AGREEMENT AND PLAN OF MERGER BY AND AMONG EVOLVING SYSTEMS, INC., TOPAZ MERGER SUB, INC., TELESPREE COMMUNICATIONS, AND, WITH RESPECT TO SECTIONS 1.8, 1.9, 2.2, 2.4, 5.1, 5.2, AND 6.3, ARTICLE VII AND ARTICLE VIII ONLY, GILL COGAN, AS THE EXCLUSIVE REPRESENTATIVE OF THE EFFECTIVE TIME SHAREHOLDERS AND CHANGE IN CONTROL PAYMENT RECIPIENTS Dated as of October 24, 2013

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

EVOLVING SYSTEMS, INC.,

TOPAZ MERGER SUB, INC.,

TELESPREE COMMUNICATIONS,

AND,

WITH RESPECT TO SECTIONS 1.8, 1.9,  2.2, 2.4, 5.1, 5.2, AND 6.3, ARTICLE VII AND
ARTICLE VIII ONLY,

GILL COGAN,
AS THE EXCLUSIVE REPRESENTATIVE
OF THE EFFECTIVE TIME SHAREHOLDERS AND CHANGE IN CONTROL PAYMENT
RECIPIENTS

Dated as of October 24, 2013

TABLE OF CONTENTS

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of October 24, 2013 by and among Evolving Systems, Inc., a Delaware corporation (“Parent”), Topaz Merger Sub, Inc., a California corporation and wholly owned Subsidiary of Parent (“Merger Sub”), Telespree Communications, a California corporation (the “Company”), and, with respect to Sections 1.8, 1.9, 2.2, 2.4, 5.1, 5.2, and 6.3, Article VII and Article VIII only, Gill Cogan, solely in his capacity as the exclusive representative of the Effective Time Shareholders (as defined herein) and the Change in Control Payment Recipients (as defined herein) in connection with the transactions contemplated by this Agreement (“Representative”).

W I T N E S S E T H:

WHEREAS, the Company Board of Directors has determined that the merger of Merger Sub with and into the Company (the “Merger”), pursuant to which, among other things, (i) each outstanding share of Company Capital Stock will be cancelled and converted into the right to receive the consideration set forth herein, and (ii) the Company will become a wholly owned Subsidiary of Parent, as well as all of the other transactions contemplated by this Agreement, are fair to and in the best interests of the Company and its shareholders, and in furtherance thereof, the Company Board of Directors has determined that this Agreement is advisable and has approved this Agreement in accordance with applicable provisions of the California Corporations Code (the “CCC”), and has approved the Merger and the other transactions contemplated by this Agreement.

WHEREAS, the Company Board of Directors has resolved to unanimously recommend that the Company Shareholders adopt this Agreement in accordance with California Law and approve the Merger and the other transactions contemplated by this Agreement.

WHEREAS, the Company has obtained  (and delivered to Parent) an irrevocable written consent, in the form attached hereto as Exhibit A (the “Shareholder Written Consent”), from Company Shareholders who collectively hold more than fifty percent (50%) of the outstanding shares of (i) Company Preferred Stock, voting together as a single class on an as-converted-to-Company-Common Stock basis, and (ii) Company Common Stock (the Company Shareholder approvals described in clauses (i) and (ii) being referred to herein as the “Required Shareholder Approval”).

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent and Merger Sub to enter into this Agreement, the persons listed on Schedule 6.2(n) have entered into and delivered to Parent Non-Competition Agreements (the “Non-Competition Agreements”) to be effective upon the Closing Date.

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent and Merger Sub to enter into this Agreement, the persons listed on Schedule 6.2(i) have entered into and delivered to Parent limited release agreements with respect to the their rights with respect to receipt of bonus payments related to the consummation of the Merger (the “Change in Control Payment Release”).

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WHEREAS, each of the Company, on the one hand, and Parent and Merger Sub, on the other hand, desire to make certain representations, warranties, covenants and agreements to the other in connection with and contemplation of the Merger and the other transactions contemplated hereby.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereby agree as follows:

Article I.
THE MERGER

1.1       The Merger.  Upon the terms and subject to the conditions set forth in this Agreement and the applicable provisions of California Law, at the Effective Time, Merger Sub shall be merged with and into the Company, whereupon the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation and as a wholly owned Subsidiary of Parent.  The Company as the surviving corporation of the Merger is hereinafter sometimes referred to herein as the “Surviving Corporation.”

1.2       Effective Time.  Upon the terms and subject to the conditions set forth in this Agreement, the parties hereto shall cause the Merger to become effective by filing an agreement of merger in substantially the form attached hereto as Exhibit B, together with accompanying officers’ certificates in customary form (collectively, the “Agreement of Merger”) with the Secretary of State of the State of California in accordance with the relevant provisions of California Law, as soon as practicable after the Closing (but in any event on the Closing Date if the Closing occurs at a time at which such filings are accepted for filing by the Secretary of State of the State of California, or the first business day thereafter if the Closing occurs at a time at which such filings are not accepted for filing by the Secretary of State of the State of California). The actual time of acceptance of such filing by the Secretary of State of the State of California (or any later time as may be mutually agreed upon in writing by Parent and the Company and expressly designated as the effective time of the Merger in the Agreement of Merger) is referred to herein as the “Effective Time.”

1.3       Closing.  The Merger shall be consummated at a closing (the “Closing”) to occur on the date hereof or as soon as practicable thereafter, at the offices of Bryan Cave LLP, 1700 Lincoln St., Suite 4100, Denver, Colorado, 80203, unless another date and/or place is mutually agreed upon in writing by Parent and the Company.  The date upon which the Closing actually occurs hereunder is referred to herein as the “Closing Date.”

1.4       Effect of the Merger.  At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Agreement of Merger and the applicable provisions of California Law.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

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1.5       Articles of Incorporation; Bylaws; Corporate Records.

(a)                                 Articles of Incorporation.  Unless otherwise determined by Parent prior to the Effective Time, at the Effective Time, the Amended and Restated Articles of Incorporation, dated as of July 6, 2006, of the Company, as amended and in effect immediately prior to the Effective Time (the “Charter” and, together with the Bylaws of the Company, as in effect immediately prior to the Effective Time, the “Company Organizational Documents”), shall be amended and restated in its entirety to read as set forth in Exhibit F.  The articles of incorporation as so amended and restated shall be the articles of incorporation of the Surviving Corporation until thereafter amended in accordance with the CCC and such articles of incorporation.

(b)                                 Bylaws.  Unless otherwise determined by Parent prior to the Effective Time, at the Effective Time, the Bylaws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated to be identical to the bylaws substantially in the form attached hereto as Exhibit G.  The bylaws as so amended and restated shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with the CCC, the articles of incorporation of the Surviving Corporation and such bylaws; provided, however, that any references to the name of Merger Sub in such bylaws shall be amended to refer to “Evolving Systems Labs, Inc.”

(c)                                  Corporate Records.  At the Closing, the Company or its agents shall have control of the original stock books, stock ledgers, minute books and corporate seal, if any, of the Company and other controlled Affiliates (if any).

1.6       Directors and Officers of Surviving Corporation.

(a)                                 Directors.  Unless otherwise determined by Parent prior to the Effective Time, the directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or their earlier death, resignation or removal.

(b)                                 Officers.  Unless otherwise determined by Parent prior to the Effective Time, the officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or their earlier death, resignation or removal.

1.7       Consideration.  The aggregate consideration payable by Parent in respect of the Merger shall be (a) (i) $1,000,000 in cash, as may be adjusted pursuant to Section 1.8(a)(ii) (the “Initial Cash Payment”) and (ii) shares of Parent Common Stock with an aggregate value of $790,763, based on the fifteen (15) day volume-weighted average price as of the day immediately prior to Closing (the “Stock Consideration”), each delivered at the Closing (the “Initial Merger Consideration”) plus (b) $500,000 in cash, as may be adjusted pursuant to Sections 1.8(b)(ii) and 7.2(g) (the “Final Cash Payment”), which shall be delivered one (1) year from the Effective Time, minus (c) the Transaction Expenses  plus (d) the Deferred Payments, as may be adjusted by Section 7.2(g) (collectively, the “Merger Consideration”).

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1.8       Adjustment Amount.

(a)                                 Pre-Closing Adjustment.

(i)             Not later than 5:00 p.m. Denver, Colorado, time on the date that is two Business Days before the Closing Date, the Company shall have delivered to Parent draft estimated financial statements (“Preliminary Financial Statements”) of Company as of the Closing Date, including the Company’s good faith determination of the Working Capital as of the Closing Date and the Adjustment Amount (the “Estimated Adjustment Amount”).

(ii)          If the Estimated Adjustment Amount is positive, Parent shall increase the amount of the Initial Cash Payment by the amount of such surplus; and if the Adjustment Amount is negative, Parent may reduce the amount of the Initial Cash Payment by the amount of such deficit; provided that if such portion of the Initial Cash Payment is not sufficient, then the Final Cash Payment shall be reduced by the amount of such additional deficiency.

(b)                                 Final Adjustment.

(i)             Parent and the Surviving Corporation will prepare (or cause to be prepared) financial statements (“Closing Financial Statements”) of Company as of the Closing Date, including Parent’s good faith determination of the Working Capital as of the Closing Date and the Adjustment Amount.  Parent will deliver the Closing Financial Statements to Representative within sixty (60) days after the Closing Date.  During the thirty (30) days immediately following the Representative’s receipt of the Closing Financial Statements (“Review Period”), the Representative will be permitted to make commercially reasonable inquiries of Parent and the Surviving Corporation and their respective employees, accountants and representatives for purposes of determining whether the Representative has any reasonable basis for objection to the Closing Financial Statements and Working Capital and Adjustment Amount calculations.  Parent, the Surviving Corporation will, and Parent and the Surviving Corporation will use commercially reasonable efforts to cause their respective auditors to  make themselves reasonably available to the Representative and its auditors, employees and other advisors, and make reasonably available to the Representative and its auditors, employees and other advisor, all records and work papers used in preparing the Closing Financial Statements and Working Capital and Adjustment Amount calculations.  Assuming such cooperation of Parent, the Surviving Corporation and their respective employees, accountants and representatives, the Working Capital and Adjustment Amount calculations shall be deemed accepted and conclusive and binding, unless Representative shall give written notice to Parent of the items with which Representative, on behalf of the Effective Time Shareholders and Change in Control Payment Recipients, disagrees (“Disagreement Notice”) within thirty (30) days of the actual receipt by Representative of the Closing Financial Statements (“Disagreement Notice Date”).  The Disagreement Notice shall specify each item disagreed with by Representative (or Representative’s calculation thereof) and the dollar amount of the disagreement and specify in reasonable detail the basis for each disagreement.  Parent and Representative shall, during the twenty (20) days after receipt by Parent of the Disagreement Notice, negotiate in good faith to resolve any such disagreements

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with respect to the Closing Financial Statements and Working Capital and Adjustment Amount calculations.  If at the end of such twenty (20) days, the parties have been unable to resolve their disagreements, such disagreements shall be resolved by KPMG LLP, (the “Unaffiliated Firm”).  The Unaffiliated Firm shall (i) resolve the disagreement as to the Closing Financial Statements as promptly as possible after its engagement by the parties, (ii) consider and resolve only those items in the Disagreement Notice which remain unresolved between Parent and Representative, and (iii) otherwise employ such procedures as it, in its sole discretion, deems necessary or appropriate under the circumstances.  The determination of the Unaffiliated Firm shall be in accordance with the standards set forth in this Section 1.8.  The Unaffiliated Firm shall submit to the parties a report (the “Unaffiliated Firm Report”) of its review of the items in the Disagreement Notice as promptly as practicable and shall include in the Unaffiliated Firm Report its calculation of the Working Capital and the Adjustment Amount, which adjustments shall be no more favorable to Parent than reflected in the Closing Financial Statements, and no more favorable to the Effective Time Shareholders and the Change in Control Payment Recipients than reflected in the Disagreement Notice.  The date Parent and Representative receive the Unaffiliated Firm Report shall be the “Unaffiliated Firm Report Date.”  The calculations so made by the Unaffiliated Firm in the Unaffiliated Firm Report shall be conclusive and binding on, and non-appealable by, the parties hereto.  If the Unaffiliated Firm’s determination of Working Capital is closer to the value initially asserted by Parent to the Unaffiliated Firm, then the Effective Time Shareholders and Change in Control Payment Recipients will pay the fees, costs and disbursements of the Unaffiliated Firm, and the Representative is authorized to pay such fees, costs and disbursements by instructing Parent to deduct the amount thereof from the Final Cash Payment.  If the Unaffiliated Firm’s determination of Working Capital is closer to the value initially asserted by the Representative to the Unaffiliated Firm, then Parent will pay the fees, costs and disbursements of Unaffiliated Firm.  Each of Parent and the Representative shall promptly cooperate in good faith with the Unaffiliated Firm to assist in the Unaffiliated Firm’s preparation of the Unaffiliated Firm Report, including making available to the extent necessary their respective books, records, work papers, and personnel from and after the Closing Date until the Unaffiliated Firm Report.

