AGREEMENT AND PLAN OF MERGER, DATED JANUARY 12, 2007

Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

SYNOVA HEALTHCARE GROUP, INC.,

SYNOVA 2006 ACQUISITION CORP.,

ALLENDALE PHARMACEUTICALS, INC.

AND

GALT INDUSTRIES, INC., GENE DETROYER AND ROBERT STAAB

JANUARY 12, 2007

THIS IS NOT A CONTRACT, OR AN OFFER FOR A CONTRACT; NOR DOES SYNOVA HEALTHCARE GROUP, INC. ACCEPT AN OFFER FOR A CONTRACT OR MEMORIALIZE ANY AGREEMENT BETWEEN THE PARTIES. NO AGREEMENT, ORAL OR WRITTEN, REGARDING OR RELATING TO ANY OF THE MATTERS COVERED BY THIS DRAFT, OTHER THAN AS SPECIFIED IN THE LETTER OF SYNOVA HEALTHCARE GROUP, INC. DATED JUNE 23, 2006, HAS BEEN ENTERED INTO BETWEEN THE PARTIES. THIS DOCUMENT, IN ITS PRESENT FORM OR AS IT MAY BE HEREAFTER REVISED BY ANY PARTY, WILL NOT BECOME THE AGREEMENT OF THE PARTIES UNTIL, WITH ALL EXHIBITS AND SCHEDULES ATTACHED BY THE PARTIES, IT HAS BEEN SIGNED BY ALL PARTIES AND THE COMPLETE SIGNED COPIES HAVE BEEN EXCHANGED.

 

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

 

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INDEX OF DEFINED TERMS

 

 

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INDEX OF DEFINED TERMS

 

 

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of January 12, 2007 (this “ Agreement ”), is by and among Synova Healthcare Group, Inc ., a Nevada corporation (“ Parent ”) , Allendale Pharmaceuticals, Inc . , a Delaware corporation (the “ Company ”), Synova 2006 Acquisition Corp ., a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), and, for certain limited purposes, Gene Detroyer, an individual residing at 357 East 57 ^th Street, Apt. 14B, New York, NY 10022 (“Detroyer”) and Robert Staab, an individual residing at 30 Neck Road, Old Lyne, CT 06372 (“Staab”), and Galt Industries, Inc. a Delaware corporation with offices located at 655 Madison Avenue, 24 ^th Floor, New York, NY 16021 (“Galt” and together with Detroyer and Staab, collectively, the “Stockholders”).

BACKGROUND

A. The board of directors of each of the Company, Parent and Merger Sub have determined that the Merger (as defined in Section 1.1) would be advisable and in the best interests of the stockholders of their respective companies, and have approved this Agreement and the Merger contemplated by this Agreement, subject to the terms and conditions set forth in this Agreement.

B. Concurrent with the execution and delivery of this Agreement, stockholders of the Company holding sufficient Company Common Stock (as defined in Section 1.4), to approve this Agreement and the Merger, have executed the action by written consent attached to this Agreement as Exhibit A (the “ Company Stockholders Written Consent ”) approving and adopting this Agreement and approving the Merger.

C. Capitalized terms used in this Agreement and not otherwise defined in context have the meanings ascribed to such terms in Section 8.4 of this Agreement.

AGREEMENT

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

ARTICLE 1 THE MERGER

1.1 The Merger . Upon the terms and subject to the conditions in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), Merger Sub shall be merged with and into the Company (the “ Merger ”) at the effective time of the Merger (the “ Effective Time ”), which shall be as set forth in the certificate of merger, substantially in the form of Exhibit B (the “ Certificate of Merger ”), to be filed with the Secretary of State of the State of Delaware (the “ Delaware Secretary ”) if, as and when the Closing occurs. The Company shall be the surviving corporation (sometimes referred to as the “ Surviving Corporation ”) in the Merger and shall succeed to and assume all the rights and obligations of Merger Sub in accordance with the DGCL.

1.2 Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place concurrently with the Effective Time upon the later of: (a) January 12, 2007, or

(b) five business days after the satisfaction or waiver of each of the conditions set forth in ARTICLE 5 or at such other time as the parties agree in writing. The Closing shall take place at the offices of Blank Rome LLP, One Logan Square, Philadelphia, Pennsylvania or at such other location as the parties agree. The date on which the Closing actually occurs is herein referred to as the “ Closing Date .”

1.3 Effects of the Merger .

(a) At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL.

(b) At the Effective Time, the certificate of incorporation of the Company shall be amended such that the certificate of incorporation shall be the certificate of incorporation attached to the Certificate of Merger, until thereafter amended as provided by the DGCL and such certificate of incorporation.

(c) At the Effective Time, the bylaws of the Company shall be amended such that the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation until thereafter amended as provided by the DGCL, the certificate of incorporation of the Surviving Corporation and such bylaws.

(d) At the Effective Time, the directors and officers of Merger Sub, as constituted immediately prior to the Effective Time, shall be the directors and officers of the Surviving Corporation, for so long as provided under DGCL, the certificate of incorporation of the Surviving Corporation and the bylaws of the Surviving Corporation.

(e) It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”) and that this Agreement shall constitute a plan of reorganization within the meaning of Treasury Regulation Section 1.368-2(g) and 1.368-3(a).

1.4 Merger Consideration . Parent shall deliver the aggregate merger consideration (the “ Merger Consideration ”) consisting of: (i) shares of unregistered Parent Common Stock (subject to adjustment as provided in this Section 1.4) (the “ Common Stock Consideration ”) , in an aggregate amount equal to (A )Fifteen Million (15,000,000) less (B) the number of shares of Parent Common Stock, which, the Nonaccredited Stockholders would be entitled to receive but for the provisions of Section 1.6 (d) and (ii) the Cash Consideration. The Merger Consideration shall be allocated as provided in Section 1.6 below. If the components of Debt Limit exceed Five Million Dollars ($5,000,000) in the aggregate as of the Effective Time, then (without regard to the Indemnification Threshold) the number of shares of Parent Common Stock included in the Merger Consideration shall be reduced dollar for dollar, but without duplication, by the aggregate amount thereof in excess of Five Million Dollars ($5,000,000). If, between the date hereof and the Effective Time, (i) the shares of Parent Common Stock shall be changed (or Parent establishes a record date for changing such shares which is prior to the Effective Time) into a different number or class of shares by reason of any reclassification, recapitalization, split-up, combination, exchange of shares or readjustment, (ii) a stock dividend shall be declared (or Parent establishes a record date for such dividend which is prior to the

 

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Effective Time) in respect of Parent Common Stock, or (iii) any distribution is made (or Parent establishes a record date for such distribution which is prior to the Effective Time) in respect of Parent Common Stock other than a regular quarterly cash dividend consistent with past practice, proportionate adjustments shall be made to the Merger Consideration. For purposes of this Agreement, Cash Consideration shall mean an amount equal to the number of shares of Company Common Stock owned by Nonaccredited Stockholders (as defined in Section 1.6(d) below) multiplied by $1.00.

