Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bd1+Zs1L1cIMPqjCTKk9kyjmRCB/TfgWZIwQ5rv6L/Ca4GLVDkPWbLq39z7FS7sh t/MXzJyOc909ru4/RReiVQ== 0001193125-09-256709.txt : 20091221 0001193125-09-256709.hdr.sgml : 20091221 20091221123841 ACCESSION NUMBER: 0001193125-09-256709 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20091221 DATE AS OF CHANGE: 20091221 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN ELECTRONIC PUBLISHERS INC CENTRAL INDEX KEY: 0000356841 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE MACHINES, NEC [3579] IRS NUMBER: 222476703 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-37836 FILM NUMBER: 091251890 BUSINESS ADDRESS: STREET 1: ONE FRANKLIN PLAZA CITY: BURLINGTON STATE: NJ ZIP: 08016 BUSINESS PHONE: 6093862500 MAIL ADDRESS: STATE: NJ ZIP: 08016 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN COMPUTER CORP DATE OF NAME CHANGE: 19900510 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Saunders Acquisition Corp CENTRAL INDEX KEY: 0001477520 IRS NUMBER: 264656665 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 2 BRIARWOOD COURT CITY: PRINCETON JUNCTION STATE: NJ ZIP: 08850 BUSINESS PHONE: 609-509-3024 MAIL ADDRESS: STREET 1: 2 BRIARWOOD COURT CITY: PRINCETON JUNCTION STATE: NJ ZIP: 08850 SC 13D 1 dsc13d.htm SCHEDULE 13D Schedule 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

Franklin Electronic Publishers, Incorporated

(Name of Issuer)

Common Stock

(Title of Class of Securities)

3535109

(CUSIP Number)

Saunders Acquisition Corporation

c/o Barry J. Lipsky,

2 Briarwood Court,

Princeton Junction,

New Jersey 08850 (609-509-3024)

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

With a copy to:

David A. Boillot, Esq.,

Reitler Kailas & Rosenblatt LLC,

800 Third Avenue,

21st Floor, New York,

NY 10022 (212-209-3050)

December 2, 2009

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP N0.: 3535109
1)	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Saunders Acquisition Corporation
2)	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) ¨
3)	SEC Use Only
4)	SOURCE OF FUNDS WC
5)	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)			¨
6)	CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A.
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7)	SOLE VOTING POWER 2,582,412
		8)	SHARED VOTING POWER 0
		9)	SOLE DISPOSITIVE POWER 2,582,412
		10)	SHARED DISPOSITIVE POWER 0
11)	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,582,412
12)	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			¨
13)	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 31.2%(1)
14)	TYPE OF REPORTING PERSON CO

(1) The percentage is calculated based upon 8,281,133 shares of common stock outstanding as of November 4, 2009, as reported on the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.

ITEM 1.

SECURITY AND ISSUER

This Statement relates to the common stock, $.01 par value (the “Common Stock”) of Franklin Electronic Publishers, Incorporated, a Pennsylvania corporation (the “Company”). The address of the principal executive offices of the Company is One Franklin Plaza, Burlington, New Jersey 08016.

ITEM 2.

IDENTITY AND BACKGROUND


(a)		This statement is being filed by Saunders Acquisition Corporation, a Delaware corporation (the “Reporting Person”).

(b)-(c)		The Reporting Person is Delaware corporation, its principal business the acquisition of the Company in accordance with the transaction described in Item 4 of this Schedule 13D and the address of its principal office is 2 Briarwood Court, Princeton Junction, New Jersey 08850. The principal occupation of Barry J. Lipsky (“Mr. Lipsky”), the President and sole director of the Reporting Person, is President and Chief Executive Officer of the Company. The principal business office and address of Mr. Lipsky is c/o Franklin Electronic Publishers, Incorporated, One Franklin Plaza, Burlington, New Jersey 08016. The principal occupation of Frank A. Musto (“Mr. Musto”), the Treasurer of the Reporting Person, is the Vice President, Chief Financial Officer, Treasurer and Secretary of the Company. The principal business office and address of Mr. Musto is c/o Franklin Electronic Publishers, Incorporated, One Franklin Plaza, Burlington, New Jersey 08016. The principal occupation of Toshihide Hokari (“Mr. Hokari”), the Secretary of the Reporting Person, is the Senior Vice President and Chief Operating Officer of the Company. The principal business office and address of Mr. Hokari is c/o Franklin Electronic Publishers, Incorporated, One Franklin Plaza, Burlington, New Jersey 08016.

(d)		During the last five (5) years, neither the Reporting Person nor any of Messrs. Lipsky, Musto or Hokari has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e)		During the last five (5) years, neither the Reporting Person nor any of Messrs. Lipsky, Musto or Hokari has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding, were or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)		The Reporting Person is a Delaware corporation. Messrs. Lipsky and Musto are citizens of the United States of America. Mr. Hokari is a citizen of Japan.

ITEM 3.

SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION

Information set forth in Item 4 of this Schedule 13D is hereby incorporated in this Item 3 by reference.

The shares of Common Stock beneficially owned by the Reporting Person were acquired pursuant to (a) that certain Exchange Agreement, dated May 29, 2009 (the “May Exchange Agreement”), by and among the Reporting Person, Messrs. Lipsky, Musto, Hokari and Howard L. Morgan (“Dr. Morgan”), James H. Simons (“Dr. Simons”), Marcy Lewis (“Ms. Lewis”) and Shining Sea Limited, an exempted company organized under the laws of the Island of Bermuda (“Shining Sea”), a copy of which is filed herewith as Exhibit 7.01 and incorporated herein by reference, and (b) that certain Exchange Agreement, dated September 11, 2009 (the “September Exchange Agreement,” and, together with the May Exchange Agreement, the “Exchange Agreements”), by and among the Reporting Person and Julien David (“Mr. J. David”) and Morton David (“Mr. M. David”), a copy of which is filed herewith as Exhibit 7.02 and incorporated herein by reference. Pursuant to the Exchange Agreements, as described in greater detail in Item 6, each of Messrs. Lipsky, Musto, Hokari, J. David and M. David, Dr. Morgan, Dr. Simons, Ms. Lewis and Shining Sea have agreed to contribute their Common Stock of the Company to the Reporting Person in exchange for an equal number of shares of Series A Preferred Stock, par value $0.01 per share of the Reporting Person (the “Series A Preferred Stock”). Pursuant to the Exchange Agreements, the Reporting Person has agreed to vote its shares of Common Stock of the Company in favor of the proposed Merger.

In connection with the transactions described in Item 4, the Reporting Person estimates that the total amount of funds necessary to acquire all of the Common Stock not currently owned by the Reporting Person in the Merger (as defined in Item 4) and pay estimated fees and expenses will be approximately $14,477,000. In connection with the Revised Proposal (as defined in Item 4), (i) Mr. Lipsky has subscribed for 200,000 shares of Series B Preferred Stock, par value $0.01 per share of the Reporting Person (the “Series B Preferred”) for an aggregate purchase price of $500,000, (ii) Dr. Morgan has subscribed for 400,000 shares of Series B Preferred for an aggregate purchase price of $1,000,000, and (iii) Mr. M. David has subscribed for 80,000 shares of Series B Preferred for an aggregate purchase price of $200,000 (collectively, the “Original Subscription Agreements”). Copies of the Original Subscription Agreements are filed herewith as Exhibit 7.03 and incorporated into this Item 3 by reference. On September 30, 2009, in connection with the proposed Merger, Noah Education Holdings Ltd. (“Noah”) has agreed to subscribe for 400,000 shares of Series B Preferred for an aggregate purchase price of $1,000,000 (the “Noah Subscription Agreement”). A copy of the Noah Subscription Agreement is filed herewith as Exhibit 7.04 and incorporated into this Item 3 by reference.

To the extent that any amounts are due or may be paid by the Reporting Persons or the surviving corporation in connection with the consummation of the Merger, such funds may be paid from generally available working capital of the surviving corporation.

ITEM 4.

PURPOSE OF TRANSACTION

On May 20, 2009, Messrs. Lipsky, Musto and Hokari, Dr. Morgan, Dr. Simons, Ms. Lewis and Shining Sea submitted a non-binding proposal (the “Original Proposal”) for a going-private transaction to the board of directors of the Company (the “Board of Directors”). A copy of the Original Proposal is filed herewith as Exhibit 7.05 and incorporated into this Item 4 by reference. On May 20, 2009, the Board of Directors formed a special committee of independent directors (the “Special Committee”) to consider the terms and conditions of the Original Proposal and to recommend to the Board of Directors whether to approve the Original Proposal. On September 11, 2009, Messrs. Lipsky, Musto, Hokari, J. David and M. David, Dr. Morgan, Dr. Simons, Ms. Lewis and Shining Sea submitted to the Special Committee a revised non-binding

proposal for a going-private transaction (the “Revised Proposal”) which contemplated the merger (the “Merger”) of the Reporting Person with and into the Company. A copy of the Revised Proposal is filed herewith as Exhibit 7.06 and incorporated into this Item 4 by reference.

On September 30, 2009, the Reporting Person entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the Company, pursuant to which, subject to the receipt of shareholder approval and certain other conditions, the Reporting Person will merge with and into the Company on the terms and conditions set forth in the Merger Agreement. Following the completion of the proposed Merger, the separate existence of the Reporting Person will cease and the Company will be the corporation surviving the proposed Merger (the “Surviving Corporation”). On the effective dated of the proposed Merger, all outstanding shares of Common Stock, other than shares held by the Reporting Person, will be cancelled and will be converted into the right to receive $2.50 in cash, without interest. Vested stock options to purchase Common Stock of the Company with an exercise price of less than $2.50 will be settled for an amount equal to the product of (i) the number of shares of Common Stock of the Company subject to such stock option and (ii) the difference between $2.50 and the exercise price of such stock option. All vested options with an exercise price equal to or greater than $2.50 and unvested stock options will be cancelled without consideration.

The Company may terminate the Merger Agreement under certain circumstances, including if the Board of Directors determines in good faith that it has received an unsolicited bona fide Superior Proposal (as defined in the Merger Agreement), and otherwise complies with certain terms of the Merger Agreement. In connection with such termination, or a termination of the Merger Agreement under certain other circumstances, the Company must pay a fee of $650,000 to the Reporting Person. In certain circumstances, the Merger Agreement provides for the Reporting Person to pay to the Company a fee of $650,000 upon termination of the Merger Agreement. The Company is also required, under certain circumstances, to reimburse the Reporting Person for its actual expenses if the Reporting Person terminates the Merger Agreement due to the Company’s board of directors violating certain of the Merger Agreement’s covenants.

If the proposed Merger is consummated, the Common Stock of the Company would be eligible for termination of registration pursuant to Section 12(g) of the Exchange Act and the Common Stock of the Company would be delisted from the NYSE Amex Equities, and following the proposed Merger the Surviving Corporation will be controlled by the Reporting Person.

As a result of the Exchanges (defined below in Item 6) effected by Messrs. Lipsky, Hokari, Musto, J. David and M. David, Ms. Lewis, Dr. Morgan, Dr. Simons and Shining Sea described in Item 6, the Reporting Person will beneficially own 2,582,412 shares of Common Stock, representing approximately 40.4% of the total outstanding votes of the Common Stock entitled to vote on the proposed Merger as a single class.

A proxy statement will be distributed to shareholders of the Company in connection with the proposed Merger. Shareholders of the Company should read the Company’s proxy statement and other relevant documents regarding the proposed Merger filed with the SEC when they become available because they will contain important information relevant to the decision to approve the proposed Merger. Shareholders will be able to receive these documents (when they become available), as well as other documents filed by the Reporting Persons or Acquisition Company or its affiliates with respect to the proposed Merger, free of charge at the SEC's web site, www.sec.gov.

Other than as set forth in the Merger Agreement, the Reporting Person has no plans or proposals that relate to or would result in any of the events set forth in this Item 4 of Schedule 13D. However, if the proposed Merger is not consummated for any reason, the Reporting Person intends to review continuously the Company’s business affairs, capital needs and general industry and economic conditions, and, based on such review, the Reporting Person may, from time to time, determine to increase its ownership of Common Stock, approve an extraordinary corporate transaction with regard to the Company or engage in any of the events set forth in this Item 4 of Schedule 13D, except that the Reporting Person currently have no intention of selling any shares of Common Stock.

The foregoing is a summary of the Merger Agreement and the proposed Merger and should not be construed as an offer to purchase shares of the Company’s Common Stock. The information set forth in response to this Item 4 does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 7.07, and is incorporated herein by reference.

Item 5.

Interest in Securities of the Company.

(a) The Reporting Person beneficially owns 2,582,412 shares of Common Stock, which represents 31.2% of the Common Stock.

Mr. Lipsky beneficially owns 352,119 shares of Common Stock, which represents 4.1% of the Common Stock, and includes 352,119 shares of Common Stock that may be acquired by Mr. Lipsky upon exercise of stock options at the exercise prices set forth in the table set forth below. If the proposed Merger is consummated in accordance with the Merger Agreement, the following stock options will be cancelled without consideration.


Number of Options	Exercise Price
36,000	$	7.50
50,000	$	7.50
30,000	$	2.80
106,119	$	3.50
30,000	$	2.70
37,500	$	3.84
37,500	$	3.80
25,000	$	3.82

Mr. Hokari beneficially owns (a) 25,000 shares of Common Stock that may be acquired by Mr. Hokari upon exercise of stock options at an exercise price of $2.95 per share and (b) 3,500 shares of Common Stock that may be acquired by Mr. Hokari upon exercise of stock options at an exercise price of $1.40. The shares of Common Stock described in (a) and (b) of this paragraph represent an aggregate of 0.3% of the Common Stock. If the proposed Merger is consummated in accordance with the Merger Agreement, (i) the stock options granted to Mr. Hokari to purchase 25,000 shares of Common Stock at an exercise price of $2.95 per share will be cancelled without consideration and (ii) in respect of the stock options granted to Mr. Hokari to purchase 3,500 shares of Common Stock at an exercise price of $1.40 per share, Mr. Hokari will receive from the Company as consideration in accordance with the Merger Agreement an amount equal to the product of (x) 3,500 and (y) $1.10, or an aggregate of $3,850.

Mr. Musto beneficially owns (a) 12,500 shares of Common Stock that may be acquired by Mr. Musto upon exercise of stock options at an exercise price of $2.95 per share and (b) 2,800 shares of Common Stock that may be acquired by Mr. Musto upon exercise of stock options at an exercise price of $1.40. The shares of Common Stock described in (a) and (b) of this paragraph represent an aggregate of 0.2% of the Common Stock. If the proposed Merger is consummated in accordance with the Merger Agreement, (i) the stock options granted to Mr. Musto to purchase 12,500 shares of Common Stock at an exercise price of $2.95 per share will be cancelled without consideration and (ii) in respect of the stock options granted to Mr. Musto to purchase 2,800 shares of Common Stock at an exercise price of $1.40 per share, Mr. Musto will receive from the Company as consideration in accordance with the Merger Agreement an amount equal to the product of (x) 2,800 and (y) $1.10, or an aggregate of $3,080.

The percentage of the Common Stock set forth for each Reporting Person in this Item 5 was calculated based upon 8,281,133 shares of common stock outstanding as of November 4, 2009, as reported on the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.

(b) The Reporting Person has the sole power to vote and dispose of 2,582,412 shares of Common Stock.

Mr. Lipsky has the sole power to vote and dispose of 352,119 shares of Common Stock.

Mr. Hokari has the sole power to vote and dispose of 28,500 shares of Common Stock.

Mr. Musto has the sole power to vote and dispose of 17,800 shares of Common Stock.

(c) Except as disclosed in Item 6 below, neither the Reporting Persons nor any of Messrs. Lipsky, Musto, Hokari have effected any transactions in any shares of Common Stock of the Company during the past 60 days.

(d) Other than the Reporting Person, no person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock beneficially owned by the Reporting Person.

Other than Mr. Lipsky, no person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock beneficially owned by Mr. Lipsky.

Other than Mr. Hokari, no person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock beneficially owned by Mr. Hokari.

Other than Mr. Musto, no person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock beneficially owned by Mr. Musto.

(e) Not applicable

ITEM 6.

CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE COMPANY.

Reference is made to the disclosure set forth under Item 3, Item 4 and Item 5 of this Schedule 13D, which disclosure is incorporated herein by reference. Except as disclosed in Item 3, Item 4 and Item 5 of this Schedule 13D, and except as otherwise described in this Item 6, to the best knowledge of each of the Reporting Persons, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the Reporting Persons and any other person with respect to any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, divisions of profits or loss, or the giving or withholding of proxies, or a pledge or contingency, the occurrence of which would give another person voting power over the securities of the Company.

Pursuant to the Exchange Agreements:

•

On (a) December 2, 2009, Mr. Lipsky transferred 49,322 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock, and (b) December 4, 2009, Mr. Lipsky transferred 19,406 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock.

•

On (a) December 2, 2009, Mr. Hokari transferred 100 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock, and (b) December 4, 2009, Mr. Hokari transferred 2,750 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock.

•

On (a) December 4, 2009, Mr. Musto transferred 2,200 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock, and (b) December 7, 2009, Mr. Musto transferred 1,900 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock.

•

On (a) December 2, 2009, Dr. Morgan transferred 34,000 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock, and (b) December 4, 2009, Dr. Morgan transferred 39,048 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock.

•

On (a) December 2, 2009, Dr. Simons transferred 410,000 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock, and (b) December 4, 2009, Dr. Simons transferred 39,048 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock.

•

On December 4, 2009, Ms. Lewis transferred 300,000 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock.

•

On December 4, 2009, Shining Sea transferred 1,684,638 shares of Common Stock to the Acquisition Company in exchange for an equal number of shares of Series A Preferred Stock.

The foregoing exchanges are sometimes referred to herein as the “Exchanges”.

Prior to the record date set for the special meeting (the “Special Meeting”) of the shareholders of the Company, where the Company will ask its shareholders to, among other things, vote upon a proposal to adopt the Merger Agreement, Messrs. J. David and M. David will transfer their respective outstanding shares of Common Stock to the Reporting Person in exchange for an equal number of shares of Series A Preferred Stock.

As a result of the Exchanges, each of Messrs. Lipsky, Musto and Hokari, Dr. Morgan, Dr. Simons, Ms. Lewis and Shining Sea have no further right, title or interest as a shareholder of Company or in or to the shares of Common Stock exchanged for shares of Series A Preferred Stock by them. In addition, following the Exchanges of Messrs. J. David and M. David, which are to occur prior to the record date set for the Special Meeting, neither Mr. J. David nor Mr. M. David will have any further right, title or interest as a shareholder of the Company or in or to the shares of Common Stock exchanged for shares of Series A Preferred Stock by them.

Messrs. Lipsky, Musto, Hokari, J. David and M. David, Dr. Morgan, Dr. Simons, Ms. Lewis, Shining Sea and Noah will also enter into a Stockholders’ Agreement, which will provide for the governance of the Surviving Corporation following the completion of the proposed Merger (the “Stockholders’ Agreement”).

Shining Sea and Noah entered into that certain Share Purchase Agreement, dated September 30, 2009 (the “Shining Sea Purchase Agreement”), a copy of which is filed herewith as Exhibit 7.08 and incorporated herein by reference. Pursuant to the Shining Sea Purchase Agreement, following the consummation of the proposed Merger, Shining Sea will sell to Noah 800,000 shares of Series A Preferred Stock received by Shining Sea in connection with the Exchanges for an aggregate purchase price of $2,000,000. In connection with the Shining Sea Purchase Agreement, Noah will execute a joinder agreement to the Stockholders’ Agreement. Each of Shining Sea, Dynamic View Investments Limited, a British Virgin Islands limited liability company (“Dynamic”), and Global Wise Technologies Ltd., a British Virgin Islands limited liability company (“Global”), entered into that certain Share Purchase Agreement, dated September 30, 2009 (the “Noah Purchase Agreement”), a copy of which is filed herewith as Exhibit 7.09 and incorporated herein by reference. Pursuant to the Noah Purchase Agreement, simultaneously with the closing of the Shining Sea Purchase Agreement, Dynamic and Global will sell to Shining Sea an aggregate of 365,630 Ordinary Shares of Noah for an aggregate purchase price of $1,999,996.10.

ITEM 7.

MATERIAL TO BE FILED AS EXHIBITS.

Exhibit 7.01 Exchange Agreement, dated May 29, 2009, among Saunders Acquisition Corporation, Barry J. Lipsky, Toshihide Hokari, Frank A. Musto, Howard L. Morgan, James H. Simons, Marcy Lewis and Shining Sea Limited.

Exhibit 7.02 Exchange Agreement, dated September 11, 2009, among Saunders Acquisition Corporation, Julien David and Morton David.

Exhibit 7.03 Subscription Agreements, dated September 11, 2009, between Saunders Acquisition Corporation and each of Barry J. Lipsky, Howard L. Morgan, James H. Simons and Morton David.

Exhibit 7.04 Subscription Agreement, dated September 30, 2009, between Saunders Acquisition Corporation and Noah Education Holdings Ltd.

Exhibit 7.05 Proposal dated May 20, 2009.

Exhibit 7.06 Revised Proposal dated September 11, 2009.

Exhibit 7.07 Agreement and Plan of Merger, dated September 30, 2009, between Franklin Electronic Publishers, Incorporated and Saunders Acquisition Corporation.

Exhibit 7.08 Shining Sea Purchase Agreement, dated September 30, 2009, between Shining Sea Limited and Noah Education Holdings Ltd.

Exhibit 7.09 Noah Purchase Agreement, dated September 30, 2009, among Shining Sea Limited, Dynamic View Investments Limited and Global Wise Technologies Ltd.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated as of: December 21, 2009


SAUNDERS ACQUISITION CORPORATION

By:		/S/ BARRY J. LIPSKY
Name:		Barry J. Lipsky
Title:		President

EX-7.01 2 dex701.htm EXCHANGE AGREEMENT, DATED MAY 29, 2009 Exchange Agreement, dated May 29, 2009

Exhibit 7.01

EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT (this “Agreement”), dated as of May 29, 2009 by and among certain shareholders signatory hereto (the “Shareholders”) of Franklin Electronic Publishers, Inc., a Pennsylvania corporation (“FEP”), and Saunders Acquisition Corporation, a Delaware corporation (the “Company”).

WITNESSETH:

WHEREAS, the Company proposes to enter into a merger agreement (the “Merger Agreement”) with FEP, pursuant to which (i) the Company, or a wholly-owned subsidiary of the Company, would merge with and into FEP (the “Merger”) and FEP would continue as the surviving corporation in the Merger, (ii) the shareholders of FEP immediately prior to the consummation of the Merger would receive, for each outstanding share of common stock, par value $.01 per share, of FEP, cash in an amount not less than $2.35 nor more than $2.50 (the “Merger Consideration”), (iii) as of the effective time of the Merger (the “Effective Time”), the articles of incorporation of FEP shall be amended and restated to be substantially in the form of the amended and restated certificate of incorporation of the Company in the form of the draft attached hereto as Exhibit A (the “Restated Charter”) and as so amended and restated shall be the certificate of incorporation of FEP, as the surviving corporation in the Merger and (iv) the stockholders of the Company immediately prior to the consummation of the Merger would become, directly or indirectly, the sole shareholders of FEP;

WHEREAS, the Shareholders own the number of shares of common stock, par value $.01 per share, of FEP (the “Common Stock”) set forth opposite each Shareholder’s name on the attached Schedule I (the “Outstanding Shares”) and, upon the exercise of the number of options set forth opposite such Shareholder’s name on the attached Schedule I (the “Options”) will receive additional shares of Common Stock (the “Option Shares”);

WHEREAS, in contemplation of the Merger, each Shareholder wishes to exchange the Outstanding Shares and the Option Shares (collectively, the “Shares”) for shares of Redeemable Convertible Preferred Stock, par value $.01 per share, of the Company (the “Series A Preferred”), having the rights, privileges and designations set forth in the Restated Charter, and the Company wishes to issue shares of Series A Preferred in return for such Shares, subject to and in accordance with the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements and provisions hereinafter contained, and subject to the terms and conditions herein, the receipt and sufficiency of which are acknowledged, the parties to this Agreement hereby agree as follows:

Section 1. Exchanges. In reliance upon the representations and warranties set forth herein, immediately following the approval of the Merger Agreement by the Board of Directors of FEP (the “FEP Board,” and such approval, the “FEP Board Approval”), each Shareholder (i) shall exercise the Options and (ii) shall transfer such Shareholder’s Outstanding Shares and the Option Shares to the Company in exchange for an equal number of shares of Series A Preferred (the “Exchange Shares”), either by means of delivery of

certificates representing the Shares, duly endorsed in blank or with executed stock powers for such Shares, or by means of the book-entry transfer of such Shares (collectively, the “Exchanges”). From and after such time each Shareholder shall have no further right, title or interest as a Shareholder of FEP or in or to its Shares and shall only have the right to receive from the Company stock certificates representing such Shareholder’s Exchange Shares. For purposes hereof, “Business Day” shall mean a day other than a Saturday, Sunday or other day on which banking institutions in The City of New York are authorized or required by law to close. In connection with the Exchanges, each Shareholder also agrees to execute and deliver a Stockholders’ Agreement substantially in the form of the draft attached hereto as Exhibit B (the “Stockholders’ Agreement”).

Section 2. Effectiveness. Notwithstanding any other provision of this Agreement, if the FEP Board does not provide the FEP Board Approval on or prior to December 31, 2009, the obligations of the Shareholders to effect the Exchanges shall lapse and this Agreement shall automatically terminate.

Section 3. Representations and Warranties of the Company. The Company hereby represents and warrants to the Shareholders as follows:

(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. This Agreement has been duly authorized, executed and delivered by the Company and constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms.

(b) When issued in compliance with the provisions of this Agreement and the Restated Charter, the Exchange Shares will be (i) validly issued, fully paid and nonassessable, (ii) assuming the accuracy of the representations and warranties of the Shareholders contained in Section 4 hereof, issued in compliance with applicable federal and state securities laws and (iii) will be free of any mortgage, pledge, lien, conditional sale agreement, security agreement, encumbrance or other charge (“Encumbrance”); provided, however, that the Exchange Shares may be subject to restrictions on transfer under state and/or federal securities laws.

(c) It is contemplated that, following the Effective Time and assuming Merger Consideration of $2.35 and additional capital of $1,000,000, the capitalization of FEP, as the surviving corporation in the Merger, would consist of (i) 2,868,114 issued and outstanding shares of Series A Preferred, all of which shares would be owned by the Shareholders as provided herein, (ii) 425,532 issued and outstanding shares of Series B Preferred Stock, par value $.01 per share (the “Series B Preferred”), having the rights, privileges and designations set forth in the Restated Charter, all of which shares would be owned by new investors in the Company, and (iii) 1,598,146 shares of common stock, par value $.01 per share, having the rights, privileges and designations set forth in the Restated Charter, all of which shares would be owned by Barry J. Lipsky, Frank A. Musto and Toshihide Hokari. As provided in the Restated Charter, the Series A Preferred and the Series B Preferred will be convertible into shares of common stock of FEP, as the surviving corporation in the Merger, initially on a share-for-share basis.

Section 4. Investment Purpose.

(a) Each Shareholder hereby represents and warrants to the Company that it is acquiring its Exchange Shares solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of applicable law.

(b) Each Shareholder acknowledges that the Exchange Shares will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws, and is being offered and sold in reliance on federal and state exemptions for transactions not involving any public offering. Each Shareholder acknowledges that the Exchange Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable, and each Shareholder acknowledges that the certificates evidencing the Exchange Shares will contain a legend in customary form with respect to the foregoing restrictions.

(c) Each Shareholder acknowledges that an investment in the Series A Preferred involves a great deal of risk and that there is a limited market for such stock. Each Shareholder confirms that such Shareholder is able to (i) bear the economic risk of the investment in the Company, (ii) afford a complete loss of such investment, and (iii) hold indefinitely the Series A Preferred. In reaching an informed decision to invest in Company, each Shareholder has sufficient information to evaluate the merits and risks of an investment in the Company and representatives of the Company have (A) fully and satisfactorily answered any questions which such party or duly authorized representatives of such party desired to ask concerning the Company, and (B) furnished such party with any additional information or documents requested to verify the accuracy of or supplement any information previously delivered to or discussed with such party or duly authorized representatives of such party.

(d) Each Shareholder represents and warrants to each other party hereto that neither the execution and delivery by such Shareholder of this Agreement, nor the performance by any Shareholder of his, her or its obligations hereunder, will (i) result in the creation or imposition of any Encumbrance upon such Shareholder’s Shares or (ii) result in a material violation or breach of or default under (or give rise to any right of termination, cancellation or acceleration), or result in the creation of any Encumbrance under, any of the terms, conditions or provisions of any note, mortgage, letter of credit, other evidence of indebtedness, guarantee, license, lease or agreement or similar instrument or obligation relating to such Shareholder or to which such Shareholder is a party or by which Shareholder or any of his, her or its assets used or held for use by such Shareholder may be bound.

Section 5. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

Section 6. Further Action. The parties agree to execute and deliver all documents, provide all information and take or refrain from taking such actions as may be necessary or appropriate to achieve the purposes of this Agreement, including, without limitation, the Stockholders’ Agreement.

Section 7. No Intent to Transfer. No person a party to this Agreement has a present plan or intention to sell, exchange or dispose of any of the stock of the Company acquired pursuant hereto.

Section 8. Amendments. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto.

Section 9. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the State of New York in the Borough of Manhattan, County of New York or of the United States District Court for the Southern District of New York, and, by execution and delivery of this agreement, each of the parties hereby irrevocably accepts the exclusive jurisdiction of the aforesaid courts.

Section 10. Entire Agreement. This Agreement constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, to the extent they related in any way to the subject matter hereof.

Section 11. Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages that will accrue to a party hereto, or to their heirs, personal representatives, successors or assigns, by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable. If any party hereto, or his heirs, personal representatives, or successors or assigns, institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such personal representative has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

Section 12. Counterparts; Delivery. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All counterparts shall be construed together and shall constitute one Agreement. This Agreement and any amendments hereto, to the extent signed and delivered by means of a facsimile machine or email, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or email to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or email as a defense to the formation of a contract and each such party forever waives any such defense.

[Signatures appear on the following page]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or have caused this Agreement to be executed by their respective duly authorized officers, all as of the date first above written.


SAUNDERS ACQUISITION CORPORATION

By		/s/ Barry J. Lipsky
		Barry J. Lipsky
		President

FRANKLIN ELECTRONIC PUBLISHERS, INC. SHAREHOLDERS:

/s/ Marcy Lewis

Marcy Lewis

/s/ James H. Simons

James H. Simons



SHINING SEA LIMITED

By	/s/ Lauretta Stoneham
	Name:	Lauretta Stoneham
	Title:	Director

By	/s/ John Richmond
	Name:	John Richmond
	Title:	Director

/s/ Howard L. Morgan

Howard L. Morgan

/s/ Barry J. Lipsky

Barry J. Lipsky

/s/ Toshihide Hokari

Toshihide Hokari

/s/ Frank A. Musto

Frank A. Musto

SCHEDULE I

FEP Shareholders


Shareholder	Number of Shares	Number of Options¹
Shining Sea Limited	1,684,638	0
Marcy Lewis	400,000	0
James H. Simons	410,000	87,827
Howard L. Morgan	34,000	87,827
Barry J. Lipsky	49,322	67,500
Toshihide Hokari	100	25,000
Frank A. Musto	1,900	20,000

¹	Represents outstanding options with an exercise price of $2.50 or less

Exhibit A

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

SAUNDERS ACQUISITION CORPORATION

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

Saunders Acquisition Corporation, a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),

DOES HEREBY CERTIFY:

1. That the name of this corporation is Saunders Acquisition Corporation, and that this corporation was originally incorporated pursuant to the General Corporation Law on April 13, 2009 under the name Saunders Acquisition Corporation.

2. That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:

FIRST: The name of this corporation is Saunders Acquisition Corporation (the “Corporation”).

SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.

THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

FOURTH: This Corporation is authorized to issue two classes of capital stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares of capital stock which the Corporation is authorized to issue is [ ], [ ] shares of which shall be Common Stock (the “Common Stock”) and [ ] shares of which shall be Preferred Stock (the “Preferred Stock”). Each of the Common Stock and Preferred Stock shall have a par value of one cent ($0.01) per share. [ ] shares of the authorized shares of Preferred Stock are hereby designated “Series A Preferred Stock” (the “Series A Preferred Stock”). [ ] shares of the authorized shares of Preferred Stock are hereby designated “Series B Preferred Stock” (the “Series B Preferred Stock”).

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

2. Dividends.

2.1 In the event that the Free Cash Flow (as defined below) in any fiscal year is in excess of $1,500,000, subject to any restrictions set forth in any credit agreements to which the Corporation is the borrowing party, the holders of Series A Preferred Stock will be entitled to receive, as a preferred dividend (the “Series A Dividend”), an amount equal to the lesser of (i) fifteen percent (15%) of the Free Cash Flow in such fiscal year and (ii) ten percent (10%) per annum of the aggregate Original Issue Price (as defined below) of all the then outstanding shares of Series A Preferred Stock, which amount shall be calculated from the Original Issue Date (as defined below) through the last day of such fiscal year (such amount described in subclause (ii), the “Maximum Series A Dividend”). The amount to be paid by the Corporation as Series A Dividends to the holders of Series A Preferred Stock in accordance with this Section 2.1 shall be paid within thirty (30) days after the completion of the financial statements of the Corporation for the relevant fiscal year and shall be shared ratably among such holders in proportion to the respective amounts which are payable to such holders in respect of the shares of Series A Preferred Stock held by them at the time such dividend payment is made. For the purposes hereof, (x) “Free Cash Flow” in a fiscal year means the net income of the Corporation for such fiscal year, determined in accordance with generally accepted accounting principals in the United States, plus any depreciation and amortization deducted in determining net income, less (1) capital expenditures, (2) the amount of any Series A Dividends paid with respect to the prior fiscal year on the Series A Preferred Stock in accordance with this Section 2.1, (3) the amount of any Series B Dividends (as defined below) paid with respect to the prior fiscal year on the Series B Preferred Stock in accordance with Section 2.2, and (4) the amount of any dividends paid with respect to the prior fiscal year on the Common Stock in accordance with Section 2.3, and (y) “Original Issue Price” shall mean $[ ]¹ per share of Preferred Stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock in accordance with Section 5.4.