(ii)          On the third (3rd) business day following the final determination of the Adjustment Amount (such date to be the Disagreement Notice Date or the Unaffiliated Firm Report Date, as applicable), if the Adjustment Amount is greater than the Estimated Adjustment Amount, Parent shall increase the amount of the Final Cash Payment by the amount of such surplus; and if the Adjustment Amount is less than the Estimated Adjustment Amount, Parent may reduce the amount of the Final Cash Payment by the amount of such deficit; provided that if such portion of the Final Cash Payment is not sufficient, then the aggregate value of the Deferred Payments shall be reduced by the amount of such additional deficiency.

(c)                                  The Preliminary Financial Statements and the Closing Financial Statements shall be prepared in accordance with GAAP applied on a basis consistent with the same accounting principles, practices and policies used by Parent in its preparation of an adjusted balance sheet of the Company for certain periods prior to the date hereof, an example of which is set forth on Schedule 1.8 (the “Adjusted Financial Statements”).  The Preliminary Financial Statements and the Closing Financial Statements shall be determined using the same

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accounting methods, policies, principles, practices and procedures, with consistent classifications, judgments and estimation methodology, as were used in preparation of the Adjusted Financial Statements; provided, however, Preliminary Financial Statements and the Closing Financial Statements shall contain the adjustments described in Schedule 1.8, and, provided further, however, other  than the adjustments described in Schedule 1.8, shall not include any changes in assets or liabilities as a result of purchase or other non-cash accounting adjustments or other changes arising from or resulting as a consequence of the transactions contemplated hereby. The parties agree that the purpose of preparing the Preliminary Financial Statements and the Closing Financial Statements and the related purchase price adjustment contemplated by this Section 1.8  according to the accounting principles, practices and policies used in the preparation of the Adjusted Financial Statements is to measure changes in Working Capital, and, other than the adjustments described in Schedule 1.8, such processes are not intended to permit the introduction of different judgments, accounting methods, policies, principles, practices, procedures, classifications or estimation methodologies for the purpose of determining the Preliminary Financial Statements and the Closing Financial Statements.

1.9       Deferred Payments.  For each of the twelve month periods (a) commencing on the Closing Date and ending on the first anniversary of the Closing Date, (b) commencing the day after the first anniversary of the Closing Date and ending on the second anniversary of the Closing Date, and (c) commencing on the day after the second anniversary of the Closing Date and ending on the third anniversary of the Closing Date (each a “Deferred Payment Period”), Parent will pay to the Effective Time Shareholders and the Change in Control Payment Recipients, as provided in Section 2.2 of this Agreement, a “Deferred Payment” equal to thirty-four percent (34%) of all Qualifying Revenue in excess of $2,290,763 for such Deferred Payment Period, subject to adjustment as described in Section 1.9(j) below  (the “Qualifying Revenue Threshold”).

(a)                                 “Qualifying Revenue” means total revenue recognized by Parent in accordance with GAAP from (i) license fees; (ii) professional or other types of services fees; (iii) usage fees, transaction fees or royalties; (iv) incremental maintenance and support fees; and (v) enforcing Company Patents (as defined below) against third parties, in each case derived from Eligible Products (as defined below), and, in the case of clause (v) above, after payment of applicable costs and expenses, including but not limited to legal fees and expert witness fees, associated with enforcing the Eligible Patents.  “Qualifying Revenue” shall include, without limitation, revenue derived from (a) any Parent or Parent affiliate purchase order received and accepted by Parent or its affiliate under an existing or new license agreement or (b) any other customer license agreement or contract with Parent or a Parent affiliate, including the Company Products (as defined below) provided as part of a Bundled Product (as defined below), under a services contract or under an existing Parent or Parent affiliate contract, all as determined in the manner specified below.

(b)                                 “Bundled Products” means Parent or Parent affiliate product or service offerings, or any other product bundle provided to a Parent or Parent affiliate customer that include:  (a) Company Products and (b) Parent products or services which do not constitute Company Products.

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(c)                                  “Company Patents” means those patents of Company set forth on Schedule 3.13(a)(ii) of the Disclosure Schedule.

(d)                                 “Company Products “ means those products (and services related primarily thereto) of Company set forth on Exhibit C, including updates, upgrades, modifications, enhancements, improvements and new versions, for example a New Industry Vertical of an existing product.  For the avoidance of doubt, Company Products will not include any products generally available from Parent prior to the Closing Date or acquired by Parent through subsequent acquisitions that do not license or incorporate Company Products.

(e)                                  Upon the license of Company Products and Bundled Products (collectively, “Eligible Products”) by Parent or a Parent affiliate, the Parent or such affiliate will assign a price to the respective Eligible Products.  Prices for Company Products will be determined by Parent; provided that, for purposes of calculating the Deferred Payments, there will be a minimum price (the “Minimum Allocated Price”) as set forth on Exhibit D.

(f)                                   Deferred Payments will be calculated and payable as follows: on or before the date which is 10 business days after Parent publicly reports its quarterly/annual financial results following the end of each Deferred Payment Period, Parent will (i) prepare and deliver to Company’s Representative a schedule setting forth the Qualifying Revenue and the Deferred Payment due to Company (the “Deferred Payment Schedule”), (ii) prepare and deliver to Company’s Representative a report, certifying that the Deferred Payment Schedule is true, complete and correct, executed  by a duly authorized officer of Parent, and setting forth with respect to the calculation of the Deferred Payments, the customers associated with the Qualifying Revenue, and the date of the contract, along with a listing of the Qualifying Revenue recognized and the identity and quantity of Eligible Products and services sold for purposes of calculating the Qualifying Revenue (the Deferred Payment Schedule together with such report, a “Deferred Payments Report”) to the extent it does not violate a customer’s Non-disclosure Agreement, and (iii) to the extent the Qualifying Revenue Threshold is met, pay to the Effective Time Shareholders and the Change in Control Payment Recipients, as provided in Section 2.2, the Deferred Payment set forth in the Deferred Payment Schedule.  The Deferred Payments Report will be considered confidential Parent information and the Representative shall not distribute the Deferred Payments Report to the Shareholders or the Change in Control Payment Recipients.  The Representative may make the Deferred Payments Report available for inspection by  the Effective Time Shareholders and the Change in Control Payment Recipients (without retaining copies thereof) so long as any such party desiring to inspect the Deferred Payments Report executes an agreement confirming that the Deferred Payments Report and the information set forth therein constitutes confidential Parent information and agreeing to hold such information in strict confidence.  Parent will provide the Representative and the Representative’s representatives reasonable access to the books and records and employees, auditors, representatives and advisors of the Parent and its affiliates to the extent necessary to determine the accuracy of the Deferred Payments Report and will cause the employees, auditors, representatives and advisors of the Parent and its affiliates to reasonably cooperate with the Representative and the Representative’s representatives in connection with their determination of the accuracy of the Deferred Payments Report.  The Deferred Payments Report will be deemed accepted and conclusive and binding, unless Representative gives written notice to Parent of the items with which Representative disagrees (“Deferred Payments Disagreement Notice”) within

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thirty (30) days of the actual receipt by Representative of the Deferred Payments Report.  The Deferred Payments Disagreement Notice will specify each item disagreed with by Representative (or Representative’s calculation thereof) and the dollar amount of the disagreement and specify in reasonable detail the basis for each disagreement.  Parent and Representative will, during the twenty (20) days after receipt by Parent of the Deferred Payments Disagreement Notice, negotiate in good faith to resolve any such disagreements with respect to the respective Deferred Payments Report.  If at the end of such twenty (20) days, the parties have been unable to resolve their disagreements, such disagreements will be resolved by the Unaffiliated Firm.  The Unaffiliated Firm will (i) resolve the disagreement as to the Deferred Payments Report as promptly as possible after its engagement by the parties, (ii) consider and resolve only those items in the Deferred Payments Disagreement Notice which remain unresolved between Parent and Representative, and (iii) otherwise employ such procedures as it, in its sole discretion, deems necessary or appropriate under the circumstances.  The Unaffiliated Firm will submit to the parties a report of its review of the items in the Deferred Payments Disagreement Notice as promptly as practicable and will include in such report its calculation of the Qualifying Revenue, which adjustments will be no more favorable to Parent than reflected in the Deferred Payments Report, and no more favorable to Company than reflected in the Deferred Payments Disagreement Notice.  The calculations so made by the Unaffiliated Firm will be conclusive and binding on, and non-appealable by, the parties hereto.  If the Unaffiliated Firm’s determination of Qualifying Revenue is closer to the value initially asserted by Parent to the Unaffiliated Firm, then the Company will pay the fees, costs and disbursements of the Unaffiliated Firm, and the Representative is authorized to pay such fees, costs and disbursements by instructing Parent to deduct the amount thereof from the Deferred Payment.  If the Unaffiliated Firm’s determination of Qualifying Revenue is closer to the value initially asserted by the Representative to the Unaffiliated Firm, then Parent will pay the fees, costs and disbursements of Unaffiliated Firm.  Each of Parent and Representative will promptly cooperate in good faith with the Unaffiliated Firm to assist in the Unaffiliated Firm’s calculation of Qualifying Revenue.  If the Unaffiliated Firm’s calculation of Qualifying Revenue results in an amount owed to Company with respect to the Deferred Payments, Parent will pay such amount to the Effective Time Shareholders and Change in Control Payment Recipients within thirty (30) business days of the delivery to Parent and Representative of such calculation by the Unaffiliated Firm.

(g)                                  Parent and its affiliates will maintain separate records regarding Qualifying Revenue.  At any time during business hours within a notice period of not less than ten (10) business days to Parent, Representative and its agents will have the right to inspect the records of Parent and its affiliates and to discuss such records with Parent’s Chief Executive Officer and Vice President of Finance at Parent’s place of business, as reasonably necessary to calculate, verify and determine Qualifying Revenue.  If such an inspection discloses an underpayment, Parent will promptly pay to the Effective Time Shareholders and Change in Control Payment Recipients the amount of the underpayment.  Parent will diligently cooperate in good faith with such inspection by Representative.  During the entire Deferred Payment Period and for the six months thereafter, Parent will maintain complete and accurate records and all data needed for verification of its calculations of Qualifying Revenue.

(h)                                 Parent will use its commercially reasonable efforts to market and sell the Eligible Products to its customers, such efforts to be evidenced by, among other factors, regular

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contact and discussions of Eligible Products with potential customers as reasonably appropriate for such potential customers, providing personnel with the necessary skills, experience and expertise to market and sell Eligible Products and providing reasonably sufficient equipment, capital and similar resources consistent with Parent’s standard practices.  Parent will also provide reasonable levels of sales and marketing and other support for Eligible Products in light of market demand, customer requirements, product life cycles, product sales, product margins, competitive concerns and other relevant considerations, consistent with Parent’s standard practices.  Subject to Section 1.9(e) above, Parent will have complete discretion and control over the pricing of Eligible Products to its customers. During the Deferred Payments Period, Parent will provide to Representative sales reports related to the Eligible Products for each fiscal quarter within thirty (30) days after the end of each fiscal quarter.

(i)                                     Parent agrees not to sell or otherwise transfer any or all of the ownership interest in or to the Eligible Products during the Deferred Payments Period without Representative’s prior written approval, which approval will not be unreasonably withheld.  For purposes of this provision either (i) the sale, lease, license, transfer, conveyance or other disposition, in one transaction or a series of related transactions, of all or substantially all of the assets of the Parent and its Subsidiaries, taken as a whole, or (ii) a transaction or a series of related transactions (including by way of merger, consolidation, recapitalization, reorganization, amalgamation, sale of equity securities or otherwise) the result of which is that the holders of the Parent’s outstanding voting securities immediately prior to such transaction or series of related transactions are (after giving effect to such transaction or series of related transactions) no longer, in the aggregate, the “beneficial owners” (as such term is defined in Rule 13d-3 and Rule 13d-5 promulgated under the Securities Exchange Act of 1934, as amended), directly or indirectly through one or more intermediaries, of a majority of the voting power of the outstanding voting securities of the Company (collectively, a (“COC Event”) will not require Representative’s consent if the resulting or acquiring entity, at its option, agrees (i) to assume all obligations of Parent under this Agreement or  (ii) to pay the Effective Time Shareholders and the Change in Control Payment Recipients the Deferred Payments Termination Fee (as defined below).

(j)                                    The “Deferred Payments Termination Fee” will be as follows, based upon the date the COC Event is closed (the “COC Completion Date”):

(i)                                     COC Completion Date occurs prior to the date that is less than 6 months after the Closing Date under this Agreement: $4,970,000;

(ii)                                  COC Completion Date occurs on or after the date that is 6 months after the Closing Date and prior to the date that is 12 months after the Closing Date under this Agreement: $4,325,700;

(iii)                               COC Completion Date occurs on or after the date that is 12 months after the Closing Date and prior to the date that is 18 months after the Closing Date under this Agreement: $3,681,400;

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(iv)                              COC Completion Date occurs on or after the date that is 18 months and prior to the date that is 24 months after the Closing Date under this Agreement: $3,037,100;

(v)                                 COC Completion Date occurs on or after the date that is 24 months and prior to the date that is 30 months after the Closing Date under this Agreement: $2,392,800;

(vi)                              COC Completion Date occurs on or after the date that is 30 months and prior to the date that is 36 months after the Closing Date under this Agreement: $1,748,500; and

(vii)                           COC Completion Date occurs on or after the date that is 36 months after the Closing Date of this Agreement: No Deferred Payments Termination Fee.

