MERGER AGREEMENT

Exhibit 10.1

MERGER AGREEMENT

by and among

VUTEK, INC.

ELECTRONICS FOR IMAGING, INC.

and

EFI MERGER SUB, INC.

Dated as of April 14, 2005

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TABLE OF CONTENTS

PAGE

1.6 Further Assurances

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization of the Company; Authority; No Restrictions on Business Combinations

ARTICLE X DEFINITIONS

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MERGER AGREEMENT

THIS MERGER AGREEMENT, dated as of April 14, 2005 (this “ Agreement ”), by and among Electronics For Imaging, Inc., a Delaware corporation (“ Parent ”), EFI Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“ Merger Sub ”), and VUTEk, Inc. a Delaware corporation (the “ Company ”).

RECITALS

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

B. This Agreement and the Merger have been approved by the respective board of directors of Parent, Merger Sub and the Company.

C. The Stockholders holding a majority of the Company Common Stock intend to adopt this Agreement pursuant to Section 251(c) of the DGCL by written consent in accordance with Section 228 of the DGCL immediately after (and on the same day as) the execution and delivery of this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and subject to the terms and conditions set forth herein, the parties hereby agree as follows:

ARTICLE I

THE MERGER

1.1 The Merger . At the Effective Time, upon the terms and subject to the conditions of this Agreement, Merger Sub will be merged with and into the Company and the separate corporate existence of Merger Sub will cease and the Company will be the surviving corporation in the Merger (the “ Surviving Corporation ”). As a result of the Merger, all of the respective outstanding shares of capital stock of the Company and Merger Sub will be converted or cancelled in the manner provided in Article II .

1.2 Effective Time . At the Closing, a certificate of merger (the “ Certificate of Merger ”) will be duly prepared and executed by the Surviving Corporation and thereafter delivered to the Secretary of State of the State of Delaware (the “ Secretary of State ”) for filing, as provided in Section 103 of the DGCL, on the Closing Date. The Merger will become effective at the time of the filing of the Certificate of Merger with the Secretary of State, or at such later time as may be agreed by Parent and the Company and stated in the Certificate of Merger (the date and time of such filing (or stated later time, if any) being referred to herein as the “ Effective Time ”).

1.3 Closing . The closing of the Merger (the “ Closing ”) will take place at the offices of Kaye Scholer LLP, 425 Park Avenue, New York, New York on the Business Day following the satisfaction or waiver of each of the conditions set forth in Article VI (other than those conditions that are to be satisfied at the Closing), or on such other date or at such other time and place as the parties mutually agree in writing (the “ Closing Date ”).

1.4 Effects of the Merger . At the Effective Time, the effects of the Merger will be as provided in the applicable provisions of the DGCL.

1.5 Certificate of Incorporation, Bylaws and Officers and Directors of the Surviving Corporation . (a) The certificate of incorporation and bylaws of the Company, as in effect immediately prior to the Effective Time, will be the certificate of incorporation and bylaws of the Surviving Corporation until thereafter amended as provided by the DGCL, the certificate of incorporation and/or the bylaws.

(b) From and after the Effective Time, the directors of the Surviving Corporation will be the directors of Merger Sub immediately prior to the Effective Time, and the officers of the Surviving Corporation will be the officers of Merger Sub immediately prior to the Effective Time, until their respective successors are duly elected and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s certificate of incorporation and bylaws.

1.6 Further Assurances . Each party hereto shall execute such further documents and instruments and take such further actions as may reasonably be requested by one or more of the others to consummate the Merger, to vest the Surviving Corporation with full title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of Merger Sub or the Company, as applicable, or to otherwise effect the purposes of this Agreement.

ARTICLE II

PURCHASE PRICE AND CONVERSION OF SHARES

2.1 Conversion of Capital Stock . At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or the Stockholders:

(a) Capital Stock of Merger Sub . Each share of the common stock, par value $0.0001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time (“ Merger Sub Common Stock ”) will be converted into and become one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation (“ Surviving Corporation Common Stock ”). Each certificate representing outstanding shares of Merger Sub Common Stock will at the Effective Time represent an equal number of shares of Surviving Corporation Common Stock.

(b) Treasury Stock; Stock Owned by Parent . All shares of capital stock of the Company that are owned by the Company as treasury stock or owned by Parent will be cancelled and will cease to exist and no consideration will be delivered in exchange therefor.

(c) Conversion of Company Common Stock . Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled in accordance with Section 2.1(b) and other than shares that are Dissenting Shares) (each, a “ Common Share ”) will be converted into the right to receive an amount per Common Share in cash equal to the Aggregate Per Share Consideration (as defined below). At the Effective Time, all such Common Shares will no longer be outstanding and will be cancelled automatically and will cease to exist, and each holder of a Certificate representing a Common Share will cease to have any rights with respect thereto, except the right to receive in cash (i) the Per Share Amount upon the surrender of such Certificate (or other evidence of ownership reasonably acceptable to Parent) in accordance with Section 2.4 and (ii) payment of such holder’s Per Share Portion of the Adjustment Escrow Amount (or any remaining portion thereof) and Upward Adjustment Amount, if any, pursuant to Section 2.6 and such holder’s Per Share Portion of the Indemnity Escrow Amount (or any remaining portion thereof), if any, pursuant to Article VII (collectively, the “ Aggregate Per Share Consideration ”).

(d) Dissenting Shares . Notwithstanding any provision of this Agreement to the contrary, each outstanding share of Company Common Stock the holder of which has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares of Company Common Stock in accordance with the DGCL (in each case, a “ Dissenting Share ”), will not be converted into a right to receive the Aggregate Per Share Consideration unless such holder fails to perfect or withdraws or otherwise loses his or her right to appraisal. If after the Effective Time such holder fails to perfect or withdraws or otherwise loses his right to appraisal, such shares of Company Common Stock will be treated as if they had been converted as of the Effective Time into a right to receive the Aggregate Per Share Consideration pursuant to Section 2.1(c) . The Company shall give Parent prompt notice of any written demands received by the Company for appraisal, and Parent shall conduct all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal or settle or offer to settle any such demands.

2.2 Payments . At the Effective Time, Parent, on behalf of the Company, shall (a) cause the Company Debt outstanding immediately prior to the Effective Time to be repaid to the lender or lenders entitled thereto pursuant to the Payoff Letters (the “ Payoff Letters ”) and (b) pay the Seller Expenses to the Persons entitled thereto in accordance with a certificate (the “ Payment Certificate ”) to be delivered by the Company to Parent. In addition, at the Effective Time, Parent shall deposit, or cause to be deposited, with (x) the Stockholder Representative, an amount in cash equal to the product obtained by multiplying (i) the Per Share Amount and (ii) the number of Common Shares issued and outstanding at the Effective Time, as reflected in the Payment Certificate by means of a wire transfer of immediately available funds to an account designated in writing by the Stockholder Representative at least two Business Days prior to the Effective Time and (y) the Escrow Agent, the Adjustment Escrow Amount and the Indemnity Escrow Amount to be held in an escrow account pursuant to the terms of the Escrow Agreement. Parent’s deposit of such amounts with the Stockholder Representative and the Escrow Agent shall satisfy in full Parent’s obligation to pay such amounts to the Equityholders, and none of Parent, Merger Sub or the Surviving Corporation shall be liable to any Equityholder for cash delivered to the Stockholder Representative and/or the Escrow Agent in accordance with the provisions of this Agreement. As promptly as possible prior to the Effective Time, the Company shall deliver the Payoff Letters and the Payment Certificate to Parent.