2.2 In the event that the Free Cash Flow in any fiscal year is in excess of $1,500,000, subject to (a) any restrictions set forth in any credit agreements to which the Corporation is the borrowing party and (b) the prior payment of the Series A Dividend on the Series A Preferred Stock in accordance with Section 2.1, the holders of Series B Preferred Stock will be entitled to receive, as a preferred dividend (the “Series B Dividend”), an amount equal to the lesser of (i) twelve percent (12%) of the Free Cash Flow in such fiscal year and (ii) eight percent (8%) per annum of the aggregate the Original Issue Price of all the then outstanding shares of Series B Preferred Stock, which amount shall be calculated from the Original Issue Date through the last day of such fiscal year (such amount described in sub clause (ii), the “Maximum Series B Dividend”); provided, however, the

¹	Insert per share cash merger consideration.

Corporation shall only pay the Maximum Series B Dividend on the Series B Preferred Stock pursuant to this Section 2.2 if it simultaneously pays the full Maximum Series A Dividend on the Series A Preferred Stock in respect of any fiscal year. The amount to be paid by the Corporation as Series B Dividends to the holders of Series B Preferred Stock in accordance with this Section 2.2 shall be paid within thirty (30) days after the completion of the financial statements of the Corporation for the relevant fiscal year and shall be shared ratably among such holders in proportion to the respective amounts which are payable to such holders in respect of the shares of Series B Preferred Stock held by them at the time such dividend payment is made.

2.3 So long as any shares of Preferred Stock shall be outstanding, no dividend, whether in cash or property, other than dividends payable in shares of Common Stock, shall be paid or declared in respect of any fiscal year, nor shall any other distribution be made, on any shares of Common Stock or any other class or series of capital stock of the Corporation hereafter created which expressly provides that it ranks, as to dividend and other distribution rights, rights upon the occurrence of a Liquidation Event (as defined below), rights of redemption or otherwise, junior to the Preferred Stock (collectively, the “Junior Stock”), nor shall any shares of any Junior Stock be purchased, redeemed, or otherwise acquired for value by the Corporation (except for acquisitions of Common Stock by the Corporation pursuant to agreements which permit the Corporation to repurchase such shares upon termination of services to the Corporation) unless the Maximum Series A Dividend on the Series A Preferred Stock (set forth in Section 2.1 above) and the Maximum Series B Dividend on the Series B Preferred Stock (set forth in Sections 2.2 above) in respect of such fiscal year shall have been paid or declared and set apart.

3. Voting.

3.1 Common Stock. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings) ; provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to the Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to the Certificate of Incorporation or pursuant to the General Corporation Law.

3.2 Series A Preferred Stock Protective Provisions. Except as otherwise required by law, the Series A Preferred Stock shall have no voting rights. However, so long as twenty percent (20%) of the shares of Series A Preferred Stock issued on the Original Issue Date remain outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least fifty-one percent (51%) of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class:

3.2.1 acquire any equity interest, or substantially all the assets, of any other entity;

3.2.2 merge or consolidate into or with any other entity, or sell all or substantially all the assets of the Corporation, unless the holders of the Series A Preferred Stock receive the full Series A Liquidation Amount (as defined below) in connection with any of the foregoing;

3.2.3 create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock or issue any additional shares of Series A Preferred Stock after the Original Issue Date (as defined below in Section 5.4.1);

3.2.4 create, or authorize the creation of, or issue, or authorize the issuance of any debt security, or otherwise incur indebtedness on a consolidated basis, if the aggregate indebtedness of the Corporation for borrowed money following such action would exceed the maximum commitment under the Corporation’s credit agreement outstanding on the Original Issue Date;

3.2.5 enter into, or amend or modify, any agreement, contract or arrangement with any of Barry Lipsky, Frank Musto or Toshihide Hokari (collectively, the “Founders”);

3.2.6 effect any Liquidation Event or consent thereto, unless the holders of the then outstanding shares of Series A Preferred Stock receive the full Series A Liquidation Amount; or

3.2.7 enter into any agreement, contract or arrangement with respect to the foregoing.

3.3 Series B Protective Provisions. Except as otherwise required by law, the Series B Preferred Stock shall have no voting rights. However, so long as twenty percent (20%) of the shares of Series B Preferred Stock issued on the Original Issue Date remain outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least fifty-one percent (51%) of the then outstanding shares of Series B Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class:

3.3.1 acquire any equity interest, or substantially all the assets, of any other entity;

3.3.2 merge or consolidate into or with any other entity, or sell all or substantially all the assets of the Corporation, unless the holders of the Series B Preferred Stock receive the full Series B Liquidation Amount (as defined below) in connection with any of the foregoing;

3.3.3 create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock;

3.3.4 create, or authorize the creation of, or issue, or authorize the issuance of any debt security, or otherwise incur indebtedness on a consolidated basis, if the aggregate indebtedness of the Corporation for borrowed money following such action would exceed the maximum commitment under the Corporation’s credit agreement outstanding on the Original Issue Date;

3.3.5 enter into, or amend or modify, any agreement, contract or arrangement with any of the Founders;

3.3.6 effect any Liquidation Event or consent thereto, unless the holders of the then outstanding shares of Series B Preferred Stock receive the full Series B Liquidation Amount; or

3.3.7 enter into any agreement, contract or arrangement with respect to the foregoing.

4. Liquidation, Dissolution or Winding Up.

4.1 Payments to Holders of Series A Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (each, a “Liquidation Event”), the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of Series B Preferred Stock or the holders of Junior Stock, by reason of their ownership thereof, an amount per share equal to the aggregate Original Issue Price of the shares of Series A Preferred Stock then outstanding, plus an amount equal to the difference between (i) an amount equal to ten percent (10%) per annum of the Original Issue Price of the shares of Series A Preferred Stock from the Original Issue Date through and including the date of the Liquidation Event, less (ii) the aggregate amount of Series A Dividends previously paid on such shares of Series A Preferred Stock in accordance with Section 2.1 (the amount payable pursuant to this sentence is hereinafter referred to as the “Series A Liquidation Amount”), which such amount shall be shared ratably among the holders of Series A Preferred Stock in proportion to the respective amounts which are payable to such holders in respect of the shares of Series A Preferred Stock held by them upon a distribution of the Series A Liquidation Amount. If upon any such Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full Series A Liquidation Amount to which they shall be entitled under this Section 4.1, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series A Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The Series A Preferred Stock shall rank, as to the distribution of assets of the Corporation upon a Liquidation Event, senior to the Series B Preferred Stock and the Junior Stock.

which such amount shall be shared ratably among the holders of Series B Preferred Stock in proportion to the respective amounts which are payable to such holders in respect of the shares of Series B Preferred Stock held by them upon a distribution of the Series B Liquidation Amount. If upon any such Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred Stock the full Series B Liquidation Amount to which they shall be entitled under this Section 4.2, the holders of shares of Series B Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series B Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The Series B Preferred Stock shall rank, as to the distribution of assets of the Corporation upon a Liquidation Event, junior to the Series A Preferred Stock and senior to the Junior Stock.

4.3 Payments to Holders of Common Stock. In the event of any Liquidation Event, after the payment of all preferential amounts required to be paid, first, to the holders of shares of Series A Preferred Stock pursuant to Section 4.1 and, second, to the holders of Series B Preferred Stock in accordance with Section 4.2, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder.

5. Optional Conversion. The holders of Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

5.1 Right to Convert.

5.1.1 Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price by the Conversion Price (as defined below) in effect at the time of conversion. The “Conversion Price” shall initially be equal to $[ ]². Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

5.1.2 Termination of Conversion Rights. In the event of a notice of redemption of any shares of Series A Preferred Stock pursuant to Section 7, the Conversion Rights of the shares of Series A Preferred Stock designated for redemption shall terminate at the close of business on the last full day preceding the Redemption Date (as defined below), unless the Redemption Price (as defined below) is not fully paid on the Redemption Date, in which case the Conversion Rights for such shares of Series A Preferred Stock shall continue until such price is paid in full. In the event of a Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock.

²	Insert per share cash merger consideration.

5.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation (the “Board”).

5.3 Mechanics of Conversion.

5.3.1 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Section 5.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

5.3.2 Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares

of Common Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

5.3.3 Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive a cash payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 5.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

5.3.4 No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

5.3.5 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 5. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

5.4 Adjustments to Conversion Price for Diluting Issues.

5.4.1 Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

(a) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities (as defined below).

(b) “Original Issue Date” shall mean the date on which the Series A Preferred Stock and Series B Preferred Stock were first issued.

(c) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

(d) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 5.4.3 below, deemed to be issued) by the Corporation after the Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

(i) shares of Common Stock issued upon conversion of the Preferred Stock in accordance with this Section 5;

(ii) shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Preferred Stock;

(iii) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Sections 5.5, 5.6, 5.7 or 5.8;

(iv) shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board;

(v) shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;

(vi) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board that do not exceed an aggregate of [ ] shares of Common Stock (including shares underlying (directly or indirectly) any such Options or Convertible Securities);

(vii) subject to the protective provision contained in Sections 3.2.2 and 3.3.2, shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement; provided, however, that such issuances are approved by the Board that do not exceed an aggregate of [ ] shares of Common Stock (including shares underlying (directly or indirectly) any such Options or Convertible Securities); or

(viii) shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors that do not exceed an aggregate of [ ] shares of Common Stock (including shares underlying (directly or indirectly) any such Options or Convertible Securities).

5.4.2 No Adjustment of Conversion Price. No adjustment in the Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of at least fifty-one percent (51%) of the then outstanding shares of the Series A Preferred Stock and Series B Preferred Stock, voting together as a single class, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

5.4.3 Deemed Issue of Additional Shares of Common Stock.

(a) If the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price pursuant to the terms of Section 5.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price pursuant to the terms of Section 5.4.4 (either because the consideration per share (determined pursuant to Section 5.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price then in effect, or because such Option or Convertible Security was issued before the Original Issue Date), are revised after the Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon

such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 5.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price pursuant to the terms of Section 5.4.4, the Conversion Price shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price provided for in Section 5.4.4 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Section 5.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price that would result under the terms of Section 5.4.4 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

5.4.4 Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 5.4.3), without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to such issue, then the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

CP₂ = CP₁* (A + B) ÷ (A + C).

For purposes of the foregoing formula, the following definitions shall apply:

(a) “CP₂” shall mean the Conversion Price in effect immediately after such issue of Additional Shares of Common Stock

(b) “CP₁” shall mean the Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;

(c) “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);

(d) “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP₁ (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP₁); and

(e) “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

5.4.5 Determination of Consideration. For purposes of this Section 5.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

(a) Cash and Property: Such consideration shall:

(i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

(ii) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and

(iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board.

(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 5.4.3, relating to Options and Convertible Securities, shall be determined by dividing

(i) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

(ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

5.4.6 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price pursuant to the terms of Section 5.4.4, and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

5.5 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

5.6 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction, the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

5.7 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 2.3 do not apply to such dividend or distribution, then and in each such event the holders of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

5.8 Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 5.4, 5.6 or 5.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 5 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 5 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

5.9 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 5, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Preferred Stock.

5.10 Notice of Record Date. In the event

(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10) days prior to the record date or effective date for the event specified in such notice.

6. Mandatory Conversion.

6.1 Trigger Events. Upon the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the date of such closing is referred to herein as the “Mandatory Conversion Date”), (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate and (ii) such shares may not be reissued by the Corporation.

authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Section 6.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Date (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section 6.2. As soon as practicable after the Mandatory Conversion Date and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 5.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

7. Redemption.

7.1 Redemption. Shares of Series A Preferred Stock shall be redeemed by the Corporation out of funds lawfully available therefor at a price equal to the Original Issue Price plus an amount equal to the difference of (i) an amount equal to ten percent (10%) per annum of the Original Issue Price of such shares of Series A Preferred Stock from the Original Issue Date through and including the date of redemption thereof (the “Redemption Date”), less (ii) the aggregate amount of Series A Dividends previously paid in respect of such shares of Series A Preferred Stock in accordance with Section 2.1 (the amount payable pursuant to this sentence is hereinafter referred to as, the “Redemption Price”), which such amount shall be shared ratably among the holders of Series A Preferred Stock in proportion to the respective amounts which are payable to such holders in respect of the shares of Series A Preferred Stock held by them on the date immediately preceding the Redemption Date. The Redemption Date shall be not more than sixty (60) days after receipt by the Corporation at any time on or after March 31, 2012, from the holders of at least sixty-six and two-thirds percent (66²/3%) of the then outstanding shares of Series A Preferred Stock, of written notice requesting redemption of all shares of Series A Preferred Stock. On the Redemption Date, the Corporation shall redeem the total number of shares of Series A Preferred Stock outstanding immediately prior to such Redemption Date. If the Corporation does not have sufficient funds legally available to redeem on the Redemption Date all shares of Series A Preferred Stock to be redeemed on the Redemption Date, the Corporation shall redeem a pro rata portion of each holder’s redeemable shares of such capital stock out of funds legally available therefor, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the legally available funds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor. The Series A Preferred Stock shall rank, as to redemption, senior to the Series B Preferred Stock and the Junior Stock.

7.2 Redemption Notice. The Corporation shall send written notice of the mandatory redemption (the “Redemption Notice”) to each holder of record of Series A Preferred Stock not less than forty (40) days prior to each Redemption Date. Each Redemption Notice shall state:

7.2.1 the number of shares of Series A Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date;

7.2.2 the Redemption Date and the Redemption Price;

7.2.3 the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Section 5.1.2); and

7.2.4 that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Series A Preferred Stock to be redeemed.

7.3 Surrender of Certificates; Payment. On or before the Redemption Date, each holder of shares of Series A Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 5, shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Series A Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of Series A Preferred Stock shall promptly be issued to such holder.

7.4 Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the Redemption Date the Redemption Price payable upon redemption of the shares of Series A Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that the certificates evidencing any of the shares of Series A Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of Series A Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate or certificates therefor.

8. Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption or other acquisition by the Corporation.

9. Waiver. Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of at least sixty-six and two-thirds percent (66²/3%) of the shares of Preferred Stock then outstanding.

10. Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

FIFTH: Subject to any additional vote required by the Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

SIXTH: The number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

SEVENTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

EIGHTH: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

NINTH: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.

Any repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

TENTH: The following indemnification provisions shall apply to the persons enumerated below.

the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 3 of this Article Tenth, the Corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.

2. Prepayment of Expenses of Directors and Officers. The Corporation shall pay the expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced if it should be ultimately determined that the Indemnified Person is not entitled to be indemnified under this Article Tenth or otherwise.

3. Claims by Directors and Officers. If a claim for indemnification or advancement of expenses under this Article Tenth is not paid in full within thirty (30) days after a written claim therefor by the Indemnified Person has been received by the Corporation, the Indemnified Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Indemnified Person is not entitled to the requested indemnification or advancement of expenses under applicable law.

4. Indemnification of Employees and Agents. The Corporation may indemnify and advance expenses to any person who was or is made or is threatened to be made or is otherwise involved in any Proceeding by reason of the fact that such person, or a person for whom such person is the legal representative, is or was an employee or agent of the Corporation or, while an employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorney’s fees) reasonably incurred by such person in connection with such Proceeding. The ultimate determination of entitlement to indemnification of persons who are non-director or officer employees or agents shall be made in such manner as is determined by the Board of Directors in its sole discretion. Notwithstanding the foregoing sentence, the Corporation shall not be required to indemnify a person in connection with a Proceeding initiated by such person if the Proceeding was not authorized in advance by the Board of Directors.

5. Advancement of Expenses of Employees and Agents. The Corporation may pay the expenses (including attorney’s fees) incurred by an employee or agent in defending any Proceeding in advance of its final disposition on such terms and conditions as may be determined by the Board of Directors.

6. Non-Exclusivity of Rights. The rights conferred on any person by this Article Tenth shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these by-laws, agreement, vote of stockholders or disinterested directors or otherwise.

7. Other Indemnification. The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer or employee of another Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise shall be reduced by any amount such person may collect as indemnification from such other Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise.

8. Insurance. The Board of Directors may, to the full extent permitted by applicable law as it presently exists, or may hereafter be amended from time to time, authorize an appropriate officer or officers to purchase and maintain at the Corporation’s expense insurance: (a) to indemnify the Corporation for any obligation which it incurs as a result of the indemnification of directors, officers and employees under the provisions of this Article Tenth; and (b) to indemnify or insure directors, officers and employees against liability in instances in which they may not otherwise be indemnified by the Corporation under the provisions of this Article Tenth.

9. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article Tenth shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. The rights provided hereunder shall inure to the benefit of any Indemnified Person and such person’s heirs, executors and administrators.

* * *

3. That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

4. That this Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this [ ] day of [ ], 2009


By:
		Name:
		Title:

Exhibit B

STOCKHOLDERS’ AGREEMENT

THIS STOCKHOLDERS’ AGREEMENT (“Agreement”) is entered into as of , 2009 by and among the persons listed on the signature page hereof under the heading “Series A Holders” (the “Series A Holders”), the persons listed on the signature page hereof under the heading “Series B Holders” (the “Series B Holders”) and the persons listed on the signature page hereof under the heading “Common Holders” (the “Common Holders” and, collectively with the Series A Holders and the Series B Holders, the “Stockholders”).

R E C I T A L S:

WHEREAS, the Common Holders hold all the issued and outstanding shares of common stock, par value $0.01 per share (the “Common Stock”), of Saunders Acquisition Corporation, a Delaware corporation (“Saunders”);

WHEREAS, the Series A Holders hold all the issued and outstanding shares of Redeemable Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred”), of Saunders;

WHEREAS, the Series B Holders hold all the issued and outstanding shares of Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred”), of Saunders;

WHEREAS, the Stockholders propose that Saunders enter into a merger agreement (the “Merger Agreement”) with Franklin Electronic Publishers, Inc. (“FEP”), pursuant to which (i) Saunders would merge with and into FEP (the “Merger”) and FEP would continue as the surviving corporation in the Merger (FEP, as the surviving corporation, is hereinafter referred to as the “Company”), (ii) the shareholders of FEP immediately prior to the consummation of the Merger would receive for each outstanding share of common stock, par value $.01 per share, of FEP cash in an amount not less than $2.35 nor more than $2.50, (iii) as of the effective time of the Merger (the “Effective Time”), the articles of incorporation of FEP would be amended and restated to be substantially in the form of the amended and restated certificate of incorporation of Saunders (the “Restated Charter”) in effect immediately prior to the Effective Time and as so amended and restated would be the certificate of incorporation of the Company and (iv) the Stockholders would become the sole stockholders of the Company and would hold the same number of shares of Common Stock, Series A Preferred and Series B Preferred in the Company as they currently hold in Saunders;

WHEREAS, the Stockholders wish to enter into this Agreement, which provides for the governance of the Company following the Effective Time and addresses certain other issues;

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Definitions.

1.1 “Approved Sale” has the meaning specified in Section 5.1.

1.2 “Board” shall mean the Board of Directors of the Company.

1.3 “Cause” shall mean (i) an Executive’s conviction of, or plea of guilty or nolo contendere to, a felony or (ii) an Executive’s gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries.

1.4 “Common Shares” shall mean shares of Common Stock now owned or hereafter acquired by any of the Stockholders, including, without limitation, shares of Common Stock issued upon conversion of the Preferred Stock or the exercise of stock options, warrants or other rights to acquire shares of Common Stock.

1.5 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

1.6 “Executive” has the meaning specified in Section 6.1.

1.7 “Fair Market Value of a Common Share” shall mean the fair value of a Common Share (assuming the full conversion of the Preferred Stock at the conversion price in effect as of the date of Separation giving rise to the determination of Fair Market Value of a Common Share) determined in good faith by the Board and set forth in the Repurchase Notice or Supplemental Repurchase Notice, as the case may be, given under Section 6 hereof. If Executive disagrees with such determination, Executive shall deliver to the Board a written notice of objection within ten days. Upon receipt of Executive’s written notice of objection, the Board and Executive will negotiate in good faith to agree on such Fair Market Value of a Common Share. If such agreement is not reached within 30 days after the delivery of Executive’s objection, (i) Fair Market Value of a Common Share shall be determined by an appraiser jointly selected by the Board and Executive in the event the Board’s determination and the Executive’s determination differ by more than ten percent (10%) or (ii) Fair Market Value of a Common Share shall be deemed to be the average of the Board’s determination and the Executive’s determination if the two determinations do not differ by more than ten percent (10%). If Fair Market Value of a Common Share is to be determined by an appraiser, such appraiser shall submit to the Board and Executive a report within 30 days of its engagement setting forth such determination. If the parties are unable to agree on an appraiser within 45 days after delivery of Executive’s objection, within seven days, each party shall submit the names of four independent firms which are engaged in the business of valuing non-public securities, and each party shall be entitled to strike two names from the other party’s list of firms, and the appraiser shall be selected by lot from the remaining four firms. The expenses of such appraiser shall be borne equally by the Company and Executive; provided, however, that if the appraiser’s determination is within twenty percent (20%) of the determination of only one of the parties, that party shall not bear any of the expenses of such appraiser. The determination of such appraiser as to Fair Market Value of a Common Share shall be final and binding upon all parties. Notwithstanding anything to the contrary herein, the determination of Fair Market Value of a Common Unit shall not include any or discount for lack of control or lack of marketability or liquidity of the Common Shares.

1.8 “Permitted Transfer” shall mean any Transfer of Shares by a Stockholder that is an individual to (i) the spouse, children, parents or siblings of such Stockholder (collectively, “Family Members”), (ii) the estate of such Stockholder, (iii) any trust solely for the benefit of such Stockholder and/or any Family Member(s) and of which such Stockholder and/or any such Family Member(s) is the trustee or are the trustees (“Family Trust”), (iv) any other Stockholder and (v) any partnership, corporation or limited liability company which is wholly owned and controlled by such Stockholder and/or any such Family Member(s) (“Family Wealth Planning Entity”); provided that any change in the beneficiaries of a Family Trust or the equity holders of a Family Wealth Planning Entity which results in such Family Trust not being solely for the benefit of a Stockholder and/or the Family Members of such Stockholder or the Family Wealth Planning Entity not being wholly owned and controlled by such Stockholder and/or the Family Members of such Stockholder shall not be deemed to be Permitted Transfer.

1.9 “Person” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, association or other entity.

1.10 “Preferred Stock” shall mean the Series A Preferred and the Series B Preferred.

1.11 “Public Offering” shall mean any sale, in an underwritten public offering registered under the Securities Act of the Company’s (or any successor’s) equity securities.

1.12 “Sale Transaction” shall have the meaning specified in Section 5.1.

1.13 “Securities Act” shall mean the Securities Act of 1933, as amended.

1.14 “Shares” shall mean shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock.

1.15 “Transfer” shall mean any sale, assignment, encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer pursuant to the laws of descent and distribution, or any other transfer or disposition of any kind, including, but not limited to, transfers to receivers, levying creditors, trustees or receivers in bankruptcy proceedings or general assignees for the benefit of creditors, whether voluntary or by operation of law. The terms “Transferee,” “Transferred,” and other forms of the word “Transfer” shall have correlative meanings.

2. Effectiveness. This Agreement shall become effective as of the Effective Time.

3. Transfers.

3.1 Transfers by Stockholders.

Transfer to a Permitted Transferee or (z) pursuant to the Repurchase Option under Section 6 hereof. Any Transfer or attempted Transfer in violation of this Agreement shall not be recognized by the Company and shall be void and of no force or effect whatsoever.

(b) Except in connection with an Approved Sale or a Public Offering, each Transferee of Shares shall, as a condition precedent to such Transfer, execute a counterpart to this Agreement pursuant to which such Transferee shall agree to be bound by the provisions of this Agreement.

3.2 Transfers. Each Series A Holder and Series B Holder shall have the right to sell all or any portion of their Shares at any time to any Person subject only to Sections 3.1(b) and 3.3.

3.3 Prohibited Transfers. Notwithstanding any other provision of this Agreement, during the term of this Agreement the Board shall have the right to refuse (and to cause the Company to refuse) to register any Transfer any Shares if such Transfer might, in the opinion of the Board, require the Company to register any of the Shares under Section 12 of the Exchange Act, or would result in the Company becoming subject to the periodic reporting requirements of the Exchange Act.

4. Board of Directors.

4.1 Agreement to Vote. Each Stockholder agrees to vote all Shares beneficially owned (as defined in Rule 13d-3(a) under the Exchange Act) by such Stockholder in accordance with the provisions of this Section 4.

4.2 Number of Directors. Each Stockholder agrees to vote all Common Shares beneficially owned by such Stockholder at any regular or special meeting of stockholders (or consent pursuant to a written consent in lieu of such meeting) to ensure that the total number of authorized directors of the Company shall be set and remain at five (5) directors.

4.3 Election of Directors.

(a) For so long as 1,462,738 shares of Series A Preferred are outstanding (as adjusted for any stock splits, stock dividends, reverse stock splits, stock combinations and other similar capitalization changes), at each election of directors each Stockholder agrees to vote all Common Shares beneficially owned by such Stockholder at any regular or special meeting of stockholders (or consent pursuant to a written consent in lieu of such meeting) so as to elect one (1) director designated by the holders of a majority of the shares of Series A Preferred (the “Series A Director”).

(b) For so long as 851,064 shares of Series B Preferred are outstanding (as adjusted for any stock splits, stock dividends, reverse stock splits, stock combinations and other similar capitalization changes), at each election of directors each Stockholder agrees to vote all Common Shares beneficially owned by such Stockholder so as to elect one (1) director designated by the holders of a majority of the shares of Series B Preferred (the “Series B Director”).

(c) At each election of directors, each Stockholder agrees to vote all Shares beneficially owned by such Stockholder at any regular or special meeting of stockholders (or consent pursuant to a written consent in lieu of such meeting) so as to elect three (3) directors (the “Common Directors”), each of which shall be designated by the Company’s Chief Executive Officer of the Company.

4.4 Removal of Directors.

(a) In the event that the Series A Holders desire to remove the Series A Director, then each Stockholder agrees to vote all Common Shares beneficially owned by such Stockholder at any regular or special meeting of stockholders (or consent pursuant to a written consent in lieu of such meeting) in favor of the removal of the Series A Director. Any vacancy created by such removal shall be filled pursuant to Section 4.3(a).

(b) In the event that the Series B Holders desire to remove the Series B Director, then each Stockholder agrees to vote all Common Shares beneficially owned by such Stockholder at any regular or special meeting of stockholders (or consent pursuant to a written consent in lieu of such meeting) in favor of the removal of the Series B Director. Any vacancy created by such removal shall be filled pursuant to Section 4.3(b).

(c) In the event that Company’s Chief Executive Officer desires to remove any of the Common Directors, then each Stockholder agrees to vote all Common Shares beneficially owned by such Stockholder at any regular or special meeting of stockholders (or consent pursuant to a written consent in lieu of such meeting) in favor of the removal of such Common Directors. Any vacancy created by such removal shall be filled pursuant to Section 4.3(c).

5. Sale of the Company.

5.1 Approved Sale. In the event of an Approved Sale (as defined below), each Stockholder agrees (a) to vote all Common Shares beneficially owned by such Stockholder at any regular or special meeting of stockholders (or consent pursuant to a written consent in lieu of such meeting) in favor of such Approved Sale, and to raise no objections against the Approved Sale or the process pursuant to which the Approved Sale was arranged, (b) to waive any and all dissenters’, appraisal or similar rights with respect to such Approved Sale, and (c) if the Approved Sale is structured as a sale of equity securities by the stockholders of the Company, to sell the Shares then owned by such Stockholder on the terms and conditions of such Approved Sale. “Approved Sale” means (i) a transaction or series of transactions with a third party on an arm’s length basis (including by way of merger, consolidation or sale of equity securities to a third party by one or more stockholders), the result of which is that the holders of the Company’s voting securities immediately prior to such transaction or series of transactions own less than a majority of the combined voting power of the outstanding voting securities of the Company or the surviving or resulting entity, as the case may be, following the transaction or series of transactions, and (ii) a sale of all or substantially all of the Company’s assets (each of the transactions in clauses (i) and (ii), a “Sale Transaction”), which, in each case, (x) has been approved by the Board and (y) provides that the cash (or the fair market value of other consideration, as determined in good faith by the Board) to be received by (A) the holders of the Series A Preferred will be at least equal to the Series A Liquidation Amount (as that

term is defined in the Restated Charter) and (B) the holders of the Series B Preferred will be at least equal to the Series B Liquidation Amount (as that term is defined in the Restated Charter). Each Stockholder will take all necessary and desirable actions in connection with the consummation of the Sale Transaction, including, without limitation, entering into an agreement reflecting the terms of the Approved Sale, surrendering stock certificates, giving customary and reasonable representations and warranties, and executing and delivering customary certificates or other documents.

5.2 Proxy; Attorney-in-Fact. As security for the performance of each Stockholder’s obligations pursuant to Section 5.1, each Stockholder hereby grants to the Board, with full power of substitution and resubstitution, an irrevocable proxy to vote all Shares, at all meetings of the shareholders of the Company held or taken after the date of this Agreement with respect to an Approved Sale, or to execute any written consent in lieu thereof, and hereby irrevocably appoints the Board, with full power of substitution and resubstitution, as the Stockholder’s attorney-in-fact with authority to sign any documents with respect to any such vote or any actions by written consent of the stockholders taken after the date of this Agreement. This proxy shall be deemed to be coupled with an interest and shall be irrevocable. This proxy shall terminate upon the consummation of a Public Offering.

5.3 Procedure. In the event of an Approved Sale, the Company shall give written notice to each Stockholder (the “Approved Sale Notice”). The Approved Sale Notice shall set forth (i) the name and address of the proposed acquirer in the Approved Sale (the “Proposed Acquirer”), (ii) the terms and conditions of the Approved Sale, including the price and consideration to be paid by the Proposed Acquirer and the terms and conditions of payment, (iii) any other material facts relating to the Approved Sale, and (iv) the date and location of the closing of the Approved Sale. The Company shall enclose with the Approved Sale Notice a copy of any term sheet, letter of intent or other written document with respect to the Approved Sale. Subject to the conditions and limitations set forth in Section 5.4, each Stockholder will take all actions deemed necessary or appropriate by the Board in connection with the Approved Sale.

5.4 Conditions and Limitations. The obligations of each Stockholder under this Section 5 are subject to the following conditions and limitations:

(a) each Stockholder shall be required to make representations and warranties only with respect to such Stockholder and the Shares owned by such Stockholder as may be set forth in any agreement approved by the Board; and

(b) if the Stockholders are given an option as to the form and amount of consideration per share to be received in the Approved Sale with respect to the Shares of any class or series owned by the Stockholders, each Stockholder shall be given the option to accept the same form and amount of consideration per share with respect to the Shares of such class or series owned by such Stockholder.

such term is defined in Rule 501 of the Securities Act) reasonably acceptable to the Board. If any such Stockholder appoints a purchaser representative designated by the Board, the Company will pay the reasonable fees of such purchaser representative, but if any such Stockholder declines to appoint the purchaser representative designated by the Board, such Stockholder will appoint another purchaser representative (reasonably acceptable to the Board), and such Stockholder will be responsible for the fees of the purchaser representative so appointed.

6. Repurchase Option.

6.1 Separation. In the event that any Stockholder that is an employee of the Company (hereinafter referred to as an “Executive”) ceases to be employed by the Company or any of its subsidiaries for any reason (the “Separation”), all Shares held by Executive or one or more of his or her Permitted Transferees will be subject to repurchase, in each case by the Company and the other Stockholders pursuant to the terms and conditions set forth in this Section 6 (the “Repurchase Option”).

6.2 Purchase Price. In the event of a Separation, the purchase price for each Share will be: (i) if the Separation occurs at any time prior to March 31, 2012, an amount per Share equal to the lesser of (x) the per share merger consideration paid in the Merger (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to the Shares) and (y) an amount per Share equal to the Fair Market Value of a Common Share as of the effective date of Separation and (ii) if the Separation occurs at any time on or after March 31, 2012, an amount per Share equal to the Fair Market Value of a Common Share as of the effective date of Separation; provided, however, that if Executive’s employment is terminated for Cause, the purchase price for each Share will be $.01 per Share.

6.3 Procedure.

(a) The Company may elect to purchase all or any portion of the Shares subject to the Repurchase Option by delivering written notice (the “Repurchase Notice”) within ninety (90) days after the Separation to Executive and any of his Permitted Transferees holding Shares. The Repurchase Notice will set forth the number of Shares to be acquired from each holder, the aggregate consideration to be paid for such Shares and the time and place for the closing of the transaction. The number of Shares to be repurchased by the Company shall first be satisfied to the extent possible from the Shares held by Executive at the time of delivery of the Repurchase Notice. If the number of Shares then held by Executive is less than the total number of Shares which the Company has elected to purchase, the Company shall purchase the remaining Shares elected to be purchased from Permitted Transferees of Executive holding Shares, pro rata according to the number of Shares held by such other holder(s) at the time of delivery of such Repurchase Notice.

has determined that there will be Available Securities, but in any event within ninety (90) days after the Separation, the Company shall give written notice (the “Option Notice”) to the Other Repurchasers setting forth the number of Available Securities and the purchase price for the Available Securities. The Other Repurchasers may elect to purchase any or all of the Available Securities by giving written notice to the Company within 20 days after the Option Notice has been given by the Company. If the Other Repurchasers elect to purchase an aggregate number greater than the number of Available Securities, the Available Securities shall be allocated among the Other Repurchasers based upon the number of Common Shares owned by each Other Repurchaser (assuming the full conversion of the Preferred Stock). As soon as practicable, and in any event within ten days, after the expiration of the 20 day period set forth above, the Company shall notify each holder of Shares as to the number of units being purchased from such holder by the Other Repurchasers (the “Supplemental Repurchase Notice”). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Shares, the Company shall also deliver written notice to each Other Repurchaser setting forth the number of Shares such Other Repurchaser is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction.