1.5 Additional Consideration . In order to induce the Stockholders to enter into the Escrow Agreement, deposit the Indemnity Escrow Shares with the Escrow Agent, and make the representations and warranties set forth in Section 2 hereof, Parent shall issue at Closing One Million (1,000,000) shares of unregistered Parent Common Stock (the “Additional Consideration”) to the Stockholders to be divided among such Stockholders as they shall determine.

1.6 Effect on Capital Stock . As of the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, Parent or the Company, the following shall occur:

(a) Each share of common stock of the Company, par value $.01 per share (the “ Company Common Stock ”) that is owned by the Company, Parent, Merger Sub or any of their respective subsidiaries shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.

(b) Each share of common stock of Merger Sub (the “ Merger Sub Common Stock ”) issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. Each certificate evidencing ownership of Merger Sub Common Stock shall evidence ownership of shares of common stock of the Surviving Corporation.

(c) Subject to the provision of Section 1.6(d) below, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 1.6(a) and Dissenting Shares (as defined in Section 1.9)) shall be converted into the right to receive and become exchangeable for: (i) a number of shares of Parent Common Stock determined by dividing the Common Stock Consideration (subject to adjustment as provided in Section 1.4) by the total number of issued and outstanding shares of Company Common Stock immediately prior to the Effective Time determined on a fully diluted basis, reserving for the exercise of all Company Options outstanding on the Effective Date. All such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate formerly representing any such shares of Company Common Stock (each a “Certificate ” and, collectively, the “ Certificates ”) shall cease to have any rights with respect thereto, except the right to receive a share of the Common Stock Consideration upon surrender of such Certificate as provided in this Agreement.

(d) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time that is owned by a Nonaccredited Stockholder shall be converted into the right to receive cash in an amount equal to the number of shares of Company

 

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Common Stock owned by such Nonaccredited Stockholder by $1.00. The Cash Consideration shall be paid solely to the Nonaccredited Stockholders. In no event, however, shall the Cash Consideration portion of the total Merger Consideration exceed twenty percent (20%) of the total Merger Consideration paid under this Agreement.

(e) Each option, warrant, or similar right to acquire stock of the Company (whether vested or unvested) (collectively, the “ Company Options ”) shall continue in accordance with its terms, entitling the holder thereof to acquire its pro rata share of the Merger Consideration upon the prior payment of the exercise price provided for in the Company Options. No consideration of any kind shall be payable by Parent or the Surviving Corporation on account of Company Options, none of which shall be assumed by Parent or the Surviving Corporation.

(f) Each share of preferred stock of the Company, if any, outstanding at the Effective Time shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.

1.7 Escrow Shares . To secure the indemnification obligations set forth in Article VII and any downward adjustment to the Merger Consideration permitted under Section 1.4, at the Closing, the Stockholders shall collectively deposit or cause to be deposited in escrow One Million (1,000,000) shares of Parent Common Stock to be received by such persons as a result of the Merger (the “ Indemnity Escrow Shares ”). Indemnity Escrow Shares shall be held and released in accordance with the terms and conditions of the Escrow Agreement to be entered into at the Closing between Parent, the Stockholder and the Escrow Agent, in substantially the form attached to this Agreement as Exhibit D (the “ Escrow Agreement ”).

1.8 Exchange of Certificates .

(a) At the Effective Time, Parent shall deposit with Island Stock Transfer, St. Petersburg, Florida (or any successor in the capacity as transfer agent for Parent Common Stock) (the “ Exchange Agent ”): (i) certificates for Parent Common Stock representing the Merger Consideration, other than Indemnity Escrow Shares which shall be deposited with the Escrow Agent pursuant to the Escrow Agreement, and (ii) the aggregate cash in lieu of fractional shares to be paid in accordance with Section 1.8(g) hereof (the “ Exchange Fund ”).

(b) At the Closing or as soon as reasonably practicable after the Closing, the Exchange Agent shall deliver or mail to each holder of record of Company Common Stock and Company Options immediately prior to the Effective Time (i) a letter of transmittal in the form approved by Parent (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in surrendering Certificates and Company Options in exchange for Merger Consideration. Upon surrender of a Certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly executed, the stock powers required to be delivered in accordance with the Escrow Agreement and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall receive in exchange therefor the Merger Consideration into which the shares formerly represented by such Certificate shall have been converted (net of the related Indemnity Escrow Shares) and the Certificate so surrendered

 

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shall be canceled. If any transfer of ownership of shares of Company Common Stock has not been registered in the Company’s transfer records, then payment may be made to a Person other than the Person in whose name the Certificate so surrendered is registered if (i) such Certificate is properly endorsed or otherwise in proper form for transfer and (ii) the Person requesting such transfer or payment shall pay any transfer or other Tax (as defined in Section 2.9(a)) required by reason of the payment to a Person other than the registered holder of such Certificate or establish to the satisfaction of Parent that such Tax has been paid or is not applicable. Upon the exercise of Company Options and tender to the Exchange Agent of the purchase price for such Company Options, together with a letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Company Options shall receive in exchange therefor the Merger Consideration into which the underlying shares formerly represented by such Company Options shall have been converted.

