STOCK PURCHASE AGREEMENT BETWEEN TYMPANY HOLDINGS, LLC, SONIC INNOVATIONS, INC., AND TYMPANY, INC

Exhibit 2.1

STOCK PURCHASE AGREEMENT

BETWEEN TYMPANY HOLDINGS, LLC,

SONIC INNOVATIONS, INC.,

AND

TYMPANY, INC.

Table of Contents

i

INDEX OF EXHIBITS

ii

Stock Purchase Agreement

This Stock Purchase Agreement ("Agreement") is made as of February 20, 2007, by Tympany Holdings, LLC, a Delaware limited liability company ("Buyer"), Sonic Innovations, Inc., a Delaware corporation ("Seller"), and Tympany, Inc., a Delaware corporation formerly known as Saxophone Acquisition Corporation and the surviving corporation of the merger pursuant to the Agreement and Plan of Reorganization defined below (the "Company").

RECITALS

Seller desires to sell, and Buyer desires to purchase, all of the issued and outstanding shares (the "Shares") of capital stock of the Company, for the consideration and on the terms set forth in this Agreement.

AGREEMENT

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

1. DEFINITIONS

For purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1:

" Agreement and Plan of Reorganization "—the Agreement and Plan of Reorganization by and among Sonic Innovations, Inc., Saxophone Merger Sub, Inc., Saxophone Acquisition Corporation, Tympany, Inc., the Shareholders of Tympany, Inc. and Christopher L. Wasden as Shareholder Representative dated December 6, 2004 pursuant to which Tympany, Inc. was merged with and into the Company.

" Applicable Contract "—any Contract (a) under which the Company has or may acquire any rights, (b) under which the Company has or may become subject to any obligation or liability, or (c) by which the Company or any of the assets owned or used by it is or may become bound.

" Balance Sheet "—as defined in Section 3.4.

" Best Efforts "—the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved as expeditiously as possible.

" Breach "—a "Breach" of a representation, warranty, covenant, obligation, or other provision of this Agreement or any instrument delivered pursuant to this Agreement will be deemed to have occurred if there is or has been (a) any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation, or other provision, or (b) any claim (by any Person) or other occurrence or circumstance that is or was inconsistent with such representation, warranty, covenant, obligation, or other provision, and the term "Breach" means any such inaccuracy, breach, failure, claim, occurrence, or circumstance.

" Buyer "—as defined in the first paragraph of this Agreement.

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" Buyer Indemnified Parties "—as defined in Section 5.2.

" Closing "—as defined in Section 2.5.

" Closing Date "—the date and time as of which the Closing actually takes place.

" Company "—as defined in the Recitals of this Agreement.

" Company Business " – the design, manufacture, distribution and sale of Company Products.

" Company Products " – the OTOGRAM ^® hearing diagnostic system and related components.

" Consent "—any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization).

" Contemplated Transactions "—all of the transactions contemplated by this Agreement, including:

• the sale of the Shares by Seller to Buyer;

  the performance by Buyer, Seller, and the Company of their respective covenants and obligations under this Agreement and the Transition Services Agreement; and

  Buyer’s acquisition and ownership of the Shares.

" Contract "—any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding.

" Disclosure Schedules "—the Disclosure Schedules delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement.

" Encumbrance "—any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

" Environment "—soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwater, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource.

" Environmental, Health, and Safety Liabilities "—any cost, damages, expense, liability, obligation, or other responsibility arising from or under Environmental Law or Occupational Safety and Health Law and consisting of or relating to:

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• (a) any environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products);

  (b) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law;

  (c) financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions ("Cleanup") required by applicable Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or any other Person) and for any natural resource damages; or

  (d) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law.

The terms "removal," "remedial," and "response action," include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., as amended ("CERCLA").

" Environmental Law "—any Legal Requirement that requires or relates to:

• (a) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that could have significant impact on the Environment;

  (b) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment;

  (c) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated;

  (d) assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of;

  (e) protecting resources, species, or ecological amenities;

  (f) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances;

  (g) cleaning up pollutants that have been released, preventing the threat of release, or paying the costs of such clean up or prevention; or

  (h) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.

" ERISA "—the Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to that Act or any successor law.