(k)                                 Increase of Annual Qualifying Revenue Threshold.  To the extent the Annual Qualifying Revenue Threshold is below $2,290,763 in year 1 or 2, the Annual Qualifying Revenue Threshold for the following year will be increased by the amount of the shortfall.  For example, if in the first year, the Annual Qualified Revenue Threshold is $2.0 M, then the amount of the shortfall ($290,763) will be added to the Annual Qualified Revenue Threshold for the second year and the Deferred Payment for the second year will only be paid if the Annual Qualified Revenue in the second year is greater than $2,581,526

(l)                                     Inter-Company Use and Licensing.  Notwithstanding anything contained herein to the contrary any use by, or license to, Parent or any of its wholly-owned subsidiaries of the Eligible Products for internal use and testing purposes (and not for resale or other commercialization purposes or with any rights to sublicense, distribute or make available for use on a service provider basis) will not be included in the calculations of the Deferred Payments.

Article II.
CONVERSION AND EXCHANGE OF SECURITIES

2.1       Effect on Company Capital Stock.  Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities:

(a)                                 Merger Sub Capital Stock.  Each share of common stock of Merger Sub that is outstanding immediately prior to the Effective Time shall be converted into and become, and shall thereupon represent, one fully paid and nonassessable share of common stock of the Surviving Corporation, with the same rights, powers and privileges as the shares so converted.

(b)                                 Company Capital Stock.

(i)                                     Generally.  At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of shares of Company Capital Stock, upon the terms and subject to the conditions set forth in this Section 1.7, and throughout this Agreement, each share of Company Capital Stock issued

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and outstanding immediately prior to the Effective Time (other than Company Treasury Stock, Parent Owned Company Capital Stock and Dissenting Shares) shall be cancelled and extinguished and converted automatically into the right to receive (without interest and subject to applicable tax withholding), following the surrender of the applicable certificate(s) (or alternatively, a Lost Stock Affidavit and a Lost Certificate Indemnity Agreement) in accordance with the terms of this Agreement and in the manner provided herein:

(A)                               with respect to each outstanding share of Company Series E Preferred Stock, each share of Series E Preferred Stock issued and outstanding immediately prior to the Effective Time shall be entitled to a pro rata portion of the Merger Consideration (without duplication, after deductions for the Change in Control Payments and Transaction Expenses to be made from the Merger Consideration), and as such Merger Consideration may be adjusted pursuant to Sections 1.8(b)(ii), 1.9, and 7.2(g);

(B)                               with respect to each outstanding share of Company Series D Preferred Stock, no consideration shall be delivered with respect thereto or in exchange therefor and each holder of a certificate that formerly evidenced such share of Company Series D Preferred Stock shall cease to have any rights with respect thereto;

(C)                               with respect to each outstanding share of Company Series C Preferred Stock, no consideration shall be delivered with respect thereto or in exchange therefor and each holder of a certificate that formerly evidenced such share of Company Series C Preferred Stock shall cease to have any rights with respect thereto;

(D)                               with respect to each outstanding share of Company Series B Preferred Stock, no consideration shall be delivered with respect thereto or in exchange therefor and each holder of a certificate that formerly evidenced such share of Company Series B Preferred Stock shall cease to have any rights with respect thereto;

(E)                                with respect to each outstanding share of Company Series A Preferred Stock, no consideration shall be delivered with respect thereto or in exchange therefor and each holder of a certificate that formerly evidenced such share of Company Series A Preferred Stock shall cease to have any rights with respect thereto; and

(F)                                 with respect to each outstanding share of Company Common Stock, no consideration shall be delivered with respect thereto or in exchange therefor and each holder of a certificate  that formerly evidenced such share of Company Common Stock shall cease to have any rights with respect thereto.

(ii)                                  Effect of Conversion of Company Capital Stock.  From and after the Effective Time, each share of Company Capital Stock that is cancelled pursuant to Section 2.1(b)(i) shall no longer be outstanding and shall be automatically cancelled and retired and shall cease to exist, and each holder of a certificate formerly representing shares of Company Capital Stock shall cease to have any rights with respect thereto other than the right to receive, upon the terms and subject to the conditions set forth in this Agreement, that portion of the Merger Consideration payable in respect of the shares of Company Capital Stock evidenced by such certificate pursuant to Section 2.1(b)(i) upon the surrender of such

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certificate (or alternatively, a Lost Stock Affidavit and a Lost Certificate Indemnity Agreement (each defined below)) in accordance with the terms of this Agreement and in the manner provided herein.

(iii)                               Company Treasury Stock.  At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub or the Company, each share of Company Capital Stock that is outstanding and held of record by the Company as of immediately prior to the Effective Time (“Company Treasury Stock”) shall continue to be so held and no consideration shall be paid or payable in respect thereof.

(iv)                              Dissenting Shares.

(A)                               Notwithstanding anything in this Agreement to the contrary, any shares of Company Capital Stock outstanding immediately prior to the Effective Time eligible under Chapter 13 of the CCC (“Chapter 13”) to exercise appraisal rights and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who is entitled to demand, and properly demands, appraisal of such shares pursuant to Chapter 13, and complies in all respects with the provisions of Chapter 13 and has not effectively withdrawn or lost the right to demand relief as a dissenting shareholder under the CCC as of the Effective Time (collectively, the “Dissenting Shares”) shall not be converted into or represent the right to receive Merger Consideration pursuant to Section 2.1(b)(i), and the holder or holders of such shares shall be entitled only to such rights as may be granted to such holder or holders in Chapter 13.  Notwithstanding the provisions of this Section 2.1(b)(iv), if any holder of Dissenting Shares shall effectively withdraw or lose (through failure to perfect or otherwise) the right to appraisal under Chapter 13, or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Chapter 13, then, as of the later of the Effective Time and the occurrence of such event, such holder’s shares shall automatically be converted into and represent only the right to receive the applicable portion of the Merger Consideration payable or otherwise deliverable in respect of such shares pursuant to Section 2.1(b)(i), without interest, upon surrender of the certificate representing such shares.  Any (i) payment or payments in respect of any Dissenting Shares in excess of the portion of the Merger Consideration that otherwise would have been payable or deliverable in respect of such shares in accordance with Section 2.1(b)(i) or (ii) Damages (including attorneys’ and consultants’ fees, costs and expenses and including any such fees, costs and expenses incurred in connection with investigating, defending against or settling any action or proceeding) in respect of any Dissenting Shares are, collectively are referred to herein as “Dissenting Share Payments.”

(B)                               The Company shall (1) comply with the requirements of Chapter 13, (2) give Parent prompt notice of any written demand received by the Company pursuant to Chapter 13 of withdrawals of such demands, and provide copies of any documents or instruments served pursuant to the CCC and received by the Company and (3) give Parent the opportunity to direct all negotiations and proceedings with respect to any such demands.  The Company shall not make any payment or settlement, or offer to pay or settle, prior to the Effective Time with respect to any such demand unless Parent shall have consented in writing to such payment or settlement offer.

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(c)                                  Company Options. Prior to the Effective Time, all Company Options shall no longer be outstanding and shall have been canceled and retired and cease to exist and each holder thereof shall have ceased to have any rights with respect thereto. The Company shall have caused each equity compensation plan, agreement or arrangement (including, without limitation, the Company Stock Plan) of the Company to be terminated prior to the Effective Time.  At the Closing, the Company shall deliver to Parent true and complete copies of the duly executed documents that effectuate each such termination.

(d)                                 Warrants.  As of the Effective Time, all warrants to purchase Common Stock, including, without limitation, the Series C Preferred Stock Warrants, (each, a “Company Warrant”) shall no longer be outstanding and shall automatically be canceled and retired and cease to exist and each holder thereof shall cease to have any rights with respect thereto.

(e)                                  Company Notes. Prior to the Effective Time, each outstanding promissory note of the Company (each, a “Company Note”) shall have been converted into Company Series E Preferred Stock or shall have been otherwise terminated, and shall no longer be outstanding and shall be canceled and retired and cease to exist and each holder thereof shall cease to have any rights with respect thereto and the Company shall have no obligations under such Company Notes.  If requested by Parent, as a condition to being paid the Merger Consideration, each prior holder of a Company Note shall execute a letter of transmittal in a form reasonably acceptable to Parent.

2.2       Payment Procedures.

(a)                                 Payment Fund.  Promptly after the Effective Time, and on the one (1), two (2) and three (3) year anniversaries of the Effective Time, Parent shall deliver the Initial Merger Consideration, the Final Cash Payment  and the Deferred Payments, as applicable, to the Effective Time Shareholders and make the payments to the  Change in Control Payment Recipients, in each case, in accordance with the Consideration Spreadsheet.

(b)                                 Payment Procedures.

(i)                                     Change in Control Payments and Transaction Expenses.  Parent shall deliver to each Change in Control Payment Recipient listed on Schedule 6.2(i) the amounts of cash and/or Parent Common Stock specified opposite such Change in Control Payment Recipient’s name on the Consideration Spreadsheet as promptly as practicable after such payments become due, net of applicable Tax withholding.  At the time of both the Initial Cash Payment and the Final Cash Payment, Parent shall pay all Transaction Expenses as specified on the Consideration Spreadsheet; provided that all such Change in Control Payments and Transaction Expenses shall be deducted, on a dollar-for-dollar basis, from the aggregate amount of the Initial Merger Consideration, the Final Cash Payment or the Deferred Payments, as applicable, prior to the distribution of the Initial Merger Consideration, the Final Cash Payment or the Deferred Payments, as applicable, pursuant to Section 2.1(b)(i)(A); provided further, however that no Change in Control payment shall be made without the receipt by Parent of a Change in Control Release executed by the Change in Control Payment Recipient.

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(ii)                                  Merger Consideration. Parent shall have mailed to each Effective Time Shareholder a letter of transmittal in substantially the form attached hereto as Exhibit E (a “Shareholder Transmittal Letter”), which shall (i) specify that delivery shall be effected, and risk of loss and title to a certificate(s) representing shares of the Company Capital Stock that are being converted into the right to receive payment pursuant to Section 2.1(b)(i) (each, a “Company Stock Certificate”) shall pass only upon delivery of such certificate(s) to Parent after the Effective Time, (ii) be in such form and have such other reasonable provisions not inconsistent with this Agreement as Parent or Representative may specify, (iii) include IRS Form W-9 or Form W-8BEN or any successor form, as applicable, and (iv) include instructions for use in effecting the surrender of Company Stock Certificate(s) for that portion of the Merger Consideration payable in respect of the shares of Company Capital Stock represented thereby under this Agreement.  The delivery of the appropriate Merger Consideration to any holder of Company Capital Stock is expressly conditioned upon the execution and delivery of a Shareholder Transmittal Letter, properly completed and duly executed by each such Effective Time Shareholder.  After the Effective Time, and after Parent receives a Company Stock Certificate (or alternatively, a Lost Stock Affidavit and a Lost Certificate Indemnity Agreement), together with a properly completed and duly executed Shareholder Transmittal Letter, Parent shall deliver to such Effective Time Shareholder the following, each in accordance with the terms of this Agreement in respect of the Shares of Company Capital Stock formerly represented by such Company Stock Certificate(s) as specified on the Consideration Spreadsheet:

(A)                               the applicable Initial Merger Consideration, in the amounts of cash and/or Parent Common Stock specified opposite such Effective Time Shareholder’s name on the Consideration Spreadsheet, upon receipt of the Shareholder Transmittal Letter and the surrender of the applicable Company Stock Certificate (or alternatively, a Lost Stock Affidavit and a Lost Certificate Indemnity Agreement);

(B)                               one (1) year from the Effective Time, the applicable Final Cash Payment in accordance with the distribution allocation percentages of cash specified opposite such Effective Time Shareholder’s name on the Consideration Spreadsheet, and as may be adjusted by Sections 1.8(a) and 7.2(g);

(C)                               one (1), two (2) and three (3) years from the Effective Time, the applicable Deferred Payments, if any, in accordance with the distribution allocation percentages specified opposite such Effective Time Shareholder’s name on the Consideration Spreadsheet, as may be adjusted by Sections 1.9 and 7.2(g);

and the Company Stock Certificate so surrendered shall forthwith be cancelled.  If payment of any portion of the applicable Initial Closing Payment, Final Cash Payment or Deferred Payment is to be made to a Person other than the Person in whose name the surrendered certificate(s) are registered, it shall be a condition of payment that the Person requesting such payment (A) shall have paid any transfer and other Taxes required by reason of the payment of those amounts to a Person other than the registered holder of the Company Stock Certificate surrendered, and shall have established to the satisfaction of Parent and Representative that such Tax has been paid, or (B) shall have established to the satisfaction of Parent and Representative that such Tax is not applicable.  From and after the Effective Time, until surrendered as contemplated by this

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Section 2.2(b), each Company Stock Certificate formerly representing shares of Company Capital Stock shall be deemed to represent for all purposes only the right to receive the applicable Merger Consideration, including, without limitation, the Initial Merger Consideration, the Final Cash Payment, and the Deferred Payments, if any, in respect of such shares of Company Capital Stock formerly represented thereby in accordance with the terms of this Agreement and in the manner provided herein.