(c) The Merger Consideration delivered upon the surrender of Certificates in and Company Options accordance with the terms of this ARTICLE 1 shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock represented by such Certificates, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Exchange Agent for any reason, they shall be canceled and exchanged for payment as provided in this ARTICLE 1, except as otherwise provided by law.

(d) In the event any Certificate or Company Option shall have been lost, stolen or destroyed, then, upon the making of an affidavit of that fact by the Person claiming such Certificate or Company Option to be lost, stolen or destroyed and the posting by such Person of a bond in such amount as Parent or the Exchange Agent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration deliverable in respect thereof pursuant to this Agreement.

(e) Parent, the Surviving Corporation and the Exchange Agent shall be entitled to deduct and withhold from amounts otherwise payable in accordance with this Agreement to any former holder of shares of Company Common Stock such amounts as any of Parent, the Surviving Corporation or the Exchange Agent reasonably believes is required to be deducted and withheld with respect to the making of such payment under the Code or any provision of state, local or foreign Tax law, including any Taxes required to be withheld pursuant to Section 409A of the Code. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by the Parent, the Surviving Corporation or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by the Parent, the Surviving Corporation or the Exchange Agent.

(f) No dividends or other distributions declared after the Effective Time with respect to Parent Common Stock and payable to the holders of record thereof shall be paid to the holder of any unsurrendered Certificate until the holder thereof shall surrender such Certificate in accordance with this ARTICLE 1. After the surrender of a Certificate in accordance with this

 

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ARTICLE 1, the record holder thereof shall be entitled to receive any such dividends or other distributions, without interest thereon, which theretofore had become payable with respect to shares of Parent Common Stock represented by such Certificate. No interest will be paid or accrued on the cash in lieu of fractional shares or the unpaid dividends and distributions, if any, payable to holders of the Certificates.

(g) Notwithstanding anything to the contrary contained herein, no certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of the Company Stock Certificates or Company Options, no dividend or distribution with respect to Parent Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. In lieu of the issuance of any such fractional share, Parent shall pay to each former stockholder of the Company who otherwise would have been entitled to receive a fractional share of Parent Common Stock an amount in cash determined by multiplying (i) $1.00 by (ii) the fraction of a share of Parent Common Stock which such holder would otherwise have been entitled to receive pursuant to Section 1.6(c) hereof.

(h) Any portion of the Exchange Fund that remains unclaimed by the stockholders of the Company for eighteen (18) months after the Effective Time shall be delivered to Parent. Any stockholders of the Company or holders of Company Options who have not theretofore complied with this ARTICLE 1 or exercised rights under the Company Options shall thereafter look only to Parent for payment of the Merger Consideration and/or the unpaid dividends and distributions on the Parent Common Stock deliverable in respect of each share of the Company Common Stock that such stockholder held as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving Corporation, the Exchange Agent or any other person shall be liable to any former holder of shares of the Company Common Stock for any amount delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

1.9 Dissenting Shares .

(a) Notwithstanding anything in this Agreement to the contrary and unless otherwise provided by applicable law, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are owned by stockholders who have properly perfected their dissenter’s rights in accordance with the provisions of the DGCL (“ Dissenting Shares ”) shall not be converted into the right to receive the Merger Consideration, unless and until such stockholders shall have failed to perfect or shall have effectively withdrawn or lost their right of payment under the DGCL, but, instead, the holders thereof shall be entitled to payment of the fair value of such Dissenting Shares in accordance with the applicable provisions of the DGCL. If any such holder shall have failed to perfect or shall have effectively withdrawn or lost such dissenter’s rights, each share of Company Common Stock held by such stockholder shall thereupon be deemed to have been converted into the right to receive and become exchangeable for, as of the Effective Time, a share of the Merger Consideration as specified in Section 1.6(c).

(b) The Company shall give Parent (i) prompt notice of any notices or demands for appraisal filed in accordance with the DGCL received by the Company, withdrawals

 

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of such notices or demands for appraisal and any other instruments served in connection with such notices or demands in accordance with the DGCL and received by the Company or its representatives and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL consistent with the Company’s obligations thereunder. The Company shall not, except with the prior written consent of Parent, (i) voluntarily make any payment, admission or statement against interest with respect to any such demand, (ii) offer to settle or settle any such demand or (iii) waive any failure by a former Company stockholder to timely deliver a written notice or demand or other act perfecting appraisal rights in accordance with the DGCL.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As a material inducement to Parent and Merger Sub to enter into this Agreement and to consummate the transactions contemplated hereby, and understanding Parent and Merger Sub are relying thereon, subject to the exceptions set forth in the disclosure letter of the Company delivered concurrently with the execution of this Agreement (the “ Company Disclosure Letter ”) (which disclosures shall delineate the section or subsection to which they apply but shall also qualify such other sections or subsections in this ARTICLE 2 to the extent it is reasonably apparent on its face from a reading of the disclosure item that such disclosure is applicable to such other section or subsection and each of such exceptions shall be deemed to be representations and warranties hereunder), the Company and the Stockholders represent and warrant to Parent and Merger Sub as follows:

2.1 Organization, Standing and Power . The Company and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. The Company and each of its Subsidiaries has the corporate power to own its properties and to conduct its business as now being conducted and as currently proposed by it to be conducted and is duly qualified to do business and is in good standing in each jurisdiction where the failure to be so qualified and in good standing, individually or in the aggregate with any such other failures, could reasonably be expected to have a Material Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries is in violation of any of the provisions of its organizational documents. Other than the Persons listed in Section 2.1 of the Company Disclosure Letter , the Company does not directly or indirectly own (and has not directly or indirectly owned) any equity or similar interest in, or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any Person. Section 2.1 of the Company Disclosure Letter  sets forth a true, correct and complete list of each Subsidiary indicating (a) its officers and directors; (b) the record and beneficial owner of all of its issued and outstanding shares of capital stock; and (c) its jurisdiction of organization. All the outstanding capital stock of each Subsidiary is duly authorized, validly issued, fully paid and nonassessable. There are no options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which any Subsidiary is a party or by which it is bound obligating any Subsidiary to issue, deliver, sell, repurchase or redeem, or cause to be issued, sold, repurchased or redeemed, any shares of the capital stock of such Subsidiary or obligating such Subsidiary to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call right, commitment or agreement. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or other similar rights with respect to any Subsidiary.

