange Ratio (as defined in Section 2.1(b));

(ii) each share of Series A Preferred Stock of the Company (“ Company Series A Preferred Stock ”) issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares) shall be converted into the right to receive (x) such number of shares of Parent Common Stock equal to the Common Exchange Ratio, plus (y) an amount of cash equal to the Series A Cash Consideration Exchange Amount (as defined below), plus (z) upon maturity of the Promissory Note (as defined below), and subject to the provisions of Article IX below, an amount of cash equal to the Series A Promissory Note Exchange Amount (as defined below);

(iii) each share of Series A1 Preferred Stock of the Company issued on December 28, 2004 (“ December 2004 Company Series A1 Preferred Stock ”) and outstanding immediately prior to the Effective Time (other than any Dissenting Shares) shall be converted into the right to receive (x) such number of shares of Parent Common Stock equal to the Common Exchange Ratio, plus (y) an amount of cash equal to the December 2004 Series A1 Cash Consideration Exchange Amount (as defined below);

(iv) each share of Series A1 Preferred Stock of the Company issued on March 31, 2005 (“ March 2005 Company Series A1 Preferred Stock ”) and outstanding immediately prior to the Effective Time (other than any Dissenting Shares) shall be converted into the right to receive (x) such number of shares of Parent Common Stock equal to the Common Exchange Ratio, plus (y) an

amount of cash equal to the March 2005 Series A1 Cash Consideration Exchange Amount (as defined below);

(v) each share of Series A1 Preferred Stock of the Company issued upon exercise of a Company warrant to purchase shares of Series A1 Preferred Stock of the Company (the “ Series A1 Warrant Shares ” and, together with the December 2004 Company Series A1 Preferred Stock and March 2005 Company Series A1 Preferred Stock, “ Company Series A1 Preferred Stock ;” Company Series A Preferred Stock and Company Series A1 Preferred Stock are collectively referred to herein as “ Company Preferred Stock ;” Company Common Stock and Company Preferred Stock are collectively referred herein to as “ Company Stock ”) and outstanding immediately prior to the Effective Time (other than any Dissenting Shares) shall be converted into the right to receive (x) such number of shares of Parent Common Stock equal to the Common Exchange Ratio, plus (y) an amount of cash equal to the Series A1 Warrant Shares Cash Consideration Exchange Amount (as defined below);

(vi) each share of Company Stock held in the treasury of the Company and each share of Company Stock owned by Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company immediately prior to the Effective Time shall be cancelled and extinguished without any conversion thereof and no payment or distribution shall be made with respect thereto;

(vii) each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. The stock certificate evidencing shares of common stock of Merger Sub shall then evidence ownership of the outstanding shares of common stock of the Surviving Corporation; and

(viii) Notwithstanding anything in this Agreement to the contrary, the maximum aggregate amount of merger consideration to which the holders of securities of the Company shall be entitled as a result of the transactions contemplated hereunder shall be the Aggregate Merger Consideration (as defined below).

(b) As used in this Agreement, the following terms have the following meanings:

(i) “ Aggregate Merger Consideration ” means (x) the Cash Consideration, plus (y) the Promissory Note, plus (z) the Parent Shares.

(ii) “ Cash Consideration ” means $4,000,000.

(iii) “ Common Exchange Ratio ” means the quotient of (x) the Parent Shares divided by (y) the Fully Diluted Common Shares Amount.

(iv) “ Fully Diluted Common Shares Amount ” means a number of shares of Company Common Stock equal to the sum of (x) the number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time, and (y) the number of shares of Company Common Stock issuable upon conversion of shares of Company Preferred Stock issued and outstanding immediately prior to the Effective Time.

(v) “ Parent Shares ” means 2,150,000 shares of Parent Common Stock (subject to splits, combinations, and similar events after the date hereof with respect to Parent Common Stock).

(vi) “ Promissory Note ” means the Promissory Note substantially in the form attached hereto as Exhibit C .

(vii) “ Promissory Note Amount ” means the amount of principal payable under the Promissory Note, which amount is subject to adjustment from time to time as set forth in Article IX below.

(viii) “ Remaining Cash Consideration ” means (x) the Cash Consideration less (y) the Total Series A1 Liquidation Preference.

(ix) “ Series A Cash Consideration Exchange Amount ” means the quotient of (x) the Remaining Cash Consideration divided by (y) the total number of shares of Company Series A Preferred Stock outstanding immediately prior to the Effective Time.

(x) “ Series A Promissory Note Exchange Amount ” means the quotient of (x) the Promissory Note Amount divided by (y) the total number of shares of Company Series A Preferred Stock outstanding immediately prior to the Effective Time.

(xi) “ December 2004 Series A1 Cash Consideration Exchange Amount ” means the product of (x) the Total Series A1 Liquidation Preference multiplied by (y) the December 2004 Series A1 Liquidation Preference Per Share Percentage.

(xii) “ December 2004 Series A1 Liquidation Preference ” means the product of (x) the December 2004 Series A1 Liquidation Preference Per Share multiplied by (y) the total number of shares of December 2004 Company Series A1 Preferred Stock outstanding immediately prior to the Effective Time.

(xiii) “ December 2004 Series A1 Liquidation Preference Per Share ” means the sum of (x) $0.225 plus (y) the Series A1 Dividend Amount accrued to the shares of December 2004 Company Series A1 Preferred Stock outstanding immediately prior to the Effective Time.

(xiv) “ December 2004 Series A1 Liquidation Preference Percentage ” means the quotient of (x) the December 2004 Series A1 Liquidation Preference divided by (y) the Total Series A1 Liquidation Preference.

(xv) “ December 2004 Series A1 Liquidation Preference Per Share Percentage ” means the quotient of (x) the December 2004 Series A1 Liquidation Preference Percentage divided by (y) the total number of shares of December 2004 Company Series A1 Preferred Stock outstanding immediately prior to the Effective Time.

(xvi) “ March 2005 Series A1 Cash Consideration Exchange Amount ” means the product of (x) the Total Series A1 Liquidation Preference multiplied by (y) the March 2005 Series A1 Liquidation Preference Per Share Percentage.

(xvii) “ March 2005 Series A1 Liquidation Preference ” means the product of (x) the March 2005 Series A1 Liquidation Preference Per Share multiplied by (y) the total number of shares of March 2005 Company Series A1 Preferred Stock outstanding immediately prior to the Effective Time.

(xviii) “ March 2005 Series A1 Liquidation Preference Per Share ” means the sum of (x) $0.225 plus (y) the Series A1 Dividend Amount accrued to the shares of March 2005 Company Series A1 Preferred Stock outstanding immediately prior to the Effective Time.

(xix) “ March 2005 Series A1 Liquidation Preference Percentage ” means the quotient of (x) the March 2005 Series A1 Liquidation Preference divided by (y) the Total Series A1 Liquidation Preference.

(xx) “ March 2005 Series A1 Liquidation Preference Per Share Percentage ” means the quotient of (x) the March 2005 Series A1 Liquidation Preference Percentage divided by (y) the total number of shares of March 2005 Company Series A1 Preferred Stock outstanding immediately prior to the Effective Time.

(xxi) “ Series A1 Warrant Shares Cash Consideration Exchange Amount ” means the product of (x) the Total Series A1 Liquidation Preference multiplied by (y) the Series A1 Warrant Shares Liquidation Preference Per Share Percentage.

(xxii) “ Series A1 Warrant Shares Liquidation Preference ” means the product of (x) the Series A1 Warrant Shares Liquidation Preference Per Share multiplied by (y) the total number of Series A1 Warrant Shares outstanding immediately prior to the Effective Time.

(xxiii) “ Series A1 Warrant Shares Liquidation Preference Per Share ” means the sum of (x) $0.225 plus (y) the Series A1 Dividend Amount accrued to the Series A1 Warrant Shares outstanding immediately prior to the Effective Time.

(xxiv) “ Series A1 Warrant Shares Liquidation Preference Percentage ” means the quotient of (x) the Series A1 Warrant Shares Liquidation Preference divided by (y) the Total Series A1 Liquidation Preference.