(c)                                  Withholding Rights. Each of the Company, Parent and the Surviving Corporation shall be entitled to deduct and withhold and pay over to the applicable Taxing Authorities from the payment of any consideration payable or otherwise deliverable to any Person under this Agreement such amounts as may be required to be deducted and withheld and paid over with respect to the making of such payment under the Code or any other applicable Laws and to request and be provided the applicable Form W-9 or W-8 or any successor form from each such Person.  To the extent that amounts are so withheld and paid by the Company, Parent or the Surviving Corporation to the applicable Taxing Authorities on behalf of the holders of Company Capital Stock, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

(d)                                 Lost, Stolen or Destroyed Certificates.  In the event any certificate(s) which formerly represented shares of Company Capital Stock shall have been lost, stolen or destroyed, upon the making and delivery of (a) an affidavit of that fact by the Effective Time Shareholder in form reasonably satisfactory to Parent (a “Lost Stock Affidavit”), Parent shall pay such Effective Time Shareholder the portion of the Merger Consideration to which such Effective Time Shareholder is entitled pursuant to Section 2.1(b)(i); provided, however, that Parent may, in its sole discretion (acting in good faith), require the owner of such lost, stolen or destroyed certificate(s) or agreements to deliver an agreement of indemnification in form reasonably satisfactory to Parent and post a bond in such sum as Parent may require, against any claim that may be made against Parent or the Surviving Corporation with respect to the certificate(s) or agreements alleged to have been lost, stolen or destroyed (the “Lost Certificate Indemnity Agreement”).

(e)                                  Escheat.  Notwithstanding anything in this Agreement to the contrary, neither Parent nor any other Person shall be liable to any Company Shareholder, holder of Company Options, holder of Company Warrants, holder of Company Notes or any other Person for any amount paid to a public official pursuant to applicable abandoned property law, escheat law or similar applicable Law.  Any portion of the Merger Consideration or other amounts remaining unclaimed by holders of Company Securities three (3) years after the date such payment originally became payable (or such earlier date immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Authority) shall, to the extent permitted by applicable Laws, become the property of Parent free and clear of any Lien.

2.3       Transfer Books; No Further Ownership Rights in the Shares.  At the Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of the shares of Company Capital Stock on the records of the Company.  From and after the Effective Time, the holders of certificates formerly evidencing

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ownership of the shares of Company Capital Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares, except as otherwise provided for herein or by applicable Laws.  After the Effective Time, the Surviving Corporation shall cancel and exchange, as provided in this Section 2.3, any presented certificate representing shares of Company Capital Stock outstanding immediately prior to the Effective Time.

2.4       Taking of Further Necessary Action. Each of Parent, the Company and Representative will take all such reasonable and lawful action as may be necessary or appropriate in order to effectuate the Merger and cause the distribution of proceeds in accordance with this Agreement as promptly as possible.  If, at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company, the officers and directors of the Company immediately prior to the Effective Time are and will remain fully authorized in the name of the Company or otherwise to take, and shall take, upon request by Parent, all such lawful and necessary action.

Article III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Subject to any exceptions that are expressly and specifically set forth in the disclosure schedule delivered by the Company to Parent and Merger Sub concurrently with the execution and delivery of this Agreement, dated as of the date hereof (the “Disclosure Schedule”) (it being understood and hereby agreed that (i) the information set forth in the Disclosure Schedule shall be disclosed under separate section and subsection references that correspond to the sections and subsections of this Article III to which such information relates, and (ii) the information set forth in each section and subsection of the Disclosure Schedule shall qualify (A) the representations and warranties set forth in the corresponding section or subsections of this Article III, and (B) any other representations and warranties set forth in this Article III (other than Section 3.7(a)) if and solely to the extent that it is readily apparent on the face of such disclosure (without reference to any document(s) referenced therein) that such disclosure applies to such other representations and warranties), the Company hereby represents and warrants to Parent and Merger Sub, as of the date hereof and as of the Closing Date, as follows:

3.1       Authority.

(a)                                 The Company has all necessary corporate power and authority to execute and deliver this Agreement and each certificate and other instrument required hereby to be executed and delivered by the Company pursuant hereto and to perform its obligations hereunder and thereunder and, subject only to the receipt of the Minimum Shareholder Approval, to consummate the Merger and  the other transactions contemplated hereby and thereby.  The execution, delivery and performance by the Company of this Agreement and each certificate and other instrument required to be executed and delivered by the Company pursuant hereto and  the consummation by the Company of the Merger and the other transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Company and the Company Shareholders.  The board of directors of the Company (the “Company Board of Directors”) has (i) unanimously determined that it is fair to, advisable and in

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the best interests of the Company Shareholders to enter into a business combination upon the terms and subject to the conditions of this Agreement, (ii) unanimously approved this Agreement, the principal terms of the Merger, the Merger and the other transactions contemplated hereby and thereby and (iii) unanimously resolved to recommend that the Company Shareholders adopt this Agreement and approve the Merger and the other transactions contemplated hereby, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or any certificate or other instrument required to be executed and delivered by the Company pursuant hereto or to consummate the Merger or any other transactions contemplated hereby or thereby.  None of such actions by the Company Board of Directors or the Company Shareholders has been amended, rescinded or modified.  Each of this Agreement and each certificate and other instrument required to be executed and delivered by the Company pursuant hereto has been (or will be) duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent, Merger Sub and Representative, constitutes (or will constitute) a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization or similar laws of general application affecting the rights and remedies of creditors, and to general equity principles.

(b)                                 The affirmative vote of the holders of (i) a majority of the outstanding shares of Company Common Stock, voting together as a single class and (ii) a majority of the outstanding shares of Company Preferred Stock, voting together as a single class on an as-converted-to-Company-Common Stock basis, are the only votes of the holders of any of Company Capital Stock necessary to adopt this Agreement and approve the principal terms of the Merger, the Merger and the other transactions contemplated hereby under applicable Laws, the Company Organizational Documents or any Contract to which the Company is a party or is otherwise bound (collectively, the “Minimum Shareholder Approval”).  The Company has notified (or will notify following the date hereof and prior to the Effective Time) the holders of Company Capital Stock of the transactions contemplated hereby as and to the extent required by the terms and conditions of the Company Organizational Documents, California Law and as contemplated herein.

(c)                                  The Company has solicited a Shareholder Written Consent from each Company Shareholder in accordance with this Agreement, California Law and the Company Organizational Documents.  In connection with such Company Shareholder approval, the Company has delivered the Information Statement to the Company Shareholders for the purpose of soliciting the written consent of the Company Shareholders.  As part of such solicitation, the Company has delivered to any Company Shareholder who has not executed a Shareholder Written Consent a notice of approval of the Merger and the adoption of this Agreement by written consent of the Company Shareholders pursuant to the applicable provisions of the CCC and the Company Organizational Documents, which notice constitutes the notice to Company Shareholders required by California Law that appraisal or dissenters’ rights may be available to Company Shareholders in accordance with the CCC.  Any materials to be submitted to the Company Shareholders in connection with the Company’s solicitation of the Company Shareholders described above, including the Information Statement, or notices with respect to appraisal rights (the “Soliciting Materials”) are in the form attached hereto as Exhibit I and have previously been reviewed by Parent and include information regarding the Company, the terms of the Merger, this Agreement and the unanimous recommendation of the Company Board of

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Directors in favor of the adoption of this Agreement and approval of the Merger, the principal terms of the Merger and the other transactions contemplated hereby.  All Soliciting Materials include the unanimous recommendation of the Company Board of Directors that all Company Shareholders consent to the adoption of this Agreement and approve the Merger, the principal terms of the Merger and the other transactions contemplated hereby.  Neither the Company Board of Directors nor any committee thereof has withheld, withdrawn, amended or modified, or proposed to withhold, withdraw, amend or modify, such unanimous recommendation.  The Company has no Knowledge of any facts that might make it necessary or appropriate to amend or supplement the Soliciting Materials in order to make statements contained or incorporated by reference therein not misleading or to comply with applicable Laws.  Anything to the contrary set forth herein notwithstanding, the Company has not included in the Soliciting Materials any information with respect to Parent or its Affiliates which has not been consented to in writing by Parent prior to such inclusion, except as required pursuant to applicable Laws.

3.2       No Violation of Charter or Existing Agreements.  Except as set forth Schedule 3.2 of the Disclosure Schedule, the Company is not in violation of the Company Organizational Documents.  Except as set forth Schedule 3.2 of the Disclosure Schedule, neither the execution and delivery of this Agreement or the Related Agreements to which the Company is a party, nor the consummation of any of the transactions provided for herein, will (a) conflict with or violate any provision of the Company Organizational Documents; (b) conflict with or violate or constitute a default under, result in a termination, acceleration or breach of, or provide any party with any right of termination or acceleration or any other material rights or remedies under (in each case with or without notice or lapse of time, or both) (i) any material Contract, Permit or Security Interest (whether verbal or in writing) to which Company is a party or by which Company or any of its assets is bound, or (ii) any Laws applicable to Company; or (c) have any Material Adverse Effect upon any rights of Company pursuant to the terms of any such material Contracts, Permits or Security Interests.

3.3       Governmental Filings and Consents.  No consent, approval, order or authorization of, or registration, declaration, notice or filing (together, the “Consents”) with any Governmental Authority is required on the part of the Company, or any holder of Company Securities in connection with the execution and delivery of this Agreement or the consummation of the Merger or any other transactions contemplated hereby or thereby, except for (i) the filing of the Agreement of Merger and (ii) such other Consents, if not obtained or made, as would not be material to the Company, and would not prevent, materially alter the terms of, or materially delay the consummation of the Merger or any of the other transactions contemplated by this Agreement.

3.4       Organization and Standing.

(a)                                 The Company is duly incorporated, validly existing and in good standing under California Law and has full corporate or other similar power and authority to conduct its business as currently conducted.  The Company is duly qualified to do business as a foreign entity and is in good standing in every jurisdiction where the properties, owned, leased or operated, or the business conducted by it requires such qualification, except for such failures to be so duly qualified and in good standing that would not have a Company Material Adverse Effect.

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(b)                                 Prior to the date of this Agreement, the Company has Made Available to Parent complete and correct copies of the Company Organizational Documents as currently in effect.  The Company Organizational Documents are in full force and effect and the Company is not in violation of (and has not previously violated) any provision of its Company Organizational Documents.

(c)                                  Except as listed on Schedule 3.4(c) of the Disclosure Schedule, the operations now being conducted by the Company are not (and have never been) conducted under any other name since its incorporation.

(d)                                 Schedule 3.4(d) of the Disclosure Schedule lists the current directors and officers of Company.

3.5       Capitalization.

(a)                                 The authorized capital stock of the Company consists of an aggregate of 41,555,760 shares of Company Capital Stock, consisting of an aggregate of 30,475,760 shares of Company Common Stock (the “Authorized Common Share Number”) and an aggregate of 11,080,000 shares of Company Preferred Stock (the “Authorized Preferred Share Number”), of which (i) an aggregate of 250,000 shares have been designated Company Series A Preferred Stock, (ii) an aggregate of 1,350,000 shares have been designated as Company Series B Preferred Stock, (iii) an aggregate of 3,280,000 shares have been designated as Company Series C Preferred Stock, (iv) an aggregate of 2,000,000 shares have been designated as Company Series D Preferred Stock, and (v) an aggregate of 4,200,000 shares have been designated as Company Series E Preferred Stock.  As of the date hereof, (A) an aggregate of 5,955,806 shares of Company Common Stock are issued and outstanding, (B) an aggregate of 250,000 shares of Company Series A Preferred Stock are issued and outstanding, (C) an aggregate of 1,097,551 shares of Company Series B Preferred Stock are issued and outstanding, (D) an aggregate of 801,159 shares of Company Series C Preferred Stock are issued and outstanding, (E) an aggregate of 1,165,737 shares of Company Series D Preferred Stock are issued and outstanding, and (F) an aggregate of 3,774,542 shares of Company Series E Preferred Stock are issued and outstanding.  The Company has reserved an aggregate of 4,073 shares of Company Series C Preferred Stock for issuance under the Company Series C Warrants.  As of the date hereof, the Company has no outstanding Company Options or Company Warrants, with the exception of the Company Series C Warrants.  No shares of Company Capital Stock are held by the Company.  Except for the Company Stock Plan, which has been terminated prior to the date hereof, the Company does not maintain, and has never maintained in the past, any stock option plans or other equity compensation related plans.