 

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2.2 Capital Structure .

(a) The authorized capital stock of the Company consists of 6,666,667 shares of Company Common Stock, and 1,693,052 shares of preferred stock, par value $.01 per share (of which 1,692,752 shares have been designated Series A Convertible Preferred Stock and [300] shares have been designated Series TS Convertible Preferred Stock of which there are issued and outstanding 6,594,390 shares of Company Common Stock and no shares of preferred stock. There are no declared or accrued but unpaid dividends with respect to any shares of Company Common Stock. There are no other issued and outstanding shares of Company Common Stock. Section 2.2(a) of the Company Disclosure Letter sets forth a true, correct and complete list (with names and addresses) of all of the Company’s security holders, the number of shares, warrants, options or other rights owned and the total number of shares of Company Common Stock reserved for issuance and any Persons with rights to acquire Company securities including all holders of outstanding Company Options, the exercise or vesting schedule, exercise price, and tax status of any options under Section 422 of the Code. All issued and outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid and non-assessable and are free of any liens, charges, claims, encumbrances, preemptive rights, rights of first refusal and “put” or “call” rights created by statute, the Company’s organizational documents or any agreement to which the Company is a party or by which it is bound or of which it has knowledge except as set forth on Section 2.2(a) of the Company Disclosure Letter. Except as set forth on Section 2.10(a) of the Company Disclosure Letter , there are no Company Options or Contracts obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of any Company Common Stock and/or Company Options or obligating the Company to grant, extend, accelerate the vesting and/or waive any repurchase rights of, change the price of, or otherwise amend or enter into any Company Option. Except as set forth in Section 2(a) of the Company Disclosure Letter , there are no Contracts relating to voting, purchase or sale of any Company Common Stock (i) between or among the Company and any of its security holders, other than written contracts granting the Company the right to purchase unvested shares upon termination of employment or service, and (ii) to the Company’s knowledge, between or among any of the Company’s security holders. All outstanding the Company securities were issued in compliance with all applicable federal and state securities laws.

(b) Except as set forth in Section 2.2(b) of the Company Disclosure Letter , the Company has never adopted or maintained any stock option plan or other plan providing for equity compensation of any person. The Company has reserved 1,800,000 shares of Common Stock for issuance to upon the exercise of Company Options. Each Company Option was properly approved by the requisite corporate authority, and the exercise price of each such Company Option was set at the fair market value of the Company Common Stock on the date of grant of such Company Option. The Company’s stockholders have properly approved and the Company has properly reserved for issuance the shares of Company Common Stock issuable under each Company stock option plan.

 

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2.3 Authority; Noncontravention . The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and its stockholders. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms. The execution and delivery of this Agreement by the Company does not, and the consummation of the transactions contemplated hereby will not, (i) result in the creation of a lien on any properties or assets of the Company or any of its Subsidiaries or (ii) conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, renegotiation or acceleration of any obligation or loss of any benefit under, or require any consent, approval or waiver from any Person in accordance with, (A) any provision of the organizational documents of the Company or any of its Subsidiaries or (B) any Contract, instrument, permit, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or any of their respective properties or assets. No consent, approval, order or authorization of, or registration, declaration or filing with, any government, any court, tribunal, arbitrator, administrative agency, commission or other governmental official, authority or instrumentality, in each case whether domestic or foreign, any stock exchange or similar self-regulatory organization or any quasi-governmental or private body exercising any regulatory, taxing or other governmental or quasi-governmental authority (each a “ Governmental Entity ”) or third party is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for the filing of the Certificate of Merger.

2.4 Financial Statements . The Company has delivered to Parent (a) its audited consolidated financial statements as of and for the years ended December 31, 2005 and 2004, (b) (c) its unaudited consolidated financial statements as at and for the six month period ended June 30, 2006 (including, in each case, balance sheets, statements of operations and statements of cash flows) (collectively, the “ Financial Statements ”). The Financial Statements (a) have been prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) (except that the unaudited financial statements do not have notes thereto) applied on a consistent basis throughout the periods indicated, and (b) present fairly the consolidated financial condition and results of operations and cash flows of the Company and each of its Subsidiaries as of the dates, and for the periods, indicated therein (subject, in the case of interim period financial statements, to normal recurring year-end audit adjustments, none of which individually or in the aggregate are material). There has been no change in the Company accounting policies since December 31, 2005 (the “ Company Balance Sheet Date ”), except as described in the Financial Statements. [The Company has maintained an adequate system of internal controls established and administered in accordance with GAAP].

2.5 Absence of Certain Changes; Undisclosed Liabilities; Debt .

(a) Since the Company Balance Sheet Date, the Company and each of its Subsidiaries has conducted its business only in the ordinary course consistent with past practice and there has not occurred any event or events which have resulted in a Material Adverse Effect on the Company.

 

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(b) The Company’s liabilities, on a consolidated basis, for (i) accrued salaries for executive officers; (ii) commercial, bank, mortgage and shareholder notes and loans payable, and (iii) amounts owed on capitalized and non-capitalized leases, do not exceed Five Million Dollars ($5,000,000) in the aggregate.

(c) The Company’s liabilities for salaries, fees and other compensation for services rendered to the Company by employees or independent contractors (the “Compensation Fees”)is set forth on Section 2.5 to the Company’s Disclosure Letter.

(d) Neither the Company nor any of its Subsidiaries has any obligations or liabilities of any nature whether matured or unmatured, fixed or contingent (whether or not required to be reflected in the Financial Statements in accordance with GAAP) other than (i) those set forth or adequately provided for in the balance sheet included in the Financial Statements as of June 30, 2006 (the “ Interim Balance Sheet ”), and (ii) those incurred in the conduct of the Company’s business since the date of the Interim Balance Sheet in the ordinary course and consistently with past practice, which, individually or in the aggregate, are not material in nature or amount (none of which is a liability for breach of contract, tort, infringement, claim, lawsuit or breach of warranty).

