Common use of Capital Structure Clause in Contracts

Capital Structure. (a) The authorized stock of Parent consists of 50,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of the Parent consists of 50,000,000 Three Hundred Million (300,000,000) shares of Common Stockcommon stock, par value $.001 0.0001 per share, and One Hundred Million (100,000,000) shares of preferred stock, par valuevalue $0.0001 per share, of which 29,767,708 (i) 3,920,709 shares were of common stock are issued and outstanding as of December 31(before giving effect to the issuances to be made at Closing), 1996, (ii) Five Hundred and 27,988,501 Ninety Five Thousand (595,000) shares of preferred stock are designated as Series A Convertible Preferred Stock, $.001 par valueof which Five Hundred and Ninety Five Thousand (595,000) are issued and outstanding, (iii) Three Hundred Twenty-Four Thousand Six Hundred Seventy One (324,671) shares of preferred stock are designated as Series B Convertible Preferred Stock, of which 18,518,500 Three Hundred Twenty-Four Thousand Six Hundred Seventy One (324,671) are issued and outstanding, (iv) One Hundred Fifty-Six Thousand Two Hundred Thirty-One (156,231) shares of preferred stock are designated as Series A B-1 Convertible Preferred Stock, all of which One Hundred Fifty-Six Thousand Two Hundred Thirty-One (156,231) are issued and outstanding; (v) Three Hundred and Fifty-Five Thousand (355,000) shares of preferred stock are designated as Series C Convertible Preferred Stock, of which 355,000 are issued and outstanding, and 9,310,001 (vi) no shares of Parent Stock or preferred stock are designated Series B Preferred Stockheld by the Parent in its treasury. No other shares of capital stock or other voting securities of the Parent were issued, all of which are issued and reserved for issuance or outstanding. All such outstanding shares have been duly authorizedof the capital stock of the Parent are, and all such shares that may be issued and outstanding shares have been prior to the date hereof will be when issued, duly authorized, validly issued, are fully paid and nonassessable non-assessable and are free not subject to or issued in violation of any liens purchase option, call option, right of first refusal, preemptive right, subscription right or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion similar right under any provision of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997Nevada Revised Statutes, the Board of Directors Parent Charter, the Parent Bylaws or any Contract to which the Parent is a party or otherwise bound. Except as set forth in the Parent SEC Documents, there are no bonds, debentures, notes or other indebtedness of the Company approved Parent having the right to vote (ior convertible into, or exchangeable for, securities having the right to vote) increasing on any matters on which holders of Parent common stock may vote (“Voting Parent Debt”). Except in connection with the authorized shares Transactions and except as set forth in the Parent SEC Documents, as of Common Stock to 100,000,000 sharesthe date of this Agreement, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments convertible or agreements exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any character kind to which the Parent is a party or by which it is bound (i) obligating the Parent to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, the Parent or any Voting Parent Debt, (ii) obligating the Parent to issue, grant, extend or enter into any such option, warrant, call, right, commitment security, commitment, Contract, arrangement or agreement. undertaking or (biii) The that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of the Parent. As of the date of this Agreement, there are no outstanding contractual obligations of the Parent to repurchase, redeem or otherwise acquire any shares of capital stock of the Parent. Except as set forth in the Parent Common Stock SEC Documents, the Parent is not a party to be issued pursuant any agreement granting any security holder of the Parent the right to cause the Merger will be duly authorized, validly issued, fully paid and non-assessableParent to register shares of the capital stock or other securities of the Parent held by such security holder under the Securities Act.

Capital Structure. (a) The authorized capital stock of Parent Target consists of 50,000,000 (i) Twenty-Five Million (25,000,000) shares of Common Stock, par value $.001 par value.0001 per share, of which 29,767,708 there were Eight Million, Ninety-Eight Thousand, Nine Hundred Three (8,098,903) shares were issued and outstanding and One Hundred Ninety-Six Thousand, Thirty-Four (196,034) shares in treasury as of the close of business on December 31, 19962000, and 27,988,501 (ii) Five Million (5,000,000) shares of Preferred Stock (the "Target Preferred Stock" and, together with the Target Common Stock, $.001 par value----------------------- the "Target Stock"), of which 18,518,500 no shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. As of the ------------ date of this Agreement, there are no other outstanding shares of capital stock or voting securities of Target and no outstanding commitments to issue any shares of capital stock or voting securities of Target other than pursuant to the exercise of options and Purchase Rights outstanding as of the date hereof under the Target Equity Plans. (b) All such outstanding shares have been of Target Common Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and are not subject to preemptive rights or rights of first refusal created by statute, the Certificate of Incorporation or the Bylaws of Target or any agreement to which Target is a party or by which it is bound. Parent has also All outstanding shares of Target Common Stock and Target Preferred Stock were issued in compliance with all applicable federal and state securities laws. (c) As of February 16, 2001, Target had reserved (i) 3,900,000 Two Million, Three Hundred Thirty-Nine Thousand, Eight Hundred Eighty-Five (2,339,885) shares of Target Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option the 1993 Plan, (ii) 160,000 One Hundred Thousand (100,000) shares of Series A Preferred Target Common Stock for issuance upon to employees and consultants pursuant to the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock")1996 Plan, (iii) 160,000 Sixty-Thousand (60,000) shares ------------- of Target Common Stock under the Directors Option Plan, (iv) Four Hundred Fifty Thousand (450,000) shares of Target Common Stock for issuance to employees pursuant to the Target ESPP, and (v) Twenty Thousand (20,000) shares of Target Common Stock for issuance upon conversion exercise of out-of-plan stock options. Between September 30, 2000 and the date of this Agreement, Target has not issued any additional shares or granted any additional options under the Target Equity Plans or other rights to purchase or receive appreciation or compensation in respect of or in relation to Target Stock. Section 2.3 of the Warrant Stock and (iv) 1,000,000 Target Disclosure Schedule sets forth, as of the date of this Agreement, the number of outstanding options to purchase Target Common Stock, the maximum number of shares of Target Common Stock for issuance upon subject to Purchase Rights under the Target ESPP, and all other rights to acquire shares of Target Common Stock pursuant to the Target Equity Plans and the applicable exercise of outstanding warrants to and/or purchase Common Stockprices. In February, 1997, the Board of Directors Section 2.3 of the Company approved Target Disclosure Schedule sets forth a true and complete list as of the date of this Agreement of all holders of (i) increasing outstanding options under each of the authorized Target Stock Option Plans, including the number of shares of Target Common Stock subject to 100,000,000 shareseach such option, the exercise or vesting schedule, the exercise price per share and the term of each such option, (ii) increasing outstanding Purchase Rights under the Target ESPP, including the number of authorized shares of Preferred Target Common Stock subject to 37,764,153 shareseach such Purchase Right, the next exercise date and the purchase price per share. On the Closing Date, Target shall deliver to Acquiror an updated Section 2.3 of the Target Disclosure Schedule that contains information of the type referred to in preparation for the preceding sentence that is current as of a sale date as close to the Closing Date as is reasonably practicable. All outstanding options to purchase Target Common Stock have been duly authorized by the Target Board of Series C Preferred StockDirectors or a committee thereof, are validly issued, and were issued in compliance with all applicable federal and state securities laws. (iiid) adopting Target has not taken any action that would result in the Company's 1997 Acquisition accelerated vesting, exercisability or payment of any options to purchase Target Common Stock Option Planas a consequence of the execution of, reserving 10,000,000 or consummation of the transactions contemplated by, this Agreement. The Merger will not accelerate the vesting, exercisability or payment of Assumed Options or the shares of Acquiror Common Stock thereunder; all that will be subject to those options upon Acquiror's assumption of these actions are currently pending. There the Assumed Options in the Merger. (e) Except (i) for the rights created pursuant to this Agreement and (ii) for or with respect to rights granted under the Target Equity Plans, as of the date of this Agreement there are no other options, warrants, calls, rights, commitments commitments, agreements or agreements arrangements of any character to which Parent Target or any Target Subsidiary is a party or by which it Target or any Target Subsidiary is bound relating to the issued or unissued capital stock of Target or any Target Subsidiary or obligating Parent Target or any Target Subsidiary to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Target or any Target Subsidiary or obligating Parent Target or any Target Subsidiary to grant, extend extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. (bf) The As of the date of this Agreement, there are no contracts, commitments or agreements relating to rights of refusal, co-sale rights or registration rights granted by Target with respect to any shares of Parent Common Stock Target capital stock. (g) As of the date of this Agreement, there are no contracts, commitments or agreements relating to be issued pursuant voting of Target's capital stock (i) between or among Target and any of its stockholders and (ii) to the Merger will be duly authorizedknowledge of Target, validly issuedbetween or among any of Target's stockholders or between or among any of Target's stockholders and any third party, fully paid except for the stockholders delivering Irrevocable Proxies (as defined below). True and non-assessablecomplete copies of all Target Stock Option Plans and forms of stock option agreements thereunder have been made available to Acquiror and such Target Stock Option Plans and agreements have not been amended, modified or supplemented, and there are no agreements to amend, modify or supplement such Target Stock Option Plans and agreements in any case from the form publicly filed by Target on or prior to February 8, 2001.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 25,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued Stock and outstanding as of December 31, 1996, and 27,988,501 7,000,000 shares of Preferred Stock, $.001 .10 par valuevalue per share. Of the 7,000,000 shares of Preferred Stock authorized, of which 18,518,500 1,500,000 shares are have been designated Series A Junior Participating Preferred Stock (the "Series A Stock") and 2,138,702 shares have been designated as Series B Preferred Stock (the "Series B Stock"). At July 31, all 1998, there were 13,244,415 shares of which are Common Stock issued and outstanding, no shares of Series A Stock issued and outstanding, and 9,310,001 2,138,702 shares are designated of Series B Preferred Stock, all of which are Stock issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been duly authorized and validly issued, 4 issued and are fully paid and nonassessable non-assessable and no issued and outstanding shares are free of any liens or encumbrances other than any liens or encumbrances subject to preemptive rights created by statute, the Certificate of Incorporation or imposed upon Bylaws or any agreement to which the holders thereofCompany is a party or by which the Company may be bound. Parent All outstanding shares of the Company's capital stock have been issued in compliance with applicable federal and state securities laws. The Company has also reserved (i) 3,900,000 for issuance shares of Common Stock in connection with the following options and convertible securities: (i) 3,000,000 shares of Common Stock, reserved for issuance to employees and consultants pursuant to Parentthe Company's 1996 1985 Stock Option Plan, of which, at July 31, 1998, options to purchase 2,240,650 shares were outstanding and 234,036 shares remain available for issuance pursuant to options that may be granted under such Plan; (ii) 160,000 60,000 shares of Series A Preferred Stock Common Stock, reserved for issuance upon pursuant to the exercise Company's 1994 Stock Award Plan, of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock")which, at July 31, 1998, 2,600 shares remained available for future awards; (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 2,300,000 shares of Common Stock Stock, reserved for issuance upon the exercise of outstanding warrants pursuant to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition 1998 Stock Option Plan, reserving 10,000,000 of which, at July 31, 1998, options to purchase 27,000 shares were outstanding and 2,273,000 shares remain available for issuance pursuant to options that may be granted under such Plan. 1,500,000 shares of Common the Series A Stock thereunder; all of these actions are currently pendinghave been reserved for issuance pursuant to the Rights Agreement. There Except as set forth on Schedule 2.2, there are no other options, warrants, calls, rights, commitments conversion privileges or agreements of other contractual rights presently outstanding or in existence to purchase or otherwise acquire any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any authorized but unissued shares of the Company's capital stock or other securities or the capital stock or other securities of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreementthe Company Subsidiary. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent RECO consists of 50,000,000 306 million shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved capital stock including (i) 3,900,000 270 million shares of RECO Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option PlanStock, (ii) 160,000 6 million shares of Series A preferred stock, par value $.10 per share ("RECO Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 30 million shares of series common stock, par value $.10 per share ("RECO Series Stock"). The authorized capital stock of OPCO consists of 306 million shares of capital stock including (x) 270 million shares of OPCO Common Stock, (y) 6 million shares of preferred stock, par value $.10 per share ("OPCO Preferred Stock"), and (z) 30 million shares of series common stock, par value $.10 per share ("OPCO Series Stock"). At the close of business on December 23, 1997, (i) 88,969,888 paired shares of RECO Common Stock thereunderand OPCO Common Stock were issued and outstanding, (ii) no shares of RECO Preferred Stock and no shares of OPCO Preferred Stock were issued and outstanding, (iii) no shares of RECO Series Stock and no shares of OPCO Series Stock were issued and outstanding, (iv) no shares of RECO Common Stock and no shares of OPCO Common Stock were held by RECO or OPCO in their respective treasuries; all provided, however, that, OPCO currently holds approximately 1.3 million shares of these actions are currently pendingRECO Common Stock, (v) 5% of the issued and outstanding shares of RECO Common Stock and 5% of the issued and outstanding shares of OPCO Common Stock plus an additional 3,522,877 Paired Shares of each were reserved for issuance pursuant to equity plans filed as exhibits to or described in the RECO SEC Documents (collectively, the "RECO Stock Plans"), and (vi) 3,350,746 shares of RECO Common Stock and 3,350,746 shares of OPCO Common Stock were reserved for issuance upon the conversion of RECO's outstanding convertible senior notes and convertible debentures described in Section 3.02(c) of the RECO Disclosure Schedule. There are At the close of business on the Representation Date, except as set forth above, there were no other outstanding stock options, warrantsstock appreciation rights or rights (other than employee stock options or other rights ("RECO Employee Stock Options") to purchase or receive RECO and OPCO Common Stock granted under the RECO Stock Plans) to receive shares of RECO Common Stock on a deferred basis granted under the RECO Stock Plans or otherwise. Section 3.02(c) of the RECO Disclosure Schedule sets forth a complete and correct list, callsas of the Representation Date, rightsexcept as set forth above, commitments or agreements of any character the number of Paired Shares subject to RECO Employee Stock Options. All outstanding shares of capital stock of the RECO Companies are, and all shares which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to may be issued, delivered, sold, repurchased or redeemed, any including shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger this Agreement, will be be, when issued, duly authorized, validly issued, fully paid and non-assessablenonassessable and not subject to preemptive rights. As of the close of business on the Representation Date, there were no bonds, debentures, notes or other indebtedness or securities of the RECO Companies having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of RECO and OPCO may vote. Except as set forth above, as of the close of business on the Representation Date, there were no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the RECO Companies or any of their respective Subsidiaries is a party or by which any of them is bound obligating the RECO Companies or any of their respective Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of the RECO Companies or of any of their respective Subsidiaries or obligating the RECO Companies or any of their respective Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. Except for agreements entered into with respect to the RECO Stock Plans and except as set forth above, as of the close of business on the Representation Date, and except as could not reasonably be expected to be required to be disclosed pursuant to the RECO SEC Documents, there were no outstanding contractual obligations of the RECO Companies or any of their respective Subsidiaries to issue, repurchase, redeem, exchange or otherwise acquire, or to register (under the federal or any state securities laws) for resale, any shares of capital stock of the RECO Companies or any of their respective Subsidiaries. As of the close of business on the Representation Date, there were no outstanding contractual obligations of the RECO Companies to vote or to dispose of any shares of the capital stock of any of their respective Subsidiaries. The Company maintains a shareholder rights plan.

Capital Structure. (a) The authorized capital stock of Parent Qwest consists of 50,000,000 5,000,000,000 shares of Qwest Common Stock and 200,000,000 shares of preferred stock, par value $1.00 per share (the “Qwest Preferred Stock” and together with the Qwest Common Stock, $.001 par valuethe “Qwest Capital Stock”). At the close of business on April 19, 2010, (i) 1,735,923,600 shares of which 29,767,708 shares Qwest Common Stock were issued and outstanding as of December 31, 1996, (excluding treasury and 27,988,501 shares of Preferred Stock, $.001 par valuerabbi trust shares), of which 18,518,500 13,015,655 were Qwest Restricted Shares, (ii) no shares are designated Series A of Qwest Preferred Stock, all of which are Stock were issued and outstanding, (iii) 10,830,529 shares of Qwest Common Stock were held by Qwest in its treasury, (iv) 21,868 shares of Qwest Common Stock were held by Qwest in rabbi trust, (v) 173,592,360 shares of Qwest Common Stock were reserved and 9,310,001 available for issuance pursuant to the Qwest Stock Plans, of which (A) 60,411,831 shares are designated Series B Preferred were issuable upon exercise of outstanding Qwest Stock Options and (B) 35,714,000 shares were potentially issuable under outstanding Qwest performance shares (assuming payout of 200%, which is the maximum attainable), (vi) 5,351,707 shares of Qwest Common Stock were reserved for issuance under the Qwest Employee Stock Purchase Plan (the “Qwest ESPP”), (vii) 24,519,454 shares of Qwest Common Stock were reserved for issuance under the Qwest Savings and Investment Plan (the “Qwest 401(k) Plan”), (viii) 83,267 shares of Qwest Common Stock were reserved for issuance under the Qwest Equity Incentive Plan for Nonemployee Directors, (ix) 10,000,000 shares of Qwest Common Stock were reserved for issuance under the Qwest Nonqualified Employee Stock Purchase Plan (the “Qwest Nonqualified ESPP”), (x) 64,312,614 shares of Qwest Common Stock were reserved for issuance in connection with exchanges of Qwest debt securities for Qwest Common Stock, all and (xi) the number of which are issued and unissued shares of Qwest Common Stock as may be issuable upon conversion of Qwest’s 3.50% Convertible Senior Notes due 2025 (the “Qwest Convertible Notes”) were reserved for issuance. Except as set forth in this Section 4.03(a), at the close of business on April 19, 2010, no shares of capital stock or voting securities of, or other equity interests in, Qwest were issued, reserved for issuance or outstanding. All such shares From the close of business on April 19, 2010 to the date of this Agreement, there have been duly authorizedno issuances by Qwest of shares of capital stock or voting securities of, and all such issued and outstanding shares have been validly issuedor other equity interests in, are fully paid and nonassessable and are free of any liens or encumbrances Qwest, other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares issuance of Qwest Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of Qwest Stock Options outstanding warrants to purchase Series A Preferred Stock (at the "Warrant Stock")close of business on April 19, (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock 2010 and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any accordance with their terms in effect at such option, warrant, call, right, commitment or agreementtime. (b) The All outstanding shares of Parent Qwest Common Stock to (including Qwest Restricted Shares) are, and, at the time of issuance, all such shares that may be issued upon the exercise of Qwest Stock Options or pursuant to the Merger Qwest Stock Plans or the Qwest ESPP will be be, duly authorized, validly issued, fully paid and nonnonassessable and not subject to, or issued in violation of, any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the Qwest Charter, the Qwest By-assessablelaws or any Contract to which Qwest is a party or otherwise bound. Except as set forth above in this Section 4.03, there are not issued, reserved for issuance or outstanding, and there are not any outstanding obligations of Qwest or any Qwest Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, (x) any capital stock of Qwest or any Qwest Subsidiary or any securities of Qwest or any Qwest Subsidiary convertible into or exchangeable or exercisable for shares of capital stock or voting securities of, or other equity interests in, Qwest or any Qwest Subsidiary, (y) any warrants, calls, options or other rights to acquire from Qwest or any Qwest Subsidiary, or any other obligation of Qwest or any Qwest Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, any capital stock or voting securities of, or other equity interests in, Qwest or any Qwest Subsidiary or (z) any rights issued by or other obligations of Qwest or any Qwest Subsidiary that are linked in any way to the price of any class of Qwest Capital Stock or any shares of capital stock of any Qwest Subsidiary, the value of Qwest, any Qwest Subsidiary or any part of Qwest or any Qwest Subsidiary or any dividends or other distributions declared or paid on any shares of capital stock of Qwest or any Qwest Subsidiary. Except for acquisitions, or deemed acquisitions, of Qwest Common Stock or other equity securities of Qwest in connection with (i) the payment of the exercise price of Qwest Stock Options with Qwest Common Stock (including but not limited to in connection with “net exercises”), (ii) required tax withholding in connection with the exercise of Qwest Stock Options, the vesting of Qwest Restricted Shares and the vesting or delivery of other awards pursuant to the Qwest Stock Plans, and (iii) forfeitures of Qwest Stock Options and Qwest Restricted Shares, there are not any outstanding obligations of Qwest or any of the Qwest Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock or voting securities or other equity interests of Qwest or any Qwest Subsidiary or any securities, interests, warrants, calls, options or other rights referred to in clause (x), (y) or (z) of the immediately preceding sentence. With respect to Qwest Stock Options, (i) each grant of a Qwest Stock Option was duly authorized no later than the Grant Date for such option by all necessary corporate action, including, as applicable, approval by the Qwest Board (or a duly constituted and authorized committee or subcommittee thereof), and (ii) the per share exercise price of each Qwest Stock Option was at least equal to the fair market value of a share of Qwest Common Stock on the applicable Grant Date. There are no debentures, bonds, notes or other Indebtedness of Qwest having the right to vote (or, other than the Qwest Convertible Notes, convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of Qwest may vote (“Qwest Voting Debt”). Neither Qwest nor any of the Qwest Subsidiaries is a party to any voting agreement with respect to the voting of any capital stock or voting securities of, or other equity interests in, Qwest. Neither Qwest nor any of the Qwest Subsidiaries is a party to any agreement pursuant to which any Person is entitled to elect, designate or nominate any director of Qwest or any of the Qwest Subsidiaries. (c) Qwest has the right to call all of the outstanding Qwest Convertible Notes for redemption at a redemption price in cash equal to 100% of the principal amount thereof, together with accrued and unpaid interest, on November 20, 2010, and if any holder of Qwest Convertible Notes exercises its conversion rights thereunder, Qwest has the right to pay cash in lieu of all shares that would otherwise be issuable upon such conversion. The Qwest Convertible Notes are not, as of the date hereof, convertible by the holders thereof and Qwest has not issued any shares of Qwest Common Stock upon conversion of the Qwest Convertible Notes.

Capital Structure. (a) The authorized capital stock of Parent Merger Sub consists of 50,000,000 one hundred (100) shares of common stock, par value $0.01 per share (the “Merger Sub Common Stock”). As of the date hereof, $.001 par value, of which 29,767,708 shares were Parent beneficially owns each issued and outstanding as share of December 31Merger Sub Common Stock and, 1996at the Effective Time, Merger Sub will be a direct or indirect wholly owned Subsidiary of Parent. Merger Sub has not incurred nor prior to the Closing shall it incur any liabilities or obligations, except those incurred in connection with its organization and the negotiation of this Agreement and the performance hereof, and 27,988,501 shares the consummation of Preferred Stockthe transactions contemplated hereby, $.001 par valueincluding the Merger. Except as contemplated by this Agreement, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free Merger Sub has not engaged in any business activities of any liens type or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeemkind whatsoever, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter entered into any such optionagreements or arrangements with any Person, warrant, call, right, commitment or agreementbecome subject to or bound by any obligation or undertaking. (b) The authorized capital stock of Parent consists of five million (5,000,000) shares of common stock, par value $0.01 per share (the “Parent Common Stock”) and one million (1,000,000) shares of preferred stock, par value $0.01 per share (the “Parent Preferred Stock”). As of the date of this Agreement: (i) 2,748,269 shares of Parent Common Stock are issued and outstanding (none of which were held by Parent in its treasury); and (ii) no shares of Parent Common Stock are owned by Subsidiaries of Parent. As of the date of this Agreement, (i) 250,000 shares of Parent Preferred Stock are designated by Parent as Series A 6% Cumulative Convertible Preferred Stock (the “Parent Series A Preferred Stock”), of which 186,744 are issued and outstanding and (ii) 150,000 shares of Parent Preferred Stock are designated by Parent as 4% Series B Cumulative Participating Perpetual Pay in Kind Preferred Stock (the “Parent Series B Preferred Stock”), of which 129,614.25 shares were issued and outstanding. As of the date of this Agreement the outstanding shares of Parent Series A Preferred Stock are in the aggregate convertible into 186,744 shares of Parent Common Stock and the outstanding shares of Parent Series B Preferred Stock are convertible into 1,010,317 shares of Parent Common Stock. As of the close of business on October 16, 2009, 657,753 Parent stock options were issued and outstanding. Each outstanding share of Parent Common Stock and Merger Sub Common Stock is duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights or similar rights and issued in compliance with applicable state and federal securities Laws. (c) Each outstanding share of Parent Common Stock to be issued as Merger Consideration pursuant to the Merger this Agreement will be duly authorized, validly issued, fully paid paid, nonassessable and non-assessablefree of preemptive rights or similar rights and issued in compliance with applicable state and federal securities Laws. Parent has reserved from its duly authorized capital stock sufficient shares of Parent Common Stock for issuance in order to meet its obligations pursuant to this Agreement and the transactions contemplated hereby. (d) Section 6.3(d) of the Parent Disclosure Schedule sets forth a true, complete and correct list, as of the date of this Agreement, of the record owners of the shares of (i) the Parent Common Stock, (ii) the Parent Preferred Stock, (iii) options to purchase Parent Common Stock or Parent Preferred Stock and (iv) restricted stock units in respect of the Parent Common Stock and the Parent Preferred Stock, in each case indicating the number of such shares or units held of record by each such Person and, as applicable, the exercise price, conversion rate or price and vesting details of such shares or units. (e) There are not issued, reserved for issuance or outstanding (i) any securities of Parent or Merger Sub convertible into or exchangeable or exercisable for shares of Parent Common Stock or Merger Sub Common Stock, respectively, other voting securities or equity interests of Parent or Merger Sub or (ii) any warrants, calls, options or other rights to acquire from Parent or Merger Sub, and no obligation of Parent or Merger Sub to issue any capital stock, voting securities, equity interests or securities convertible into or exchangeable or exercisable for Parent Common Stock, Merger Sub Common Stock or voting securities of Parent or Merger Sub. There are not any outstanding obligations of Parent or Merger Sub to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. Neither Parent nor Merger Sub is a party to any voting Contract with respect to the voting of any such securities. (f) Parent has obtained all necessary waivers such that no holder of any capital stock of Parent has any preemptive rights or other rights to purchase additional shares of Parent in connection with the Merger and any of the transactions contemplated hereby, including without limitation the Initial Investment and the distribution of the Merger Consideration to the Company Stockholders. (g) There are no bonds, debentures, notes or other Indebtedness of Parent or Merger Sub having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of Parent or Merger Sub, respectively, may vote.

Capital Structure. (a) The Parent is authorized stock of Parent consists of 50,000,000 to issue 150,000,000 shares of Common Stockcapital stock, consisting of 125,000,000 Parent Shares, 25,000,000 shares of preferred stock, $.001 1.00 par valuevalue per share (the “Parent Preferred Stock”), of which 29,767,708 4,000,000 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of have been designated 7.875% Series D Cumulative Redeemable Preferred Stock (“Parent Series D Preferred Stock”), $.001 par value, of which 18,518,500 1,060,000 shares are have been designated 6% Series A E Cumulative Convertible and Redeemable Preferred Stock (“Parent Series E Preferred Stock”) and 7,000,000 shares have been designated 7.625% Series F Cumulative Redeemable Preferred Stock (“Parent Series F Preferred Stock”). At the close of business on September 11, all of which are 2006, (i) 62,955,103 Parent Shares were issued and outstanding, and 9,310,001 (ii) 4,000,000 shares are designated of Parent Series B D Preferred Stock, all 74,989 shares of which are Parent Series E Preferred Stock and 7,000,000 shares of Parent Series F Preferred Stock were issued and outstanding, (iii) 76,247 Parent Shares were held in the treasury of Parent, (iv) 629,243 Parent Shares were reserved for issuance upon exercise of options to purchase Parent Shares (“Parent Stock Options”) issued and outstanding pursuant to Parent’s Stock Plan for Non-Employee Directors, 2005 Long-Term Incentive Plan and 1995 Stock Incentive Plan (together, and each as amended, the “Parent Stock Plans”), (v) 1,970,217 Parent Shares were reserved for additional awards pursuant to Parent Stock Plans, (vi) 57,401 Parent Shares were reserved for issuance upon conversion of Parent Series E Preferred Stock and (vii) 1,743,576 Parent Shares were reserved for issuance under Parent’s Amended and Restated Dividend Reinvestment and Stock Purchase Plan. All such shares As of the close of business on September 11, 2006, except as set forth above, no Parent Shares were issued, reserved for issuance or outstanding, no Parent Stock Options have been granted and there are not any phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any capital stock of the Parent. Since September 11, 2006 and on or prior to the date of this Agreement, except for the exercise of any Parent Stock Options referred to in clause (iii) above, Parent has not issued any Parent Shares or made any grant of awards under the Parent Stock Plans or authorized or entered into any Contract to do any of the foregoing. There are no outstanding stock appreciation rights with respect to the capital stock of Parent. Each outstanding Parent Share is, and each Parent Share which may be issued pursuant to the Parent Stock Plans will be, when issued, duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other not subject to preemptive rights. Other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees Shares and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Parent Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other authorized classes of capital stock of Parent. Other than the Parent Preferred Shares, there are no outstanding bonds, debentures, notes or other indebtedness of Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of Parent Shares may vote. Except as set forth above or on Section 4.4(a) of the Parent Disclosure Letter, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments commitments, agreements, arrangements or agreements undertakings of any character kind to which Parent or any Parent Subsidiary is a party or by which it any of them is bound obligating Parent or any Parent Subsidiary to issue, deliver, sell, repurchase deliver or redeemsell or create, or cause to be issued, delivereddelivered or sold or created, sold, repurchased or redeemed, any additional shares of the capital stock stock, Parent Stock Options or other voting securities or Stock Equivalents of Parent or of any Parent Subsidiary or obligating Parent or any Parent Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment commitment, agreement, arrangement or agreementundertaking. As of the date of this Agreement, except as set forth in Section 4.4(a) of the Parent Disclosure Letter, there are no outstanding contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock of Parent or any Parent Subsidiary. There are no outstanding agreements to which Parent, a Parent Subsidiary or any of their respective officers or directors is a party concerning the voting of any capital stock of Parent or any of Parent Subsidiary. (b) The shares Parent Shares, when issued in accordance with the terms of Parent Common Stock to be issued pursuant to the Merger this Agreement, will be duly authorized, validly issued, fully paid and non-assessablenonassessable and not subject to preemptive rights.