2.3 Settlement of Options and Warrants . (a) Prior to the Effective Time, the Company shall notify the Optionholders, in writing, of the transactions contemplated hereby in accordance with the applicable Option Plan. As of the Effective Time, each outstanding Option shall be cancelled and retired by virtue of the Merger and each Optionholder shall cease to have any rights with respect thereto, other than the right to receive for each such Option (other than the Tranche B Options) an amount per Option (without interest and subject to applicable withholding tax as provided in Section 2.4(d) ) in cash equal to (i) the Per Share Amount minus the exercise price for such Option (the “ Per Option Amount ”) and (ii) a Per Share Portion of the Adjustment Escrow Amount (or any remaining portion thereof) and Upward Adjustment Amount, if any, pursuant to Section 2.6 and the Indemnity Escrow Amount (or any remaining portion thereof) pursuant to Article VII (clauses (i) and (ii) together, the “ Aggregate Per Option Amount ” and the sum of all Aggregate Per Option Amounts to be received by all Optionholders entitled thereto is referred to as the “ Option Consideration ”). Payment of the Per Option Amount to each of the Optionholders entitled thereto shall be made by the Surviving Corporation, subject to the terms and conditions of this Agreement, as soon as practicable after the Effective Time and receipt by the Surviving Corporation of the surrendered option agreements representing the Options (other than the Tranche B Options) and a written instrument, reasonably satisfactory to Parent, duly executed by such Optionholder setting forth (i) a representation by such Optionholder that he or she is the owner of all Options represented by such Option and (ii) a confirmation of, and consent to, the cancellation of all of his or her Options. The Company shall take all actions required under each Option Plan to cause such Option Plan to terminate at the Effective Time, other than any Option Plan set forth in a written notice delivered to the Company by Parent no later than ten Business Days prior to the Closing instructing the Company not to terminate such Option Plan pursuant to this Section 2.3 (a). Payment of the remaining portion of the Aggregate Per Option Amount to each Optionholder entitled thereto shall be made by the Stockholder Representative as, if and when such amounts are released or paid to the Stockholder Representative pursuant to the terms of this Agreement and the Escrow Agreement.

(b) As of the Effective Time, each outstanding Warrant shall be cancelled and retired by virtue of the Merger and each Warrantholder shall cease to have any rights with respect thereto, other than the right to receive for each such Warrant an amount per Warrant (without interest and subject to applicable withholding tax as provided in Section 2.4(d) ) in cash equal to (i) the Per Share Amount minus the exercise price for such Warrant (the “ Per Warrant Amount ”) and (ii) a Per Share Portion of the Adjustment Escrow Amount (or any remaining portion thereof) and Upward Adjustment Amount, if any, pursuant to Section 2.6 and the Indemnity Escrow Amount (or any remaining portion thereof) pursuant to Article VII (clauses (i) and (ii) together, the “ Aggregate Per Warrant Amount ” and the sum of all Aggregate Per Warrant Amounts to be received by all Warrantholders is referred to as the “ Warrant Consideration ”). Payment of the Per Warrant Amount to each of the Warrantholders shall be made by the Surviving Corporation, subject to the terms and conditions of this Agreement, as soon as practicable after the Effective Time and receipt by the Surviving Corporation of the surrendered warrant agreements representing the Warrants and a written instrument, reasonably satisfactory to Parent, duly executed by such Warrantholder setting forth (i) a representation by such Warrantholder that he, she or it is the owner of all Warrants represented by such warrant agreement and (ii) a confirmation of, and consent to, the cancellation of all of his, her or its Warrants. Payment of the remaining portion of the Aggregate Per Warrant Amount to each Warrantholder shall be made by the Stockholder Representative as, if and when such amounts are released or paid to the Stockholder Representative pursuant to the terms of this Agreement and the Escrow Agreement.

(c) Unless terminated pursuant to Section 2.3(a) , Parent shall assume the Company’s Nonqualified Stock Option Plan and to the extent permitted under Applicable Law, the shares of Company Common Stock that remain available for issuance under the Nonqualified Stock Option Plan as of the Effective Time (the “ Reserved Shares ”) shall be available for issuance pursuant to awards issued by Parent following the Effective Time under the Nonqualified Stock Option Plan; provided that such Reserved Shares shall be converted into shares of common stock of Parent.

2.4 Payment and Surrender of Certificates .

(a)  Payment Procedures . As soon as reasonably practicable after the date hereof, the Company shall mail to each holder of record of a certificate or certificates representing Common Shares (“ Certificates ”): (i) a letter of transmittal, in a form reasonably satisfactory to Parent and the Company (the “ Letter of Transmittal ”), and (ii) instructions for use in surrendering the Certificates in exchange for the Per Share Amount. After the Effective Time and upon surrender by the holder thereof to the Surviving Corporation of (i) Certificates and (ii) a duly executed Letter of Transmittal, the Stockholder Representative shall pay to the holder of such Certificates in exchange therefor (without interest) cash in an amount equal to the product obtained by multiplying (A) the number of Common Shares represented by such Certificate and (B) the Per Share Amount, and the Certificate so surrendered will forthwith be canceled. No interest will be paid or accrued on the Per Share Amount payable upon the surrender of any Certificate.

(b)  Stock Transfer Books . At the Effective Time, the stock transfer books of the Company will be closed and thereafter there will be no further registration of transfers on the stock transfer books of the Surviving Corporation of Common Shares. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they will be canceled and exchanged as provided in this Article II , except as otherwise provided by Applicable Law. Until surrendered as contemplated by this Section 2.1(c) , each Certificate (other than Certificates representing shares cancelled pursuant to Section 2.1(c) ) will be deemed at any time after the Effective Time to represent only the right to receive upon surrender the Aggregate Per Share Consideration that the holder thereof has the right to receive in respect of such Certificate pursuant to the provisions of this Agreement.

(c)  Lost Certificates . If any Certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and subject to such other reasonable conditions as Parent may impose, and, if required by the Stockholder Representative, the posting by such Person of a bond in such reasonable amount as the Stockholder Representative may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Stockholder Representative shall, in exchange for such lost, stolen or destroyed Certificate, pay to the Person entitled thereto the Per Share Amount due to such Person pursuant to the provisions of this Article II .

(d)  Withholding Rights . Parent or the Surviving Corporation will be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Equityholder such amounts as Parent or the Surviving Corporation 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 law. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Parent or the Surviving Corporation, such withheld amounts will be treated for all purposes of this Agreement as having been paid to the Equityholders in respect of which such deduction and withholding was made by Parent or the Surviving Corporation.