2.6 Litigation . Except as set forth in Section 2.6 of the Company Disclosure Letter , there is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any Governmental Entity or arbitrator, or, to the knowledge of the Company or any of its Subsidiaries, threatened against the Company or any of its Subsidiaries or any of their respective assets or properties, including any Company Intellectual Property, or any of their respective officers or directors (in their capacities as such). There is no judgment, decree or order against the Company or any of its Subsidiaries, any of their respective assets or properties, or, to the knowledge of the Company and each of its Subsidiaries, any of their respective directors or officers (in their capacities as such), that could prevent, enjoin, or materially alter or delay any of the transactions contemplated by this Agreement, or that, individually or in the aggregate with any such other judgments, decrees and orders, could reasonably be expected to have a Material Adverse Effect on the Company.

2.7 Restrictions on Business Activities . Except as set forth in Section 2.7 of the Company Disclosure Letter , there is no Contract (including covenants not to compete), judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries which has or could reasonably be expected to have, whether before or after consummation of the Merger, the effect of prohibiting or impairing any current or future business practice of the Company or any of its Subsidiaries, any acquisition of property (tangible or intangible) by the Company or any of its Subsidiaries or the conduct of business by the Company or any of its Subsidiaries, in each case, as currently conducted or as proposed to be conducted by the Company or any of its Subsidiaries. Without limiting the generality of the foregoing, neither the Company nor any of its Subsidiaries has entered into any customer or other similar Contract (i) that includes a “most favored purchaser/licensee” or similar clause restricting or otherwise impacting the right of the Company or any of its Subsidiaries to sell/license the Company Products in any manner or (ii) under which the Company or any of its Subsidiaries is restricted from selling, licensing, transferring, distributing any of their respective technology, assets or properties (including any Company Intellectual Property), or products to, or from providing

 

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services to, customers or potential customers or any class of customers, in any geographic area, during any period of time or in any segment of the market, or from otherwise exercising any right or interest in, to, or under such technology, assets or properties, or products.

2.8 Intellectual Property .

(a) To the Company’s knowledge, Section 2.8(a) of the Company Disclosure Letter lists all products of the Company and each of its Subsidiaries (collectively, the “ Company Products ”) which, to the Company’s knowledge, have been used, marketed, sold, licensed, distributed or otherwise disposed of, as applicable, or which are under development, pending regulatory approvals or which the Company or any of its Subsidiaries intends to use, market, sell, license, distribute or otherwise.

(b) To the Company’s knowledge, Section 2.8(b) of the Company Disclosure Letter lists all Intellectual Property (A) included among the Company Intellectual Property and each Registration in respect thereof or (B) filed by or in the name of the Company or any of its Subsidiaries, including all Patents, registered, renewed, and applied for Copyrights, registered, renewed, and applied for Trademarks, and registered Domain Names (the “ Company Registered Intellectual Property ”). For each listed item, Section 2.8(b) of the Company Disclosure Letter shall indicate, as applicable, the owner of such Intellectual Property, the countries in which such Intellectual Property is patented, filed, issued, applied for, renewed, or registered, the patent, application, renewal, or registration number, the filing and expiration dates thereof.

(c) Except as stated in Section 2.8(c) of the Company Disclosure Letter , all of the Company Intellectual Property is either (i) wholly and exclusively owned by the Company or one of its Subsidiaries free and clear of all options, rights, licenses, restrictions or liens or (ii) duly, validly, wholly, and exclusively licensed to the Company or one of its Subsidiaries. Section 2.8(c) of the Company Disclosure Letter accurately identifies, with respect to each item of Company Intellectual Property, whether the Intellectual Property is wholly and exclusively owned, co-owned, or jointly owned by or exclusively licensed to the Company or one of its Subsidiaries. Except as stated in Section 2.8(b) of the Company Disclosure Letter , with respect to any Company Intellectual Property which the Company or any of its Subsidiaries is a joint owner or co-owner, the Company or, its Subsidiary jointly owns or co-owns all Intellectual Property Rights in, to and under the Intellectual Property and to the Company’s knowledge, there are no known restrictions (by agreement with any third party joint owner or co-owner of the Company Intellectual Property or otherwise) on the Company’s or its Subsidiaries’ exercise of the rights afforded a joint owner or co-owner of that type of Intellectual Property under the law.

(d) Section 2.8(d) of the Company Disclosure Letter lists all Contracts (other than licenses for commercial off-the-shelf Software) to which the Company or any of its Subsidiaries is a party with respect to any Intellectual Property.

(e) Section 2.8(e) of the Company Disclosure Letter lists all Contracts (other than licenses for commercial off-the-shelf Software) between the Company and any other Person wherein or whereby the Company has agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless, release, guaranty or otherwise assume, waive, or incur any obligation or liability or provide a right of rescission with respect to the infringement, interference

 

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or misappropriation by the Company, any of its Subsidiaries or such other Person of the Intellectual Property of any Person e xcept as set forth on Section 2.8(e) of the Company Disclosure Letter.

(f) To the Company’s knowledge, except for the Intellectual Property licensed pursuant to the contracts set forth in Section 2.8(c) of the Company Disclosure Letter and, except as set forth in Section 2.8(f) of the Company Disclosure Letter , no other Person owns or has any rights to any portion of such Intellectual Property. To the Company’s knowledge where otherwise appropriate, all Intellectual Property used in or necessary to the conduct of the Company’s and each of its Subsidiaries’ business as presently conducted was created solely by either (i) employees of the Company or one of its Subsidiaries acting within the scope of their employment who have validly and irrevocably assigned all of their rights, including Intellectual Property Rights therein, to the Company or such Subsidiary or (ii) employees of the Company or one of its Subsidiaries not acting within the scope of their employment or other Persons who have validly and irrevocably assigned all of their rights, including Intellectual Property Rights therein, to the Company or such Subsidiary.

(g) Except as set forth in Section 2.8(g) of the Company Disclosure Letter , neither the Company nor any of its Subsidiaries has transferred ownership of, or granted any exclusive license of or exclusive right to use, or covenanted not to sue, or authorized the retention of any exclusive rights in or to joint ownership of, any Intellectual Property to any other Person.

(h) Except as set forth in this Section 2.8 or Section 2.8 of the Parent Disclosure Letter , all Company Intellectual Property is, and will be upon consummation of the transactions contemplated hereby, fully transferable, alienable and licensable by the Surviving Corporation without restriction and without payment of any kind to any Person.