Capital Structure. (a) The authorized capital stock of Parent consists of 50,000,000 480,000,000 shares of Parent Common Stock and 30,000,000 shares of preferred stock, par value $1.00 per share, of Parent (the "Parent Authorized Preferred Stock, $.001 par value"), of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such 2,500,000 shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A designated as $3.50 Cumulative Convertible Preferred Stock (the "Warrant Parent Convertible Preferred Stock") and 1,200,000 shares have been designated as Series A Junior Participating Preferred Stock (the "Parent Junior Preferred Stock"). At the close of business on November 20, 1997, and without giving effect to adjustments that will be required in connection with the Stock Split: (i) 159,915,778 shares of Parent Common Stock were issued and outstanding; (ii) 3,707,685 shares of Parent Common Stock were issued and held by Parent in its treasury or by subsidiaries of Parent; (iii) 160,000 2,499,372 shares ------------- of Parent Convertible Preferred Stock were issued and outstanding; (iv) no shares of Parent Junior Preferred Stock were issued and outstanding; (v) 5,859,052 shares of Parent Common Stock were reserved for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Parent Convertible Preferred Stock, and ; (iiivi) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The 13,995,990 shares of Parent Common Stock were reserved for issuance upon conversion of Parent's 6% Convertible Subordinated Debentures, Due 2005 (the "Parent Convertible Debentures" and, together with the Parent Convertible Preferred Stock, the "Parent Convertible Securities"); (vii) 11,305,720 shares of Parent Common Stock reserved for issuance upon exercise of warrants (the "Parent Warrants"); (viii) 23,570,792 shares were reserved for issuance pursuant to the stock-based plans identified in Section 3.3(c) of the Parent Disclosure Schedule (such plans, collectively, the "Parent Stock Plans"), of which 12,912,597 shares are subject to outstanding employee or director stock options, deferred stock awards or other rights to purchase or receive Parent Common Stock granted under the Parent Stock Plans (collectively, "Parent Stock Options"); and (viii) other than as set forth above, no other shares of Parent Authorized Preferred Stock have been designated or issued. All outstanding shares of capital stock of Parent are, and all shares thereof which may be issued pursuant to the Merger this Agreement or otherwise will be be, when issued, duly authorized, validly issued, fully paid and non-assessable.nonassessable and not subject to preemptive rights. Except as set forth in this Section 3.3(c), except for the declaration by

Capital Structure. (a) The authorized stock of Parent consists of 50,000,000 100,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 32,524,985 shares were issued and outstanding as of December 31September 25, 19961997, and 27,988,501 38,188,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 18,678,500 shares are designated Series A Preferred Stock, all 18,518,500 of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding, and 10,200,000 shares are designated Series C Preferred Stock, 8,454,580 of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan and the 1996 Equity Compensation Plan, (ii) 160,000 shares of Series A Preferred Stock and 2,113,647 shares of Series C Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock and Series C Preferred Stock, respectively (the "Warrant Stock"), (iii) 160,000 6,013,647 shares ------------- of Common Stock for ------------- issuance upon conversion of the Warrant Stock and Stock, (iv) 1,000,000 1,154,167 shares of Common Stock for issuance upon the exercise of warrants issued or outstanding warrants to purchase Common Stock. In Februaryissuable pursuant to the Company's Affiliate Warrant Program or otherwise issued, 1997, the Board of Directors of the Company approved and (iv) increasing the authorized 24,000,000 shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting issuance under the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger Merger, when issued as contemplated hereby, will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent OSI consists of 50,000,000 30,000,000 shares of OSI Common Stock, $.001 .0001 par value, and 3,000,000 shares of which 29,767,708 Preferred ▇▇▇▇▇, $.▇▇▇▇ par value ("OSI Preferred Stock"). As of March 14, 1997, (i) 7,647,962 shares of OSI Common Stock were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stockoutstanding, all of which are duly authorized, validly issued, fully paid and nonassessable; (ii) no shares of OSI Preferred Stock were issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved ; (iiii) 3,900,000 no shares of OSI Common Stock or OSI Preferred Stock were held in the treasury of OSI or by subsidiaries of OSI; and (iv) 3,500,599 shares of OSI Common Stock were reserved for future issuance pursuant to the OSI Stock Plans, including (A) 1,234,431 shares reserved for issuance to employees and consultants pursuant to Parent's 1996 under the 1992 Stock Option Plan, 1,148,421 of which were subject to or reserved for outstanding options and 86,010 of which were reserved for future option grants; (iiB) 160,000 125,000 shares of Series A Preferred Stock reserved for issuance upon under the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition 1995 Director Stock Option Plan, reserving 10,000,000 55,000 of which were subject to or reserved for outstanding options and 70,000 of which were reserved for future option grants; (C) 2,000,000 shares reserved for issuance under the 1996 Equity Incentive Plan, 800,000 of which were subject to or reserved for outstanding options and 1,200,000 of which were reserved for future issuance; (D) 141,168 shares reserved for future issuance under the OSI Purchase Plan; and (E) 98,000 shares reserved for issuance pursuant to exercise of warrants, the material terms of which warrants are described in the OSI Disclosure Letter. No change in such capitalization has occurred since such date other than the exercise and termination of outstanding stock options and the accrual of rights under the OSI Purchase Plan, all in the ordinary course. All shares of OSI Common Stock thereunder; subject to issuance as specified above, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be duly authorized, validly issued, fully paid and nonassessable. The terms of the OSI Stock Option Plans permit the assumption or substitution of options to purchase LRC Common Stock as provided in this Agreement, without the consent or approval of the holders of such securities, the OSI stockholders, or otherwise and without any acceleration of the exercise schedule or vesting provisions in effect for those options. The terms of the OSI Purchase Plan permit the conversion of participants' rights thereunder to purchase OSI Common Stock into rights to purchase LRC Common Stock, as described in Section 5.10(b), without the consent or approval of such participants or the OSI stockholders, or otherwise and without any acceleration of the exercise schedule in effect for such rights. The current two-year "offering period" under the OSI Purchase Plan commenced on February 1, 1997 and, except for the purchase rights granted on such commencement date to participants in the current offering period, there are no other purchase rights or options outstanding under the OSI Purchase Plan. True and complete copies of all agreements and instruments relating to or issued under the OSI Stock Option Plans or OSI Purchase Plan have been made available to LRC and such agreements and instruments have not been amended, modified or supplemented, and there are no agreements to amend, modify or supplement such agreements or instruments in any case from the form made available to LRC. (b) OSI owns beneficially and of these actions are currently pendingrecord, directly or through a subsidiary, all outstanding shares of capital stock of each of its subsidiaries free and clear of any security interest, claim, lien, pledge, right, voting trust or proxy or other encumbrance or restriction whatsoever. There are no obligations, contingent or otherwise, of OSI or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of OSI Common Stock or the capital stock of any OSI subsidiary or make any investment (in the form of a loan, capital contribution or otherwise), in any such subsidiary or any other entity other than guarantees of bank obligations of such subsidiaries entered into in the ordinary course of business. (c) Except as set forth in Section 2.2(a) or (b), there are no equity securities of any class of OSI or its subsidiaries, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding. Except as set forth in Section 2.2(a) or (b), there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Parent OSI or any of its subsidiaries is a party or by which it any of them is bound obligating Parent OSI or any of its subsidiaries to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock of Parent OSI or any of its subsidiaries or obligating Parent OSI or any of its subsidiaries to grant, extend extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement. (b) The , and to the knowledge of OSI, except for the Voting Agreements and related proxies contemplated by this Agreement, there are no voting trusts, proxies or other agreements or understandings with respect to the capital shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessableOSI or its subsidiaries.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 30,000,000 shares of Company Common Stock, 800,000 shares of Class A Preferred Stock, $.001 1.00 par value, and 2,000,000 shares of Class B Preferred Stock, $1.00 par value, of which 29,767,708 (i) 333,333 shares were issued and outstanding have been designated as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series Class B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorizedSeries 1987, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan$1.00 par value, (ii) 160,000 152,321 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of have been designated as Series C Preferred Stock, $1.00 par value, (iii) 100,000 shares have been designated as Series 1996 Preferred Stock, $1.00 par value, (iv) 100,000 shares have been designated as Series 1997 Preferred Stock, $1.00 par value and (v) 4,000 shares have been designated as Series 1997-A Preferred Stock (collectively, the "COMPANY PREFERRED STOCK"). At the close of business on April 8, 2003, (i) 9,304,159 shares of Company Common Stock were issued and outstanding, (ii) 193,850 shares of Company Common Stock were held by the Company in its treasury and (iii) adopting no shares of Company Preferred Stock were issued and outstanding or held in the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 treasury. All issued and outstanding shares of Company Common Stock thereunder; all are duly authorized, validly issued and fully paid and nonassessable. SCHEDULE 4.01(C) sets forth a complete and correct list, as of these actions the close of business on April 8, 2003, of the plans pursuant to which Options have been granted and are currently pendingoutstanding (the "COMPANY STOCK PLANS"), the number of shares of Company Common Stock subject to Options and Warrants, and the exercise prices thereof. There are Except as set forth on SCHEDULE 4.01(C), as of the close of business on April 8, 2003, there were no other outstanding securities, options, warrants, calls, rights, commitments rights or agreements of any character to which Parent the Company or any of its subsidiaries is a party obligating the Company or by which it is bound obligating Parent any of its subsidiaries to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased additional shares of capital stock or redeemedother voting securities of the Company or of any of its subsidiaries. As of the close of business on April 8, 2003, there were no outstanding contractual obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of the capital stock of Parent the Company or obligating Parent any of its subsidiaries. The Company has made available to grantPurchaser a complete and correct copy of the Rights Agreement dated as of August 1, extend or enter into any such option1995, warrantas amended to date (the "COMPANY RIGHTS AGREEMENT"), call, right, commitment or agreement. between the Company and the rights agent thereunder relating to rights to purchase Company Common Stock (b) The the "COMPANY RIGHTS"). All outstanding shares of Parent Company Common Stock to be issued pursuant to are duly included for trading on the Merger will be duly authorized, validly issued, fully paid and non-assessableNasdaq SmallCap Market.

Capital Structure. (a) The authorized capital stock of Parent consists of 50,000,000 600,000,000 shares of HDD Common Stock, par value $.001 par value0.01 per share, of which 29,767,708 there were 76,968,118 shares were issued and outstanding as of December 31September 30, 19962000, 1,000,000,000 shares of DSS Common Stock, par value $0.01 per share, of which there were 148,823,768 shares issued and outstanding as of September 30, 2000 (together the "Parent Common Stock"), and 27,988,501 20,000,000 shares of Preferred Stock, par value $.001 par value0.01 per share, of which 18,518,500 no shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and or outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been of Parent Common Stock are duly authorized and validly issued, are fully paid and nonassessable nonassessable, and are free of not subject to any liens or encumbrances other than any liens or encumbrances preemptive rights created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997statute, the Board Restated Certificate of Directors Incorporation or Bylaws of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no Parent or any agreement or other options, warrants, calls, rights, commitments or agreements of any character instrument to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, its properties or cause to be issued, delivered, sold, repurchased or redeemed, any assets are bound. Of the shares of HDD Common Stock outstanding as of September 30, 2000, 1,494,409 were issued as shares of restricted stock and were subject to repurchase upon the capital stock termination of employment of the holder ("Restricted Stock") and of the shares of DSS Common Stock outstanding as of such date, 2,988,809 were shares of Restricted Stock. As of September 30, 2000, Parent had reserved an aggregate of 59,884,263 shares of Parent or obligating Common Stock, net of exercises, for issuance to employees, consultants and non-employee directors pursuant to the Parent Stock Option Plans, under which (i) options were outstanding to purchase an aggregate of 54,630,672 shares; and (ii) 5,253,591 shares were available for future grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The . All shares of Parent Common Stock subject to be issued issuance as aforesaid, upon issuance on the terms and conditions set forth in the instruments pursuant to the Merger will which they are issuable, would be duly authorized, authorized and validly issued, fully paid and non-assessablenonassessable.

Capital Structure. (a) The As of the date of this Agreement, the authorized capital stock of Parent consists of 50,000,000 1,255,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital common stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The consisting of 1,000,000,000 shares of Parent Common Stock and 225,000,000 shares of Applera Corporation--Applied Biosystems Group Common Stock, par value $.01 per share ("AB Stock")) and 10,000,000 shares of preferred stock of Parent (the "Parent Preferred Stock"). As of the close of business on June 11, 2001, there were: (i) 61,561,502.74 shares of Parent Common Stock issued and outstanding; (ii) 13,717 shares of Parent Common Stock held in the treasury of Parent; (iii) 14,127,347.26 shares of Parent Common Stock reserved for issuance pursuant to be Parent's stock option plans, Parent's employee stock purchase plans and Parent's Director Stock Purchase and Deferred Compensation Plan (collectively, the "Parent Stock Plans"); (iv) 13,018,883 shares of Parent Common Stock issuable upon exercise of awarded but unexercised stock options; (v) 56,350 shares of Parent Common Stock issuable upon exercise of currently outstanding warrants to purchase Parent Common Stock; (vi) 1,432,200 shares of Parent Common Stock issuable upon exercise of an option held by a third party; (vii) 211,265,745.85 shares of AB Stock issued and outstanding; (viii) 5,105 shares of AB Stock held in the treasury of Parent; (ix) 31,613,807.05 shares of AB Stock reserved for issuance pursuant to Parent Stock Plans; (x) 27,811,815 shares of AB Stock issuable upon exercise of awarded but unexercised stock options; (xi) 214,794 shares of AB Stock issuable upon exercise of currently outstanding warrants to purchase AB Stock; and (xii) no shares of Parent Preferred Stock outstanding. Except as set forth above and except for shares of participating junior preferred stock issuable pursuant to the Merger will be duly authorizedShareholders' Protection Rights Plan, validly dated as of April 28, 1999 between Parent and BankBoston, N.A., as of the close of business on June 11, 2001, there were no shares of capital stock or other equity securities of Parent issued, fully paid and non-assessablereserved for issuance or outstanding.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 shares of Common Stock, $.001 par value25,000,000 Shares, of which 29,767,708 shares only 9,703,769 Shares were issued and outstanding as of December 31the close of business on July 23, 19961999, and 27,988,501 5,000,000 shares of Preferred Stock, par value $.001 par value0.001 per share (the "Preferred Shares"), of which 18,518,500 150,000 shares are have been designated Series A Junior Participating Preferred Stock, all none of which are issued and outstandingwere outstanding as of the close of business on July 23, and 9,310,001 shares are 1999, one share has been designated as Series B Convertible Preferred Stock, all which share was outstanding as of which are issued and outstandingthe close of business on July 23, 1999. All such shares of the outstanding Shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable authorized and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and nonnonassessable. Other than Shares reserved for issuance pursuant to the Stock Option Agreement, the Company has no Shares or Preferred Shares subject to issuance, except (i) 150,000 Preferred Shares, designated Series A Junior Participating Preferred Stock, subject to issuance upon exercise of the Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of March 17, 1997 (the "Rights Agreement"), between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, (ii) one share of Series B Convertible Preferred Stock, which was outstanding as of July 23, 1999, (iii) 2,513,141 shares reserved for issuance under the Company's 1996 Equity Incentive Plan, as amended, of which options to acquire 1,057,205 shares are outstanding as of July 23, 1999, (iv) 500,000 shares reserved for issuance under the Company's Employee Stock Purchase Plan, of which 416,581 shares are available for purchase as of July 23, 1999, (v) 235,000 shares reserved for issuance under the Company's 1996 Non-assessable.Employee Directors' Stock Option Plan, of which options to acquire 65,000 shares are outstanding as of July 23, 1999, (vi) 219,304 shares reserved for issuance under the Company's Amended and Restated 1992 Stock Option and Restricted Stock Plan, of which options to acquire 219,304 shares are outstanding as of July 23, 1999, (vii) 205,487 shares outstanding under the Management Change of Control Plan and (viii) 1,410 shares outstanding under the 1981 Employee Stock Option Plan. The Company Disclosure Schedule sets forth a correct and complete list of each outstanding option to purchase Shares under the Stock Plans, as defined below (each a "Company Option"), as of July 23, 1999, including the holder, date of grant, exercise price and number of Shares subject thereto. As of July 23, 1999, there are no shares of capital stock of the Company authorized, issued or outstanding and except as set forth above, there are no preemptive rights or any outstanding subscriptions, options, warrants, rights, convertible securities or other agreements or commitments of any character to which the Company is a party or may be bound relating to the issued or unissued capital stock or other securities of the Company and the Shares subject to the Stock Option Agreement

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 250,000,000 shares of Company Common Stock and 10,000,000 shares of preferred stock, par value $0.001 per share, 44,248 shares of which are designated as shares of Series A-1 Preferred Stock, $.001 par value, 44,248 shares of which 29,767,708 are designated as shares of Series A-2 Preferred Stock, 4,868 shares of which are designated as shares of Series B-1 Preferred Stock, and 4,868 shares of which are designated as shares of Series B-2 Preferred Stock. As of the close of business on December 8, 2006: 62,212,369 shares of Company Common Stock were issued and outstanding as of December 31outstanding, 1996, and 27,988,501 23,441 shares of Series A-1 Preferred StockStock were issued and outstanding, $.001 par value44,242 shares of Series A-2 Preferred Stock were issued and outstanding, 4,835 shares of which 18,518,500 shares are designated Series A B-1 Preferred Stock, all of which are Stock were issued and outstanding, and 9,310,001 4,862 shares are designated of Series B B-2 Preferred Stock, all of which are Stock were issued and outstanding. There are no shares of Company capital stock were held by the Company in its treasury and no shares of Company capital stock are owned or held by any Subsidiary of the Company. All such shares have been duly authorized, and all such issued and of the outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors capital stock of the Company approved (i) increasing the are duly authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and nonassessable and not subject to any preemptive rights. (b) Section 3.2(b) of the Company Disclosure Schedule sets forth a complete and accurate list, as of the close of business on December 8, 2006 of: (i) the number of shares of Company Common Stock subject to outstanding options under each Company Stock Plan and the number of shares of Company Common Stock available for grant under each Company Stock Plan; and (ii) all outstanding options to acquire shares of Company Common Stock (“Company Stock Options”), indicating with respect to each such Company Stock Option the name of the holder thereof and whether such holder is an employee of the Company or any of its Subsidiaries, the Company Stock Plan under which it was granted and whether such Company Stock Option is an “incentive stock option” (as defined in Section 422 of the Code) or a non-assessablequalified stock option, the number of shares of Company Common Stock subject to such Company Stock Option, the exercise price and the date of grant thereof, the applicable vesting schedule of such Company Stock Option and the extent to which such Company Stock Option was vested and exercisable as of December 8, 2006, whether such Company Stock Option was granted with a per share exercise price lower than the fair market value of one share of Company Common Stock on the date of grant as determined in good faith by the Administrator of the Company Stock Plan (as defined in each such plan), and the expiration date of such Company Stock Option. As of the close of business on December 8, 2006, approximately 63,000 shares of Company Common Stock were issuable pursuant to the Company’s 2000 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). For purposes of this Agreement, “Company Stock Plans” means the Company’s 1996 Stock Option Plan, the Company’s 2000 Stock Option Plan, the Company’s 2005 Stock Option Plan and the Company’s 2000 Directors’ Stock Option Plan, and all sub-plans relating thereto, taken together.

Capital Structure. (a) The As of September 30, 2000, the authorized capital stock of Parent consists of 50,000,000 2,500,000,000 shares of Common Stockcommon stock, par value $.001 par value0.01 per share, of which 29,767,708 2,000,000,000 shares were issued are Parent Common Stock and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 500,000,000 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved as ▇▇▇▇.▇▇▇ common stock (i) 3,900,000 shares of "▇▇▇▇.▇▇▇ Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 10,000,000 shares of Common Stock for issuance upon preferred stock, par value $.01 per share, of Parent ("Parent Authorized Preferred Stock"). At the exercise close of outstanding warrants to purchase Common Stock. In Februarybusiness on September 30, 1997, the Board of Directors of the Company approved 2000: (i) increasing the authorized 728,703,667 shares of Parent common stock and 3,742,286 shares of ▇▇▇▇.▇▇▇ Common Stock to 100,000,000 shares, were issued and outstanding; (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The 179,003,833 shares of Parent Common Stock were held by Parent in its treasury; (iii) no shares of Parent Authorized Preferred Stock were issued and outstanding; (iv) 238,428,979 shares of Parent Common Stock and 10,993,642 shares of ▇▇▇▇.▇▇▇ Common Stock were reserved for issuance pursuant to the stock-based plans identified in Section 3.2(b) of the Parent Disclosure Schedule (such plans, collectively, the "Parent Stock Plans"), of which approximately 188,175,715 shares of Parent Common Stock and 6,282,196 shares of ▇▇▇▇.▇▇▇ Common Stock are subject to outstanding employee stock options or other rights to purchase or receive Parent Common Stock granted under the Parent Stock Plans (collectively, "Parent Employee Stock Options"); and (vi) 30,997,000 shares of Parent Common Stock and 1,586,000 shares of ▇▇▇▇.▇▇▇ Common Stock are subject to warrants (collectively, "Parent Warrants"). All outstanding shares of capital stock of Parent are, and all shares thereof which may be issued pursuant to the Merger this Agreement or otherwise will be be, when issued, duly authorized, validly issued, fully paid and non-assessablenonassessable and not subject to preemptive rights. Except (i) as set forth in this Section 3.2(b), (ii) for the 3% Convertible Subordinated Notes, (iii) for the 34,000,000 PRIDES, of which 32,000,000 have been designated as Income PRIDES and 2,000,000 have been designated as Growth PRIDES, and (iv) for changes since September 30, 2000 resulting from the issuance of shares of Parent Common Stock pursuant to the Parent Stock Plans or Parent Employee Stock Options or Parent Warrants and other rights referred to in this Section 3.2(b), as of the date hereof, (x) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities of Parent, (B) any securities of Parent or any Parent subsidiary convertible into or exchangeable or exercisable for shares of capital stock or voting securities of Parent, (C) any warrants, calls, options or other rights to acquire from Parent or any Parent subsidiary, and any obligation of Parent or any Parent subsidiary to issue, any capital stock, voting securities or securities convertible into or exchangeable or exercisable for capital stock or voting securities of Parent or other ownership interests of Parent, and (y) there are no outstanding obligations of Parent or any Parent subsidiary to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. As of the date hereof, there are no outstanding (A) securities of Parent or any Parent subsidiary convertible into or exchangeable or exercisable for shares of capital stock or other voting securities or other ownership interests in any Parent subsidiary, (B) warrants, calls, options or other rights to acquire from Parent or any Parent subsidiary, and any obligation of Parent or any Parent subsidiary to issue, any capital stock, voting securities or other ownership interests in, or any securities convertible into or exchangeable or exercisable for any capital stock, voting securities or ownership interests in, any Parent subsidiary or (C) obligations of Parent or any Parent subsidiary to repurchase, redeem or otherwise acquire any such outstanding securities of Parent subsidiaries or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. To Parent's knowledge, neither Parent nor any Parent subsidiary is a party to any agreement restricting the transfer of, relating to the voting of, requiring registration of, or granting any preemptive or, except as provided by the terms of Parent Stock Plans, antidilutive rights with respect to, any securities of the type referred to in the two preceding sentences.

Capital Structure. (ai) The authorized capital stock of Parent AMB consists of 50,000,000 500,000,000 shares of AMB Common Stock, $.001 par value, of which 29,767,708 shares were issued Stock and outstanding as of December 31, 1996, and 27,988,501 100,000,000 shares of Preferred Stock, par value $.001 par value, of which 18,518,500 shares are designated Series A 0.01 per share (the “AMB Preferred Stock”). As of the close of business on January 26, all 2011 (A) 168,764,823 shares of which are AMB Common Stock were issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 8,627,029 shares of AMB Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock were reserved for issuance upon the exercise or payment of outstanding warrants to purchase Series A Preferred stock or share options, stock or share units or other equity-based awards under The Third Amended and Restated 1997 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P., and the Amended and Restated 2002 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P., each as amended (collectively, the "Warrant Stock"), “AMB Stock Plans”) (iii) 160,000 and no shares ------------- of AMB Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock were reserved for issuance upon the exercise or payment of outstanding warrants to purchase Common Stock. In Februaryany such awards other than under the AMB Stock Plans), 1997, the Board of Directors of the Company approved (i) increasing the authorized and no shares of AMB Common Stock to 100,000,000 shareswere held by Subsidiaries of AMB, (iiB) increasing the number of authorized 9,300,000 shares of AMB Preferred Stock to 37,764,153 shares, in preparation for a sale were issued and outstanding (consisting of 2,000,000 shares of Series C L Cumulative Redeemable Preferred Stock, 2,300,000 shares of Series M Cumulative Redeemable Preferred Stock, 3,000,000 shares of Series O Cumulative Redeemable Preferred Stock, and 2,000,000 shares of Series P Cumulative Redeemable Preferred Stock), and no shares of AMB Preferred Stock were reserved for issuance, (C) 170,594,142 AMB Partnership Units were issued and outstanding, of which 2,058,730 AMB Partnership Units were owned by the Persons and in the amounts indicated in Section 3.1(b)(i) of the AMB Disclosure Letter and 168,535,412 AMB Partnership Units were owned by AMB, and (D) 18,590,763 AMB II (Class A and B) Partnership Units were issued and outstanding, of which 983,013 AMB II (Class B) Partnership Units were owned by the Persons and in the amounts indicated in Section 3.1(b)(i) of the AMB Disclosure Letter and 17,607,750 AMB II (Class A) Partnership Units were owned by AMB. All outstanding shares of AMB Common Stock and AMB Preferred Stock and all outstanding AMB Partnership Units and AMB II Partnership Units have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights. (ii) No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which stockholders may vote (“Voting Debt”) of AMB are issued or outstanding. (iii) adopting Except for (A) this Agreement, the Company's 1997 Acquisition AMB Partnership Agreement and the AMB II Partnership Agreement, (B) outstanding AMB Partnership Units and AMB II Partnership Units, and (C) stock or share options, stock or share units and deferred stock or shares issued and outstanding under the AMB Stock Option PlanPlans (which represented, reserving 10,000,000 as of January 26, 2011, the right to acquire up to an aggregate of 8,627,029 shares of AMB Common Stock thereunder; all of these actions are currently pending. There Stock), there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent AMB or any Subsidiary of AMB is a party or by which it or any such Subsidiary is bound obligating Parent AMB or any Subsidiary of AMB to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock or any Voting Debt or stock appreciation rights of Parent AMB or of any Subsidiary of AMB or obligating Parent AMB or any Subsidiary of AMB to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. . There are no outstanding contractual obligations of AMB or any of its Subsidiaries (b1) The to repurchase, redeem or otherwise acquire any shares of Parent capital stock of AMB or any of its Subsidiaries or (2) pursuant to which AMB or any of its Subsidiaries is or could be required to register shares of AMB Common Stock to be issued pursuant to or other securities under the Merger will be duly authorizedU.S. Securities Act of 1933, validly issued, fully paid and non-assessableas amended (the “Securities Act”).

Capital Structure. (a) The Immediately prior to the Closing, the authorized capital stock of Parent consists the Company shall consist of 50,000,000 (i) 500,000 shares of Class A Common Stock, $.001 0.01 par value, of which 29,767,708 316,399 shares were issued and outstanding as of December 31will be outstanding, 1996, and 27,988,501 (ii) 200,000 shares of Class B Common Stock, $0.01 par value ("Class B Common Stock"), of which 10,000 shares will be outstanding, (iii) 75,000 shares of Series A Preferred Stock, $.001 0.01 par value, ("Series A Preferred Stock") of which 40,000 shares will be outstanding and (iv) 20,000 shares of Series B Preferred Stock, $0.01 par value, of which 18,518,500 no shares are designated Series A Preferred Stockwill be outstanding. Immediately prior to the Closing, all of which are issued and outstanding, and 9,310,001 the outstanding shares are designated Series B Preferred of Class A Common Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Class B Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock will have been duly authorized and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and nonnonassessable. The ownership of Class A Common Stock, the Class B Common Stock and the Series A Preferred immediately prior to the transactions contemplated hereby is as set forth on Schedule 3.03(a) hereto. The Acquired Securities have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable, and the issuance thereof will not have been subject to any preemptive rights or made in violation of any Applicable Law. (b) Immediately prior to the Closing, except for the Series A Preferred Stock, there will be (i) no outstanding options, warrants, agreements, conversion rights, exchange rights, preemptive rights or other rights (whether contingent or not) to subscribe for, purchase or acquire any issued or unissued shares of capital stock of the Company or any subsidiary of the Company, and (ii) no restrictions upon, or Contracts or understandings of the Company or any subsidiary of the Company, or, to the knowledge of the Company, Contracts or understandings of any other Person with respect to the voting or transfer of any shares of capital stock of the Company or any subsidiary. (c) The shares of Class B Common Stock to be issued upon conversion of the Acquired Securities have been duly authorized and adequately reserved in contemplation of the conversion of the Series B Preferred Stock and, when issued and delivered in accordance with the terms of the Certificate of Designation of the Series B Preferred Stock, will be validly issued, and will be fully paid and nonassessable, and the issuance thereof will not have been subject to any preemptive rights or made in violation of Applicable Law which would likely have a material adverse effect on such issuance. (d) The holders of the Series B Preferred Stock will, upon the issuance thereof, have the rights set forth in the Certificate of Designation of the Series B Preferred Stock (subject to the limitations and qualifications set forth therein and under the Nevada Revised Statutes). (e) The issuance of the Series B Preferred Stock contemplated by this Agreement will not cause any anti-assessabledilution provisions contained in any outstanding securities of the Company to become applicable to such issuance.