(xxv) “ Series A1 Warrant Shares Liquidation Preference Per Share Percentage ” means the quotient of (x) the Series A1 Warrant Shares Liquidation Preference Percentage divided by (y) the total number of Series A1 Warrant Shares outstanding immediately prior to the Effective Time.

(xxvi) “ Series A1 Dividend Amount ” means that dollar amount of dividends that have accrued but have not been paid in respect of a share of Company Series A1 Preferred Stock, which dollar amount is equal to $0.018 (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like with respect to the Company Series A1 Preferred Stock occurring after the date of this Agreement and prior to the Effective Time) per annum (compounded annually on the anniversary of the original issuance date) for each share of Company Series A1 Preferred Stock, calculated from the date of original issuance by the Company of shares of Company Series A1 Preferred Stock through and including the Closing Date. For avoidance of doubt, “Series A1 Dividend Amount” shall not include that dollar amount of dividends that have otherwise been paid by the Company, or will be paid by the Company at or prior to the Effective Time, in respect of a share of Company Series A1 Preferred Stock.

(xxvii) “ Total Series A1 Liquidation Preference ” means the sum of (x) the December 2004 Series A1 Liquidation Preference plus (y) the March 2005 Series A1 Liquidation Preference plus (z) the Series A1 Warrant Shares Liquidation Preference.

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

2.2 Exchange of Cash and Certificates .

(a) Exchange Procedures . From and after the Effective Time, a third party designated by Parent will act as exchange agent (the “ Exchange Agent ”) in effecting the exchange of the applicable Cash Consideration, Parent Shares and Promissory Note Amount for certificates which immediately prior to the Effective Time represented outstanding shares of Company Stock (“ Company Share Certificates ”) and which were converted into the right to receive the applicable Cash Consideration, Parent Shares and Promissory Note Amount pursuant to Section 2.1. As promptly as practicable after the Effective Time, Parent and the Exchange Agent shall mail to each record holder of Company Share Certificates a letter of transmittal (the “ Letter of Transmittal ”) in a form approved by Parent and the Company and instructions for use in surrendering such Company Share Certificates and receiving the applicable Cash Consideration, Parent Shares and Promissory Note Amount pursuant to Section 2.1. Promptly after the Effective Time, but in no event later than ten (10) business days following the Effective Time, Parent shall cause to be deposited in trust with the Exchange Agent the Cash Consideration and Parent Shares, and shall cause the Promissory Note to be delivered to the Shareholders’ Representative, with a copy to the Exchange Agent.

Upon the surrender of each Company Share Certificate for cancellation to the Exchange Agent, together with a properly completed Letter of Transmittal and such other documents as may reasonably be required by Parent:

(i) Parent shall cause to be issued to the holder of such Company Share Certificate in exchange therefor (x) the portion of the Cash Consideration to which such holder is entitled pursuant to Section 2.1, and (y) a separate stock certificate representing the Parent Shares to which such holder is entitled pursuant to Section 2.1; and

(ii) the Company Share Certificates so surrendered shall forthwith be cancelled.

Until surrendered as contemplated by this Article II, each Company Share Certificate shall, subject to appraisal rights under the CGCL and Section 2.6, be deemed at any time after the Effective Time to represent only the right to receive upon surrender the applicable Cash Consideration, Promissory Note Amount, and Parent Shares with respect to the shares of Company Stock formerly represented thereby to which such holder is entitled pursuant to Section 2.1.

(b) Distributions with Respect to Unexchanged Parent Shares . No dividends or other distributions declared or made after the Effective Time with respect to Parent Shares comprising part of the Aggregate Merger Consideration and with a record date after the Effective Time shall be paid to the holder of any unsurrendered Company Share Certificate with respect to the Parent Shares represented thereby until the holder of such Company Share Certificate shall surrender such Company Share Certificate in accordance with this Section 2.2.

(c) No Further Rights in Company Stock . The Aggregate Merger Consideration issuable upon the conversion of shares of Company Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Company Stock.

(d) No Fractional Shares . Notwithstanding any other provision of this Agreement, and subject to the provisions of the CGCL, no fractional shares of Parent Common Stock shall be issued upon the conversion and exchange of Company Share Certificates, and no holder of Company Share Certificates shall be entitled to receive a fractional share of Parent Common Stock. In the event that any holder of Company Stock would otherwise be entitled to receive a fractional share of Parent Common Stock (after aggregating all shares and fractional shares of Parent Common Stock issuable to such holder), then such holder will receive an aggregate number of shares of Parent Common Stock rounded up or down to the nearest whole share (with 0.5 being rounded up).

(e) No Liability . Neither Parent nor the Surviving Corporation shall be liable to any holder of shares of Company Stock for any such shares of Parent Common Stock (or dividends or distributions with respect thereto) or cash properly and legally delivered to a public official pursuant to any abandoned property, escheat or similar Law (as defined in Section 3.6(a)).

(f) Withholding Rights . Each of the Exchange Agent, the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax (as defined in Section 3.15(c)) Law. To the extent that amounts are so withheld by the Exchange Agent, the Surviving Corporation or Parent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Stock in respect of which such deduction and withholding were made by the Exchange Agent, the Surviving Corporation or Parent, as the case may be.

(g) Lost Certificates . If any Company Share Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Company Share Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Company Share Certificate, Parent shall issue in exchange for such lost, stolen or destroyed Company Share Certificate, the applicable Cash Consideration, Promissory Note Amount and Parent Shares (and dividends or other distributions pursuant to Section 2.2(b)) to which such person is entitled pursuant to the provisions of this Article II.

(h) Return of Parent Shares . Promptly following the end of the third full calendar month after the Effective Time, the Exchange Agent shall return to Parent all of the remaining Cash Consideration and Parent Shares in the Exchange Agent’s possession. Thereafter, upon the surrender of a Company Share Certificate to Parent, together with a properly executed Letter of Transmittal and forms of stock power and such other documents as may reasonably be required by Parent, and subject to applicable abandoned property, escheat and similar Laws, the holder of such Company Share Certificate shall be entitled to receive in exchange therefor the applicable Cash Consideration, Promissory Note Amount and Parent Shares (and dividends or other distributions pursuant to Section 2.2(c)) without any interest thereon.

2.3 Stock Transfer Books . Commencing on the date hereof, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of shares of Company Stock thereafter on the records of the Company other than as required to comply with the terms

of this Agreement. From and after the Effective Time, each holder of a Company Share Certificate shall cease to have any rights as a shareholder of the Company, except as otherwise provided in this Agreement or by Law.

2.4 Company Stock Options; Company Warrants .

(a) At the Effective Time, all options to purchase Company Common Stock issued by the Company pursuant to the Stock Plan, as defined in Section 3.4(b) (each a “ Company Option ”), shall terminate. A reasonable period prior to the Effective Time, the Company shall deliver to each holder of a Company Option a written notice advising him or her of the opportunity to exercise such Company Option prior to the Effective Time and, if applicable, the acceleration of such Company Option. In the case of a Company Option that becomes exercisable only as of the Effective Time pursuant to this Subsection (a), any exercise of such Company Option shall be contingent on the consummation of the Merger. Shares of Company Common Stock acquired by exercising Company Options (including contingent exercises) shall be subject to Section 2.1(a)(i). The Company’s repurchase right with respect to any unvested shares acquired by the exercise of Company Options prior to the Effective Time shall be assigned to Parent by virtue of the Merger and without any further action on the part of the Company or the holder of such unvested shares.

(b) Parent shall not assume any warrants or other rights to acquire shares of Company Stock. Prior to the Effective Time, each warrant to purchase Company Stock (a “ Company Warrant ”), and any agreement evidencing such warrant, that has not otherwise been exercised or converted shall have been terminated and of no further force and effect.

2.5 Securities Laws Issues . Parent intends to issue the shares of Parent Common Stock as provided in this Agreement pursuant to a “private placement” exemption or exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended (the “ Securities Act ”) and/or Regulation D promulgated under the Securities Act and an exemption from qualification under the laws of the State of California and other applicable state securities laws. Parent and the Company shall comply with all applicable provisions of and rules under the Securities Act and applicable state securities laws in connection with the offering and issuance of the shares of Parent Common Stock pursuant to this Agreement. Such shares of Parent Common Stock will be “restricted securities” under the Federal and state securities laws and cannot be offered or resold except pursuant to registration under the Securities Act or an available exemption from registration.