(i) To Parent’s knowledge, as of the date of this Agreement, the operation of the business of the Company and each of its Subsidiaries as it currently is conducted, and as it has been conducted in the past, by the Company and such Subsidiary, including the design, development, use, import, manufacture and sale of the Company Products, does not infringe, interfere with, or misappropriate the Intellectual Property Rights of any Person, violate the rights of any Person (including rights to privacy or publicity), or constitute unfair competition or trade practices under the laws of any jurisdiction. Without limiting the foregoing, to the Company’s knowledge, neither the Company nor any of its Subsidiaries is infringing, interfering with, or is misappropriating, or misappropriated any Intellectual Property of any Person or any law relating to Intellectual Property. To the Company’s knowledge, neither the Company nor any of its Subsidiaries has received any notice from any Person claiming that such operation or any Company Product infringes, interferes with, or misappropriates the Intellectual Property Rights of any Person or constitutes unfair competition or trade practices under the laws of any jurisdiction (nor does the Company have knowledge of any basis therefor). To the Company’s knowledge, no Person is infringing, interfering with, or misappropriating, or has infringed, interfered with, or misappropriated, any Intellectual Property of the Company or any of its Subsidiaries.

(j) Each item of Company Registered Intellectual Property listed on Section 2.8(b) of the Company Disclosure Letter is valid and subsisting, and all necessary registration, maintenance and renewal fees in connection with such Company Registered

 

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Intellectual Property have been paid and all necessary documents and articles in connection with such Company Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Registered Intellectual Property. There are no actions that must be taken by the Company or any of its Subsidiaries within 60 days after the Closing Date, including the payment of any registration, maintenance or renewal fees or the filing of any documents, applications or articles for the purposes of maintaining, perfecting or preserving or renewing any Company Registered Intellectual Property, except as set forth on Section 2.8(j) of the Company Disclosure Letter.

(k) To the Company’s knowledge, there is no pending, decided or settled opposition, interference, reexamination, injunction, lawsuit, proceeding, hearing investigation, complaint, challenge, arbitration, mediation, demand, decree, or any other dispute, disagreement, or claim (“ Dispute related to the Company Intellectual Property”), nor, has any Dispute been threatened, challenging the legality, validity, enforceability or ownership of any Company Intellectual Property or the Company’s or any of its Subsidiaries’ exercise of any right or interest in, to, or under any Intellectual Property used, marketed, supported, maintained, sold, licensed, distributed or otherwise disposed of by the Company or any of its Subsidiaries, including any Dispute challenging the legality, validity, or enforceability of any Intellectual Property Rights held, possessed, or used by the Company or any of its Subsidiaries’ in any third party Intellectual Property. To the Company’s knowledge, no circumstances or grounds exist that would give rise to such a Dispute. Neither the Company nor any of its Subsidiaries has sent any notice of any such Dispute, and to the Company’s knowledge, no circumstances or grounds exist upon which the Company or any of its Subsidiaries could assert any such Dispute. No Company Intellectual Property is subject to any outstanding injunction, judgment, order, decree, ruling charge, settlement or other disposition of any Dispute.

(l) To the Company’s knowledge, there are no facts or circumstances that would render any Company Intellectual Property invalid or unenforceable. Without limiting the foregoing, to the Company’s knowledge, there are no information, materials, facts, or circumstances, including any information or fact that would constitute prior art, that would render any of the Company Registered Intellectual Property invalid or unenforceable, or would adversely effect any pending application for any Company Registered Intellectual Property, and neither the Company nor any of its Subsidiaries has misrepresented, or failed to disclose, there are no misrepresentations of or failures to disclose, any fact or circumstance in any application for any Registered Intellectual Property that would constitute fraud or a misrepresentation with respect to such application or that would otherwise affect the validity or enforceability of any such Registered Intellectual Property.

(m) To the Company’s knowledge, there are no measures necessary to protect the Company Intellectual Property which have not been taken and which the failure to take would be reasonably likely to result in or otherwise have a Material Adverse Effect on the Company. In each case in which the Company or any of its Subsidiaries has acquired any Intellectual Property from any Person (“ Assigned Intellectual Property ”), the Company or such Subsidiary, as the case may be, has obtained a valid and enforceable assignment sufficient to irrevocably transfer all rights in such Intellectual Property (including the right to seek past and future damages with respect thereto) to the Company or such Subsidiary and, in accordance with, applicable laws, the

 

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Company or such Subsidiary has recorded each such assignment with the relevant governmental authorities, including the U.S. Patent and Trademark Office, the U.S. Copyright Office, or their respective equivalents in any relevant foreign jurisdiction, as the case may be.

(n) There are no Contracts between the Company or any of its Subsidiaries and any other Person with respect to the Company Intellectual Property or any other Intellectual Property under which there is currently any Dispute regarding the scope of such Contract, or performance under such Contract including with respect to any payments to be made or received by the Company or any of its Subsidiaries thereunder.

(o) The Company and each of its Subsidiaries has taken all reasonable steps that are required to protect the Company’s or such Subsidiaries’ rights in Trade Secrets of the Company or such Subsidiary, or provided by any other Person to the Company or such Subsidiary. Without limiting the foregoing, the Company and each of its Subsidiaries has, and enforces, a policy requiring each employee, consultant, and contractor to execute proprietary information, confidentiality and assignment agreements substantially in the Company’s standard form, which form is set forth in Section 2.8(o) of the Company Disclosure Letter .

2.9 Taxes .

(a) “ Tax ” means (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, escheat, unclaimed property environmental or windfall profit tax (including any Taxes under Section 59A of the Code), 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) (each, a “ Tax Authority ”), (ii) any liability for the payment of any amounts of the type described in clause (i) of this sentence as a result of being a member of an Affiliated, consolidated, combined, unitary or aggregate group for any Taxable period, and (iii) any liability for the payment of any amounts of the type described in clause (i) or (ii) of this sentence as a result of being a transferee of or successor to any Person or as a result of any express or implied obligation to indemnify any other Person. “ Tax Return ” means any return, statement, report or form (including estimated tax returns and reports, withholding tax returns and reports and information returns and reports) required to be filed with respect to Taxes, including any amendments thereto.