Capital Structure. (a) The authorized capital stock of Parent Target consists of 50,000,000 35,000,000 shares of Target Common Stock, $.001 par valueof which there are issued and outstanding 9,630,934 shares, and 15,755,722 shares of Target Preferred Stock, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 there are designated 3,965,331 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all 2,068,169 shares of which Series B Preferred Stock, and 9,722,222 shares of Series C Preferred Stock. There are issued and outstanding, and 9,310,001 3,936,760 shares are designated of Series A Preferred Stock, convertible into 3,936,760 shares of Common Stock; 2,068,169 shares of Series B Preferred Stock, all convertible into 2,068,169 shares of which are issued Common Stock; and outstanding9,711,111 shares of Series C Preferred Stock, convertible into 9,711,111 shares of Common Stock. All such outstanding shares have been of Target Common Stock and Target Preferred Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable non-assessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and are not subject to preemptive rights or rights of first refusal created by statute, the Certificate of Incorporation or Bylaws of Target or any agreement to which Target is a party or by which it is bound. Parent has also reserved (i) 3,900,000 There are 4,593,925 shares of Common Stock reserved for issuance to employees and consultants pursuant to Parent's 1996 under the Target 2000 Stock Option Plan (the "Target 2000 Plan"), of which 2,464,583 shares were subject to outstanding options and 409,658 shares were reserved for future option grants and there are 2,531,075 shares of Common Stock reserved for issuance under the Target 2006 Equity Incentive Plan (the "Target 2006 Plan"), of which 1,578,000 shares were subject to outstanding options and 896,825 shares were reserved for future option grants (the Target 2006 Plan and the Target 2000 Plan, (ii) 160,000 together are referred to herein as the "Target Plans"). There are 11,111 shares of Series A C Preferred Stock reserved for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred StockTarget Warrants, and (iii) adopting the Company's 1997 Acquisition Stock Option PlanTarget Warrants are held in the amounts and by the persons set forth in the Target Disclosure Schedule. Target has delivered to Acquiror true and complete copies of each warrant and warrant agreement evidencing each Target Warrant and each form of agreement or stock option plan evidencing each Target Option. Except for the rights created pursuant to this Agreement and the rights disclosed in the preceding three sentences, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent Target is a party or by which it is bound bound, obligating Parent Target to issue, deliver, sell, repurchase or redeem, redeem or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Target Capital Stock or obligating Parent Target to grant, extend extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. (b) The . All shares of Parent Common Stock to be issuable upon conversion of the Preferred Stock or upon exercise of the options described in this Section 3.5, and all shares of Series C Preferred Stock issuable upon exercise of warrants described in this Section 3.5, will be, when issued pursuant to the Merger will be respective terms of such Preferred Stock, options or warrants, duly authorized, validly issued, fully paid and non-assessablenonassessable. Except as described above, there are no other contracts, commitments or agreements relating to voting, purchase or sale of Target Capital Stock (a) to which Target is a party, and (b) to Target's knowledge, between or among any of Target's stockholders. All shares of outstanding Target Common Stock and Target Preferred Stock and rights to acquire Target Capital Stock were issued in compliance with all applicable federal and state securities laws.

Capital Structure. (a) The authorized capital stock of Parent CPI consists and, at all times prior to the Recapitalization, will consist, of 50,000,000 shares of Common Stock, $.001 par value97,000 CPI First Preferred Shares, of which 29,767,708 92,343.4 shares were issued and outstanding as of December 31on May 2, 19962001, and 27,988,501 shares of 1,000,000 CPI Second Preferred Stock, $.001 par valueShares, of which 18,518,500 544,076.75 shares are designated Series A were outstanding on May 2, 2001, 5,000,000 CPI Third Preferred StockShares, all of which are issued and outstanding3,806,043 shares were outstanding on May 2, 2001, 1,500 CPI Class A Common Shares, of which 0 shares were outstanding on May 2, 2001, 13,500 CPI Class B Common Shares, of which 11,172 shares were outstanding on May 2, 2001, and 9,310,001 shares are designated Series B Preferred Stock1,500 CPI Class C Common Shares, all of which are issued 1,306 shares were outstanding on May 2, 2001. As of and outstandingfollowing the Recapitalization, the authorized capital stock of CPI will consist of 23,508,000 Recapped Shares, of which 23,508,000 will be outstanding immediately prior to the CPI Merger Effective Time. All such of the outstanding shares of capital stock of CPI have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable authorized and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion following consummation of the Warrant Stock and (ivRecapitalization will be) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessablenonassessable. As of the date of this Agreement, CPI has no shares of capital stock reserved for issuance or subject to issuance, except that, as of May 2, 2001, there were 1,306 CPI Class A Common Shares reserved for issuance upon conversion of CPI Class C Common Shares. As of the Closing, there will be no shares of capital stock reserved for issuance or subject to issuance. Except with respect to the Recapitalization and as set forth above or in the certificate of incorporation of CPI, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements or commitments to issue or sell any shares of capital stock or other securities of CPI or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of CPI, and no securities or obligations evidencing such rights are authorized, issued or outstanding. CPI does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of CPI on any matter ("CPI Voting Debt"). Except as set forth in Section 5.1(b) of the CPI Disclosure Letter, CPI does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person.

Capital Structure. (ai) The authorized capital stock of Parent the Company consists of 50,000,000 shares of Common Stock, $.001 par value400,000,000 Company Shares, of which 29,767,708 shares 374,107,972 Company Shares were issued and outstanding as of December 31January 15, 19962007, 20,000,000 shares of Class A common stock, par value $1.00 per share, none of which were outstanding as of the date of this Agreement, and 27,988,501 10,000,000 shares of Preferred preference stock, no par value, 600,000 shares of which have been designated “Preference Stock, $.001 par value, 2.4375 Series,” 400,000 of which 18,518,500 shares are have been designated Series A Preferred “Preference Stock, all $2.6125 Series,” and 320,000 of which are issued and outstanding, and 9,310,001 shares are have been designated Series B Preferred “Preference Stock, all $4.125 Series.” No shares of which are preference stock were issued and outstandingor outstanding as of the date of this Agreement. All such shares of the outstanding Company Shares have been duly authorized, authorized and all such validly issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free nonassessable. The Company has no Company Shares reserved for issuance, except that (A) as of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also January 15, 2007, there was an aggregate of 1,019,164 Company Shares reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock 103,955 Premium Income Equity Securities outstanding as of January 15, 2007, (B) as of January 15, 2007, there were an aggregate of 135,898 Company Shares reserved for interest reinvestment and issuance upon conversion of the Convertible Debentures, with an aggregate outstanding principal amount of $1,992,000 as of January 15, 2007 and (ivC) 1,000,000 shares as of Common Stock January 15, 2007, there were an aggregate of 10,198,703 Company Shares reserved for issuance upon pursuant to the exercise Company’s stock-based plans and individual agreements related to deferred director compensation or evidencing the grant of outstanding warrants to purchase Common StockCompany Options and Company Stock Units. In February, 1997, the Board of Directors Section 6.1(b) of the Company approved Disclosure Letter contains a correct and complete list as of January 15, 2007 of (i1) increasing the authorized number of outstanding Company Options, the exercise price of each such Company Option and number of Company Shares issuable at such exercise price, (2) the number of outstanding Company Stock Units and the number of Company Shares subject thereto and (3) the number of Company Shares issuable upon conversion of the Convertible Debentures. From January 15, 2007 to the date of this Agreement, the Company has not issued any Company Shares except pursuant to the exercise, settlement or conversion of Company Options, Company Stock Units, Premium Income Equity Securities or Convertible Debentures, and since January 15, 2007 to the date of this Agreement, the Company has not issued any Company Options, Company Stock Units, Premium Income Equity Securities or Convertible Debentures. Except as set forth in this Section 6.1(b), as of the date of this Agreement, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, puts, commitments or rights of any kind that obligate the Company or any of its Subsidiaries to issue, purchase or sell any shares of Common Stock capital stock or other equity securities of the Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to 100,000,000 sharessell to, subscribe for or acquire from the Company or any of its Subsidiaries, any equity securities of the Company, and no securities or obligations of the Company or any of its Subsidiaries evidencing those rights are authorized, issued or outstanding. Except as set forth in this Section 6.1(b), as of the date of this Agreement, the Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of the Company on any matter. (ii) increasing Each of the number of authorized outstanding shares of Preferred Stock to 37,764,153 shares, in preparation for capital stock or other equity securities of each Subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable and owned by the Company or by a sale wholly-owned Subsidiary of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares free and clear of Common Stock thereunder; all of these actions are currently pendingany Lien, except for those Liens as would not reasonably be expected to have a Company Material Adverse Effect. There are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, rightsputs, commitments or agreements rights of any character to which Parent is a party kind that obligate the Company or by which it is bound obligating Parent any of its Subsidiaries to issue, deliver, sell, repurchase purchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, sell any shares of capital stock or other equity securities of any of the Company’s Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to sell to, subscribe for or acquire from the Company or any of its Subsidiaries, any equity securities of any of the Company’s Subsidiaries, and no securities or obligations of the Company or any of its Subsidiaries evidencing those rights are authorized, issued or outstanding. There are no voting trusts, proxies or other commitments, understandings, restrictions or arrangements in favor of any person other than the Company or a Subsidiary wholly-owned, directly or indirectly, by the Company with respect to the voting of or the right to participate in dividends or other earnings on any capital stock of Parent any Subsidiary of the Company owned by the Company or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreementof its Subsidiaries. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent Telenetics ----------------- consists of 50,000,000 25,000,000 shares of common stock, no par value per share ("Telenetics Common Stock"), $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 1,500,000 shares of Series A 7.0% Convertible ----------------------- Redeemable Preferred Stock, $.001 no par value, of which 18,518,500 shares are designated value per share (the "Series A Preferred ------------------ Stock"), 128,571 shares of Series B Convertible Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated no par value ----- per share (the "Series B Preferred Stock"), all 400,000 shares of which Series C 7.0% ------------------------ Convertible Preferred Stock, no par value per share (the "Series C Preferred ------------------ Stock"), and 2,971,429 shares of undesignated preferred stock, no par value per ----- share (the "Undesignated Preferred Stock"). As of the date hereof, 10,196,754 ---------------------------- shares of Telenetics Common Stock are issued and outstanding. All such shares have been duly authorizedoutstanding (which amount does not include the Base Stock issuable hereunder), and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 11,183,677 shares of Telenetics Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock are reserved for issuance upon the exercise of outstanding options and warrants to purchase Series A Preferred Telenetics Common Stock (which amount includes the "Warrant shares underlying the Options and the Additional Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance and upon conversion of the Warrant Series A Preferred Stock, Series B Preferred Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 756,884 shares of Series A Preferred Stock are issued and outstanding, 128,571 shares of Series B Preferred Stock are issued and outstanding, 400,000 shares of Series C Preferred Stock are issued and outstanding, and no shares of Undesignated Preferred Stock are issued and outstanding. Except for the options, warrants and convertible securities for which shares of Telenetics Common Stock thereunder; all of these actions are currently pending. There reserved for issuance as described in this Section 3.2, and except as ----------- provided in the Telenetics Transaction Agreements, there are no other options, warrants, calls, rights, commitments commitments, conversion rights or agreements of any character to which Parent Telenetics is a party or by which it Telenetics is bound obligating Parent Telenetics to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any shares of the capital stock of Parent Telenetics or securities convertible into or exchangeable for shares of capital stock of Telenetics, or obligating Parent Telenetics to grant, extend or enter into any such option, warrant, call, right, commitment commitment, conversion right or other agreement. (b) The . None of the outstanding shares of Parent Telenetics Common Stock, Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock are subject to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessablepreemptive rights.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 200,000,000 shares of Common Stock, $.001 par value26,000,000 shares of Class A Common Stock, 11,000,000 shares of which 29,767,708 Class C Common Stock, 40,000,000 shares were issued and outstanding as of December 31, 1996Class D Common Stock, and 27,988,501 15,000,000 shares of Preferred Stock, par value $.001 par value1.00 per share (the "Company Preferred Stock"), of which 18,518,500 2,300,000 shares are have been designated as "Series A Convertible Preferred Stock" (the "Series A Convertible Preferred Stock"), 500,000 shares have been designated as "Series A Junior Participating Preferred Stock" (the "Series A Junior Preferred Stock") and 6,200,000 shares have been designated as "8% Series B Cumulative Convertible Preferred Stock". At the close of business on December 6, 1996, (i) 42,812,129 shares of Common Stock were issued and outstanding, all of which are were validly issued, fully paid and nonassessable and free of preemptive rights, (ii) 1,848,526.112 shares of Class A Common Stock were issued and outstanding, all of which were validly issued, fully paid and 9,310,001 nonassessable and free of preemptive rights, (iii) 348,690 shares are designated of Class C Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable and free of preemptive rights, (iv) no shares of Class D Common Stock were outstanding, (v) 2,300,000 shares of Series A Convertible Preferred Stock were outstanding, all of which were validly issued, fully paid and nonassessable and free of preemptive rights, (vi) no shares of Series A Junior Participating Preferred Stock of the Company were outstanding and (vii) 4,751,208.9707 shares of Series B Preferred Stock were outstanding, all of which were validly issued, fully paid and nonassessable and free of preemptive rights. As of the date of this Agreement, except as provided in the Company's Charter with respect to Class A Common Stock, Class C Common Stock, Class D Common Stock, Series A Convertible Preferred Stock and Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon except for the holders thereof. Parent has also reserved (i) 3,900,000 rights to purchase shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of the Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Junior Preferred Stock (the "Warrant StockRights") issued pursuant to the Rights Agreement dated as of June 11, 1987, as amended and restated as of March 22, 1990, and as amended as of April 21, 1992, June 6, 1994, July 15, 1994 and November 16, 1995 (as so amended, the "Rights Agreement"), (iii) 160,000 shares ------------- between the Company and First Chicago Trust Company of Common Stock New York, as Rights Agent, and except for issuance upon conversion stock options covering not in excess of the Warrant Stock and (iv) 1,000,000 6,100,000 shares of Common Stock for issuance upon the exercise and rights to acquire not in excess of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized 600,000 shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting under the Company's 1997 Acquisition Employee Discount Stock Option Purchase Plan, reserving 10,000,000 shares of Common Bonus Equity Plan and Worldwide Savings Related Stock thereunder; all of these actions are currently pending. There Purchase Plan (collectively, the "Company Stock Options"), there are no other options, warrants, calls, rights, commitments rights or agreements of any character to which Parent the Company or any of its Subsidiaries is a party or by which it any of them is bound obligating Parent the Company or any of its Subsidiaries to issue, deliver, issue or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock of Parent the Company or any Subsidiary or obligating Parent the Company or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, right, commitment right or agreement. (b) The . At such time as the amount of outstanding RSC Class 1 Shares and shares of Parent Class C Common Stock shall in the aggregate be less than 1,500,000, RSC shall be entitled to cause the mandatory redemption of all outstanding RSC Class 1 Shares for shares of Common Stock (on a share-for-share basis) in compliance with the provisions of Section 36 of the Canada Business Corporations Act and simultaneously therewith the Company shall be entitled to repurchase at Cdn.$0.00001 per share all outstanding shares of Class A Common Stock. At such time as the shares of Class A Common Stock and Class C Common Stock shall in the aggregate be less than 1,500,000, the Company shall be entitled to cause the mandatory conversion of all outstanding shares of Class C Common Stock into shares of Common Stock on a share-for-share basis and simultaneously therewith AAUK shall be entitled to mandatorily redeem at 2 ▇▇▇▇▇ per share all outstanding Dividend Shares. Following the actions contemplated in Section 7.14(c), there shall be outstanding no shares of Class A Stock, shares of Class C Stock, RSC Class 1 Shares or Dividend Shares. Following the consummation of the Merger, each share of Series A Convertible Preferred Stock shall cease to be issued convertible at the option of a holder into shares of Common Stock but will, at the option of a holder, be convertible solely into cash of $52.54 per share of Series A Convertible Preferred Stock (assuming the purchase of Shares pursuant to the Merger will be duly authorizedOffer prior to March 22, validly issued1997). Except as set forth in the Company Filed SEC Documents (as defined in Section 4.7), fully paid and non-assessableas of the date of this Agreement, there are no outstanding contractual obligations of the Company or any of its Subsidiaries (i) to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or (ii) to vote or to dispose of any shares of the capital stock of any of the Company's Subsidiaries.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 30,000,000 shares of Company Common Stock, 800,000 shares of Class A Preferred Stock, $.001 1.00 par value, and 2,000,000 shares of Class B Preferred Stock, $1.00 par value, of which 29,767,708 (i) 333,333 shares were issued and outstanding have been designated as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series Class B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorizedSeries 1987, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan$1.00 par value, (ii) 160,000 152,321 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of have been designated as Series C Preferred Stock, $1.00 par value, (iii) 100,000 shares have been designated as Series 1996 Preferred Stock, $1.00 par value, (iv) 100,000 shares have been designated as Series 1997 Preferred Stock, $1.00 par value and (v) 4,000 shares have been designated as Series 1997-A Preferred Stock (collectively, the "Company Preferred Stock"). At the close of business on April 8, 2003, (i) 9,304,159 shares of Company Common Stock were issued and outstanding, (ii) 193,850 shares of Company Common Stock were held by the Company in its treasury and (iii) adopting no shares of Company Preferred Stock were issued and outstanding or held in the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 treasury. All issued and outstanding shares of Company Common Stock thereunder; all are duly authorized, validly issued and fully paid and nonassessable. Schedule 4.01(c) sets forth a complete and correct list, as of these actions the close of business on April 8, 2003, of the plans pursuant to which Options have been granted and are currently pendingoutstanding (the "Company Stock Plans"), the number of shares of Company Common Stock subject to Options and Warrants, and the exercise prices thereof. There are Except as set forth on Schedule 4.01(c), as of the close of business on April 8, 2003, there were no other outstanding securities, options, warrants, calls, rights, commitments rights or agreements of any character to which Parent the Company or any of its subsidiaries is a party obligating the Company or by which it is bound obligating Parent any of its subsidiaries to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased additional shares of capital stock or redeemedother voting securities of the Company or of any of its subsidiaries. As of the close of business on April 8, 2003, there were no outstanding contractual obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of the capital stock of Parent the Company or obligating Parent any of its subsidiaries. The Company has made available to grantPurchaser a complete and correct copy of the Rights Agreement dated as of August 1, extend or enter into any such option1995, warrantas amended to date (the "Company Rights Agreement"), call, right, commitment or agreement. between the Company and the rights agent thereunder relating to rights to purchase Company Common Stock (b) The the "Company Rights"). All outstanding shares of Parent Company Common Stock to be issued pursuant to are duly included for trading on the Merger will be duly authorized, validly issued, fully paid and non-assessableNasdaq SmallCap Market.

Capital Structure. (a) The authorized capital stock of Parent ▇▇▇▇▇▇▇▇.▇▇▇ consists of 50,000,000 150,000,000 shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock, $.001 and 5,000,000 shares of preferred stock, without par valuevalue ("▇▇▇▇▇▇▇▇.▇▇▇ Preferred Stock"). At the close of business on August 4, 2000: (i) 48,866,633 shares of which 29,767,708 shares ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock were issued and outstanding as of December 31, 1996, and 27,988,501 outstanding; (ii) 52,698 shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock were held by ▇▇▇▇▇▇▇▇.▇▇▇ in its treasury; (iii) no shares of ▇▇▇▇▇▇▇▇.▇▇▇ Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are Stock were issued and outstanding; (iv) 8,817,838 shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock were reserved for issuance pursuant to all stock option, restricted stock or other stock-based compensation, benefits or savings plans, agreements or arrangements in which current or former employees or directors of ▇▇▇▇▇▇▇▇.▇▇▇ or its subsidiaries participate as of the date hereof, complete and 9,310,001 shares are designated Series B Preferred Stockcorrect copies of which, all in each case as amended as of which are issued and outstanding. All such shares the date hereof, have been duly authorizedfiled as exhibits to the ▇▇▇▇▇▇▇▇.▇▇▇ Filed SEC Documents or delivered to Phone (such plans, and all such issued and outstanding shares have been validly issuedcollectively, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved "▇▇▇▇▇▇▇▇.▇▇▇ Stock Plans"), (iv) 3,900,000 850,000 shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock were reserved for issuance to employees and consultants pursuant to Parent's 1996 options outside the ▇▇▇▇▇▇▇▇.▇▇▇ Stock Option Plan, Plans; and (iivi) 160,000 146,721 shares of Series A Preferred ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock were reserved for issuance upon the exercise of outstanding warrants to purchase and (vii) 155,000 shares of ▇▇▇▇▇▇▇▇.▇▇▇ Preferred Stock will be designated as Series A Participating Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- all of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock which will be reserved for issuance upon the exercise of outstanding warrants to preferred stock purchase Common Stock. In February, 1997, rights (the Board of Directors of the Company approved (i"▇▇▇▇▇▇▇▇.▇▇▇ Rights") increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger Rights Agreement approved by the board of directors of ▇▇▇▇▇▇▇▇.▇▇▇ in connection with its approval of this Agreement and to be entered into no later than ten (10) days following the date hereof substantially in the form previously provided to Phone (the "▇▇▇▇▇▇▇▇.▇▇▇ Rights Agreement"). All outstanding shares of capital stock of ▇▇▇▇▇▇▇▇.▇▇▇ are, and all shares which may be issued as permitted by this Agreement or otherwise will be be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Except as set forth in this Section 3.2(c), and except for changes since March 31, 2000, resulting from the issuance of shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock pursuant to the ▇▇▇▇▇▇▇▇.▇▇▇ Options or as expressly permitted by this Agreement, (x) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities of ▇▇▇▇▇▇▇▇.▇▇▇, (B) any securities of ▇▇▇▇▇▇▇▇.▇▇▇ or any ▇▇▇▇▇▇▇▇.▇▇▇ subsidiary convertible into or exchangeable or exercisable for shares of capital stock or voting securities of ▇▇▇▇▇▇▇▇.▇▇▇, (C) any warrants, calls, options or other rights to acquire from ▇▇▇▇▇▇▇▇.▇▇▇ or any ▇▇▇▇▇▇▇▇.▇▇▇ subsidiary, and any obligation of ▇▇▇▇▇▇▇▇.▇▇▇ or any ▇▇▇▇▇▇▇▇.▇▇▇ subsidiary to issue, any capital stock, voting securities or securities convertible into or exchangeable or exercisable for capital stock or voting securities of ▇▇▇▇▇▇▇▇.▇▇▇, and (y) there are no outstanding obligations of ▇▇▇▇▇▇▇▇.▇▇▇ or any ▇▇▇▇▇▇▇▇.▇▇▇ subsidiary to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. Neither ▇▇▇▇▇▇▇▇.▇▇▇ nor any ▇▇▇▇▇▇▇▇.▇▇▇ subsidiary is a party to any agreement restricting the purchase or transfer of, relating to the voting of, requiring registration of, or granting any preemptive or, except as provided by the terms of the ▇▇▇▇▇▇▇▇.▇▇▇ Options, antidilutive rights with respect to, any securities of the type referred to in the two preceding sentences. Other than the ▇▇▇▇▇▇▇▇.▇▇▇ subsidiaries, ▇▇▇▇▇▇▇▇.▇▇▇ does not directly or indirectly beneficially own any securities or other beneficial ownership interests in any other entity except for non-assessablecontrolling investments made in the ordinary course of business in entities which are not individually or in the aggregate material to ▇▇▇▇▇▇▇▇.▇▇▇ and its subsidiaries as a whole.

Capital Structure. (ai) The As of the date hereof, the authorized capital stock of Parent consists consisted of 50,000,000 shares of Common Stock(A) Class A Ordinary Shares, par value $.001 par value1.00 per share ("Parent Class A Shares"), of which 29,767,708 6,000 shares were outstanding, (B) Class B Ordinary Shares, par value $1.00 per share ("Parent Class B Shares"), of which 6,000 shares were outstanding, (C) Class C Ordinary Shares, par value $1.00 per share ("Parent Class C Shares" and together with Parent Class A Shares and Parent Class B Shares, the "Parent Voting Ordinary Shares"), of which 6,153 shares were outstanding, (D) Class D Non-Voting Ordinary Shares, par value $1.00 per share, of which 740.658 shares were outstanding, and (E) Class E Non-Voting Ordinary Redeemable Shares, par value $1.00 per share, of which zero shares were outstanding. As of the Effective Time and prior to the issuance of the Merger Consideration, the amended constitutive documents of Parent attached to the Parent Recapitalization Agreement shall have become effective, the Parent Recapitalization shall have occurred and the authorized capital stock of Parent shall consist of (x) 100,000,000 Parent Ordinary Shares, of which 6,139,425 shares will be outstanding, (y) 6,000,000 non-voting ordinary shares, par value $1.00 per share, of which 2,972,892 will be outstanding, and (z) 50,000,000 preferred shares, par value $1.00 per share, none of which will be issued. All issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent are, and when Parent Ordinary Shares are issued in the Merger or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares upon exercise of Parent Common Company Stock to be issued Options converted in the Merger pursuant to the Merger Section 1.9, such shares will be be, duly authorized, validly issued, fully paid and non-assessableassessable and free of any preemptive rights. (ii) Except as otherwise set forth in this Section 3.1(b), as contemplated by Section 1.8, Section 1.9, Section 1.10 and pursuant to the Parent Recapitalization, there are no securities, options, warrants, calls, rights commitments, agreements, arrangements or undertakings of any kind outstanding or to which Parent or any of its Subsidiaries is a party or by which any of them is bound obligating Parent or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of Parent or any of its Subsidiaries or obligating Parent or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. Except pursuant to the Parent Recapitalization, there are no outstanding obligations of Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Parent or any of its Subsidiaries. There are no outstanding obligations of Parent or any of its Subsidiaries to provide funds or make any investment in any of its Subsidiaries or any other entity, nor has Parent or any of its Subsidiaries granted or agreed to grant to any Person any stock appreciation rights or similar equity based rights.

Capital Structure. (a) The As of the date hereof, the authorized capital stock of Parent Target consists of 50,000,000 22,000,000 shares of Target Common Stock, par value $.001 par value0.001 per share, of which 29,767,708 shares were there are issued and outstanding as of December 31, 19966,695,925 shares, and 27,988,501 5,600,000 shares of Target Preferred Stock, par value $.001 par value0.001 per share, of which 18,518,500 there are issued and outstanding 507,000 shares are designated of Series A 1 Preferred Stock, 1,584,750 shares of Series 2 Preferred Stock, 997,017 shares of Series 3 Preferred Stock, and 1,590,000 shares of Series 4 Preferred Stock, all of which series of Preferred Stock are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 convertible into shares of Common Stock for issuance to employees and consultants pursuant to Parentthe terms of the Target's 1996 Stock Option PlanCertificate. Also outstanding on the date hereof are the Convertible Notes, (ii) 160,000 which are convertible in accordance with the terms of the Convertible Notes into 1,481,250 shares of Series A Common Stock, and Warrants exercisable for 928,591 shares of Common Stock. All outstanding shares of Target Common Stock and Target Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock")are duly authorized, (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion validly issued, fully paid, and non- assessable. As of the Warrant Stock and (iv) 1,000,000 date hereof, there are 1,019,500 shares of Common Stock reserved for issuance upon under option agreements (the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition "Target Stock Option Plan"). Except for the rights created pursuant to this Agreement and the rights disclosed in the preceding sentences, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent Target is a party or by which it is bound obligating Parent Target to issue, deliver, sell, repurchase or redeem, redeem or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Target Capital Stock or obligating Parent Target to grant, extend extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. (b) The . All shares of Parent Common Stock to be issuable upon conversion of the Preferred Stock or upon exercise of the options or warrants described in this Section 2.4, will be, when issued pursuant to the Merger will be respective terms of such Preferred Stock or options or warrants, duly authorized, validly issued, fully paid and non-assessablenonassessable. There are no other contracts, commitments or agreements relating to voting, purchase, or sale of Target's Capital Stock (i) between or among Target and any of its shareholders and (ii) to Target's knowledge, between or among any of Target's shareholders. All shares of outstanding Target Capital Stock and rights to acquire Target Capital Stock were issued in compliance with all applicable federal and state securities laws.