" Facilities "—any real property, leaseholds, or other interests currently or formerly owned or operated by the Company and any buildings, plants, structures, or equipment (including motor vehicles, tank cars, and rolling stock) currently or formerly owned or operated by the Company.

" Financial Statements "—those documents called for in Section 3.4.

" GAAP "—generally accepted United States accounting principles, applied on a basis consistent with the basis on which the Balance Sheet and the other financial statements referred to in Section 3.4(b) were prepared.

"Governmental Authorization "—any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

" Governmental Body "—any:

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• (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature;

  (b) federal, state, local, municipal, foreign, or other government;

  (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal);

  (d) multi-national organization or body; or

  (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

" Hazardous Activity "—the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about, or from the Facilities or any Schedule thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the value of the Facilities or the Company.

" Hazardous Materials "—any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials.

" Indemnified Costs "—as defined in Section 5.2.

" Indemnified Party "—as defined in Section 5.4.

" Indemnifying Party "—as defined in Section 5.4.

" Intellectual Property Assets "—as defined in Section 3.22.

" IRC "—the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.

" IRS "—the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

" Knowledge "—an individual will be deemed to have "Knowledge" of a particular fact or other matter if:

• (a) such individual is actually aware of such fact or other matter; or

  (b) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter if such investigation were reasonably warranted.

A Person (other than an individual) will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is serving as a director, officer, partner, executor, or trustee of such Person (or in any similar capacity) has Knowledge of such fact or other matter.

" Legal Requirement "—any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty.

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" Material Adverse Effect "—any change, effect, event, occurrence or state of facts that is materially adverse to the business, or the properties, results of operations, financial condition or prospects of a company.

" Net Company Product Revenue "—the amount of net revenue recognized by the Company, without duplication, in accordance with GAAP and the Company’s revenue recognition policies from the sale of, or revenues generated from services associated with, Company Products in effect as of the date of this Agreement.

" Occupational Safety and Health Law "—any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.

" Order "—any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.

" Ordinary Course of Business "—an action taken by a Person will be deemed to have been taken in the "Ordinary Course of Business" only if:

• (a) such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person;

  (b) such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority) and is not required to be specifically authorized by the parent company (if any) of such Person; and

  (c) such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person.

" Organizational Documents "—(a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (e) any amendment to any of the foregoing.

" Permitted Encumbrances "—(a) liens for Taxes not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings and which are subject to reasonable reserves; (b) mechanics, materialmen, and similar Encumbrances incurred in the ordinary course of business consistent with past practice securing amounts not yet due and payable or being contested in good faith by appropriate proceedings and which are subject to reasonable reserves; (c) zoning, entitlement, building and other land use regulations imposed by governmental bodies having jurisdiction over the real property owned or used by the Company that are not violated by the current use and operation of such real property; (d) covenants, conditions, restrictions, easements and other similar matters that appear in the title commitments or insurance policies set forth in Schedule 3.6 of the Disclosure Schedules or that do not, individually or in the aggregate, materially impair the ownership, occupancy, use, or insurability of the real property as currently owned, used and operated by the Company; (e) purchase money security interests incurred in the ordinary course of business consistent with past practices; (f)

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Encumbrances disclosed in, or existing by virtue of the Contracts identified on Schedule 3.17 of the Disclosure Schedules; and (g) any Encumbrances related to retained debt.

" Person "—any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.

" Plan "—as defined in ERISA § 3(3), and any other employment, consulting, severance, change in control, salary continuation, bonus, incentive, savings, insurance, retention, retirement, deferred compensation, vacation, sick leave, sick pay, health, medical, vision, disability, life, welfare benefit, stock purchase, stock option, equity, fringe benefit or other compensatory plans, policies, agreements or arrangements (whether written or unwritten, insured or self-insured, or domestic or foreign) sponsored, maintained or contributed to by Seller or the Company on behalf of any employee, officer, director, shareholder or service provider of the Company (whether current, former or retired) or their beneficiaries or with respect to which the Company has or could reasonably be expected to have any obligation or liability.

" Proceeding "—any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

" Related Person "—with respect to a particular individual:

• (a) each other member of such individual’s Family;

  (b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual’s Family;

  (c) any Person in which such individual or members of such individual’s Family hold (individually or in the aggregate) a Material Interest; and

  (d) any Person with respect to which such individual or one or more members of such individual’s Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity).