(b)                                 All of the issued and outstanding shares of Company Capital Stock have been duly authorized and validly issued and are fully paid and nonassessable.  All shares of Company Capital Stock, Company Options, Company Warrants, Company Notes and other rights to acquire Company Capital Stock and all other securities that have ever been issued or granted by the Company have been issued and granted in compliance with:  (i) all applicable Laws; and (ii) all requirements set forth in all applicable Contracts.  None of the outstanding shares of Company Capital Stock were issued in violation of any preemptive rights or other rights to subscribe for or purchase securities of the Company.  Except as set forth in

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Section 3.5(a), no subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any shares of capital stock of the Company is authorized or outstanding.  The Company does not have any obligation (whether written, oral, contingent or otherwise) to issue any subscription, warrant, option, convertible security or other such right or to issue or distribute to holders of any shares of its capital stock any evidences of indebtedness or assets of the Company.  Except as listed on Schedule 3.5(b) of the Disclosure Schedule, the Company does not have any obligation (whether written, oral, contingent or otherwise) to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof.  There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company.  Except for amounts consistent with the amounts payable pursuant to this Agreement, the Company has not made or delivered any oral or written communications to Employees of the Company with respect to any payment arising out of the transactions contemplated by this Agreement.  Except as set forth on Schedule 3.5(b) of the Disclosure Schedule, there are no agreements, written or oral, between the Company and any holder of its securities or others, or, to the Knowledge of the Company, among any holders of its securities, relating to the acquisition (including rights of co-sale, first refusal, anti-dilution or pre-emptive rights), disposition, registration under the Securities Act of 1933, as amended (the “Securities Act”) or voting of the Company Capital Stock or with respect to board observation, information or redemption rights.

(c)                                  Schedule 3.5(c) of the Disclosure Schedule contains a true, complete and correct list of all of the Company Shareholders as of the date hereof, setting forth the shares of Company Capital Stock held by each Company Shareholder as of the date of this Agreement and the date such shares of Company Capital Stock were acquired.

(d)                                 The total number of outstanding shares of Company Common Stock, after giving effect to the conversion of all shares of Company Preferred Stock into Company Common Stock and the full exercise of all options and warrants to acquire Company Common Stock, does not exceed the Authorized Common Share Number.  The total number of outstanding shares of Company Preferred Stock, after giving effect to the full exercise of all options, warrants and convertible debt to acquire Company Preferred Stock, does not exceed the Authorized Preferred Share Number.  Each share of Company Preferred Stock is convertible into one (1) share of Company Common Stock.  The Merger Consideration into which each share of Company Capital Stock and each Company Security will be converted in the Merger pursuant to this Agreement, and the allocation of the Merger Consideration pursuant to the Consideration Spreadsheet, in each case, conforms to the terms of the Company Organizational Documents, and no Company Shareholder, holder of Company Securities or other Person shall be entitled to receive any different or additional amount in the Merger with respect to shares of Company Capital Stock or Company Securities held or claimed to be held by such Company Shareholder or other securityholder or Person.

(e)                                  Attached hereto as Exhibit H is the Consideration Spreadsheet.

(f)                                   There has never been a stock dividend, combination, split, reverse-split, recapitalization or any similar transaction with respect to the Company Capital Stock.

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3.6       Subsidiaries.  The Company does not have, and has never had, any Subsidiaries.  The Company is not obligated to make, nor bound by any agreement or obligation to make, any investment in or capital contribution in or on behalf of any other entity.

3.7       Financial Statements.

(a)                                 Attached to Schedule 3.7 of the Disclosure Schedule are the following financial statements (collectively, the “Financial Statements”): (i) its unaudited balance sheet as of December 31, 2012 for the year then ended and (ii) its unaudited balance sheet as of August 31, 2013 (the “Most Recent Balance Sheet”) for the eight-month period then ended.  The Financial Statements (subject to normal year-end adjustments in accordance with GAAP) (i) are in accordance with the books and records of the Company, (ii) fairly and accurately represent the financial condition, operating results and cash flows of the Company at the respective dates and during the periods specified therein, (iii) are true and correct in all material respects, and (iv) have been prepared in accordance with GAAP except as may be noted therein.  Except as set forth on Schedule 3.7 of the Disclosure Schedule, the Company has no Indebtedness, Liability or obligation of any nature, whether known or unknown, accrued, absolute, contingent or otherwise, and whether due or to become due, except for (i) those set forth in the Financial Statements, (ii) those incurred in the ordinary course of the Company’s business, consistent with past practice, that are not material in amount, either individually or collectively, and do not result from any breach of contract, tort or violation of law, provided that if such Indebtedness, Liability or obligation was incurred before the date of the Most Recent Balance Sheet, it is not required under GAAP to be set forth in the Financial Statements, (iii) consist of executory obligations under Contracts entered into by the Company in the ordinary course of business, and (iv) Liabilities incurred pursuant to this Agreement and the transactions contemplated hereby or with the prior written consent of Parent.  Except as set forth in Schedule 3.7 of the Disclosure Schedule, since January 1, 2010, except as required by Legal Requirements or GAAP, there has been no change in Company’s accounting policies since inception.  Except for Liabilities reflected in the Financial Statements, the Company does not have any off balance sheet Liability of any nature to, or any financial interest in, any third party or entities, the purpose or effect of which is to defer, postpone, reduce or otherwise avoid or adjust the recording of debt expenses incurred by the Company.  All reserves that are set forth in or reflected in the Most Recent Balance Sheet have been established in accordance with GAAP consistently applied and are reasonable.

(b)                                 Except as otherwise indicated in the Financial Statements, there were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to December 31, 2012, including any corrective actions with regard to significant deficiencies and material weaknesses.  The Company’s internal controls are sufficient and accurate for maintaining true and accurate records of the Company in all material respects.

3.8       Absence of Changes.  Since the date of the Most Recent Balance Sheet, the Company has carried on its business in the ordinary course in accordance with the procedures and practices in effect on the date of the Most Recent Balance Sheet.  Except as set forth on Schedule 3.8 of the Disclosure Schedule or as specifically contemplated by this Agreement, since the date of the Most Recent Balance Sheet there has not been with respect to the Company any:

(a)                                 Company Material Adverse Effect;

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(b)                                 contingent liability incurred as guarantor or surety with respect to the obligations of others;

(c)                                  Lien placed on any of its properties or granted with respect to any of its assets other than Permitted Liens;

(d)                                 obligation or Liability incurred other than in the ordinary course of business consistent with past practice, or any borrowing of moneys;

(e)                                  purchase, license, sale or other disposition, or any agreement or other arrangement for the purchase, license, sale or other disposition, of any of the properties or assets of the Company other than in the ordinary course of business, consistent with past practice;

(f)                                   damage, destruction or loss, whether or not covered by insurance, affecting the properties, assets or business of the Company;

(g)                                  declaration, setting aside or payment of any dividend or other distribution on, or in respect of, the Company Capital Stock or any split, distribution, combination or recapitalization of the Company Capital Stock or any direct or indirect redemption, purchase or other acquisition by the Company of any Company Capital Stock;

(h)                                 labor dispute or claim of unfair labor practices;

(i)                                     change of individuals in positions as officers, directors or management of the Company;

(j)                                    any modification of the benefits payable or to become payable to any officers or  Employees of the Company, or any increase in the compensation payable or to become payable to any of the Company’s officers or Employees of the Company, or any bonus payment made to or arrangement made with any of such officers or Employees;

(k)                                 material increase in or modification of any bonus, pension, insurance or other employee benefit plan, or benefits payable to, payment or arrangement (including, but not limited to, the granting of options, restricted share awards or share appreciation rights) made to, for or with any of the Company’s officers or Employees;

(l)                                     making of any loan, advance (other than reasonable advances for travel expenses made in the ordinary course of business)  or capital contribution to, or investment in, any Person;

(m)                             entry into, amendment of, relinquishment, termination or nonrenewal by the Company of any contract, lease transaction, commitment or other right or obligation other than in the ordinary course of business, consistent with past practice;

(n)                                 payment or discharge of a Lien or Liability, which Lien or Liability was not either (i) shown on Most Recent Balance Sheet or (ii) incurred in the ordinary course of business, consistent with past practice after the date of the Most Recent Balance Sheet;

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(o)                                 obligation or liability incurred by the Company to any of its officers or Employees (other than (i) for payments of salary for services within the scope of their employment made in the ordinary course of business; (ii) reimbursement for reasonable expenses incurred on behalf of the Company; and (iii) for other standard employee benefits made generally available to all employees);

(p)                                 amendment or change in the Company Organizational Documents or other agreements by or among the Effective Time Shareholders, on the one hand, and the Company, on the other hand;

(q)                                 deferral of the payment of any accounts payable outside the ordinary course of business or any discount, accommodation or other concession in order to accelerate or induce the collection of any receivable;

(r)                                    acceleration or release of any vesting condition to the right to exercise any option, warrant or other right to purchase or otherwise acquire any interests of the Company, or any acceleration or release of any right to repurchase interests of the Company upon the Shareholder’s termination of employment or services with the Company or pursuant to any right of first refusal;

(s)                                   sale, issuance, grant or authorization of the issuance or grant of: (i) any Company Capital Stock or other equity securities of the Company; (ii) any option, call, warrant, obligation, subscription, or other right to acquire any interests or other equity securities of the Company; or (iii) any instrument convertible into or exchangeable for any interests or other securities of the Company; or

(t)                                    any agreement or arrangement made by the Company to do any of the foregoing.

3.9       Taxes.

(a)                                 The Company has duly and timely filed all Tax Returns required to be filed by the Company.  All Tax Returns filed by or with respect to the Company are true, accurate, complete and correct in all material respects.  The Company has paid all Taxes when due (whether or not shown on any Tax Return), has made all necessary estimated tax payments, and has no liability for Taxes in excess of the amount so paid, except to the extent adequate reserves have been established in the Financial Statements.  No deficiencies, assessments or adjustments for any Taxes, or relating to any item that affects Taxes, have been, to the Company’s Knowledge, threatened, claimed, proposed or assessed against the Company, other than such items that have been settled or paid.  No Tax Return of the Company has ever been audited by the Internal Revenue Service or any other taxing agency or authority, to the Company’s Knowledge, no such audit is in progress and the Company has not been notified of any request for such an audit or other examination.  The Company has no current or deferred liabilities for Taxes and will not as a result of the transactions contemplated hereby become liable for any Taxes not adequately reserved against on the Financial Statements.  The Company has not executed any currently effective waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax.  No assets of the Company are subject to any

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Lien for Taxes (other than Taxes not yet due or that are being contested in good faith).  The Company has materially complied with all applicable laws, rules and regulations relating to the payment and withholding of Taxes (including, without limitation, withholding of taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar provisions under any foreign Law), has, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper Governmental Authority all amounts required to be so withheld and paid over under all applicable Laws and has timely filed all withholding Tax Returns.  The Company is not a party to, and does not owe any amount under, any tax-sharing or allocation agreement.  The Company has not been a member of an affiliated group filing a consolidated federal income Tax Return or has no liability for the Taxes of any Person (other than Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee or successor, by contract or otherwise (other than a contract or other arrangement entered into in the ordinary course of business the primary purpose of which is not the sharing of Taxes).  Since its inception, the Company has not been a “United States real property holding corporation,” as defined in Section 897(c)(2) of the Code, and in Section 1.897-2(b) of the Treasury Regulations issued thereunder (the “Treasury Regulations”), and the Company has filed with the Internal Revenue Service all statements, if any, which are required under Section 1.897-2(h) of the Treasury Regulations.

(b)                                 The Company has not engaged in a “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4.  The Company is not nor has been required to make any adjustment pursuant to Section 481(a) of the Code (or any predecessor provision) or any similar provision of state, local or foreign tax law by reason of any change in any accounting methods, or will be required to make such an adjustment as a result of the transactions contemplated hereby, and there is no application pending with any Governmental Authority requesting permission for any changes in any of its accounting methods for Tax purposes.  The Company will not be required to include any amount in taxable income or exclude any item of deduction or loss from taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of (i) any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date, (ii) installment sale or open transaction disposition made on or prior to the Closing Date, or (iii) any prepaid amount received on or prior to the Closing Date.

3.10                        Property.  Except as set forth on Schedule 3.10 of the Disclosure Schedule, the Company has good and marketable title to or a valid leasehold interest in all of the tangible assets used in its business or as shown on the Most Recent Balance Sheet, free and clear of all Liens (other than Permitted Liens).  Such tangible assets are in good operating condition and repair, subject to normal wear and tear, and sufficient for the uses to which they are being put and have been maintained and serviced in accordance with prudent practice.  All leases of real or personal property to which Company is a party are currently in effect.  Company owns no real property and has never owned any real property.

3.11                        Contracts.  Schedule 3.11 of the Disclosure Schedule sets forth a complete and accurate list of each of the following Contracts (other than the Company Employee Plans and Employee Agreements) to which the Company is a party or by which the Company, or any of its assets or properties, are bound:

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(a)                                 any Contract providing for payments by or to the Company in an aggregate amount of $25,000 or more;

(b)                                 copies of all standard forms of agreement under which Company is the licensor of Intellectual Property, or under which the Company is licensee of any Intellectual Property of any other Person or under which Company has granted or obtained any rights in any Intellectual Property, including copies of all Standard Customer Agreements, Standard NDAs, and other standard forms of agreement;

(c)                                  any Contract to which Company is a party to encumber, transfer, assign, or sell rights in or with respect to any Intellectual Property (other than Permitted Liens);

(d)                                 any Contract for the sale or lease of real or personal property;

(e)                                  any dealer, distributor, sales representative, original equipment manufacturer, value added remarketer, volume purchase agreement or other Contract under which any other Person is permitted or authorized to distribute, market or sell the Company Products;

(f)                                   any franchise Contract;

(g)                                  any equity redemption or purchase Contract;

(h)                                 any joint venture Contract or arrangement or any other Contract that involves a sharing of profits with other persons or the payment of royalties to any other Person (excluding licenses for Off The Shelf Code);

(i)                                     any instrument evidencing Indebtedness or guarantees thereof;

(j)                                    any Contract containing covenants purporting to limit Company’s freedom to compete in any line of business in any geographic area;

(k)                                 any Contract of indemnification or warranting other than indemnities or warranties in connection with the sale of products and/or services in the ordinary course of business, consistent with past practice;

(l)                                     any Contract relating to capital expenditures and which involves future payments in excess of $25,000;

(m)                             any Contract relating to the disposition or acquisition of any assets by the Company, including any Intellectual Property, which involves payments individually in excess of $10,000 or in the aggregate in excess of $25,000;

(n)                                 any Contract providing for development of technology for the Company;

(o)                                 any Contract for consulting or similar services with a term of more than sixty (60) days and which is not terminable without penalty with notice of sixty (60) days or less

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(excluding Contracts with any Employee of the Company entered into within the scope of their employment);

(p)                                 any Contract granting most favored nation pricing and/or terms to any customer, licensee, purchaser, reseller, promoter or remarketer of any products or services.