2.6 Dissenting Shares .

(a) Notwithstanding any provision of this Agreement to the contrary, shares of Company Stock that are outstanding immediately prior to the Effective Time and which are held by shareholders who have exercised and perfected appraisal rights for such shares of Company Stock in accordance with the CGCL (collectively, the “ Dissenting Shares ”) shall not be converted into or represent the right to receive the applicable Cash Consideration, Promissory Note Amount, and Parent Shares. Such shareholders shall be entitled to receive payment of the appraised value of such shares of Company Stock held by them in accordance with the CGCL, unless and until such shareholders fail to perfect or effectively withdraw or otherwise lose their appraisal rights under the CGCL. All Dissenting Shares held by shareholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such shares of Company Stock under the CGCL shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the applicable Cash Consideration, Promissory Note Amount and Parent Shares, without any interest thereon, upon the surrender in the manner provided in Section 2.2 of the corresponding Company Share Certificate.

(b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other related instruments served pursuant to the CGCL and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the CGCL. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub that the statements contained in this Article III are true and correct except as set forth in the disclosure schedule delivered by the Company to Parent and Merger Sub concurrently with the execution of this Agreement (the “ Company Disclosure Schedule ”). The Company Disclosure Schedule shall be arranged according to specific sections in this Article III and shall provide exceptions to, or otherwise qualify in reasonable detail, only the corresponding section in this Article III and any other section hereof where it is clear, upon a reading of such disclosure without any independent knowledge on the part of the reader regarding the matter disclosed, that the disclosure is intended to apply to such other section.

3.1 Organization and Qualification . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to own, lease and otherwise hold and operate its properties and other assets and to carry on its business as it is now being conducted and as currently proposed to be conducted, except where the failure to be so organized, existing or in good standing or to have such corporate power and authority has not had, and could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect (as defined below). The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing has not had, and could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Section 3.1 of the Company Disclosure Schedule sets forth each jurisdiction where the Company is qualified or licensed as a foreign corporation and each other jurisdiction in which the Company owns, uses, licenses or leases real property or has employees or engages independent contractors. The term “ Company Material Adverse Effect ” means any event, change, violation, inaccuracy, circumstance or effect (regardless of whether or not such events, changes, violations, inaccuracies, circumstances or effects are inconsistent with the representations or warranties made by the Company in this Agreement) that is, or could reasonably be expected to be, individually or in the aggregate, materially adverse to the business, operations, condition (financial or otherwise), assets (tangible or intangible), liabilities, properties, capitalization or results of operations of the Company, except for any such events, changes, violations, inaccuracies, circumstances or effects resulting from or arising in connection with (i) any changes in general economic or business conditions that do not disproportionately impact the Company or (ii) any changes or events affecting the industry in which the Company operates that do not disproportionately impact the Company (it being understood that in any controversy concerning the applicability of the preceding exceptions, the Company shall have the burden of proof with respect to the elements of such exceptions).

3.2 Articles of Incorporation and Bylaws . The Company has heretofore made available to Parent a complete and correct copy of (a) the Articles of Incorporation and the Bylaws of the Company including all amendments thereto, (b) the minute books containing all consents, actions and meeting of the shareholders of the Company and the Company’s Board of Directors and any committees

thereof, and (c) the stock transfer books of the Company setting forth all issuances or transfers of any capital stock of the Company. Such Articles of Incorporation and Bylaws are in full force and effect. The Company is not in violation of any of the provisions of its Articles of Incorporation or Bylaws. The corporate minute books, stock certificate books, stock registers and other corporate records of the Company are complete and accurate in all material respects, and the signatures appearing on all documents contained therein are the true or facsimile signatures of the persons purported to have signed the same.

3.3 No Subsidiaries . The Company does not own, of record or beneficially, or control any direct or indirect equity or other interest, or any right (contingent or otherwise) to acquire the same, in any corporation, partnership, limited liability company, joint venture, association or other entity. The Company is not a member of (nor is any part of the Company’s business conducted through) any partnership, nor is the Company a participant in any joint venture or similar arrangement. There are no contractual obligations of the Company to provide funds to, or make any investment in (whether in the form of a loan, capital contribution or otherwise), any other person.

3.4 Capitalization .

(a) The authorized capital stock of the Company consists of 50,000,000 shares of Company Common Stock, 17,500,000 shares of Company Series A Preferred Stock and 11,111,111 shares of Company Series A1 Preferred Stock. As of the date hereof, (i) 9,013,352 shares of Company Common Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable, and (ii) 4,259,500 shares of Company Common Stock are reserved for future issuance pursuant to outstanding Company Options. As of the date of this Agreement, (A) 17,335,000 shares of Company Series A Preferred Stock are issued and outstanding, and (B) 11,036,088 shares of Company Series A1 Preferred Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable. Each share of Company Preferred Stock is convertible into one share of Company Common Stock. There are no other shares of Company Preferred Stock outstanding. As of the date hereof, the outstanding shares of Company Common Stock, Company Series A Preferred Stock and Company Series A1 Preferred Stock are owned as set forth in Section 3.4(a) of the Company Disclosure Schedule. Section 3.4(a) of the Company Disclosure Schedule also provides an accurate and complete description of the terms of each repurchase option or right of first refusal which is held by the Company and to which any of such shares are subject.

(b) The Company has reserved 2,380,000 shares of Company Common Stock for issuance under the Company’s 2003 Equity Incentive Plan and 2,500,000 shares of Company Common Stock for issuance under the Company’s 2004 Equity Incentive Plan (collectively, the “ Stock Plan ”) of which options to purchase 1,772,500 and 2,487,000 shares of Company Common Stock, respectively, are outstanding as of the date of this Agreement. Section 3.4(b) 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 was originally subject to such Company Option; (iii) the number of shares of Company Common Stock that remain subject to such Company Option, (iv) the date on which such Company Option was granted and the term of such Company Option; (v) the vesting schedule and vesting commencement date for such Company Option; (vi) the exercise price per share of Company Common Stock purchasable under such Company Option; (vii) whether such Company Option has been designated an “incentive stock option” as defined in Section 422 of the Code; (viii) the current employee or independent contractor status of the holder of such Company Option; and (ix) the current State of residence of the holder of such Company Option. No Company Option will by its terms require an adjustment in connection with the Merger, except as contemplated by this Agreement. Neither the consummation of transactions contemplated by this Agreement, nor any action taken or to be taken by

Company in connection with such transactions, will result in (i) any acceleration of exercisability or vesting, whether or not contingent on the occurrence of any event after consummation of the Merger, in favor of any optionee under any Company Option; (ii) any additional benefits for any optionee under any Company Option, except as contemplated by this Agreement; or (iii) the inability of Parent after the Effective Time to exercise any right or benefit held by Company prior to the Effective Time with respect to any shares of Company Common Stock previously issued upon exercise of a Company Option, including, without limitation, the right to repurchase an optionee’s unvested shares on termination of such optionee’s employment. The termination of all Company Options in accordance with Section 2.4(a) hereunder will not give rise to any event described in clauses (i) through (iii) in the immediately preceding sentence or constitute a breach of the Stock Plan or any agreement entered into pursuant to such plan.

(c) The Company previously reserved 3,557,316 shares of Company Common Stock for issuance pursuant to the exercise or conversion of warrants to purchase Company Common Stock, 165,000 shares of Company Series A Preferred Stock for issuance pursuant to the exercise or conversion of warrants to purchase Company Series A Preferred Stock, and 75,023 shares of Company Series A1 Preferred Stock for issuance pursuant to the exercise or conversion of warrants to purchase Company Series A1 Preferred Stock. As of the Closing, all Company Warrants will have been exercised or converted pursuant to their terms or terminated. Section 3.4(c) of the Company Disclosure Schedule sets forth, with respect to each Company Warrant issued to any person by the Company since the Company’s date of incorporation: (i) the name of the holder of such Company Warrant; (ii) the total number and type of shares of Company Stock that are subject to such Company Warrant; (iii) the exercise price per share of Company Stock purchasable under such Company Warrant; (iv) the total number of shares of Company Stock with respect to which such warrant is immediately exercisable; (v) the vesting schedule for such Company Warrant; and (vi) the disposition (i.e., exercised or converted or terminated) of such Company Warrant.