Capital Structure. (a) The authorized stock of Parent consists of 50,000,000 100,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 28,850,214 shares were issued and outstanding as of December 31August 28, 19961997, and 27,988,501 38,188,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 18,678,500 shares are designated Series A Preferred Stock, all 18,518,500 of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and 10,200,000 shares are designated Series C Preferred Stock, 8,454,580 of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan and the 1996 Equity Compensation Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of warrants issued or outstanding warrants to purchase Common Stock. In Februaryissuable pursuant to the Company's Affiliate Warrant Program, 1997, the Board of Directors of the Company approved (iiv) increasing the authorized 24,000,000 shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting issuance under the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 (v) 2,113,647 shares of Common Series C Preferred Stock thereunder; all for issuance upon exercise of these actions are warrants to purchase Series C Preferred Stock, and (vi) a sufficient number of shares for issuance upon conversion of the Preferred Stock currently pendingoutstanding. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The As of May 31, 2001, the authorized capital stock of Parent Commerce One consists of 50,000,000 950,000,000 shares of Common Stock, $.001 .0001 par value, of which 29,767,708 208,742,610 shares were (together with the associated rights to purchase Series A Participating Preferred Stock) are issued and outstanding as of December 31on such date, 1996, and 27,988,501 50,000,000 shares of Preferred Stock, $.001 0.0001 par value, of which 18,518,500 300,000 shares are designated Series A Participating Preferred Stock, all $.0001 par value, none of which are issued and outstandingoutstanding of such date, and 9,310,001 49,700,000 shares of which are designated Series B undesignated Preferred Stock▇▇▇▇▇, all $.▇▇▇▇ par value, none of which are issued and outstandingor outstanding on such date. All such shares of Commerce One have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens Liens or encumbrances other than any liens Liens or encumbrances created by or imposed upon the holders thereof. Parent Commerce One has also reserved (i) 3,900,000 75,743,739 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to its employee and director stock and option and stock purchase Series A Preferred Stock plans (the "Warrant StockPlans"), (iii) 160,000 shares ------------- 23,219,156 of Common Stock for issuance which were issuable upon conversion exercise of the Warrant Stock such outstanding stock options as of May 31, 2001 and (iv) 1,000,000 24,641,051 of which may be issued in connection with Commerce One's employee stock option exchange program. In addition, 200,000 other shares of Common Stock for issuance upon are issuable pursuant to outstanding stock options (other than those described above), warrants, rights, convertible or exchangeable securities or other agreements as of May 31, 2001. Upon the exercise Reorganization, New Commerce One Holding's certificate of outstanding warrants incorporation and bylaws as in effect immediately following the reorganization will be identical to purchase Common Stock. In FebruaryCommerce One's certificate of incorporation and bylaws, 1997respectively, as in effect immediately prior to the Board of Directors consummation of the Company approved (i) increasing Reorganization, and New Commerce One Holding's capitalization will become identical to the authorized capitalization of Commerce One immediately prior to the consummation of the Reorganization, except that an additional 28,800,000 shares of Common Stock to 100,000,000 shareswill be issued and outstanding following the consummation of the Reorganization. Except as contemplated by this Agreement, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments convertible or exchangeable securities, commitments, or agreements of any character to which Parent Commerce One is a party or by which it is bound obligating Parent Commerce One to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Commerce One or any securities convertible into or exchangeable for capital stock of Commerce One or obligating Parent Commerce One to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding bonds, debentures, notes or other obligations issued by Commerce One which permit the holders thereof to vote with the stockholders of Commerce One on any matter. Except as contemplated by this Agreement, no change in the capitalization of Commerce One or New Commerce One Holding has occurred since May 31, 2001 and through the date of this Agreement, except for (i) issuance of stock options and other rights under Commerce One's and its affiliates' stock and option and stock purchase plans, (ii) exercise of outstanding options and other rights under Commerce One's and its affiliates' stock and option and stock purchase plans. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be this Agreement have been duly authorized, and when issued to SAP AG in accordance with the terms hereof, will be validly issued, fully paid and non-assessable, free of any Liens except as provided in this Agreement or any of the Related Equity Agreements or federal and state applicable securities laws. Assuming that the representations and warranties of SAP AG in Section 3.6 hereof are truthful and accurate, the issuance and sale of the Shares pursuant to this Agreement will be exempt from the registration requirements of Section 5 of the Securities Act.

Capital Structure. (ai) The authorized capital stock of Parent the Company consists of 50,000,000 35,062,202 shares, of which 16,500,000 are shares of Class A Common Stock, $.001 par value, 16,500,000 are shares of which 29,767,708 shares were issued and outstanding as of December 31, 1996Class B Common Stock, and 27,988,501 2,062,202 are shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are 750,000 Shares have been designated Series Class A Convertible Preferred Stock, (C) 545,702 Shares have been designated Class A Series 2 Convertible Preferred Stock, (D) 350,000 Shares have been designated Class A Series 3 Convertible Preferred Stock and (E) 416,500 Shares have been designated Class A Series 4 Convertible Preferred Stock. As of the close of business on April 24, 2015 (the “Measurement Date”), (AA) 4,670,151 Shares of Class A Common Stock (including 2,000 non-vested Shares of Class A Common Stock outstanding under the Company’s 2013 Non-Employee Director Restricted Stock Plan and all other equity incentive plans for non-employee directors (collectively, the “Company Equity Plans”)), (BB) 750,000 Shares of Class A Convertible Preferred Stock, (CC) 545,585 Shares of Class A Series 2 Convertible Preferred Stock, (DD) 350,000 Shares of Class A Series 3 Convertible Preferred Stock and (EE) 416,500 Shares of Class A Series 4 Convertible Preferred Stock, were issued and outstanding, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be were duly authorized, validly issued, fully paid and nonnonassessable and were issued free of preemptive rights, and (X) no shares of Class B Common Stock were issued and outstanding and (Y) no shares were held by the Company in its treasury. Except as set forth above, as of the Measurement Date, there were no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, restricted stock units, redemption rights, repurchase rights, agreements, arrangements, calls or commitments that obligate the Company or any of its Subsidiaries to issue, or sell, or repurchase, or make payments based on the value of, any Shares or other equity securities of the Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any Shares or other equity securities of the Company (“Contingent Company Equity”). Other than Preferred Stock, there are no outstanding securities, bonds, debentures, notes or indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of shares of Common Stock are entitled to vote. From the Measurement Date through the date of this Agreement, neither the Company nor any of its Subsidiaries has issued any Contingent Company Equity or any Shares, other than upon conversion of Preferred Stock outstanding as of the Measurement Date in accordance with the terms of the Preferred Stock, if applicable. There are no outstanding contractual obligations of the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries is currently required, or may in the future be required, to register Shares or other securities under the Securities Act of 1933, as amended (the “Securities Act”). All dividends or distributions on the Common Stock or Preferred Stock that have been declared prior to the date hereof have been paid in full. (ii) Each of the outstanding shares of capital stock or other equity securities of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and, except for directors’ qualifying shares (or a nominal amount of shares held pursuant to similar requirements in various jurisdictions), owned by the Company or by a direct or indirect wholly-assessableowned Subsidiary of the Company, free and clear of any lien, charge, pledge, security interest, claim, option to purchase or otherwise acquire any interest or other encumbrance (each, a “Lien”) except for such transfer restrictions of general applicability as may be provided under the Securities Act, and other applicable securities Laws. Except as set forth above, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, restricted stock units, redemption rights, repurchase rights, agreements, arrangements, calls or commitments that obligate the Company or any of its Subsidiaries to issue, or sell, or repurchase, or make payments based on the value of, any shares or other equity securities of any of the Subsidiaries of the Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any equity securities of any Subsidiary of the Company. None of the Company or its Subsidiaries owns directly or indirectly any capital stock or other equity securities of any other Person (other than a Subsidiary of the Company). All dividends or distributions on the equity securities of any Subsidiary of the Company that have been declared prior to the date hereof have been paid in full. (iii) As of the date hereof, the Listed Stockholders hold of record Shares representing approximately 83.4% of the voting power of the outstanding Shares, voting together as a single class.

Capital Structure. (a) As of the date of this Agreement, The authorized capital stock of Parent Acquiror consists of 50,000,000 shares of Acquiror Common Stock, $.001 par valueof which there are issued and outstanding 2,481,056 shares, and 20,000,000 shares of Acquiror Preferred Stock, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 there are designated 1,502,396 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all 3,097,128 shares of which Series B Preferred Stock, 5,193,516 shares of Series C Preferred Stock and 9,387,363 shares of Series D Preferred Stock. There are issued and outstanding, and 9,310,001 1,853,499 shares are designated of Series A Preferred Stock, convertible into 1,853,499 shares of Common Stock; 3,936,294 shares of Series B Preferred Stock, all convertible into 3,936,294 shares of which are issued Common Stock; and outstanding5,142,552 shares of Series C Preferred Stock, convertible into 5,142,552 shares of Common Stock. All such outstanding shares have been of Acquiror Common Stock and Acquiror Preferred Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable non-assessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and are not subject to preemptive rights or rights of first refusal created by statute, the Certificate of Incorporation or Bylaws of Acquiror or any agreement to which Acquiror is a party or by which it is bound. Parent has also reserved (i) 3,900,000 There are 6,742,399 shares of Common Stock reserved for issuance to employees and consultants pursuant to Parent's 1996 under the Acquiror 1999 Stock Option/Stock Issuance Plan (the "Acquiror Option Plan"), (ii) 160,000 of which 4,744,191 shares were subject to outstanding options and 379,652 shares were reserved for future option grants. There are 25,000 shares of Common Stock, 5,084 shares of Series A B Preferred Stock, 50,962 shares of Series C Preferred Stock and 636,768 shares of Series D Preferred Stock reserved for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred StockAcquiror Warrants, and (iii) adopting the Company's 1997 Acquisition Stock Option PlanAcquiror Warrants are held in the amounts and by the persons set forth in the Acquiror Disclosure Schedule. Acquiror has delivered to Target true and complete copies of each warrant and warrant agreement evidencing each Acquiror Warrant and each form of agreement or stock option plan evidencing each Acquiror Option. Except for the rights created pursuant to this Agreement and the rights disclosed in the preceding three sentences, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent Acquiror is a party or by which it is bound bound, obligating Parent Acquiror to issue, deliver, sell, repurchase or redeem, redeem or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Acquiror Capital Stock or obligating Parent Acquiror to grant, extend extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. All shares of Common Stock issuable upon conversion of the Preferred Stock or upon exercise of the options described in this Section 3.5, and all shares of Acquiror Capital Stock issuable upon exercise of warrants described in this Section 3.5, will be, when issued pursuant to the respective terms of such Preferred Stock, options or warrants, duly authorized, validly issued, fully paid and nonassessable. Except as described above, there are no other contracts, commitments or agreements relating to voting, purchase or sale of Acquiror Capital Stock (a) to which Acquiror is a party, and (b) to Acquiror's knowledge, between or among any of Acquiror's stockholders. All shares of outstanding Acquiror Common Stock and Acquiror Preferred Stock and rights to acquire Acquiror Capital Stock were issued in compliance with all applicable federal and state securities laws. (b) The On the Closing Date, the authorized capital stock of Acquiror shall consist of (i) 60,000,000 shares of Parent Acquiror Common Stock, of which there shall be designated 51,170,000 shares of Acquiror Series P Common Stock, 3,802,600 shares of Acquiror Series Q Common Stock, 1,930,800 shares of Acquiror Series R Common Stock, and 3,096,600 shares of Acquiror Series S Common Stock, of which there shall be issued and outstanding 13,891,630 shares of Series P Common Stock, and (ii) 15,000,000 shares of Acquiror Preferred Stock, of which there shall be designated 9,000,000 shares of Series A Convertible Preferred Stock, and 3,300,000 shares of Series B Convertible Preferred Stock, of which there shall be issued and outstanding, 8,625,622 shares of Series A Convertible Preferred Stock, convertible into 8,625,622 shares of Series P Common Stock, and no shares of Series B Convertible Preferred Stock outstanding. On the Closing Date, the rights, preferences and privileges of the Acquiror Common Stock to and Acquiror Preferred Stock shall be issued pursuant to are as set forth in the Merger will Amended and Restated Certificate of Incorporation of Acquiror in substantially the form attached hereto as Exhibit H (the "Restated Certificate") with such additional changes and/or modifications as the Acquiror and the Target may agree in writing. On the Closing Date, all outstanding shares of Acquiror Common Stock and Acquiror Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessableassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and are not subject to preemptive rights or rights of first refusal created by statute, the Certificate of Incorporation or Bylaws of Acquiror or any agreement to which Acquiror is a party or by which it is bound. As of the Closing Date, there are 6,742,399 shares of Common Stock reserved for issuance under the Acquiror Option Plan, of which 4,744,191 shares were subject to outstanding options and 379,652 shares were reserved for future option grants. As of the Closing Date, there shall be (i) 364,966 shares of Series P Common Stock and (ii) 352,848 shares of Series A Convertible Preferred Stock, reserved for issuance upon the exercise of outstanding Acquiror Warrants, and the Acquiror Warrants are held in the amounts and by the persons set forth in the Acquiror Disclosure Schedule. Except for the rights created pursuant to this Agreement and the rights disclosed in the preceding three sentences, on the Closing Date there shall be no other options, warrants, calls, rights, commitments or agreements of any character to which Acquiror is a party or by which it is bound, obligating Acquiror to issue, deliver, sell, repurchase or redeem or cause to be issued, delivered, sold, repurchased or redeemed, any shares of Acquiror Capital Stock or obligating Acquiror to grant, extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. All shares of Common Stock issuable upon conversion of the Preferred Stock or upon exercise of the options described in this Section 5.5, and all shares of Series P Preferred Stock issuable upon exercise of warrants described in this Section 5.5, will be, when issued pursuant to the respective terms of such Preferred Stock, options or warrants, duly authorized, validly issued, fully paid and nonassessable. Except as described above, on the Closing Date there shall be no other contracts, commitments or agreements relating to voting, purchase or sale of Acquiror Capital Stock (a) to which Acquiror is a party, and (b) to Acquiror's knowledge, between or among any of Acquiror's stockholders. All shares of outstanding Acquiror Common Stock and Acquiror Preferred Stock and rights to acquire Acquiror Capital Stock were issued in compliance with all applicable federal and state securities laws.

Capital Structure. (ai) The authorized capital stock of Parent consists of 50,000,000 2,000,000,000 shares of Parent Class A Common Stock, 22,000,000 shares of Class B common stock, par value $.001 0.01 per share (the "Parent Class B Common Stock"), 2,000,000 shares of serial preferred stock, par valuevalue $0.01 per share (the "Parent Preferred Stock"), of which 29,767,708 1,150,000 shares have been designated as 6.75% Series A Cumulative Convertible Preferred Stock (the "Parent Series A Preferred Stock"), 275,000 shares have been designated as Series B Cumulative Convertible Preferred Stock (the "Parent Series B Preferred Stock") and 125,000 shares have been designated as Series C Convertible Preferred Stock (the "Parent Series C Preferred Stock"), and 10,000,000 shares of Class II preferred stock, par value $0.001 per share (the "Parent Class II Preferred Stock"). As of the close of business on August 31, 2000, (i) 583,802,894 shares of Parent Class A Common Stock were issued and outstanding as of December 31outstanding, 1996, and 27,988,501 (ii) no shares of Preferred StockParent Class A Common Stock were held by Parent as treasury shares, $.001 par value, (iii) 29,659,181 shares of which 18,518,500 shares are designated Parent Class A Common Stock were reserved for issuance upon the conversion of the Parent Series A Preferred Stock, all (iv) 56,506,847 shares of which are issued and outstanding, and 9,310,001 shares are designated Parent Class A Common Stock were reserved for issuance upon the conversion of the Parent Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (iv) 3,900,000 25,684,930 shares of Parent Class A Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock were reserved for issuance upon the exercise conversion of outstanding warrants to purchase the Parent Series C Preferred Stock, (vi) 307,448 shares of Parent Class A Preferred Common Stock were reserved for issuance in connection with the acquisition by Parent of Dakota Telecommunications Group, Inc. on March 5, 1999 (the "Warrant Dakota Acquisition Stock"), (iiivii) 160,000 240,000 shares ------------- of Parent Class A Common Stock were reserved for issuance upon conversion pursuant to stock option agreements entered into in connection with the acquisition by Parent of the Warrant Stock and assets of Noverr Publishing, Inc. on June 16, 1999 (ivthe "Noverr Options"), (viii) 1,000,000 1,473,216 shares of Parent Class A Common Stock were reserved for issuance pursuant to a Stock Option Agreement dated August 21, 1998 between Parent and QST Enterprises, Inc. (the "QST Options"), (ix) 59,358 shares of Parent Class A Common Stock were reserved for issuance pursuant to Stock Option Agreements dated December 29, 1998, between Parent and certain stockholders of Inlet, Inc. (the "Inlet Options"), (x) 229,029 shares of Parent Class A Common Stock were reserved for issuance in connection with the Stock Option Agreement dated January 28, 1998, between Parent and Diamond Partners Incorporated (the "Diamond Partners Options"), (xi) up to 267,826,074 shares of Parent Class A Common Stock were reserved for issuance pursuant to the 1992, 1993 and 1995 Incentive Stock Option Plans, the 1996 Employee Stock Option Plan, the Directors' Stock Option Plan and other stock option grants (such plans and arrangements, collectively, the "Parent Stock Plans"), of which 130,233,437 shares were subject to outstanding stock options or other rights to purchase or receive shares of Parent Class A Common Stock (such stock options or other rights, together with the Noverr Options, the QST Options, the Inlet Options and the Diamond Partners Options, the "Parent Stock Options"), (xii) 3,691,797 shares of Parent Class A Common Stock were reserved for issuance pursuant to the Employee Stock Purchase Plan (the "Parent ESPP"), (xiii) 4,696,856 shares of Parent Class A Common Stock were reserved for issuance pursuant to the 401(k) Profit Sharing Plan (the "Parent 401(k)"), (xiv) no shares of Parent Class B Common Stock were issued and outstanding or were held by Parent as treasury shares, (xv) 7,804,128 shares of Parent Class B Common Stock were reserved for issuance pursuant to the grant of options to a significant non-employee stockholder (the "Parent Class B Options"), (xvi) 7,804,128 shares of Parent Class A Common Stock were reserved for issuance upon the conversion of the shares of Parent Class B Common Stock issued upon the exercise of outstanding warrants to purchase Common Stock. In Februarythe Parent Class B Options, 1997, the Board of Directors of the Company approved (ixvii) increasing the authorized 1,149,580 shares of Common Parent Series A Preferred Stock to 100,000,000 shareswere issued and outstanding, (iixviii) increasing the number of authorized 275,000 shares of Parent Series B Preferred Stock to 37,764,153 shareswere issued and outstanding, in preparation for a sale (xix) 125,000 shares of Parent Series C Preferred Stock were issued and outstanding, (xx) no shares of Parent Series A Preferred Stock, Parent Series B Preferred Stock or Parent Series C Preferred Stock were held by Parent as treasury shares and (iiixxi) adopting no shares of Parent Class II Preferred Stock were issued and outstanding or were held by Parent as treasury shares. Except as set forth above, as of the Company's 1997 close of business on August 31, 2000, no shares of capital stock of, or other equity or voting interests in, Parent or options, warrants or other rights to acquire any such stock, securities or interests were issued, reserved for issuance or outstanding. During the period from August 31, 2000, to the date of this Agreement, (x) there have been no issuances by Parent or any of its Subsidiaries of shares of capital stock of, or other equity or voting interests in, Parent other than issuances of shares of Parent Class A Common Stock pursuant to the exercise of Parent Stock Options outstanding on such date as required by their terms as in effect on the date of this Agreement or the issuance of the Dakota Acquisition Stock Option Planand (y) except for issuances of Parent Stock Options to employees in the ordinary course of business, reserving 10,000,000 there have been no issuances by Parent or any of its Subsidiaries of options, warrants or other rights to acquire shares of capital stock of, or other equity or voting interests in, Parent, other than rights that may have arisen under the Parent ESPP or the Parent 401(k). As of the date of this Agreement, there are no outstanding stock appreciation rights, performance units or rights (other than the Parent Stock Options, the Parent Class B Options and any rights that may have arisen under the Parent ESPP or the Parent 401(k) or in respect of the Dakota Acquisition Stock) to receive shares of Parent Class A Common Stock thereunder; all or Parent Class B Common Stock on a deferred basis or otherwise linked to the price of these actions are currently pendingParent Class A Common Stock granted under the Parent Stock Plans or otherwise. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any All outstanding shares of the capital stock of Parent or obligating Parent to grantare, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The and all shares of Parent Common Stock to that may be issued pursuant to the Merger Parent Stock Plans, the Parent ESPP, the Parent 401(k) or the Parent Class B Options or in connection with any acquisition described above for which shares have been reserved will be be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and non-assessablenonassessable and not subject to preemptive rights. As of the date of this Agreement, there are no bonds, debentures, notes or other indebtedness of Parent or any of its Subsidiaries, and, except as set forth above, no securities or other instruments or obligations of Parent or any of its Subsidiaries the value of which is in any way based upon or derived from any capital or voting stock of Parent, in each case having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of Parent or any of its Subsidiaries may vote, except for any Parent Stock Options issued after the date hereof. Except as set forth above or as otherwise contemplated herein, as of the date of this Agreement, there are no Contracts to which Parent or any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries is bound obligating Parent or any of its Subsidiaries to issue, deliver or sell, or cause to be issued delivered or sold, additional shares of capital stock of, or other equity or voting interests in, or securities convertible into, or exchangeable or exercisable for, shares of capital stock of, or other equity or voting interests in, Parent or any of its Subsidiaries or obligating Parent or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right or Contract. As of the date of this Agreement, there are not outstanding contractual obligations of Parent or any of its Subsidiaries to (I) repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interests in, Parent or any of its Subsidiaries or (II) vote or dispose of any shares of the capital stock of, or other equity or voting interests in, Parent or any of its Subsidiaries. As of the date of this Agreement, there are no irrevocable proxies and no voting agreements to which Parent is a party with respect to any shares of the capital stock of, or other equity or voting interests in, Parent or any of its Subsidiaries. (ii) Section 3.02(b)(ii) of the Parent Disclosure Schedule sets forth a true and complete list of each of Parent's Subsidiaries as of the date hereof. All the outstanding shares of capital stock of, or other equity or voting interests in, each Subsidiary of Parent have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by Parent, free and clear of any Liens and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests. Except for the capital stock or other ownership interests of its Subsidiaries, as of the date hereof, Parent does not beneficially own directly or indirectly any material capital stock of, or other material equity or voting interest in, any person.

Capital Structure. (ai) The authorized stock of Parent consists of 50,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 19,137,001 shares were are issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 18,678,500 shares are designated Series A Preferred Stock, all 18,518,500 of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan and 1996 Equity Compensation Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares of ------------- of Common Stock for issuance upon conversion of the Warrant Stock and Stock, (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock issued or issuable pursuant to the Company's 1997 Affiliate Warrant Program, (v) 300,000 shares of Common Stock for issuance upon the exercise of other warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved and (ivi) increasing the authorized 10,000,000 shares of Common Stock to 100,000,000 shares, (ii) increasing for issuance under the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the CompanyParent's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (ii) If the Closing has not occurred on or before June 30, 1997, the Company shall prepare a revised version of Section 3(a)(i) above as of such date, and attach it hereto as Exhibit C-1. ----------- (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessableassessable and not subject to any unwaived preemptive rights.

Capital Structure. (ai) The authorized capital stock of Parent the Company consists of 50,000,000 (A) 100,000,000 Common Shares, (B) 6,200,000 shares of Class B Non-Voting Common Stock, par value $.001 0.000006 per share (the "Class B Common Shares") and (C) 100,000 shares of preferred stock, par valuevalue $0.10 per share, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such 38,000 shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase designated Series A Preferred Stock (the "Warrant StockSeries A Preferred Shares"), 50,000 shares have been designated Series B Preferred Stock (iiithe "Series B Preferred Shares") 160,000 and 3,500 shares ------------- of Common Stock for issuance upon conversion have been designated Series C Preferred Shares. As of the Warrant Stock close of business on August 22, 2006, (1) 76,059,735 Common Shares were issued and outstanding (ivand no shares, were held by the Company in its treasury or by any Subsidiary of the Company), (2) 1,000,000 shares none of the Class B Common Stock for issuance upon Shares, Series A Preferred Shares and Series B Preferred Shares were issued or outstanding or were held by the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors Company in its treasury or by any Subsidiary of the Company approved and (i3) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of 3,202.780099 Series C Preferred StockShares were issued and outstanding. All of the outstanding Common Shares and Series C Preferred Shares have been duly authorized and are validly issued, fully paid and nonassessable. The Company has no Common Shares, Class B Common Shares, Series A Preferred Shares, Series B Preferred Shares or Series C Preferred Shares reserved for issuance, except that, as of the close of business on August 22, 2006, there were (x) 6,223,522 Common Shares reserved for options granted pursuant to the Firearms Training Systems, Inc. Stock Option Plan and 613,367 Common Shares reserved for future option grants under such plan (none of which shall be issued) and (iiiy) adopting 189,733 Common Shares reserved for issuance pursuant to the Company's 1997 Acquisition Firearms Training Systems, Inc. Employee Stock Option PlanCompensation Plan (the plans referred to in the foregoing clauses (x) and (y), reserving 10,000,000 as amended, supplemented or otherwise modified through the date hereof, the "Stock Plans"). Except as set forth above, no shares of Common Stock thereunder; all capital stock or other voting securities of these actions are currently pendingthe Company were, and, immediately prior to the Effective Time no shares of capital stock or other voting securities of the Company will be, issued, reserved for issuance or outstanding. There are no outstanding stock appreciation rights linked to the price of Common Shares and granted under any Stock Plan or otherwise. None of the outstanding shares of Company capital stock are, and none of such shares that may be issued prior to the Effective Time will be when issued, subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Company Charter, the Company Bylaws or any Contract (as defined in Section 5.1(d)(ii)) to which the Company is a party or otherwise bound. All Common Shares issued under the Stock Plans have been offered, issued and sold pursuant to a registration statement declared effective by the U.S. Securities and Exchange Commission (the "SEC") and for which no stop order or investigation is pending. Except as set forth above, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, rights, commitments or agreements rights of any character kind that obligate the Company or any of its Subsidiaries to which Parent is a party issue or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, sell any shares of the capital stock or other securities of Parent the Company or obligating Parent any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to grantsubscribe for or acquire, extend any securities of the Company or enter into any of its Subsidiaries, and no securities or obligations evidencing such optionrights are authorized, warrant, call, right, commitment issued or agreementoutstanding. (bii) The Section 5.1(b)(ii) of the Company Disclosure Letter lists each of the Company's Subsidiaries, its jurisdiction of organization, and the number of shares outstanding of its capital stock and the number of shares of Parent Common Stock to be issued pursuant to its outstanding capital stock owned directly or indirectly by the Merger will be Company. Each of the outstanding shares of capital stock or other equity securities of each of the Company's Subsidiaries is duly authorized, validly issued, fully paid and nonnonassessable and, except for directors' qualifying shares, owned by the Company or by a wholly-assessableowned Subsidiary of the Company, free and clear of any Encumbrance (as defined below), other than Permitted Encumbrances (as defined below). (iii) Except for its interests in the Subsidiaries and except for the ownership interests set forth in Section 5.1(b)(iii) of the Company Disclosure Letter, the Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.