(c) The closing of the purchase of the Shares pursuant to the Repurchase Option shall take place on the date designated by the Company in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not be more than 30 days nor less than five days after the delivery of the later of either such notice to be delivered; provided, however, that if the Fair Market Value of a Common Share has not been determined within 30 days after the delivery of the later of either such notice, the closing of the Shares shall take place within five days after the determination of the Fair Market Value of a Common Share. At the closing, the sellers of the Shares shall deliver certificates representing the Shares (together with stock powers duly endorsed in blank) or, if applicable, affidavits of lost stock certificates (together with indemnification and security therefor reasonably satisfactory to the Company and the Other Repurchasers). The Company and the Other Repurchasers will be entitled to receive customary representations and warranties from the sellers with respect to good and valid title to the Shares, absence of liens, absence of conflicts and the ability to enter into the transaction regarding such sale.

(d) The Company will pay for the Shares to be purchased by it pursuant to the Repurchase Option by first offsetting amounts outstanding under any bona fide debts owed by the Executive to the Company or any of its subsidiaries or affiliates. If the Separation occurs at any time prior to March 31, 2012, the Company and the Other Repurchasers will issue non-interest bearing promissory notes to the sellers of the Shares in an aggregate amount equal to the balance of the purchase price (the “Notes”). Any Notes issued by the Other Repurchasers will mature on March 31, 2012, and any Notes issued by the Company will mature on the later of March 31, 2012 or, in the event the Company enters into a credit agreement with a financial institution as of or after the Effective Time (each, a “Credit Agreement”), at such time as such payment in cash is permitted under the terms of the Credit Agreement. Each Note issued by the Company shall be junior, subordinate and subject in right of payment to the prior payment in full of amounts owing or payable under any Credit Agreement. If the Separation occurs on or after March 31, 2012, subject to subsection (e) below, the Company and the Other Repurchasers shall pay the balance of the purchase price at the closing in immediately available funds.

(e) Notwithstanding the foregoing, in the event the provisions of any Credit Agreement prohibit (either because such payment is expressly prohibited by the terms of such Credit Agreement or because such payment would result in a default under such Credit Agreement), the Company from paying the sellers of the Shares the full purchase price for the Shares to be purchased by the Company in cash at any closing (or prohibit the Company from paying the principal amount of any Notes on the maturity date thereof), the Company shall pay in cash at such closing such portion of the purchase price as is permitted under the terms of the Credit Agreement (or shall pay such amount under the Note as is permitted under the terms of the Credit Agreement) and shall issue the sellers of the Shares a non-interest bearing promissory note for the balance of the purchase price (or the unpaid principal amount of the Note). Each such note shall be junior, subordinate and subject in right of payment to the prior payment in full of amounts owing or payable under any Credit Agreement and will become due and payable in full in cash at such time as such payment in cash is permitted under the terms of the Credit Agreement.

7. Legend. Each certificate representing Shares now owned or hereafter acquired by a Holder or issued to any person in connection with a Transfer pursuant to Section 3 hereof shall be endorsed with the following legend:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDER AGREEMENT BY AND AMONG CERTAIN STOCKHOLDERS OF THE COMPANY WHICH PLACES CERTAIN RESTRICTIONS ON THE TRANSFER AND VOTING OF THE SHARES. ANY PERSON TO WHOM SHARES REPRESENTED BY THIS CERTIFICATE, OR ANY INTEREST THEREIN, ARE TRANSFERRED SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY SUCH AGREEMENT. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

The Stockholders agree that the Company may instruct its transfer agent to impose transfer restrictions on the Shares represented by certificates bearing the legend referred to above to enforce the provisions of this Agreement, and the Company agrees to promptly do so. The legend shall be removed upon termination of this Agreement.

8. Termination. This Agreement shall continue in full force and effect from the date hereof through the earliest of the following dates, on which date it shall terminate in its entirety: (a) the date of closing of a Public Offering; (b) the date of closing of a Sale Transaction; or (c) the date as of which the parties hereto terminate this Agreement by written consent of the Common Holders holding a majority of the Common Shares then outstanding, voting as a separate class, and the Stockholders holding a majority of the shares of Preferred Stock then outstanding, voting as a separate class.

9. Miscellaneous.

State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the State of New York in the Borough of Manhattan, County of New York or of the United States District Court for the Southern District of New York, and, by execution and delivery of this agreement, each of the parties hereby irrevocably accepts the exclusive jurisdiction of the aforesaid courts.

9.2 Amendment and Waiver. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by the written consent of (a) Common Holders holding not less than a majority of the Common Shares then outstanding, voting as a separate class and (b) the Stockholders holding a majority of the shares of Preferred Stock then outstanding, voting as a separate class. Any amendment or waiver effected in accordance with this Section 9.2 shall be binding upon each Stockholder and his, her or its respective successors and assigns.

9.3 Entire Agreement. With respect to each Stockholder, the restrictions on the transfer of Shares set forth in this Agreement are in addition to, and do not limit, the restrictions on transfer and the vesting provisions set forth in any other agreement between the Company and such Stockholder. Subject to the foregoing, this Agreement constitutes the entire agreement between the parties relative to the specific subject matter hereof. Any previous agreement among the parties relative to the specific subject matter hereof is superseded by this Agreement.

9.4 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex, electronic mail or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) the next business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to each Stockholder at the mailing address, email address or facsimile number set forth on Schedule 1 hereto, or at such other address as each Stockholder or may designate by 10 days’ advance written notice to the other parties hereto.

9.5 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

9.6 Stock Splits, Stock Dividends, etc. In the event of any issuance of shares of the Company’s voting securities hereafter to any of the parties hereto (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization, or the like), such shares shall become subject to this Agreement and shall be endorsed with the legend set forth in Section 7.

9.7 Counterparts; Delivery. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All counterparts shall be construed together and shall constitute one Agreement. This Agreement and any amendments hereto, to the extent signed and delivered by means of a facsimile machine or email, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or email to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or email as a defense to the formation of a contract and each such party forever waives any such defense.

9.8 Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.

9.9 Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages that will accrue to a party hereto, or to their heirs, personal representatives, successors or assigns, by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable. If any party hereto, or his heirs, personal representatives, or successors or assigns, institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such personal representative has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

9.10 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof.


SERIES A HOLDERS:

SHINING SEA LIMITED

By
		Name:
		Title: Director


		James H. Simons


		Howard L. Morgan


		Marcy Lewis


		Barry J. Lipsky


		Frank A. Musto


		Toshihide Hokari

SERIES B HOLDERS:







COMMON HOLDERS:


		Barry J. Lipsky


		Frank A. Musto


		Toshihide Hokari

Schedule 1

STOCKHOLDER LIST


NAME		CONTACT INFO

Shining Sea Limited		Address: c/o Bermuda Trust Company Ltd. Compass Point, 9 Bermudiana Road, Hamilton HM11, Bermuda Attention: [ ] Facsimile: [ ] Email Address: [ ]

James H. Simons		Address: c/o Renaissance Technologies LLC 800 Third Avenue New York, New York 10022 Facsimile: [ ] Email Address: [ ]

Howard L. Morgan		Address: c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016 Facsimile: [ ] Email Address: [ ]

Marcy Lewis		Address: 11111 Biscayne Boulevard North Miami, Florida 33181 Facsimile: [ ] Email Address: [ ]



Barry J. Lipsky		Address: c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016 Facsimile: [ ] Email Address: barry@barrylipsky.com

Frank A. Musto		Address: c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016 Facsimile: [ ] Email Address: fmusto2@gmail.com

Toshihide Hokari		Address: c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016 Facsimile: [ ] Email Address: toshihide.hokari.wh00@wharton.upenn.edu

EX-7.02 3 dex702.htm EXCHANGE AGREEMENT, DATED SEPTEMBER 11, 2009 Exchange Agreement, dated September 11, 2009

Exhibit 7.02

EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT (this “Agreement”), dated as of September 11, 2009 by and among certain shareholders signatory hereto (the “Shareholders”) of Franklin Electronic Publishers, Inc., a Pennsylvania corporation (“FEP”), and Saunders Acquisition Corporation, a Delaware corporation (the “Company”).

WITNESSETH:

WHEREAS, the Company proposes to enter into a merger agreement (the “Merger Agreement”) with FEP, pursuant to which (i) the Company, or a wholly-owned subsidiary of the Company, would merge with and into FEP (the “Merger”) and FEP would continue as the surviving corporation in the Merger, (ii) the shareholders of FEP immediately prior to the consummation of the Merger would receive, for each outstanding share of common stock, par value $.01 per share, of FEP, $2.50 in cash (the “Merger Consideration”), (iii) as of the effective time of the Merger (the “Effective Time”), the articles of incorporation of FEP shall be amended and restated to be substantially in the form of the amended and restated certificate of incorporation of the Company in the form of the draft attached hereto as Exhibit A (the “Restated Charter”) and as so amended and restated shall be the certificate of incorporation of FEP, as the surviving corporation in the Merger and (iv) the stockholders of the Company immediately prior to the consummation of the Merger would become, directly or indirectly, the sole shareholders of FEP;

WHEREAS, in contemplation of the Merger, each Shareholder wishes to exchange the Outstanding Shares (collectively, the “Shares”) for shares of Redeemable Convertible Preferred Stock, par value $.01 per share, of the Company (the “Series A Preferred”), having the rights, privileges and designations set forth in the Restated Charter, and the Company wishes to issue shares of Series A Preferred in return for such Shares, subject to and in accordance with the terms and conditions set forth herein;

Section 1. Exchanges. In reliance upon the representations and warranties set forth herein, immediately following the approval of the Merger Agreement by the Board of Directors of FEP (the “FEP Board,” and such approval, the “FEP Board Approval”), each Shareholder shall transfer such Shareholder’s Outstanding Shares to the Company in exchange for an equal number of shares of Series A Preferred (the “Exchange Shares”), either by means of delivery of certificates representing the Shares, duly endorsed in blank or with executed stock powers for such Shares, or by means of the book-entry transfer of such Shares (collectively, the

“Exchanges”). From and after such time each Shareholder shall have no further right, title or interest as a Shareholder of FEP or in or to its Shares and shall only have the right to receive from the Company stock certificates representing such Shareholder’s Exchange Shares. For purposes hereof, “Business Day” shall mean a day other than a Saturday, Sunday or other day on which banking institutions in The City of New York are authorized or required by law to close. In connection with the Exchanges, each Shareholder also agrees to execute and deliver a Stockholders’ Agreement substantially in the form of the draft attached hereto as Exhibit B (the “Stockholders’ Agreement”).

Section 3. Representations and Warranties of the Company. The Company hereby represents and warrants to the Shareholders as follows:

(c) It is contemplated that, following the Effective Time and assuming Merger Consideration of $2.50 and additional capital of $2,700,000, the capitalization of FEP, as the surviving corporation in the Merger, would consist of (i) 3,024,114 issued and outstanding shares of Series A Preferred, all of which shares would be owned by the Shareholders as provided herein and the signatories to the Exchange Agreement dated as of May 29, 2009, (ii) 1,080,000 issued and outstanding shares of Series B Preferred Stock, par value $.01 per share (the “Series B Preferred”), having the rights, privileges and designations set forth in the Restated Charter, all of which shares would be owned by new investors in the Company, and (iii) 1,946,858 shares of common stock, par value $.01 per share, having the rights, privileges and designations set forth in the Restated Charter, all of which shares would be owned by Barry J. Lipsky, Frank A. Musto, Toshihide Hokari and Howard Morgan. As provided in the Restated Charter, the Series A Preferred and the Series B Preferred will be convertible into shares of common stock of FEP, as the surviving corporation in the Merger, initially on a share-for-share basis.

Section 4. Investment Purpose.

Section 7. No Intent to Transfer. No person a party to this Agreement has a present plan or intention to sell, exchange or dispose of any of the stock of the Company acquired pursuant hereto.

Section 8. Amendments. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or have caused this Agreement to be executed by their respective duly authorized officers, all as of the date first above written.


SAUNDERS ACQUISITION CORPORATION

By:		/s/ Barry J. Lipsky
		Barry J. Lipsky
		President

FRANKLIN ELECTRONIC PUBLISHERS, INC.

SHAREHOLDERS:

/s/ Julien David

Julien David

/s/ Morton David

Morton David, in his capacity as trustee of the Claudia David 1985 Trust, the Aaron J. David 1989 Trust and the Zachary M. David 1992 Trust

SCHEDULE I

FEP Shareholders


Shareholder		Number of Shares
Julien David		39,000
Morton David, in his capacity as trustee of the Claudia David 1985 Trust, the Aaron J. David 1989 Trust and the Zachary M. David 1992 Trust		117,000

Exhibit A

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

SAUNDERS ACQUISITION CORPORATION

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

DOES HEREBY CERTIFY:

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:

FIRST: The name of this corporation is Saunders Acquisition Corporation (the “Corporation”).

THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

Exhibit A

2. Dividends.

2.1 In the event that the Free Cash Flow (as defined below) in any fiscal year is in excess of $1,500,000, subject to any restrictions set forth in any credit agreements to which the Corporation is the borrowing party, the holders of Series A Preferred Stock will be entitled to receive, as a preferred dividend (the “Series A Dividend”), an amount equal to the lesser of (i) fifteen percent (15%) of the Free Cash Flow in such fiscal year and (ii) ten percent (10%) per annum of the aggregate Original Issue Price (as defined below) of all the then outstanding shares of Series A Preferred Stock, which amount shall be calculated from the Original Issue Date (as defined below) through the last day of such fiscal year (such amount described in subclause (ii), the “Maximum Series A Dividend”). The amount to be paid by the Corporation as Series A Dividends to the holders of Series A Preferred Stock in accordance with this Section 2.1 shall be paid within thirty (30) days after the completion of the financial statements of the Corporation for the relevant fiscal year and shall be shared ratably among such holders in proportion to the respective amounts which are payable to such holders in respect of the shares of Series A Preferred Stock held by them at the time such dividend payment is made. For the purposes hereof, (x) “Free Cash Flow” in a fiscal year means the net income of the Corporation for such fiscal year, determined in accordance with generally accepted accounting principals in the United States, plus any depreciation and amortization deducted in determining net income, less (1) capital expenditures, (2) the amount of any Series A Dividends paid with respect to the prior fiscal year on the Series A Preferred Stock in accordance with this Section 2.1, (3) the amount of any Series B Dividends (as defined below) paid with respect to the prior fiscal year on the Series B Preferred Stock in accordance with Section 2.2, and (4) the amount of any dividends paid with respect to the prior fiscal year on the Common Stock in accordance with Section 2.3, and (y) “Original Issue Price” shall mean $[ ]¹ per share of Preferred Stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock in accordance with Section 5.4.

¹	Insert per share cash merger consideration.

Exhibit A

Maximum Series B Dividend on the Series B Preferred Stock pursuant to this Section 2.2 if it simultaneously pays the full Maximum Series A Dividend on the Series A Preferred Stock in respect of any fiscal year. The amount to be paid by the Corporation as Series B Dividends to the holders of Series B Preferred Stock in accordance with this Section 2.2 shall be paid within thirty (30) days after the completion of the financial statements of the Corporation for the relevant fiscal year and shall be shared ratably among such holders in proportion to the respective amounts which are payable to such holders in respect of the shares of Series B Preferred Stock held by them at the time such dividend payment is made.

3. Voting.

3.2.1 acquire any equity interest, or substantially all the assets, of any other entity;

Exhibit A

3.2.5 enter into, or amend or modify, any agreement, contract or arrangement with any of Barry Lipsky, Frank Musto or Toshihide Hokari (collectively, the “Founders”);

3.2.6 effect any Liquidation Event or consent thereto, unless the holders of the then outstanding shares of Series A Preferred Stock receive the full Series A Liquidation Amount; or

3.2.7 enter into any agreement, contract or arrangement with respect to the foregoing.

3.3.1 acquire any equity interest, or substantially all the assets, of any other entity;

3.3.3 create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock;

Exhibit A

3.3.5 enter into, or amend or modify, any agreement, contract or arrangement with any of the Founders;

3.3.6 effect any Liquidation Event or consent thereto, unless the holders of the then outstanding shares of Series B Preferred Stock receive the full Series B Liquidation Amount; or

3.3.7 enter into any agreement, contract or arrangement with respect to the foregoing.

4. Liquidation, Dissolution or Winding Up.

Exhibit A

amount shall be shared ratably among the holders of Series B Preferred Stock in proportion to the respective amounts which are payable to such holders in respect of the shares of Series B Preferred Stock held by them upon a distribution of the Series B Liquidation Amount. If upon any such Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred Stock the full Series B Liquidation Amount to which they shall be entitled under this Section 4.2, the holders of shares of Series B Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series B Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The Series B Preferred Stock shall rank, as to the distribution of assets of the Corporation upon a Liquidation Event, junior to the Series A Preferred Stock and senior to the Junior Stock.

5. Optional Conversion. The holders of Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

5.1 Right to Convert.

5.1.1 Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price by the Conversion Price (as defined below) in effect at the time of conversion. The “Conversion Price” shall initially be equal to $[ ]². Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

²	Insert per share cash merger consideration.

Exhibit A

5.3 Mechanics of Conversion.

Exhibit A

Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

5.4 Adjustments to Conversion Price for Diluting Issues.

5.4.1 Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

(a) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities (as defined below).

(b) “Original Issue Date” shall mean the date on which the Series A Preferred Stock and Series B Preferred Stock were first issued.

Exhibit A

(i) shares of Common Stock issued upon conversion of the Preferred Stock in accordance with this Section 5;

(ii) shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Preferred Stock;

Exhibit A

5.4.3 Deemed Issue of Additional Shares of Common Stock.

Exhibit A

then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 5.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

CP₂ = CP₁* (A + B) ÷ (A + C).

For purposes of the foregoing formula, the following definitions shall apply:

(a) “CP₂” shall mean the Conversion Price in effect immediately after such issue of Additional Shares of Common Stock

(b) “CP₁” shall mean the Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;

Exhibit A

(e) “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

(a) Cash and Property: Such consideration shall:

(i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

(ii) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and

Exhibit A

5.10 Notice of Record Date. In the event

(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

6. Mandatory Conversion.

Exhibit A

to the Preferred Stock converted pursuant to Section 6.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Date (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section 6.2. As soon as practicable after the Mandatory Conversion Date and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 5.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

7. Redemption.

7.1 Redemption. Shares of Series A Preferred Stock shall be redeemed by the Corporation out of funds lawfully available therefor at a price equal to the Original Issue Price plus an amount equal to the difference of (i) an amount equal to ten percent (10%) per annum of the Original Issue Price of such shares of Series A Preferred Stock from the Original Issue Date through and including the date of redemption thereof (the “Redemption Date”), less (ii) the aggregate amount of Series A Dividends previously paid in respect of such shares of Series A Preferred Stock in accordance with Section 2.1 (the amount payable pursuant to this sentence is hereinafter referred to as, the “Redemption Price”), which such amount shall be shared ratably among the holders of Series A Preferred Stock in proportion to the respective amounts which are payable to such holders in respect of the shares of Series A Preferred Stock held by them on the date immediately preceding the Redemption Date. The Redemption Date shall be not more than sixty (60) days after receipt by the Corporation at any time on or after March 31, 2012, from the holders of at least sixty-six and two-thirds percent (66 2/3%) of the then outstanding shares of Series A Preferred Stock, of written notice requesting redemption of all shares of Series A Preferred Stock. On the Redemption Date, the Corporation shall redeem the total number of shares of Series A Preferred Stock outstanding immediately prior to such Redemption Date. If the Corporation does not have sufficient funds legally available to redeem on the Redemption Date all shares of Series A Preferred Stock to be redeemed on the Redemption Date, the Corporation shall redeem a pro rata portion of each holder’s redeemable shares of such capital stock out of funds legally available therefor, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the legally available funds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor. The Series A Preferred Stock shall rank, as to redemption, senior to the Series B Preferred Stock and the Junior Stock.

7.2.1 the number of shares of Series A Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date;

Exhibit A

7.2.2 the Redemption Date and the Redemption Price;

7.2.3 the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Section 5.1.2); and

Exhibit A

9. Waiver. Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the shares of Preferred Stock then outstanding.

SIXTH: The number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

SEVENTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

TENTH: The following indemnification provisions shall apply to the persons enumerated below.

Exhibit A

at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 3 of this Article Tenth, the Corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.

Exhibit A

* * *

3. That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this [ ] day of [ ], 2009




By:
		Name:
		Title:

Exhibit B

STOCKHOLDERS’ AGREEMENT

THIS STOCKHOLDERS’ AGREEMENT (“Agreement”) is entered into as of __________, 2009 by and among the persons listed on the signature page hereof under the heading “Series A Holders” (the “Series A Holders”), the persons listed on the signature page hereof under the heading “Series B Holders” (the “Series B Holders”) and the persons listed on the signature page hereof under the heading “Common Holders” (the “Common Holders” and, collectively with the Series A Holders and the Series B Holders, the “Stockholders”).

R E C I T A L S:

WHEREAS, the Series A Holders hold all the issued and outstanding shares of Redeemable Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred”), of Saunders;

WHEREAS, the Series B Holders hold all the issued and outstanding shares of Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred”), of Saunders;

WHEREAS, the Stockholders wish to enter into this Agreement, which provides for the governance of the Company following the Effective Time and addresses certain other issues;

1. Definitions.

1.1 “Approved Sale” has the meaning specified in Section 5.1.

1.2 “Board” shall mean the Board of Directors of the Company.

1.5 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

1.6 “Executive” has the meaning specified in Section 6.1.

1.10 “Preferred Stock” shall mean the Series A Preferred and the Series B Preferred.

1.11 “Public Offering” shall mean any sale, in an underwritten public offering registered under the Securities Act of the Company’s (or any successor’s) equity securities.

1.12 “Sale Transaction” shall have the meaning specified in Section 5.1.

1.13 “Securities Act” shall mean the Securities Act of 1933, as amended.

1.14 “Shares” shall mean shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock.

2. Effectiveness. This Agreement shall become effective as of the Effective Time.

3. Transfers.

3.1 Transfers by Stockholders.

or (z) pursuant to the Repurchase Option under Section 6 hereof. Any Transfer or attempted Transfer in violation of this Agreement shall not be recognized by the Company and shall be void and of no force or effect whatsoever.

3.2 Transfers. Each Series A Holder and Series B Holder shall have the right to sell all or any portion of their Shares at any time to any Person subject only to Sections 3.1(b) and 3.3.

4. Board of Directors.

4.3 Election of Directors.

4.4 Removal of Directors.

5. Sale of the Company.

be at least equal to the Series A Liquidation Amount (as that term is defined in the Restated Charter) and (B) the holders of the Series B Preferred will be at least equal to the Series B Liquidation Amount (as that term is defined in the Restated Charter). Each Stockholder will take all necessary and desirable actions in connection with the consummation of the Sale Transaction, including, without limitation, entering into an agreement reflecting the terms of the Approved Sale, surrendering stock certificates, giving customary and reasonable representations and warranties, and executing and delivering customary certificates or other documents.

5.4 Conditions and Limitations. The obligations of each Stockholder under this Section 5 are subject to the following conditions and limitations:

term is defined in Rule 501 of the Securities Act) reasonably acceptable to the Board. If any such Stockholder appoints a purchaser representative designated by the Board, the Company will pay the reasonable fees of such purchaser representative, but if any such Stockholder declines to appoint the purchaser representative designated by the Board, such Stockholder will appoint another purchaser representative (reasonably acceptable to the Board), and such Stockholder will be responsible for the fees of the purchaser representative so appointed.

6. Repurchase Option.

6.3 Procedure.

that there will be Available Securities, but in any event within ninety (90) days after the Separation, the Company shall give written notice (the “Option Notice”) to the Other Repurchasers setting forth the number of Available Securities and the purchase price for the Available Securities. The Other Repurchasers may elect to purchase any or all of the Available Securities by giving written notice to the Company within 20 days after the Option Notice has been given by the Company. If the Other Repurchasers elect to purchase an aggregate number greater than the number of Available Securities, the Available Securities shall be allocated among the Other Repurchasers based upon the number of Common Shares owned by each Other Repurchaser (assuming the full conversion of the Preferred Stock). As soon as practicable, and in any event within ten days, after the expiration of the 20 day period set forth above, the Company shall notify each holder of Shares as to the number of units being purchased from such holder by the Other Repurchasers (the “Supplemental Repurchase Notice”). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Shares, the Company shall also deliver written notice to each Other Repurchaser setting forth the number of Shares such Other Repurchaser is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction.

9. Miscellaneous.

of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the State of New York in the Borough of Manhattan, County of New York or of the United States District Court for the Southern District of New York, and, by execution and delivery of this agreement, each of the parties hereby irrevocably accepts the exclusive jurisdiction of the aforesaid courts.

9.8 Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.

9.10 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof.



SERIES A HOLDERS:

SHINING SEA LIMITED

By
		Name:
		Title: Director


		James H. Simons


		Howard L. Morgan


		Marcy Lewis


		Barry J. Lipsky


		Frank A. Musto


		Toshihide Hokari


		Julien David





		Morton David, in his capacity as trustee of the Claudia David 1985 Trust, the Aaron J. David 1989 Trust and the Zachary M. David 1992 Trust

		SERIES B HOLDERS:









		COMMON HOLDERS:


		Barry J. Lipsky


		Frank A. Musto


		Toshihide Hokari

Schedule 1

STOCKHOLDER LIST


Name		Contact Info

Shining Sea Limited		Address: c/o Bermuda Trust Company Ltd. Compass Point, 9 Bermudiana Road, Hamilton HM11, Bermuda Attention: [_____] Facsimile: [_____] Email Address: [_____]

James H. Simons		Address: c/o Renaissance Technologies LLC 800 Third Avenue New York, New York 10022 Facsimile: [_____] Email Address: [_____]

Howard L. Morgan		Address: c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016 Facsimile: [_____] Email Address: [_____]

Marcy Lewis		Address: 11111 Biscayne Boulevard North Miami, Florida 33181 Facsimile: [_____] Email Address: [_____]



Barry J. Lipsky		Address: c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016 Facsimile: [_____] Email Address: barry@barrylipsky.com

Frank A. Musto		Address: c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016 Facsimile: [_____] Email Address: fmusto2@gmail.com

Toshihide Hokari		Address: c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016 Facsimile: [_____] Email Address: toshihide.hokari.wh00@wharton.upenn.edu

EX-7.03 4 dex703.htm SUBSCRIPTION AGREEMENT, DATED SEPTEMBER 11, 2009 Subscription Agreement, dated September 11, 2009

Exhibit 7.03

SAUNDERS ACQUISITION CORP.

SUBSCRIPTION FOR

CONVERTIBLE PREFERRED STOCK

To the Board of Directors of

Saunders Acquisition Corp.:

The undersigned (the “Subscriber”) hereby subscribes for 200,000 shares of Convertible Preferred Stock of Saunders Acquisition Corp., a Delaware corporation (such shares, the “Shares” and such corporation, the “Company”), for an aggregate purchase price of US$500,000 (the “Purchase Price”).

The Subscriber hereby agrees, represents and warrants to the Company that:

(1)

The Subscriber is acquiring the Shares for the Subscriber’s own account (and not for the account of others) for investment and not with a view to the distribution or resale thereof.

(2)

The Subscriber and the Subscriber’s representatives and advisors have received all information regarding the Company, its intended business and operations and the Shares as the Subscriber or the Subscriber’s representatives and advisors have requested.

(3)

The Subscriber is a sophisticated investor and may be deemed to have sufficient business, financial or investment experience to evaluate the risks of the Subscriber’s investment in the Shares pursuant hereto. The Subscriber is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Subscriber acknowledges that an investment in the Shares involves substantial risks, including the loss of the full amount of the Subscriber’s investment in the Shares pursuant hereto.

(4)

The Subscriber understands that the Shares have not been registered under the Securities Act or applicable state securities laws and that the Subscriber may not sell or otherwise dispose of the Shares except pursuant to either an effective registration statement under the Securities Act and in compliance with applicable state securities laws, or pursuant to exemptions from the registration provisions of the Securities Act and applicable state securities laws. The Subscriber agrees that the Subscriber will not sell or otherwise dispose of the Shares except in compliance with the securities laws limitations described in the foregoing sentence.

(5)

This agreement shall be governed by the laws of the State of New York, without regard to its conflicts of laws principles, and may be executed in one or more counterparts, each of which shall be a binding instrument, but which together shall constitute but one agreement.

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IN WITNESS WHEREOF, the parties hereto have duly executed this agreement of subscription for Shares as of the dates set forth opposite their respective names below.

Dated: September 11, 2009


By:		/s/ Barry J. Lipsky
		Barry J. Lipsky

Accepted and Agreed as of September 11, 2009:


SAUNDERS ACQUISITION CORP

By:		/s/ Barry J. Lipsky
Name:		Barry J. Lipsky
Title:		President

SAUNDERS ACQUISITION CORP.

SUBSCRIPTION FOR

CONVERTIBLE PREFERRED STOCK

To the Board of Directors of

Saunders Acquisition Corp.:

The undersigned (the “Subscriber”) hereby subscribes for 400,000 shares of Convertible Preferred Stock of Saunders Acquisition Corp., a Delaware corporation (such shares, the “Shares” and such corporation, the “Company”), for an aggregate purchase price of US$1,000,000 (the “Purchase Price”).

The Subscriber hereby agrees, represents and warrants to the Company that:

(1)

The Subscriber is acquiring the Shares for the Subscriber’s own account (and not for the account of others) for investment and not with a view to the distribution or resale thereof.

(2)

(3)

(4)

(5)

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IN WITNESS WHEREOF, the parties hereto have duly executed this agreement of subscription for Shares as of the dates set forth opposite their respective names below.

Dated: September 11, 2009


By:		/s/ Howard Morgan
		Howard Morgan

Accepted and Agreed as of September 11, 2009:


SAUNDERS ACQUISITION CORP

By:		/s/ Barry J. Lipsky
Name:		Barry J. Lipsky
Title:		President

SAUNDERS ACQUISITION CORP.

SUBSCRIPTION FOR

CONVERTIBLE PREFERRED STOCK

To the Board of Directors of

Saunders Acquisition Corp.:

The Subscriber hereby agrees, represents and warrants to the Company that:

(1)

The Subscriber is acquiring the Shares for the Subscriber’s own account (and not for the account of others) for investment and not with a view to the distribution or resale thereof.

(2)

(3)

(4)

(5)

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IN WITNESS WHEREOF, the parties hereto have duly executed this agreement of subscription for Shares as of the dates set forth opposite their respective names below.

Dated: September 11, 2009


By:		/s/ James H. Simons
		James H. Simons

Accepted and Agreed as of September 11, 2009:


SAUNDERS ACQUISITION CORP

By:		/s/ Barry J. Lipsky
Name:		Barry J. Lipsky
Title:		President

SAUNDERS ACQUISITION CORP.

SUBSCRIPTION FOR

CONVERTIBLE PREFERRED STOCK

To the Board of Directors of

Saunders Acquisition Corp.:

The undersigned (the “Subscriber”) hereby subscribes for 80,000 shares of Convertible Preferred Stock of Saunders Acquisition Corp., a Delaware corporation (such shares, the “Shares” and such corporation, the “Company”), for an aggregate purchase price of US$200,000 (the “Purchase Price”).

The Subscriber hereby agrees, represents and warrants to the Company that:

(1)

The Subscriber is acquiring the Shares for the Subscriber’s own account (and not for the account of others) for investment and not with a view to the distribution or resale thereof.

(2)

(3)

(4)

(5)

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IN WITNESS WHEREOF, the parties hereto have duly executed this agreement of subscription for Shares as of the dates set forth opposite their respective names below.

Dated: September 11, 2009


By:		/s/ Morton David
		Morton David

Accepted and Agreed as of September 11, 2009:


SAUNDERS ACQUISITION CORP

By:		/s/ Barry J. Lipsky
Name:		Barry J. Lipsky
Title:		President

EX-7.04 5 dex704.htm SUBSCRIPTION AGREEMENT, DATED SEPTEMBER 30, 2009 Subscription Agreement, dated September 30, 2009

Exhibit 7.04

EXECUTION COPY

SAUNDERS ACQUISITION CORP.

SUBSCRIPTION FOR

CONVERTIBLE PREFERRED STOCK

To the Board of Directors of

Saunders Acquisition Corp.:

In connection with the proposed merger (the “Merger”) of Saunders Acquisition Corp., a Delaware corporation (the “Company”), with and into Franklin Electronic Publishers Incorporated (“Franklin”) with Franklin as the surviving corporation in the Merger (the “Surviving Corporation”), the undersigned (the “Subscriber”) hereby agrees to subscribe (the “Series B Subscription”) for 400,000 shares of Series B Preferred Stock of the Company (the “Shares”), for an aggregate subscription price of US$1,000,000 (the “Subscription Price”), which Subscription Price shall be paid in full by the Subscriber not later than the business day immediately preceding the date of the Special Meeting of the Stockholders of Franklin (the “Special Meeting”) convened to consider and vote on the Merger.

The subscription agreement shall be terminated if the Special Meeting does not occur on or prior to February 28, 2010. In addition, in the event that the Special Meeting does occur on or prior to February 28, 2010, but the stockholders of Franklin do not approve the Merger, the Company shall redeem the Shares at a redemption price equal to the Subscription Price, with no interest, not later than the date that is two (2) business days following the Special Meeting.

The Subscriber hereby agrees, represents and warrants to the Company that:

(1)

The Subscriber is acquiring the Shares for the Subscriber’s own account (and not for the account of others) for investment and not with a view to the distribution or resale of such Shares and the Subscriber will not offer, sell or otherwise transfer the Shares within the United States or to any U.S. person except pursuant to an effective registration statement under the Securities Act of 1933, as mended (the “Securities Act”) or pursuant to an exemption from the registration requirements of the Securities Act; provided, however, that by making the representations herein, such Subscriber does not agree to hold the Shares for any minimum or other specific term, and reserves, subject to the applicable transfer restrictions in the Stockholders’ Agreement of the Surviving Corporation to which the Subscriber will be a party (the “Stockholders’ Agreement”), the right to dispose of the Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.