(d) Except as described in Section 3.4(b) above or as set forth in Sections 3.4(b), 3.4(c) and 3.4(d) of the Company Disclosure Schedule, there are no options, warrants or other rights, agreements, arrangements or commitments of any character, whether or not contingent, relating to the issued or unissued capital stock of the Company or obligating the Company to issue or sell any share of capital stock of, or other equity interest in, the Company. All shares of Company Stock so subject to issuance, upon issuance in accordance with the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. The holders of Company Options and Company Warrants have been or will be given, or shall have properly waived, any required notice of the Merger or the termination of such Company Warrants or Company Options prior to Effective Time, and all such rights, if any, will terminate at or prior to the Effective Time.

(e) Except as described in Section 3.4(e) of the Company Disclosure Schedule, the Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the shareholders of the Company on any matter.

(f) All of the securities offered, sold or issued by the Company (i) have been offered, sold or issued in compliance with the requirements of the Federal securities laws and any applicable state securities or “blue sky” laws, and (ii) are not subject to any preemptive right, right of first refusal (other than the Company’s right of first refusal), right of first offer or right of rescission.

(g) Except as set forth in Section 3.4(g) of the Company Disclosure Schedule, the Company has never repurchased, redeemed or otherwise reacquired any shares of capital

stock or other securities of the Company, other than unvested securities in the ordinary course upon termination of employment or consultancy. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any share of capital stock of, or other equity interest in, the Company. There are no shareholder agreements, voting trusts or other agreements or understandings to which the Company is a party, or of which the Company is aware, that (i) relate to the voting, registration or disposition of any securities of the Company, (ii) grant to any person or group of persons the right to elect, or designate or nominate for election, a director to the Board of Directors of the Company, or (iii) grant to any person or group of persons information rights.

(h) An updated Section 3.4 of the Company Disclosure Schedule reflecting changes permitted by this Agreement in the capitalization of the Company between the date hereof and the Effective Time shall be delivered by the Company to Parent on the Closing Date.

3.5 Authority Relative to This Agreement .

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and, subject to obtaining the necessary approvals of the Company Shareholders, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger and the other transactions contemplated by this Agreement (other than the approval and adoption of this Agreement and the Merger by the Company Shareholders as described in Section 3.16 hereof and the filing and recordation of appropriate merger documents as required by the CGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming Company Shareholder approval and the due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity.

(b) Without limiting the generality of the foregoing, the Board of Directors of the Company, at a meeting duly called and held, has unanimously (i) determined that the Merger and the other transactions contemplated hereby are fair to, and in the best interests of, the Company and its shareholders, (ii) approved and adopted the Merger, this Agreement and the other transactions contemplated hereby in accordance with the provisions of the CGCL and the Company’s charter documents, and (iii) directed that this Agreement and the Merger be submitted to the Company Shareholders for their approval and adoption and (iv) resolved to recommend that the Company Shareholders vote in favor of the approval and adoption of this Agreement.

3.6 No Conflict; Required Filings and Consents .

(a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company and the transactions contemplated hereby will not, (i) conflict with or violate the Articles of Incorporation or Bylaws of the Company, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 3.6(b) have been obtained and all filings and obligations described in Section 3.6(b) have been made or complied with, conflict with or violate in any material respect any foreign or domestic (Federal, state or local) law, statute, ordinance, franchise, permit, concession, license, writ, rule, regulation, order, injunction, judgment or decree (“ Law ”) applicable to the Company or any property or asset of the Company, or (iii) conflict with, result

in any material breach of or constitute a material default (or an event which with notice or lapse of time or both would become a default) under, require consent, approval or notice under, give to others any right of termination, amendment, acceleration or cancellation of, require any payment under, or result in the creation of a lien or other encumbrance on any property or asset of the Company pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which any property or asset of the Company is bound.

(b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, order, permit or authorization from, or registration, filing or notification with, any domestic or foreign governmental, regulatory or administrative authority, agency or commission, any court, tribunal or arbitral body, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental authority (a “ Governmental Entity ”), except for such consents, approvals, orders, permits, authorizations, registrations, filings or notifications, which if not obtained or made could not reasonably be expected, individually or in the aggregate, to prevent or materially delay the consummation of the transactions contemplated by this Agreement.

3.7 Permits; Compliance .

(a) The Company is in possession of all material franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for the Company to own, lease and otherwise hold and operate its properties and other assets and to carry on its business as it is now being conducted and as currently proposed to be conducted (the “ Company Permits ”). All Company Permits are in full force and effect and will remain so after the Closing and no suspension or cancellation of any Company Permit is pending or, to the knowledge of the Company, threatened. The Company has received no notice or other communication from any Governmental Entity regarding (i) any actual or possible violation of or failure to comply with any term or requirement of any Company Permit, or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Company Permit.

(b) The Company is not, in any material respect, in conflict with, or in default or violation of (i) any Law applicable to the Company or by which any property or asset of the Company is bound or affected, (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or any property or asset of the Company is bound or affected, or (iii) any Company Permit.

3.8 Financial Statements .

(a) True and complete copies of (i) the audited consolidated balance sheets of the Company at December 31, 2005, and the unaudited consolidated balance sheets of the Company at December 31, 2004, and December 31, 2003, and the related audited statements of operations, changes in shareholders’ equity and changes in cash flows for the years then ended, together with all related notes and schedules thereto (collectively referred to herein as the “ Company Audited Financial Statements ”), and (ii) the unaudited consolidated balance sheet of the Company as of August 31, 2006 (the “ Company Reference Balance Sheet ”), and the related statements of operations, changes in shareholders’ equity and changes in cash flows for the eight months ended August 31, 2006 (collectively referred to herein as the “ Company Interim Financial Statements ”), are attached as Section 3.8(a) of the Company Disclosure Schedule. The Company Audited Financial Statements and the Company Interim Financial Statements (including, in each case, any notes thereto) were prepared in accordance with United States generally accepted accounting principles (“ U.S. GAAP ”) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as

permitted by U.S. GAAP and except for (i) the absence of footnotes, and (ii) normal, recurring year-end adjustments that would not reasonably be expected, either individually or in the aggregate, to be material) and each present fairly, in all material respects, the consolidated financial position of the Company as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not and are not expected, individually or in the aggregate, to be material).

(b) Except as set forth in Section 3.8(b) of the Company Disclosure Schedule, the Company does not have any debts, liabilities or obligations of a type required by generally accepted accounting principles to be reflected in the Company Reference Balance Sheet that were not so reflected in the Company’s Reference Balance Sheet (“ Liabilities ”), other than Liabilities (i) recorded or reserved against on the Company Reference Balance Sheet and (ii) in an aggregate amount not exceeding $50,000 incurred since August 31, 2006 in the ordinary course of the business, consistent with past practice. Except as set forth in Section 3.8(b) of the Company Disclosure Schedule, reserves are reflected on the Company Reference Balance Sheet and on the books of account and other financial records of the Company against all Liabilities of the Company in amounts that have been established on a basis consistent with the past practice of the Company and in accordance with U.S. GAAP. Except as set forth in Section 3.8(b) of the Company Disclosure Schedule, there are no outstanding warranty claims against the Company.