(q)                                 any Contract with or commitment to any labor union; or

(r)                                    any other Contract that is material to Company, its financial condition or business.

All of the foregoing agreements, contracts, obligations and commitments listed on Schedule 3.11 of the Disclosure Schedule (collectively, the “Material Contracts”) are valid and in full force and effect.  Except as set forth in Schedule 3.11 of the Disclosure Schedule, neither the Company nor, to the Company’s Knowledge, any other party is in breach of or default under any material term of any Material Contract, nor will Company or, to the Company’s Knowledge, any other party be in breach of or default under any such term after giving effect to the transactions contemplated hereby.  To the Company’s Knowledge, no party to any such Material Contract intends to cancel, withdraw, modify or amend such Material Contract.  A true and complete copy of each Material Contact and all amendments and schedules thereto has been delivered or Made Available to Parent or its representatives.

Except as set forth on Schedule 3.11 of the Disclosure Schedule, the Company is not a party to any Material Contract or any other Contract with any customer, supplier, landlord or labor union or association that (i) provides for the reduction of prices charged by the Company to any Significant Customer for its products or services other than price reductions that are proportionate to reductions in the related costs; or (ii) provides for any increases in the prices to be paid by the Company to any Significant Supplier for any products or services, other than provisions that are in the ordinary course of the Company’s businesses and are consistent with industry practice.

3.12                        Employee Benefit Plans and Compensation.

(a)                                 Plans.  Schedule 3.12(a) of the Disclosure Schedule sets forth an accurate and complete list of each Company Employee Plan and Employee Agreement.  The Company has never established, adopted, maintained, sponsored, contributed to, participated in or incurred any Liabilities with respect to any Employee Benefit Plan, except for the Company Employee Plans as set forth in Schedule 3.12(a) of the Disclosure Schedule, or plans as to which neither the Company nor any ERISA Affiliate would reasonably be expected to have any Liability.

(b)                                 No Plan.  No Company Employee Plan (i) provides or has provided any benefit guaranteed by the Pension Benefit Guaranty Corporation (as described in ERISA); (ii) is or has ever been a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA; or (iii) is or has ever been subject to the minimum funding standards of Section 412 of the Code or Section 302 of ERISA.  The Company is not and has never been a member of a controlled group or considered a single employer under common control with any Person within the meaning of Section 414 of the Code or Section 4001 of ERISA.

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(c)                                  Copies.  The Company has delivered to Parent, with respect to each Company Employee Plan:  (i) an accurate and complete copy of such Company Employee Plan (including all amendments or modifications adopted or scheduled to take effect in the future); (ii) an accurate and complete copy of each Contract (including any trust agreement, funding agreement, service provider agreement, insurance agreement, investment management agreement, record-keeping agreement or other agreement and all amendments or modifications) relating to such Company Employee Plan; (iii) an accurate and complete copy of the most recent summary plan or policy description, and all related summaries or material modifications thereto, and the most recent report or other document that has been furnished to any Employee of the Company with respect to such Company Employee Plan; (iv) an accurate and complete copy of any form, report, registration statement or other document that has been filed with or submitted to any Governmental Authority within the past six years with respect to such Company Employee Plan; and (v) an accurate and complete copy of any determination letter, notice or other document that has been issued by, or that has been received by the Company from, any Governmental Authority with respect to such Company Employee Plan.

(d)                                 Compliance.  The Company has performed and complied with all of its obligations with respect thereto and each of the Company Employee Plans has, at all times, been operated and administered in compliance, in all material respects, with the provisions thereof.  Each Company Employee Plan has at all times complied and been operated and administered in compliance, in all material respects, with all applicable reporting, disclosure and other requirements of ERISA, COBRA, HIPAA, the Code and other applicable Law.  The Company has never incurred any liability to the Internal Revenue Service or any other Governmental Authority with respect to any Company Employee Plan, and, no event has occurred, and to the Company’s Knowledge, no condition or circumstance exists, that would reasonably be expected to (with or without notice or lapse of time) give rise directly or indirectly to any such liability.  Neither the Company nor any Person that is or was an administrator or fiduciary of any Company Employee Plan (or that acts or has acted as an agent of the Company or any such administrator or fiduciary) has engaged in any transaction or has otherwise acted or failed to act in a manner that has subjected or may subject Company to any material liability for breach of any fiduciary duty or any other duty.  No Company Employee Plan, and no Person that is or was an administrator or fiduciary of any Company Employee Plan (or that acts or has acted as an agent of any such administrator or fiduciary): (i) has engaged in a “prohibited transaction” within the meaning of Section 406 of ERISA or Section 4975 of the Code for which there is no applicable statutory or administrative exemption; (ii) has failed to perform any of the responsibilities or obligations imposed upon fiduciaries under Title I of ERISA; or (iii) has taken any action that (A) may subject the Company or such Person to any Tax, penalty or liability relating to any “prohibited transaction,” which is not exempt within the meaning of Section 408 of ERISA or (B) may directly or indirectly give rise to or serve as a basis for the assertion (by any employee or by any other Person) of any Action under, on behalf of or with respect to such Company Employee Plan.

(e)                                  No Misrepresentations.  No materially inaccurate or misleading representation, statement or other communication has been made or directed by or on behalf of the Company (in writing or otherwise) to any current or former Employee of the Company (i) with respect to such Employee’s participation, eligibility for benefits, vesting, benefit accrual or coverage under any Company Employee Plan or with respect to any other matter relating to any

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Company Employee Plan, or (ii) with respect to any proposal or intention on the part of the Company to establish or sponsor any Company Employee Plan, except as would not reasonably be expected to result in any Liability for the Company or any ERISA Affiliate.  All records and information legally required or necessary to properly administer the Company Employee Plans are maintained in good order in all material respects and all such records are true, accurate and complete.

(f)                                   Contributions and Premiums.  All required and discretionary contributions, premiums, reimbursements or other payments with respect to the Company Employee Plans for all periods ending on or prior to the Closing Date (including periods from the first day of the current plan year to the Closing Date) will have been made prior to the Closing Date by the Company.  All contributions to Company Employee Plans have been made on a timely basis in accordance with ERISA and the Code, to the extent applicable.  All insurance premiums have been paid in full with regard to Company Employee Plans for policy years or other applicable policy periods ending on or before the Closing Date.

(g)                                  Claims and Liability.  There are no actions, suits, proceedings, hearings or investigations pending (other than routine claims for benefits) and, to the best Knowledge of the Company, no such actions, suits, proceedings, hearings or investigations are threatened; and there are no outstanding liabilities for Taxes, penalties or fees relating to the Company Employee Plans.

(h)                                 Additional Benefits.  The Company has not advised any of its Employees (in writing or otherwise) that it intends or expects to establish, sponsor, make available or provide any employee, welfare or fringe benefit other than the Company Employee Plans.

(i)                                     Post-Employment Benefits.  The Company does not maintain, contribute to, or have any obligation to contribute to, or any liability with respect to any Company Employee Plan or other arrangement that provides health, medical or life insurance benefits for current or future retired or terminated directors or Employees (including any beneficiary of the foregoing), other than in accordance with the requirements of COBRA or similar state Laws.  The requirements of COBRA and similar state Laws have been met with respect to each Company Employee Plan, if applicable.  Each Company Employee Plan which provides medical, dental, health or long-term disability benefits is fully insured and claims with respect to any participant or covered dependent under such plan would not reasonably be expected to result in any uninsured Liabilities.

(j)                                    International Plans.  The Company does not maintain any Company Employee Plan or other benefit arrangements covering any Employee or former Employee outside of the United States and has never been obligated to contribute to any such plan.

(k)                                 No Triggering of Obligations.  Except as listed on Schedule 3.12(k), neither the execution of this Agreement nor the consummation of any or all of the transactions contemplated by this Agreement, will (i) entitle any current or former director or Employee to severance pay or any other payment or other rights, (ii) accelerate the time of payment or vesting, or increase the amount of any compensation due to any such Person, or (iii) give rise to any “excess parachute payment” within the meaning of Section 280G of the Code.

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(l)                                     Section 409A.  Each Company Employee Plan or other contract or arrangement that is a “nonqualified deferred compensation plan” subject to Section 409A of the Code complies with the requirements of Section 409A(a)(2), (3), and (4) of the Code and Internal Revenue Service guidance issued thereunder, and no amounts under any such plan or arrangement is or has been subject to the interest and additional tax set forth under Section 409A of the Code.  The Company does not have any actual or potential obligation to reimburse or otherwise “gross-up” any Person for the interest or additional tax pursuant to Section 409A of the Code.

(m)                             Employee and Independent Contractor Status.  Each individual who has received compensation for the performance of services on behalf of the Company has been properly classified as an Employee or independent contractor for all purposes in accordance with applicable Law.

(n)                                 Termination of Company 401(k) Plan Participation.  The Company and any ERISA Affiliate have terminated any and all employee benefit plans intended to qualify under Section 401(a) of the Code or include an arrangement under Section 401(k) of the Code (“401(a) Plan”).  The Company has timely notified all applicable service providers and participants and beneficiaries of such termination and has taken all corporate action reasonably necessary to effect such termination.

(o)                                 Cancellation of Company Options and Termination of Company Stock Plan. Prior to the Closing Date, the Company has taken all action necessary to terminate the Company Stock Plan, effective at or prior to the Closing Date.  Prior to the Closing Date, the Company has delivered notice to the holders of Company Options, in compliance with the terms of such Company Options, that the outstanding Company Options will be immediately exercisable in accordance with the Company Stock Plan and all outstanding Company Options are to be cancelled effective immediately prior to the Closing.  Any materials submitted to the holders of Company Options in connection with the notice required under this Section 3.12(o)  have been reviewed and approved by Parent.

3.13                        Intellectual Property; Technology; and Data Security.

(a)                                 Disclosures.

(i)             Schedule 3.13(a)(i) of the Disclosure Schedule lists all Company Products by name and version number.

(ii)          Schedule 3.13(a)(ii) of the Disclosure Schedule lists all Company Intellectual Property owned by the Company that is registered, filed, applied for, or issued by, with, or under the authority of any Governmental Authority (“Registered Company Intellectual Property”), including as to each item of Registered Company Intellectual Property a summary description of the Registered Company Intellectual Property and: (A) the applicable jurisdiction and application, registration or serial number; (B) any actions that must be taken by the Company within 180 days after the date of this Agreement with respect thereto; (C) any unpaid registration, maintenance or renewal fees, accrued in connection with respect thereto; and (D) any proceedings or actions before any court or

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tribunal to which the Company is a party or in which claims are raised relating to the validity, enforceability, scope, ownership or infringement thereof (other than in the ordinary course of patent and trademark prosecution in front of the United States Patent and Trademark Office or equivalent authority anywhere in the world).

(b)                                 Contract Rights.  Schedule 3.13(b) of the Disclosure Schedule contains a complete and accurate list, and the Company has Made Available accurate and complete copies, of all Contracts to which the Company is a party pursuant to which (i) other than Standard Customer Agreements and Standard NDAs, the Company grants or has granted to any other Person a license, covenant not to sue, or other rights with respect to Company Intellectual Property, or (ii) other than Standard NDAs, licenses to Off The Shelf Software and Open Sources Licenses, the Company has been granted a license, covenant not to sue, or other rights with respect to Intellectual Property of any other Person (collectively, including the Intellectual Property subject to Standard NDAs, licenses to Off The Shelf Software and Open Source Licenses to which the Company is a party, the “Licensed Intellectual Property”).  The Company has valid and subsisting written Contracts to use, reproduce, modify, incorporate, distribute, sell, market, license, make or have made, sublicense and provide access to customers in respect of all Licensed Intellectual Property, as necessary for the operation of the Company’s business as it is currently conducted, without the need for further consent or permission from any Person.  There are no outstanding and, to the Company’s Knowledge, no threatened disputes or disagreements with respect to any such Contract.  None of the Company’s agreements with its customers confers upon any customer or any third party any right in any Licensed Intellectual Property greater than that which Company has the right to grant or any ownership right with respect to any Company Intellectual Property.  No third party that has licensed any Licensed Intellectual Property to the Company has retained or been assigned an ownership interest in or any exclusive license to any Intellectual Property in any improvements or derivative works to such Licensed Intellectual Property made solely or jointly by the Company.