Capital Structure. (a) The authorized shares of capital stock of Parent consists ▇▇▇▇▇▇▇ consist of 50,000,000 1,000,000,000 shares of capital stock, par value $.0001 per share, 649,000,000 of which are classified as ▇▇▇▇▇▇▇ Common Stock, $.001 par value, 2,000,000 of which 29,767,708 are classified as Class B Common Stock (par value $.0001 per share) of ▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇ Class B Common Stock”), 1,500,000 of which are classified as Class C Common Stock (par value $.0001 per share) of ▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇ Class C Common Stock”), 1,000,000 of which are classified as Series A Preferred Shares, 5,000,000 of which are classified as Series B Preferred Shares, 6,000,000 of which are classified as Series C Preferred Shares, 1,500,000 of which are classified as Series D Preferred Shares, 4,000,000 of which are classified as Series E Preferred Shares and 330,000,000 of which are classified as Excess Stock. 65,923,946 shares were of ▇▇▇▇▇▇▇ Common Stock are issued and outstanding as on the date of December 31, 1996, and 27,988,501 this Agreement; no shares of Preferred Stock, $.001 par value, ▇▇▇▇▇▇▇ Class B Common Stock are issued and outstanding on the date of which 18,518,500 this Agreement; no shares of ▇▇▇▇▇▇▇ Class C Common Stock are designated issued and outstanding on the date of this Agreement; 1,000,000 ▇▇▇▇▇▇▇ Series A Preferred Stock, all of which Shares are issued and outstanding, and 9,310,001 shares are designated outstanding on the date of this Agreement; 4,250,000 ▇▇▇▇▇▇▇ Series B Preferred Stock, all of which Shares are issued and outstanding. All such shares have been duly authorized, and all such outstanding on the date of this Agreement; 6,000,000 ▇▇▇▇▇▇▇ Series C Preferred Shares are issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free on the date of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 this Agreement; no shares of Common Stock for issuance to employees ▇▇▇▇▇▇▇ Series D Preferred Shares are issued and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 outstanding on the date of this Agreement; 4,000,000 ▇▇▇▇▇▇▇ Series E Preferred Shares are issued and outstanding on the date of this Agreement. 6,500,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A ▇▇▇▇▇▇▇ Participating Preferred Stock (the "Warrant Stock"), (iiipar value $.0001 per share) 160,000 shares ------------- of Common Stock have been reserved for issuance upon conversion of pursuant to the Warrant Stock ▇▇▇▇▇▇▇ Rights Plan and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions none are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreementoutstanding. (b) The Set forth in Schedule 2.3(b) to the ▇▇▇▇▇▇▇ Disclosure Letter is a true and complete list of the following: (i) each qualified or nonqualified option to purchase shares of Parent ▇▇▇▇▇▇▇ Common Stock or ▇▇▇▇▇▇▇ OP Units granted under ▇▇▇▇▇▇▇’▇ Amended and Restated 1993 Directors’ Stock Option Plan, ▇▇▇▇▇▇▇’▇ Amended and Restated 1993 Stock Incentive Plan, ▇▇▇▇▇▇▇ Partnership’s Employee Stock Incentive Pool or any other formal or informal arrangement (collectively, the “▇▇▇▇▇▇▇ Stock Options”); and (ii) except for the ▇▇▇▇▇▇▇ Rights, the ▇▇▇▇▇▇▇ Series A Preferred Shares and the ▇▇▇▇▇▇▇ OP Units, all other warrants or other rights to be issued pursuant acquire ▇▇▇▇▇▇▇ Common Stock, all stock appreciation rights, restricted stock, dividend equivalents, deferred compensation accounts, performance awards, restricted stock unit awards and other awards which are outstanding on the date of this Agreement (“▇▇▇▇▇▇▇ Stock Rights”). Schedule 2.3(b) to the Merger will be ▇▇▇▇▇▇▇ Disclosure Letter sets forth for each ▇▇▇▇▇▇▇ Stock Option and ▇▇▇▇▇▇▇ Stock Right (other than ▇▇▇▇▇▇▇ OP Units and ▇▇▇▇▇▇▇ Series A Preferred Shares) the name of the grantee, the date of the grant, the type of grant, the status of the option grants as qualified or nonqualified under Section 422 of the Code, the number of shares of ▇▇▇▇▇▇▇ Common Stock subject to each option or other award, the number and type of shares subject to options or awards that are currently exercisable, the exercise price per share, and the number and type of such shares subject to stock appreciation rights. On the date of this Agreement, except as set forth in this Section 2.3 or excepted therefrom or as set forth in Schedule 2.3(b) to the ▇▇▇▇▇▇▇ Disclosure Letter, no shares of ▇▇▇▇▇▇▇ Common Stock were outstanding or reserved for issuance. (c) All outstanding shares of ▇▇▇▇▇▇▇ Common Stock are duly authorized, validly issued, fully paid and non-assessablenonassessable and not subject to preemptive or similar rights under law or the ▇▇▇▇▇▇▇ Articles or ▇▇▇▇▇▇▇ Bylaws, or any contract or instrument to which ▇▇▇▇▇▇▇ is a party or by which it is bound. There are no bonds, debentures, notes or other indebtedness of ▇▇▇▇▇▇▇ having the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote) on any matters on which shareholders of ▇▇▇▇▇▇▇ may vote. (d) Other than (i) as set forth in this Section 2.3 or in Schedule 2.3(b) to the ▇▇▇▇▇▇▇ Disclosure Letter, (ii) ▇▇▇▇▇▇▇ OP Units, which may be converted into shares of ▇▇▇▇▇▇▇ Common Stock at a rate of one share of ▇▇▇▇▇▇▇ Common Stock for each ▇▇▇▇▇▇▇ OP Unit or, under the circumstances described in Article XI and Exhibit C of the ▇▇▇▇▇▇▇ Partnership Agreement, into cash, shares of ▇▇▇▇▇▇▇ Common Stock or a combination of cash and shares of ▇▇▇▇▇▇▇ Common Stock, (iii) 1,500,000 ▇▇▇▇▇▇▇ Series D Preferred Shares issuable, and reserved for issuance, upon the conversion of ▇▇▇▇▇▇▇ Series D Preferred OP Units, and (iv) 1,219,512 shares of ▇▇▇▇▇▇▇ Common Stock issuable, and reserved for issuance, upon the conversion of the ▇▇▇▇▇▇▇ Series A Preferred Shares, as of the date of this Agreement, there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary or ▇▇▇▇▇▇▇ TRS is a party or by which such entity is bound, obligating ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary or ▇▇▇▇▇▇▇ TRS to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock, voting securities or other ownership interests of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary or ▇▇▇▇▇▇▇ TRS or obligating ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary or ▇▇▇▇▇▇▇ TRS to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking (other than to ▇▇▇▇▇▇▇ or a ▇▇▇▇▇▇▇ Subsidiary or ▇▇▇▇▇▇▇ TRS). (e) As of the date of this Agreement, (i) 75,749,191 ▇▇▇▇▇▇▇ OP Units (including for purposes of this Section 2.3(e) the ▇▇▇▇▇▇▇ Series A Preferred Unit representing 1,000,000 ▇▇▇▇▇▇▇ OP Units) are validly issued and outstanding, fully paid and nonassessable and not subject to preemptive or similar rights under law or the ▇▇▇▇▇▇▇ Partnership Agreement, or any contract or instrument to which ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ Partnership is a party or by which either is bound, of which 66,923,946 ▇▇▇▇▇▇▇ OP Units (including for purposes of this Section 2.3(e) the ▇▇▇▇▇▇▇ Series A Preferred Unit representing 1,000,000 ▇▇▇▇▇▇▇ OP Units) are owned by ▇▇▇▇▇▇▇, (ii) the ▇▇▇▇▇▇▇ Series A Preferred OP Unit (which represents 1,000,000 ▇▇▇▇▇▇▇ OP Units) is validly issued and outstanding, fully paid and nonassessable and not subject to preemptive or similar rights, and is owned by ▇▇▇▇▇▇▇, (iii) the ▇▇▇▇▇▇▇ Series B Preferred OP Unit is validly issued and outstanding, fully paid and nonassessable and not subject to preemptive or similar rights and is owned by ▇▇▇▇▇▇▇, (iv) the ▇▇▇▇▇▇▇ Series C Preferred OP Unit is validly issued and outstanding, fully paid and nonassessable and not subject to preemptive or similar rights, and is owned by ▇▇▇▇▇▇▇, (v) 1,500,000 ▇▇▇▇▇▇▇ Series D Preferred OP Units are validly issued and outstanding, fully paid and nonassessable and not subject to preemptive or similar rights, none of which are owned by ▇▇▇▇▇▇▇ and (vi) the ▇▇▇▇▇▇▇ Series E Preferred OP Unit is validly issued and outstanding, fully paid and nonassessable and not subject to preemptive or similar rights, and is owned by ▇▇▇▇▇▇▇. Schedule 2.3(e) to the ▇▇▇▇▇▇▇ Disclosure Letter sets forth the name of each holder of ▇▇▇▇▇▇▇ OP Units and the number of ▇▇▇▇▇▇▇ OP Units owned by each such holder as of the date of this Agreement. Except as provided in the ▇▇▇▇▇▇▇ Partnership Agreement or as contemplated by this Agreement, the ▇▇▇▇▇▇▇ OP Units are not subject to any restrictions imposed by ▇▇▇▇▇▇▇ Partnership on the transfer, assignment, pledge, distribution, encumbrance or other disposition thereof (either voluntarily or involuntarily and with or without consideration) or on the exercise of the voting rights thereof provided in the ▇▇▇▇▇▇▇ Partnership Agreement. Except as provided in the ▇▇▇▇▇▇▇ Partnership Agreement, ▇▇▇▇▇▇▇ Partnership has not issued or granted and is not a party to any outstanding commitments of any kind relating to, or any presently effective agreements or understandings with respect to, the issuance or sale of interests in ▇▇▇▇▇▇▇ Partnership, whether issued or unissued, or securities convertible into or exchangeable or exercisable for interests in ▇▇▇▇▇▇▇ Partnership. (f) All dividends on ▇▇▇▇▇▇▇ Common Stock and each series of ▇▇▇▇▇▇▇ Preferred Stock and all distributions on ▇▇▇▇▇▇▇ OP Units and ▇▇▇▇▇▇▇ Preferred OP Units, which have been declared prior to the date of this Agreement, have been paid in full. (g) Set forth on Schedule 2.3(g) to the ▇▇▇▇▇▇▇ Disclosure Letter is a list of each registration rights agreement or other agreement between ▇▇▇▇▇▇▇ and/or ▇▇▇▇▇▇▇ Partnership, on the one hand, and one or more other parties, on the other hand, which sets forth the rights of any such other party or parties to cause the registration of any securities of ▇▇▇▇▇▇▇ and/or ▇▇▇▇▇▇▇ Partnership pursuant to the Securities Act of 1933, as amended (the “Securities Act”).

Capital Structure. (a) The authorized capital stock of Parent Company consists of 50,000,000 20,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996value per share, and 27,988,501 5,000,000 shares of Preferred Stock, $.001 par valuevalue per share, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are there were issued and outstanding, as of the date hereof, 5,805,132 shares of Common Stock, 35,900 shares of Series A Preferred Stock (the "Series A Preferred"), and 9,310,001 600,600 shares are designated of Series B Preferred StockStock (the "Series B Preferred"). There are no other outstanding shares of capital stock or voting securities and no outstanding commitments to issue any shares of capital stock or voting securities, all other than options to purchase an aggregate of which are 318,609 shares of Common Stock issued pursuant to the PlanSite Corporation Stock Incentive Plan (the "Company Plan"), and outstanding300,000 shares of Common Stock issuable pursuant to an outstanding warrant certificate. All such outstanding shares have been of Company Capital Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable non- assessable and are free and clear of all pledges, liens, security interests, restrictions, trusts, options, covenants, conditions, encumbrances, charges, claims or rights of others of every type and description ("Encumbrances"), including preemptive rights or rights of first refusal created by statute, the Certificate of Incorporation or Bylaws of the Company, or any agreement to which Company is a party or by which it is bound. All outstanding shares of Company Common Stock, Series A Preferred and Series B Preferred were issued in compliance with all applicable federal and state securities laws. There are no accrued and unpaid dividends owing to the holders of any liens or encumbrances other than any liens or encumbrances created by or imposed upon Preferred Stock of the holders thereofCompany. Parent As of the date hereof, Company has also reserved (i) 3,900,000 887,800 shares of Common Stock for issuance upon conversion of the Series A Preferred and the Series B Preferred, and (ii) 2,500,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 the Company Plan, of which 1,977,032 shares have been issued pursuant to option exercises or direct stock purchases, 318,609 shares are subject to outstanding, unexercised options, and no shares are subject to outstanding stock purchase rights. Since July 7, 2000, Company has not issued or granted additional options under the Company Plan. Section 2.4 of the Company Disclosure Schedule sets forth the number of outstanding Company Options and all other rights to acquire shares of Company Common Stock Option Planpursuant to the Company Plan and the applicable exercise prices. Except (i) for the rights created pursuant to this Agreement, (ii) 160,000 for Company's right to repurchase any unvested shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of under the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, Plan and (iii) adopting as set forth in this Section 2.4 or in Section 2.4 of the Company's 1997 Acquisition Stock Option PlanCompany Disclosure Schedule, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments commitments, agreements or agreements arrangements of any character to which Parent Company is a party or by which it Company is bound relating to the issued or unissued capital stock of Company or obligating Parent Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Company or obligating Parent Company to grant, extend extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. . There are no contracts, commitments or agreements relating to voting, purchase or sale of Company's capital stock (bi) The between or among Company and any of its shareholders and (ii) to the Company's knowledge, between or among any of Company's shareholders. True and complete copies of all agreements and instruments relating to or issued under the Company Plan have been made available to Parent and such agreements and instruments have not been amended, modified or supplemented, and there are no agreements to amend, modify or supplement such agreements or instruments in any case from the form made available to Parent. Section 2.4 of the Company Disclosure Schedule sets forth the number and percentage of shares of Parent Company Common Stock to be issued pursuant to the Merger that will be duly authorized, validly issued, fully paid and non-assessableowned by each Company shareholder on the Closing Date immediately before the Effective Time.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 25,000,000 shares of common stock, par value $.001 per share (the "Company ------- Common Stock") and 3,500,000 shares of preferred stock, par value $.001 par valueper ------------ share (the "Company Preferred Stock"), of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such (A) 2,501,760 shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase ------------------------ designated Series A Preferred Stock (the "Warrant Company Series A Preferred Stock"), -------------------------------- (B) 25,000 shares have been designated Series B Preferred Stock (the "Company ------- Series B Preferred Stock"), (iiiC) 160,000 27,953 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of have been designated Series C ------------------------ Preferred Stock to 37,764,153 shares, in preparation for a sale of (the "Company Series C Preferred Stock") and (D) 632,366 shares -------------------------------- shares have been designated Series D Preferred Stock (the "Company Series D ---------------- Preferred Stock"). As of the date hereof, (i) 3,011,656 shares of Company --------------- Common Stock are issued and outstanding; (ii) no shares of the Company Series A Preferred Stock or Company Series D Preferred Stock are issued and outstanding; (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any 25,000 shares of the Company Series B Preferred Stock are issued and outstanding; (iv) 27,953 shares of the Company Series C Preferred Stock are issued and outstanding; (v) no shares of Company Common Stock are held by the Company in its treasury; (vi) 1,828,006 shares of Company Common Stock are reserved for issuance pursuant to the Company Stock Plans, of which 1,555,698 shares are subject to outstanding Company Stock Options; (vii) warrants to purchase 642,183 shares of the Company Common Stock (the "Warrants") are issued -------- and outstanding; and (viii) 9 5/8% Senior Subordinated Notes due in 2008 with an aggregate principal amount of $100,000,000 are issued and outstanding. All outstanding shares of capital stock of Parent or obligating Parent to grantthe Company are, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The and all shares of Parent Common Stock to which may be issued pursuant to the Merger will be be, duly authorized, validly issued, fully paid and non-assessablenonassessable, not subject to preemptive rights and were issued in compliance in all material respects with all applicable federal and state securities laws. (b) Except as set forth in Section 2.3(a), as of the date hereof, no shares of capital stock or other equity or voting securities of the Company were issued, reserved for issuance or outstanding. There are no outstanding stock appreciation rights or rights (other than Company Stock Options) to receive shares of Company Common Stock or other equity or voting securities of the Company on a deferred basis granted under the Company Stock Plans or otherwise and, except as set forth in Section 2.3(a), no warrants to purchase shares of capital stock or other equity or voting securities of the Company at any time or upon the occurrence of any stated event. (c) Except as set forth in Section 2.3(a), no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote are issued or outstanding. (d) As of the date hereof, except as set forth in this Section 2.3, (i) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities of the Company, (B) any securities of the Company convertible into or exchangeable or exercisable for shares of capital stock or voting securities of the Company, (C) any warrants, calls, options, phantom stock, shadow warrants or other rights to acquire from the Company or any Subsidiary, and no obligation of the Company or any Subsidiary to issue, any capital stock, voting securities, derivative securities or other securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company, and (ii) there are not any outstanding obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. The Company is not a party to or aware of any voting agreement with respect to the voting of any such securities. (e) There are no outstanding (i) securities of the Company or any Subsidiary convertible into or exchangeable or exercisable for shares of capital stock or other voting securities or ownership interests in any Subsidiary, (ii) warrants, calls, options, phantom stock, shadow warrants or other rights to acquire from the Company or any Subsidiary, and no obligation of the Company or any Subsidiary to issue, any capital stock, voting securities, derivative securities or other ownership interests in, or any securities convertible into or exchangeable or exercisable for any capital stock, voting securities, derivative securities or ownership interests in, any such Subsidiary, or (iii) obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any such outstanding securities of such Subsidiaries or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. Except for the Company's ownership of the Subsidiaries, the Company does not, directly or indirectly, have any ownership or other interest in, or control of, any Person, nor is the Company or any Subsidiary controlled by or under common control with any Person.

Capital Structure. (a) The authorized capital stock of Parent Target consists of 50,000,000 30,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock, $.001 par value, of which 29,767,708 shares there were issued and outstanding as of December 31the date of this Agreement, 1996, and 27,988,501 5,342,713 shares of Preferred Common Stock, $.001 par value119,965 shares of Series A-1 Preferred Stock (the "Series A-1 Preferred"), 92,500 shares of which 18,518,500 Series A-2 Preferred Stock (the "Series A-2 Preferred") and 45,000 shares are designated of Series A-3 Preferred Stock (the "Series A-3 Preferred" and together with the Series A-1 Preferred and Series A-2 Preferred, the "Series A Preferred"), 566,658 shares of Series B Preferred Stock (the "Series B Preferred") and 8,284,651 shares of Series C Preferred Stock (the "Series C Preferred," together with the Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred, the "Target Preferred Stock"). There are no other outstanding shares of capital stock or voting securities and no outstanding commitments to (i) issue any shares of capital stock or voting securities after the date of this Agreement other than pursuant to the exercise of options outstanding as of the date of this Agreement under the Target Stock Option Plan, all of which are issued and outstanding(ii) Target Warrants or (iii) pursuant to the Strategic Investment (as defined below). All such outstanding shares have been of Target Capital Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable non-assessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and except as set forth in that certain Fourth Amended and Restated Stockholders' Agreement dated as of July 19, 1999 by and among Target and the other parties thereto ("Target Stockholders Agreement") are not subject to preemptive rights, rights of first refusal, rights of first offer or similar rights created by statute, the Certificate of Incorporation or Bylaws of Target or any agreement to which Target is a party or by which it is bound. Parent As of the date of this Agreement, Target has also reserved (i) 3,900,000 2,059,720 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and Series A Preferred, (ivii) 1,000,000 4,533,265 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors conversion of the Company approved Series B Preferred, (iiii) increasing the authorized 8,450,322 shares of Common Stock for issuance upon conversion of the Series C Preferred, (iv) 4,568,250 shares of Common Stock for issuance to 100,000,000 sharesemployees, directors and consultants pursuant to the Target's 1997 Employee Stock Option Plan, Target's 1997 Non-Employee Stock Option Plan and the Target's 1999 Employee Stock Option/Issuance Plan (together, "Target Stock Option Plans"), (of which 423,500 shares have been issued pursuant to option exercises or direct stock purchases, and 3,217,450 shares are subject to outstanding, unexercised options), (v) 91,248 shares issuable upon exercise of the Target Warrants, (vi) 409,127 shares of Common Stock for issuance under stock option agreements and warrants (in addition to those set forth in the preceding sentence) and (vii) 165,671 shares of Series C Preferred for issuance under certain bridge warrants issued on February 26, 1999. Except for (i) the rights created pursuant to this Agreement, (ii) increasing Target's right to repurchase any unvested shares under each of the number of authorized shares of Preferred Target Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred StockOption Plans, and (iii) adopting the Company's 1997 Acquisition Stock Option Planrights under Target Warrants, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent Target is a party or by which it is bound obligating Parent Target to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Target Capital Stock or obligating Parent Target to grant, extend extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. . There are no contracts, commitments or agreements relating to the voting, purchase or sale of Target Capital Stock (bi) between or among Target and any of its stockholders and (ii) to the best of Target's knowledge, among any of Target's stockholders or between any of Target's stockholders and any third party, except for the stockholders delivering the Stockholder Agreement and those stockholders of Target who are parties to the Target Stockholders Agreement. The terms of the Target Stock Option Plans permit the assumption of such Target Stock Option Plans by Acquiror provided in this Agreement, without the consent or approval of the holders of the outstanding options, the Target stockholders, or otherwise and without any acceleration of the exercise schedule or vesting provisions in effect for such options. True and complete copies of all agreements and instruments relating to or issued under the Target Stock Option Plans have been made available to Acquiror, and such agreements and instruments have not been amended, modified or supplemented, and there are no agreements to amend, modify or supplement such agreements or instruments from the form made available to Acquiror. All outstanding shares of Parent Common Target Capital Stock and options to be purchase shares of Target Capital Stock were issued pursuant to the Merger will be duly authorized, validly issued, fully paid in compliance with all applicable federal and non-assessablestate securities laws.

Capital Structure. (a) The authorized capital stock of Parent Target consists of 50,000,000 ----------------- 25,000,000 shares of Common Stock and 15,000,000 shares of Preferred Stock, $.001 par value, of which 29,767,708 shares there were issued and outstanding as of December 31the date of this Agreement, 1996, and 27,988,501 5,504,550 shares of Preferred Common Stock, $.001 par value, 3,469,233 shares of which 18,518,500 shares are designated Series A Preferred StockStock (the "Series A Preferred"), all 7,761,965 shares of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred StockStock (the "Series B Preferred") and 3,528,487 shares of Series C Preferred Stock (the "Series C Preferred"). There are no other outstanding shares of capital stock or voting securities and no outstanding commitments to issue any shares of capital stock or voting securities after the date of this Agreement other than pursuant to the exercise of options outstanding as of the date of this Agreement under the Target Stock Option Plan and upon conversion of the promissory note dated October 11, all 1999 in favor of which are issued and outstandingLighthouse Capital Partners III, L.P. (the "Lighthouse Convertible Note"). All such outstanding shares have been of Target Capital Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable non-assessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and are not subject to preemptive rights, rights of first refusal, rights of first offer or similar rights created by statute, the Articles of Organization or Bylaws of Target or any agreement to which Target is a party or by which it is bound. Parent As of the date of this Agreement, Target has also reserved (i) 3,900,000 3,469,233 shares, 7,761,965 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 3,528,487 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock Series A Preferred, the Series B Preferred and the Series C Preferred, (ivii) 1,000,000 5,585,000 shares of Common Stock for issuance upon to employees, directors and consultants pursuant to the exercise Target Stock Option Plan, of outstanding warrants which 852,730 shares have been issued pursuant to purchase Common Stock. In Februaryoption exercises or direct stock purchases, 19974,354,393 shares are subject to outstanding, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, unexercised options and (iii) adopting 129,218 shares for issuance upon conversion of the CompanyLighthouse Convertible Note. Except for (i) the rights created pursuant to this Agreement and (ii) Target's 1997 Acquisition right to repurchase any unvested shares under the Target Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent Target is a party or by which it is bound obligating Parent Target to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Target Capital Stock or obligating Parent Target to grant, extend extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. . There are no contracts, commitments or agreements relating to the voting, purchase or sale of Target Capital Stock (bi) between or among Target and any of its stockholders and (ii) to the best of Target's knowledge, among any of Target's stockholders or between any of Target's stockholders and any third party, except for the stockholders delivering the Stockholder Agreement (as defined herein). The terms of the Target Stock Option Plan permit the assumption of such Target Stock Option Plan by Acquiror provided in this Agreement, without the consent or approval of the holders of the outstanding options, the Target stockholders, or otherwise and without any acceleration of the exercise schedule or vesting provisions in effect for such options, except as set forth in the Target Stock Option Plan. True and complete copies of all agreements and instruments, as amended, relating to or issued under the Target Stock Option Plan have been made available to Acquiror, and such agreements and instruments have not been further amended, modified or supplemented, and there are no agreements to amend, modify or supplement such agreements or instruments from the form made available to Acquiror. All outstanding shares of Parent Common Target Capital Stock and options to be purchase shares of Target Capital Stock were issued pursuant to the Merger will be duly authorized, validly issued, fully paid in compliance with all applicable federal and non-assessablestate securities laws.

Capital Structure. (a) The authorized capital stock of Parent Target consists of 50,000,000 52,256,803 shares of Target Common Stock, $.001 par value, of which 29,767,708 shares there were issued and outstanding as of December 31, 1996the date hereof 3,817,571 shares, and 27,988,501 44,449,104 shares of Target Preferred Stock, $.001 par value, of which 18,518,500 as of that same date there were designated 7,029,902 shares are designated of Series A Preferred Stock, all 7,029,902 shares of which are issued and outstandingSeries A-1 Preferred Stock, and 9,310,001 10,936,850 shares are designated of Series B Preferred Stock, all 10,936,850 shares of which are Series B-1 Preferred Stock, 4,257,800 shares of Series C Preferred Stock and 4,257,800 shares of Series C-1 Preferred Stock. As of that same date, there were issued and outstanding, 7,029,902 shares of Series A Preferred Stock, convertible into 7,029,902 shares of Common Stock; no shares of Series A-1 Preferred Stock; 10,936,850 shares of Series B Preferred Stock, convertible into 10,936,850 shares of Common Stock; no shares of Series B-1 Preferred Stock; 4,257,797 shares of Series C Preferred Stock, convertible into 4,257,797 shares of Common Stock; and no shares of Series C-1 Preferred Stock. All such outstanding shares have been of Target Capital Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable non-assessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved , and are not subject to preemptive rights or rights of first refusal created by statute, the Target Charter Documents or any agreement to which Target is a party or by which it is bound other than (ix) 3,900,000 that certain Investor Rights Agreement dated as of November 5, 2002 among Target and certain of its stockholders (the “First Investor Rights Agreement”), (y) that certain Amended and Restated Preferred Stock Investor Rights Agreement dated as of May 2, 2005 among Target and certain of its stockholders (the “Second Investor Rights Agreement” and together with the First Investor Rights Agreement, the “Investor Rights Agreements”) and (z) that certain Second Amended and Restated Stock Purchase and Put Right Agreement dated as of May 2, 2005 among Target and certain of its stockholders (the “Put Right Agreement”). (b) As of the date hereof, there are 4,437,699 shares of Common Stock reserved for issuance to employees and consultants pursuant to Parent's 1996 Stock under the Target 2000 Equity Incentive Plan (including the Sub-Plan for UK Employees) (the “Target Option Plan”), of which 2,936,470 shares were subject to outstanding options and 118,802 shares were reserved for future option grants. The spreadsheet attached as Schedule B hereto (the “Option Spreadsheet”), which sets forth with respect to options to purchase shares of Target Common Stock outstanding as of the date hereof, (iia) 160,000 the name of the holder of such option, (b) the date of grant of such option as set forth in the corresponding stock option agreement, (c) whether such option is an incentive stock option or a non-qualified stock option, (d) the number of shares of Series A Preferred Target Common Stock for issuance initially issuable upon exercise of such option, (e) the exercise price per share of outstanding warrants to purchase Series A Preferred such Target Common Stock, (f) the date upon which vesting commenced under such option, (g) the number of shares of Target Common Stock vested as of the date hereof under such option, (h) the "Warrant Stock"number of shares of Target Common Stock exercised under such option, (i) the number of shares of Target Common Stock issuable upon exercise of such option (net of any exercises), (iiij) 160,000 shares ------------- the term of such option, (k) the state of residence of the holder of such option on the date of grant thereof and (l) the exercise or vesting schedule of such option, including the terms of any acceleration of vesting potentially applicable to the shares, is true and correct in all respects. All outstanding options have been duly approved by the Target Board of Directors. Target has not issued any options to purchase Target Common Stock for issuance with an exercise price of less than the fair market value of such Target Common Stock on the date of grant to any employee, consultant or other provider of services to Target. Target has not taken any other action that would cause a holder of such option, or the securities issued or issuable upon conversion exercise of such option, to be subject to taxation under Section 409A of the Warrant Stock and (iv) 1,000,000 shares Code. Target has not entered into any other arrangements that would constitute non-qualified deferred compensation subject to taxation under Section 409A of the Code. All exercises of options to purchase Target Common Stock have been paid in cash or check by the holder of such option, and no such holder has received reimbursement, additional compensation or other monetary contribution from the Target in connection therewith. (c) Except for issuance upon the exercise of outstanding warrants rights created pursuant to purchase Common Stock. In February, 1997this Agreement, the Board of Directors of Investor Rights Agreements, the Company approved Put Right Agreement and the rights disclosed in the preceding paragraph (i) increasing the authorized shares of Common Stock to 100,000,000 sharesb), (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent Target is a party or by which it is bound bound, obligating Parent Target to issue, deliver, sell, repurchase or redeem, redeem or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Target Capital Stock or obligating Parent Target to grant, extend extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. (b) The . All shares of Parent Common Stock to be issuable upon conversion of the Preferred Stock or upon exercise of the options described in this Section 3.5, will be, when issued pursuant to the Merger will be respective terms of such Preferred Stock or options, duly authorized, validly issued, fully paid and non-assessablenonassessable. There are no other contracts, commitments or agreements relating to or restricting the voting, purchase or sale of Target Capital Stock (a) between or among Target and any of its stockholders; and (b) to Target’s knowledge, between or among any of Target’s stockholders, except for the Investor Rights Agreements, the Put Right Agreement and that certain Second Amended and Restated Voting Agreement dated as of May 2, 2005 among Target and certain of its stockholders (the “Voting Agreement”). All shares of outstanding Target Capital Stock and rights to acquire Target Capital Stock, including all options to purchase Target Common Stock, were issued in compliance with all applicable foreign, federal and state laws.