3.9 Absence of Certain Changes or Events . Since December 31, 2005, except as contemplated by or as disclosed in this Agreement, the Company has conducted its business only in the ordinary course and in a manner consistent with past practice and, since such date, (a) there has not been any Company Material Adverse Effect and (b) the Company has not taken or legally committed to take any of the following actions:

(a) any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Company Audited Financial Statements, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse;

(b) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results, prospects or business of the Company (as such business is presently conducted and as it is proposed to be conducted);

(d) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and that is not material to the assets, properties, financial condition, operating results or business of the Company (as such business is presently conducted and as it is proposed to be conducted);

(e) any material change or amendment to a Material Contract or arrangement by which the Company or any of its assets or properties is bound or subject;

(f) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

(g) any sale, assignment or transfer of any Company Intellectual Property other than in the ordinary course of business consistent with past practice;

(h) any resignation or termination of employment of any key officer of the Company; and the Company, to its knowledge, does not know of the impending resignation or termination of employment of any such officer or key employee;

(i) receipt of notice that there has been a loss of, or material order cancellation by, any major customer of the Company;

(j) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except Liens for Taxes not yet due or payable and Liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets;

(k) any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

(l) any declaration, setting aside or payment or other distribution in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase or other acquisition of any of such stock by the Company, other than repurchase of Company Common Stock from employees, consultants or other persons performing services for Company pursuant to agreements under which Company has the option to repurchase such shares at cost upon the termination of employment or other services;

(m) to the Company’s knowledge, any other event or condition of any character that might materially and adversely affect the assets, properties, financial condition, operating results or business of the Company (as such business is presently conducted and as it is proposed to be conducted); or

(n) any agreement or commitment by the Company to do any of the things described in this Section 3.9.

3.10 Absence of Litigation . There is no litigation, suit, claim, action, proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company, or any property or asset owned or used by the Company or any person whose liability the Company has or may have assumed, either contractually or by operation of Law, before any arbitrator or Governmental Entity (a “ Company Legal Proceeding ”). To the Company’s knowledge, no event has occurred, and no claim, dispute or other condition or circumstance exists, that could reasonably be expected to give rise to or serve as a basis of the commencement of any Company Legal Proceeding. None of the Company, the officers or directors thereof (in their capacity as such), or any material property or asset of the Company is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of the Company, continuing investigation by, any Governmental Entity, or any order, writ, judgment, injunction, decree, determination or award of any court, arbitrator or Governmental Entity. The Company has no plans to initiate any Company Legal Proceeding against any third party.

3.11 Employee Benefit Plans; Labor Matters .

(a) Schedule 3.11(a) of the Company Disclosure Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) and all bonus, stock option, stock purchase, stock appreciation right, restricted stock, phantom stock, incentive, deferred compensation, retiree medical, disability or life

insurance, cafeteria benefit, dependent care, disability, director or employee loan, fringe benefit, sabbatical, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance or other contracts or agreements (whether legally enforceable or not, whether formal or informal and whether in writing or not) to which the Company is a party, with respect to which the Company has any obligation or which are maintained, contributed to or sponsored by the Company for the benefit of any current or former employee, officer or director of the Company, (ii) each employee benefit plan for which the Company could incur liability under Section 4069 of ERISA in the event such plan has been or were to be terminated, (iii) any plan in respect of which the Company could incur liability under Section 4212(c) of ERISA, and (iv) any employment agreements, offer letters or other contracts, arrangements or understandings between the Company and any employee of the Company (whether legally enforceable or not, whether formal or informal and whether in writing or not) including, without limitation, any contracts, arrangements or understandings relating to a sale of the Company (each, a “ Company Plan ,” and collectively, the “ Company Plans ”). The Company has no express or implied commitment, whether legally enforceable or not, (x) to create, incur liability with respect to, or cause to exist, any other employee benefit plan, program or arrangement, (y) to enter into any contract or agreement to provide compensation or benefits to any individual, or (z) to modify, change or terminate any Company Plan, other than with respect to a modification, change or termination required by ERISA or the Code.

(b) Each Company Plan is in writing and the Company has furnished Parent with a true and complete copy of each Company Plan (or a written summary where the Company Plan is not in writing) and a true and complete copy of each material document, if any, prepared in connection with each such Company Plan, including, without limitation, (i) a copy of each trust or other funding arrangement, (ii) each summary plan description and summary of material modifications, (iii) the three (3) most recent annual reports (Form 5500 series and all schedules and financial statements attached thereto), if any, required under ERISA or the Code in connection with each Company Plan, (iv) the most recently received Internal Revenue Service determination letter for each Company Plan intended to qualify under ERISA or the Code, (v) the most recently prepared actuarial report and financial statement in connection with each such Company Plan, (vi) any correspondence with the Internal Revenue Service or the Department of Labor with respect to each such Company Plan and (vii) each form of notice of grant and stock option agreement used to document Company Options.

(c) Neither the Company nor any ERISA Affiliate has ever maintained or contributed to a plan subject to Title IV of ERISA. Each Company Plan is subject only to the Laws of the United States or a political subdivision thereof.

(d) Except for benefits paid as a result of the termination of the Company’s 401(k) Plan as set forth in Section 6.1 hereof, none of the Company Plans provides for the payment of separation, severance, termination or similar benefits to any person or obligates the Company to pay separation, severance, termination or similar-type benefits solely or partially as a result of any transaction contemplated by this Agreement or as a result of a “change in ownership or control,” within the meaning of such term under Section 280G of the Code. Except for benefits paid as a result of the termination of the Company’s 401(k) Plan as set forth in Section 6.1 hereof, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, either alone or together with another event, will (i) result in any payment (including, without limitation, severance, unemployment compensation, golden parachute, forgiveness of indebtedness or otherwise) becoming due under any Company Plan, whether or not such payment is contingent, (ii) increase any benefits otherwise payable under any Company Plan or other arrangement, (iii) result in the acceleration of the time of payment, vesting or funding of any benefits including, but not limited to, the acceleration of the vesting and exercisability of any Company Option, whether or not contingent, or (iv) affect in any material respects any Company Plan’s current treatment under any Laws including any Tax or social contribution Law. No

Company Plan provides, or reflects or represents any liability to provide, retiree health, disability, or life insurance benefits to any person for any reason, except as may be required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), or other applicable statute, and the Company has never represented, promised or contracted (whether in oral or written form) to any employee (either individually or to employees as a group) or any other person that such employee or other person would be provided with retiree health, disability, or life insurance benefits, except to the extent required by statute.

(e) Each Company Plan is now and always has been operated in all material respects in accordance with its terms and the requirements of all applicable Laws, regulations and rules promulgated thereunder including, without limitation, ERISA and the Code. The Company has performed all obligations required to be performed by it under, is not in any respect in default under or in violation of, and has no knowledge of any default or violation by any party to, any Company Plan. No action, claim or proceeding is pending or, to the knowledge of the Company, threatened with respect to any Company Plan (other than claims for benefits in the ordinary course) and no fact or event exists that could give rise to any such action, claim or proceeding. Neither the Company is nor any person that is a member of the same controlled group as the Company or under common control with the Company within the meaning of Section 414 of the Code (each, a “ Company ERISA Affiliate ”) is subject to any penalty or Tax with respect to any Company Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code. Each Company Plan can be amended, terminated or otherwise discontinued at any time without material liability to Parent, the Company or any of their respective ERISA Affiliates (other than ordinary administration expenses). Neither the Company nor any affiliate has, prior to the Effective Time and in any material respect, violated any of the health care continuation requirements of COBRA, the requirements of the Family Medical Leave Act of 1993, the requirements of the Health Insurance Portability and Accountability Act of 1996, the requirements of the Women’s Health and Cancer Rights Act of 1998, the requirements of the Newborns’ and Mothers’ Health Protection Act of 1996, or any amendment to each such act, or any similar provisions of state Law applicable to its employees.

(f) Each Company Plan intended to qualify under Section 401(a) or Section 401(k) of the Code and each trust intended to qualify under Section 501(a) of the Code (i) has received a favorable determination, opinion, notification or advisory letter from the Internal Revenue Service with respect to each such Company Plan as to its qualified status under the Code, including all amendments to the Code effected by the Tax Reform Act of 1986 and subsequent legislation, and no fact or event has occurred since the date of such determination letter or letters from the Internal Revenue Service to adversely affect the qualified status of any such Company Plan or the exempt status of any such trust, or (ii) has remaining a period of time under applicable Treasury regulations or Internal Revenue Service pronouncements in which to apply for such a letter and make any amendments necessary to obtain a favorable determination as to the qualified status of each such Company Plan.

(g) All contributions, premiums or payments required to be made or accrued with respect to any Company Plan have been made on or before their due dates. All such contributions have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any Governmental Entity and no fact or event exists which could give rise to any such challenge or disallowance.