2.5 Pre-Closing Purchase Price Adjustment . At least five days prior to the Closing Date, the Company shall deliver to Parent a good faith estimate prepared by the Company’s Chief Financial Officer (the “ Working Capital Estimate ”) of the Net Working Capital as of the Effective Time (including an estimate of all Seller Expenses) without giving effect to any of the transactions contemplated hereby or the tax benefits or consequences thereof and determined in accordance with Applicable Accounting Principles, together with related supporting schedules, calculations and documentation and, if any, the resulting estimate of Working Capital Overage or Working Capital Underage, which Working Capital Estimate shall be reasonably acceptable to Parent. A “ Working Capital Overage ” shall exist when (and shall be equal to the amount by which) the Working Capital Estimate exceeds the Target Working Capital, which amount shall be added to the Merger Consideration as contemplated in the definition thereof contained in Article IX . A “ Working Capital Underage ” shall exist when (and shall be equal to the amount by which) the Target Working Capital exceeds the Working Capital Estimate, which amount shall be subtracted from the Merger Consideration as contemplated in the definition thereof contained in Article IX .

2.6 Post-Closing Purchase Price Adjustment .

(a)  Working Capital Statement . As soon as practicable but in no event later than 60 days after the Effective Time, Parent shall deliver to the Stockholder Representative a statement (the “ Working Capital Statement ”) of the Net Working Capital as of the Effective Time (including an estimate of all Seller Expenses) without giving effect to any of the transactions contemplated hereby or the tax benefits or consequences thereof and determined in accordance with the Applicable Accounting Principles (the “ Final Working Capital ”).

(b)  Dispute . Within 30 days following receipt by the Stockholder Representative of the Working Capital Statement, the Stockholder Representative shall deliver written notice (the “ Notice of Disagreement ”) to Parent of any dispute the Stockholder Representative has with respect to the preparation or content of the Working Capital Statement or the Final Working Capital reflected therein. The Notice of Disagreement must describe in reasonable detail the items contained in the Working Capital Statement that the Stockholder Representative disputes and the basis for any such disputes. If the Stockholder Representative does not notify Parent of a dispute with respect to the Working Capital Statement within such 30-day period, such Working Capital Statement and the Final Working Capital reflected therein will be final, conclusive and binding on the parties. In the event a Notice of Disagreement is delivered to Parent, Parent and the Stockholder Representative shall negotiate in good faith to resolve such dispute. If Parent and the Stockholder Representative, notwithstanding such good faith effort, fail to resolve such dispute within 14 days after the Stockholder Representative delivers the Notice of Disagreement, then Parent and the Stockholder Representative jointly shall engage the Arbitration Firm to resolve such dispute in accordance with the standards set forth in this Section 2.6(b) . The Stockholder Representative and Parent shall use reasonable best efforts to cause the Arbitration Firm to render a written decision resolving the matters submitted to the Arbitration Firm within 30 days of the making of such submission. The Arbitration Firm shall address only those items in dispute. The Arbitration Firm shall determine, on such basis, whether and to what extent, the Working Capital Statement and the Final Working Capital reflected therein require adjustment, which determination shall be consistent with either the position of Parent or the position of the Stockholder Representative or between the positions of Parent and the Stockholder Representative. Judgment may be entered upon the determination of the Arbitration Firm in any court having jurisdiction over the party against which such determination is to be enforced. Parent and the Stockholder Representative shall share equally the fees and expenses of the Arbitration Firm. All determinations made by the Arbitration Firm will be final, conclusive and binding on the parties.

(c)  Access . For purposes of complying with the terms set forth in this Section 2.6 , each party shall cooperate with and make available to the other parties and their respective representatives all information, records, data and working papers, and shall permit reasonable access to its facilities and personnel, as may be reasonably required in connection with the preparation and analysis of the Working Capital Statement and the Final Working Capital reflected therein and the resolution of any disputes in connection therewith.

(d)  Downward Adjustment . If the Final Working Capital (as finally determined pursuant to Section 2.6(a) ) is less than the Working Capital Estimate, then the Merger Consideration will be adjusted downward by the amount of such shortfall (the “ Downward Adjustment Amount ”), and Parent and the Stockholder Representative shall deliver a joint written authorization to the Escrow Agent within two Business Days from the date on which the Final Working Capital is finally determined instructing the Escrow Agent (i) to pay to Parent an amount equal to the Downward Adjustment Amount (together with any interest earned on such amount), first, out of the Adjustment Escrow Amount and, second, out of the Indemnity Escrow Amount to the extent (and only to the extent) the Adjustment Escrow Amount is insufficient to cover the entire Downward Adjustment Amount and (ii) to pay, after payment of the Downward Adjustment Amount to Parent pursuant to clause (i), the remaining portion of the Adjustment Escrow Amount, if any, (together with any interest earned on such amount), to the Stockholder Representative, on behalf of the Equityholders.

(e)  Upward Adjustment . If the Final Working Capital (as finally determined pursuant to Section 2.6(a) ) is greater than the Working Capital Estimate, then the Merger Consideration will be adjusted upward by the amount of such excess (the “ Upward Adjustment Amount ”), and (i) Parent and the Stockholder Representative shall deliver a joint written authorization to the Escrow Agent within two Business Days from the date on which the Final Working Capital is finally determined instructing the Escrow Agent to pay to the Stockholder Representative, on behalf of the Equityholders, the entire Adjustment Escrow Amount (together with any interest earned on such amount) and (ii) Parent shall cause the Surviving Corporation to pay to the Stockholder Representative, on behalf of the Equityholders, by bank wire transfer of immediately available funds, to an account designated in writing by the Stockholder Representative an amount in cash equal to the Upward Adjustment Amount together with interest on such amount at the 90-day LIBOR rate as published in the Wall Street Journal on the Business Day immediately preceding the date of such payment. The Upward Adjustment Amount (including interest) shall be made to the Stockholder Representative within five Business Days from the date on which the Final Working Capital is finally determined pursuant to Section 2.6(b) .

(f)  No Adjustment . If the Final Working Capital (as finally determined pursuant to Section 2.6(b) ) is equal to the Working Capital Estimate, there shall be no adjustment to the Merger Consideration pursuant to this Section 2.6 and Parent and the Stockholder Representative shall deliver joint written authorization to the Escrow Agent within two Business Days from the date on which the Final Working Capital is finally determined instructing the Escrow Agent to pay the entire Adjustment Escrow Amount (together with any interest earned on such amount) to the Stockholder Representative, on behalf of the Equityholders.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on the disclosure schedule delivered by the Company to Parent simultaneously with the execution of this Agreement (the “ Disclosure Schedule ”), the Company represents and warrants to Parent and Merger Sub as follows:

3.1 Organization of the Company; Authority; No Restrictions on Business Combinations . (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite power and authority to enter into this Agreement, the Escrow Agreement and the other Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby, to own, lease and operate its properties and to conduct its business. The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to obtain such qualification or license would not, individually or in the aggregate, have a Material Adverse Effect.

(b) The execution, delivery and performance by the Company of this Agreement and the other Ancillary Agreements to which it is a party, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. Each Ancillary Agreement to which it is a party will be duly executed and delivered by the Company and, assuming that such Ancillary Agreement constitutes a valid and binding obligation of the other parties thereto, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The Company is not in violation of any of the provisions of its certificate of incorporation or bylaws.