Capital Structure. (ai) The authorized capital stock of Parent Company consists of 50,000,000 30,000,000 shares of Class A Common Stock, 1,689,256 shares of Class B Common Stock, 367,344 shares of Class C Common Stock, 1,444,366 shares of Class D Common Stock and 4,000,000 shares of preferred stock, par value $.001 par value.01 per share ("Authorized Preferred Stock"), of which 29,767,708 which, as of the date of this Agreement, (A) 3,172,533 shares were of Class A Common Stock are issued and outstanding as of December 31outstanding, 1996, and 27,988,501 (B) 244,890 shares of Class B Common Stock are issued and outstanding, (C) 31,000 shares of Class C Common Stock are issued and outstanding, (D) 1,444,366 shares of Class D Common Stock are issued and outstanding, (E) 600,000 shares of Authorized Preferred Stock are designated as Series B Preferred Stock, $.001 par value, 565,000 shares of which 18,518,500 shares are issued and outstanding, (F) 598,000 of the Authorized Preferred Stock are designated Series A as Mandatory Preferred Stock, all 583,400 shares of which are issued and outstanding, and 9,310,001 (G) no shares of Class A Common Stock, Class B Common Stock, Class C Common Stock or Class D Common Stock are designated held by the Company in its treasury or by any of the Company's Subsidiaries. (ii) As of the date hereof, there are no bonds, debentures, notes or other indebtedness issued or outstanding having the right to vote on any matters on which holders of Common Stock or Authorized Preferred Stock may vote, including without limitation the Merger. (iii) Section 3.01(c)(iii) of the Company's Disclosure Schedule sets forth a complete and correct list as of the date hereof, of each holder of record of shares of Class B Common Stock, Class C Common Stock, Class D Common Stock and Series B Preferred StockStock and, all in each case, the number of which are issued shares held of record by each such holder. (iv) Giving effect to the applicable provisions of the Company's Amended and outstanding. All such shares have been duly authorizedRestated Certificate of Incorporation (the "Restated Certificate"), and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free the Certificate of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares Designation of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A B Convertible Preferred Stock (the "Warrant StockSeries B Designation"), the Certificate of Designations of Preferred Stock of Triathlon Broadcasting Company to be designated 9% Mandatory Convertible Preferred Stock (iiithe "Mandatory Designation") 160,000 shares ------------- and all other instruments affecting the rights of holders of Capital Stock to which the Company is a party or is bound (which, if any, other than the Restated Certificate, the Series B Designation, the Mandatory Designation and the Transaction Documents (as defined in Section 8.03), are set forth in Section 3.01(c)(iv) of the Company Disclosure Schedule): (A) each outstanding share of Class D Common Stock is convertible into one share of Class A Common Stock or, in the event of an occurrence set forth in paragraph 4.2(f)(iii)(B) of Article Four of the Restated Certificate, one share of Class B Common Stock, in each case subject to any necessary FCC (as defined in Section 3.01(d)(iii)) approval and approval under the HSR Act (as defined in Section 3.01(d)(iii)); other than as set forth in paragraph 4.2(f)(iii)(B) of the Restated Certificate and any restrictions or required approval of the FCC or under the HSR Act, there are no restrictions or limitations, contractual or otherwise, binding upon the Company or to which the Company is subject that prohibit or limit the right of a holder of Class D Common Stock to convert shares of Class D Common Stock into shares of Class A Common Stock or Class B Common Stock; and the conversion of any Class D Common Stock into shares of Class A Common Stock or Class B Common Stock will not violate or result in or constitute a default under the Credit Agreement or any other loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or any other contract, agreement, arrangement or understanding to which the Company is a party or by which it or any of its properties or assets are bound; (B) as of the date hereof, no event has occurred permitting any outstanding shares of Series B Preferred Stock to become convertible into any shares of Capital Stock; and (C) as of the date hereof, each outstanding share of Mandatory Preferred Stock is convertible into 8.33 shares of Class A Common Stock, and no event has occurred requiring any adjustment to the Redemption Rate (as defined in paragraph 6(a) of the Mandatory Designation), pursuant to paragraph 8 of the Mandatory Designation or otherwise, or the Optional Conversion Rate (as defined in Paragraph 7(a) of the Mandatory Designation), pursuant to paragraph 8 of the Mandatory Designation or otherwise. (v) Except as set forth in Section 3.01(c)(v) of the Company Disclosure Schedule, there are no outstanding stock options, stock appreciation rights or other rights to receive shares of Capital Stock granted under the Option Plans. Without limiting the generality of the foregoing, except as set forth in Section 3.01(c)(v) of the Company Disclosure Schedule, there are no outstanding "Options" as defined in the Option Plans. Section 3.01(c)(v) of the Company Disclosure Schedule sets forth a complete and correct list, as of the date hereof, of the holders of all Warrants, Options and SARs, and the number, class and series of shares subject to each such Warrant, Option and SAR, and the exercise or base prices thereof. Except for issuance the Options, Warrants, Class B Common Stock, Class C Common Stock, Class D Common Stock, Series B Preferred Stock and Mandatory Preferred Stock (as to which no more than 7,388,728 shares of Class A Common Stock and, except for 1,444,366 shares of Class B Common Stock issuable upon conversion of the Warrant Stock and (iv) 1,000,000 outstanding Class D Common Stock, no shares of Common any other class or series of Capital Stock for issuance are issuable upon the exercise of outstanding warrants to purchase Common Stock. In Februaryor conversion thereof, 1997as applicable) and, the Board of Directors except as set forth above or in Section 3.01(c)(v) of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 sharesDisclosure Schedule, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other outstanding securities, options, warrants, calls, rights, commitments commitments, agreements, arrangements or agreements undertakings of any character kind to which Parent the Company or any of its Subsidiaries is a party or by which it any of them is bound obligating Parent the Company or any of its Subsidiaries to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock or other voting securities of Parent the Company or of any of its Subsidiaries or obligating Parent the Company or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment commitment, agreement, arrangement or agreementundertaking ("Derivative Securities"). Except as set forth in the Mandatory Designation, the Series B Designation and in Section 3.01(c)(iv) of the Company Disclosure Schedule, 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 of the Company or any of its Subsidiaries, and during the period commencing on March 4, 1996, and ending on July 31, 1997, the Company took such actions as necessary to satisfy the requirements of paragraph 9 of the Mandatory Designation and has not at any time been required to repurchase any shares of Mandatory Preferred Stock pursuant to paragraph 9 of the Mandatory Designation. (bvi) The All outstanding shares of Parent Common Stock to capital stock of the Company and its Subsidiaries are, and all shares which may be issued pursuant to the Merger will be be, when issued, duly authorized, validly issued, fully paid and non-assessablenonassessable and not subject to preemptive or similar rights. (vii) Except as contemplated hereby or in the other Transaction Documents or as set forth in Section 3.01(c)(vii) of the Company Disclosure Schedule, there are not as of the date hereof and there will not be at the Effective Time any stockholder agreements, voting agreements or trusts, proxies or other agreements or contractual obligations to which the Company or any Subsidiary is a party or bound with respect to the voting or disposition of any shares of the capital stock of the Company or any of its Subsidiaries and, to the Company's knowledge, as of the date hereof, there are no other stockholder agreements, voting agreements or trusts, proxies or other agreements or contractual obligations among the stockholders of the Company with respect to the voting or disposition of any shares of the capital stock of the Company or any of its Subsidiaries.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 43,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock, each with $0.001 par value, of which 110,000 shares are designated as "Series A Convertible Preferred Stock" (the "Series A Preferred"), 200,000 shares are designated "Series B Convertible Preferred Stock" (the "Series B Preferred"), 670,000 shares are designated "Series C Convertible Preferred Stock" (the "Series C Preferred"), 240,000 shares are designated "Series D Convertible Preferred Stock" (the "Series D Preferred"), 2,500 shares are designated "Series E Convertible Preferred Stock" (the "Series E Preferred"), and 2,500 shares are designated "Series F Convertible Preferred Stock" (the "Series F Preferred"). As of November 30, 1999, (i) there were issued and outstanding 20,606,922 shares of Common Stock, $.001 par value, 102,564 shares of Series A Preferred (which 29,767,708 are convertible into an aggregate of 1,025,640 shares were issued and outstanding as of December 31, 1996Common Stock), and 27,988,501 2,500 shares of Series F Preferred (which are convertible into an aggregate of 392,465 shares of Common Stock), and (ii) 3,548,916 additional shares of Common Stock were reserved for issuance pursuant to outstanding stock options and warrants (including shares of Common Stock issuable upon conversion of Preferred Stock issuable upon exercise of warrants). No material change in such capitalization has occurred between November 30, 1999 and the date of this Agreement. The Company has previously provided the Purchasers with the names of the record holders of such outstanding shares of Preferred Stock, $.001 par value, Stock and warrants. All the outstanding shares of which 18,518,500 shares Common and Preferred Stock are designated Series A Preferred Stock, all of which are validly issued and outstanding, are fully paid and 9,310,001 nonassessable. No shares of the Company's Common or Preferred Stock are designated Series B Preferred Stock, all held in the treasury of which are issued and outstandingthe Company. All shares of Common Stock subject to issuance as specified above, upon such shares have been issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free subject to no preemptive rights or rights of any liens or encumbrances other than any liens or encumbrances first refusal created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997statute, the Board of Directors charter documents of the Company approved or any agreement to which the Company is a party or by which it is bound. (ib) increasing Except as set forth in this Section 2.4 or as reserved for future grants of options under the authorized shares stock option plan(s) (collectively, "Company Option Plans") described in the SEC Reports (as defined in Section 2.8(a)), there are (a) no equity securities of Common Stock to 100,000,000 sharesany class of the Company, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 sharesor any security exchangeable or convertible into or exercisable for such equity securities, in preparation issued, reserved for a sale of Series C Preferred Stock, issuance or outstanding and (iiib) adopting the Company's 1997 Acquisition Stock Option Planno outstanding subscriptions, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, puts, calls, rights, rights or other commitments or agreements of any character to which Parent the Company is a party or by which it is bound obligating Parent the Company to issue, deliver, sell, repurchase or redeem, redeem or cause to be issued, delivered, sold, repurchased or redeemed, redeemed any shares equity securities of the capital stock of Parent Company or obligating Parent the Company to grant, extend extend, accelerate the vesting of, change the exercise price of or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent MedSource without giving effect to the transactions contemplated hereby, consists of 50,000,000 of: (i) 1,000,000 shares of preferred stock, par value $.0l per share (the "Preferred Stock"), of which 100,000 shares have been designated as Series A (the "Series A Preferred Stock"), 400,000 shares have been designated as 6% Series B Cumulative Convertible Redeemable Preferred Stock (the "Series B Preferred Stock"), 52,029 shares have been designated as 6% Cumulative Convertible Redeemable Preferred Stock, Series C (the "Series C Preferred Stock"), prior to the Effective Time 43,000 shares will have been designated Series D 6% Cumulative Convertible Preferred Stock, 65,000 shares have been designated as Series Z Convertible Nominal Value Redeemable Preferred Stock (the "Series Z Preferred Stock"); 382,971 shares of Preferred Stock remain undesignated; and (ii) 40,000,000 shares of MedSource Common Stock. (b) As of the date hereof, there were outstanding 5,255,008 shares of MedSource Common Stock, $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 38,370 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all 332,728 shares of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such 40,000 shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 65,000 shares of Series Z Preferred Stock. Also at the date hereof, 10,401,437 shares of MedSource Common Stock thereunder; all of these actions are currently pending. There are no other were reserved for issuance pursuant to outstanding options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any warrants and convertible securities. (c) All outstanding shares of the capital stock of Parent or obligating Parent to grantMedSource are, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The and all shares of Parent Common Stock to that may be issued pursuant to the Merger will securities or rights disclosed on Schedule 6.2(c) will, when issued, be duly authorized, validly issued, fully --------------- paid and non-assessablenonassessable and not subject to preemptive rights, except as may be disclosed on Schedule 6.2(c). Except as set forth in this Section 6.2 or in --------------- Schedule 6.2(c), there are no (i) options, warrants, calls, preemptive rights, --------------- subscriptions or other rights, convertible securities, agreements or commitments of any character obligating now or in the future, MedSource or the holders of MedSource Shares to issue, transfer or sell any shares of capital stock, options, warrants, calls or other equity interest of any kind whatsoever in MedSource or securities convertible into or exchangeable for such shares or equity interests, (ii) contractual obligations of MedSource to repurchase, redeem or otherwise acquire any capital stock or equity interest of MedSource or (iii) voting trusts, proxies or similar agreements to which MedSource or any of the holders of MedSource Shares is a party with respect to the voting of the capital stock of MedSource.

Capital Structure. (ai) The authorized Schedule 3.01(c) sets forth a list of (i) all holders of Capital Stock on the date hereof, including the amount and kind of capital stock held by each such holder and (ii) all outstanding options and warrants pursuant to which the Company is or may become obligated to issue any shares of the Company Capital Stock or other securities of or other equity interests in the Company and the holders thereof. (ii) As of the date hereof, the capital stock of Parent the Company authorized, outstanding or reserved for issuance consists of of: (i) 50,000,000 shares of Common Stock, $.001 no par value, authorized, of which 29,767,708 12,302,639 shares were issued are issue and outstanding as of December 31, 1996, outstanding; and 27,988,501 (ii) 2,332,468 shares of Preferred Stockpreferred stock, $.001 no par value, authorized, of which 18,518,500 (A) 331,390 shares are have been designated as Series A Preferred Stock, all of which 318,134 shares are issued and outstanding, and 9,310,001 (B) 1,001,078 shares are have been designated as Series B Preferred Stock, all of which 990,077 shares are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (iiii) 3,900,000 6,345,010 shares of Common Stock reserved for issuance to employees and consultants upon exercise of options outstanding pursuant to Parent's 1996 the Company’s Amended and Restated 1999 Stock Option Plan, (iiiv) 160,000 16,570 shares of Series A Convertible Preferred Stock reserved for issuance upon the exercise of warrants, and (v) 11,001 shares of Series B Convertible Preferred Stock reserved for issuance upon exercise of warrants. (iii) Immediately prior to the Merger, the capital stock of the Company authorized, outstanding warrants to purchase or reserved for issuance shall consist of: (i) 50,000,000 shares of Common Stock, no par value, authorized, of which 17,305,203 shares are issue and outstanding; and (ii) 2,332,468 shares of preferred stock, no par value, authorized, of which (A) 331,390 shares have been designated as Series A Preferred Stock Stock, of which 220,352 shares are issued and outstanding, and (the "Warrant B) 1,001,078 shares have been designated as Series B Preferred Stock"), of which 629,432 shares are issued and outstanding, (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 6,345,010 shares of Common Stock reserved for issuance upon the exercise of options outstanding warrants pursuant to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition ’s Amended and Restated 1999 Stock Option Plan, reserving 10,000,000 (iv) 16,570 shares of Common Series A Convertible Preferred Stock thereunder; all reserved for issuance upon exercise of these actions are currently pending. There are warrants, and (v) 11,001 shares of Series B Convertible Preferred Stock reserved for issuance upon exercise of warrants. (iv) Immediately following the Closing, there will be no other options, warrants, calls, rights, commitments rights or agreements convertible securities exercisable for shares of any character the Company’s Common Stock (“Common Stock Equivalents”) pursuant to which Parent the Company is a party or by which it is bound obligating Parent may be obligated to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, issue any shares of the capital stock of Parent or obligating Parent other equity interests in the Company, or rights to grantsell or otherwise transfer, extend or enter into otherwise relating to, any such optionissued or unissued shares of the capital stock of or other equity interests in the Company pursuant to any provision of applicable law, warrantthe Company’s Certificate or By-laws, callany contract to which the Company is a party or otherwise obligated; and, rightimmediately after the Closing there will not be, commitment any contract or encumbrance (including a right of first refusal, right of first offer, proxy, voting agreement, voting trust, registration rights agreement, or shareholders agreement, whether or not the Company is a party thereto) with respect to the purchase, sale or voting of any shares of capital stock of or other equity interests in the Company (whether outstanding or issuable upon conversation of any Common Stock Equivalents). (bv) The There are no rights to sell or otherwise transfer, or otherwise relating to, any issued or unissued shares of Parent the capital stock of or other equity interests of the Company pursuant to any provision of applicable law, the Company’s Certificate or By-laws, any contract to which the Company is a party or otherwise; and the Company is not a party to, and there is no contract or encumbrance (including a right of first refusal, right of first offer, proxy, voting agreement, voting trust, registration rights agreement or shareholders agreement, whether or not the Company is a party thereto) with respect to the purchase, sale or voting of any shares of capital stock of or any other equity interests in the Company (whether outstanding or issuable upon conversation or exercise of any Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessableEquivalents).

Capital Structure. (a) The authorized capital stock of Parent consists the Company is 2,607,500 shares consisting of 50,000,000 (i) 1,107,500 shares of Company Common Stock, $.001 par valueincluding 900,000 shares of Class A Common Stock ("COMPANY CLASS A COMMON STOCK"), 150,000 shares of which 29,767,708 Class B Common Stock ("COMPANY CLASS B COMMON STOCK") and 57,500 shares were issued of Class C Common Stock ("COMPANY CLASS C COMMON STOCK") and outstanding as of December 31, 1996, and 27,988,501 (ii) 1,500,000 shares of Preferred Stock, $.001 .01 par value, value ("COMPANY PREFERRED STOCK") all of which 18,518,500 shares are have been designated as Company Series A Preferred Stock. As of the date hereof (i) 869,155 shares of Company Class A Common Stock, 129,750 shares of Company Class B Common Stock, 46,350 shares of Company Class C Common Stock and 1,032,967 shares of Company Series A Preferred Stock are issued and outstanding, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessablenonassessable and free of preemptive rights, (ii) no shares of Company Common Stock are held in the treasury of the Company or by Subsidiaries of the Company and (iii) 2,343 shares of Company Class A Common Stock, 4,350 shares of Company Class B Common Stock, 11,150 shares of Company Class C Common Stock and 2,343 shares of Company Series A Preferred Stock are reserved for issuance pursuant to the Company's Investment and Incentive Plan and the Class C Plan (collectively, the "COMPANY INCENTIVE Plans"). The Company has issued options to purchase Company Stock ("COMPANY OPTIONS") and 41/4% Convertible Notes ("CONVERTIBLE NOTES"), in the amounts set forth in SECTION 3.2 of the Company Letter.

Capital Structure. (ai) The As of April 21, 2016, the authorized capital stock of Parent the Company consists of 50,000,000 (x) 350,000,000 shares of Company Common Stock, $.001 par valueof which (A) 11,689,909 shares are issued and outstanding, (B) 4,483,089 shares are reserved for issuance under the Warrants to purchase Company Common Stock and (C) 23,604,118 shares are reserved for issuance under the Company Stock Plan, of which 29,767,708 15,577,678 shares were are in respect of outstanding and unexercised Company Options, and (y) 290,427,241 shares of Company Preferred Stock, of which (A) 176,382,344 shares are designated as Series A Preferred Stock, 88,191,172 of which are issued and outstanding, (B) 12,845,840 shares are designated as Series B Preferred Stock, 12,055,328 of which are issued and outstanding as and 790,512 of December 31, 1996, and 27,988,501 shares of which are reserved for issuance under the Warrants to purchase Series B Preferred Stock, $.001 par value, of which 18,518,500 (C) 29,556,696 shares are designated as Series A C Preferred Stock, all of which are issued and outstanding, and 9,310,001 (D) 22,000,000 shares are designated as Series B D Preferred Stock, all of which are issued and outstanding, (E) 8,090,055 shares are designated as Series E Preferred Stock, all of which are issued and outstanding, (F) 28,531,473 shares are designated as Series F Preferred Stock, 16,518,218 of which are issued and outstanding, and (G) 13,020,833 shares are designated as Series G Preferred Stock, 10,849,765 of which are issued and outstanding. All such shares of the outstanding Company Shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable authorized and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable. Except as set forth above and except as specified in Section 6.1(b)(i) (Part A) of the Company Disclosure Letter, as of the date of this Agreement, there are no preemptive or other outstanding rights, options, restricted stock, phantom stock rights, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company to issue or sell any shares of capital stock or other securities of the Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company, and no securities or obligations evidencing such rights are authorized, issued or outstanding. Neither the Company nor its Subsidiary has outstanding any 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 stockholders of the Company on any matter. Except for the Voting Agreement and except as set forth in Section 6.1(b)(i) (Part B) of the Company Disclosure Letter, there are no voting trusts or other agreements or understandings to which the Company or its Subsidiary is a party with respect to the voting or registration of the capital stock or other equity interest of the Company or its Subsidiary. (ii) Section 6.1(b)(ii) of the Company Disclosure Letter contains a correct and complete list, as of the date of this Agreement, of Company Options issued under the Company Stock Plan, including the holder, date of grant, number of Company Shares issuable upon exercise of each Company Option, the exercise price per Company Share, the vesting commencement date, the associated vesting schedule, and whether such Company Option is an incentive stock option or nonqualified stock option. There are no outstanding incentive awards payable in or based on the value of the stock of the Company other than such Company Options. (iii) As of the Effective Time, the Spreadsheet will be correct and complete. (iv) Other than the Subsidiary of the Company, the Company (x) does not own or control any equity security or other interest of any other corporation, partnership, limited liability company or other business entity, and (y) is not a party to any joint venture, partnership, limited liability company or similar arrangement.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 45,000,000 shares of stock, which includes 30,000,000 shares of Common Stock and 15,000,000 shares of Preferred Stock, of which 3,750,000 shares are designated as Series A Preferred Stock, 4,710,000 shares are designated as Series B Preferred Stock and 2,150,000 shares are designated as Series C Preferred Stock. The issued and outstanding stock as of the date of this Agreement is as follows: 5,964,565 shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 3,750,000 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all 4,710,000 shares of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock and 2,120,000 shares of Series C Preferred Stock. As of the date of this Agreement there are outstanding options relating to the purchase of 2,862,804 shares of Common Stock which were granted pursuant to the Company Stock Plan. 5,314,000 shares of Common Stock are reserved for issuance pursuant to the Company Stock Plan and no shares of Common Stock, all no shares of which Series A Preferred Stock, no shares of Series B Preferred Stock and no shares of Series C Preferred Stock are reserved for issuance pursuant to outstanding Warrants. All of the issued and outstanding. All such outstanding shares of Common Stock and Preferred Stock (collectively, the “Company Stock”) have been duly authorized, and all such are validly issued, fully paid, nonassessable and free of preemptive rights created by statute, the Company’s Certificate of Incorporation or By-Laws, or any Contract. None of the issued and outstanding shares have of Company Stock has been issued in violation of any applicable federal or state law or any such preemptive rights or rights to subscribe for or purchase securities. All shares of Company Stock subject to issuance as specified above, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, are fully paid paid, nonassessable, and nonassessable and are free of such preemptive rights and, assuming such issuance prior to the Effective Time, will not have been issued in violation of any liens applicable federal or encumbrances other than state law or any liens such preemptive rights or encumbrances created by rights to subscribe for or imposed upon the holders thereofpurchase securities. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance Each agreement to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of which the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for or a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent Company Subsidiary is a party or by which it is bound relating to the sale, issuance, repurchase or other transfer of any of the Company Stock or any securities convertible into Company Stock is identified in Section 3.3(a) of the Company Disclosure Schedule. (b) Except as set forth in Section 3.3(a), there are no Equity Interests of the Company issued, reserved for issuance or outstanding. Except as set forth in Section 3.3(a) and Section 3.3(a) of the Company Disclosure Schedule, there are no options, warrants, convertible securities, calls, rights, stock appreciation rights, preemptive rights, rights of first refusal or commitments or agreements of any character to which the Company is a party, or by which the Company is bound, obligating Parent the Company to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemedany Equity Interests, any shares of the capital stock of Parent or obligating Parent the Company to grant, extend or enter into accelerate the vesting of any Equity Interests (“Equity Rights”). Except for the Support Agreements, there are no voting trusts, proxies or other agreements or understandings with respect to any Company Stock to which the Company or, to the knowledge of the Company, any other Person is a party or by which it or any such optionother Person is bound. Except as set forth in the Certificate of Incorporation, warrantthere are no obligations, callcontingent or otherwise, rightof the Company to repurchase, commitment redeem or agreementotherwise acquire any Company Stock or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any entity. (bc) The Section 3.3(c) of the Company Disclosure Schedule lists (i) all holders of Company Stock as of the Record Date, as well as the class, series and number of shares of Parent Company Stock held by each such holder and (ii) all holders of Warrants, Options or other Equity Rights as of the date hereof, the number of shares of Common Stock or the number and Series of shares of Preferred Stock subject thereto, the grant date, the expiration date, the vesting schedule (including a description of the circumstances under which such vesting schedule can or will be accelerated) and the exercise, conversion or exchange price per share of each such Warrant, Option or other Equity Right. No action is required to be issued pursuant taken by the Company, the Board of Directors of the Company (the “Company Board”), any trustee or administrator under the Company Stock Plan or any holder of Options, to effect the treatment of Options described in Section 5.8 hereof. No Options (or any portion thereof, and including after Parent’s assumption thereof as described in Section 5.8) will be entitled to accelerated vesting (including after conversion of such shares in the Merger into Ordinary Shares) as a result of the Merger. (d) Immediately prior to the Effective Time and following payment of the Paid Dividend Amount with respect to the Series C Preferred Stock, the amount of all accrued and unpaid dividends for the Series C Preferred Stock shall be zero. The Company has never declared, nor is there accrued, any dividend or other distribution with respect to any Company Stock other than with respect to the Series C Preferred Stock as set forth in the Certificate of Incorporation. (e) Upon payment of the Merger Consideration as provided for in this Agreement and except with respect to obligations of Parent or the Surviving Corporation hereunder expressly contemplated to be performed by Parent or the Surviving Corporation after Closing, the Stockholders will have no further right or claim, in their capacity as Stockholders, against the Company or Parent, or any of their respective officers, directors, employees, agents or advisors for any amount owing to the Stockholders with respect to any claim arising contemporaneously with or prior to the Closing Date or on account of or arising out of any matter in their capacity as a Stockholder, cause or event occurring contemporaneously with or prior to the Closing Date; provided, however, the foregoing shall be duly authorizeddeemed not to apply with respect to any breach by Parent of its representations, validly issuedwarranties, fully paid and non-assessablecovenants or agreements hereunder.

Capital Structure. (a) The As of the date hereof, the authorized capital stock of Parent Predix consists of 50,000,000 338,085,813 shares of Common Stock, par value $.001 par value.01 per share (the “Predix Common Stock”), of which 29,767,708 1,044,059 shares were are issued and outstanding as of December 31, 1996, and 27,988,501 275,298,740 shares of Preferred Stock, par value $.001 par value.01 per share, of which 18,518,500 76,771,672 shares are designated Series A AB Convertible Preferred Stock, all par value $.01 per share (the “Series AB Preferred Stock”), of which 76,771,672 are issued and outstanding, outstanding and 9,310,001 such shares are convertible on an eighteen (18) shares for one (1) share basis into 4,265,060 shares of Predix Common Stock and 198,527,068 shares are designated Series B C Convertible Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock par value $.01 per share (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of “Series C Preferred Stock,” together with the Series AB Preferred Stock, the “Predix Preferred Stock”), of which 196,431,820 are issued and outstanding and such shares are convertible on an eighteen (iii18) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares for one (1) share basis into 10,912,838 shares of Predix Common Stock. No shares of capital stock are held in Predix’s treasury. All outstanding shares of Predix Common Stock thereunder; all and Predix Preferred Stock are duly authorized, validly issued, fully paid and non-assessable and are not subject to preemptive rights created by statute, the Certificate of these actions are currently pending. There are no other options, warrants, calls, rights, commitments Incorporation or agreements Bylaws of Predix or Table of Contents any character agreement or document to which Parent Predix or any of its subsidiaries is a party or by which it or any of its subsidiaries is bound obligating Parent to issuebound, deliverand were issued in compliance with all applicable federal and state securities laws. As of the date hereof, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any Predix has reserved an aggregate of 3,648,905 shares of the capital stock Predix Common Stock, net of Parent or obligating Parent exercises, for issuance to grantemployees, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued consultants and non-employee directors pursuant to the Merger will Predix 2003 Stock Plan under which options are outstanding for an aggregate of 2,202,498 shares, an aggregate of 4,482 shares of Predix Common Stock, net of exercises, for issuance to employees, consultants and non-employee directors pursuant to the Physiome 1997 Stock Option Plan under which options are outstanding for an aggregate of 4,482 shares and 213,687 shares of Predix Common Stock are reserved for issuance to holders of Predix Warrants upon their exercise. All shares of Predix Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, would be duly authorized, validly issued, fully paid and non-assessable. Section 2.2 of the Predix Disclosure Schedule lists each holder of Predix Common Stock and Predix Preferred Stock, each outstanding option and warrant to acquire shares of Predix Common Stock or Predix Preferred Stock, as applicable, the name of the holder of such option or warrant, the number of shares subject to such option or warrant, the exercise price of such option or warrant, the number of shares as to which such option or warrant will have vested at such date, the vesting schedule and termination date of such option or warrant and whether the exercisability of such option or warrant will be accelerated in any way by the transactions contemplated by this Agreement or for any other reason, indicating the extent of acceleration, if any.

Capital Structure. (a) The authorized capital stock of Parent HomeCom consists of 50,000,000 (i) 15,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 14,999,156 shares were shall be issued and outstanding as of December 31, 1996the Closing Date, and 27,988,501 (ii) 125 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated HomeCom Series B Preferred Stock, all of which are issued and outstanding. All such 17.8 shares have been duly authorized, and all such shall be issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free as of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), Closing Date; (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 175 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of HomeCom Series C Preferred Stock, of which 90.5 shares shall be issued and outstanding as of the Closing Date; (iiiiv) adopting 75 shares of HomeCom Series D Preferred Stock, of 1.3 shares shall be issued and outstanding as of the Company's 1997 Acquisition Stock Option PlanClosing Date; (v) 106.4 shares of HomeCom Series E Preferred Stock, reserving 10,000,000 of which 106.4 shares shall be issued and outstanding as of the Closing Date (collectively, the "SERIES B-E PREFERRED STOCK"). All of the outstanding shares of Common Stock thereunder; all of these actions are currently pending. There are no other optionsStock, warrantsand Series B-E Preferred Stock, callsand the HomeCom Series F Stock, rightsincluding the Exchange Shares, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issuethe Additional Preferred Shares, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of and the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be Polymate Shares and Greenfield Shares when issued at the Closing pursuant to this Agreement, have been or will (at the Merger will Closing) be duly authorized, validly issued, fully paid and nonnonassessable. Except as disclosed in this Section 4.2 or on Schedule 4.2, as of the Closing Date, there are no additional issued and outstanding shares of Common Stock, Series B-assessableE Preferred Stock or HomeCom Series F Stock, and there are no rights, options, warrants or similar instruments outstanding pursuant to which any shares of capital stock of any class or series of HomeCom are issueable to any person or entity, except for 1,069 shares of Series G Convertible Preferred Stock.