(h) The Company is not a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or in the Company’s business, and currently there are no organizational campaigns, petitions or other unionization activities seeking recognition of a collective bargaining unit that could affect the Company. In addition: (i) there are no controversies, strikes, slowdowns or work stoppages pending or, to the best knowledge of the Company

after due inquiry, threatened between the Company and any of its employees, and the Company has not experienced any such controversy, strike, slowdown or work stoppage within the past three years; (ii) the Company is currently in compliance with all applicable Laws relating to the employment of labor, including those related to wages, hours, worker classification (including the proper classification of independent contractors and consultants), collective bargaining, workers’ compensation and the payment and withholding of Taxes and other sums as required by the appropriate Governmental Entity and has withheld and paid to the appropriate Governmental Entity or is holding for payment not yet due to such Governmental Entity all amounts required to be withheld from employees of the Company and is not liable for any arrears of wages, Taxes, penalties or other sums for failure to comply with any of the foregoing; (iii) the Company has paid in full to all employees or adequately accrued for in accordance with U.S. GAAP consistently applied all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees; (iv) there is no claim with respect to payment of wages, salary, overtime pay, workers compensation benefits or disability benefits that has been asserted or threatened against the Company or that is now pending before any Governmental Entity with respect to any person currently or formerly employed by the Company; (v) the Company is not a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Entity relating to employees or employment practices; (vi) the Company is in compliance with all Laws and regulations relating to occupational safety and health Laws and regulations, and there is no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted or is now pending or threatened with respect to the Company; (vii) the Company is in compliance with all Laws and regulations relating to discrimination in employment, and there is no charge of discrimination in employment or employment practices for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which has been asserted or, to the knowledge of the Company, threatened against the Company or that is now pending before the United States Equal Employment Opportunity Commission or any other Governmental Entity; and (viii) each employee of the Company who is located in the United States and is not a United States citizen has all approvals, authorizations and papers necessary to work in the United States in accordance with applicable Law.

(i) Section 3.11(i) of the Company Disclosure Schedule contains a true and complete list of (i) all individuals who serve as employees of or consultants to the Company as of the date hereof, (ii) in the case of such employees, the position and base compensation payable to each such individual, and (iii) in the case of each such consultant, the consulting rate payable to such individual.

(j) To the Company’s knowledge, no employee of or consultant to the Company has been injured in the workplace or in the course of his or her employment or consultancy, except for injuries which are covered by insurance or for which a claim has been made under worker’s compensation or similar Laws.

3.12 Contracts .

(a) The Company has provided to Parent true and correct copies of all of the following written or oral contracts and agreements of the Company (such contracts and agreements being the “ Company Material Contracts ”):

(i) each contract and agreement for the purchase or lease of personal property with any supplier or for the furnishing of services to the Company with payments greater than $25,000 per year;

(ii) all broker, exclusive dealing or exclusivity, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing, consulting

and advertising contracts and agreements to which the Company is a party or any other contract that compensates any person based on any sales by the Company;

(iii) all leases and subleases of real property;

(iv) all contracts and agreements relating to indebtedness other than trade indebtedness of the Company, including any contracts and agreements in which the Company is a guarantor of indebtedness;

(v) all contracts and agreements with any Governmental Entity to which the Company is a party;

(vi) all contracts and agreements that limit or purport to limit the ability of the Company to compete in any line of business or with any person or in any geographic area or during any period of time;

(vii) all contracts containing confidentiality requirements (including all nondisclosure agreements);

(viii) all contracts and agreements between or among the Company and any shareholder of the Company or any affiliate of such person;

(ix) all contracts and agreements relating to the voting and any rights or obligations of a shareholder of the Company;

(x) all contracts to manufacture for, supply to or license or distribute to any third party any products or components;

(xi) all contracts regarding the acquisition, issuance or transfer of any securities and each contract affecting or dealing with any securities of the Company, including, without limitation, any restricted stock agreements or escrow agreements;

(xii) all contracts providing for indemnification of any officer, director, employee or agent of the Company;

(xiii) all contracts related to or regarding the performance of consulting, advisory or other services or work of any type by any third party;

(xiv) all other contracts that have a term of more than 60 days and that may not be terminated by the Company, without penalty, within 30 days after the delivery of a termination notice by the Company;

(xv) any agreement of the Company that is terminable upon or prohibits assignment or a change of ownership or control of the Company, or is silent as to whether consent is required upon assignment or upon a change of ownership or control of the Company;

(xvi) all other contracts and agreements, whether or not made in the ordinary course of business, that contemplate an exchange of consideration with an aggregate value greater than $25,000; and

(xvii) any agreement of guarantee, assumption or endorsement of, or any similar commitment with respect to, the obligations, liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness of any person other than software licenses or professional services contracts entered into in the ordinary course of business.

(b) Each Company Material Contract (i) is valid and binding on the Company and, to the knowledge of the Company, on the other parties thereto, and is in full force and effect, and (ii) subject to restrictions on assignment of the Material Contracts described in Section 3.12(b) of the Company Disclosure Schedule, upon consummation of the transactions contemplated by this Agreement, shall continue in full force and effect without penalty or other adverse consequence. The Company is not in breach or violation of, or default under, any Company Material Contract with a retailer (a “Retailer Company Material Contract”) and, to the knowledge of the Company, no other party to any Retailer Company Material Contract is in breach or violation thereof or default thereunder. The Company is not in material breach or material violation of, or material default under, any non-Retailer Company Material Contract and, to the knowledge of the Company, no other party to any non-Retailer Company Material Contract is in material breach or material violation thereof or material default thereunder

(c) Except as set forth in Section 3.12(c) of the Company Disclosure Schedule, to the Company’s knowledge, 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, (i) result in a breach or violation of, or default under, any Retailer Company Material Contract, (ii) result in a material breach or material violation of, or material default under, any non-Retailer Company Material Contract, (iii) give any entity the right to declare a default, seek damages or exercise any other remedy under any Company Material Contract, (iv) give any entity the right to accelerate the maturity or performance of any Company Material Contract or (v) give any entity the right to cancel, terminate or modify any Company Material Contract.

3.13 Environmental Matters .

(a) To the Company’s knowledge, the Company (i) is in compliance with all applicable Environmental Laws (as defined below), (ii) holds all Environmental Permits (as defined below) necessary to conduct the Company’s business and (iii) is in material compliance with its Environmental Permits.

(b) The Company has not released Hazardous Materials (as defined below) on any real property owned or leased by the Company or, during their ownership or occupancy of such property, on any property formerly owned or leased by the Company, in violation of Environmental Laws in effect as of the date of this Agreement.

(c) The Company has received no written request for information, or been notified that it is a potentially responsible party, under CERCLA (as defined below) or any similar Law of any state, locality or any other jurisdiction. The Company has not entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and, to the knowledge of the Company, no investigation, litigation or other proceeding is pending or threatened in writing with respect thereto.

(d) To the knowledge of the Company, none of the real property currently or formerly owned or leased by the Company is listed or, to the knowledge of the Company, proposed to be listed on the “National Priorities List” under CERCLA, as updated through the date of this Agreement, or any similar list of sites in the United States or any other jurisdiction requiring investigation or cleanup.

For purposes of this Agreement:

“ CERCLA ” means the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended as of the date hereof.

“ Environmental Laws ” means any Federal, state or local statute, law, ordinance, regulation, rule, code or order of the United States, or any other jurisdiction and any enforceable judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to pollution or protection of the environment or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials, as in effect as of the date of this Agreement.

“ Environmental Permits ” means any permit, approval, identification number, license and other authorization required under any applicable Environmental Law.

“ Hazardous Materials ” means (i) any petroleum, petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical, material or substance defined or regulated as toxic or hazardous or as a pollutant or contaminant or waste under any applicable Environmental Law.