With respect to a specified Person other than an individual:

• (a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person;

  (b) any Person that holds a Material Interest in such specified Person;

  (c) each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity);

  (d) any Person in which such specified Person holds a Material Interest;

  (e) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and

  (f) any Related Person of any individual described in clause (b) or (c).

For purposes of this definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual’s spouse and former spouses, (iii) any other natural person who is related to the individual or the individual’s spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least 10% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 10% of the outstanding equity securities or equity interests in a Person.

" Release "—any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, or other releasing into the Environment, whether intentional or unintentional.

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" Representative "—with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.

" Securities Act "—the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law.

" Seller Indemnified Parties "—as defined in Section 5.3.

" Seller "—as defined in the first paragraph of this Agreement.

" Shares "—as defined in the Recitals of this Agreement.

" Subsidiary "—with respect to any Person (the "Owner"), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation’s or other Person’s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one or more of its Subsidiaries; when used without reference to a particular Person, "Subsidiary" means a Subsidiary of the Company.

" Tax "—any tax (including income tax, capital gains tax, value added tax, sales tax, property tax, gift tax, or estate tax), levy, assessment, tariff, duty (including any customs duty), deficiency or other fee, and any related charge or amount (including any fine, penalty, interest or addition to tax), imposed, assessed or collected by or under the authority of any Governmental Body or payable pursuant to any tax-sharing agreement or any other Contract relating to the sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency or fee.

" Tax Return "—any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.

" Third-Party Action "—as defined in Section 5.4.

" Threat of Release "—a substantial likelihood of a Release that may require action in order to prevent or mitigate damage to the Environment that may result from such Release.

" Threatened "—a claim, Proceeding, dispute, action, or other matter will be deemed to have been "Threatened" if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.

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2. SALE AND TRANSFER OF SHARES

2.1 SHARES

Subject to the terms of this Agreement, Seller hereby sells and transfers the Shares to Buyer, and Buyer hereby purchases the Shares from Seller.

2.2 PURCHASE PRICE

The purchase price (the "Purchase Price") for the Shares will be $2,000,000, plus the amount, if any, payable pursuant to Section 2.3 below. The Purchase Price shall be paid as follows:

• • • $600,000 to be paid upon Closing;

      $466,666.66 to be paid to Seller three (3) months after the Closing;

      $466,666.66 to be paid to Seller six (6) months after the Closing; and

      $466,666.68 to be paid to Seller nine (9) months after the Closing.

The Buyer’s obligation to make the payments specified in Section 2.2(a)(ii)-(iv) and Section 2.3 will be guaranteed by a Guaranty Agreement in the form attached hereto as Exhibit B and executed by each member of Buyer.

2.3 ADDITIONAL PURCHASE PRICE BASED ON EARN-OUT

In addition to payment of the Purchase Price as set forth above in Section 2.2, Buyer will provide Seller with a statement setting forth the calculations of the payments set forth below and will pay to Seller within twenty-five days following the end of the period beginning on the Closing Date and ending June 30, 2007, and of the period beginning July 1, 2007 and ending December 31, 2007:

• 35% of (.35 multiplied by) Net Company Product Revenue in such semiannual period of 2007 to the extent in excess of the Net Company Product Revenue in the corresponding semiannual period of 2006 (which Net Company Product Revenue in the corresponding periods of 2006 are set forth in Schedule 3.29 of Seller’s Disclosure Schedules); and

  20% of (.20 multiplied by) the lesser of (A) Net Company Product Revenue in the corresponding semiannual period of 2006, or (B) Net Company Product Revenue in such semiannual period of 2007.

Notwithstanding any other provision of this Agreement, Buyer retains the right, in its sole discretion, to refuse to enter into any agreement, understanding or arrangement that might or would lead to Net Company Product Revenue if the Board of Directors of the Company determines in its good faith business judgment that the approval of such action would breach the directors’ fiduciary duties to the Company and its stockholders.