Capital Structure. (a) The authorized stock of Parent consists of 50,000,000 100,000,000 shares of Common Stock, $.001 0.001 par value, of which 29,767,708 30,372,368 shares were of Common Stock are issued and outstanding as of December 31August 29, 19961997, and 27,988,501 38,188,501 shares of Preferred Stock, $.001 0.001 par value, of which 18,518,500 (x) 18,678,500 shares are designated Series A Preferred Stock, all 18,518,500 of which are issued and outstandingoutstanding as of the Agreement Date, and (y) 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstandingoutstanding as of August 29, 1997 and (z) 10,200,000 shares are designated Series C Preferred Stock, 8,454,580 of which are issued and outstanding as of August 29, 1997. There are no other classes or series of capital stock of Parent of any kind outstanding or issuable. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. . (b) Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan and the 1996 Equity Compensation Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares of ------------- of Common Stock for issuance upon conversion of the Warrant Stock and Stock, (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of warrants issued or outstanding warrants to purchase Common Stock. In Februaryissuable pursuant to the Company's Affiliate Warrant Program, 1997, the Board of Directors of the Company approved and (iv) increasing the authorized 24,000,000 shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting issuance under the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character character, written or oral, to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend extend, or enter into any such option, warrant, call, right, commitment or agreement. (bc) The shares of Parent Common Stock to be issued pursuant to the Merger (including any shares issued pursuant to the exercise of any options to be granted pursuant to Article V) will be duly authorized, validly issued, fully paid and non-assessable. (d) All shares of the capital stock of Sub have been validly issued, are fully paid and nonassessable, are free of any liens or encumbrances, are not subject to any right of first refusal and are owned by Parent.

Capital Structure. (a) The authorized capital stock of Parent PSI immediately prior to the Effective Time consists of 50,000,000 53,500,000 shares of capital stock, consisting of (i) 35,000,000 shares of Common Stock, par value $.001 par value.01 per share (the "PSI COMMON STOCK"), of which 29,767,708 7,327,627 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstandingoutstanding on the date of this Agreement, (ii) 10,500,000 shares of Series A preferred stock, $.01 par value per share (the "PSI SERIES A PREFERRED STOCK") of which 10,497,000 shares are issued and outstanding on the date of this Agreement, and 9,310,001 (iii) 8,000,000 shares of Series B preferred stock $.01 par value per share (the "PSI SERIES B PREFERRED STOCK") of which 4,975,736 shares are designated issued and outstanding on the date of this Agreement. As of the date of this Agreement, there are outstanding warrants to purchase 1,341,028 shares of PSI Series B Preferred Stock and 180,379 shares of PSI Common Stock. Warrants to purchase 928,308 shares of PSI Series B Preferred Stock will be exercised prior to the Effective Time (the "EXERCISED WARRANTS"). The remaining warrants to purchase 412,720 shares of PSI Series B Preferred Stock will be canceled prior to the Effective Time (the "CANCELED WARRANTS"). There are no other outstanding shares of capital stock or voting securities and no outstanding commitments to issue any shares of capital stock or voting securities, all other than as set forth in this Section 2.2. Attached to or as set forth in SCHEDULE 2.2 to the PSI Disclosure Schedule is a true and correct list of PSI's stockholders and any persons with rights to acquire PSI securities, which list will be promptly updated from time to time prior to Closing to reflect any changes thereto (which changes are issued and outstandingin any event subject to the restrictions imposed under Section 5.9). All such outstanding shares have been of PSI Capital Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and are not subject to preemptive rights or rights of first refusal created by statute, the Certificate of Incorporation or Bylaws of PSI or any agreement to which PSI is a party or by which it is bound. Parent PSI has also reserved (i) 3,900,000 sufficient shares of PSI Common Stock for issuance upon conversion of the PSI Preferred Stock, and (ii) 3,373,313 shares of PSI Common Stock for issuance to employees and consultants pursuant to Parent's 1996 the PSI Stock Option Plan, (ii) 160,000 of which 709,886 shares of Series A Preferred Stock have been issued pursuant to option exercises or direct stock purchases, 2,205,499 shares are subject to outstanding, unexercised options, and 457,928 shares are available for issuance upon the exercise thereunder. PSI has outstanding subordinated notes with an aggregate principal amount of outstanding warrants to purchase $3,564,000.14 which are convertible into PSI Series A B Preferred Stock (the "Warrant StockCONVERTIBLE NOTES"). Except for (i) the rights created pursuant to this Agreement, (ii) PSI's right to repurchase any unvested shares under the PSI Stock Plan, (iii) 160,000 outstanding warrants to purchase 1,341,028 shares ------------- of PSI Series B Preferred Stock and 180,379 shares of PSI Common Stock for issuance upon conversion of the Warrant Stock Stock, and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In FebruaryConvertible Notes, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent PSI is a party or by which it is bound obligating Parent PSI to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent PSI or obligating Parent PSI to grant, extend extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. Except for the agreements contemplated by this Agreement, there are no contracts, commitments or agreements relating to voting, purchase or sale of PSI's capital stock (i) between or among PSI and any of its securityholders and (ii) to PSI's knowledge, between or among any of PSI's securityholders. The terms of the PSI Stock Plan and the applicable stock option agreements permit the assumption or substitution of options to purchase PMR Common Stock as provided in this Agreement, without the consent or approval of the holders of such securities, the PSI stockholders, or otherwise. None of the outstanding options permit any accelerated vesting or exercisability of those options by reason of the Merger or any other transactions contemplated by this Agreement. True and complete copies of all agreements and instruments relating to or issued under the PSI Stock Plan have been provided to PMR and such agreements and instruments have not been amended, modified or supplemented, and there are no agreements to amend, modify or supplement such agreements or instruments in any case from the form provided to PMR. All outstanding shares of PSI Common Stock and PSI Preferred Stock were issued in compliance with all applicable federal and state securities laws. (b) The Each of the PSI stockholders and/or optionholders is the registered and beneficial owner of that number of shares of Parent Common PSI Capital Stock and/or PSI options set forth opposite its name in SCHEDULE 2.2. The number of shares of PSI Capital Stock and/or PSI options set forth opposite such person's name in SCHEDULE 2.2 constitutes the entire interest of such person in the outstanding capital stock or voting securities of PSI. No other person or entity not disclosed in SCHEDULE 2.2 has a beneficial interest in or a right to acquire any PSI Capital Stock or PSI options. In addition, the shares of PSI Capital Stock and/or PSI Options disclosed in SCHEDULE 2.2 are and will, at all times during the term of this Agreement and through and including the Closing, be issued pursuant free and clear of any liens, pledges, options, charges, restrictions or other encumbrances. (c) Notwithstanding anything in the foregoing to the Merger will be duly authorizedcontrary, validly issued, fully paid the exercise of options by any PSI option holder between the date of this Agreement and non-assessablethe Effective Time shall not cause a breach of this Section 2.2.

Capital Structure. (a) The authorized capital stock of Parent HomeCom consists of 50,000,000 (i) 15,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 14,999,156 shares were shall be issued and outstanding as of December 31, 1996the Closing Date, and 27,988,501 (ii) 125 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated HomeCom Series B Preferred Stock, all of which are issued and outstanding. All such 17.8 shares have been duly authorized, and all such shall be issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free as of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), Closing Date; (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 175 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of HomeCom Series C Preferred Stock, of which 90.5 shares shall be issued and outstanding as of the Closing Date; (iiiiv) adopting 75 shares of HomeCom Series D Preferred Stock, of 1.3 shares shall be issued and outstanding as of the Company's 1997 Acquisition Stock Option PlanClosing Date; (v) 106.4 shares of HomeCom Series E Preferred Stock, reserving 10,000,000 of which 106.4 shares shall be issued and outstanding as of the Closing Date (collectively, the "Series B-E Preferred Stock"). All of the outstanding shares of Common Stock thereunder; all of these actions are currently pending. There are no other optionsStock, warrantsand Series B-E Preferred Stock, callsand the HomeCom Series F Stock, rightsincluding the Exchange Shares, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issuethe Additional Preferred Shares, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of and the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be Polymate Shares and Greenfield Shares when issued at the Closing pursuant to this Agreement, have been or will (at the Merger will Closing) be duly authorized, validly issued, fully paid and nonnonassessable. Except as disclosed in this Section 4.2 or on Schedule 4.2, as of the Closing Date, there are no additional issued and outstanding shares of Common Stock, Series B-assessableE Preferred Stock or HomeCom Series F Stock, and there are no rights, options, warrants or similar instruments outstanding pursuant to which any shares of capital stock of any class or series of HomeCom are issueable to any person or entity, except for 1,069 shares of Series G Convertible Preferred Stock.

Capital Structure. (a) The As of the date of this Agreement, the authorized capital stock of Parent consists of 50,000,000 1,255,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital common stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The consisting of 1,000,000,000 shares of Parent Common Stock and 225,000,000 shares of Applera Corporation-Applied Biosystems Group Common Stock, par value $.01 per share ("AB Stock")) and 10,000,000 shares of preferred stock of Parent (the "Parent Preferred Stock"). As of the close of business on June 11, 2001, there were: (i) 61,561,502.74 shares of Parent Common Stock issued and outstanding; (ii) 13,717 shares of Parent Common Stock held in the treasury of Parent; (iii) 14,127,347.26 shares of Parent Common Stock reserved for issuance pursuant to be Parent's stock option plans, Parent's employee stock purchase plans and Parent's Director Stock Purchase and Deferred Compensation Plan (collectively, the "Parent Stock Plans"); (iv) 13,018,883 shares of Parent Common Stock issuable upon exercise of awarded but unexercised stock options; (v) 56,350 shares of Parent Common Stock issuable upon exercise of currently outstanding warrants to purchase Parent Common Stock; (vi) 1,432,200 shares of Parent Common Stock issuable upon exercise of an option held by a third party; (vii) 211,265,745.85 shares of AB Stock issued and outstanding; (viii) 5,105 shares of AB Stock held in the treasury of Parent; (ix) 31,613,807.05 shares of AB Stock reserved for issuance pursuant to Parent Stock Plans; (x) 27,811,815 shares of AB Stock issuable upon exercise of awarded but unexercised stock options; (xi) 214,794 shares of AB Stock issuable upon exercise of currently outstanding warrants to purchase AB Stock; and (xii) no shares of Parent Preferred Stock outstanding. Except as set forth above and except for shares of participating junior preferred stock issuable pursuant to the Merger will be duly authorizedShareholders' Protection Rights Plan, validly dated as of April 28, 1999 between Parent and BankBoston, N.A., as of the close of business on June 11, 2001, there were no shares of capital stock or other equity securities of Parent issued, fully paid and non-assessablereserved for issuance or outstanding.

Capital Structure. (a) The authorized capital stock of Parent consists of 50,000,000 240,000,000 shares of Parent Common Stock and 150,000 shares of preferred stock, par value $100.00 per share (the “Parent Preferred Stock” and, together with the Parent Common Stock, $.001 par valuethe “Parent Capital Stock”), of which 29,767,708 8,000 shares were issued and outstanding have been designated as Series A Convertible Preferred Stock (the “Parent Series A Shares”). At the close of December 31business on October 26, 19962012, and 27,988,501 (i) 71,037,023 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are Parent Common Stock were issued and outstanding, and 9,310,001 (ii) 4,000 shares are designated of Parent Series B Preferred Stock, all of which are A Shares were issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 413,301 shares ------------- of Parent Common Stock were held by Parent in its treasury, (iv) 6,274,689 shares of Parent Common Stock were reserved and available for issuance pursuant to the Parent Stock Plans, of which (A) 2,145,379 shares were issuable upon exercise of outstanding Parent Stock Options, (B) 676,336 shares of Parent Common Stock were potentially issuable upon the vesting of Parent RSU Awards, and (C) 683,177 shares of Parent Common Stock were potentially issuable upon the vesting of outstanding Parent Performance Shares, and (v) 2,094,680 shares of Parent Common Stock were reserved for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 Parent Series A Shares. Except as set forth in this Section 3.03(a), at the close of business on October 26, 2012, no shares of capital stock or voting securities of, or other equity interests in, Parent were issued, reserved for issuance or outstanding. From the close of business on October 26, 2012 to the date of this Agreement, there have been no issuances by Parent of shares of capital stock or voting securities of, or other equity interests in, Parent other than the issuance of Parent Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, Parent Stock Options or upon the Board vesting of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 sharesParent RSU Awards or Parent Performance Shares, in preparation each case, outstanding at the close of business on October 26, 2012 and in accordance with their terms in effect at such time. (b) Except as set forth in Section 3.03(a) or pursuant to the terms of this Agreement, there are not issued, reserved for a sale of Series C Preferred Stockissuance or outstanding, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares there are not any outstanding obligations of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments Parent or agreements of any character to which Parent is a party or by which it is bound obligating Parent Subsidiary to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, (i) any shares of the capital stock of Parent or obligating any Parent Subsidiary or any securities of Parent or any Parent Subsidiary convertible into or exchangeable or exercisable for shares of capital stock or voting securities of, or other equity interests in, Parent or any Parent Subsidiary, (ii) any warrants, calls, options or other rights to grantacquire from Parent or any Parent Subsidiary, extend or enter into any such optionother obligation of Parent or any Parent Subsidiary to issue, warrantdeliver or sell, callor cause to be issued, rightdelivered or sold, commitment any capital stock or agreementvoting securities of, or other equity interests in, Parent or any Parent Subsidiary, or (iii) any rights issued by or other obligations of Parent or any Parent Subsidiary that are linked in any way to the price of any class of Parent Capital Stock or any shares of capital stock of any Parent Subsidiary, the value of Parent, any Parent Subsidiary or any part of Parent or any Parent Subsidiary or any dividends or other distributions declared or paid on any shares of capital stock of Parent or any Parent Subsidiary. Except for acquisitions, or deemed acquisitions, of Parent Common Stock or other equity securities of Parent in connection with (x) the payment of the exercise price of Parent Stock Options with Parent Common Stock (including but not limited to in connection with “net exercises”), (y) required tax withholding in connection with the exercise of Parent Stock Options, the vesting of Parent Performance Shares or Parent RSU Awards and the vesting or delivery of other awards pursuant to the Parent Stock Plans and (z) forfeitures of Parent Stock Options, Parent Performance Shares and Parent RSU Awards, there are not any outstanding obligations of Parent or any of the Parent Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock or voting securities or other equity interests of Parent or any Parent Subsidiary or any securities, interests, warrants, calls, options or other rights referred to in clause (i), (ii) or (iii) of the immediately preceding sentence. There are no bonds, debentures, notes or other Indebtedness of Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of Parent may vote (“Parent Voting Debt”). Neither Parent nor any of the Parent Subsidiaries is a party to any voting agreement with respect to the voting of any capital stock or voting securities of, or other equity interests in, Parent. Neither Parent nor any of the Parent Subsidiaries is a party to any agreement pursuant to which any Person is entitled to elect, designate or nominate any director of Parent or any of Parent Subsidiaries. (bc) The shares of Parent Common Stock to be issued pursuant to constituting the Merger Stock Consideration will be be, when issued, duly authorized, validly issued, fully paid and nonnonassessable and not subject to, or issued in violation of, any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the Parent Articles, the Parent By-assessablelaws or any Contract to which Parent is a party or otherwise bound.

Capital Structure. (a) The As of the date hereof, the authorized capital stock of Parent consists of 50,000,000 43,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued Stock and outstanding as of December 31, 1996, and 27,988,501 2,000,000 shares of Preferred Stock, par value $.001 par valueper share ("PREFERRED STOCK"), of which 18,518,500 200,000 shares are designated were authorized as Series A Preferred StockB, 670,000 shares were authorized as Series C, 240,000 shares were authorized as Series D, 2,500 shares were authorized as Series E and 2,500 shares were authorized as Series F. At July 26, 1999, (i) 18,457,681 shares of Common Stock were issued and outstanding, all of which are were validly issued, fully paid and nonassessable and free of preemptive rights, (ii) no shares of Common Stock and Preferred Stock were held in treasury of Parent or by Subsidiaries of Parent, (iii) no shares of Series B or Series E Preferred Stock were issued and outstanding, 282,607 shares of Series C were issued and outstanding, 18,712 shares of Series D were issued and outstanding, and 9,310,001 2,500 shares are designated of Series B Preferred StockF were issued and outstanding, all of which are issued were validly issued, fully paid and non-assessable and free of preemptive rights, and (iv) 7,841,767 shares of Common Stock were reserved for issuance pursuant to outstanding options, convertible securities or other rights to purchase or otherwise acquire shares of Common Stock or Preferred Stock, including under Parent's benefit plans or arrangements or pursuant to any similar plans assumed by Parent in connection with any acquisition, business combination or similar transaction (collectively, the "PARENT STOCK PLANS"). As of the date of this Agreement, except as set forth above and except for the issuance of shares of Common Stock pursuant to the Parent Stock Plans, no shares of capital stock or other voting securities of Parent were issued, reserved for issuance or outstanding. All such of the shares have been of Common Stock to be issued in accordance with this Agreement will be, when so issued, duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon preemptive rights. As of the holders thereof. Parent has also reserved date of this Agreement, except for (i) 3,900,000 shares of Common Stock for issuance to employees this Agreement and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock")as set forth above, (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments puts or agreements of any character to which any Parent Entity is a party or by which it any of them is bound obligating any Parent Entity to issue, deliver, sell, repurchase sell or redeem, or cause to be issued, delivered, sold, repurchased sold or redeemed, any additional shares of the capital stock (or other voting securities or equity equivalents) of any Parent Entity or obligating any Parent Entity to grant, extend or enter into any such option, warrant, call, right, commitment put or agreement. (b) The shares As of the date of this Agreement, each outstanding share of capital stock (or other voting security or equity equivalent) of each Subsidiary of Parent Common Stock to be issued pursuant to the Merger will be is duly authorized, validly issued, fully paid and non-assessable.nonassessable and, except for director or qualifying shares or as set forth on SCHEDULE 5.4, each such share (or other voting security or equity equivalent) is owned by

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 shares of Common Stock, Company common stock at par value $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996per share, and 27,988,501 25,000,000 shares of Preferred Stock, par value $.001 par value, per share. There are 7,975,003 shares of which 18,518,500 shares are designated Series A Preferred Stock, all of which are INTB common stock currently issued and outstanding, and 9,310,001 1,000,000 shares are designated of Series B Preferred Stock, all to be issued to Principal Holdings, LLC (“Principal”), in consideration of which are issued Principal successfully negotiating the purchase of INTB, structuring this Agreement and outstandingthe capitalization, and performing due-diligence. All such outstanding shares have been of common stock and Preferred Stock of the Company are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free not subject to preemptive rights. At and as of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock Closing INTB’s current principal shareholder (the "Warrant Stock")“INTB Principal”) will return to INTB, (iii) 160,000 for cancellation and retirement, 3,446,950 shares ------------- of Common Stock for issuance upon conversion owned by the INTB Principal, so that, as a result of the Warrant Stock retirement of the 3,446,950 shares by the INTB Principal, and (iv) 1,000,000 assuming the issuance of up to 702,111 shares to the HOLDERS, INTB will have issued and outstanding 7,254,575 common shares as of Common Stock for issuance upon the exercise of Closing. There are no outstanding warrants to purchase Common Stock. In Februarybonds, 1997debentures, the Board of Directors notes or other indebtedness or other securities of the Company approved having the right to vote (ior convertible into, or exchangeable for, securities having the right to vote) increasing on any matters on which shareholders of the authorized shares of Common Stock Company may vote, except for the Series B Preferred Shares and the INTB Convertible Note, which has been shown to 100,000,000 sharesCANNAVOLVE. Except for the INTB Note, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C B Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Planproposed issuance of common shares to the HOLDERS pursuant to this Agreement, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other outstanding securities, options, warrants, calls, rights, commitments commitments, agreements, arrangements or agreements undertakings of any character kind to which Parent the Company is a party or by which it is bound obligating Parent the Company to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock or other equity or voting securities of Parent the Company. There are no agreements or obligating Parent arrangements pursuant to grant, extend which the Company is or enter into any such option, warrant, call, right, commitment or agreement. (b) The could be required to register shares of Parent Company Common Stock to be issued pursuant to or other securities under the Merger will be duly authorizedSecurities Act of 1933, validly issued, fully paid and non-assessableas amended (the "Securities Act").

Capital Structure. (a) The entire authorized capital stock of Parent Seller consists of 50,000,000 (i) 25,000,000 shares of Common Stock, (ii) 8,250 shares of Class A preferred stock of the par value of $.001 10.00 per share of Seller (the "Class A Preferred Stock"), and (iii) 5,000,000 shares of serial preferred stock of the par valuevalue of $10.00 per share (the "Serial Preferred Stock"), of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such 292,043 shares have been duly authorizeddesignated as 8% convertible preferred stock (the "Convertible Preferred Stock"). There are, and all such issued and outstanding shares have been validly issuedsubject to any Permitted Changes as of the Closing Date there shall be, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 17,093,155.3104 shares of Common Stock for issuance issued and outstanding (excluding shares held in the treasury of Seller), 135,382 of which shares are currently subject to employees and consultants pursuant to Parent's 1996 Stock Option Plan, restrictions on transfer (the "Restricted Shares"); (ii) 160,000 52,226.6896 shares of Series Common Stock held in the treasury of Seller; (iii) 8,250 shares of Class A Preferred Stock issued and outstanding; (iv) 278,201 shares of Convertible Preferred Stock issued and outstanding and no other shares of Serial Preferred Stock issued or outstanding; (v) 762,161 shares of Common Stock reserved for issuance upon exercise of authorized but unissued outstanding employee or director stock options to purchase shares of Common Stock ("Stock Options") granted under any stock option or stock purchase plan, program or arrangement of Seller (the "Stock Plans"); (vi) 602,457 shares of Common Stock issuable upon exercise of outstanding warrants to purchase Series A Preferred Stock Options (the "Warrant Stock"with an average exercise price of $17.03 and those other options determined by formula specifically described on Schedule 3.03(b), ; and (iiivii) 160,000 639,863 shares ------------- of Common Stock reserved for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Convertible Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The Schedule 3.03(b) contains a list, as of the date of this Agreement, of each record holder of Common Stock, Class A Preferred Stock and Convertible Preferred Stock and the number of shares of Parent each of such securities held by each such holder (including an indication of whether any such securities are Restricted Shares), and a list, as of the date of this Agreement, of each holder of Stock Options and the number of shares of Common Stock issuable upon exercise of such Stock Options to each such holder. Schedule 3.03(b) also describes the restrictions related to each of the Restricted Shares and the periods over which such restrictions lapse in accordance with the terms of the Seller Plans or agreements, as applicable, governing such Restricted Shares. All such restrictions shall lapse as a result of the consummation of the Purchase. Except as set forth above, no shares of capital stock or other equity securities of Seller are issued, reserved for issuance or outstanding. All outstanding shares of capital stock of Seller are, and all shares which may be issued pursuant to the Merger Stock Plans or upon conversion of the Convertible Preferred Stock will be when issued, duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive or similar rights. Except for the Convertible Preferred Stock and Stock Options, there are no outstanding bonds, debentures, notes or other Indebtedness or other securities of Seller or any Subsidiary having the right to vote (or convertible into, exercisable or exchangeable for, securities having the right to vote) on any matters on which shareholders of Seller may vote. Except as set forth above or as described on Schedule 3.03(b), there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which Seller or any of the Subsidiaries is a party or by which any of them is bound obligating Seller or any of the Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity or voting securities of Seller or of any of the Subsidiaries or obligating Seller or any of the Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. Except as set forth on Schedule 3.03(b), no shares of capital stock of Seller have been issued or may be issued in connection with Seller's acquisition of ▇▇▇▇▇▇ Companies, Inc., including upon the occurrence of any tax contingency. (c) Other than pursuant to this Agreement, the Stock Options and the Shareholders Agreement and other than as described on Schedule 3.03(c), (i) there are no outstanding contractual obligations, commitments, understandings or arrangements of Seller or any of the Subsidiaries to repurchase, redeem or otherwise acquire or make any payment in respect of any shares of capital stock of Seller or any of the Subsidiaries, other than Seller's obligation to repurchase an aggregate of 613,457 shares of Common Stock (the "Putable Shares") at a price equal to the fair value per share (as determined in the most recent valuation of the Common Stock held by the ESOP (or any successor 401(k) Plan), which determination shall have been made in accordance with the provisions of the ESOP (or such successor 401(k) Plan)), upon exercise by the respective holders thereof of such holders' put rights in respect of such shares (the shares subject to such put rights are described on Schedule 3.03(c) and such Schedule identifies the holders of such shares, the applicable put prices of such shares and the applicable agreement pursuant to which the applicable put rights may be exercised), and (ii) to the Knowledge of Seller, there are no irrevocable proxies with respect to shares of capital stock of Seller or any of the Subsidiaries. Schedule B of the Shareholders Agreement, which sets forth the record and, to the Knowledge of Seller, beneficial ownership of, and voting power in respect of, the capital stock of Seller with respect to the signatories to the Shareholders Agreement, is accurate in all material respects. Except for the Shareholders Agreement and except as described on Schedule 3.03(c), there are no agreements or arrangements pursuant to which Seller is or could be required to register shares of Common Stock or other securities under the Securities Act or other agreements or arrangements with or among any securityholders of Seller with respect to securities of Seller. (d) The Shares, the Option Shares and the Additional Shares have been duly and validly authorized, and, when issued and delivered pursuant to this Agreement, such Shares, Option Shares and Additional Shares shall be duly and validly issued and fully paid and non-assessable, and not subject to preemptive or similar rights. The transfer and delivery of the Shares, the Option Shares and the Additional Shares by Seller to Buyer as contemplated by this Agreement will transfer good title to the Shares, the Option Shares and the Additional Shares to Buyer, free and clear of any Liens, except Liens arising as a result of any action taken by Buyer.

Capital Structure. (a) The As of the Execution Date, the authorized capital stock of Parent Target consists of 50,000,000 70,000,000 shares of Target Common Stock, of which 480,230 shares are issued and outstanding, and 54,279,877 shares of preferred stock, par value $.001 par value0.01 per share ("TARGET PREFERRED STOCK"), of which 29,767,708 5,000,000 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are have been designated Series A Preferred Stock, all of which shares are issued and outstanding; 13,000,000 shares have been designated Series X Junior Preferred Stock, and 9,310,001 of which 11,150,732 shares are issued and outstanding; 7,000,000 shares have been designated Series B Preferred Stock, of which 6,389,229 shares are issued and outstanding; 12,500,000 shares have been designated Series C Preferred Stock, of which 9,506,431 shares are issued and outstanding; 546,110 shares have been designated Series D Preferred Stock, all of which shares are issued and outstanding; and 16,233,767 shares have been designated Series E Preferred Stock, of which 6,507,274 are issued and outstanding. All such shares have been duly authorized, and all such of the issued and outstanding shares of Target Capital Stock have been duly authorized and validly issued, issued and are fully paid and nonassessable and are free nonassessable. Except as set forth in Section 2.2 of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option PlanTarget Disclosure Schedule, (iia) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants no subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, acquire from Target any shares of the capital stock of Parent Target is authorized, reserved or obligating Parent outstanding, (b) Target has no obligation (contingent or otherwise) to grant, extend or enter into issue any such optionsubscription, warrant, calloption, rightconvertible security or other such right or to issue or distribute to holders of any shares of its capital stock any evidences of indebtedness or assets of Target, commitment (c) Target has no obligation (contingent or agreementotherwise) to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof and (d) no other shares of capital stock of the Target are issued and outstanding. All of the issued and outstanding securities of Target, including those offered pursuant to the Target Stock Option Plans or the Target Warrants, have been offered, issued and sold by Target in compliance with applicable federal and state securities laws. (b) The Section 2.2(b) of the Target Disclosure Schedule contains a true and complete list of all issued and outstanding Warrants to purchase or acquire from Target any shares of Parent Common capital stock of Target as of the date hereof. Schedule 2.2(b) sets forth (i) the name and address of each warrant holder; (ii) the manner in which each warrant terminates; and (iii) the number of shares and class of capital stock of Target into which each warrant is exercisable. True and complete copies of all agreements and instruments relating to or issued under the Target Stock Plans and the Warrants have been made available to be issued pursuant Acquiror, and such agreements and instruments have not been amended, modified or supplemented, and there are no agreements to amend, modify or supplement such agreements or instruments from the Merger will be duly authorized, validly issued, fully paid and non-assessableforms made available to Acquiror.

Capital Structure. (a) The As of the date hereof, the authorized capital stock of Parent Company consists of 50,000,000 85,000,000 shares of Common Stock, par value $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 19960.001 per share ("Company Common Stock"), and 27,988,501 22,652,913 shares of Preferred Stock, par value $.001 par value0.001 per share, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are there were issued and outstanding, 10,150,863.5 shares of Common Stock disregarding any option exercises following June 14, 2000, 6,562,873 shares of Series A Preferred Stock (the "Series A Preferred"), and 9,310,001 16,040,039 shares are designated of Series B Preferred Stock (the "Series B Preferred," together with the Series A Preferred, the "Company Preferred Stock"). As of the date hereof, all there are no other outstanding shares of which are issued and outstandingCompany Capital Stock disregarding any option exercises following June 14, 2000. All such outstanding shares have been of Company Capital Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable non-assessable and are free of any liens or encumbrances (other than any liens or encumbrances created by or imposed upon the holders thereof), and except as set forth on Section 2.2 of the Company Disclosure Letter are not subject to preemptive rights, rights of first refusal, rights of first offer or similar rights created by statute, the Certificate of Incorporation or Bylaws of Company or any agreement to which Company is a party or by which it is bound. Parent As of the date hereof, Company has also reserved (i) 3,900,000 13,225,746 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Company Common Stock for issuance upon conversion of the Warrant Stock and Series A Preferred, (ivii) 1,000,000 8,020,020 shares of Company Common Stock for issuance upon conversion of the Series B Preferred, (iii) 6,551,924 shares of Company Common Stock for issuance to employees, directors, consultants and other persons pursuant to the Company Stock Option Plan (of which 291,618 shares have been issued pursuant to option exercises or direct stock purchases through June 14, 2000, and 4,355,315 shares are subject to outstanding, unexercised options as of June 14, 2000), (iv) 818,030 shares of Company Common Stock for issuance upon exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares Warrants, of Common Stock which none are subject to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stockoutstanding Company Warrants, and (iiiv) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 no shares of Company Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued issuable pursuant to the Merger will be duly authorizedOther Company Stock Rights, validly issued, fully paid and non-assessableof which none are subject to outstanding Other Company Stock Rights.