3.2 Capitalization . (a) Section 3.2 of the Disclosure Schedule sets forth the authorized, issued and outstanding capital stock of the Company and a true and complete list of the holders of such capital stock. Section 3.2 of the Disclosure Schedule sets forth a true and complete list of all outstanding Options, Optionholders and exercise prices therefor. Section 3.2 of the Disclosure Schedule sets forth a true and complete list of all outstanding Warrants, Warrantholders and the exercise prices thereof. Except as set forth in Section 3.2 of the Disclosure Schedule, there are no shares of Company Common Stock or other equity securities of the Company issued, reserved for issuance or outstanding and no outstanding options, warrants, convertible or exchangeable securities, subscriptions, rights (including any preemptive rights), stock appreciation rights, calls or commitments of any character whatsoever to which the Company is a party or may be bound requiring the issuance or sale of shares of any capital stock of the Company.

(b) All of the issued and outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable and free of any preemptive rights in respect thereto.

3.3 Subsidiaries . Section 3.3 of the Disclosure Schedule lists each of the Company’s subsidiaries (the “ Subsidiaries ” ), their respective jurisdictions of incorporation or organization and the authorized, issued and outstanding capital stock of each Subsidiary. Except as set forth in Section 3.3 of the Disclosure Schedule, none of the Company or any Subsidiary holds an Equity Interest in any other Person. Each of the Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, and has all requisite power and authority to consummate the transactions contemplated hereby, to own, lease and operate its properties and to conduct its business. Each of the Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to obtain such qualification or license would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in Section 3.3 of the Disclosure Schedule, the outstanding shares of capital stock of each Subsidiary are duly authorized, validly issued, fully paid and non-assessable and, are owned by the Company, directly or through one or more Subsidiaries, free and clear of any Liens other than such Liens as set forth on Section 3.3 of the Disclosure Schedule. Except as set forth in Section 3.3 of the Disclosure Schedule, there are no shares of capital stock or other equity securities of any Subsidiary issued, reserved for issuance or outstanding and no outstanding options, warrants, convertible or exchangeable securities, subscriptions, rights (including any preemptive rights), stock appreciation rights, calls or commitments of any character whatsoever to which the Subsidiaries are a party or may be bound requiring the issuance or sale of shares of any capital stock of the Subsidiaries. There are no outstanding contractual obligations of the Company or any Subsidiary to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary or any other Person. None of the Subsidiaries is in violation of any of the provisions of their respective organizational documents.

3.4 No Violation; Consents and Approvals . Except as set forth in Section 3.4 of the Disclosure Schedule, the execution and delivery by the Company of this Agreement and the Ancillary Agreements to which it is a party do not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof and thereof will not, conflict with, or result in any violation of or default (or an event which, with notice or lapse of time or both, would constitute a default) under, (a) any provision of the organizational documents of the Company or any Subsidiary, (b) any material order or Applicable Law applicable to the Company or any Subsidiary or the property or assets of the Company or any Subsidiary, or (c) give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Lien upon any of the properties of the Company or any Subsidiary under, any Material Contract. Except as set forth in Section 3.4 of the Disclosure Schedule, no Governmental Approval is required to be obtained or made by or with respect to the Company or any Subsidiary in connection with the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party or the consummation of the transactions contemplated hereby or thereby.

3.5 Financial Statements . (a) The Company has heretofore (i) delivered to Parent copies of the audited consolidated balance sheet of the Company and the Subsidiaries as of December 31, 2003 and the related audited consolidated statements of operations, changes in stockholders equity and cash flows for the fiscal year then ended and (ii) delivered as Exhibit 3.5 hereto, the unaudited consolidated balance sheet of the Company and the Subsidiaries as of December 31, 2004 (the “ Balance Sheet ”) and the related unaudited consolidated statements of operations, changes in stockholders equity and cash flows for the fiscal year then ended (collectively, the “ Financial Statements ”). The Financial Statements (1) have been prepared from the books and records of the Company and the Subsidiaries, (2) fairly present in all material respects the consolidated financial condition and the results of operations and cash flows of the Company and the Subsidiaries as of the dates and for the periods indicated and (3) have been prepared in accordance with generally accepted accounting principles in the United States (“ GAAP ”) applied consistently throughout and among the periods covered thereby; provided , however , that the unaudited financial statements are subject to year-end adjustments and do not contain all footnotes required under GAAP.

(b) Except as set forth in Section 3.5(b) of the Disclosure Schedule, neither the Company nor any of the Subsidiaries has any liabilities or obligations of the type required to be reflected or disclosed in the financial statements prepared in accordance with GAAP, except for liabilities or obligations (i) disclosed or provided for in the Financial Statements, (ii) incurred since December 31, 2004 in the ordinary course of business or (iii) which, individually or in the aggregate, are not material to the Company and the Subsidiaries on a consolidated basis. To the Company’s Knowledge, neither the Company nor any of the Subsidiaries has any other liabilities or obligations (whether or not required to be disclosed in the financial statements prepared in accordance with GAAP), except for liabilities or obligations (1) set forth in the Disclosure Schedule or (2) which, together with any related liabilities and obligations, do not exceed $250,000.

(c) The Company maintains a system of internal accounting controls sufficient, in all material respects, to provide reasonable assurance that (i) transactions are executed with management’s authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s authorization and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(d) The accounting books and records of the Company, in reasonable detail, accurately and fairly reflect the activities of the Company in connection with its business. The Company has not engaged in any material transaction, maintained any bank account or used any material amount of corporate funds, except for transactions, bank accounts or funds which have been and are reflected in the normally maintained accounting books and records. The Company’s and the Subsidiaries’ stock records and minute books have been made available to Parent and accurately and fairly reflect all minutes of meetings, resolutions and other material actions and proceedings of its and their stockholders and board of directors and all committees thereof since April 14, 2000 and, to the Company’s Knowledge, all issuances, transfers and redemptions of capital stock of the Company.

(e) As of the date of this Agreement, the Company and the Subsidiaries have no Indebtedness other than the amounts outstanding under the Credit Agreement and as set forth in Section 2.2 of the Disclosure Schedule and, upon repayment of the Company Debt at the Closing in accordance with Section 2.2 , will have no Indebtedness as of the Closing Date.

3.6 Absence of Certain Changes or Events . Except as set forth in Section 3.6 of the Disclosure Schedule or as otherwise contemplated by this Agreement, since the date of the Balance Sheet, (i) the Company and the Subsidiaries have operated their businesses in the ordinary course of business consistent with past practices and (ii) the Company and the Subsidiaries have not engaged in any of the activities prohibited by Section 5.1(a) through (v) .

3.7 Personal Property . (a) Except as set forth in Section 3.7(a) of the Disclosure Schedule, the Company and the Subsidiaries have good and valid title to all material items of personal property, whether tangible or intangible, owned by them, and a valid and enforceable right to use all material tangible items of personal property leased by or licensed to them (collectively, the “ Personal Property ”), in each case, free and clear of all Liens, other than Permitted Liens.

(b) The Personal Property (i) constitutes, in the aggregate, all personal property necessary for the operation or conduct of the businesses of the Company and the Subsidiaries as conducted on the date hereof and (ii) is, in the aggregate, in such operating condition and repair, normal wear and tear excepted, adequate for the operation of the business of the Company and the Subsidiaries as conducted on the date hereof.