(b) The Company and each of its Subsidiaries, and any consolidated, combined, unitary or aggregate group for Tax purposes of which the Company or any of its Subsidiaries is or has been a member, have properly completed and timely filed all material Tax Returns required to be filed by them. All such Tax Returns are true and correct in all material respects and have been completed in accordance with applicable law, and the Company and each of its Subsidiaries have paid or withheld and paid to the appropriate Tax Authority all material Taxes due (whether or not shown to be due on such Tax Returns). The Company Interim Balance Sheet reflects all unpaid Taxes of the Company and each of its Subsidiaries for periods (or portions of periods) through the date of the Interim Balance Sheet. Neither the Company nor any of its Subsidiaries has any liability for any material amount of unpaid Taxes accruing after the date of the Interim Balance Sheet.

 

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(c) There is (i) no claim for Taxes being asserted or previously asserted against the Company or any of its Subsidiaries that has resulted in a lien against the property of the Company or any of its Subsidiaries other than liens for Taxes not yet due and payable, (ii) no audit of any Tax Return of the Company or any of its Subsidiaries being conducted by a Tax Authority, and (iii) no extension of any statute of limitations on the assessment of any Taxes granted by the Company or any of its Subsidiaries currently in effect. Neither the Company nor any of its Subsidiaries has been informed by any jurisdiction that the jurisdiction believes that such entity was required to file any Tax Return that was not filed.

(d) Neither the Company nor any of its Subsidiaries has (i) engaged in a “reportable transaction,” as set forth in Treasury Regulation Section 1.6011-4(b), or any transaction that is the same as or substantially similar to one of the types of transactions referred to as “listed transactions” in Treasury Regulation Section 1.6011-4(b)(2), (ii) been the “distributing corporation” or the “controlled corporation” (in each case, within the meaning of Section 355(a)(1) of the Code) with respect to a transaction described in Section 355 of the Code (A) within the two-year period ending as of the date of this Agreement, or (B) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the transactions contemplated by this Agreement, or (iii) ever been a “United States real property holding company” within the meaning of Section 897 of the Code.

(e) Except for periods prior to tax year 1999, neither the Company nor any of its Subsidiaries has ever been a member of an affiliated group of corporations filing a combined federal income Tax Return (other than a group the common parent of which is or was the Company) nor does the Company or any of its Subsidiaries have any liability for Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of foreign, state or local law).

(f) Neither the Company nor any of its Subsidiaries is a party to or bound by any Tax sharing or Tax allocation agreement nor does the Company or any of its Subsidiaries have any liability or potential liability to another party under any such agreement.

(g) Each of the Company and its Subsidiaries has withheld or collected and paid over to the appropriate Tax authorities (or are properly holding for such timely payment) all Taxes required by law to be withheld or collected by them.

(h) Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of any: (i) installment sale or other open transaction disposition made on or prior to the Closing Date; (ii) prepaid amount received on or prior to the Closing Date; (iii) “closing agreement” as described in Section 7121 of the Code (or any corresponding provision of state, local or foreign income Tax law); and (iv) intercompany transactions or any excess loss accounts described in the Treasury Regulations promulgated under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law).

 

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(i) Neither the Company nor any of its Subsidiaries has a Contract currently in place covering any Person that, individually or collectively, could give rise to the payment of any amount that would not be deductible by reason of Section 280G of the Code, or would constitute compensation in excess of the limitation set forth in Section 162(m) of the Code. Neither the Company nor any of its Subsidiaries is obligated to make any “gross-up” or similar payment to any Person on account of any Tax under Section 4999 of the Code.

(j) Neither the Company nor any of its Subsidiaries is subject to any private letter ruling of the Internal Revenue Service or comparable rulings of other taxing authorities. No power of attorney currently in force has been granted by the Company or any of its Subsidiaries concerning any Tax matter.

(k) No federal, state, local or foreign audits or other administrative proceedings are pending as of the date of this Agreement with regard to any Taxes or Tax Returns of the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries has received a written notice prior to the date of this Agreement of any actual or threatened audits or proceedings.

2.10 Employee Benefit Plans .

(a) Section 2.10(a) of the Company Disclosure Letter sets forth a complete list of all “employee benefit plans,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”) and any other plan, program, policy or arrangement for or regarding bonuses, commissions, incentive compensation, severance, vacation, deferred compensation, pensions, profit sharing, retirement, payroll savings, stock options, stock purchases, stock awards, stock ownership, phantom stock, stock appreciation rights, equity compensation, medical/dental expense payment or reimbursement, disability income or protection, sick pay, group insurance, self insurance, death benefits, employee welfare or fringe benefits of any nature, including those benefiting retirees or former employees which are sponsored, maintained or contributed to, or to which there is an obligation to contribute, by the Company or any of its Subsidiaries (“ Employee Benefit Plans ”). The Company has no liability with respect to any plan of the type described in the preceding sentence other than the Employee Benefit Plans.

(b) Each Employee Benefit Plan has been maintained, operated, and administered in compliance with its terms and any related documents or agreements and in compliance with all applicable laws. There have been no prohibited transactions or breaches of any of the duties imposed on “fiduciaries” (within the meaning of Section 3(21) of ERISA) by ERISA with respect to the Employee Benefit Plans that could result in any liability or excise tax under ERISA or the Code being imposed.

(c) Each Employee Benefit Plan intended to be qualified under Section 401(a) of the Code is so qualified and has heretofore been determined by the Internal Revenue Service (the “ IRS ”) to be so qualified, and each trust created thereunder has heretofore been determined by the IRS to be exempt from tax under the provisions of Section 501(a) of the Code, and nothing has occurred since the date of any such determination that could reasonably be expected to give the IRS grounds to revoke such determination.

 

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(d) The Company does not currently have and at no time in the past has had an obligation to contribute to a “defined benefit plan” as defined in Section 3(35) of ERISA, a pension plan subject to the funding standards of Section 302 of ERISA or Section 412 of the Code, a “multiemployer plan” as defined in Section 3(37) of ERISA or Section 414(f) of the Code or a “multiple employer plan” within the meaning of Section 210(a) of ERISA or Section 413(c) of the Code.