Buyer and Seller acknowledge that the payments made pursuant to Section 2.3(a)(i) and (ii) (the "Earnout Payments") above will be paid by the Seller directly (less any off sets set forth in the Agreement and Plan of Reorganization) to the prior shareholders of the Company. The Agreement and Plan of Reorganization provides the prior shareholders with a mechanism to challenge the calculation of the Earnout Payments. In the event of such a challenge, Buyer agrees, at Seller’s expense, to cooperate with Seller to respond to the challenge and will provide such documentation as is necessary to respond to the challenge. Neither Buyer nor the Company shall have any liability to such prior shareholders by virtue of this Agreement.

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Within 15 days after the end of each calendar month during the period from Closing until December 31, 2007, Buyer will cause the Company to pay Seller 20% of the Company’s Net Company Product Revenue during such preceding month as an advance payment toward the amounts payable pursuant to Section 2.3(a)(i) and (ii) above. If additional amounts are to be paid to Seller pursuant to Section 2.3(a)(i), then Buyer will cause the Company to pay such additional amounts within 25 days after the end of each period specified in (a) above.

Buyer agrees that it will cause the Company to account for sales of Company Products from Closing to December 31, 2007 in accordance with the way the Company currently accounts for sales of Company Products, (i.e., sales will be recognized upon installation of the sold Product).

2.4 EXCLUDED ASSETS AND LIABILITIES

• The Company has assigned to Seller, and Seller has assumed all of the Company’s obligations under the lease for the Stafford, Texas facility. As reflected in the Tympany Balance Sheet included in Schedule 3.4, (i) certain accounts payable in the amount of $384,987 and accrued expenses in the amount of $41,315 (each as of January 31, 2007) will be assigned by the Company to Seller, and Seller agrees to assume, pay and discharge such liabilities when and as due, and (ii) all intercompany payables owed by the Company to Seller ($12,550,760 as of January 31, 2007) will be forgiven at the Closing.

2.5 CLOSING

The purchase and sale (the "Closing") provided for in this Agreement will take place upon the execution of this Agreement.

2.6 CLOSING OBLIGATIONS

At the Closing:

• Seller will deliver to Buyer certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers).

  Buyer will deliver to Seller:

  • • $600,000.00 by wire transfer to an account specified by Seller; and Executed Guaranty Agreements.

Seller and the Company shall enter into the Transition Services Agreement in the form attached hereto as Exhibit A. The Transition Services Agreement will provide that the Seller will continue to provide a comparable level of service to the Company that it currently provides for the period of time specified therein at a rate equal to the cost to the Seller to provide the services plus ten percent (10%).

3. REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer as follows, with the intention that Buyer may rely upon the same, and acknowledge that the same shall survive the Closing:

3.1 ORGANIZATION AND GOOD STANDING

Schedule 3.1 of the Disclosure Schedules contains a complete and accurate list of the Company’s name, its jurisdiction of incorporation, other jurisdictions in which it is authorized to do business, and its capitalization. The Company is a corporation duly organized, validly existing, and in good standing under the laws of Delaware, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under Applicable Contracts. The Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification.

Seller has delivered to Buyer copies of the Organizational Documents of the Company, as currently in effect.

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3.2 AUTHORITY; NO CONFLICT

This Agreement constitutes, and upon execution and delivery the Transition Services Agreement will constitute, the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms. Seller has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Transition Services Agreement and to perform its obligations hereunder and thereunder.

Except as set forth in Schedule 3.2 of the Disclosure Schedules, neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time):

• contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of the Company, or (B) any resolution adopted by the board of directors or the stockholders of the Company or Seller;

  contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Company or Seller, or any of the assets owned or used by the Company, may be subject;

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

  cause Buyer or the Company to become subject to, or to become liable for the payment of, any Tax;

  cause any of the assets owned by the Company to be reassessed or revalued by any taxing authority or other Governmental Body;

  contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; or

  result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by the Company.

Except as set forth in Schedule 3.2 of the Disclosure Schedules, neither Seller nor the Company is or will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

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3.3 CAPITALIZATION

The authorized equity securities of the Company consist of 1,000 shares of common stock, par value $.001 per share, of which 1,000 shares are issued and outstanding and constitute the Shares. Seller is the record and beneficial owner and holder of the Shares, free and clear of all Encumbrances. No other equity securities or other securities of the Company are outstanding. No legend or other reference to any purported Encumbrance appears upon any certificate representing equity securities of the Company. All of the outstanding equity securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. There are no Contracts relating to the issuance, sale, or transfer of any equity securities or other securities of the Company. None of the outstanding equity securities or other securities of the Company was issued in violation of the Securities Act or any other Legal Requirement. The Company does not own, or have any Contracts to acquire, any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business.