3.8 Real Property . (a) As used in this Agreement, the term “ Real Property ” shall mean all real property and interests in real property owned or leased by the Company or any of the Subsidiaries. Section 3.8(a) of the Disclosure Schedule lists all Real Property, and all leases, subleases and other occupancy agreements relative to any Real Property to which the Company or any of the Subsidiaries are a party (each, a “ Real Property Lease ”). Except as set forth in Section 3.8(a) of the Disclosure Schedule, the Real Property constitutes all parcels of real property and interests in real property used in, and necessary for, the conduct of the businesses of the Company and the Subsidiaries as conducted on the date hereof.

(b) With respect to each parcel of Real Property owned by the Company or any Subsidiary, except as set forth in Section 3.8(b) of the Disclosure Schedule, (i) the Company or such Subsidiary has good and marketable fee simple title to such parcel of real property, free and clear of any and all Encumbrances other than Real Estate Permitted Liens, (ii) there are no leases, subleases, licenses, options, rights, concessions or other agreements, granting to any Person the right of use or occupancy of any portion of such parcel of real property, except for those which constitute a Real Estate Permitted Lien, (iii) there are no outstanding options or rights of first refusal in favor of any other Person to purchase any such parcel of Real Property or any portion thereof or interest therein and (iv) there are no Persons (other than the Company or any Subsidiary) in possession of or using any such parcel of Real Property, except in connection with a Real Estate Permitted Lien.

(c) Except as set forth in Section 3.8(c) of the Disclosure Schedule, the Company and the Subsidiaries have valid leasehold interests in and enjoy peaceful and undisturbed possession of, the Real Property leased by them under each Real Property Lease, in each case, free and clear of all Encumbrances other than for Real Estate Permitted Liens none of which would permit the termination of the applicable Real Property Lease. With respect to each Real Property Lease, (i) there has been no material default under any such Real Property Lease by the Company or any Subsidiary or, to the Company’s Knowledge, by any other party thereto, (ii) the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby will not cause a default under any such Real Property Lease, (iii) to the Company’s Knowledge, such Real Property Lease is a valid and binding obligation of the lessor, is in full force and effect with respect to and is enforceable against the lessor in accordance with its terms, (iv) no action has been taken by the Company or any Subsidiary, and, to the Company’s Knowledge, no event has occurred, which with notice or lapse of time or both would permit termination, modification or acceleration by a party thereto (other than the Company or a Subsidiary) without the consent of the Company under any such Real Property Lease, (v) no party has repudiated in writing to the Company or any Subsidiary any term thereof or threatened in writing to the Company or any Subsidiary to terminate, cancel or not renew any such Real Property Lease and (vi) neither the Company nor any Subsidiary has assigned, transferred, conveyed, mortgaged or encumbered any such Real Property Lease other than with respect to the Real Estate Permitted Liens.

(d) Except as set forth in Section 3.8(d) of the Disclosure Schedule, there are no pending condemnation proceedings or eminent domain proceedings of any kind against, or any pending claims or actions relating to, the Real Property owned by the Company or, to the Company’s Knowledge, the Real Property leased by the Company and, to the Company’s Knowledge, none are threatened against such Real Property. The Company has not received notice of, and, to the Company’s Knowledge, no special assessment relating to any Real Property is pending or threatened.

(e) Except as set forth in Section 3.8(e) of the Disclosure Schedule, (i) all of the Real Property owned by the Company and, to the Company’s Knowledge, all Real Property leased by the Company has received all required Governmental Approvals (including, without limitation, a valid and current certificate of occupancy or similar permit), (ii) since April 14, 2000, all of the Real Property has been operated and maintained in all material respects in accordance with Applicable Law and (iii) to the Company’s Knowledge, there are no existing facts which would prevent any Real Property from being used after the Closing Date in a manner comparable to the present use prior to the Closing Date.

(f) Except as set forth in Section 3.8(f) of the Disclosure Schedule, all improvements on the Real Property are structurally sound in all material respects and in reasonably good maintenance and repair, normal wear and tear excepted.

(g) All of the Real Property is supplied with utilities (including, without limitation, water, sewage, disposal, electricity, gas and telephone) and other services necessary for the operation of the Real Property as currently operated, and, to the Company’s Knowledge, there is no condition which would reasonably be expected to result in the termination of the present access from the Real Property to such utility service.

3.9 Intellectual Property .

(a)  General . Section 3.9(a) of the Disclosure Schedule sets forth with respect to Proprietary Rights of the Company: (i) for each patent, the patent number for each jurisdiction in which filed and the date issued; (ii) for each patent application, the patent application serial number for each jurisdiction in which filed, the date filed and the present status thereof; (iii) for each trademark, tradename or service mark material to the Company’s business, whether or not registered, the application serial number or registration number (if any) for each jurisdiction in which filed and the class or nature of the goods or services covered thereby; (iv) for any domain name, the registration date, any renewal date and the name of registry; (v) for each registered copyrighted work, the number and date of registration for each jurisdiction in which each such copyright has been registered; (vi) a list of all Software incorporated in, provided with or otherwise necessary to use, directly support and directly maintain, the Company’s products, including all Software that the Company provides or makes available to its customers but excluding (A) any third party internet web sites or browsers (including any content, hyperlinks, graphical user interfaces, menus, images, icons and forms incorporated or embedded therein) to the extent that they are not otherwise provided to customers in connection with the Company’s products or services, and (B) Software excluded pursuant to the parenthetical in clause (vii) of this Section 3.9(a) ; (vii) all Proprietary Rights licenses from third parties for components or Software incorporated in the Company’s products (excluding “shrink-wrap” and “click-wrap” licenses and the related Software for generally available, commercial, off-the-shelf software that has not been modified) (“ Licenses In ”); and (viii) for each mask work currently used or contemplated to be used in the production of the Company’s products (if any), whether or not registered, the date of first commercial exploitation and if registered, the registration number and date of registration for each jurisdiction in which filed. Section 3.9(a) of the Disclosure Schedule also sets forth all firmware and Software that is incorporated in or provided by the Company with Company’s products, or that is otherwise materially necessary for the manufacture of the Company’s products.

(b)  Adequacy . The Proprietary Rights owned solely by the Company or licensed by the Company pursuant to Licenses In listed in Section 3.9(a) of the Disclosure Schedule, together with the Licenses In that, pursuant to the parenthetical in clause (vii) of Section 3.9(a) , are not required to be so listed, as well as any other third party components purchased by the Company and incorporated in the Company’s products, constitute all Proprietary Rights necessary for the conduct of the Company’s business as presently conducted, including the design, manufacture, license and sale of all products either under development and expected to be in production within the 12 months immediately following the date of this Agreement or currently in production, and all such Proprietary Rights are free and clear of Encumbrances, other than Permitted Encumbrances and the Encumbrances listed in Section 3.9(b) of the Disclosure Schedule.

(c)  Royalties and Licenses . Except pursuant to Licenses In, which are set forth in Section 3.9(a) of the Disclosure Schedule or are permitted to be excluded from such Schedule by the parenthetical in clause (vii) of Section 3.9(a) , and except for compensation paid to consultants in the ordinary course of business for development work performed solely for the benefit of the Company, the Company has no obligation to compensate or account to any Person for the use of any of the Company’s Proprietary Rights.