(2)

The Subscriber and the Subscriber’s representatives and advisors have received all material information regarding the Company, its intended business and operations and the Shares as the Subscriber or the Subscriber’s representatives and advisors have requested.

(3)

The Subscriber is a sophisticated investor and may be deemed to have sufficient business, financial or investment experience to evaluate the risks of the Subscriber’s investment in the Shares pursuant hereto. The Subscriber acknowledges that an investment in the Shares involves substantial risks, including the loss of the full amount of the Subscriber’s investment in the Shares pursuant hereto.

(4)

(5)

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IN WITNESS WHEREOF, the parties hereto have duly executed this agreement of subscription for Shares as of the dates set forth opposite their respective names below.

Dated: September 30, 2009


NOAH EDUCATION HOLDINGS LTD.,

By:		/s/ JERRY HE
Name:		Jerry He
Title:		Executive Vice President


Accepted and Agreed as of September 30, 2009:

SAUNDERS ACQUISITION CORP.

By:		/s/ BARRY J. LIPSKY
Name:		Barry J. Lipsky
Title:		President

EX-7.05 6 dex705.htm PROPOSAL DATED MAY 20, 2009. Proposal dated May 20, 2009.

Exhibit 7.05

Saunders Acquisition Corporation

2 Briarwood Ct, Princeton Jct., NJ 08550

Telephone: +1-609-509-3024

Email: barry@barrylipsky.com

May 20, 2009

Board of Directors

Franklin Electronic Publishers, Inc.

One Franklin Plaza

Burlington, New Jersey 08016-4907

Dear Members of the Board:

The purpose of this letter is to submit for your consideration a proposal pursuant to which Saunders Acquisition Corporation, a newly formed Delaware corporation (“Saunders”), would be merged (the “Merger”) with and into Franklin Electronic Publishers, Inc. (“Franklin”), and all outstanding shares of common stock of Franklin, other than shares held by Saunders, would be converted into the right to receive $2.35 in cash per share.

We believe that the price we are proposing as the merger consideration presents an excellent opportunity for Franklin’s stockholders to achieve liquidity for their shares at a significant premium to current market value. We are confident that you will conclude that the proposal is fair and in the best interests of the public stockholders.

Saunders is currently wholly owned by Barry J. Lipsky, Frank A. Musto and Toshihide Hokari. In addition, James H. Simons, Shining Sea Limited, Howard L. Morgan and Marcy Lewis, each of whom is a current stockholder of Franklin, have agreed to become investors in Saunders. Accordingly, our proposal is not subject to any financing condition.

The Merger will require approval of Franklin’s Board of Directors and its stockholders. Since certain stockholders of and potential investors in Saunders are members of management and serve on Franklin’s Board of Directors, we believe it is prudent and in the best interests of Franklin and its stockholders for Franklin’s Board of Directors to form a committee consisting of independent and disinterested Directors (the “Special Committee”) to assess and approve the Merger. We also believe it is prudent and in the best interests of Franklin and its stockholders that the Special Committee engage legal advisors to advise the Special Committee as to the legal obligations of the Special Committee and the Board of Directors in connection with the Merger and financial advisors to advise the Special Committee as to the fairness of the proposed transaction from a financial point of view.

Our proposal is also subject to the negotiation of a definitive merger agreement between Saunders and Franklin. We are prepared, at the earliest possible time, to enter into a binding agreement which would contain standard terms and conditions for transactions of this nature.

This proposal is non-binding and no agreement, arrangement or understanding between the parties shall be created until such time as definitive documentation has been executed and delivered by Franklin and all other appropriate parties, and the agreement, arrangement or understanding has been approved by the Special Committee.


Very truly yours,

SAUNDERS ACQUISITION CORPORATION

By		/s/ Barry J. Lipsky
		Barry J. Lipsky
		President

EX-7.06 7 dex706.htm REVISED PROPOSAL DATED SEPTEMBER 11, 2009. Revised Proposal dated September 11, 2009.

Exhibit 7.06

September 11, 2009

Franklin Electronic Publishers, Incorporated

c/o Oppenheimer & Co., Inc.

300 Madison Avenue

New York, New York 10017

Attention: William Yu

Ladies and Gentlemen:

Pursuant to the letter dated August 21, 2009 from Oppenheimer & Co., Inc. to Mr. Barry Lipsky of Saunders Acquisition Corporation (“Saunders”) inviting bids for the acquisition of 100% of the outstanding shares of common stock of Franklin Electronic Publishers, Incorporated (“Franklin”), we are pleased to offer the following proposal for the merger of Saunders into and with Franklin (the “Merger”).

1. Purchase Price. We are offering a per share merger consideration of $2.50 in cash (the “Merger Consideration”) for the outstanding shares of common stock of Franklin, other than shares currently held by the investors in Saunders.

2. Sources of Financing. Approximately 2,735,960 shares of Franklin common stock are held by investors in Saunders and will be rolled over in the transaction, leaving approximately 5,537,067 shares that will be converted into the right to receive the Merger Consideration of $2.50 per share. An additional $609,446 will paid to the holders of outstanding vested options having an exercise price of less than $2.50 (excluding options held by investors in Saunders), resulting in an aggregate Merger Consideration of $14,452,114. In addition, we estimate that our transaction expenses that will still be outstanding at the time of the closing will be approximately $25,000. The following table sets forth our estimated sources and uses of funds:

Sources of Funds


Equity investments in Saunders	$	2,700,000
Cash on hand at Franklin	$	11,777,114	*

Total sources of funds	$	14,477,114

Uses of Funds


Merger Consideration	$	14,452,114
Transaction costs	$	25,000

Total uses of funds	$	14,477,114

*	Includes $677,162 representing the exercise price to be paid by investors in Saunders upon the exercise by them of options having an exercise price of less than $2.50, but does not include any financing that might be available to Franklin at the time of the closing.

We are attaching as Attachment 1 binding subscription agreements from four individuals who will invest additional funds in Saunders.

3. Timing. We are prepared to execute immediately the form of Merger Agreement that was distributed on August 19, 2009 with the changes that we are proposing in the redlined marked copy attached hereto as Attachment 2 (the “Merger Agreement”). Following the execution of the Merger Agreement, we and our counsel are prepared to work with Franklin and its counsel in connection with the preparation and filing with the Securities and Exchange Commission (“SEC”) of a Proxy Statement related to the Special Meeting of the Stockholders of Franklin to be convened to consider and vote on the Merger (the “Special Meeting”) and the preparation and filing with the SEC of a related Schedule 13E-3. The following table sets forth our proposed timetable/checklist for the actions that need to be taken in order to consummate the Merger. There are no other actions or filings that are required in order for us to consummate the Merger.

Timetable—Checklist


Date		Event
Week of September 14		Negotiate and sign merger agreement

Week of September 21		1. Commence drafting proxy statement, notice of meeting, letter to shareholders, proxy card and Schedule 13E-3 2. Circulate directors’ and officers’ questionnaire 3. Select Exchange Agent

Week of October 26		1. Complete proxy statement and file with SEC (and Schedule 13E-3) 2. Negotiate Exchange Agent Agreement

Week of November 2		1. Execute Exchange Agent Agreement

Week of November 9		1. Draft Certificate of Merger 2. Draft letter of transmittal to be sent to shareholders after the Merger

Week of November 30		Receive and respond to SEC comments on proxy

Week of December 7		1. File final forms of proxy statement and Schedule 13E-3


		2. Call FEP Board of Directors meeting to set record date and meeting date and to approve filings

Week of December 14		Mail proxy statement and related material to shareholders

Week of December 21		1. Preclear Certificate of Merger with Secretary of State 2. Finalize form of letter of transmittal

Week of January 4		1. Hold Special Meeting of FEP Shareholders 2. File Certificate of Merger with Secretary of State 3. Deposit Merger Consideration with Exchange Agent 4. Issue Press Release

Post Closing		1. File Form 15 to deregister FEP stock 2. Mail letter of transmittal to shareholders 3. File final amendment to Schedule 13E-3 with the SEC

4. Agreement. Redlined marked and clean copies of the Merger Agreement are attached hereto as Attachment 2.

5. Statement of Intent. Our plans for the future operations of Franklin have already been provided to Franklin, along with the future projections and plans. There is no material change in management and employees anticipated other than what has already been provided (e.g. additional savings and headcount reductions from privatization, warehouse outsourcing and possible sublease and hence relocation of facility).

6. Management Participation. Following the consummation of the Merger, we will continue to provide enhanced equity participation for senior management. Short term incentive plans are anticipated to remain commensurate with the current incentive plans, and long term incentive plans which have predominately been stock options are expected to be replaced with other long term incentive equity participation programs. In addition, those individuals holding unvested options (which will be cancelled in connection with the Merger) will receive new options following the consummation of the Merger.

7. Authorization/Approvals. All necessary approvals have been obtained by Saunders and its affiliates. Our proposal is not subject to financing, additional corporate approvals, additional due diligence or any other condition, other than the actions set forth in paragraph 3 above.

8. Contact Persons. Should you have any questions concerning our bid, please contact Barry Lipsky, c/o Franklin (609-386-2500, ext. 6000). Our legal counsel is David Boillot at Reitler Kailas & Rosenblatt (212-209-3058).

We are pleased to make this offer to Franklin and to inform you that our offer will remain firm and binding until 5:00 pm (Eastern Daylight Time) on Friday, October 2, 2009. Should you accept our offer, we are ready to commence immediately the further negotiation of the Merger Agreement and related documentation in order to complete the Merger at the earliest practicable date.


Very truly yours,

SAUNDERS ACQUISITION CORPORATION

By:		/s/ Barry J. Lipsky
		Barry J. Lipsky
		President

Cc:	Matthew Haskey

Oppenheimer & Co., Inc.

111 South Calvert Street, Suite 2600

Baltimore, Maryland 21202

EX-7.07 8 dex707.htm AGREEMENT AND PLAN OF MERGER Agreement and Plan of Merger

Exhibit 7.07

Execution Version

AGREEMENT AND PLAN OF MERGER

DATED AS SEPTEMBER 30, 2009

BY AND BETWEEN

FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED

AND

SAUNDERS ACQUISITION CORPORATION

TABLE OF CONTENTS


		Page

ARTICLE I DEFINITIONS		1

SECTION 1.1 *Definitions*		1

ARTICLE II THE MERGER		7

SECTION 2.1 *The Merger*.		7

SECTION 2.2 *Conversion of Shares*		8

SECTION 2.3 *Surrender and Payment*		9

SECTION 2.4 *Adjustments*		10

SECTION 2.5 *Withholding Rights*		11

SECTION 2.6 *Lost Certificates*		11

SECTION 2.7 *Treatment of Restricted Stock*		11

ARTICLE III CERTAIN GOVERNANCE MATTERS		11

SECTION 3.1 *Articles of Incorporation of the Surviving Corporation*		11

SECTION 3.2 *Bylaws of the Surviving Corporation*		11

SECTION 3.3 *Directors and Officers of the Surviving Corporation*		11

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY		12

SECTION 4.1 *Organization and Qualification*		12

SECTION 4.2 *Capitalization*		12

SECTION 4.3 *Corporate Authorization; Enforceability; Board Action*		13

SECTION 4.4 *Consents and Approvals; No Violations*		13

SECTION 4.5 *SEC Filings and Financial Statements*		14

SECTION 4.6 *Absence of Certain Changes*		14

SECTION 4.7 *Undisclosed Liabilities*		15

SECTION 4.8 *Litigation*		15



SECTION 4.9 *Compliance with Laws*		16

SECTION 4.10 *Employee Benefit Plans*		16

SECTION 4.11 *Employee Matters*		19

SECTION 4.12 *Taxes*		19

SECTION 4.13 *Certain Contracts*		21

SECTION 4.14 *Intellectual Property*		22

SECTION 4.15 *Properties and Assets*		23

SECTION 4.16 *Environmental Matters*		24

SECTION 4.17 *Transactions with Related Parties*		24

SECTION 4.18 *Finders’ or Advisors’ Fees*		25

SECTION 4.19 *Receivables*		25

SECTION 4.20 *Absence of Sensitive Matters*		25

SECTION 4.21 *Bank Accounts*		25

ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER		25

SECTION 5.1 *Organization and Qualification*		25

SECTION 5.2 *Corporate Authorization; Enforceability; Board Action*		26

SECTION 5.3 *Consents and Approvals; No Violations*		26

SECTION 5.4 *Finders’ or Advisors’ Fees*		27

SECTION 5.5 [INTENTIONALLY OMITTED]		27

SECTION 5.6 *Capital Resources*		27

ARTICLE VI COVENANTS		27

SECTION 6.1 *Conduct of the Company*		27

SECTION 6.2 *Preparation of Proxy Statement, Shareholder Meeting*		30

SECTION 6.3 *Access to Information*		32

SECTION 6.4 *No Solicitation; Unsolicited Proposals; Change of Company Recommendation*		32



SECTION 6.5 *Regulatory Filings*		35

SECTION 6.6 *Announcements*		36

SECTION 6.7 *Further Assurances*		36

SECTION 6.8 *Notification of Certain Matters*		36

SECTION 6.9 *Director and Officer Liability*		36

SECTION 6.10 *Opinion of Financial Advisor*		38

SECTION 6.11 *Employee Benefit Matters*		38

SECTION 6.12 *Section 16 Matters*		39

SECTION 6.13 *Reasonable Efforts*		39

SECTION 6.14 *Shareholder Vote*		39

ARTICLE VII CONDITIONS TO THE MERGER; CERTAIN EXCEPTIONS TO CONDITIONS, REPRESENTATIONS, WARRANTIES & COVENANTS		39

SECTION 7.1 *Conditions to the Obligations of Each Party*		39

SECTION 7.2 *Conditions to the Obligations of Buyer*		40

SECTION 7.3 *Conditions to the Obligations of the Company*		41

ARTICLE VIII TERMINATION AND EXPENSES		41

SECTION 8.1 *Termination*		41

SECTION 8.2 *Effect of Termination*		43

SECTION 8.3 *Fees and Expenses*		43

SECTION 8.4 *Termination Fee and Reverse Termination Fee*		43

ARTICLE IX MISCELLANEOUS		44

SECTION 9.1 *Non-Survival of Representations and Warranties*		44

SECTION 9.2 *Amendments; No Waivers*		44

SECTION 9.3 *Notices*		44

SECTION 9.4 *Successors and Assigns*		45

SECTION 9.5 *Governing Law*		46

iii



SECTION 9.6 *Jurisdiction*		46

SECTION 9.7 *Waiver of Jury Trial*		46

SECTION 9.8 *Counterparts; Effectiveness*		46

SECTION 9.9 *Agreement*		46

SECTION 9.10 *Third Party Beneficiaries*		46

SECTION 9.11 *Severability*		47

SECTION 9.12 *Specific Performance*		47

SECTION 9.13 *Construction; Interpretation; Disclosure Letters*		47

EXHIBITS

Exhibit A – Plan of Merger

Exhibit B – Articles of Incorporation of Buyer

Exhibit C – Bylaws of Buyer

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of September 30, 2009 is entered into by and between Franklin Electronic Publishers, Incorporated, a Pennsylvania corporation (the “Company”), and Saunders Acquisition Corporation, a Delaware corporation (“Buyer”).

RECITALS:

A. A special committee of the Board of Directors of the Company (the “Company Board”) consisting solely of independent directors (the “Company Special Committee”) [unanimously] has determined that the merger of Buyer with and into the Company on the terms and conditions set forth in this Agreement (the “Merger”) is advisable and in the best interests of the Company and has recommended that the Company Board approve and adopt this Agreement and recommend that the Company’s shareholders vote for the adoption of this Agreement;

B. The Company Board has determined that the Merger is advisable and in the best interests of the Company and has approved and adopted this Agreement and has resolved to recommend that the Company’s shareholders vote for the adoption of this Agreement;

C. Pursuant to the terms of this Agreement, Buyer has determined to acquire the Company by means of the Merger; and

D. Buyer and certain shareholders of the Company have previously entered into Exchange Agreements dated as of May 29, 2009 and September 11, 2009, as each may be amended from time to time, pursuant to which such shareholders have agreed to contribute to Buyer, immediately following the approval of this Agreement by the Board of Directors of the Company, 3,024,114 shares of Company Common Stock (as hereinafter defined) owned beneficially or of record by such shareholders in exchange for an equity interest in Buyer, and upon the Effective Time (as hereinafter defined) such Rollover Shares shall be automatically cancelled and shall cease to exist without any payment therefor pursuant to Section 2.2(a)(iv) hereof.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Definitions. When used in this Agreement, the following terms shall have the respective meanings specified therefore below:

“Acquisition Proposal” as defined in Section 6.4(e)(i).

“Action” as defined in Section 4.8(a).

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by, or under common Control with such Person, including without limitation any Subsidiary.

“Agreement” as defined in the first paragraph of this Agreement.

“Aggregate Merger Consideration” means the dollar amount resulting from multiplying the Merger Consideration by the aggregate number of shares of Company Common Stock outstanding immediately prior to the Effective Time, other than the Rollover Shares.

“Buyer” as defined in the first paragraph of this Agreement and Plan of Merger.

“Buyer Common Stock” as defined in Section 2.2(a)(iii).

“Buyer Disclosure Letter” as defined in the first paragraph of Article V.

“Certificate” as defined in Section 2.2(a)(i).

“Closing” as defined in Section 2.1(b).

“Closing Date” as defined in Section 2.1(b).

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Company” as defined in the first paragraph of this Agreement.

“Company Balance Sheet” means the audited consolidated balance sheet of the Company as of March 31, 2009 set forth in the Annual Report on Form 10-K filed by the Company with the SEC on June 29, 2009, as supplemented by the consolidated balance sheets of the Company as of June 30, 2009 set forth in the Quarterly Report on Form 10¬Q filed by the Company with the SEC on August 13, 2009.

“Company Benefit Plan” as defined in Section 4.10(a).

“Company Board” as defined in the Recitals.

“Company Change of Recommendation” as defined in Section 6.4(c).

“Company Common Stock” means the common stock, par value $0.01 per share, of the Company.

“Company Disclosure Letter” as defined in the first paragraph of Article IV.

“Company Financial Statements” as defined in Section 4.5(a).

“Company Options” as defined in Section 2.2(a)(ii).

“Company Permits” means all Permits required for any business operated or services furnished by the Company or its Subsidiaries.

“Company Recommendation” as defined in Section 6.2(a)(ii).

“Company SEC Documents” as defined in Section 4.5(a).

“Company Shareholder Approval” as defined in Section 4.3.

“Company Special Committee” as defined in the Recitals.

“Company Subsidiaries” means the Subsidiaries of the Company set forth in Section 4.2 of the Company Disclosure Letter.

“Contract” means, with respect to any Person, any agreement, arrangement, undertaking, contract, commitment, obligation, promise, indenture, deed of trust or other instrument or agreement (whether written or oral and whether express or implied) by which that Person is bound or subject.

“Control” means with respect to any corporation or limited liability company the right or power to exercise, directly or indirectly, more than fifty percent (50%) of the voting power of shareholders, members or owners and with respect to any individual, partnership, trust or other entity or association other than a corporation or limited liability company, the possession directly to cause the direction of the management or actions of the controlled entity.

“Copyrights” as defined in Section 4.14(a).

“DGCL” means the General Corporation Law of the State of Delaware.

“Effective Time” as defined in Section 2.1(c).

“Environmental Laws” means federal, state, local and foreign statutes, Laws, judicial decisions, regulations, ordinances, rules, judgments, orders, codes, injunctions, permits and governmental agreements relating to the environment or the protection of human health as it relates to the environment, including those relating to the management or Release of Hazardous Materials.

“ERISA” as defined in Section 4.10(a).

“ERISA Affiliate” as defined in Section 4.10(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Exchange Agent” as defined in Section 2.3(a).

“Expense Reimbursement” as defined in Section 8.4(b)

“Foreign Plans” as described in Section 4.10(i)

“GAAP” as defined in Section 4.5(a).

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, including any domestic (federal, state or local), foreign or supranational governmental or regulatory authority, agency, department, board, commission, administration or instrumentality, any court, tribunal or arbitrator or any self-regulatory organization, including state departments or divisions of insurance or insurance commissioners or superintendents.

“Hazardous Material” means all substances or materials regulated as hazardous, toxic, explosive, dangerous, flammable or radioactive under any Environmental Law including (i) petroleum, asbestos or polychlorinated biphenyls, and (ii) in the United States; all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5.

“IP Licenses” as defined in Section 4.14(a).

“Indemnified Parties” as defined in Section 6.9(a).

“Intellectual Property” as defined in Section. 4.14(a).

“Investment Assets” means bonds, notes, debentures, mortgage loans, collateral loans and all other instruments of indebtedness, stocks, partnership or joint venture interests and all other equity interests, real estate and leasehold and other interests therein, certificates issued by or interests in trusts, cash on hand and on deposit, personal property and interests therein and all other assets acquired for investment purposes.

“IRS” as defined in Section 4.10(b).

“Law” means any law (including common law), ordinance, writ, directive, judgment, order, decree, injunction, statute, treaty, rule, regulation, regulatory requirement or determination of (or an agreement with) a Governmental Authority.

“Leased Real Property” as defined in Section 4.15(b).

“Liability” means any debt, liability, commitment, claim or obligation of any kind whatsoever, whether due or to become due, known or unknown, accrued or fixed, or absolute or contingent.

“Lien” means any and all liens, charges, security interests, options, claims, mortgages, pledges or restrictions on title or transfer of any nature whatsoever.

“Material Adverse Effect” means, with respect to any Person, any fact, event, circumstance, change, condition or effect, individually or in the aggregate, that is material and adverse to the business, assets, properties, liabilities, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole; provided, however, that: “Material Adverse Effect” shall not include any (i) decrease in the trading or market prices of an entity’s capital stock or (ii) any change or effect (A) resulting from changes or effects to the U.S. or global economy in general, (B) with respect to the Company, resulting primarily from the

identities of Buyer and its Affiliates or statements or other actions by them, (C) resulting from changes in law or GAAP or the interpretation thereof after the date hereof, (D) resulting from acts of war, armed hostility or terrorism, or (E) resulting from the announcement of Buyer’s proposal to acquire the Company, the negotiation, execution or announcement of this Agreement or the Merger or regulatory approvals contemplated hereby including any litigation resulting therefrom.

“Material Contract(s)” as defined in Section 4.13(a).

“Merger” as defined in the Recitals.

“Merger Consideration” means an amount of cash per share of Company Common Stock equal to $2.50.

“Multiemployer Plan” as defined in Section 4.10(f).

“NYSE AMEX” as defined in Section 4.4(a).

“Oppenheimer” as defined in Section 4.18.

“Option Payments” as defined in Section 2.7(a).

“PBCL” means the Pennsylvania Business Corporation Law of 1988, as amended.

“Patents” as defined in Section 4.15(a).

“Permits” means any licenses, franchises, permits, certificates, approvals, accreditations or other similar authorizations from any Governmental Authority.

“Permitted Liens” means, collectively, (i) Liens for Taxes not yet payable or the validity of which are being contested in good faith by appropriate proceedings and for which adequate reserves are reflected in the Company SEC Documents, (ii) any minor imperfection of title or similar Lien which does not and would not reasonably be expected to impair in any material respect the operations of the business of the Company or any of its Subsidiaries, and (iii) Liens incurred pursuant to actions of Buyer or any of its Affiliates.

“Person” means and includes an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an association, an unincorporated organization, a Governmental Authority and any other entity or group (as defined in the Exchange Act).

“Proxy Statement” as defined in Section 6.2(a)(ii).

“Quarterly Statements” shall mean, with respect to any Person, the quarterly statements of such Person filed with the SEC.

“Release” means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the indoor or outdoor environment

(including ambient air, surface water, groundwater, and surface or subsurface strata) or into or out of any property.

“Representative” means, with respect to any Person, (a) its Subsidiaries and Affiliates, and (b) its, and its Subsidiaries’ and Affiliates’ respective officers, directors, employees, auditors, financial advisors, attorneys, accountants, consultants, agents, advisors or representatives.

“Requisite Regulatory Approvals” as defined in Section 7.1(c).

“Reverse Termination Fee” as defined in Section 8.4(c).

“Rollover Shares” means such number of shares of Company Common Stock as are owned by Buyer at the Effective Time.

“Schedule 13E-3” as defined in Section 6.2(b).

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Securities Laws” means the Securities Act and the Exchange Act.

“Software” as defined in Section 4.15(a).

“Special Meeting” as defined in Section 6.2(a).

“Subsidiary” when used with respect to any Person means another Person Controlled by such first Person or another Subsidiary of such first Person.

“Superior Proposal” as defined in Section 6.4(e)(ii).

“Surviving Corporation” as defined in Section 2.1(a).

“Tax” or “Taxes” means any and all federal, state, local, foreign or other taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any taxing authority, including, taxes, fees, duties, levies, customs, tariffs, imposts, assessments, obligations or other similar charges of any kind on or with respect to income, franchises, premiums, windfall or other profits, gross receipts, property, sales, use, transfer, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation or net worth, and taxes or other similar charges of any kind in the nature of excise, withholding, ad valorem or value added.

“Tax Proceeding” means any audit, administrative action, assessment, case, deposition, examination, executive action, filing, hearing, information request, injunction, inquiry, investigation, judgment, levy, litigation, order, reassessment, review, seizure, subpoena, suit,

summons, testimony, or other activity involving or conducted by or on behalf of any Governmental Authority relating to Tax.

“Tax Return” means any return, report or similar statement (including any attachment or supplements thereto) supplied to or required to be supplied to any taxing authority, including, any information return, claim for refund, amended return or declaration of estimated Tax.

“Termination Date” as defined in Section 8.1(b)(iii).

“Termination Fee” as defined in Section 8.4(a).

“Third Party” means any Person (or group of Persons) other than the Company, Buyer and their respective Subsidiaries.

“Trademarks” as defined in Section 4.14(a).

ARTICLE II

THE MERGER

SECTION 2.1 The Merger.

(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Buyer shall be merged with and into the Company in accordance with the requirements of the PBCL and DGCL, whereupon the separate existence of Buyer shall cease, and the Company shall be the corporation surviving the Merger (the “Surviving Corporation”). The Merger will have the effects set forth in Section 1929 of the PBCL and Section 259 of the DGCL. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, the Surviving Corporation shall possess all the rights, privileges, franchises, property, immunities, powers and purposes and assume and be liable for all the debts, liabilities, obligations and penalties of the Company and Buyer.

(b) The closing of the transactions contemplated hereby (the “Closing”) shall take place at the offices of Katten Muchin Rosenman LLP in New York City at 10:00 a.m. local time, as soon as reasonably practicable, but in any event within two (2) business days, after the satisfaction or waiver of the conditions set forth in Article VII (other than those conditions that are to be satisfied at the Closing) (the actual time and date of the Closing being referred to herein as the “Closing Date”).

(c) As soon as reasonably practicable following the Closing on the Closing Date, the Company and Buyer shall execute and file articles of merger with the Department of State of the Commonwealth of Pennsylvania and a certificate of merger with the Secretary of State of the State of Delaware, and make all other filings or recordings required by the PBCL to be made in connection with the Merger. The articles of merger shall have attached thereto a plan of merger in the form of Exhibit A. The Merger shall become effective at such time as articles of merger are duly filed with the Department of State of the Commonwealth of Pennsylvania and a certificate of merger is duly filed with the Secretary of State of the State of Delaware or, if

agreed to by the Company and Buyer, at such later time as is specified in the articles of merger (such time, the “Effective Time”).

SECTION 2.2 Conversion of Shares.

(a) At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof:

(i) each share of Company Common Stock outstanding immediately prior to the Effective Time shall, except as otherwise provided in Section 2.2(a)(vii), be converted into the right to receive an amount in cash equal to the Merger Consideration, payable in cash upon surrender of the certificate that formerly evidenced such share of Company Common Stock (a “Certificate”) in the manner provided in Section 2.3;

(ii) each outstanding and unexercised option to purchase shares of Company Common Stock (the “Company Options”) under any stock option plan of the Company, including, without limitation, the Company’s 1998 and 2005 Stock Option Plans or any other similar plan, agreement or arrangement outstanding immediately prior to the Effective Time, shall be cancelled and, in exchange therefore, each former holder of any such Company Option shall be entitled to receive a payment in cash (subject to any applicable withholding of Taxes) of an amount equal to the product of (i) the total number of shares of Company Common Stock previously subject to such Company Option which have vested as of the Effective Time, and (ii) the excess, if any, of the Merger Consideration over the exercise price per share previously subject to such Company Option (such amounts payable hereunder being referred to as the “Option Payments”). From and after the Effective Time, any such Company Option shall no longer be exercisable by the holder thereof but shall only entitle such holder to the payment of the Option Payment. If the exercise price per share with respect to any Company Option is equal to or greater than the Merger Consideration, such Company Option will be cancelled pursuant to this Section 2.2(a)(ii) without consideration, as will that portion of any Company Option that has not vested as of the Effective Time.

(iii) each share of common stock, par value $.01 per share, of Buyer (“Buyer Common Stock”) outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation with the same rights, powers and privileges as the share so converted;

(iv) each share of Series A Preferred Stock, par value $0.01 per share, of Buyer (“Buyer Series A Preferred Stock”) outstanding immediately prior to the Effective Time shall be converted into and become one share of Series A Preferred Stock of the Surviving

Corporation with the same rights, powers and privileges as the share so converted;

(v) each share of Series B Preferred Stock, par value $0.01 per share, of Buyer (“Buyer Series B Preferred Stock”) outstanding immediately prior to the Effective Time shall be converted into and become one share of Series B Preferred Stock of the Surviving Corporation with the same rights, powers and privileges as the share so converted;

(vi) each share of Buyer Common Stock, Buyer Series A Preferred Stock and Buyer Series B Preferred Stock converted pursuant to Sections 2.2(a)(iii), 2.2(a)(iv) and 2.2(a)(v), as applicable, shall constitute the only outstanding shares of capital stock of the Surviving Corporation; and

(vii) each share of Company Common Stock held by the Company as treasury stock immediately prior to the Effective Time and each of the Rollover Shares shall be canceled, and no payment shall be made with respect thereto; provided, that shares of Company Common Stock held by the Company or its Subsidiaries in trust accounts, managed accounts, investment accounts and the like shall not be cancelled and shall be treated in accordance with Section 2.2(a)(i).

(b) From and after the Effective Time, all shares of Company Common Stock converted pursuant to Section 2.2(a)(i), all shares of Company Common Stock cancelled in accordance with Section 2.2(a)(vii) and all Company Options shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a Certificate shall cease to have any rights with respect thereto, except, in the case of shares of Company Common Stock canceled pursuant to Section 2.2(a)(i), the right to receive the Merger Consideration to which such holder is entitled with respect to the shares of Company Common Stock represented by the Certificate(s) surrendered by such holder pursuant to Section 2.3(b), or in the case of a cancelled Company Option the right to receive the Option Payments. From and after the Effective Time, all certificates representing Buyer Common Stock, Buyer Series A Preferred Stock or Buyer Series B Preferred Stock, as the case may be, shall be deemed for all purposes to represent only the number of shares of capital stock of the Surviving Corporation into which such shares were converted in accordance with Sections 2.2(a)(iii), 2.2(a)(iv) or 2.2(a)(v), as applicable.

SECTION 2.3 Surrender and Payment.

(a) Prior to the Effective Time, Buyer shall appoint an exchange agent (the “Exchange Agent”) reasonably acceptable to a majority of the independent directors of the Company for the purpose of exchanging Certificates for the Merger Consideration. At the Effective Time, Buyer shall deposit, or cause to be deposited, with the Exchange Agent cash sufficient to make the cash payments payable pursuant to Section 2.2(a)(i). Promptly after the Effective Time, Buyer will send, or cause the Exchange Agent to send, to each holder of record

of shares of Company Common Stock as of the Effective Time, a letter of transmittal for use in such exchange (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates to the Exchange Agent), which letter shall be in such form as the Company and Buyer may reasonably agree to use in effecting delivery of shares of Company Common Stock to the Exchange Agent.

(b) Each holder of shares of Company Common Stock that have been converted into the right to receive the Merger Consideration as provided herein will be entitled to receive the Merger Consideration in respect of the shares of Company Common Stock represented by such Certificate only upon surrender to the Exchange Agent of such Certificate. Until so surrendered, each such Certificate so converted shall, after the Effective Time, represent for all purposes only the right to receive such Merger Consideration. No interest will be paid or accrued on any cash payable as part of the Merger Consideration or in lieu of fractional shares pursuant to Section 2.6.

(c) If any Merger Consideration is to be paid to the name of a Person other than the Person in whose name the applicable surrendered Certificate is registered, it shall be a condition to the registration or payment of such Merger Consideration that the surrendered Certificate shall be properly endorsed or otherwise be in proper form for transfer.

(d) After the Effective Time, there shall be no further registration of transfers of shares of capital stock of the Company on the stock records of, or relating to, the Company. If, after the Effective Time, Certificates are presented to the Exchange Agent, the Surviving Corporation or Buyer, they shall be canceled and, if applicable, exchanged for the Merger Consideration payable in exchange therefor in accordance with the procedures and limitations set forth, in this Article II.

(e) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.3(a) that remains unclaimed by the holders of shares of Company Common Stock twelve (12) months after the Effective Time shall be returned to Buyer and any such holder who has not exchanged such holder’s shares of Company Common Stock for the Merger Consideration payable in exchange therefor in accordance with this Section 2.3 prior to that time shall thereafter look only to Buyer for delivery of the Merger Consideration in respect of such holder’s shares without any interest thereon. Notwithstanding the foregoing, Buyer shall not be liable to any Person for any Merger Consideration delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws.