(e) No Employee Benefit Plan is or at any time was funded through a “welfare benefit fund” as defined in Section 419(e) of the Code, and no benefits under any Employee Benefit Plan are or at any time have been provided through a voluntary employees’ beneficiary association (within the meaning of subsection 501(c)(9) of the Code) or a supplemental unemployment benefit plan (within the meaning of Section 501(c)(17) of the Code). No Employee Benefit Plan provides for a self-insured benefit.

(f) All contributions, transfers and payments in respect of any Employee Benefit Plan, other than transfers incident to an incentive stock option plan within the meaning of Section 422 of the Code, have been or are fully deductible under the Code.

(g) There is no pending or, to the Company’s knowledge, threatened assessment, complaint, proceeding, or investigation of any kind in any Governmental Entity agency with respect to any Employee Benefit Plan (other than routine claims for benefits), nor is there any basis for one.

(h) All (i) insurance premiums required to be paid with respect to, (ii) benefits, expenses, and other amounts due and payable under, and (iii) contributions, transfers, or payments required to be made to, any Employee Benefit Plan prior to the Closing Date will have been paid, made or accrued on or before the Closing Date

(i) No Employee Benefit Plan provides benefits, including, without limitation, death or medical benefits, beyond termination of service or retirement other than (i) coverage mandated by law, (ii) death or retirement benefits under any Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code or (iii) deferred compensation benefits reflected on the books of the Company.

(j) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, alone or in connection with any other event, (i) result in any material payment (including severance, unemployment compensation or golden parachute) becoming due under any Employee Benefit Plan, (ii) materially increase any benefits (including severance, deferred compensation and equity benefits) otherwise payable under any Employee Benefit Plan, or (iii) result in the acceleration of the time of payment or vesting of any such benefits to any material extent.

(k) Accurate and complete copies of all of the Employee Benefit Plans have been provided to Parent together with the most recent determination letter issued, if any, or if none, IRS opinion or advisory letter issued by the Internal Revenue Service (the “IRS”), with respect to an Employee Benefit Plan that is intended to be a qualified plan within the meaning of Section 401(a) of the Code, all pending applications for rulings, determination letters, opinions, no

 

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action letters and similar documents filed with any Governmental Entity (including the Department of Labor and the IRS), summary plan descriptions, service agreements, stop loss insurance policies, and all related contracts and documents (including employee summaries and material employee communications), all closing letters, audit finding letters, revenue agent findings and similar documents. The Company has delivered to Parent an accurate and complete copy of the most current Form 5500 and any other form or filing required to be submitted to any Governmental Entity with regard to each Employee Benefit Plan.

2.11 Employee Matters .

(a) Neither the Company nor any of its Subsidiaries is liable for any payment to any trust or other fund or to any Governmental Entity, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistently with past practice). There are no pending claims against the Company and/or any of its Subsidiaries under any workers compensation plan or policy or for long term disability.

(b) Section 2.11(b) of the Company Disclosure Letter  sets forth a true, correct and complete list of all severance Contracts, employment Contracts and independent contractor Contracts to which the Company and/or any of its Subsidiaries is a party or by which the Company and/or any of its Subsidiaries is bound. Neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement or other labor union contract, no collective bargaining agreement is being negotiated by the Company or any of its Subsidiaries and neither the Company nor any of its Subsidiaries has any duty to bargain with any labor organization. Neither the Company nor any of its Subsidiaries is aware of any activities or proceedings of any labor union or to organize their respective employees. There is no labor dispute, strike or work stoppage against the Company or any of its Subsidiaries pending or threatened which may interfere with the respective business activities of the Company or any of its Subsidiaries.

(c) Section 2.11(c) of the Company Disclosure Letter is a true, correct and complete list of the names, positions and rates of compensation of all officers, directors, employees (permanent, temporary or otherwise) and independent contractors of the Company and each of its Subsidiaries showing each such person’s name, position or independent contractor responsibilities, status as exempt/non-exempt, bonuses and fringe benefits for the current fiscal year and the most recently completed fiscal year. None of the officers or directors of the Company listed in Section 2.11(c) of the Company Disclosure Letter or any of its Subsidiaries has given notice to the Company or any of its Subsidiaries, nor is the Company otherwise aware, that any such employee intends to terminate his or her employment with the Company, any of its Subsidiaries or the Surviving Corporation. Except as provided in the Contracts listed in Section 2.11(c) of the Company Disclosure Letter , the employment of each of the employees of the Company or any of its Subsidiaries is “at will” and neither the Company nor any of its Subsidiaries has any obligation to provide any particular form or period of notice prior to terminating the employment of any of their respective employees.

(d) None of the execution and delivery of this Agreement or the consummation of any transaction contemplated hereby or any termination of employment or

 

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service in connection therewith or subsequent thereto will (i) result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any Person, (ii) result in the triggering of any other change in control provision, (iii) materially increase any benefits otherwise payable by the Company or any of its Subsidiaries, (iv) result in the acceleration of the time of payment or vesting of any such benefits, except as required under Section 411(d)(3) of the Code, (v) increase the amount of compensation due to any Person, or (vi) result in the forgiveness in whole or in part of any outstanding loans made by the Company or any of its Subsidiaries to any Person.

2.12 Related Party Transactions . Except as set forth in Section 2.12 of the Company Disclosure Letter , no officer or director or, to the Company’s knowledge, any stockholder of the Company (nor any immediate family member of any of such Persons, or any trust, partnership or company in which any of such Persons has or has had an interest), has or has had, directly or indirectly, (a) an interest in any third party which furnished or sold, or furnishes or sells, services, products or technology that the Company or any of its Subsidiaries furnishes or sells, or proposes to furnish or sell, or (b) any interest in any third party that purchases from or sells or furnishes to the Company or any of its Subsidiaries, any goods or services, (c) an interest in any Contract to which the Company or any of its Subsidiaries is a party, provided , however , that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded company shall not be deemed to be an “interest in any entity” for purposes of this Section 2.12.

2.13 Insurance . Section 2.13 of t