(d)  Ownership . The Company owns all right, title and interest in the Proprietary Rights, or has a valid and enforceable right to use the Software and technology and to exercise its rights under the Proprietary Rights, and such Proprietary Rights will not cease to be valid and enforceable rights of the Company by reason of the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby. Without limiting the foregoing, the technology that the Company owns or purports to own was: (i) developed by employees of the Company within the scope of their employment; (ii) developed by independent contractors who have assigned their rights to the Company pursuant to enforceable written agreements; or (iii) otherwise acquired by the Company from third parties that assigned all Proprietary Rights in each such technology to the Company.

(e)  Absence of Claims . The Company has not received any written notice alleging, nor otherwise has any knowledge as to, (i) the invalidity with respect to any of the Proprietary Rights owned or used by the Company, or (ii) any infringement, misappropriation or breach of any Proprietary Rights of a third party by the Company or the Company’s Proprietary Rights. Neither the Company’s past nor present use of Proprietary Rights infringes upon or misappropriates, breaches or otherwise conflicts with the rights of any other Person anywhere in the world. No Person (x) has notified the Company in writing that it is claiming any ownership of or right to use any Proprietary Rights which the Company purports to own or (y) to the Company’s Knowledge, is infringing upon or misappropriating any such Proprietary Rights in any way. The Software incorporated in the Company’s products currently performs in all material respects free of any bugs, viruses, worms, trojan horses, or programming errors affecting its functionality. None of the Software currently used or contemplated to be used in the Company’s products is, in whole or in part, subject to the provisions of any open source or quasi-open source license agreement in such a way that would obligate the Company to make its source code available to third parties or publish its source code, including without limitation, any of the following: (1) GNU’s General Public License (“ GPL ”) or Lesser/Library GPL, (2) The Artistic License (e.g., PERL), (3) the Mozilla Public License, (4) the Netscape Public License, (5) the Berkeley software design (“ BSD ”) license including Free BSD or BSD-style license, (6) the Sun Community Source License, (7) an Open Source Foundation License (e.g., CDE and Motif UNIX user interfaces), (8) the Apache Server license, or (9) any other agreement obligating the Company to make source code available to third parties or publish source code. The Company has made no submission or suggestion and is not subject to any agreement with standards bodies or other entities that would obligate the Company to grant licenses to or otherwise impair its control of its Proprietary Rights.

(f)  Protection of Proprietary Rights . All of the pending applications for the Company’s owned Proprietary Rights have been duly filed, prosecution for such applications has been attended to and all maintenance and related fees have been paid. The Company has taken reasonable steps necessary or appropriate (including entering into necessary and appropriate confidentiality and nondisclosure agreement with officers, employees, subcontractors, licencees and customers in connection with the Company’s business) to safeguard and maintain the secrecy and confidentiality of Trade Secrets that are material to the Company’s business. Each officer and employee of the Company has executed the Company’s form confidentiality and non-competition agreement and each technical employee and consultant of the Company has executed the Company’s form confidentiality and intellectual property assignment agreement. To the Company’s Knowledge: (i) there has been no misappropriation of any Trade Secrets or other confidential Proprietary Rights used in connection with and material to the Company’s business by any person; (ii) no employee, independent contractor or agent of the Company has misappropriated any Trade Secrets of any other person in the course of performance as an employee, independent contractor or agent of the Company’s business; and (iii) no employee, independent contractor or agent of the Company is in default or breach of any material term of any employment agreement, nondisclosure agreement, assignment of invention agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of the Proprietary Rights.

(g)  Export Control . The Company has obtained all approvals necessary for exporting the Company’s products, including Software, outside the United States in accordance with all applicable United States export control regulations, and importing the products and Software into any country in which the products and Software are now 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.

3.10 Litigation . Except as set forth in Section 3.10 of the Disclosure Schedule, there are no Actions pending, or, to the Company’s Knowledge, threatened (a) against, relating to or affecting the Company, any Subsidiary or their respective assets or employees that, if adversely determined, could reasonably be expected to result in a loss to the Company, individually or in the aggregate, in excess of $250,000, (b) seeking to enjoin or obtain damages in respect of the transactions contemplated by this Agreement, (c) that would prevent the Company or any Subsidiary from consummating the transactions contemplated by this Agreement or (d) that involve any potential criminal liability. None of such Actions (i) purport to be brought in a class or similar representative capacity or (ii) if adversely determined, could reasonably be expected to result in a Material Adverse Effect. Except as set forth in Section 3.10 of the Disclosure Schedule, there are presently no outstanding Orders against or affecting the Company, the Subsidiaries or any of their respective assets.

3.11 Employee Benefit Plans . (a) Section 3.11(a) of the Disclosure Schedule sets forth a complete list of all plans, contracts, agreements, practices, policies or arrangements, oral or written, providing for employment or for any bonuses, current or deferred compensation, excess benefits, pensions, retirement benefits, profit sharing, stock bonuses, stock options, stock purchases, life, accident and health insurance, hospitalization, vacation, severance pay, change of control payments or benefits, sick pay, leave, disability, tuition refund or other employee benefits, including, without limitation, any such plan, contract, agreement, practice, policy or arrangement which is an “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder (collectively, “ ERISA ”), including any “employee welfare benefit plan” as defined in Section 3(l) of ERISA (“ Welfare Plan ”) and any employee pension benefit plan as defined in Section 3(2) of ERISA (“ Pension Plan ”) providing employee benefits or compensation to current or former employees (or their dependents or beneficiaries) of the Company or any ERISA Affiliate maintained or contributed to by the Company or any ERISA Affiliate or to which the Company or any ERISA Affiliate is a party or under which the Company or any ERISA Affiliate could have any liability(each of the preceding hereinafter is referred to individually as a “ Plan ” and collectively as the “ Plans ”). Section 3.11(a) of the Disclosure Schedule further discloses whether each Plan that is an employee welfare benefit plan is (i) unfunded or self-insured, (ii) funded through a “welfare benefit fund,” as such term is defined in Section 419(e) of the Code or other funding mechanism or (iii) insured. Each Plan may be amended or terminated (including with respect to benefits provided to retirees and other former employees) without material liability (other than benefits then payable under such Plan without regard to such amendment or termination) to the Company or any ERISA Affiliate at any time after the Effective Time.

(b) With respect to each Plan, the Company has delivered or made available to Parent a current, accurate and complete copy thereof and, to the extent applicable: (i) all documents which comprise the most current version of each such Plan and any related trust agreement or other funding instrument; (ii) the most recent summary plan description for each such Plan; (iii) for the three most recent years (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial reports; and (iv) the most recent Internal Revenue Service (the “ IRS ”) determination for each Plan that is intended to be qualified within the meaning of Section 401(a) of the Code. No Plan is in violation of its requirements to timely file a Form 5500 in respect of the most recent year.

(c) Neither the Company nor the Subsidiaries is currently contributing to, or has in the past three years contributed to, nor had any liability in respect of, any plan subject to Title IV of ERISA or Section 412 of the Code or any multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.