(f) The Exchange Agent shall invest any cash made available to the Exchange Agent pursuant to Section 2.3(a) as directed by Buyer on a daily basis in Treasury bills, Treasury notes, Treasury bonds or other short-term instruments guaranteed by the full faith and credit of the United States. Any interest and other income resulting from such investments shall promptly be paid to Buyer.

SECTION 2.4 Adjustments. If, at any time during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of Buyer or the Company shall occur by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, or any similar transaction; or any stock

dividend thereon with a record date during such period, the Merger Consideration shall be appropriately adjusted to provide the holders of shares of Company Common Stock the same economic effect, in the aggregate, as contemplated by this Agreement prior to such event.

SECTION 2.5 Withholding Rights. Each of the Surviving Corporation, Buyer and Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article II such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign Tax Law including any withholding from any payment that is treated as wages or compensation for the performance of services. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

SECTION 2.6 Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and the providing of such security or indemnity as the Exchange Agent deems necessary to save and hold the Company and Buyer harmless, the Exchange Agent shall pay in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in exchange for the shares of Company Common Stock represented thereby.

SECTION 2.7 Treatment of Restricted Stock. As of the Effective Time, the holder of each vested share of restricted stock awarded under the 2005 Restricted Stock Plan or any other similar plan, agreement or arrangement shall be entitled to receive the Merger Consideration, without interest, and subject to any withholding of Taxes. All unvested shares of restricted stock will be cancelled without consideration.

ARTICLE III

CERTAIN GOVERNANCE MATTERS

SECTION 3.1 Articles of Incorporation of the Surviving Corporation. At the Effective Time, the articles of incorporation of the Company shall be amended and restated so that the articles of incorporation of the Surviving Corporation (until amended in accordance with applicable Law) will read in full as set forth on Exhibit B.

SECTION 3.2 Bylaws of the Surviving Corporation. At the Effective Time, the bylaws of the Company shall be amended and restated so that the bylaws of the Surviving Corporation (until amended in accordance with applicable Law) will read in full as set forth on Exhibit C.

SECTION 3.3 Directors and Officers of the Surviving Corporation. From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with the bylaws and applicable Law, (a) the directors of Buyer immediately prior to the Effective Time shall become the directors of the Surviving Corporation, and (b) the officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as disclosed in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q since such Annual Report on Form 10-K (including, in each case, to the extent included in any document filed or incorporated by reference as an exhibit thereto), in each case included in the Company SEC Documents filed and publicly available prior to the date hereof and except as set forth in the disclosure letter delivered by the Company to Buyer simultaneously with the execution of this Agreement (the “Company Disclosure Letter”), the Company represents and warrants to Buyer that the following statements are true and correct in all material respects as of the date hereof:

SECTION 4.1 Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the Commonwealth of Pennsylvania. Each of the Company Subsidiaries is duly incorporated or organized, validly existing and in good standing under the Laws of the state or country of such Subsidiary’s incorporation or organization (such jurisdictions being those listed on the Company Disclosure Letter). Each of the Company and its Subsidiaries has the requisite power and authority to own, operate and lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted, and is duly qualified as a foreign entity to do business, and is in good standing in each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary (such jurisdictions being those listed on the Company Disclosure Letter), except for such failures to be so qualified and in good standing that have not had, and would not reasonably be expected to, have, individually or in the aggregate, a Material Adverse Effect on the Company.

SECTION 4.2 Capitalization.

(a) The authorized capital stock of the Company consists of 50,000,000 shares of Company Common Stock, of which, as of the date of this Agreement, 8,281,133 shares were issued and outstanding and 10,000,000 shares of preferred stock, of which, as of the date of this Agreement, no shares were issued and outstanding. As of the date of this Agreement there were no shares of Company Common Stock held in treasury. All the outstanding shares of the Company’s capital stock are in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable. Except as set forth in the Company Disclosure Letter or as provided for in this Agreement, as of the date of this Agreement: (A) there are no outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the shareholders of the Company or any of its Subsidiaries on any matter, (B) there are outstanding options to purchase an aggregate of 2,511,086 shares of Company Common Stock, (C) there were no warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments which obligate the Company or any of its Subsidiaries to issue, transfer or sell any shares of capital stock of the Company or any of its Subsidiaries, (D) there are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock, partnership interests or any other securities of the Company or any of its Subsidiaries and (E) there are no outstanding preemptive rights, rights of

first refusal, rights of co-sale, tag along rights or drag along rights of or for the shareholders of the Company or any of its Subsidiaries on any matter. As of the date hereof, there are no declared but unpaid dividends outstanding with respect to the Company’s capital stock.

(b) Except as set forth in the Company Disclosure Letter, all of the outstanding capital stock of, or other ownership interests in, each Subsidiary of the Company is, directly or indirectly, owned by the Company, and all such capital stock has been validly issued and is fully paid and nonassessable and owned by either the Company or one of its Subsidiaries free and clear of all Liens (other than Permitted Liens) and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests) other than any restrictions imposed under applicable federal and state securities Laws.

SECTION 4.3 Corporate Authorization; Enforceability; Board Action. The Company has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, including the Merger. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject to the approval and adoption by the Company’s shareholders of this Agreement and the consummation of the Merger in accordance with the Company’s articles of incorporation and bylaws and the PBCL (the “Company Shareholder Approval”). This Agreement has been duly executed and delivered by the Company and, subject to Company Shareholder Approval and assuming due authorization, execution and delivery of this Agreement by the other parties hereto, constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws, now or hereafter in effect, affecting creditors’ rights generally, and to general equity principles.

SECTION 4.4 Consents and Approvals; No Violations.

(a) Except as set forth in the Company Disclosure Letter, the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby, including the Merger, require no consent, approval or action by or in respect of, or notice to or filing with, any Governmental Authority other than: (i) the filing of articles of merger in connection with the Merger in accordance with the PBCL, (ii) compliance with any applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder, (iii) compliance with the rules and regulations of the American Stock Exchange (“NYSE AMEX”), and (iv) any other approvals the absence of which would not reasonably be expected to, individually or in the aggregate, (A) materially impair or delay consummation of the Merger or (B) have a Material Adverse Effect on the Company.

(b) Except as set forth in the Company Disclosure Letter, neither the execution, delivery or performance by the Company of this Agreement nor the consummation by the Company of the transactions contemplated hereby, including the Merger, nor compliance by the Company and its Subsidiaries, with any of the provisions hereof will (i) conflict with or result in any breach of any provisions of the Company’s articles of incorporation or the Company’s bylaws or the organizational documents of any of its Subsidiaries, (ii) assuming

compliance with the matters referred to in Section 4.4(a), conflict with or result in any violation of any provision of any Law applicable to the Company or any of its Subsidiaries, (iii) require the consent, approval or authorization of, or notice to or filing with, any Third Party, with respect to, result in any violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, amendment, or acceleration of any right or obligation of the Company or any of its Subsidiaries or to a loss of any benefit to which the Company or any of its Subsidiaries is entitled) under, any provision of any Contract by which the Company or any of its Subsidiaries is bound or subject, or (iv) result in the creation or imposition of any Lien (other than Permitted Liens) on any asset of the Company or any of its Subsidiaries, except in the case of (ii) and (iii) for such conflicts, violations, breaches, defaults, rights or losses, or the failure to obtain any such consents or approvals or to provide such notices or make such filings, that would not reasonably be expected to, individually or in the aggregate, (A) materially impair or delay consummation of the Merger or (B) have a Material Adverse Effect on the Company.

SECTION 4.5 SEC Filings and Financial Statements. The Company has filed with the SEC all forms, reports, schedules, statements and other documents required to be filed or furnished by it and its Subsidiaries since April 1, 2006 under the Exchange Act or the Securities Act (as such documents have been amended since the time of their filing prior to the date hereof, collectively, the “Company SEC Documents”). As of their respective dates or, if amended prior to the date hereof, as of the date of the last such amendment, the Company SEC Documents, including any financial statements or schedules included therein (i) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and (ii) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. Each of the consolidated financial statements included in the Company SEC Documents (the “Company Financial Statements”) has been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly presents in all material respects, as applicable, the consolidated financial position and the consolidated results of operations and cash flows (and changes in financial position, if any) of the Company and its consolidated Subsidiaries as at the dates thereof or for the periods presented therein (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments and for the absence of footnotes).

SECTION 4.6 Absence of Certain Changes. Except (a) as set forth in the Company Disclosure Letter or (b) as disclosed in the Company SEC Documents filed prior to the date hereof, since March 31, 2009, the Company and its Subsidiaries have conducted their respective businesses and operations consistent with past practice only in the ordinary and usual course thereof and there has not occurred, and the Company or any of its Subsidiaries have not:

(i) any fact, event, circumstance, change, condition or effect (including the incurrence of any Liabilities of any nature, whether or not accrued, contingent or otherwise) that can reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company;

(ii) any material change by the Company or any of its Subsidiaries in accounting principles or methods other than those required by Law or GAAP;

(iii) taken any action or made any omission, that, if taken or made on or after the date of this Agreement, would be prohibited by Section 6.1;

(iv) suffered any material physical damage, destruction or loss (whether or not covered by insurance) that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, affecting each Company’s or any Subsidiary’s respective property or business;

(v) entered into any material transaction involving consideration or obligations in excess of $500,000;

(vi) made or pledged to make any material charitable contribution or capital contribution;

(vii) accelerated, terminated, modified or canceled any material Contract to which the Company is a party or by which the Company or its assets are bound, except where such acceleration, termination, modification or cancellation would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; or

(viii) agreed or committed, whether in writing or otherwise, to do any of the foregoing.

SECTION 4.7 Undisclosed Liabilities. Except for Liabilities (a) set forth in the Company Disclosure Letter or reflected, disclosed or reserved against in the Company Financial Statements (including the footnotes thereto) included in the Company SEC Documents filed prior to the date of this Agreement; (b) incurred in the ordinary course of business and consistent with past practice or (c) that individually or in the aggregate, have not or will not be reasonably expected to have, a Material Adverse Effect on the Company or its Subsidiaries taken as a whole, neither the Company nor any of its Subsidiaries has any Liabilities of any nature whether or not accrued, contingent or otherwise, and whether or not required to be discharged, nor are there any facts or circumstances that would reasonably be expected to result in any obligation or Liability.

SECTION 4.8 Litigation.

(a) As of the date hereof, except as set forth in the Company Disclosure Letter or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company (i) there is no litigation, suit, action, claim, charge or other proceeding (each, an “Action”) by or before any Governmental Authority or any other Person pending or, to the knowledge of the Company, threatened, against, by or affecting the Company or any of its Subsidiaries (other than insurance claims litigation in the ordinary course of business for which claims reserves that are adequate in the aggregate have been established), or

any of its or their respective assets, properties or business, and (ii) no investigation or inquiry by or before any Governmental Authority is pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries.

(b) Except as set forth in the Company Disclosure Letter, there are no judgments, injunctions, writs, orders or decrees binding on the Company or any of its Subsidiaries that have had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.

SECTION 4.9 Compliance with Laws.

(a) Except as set forth in the Company Disclosure Letter, the Company and its Subsidiaries have been, since April 1, 2006, and their operations are currently being, conducted in compliance with all applicable Laws and Judgments, except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.

(b) Except as set forth in the Company Disclosure Letter, the Company and each of its Subsidiaries possess all licenses, Permits and other authorizations required to conduct their businesses as now conducted by them, except where the failure to possess such licenses, permits and other authorizations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole. The Company has not received notice of pending cancellation or suspension thereof, nor to the knowledge of the Company, is any cancellation thereof threatened.

SECTION 4.10 Employee Benefit Plans.

(a) Company Benefit Plans. The Company Disclosure Letter sets forth a complete list of each “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (whether or not subject to ERISA), and any other material plan, policy, program practice, agreement, understanding or arrangement (whether written or oral) providing compensation or other benefits to any current or former director, officer, employee or consultant (or to any dependent or beneficiary thereof of the Company or any ERISA Affiliate), which are now, or were within the past 6 years, maintained, sponsored or contributed to by the Company or any ERISA Affiliate, or under which the Company or any ERISA Affiliate has any material obligation or liability, whether actual or contingent, including, without limitation, all incentive, bonus, deferred compensation, vacation, holiday, cafeteria, medical, disability, stock purchase, stock option, stock appreciation, phantom stock, restricted stock, restricted stock unit, stock-based compensation, change-in-control., retention, transaction, employment, consulting, personnel or severance policies, programs, practices, Contracts or arrangements (each a “Company Benefit Plan”). For purposes of this Section 4.10, “ERISA Affiliate” shall mean any entity (whether or not incorporated) other than the Company that, together with the Company, is considered under common control and treated as one employer under Sections 414(b), (c), (m) or (o) of the Code. To the knowledge of the Company, the Company has no express or implied commitment to modify, change or terminate any Company Benefit Plan, other than with respect to a modification, change or termination

required by ERISA or the Code and each Company Benefit Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms.

(b) Deliveries. The Company has made available to Buyer complete copies of each Company Benefit Plan (or, if not written a written summary of its material terms), including without limitation all plan documents, trust agreements, annuity contracts, insurance contracts or other funding vehicles and all amendments thereto.

(c) General Compliance. Except as would not reasonably be expected to have a Material Adverse Effect on the Company, (i) each Company Benefit Plan has been administered in accordance with its terms and all applicable Laws and Orders, including ERISA and the Code, including, without limitation, timely filing of all Tax, annual reporting and other governmental filings required by ERISA and the Code and timely contribution (or, if not yet due, proper financial reporting) of any amounts required to be made under the terms of any of the Company Benefit Plans as of the date of this Agreement, (ii) no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code and other than a transaction that is exempt under a statutory or administrative exemption) has occurred with respect to any Company Benefit Plan, and (iii) the Company and its ERISA Affiliates have complied with the Consolidated Omnibus Budget Reconciliation Act of 2985, as amended, and the regulations thereunder (“COBRA”), and any similar state law. None of the assets of any Company Benefit Plan which is intended to qualify under Section 401(a), Section 401(k), Section 401(m) or Section 4975(e)(7) of the Code have been invested in any equity interest issued by the Company or any Company Subsidiary.

(d) Legal Actions. Except as would not reasonably be expected to have a Material Adverse Effect on the Company or as set forth in the Company Disclosure Letter, no suit, administrative proceeding, action or other litigation has been brought, or to the knowledge of the Company is threatened, against or with respect to any such Company Benefit Plan, including any audit or inquiry by the IRS or United States Department of Labor (other than routine benefits claims) and any civil action under Section 502 of ERISA.

(e) Title IV of ERISA. No Company Benefit Plan is a multiemployer pension plan (as defined in Section 3(37) of ERISA) (“Multiemployer Plan”) or other pension plan subject to Title IV of ERISA and neither the Company nor any ERISA Affiliate has sponsored or contributed to or been required to contribute to a Multiemployer Plan or other pension plan subject to Title IV of ERISA. No liability under Title IV of ERISA has been incurred by the Company or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to the Company or any ERISA Affiliate of incurring or being subject (whether primarily, jointly or secondarily) to a material liability thereunder. None of the assets of the Company or any ERISA Affiliate is, or any reasonably be expected to become, the subject of any Lien arising under ERISA or Section 412(n) of the Code.

(f) Change in Control. Except as set forth in the Company Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby (either alone or in conjunction with any other event, such as termination of employment) will (A) result in any payment (including, without limitation, severance, unemployment compensation, parachute or otherwise) becoming due to any director or employee

of the Company or any Company Subsidiary or any of their respective affiliates, or to any Governmental Entity or other Person on behalf of any such director or employee, from the Company or any Company Subsidiary or any of their respective affiliates under any Company Benefit Plan or otherwise, (B) significantly increase any benefits otherwise payable under any Company Benefit Plan, (C) result in any acceleration of the time of payment or vesting of ay material benefits or (D) result in the payment of any amount that could, individually or in combination with any other such payment, constitute an “excess parachute payment,” as defined in Section 280g(b)(1) of the Code.

(g) No Retiree Welfare Benefits; Section 409A. Except as required by COBRA, any similar state or local law or pursuant to any employment agreement or severance arrangement providing for Company or Company Subsidiary-paid-post-employment health care benefits for a period of not more than 18 months following termination of employment, no Company Benefit Plan provides any retiree or post-employment medical, disability or life insurance benefits to any Person. Each “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) of the Company has been operated since January 1, 2005 in good faith compliance with Section 409A of the Code, the applicable proposed and final regulations thereunder, and any applicable IRS guidance, except for such noncompliance as would not, individually or in the aggregate, be material to the Company. The Company has no liability or obligation to provide any gross-up of the Tax imposed by Section 409A(a)(1)(B) of the Code.

(h) Foreign Plans.

(i) The only material pension, unemployment insurance, medical insurance, work injury insurance, housing provident fund, welfare, bonus, stock purchase, stock ownership, stock option, deferred compensation, incentive, severance, termination or other compensation plan or arrangement, or other material employee fringe benefit plan presently maintained by, or contributed to by the Company, any of the Company Subsidiaries or any ERISA Affiliate for the benefit of any employee of the Company, any of the Company Subsidiaries or any ERISA Affiliate, or with respect to which the Company, any Company Subsidiary or any ERISA Affiliate has any liability, including without limitation any such plan required to be maintained or contributed to by the law of the relevant jurisdiction, which would be described in Section 4.10(a) above, but for the fact that such plans are maintained outside the jurisdiction of the United States (but excluding plans maintained by a governmental entity), are also listed in the Company Disclosure Letter (the “Foreign Plans”), and a true and complete copy of each written Foreign Plan and of any description of each Foreign Plan that is not written has been furnished to Buyer.

(ii) Except as does not have a Material Effect, the Company, each of the Company Subsidiaries, each ERISA Affiliate and each of the Foreign Plans are in compliance (both as to documentation and administration) in all material respects with the provisions of the Laws of each jurisdiction in which any of the Foreign Plans are maintained, to the

extent such laws are applicable to the Foreign Plan. Except as does not have a Material Adverse Effect, each Foreign Plan that is required to be registered with any Governmental Entity has been so registered and has been maintained in good standing with all applicable Governmental Entity and, if intended to qualify for special tax treatment, each Foreign Plan meets all requirements for such treatment.

(iii) There are no pending investigations by any Governmental Entity involving the Foreign Plans, no claims pending or threatened in writing (except for claims for benefits payable in the normal operation of the Foreign Plans), suits or proceedings against any Foreign Plan or asserting any rights or claims to benefits under any Foreign Plan which could give rise to any liability that has a Material Adverse Effect.

SECTION 4.11 Employee Matters.

(a) Neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining or similar agreement with any labor organization.

(b) Except (i) as set forth in the Company Disclosure Letter or (ii) disclosed in the Company SEC Documents filed prior to the date hereof, as of the date hereof, there are no complaints, charges or claims against the Company or any of its Subsidiaries pending or, to the knowledge of the Company, threatened to be brought or filed with any Governmental Authority or any other Person in connection with the employment by the Company or any of its Subsidiaries of any individual, including, without limitation, any claim relating to employment discrimination, equal pay, sexual harassment, employee safety and health, wages and hours or workers’ compensation.

SECTION 4.12 Taxes.

(a) Each of the Company and its Subsidiaries has (i) timely filed (or there have been timely filed on its behalf) with the appropriate Governmental Authorities all Tax Returns required to be filed by it or them (giving effect to all extensions) and such Tax Returns are correct and complete in all material respects; (ii) timely paid in full (or there has been timely paid in full on its behalf) all material Taxes required to have been paid by it or them, and (iii) made adequate provision (or adequate provision has been made on its behalf) in accordance with GAAP for all material accrued Taxes not yet due.

(b) There are no Liens for Taxes upon any property or assets of the Company or its Subsidiaries, except for Liens for Taxes not yet due and payable or which are being contested in good faith and for which adequate reserves in accordance with GAAP have been established.

(c) Each of the Company and its Subsidiaries has complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes and has, within the time and in the manner prescribed by Law, withheld and paid over to the proper Governmental Authorities all material amounts required to be so withheld and paid over under applicable Law.

(d) No federal, state, local or foreign Tax Proceedings are presently pending with regard to any material Taxes or material Tax Returns of the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries has received a written notice of any proposed Tax Proceedings with respect to any material Taxes.

(e) No extension of time to file the Tax Return of the Company or any of its Subsidiaries, which such Tax Return has not since been filed in accordance with applicable law, has been filed.

(f) The statute of limitations for any Tax Proceeding relating to the Company or any of its Subsidiaries has never been modified, extended or waived.

(g) Any assessment, deficiency, adjustment or other similar item relating to any Tax or Tax Return of the Company or any of its Subsidiaries has been reported to all Governmental Authorities in accordance with applicable law.

(h) Since September 30, 2003, no jurisdiction where no Tax Return has been filed or no Tax has been paid has made or threatened to make a claim for the payment of any Tax or the filing of any Tax Return relating to the Company or any of its Subsidiaries.

(i) The Company is not a party to any agreement with any Governmental Authority with respect to Taxes (including, but not limited to, any closing agreement within the meaning of Code Section 7121 or any analogous provision of applicable law). No private letter or other ruling or determination from any Governmental Authority relating to the Tax of the Company or any of its Subsidiaries has ever been requested or received.

(j) Neither the Company nor any of its Subsidiaries has any “tax-exempt bond-financed property” or “tax-exempt use property,” within the meaning of Code Section 168(h) or any similar provision of applicable law.

(k) No asset of the Company or any of its Subsidiaries is required to be treated as being owned by any other Person pursuant to any provision of applicable law (including, but not limited to, the “safe harbor” leasing provisions of Code Section 168(f)(8), as in effect prior to the repeal of those “safe harbor” leasing provisions).

(l) Since September 30, 2003, neither the Company nor any of its Subsidiaries is or has been a beneficiary or otherwise participated in any reportable transaction within the meaning of Treasury Regulation Section 1.6011-4(b)(1).

(m) Since September 30, 2003, neither the Company nor any of its Subsidiaries has distributed stock of another Person nor has its stock been distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Code Section 355 or Code Section 361.

(n) The Company is not, nor since September 30, 2003 has it been, a “United States real property holding corporation” within the meaning of Code Section 897(c)(2).

(o) No election under Code Section 338 or any similar provision of applicable law has been made or required to be made by or with respect to the Company.

(p) The Company has provided to Buyer all Tax Returns of Company and its Subsidiaries filed since September 30, 2003 and all audit reports, closing agreements, letter rulings, or technical advice memoranda relating to any Tax or Tax Return of the Company or any of its Subsidiaries.

(q) The Company Disclosure Letter sets forth a list of all jurisdictions (foreign and domestic) in which the Tax Return of the Company or any of its Subsidiaries has been the subject of any Tax Proceedings since September 30, 2003, a description of each such Tax Return, and the relevant Tax periods.

(r) The Company Disclosure Letter sets forth a list of all jurisdictions (foreign and domestic) to which any Tax has been paid or in which any Tax Return has been filed by the Company or any of its Subsidiaries since September 30, 2003.

(s) The Company Disclosure Letter sets forth a list of all Tax elections made since September 30, 2003 with respect to the Tax or Tax Return of the Company or any Subsidiary.

SECTION 4.13 Certain Contracts.

(a) The Company Disclosure Letter lists each of the following Contracts, to which either the Company or any of its Subsidiaries is a party, including all amendments and supplements thereto, (collectively, the “Material Contracts” and each a “Material Contract”):

(i) All employment, consultation, retirement, termination, sign-on, buy-out or other Contracts with any present or former officer, director, trustee, employee, agent, broker or independent contractor of the Company or any of its Subsidiaries (including, but not limited to, loans or advances to any such Person (as defined below) or any Affiliate of such Person) excluding (I) such Contracts which are terminable by the Company or any of its Subsidiaries at will without severance and (II) Contracts that involve or are reasonably likely to involve the payment pursuant to the terms of such Contract of less than $100,000;

(ii) All Contracts containing any provision or covenant (A) limiting the ability of the Company or any of its Subsidiaries to compete with any Person in its business, to do business with any Person or in any location or to employ any Person, (B) limiting the ability of any Person to compete with or obtain products or services from the Company or any of its Subsidiaries or (C) restricts the Company or any of its Subsidiaries from engaging in any business or activity anywhere in the world;

(iii) All Contracts relating to the borrowing of money by the Company or any of its Subsidiaries or the direct or indirect guarantee by the Company or any of its Subsidiaries of any obligation of

any Person for borrowed money or other specific financial obligation of any Person, or any other liability of the Company or any of its Subsidiaries in respect of indebtedness for borrowed money or other specific financial obligation of any Person, including, but not limited to, any Contract relating to or containing provisions with respect to any lines of credit or similar facilities;

(iv) All Contracts (other than contracts entered into in the ordinary course of business) with any Person containing any provision or covenant relating to the indemnification or holding harmless by the Company or any of its Subsidiaries of any Person which is reasonably likely to result in a liability to the Company or any of its Subsidiaries of $100,000 or more;

(v) All Contracts relating to the future disposition (including, but not limited to, restrictions on transfer or rights of first refusal) or future acquisition of any interest in any business enterprise, and all contracts relating to the future disposition of a material portion of the assets of the Company or any of its Subsidiaries;

(vi) All Contracts with any director or Affiliate of the Company; and

(vii) All other Contracts (other than Contracts which are expressly excluded under any other subsection of this Section 4.14) that involve or are reasonably likely to involve the payment pursuant to the terms of such Contracts by or to the Company or its Subsidiaries of $100,000 or more or the termination of which is reasonably likely to have a Material Adverse Effect on the Company.

(b) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company and except as provided in the Company Disclosure Letter: (i) each Material Contract is a legal, valid and binding obligation of the Company or any of its Subsidiaries, as the case may be, and, to the knowledge of the Company, of each other party thereto, enforceable against each such party in accordance with its terms, (ii) neither the Company nor any of its Subsidiaries, as the case may be, nor, to the knowledge of the Company, any other party to a Material Contract, is in violation or default of any term of any Material Contract, and (iii) no condition or event exists that, with the giving of notice or the passage of time, or both, would constitute a violation or default by the Company or any of its Subsidiaries, as the case may be, or any other party to a Material Contract, or permit the termination, modification, cancellation or acceleration of performance of the obligations of the Company or any of its Subsidiaries, as the case may be, or any other party to the Material Contract.

SECTION 4.14 Intellectual Property.

(a) As used herein: (i) “Intellectual Property” means all U.S. state and foreign (A) trademarks, service marks, trade names, Internet domain names, designs, logos, slogans and general intangibles of like nature, together with the goodwill associated therewith, registrations and applications relating to the foregoing (“Trademarks”), (B) patents and pending patent applications, patent disclosures, and any and all divisions, continuations, continuations-in-part, reissues, reexaminations, and any extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, certificates of invention and like statutory rights (“Patents”), and (C) registered and unregistered copyrights (including those in Software), rights of publicity and all registrations and applications to register the same (“Copyrights”); (ii) “IP Licenses” means all licenses and agreements (excluding “click-wrap” or “shrink-wrap” agreements or agreements contained in “off-the-shelf” Software or the terms of use or service for any web site) pursuant to which the Company and any of its Subsidiaries have acquired rights in (including usage rights) or to any Intellectual Property, or licenses and agreements pursuant to which the Company and any of its Subsidiaries have licensed or transferred the right to use any Intellectual Property, including license agreements, settlement agreements and covenants not to sue; and (iii) “Software” means all computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code or object code form, databases and compilations, including any and all data and collections of data, all documentation, including user manuals and training materials, related to any of the foregoing and the content and information contained on any Web site.

(b) Except as set forth in the Company Disclosure Letter or as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company, since April 1, 2006, no claims have been asserted by any Third Party against the Company or any of its Subsidiaries related to use of or grant of licenses to use, any Intellectual Property, IP Licenses or Software.

SECTION 4.15 Properties and Assets.

(a) The Company and each of its Subsidiaries has (i) good and valid title to all of the material properties and assets reflected as owned on the most recent balance sheet of the Company contained in the Company SEC Documents, and to the knowledge of the Company, free and clear of any material Liens other than Permitted Liens, except for properties or assets that have been sold or disposed of in the ordinary course of business consistent with past practice since the date of such balance sheet and (ii) a valid leasehold interest or other comparable Contract of use in all material properties and assets (in each case, tangible or intangible) reflected as leased on such balance sheet, and to the knowledge of the Company, free and clear of any material Liens other than Permitted Liens, except for such leases or comparable Contracts terminated in the ordinary course of business consistent with past practice since the date of such balance sheet.

(b) The Company Disclosure Letter sets forth (i) a true and complete list of all real property leased, subleased or otherwise occupied by the Company or any Company Subsidiary (collectively, the “Leased Real Property”), (ii) the address for each parcel of Leased Real Property, (iii) a description of the applicable Contract relating thereto and (iv) the current rent amounts payable by the Company or any Company Subsidiary related to each Leased Real Property. No Lease Agreement is subject to any Lien entered into by the Company or any

Company Subsidiary, including without limitation any right to the use or occupancy of any Leased Real Property, other than Permitted Liens. Each Lease Agreement is, with respect to the Company or the applicable Company Subsidiary, a valid and subsisting agreement in full force and effect and constitutes a valid and binding obligation of the Company or the applicable Company Subsidiary, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws, now or hereafter in effect, affecting creditors’ rights generally, and to general equity principles.

(c) Each parcel of Leased Real Property is, to the knowledge of the Company or the applicable Company Subsidiary, in material compliance with all existing material Laws applicable to such Leased Real Property, and neither the Company nor any Company Subsidiary has received written notice from any Governmental Entity regarding non-compliance with respect to such Laws. Neither the Company nor any Company Subsidiary has received written notice of any proceedings in eminent domain, condemnation or other similar proceedings that are pending, and there are no such proceedings threatened in writing, affecting any portion of the Leased Real Property and neither the Company nor any Company Subsidiary has received written notice of the existence of any outstanding writ, injunction, decree, order or judgment or of any pending proceeding.

SECTION 4.16 Environmental Matters. No written notice, notification, demand, request for information, citation, summons, complaint or order has been received by, and no action, claim, suit, proceeding or review or, to the knowledge of the Company, investigation is pending or, to the knowledge of the Company, threatened by any Person against, the Company or any of its Subsidiaries with respect to any matters relating to or arising out of any Environmental Law and (b) the Company and its Subsidiaries have been and are in compliance with all Environmental Laws, including possessing all material permits, authorizations, licenses, exemptions and other governmental authorizations required for its operations under applicable Environmental Laws.

SECTION 4.17 Transactions with Related Parties. Except as set forth in the Company Disclosure Letter, the Company SEC Documents disclose Contracts entered into by the Company or its Subsidiaries (which are or will be in effect as of or after the date of this Agreement) involving payments with any person who is an officer, director or Affiliate of the Company or any of its Subsidiaries, or any relative of any of the foregoing. To the Company’s knowledge, no officer, director or Affiliate of the Company or any of its Subsidiaries has, either directly or indirectly:

(a) an equity interest of five percent (5%) or more in any Person that purchases from or sells or furnishes any goods or services to the Company or any of its Subsidiaries or otherwise does business with the Company or any of its Subsidiaries, or

(b) a beneficial interest in any Material Contract, commitment or agreement to which any of the Company or any of its Subsidiaries is a party or under which the Company or any of its Subsidiaries is obligated or bound or to which the property of the Company or any of its Subsidiaries may be subject, other than Material Contracts, commitments or agreements between the Company or any of its Subsidiaries and such Persons in their capacities as officers or directors of the Company; provided that such representation and warranty shall not apply to

the ownership, as a passive investment, by any such officer, director or Affiliate of less than one percent (1%) of a class or securities listed for trading on a national securities exchange or publicly traded in the over-the-counter market.

SECTION 4.18 Finders’ or Advisors’ Fees. Except for Oppenheimer & Co. Inc. (“Oppenheimer”), there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of the Company who might be entitled to any fee or, commission in connection with the transactions contemplated by this Agreement.

SECTION 4.19 Receivables. All of the accounts receivable of the Company and its Subsidiaries on the Company Balance Sheet have arisen from bona fide transactions in the ordinary course of the business consistent with past practice and are not subject to any credits or allowances, other than allowances for doubtful accounts (which allowances have been made in accordance with GAAP).

SECTION 4.20 Absence of Sensitive Matters. To the knowledge of the Company, none of the officers or directors of the Company or any of its Subsidiaries or Affiliates:

(a) has made or has agreed to make any contribution, payment or gift or to provide any other compensation or other benefit to any Governmental Authority or any Person (including, but not limited to, any employee or agent) associated or affiliated with or representing a Governmental Authority, where the contribution, payment, compensation or other benefit or the purpose of the contribution, payment, compensation or other benefit was or is illegal under the applicable Law or other rules of any Governmental Authority; or

(b) has made or agreed to make any contribution or expenditure, or has reimbursed any political gift or contribution or expenditure made by any other Person to candidates for public office, whether federal, state or local (foreign or domestic) where such contributions were or would be a violation of applicable Law.

SECTION 4.21 Bank Accounts. The Company Disclosure letter sets forth the names and locations of all banks, depositories and other financial institutions in which the Company or any of its Subsidiaries have an account or safe deposit box and the names of all Persons authorized to draw thereon or to have access thereto.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Except as set forth in the disclosure letter delivered by Buyer to the Company simultaneously with the execution of this Agreement (the “Buyer Disclosure Letter”), Buyer represents and warrants to the Company that the following statements are true and correct in all material respects as of the date hereof:

SECTION 5.1 Organization and Qualification. Buyer is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware. Buyer has the requisite corporate power and corporate authority and any necessary Governmental Authority, franchise, license, certificate, or permit to own, operate and lease the

properties that it purports to own, operate or lease and to carry on its business as it is now being conducted, and is duly qualified as a foreign corporation to do business, and is in good standing in each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary, except for such failures to be so qualified and in good standing that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Buyer.

SECTION 5.2 Corporate Authorization; Enforceability; Board Action. Buyer has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, including the Merger. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Buyer and no other corporate proceedings on the part of Buyer are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and, assuming due authorization, execution and delivery of this Agreement by the Company, constitutes a valid and binding agreement of Buyer enforceable against each such party in accordance with its terms, except to the extent that such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, affecting creditors’ rights generally, and to general equity principles.