(c)                                  Adequacy of Intellectual Property.

(i)             The Company Intellectual Property listed on Schedule 3.13(a)(ii) and the Licensed Intellectual Property subject to Contracts listed on Schedule 3.13(b) together includes all Intellectual Property necessary for the operation of the Company’s business as it is currently conducted, including the design, development, delivery, use, marketing, distribution, licensing out, and sale of any Company Products, other than Intellectual Property subject to Standard NDAs, licenses to Off The Shelf Software and Open Source Licenses to which the Company is a party, and Company Intellectual Property not subject to a registration, filing, or application with, or under the authority of any Governmental Authority.

(ii)          The Company has not been granted an exclusive license or other exclusive rights by any Person with respect to any Intellectual Property.  The Company is the exclusive owner of all right, title and interest in and to all Company Intellectual Property, free and clear of all Liens (other than Permitted Liens) and subject only to the rights of licensors under Contracts disclosed on Schedule 3.13(c)(ii) of the Disclosure Schedule, and otherwise has the right to use without payment to any Person all Company Intellectual Property.

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(iii)       No former or current employee or contractor (or employer of any such employee or contractor) has any claim, right or interest to or in any Company Intellectual Property.  All former and current employees or contractors of the Company have executed a written and enforceable Contract with the Company that irrevocably assign to the Company all rights in and to all Intellectual Property relating to the business of the Company and contain confidentiality provisions protecting the Company Intellectual Property.  Such Contracts provide for the Company to have complete and exclusive ownership of such Company Intellectual Property without the exclusion or reservation of any Intellectual Property that is related to or necessary for the business of the Company as currently conducted, including the design, development, delivery, use, marketing, distribution, licensing out, and sale of any Company Products. No former or current employee or contractor of the Company is materially in breach of any such Contract.

(d)                                 Confidentiality and Trade Secrets.

(i)             The Company has taken all reasonable precautions to protect the secrecy, confidentiality and value of all Trade Secrets in the possession of the Company, including any such information provided to the Company by a third party with obligations of confidentiality.  Without limiting the foregoing, the Company has at all times enforced of a policy requiring each employee or contractor to execute proprietary information and confidentiality agreements substantially in the form of the Contracts attached as Schedule 3.13(d) of the Disclosure Schedule.  All current and former employees and contractors of Company have executed such an agreement.

(ii)          Except for Trade Secrets that lost their status as trade secrets upon the release of a new Company Product, upon the issuance of a Patent or publication of a Patent application, or as a result of a good faith business decision to disclose such Trade Secret, and except for trademarks, trade names and service marks that the Company made a good faith business decision to stop using, the Company has not permitted the rights of the Company in any Company Intellectual Property that is or was at the time material to its business to enter into the public domain.  To the Company’s Knowledge, no Trade Secret that is part of the Company Intellectual Property is subject to any adverse Action (evidenced in writing) and, to the Company’s Knowledge, no such Action is threatened against any such Trade Secret.

(e)                                  Validity and Enforceability of Intellectual Property. Each item of Registered Company Intellectual Property has been applied for or registered in the name of the Company and is and at all times has been in compliance with all requirements under applicable Law.  All filings, payments and other actions required to be made or taken to maintain such item of Registered Company Intellectual Property in full force and effect have been made by the applicable deadline.  No item of Company Intellectual Property has been or is now involved in any dispute, opposition, invalidation or cancellation proceeding (other than in the ordinary course of patent and trademark prosecution in front of the United States Patent and Trademark Office or equivalent authority anywhere in the world), and, to the Company’s Knowledge, no such action is threatened with respect to any such Company Intellectual Property.  To the Knowledge of the Company, there is no basis for a claim that any Company Intellectual Property is invalid or, except for pending applications, unenforceable.

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(f)                                   Effects of This Transaction on Intellectual Property.  Neither the execution, delivery or performance of this Agreement or any other agreements referred to in this Agreement nor the consummation of any of the transactions contemplated by this Agreement or any such other agreement will, with or without notice or the lapse of time, result in or give any other Person the right or option to cause or declare: (i) a loss of, or Lien on, any Company Intellectual Property; (ii) a breach of any Contract listed or specifically excluded from listing on Schedule 3.13(b) of the Disclosure Schedule; (iii) Parent or the Company to be bound by or subject to any material restriction on the operation or scope of their respective businesses (except as the result of Parent’s or its Affiliates’ agreements, licenses or other obligations existing as of the Closing); (iv) the release, disclosure or delivery of any Company Intellectual Property by or to any escrow agent or other Person; (v) Parent or the Company to become obligated to pay any royalties or other fees or amounts with respect to Intellectual Property of any Person in excess of those payable by the Company in the absence of this Agreement or the transactions contemplated hereby (except as the result of Parent’s or its Affiliates’ agreements, licenses or other obligations existing as of the Closing); or (vi) the grant, assignment or transfer to any other Person of any license or other right under or to any of Company Intellectual Property.

(g)                                  Infringement.

(i)             To the Knowledge of the Company, no Person has infringed, misappropriated, or otherwise violated, and no Person is currently infringing, misappropriating or otherwise violating, any Company Intellectual Property.  To the Company’s Knowledge, (A) no Company Intellectual Property conflicts or interferes with any Intellectual Property of any other Person and (B) none of the goodwill associated with or inherent in any Trademarks within the Company Intellectual Property has or purports to have an ownership interest has been materially impaired.  Schedule 3.13(g) of the Disclosure Schedule accurately identifies (and the Company has Made Available a true, correct and complete copy of) each letter or other written or electronic communication or correspondence that has been sent or otherwise delivered by or to the Company or any of its representatives regarding any actual, alleged or suspected infringement or misappropriation of any Company Intellectual Property.

(ii)          Company is not infringing, misappropriating or otherwise violating, and has not ever infringed, misappropriated or otherwise violated, any Intellectual Property of any other Person.  The conduct of the business of the Company, including the design, development, delivery, use, marketing, distribution, licensing out, and sale of any Company Products, does not and has not ever infringed, misappropriated or otherwise violated any Intellectual Property of any other Person or constituted unfair competition or trade practices under any applicable Laws.  Without limiting the foregoing no infringement, misappropriation or similar Action, or any Action alleging unfair competition or trade practices, is pending or has been threatened against the Company or, to the Knowledge of the Company, against any other Person who may be entitled to be indemnified, defended, held harmless or reimbursed by the Company with respect to such Action.  Company has not received any notice or other communication (in writing or otherwise) relating to any actual, alleged or suspected infringement, misappropriation or violation of any Intellectual Property of another Person, or any actual, alleged or suspected engagement by the Company in unfair competition or trade practices under the laws of any jurisdiction.  Except in a Contract listed

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on Schedule 3.13(b) of the Disclosure Schedule, or under and Standard Customer Contract, the Company is not bound by any Contract to indemnify, defend, hold harmless or reimburse any other Person with respect to any infringement, misappropriation or violation of any Intellectual Property.

(h)                                 Company Technology and Software.

(i)             None of the software, hardware, or other technology that is embedded or included in or with, or otherwise used in the development, marketing, sale, licensing, delivery, hosting, provision, or distribution of, any Company Products (collectively, “Company Technology”): (A) materially fails to comply with any applicable warranty or other contractual commitment relating to the use, functionality or performance of, such Company Technology; or (B) contains any “back door,” “drop dead device,” “time bomb,” “Trojan horse,” “virus,” or “worm” (as such terms are commonly understood in the software industry) or any other code, software routines, or hardware components designed or intended to have, or capable of performing, any of the following functions: (A) disrupting, disabling, harming or otherwise impeding in any manner the operation of, or permitting or causing unauthorized access to, a system, network, or other device; or (B) damaging or destroying any data or file without the user’s consent (collectively, “Contaminants”).  The Company uses industry standard measures, which measures are no less than reasonable, to prevent the introduction of Contaminants into the Company Technology from software, products, services or systems licensed or otherwise obtained from third parties.  The Company Technology does not contain any vulnerabilities that could permit a third party to gain unauthorized access to the Company Technology, any Company Database or other data or information of the Company or any of its clients or customers.

(ii)          Schedule 3.13(h)(ii) of the Disclosure Schedule (A) lists all software licensed under an Open Source License (collectively “Open Source Software”) that has been licensed or obtained by Company and that has been embedded or included in or with, or otherwise used in the development, delivery, hosting, or distribution of, any Company Products; and (B) describes the manner in which such Open Source Software was incorporated or used, which description shall include, without limitation, whether (and, if so, how) the Open Source Software was modified and/or distributed by the Company and whether (and if so, how) such Open Source Software was incorporated into and linked in any Company Products.  The Company has not distributed any Open Source Software, including in any Company Products incorporating, including, or imbedding any Open Source Software.  Without limiting the foregoing sentence, the Company has not used Open Source Software in any manner that would or could: (1) require the disclosure or distribution of any source code of any Company Products; (2) require the licensing of any Company Products for the purpose of making derivative works; (3) impose any restriction on the consideration to be charged for any Company Products, (4) create, or purport to create, obligations for the Company with respect to any Company Products or grant, or purport to grant, to any third party, any rights or immunities under any Company Intellectual Property, or (5) create, or purport to create, an obligation to grant a license or other rights to any Patent to any third party.  With respect to any Open Source Software that is or has been used by the Company in any way, the Company has been and is in compliance with all applicable licenses with respect thereto.

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None of the Owned Software subject to any Patent included in the Company Intellectual Property incorporates, includes, or imbeds any Open Source Software.

(iii)                               No source code for any Company Technology has been delivered, licensed, or otherwise made available to any escrow agent or other Person who is not, as of the date of this Agreement, an employee of the Company, including under any Open Source License.  The Company does not have any duty or obligation (whether present, contingent or otherwise) to deliver, license or make available the source code for any Company Technology to any escrow agent or other Person who is not, as of the date of this Agreement, an employee of the Company.  No event has occurred, and no circumstance or condition exists, that will, or could reasonably be expected to, result in the delivery, license or disclosure of any source code for any Company Technology to any other Person who is not, as of the date of this Agreement, an employee of the Company.

(i)                                     Data Privacy.  All Personal Information collected or used by or on behalf of the Company in connection with the business of the Company and the Company Products, including any marketing or advertising by the Company related thereto, has been collected and used in accordance with all applicable Laws and Company Privacy Policies and there has been no unauthorized access to or use of any such Personal Information.  The Company and all Persons acting on behalf of the Company comply, and have always complied, with all applicable Laws and other Privacy Legal Requirements regarding the collection, use, storage, retention, disclosure, transfer, disposal and any other processing of any Personal Information collected, used, stored, or transmitted by or on behalf of the Company.  Neither the execution, delivery and performance of this Agreement nor the subsequent transfer of Company’s Databases, Personal Information, and other information relating to its business from the Company to Parent will cause, constitute, or result in a breach or violation of any applicable Law or other Privacy Legal Requirements by any party to this Agreement, or cause, constitute, or result in a violation of any representations with regard to Personal Information made by or applicable to Company, including, without limitation, any external or internal, past or present privacy policy or privacy- or security-related representation, obligation or promise of the Company or to which Company is otherwise subject (“Company Privacy Policy”).  Copies of all Company Privacy Policies have been Made Available.  The Company Privacy Policies have at all times made all disclosures to users or customers required by all applicable Laws and other Privacy Legal Requirements, and Company has obtained all consents with respect to the collection, use, storage, or transmission of Personal Information from or to customers or users required by all applicable Laws.  None of the disclosures made or contained in the Company Privacy Policies, and no other representation with regard to Personal Information made by Company, has been inaccurate, misleading or deceptive or in violation of any applicable Law (including containing any material omission).  To the Company’s Knowledge, there is no complaint or Action (including any informal investigation) currently pending against the Company or any of its customers (specific to Company Products) by any private party or by the Federal Trade Commission, any state attorney general or similar state official, or any other Governmental Entity, with respect to the security or privacy of any Company Technology or other information technology systems, networks and equipment of the Company, including any Company Databases, Personal Information, or other data or information collected, transmitted, processed, or stored by or on behalf of the Company.

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(j)                                    Data Security.  The Company has taken all steps and implemented all procedures necessary, reasonable, and appropriate to preserve the availability, security, and integrity Company Technology and the other information technology systems, networks and equipment of the Company and the data and information stored, processed, and transmitted thereon.  All such steps and comply with all applicable Laws relating to the security of information technology assets, Personal Information, Confidential Information, and other data, information, and Company Intellectual Property to which the Company or any third party acting on behalf of Company has access or otherwise collects, handles, transmits, processes, or stores.  Without limiting the foregoing, the Company has implemented and maintained reasonable and appropriate measures with respect to technical, administrative, and physical security to preserve and protect the confidentiality, availability, security, and integrity of the Company Technology and the other information technology systems, networks and equipment of Company, including all Databases of the Company, Personal Information of the Company, and other data and information collected, transmitted, processed, or stored by or on behalf of the Company.  The Company has implemented written information security plans documenting all such security measures.  The Company’s written information security plans and all information security practices conform, and at all times have conformed, with all applicable Laws and to all of the Company’s contractual commitments.  There have been no intrusions or breaches of the security of the Company Technology and the other information technology systems, networks and equipment of Company, including any breaches involving any Databases of the Company, Personal Information of the Company, or other data or information collected, handled, transmitted, processed, or stored by the Company.  There have been no intrusions or breaches of the security of the Company Technology or any other information technology systems, networks and equipment of the Company, including any Databases of the Company, Personal Information of the Company, or other data or information collected, transmitted, processed, or stored by or on behalf of the Company.  All Personal Information is encrypted in accordance with applicable Law and the Company’s contractual commitments and representations made in the Company privacy policies and in accordance with industry standards and  practices regarding encryption technologies and key management practices.