(d) Except as set forth in Section 3.11(d) of the Disclosure Schedule, (i) for each Plan that is intended to be qualified under Code Section 401(a), the Company has obtained a favorable determination letter from the IRS to such effect, and, to the Company’s Knowledge, nothing has occurred, whether by action or inaction, that could reasonably be expected to cause the loss of such qualification, (ii) no Pension Plan has any “accumulated funding deficiency” within the meaning of Section 302(a) of ERISA and Section 412 of the Code, (iii) no “reportable event” within the meaning of Section 4043 of ERISA (other than reportable events for which the notice period has been waived) or “prohibited transaction” within the meaning of Section 406 of ERISA has occurred with respect to any Plan and no material tax has been imposed pursuant to Section 4975 or Section 4976 of the Code in respect thereof, and (iv) neither the Company nor the Subsidiaries has incurred any material liability to the Pension Benefit Guaranty Corporation with respect to any Plan.

(e) Except as set forth in Section 3.11(e) of the Disclosure Schedule, there are no claims, suits or actions pending or, to the Company’s Knowledge, threatened by or on behalf of any of the Plans, by any employee or beneficiary covered under any such Plan, or otherwise involving any such Plan (other than routine claims for benefits).

(f) Each Plan listed on Section 3.11(f) of the Disclosure Schedule is by its terms in material compliance, and has been operated in material compliance, with the provisions of ERISA, the Code, its governing documents and all other Applicable Law, including, without limitation, all notice and other requirements of the Health Insurance Portability and Accountability Act of 1996 (“ HIPAA ”).

(g) The Company and the Subsidiaries are in material compliance with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), and all other Applicable Laws which require the continuation of benefit coverage upon the happening of certain events, such as the termination of employment or change in beneficiary or dependent status. Neither the Company nor the Subsidiaries has any obligation to provide health or other non-pension benefits to retired or other former employees, except as specifically required by COBRA.

(h) There are no unpaid contributions due prior to the date hereof with respect to any Plan that are required to have been made.

(i) With respect to any Plan: (i) no filing, application or other matter is pending with the Internal Revenue Service, the Pension Benefit Guaranty Corporation (“ PBGC ”), the United States Department of Labor or any other governmental body, and (ii) there are no outstanding material liabilities for Taxes, penalties or fees.

(j) Neither the Company nor any ERISA Affiliate has incurred any liability or taken any action and none of them has any knowledge of any action or event that could cause any one of them to incur any liability under Section 412 of the Code or Title IV of ERISA. Except as set forth in Section 3.11(k) of the Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of any or all of the transactions contemplated by this Agreement will: (i) entitle any current or former employee of the Company or its ERISA Affiliates to severance or unemployment compensation or any similar payment, (ii) accelerate the time of payment or vesting or increase the amount of any compensation due to any such employee or former employee, or (iii) directly or indirectly result in any payment made or to be made to or on behalf of any person constituting a “parachute payment” within the meaning of Section 280G of the Code.

(k) Neither the Company nor its ERISA Affiliates has filed a notice of intent to terminate any Plan or adopted any amendment to treat any such Plan as terminated. The PBGC has not instituted proceedings to terminate any such Plan; and, to the Company’s Knowledge, no other event or condition has occurred which might constitute ground under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any such Plan.

(l) Neither the Company nor any of its Subsidiaries has any material liability or obligations, including under or on account of a Plan, arising out of the hiring of persons to provide services to the Company or any of its Subsidiaries and treating such persons as consultants or independent contractors and not as employees of the Company or any of its Subsidiaries.

(m) All Plans required to have been approved by or registered with any foreign governmental entity have been so approved, no such approval has been revoked (nor has revocation been threatened) and no event has occurred since the date of the most recent approval or application therefore relating to any such Plan that would reasonably be expected to adversely affect any such approval relating thereto or materially increase the costs relating thereto.

(n) None of the issued and outstanding Options are “incentive stock options” under Section 422 of the Code.

3.12 Taxes . Except as set forth in Section 3.12 of the Disclosure Schedule:

(a) the Company and its Subsidiaries have timely filed (after giving effect to applicable extensions) with the appropriate taxing authorities all Tax Returns (as hereinafter defined) required to be filed by or with respect to the Company and/or the Subsidiaries, either separately or as part of an affiliated group of corporations, pursuant to the laws of any Governmental Authority with taxing power over the Company, its Subsidiaries or their assets or businesses, on or prior to the Closing Date, and such Tax Returns were true, correct and complete. No written claim has ever been made by an authority in a jurisdiction where any of the Company and its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction;

(b) the Company and the Subsidiaries have timely paid all Taxes (as hereinafter defined) due and owing by the Company and the Subsidiaries on or before the Closing Date (whether or not shown to be due on any Tax Returns);

(c) the unpaid Taxes of the Company and its Subsidiaries did not, as of the date of the Balance Sheet, exceed the reserves for such Taxes as reflected in Section 3.12(c) of the Disclosure Schedule. Since the date of the Balance Sheet, neither the Company nor any of its Subsidiaries has incurred any liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice;

(d) no deficiencies for Taxes against any of the Company and its Subsidiaries have been claimed, proposed or assessed in writing by any taxing or other Governmental Authority. There are no pending or, to the Company’s Knowledge, threatened audits, assessments or other actions for or relating to any liability in respect of Taxes of any of the Company and its Subsidiaries, and, to the Company’s Knowledge, there are no matters under discussion with any Governmental Authorities with respect to Taxes that are likely to result in an additional liability for Taxes with respect to any of the Company and its Subsidiaries. The Company has delivered or made available to Parent complete and accurate copies of federal, state and local income Tax Returns of each of the Company and its Subsidiaries and their predecessors for the years ended December 31, 2001, 2002 and 2003, and complete and accurate copies of all examination reports and statements of deficiencies assessed against or agreed to by any of the Company and its Subsidiaries or any predecessors since December 31, 2000 relating to such income Tax Returns. Neither the Company nor any of its Subsidiaries nor any predecessor has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency;

(e) there are no Liens for Taxes other than Permitted Liens on any assets of any of the Company and its Subsidiaries;

(f) neither the Company nor any of its Subsidiaries (i) has consented at any time under former Section 341(f)(1) of the Code to have the provisions of former Section 341(f)(2) of the Code apply to any disposition of the assets of any of the Company and its Subsidiaries; (ii) has agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (iii) has made an election, or is required, to treat any of its assets as owned by another Person pursuant to the provisions of Section 168(f) of the Internal Revenue Code of 1954 or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; (iv) has acquired or owns any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; (v) has made or will make a consent dividend election under Section 565 of the Code; (vi) has elected at any time to be treated as an S corporation within the meaning of Section 1361 or 1362 of the Code; or (vii) made any of the foregoing elections or is required to apply any of the foregoing rules under any comparable state or local Tax provision;

(g) there are no Tax-sharing agreements or similar arrangements (including indemnity arrangements) with respect to or involving any of the Company and its Subsidiaries, and, after the Closing Date, none of the Company and its Subsidiaries shall be bound by any such Tax-sharing agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date;

(h) none of the Company and its Subsidiaries has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which is the Company). None of the Company and its Subsidiaries has any liability for the Taxes of any Person (other than Taxes of the Company and its Subsidiaries) (i) under Treasury regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise;

(i) each of the Company and its Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. The transaction contemplated herein is not subject to the tax withholding provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code or of any other provision of law;

(j) none of the Company and its Subsidiaries has been a United State real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;