3.14 Intellectual Property .

(a) The Company owns or has a license to, and in any event possesses sufficient and legally enforceable rights with respect to, all Company Intellectual Property (as defined below) relevant to its business, as presently conducted, or necessary to conduct any such business without any conflict with or infringement or misappropriation of any rights or property of any person (“ Infringement ”), except for such items as have yet to be conceived or developed or that may reasonably be expected to be available for licensing on reasonable terms from third parties. Such ownership, licenses and rights are exclusive (A) except with respect to Inventions (as defined below) in the public domain that are not important differentiators of the Company’s business as currently conducted and as proposed to be conducted by the Company and (B) except with respect to standard, generally commercially available, “off-the-shelf” third party products. “ Intellectual Property ” means (i) inventions (whether or not patentable); trade names, trade and service marks, logos, domains, URLs, websites, addresses and other designations (“ Marks ”); works of authorship; mask works; data; technology, know-how, trade secrets, ideas and information; designs; formulas; algorithms; processes; methods; schematics; computer software (in source code and/or object code form); and all other intellectual property of any sort (“ Inventions ”) and (ii) patent rights; Mark rights; copyrights; mask work rights; sui generis database rights; trade secret rights; and all other intellectual and industrial property rights of any sort throughout the world, and all applications, registrations, issuances and the like with respect thereto (“ IP Rights ”). “ Company Intellectual Property ” means all Intellectual Property that is used, exercised, or exploited (“ Used ”) or is proposed by the Company to be used in any business of the Company, or that may be necessary to conduct any such business as presently conducted and as proposed to be conducted by the Company. All copyrightable matter within Company Intellectual Property that is relevant to the Company has been created by persons who were employees of the Company at the time of creation and no third party has or will have “moral rights” or rights to terminate any assignment or license with respect thereto.

(b) To the extent included in Company Intellectual Property, Section 3.14(b) of the Company Disclosure Schedule lists (by name, number, jurisdiction and owner) all patents and patent applications; all registered and unregistered Marks; and all registered copyrights. All the foregoing (i) are valid, enforceable and subsisting, and (ii) along with all related filings, registrations and correspondence, have been provided to Parent. No cancellation, termination, expiration or abandonment

of any of the foregoing (except natural expiration or termination at the end of the full possible term, including extensions and renewals) is anticipated by the Company. The Company has no knowledge of any material questions or challenges (or any potential basis therefor) with respect to the patentability or validity of any claims of any of the foregoing patents or patent applications or the validity (or any other aspect or status) of any such IP Rights.

(c) Section 3.14(c) of the Company Disclosure Schedule lists: (i) all licenses, sublicenses and other agreements to which the Company is a party (or by which it or any Company Intellectual Property is bound or subject) and pursuant to which any person has been or may be assigned, authorized to Use, granted any lien or encumbrance regarding, or given access to any Company Intellectual Property. The Company has not entered into any agreement to indemnify, hold harmless or defend any other person with respect to any assertion of Infringement, other than indemnification provisions contained in standard forms of customer service or license agreements.

(d) To the Company’s knowledge, no event or circumstance has occurred, exists or is contemplated (including, without limitation, the authorization, execution or delivery of this Agreement or the consummation of any of the transactions contemplated hereby) that (with or without notice or the lapse of time) could reasonably be expected to result in (i) the breach or violation of any license, sublicense or other agreement required to be listed in Section 3.14 of the Company Disclosure Schedule (or specifically exempted in Section 3.14 from being listed), (ii) the loss or expiration of any material right or option by the Company (or the gain thereof by any third party) under any such license, sublicense or other agreement, or (iii) except as otherwise set forth in those agreements listed in Section 3.14(d) of the Company Disclosure Schedules, the release, disclosure or delivery to any third party of any part of the source code of the Company’s products (“ Company Source Materials ”). Further, the Company makes all the same representations and warranties with respect to each license, sublicense and agreement listed on Section 3.14 of the Company Disclosure Schedule as are made with respect to the Company Material Contracts elsewhere in this Agreement.

(e) There is, to the knowledge of the Company, no unauthorized Use, disclosure, or Infringement of any Company Intellectual Property by any third party, including, without limitation, any employee or former employee of the Company or any of its Subsidiaries. The Company has not brought or threatened any action, suit or proceeding against any third party for any Infringement of any Company Intellectual Property or any breach of any license, sublicense or agreement involving Company Intellectual Property.

(f) The Company has taken all reasonable steps to protect and preserve the confidentiality of all Company Intellectual Property not otherwise disclosed in published patents or patent applications or registered copyrights (“ Company Confidential Information ”). All use by and disclosure to employees or others of Company Confidential Information has been pursuant to the terms of valid and binding written confidentiality and nonuse/restricted-use agreements or agreements that contain similar obligations. The Company has not disclosed or delivered to any third party, or permitted the disclosure or delivery to any escrow agent or other third party, any part of the Company Source Materials.

(g) Each current and former employee and contractor of the Company has executed and delivered (and to the Company’s knowledge, is in compliance with) an agreement in substantially the form of the Company’s standard Proprietary Information and Inventions Agreement (in the case of an employee) or Consulting Agreement (in the case of a contractor) (which agreements provide valid written assignments to the Company of all title and rights to any Company Intellectual Property conceived or developed thereunder but not already owned by the Company by operation of Law).

(h) The Company has not received any communication alleging or suggesting that or questioning whether the Company has been or may be (whether in its past, current or proposed business or otherwise) engaged in, liable for or contributing to any Infringement, nor does the Company have any particular reason to expect that any such communication will be forthcoming.

(i) To the Company’s knowledge, none of its employees or contractors is obligated under any agreement, commitment, judgment, decree, order or otherwise (an “ Employee Obligation ”) that would interfere with the use of his or her best efforts to promote the interests of the Company or that would conflict with any of their businesses as conducted or proposed to be conducted. Neither the execution nor delivery of this Agreement nor the conduct of the Company’s business as conducted or proposed to be conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any Employee Obligation. To the Company’s knowledge, the Company is not Using, and it will not be necessary to Use, (i) any Inventions of any of their past or present employees or contractors (or people currently intended to be hired) made prior to their employment by the Company, or (ii) any confidential information or trade secret of any former employer of any such person.

(j) To its knowledge, all Company Software is free of all viruses, worms, trojan horses and other material known infections or harmful routines and does not contain any bugs, errors, or problems of a material nature that, to the Company’s knowledge, would disrupt its operation or have a material adverse impact on the operation of other software programs or operating systems. “ Company Software ” means software, programs, databases and related documentation, in any form (including Internet sites, Internet content and links) that is (i) material to the operation of the business of the Company, including, but not limited to, that operated by the Company on its web sites or used by the Company in connection with processing customer orders, storing customer information, or storing or archiving data, or (ii) manufactured, distributed, sold, licensed or marketed by the Company.

(k) The Company has obtained all approvals and agreements necessary or appropriate (including, without limitation, assurances from customers regarding further export) for exporting any Company Intellectual Property outside the United States and importing any Company Intellectual Property into any country in which they are or have been disclosed, sold or licensed for Use, and all such export and import approvals in the United States and throughout the world are valid, current, outstanding and in full force and effect.

3.15 Taxes .

(a) All Tax (as defined below) returns, statements, reports, declarations and other forms and documents (including without limitation estimated Tax returns and reports and material information returns and reports) required to be filed with any Tax Authority (as defined below) with respect to any Taxable (as defined below) period ending on or before the Closing (collectively, “ Tax Returns ” and individually, a “ Tax Return ”), by or on behalf of the Company, have been or will be completed and filed when due (including any extensions of such due date). Except to the extent that a reserve for Taxes has been established on the Company Reference Balance Sheet, all such Returns are true, complete and correct and were prepared in substantial compliance with all applicable Laws. Company has paid all Taxes due and owing (whether or not shown on any Tax Return) for all periods through the August 31, 2006, except to the extent reserves for Taxes have been established on the Company Reference Balance Sheet. The Company Interim Financial Statements (i) fully accrue all actual and contingent liabilities for Taxes (as defined below) with respect to all periods through August 31, 2006, and the Company has not and will not incur any Tax liability in excess of the amount reflected (excluding any amount thereof that reflects timing differences between the recognition of income for purposes of U.S. GAAP and for Tax purposes) on the Reference Balance Sheet included in the Company

Interim Financial Statements with respect to such periods, and (ii) properly accrues in accordance with U.S. GAAP all material liabilities for Taxes payable after August 31, 2006, with respect to all transactions and events occurring on or prior to such date. All information set forth in the notes to the Company Interim Financial Statements relating to Tax matters is true, complete and accurate in all material respects. The Company has not incurred any material Tax liability since August 31, 2006 other than in the ordinary course of business and the Company has made adequate provisions for all Taxes since that date in accordance with U.S. GAAP on at least a quarterly basis.