3.14                        Insurance.  Schedule 3.14 of the Disclosure Schedule sets forth all Actions in excess of $10,000 made under the Company’s insurance policies since January 1, 2010.  All policies of insurance now held by the Company are set forth in Schedule 3.14 of the Disclosure Schedule, together with the name of the insurer under each policy, the type of policy, the policy coverage amount and any applicable deductible, as of the date of the Agreement.  There is no Action pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds.  All premiums due and payable under all such policies and bonds have been timely paid and the Company is otherwise in material compliance with the terms of such policies and bonds and all such policies are in full force and effect.  The Company has no Knowledge of any threatened termination of, or material premium increase with respect to, any of such policies.

3.15                        Personnel.

(a)                                 Employee Information.  Schedule 3.15(a) of the Disclosure Schedule accurately sets forth, with respect to all current Employees of the Company:  (i) the name and title of such Employee; (ii) the aggregate dollar amounts of the compensation (including wages,

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salary, commissions, director’s fees, fringe benefits, bonuses, profit sharing payments and other payments or benefits of any type) received by such Employee from Company with respect to services performed in 2012 and the first nine months of 2013; and (iii) such Employee’s annualized compensation as of the date of this Agreement.  Schedule 3.15(a) of the Disclosure Schedule accurately identifies all of the directors and officers of the Company.

(b)                                 Employee Agreements, Union Contracts.  Neither the Company nor any of the Company’s Employees is a party to or bound by any union contract, collective bargaining agreement or similar contract.

(c)                                  Employment at Will.  Except as set forth Schedule 3.15(c) of the Disclosure Schedule, the employment of the Employees of the Company is terminable by the Company at will and no Employee is entitled to severance pay or other benefits following termination or resignation, except as otherwise provided by Law.

(d)                                 Termination, Etc.  Except as set forth on Schedule 3.15(d) of the Disclosure Schedule, to the Company’s Knowledge:  (i) no Employee intends to terminate his or her employment; (ii) no Employee of the Company has received an offer to join or intends to join or create a business that may be competitive with the business of the Company or the business of Parent (including prospective businesses of both Parent and Company); and (iii) no Employee of the Company is a party to or is bound by any confidentiality agreement, noncompetition agreement or other contract (with any Person) that may have an adverse effect on (A) the performance by such Employee of any of his or her duties or responsibilities as an Employee of the Company, or (B) the business of the Company.

(e)                                  The Company is in compliance with the Worker Adjustment Retraining Notification Act of 1988, as amended (“WARN Act”), and any similar state or local Law.  The Company has not (i) effectuated a “plant closing” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business, (ii) there has not occurred a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of the Company, and (iii) the Company has not been affected by any transaction or engaged in layoffs or employment terminations sufficient in number, including as aggregated, to trigger application of any state, local or foreign Law similar to the WARN Act.  The Company has not caused any of its Employees to suffer an “employment loss” (as defined in the WARN Act) that triggers the WARN Act during the ninety (90) day period prior to the Closing Date.  No termination prior to the Closing would trigger any notice or other obligations under the WARN Act or similar state, local or foreign Law.

3.16                        Litigation.  There is no (a) Action pending, or to the Company’s Knowledge, threatened against the Company, any of its properties or assets or the Merger or the other transactions contemplated hereby, (b) governmental inquiry or investigation pending or, to the Company’s Knowledge, threatened against the Company or any of its properties or assets (including any inquiry as to the qualification of the Company to hold or receive any license or Permit) or (c) to the Company’s Knowledge, any Actions pending or threatened against any Related Party in connection with the business of the Company.  The Company is not in default with respect to any order, writ, injunction or decree of any Governmental Authority known to or

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served upon the Company.  There is no Action by the Company pending or threatened against any other Person.

3.17                        Environmental Matters. Except as set forth on Schedule 3.17 of the Disclosure Schedule, to the Knowledge of the Company, (i) the Company is, and, for not less than five (5) years, has been, in compliance in all material respects with all Environmental Laws, (ii) to the Company’s Knowledge, for not less than five (5) years, there has been no release or threatened release of any Hazardous Substance on, upon, into or from any site currently or heretofore owned, leased or otherwise used by the Company, (iii) for not less than five (5) years, there have been no Hazardous Substances generated by the Company that have been disposed of or come to rest at any site that has been included in any published U.S. federal, state or local “superfund” site list or any other similar list of hazardous or toxic waste sites published by any Governmental Authority in the United States, and (iv) to the Company’s Knowledge, without any inquiry of any landlord, there are no underground storage tanks located on, no PCBs (polychlorinated biphenyls) or PCB-containing Equipment used or stored on, and no hazardous waste as defined by the Resource Conservation and Recovery Act stored on, any site owned, leased or operated by the Company, except for the storage of hazardous waste in compliance in all material respects with Environmental Laws.

3.18                        Compliance with Laws; Permits.

(a)                                 Except as set forth on Schedule 3.18(a) of the Disclosure Schedule, the Company has complied and will be as of the Closing Date in compliance with all Laws  applicable to the Company or its assets, properties and business in all material respects.  The Company has received all material permits and approvals from, and has made all material filings with, third parties, including any Governmental Authority, that are necessary to the conduct of its business as presently conducted, and there currently exists no default under or violation of any such permit or approval.

(b)                                 All Permits (i) pursuant to which the Company currently operates or holds any interest in property, or (ii) which are required for the operation of the business of the Company as currently conducted or the holding of any such interest, have been issued or granted to the Company, and all such Permits are in full force and effect and constitute all Permits required to permit the Company to operate or conduct its business as it is currently conducted and hold any interest in its properties or assets.  Schedule 3.18(b) of the Disclosure Schedule contains a complete and accurate list of all material Permits necessary to conduct the business of the Company.

(c)                                  The Company has conducted its export transactions in accordance with applicable provisions of the U.S. export control laws and regulations.

(d)                                 The Company (including to the Company’s Knowledge any of their respective officers, directors, agents, Employees or other Person associated with or acting on their behalf) has not, directly or indirectly, provided anything of value to foreign officials in order to obtain or retain business, direct business to another or otherwise gain an advantage, nor has it taken any other action which would cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations thereunder, used any corporate

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funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, made any unlawful payment to foreign or domestic government officials or employees or made any unlawful bribe, rebate, payoff, influence payment, kickback or other similar unlawful payment.  The Company has not ever been investigated, formally or informally, by any Governmental Authority for conduct related to corruption.

3.19                        Banking Relationships.  Schedule 3.19 of the Disclosure Schedule sets forth the names and locations of all banks, trust companies, savings and loan associations, and other financial institutions at which the Company maintains accounts of any nature and the names of all persons authorized to draw thereon or make withdrawals therefrom.

3.20                        Books and Records.  The books, records and accounts of the Company (a) are in all material respects true and complete, (b) have been maintained in accordance with reasonable business practices on a basis consistent with prior years, (c) are stated in reasonable detail and accurately and fairly reflect the transactions and dispositions of the assets of the Company, and (d) accurately and fairly reflect the basis for the Financial Statements.  The Company has devised and maintains a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management’s general or specific authorization; (b) transactions are recorded as necessary (i) to permit preparation of accurate financial statements which are true and complete in all material respects and (ii) to maintain accountability for assets; and (c) the amount recorded for assets on the books and records of the Company is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

3.21                        Product and Service Warranties.  Each of the products sold, distributed or delivered by Company has been in material conformity with all applicable contractual commitments and all applicable express and applicable implied service and product warranties.  Except as disclosed on Schedule 3.21 of the Disclosure Schedule, (a) there are no existing or, to the Company’s Knowledge, threatened Actions against the Company for services or merchandise which are defective or fail to meet any express or implied service or product warranties, or, to the Company’s Knowledge, any facts which, if discovered by a third party, would support such an Action; and (b) no Action has been asserted in writing against Company for renegotiation or price redetermination with respect to any transaction, and, to the Company’s Knowledge, there are no facts upon which any such Action could be based.  Since January 1, 2008, the Company has not experienced any product or service warranty claims that have had a detrimental economic effect on the Company in excess of $25,000.

3.22                        Accounts Receivable.  The accounts receivable of the Company shown on the Most Recent Balance Sheet arose in the ordinary course of business consistent with past practice, and have been collected or are, to the Company’s Knowledge, collectible in the book amounts thereof, less an amount not in excess of the allowance for doubtful accounts provided for in the Most Recent Balance Sheet.  Allowances for doubtful accounts and warranty returns are adequate for expected payment defaults based on past practice and collection experience.  The receivables of the Company arising after the date of the Most Recent Balance Sheet and prior to the Closing Date arose in the ordinary course of business, consistent with past practice, and have been collected or are, to the Company’s Knowledge, collectible in the book amounts thereof, less reasonable allowances for doubtful accounts and warranty returns based upon past

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practice of the Company.  None of the receivables of the Company are subject to any material Action for offset, recoupment, setoff or counter claim and the Company has no Knowledge of any specific facts or circumstances (whether asserted or unasserted) that could give rise to any such material Action.  Except as set forth on Schedule 3.22 of the Disclosure Schedule, no Person has any Lien on any of such receivables (except Permitted Liens).  Schedule 3.22 of the Disclosure Schedule sets forth an aging of accounts receivable of the Company as of September 30, 2013 in the aggregate and by customer, and indicates the amounts of allowances for doubtful accounts and warranty returns and the amounts of accounts receivable which are subject to asserted warranty Actions.  Schedule 3.22 of the Disclosure Schedule sets forth such amounts of accounts receivable which are subject to asserted warranty Actions by customers and reasonably detailed information regarding asserted warranty Claims made within the last year, including the type and amounts of such Actions.

3.23                        Brokers and Finders.  Except as listed on Schedule 3.23 of the Disclosure Schedule, neither the Company nor any Effective Time Shareholder is obligated for the payment of any fees or expenses of any investment banker, broker, finder or similar party in connection with the origin, negotiation or execution of this Agreement or in connection with any other transaction contemplated by this Agreement and neither Parent nor the Company will incur any liability, either directly or indirectly, to any such investment banker, broker, finder or similar party as a result of, this Agreement.

3.24                        Anti-Takeover Statute Not Applicable.  No “business combination,” “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation or anti-takeover provision in the Company Organizational Documents is applicable to the Company, any shares of Company Capital Stock or other Company Securities, this Agreement, the Merger or any of the other transactions contemplated by this Agreement.

3.25                        Complete Copies of Documents.  The Company has Made Available true and complete copies of all Contracts and other documents required to be set forth (whether or not disclosed) in the Disclosure Schedule.

3.26                        Certain Relationships and Related Transactions.  Except as set forth on Schedule 3.26 of the Disclosure Schedule, no officer or director of the Company, or any member of any officer’s or director’s immediate family, (a) has any direct or indirect ownership interest in or any employment or consulting agreement with any firm or corporation that competes with the Company or Parent (except with respect to any interest in less than two percent (2%) of the outstanding voting shares of any corporation whose stock is publicly traded), (b) is directly or indirectly interested in any Material Contract or informal arrangement with the Company, except for (i) this Agreement, the Related Agreements to which the Company and the Effective Time Shareholders are a party and (ii) compensation for services, or reimbursement of expenses in connection with performance of services, as an officer or director of the Company, (c) has any interest in any property, real or personal, tangible or intangible, used in the business of the Company, or (d) has had, either directly or indirectly, a material interest in any Person which purchases from or sells, licenses or furnishes to the Company any goods, property, technology or intellectual or other property rights or services.

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3.27                        Customers and Suppliers.

(a)                                 Customers. The Company has no outstanding material disputes concerning its goods and/or services with any customer who, in the year ended December 31, 2012, or the nine months ended September 30, 2013, was one of the ten (10) largest sources of revenues for the Company, based on amounts paid (a “Significant Customer”).  Except as set forth on Schedule 3.27(a) of the Disclosure Schedule, the Company has not received any information from any current Significant Customer that the customer will not continue as a customer of the Company after the Closing or that any such customer intends to terminate or materially modify existing contracts or arrangements with the Company.  The Company has not had any of its products returned by a purchaser thereof except for normal warranty returns consistent with past history and those returns that would not result in a reversal of any revenue by the Company.  Except as set forth on Schedule 3.27(a) of the Disclosure Schedule, the Company is not currently obligated and shall not become obligated as a result of any understanding or agreement with any third party, whether written or oral, to (i) place the source code, object code or developmental tools of any of Company’s Intellectual Property (collectively, the “Source Code”) into escrow, (ii) release the Source Code from any escrow to any third party, or (iii) otherwise deliver, assign, transfer or convey the Source Code to any third party, in each case as a result of, or in connection with, the consummation of the transactions contemplated by this Agreement.