(k) neither the Company nor any of its Subsidiaries (i) is a partner for Tax purposes with respect to any joint venture, partnership, or other arrangement or contract which is treated as a partnership for Tax purposes, (ii) owns a single member limited liability company which is treated as a disregarded entity, (iii) is a shareholder of a “controlled foreign corporation” as defined in Section 957 of the Code (or any similar provision of state, local or foreign law) or (iv) is a “personal holding company” as defined in Section 542 of the Code (or any similar provision of state, local or foreign law);

(l) neither the Company nor any of its Subsidiaries has or has 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;

(m) none of the outstanding indebtedness of any of the Company and its Subsidiaries constitutes indebtedness with respect to which any interest deductions may be disallowed under Sections 163(i), 163(l) or 279 of the Code or under any other provision of applicable law;

(n) neither the Company nor any of its Subsidiaries has distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code since April 16, 1997, and neither the stock of the Company nor the stock of any of its Subsidiaries has been distributed in a transaction satisfying the requirements of Section 355 of the Code since April 16, 1997; and

(o) neither the Company nor any of its Subsidiaries has entered into any transaction identified as a “listed transaction” for purposes of Treasury regulations Sections 1.6011-4(b)(2) or 301.6111-2(b)(2). If either the Company or any of its Subsidiaries has entered into any transaction such that, if the treatment claimed by it were to be disallowed, the transaction would constitute a substantial understatement of federal income tax within the meaning of Section 6662 of the Code, then it believes that it has either (i) substantial authority for the tax treatment of such transaction or (ii) disclosed on its Tax Return the relevant facts affecting the tax treatment of such transaction.

3.13 Contracts and Commitments . Section 3.13 of the Disclosure Schedule sets forth a list of all of the following agreements, contracts and commitments to which the Company or any of the Subsidiaries is a party or by which the Company, any of the Subsidiaries or their respective assets are bound (except for purchase orders for inventory by the Company or any of the Subsidiaries in the ordinary course of business) (each such contract of the type described in this Section 3.13 , whether or not set forth in Section 3.13 of the Disclosure Schedule, a “ Material Contract ”):

(a) employment agreements or severance agreements or employee termination arrangements or consulting agreements, in any such case, with respect to employees or consultants earning in excess of $50,000 per year;

(b) any change of control agreements with employees or consultants of the Company or the Subsidiaries earning in excess of $100,000 per year;

(c) agreements, contracts, commitments or arrangements containing any covenant limiting the ability of the Company or the Subsidiaries to engage in any line of business or to compete with any business or person;

(d) agreements or contracts (including loans or similar arrangements) with the Company or any affiliate of the Company (other than the Company and the Subsidiaries) or any past or present officer, director or employee of the Company or any of such affiliates (other than employment, severance and change of control agreements covered by clause (a) or (b) above);

(e) agreements or contracts under which the Company or the Subsidiaries has borrowed or loaned money, or any note, bond, indenture, mortgage, installment obligation or other evidence of indebtedness for borrowed or loaned money or any guarantee of such indebtedness, in each case, relating to amounts in excess of $100,000;

(f) joint venture agreements or other agreements involving the sharing of profits;

(g) leases pursuant to which (i) material personal property or (ii) real property is leased to or from the Company or the Subsidiaries;

(h) powers of attorney from the Company or any Subsidiaries;

(i) guaranties, suretyships or other contingent agreements of the Company or the Subsidiaries involving underlying obligations of not less than $100,000;

(j) any agreement, contract, commitment or arrangement relating to capital expenditures with respect to the Company or the Subsidiaries and involving future payments which exceed $100,000 in any 12-month period;

(k) any agreement, contract, commitment or arrangement relating to the acquisition of assets (other than in the ordinary course of business consistent with past practice) or any capital stock of any business enterprise;

(l) license or royalty agreements involving any form of Intellectual Property, whether the Company is the licensor or licensee thereunder (excluding licenses that are commonly available on standard commercial terms, such as software “shrink-wrap” license);

(m) confidentiality and non-disclosure agreements (whether the Company is the beneficiary or the obligated party thereunder), other than those related to (i) commercial transactions in the ordinary course of business that are not individually material and (ii) the sale or disposition of the Company that do not adversely affect the transactions contemplated by this Agreement or any Ancillary Agreement or the operation of the Company by Parent after the Effective Time assuming that Parent operates the Surviving Corporation in a manner substantially similar to the manner in which the Company has been operated prior to the Effective Time;

(n) contracts or commitments relating to commission arrangements that are material to the Company or its business;

(o) indemnification agreements, other than in connection with commercial transactions in the ordinary course of business;

(p) any contract with any Governmental Authority;

(q) any other contract under which the consequences of a default or termination would reasonably be expected to have a Material Adverse Effect;

(r) contracts (other than those covered by clause (a) through (q) above) pursuant to which the Company and the Subsidiaries will receive or pay in excess of $100,000 over the life of the contract; and

(s) any other material agreements, contracts and commitments not entered into in the ordinary course of business.

Complete and accurate copies of all Material Contracts, including all amendments and supplements thereto, have been delivered to Parent. Each Company Material Contract is valid and binding on the Company and each Subsidiary party thereto and, to the Company’s Knowledge, each other party thereto, and in full force and effect. With respect to the Material Contracts, neither the Company, the Subsidiaries nor, to the Company’s Knowledge, any other party to any such contract has failed to perform any material obligation thereunder or is in material breach thereof or default thereunder, and, to the Company’s Knowledge, no event has occurred which, with the giving of notice or the lapse of time, would constitute such a material breach or default.

3.14 Compliance with Laws . Except as set forth in Section 3.14 of the Disclosure Schedule and except with respect to the matters described in Sections 3.11 , 3.12 , 3.15 and 3.16 , the Company and the Subsidiaries are, and, to the Company’s Knowledge, at all times since April 14, 2000 have been, in compliance, in all material respects, with all Applicable Laws and all Orders of, and agreements with, any Governmental Authority applicable to the Company or the Subsidiaries or any of their respective assets or properties. Except as set forth in Section 3.14 of the Disclosure Schedule, the Company and the Subsidiaries have all material permits, certificates, licenses, approvals and other authorizations (collectively, “ Permits ”) required under Applicable Laws or necessary in connection with the ownership, lease and operation of their assets and properties and the conduct of their businesses, and all such Permits are in full force and effect.

3.15 Labor Matters . (a) Except as set forth in Section 3.15(a) of the Disclosure Schedule, (i) the Company and the Subsidiaries are, and at all times since April 14, 2000, have been in compliance in all material respects with all Applicable Laws regarding labor, employment, employment practices, employee classification, fair employment practices, terms and conditions of employment, independent contractors, child labor, work permits, workers’ compensation, occupational safety and wages and hours, (ii) there is no unfair labor practice charge or complaint against the Company nor the Subsidiaries pending before the National Labor Relations Board, (iii) there is no labor strike, slowdown, work stoppage or lockout in effect, or, to the Company’s Knowledge, threatened against the Company or the Subsidiaries, and the Company and the Subsidiaries have not experienced any such labor controversy since January 1, 2003, (iv) there is no material charge or complaint pending against the Company or the Subsidiaries before the Equal Employmen