SECTION 5.3 Consents and Approvals; No Violations.

(a) The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby, including the Merger, require no consent, approval or action by or in respect of, or notice to or filing with, any Governmental Authority other than (i) the filing of articles of merger in connection with the Merger in accordance with the PBCL and the certificate of merger with the Secretary of State of the State of Delaware in accordance with the DGCL, and (ii) any other approvals the absence of which would not reasonably be expected to, individually or in the aggregate, (A) prevent or delay consummation of the Merger in any material respect or (B) have a Material Adverse Effect on the Surviving Company, Buyer.

(b) Except as set forth in the Buyer Disclosure Letter, neither the execution, delivery or performance by Buyer of this Agreement nor the consummation by Buyer of the transactions contemplated hereby, including the Merger, nor compliance by Buyer with any of the provisions hereof will (i) conflict with or result in any breach of any provisions of the articles of incorporation or bylaws of Buyer or the similar organizational and governing documents of Buyer or any of its Subsidiaries, (ii) conflict with or result in any violation of any provision of any Law binding upon or applicable to Buyer or any of its Subsidiaries or applicable to the consummation by Buyer of the Merger and the transactions contemplated hereby, (iii) require the consent, approval or authorization of, or notice to or filing with, any Third Party with respect to, result in any violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, amendment, or acceleration of any right or obligation of Buyer, or any of its Subsidiaries or to a loss of any benefit to which Buyer, or any of its Subsidiaries is entitled) under any provision of Contract by or which any of Buyer, or any of its Subsidiaries is bound or subject or any of Buyer’s Permits, except in the case

of (ii) and (iii) for such conflicts, violations, breaches, defaults, rights or losses, or the failure to obtain any such consents or approvals or to provide such notices or make such filings, that would not reasonably be expected to (A) materially impair or delay consummation of the Merger, or (B) have a Material Adverse Effect on Buyer or the Surviving Company.

SECTION 5.4 Finders’ or Advisors’ Fees. There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

SECTION 5.5 [INTENTIONALLY OMITTED].

SECTION 5.6 Capital Resources. Buyer now has, or has provided to the Company copies of executed binding and enforceable commitment letters which are subject to no contingencies for, sufficient resources (and Buyer hereby agrees that it shall continue to have such resources through the Effective Time) to provide equity and debt in an aggregate amount sufficient to fulfill its obligations to pay all cash amounts required to be paid by it under this Agreement.

ARTICLE VI

COVENANTS

SECTION 6.1 Conduct of the Company. Except as set forth in Section 6.1 of the Company Disclosure Letter, the Company covenants and agrees that, except as required to comply with applicable Law, from and after the date of this Agreement and until the Effective Time:

(a) the Company will not, and will not permit any of its Subsidiaries to (without the prior written consent of Buyer):

(i) amend or propose to amend its articles of incorporation, bylaws or similar organizational documents;

(ii) issue, sell, grant, transfer, pledge, dispose of, encumber or authorize the issuance of any shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments, appreciation rights, performance guarantees or, any other rights, or rights of any kind to acquire, any securities of the Company or any of its Subsidiaries except for the issuance and delivery of shares of Company Common Stock pursuant to the exercise of outstanding Company Options;

(iii) (A) directly or indirectly, split; combine or reclassify the outstanding shares of capital stock; or (B) redeem, purchase or otherwise acquire directly or indirectly any of the capital stock of the Company or any of its Subsidiaries;

(iv) declare, set aside, make or pay (A) any dividend or other distribution payable in cash, securities or property; or (B) any contribution, loan or other payment or any combination thereof, with respect to its capital stock;

(v) adopt a plan of complete or partial liquidation, dissolution, merger or consolidation or adopt resolutions providing for or authorizing such liquidation, dissolution, merger or consolidation or adoption of any liquidation or dissolution, merger or consolidation;

(vi) (A) increase the compensation or benefits payable to any director or officer, other employee or consultant of the Company or any of its Subsidiaries except in the ordinary course of business consistent with past practice; (B) enter into any new severance or termination pay agreement with (or amend any such existing arrangement with) any director or officer, other employee or consultant of the Company or any of its Subsidiaries; (C) enter into any new employment, deferred compensation or other similar agreement (or amend any such existing agreement) with any director or officer, other employee or contractor of the Company or any of its Subsidiaries; or (D) increase any benefits payable under any existing severance or termination pay policies or agreements or employment agreements;

(vii) adopt any Employee Plan;

(viii) authorize any capital expenditure payable by the Company or any of its Subsidiaries in excess of One Hundred Thousand Dollars ($100,000) individually or in the aggregate;

(ix) (A) incur or assume any indebtedness for borrowed money or issue debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible or liable for (whether directly or indirectly), the obligations of any Person for borrowed money, except for indebtedness incurred under the Company’s existing credit facilities in the ordinary course of business and consistent with past practice; (B) make any loans, advances or capital contributions to, or investments in, any other Person (other than to the Company from its Subsidiaries or to a Subsidiary from the Company); or (C) enter into any material commitment or transaction (including any borrowing, capital expenditure or purchase, sale or lease of assets) requiring a capital expenditure (including any leases) by the Company or any of its Subsidiaries, other than capital expenditures that do not exceed one hundred thousand dollars ($100,000), individually;

(x) (A) make, revoke or change a material Tax election with respect to the Company or any of its Subsidiaries (unless required by applicable Law); (B) change a material method of accounting for Tax purposes with respect to the Company or any of its Subsidiaries; (C)

consent to extend the period of limitations for the payment or assessment of any material Tax with respect to the Company or any of its Subsidiaries; or (D) settle or compromise any material Tax liability or refund of the Company or any of its Subsidiaries;

(xi) waive any material defenses with respect to, or, other than in the ordinary course of business, make any payment of any material Liability of the Company or any of its Subsidiaries;

(xii) (A) acquire (by merger, consolidation, or acquisition of stock or assets) any Person or division thereof or make any investment in another Person (other than an existing Subsidiary of the Company and other than incorporation of a wholly-owned subsidiary of the Company) or, except in the ordinary course of business and consistent with past practice, acquire assets; or (B) sell, transfer, lease, license, pledge, dispose of, or encumber or authorize or propose the sale, pledge, disposition or Lien of any of the properties or assets of the Company or any of its Subsidiaries, except in the case of clause (B) above, for sales, transfers, leases, licenses, pledges, dispositions or Liens (1) pursuant to existing Contracts (the terms of which have been previously disclosed to Buyer); or (2) in the ordinary course of business and consistent with past practice;

(xiii) take any action, or fail to take any action, to cause the Company Common Stock to cease to be listed on the AMEX prior to the Closing Date;

(xiv) except as otherwise provided in this Agreement, take any action, or fail to take any action, that could materially impair, prevent or impose a delay in consummating the transactions contemplated hereby, including the Merger;

(xv) take any action to cause the Company or any of its Subsidiaries to enter any line of business unrelated to the business conducted by them as of the date of this Agreement;

(xvi) fail to maintain insurance at presently existing levels;

(xvii) waive any benefits, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which the Company is a party;

(xviii) take or suffer any action that would result in the creation, or consent to the imposition, of any Lien on any of its assets other than pursuant to existing credit facilities;

(xix) change any method, estimate or practice or any of the accounting principles used by it unless required by GAAP or applicable Law;

(xx) except in the ordinary course of business and consistent with past practice, enter into, modify, amend or terminate any of any Material Contract described in Section 4.14, or waive, release, assign or compromise any material rights or claims with respect thereto;

(xxi) take any action that could reasonably be expected to result in a failure of any of the conditions set forth in Section 7.1 or Section 7.3 hereof;

(xxii) enter into a Contract to do any of the foregoing, or authorize, recommend, propose or announce an intention to do any of the foregoing; or

(xxiii) agree or commit to do any of the foregoing; and

(b) The Company shall (except to the extent that Buyer shall otherwise consent in writing):

(i) conduct its and each of its Subsidiaries’ business in accordance with applicable Law and consistent with past practice;

(ii) conduct its and each of its Subsidiaries’ business only in the ordinary course of business consistent with past practice and in accordance with the transactions contemplated by this Agreement; and

(iii) use commercially reasonable efforts to preserve intact its and each of its Subsidiaries’ assets.

SECTION 6.2 Preparation of Proxy Statement, Shareholder Meeting.

(a) The Company, acting through the Company Board and the Company Special Committee, shall, in accordance with applicable law duly call, give notice of, convene and hold a special meeting of its shareholders (the “Special Meeting”) as soon as practicable following the execution of this Agreement for the purpose of considering and taking action upon this Agreement and the Merger.

(b) The Company shall together with Buyer prepare and file with the SEC a preliminary proxy statement (the “Preliminary Proxy”) relating to this Agreement and the Merger, which shall be filed no later than sixty (60) days following the date hereof, and subsequently file and furnish to the shareholders of the Company a definitive proxy statement (the “Definitive Proxy” and collectively with the Preliminary Proxy, the “Proxy Statement”) and

use its best efforts to (i) obtain and furnish the information required to be included by the SEC in the Proxy Statement and, after consultation with Buyer, respond promptly to any comments made by the SEC with respect to the Preliminary Proxy; (ii) obtain the necessary approval and adoption of this Agreement and the Merger by its shareholders; and (iii) subject to the other provisions of this Agreement, include in the Proxy Statement the recommendation of the Company Board and the Company Special Committee that shareholders of the Company vote in favor of the approval and adoption of this Agreement and the Merger (the “Company Recommendation”). The parties hereto shall also prepare a Schedule 13E-3 (the “Schedule 13E-3”) of the Company relating to the Merger which shall be filed with the SEC concurrently with the filing of the Preliminary Proxy.

(c) Buyer shall furnish all information about itself, its business and operations and its owners and all financial information to the Company as may be reasonably necessary in connection with the preparation of the Proxy Statement. The Company shall give Buyer and its counsel the opportunity to review, prior to their being filed with, or sent to the SEC, (i) the Proxy Statement and (ii) all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments. Each of the Company and Buyer, agrees to correct promptly any information provided by it for use in the Proxy Statement if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all necessary steps to cause the Proxy Statement as so corrected to be filed with the SEC and to be disseminated to the shareholders of the Company, in each case, to the extent required by applicable Securities Laws. The Company shall notify Buyer of the receipt of any comments of the SEC with respect to the Preliminary Proxy. Any other provision of this Section 6.2 notwithstanding, the Company, in connection with a Company Change of Recommendation, may amend or supplement the Proxy Statement (including by incorporation by reference).

(d) None of the information supplied by the Company specifically for inclusion or incorporation by reference in the Proxy Statement or the Schedule 13E-3 will, at the time filed with the SEC and as of the date it or any amendment or supplement thereto is mailed to shareholders of the Company and at the time of the Special Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder. The Company makes no representation, warranty or covenant with respect to information supplied by Buyer or its Affiliates specifically for inclusion in the Proxy Statement or Schedule 13E-3.

(e) None of the information supplied by Buyer or its Affiliates specifically for inclusion or incorporation by reference in the Proxy Statement or Schedule 13E-3 will, at the time filed with the SEC and as of the date it or any amendment or supplement thereto is mailed to shareholders and at the time of the Special Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Buyer makes no representations, warranties or covenants with respect to information concerning

the Company included in the Proxy Statement or information supplied by the Company specifically for inclusion in the Proxy Statement or Schedule 13E-3.

(f) In the event that subsequent to the date hereof, the Company Board or the Company Special Committee determines in accordance with Section 6.4 that the Merger Consideration is no longer fair to, or in the best interests of, the shareholders of the Company or that this Agreement is no longer advisable and either withdraws its recommendation in favor of the Merger and this Agreement, makes no recommendation or recommends to the shareholders that they reject the Merger and this Agreement, the Company may at its option cancel the Special Meeting and withdraw the Proxy Statement.

SECTION 6.3 Access to Information. The Company shall, and shall cause each of its Subsidiaries to the extent in the possession of the Company or its Subsidiaries to, give Buyer and its Representatives access to books, records, Contracts, commitments, personnel and officers of the Company and each of its Subsidiaries during normal business hours, furnish such financial and operating data and all other information as such Persons may reasonably request and shall instruct its own Representatives to cooperate in the other party’s investigation of the business of such party. The Company shall (i) at the request of Buyer confer on a regular basis with one or more Representatives of Buyer to discuss material operational matters and the general status of its ongoing operations, (ii) advise Buyer of any change or event that has had or would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries, and (iii) furnish to Buyer promptly all other information concerning its business, properties and personnel, in each case as Buyer may reasonably request. Notwithstanding the foregoing, neither the Company nor its Subsidiaries shall be required to provide access to or to disclose any information (i) where such access or disclosure could jeopardize the attorney-client privilege or work product privilege of such Company or any of its Subsidiaries or contravene any Law or binding agreement entered into prior to the date of this Agreement, or (ii) to the extent that outside counsel to the Company advises that such access or disclosure should not be disclosed in order to ensure compliance with any other applicable Law.

SECTION 6.4 No Solicitation; Unsolicited Proposals; Change of Company Recommendation.

(a) Except as otherwise expressly provided in this Section 6.4(a), from the date of this Agreement until the Effective Time or, if earlier, the termination of this Agreement in accordance with its terms, neither the Company nor any of its Subsidiaries shall permit or cause any of its or their respective Affiliates, or its or their Representatives, to, and the Company shall direct its Representatives not to, directly or indirectly, (i) solicit, initiate, or knowingly encourage or knowingly take any action designed to facilitate any inquiries or the making of any proposal that constitutes an Acquisition Proposal (as defined in Section 6.4(e)(i)), (ii) participate in any discussions or negotiations with any Third Party relating to an Acquisition Proposal, or (iii) enter into any Contract (including any agreement in principle, letter of intent, or understanding) with respect to or contemplating any Acquisition Proposal or enter into any Contract requiring the Company to abandon, terminate or fail to consummate the Merger or causing the Company Board or the Company Special Committee to not endorse or recommend the Merger or this Agreement or change its or their recommendation; provided, however that if (A) at any time prior to the Effective Time, the Company Board and the Company Special Committee determine

in good faith, after consultation with their legal and financial advisors that an unsolicited written Acquisition Proposal is, or is reasonably likely to result in, a Superior Proposal, (B) neither the Company nor its Representatives shall have materially violated any of the restrictions set forth in this Section 6.4(a) in connection with the Acquisition Proposal in question and (C) the Company shall have, at least one (1) business day prior to taking any of the following actions, provided to Buyer prior written notice of its decision to take such action as provided in Section 6.4(d) and in compliance with Section 6.4(c), the Company may (x) furnish information with respect to the Company to the Person making such proposal (and its Representatives) pursuant to a customary confidentiality agreement (provided, that such confidentiality agreement shall not in any way restrict the Company from complying with its disclosure obligations under this Agreement, including with respect to such proposal; provided further, that any such confidentiality agreement need not contain a standstill or similar provision) and (y) participate in discussions or negotiations regarding such proposal with respect to such acquisition. The Company agrees to provide Buyer with any information provided in writing or a reasonable summary of oral information provided to the Person making such Acquisition Proposal and its Representatives substantially simultaneously with the provision thereof to such other person. The Company shall, and shall cause any of its respective Affiliates or any Persons acting on their behalf to, immediately cease and cause to be terminated any activities, discussions or negotiations with any parties existing or taking place on the date hereof with respect to any Acquisition Proposal.

(b) Except as contemplated by Section 6.4(c), neither the Company Board nor the Company Special Committee, nor any other committee of the Company Board shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Buyer, the approval or recommendation by such Company Board or Company Special Committee of this Agreement or the Merger, (ii) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal, or (iii) cause the Company to enter into any letter of intent, agreement in principle or acquisition agreement or other similar agreement related to any Acquisition Proposal (each, an “Acquisition Agreement”).

(c) Nothing in this Agreement shall prevent the Company Board or Company Special Committee from withdrawing or modifying in any manner, or recommending, or proposing publicly to withdraw or modify in any manner, the Company Recommendation (a “Company Change of Recommendation”) or approving or recommending, or proposing to approve or recommend, any Superior Proposal, if all of the following conditions are met: (i) if the Change of Recommendation is precipitated by the submission of an Acquisition Proposal that has not been withdrawn, the Company Board (or the Company Special Committee) determines that such Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Offer; (ii) neither the Company nor any of its subsidiaries nor any of their respective Representatives shall have materially violated any of its covenants or any of the restrictions on soliciting Acquisition Proposals set forth in Section 6.4(a) hereof; (iii) the Company shall have delivered to Buyer written notice (a “Change of Recommendation Notice”) at least three (3) business days prior to effecting such Change of Recommendation, which shall (A) state expressly that the Company Board (or the Company Special Committee) intends to effect a Change of Recommendation, and set forth in reasonable detail the facts and circumstances giving rise to the Company Board’s (or the Company Special Committee’s) decision to effect a Change of Recommendation and that the Company Board (or the Company Special Committee) has determined in good faith (after consultation with legal counsel) that the failure to take such action would be inconsistent with

the fiduciary duties of the Company Board (or the Company Special Committee) to the shareholders of the Company under applicable Law, and (B) if the Change of Recommendation is precipitated by the submission of an Acquisition Proposal that has not been withdrawn, such notice shall also disclose the identity of the person or group making such Acquisition Proposal and include a copy of any definitive documentation relating to such Acquisition Proposal and such other documentation reflecting the final terms and conditions of such Acquisition Proposal as are being considered by the Company Board (or the Company Special Committee); (iv) after delivering the Change of Recommendation Notice, the Company shall provide Buyer with a reasonable opportunity to propose adjustments in the terms and conditions of this Agreement during such three (3) business day period, and negotiate in good faith with Buyer with respect thereto during such three (3) business day period; and (v) the Company Board (or the Company Special Committee) must have concluded in good faith, after consultation with its outside legal counsel, that in light of the facts and circumstances giving rise to the Company Board’s (or the Company Special Committee’s) decision to effect or consider effecting a Change of Recommendation as set forth in the Change of Recommendation Notice, and after considering any adjustments or negotiations pursuant to the preceding clause (iv), if applicable, that failing to make such Change of Recommendation would be inconsistent with the fiduciary duties of the Company Board (or the Company Special Committee) to the Company’s shareholders under applicable Law.

(d) In addition to the obligations of the Company set forth in paragraphs (a), (b) and (c) of this Section 6.4, the Company shall as promptly as practicable advise Buyer, orally and in writing, of any request for information or of any Acquisition Proposal (and in any case within 24 hours of such request or the receipt of such Acquisition Proposal), the principal terms and conditions of such request or Acquisition Proposal and the identity of the person making such request or Acquisition Proposal. The Company shall keep Buyer informed of the status and material details (including amendments or proposed amendments) of any such request or Acquisition Proposal as promptly as practicable.

(e) For purposes of this Agreement:

(i) “Acquisition Proposal” means any inquiry, offer, proposal, indication of interest, signed agreement or completed action, as the case may be, by any Third Party that relates to (A) a merger or consolidation involving the Company or any of its Subsidiaries, (B) the issuance, sale or other disposition by the Company or any of its Subsidiaries to a Third Party (including by way of merger, consolidation, share exchange or otherwise) of shares of capital stock or options, warrants, calls, subscriptions or securities convertible into capital stock of the Company or any of its Subsidiaries representing twenty percent (20%) of the votes associated with the outstanding capital stock of the Company or any of its Subsidiaries, as applicable, (C) any tender or exchange offer that if consummated would result in any Third Party, together with all Affiliates thereof, beneficially owning shares of capital stock or other equity securities of the Company or any of its Subsidiaries representing twenty percent (20%) (by voting power) of the outstanding capital stock of the Company or any of its Subsidiaries, as applicable, or (D) the acquisition, lease, license, purchase

or other disposition of assets of the Company or any of its Subsidiaries, representing twenty percent (20%) or more of the consolidated assets of the Company and any of its Subsidiaries; and

(ii) “Superior Proposal” means any bona fide written Acquisition Proposal, that the Company Special Committee determines in its good faith judgment (with the advice of its financial and legal advisers) is more favorable to the shareholders of the Company than the Merger (taking into account (A) all the terms and conditions of such Acquisition Proposal, as well as the payment of a Termination Fee under this Agreement, and the Merger, including without limitation the price and any conditions to consummation and (B) the likelihood of such Acquisition Proposal and the Merger being consummated). For purposes of determining whether an Acquisition Proposal is a Superior Proposal, references to 20% in the definition of Acquisition Proposal shall be deemed to be a reference to one hundred percent (100%).

SECTION 6.5 Regulatory Filings.

(a) As promptly as practicable, each of the Company and Buyer shall prepare and file, or cause to be prepared and filed, any filings required under the Exchange Act or any other federal or state law relating to the Merger, including filings, if any, required by Buyer. Each of the Company and Buyer shall promptly notify the other of the receipt of any comments on, or any request for amendments or supplements to, any such filings by any Governmental Authority, and each of the Company and Buyer shall supply the other with copies of all correspondence between it and each of its Subsidiaries and Representatives, on the one hand, and such Governmental Authority, on the other hand, with respect to any such filings. Each of the Company and Buyer shall use its reasonable efforts to obtain and furnish the information required to be included in any such filings.

(b) Subject to the terms and conditions of this Agreement, each of the parties agrees to use its reasonable efforts (i) to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the Merger and the other transactions contemplated hereby and to cooperate with each other in connection with the foregoing, including the taking of such actions as are necessary to obtain any necessary consents, approvals, orders, exemptions or authorizations by or from any Governmental Authority or other Person, or consents, approvals, orders exemptions or authorizations that are required to be obtained under any federal, state or local law or regulation or any contract, agreement or instrument to which Buyer or the Company is a party or by which any of their respective properties or assets are bound, (ii) to defend all lawsuits or other legal proceedings challenging this Agreement or the consummation of the Merger or the other transactions contemplated hereby, (iii) to cause to be lifted or rescinded any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the Merger or the other transactions contemplated hereby, (iv) to effect all necessary registrations and filings, and submissions of information requested by any Governmental Authority and (v) to execute and deliver any additional instruments necessary to consummate the Merger and the other transactions contemplated hereby.

SECTION 6.6 Announcements. The initial press release with respect to the Merger shall be a joint press release, which has previously been agreed upon by Buyer and the Company. Thereafter, except as required by Law or stock exchange rules and regulations, each party hereto (a) shall consult with the other party before issuing any press release or making any public statement with respect to this Agreement and the transactions contemplated hereby (to the extent not previously issued or made in substance), and (b) shall not issue any press release or make any public statement concerning the Merger without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed.

SECTION 6.7 Further Assurances. At and after the Effective Time, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of the Company any deeds, bills of sale, assignments, assurances or other documents, or instruments, and to take any other actions and do any other things, in the name and on behalf of the Company, reasonably necessary to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger and to otherwise accomplish the purpose and intent of this Agreement and the transactions contemplated hereby.

SECTION 6.8 Notification of Certain Matters.

(a) The Company shall give prompt notice to Buyer, and Buyer shall give prompt notice to the Company, of: (i) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement, and (ii) any material notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement.

(b) Subject to compliance with applicable Law (including, without limitation, antitrust Laws and privacy Laws), from the date hereof until the Effective Time, at Buyer’s request, the Company shall confer on a regular basis with one or more Representatives of each other party to report on the general status of ongoing operations of the Company. Buyer and the Company shall promptly notify each other in writing of, and will use commercially reasonable efforts to cure before the Effective Time, any event, transaction or circumstance, as soon as practical after it becomes known to such party, that (i) causes or will cause any covenant or agreement of Buyer or the Company under this Agreement to be breached in any material respect, (ii) renders or will render untrue in any material respect any representation or warranty of the respective parties contained in this Agreement or (iii) of any fact, circumstance, event or action which will result in, or would reasonably be expected to result in, the failure of such party to timely satisfy any of the closing conditions specified in ARTICLE VII of this Agreement, as applicable.

SECTION 6.9 Director and Officer Liability.

(a) The Surviving Corporation shall, and Buyer shall cause the Surviving Corporation to, for a period of six (6) years after the Effective Time, indemnify and hold harmless all Persons who as of this date are current or former directors and officers of the Company and its Subsidiaries, determined as of immediately prior to the date hereof (the

“Indemnified Parties”), to the maximum extent permitted by law for acts or omissions occurring at or prior to the Effective Time, against any and all costs or expenses (including reasonable attorney’s fees as incurred), judgments, fines, losses, claims, damages or liabilities (collectively, “Costs”) arising from, relating to or otherwise in respect of, any actual or threatened claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time (including with respect to the transactions contemplated by this Agreement), to the fullest extent permitted under applicable Law; provided, that the Surviving Corporation shall not be required to indemnify any Indemnified Party pursuant to this Section 6.9 if it is determined that the Indemnified Party acted in bad faith and not in a manner such Indemnified Party reasonably believed to be in, or not opposed to, the best interests of the Company;

(b) Any Indemnified Party wishing to claim indemnification under Section 6.9(a), upon learning of any such claim, action, suit, proceeding or investigation, must promptly notify the Surviving Corporation thereof, but the failure to so notify shall not relieve the Surviving Corporation of any liability it may have to such Indemnified Party to the extent such failure does not materially prejudice the Surviving Corporation. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), after the Effective Time (i) the Surviving Corporation shall have the right to assume the defense thereof and the Surviving Corporation shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if the Surviving Corporation elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, however, that the Surviving Corporation shall be obligated pursuant to this Section 6.9 to pay only one firm of counsel (unless the use of one counsel for such Indemnified Parties would present such counsel with a conflict of interest) for all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) the Surviving Corporation shall not be liable for any settlement effected without its prior written consent; and provided, further, that the Surviving Corporation shall not have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law or that the Indemnified Party acted in bad faith and not in a manner such Indemnified Party reasonably believed to be in, or not opposed to, the best interests of the Company;

(c) For a period of six (6) years after the Effective Time, the Surviving Corporation shall, and Buyer shall cause the Surviving Corporation to provide, a policy of directors’ and officers’ liability insurance of at least the same coverage and amounts containing terms and conditions that are no less advantageous in any material respect to the insured than the coverage currently provided to directors and officers of the Company with respect to claims arising from facts or events that occurred on or before the Effective Time.

(d) The provisions of Section 6.9(a) and Section 6.9(c) shall be deemed to have been satisfied if the Company before the Effective Time, or the Surviving Corporation after the Effective Time, obtains prepaid policies from Great American Insurance Group, or such other insurance company reasonably satisfactory to a majority of the independent directors of the Company, which policies provide directors and officers of the Company with coverage no less advantageous to the insured than the terms currently provided to directors and officers of the Company for an aggregate period of six (6) years after the Effective Time with respect to claims arising from facts or events that occurred on or before the Effective Time.

(e) Notwithstanding anything herein to the contrary, if any claim, action, suit, proceeding or investigation is made against any Indemnified Party, on or prior to the sixth anniversary of the Effective Time, the provisions of this Section 6.9 shall continue in effect until the final disposition of such claim, action, suit, proceeding or investigation.

(f) If Buyer, the Surviving Corporation, or any of their respective successors or assigns (i) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) shall transfer all or substantially all of its properties and assets to any individual, corporation or other entity, then, and in each such case, to the extent necessary to effect such assumption, proper provisions shall be made so that such successors and assigns shall assume all of the applicable obligations set forth in this Section 6.9.

(g) The provisions of this Section 6.9 are (i) intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his or her heirs and representatives, and (ii) in addition to, and not in substitution for, any other rights to indemnification or contribution that any such Person may have by contract or otherwise.

SECTION 6.10 Opinion of Financial Advisor. The Company Special Committee has received the written opinion of Oppenheimer, dated the date hereof, to the effect that, as of such date, the consideration to be received by the shareholders of the Company pursuant to the Merger is fair to such shareholders (other than Buyer) from a financial point of view. The Company has provided a true, correct and complete signed copy of such opinion to Buyer.

SECTION 6.11 Employee Benefit Matters.

(a) Until the first anniversary of the Effective Time, the Surviving Corporation shall provide employees of the Company and the Company Subsidiaries who are located in the United States and retained by the Surviving Corporation with employee benefits (excluding equity-based compensation and change in control plans, programs, agreements or arrangements) that are substantially comparable in the aggregate to those benefits provided to such employees immediately prior to the Effective Time pursuant to the Company Benefit Plans, which comparable benefits shall specifically include the compensation and employee benefits set forth in the Company Disclosure Letter; provided, however, that the Surviving Corporation (or any of its affiliates) shall be under no obligation to retain any employee or group of employees of the Company or any of its Subsidiaries other than as required by applicable Law, or pursuant to the terms of an employment agreement listed in the Company Disclosure Letter as in effect on the date hereof.

(b) The Company and Buyer acknowledge and agree that all provisions contained in this Section 6.11 and in Section 4.10 with respect to Company employees are included for the sole benefit of the Company, and that nothing in this Agreement, whether express or implied, shall create any third party beneficiary or other rights (i) in any other Person, including, without limitation, any Company employees, former Company employees, any participant in any Company Benefit Plan, or any dependent or beneficiary thereof, or (ii) to continued employment with the Surviving Corporation or any Company Subsidiary. No provision of this Section 6.11 or Section 4.10 will constitute an amendment to any Company Benefit Plan or any employee benefit or compensation plan, policy agreement or arrangement of the Company or any Company Subsidiary.

SECTION 6.12 Section 16 Matters. Prior to the Effective Time, the Company Board, or an appropriate committee of non-employee directors thereof, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the disposition by any officer or director of the Company who is a covered Person of the Company for purposes of Section 16 of the Exchange Act and the rules and regulations thereunder (“Section 16”) of shares of Company Common Stock or Company Options pursuant to this Agreement, and the Merger shall be an exempt transaction for purposes of Section 16.

SECTION 6.13 Reasonable Efforts. The Company will use its reasonable good faith efforts to ensure that the conditions set forth in Sections 7.1 and 7.2 hereof are satisfied, insofar as such matters are within the control of the Company and Buyer will use its reasonable good faith efforts to ensure that the conditions set forth in Sections 7.1 and 7.3 hereof are satisfied, insofar as such matters are within the control of Buyer; provided, however, that no Party shall be obligated to take any action that would alter in a material adverse manner the benefits to such Party of this Agreement, the Merger or the other transactions contemplated hereby.

SECTION 6.14 Shareholder Vote. At the Special Meeting, or if any action is taken by written consent with respect to the Merger, Buyer shall, and shall cause any Affiliate of Buyer owning any Company Common Stock to, vote all Company Common Stock owned or held by Buyer and any such Affiliate in favor of the Merger and the Merger Agreement.

ARTICLE VII

CONDITIONS TO THE MERGER; CERTAIN EXCEPTIONS TO CONDITIONS,

REPRESENTATIONS, WARRANTIES & COVENANTS

SECTION 7.1 Conditions to the Obligations of Each Party. The obligations of the Company and Buyer to consummate the Merger are subject to the satisfaction (or, to the extent legally permissible, waiver) of the following conditions:

(a) Company Shareholder Approval. The Company shall have obtained the Company Shareholder Approval;

(b) No Injunctions or Restraints. No provision of any applicable Law and no judgment, injunction, order or decree that makes illegal or otherwise prohibits the consummation of the Merger or any of the other transactions contemplated by this Agreement shall be in effect;

provided, however, that prior to invoking this condition, each party shall comply with its obligations under Article VI and; provided, further, that none of the initiation, threat or existence of any legal action of any kind with respect to this Agreement or the Merger, including without limitation any action initiated, threatened, or maintained by any shareholder of the Company, whether alleging claims under any Securities Laws or state securities laws, contract or tort claims, claims for breach of fiduciary duty, or otherwise, will constitute a failure of the conditions set forth in Sections 7.1, 7.2 or 7.3 of this Agreement unless that action has resulted in the granting of an injunction (whether temporary, preliminary or permanent) which is in effect and prevents or prohibits the consummation of the Merger, and such injunction has not expired or been dissolved or vacated;

(c) Regulatory Matters. Any authorizations, consents, orders, permits or approvals of, or declarations or filings with, and all expirations of waiting periods imposed by, any Governmental Authority that are identified in the Company Disclosure Letter or the Buyer Disclosure Letter (“Requisite Regulatory Approvals”), shall have been filed, have occurred or have been obtained and all such Requisite Regulatory Approvals shall be in full force and effect; and

(d) Opinion of Financial Advisor. The Company Special Committee shall have received the opinion of Oppenheimer, dated the date hereof, to the effect that, based on, and subject to the various assumptions and qualifications set forth in such opinion, as of the date of such opinion, the consideration to be received by the shareholders of the Company pursuant to the Merger is fair to such shareholders (other than Buyer) from a financial point of view.

SECTION 7.2 Conditions to the Obligations of Buyer. The obligations of Buyer to consummate the Merger are subject to the satisfaction (or, to the extent legally permissible, waiver, in whole or in part) of the following further conditions:

(a) Representations and Warranties. As of the Effective Time there shall exist no misrepresentation, breach or inaccuracy of any of the Company’s representations or warranties in this Agreement, the effect of which, individually, or in the aggregate constitutes, or could reasonably be expected to constitute, a Material Adverse Effect with respect to the Company, except that the representations and warranties set forth in Section 4.2 shall be true and correct in all material respects.

(b) Performance of Obligations.

(i) The Company shall have performed in all material respects all of its covenants, agreements and obligations pursuant to this Agreement required to be performed by it prior to the Effective Time, excluding however, its obligations in Section 6.1; and

(ii) There shall not have been a material failure to perform the Company’s obligations under Section 6.1 that has been a result of action by the Company Board.

(c) Material Adverse Effect. No Material Adverse Effect with respect to the Company shall have occurred since the date of this Agreement.

SECTION 7.3 Conditions to the Obligations of the Company. The obligations of the Company to consummate the merger are subject to the satisfaction (or, to the extent legally permissible) of the following further conditions:

(a) Representations and Warranties. As of the Effective Time there shall exist no misrepresentation, breach or inaccuracy of any of the representatives or warranties of Buyer in this Agreement, the effect of which, individually, or in the aggregate constitutes a Material Adverse Effect with respect to Buyer;

(b) Performance of Obligations. Buyer shall have performed in all material respects all of its covenants, agreements and obligations hereunder required to be performed by it at or prior to the Effective Time.