(b) The Company has withheld and paid to the applicable financial institution or Tax Authority all amounts required to be withheld. To the knowledge of the Company, no Tax Returns filed with respect to Taxable years through the Taxable year ended December 31, 2005, in the case of the United States, have been examined and closed. The Company (or any member of any affiliated or combined group of which the Company has been a member) has not granted any extension or waiver of the limitation period applicable to any Tax Returns that is still in effect and there is no material claim, audit, action, suit, proceeding, or (to the knowledge of the Company) investigation now pending or threatened against or with respect to the Company in respect of any Tax or assessment. No notice of deficiency or similar document of any Tax Authority has been received by the Company, and there are no liabilities for Taxes (including liabilities for interest, additions to Tax and penalties thereon and related expenses) with respect to the issues that have been raised (and are currently pending) by any Tax Authority that could, if determined adversely to the Company, materially and adversely affect the liability of the Company for Taxes. There are no Liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company. The Company has never been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code. The Company is in full compliance with all the terms and conditions of any Tax exemption or other Tax-sharing agreement or order of a foreign government, and the consummation of the Merger will not have any adverse effect on the continued validity and effectiveness of any such Tax exemption or other Tax-sharing agreement or order. None of the assets of the Company directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code. None of the assets of the Company is “tax-exempt use property” within the meaning of Section 168(h) of the Code. The Company has not made and will not make a deemed dividend election under Treas. Reg. §1.1502-32(f)(2) or a consent dividend election under Section 565 of the Code. The Company has never been a party (either as a distributing corporation, a distributed corporation or otherwise) to any transaction intended to qualify under Section 355 of the Code or any corresponding provision of state Law. The Company has not participated in (and will not participate in) an international boycott within the meaning of Section 999 of the Code. No Company Shareholder is other than a United States person within the meaning of the Code. The Company does not have and has not had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country and the Company has not engaged in a trade or business within any foreign country. The Company has never elected to be treated as an S-corporation under Section 1362 of the Code or any corresponding provision of Federal or state Law. All material elections with respect to the Company’s Taxes made during the fiscal years ending December 31, 2003, 2004 and 2005, are reflected on the Tax Returns for such periods, copies of which have been provided to Parent. After the date of this Agreement, no material election with respect to Taxes will be made without the prior written consent of Parent, which consent will not be unreasonably withheld or delayed. The Company is not party to any joint venture, partnership, or other arrangement or contract which could be treated as a partnership for Federal income tax purposes. The Company is not currently and never has been subject to the reporting requirements of Section 6038A of the Code. There is no agreement, contract or arrangement to which the Company is a party that could, individually or collectively, result in the payment of any amount that would not be deductible by reason of Sections 280G (as determined without regard to Section 280G(b)(4)), 162 (other than 162(a)) or 404 of the Code. The Company is not a party to or bound by any Tax indemnity, Tax sharing or Tax allocation agreement (whether written or unwritten or arising under operation of Federal Law as a result of being a member of

a group filing consolidated Tax Returns, under operation of certain state Laws as a result of being a member of a unitary group, or under comparable Laws of other states or foreign jurisdictions) that includes a party other than the Company nor does the Company owe any amount under any such agreement. The Company has previously provided or made available to Parent true and correct copies of all income, franchise, and sales Tax Returns, and, as reasonably requested by Parent, prior to or following the date hereof, presently existing information statements and reports. The Company is not, and has not been, a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Other than by reason of the Merger, the Company has not been and will not be required to include any material adjustment in Taxable income for any Tax period (or portion thereof) pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax Laws as a result of transactions, events or accounting methods employed prior to the Merger.

(c) For purposes of this Agreement, the following terms have the following meanings: “ Tax ” (and, with correlative meaning, “ Taxes ” and “ Taxable ”) means any and all taxes including, without limitation, (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, value added, net worth, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Entity responsible for the imposition of any such tax (domestic or foreign) (a “ Tax Authority ”), (ii) any liability for the payment of any amounts of the type described in (i) as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period or as the result of being a transferee or successor thereof and (iii) any liability for the payment of any amounts of the type described in (i) or (ii) as a result of any express or implied obligation to indemnify any other person. As used in this Section 3.15, the term “Company” means the Company and any entity included in, or required under U.S. GAAP to be included in, any of the Company Audited Financial Statements or the Company Interim Financial Statements.

(d) 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 has not consummated or participated in, and is not currently participating in, any transaction which was or is a “Tax shelter” transaction as defined in Section 6662, 6011, 6111 or 6112 of the Code, the Regulations or other published guidance from the Internal Revenue Service.

3.16 Vote Required . The only votes of the holders of any classes or series of capital stock of the Company necessary to approve and adopt this Agreement, the Merger and the other transactions contemplated by this Agreement are the affirmative vote of the holders of at least a majority of the outstanding shares of the Company Common Stock, Company Series A Preferred Stock and Company Series A1 Preferred Stock, voting as separate classes, in favor of the approval and adoption of this Agreement and the Merger, and at least seventy five percent (75%) of all outstanding shares of the Company Common Stock, Company Series A Preferred Stock and Company Series A1 Preferred Stock voting together as a single class.

3.17 Assets; Absence of Liens and Encumbrances . Except as set forth in Section 3.17 of the Company Disclosure Schedule, the Company owns, leases or has the legal right to use all of the material assets, properties and rights of every kind, nature, character and description, including, without limitation, real property and personal property (other than Intellectual Property, which is covered by Section 3.14 hereof), used or intended to be used in the conduct of the business of the Company or otherwise owned or leased by the Company and, with respect to contract rights, is a party to and enjoys

the right to the benefits of all material contracts, agreements and other arrangements used or intended to be used by the Company in or relating to the conduct of the business of the Company (all such properties, assets and contract rights being the “ Company Assets ”). The Company has good and marketable title to, or, in the case of leased or subleased Company Assets, valid and subsisting leasehold interests in, all the Company Assets, free and clear of all mortgages, liens, pledges, charges, claims, defects of title, restrictions, infringements, security interests or encumbrances of any kind or character (“ Liens ”) except for (x) Liens for current Taxes not yet due and payable, and (y) Liens that have arisen in the ordinary course of business and that do not, individually or in the aggregate, materially detract from the value, or materially interfere with the present or contemplated use, of the Company Assets subject thereto or affected thereby. The equipment of the Company used in the operations of their business is, taken as a whole, in good operating condition and repair, ordinary wear and tear excepted.

3.18 Owned Real Property . The Company does not own any real property.

3.19 Certain Interests .

(a) No officer or director of the Company and, to the knowledge of the Company, no immediate relative or spouse (or immediate relative of such spouse) who resides with, or is a dependent of, any such officer or director and to the knowledge of the Company, no holder of greater than 1% of the voting power of the Company or its affiliates:

(i) has any direct or indirect financial interest in any creditor, competitor, supplier manufacturer, agent, representative, distributor or customer of the Company; provided , however , that the ownership of securities representing no more than 1% of the outstanding voting power of any creditor, competitor, supplier manufacturer, agent, representative, distributor or customer, and which are listed on any national securities exchange or traded actively in the national over-the-counter market, shall not be deemed to be a “financial interest” as long as the person owning such securities has no other connection or relationship with such creditor, competitor, supplier manufacturer, agent, representative, distributor or customer;

(ii) owns, directly or indirectly, in whole or in part, or has any other interest in, any tangible or intangible property that the Company uses in the conduct of its business (except for any such ownership or interest resulting from the ownership of securities in a public company);

(iii) has any claim or cause of action against the Company; or

(iv) has any outstanding indebtedness to the Company.

(b) Except for the payment of employee compensation in the ordinary course of business, consistent with past practice, and except as described in Section 3.19(b) of the Company Disclosure Schedule, the Company has no liability or any other obligation of any nature whatsoever to any Company Shareholder or an

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