3.4 FINANCIAL STATEMENTS

Seller has delivered to Buyer: (a) unaudited balance sheets of the Company as at December 31, 2005 and 2006, and the related statements of income for the years then ended, and (b) an unaudited balance sheet of the Company as at January 31, 2007 (the "Balance Sheet"). Such financial statements are true and correct and fairly present the financial condition and the results of operations, of the Company as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP; the financial statements referred to in this Section 3.4 reflect the consistent application of such accounting principles throughout the periods involved. No financial statements of any Person other than the Company are required by GAAP to be included in the financial statements of the Company.

3.5 BOOKS AND RECORDS

The books of account, minute books, stock record books, and other records of the Company, all of which have been made available to Buyer, are complete and correct and have been maintained in accordance with sound business practices and the requirements of Section 13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless of whether or not the Company is subject to that section), since December 6, 2004, including the maintenance of an adequate system of internal controls. The minute books of the Company contain accurate and complete records of all meetings held of, and corporate action taken by, the stockholders, the Boards of Directors, and committees of the Boards of Directors of the Company since December 6, 2004, and no meeting of any such stockholders, Board of Directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company.

3.6 TITLE TO PROPERTIES; ENCUMBRANCES

Schedule 3.6 of the Disclosure Schedules contains a complete and accurate list of all real property, leaseholds, or other interests therein owned by the Company. Seller has delivered or made available to Buyer copies of the deeds and other instruments (as recorded) by which the

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Company acquired such real property and interests, and copies of all title insurance policies, opinions, abstracts, and surveys in the possession of Seller or the Company and relating to such property or interests. The Company owns (with good and marketable title in the case of real property, subject only to the matters permitted by the following sentence) all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) used in or necessary to the conduct of the Company’s business, including those located in the facilities owned or operated by the Company or reflected as owned in the books and records of the Company, including the Balance Sheet (except for assets held under capitalized leases disclosed or not required to be disclosed in Schedule 3.6 of the Disclosure Schedules and personal property sold since the date of the Balance Sheet, as the case may be, in the Ordinary Course of Business), and all of the properties and assets purchased or otherwise acquired by the Company since the date of the Balance Sheet (except for personal property acquired and sold since the date of the Balance Sheet in the Ordinary Course of Business and consistent with past practice). All material properties and assets reflected in the Balance Sheet are free and clear of all Encumbrances and are not, in the case of real property, subject to any rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature except, with respect to all such properties and assets, (a) mortgages or security interests shown on the Balance Sheet as securing specified liabilities or obligations, with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists, (b) mortgages or security interests incurred in connection with the purchase of property or assets after the date of the Balance Sheet (such mortgages and security interests being limited to the property or assets so acquired), with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists, (c) liens for current taxes not yet due, and (d) with respect to real property, (i) minor imperfections of title, if any, none of which is substantial in amount, materially detracts from the value or impairs the use of the property subject thereto, or impairs the operations of the Company, and (ii) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. All buildings, plants, and structures owned by the Company lie wholly within the boundaries of the real property owned by the Company and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person.

3.7 CONDITION AND SUFFICIENCY OF ASSETS

The buildings, plants, structures, and equipment of the Company are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, or equipment is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. The building, plants, structures, and equipment of the Company are sufficient for the continued conduct of the Company’s business after the Closing in substantially the same manner as conducted prior to the Closing.

3.8 ACCOUNTS RECEIVABLE

All accounts receivable of the Company that are reflected on the Balance Sheet or on the accounting records of the Company as of the Closing Date (collectively, the "Accounts Receivable") represent or will represent valid obligations arising from sales actually made or services actually performed in the Ordinary Course of Business. Unless paid prior to the Closing

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Date, the Accounts Receivable are or will be as of the Closing Date current and collectible net of the respective reserves shown on the Balance Sheet or on the accounting records of the Company as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the Accounts Receivable as of the Closing Date than the reserve reflected in the Interim Balance Sheet represented of the