ARTICLE VIII

TERMINATION AND EXPENSES

SECTION 8.1 Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after Company Shareholder Approval:

(a) by the mutual written consent of Buyer and the Company at any time prior to the Effective Time, whether before or after Company Shareholder Approval;

(b) by either of the Company or Buyer:

(i) if the shareholders of the Company shall have voted on this Agreement and the Merger and the votes shall not have been sufficient to constitute Company Shareholder Approval; provided, however, that the right to terminate this Agreement under this Section 8.1(b)(i) shall not be available to either party where the failure to obtain the Company Shareholder Approval shall have been caused by the action or failure to act of such party and such action or failure to act constitutes a breach by such party of this Agreement;

(ii) if any judgment, injunction, order or decree enjoining Buyer or the Company from consummating the Merger is entered and such judgment, injunction, order or decree shall become final and nonappealable; or

(iii) if, without any material breach by the terminating party of its obligations under this Agreement, the Merger shall not have occurred on or before February 28, 2010 (as such date may be extended by the mutual agreement of the parties, the “Termination Date”).

(i) in connection with entering into a definitive agreement to effect a Superior Proposal in accordance with Section 6.4(c); provided, however, that prior to terminating this Agreement pursuant to this Section 8.1(c)(i), the Company shall have complied with, and not otherwise violated, the provisions of Section 6.4; or

(ii) if Buyer shall have breached any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach (A) constitutes a failure of one or more of the conditions set forth in Sections 7.1 or 7.3 or constitutes a breach of Section 5.6 of this Agreement and (B) has not been cured within 30 days after the giving of written notice to Buyer; provided, however, that the Company’s right to terminate this Agreement under this Section 8.1(c)(ii) shall not be available if, at the time of such intended termination, any material covenant of the Company contained in this Agreement shall have been breached in any material respect and such breach shall not have been cured, or there exists a breach of or inaccuracy in any representation or warranty of the Company contained in this Agreement, the effect of which, individually, or in the aggregate constitutes, or could reasonably be expected to constitute, a Material Adverse Effect with respect to the Company, except that the representations and warranties set forth in Section 4.2 shall be true and correct in all material respects.

(d) by Buyer:

(i) if the Company shall have breached any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach (A) constitutes a failure in one or more of the conditions set forth in Section 7.1 or 7.2 and (B) has not been cured within 30 days after the giving of written notice to the Company; provided, further, that Buyer’s right to terminate this Agreement under this Section 8.1(d)(i) shall not be available if, at the time of such intended termination, any material covenant of Buyer contained in this Agreement shall have been breached in any material respect and such breach shall not have been cured, or there exists a breach or inaccuracy, in any representation or warranty of Buyer contained in this Agreement, the effect of which, individually, or in the aggregate constitutes a Material Adverse Effect with respect to Buyer;

(ii) if a Material Adverse Effect with respect to the Company shall have occurred since the date of this Agreement; or

(iii) if (A) the Company enters into a definitive agreement to effect a Superior Proposal, or (B) the Company Board makes a Company Change of Recommendation; or

(iv) in the event of a material breach of Section 6.4.

SECTION 8.2 Effect of Termination. Subject to Section 8.4, if this Agreement is terminated pursuant to Section 8.1, this Agreement shall become void and of no effect with no liability on the part of any party hereto, except that Sections 8.2, 8.3 and 8.4 and Article IX shall survive the termination hereof.

SECTION 8.3 Fees and Expenses. Other than as specifically provided in Section 8.4 or otherwise agreed to in writing by the parties, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses, whether or not the Merger is consummated.

SECTION 8.4 Termination Fee and Reverse Termination Fee.

(a) If this Agreement is terminated pursuant to:

(i) Section 8.1(b)(i) and (A) at the time of said termination there shall have been outstanding, there shall have been under consideration by the Company Board or the Company Special Committee or there shall have been publicly announced, a plan, intention or proposal (whether or not conditional) with respect to an Acquisition Proposal, which plan, intention or proposal has not been irrevocably withdrawn, (B) within eighteen (18) months after termination of this Agreement, the Company shall enter into any Contract with respect to such Acquisition Proposal (whether such Acquisition Proposal is consummated at any time thereafter) and (C) the aggregate purchase price for the Company (or its assets) pursuant to such Acquisition Proposal equals or exceeds the Aggregate Merger Consideration under this Agreement; or

(ii) Section 8.1(b)(i) following a Company Change of Recommendation pursuant to Section 6.4(c), or pursuant to Section 8.1(c)(i), 8.1(d)(iii) or 8.1(d)(iv);

then Buyer would suffer direct and substantial damages, which damages cannot be determined with reasonable certainty and, in order to compensate Buyer for such damages, the Company shall pay to Buyer as liquidated damages $650,000 by wire transfer in immediately available funds to an account designated by Buyer (the “Termination Fee”). The Termination Fee or any other amounts payable by the Company to the Buyer pursuant to this Section 8.4 shall be due and payable upon termination of this Agreement, except that in the case of a Termination Fee payable pursuant to Section 8.4(a)(i), such Termination Fee will be due upon the execution of the Contract with respect to the relevant Acquisition Proposal. It is specifically agreed that the amount to be paid pursuant to this Section 8.4(a) represents liquidated damages and not a penalty.

(b) If this Agreement is terminated pursuant to Section 8.1(d)(i) based on a breach of Section 6.1 as a result of action taken by the Company Board, the Company shall pay to Buyer the actual costs and expenses incurred by Buyer and its Representatives in connection with this Agreement prior to the termination of this Agreement by wire transfer in immediately available funds to an account designated by Buyer (the “Expense Reimbursement”); provided,

however, that in no event shall the Company be required to pay both the Termination Fee and the Expense Reimbursement.

(c) If this Agreement is terminated pursuant to Section 8.1(c)(ii), then the Company would suffer direct and substantial damages, which damages cannot be determined with reasonable certainty and, in order to compensate the Company for such damages, Buyer shall pay to the Company as liquidated damages $650,000 by wire transfer in immediately available funds to an account designated by the Company (the “Reverse Termination Fee”).

(d) Company and Buyer each hereby acknowledge that the agreements contained in this Section 8.4 are an integral part of the transactions contemplated by this Agreement, and that without these agreements, neither the Company nor Buyer would enter into this Agreement. The payment of the Termination Fee, the Reverse Termination Fee or the Expense Reimbursement pursuant to this Section 8.4 shall be in lieu of any other liabilities or damages with respect to this Agreement and the transactions contemplated hereby.

ARTICLE IX

MISCELLANEOUS

SECTION 9.1 Non-Survival of Representations and Warranties. The representations and warranties contained herein and in any certificate or other writing delivered pursuant hereto shall not survive the Effective Time. This Section 9.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time.

SECTION 9.2 Amendments; No Waivers.

(a) Any provision of this Agreement (including the Company Disclosure Letter and the Buyer Disclosure Letter) may be amended or waived prior to the Effective Time if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company and Buyer, or in the case of a waiver, by the party against whom the waiver is to be effective and, in the case of an amendment, approved by the board of directors of each of the Company and Buyer; provided, however, that after the receipt of the Company Shareholder Approval, if any such amendment or waiver shall by Law or in accordance with the rules and regulations of any relevant securities exchange or market require further approval of the shareholders of the Company or Buyer, the effectiveness of such amendment or waiver shall be subject to the necessary shareholder approval.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Law.

SECTION 9.3 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be deemed to have been duly given upon receipt when delivered in person, by facsimile (receipt confirmed) or by overnight courier or registered or certified mail (postage prepaid, return receipt requested) to the

respective parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to the Company:

Edward H. Cohen, Esq.

Chairman of the Special Committee of the Board

c/o Robert L. Kohl, Esq.

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, NY 10022-2585

Fax No.: 212-940-6557

with a copy (which shall not constitute notice) to:

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, NY 10022

Attn.: Robert L. Kohl, Esq.

Fax No.: 212-940-6557

If to Buyer:

Saunders Acquisition Corporation

2 Briarwood Ct.

Princeton Junction, New Jersey 08550

Attn.: Barry J. Lipsky, President

Fax No.:

with further copies (which shall not constitute notice) to:

Reitler Kailas & Rosenblatt LLC

800 Third Avenue 21^st Floor

New York, New York 10022

Attn: David A. Boillot

Fax No.: 212-371-5500

SECTION 9.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, that no party may assign, delegate or otherwise transfer any of its or their rights or obligations under this Agreement without the consent of the other parties hereto; provided, however, that Buyer may assign, delegate or otherwise transfer any of its or their rights or obligations under this agreement to an Affiliate without the consent of the other parties hereto; further provided, that, any assignment by Buyer to one of its Affiliates shall not be valid under this Agreement unless such Affiliate assumes all of Buyer’s obligations hereunder and such assignment shall not relieve Buyer of its obligations hereunder.

SECTION 9.5 Governing Law. This Agreement, including all matters of construction, validity and performance, shall be construed in accordance with and governed by the law of the Commonwealth of Pennsylvania (without regard to principles of conflicts or choice of laws) as to all matters, including but not limited to, matters of validity, construction, effect, performance and remedies.

SECTION 9.6 Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in any federal or state court located in the County of Philadelphia in the Commonwealth of Pennsylvania, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 9.3 shall be deemed effective service of process on such party.

SECTION 9.7 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this agreement or the transactions contemplated hereby.

SECTION 9.8 Counterparts; Effectiveness. This Agreement may be executed in one or more counterparts, each of which together shall be deemed an original, but all of which together shall constitute one and the same instrument. The exchange of executed copies of this Agreement by facsimile transmission shall constitute effective execution and delivery of this Agreement and signatures of the parties transmitted by facsimile shall be deemed to be originals for all purposes.

SECTION 9.9 Agreement. This Agreement (including the Company Disclosure Letter and the Buyer Disclosure Letter) and the Guarantee provided in Section 8.4(b) constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede and cancel all prior agreements, negotiations, correspondence, undertakings, understandings and communications of the parties, oral and written, with respect to the subject matter hereof and thereof.

SECTION 9.10 Third Party Beneficiaries. Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any Person that is not a party hereto or thereto or a permitted successor or assign of such a party; provided, however, that the parties hereto specifically acknowledge that the provisions of Section 6.9 hereof are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives, affected thereby.

SECTION 9.11 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

SECTION 9.12 Specific Performance. The parties hereby acknowledge and agree that the failure of any party to perform its agreements and covenants hereunder, including its failure to take all actions as are necessary on its part to the consummation of the Merger, will cause irreparable injury to the other parties, for which damages, even if available, will not be an adequate remedy. Accordingly, each party hereby consents to the issuance of injunctive relief by any court of competent jurisdiction to compel performance of such party’s obligations and to the granting by any court of the remedy of specific performance of its obligations hereunder without proof of actual damages and without any requirement for the securing or posting of any bond. Such remedy shall not be deemed to be the exclusive remedy for a party’s breach of its obligations but shall be in addition to all other remedies available at law or equity.

SECTION 9.13 Construction; Interpretation; Disclosure Letters.

(a) The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. As used in this Agreement, (i) the term “including” shall mean “including, without limitation”, (ii) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires, (iii) the words “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including the Company Disclosure Letter and the Buyer Disclosure Letter) and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of this Agreement, unless otherwise specified, and (iv) Buyer and the Company will be referred to herein individually as a “party” and collectively as “parties” (except where the context otherwise requires). Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. A reference to any party to this Agreement or any other agreement or document shall include such party’s successors and permitted assigns.

(b) The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

(c) Any reference to any federal, state, local or non-United States statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context otherwise requires.

[The remainder of this page is intentionally blank; the next page is the signature page.]

In witness whereof the undersigned have executed this Agreement and Plan of Merger effective as of the date first set forth above.


FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED		SAUNDERS ACQUISITION CORPORATION

BY:	/s/ Toshihide Hokari	BY:	/s/ Barry J. Lipsky
Name:	Toshihide Hokari	Name:	Barry J. Lipsky
Title:	Senior Vice President and Chief Operating Officer	Title:	President

EX-7.08 9 dex708.htm SHINING SEA PURCHASE AGREEMENT Shining Sea Purchase Agreement

Exhibit 7.08

Execution Copy

SHARE PURCHASE AGREEMENT

THIS SHARE PURCHASE AGREEMENT (the “Agreement”), made and entered into as of the 30th day of September, 2009, by and among Shining Sea Limited, an exempted company organized under the laws of the Island of Bermuda (“Shining Sea”), and Noah Education Holdings Ltd., a Cayman Islands company (“Noah”).

RECITALS

WHEREAS, Shining Sea is the holder of certain shares of common stock, par value $0,001 per share (the “Common Stock”), of Franklin Electronic Publishers, Incorporated (“Franklin”);

WHEREAS, Shining Sea has entered into an Exchange Agreement dated as of May 29, 2009 with Saunders Acquisition Corporation (“Saunders”) pursuant to which Shining Sea has agreed to transfer and exchange the shares of Common Stock of Franklin held by Shining Sea for a like number of shares of Convertible Redeemable Preferred Stock, par value $0.01 per share, of Saunders, with the understanding that Saunders proposes to enter into a merger agreement (the “Merger Agreement”) with Franklin pursuant to which (i) Saunders will be merged with and into Franklin (the “Merger”) and Franklin would continue as the surviving corporation in the Merger (the “Surviving Corporation”), (ii) the shareholders of Franklin immediately prior to the consummation of the Merger, other than Saunders, would receive, for each outstanding share of Common Stock of Franklin, $2.50 in cash (the “Merger Consideration”), (iii) as of the effective time of the Merger (the “Effective Time”), the articles of incorporation of Franklin shall be amended and restated to be substantially in the form of the amended and restated certificate of incorporation of Saunders substantially in the form of the draft attached hereto as Exhibit A (the “Restated Charter”) and as so amended and restated shall be the certificate of incorporation of the Surviving Corporation and (iv) the stockholders of Saunders immediately prior to the consummation of the Merger would become, directly or indirectly, the sole shareholders of the Surviving Corporation;

WHEREAS, Noah wishes to purchase, and Shining Sea wishes to sell, 800,000 shares of Convertible Redeemable Preferred Stock, par value $0.01 per share, of the Surviving Corporation (collectively, the “Shares”) on the terms and subject to the conditions set forth herein; and

WHEREAS, in connection with the purchase of the Shares as provided herein, Noah is entering into (i) a Subscription Agreement with Saunders (the “Subscription Agreement”), pursuant to which Noah will subscribe for 400,000 shares of Convertible Preferred Stock, par value $.01 per share, of Saunders (the “Series B Preferred”), and (ii) a related Letter Agreement with Saunders (the “Side Letter”), pursuant to which Saunders has agreed, among other things, that following the completion of the Merger a representative of Noah shall be elected to the Board of Directors of the Surviving Corporation;

WHEREAS, simultaneously with the execution and delivery of this Agreement, Shining Sea is entering into a Share Purchase Agreement with certain holders of the ordinary shares of Noah, pursuant to which the holders shall sell, and Shining Sea shall purchase, certain number of ordinary shares of Noah, for an aggregate purchase price of US$2,000,000. (the “Noah Share Purchase Agreement”).

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions set forth in this Agreement, and intending to be legally bound hereby, the parties hereby agree:

1.	PURCHASE AND SALE OF SHARES

1.1 Shares. Subject to the terms and conditions of this Agreement, at the Closing Shining Sea shall sell, and Noah shall purchase, the Shares for an aggregate purchase price of US$2,000,000 (the “Purchase Price”).

2.	CLOSING

The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at 10:00 a.m. (New York time) on the business day (the “Closing Date”) immediately following the date on which all conditions to Closing as set forth in Sections 5 and 6 of this Agreement have been either satisfied or waived by the party entitled to waive such condition (excluding conditions capable of being satisfied as part of Closing), in the offices of Renaissance Technologies LLC at 800 Third Avenue, New York, New York 10022 or at such other place as the parties may agree. The Closing shall take place simultaneously with the closing under the Noah Share Purchase Agreement. At the Closing, Shining Sea shall transfer the Shares to Noah by means of book entry, and Noah shall pay Shining Sea the Purchase Price by wire transfer of immediately available funds to such account as Shining Sea shall designate at least three (3) business days prior to the Closing Date.

3.	REPRESENTATIONS AND WARRANTIES OF SHINING SEA

Shining Sea hereby represents and warrants to Noah that:

3.1 Organization. Shining Sea is an exempted company duly organized, validly existing and in good standing under the laws of Bermuda and has all requisite corporate power and authority to enter into this Agreement and to transfer the Shares to Noah.

3.2 Authorization. This Agreement has been duly and validly authorized, executed and delivered by Shining Sea and constitutes the legal, valid and binding obligation of Shining Sea, enforceable against Shining Sea in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

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3.3 Ownership and Transfer of Shares. Shining Sea has good title to the Shares. The Shares will be transferred to Noah free and clear of any mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances (“Liens”).

3.4 Consents and Approvals. The execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of and compliance with the terms and conditions hereof (a) do not materially violate or conflict with (i) any provision of the organizational documents of Shining Sea, (ii) any judgment, decree or order of any governmental authority to which Shining Sea is a party or by which Shining Sea any of its properties is bound or (iii) any law or arbitration award applicable to Shining Sea; or (b) require any filing with, or the obtaining of any permit, authorization, consent or approval of, any third party or governmental authority.

4.	REPRESENTATIONS AND WARRANTIES OF NOAH

Noah hereby represents and warrants to Shining Sea as follows:

4.1 Organization. Noah is a company duly organized and validly existing under the laws of the Cayman Islands and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder.

4.2 Authorization. This Agreement has been duly and validly authorized, executed and delivered by Noah and constitutes the legal, valid and binding obligation of Noah, enforceable against Noah in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

4.3 Consents and Approvals: No Violations. The execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of and compliance with the terms and conditions hereof (a) do not materially violate or conflict with (i) any provision of the organizational documents of Noah, (ii) any judgment, decree or order of any governmental authority to which Noah is a party or by which Noah any of its properties is bound or (iii) any law or arbitration award applicable to Noah; or (b) require any filing with, or the obtaining of any permit, authorization, consent or approval of, any third party or governmental authority.

4.4 Purchase for Investment. Noah is acquiring the Shares solely for investment for its own account and not with the view to, or for resale in connection with, any “distribution” (as such term is used in Section 2(11) of the Securities Act thereof.

4.5 Sophistication of Investor. By reason of its business or financial experience, Noah is capable of evaluating the risks and merits of an investment in Franklin and of protecting its own interests in connection with this investment.

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4.6 Independent Review. Noah has conducted his or her own independent review and analysis of Franklin and its condition, business and prospects, and acknowledges that in entering this Agreement, Noah has relied exclusively upon its own investigation and analysis and the representations and warranties contained herein, and Noah:

(a) acknowledges that it has undertaken such due diligence of Franklin as Noah deems adequate;

(b) acknowledges that neither Shining Sea nor any of its respective directors, officers, employees, affiliates, agents or representatives make any representation or warranty, either express or implied, as to Franklin or its condition, business or prospects ; and

(c) agrees, to the fullest extent permitted by law, that neither Shining Sea nor its directors, officers, employees, affiliates, agents or representatives will have any liability or responsibility whatsoever to Noah on any basis (including in contract or tort, under federal or state securities laws or otherwise) based on any information provided or made available, or statements made, to Noah prior to the execution of this Agreement.

5.	CONDITIONS TO THE OBLIGATIONS OF SHINING SEA

The obligations of Shining Sea to consummate the transactions contemplated hereunder shall be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived in whole or in part by Shining Sea:

5.1 Representations and Warranties True. All of the representations and warranties of Noah contained in this Agreement shall be true and correct in all material respects when made and on the Closing Date as though such representations and warranties were made on such date.

5.2 Performance. Noah shall have performed and complied in all material respects with all covenants and obligations under this Agreement which are required to be performed or complied with by Noah.

5.3 Merger Agreement. The Merger shall have been consummated.

5.4 Noah Share Purchase Agreement. All of the conditions to closing under the Noah Share Purchase Agreement shall have been satisfied or waived (other than the condition in respect of the closing of this Agreement).

5.5 Subscription Agreement. Noah shall have paid the Subscription Price under, and as defined in, the Subscription Agreement.

5.6 Stockholders’ Agreement. Noah shall have executed and delivered to Saunders and Shining Sea a joinder agreement pursuant to which Noah shall agree to become a party to, and to be bound by the terms of, the Stockholders’ Agreement of the Surviving Corporation substantially in the form of the draft attached hereto as Exhibit B.

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6.	CONDITIONS TO THE OBLIGATIONS OF NOAH

The obligations of Noah to consummate the transactions contemplated hereunder shall be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived in whole or in part by Noah:

6.1 Representations and Warranties True. All of the representations and warranties of Shining Sea contained in this Agreement shall be true and correct in all material respects when made and on the Closing Date as though such representations and warranties were made on such date.

6.2 Performance. Shining Sea shall have performed and complied in all material respects with all covenants and obligations under this Agreement which are required to be performed or complied with by the Buyer.

6.3 Merger Agreement. The Merger shall have been consummated, and the articles of incorporation of the Surviving Corporation shall be substantially in the form of the Restated Charter.

6.4 Board of Director. A representative of Noah shall have been elected as a member of the board of directors of the Surviving Corporation.

6.5 Noah Share Purchase Agreement. All of the conditions to closing under the Noah Share Purchase Agreement shall have been satisfied or waived (other than the condition in respect of the closing of this Agreement).

6.6 Stockholders’ Agreement. The Stockholders’ Agreement of Saunders shall have been amended and restated substantially in the form of the draft attached hereto as Exhibit B.

7.	INDEMNIFICATION

7.1 Survival. The representations and warranties of the parties set forth in this Agreement shall survive for a period of twelve (12) months following the Closing.

7.2 Indemnification Obligations of Shining Sea. From and after the Closing, Shining Sea will indemnify and hold harmless Noah from, against and in respect of any and all losses, claims, liabilities, damages and expenses (collectively, “Losses”) arising out of (a) any breach of any representation or warranty made by Shining Sea in this Agreement or (b) any breach of any covenant, agreement or undertaking made by Shining Sea in this Agreement.

7.3 Indemnification Obligations of Noah. From and after the Closing, Noah will indemnify and hold harmless Shining Sea and its officers, directors, employees, agents and representatives from, against and in respect of any and all Losses arising out of (a) any breach of any representation or warranty made by Noah in this Agreement or (b) any breach of any covenant, agreement or undertaking made by Noah in this Agreement.

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7.4 Exclusive Remedies. The provisions of this Article 7 set forth the exclusive rights and remedies of the Parties to seek or obtain damages or any other remedy or relief whatsoever from any party with respect to matters arising under or in connection with this Agreement and the transactions contemplated hereby.

8.	COVENANTS OF SHINING SEA

8.1 Best Efforts. Shining Sea agrees to use its best efforts to ensure that the representative of Noah who has been elected to the board of directors of Saunders on or prior to the Closing will continue as the Series A Director (as defined in the Stockholders’ Agreement) of the Surviving Corporation following the consummation of the Merger and that Noah continues to have the right to appoint a representative as Series A Director for so long as Noah continues to hold at least 6.0% of the total share capital of the Surviving Corporation on a fully-diluted basis. Shining Sea also agrees to use its best efforts to have the foregoing right of Noah memorialized in the Stockholders Agreement of the Surviving Corporation.

9.	MISCELLANEOUS

9.1 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner so that the transactions contemplated by this Agreement can be consummated as originally contemplated to the fullest extent possible.

9.2 Binding Effect; Assignment. This Agreement and all of the provisions hereof will be binding upon and will inure to the benefit of the parties and their respective successors and permitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned, directly or indirectly, including by operation of law, by any party without the prior written consent of the other party.

9.3 Entire Agreement. This Agreement (including the Schedules and Exhibits attached hereto) constitute the entire agreement among the parties with respect to the subject matter of this Agreement and supersede all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement.

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that any legal dispute will be brought only to the exclusive jurisdiction of the United States District Court for the Southern District of New York, and each party hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding that is brought in such court has been brought in an inconvenient forum.

9.5 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed to be an original, but all of which will constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic means (including email) will be as effective as delivery of a manually executed counterpart of the Agreement.

9.6 Termination. This Agreement may be terminated at any time prior to the Closing Date:

(a) by written agreement of the parties hereto;

(b) by any of the parties hereto, by giving written notice of such termination to the other parties, without liability to the terminating party on account of such termination if the Closing has not occurred on or prior to February 28, 2010, unless such deadline has been extended by written agreement of the parties hereto; or

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the date first written above.


SHINING SEA LIMITED

By:		/s/ MARCUS BURNS
Name:		Marcus Burns
Title:		Alternate Director

By:		/s/ LORI BAZZARD
Name:		Lori Bazzard
Title:		Alternate Director


NOAH EDUCATION HOLDINGS LTD.

By:		/s/ JERRY HE
Name:		Jerry He
Title:		Executive Vice President

Exhibit A to Shining Sea Share Purchase Agreement

Exhibit A

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

SAUNDERS ACQUISITION CORPORATION

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

Saunders Acquisition Corporation, a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),

DOES HEREBY CERTIFY:

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:

FIRST: The name of this corporation is Saunders Acquisition Corporation (the “Corporation”).

THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

FOURTH: This Corporation is authorized to issue two classes of capital stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares of capital stock which the Corporation is authorized to issue is [ ], [ ] shares of which shall be Common Stock (the “Common Stock”) and [ ] shares of which shall be Preferred Stock (the “Preferred Stock”). Each of the Common Stock and Preferred Stock shall have a par value of one cent ($0.01) per share. [ ] shares of the authorized shares of Preferred Stock are hereby designated “Series A Preferred Stock” (the “Series A Preferred Stock”). [ ] shares of the authorized shares of Preferred Stock are hereby designated “Series B Preferred Stock” (the “Series B Preferred Stock”).

Exhibit A to Shining Sea Share Purchase Agreement

2. Dividends.

2.1 In the event that the Free Cash Flow (as defined below) in any fiscal year is in excess of $1,500,000, subject to any restrictions set forth in any credit agreements to which the Corporation is the borrowing party, the holders of Series A Preferred Stock will be entitled to receive, as a preferred dividend (the “Series A Dividend”), an amount equal to the lesser of (i) fifteen percent (15%) of the Free Cash Flow in such fiscal year and (ii) ten percent (10%) per annum of the aggregate Original Issue Price (as defined below) of all the then outstanding shares of Series A Preferred Stock, which amount shall be calculated from the Original Issue Date (as defined below) through the last day of such fiscal year (such amount described in subclause (ii), the “Maximum Series A Dividend”). The amount to be paid by the Corporation as Series A Dividends to the holders of Series A Preferred Stock in accordance with this Section 2.1 shall be paid within thirty (30) days after the completion of the financial statements of the Corporation for the relevant fiscal year and shall be shared ratably among such holders in proportion to the respective amounts which are payable to such holders in respect of the shares of Series A Preferred Stock held by them at the time such dividend payment is made. For the purposes hereof, (x) “Free Cash Flow” in a fiscal year means the net income of the Corporation for such fiscal year, as determined in good faith by the Corporation in accordance with generally accepted accounting principals in the United States, subject to verification by the independent external accounting firm of the Corporation in the event that one or more holders of more than twenty percent (20%) of the outstanding share of Series A Preferred object to such determination by the Corporation,, plus any depreciation and amortization deducted in determining net income, less (1) capital expenditures, (2) the amount of any Series A Dividends paid with respect to the prior fiscal year on the Series A Preferred Stock in accordance with this Section 2.1, (3) the amount of any Series B Dividends (as defined below) paid with respect to the prior fiscal year on the Series B Preferred Stock in accordance with Section 2.2, and (4) the amount of any dividends paid with respect to the prior fiscal year on the Common Stock in accordance with Section 2.3, and (y) “Original Issue Price” shall mean $[ ]¹ per share of Preferred Stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock in accordance with Section 5.4.

¹	Insert per share cash merger consideration.

Exhibit A to Shining Sea Share Purchase Agreement

will be entitled to receive, as a preferred dividend (the “Series B Dividend”), an amount equal to the lesser of (i) twelve percent (12%) of the Free Cash Flow in such fiscal year and (ii) eight percent (8%) per annum of the aggregate the Original Issue Price of all the then outstanding shares of Series B Preferred Stock, which amount shall be calculated from the Original Issue Date through the last day of such fiscal year (such amount described in sub clause (ii), the “Maximum Series B Dividend”); provided, however, the Corporation shall only pay the Maximum Series B Dividend on the Series B Preferred Stock pursuant to this Section 2.2 if it simultaneously pays the full Maximum Series A Dividend on the Series A Preferred Stock in respect of any fiscal year. The amount to be paid by the Corporation as Series B Dividends to the holders of Series B Preferred Stock in accordance with this Section 2.2 shall be paid within thirty (30) days after the completion of the financial statements of the Corporation for the relevant fiscal year and shall be shared ratably among such holders in proportion to the respective amounts which are payable to such holders in respect of the shares of Series B Preferred Stock held by them at the time such dividend payment is made.

2.3 So long as any shares of Preferred Stock shall be outstanding, no dividend, whether in cash or property, other than dividends payable in shares of Common Stock, shall be paid or declared in respect of any fiscal year, nor shall any other distribution be made, on any shares of Common Stock or any other class or series of capital stock of the Corporation hereafter created which expressly provides that it ranks, as to dividend and other distribution rights, rights upon the occurrence of a Liquidation Event (as defined below), rights of redemption or otherwise, junior to the Preferred Stock (collectively, the “Junior Stock”), nor shall any shares of any Junior Stock be purchased, redeemed, or otherwise acquired for value by the Corporation (except for acquisitions of Common Stock by the Corporation pursuant to agreements which permit the Corporation to repurchase such shares upon termination of services to the Corporation) unless the Maximum Series A Dividend on the Series A Preferred Stock (set forth in Section 2.1 above) and the Maximum Series B Dividend on the Series B Preferred Stock (set forth in Sections 2.2 above) in respect of such fiscal year shall have been paid or declared and set apart.

3. Voting.

Exhibit A to Shining Sea Share Purchase Agreement

Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class:

3.2.1 acquire any equity interest, or substantially all the assets, of any other entity;

3.2.4 change, amend or terminate the rights, privileges and designations of Series A Preferred Stock as set forth herein;

3.2.5 create, or authorize the creation of, or issue, or authorize the issuance of any debt security, or otherwise incur indebtedness on a consolidated basis, if the aggregate indebtedness of the Corporation for borrowed money following such action would exceed the maximum commitment under the Corporation’s credit agreement outstanding on the Original Issue Date;

3.2.6 enter into, or amend or modify, any agreement, contract or arrangement with any of Barry Lipsky, Frank Musto or Toshihide Hokari (collectively, the “Founders”);

3.2.7 effect any Liquidation Event or consent thereto, unless the holders of the then outstanding shares of Series A Preferred Stock receive the full Series A Liquidation Amount; or

3.2.8 enter into any agreement, contract or arrangement with respect to the foregoing.

3.3.1 acquire any equity interest, or substantially all the assets, of any other entity;

Exhibit A to Shining Sea Share Purchase Agreement

3.3.3 create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock;

3.3.4 change, amend or terminate the rights, privileges and designations of Series B Preferred Stock as set forth herein

3.3.5 create, or authorize the creation of, or issue, or authorize the issuance of any debt security, or otherwise incur indebtedness on a consolidated basis, if the aggregate indebtedness of the Corporation for borrowed money following such action would exceed the maximum commitment under the Corporation’s credit agreement outstanding on the Original Issue Date;

3.3.6 enter into, or amend or modify, any agreement, contract or arrangement with any of the Founders;

3.3.7 effect any Liquidation Event or consent thereto, unless the holders of the then outstanding shares of Series B Preferred Stock receive the full Series B Liquidation Amount; or

3.3.8 enter into any agreement, contract or arrangement with respect to the foregoing.

4. Liquidation, Dissolution or Winding Up.

4.1 Payments to Holders of Series A Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (each, a “Liquidation Event”), the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of Series B Preferred Stock or the holders of Junior Stock, by reason of their ownership thereof, an amount per share equal to the aggregate Original Issue Price of the shares of Series A Preferred Stock then outstanding, plus an amount equal to the difference between (i) an amount equal to ten percent (10%) per annum of the Original Issue Price of the shares of Series A Preferred Stock from the Original Issue Date through and including the date of the Liquidation Event, less (ii) the aggregate amount of Series A Dividends previously paid on such shares of Series A Preferred Stock in accordance with Section 2.1 (the amount payable pursuant to this sentence is hereinafter referred to as the “Series A Liquidation Amount”), which such amount shall be shared ratably among the holders of Series A Preferred Stock in proportion to the respective amounts which are payable to such holders in respect of the shares of Series A Preferred Stock held by them upon a distribution of the Series A Liquidation Amount. If upon any such Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full Series A Liquidation Amount to which they shall be entitled under this Section 4.1, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series A Preferred Stock

Exhibit A to Shining Sea Share Purchase Agreement

held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The Series A Preferred Stock shall rank, as to the distribution of assets of the Corporation upon a Liquidation Event, senior to the Series B Preferred Stock and the Junior Stock.

4.2 Payments to Holders of Series B Preferred Stock. In the event of a Liquidation Event, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after payment to the holders of Series A Preferred Stock of the full Series A Liquidation Amount, but before any payment shall be made to the holders of Junior Stock, by reason of their ownership thereof, an amount per share equal to the aggregate Original Issue Price of the shares of Series B Preferred Stock then outstanding (the “Series B Liquidation Amount”), which such amount shall be shared ratably among the holders of Series B Preferred Stock in proportion to the respective amounts which are payable to such holders in respect of the shares of Series B Preferred Stock held by them upon a distribution of the Series B Liquidation Amount. If upon any such Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred Stock the full Series B Liquidation Amount to which they shall be entitled under this Section 4.2, the holders of shares of Series B Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series B Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The Series B Preferred Stock shall rank, as to the distribution of assets of the Corporation upon a Liquidation Event, junior to the Series A Preferred Stock and senior to the Junior Stock.

5. Optional Conversion. The holders of Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

5.1 Right to Convert.

5.1.1 Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price by the Conversion Price (as defined below) in effect at the time of conversion. The “Conversion Price” shall initially be equal to $[ ]². Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

²	Insert per share cash merger consideration.

Exhibit A to Shining Sea Share Purchase Agreement

5.3 Mechanics of Conversion.

5.3.1 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Section 5.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

Exhibit A to Shining Sea Share Purchase Agreement

5.4 Adjustments to Conversion Price for Diluting Issues.

5.4.1 Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

(a) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities (as defined below).

Exhibit A to Shining Sea Share Purchase Agreement

(b) “Original Issue Date” shall mean the date on which the Series A Preferred Stock and Series B Preferred Stock were first issued.

(c) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

(d) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 5.4.3 below, deemed to be issued) by the Corporation after the Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

(i) shares of Common Stock issued upon conversion of the Preferred Stock in accordance with this Section 5;

(ii) shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Preferred Stock;

(vi) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board that do not exceed an aggregate of [ ] shares of Common Stock (including shares underlying (directly or indirectly) any such Options or Convertible Securities);

(vii) subject to the protective provision contained in Sections 3.2.2 and 3.3.2, shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement; provided, however, that such issuances are approved by the Board that do not exceed an aggregate of [ ] shares of Common Stock (including shares underlying (directly or indirectly) any such Options or Convertible Securities); or

Exhibit A to Shining Sea Share Purchase Agreement

(viii) shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors that do not exceed an aggregate of [ ] shares of Common Stock (including shares underlying (directly or indirectly) any such Options or Convertible Securities).

5.4.3 Deemed Issue of Additional Shares of Common Stock.

Exhibit A to Shining Sea Share Purchase Agreement

share less than the Conversion Price in effect immediately prior to such issue, then the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

CP₂ = CP₁* (A + B) ÷ (A + C).

For purposes of the foregoing formula, the following definitions shall apply:

(a) “CP₂” shall mean the Conversion Price in effect immediately after such issue of Additional Shares of Common Stock;

(b) “CP₁” shall mean the Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;

(e) “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

(a) Cash and Property: Such consideration shall:

(i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

(ii) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and

Exhibit A to Shining Sea Share Purchase Agreement

been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction, the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

Exhibit A to Shining Sea Share Purchase Agreement

5.10 Notice of Record Date. In the event

(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

6. Mandatory Conversion.

6.1 Trigger Events. Upon the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the date of such closing is referred to herein as the “Mandatory Conversion Date”), (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate and (ii) such shares may not be reissued by the Corporation.

Exhibit A to Shining Sea Share Purchase Agreement

6.2 Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Date and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 6. Such notice need not be sent in advance of the Mandatory Conversion Date. Upon receipt of such notice, each holder of shares of Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Section 6.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Date (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section 6.2. As soon as practicable after the Mandatory Conversion Date and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 5.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

7. Redemption.

Exhibit A to Shining Sea Share Purchase Agreement

Preferred Stock. On the Redemption Date, the Corporation shall redeem the total number of shares of Series A Preferred Stock outstanding immediately prior to such Redemption Date . If the Corporation does not have sufficient funds legally available to redeem on the Redemption Date all shares of Series A Preferred Stock to be redeemed on the Redemption Date, the Corporation shall redeem a pro rata portion of each holder’s redeemable shares of such capital stock out of funds legally available therefor, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the legally available funds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor. The Series A Preferred Stock shall rank, as to redemption, senior to the Series B Preferred Stock and the Junior Stock.

7.2.1 the number of shares of Series A Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date;

7.2.2 the Redemption Date and the Redemption Price;

7.2.3 the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Section 5.1.2); and

Exhibit A to Shining Sea Share Purchase Agreement

shares of Series A Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of Series A Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate or certificates therefor.

9. Waiver. Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the shares of Preferred Stock then outstanding.

SIXTH: The number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

SEVENTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

Exhibit A to Shining Sea Share Purchase Agreement

TENTH: The following indemnification provisions shall apply to the persons enumerated below.

1. Right to Indemnification of Directors and Officers. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an “Indemnified Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 3 of this Article Tenth, the Corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.

Exhibit A to Shining Sea Share Purchase Agreement

employee benefit plans, against all liability and loss suffered and expenses (including attorney’s fees) reasonably incurred by such person in connection with such Proceeding. The ultimate determination of entitlement to indemnification of persons who are non-director or officer employees or agents shall be made in such manner as is determined by the Board of Directors in its sole discretion. Notwithstanding the foregoing sentence, the Corporation shall not be required to indemnify a person in connection with a Proceeding initiated by such person if the Proceeding was not authorized in advance by the Board of Directors.

* * *

3. That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

Exhibit A to Shining Sea Share Purchase Agreement

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this [ ] day of [ ], 2009

By:

Name:

Title:

Exhibit B to Shining Sea Share Purchase Agreement

EXHIBIT B

STOCKHOLDERS’ AGREEMENT

THIS STOCKHOLDERS’ AGREEMENT (“Agreement”) is entered into as of , 2009 by and among (i) the persons listed on the signature page hereof under the heading “Series A Holders” (the “Series A Holders”), (ii) the persons listed on the signature page hereof under the heading “Series B Holders” (the “Series B Holders”), (iii) the persons listed on the signature page hereof under the heading “Common Holders” (the “Common Holders” and, collectively with the Series A Holders and the Series B Holders, the “Stockholders”) and (iv) Franklin Electronic Publishers, Inc.

R E C I T A L S:

WHEREAS, the Series A Holders hold all the issued and outstanding shares of Redeemable Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred”), of Saunders;

WHEREAS, the Series B Holders hold all the issued and outstanding shares of Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred”), of Saunders;

WHEREAS, the Stockholders propose that Saunders enter into a merger agreement (the “Merger Agreement”) with Franklin Electronic Publishers, Inc. (“FEP”), pursuant to which (i) Saunders would merge with and into FEP (the “Merger”) and FEP would continue as the surviving corporation in the Merger (FEP, as the surviving corporation, is hereinafter referred to as the “Company”), (ii) the shareholders of FEP immediately prior to the consummation of the Merger would receive for each outstanding share of common stock, par value $.01 per share, of FEP $2.50 in cash, (iii) as of the effective time of the Merger (the “Effective Time”), the articles of incorporation of FEP would be amended and restated to be substantially in the form of the amended and restated certificate of incorporation of Saunders (the “Restated Charter”) in effect immediately prior to the Effective Time and as so amended and restated would be the certificate of incorporation of the Company and (iv) as of the Effective Time, the Stockholders would become the sole stockholders of the Company and would hold the same number of shares of Common Stock, Series A Preferred and Series B Preferred in the Company as they currently hold in Saunders;

WHEREAS, the Stockholders wish to enter into this Agreement, which provides for the governance of the Company following the Effective Time and addresses certain other issues;

1. Definitions.

Unless otherwise defined in this Agreement, the following capitalized terms used in this Agreement shall have the meanings assigned to them in this Section.

1.1 “Approved Sale” has the meaning specified in Section 5.1.

1.2 “Board” shall mean the Board of Directors of the Company.

1.3 “Cause” shall mean (i) an Executive’s conviction of, or plea of guilty or nolo contendere to, a felony or (ii) an Executive’s gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries.

1.5 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

1.6 “Executive” has the meaning specified in Section 6.1.

1.7 “Fair Market Value of a Common Share” shall mean the fair value of a Common Share (assuming the full conversion of the Preferred Stock at the conversion price in effect as of the date of Separation giving rise to the determination of Fair Market Value of a Common Share) determined in good faith by the Board and set forth in the Repurchase Notice or Supplemental Repurchase Notice, as the case may be, given under Section 6 hereof. If Executive disagrees with such determination, Executive shall deliver to the Board a written notice of objection within ten days. Upon receipt of Executive’s written notice of objection, the Board and Executive will negotiate in good faith to agree on such Fair Market Value of a Common Share. If such agreement is not reached within 30 days after the delivery of Executive’s objection, (i) Fair Market Value of a Common Share shall be determined by an appraiser jointly selected by the Board and Executive in the event the Board’s determination and the Executive’s determination differ by more than ten percent (10%) or (ii) Fair Market Value of a Common Share shall be deemed to be the average of the Board’s determination and the Executive’s determination if the two determinations do not differ by more than ten percent (10%). If Fair Market Value of a Common Share is to be determined by an appraiser, such appraiser shall submit to the Board and Executive a written report within 30 days of its engagement setting forth such determination. If the parties are unable to agree on an appraiser within 45 days after delivery of Executive’s objection, within seven days, each party shall submit the names of four independent firms which are engaged in the business of valuing non-public securities, and each party shall be entitled to strike two names from the other party’s list of firms, and the appraiser shall be selected by lot from the remaining four firms. The expenses of such appraiser shall be borne equally by the Company and Executive; provided, however, that if the appraiser’s determination is within twenty percent (20%) of the determination of only one of the parties, that party shall not bear any of the expenses of such appraiser. The determination of such appraiser as to Fair Market Value of a Common Share shall be final and binding upon all parties.

Notwithstanding anything to the contrary herein, the determination of Fair Market Value of a Common Unit shall not include any or discount for lack of control or lack of marketability or liquidity of the Common Shares.

1.10 “Preferred Stock” shall mean the Series A Preferred and the Series B Preferred.

1.11 “Public Offering” shall mean any sale, in an underwritten public offering registered under the Securities Act of the Company’s (or any successor’s) equity securities.

1.12 “Sale Transaction” shall have the meaning specified in Section 5.1.

1.13 “Securities Act” shall mean the Securities Act of 1933, as amended.

1.14 “Shares” shall mean shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock.

2. Effectiveness. This Agreement shall become effective as of the Effective Time.

3. Transfers.

3.1 Transfers by Stockholders.

(a) No Stockholder shall Transfer any Shares other than (i) pursuant to and in compliance with the terms of this Agreement or (ii) with the prior written consent of the Board, which consent may be withheld in the Board’s sole discretion. A Stockholder may Transfer any legal or beneficial interests in any of its Shares without the prior written consent of the Board (w) pursuant to an Approved Sale or a Public Offering, (x) pursuant to Section 3.2 below, (y) in a Transfer to a Permitted Transferee or (z) pursuant to the Repurchase Option under Section 6 hereof. Any Transfer or attempted Transfer in violation of this Agreement shall not be recognized by the Company and shall be void and of no force or effect whatsoever.

3.2 Transfers. Each Series A Holder and Series B Holder shall have the right to sell all or any portion of their Shares at any time to any Person subject only to Sections 3.1(b) and 3.3.

3.3 Prohibited Transfers. Notwithstanding any other provision of this Agreement, during the term of this Agreement the Board shall have the right to refuse (and to cause the Company to refuse) to register any Transfer any Shares if such Transfer may, in the opinion of the Board based on advice from a reputable U.S. law firm, require the Company to register any of the Shares under Section 12 of the Exchange Act, or would result in the Company becoming subject to the periodic reporting requirements of the Exchange Act.

4. Board of Directors.

4.3 Election of Directors.

(a) For so long as at least twenty per cent (20%) of the shares of Series A Preferred outstanding at the Effective Time remain outstanding (as adjusted for any stock splits, stock dividends, reverse stock splits, stock combinations and other similar capitalization changes), at each election of directors each Stockholder agrees to vote all Common Shares beneficially owned by such Stockholder at any regular or special meeting of stockholders (or consent pursuant to a written consent in lieu of such meeting) so as to elect one (1) director designated by the holders of a majority of the shares of Series A Preferred (the “Series A Director”).

(b) For so long as twenty per cent (20%) of the shares of Series B Preferred outstanding at the Effective Time remain outstanding (as adjusted for any stock splits, stock dividends, reverse stock splits, stock combinations and other similar capitalization changes), at each election of directors each Stockholder agrees to vote all Common Shares beneficially owned by such Stockholder so as to elect one (1) director designated by the holders of a majority of the shares of Series B Preferred (the “Series B Director”).

4.4 Removal of Directors.

4.5 Compensation Committee. The Board shall establish a compensation committee, which shall consist of the Series A Director, the Series B Director and a Common Director who also serves as the Chief Executive Officer of the Company. The compensation committee shall be responsible for (i) reviewing and approving the compensation arrangements (including salaries, bonuses and share-based compensation) for the Company’s Executives, (ii) reviewing and making recommendations to the Board regarding the Company’s compensation policies and (iii) administering the Company’s stock option plan or other forms of equity incentive plans.

4.6 Protective Provisions. From the date hereof to the termination of this Agreement, the Company shall not, and Stockholders shall procure the Company not to, whether by merger, amalgamation, consolidation, scheme of arrangement, amendment or otherwise and whether in a single transaction or in a series of related transactions, without first obtaining the

approval of the Board (including an approving vote from the Series A Director, which approving vote shall not be unreasonably withheld), authorize, approve, make or effect:

(a) the execution of any filing for any bankruptcy, voluntary dissolution, winding-up, liquidation, recapitalization, reorganization, split-off, spin-off, bankruptcy with respect to the Company;

(b) the engagement in any business or business activities materially different from that described in the then current business plan of the Company or as currently being conducted by the Company, except for new business activities or ventures undertaken by the Company that do not materially alter the principal business focus of the Company on the design, development, publication and distribution of electronic information;

(c) the entering of, amendment or termination of any agreement (other than any agreement in respect of the employment or compensation arrangements for such Executive) or transaction (or any series of related transactions) with any Executive; or

(d) the agreement or commitment to any of the foregoing.

5. Sale of the Company.

5.4 Conditions and Limitations. The obligations of each Stockholder under this Section 5 are subject to the following conditions and limitations:

5.5 Purchaser Representative. In connection with an Approved Sale, the Stockholders who are not accredited investors (as that term is defined in Rule 501 of the Securities Act) will, at the request of the Board, appoint a purchaser representative (as such term is defined in Rule 501 of the Securities Act) reasonably acceptable to the Board. If any such Stockholder appoints a purchaser representative designated by the Board, the Company will pay the reasonable fees of such purchaser representative, but if any such Stockholder declines to appoint the purchaser representative designated by the Board, such Stockholder will appoint another purchaser representative (reasonably acceptable to the Board), and such Stockholder will be responsible for the fees of the purchaser representative so appointed.

6. Repurchase Option.

6.1 Separation. In the event that any Stockholder that is an executive officer of the Company (hereinafter referred to as an “Executive”) ceases to be employed by the Company or any of its subsidiaries for any reason (the “Separation”), all Shares held by Executive or one or more of his or her Permitted Transferees will be subject to repurchase, in each case by the Company and the other Stockholders pursuant to the terms and conditions set forth in this Section 6 (the “Repurchase Option”).:

6.2 Purchase Price. In the event of a Separation, the purchase price for each Share will be: (i) if the Separation occurs at any time prior to March 31, 2012, an amount per Share equal to the lesser of (x) the per share merger consideration paid in the Merger (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to the Shares) and (y) an amount per Share equal to the Fair Market Value of a Common Share as of the effective date of Separation; and (ii) if the Separation occurs at any time on or after March 31, 2012, an amount per Share equal to the Fair Market Value of a Common Share as of the effective date of Separation; provided, however, that if Executive’s employment is terminated for Cause, the purchase price for each Share will be $.01 per Share.

6.3 Procedure.

(a) The Company may elect to purchase all or any portion of the Shares subject to the Repurchase Option by delivering written notice (the “Repurchase Notice”) within ninety (90) days after the Separation to Executive and any of his Permitted Transferees holding Shares. The Repurchase Notice will set forth the number of Shares to be acquired from each holder, the aggregate consideration to be paid for such Shares and the time and place for the closing of the transaction. The number of Shares to be repurchased by the Company shall first be satisfied to the extent possible from the Shares held by Executive at the time of delivery of the Repurchase Notice. If the number of Shares then held by Executive is less than the total number of Shares which the Company has elected to purchase, the Company shall purchase the remaining Shares elected to be purchased from Permitted Transferees of Executive holding Shares, pro rata according to the number of Shares held by such other holders) at the time of delivery of such Repurchase Notice.

(b) If for any reason the Company does not elect to purchase all of the Shares pursuant to the Repurchase Option, the other Stockholders (the “Other Repurchasers”) shall be entitled to exercise the Repurchase Option for all or any portion of the Shares the Company has not elected to purchase (the “Available Securities”). As soon as practicable after the Company has determined that there will be Available Securities, but in any event within ninety (90) days after the Separation, the Company shall give written notice (the “Option Notice”) to the Other Repurchasers setting forth the number of Available Securities and the purchase price for the Available Securities. The Other Repurchasers may elect to purchase any or all of the Available Securities by giving written notice to the Company within 20 days after the Option Notice has been given by the Company. If the Other Repurchasers elect to purchase an aggregate number greater than the number of Available Securities, the Available Securities shall be allocated among the Other Repurchasers based upon the number of Common Shares owned by each Other Repurchaser (assuming the full conversion of the Preferred Stock). As soon as practicable, and in any event within ten days, after the expiration of the 20 day period set

forth above, the Company shall notify each holder of Shares as to the number of units being purchased from such holder by the Other Repurchasers (the “Supplemental Repurchase Notice”). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Shares, the Company shall also deliver written notice to each Other Repurchaser setting forth the number of Shares such Other Repurchaser is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction.

(d) The Company will pay for the Shares to be purchased by it pursuant to the Repurchase Option by first offsetting amounts outstanding under any bona fide debts owed by the Executive to the Company or any of its subsidiaries or affiliates. If the Separation occurs at any time prior to March 31, 2012, the Company and the Other Repurchasers will issue non-interest bearing promissory notes to the sellers of the Shares in an aggregate amount equal to the balance of the purchase price (the “Notes”). Any Notes issued by the Other Repurchasers will mature on March 31, 2012, and any Notes issued by the Company will mature on the later of March 31,2012 or, in the event the Company enters into a credit agreement with a financial institution as of or after the Effective Time (each, a “Credit Agreement”), at such time as such payment in cash is permitted under the terms of the Credit Agreement. Each Note issued by the Company shall be junior, subordinate and subject in right of payment to the prior payment in full of amounts owing or payable under any Credit Agreement. If the Separation occurs on or after March 31, 2012, subject to subsection (e) below, the Company and the Other Repurchasers shall pay the balance of the purchase price at the closing in immediately available funds.

such note shall be junior, subordinate and subject in right of payment to the prior payment in full of amounts owing or payable under any Credit Agreement and will become due and payable in full in cash at such time as such payment in cash is permitted under the terms of the Credit Agreement.

‘THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND THE REGULATIONS PROMULGATED THEREUNDER, AS IN EFFECT FROM TIME TO TIME (THE “SECURITIES ACT”) OR ANY SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO ANY UNITED STATES PERSON EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.

8. Termination. This Agreement shall continue in full force and effect from the date hereof through the earliest of the following dates, on which date it shall terminate in its entirety: (a) the date of closing of a Public Offering; (b) the date of closing of a Sale Transaction; or (c) the date as of which the parties hereto terminate this Agreement by written consents of (i) the Common Holders holding a majority of the Common Shares then outstanding, (ii) the Stockholders holding a majority of the shares of Series A Preferred then outstanding, and (iii) the Stockholders holding a majority of the shares of Series B Preferred then outstanding, each of (i). (ii) and (iii) voting as a separate class

9. Miscellaneous.

9.1 Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the State of New York in the Borough of Manhattan, County of New York or of the United States District Court for the Southern District of New York, and, by execution and delivery of this agreement, each of the parties hereby irrevocably accepts the exclusive jurisdiction of the aforesaid courts.

9.8 Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.

9.10 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Exhibit B to Shining Sea Share Purchase Agreement

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof.


SERIES A HOLDERS:

SHINING SEA LIMITED

By:
		Name:
		Title:

By:
		Name:
		Title:


NOAH EDUCATION HOLDINGS LTD.

By:
		Name:
		Title:

James H. Simons

Howard L. Morgan

Marcy Lewis

Barry J. Lipsky

Frank A. Musto

Toshihide Hokari

Julien David

Morton David, in his capacity as trustee of the Claudia David 1985 Trust, the Aaron J. David 1989 Trust and the Zachary M. David 1992 Trust


SERIES B HOLDERS:

NOAH EDUCATION HOLDINGS LTD.

By:
		Name:
		Title:

COMMON HOLDERS:

Barry J. Lipsky

Frank A. Musto

Toshihide Hokari


COMPANY:

FRANKLIN ELECTRONIC PUBLISHERS, INC.

By:
		Name:
		Title:

Exhibit B to Shining Sea Share Purchase Agreement

Schedule 1

STOCKHOLDER LIST


NAME		CONTACT INFO
Shining Sea Limited		Address:

		c/o Bermuda Trust Company Ltd. Compass Point, 9 Bermudiana Road, Hamilton HM11, Bermuda

		Attention: Lori Gazzard

		Facsimile: 441-299-6526

		Email Address: Lorinda.R.Gazzard@bob.hsbc.com

Noah Education Holdings Ltd.		Address:

		10/F Building B, Tianan High-Tech Venture Park, Futian, Shenzhen 518048, China

		Attention: Jerry He

		Facsimile: 86-755-8204-9670

		Email Address: jerry.he@noahedu.com

James H. Simons		Address:

		c/o Renaissance Technologies LLC 800 Third Avenue New York, New York 10022

		Facsimile: [ ]

		Email Address: [ ]

Howard L. Morgan		Address:

		c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016

		Facsimile: [ ]

		Email Address: [ ]


Marcy Lewis		Address:

		11111 Biscayne Boulevard North Miami, Florida 33181

		Facsimile: [ ]

		Email Address: [ ]

Barry J. Lipsky		Address:

		c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016

		Facsimile: [ ]

		Email Address: barry@barrylipsky.com

Frank A. Musto		Address:

		c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016

		Facsimile: [ ]

		Email Address: fmusto2@gmail.com

Toshihide Hokari		Address:

		c/o Franklin Electronic Publishers Incorporated, One Franklin Plaza Burlington, New Jersey 08016

		Facsimile: [ ]

		Email Address: toshihide.hokari.wh00@wharton.upenn.edu

EX-7.09 10 dex709.htm NOAH PURCHASE AGREEMENT Noah Purchase Agreement

Exhibit 7.09

Execution Copy

SHARE PURCHASE AGREEMENT

THIS SHARE PURCHASE AGREEMENT (the “Agreement”), made and entered into as of the 30th day of September, 2009, by and among Shining Sea Limited, an exempted company organized under the laws of the Island of Bermuda (“Shining Sea”), and Dynamic View Investments Limited and Global Wise Technologies Ltd., each a British Virgin Islands limited liability company (collectively, the “Shareholders”).

RECITALS

WHEREAS, the Shareholders are holders of certain Ordinary Shares, per value 0.00005 per share (the “Ordinary Shares”), of Noah Education Holdings Ltd., a Cayman Islands company (“Noah”), listed on The New York Stock Exchange (“NYSE”);

WHEREAS, Shining Sea is the holder of certain shares of common stock, par value $0,001 per share (the “Common Stock”), of Franklin Electronic Publishers, Incorporated (“Franklin”);

WHEREAS, the Shareholders wish to sell, and Shining Sea wishes to purchase US$2,000,000 worth of Ordinary Shares of Noah on the terms and subject to the conditions set forth herein; and

WHEREAS, simultaneously with the execution and delivery of this Agreement, Shining Sea is entering into a Share Purchase Agreement with Noah, pursuant to which, on the first business day following the Effective Time, Shining Sea shall sell, and Noah shall purchase, 800,000 shares of the Convertible Redeemable Preferred Stock of the Surviving Corporation (the “Shining Sea Share Purchase Agreement”):

1.	THE PURCHASE AND SALE OF SHARES

1.1 Shares. Subject to the terms and conditions of this Agreement, at the Closing (as defined below), the Shareholders shall sell, and Shining Sea shall purchase, 365,630 of Ordinary Shares (the “Shares”) at per share price of US$5.47, for an aggregate price of US$1,999,996.10 (the “Purchase Price”). Each Shareholder shall sell and transfer the number of Shares set forth opposite the name of such Shareholder in Schedule 1 attached hereto and made a part hereof.

2.	CLOSING

2.1 The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at 10:00 a.m. (New York time) on the business day (the “Closing Date”) immediately following the date on which all conditions to Closing as set forth in Sections 5 and 6 of this Agreement have been either satisfied or waived by the party entitled to waive such condition (excluding conditions capable of being satisfied only as part of Closing), in the offices of Renaissance Technologies LLC at 800 Third Avenue, New York, New York 10022 or at such other place as the parties may agree. The Closing shall take place simultaneously with the closing under the Shining Sea Share Purchase Agreement.

2.2 On the Closing Date, (i) Shining Sea shall pay each Shareholder such Shareholder’s share of the Purchase Price by wire transfer of immediately available funds in accordance with the Shareholders’ written wire instructions (which shall be provided to Shining Sea at least three (3) business days prior to the Closing Date) and (ii) the Shareholders shall deliver duly executed instruments of transfer and instructions to reflect Shining Sea’s ownership of the Shares on Noah’s share register and promptly thereafter deliver the underlying certificate(s) for the Shares.

3.	REPRESENTATIONS AND WARRANTIES OF SHINING SEA

Shining Sea hereby represents and warrants to each of the Shareholders that:

3.3 Consents and Approvals. The execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of and compliance with the terms and conditions hereof (a) do not materially violate or conflict with (i) any provision of the organizational documents of Shining Sea, (ii) any judgment, decree

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or order of any governmental authority to which Shining Sea is a party or by which Shining Sea any of its properties is bound or (iii) any law or arbitration award applicable to Shining Sea; or (b) require any filing with, or the obtaining of any permit, authorization, consent or approval of, any third party or governmental authority.

3.4 Purchase for Investment. Shining Sea is acquiring the Shares solely for investment for its own account and not with the view to, or for resale in connection with, any “distribution” (as such term is used in Section 2(11) of the Securities Act of 1933, as amended (the “Securities Act”)) thereof.

3.5 Sophistication of Investor. By reason of its business or financial experience, Shining Sea is capable of evaluating the risks and merits of an investment in Noah and of protecting its own interests in connection with this investment.

3.6 Accredited Investor Status. Shining Sea is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D as promulgated by the United States Securities and Exchange Commission (“SEC”) under the Securities Act.

3.7 Reliance on Exemptions. Shining Sea understands that the Shares are being sold to it in reliance on specific exemptions from the registration requirements of the United States federal and state securities laws and that the Shareholders are relying in part on the truth and accuracy of, and such Shining Sea’s compliance with, the representations, warranties, agreements, acknowledgements and understandings of Shining Sea set forth herein in order to determine the availability of such exemptions and the eligibility of Shining Sea to acquire the Shares.

3.8 Transfer or Resale. Shining Sea understands that the Shares have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless subsequently registered thereunder or sold, assigned or transferred pursuant to an exemption from registration under the Securities Act.

3.9 Legends. Shining Sea understands that the stock certificates representing the Share, except as set forth below, may bear a restrictive legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

The legend set forth above shall be removed in respect of the Shares and the Noah’s transfer agent shall issue a stock certificate without such legend to the holder thereof, unless otherwise required by state securities laws, if (i) such Shares are registered for resale under the

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Securities Act and such shares have been sold in compliance with applicable prospectus delivery requirements, (ii) such holder provides Noah with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Share may be made without registration under the Securities Act, or (iii) such holder provides Noah with reasonable assurance that the Shares have been sold, assigned or transferred pursuant to Rule 144 under the Securities Act.

3.10 Independent Review. Shining Sea has conducted its own independent review and analysis of Noah and its condition, business and prospects, and acknowledges that Shining Sea in entering into this Agreement has relied exclusively upon its own investigation and analysis, and Shining Sea:

(a) acknowledges that it has undertaken such due diligence of Noah as Shining Sea deems adequate;

(b) acknowledges that none of the Shareholders makes any representation or warranty, either express or implied, as to Noah or its condition, business or prospects; and

(c) agrees, to the fullest extent permitted by law, that none of the Shareholders will have any liability or responsibility whatsoever to Shining Sea on any basis (including in contract or tort, under federal or state securities laws or otherwise) based on any information provided or made available, or statements made, to Shining Sea with respect to Noah prior to the execution of this Agreement.

4.	REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS

Each of the Shareholders, severally but not jointly, hereby represents and warrants to Shining Sea as follows:

4.1 Organization. Such Shareholder is a company duly organized and validly existing under the laws of the British Virgin Islands and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder.

4.2 Authorization. This Agreement has been duly and validly authorized, executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

4.3 Consents and Approvals; No Violations. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the terms and conditions hereof (a) do not materially violate or conflict with (i) any provision of the organizational documents of such Shareholder, (ii) any judgment, decree or order of any governmental authority to which such Shareholder is a party or by which such Shareholder or any of its properties is bound or (iii) any law or arbitration award applicable to such Shareholder; (b) require any filing with, or the obtaining of any permit, authorization, consent or approval of, any third party or governmental authority (other than those

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filings required under U.S. federal securities laws and the regulations of PRC State Administration of Foreign Exchange); or (c) violate or conflict with any judgment, decree or order of any governmental authority to which such Shareholder is a party or by which such Shareholder any of its properties is bound or any law or arbitration award applicable to such Shareholder.

4.4 Ownership and Transfer of Shares. Each Shareholder has good title to the Shares such Shareholder shall sell pursuant to this Agreement. The Shares will be transferred to Shining Sea free and clear of any mortgages, liens, pledges, security interests, charges, claims or encumbrances (“Liens”).

4.5 American Depositary Shares. To the knowledge of the Shareholders, following the expiration of the Lockup Period, Shining Sea will be entitled to deposit the Shares in accordance with and subject to the terms and conditions of the existing Deposit Agreement entered into by Noah and The Bank of New York (the “Depository”) (assuming such agreement is effective at that time) and to receive a number of American Depositary Shares (the “ADSs”) equal to the number of Shares so deposited and accepted by the Depository (assuming the exchange ratio between the ADSs and the Ordinary Shares remains at 1:1 at that time) and such ADSs may be freely transferable by Shining Sea pursuant to Rule 144 under the Securities Act (assuming Shining Sea is not an affiliate of Noah at such time under Rule 144) without any further registration under the Securities Act.

5.	CONDITIONS TO THE OBLIGATIONS OF SHINING SEA

5.1 Representations and Warranties True. All of the representations and warranties of the Shareholders contained in this Agreement shall be true and correct in all material respects when made and on the Closing Date as though such representations and warranties were made on such date.

5.2 Performance. Each of the Shareholders shall have performed and complied in all material respects with all covenants and obligations under this Agreement which are required to be performed or complied with by the Shareholders.

5.3 Merger Agreement. The Merger shall have been consummated.

5.4 Shining Sea Share Purchase Agreement. All of the conditions to closing under the Shining Sea Share Purchase Agreement have been satisfied or waived (other than the condition in respect of the closing of this Agreement).

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6.	CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS

The obligations of the Shareholders to consummate the transactions contemplated hereunder shall be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived in whole or in part by either of the Shareholders:

6.3 Merger Agreement. The Merger shall have been consummated.

6.4 Shining Sea Share Purchase Agreement. All of the conditions to closing under the Shining Sea Share Purchase Agreement have been satisfied or waived (other than the condition in respect of the closing of this Agreement).

7.	INDEMNIFICATION

7.1 Survival. The representations and warranties of the parties set forth in this Agreement shall survive for a period of twelve (12) months following the Closing.

7.2 Indemnification Obligations of Shining Sea. From and after the Closing, Shining Sea will indemnify and hold harmless each of the Shareholders from, against and in respect of any and all losses, claims, liabilities, damages and expenses (collectively, “Losses”) arising out of (a) any breach of any representation or warranty made by Shining Sea in this Agreement or (b) any breach of any covenant, agreement or undertaking made by Shining Sea in this Agreement.

7.3 Indemnification Obligations of the Shareholders. From and after the Closing, each of the Shareholders, severally and not jointly, will indemnify and hold harmless Shining Sea and its officers, directors, employees, agents and representatives from, against and in respect of any and all Losses arising out of (a) any breach of any representation or warranty made by such Shareholder in this Agreement or (b) any breach of any covenant, agreement or undertaking made by such Shareholder in this Agreement.

8.	COVENANTS OF SHINING SEA

Shining Sea hereby covenants and agrees that, during the period beginning from the Closing Date and continuing to and including the second anniversary of the Closing Date (the “Lockup Period”), it will not offer, sell, transfer, pledge, grant any option to purchase, or otherwise dispose of any of the Shares acquired pursuant to this Agreement.

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9.	MISCELLANEOUS

9.4 Governing Law; Venue. This Agreement will be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof) as to all matters, including matters of validity, construction, effect, performance and remedies. Each Party hereby irrevocably agrees that any legal dispute will be brought only to the exclusive jurisdiction of the United States District Court for the Southern District of New York, and each party hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding that is brought in such court has been brought in an inconvenient forum.

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9.6 Termination. This Agreement may be terminated at any time prior to the Closing Date:

(a) by written agreement of the parties hereto;

9.7 Announcement. Shining Sea agrees that Noah may make a press release promptly after the date of this Agreement in respect of Shining Sea entering into this Agreement to acquire the Shares provided that such press release shall be subject to the prior written approval of Shining Sea, such approval not to be unreasonably withheld.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the date first written above.


SHINING SEA LIMITED

By:		/s/ LORI BAZZARD
Name:		Lori Bazzard
Title:		Alternate Director

By:		/s/ MARCUS BURNS
Name:		Marcus Burns
Title:		Alternate Director


SHAREHOLDERS:

DYNAMIC VIEW INVESTMENTS LIMITED

By:		/S/ XIANQUAN XIAO
Name:		Xianquan Xiao
Title:		Director


GLOBAL WISE TECHNOLOGIES LTD.

By:		/S/ XIAOTONG WANG
Name:		Xiaotong Wang
Title:		Director

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Schedule 1


Name of Shareholders		Number of Ordinary Shares to be transferred
Dynamic View Investments Limited		270,000
Global Wise Technologies Ltd.		95,630
Total		365,630

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