Capital Structure. (ai) The As of November 30, 1999, the authorized capital stock of Parent Time Warner consists of 50,000,000 (A) 5,000,000,000 shares of Time Warner Common Stock of which 1,172,176,909 shares were outstanding, (B) 600,000,000 shares of Series Common Stock, par value $.001 par value.01 per share, of which 29,767,708 (1) 140,000,000 shares were issued and outstanding have been designated as of December 31, 1996, and 27,988,501 shares of Preferred Time Warner Series LMC Common Stock, $.001 par value, of which 18,518,500 no shares are outstanding and (2) 140,000,000 shares have been designated as Time Warner Series LMCN-V Common Stock, of which 114,123,884 shares are outstanding, and (C) 250,000,000 shares of preferred stock, par value $.10 per share, of which (1) 8,000,000 shares have been designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Participating Cumulative Preferred Stock and reserved for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock the rights (the "Warrant StockTime Warner Rights") distributed to holders of Time Warner Common Stock pursuant to the Rights Agreement, dated as of October 10, 1996 between Time Warner and ChaseMellon Shareholder Services, LLC, as Rights Agent, as amended (together with any substitute rights agreement entered into pursuant to Section 6.10(b), the "Time Warner Rights Agreement"), (iii2) 160,000 11,000,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of have been designated Series C D Convertible Preferred Stock, of which no shares are outstanding, (3) 3,250,000 shares have been designated Series E Convertible Preferred Stock, of which 3,129,251 shares are outstanding, (4) 3,100,000 shares have been designated Series F Convertible Preferred Stock, of which 2,965,761 shares are outstanding, (5) 7,000,000 shares have been designated Series I Convertible Preferred Stock, of which 700,000 shares are outstanding and (iii6) adopting 3,350,000 shares have been designated Series J Convertible Preferred Stock, of which 1,608,708 shares are outstanding. Since November 30, 1999 to the Company's 1997 Acquisition Stock Option Plandate of this Agreement, reserving 10,000,000 shares there have been no issuances of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Time Warner or obligating Parent any other securities of Time Warner other than issuances of shares pursuant to grantoutstanding convertible securities or options or rights outstanding as of November 30, extend or enter into any such option1999 and 59,250 Time Warner Restricted Shares under the Benefit Plans of Time Warner, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued and pursuant to the Merger will be Time Warner Dividend Reinvestment and Stock Purchase Plan. All issued and outstanding shares of the capital stock of Time Warner are duly authorized, validly issued, fully paid and nonnonassessable, and free of any preemptive rights. All accrued dividends that were payable on Time Warner Preferred Stock have been paid. There were outstanding as of December 31, 1999 no options, warrants or other rights to acquire capital stock from Time Warner other than (x) the Time Warner Rights and (y) approximately 135,867,893 Time Warner Stock Options (as defined in the next sentence) and 82,000 Time Warner Restricted Shares. The options and other rights to acquire Time Warner Common Stock from Time Warner representing the right to purchase shares of Time Warner Common Stock, together with other employee stock options issued by Time Warner after the date hereof in accordance with the Time Warner Stock Option Plans (as defined in the next sentence) and Section 5.2, are referred to herein collectively as the "Time Warner Stock Options"). The Time Warner Stock Options and the Time Warner Restricted Shares have been and will be granted under the Time Warner 1986 Stock Option Plan, the 1988 Stock Incentive Plan of Time Warner Inc., Time Warner 1989 Stock Incentive Plan, Time Warner 1994 Stock Option Plan, Time Warner Corporate Group Stock Incentive Plan, Time Warner 1997 Stock Option Plan, Time Warner 1996 Stock Option Plan for Non-assessableEmployee Directors, Time Warner 1989 WCI Replacement Stock Option Plan, 1989 Lorimar Non-Employee Replacement Stock Option Plan, Time Warner 1993 Stock Option Plan, Time Warner Filmed Entertainment Group Stock Incentive Plan, Time Warner Music Group Stock Incentive Plan, Time Warner Programming Group Stock Incentive Plan, Time Warner Publishing Group Stock Incentive Plan, Time Warner Cable Group Stock Incentive Plan, Subsidiary 1988 Stock Option Plan, Subsidiary 1993 Stock Option and Equity-Based Award Plan, Subsidiary 1986 Stock Option Plan, Subsidiary 1990 Stock Option Plan, Subsidiary 1991 Stock Option Plan and Subsidiary Nonqualified Stock Option Agreements, the Time Warner 1999 Restricted Stock Plan, the Time Warner 1988 Restricted Stock Plan for Non-Employee Directors and the Time Warner 1999 International Employees Restricted Stock Plan (collectively, the "Time Warner Stock Option Plans"). Except in connection with pre-employment grants of Time Warner Stock Options made in a manner consistent with past practice to purchase, in the aggregate, not more than 100,000 shares of Time Warner Common Stock, Section 4.2(b)(i) of the Time Warner Disclosure Schedule sets forth a complete and correct list, as of December 31, 1999, of the number of shares of Time Warner Common Stock subject to Time Warner Stock Options or other rights to purchase or receive Time Warner Common Stock granted under the Time Warner Benefit Plans or otherwise and the weighted average exercise price of the outstanding Time Warner Stock Options referenced therein. Except in connection with pre-employment grants of Time Warner Stock Options made in a manner consistent with past practice to purchase, in the aggregate, not more than 100,000 shares of Time Warner Common Stock, no options or warrants or other rights to acquire capital stock from Time Warner have been issued or granted since December 31, 1999 to the date of this Agreement. (ii) No bonds, debentures, notes or other indebtedness of Time Warner having the right to vote on any matters on which holders of capital stock of Time Warner may vote ("Time Warner Voting Debt") are issued or outstanding. (iii) Except as otherwise set forth in this Section 4.2(b) or in Section 4.2(b)(iii) of the Time Warner Disclosure Schedule, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which Time Warner or any of its Subsidiaries is a party or by which any of them is bound obligating Time Warner or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of Time Warner or any of its Subsidiaries or obligating Time Warner or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. As of the date of this Agreement, there are no outstanding obligations of Time Warner or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Time Warner or any of its Subsidiaries.

Capital Structure. (a1) The authorized capital stock of Parent WAXS consists of 50,000,000 (A) 150,000,000 shares of WAXS Common Stock, par value $.001 par value.01 per share ("WAXS Common Stock"), of which 29,767,708 51,010,501 shares were are issued and outstanding as and 50,000 shares are held in the treasury of December 31, 1996WAXS, and 27,988,501 (B) 10,000,000 shares of Preferred Stock, par value $.001 par value.01 per share, of which 18,518,500 50,000 shares are designated Series A as 4.25% Cumulative Senior Perpetual Convertible Preferred Stock, all of which are issued and outstandingSeries A, and 9,310,001 par value $.01 per share (the "WAXS SERIES A PREFERRED"), 23,174 shares are designated Series B as 4.25% Cumulative Junior Convertible Preferred Stock, all of which Series B, par value $.01 per share (the "WAXS SERIES B PREFERRED"), and 350,259.875 shares designated as Convertible Preferred, Series C, par value $.01 per share (the "WAXS Series C Preferred") are issued and outstanding. All such Upon filing of the Certificate of Designation, 185,000 shares have been duly authorized, and all such of WAXS Series D Preferred will be issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens outstanding. WAXS has reserved or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 available 4,347,827 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of WAXS Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 WAXS Series A Preferred, 1,448,375 shares of WAXS Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors conversion of the Company approved (i) increasing the authorized WAXS Series B Preferred, and 18,027,478 shares of WAXS Common Stock to 100,000,000 shares, (ii) increasing for issuance upon conversion of the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of WAXS Series C Preferred Stock, Preferred. All issued and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any outstanding shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be WAXS are duly authorized, validly issued, fully paid and nonnonassessable, and no class of capital stock is entitled to preemptive rights. There are no outstanding options, warrants or other rights to acquire capital stock from WAXS other than options representing in the aggregate the right to purchase 8,471,190 shares of WAXS Common Stock (collectively, the "WAXS STOCK OPTIONS") under the World Access, Inc. 1991 Stock Option Plan, World Access, Inc. Outside Directors' Warrant Plan, World Access, Inc. Directors' Warrant Incentive Plan, World Access, Inc. 1998 Incentive Equity Plan, Telco Systems, Inc. 1980 Stock Option Plan, Telco Systems, Inc. 1988 Non-assessableStatutory Stock Option Plan and Telco Systems, Inc. 1990 Stock Option Plan (collectively, the "WAXS STOCK OPTION PLANS"). Section 2.2(b) of the WAXS Disclosure Schedule sets forth a complete and correct list of the number of shares of WAXS Common Stock subject to WAXS Stock Options or other rights to purchase or receive WAXS Common Stock granted under the WAXS benefit plans or otherwise and the exercise prices thereof. (2) There are no issued or outstanding bonds, debentures, notes or other indebtedness of WAXS having the right to vote on any matters on which holders of capital stock of WAXS may vote. (3) Except as otherwise set forth in this Section 2.2(b) and as contemplated by Section 1.3, there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which WAXS or any of its Subsidiaries is a party or by which any of them is bound obligating WAXS or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of WAXS or any of its Subsidiaries or obligating WAXS or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call right, commitment, agreement, arrangement or undertaking. There are no outstanding obligations of WAXS or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of WAXS or any of its Subsidiaries.

Capital Structure. (a) The authorized capital stock of Parent Adaytum consists of 50,000,000 shares of Adaytum Common Stock, Stock and 20,000,000 shares of Adaytum Preferred Stock $.001 .01 par value, of which 29,767,708 1,544,000 shares were issued and outstanding have been designated as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 4,322,035 shares are have been designated as Series B Preferred Stock, all of which are issued and outstanding. All such 2,750,091 shares have been duly authorizeddesignated as Series C Preferred Stock, 2,049,624 shares have been designated as Series D Preferred Stock, 1,594,896 shares have been designated as Series E Preferred Stock, 1,179,815 shares have been designated as Series F Preferred Stock, and all such 3,598,191 shares have been designated as Series G Preferred Stock. The issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 capital stock of Adaytum consist of 11,082,765 shares of Adaytum Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option PlanStock, (ii) 160,000 1,544,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 4,322,035 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Series B Preferred Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized 2,750,091 shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 2,049,624 shares of Common Series D Preferred Stock, 1,594,896 shares of Series E Preferred Stock, 1,179,815 shares of Series F Preferred Stock thereunder; all and 2,834,833 shares of these actions are currently pendingSeries G Preferred Stock. There are 669,537 shares of Adaytum Common Stock that are issued and held as treasury shares by Adaytum and no other shares of Adaytum Preferred Stock that are issued and held as treasury shares by Adaytum. Section 3.2(a) of the Adaytum Disclosure Schedule sets forth all holders of Adaytum Common Stock and Adaytum Preferred Stock and the number of shares owned. Section 3.2(a) of the Adaytum Disclosure Schedule also sets forth any options, warrants, calls, conversion rights, commitments commitments, agreements, contracts, understandings, restrictions, arrangements or agreements rights of any character (other than the Adaytum Preferred Stock) (each, an “Adaytum Option”) to which Parent Adaytum is a party or by which it is Adaytum may be bound obligating Parent Adaytum to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock of Parent Adaytum, or obligating Parent Adaytum to grant, extend extend, or enter into any such option, warrant, call, conversion right, commitment conversion payment, commitment, agreement, contract, understanding, restriction, arrangement or agreementright. All issued and outstanding Adaytum Options have been offered, issued and delivered in compliance with applicable federal and state securities laws. The holders of Adaytum Options have been or will be given, or shall have properly waived, any required notice prior to the Merger. Upon the assumption by US Sub of the outstanding Adaytum Options as set forth in Section 2.6, all of such Adaytum Options shall be exercisable solely for shares of Parent Common Stock as set forth in Section 2.6. The assumption of the Adaytum Options by US Sub as set forth in Section 2.6 does not conflict with or violate the provisions of the Adaytum Software, Inc. 1999 Stock Option Plan, as amended (the “Option Plan”), or any stock option or other agreement or instrument relating to or governing any Adaytum Option and no consent or approval of, or notice to, any Person is required in connection with such assumption, other than as contemplated by Section 9.2(m). (b) The All outstanding shares of Parent Adaytum Common Stock to be and Adaytum Preferred Stock are, and any shares of Adaytum Common Stock issued pursuant to the Merger upon exercise of any Outstanding Adaytum Options will be duly authorizedbe, validly issued, fully paid paid, nonassessable and non-assessablenot subject to any preemptive rights (other than those which have been duly waived), or to any agreement to which Adaytum is a party or by which Adaytum may be bound. Adaytum does not have outstanding any bonds, debentures, notes or other indebtedness the holders of which (i) have the right to vote (or convertible or exercisable into securities having the right to vote) with holders of shares of Adaytum Common Stock or Adaytum Preferred Stock on any matter (“Adaytum Voting Debt”) or (ii) are or will become entitled to receive any payment as a result of the execution of this Agreement or the completion of the transactions contemplated hereby.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 2,250,000 shares of Common Stockcommon stock, par value $.001 par value0.10 per share, of which 29,767,708 2,000,000 shares are designated as Class A common stock and 250,000 shares are designated as Class B common stock; and 200,000 shares of preferred stock, par value $0.10 per share, of which 125,000 are designated as Series A preferred stock, 14,000 are designated as Series B Preferred Stock and the remainder are undesignated. At the close of business on __,March 9, 1999, (i) 706,950 shares of Company Class A Common Stock were issued and outstanding, (ii) 172,513 shares of Company Class B Common Stock were issued and outstanding as of December 31or subject to options, 1996, and 27,988,501 (iii) 125,000 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Company Series A Preferred Stock, all of which are Stock were issued and outstanding, and 9,310,001 (iv) 14,000 shares are designated of Company Series B Preferred Stock, all of which are Stock were issued and outstanding. All such shares have been duly authorizedThere are no bonds, and all such issued and outstanding shares have been validly issueddebentures, are fully paid and nonassessable and are free of any liens notes or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors indebtedness of the Company approved having the right to vote (ior convertible into securities having the right to vote) increasing on any matters on which stockholders of the authorized shares Company may vote. Except as set forth in Schedule 3.01(c), as of Common Stock to 100,000,000 sharesthe date of this Agreement, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other outstanding securities, options, warrants, calls, rights, commitments commitments, agreements, arrangements or agreements undertakings of any character kind to which Parent the Company or any of its subsidiaries is a party or by which it any of them is bound obligating Parent the Company or any of its subsidiaries to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock or other voting securities of Parent the Company or of any of its subsidiaries or obligating Parent the Company or any of its subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment commitment, agreement, arrangement or agreement. (b) The undertaking. Except as described in Schedule 3.01(c), as of the date of this Agreement, there are not any outstanding contractual obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of Parent Common Stock to be issued pursuant to capital stock of the Merger will be Company or any of its subsidiaries. All outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessableassessable and not subject to preemptive rights.

Capital Structure. (a) The authorized capital stock of Parent Acquiror consists ----------------- of 50,000,000 31,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 9,925,689 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 7,149,801 shares are of Preferred Stock, of which 2,596,957 shares have been designated as Series A Preferred Stock, 2,941,176 shares have been designated as Series B Preferred Stock and 1,611,668 shares have been designated as Series C Preferred Stock, all of which are issued and outstanding. All such Except as described on Schedule 3.3(a), all outstanding shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable nonassessable, were issued in compliance with all applicable federal and state securities laws and are free of any liens or encumbrances other than any liens or encumbrances not subject to preemptive rights created by statute, the Certificate of Incorporation or imposed upon the holders thereofBylaws of Acquiror or any agreement to which Acquiror is a party or by which it is bound. Parent Acquiror has also reserved (i) 3,900,000 12,863,880 shares of Acquiror Common Stock for issuance to employees and consultants pursuant to Parent's 1996 its 1993 Stock Option Plan and its 1997 Stock Plan, (ii) 160,000 of which 5,449,067 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants are subject to purchase Series A Preferred Stock outstanding, unexercised options (the "Warrant StockAcquiror Stock Options") and 9,125 shares are available for grant. Except for the Acquiror Stock Options and except as described on Schedule 3.3(a), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character character, written or oral, to which Parent Acquiror is a party or by which it is bound obligating Parent Acquiror to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Acquiror. Except for the Acquiror Stock Options and except as described in Schedule 3.3(a), there are no options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which Acquiror is a party or by which it is bound obligating Parent Acquiror to grant, extend extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. (ba) The shares of Parent Acquiror Common Stock to be issued pursuant to the Merger will will, when issued in accordance with the terms of this Agreement, be duly authorized, validly issued, fully paid and non-assessable.paid, nonassessable

Capital Structure. (a) The authorized capital stock of Parent consists of 50,000,000 (i) 40,000,000 shares of common stock, $.01 par value per share, of which (A) 34,500,000 shares have been designated as Class A Common Stock, $.001 par value, 13,753,365 shares of which 29,767,708 shares were issued and outstanding as of December March 31, 19962000 (the "Capitalization Date"), (B) 2,000,000 shares have been designated as Class E-1 Common Stock, 1,508,267 shares of which were issued and outstanding as of the Capitalization Date, (C) 2,000,000 shares have been designated as Class E-2 Common Stock, 1,508,267 shares of which were issued and outstanding as of the Capitalization Date, and 27,988,501 (D) 1,500,000 shares have been designated as Class E-3 Common Stock, 1,005,503 shares of Preferred Stockwhich were issued and outstanding as of the Capitalization Date and (ii) 5,000,000 shares of preferred stock, $.001 .01 par valuevalue per share, of which 18,518,500 (A) 250 shares are have been designated as Series A Preferred Stock, all of which are issued and outstandingno shares were outstanding as of the Capitalization Date, and 9,310,001 (B) 300 shares are have been designated as Series B Preferred Stock, all of which are issued and outstanding. All such no shares were outstanding as of the Capitalization Date, (C) 500 shares have been duly authorizeddesignated as Series C Preferred Stock, of which no shares were outstanding as of the Capitalization Date, (D) 100,000 shares have been designated as Series D Preferred Stock, of which no shares were outstanding as of the Capitalization Date, and all such (E) 500 shares have been designated as Series F Preferred Stock, 153 shares of which were issued and outstanding as of the Capitalization Date. All outstanding shares have been of capital stock of Parent are validly issued, fully paid and nonassessable and not subject to preemptive rights contained in Parent's charter documents or in any contract or agreement to which Parent is a party. All outstanding shares of the capital stock of each of Parent's subsidiaries are validly issued, fully paid and nonassessable and are owned by Parent or one of its subsidiaries free and clear of any liens liens, security interests, pledges, agreements, claims, charges or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreementencumbrances. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The As of the Effective Time, the authorized capital stock of Parent consists will consist of 50,000,000 30,000,000 shares of Parent Common Stock, $.001 10,000,000 shares of Class B Common Stock, par value, of which 29,767,708 shares were issued value $ 0.01 per share (the "Parent Class B Common Stock") and outstanding as of December 31, 1996, and 27,988,501 5,000,000 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A value $ 1.00 per share (the "Parent Preferred Stock"). At the close of business on January 18, 1999, (i) 9,029,085 shares of Parent Common Stock were issued and outstanding, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been were validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved preemptive rights; (iii) 3,900,000 2,200,000 shares of Parent Common Stock were reserved for future issuance to employees and consultants pursuant to Parent's 1996 Key Employee Stock Option Plan, Employee Discount Stock Purchase Plan, Independent Director Stock Option Plan and 1998 Stock Incentive Plan (ii) 160,000 collectively, "Parent Stock Plans"). All of the shares of Series A Preferred Parent Common Stock issuable in exchange for Company Common Stock at the Effective Time in accordance with this Agreement will be, when so issued, duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights. As of the date of this Agreement, except for (a) this Agreement, (b) stock options covering 1,092,697 shares of Parent Common Stock (collectively, the "Parent Stock Options"), and (c) 3,325,303 shares of Parent Common Stock reserved for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Parent Class B Common Stock and (iv) 1,000,000 1,289,000 shares of Parent Common Stock reserved for issuance upon the exercise conversion of outstanding warrants to purchase the 7 1/2% Trust Preferred Securities into the Parent's 7 1/2% Convertible Subordinated Debentures and the subsequent conversion of the 7 1/2% Convertible Subordinated Debentures into Parent Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments rights or agreements of any character to which Parent or any of its Subsidiaries is a party or by which it any of them is bound obligating Parent or any of its Subsidiaries to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock of Parent or any of its Subsidiaries or obligating Parent or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, right, commitment right or agreement. (b) The shares . Each outstanding share of capital stock of each Subsidiary of Parent Common Stock to be issued pursuant to the Merger will be is duly authorized, validly issued, fully paid and non-assessablenonassessable and, except as disclosed in the Parent SEC Documents (as hereinafter defined), each such share is owned by Parent or another Subsidiary of Parent, free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, charges and other encumbrances of any nature whatsoever.

Capital Structure. (a) The authorized capital stock of Parent Company consists of 50,000,000 30,000,000 shares of Company Common Stock, $.001 0.001 par value, ("Company Common Shares") of which 29,767,708 8,085,196 shares were are issued and outstanding as of December 31, 1996outstanding, and 27,988,501 18,000,000 shares of Preferred Stock, $.001 0.001 par value, ("Company Preferred Shares") of which 18,518,500 shares are (i) 1,346,666 have been designated as Series A Preferred Stock, all Stock ("Series A Shares") of which 1,010,000 Series A Shares are issued and outstanding, and 9,310,001 shares (ii) 1,346,666 have been designated as Series A-1 Preferred Stock ("Series A-1 Shares") of which no Series A-1 Shares are outstanding, (iii) 4,600,000 have been designated as Series B Preferred Stock, all Stock ("Series B Shares") of which 4,362,498 Series B Shares are issued outstanding, (iv) 4,600,000 have been designated as Series B-1 Preferred Stock ("Series B-1 Shares") of which no Series B-1 Shares are outstanding, (v) 3,000,000 have been designated as Series C Preferred Stock ("Series C Shares") of which 1,999,900 Series C Shares are outstanding, and (vi) 3,000,000 have been designated as Series C-1 Preferred Stock ("Series C-1 Shares") of which no Series C-1 Shares are outstanding. All such shares have been duly authorizedThe Company Common Shares and the Company Preferred Shares are collectively referred to herein as the "Company Shares". (b) As of the date hereof, and all such issued and outstanding shares have been validly issued, 2,500,000 Company Common Shares are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred stock options under Company's "1999 Stock Option Plan" (the "Warrant StockCompany Stock Plan"), options for 2,405,934 Company Common Shares have been granted and remain outstanding (iii) 160,000 shares ------------- of the "Company Options"). No options to purchase Company Common Stock for issuance upon conversion Shares have been issued outside of the Warrant Company Stock Plan and remain outstanding. Warrants to purchase 136,436 Company Common Shares and 336,666 Series A Shares are outstanding. Such warrants shall either be exercised into Company Common Shares or Series A Shares, as applicable, prior to the Closing, be cancelled by the holder thereof, or at the Effective Time, terminate. All Company Common Share Equivalents and other securities outstanding as of January 28, 2000 are set forth on Schedule 1.4. (ivc) 1,000,000 All outstanding Company Shares are, and any Company Shares issued upon exercise of any Company Options will be, validly issued, fully paid, nonassessable and not subject to any preemptive rights, or to any agreement to which Company is a party or by which Company may be bound. Except for the shares of Common Stock for issuance upon described above issuable pursuant to the exercise of outstanding warrants to purchase Common Stock. In FebruaryCompany Options and warrants, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions there are currently pending. There are no other not any options, warrants, calls, conversion rights, commitments commitments, agreements, contracts, understandings, restrictions, arrangements or agreements rights of any character to which Parent Company is a party or by which it is Company may be bound obligating Parent Company to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock of Parent Company, or obligating Parent Company to grant, extend or enter into any such option, warrant, call, conversion right, commitment conversion payment, commitment, agreement, contract, understanding, restriction, arrangement or agreementright. Company does not have outstanding any bonds, debentures, notes or other indebtedness the holders of which (i) have the right to vote (or convertible or exercisable into securities having the right to vote) with holders of Company Shares on any matter ("Company Voting Debt") or (ii) are or will become entitled to receive any payment as a result of the execution of this Agreement or the completion of the transactions contemplated hereby. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent Acquiror consists of 50,000,000 65,000,000 shares of Common Stock and 42,971,150 shares of Preferred Stock, $.001 par value, of which 29,767,708 shares there were issued and outstanding as of December 31the close of business on the business day immediately preceding the date hereof, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 9,940,260 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option PlanStock, (ii) 160,000 2,000,000 shares of Series A Preferred Stock for issuance upon the exercise (of outstanding warrants to purchase a total of 2,000,000 shares of Series A Preferred Stock authorized) (the "Warrant Stock"“Series A Preferred”), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 3,000,000 shares of Common Series B Preferred Stock for issuance upon the exercise (of outstanding warrants to purchase Common Stock. In February, 1997, the Board a total of Directors of the Company approved (i) increasing the authorized 3,000,000 shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Series B Preferred Stock to 37,764,153 sharesauthorized) (the “Series B Preferred”), in preparation for a sale 500,000 shares of Series C Preferred StockStock (of a total of 500,000 shares of Series C Preferred Stock authorized) (the “Series C Preferred”), 8,155,737 shares of Series D Preferred Stock (of a total of 8,155,737 shares of Series D Preferred Stock authorized) (the “Series D Preferred”), 8,765,395 shares of Series E Preferred Stock (of a total of 8,765,395 shares of Series E Preferred Stock authorized) (the “Series E Preferred”), 3,915,732 shares of Series F Preferred Stock (of a total of 3,915,732 shares of Series F Preferred Stock authorized) (the “Series F Preferred”), 7,974,896 shares of Series G Preferred Stock (of a total of 7,974,896 shares of Series G Preferred Stock authorized) (the “Series G Preferred”), and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 1,000,000 shares of Common Series H Preferred Stock thereunder; all (of these actions are currently pendinga total of 1,000,000 shares of Series H Preferred Stock authorized) (the “Series H Preferred”). There are no other options, warrants, calls, rights, outstanding shares of capital stock or voting securities and no outstanding commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, issue any shares of the capital stock or voting securities other than pursuant to: (i) options to purchase an aggregate of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The 9,276,155 shares of Parent Acquiror Common Stock outstanding under the Acquiror’s stock incentive plans, and (ii) warrants to be purchase an aggregate of 1,204,288 shares of Acquiror Common Stock. All outstanding shares of Acquiror Capital Stock were issued pursuant to the Merger will be duly authorized, validly issued, fully paid in compliance with all applicable federal and non-assessablestate securities laws.

Capital Structure. (a) Attached to this Agreement as Exhibit E is a capitalization schedule of the Parent dated as of the date of this Agreement. The authorized capital stock of the Parent consists of 50,000,000 Two Hundred Million (200,000,000) shares of Common Stockcommon stock, par value $.001 0.0001 per share, and Twenty Million (20,000,000) shares of preferred stock, par valuevalue $0.0001 per share, of which 29,767,708 (i) 5,383,172 shares were of common stock are issued and outstanding as (before giving effect to the issuances of December 31Parent Common Stock to be made at Closing), 1996, and 27,988,501 (ii) Twenty Thousand (20,000) shares of preferred stock are designated as Series A Convertible Preferred Stock, $.001 par value, of which 18,518,500 Twenty Thousand (20,000) shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 (iii) Thirty Thousand (30,000) shares of preferred stock are designated as Series B Convertible Preferred Stock, all of which Six Thousand Six Hundred and Sixty-Six (6,666) shares are issued and outstanding, (iv) Four Million (4,000,000) shares of preferred stock are designated as Series C Convertible Preferred Stock, of which One Million (1,000,000) shares are issued and outstanding, (v) Five Million (5,000,000) shares of preferred stock are designated as Series D Convertible Preferred Stock, of which Five Million (5,000,000) shares are issued and outstanding and (vi) no shares of common stock or preferred stock are held by the Parent in its treasury. No other shares of capital stock or other voting securities of the Parent are issued, reserved for issuance or outstanding, except as set forth on the Parent Disclosure Schedule and as otherwise provided in Section 1.01. All such outstanding shares have been duly authorizedof the capital stock of the Parent are, and all such shares that may be issued prior to the date hereof and outstanding shares have been all of the Parent Securities to be issued to the Shareholders on the Closing Date will be when issued, duly authorized, validly issued, are fully paid and nonassessable non-assessable and are free not subject to or issued in violation of any liens purchase option, call option, right of first refusal, preemptive right, subscription right or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion similar right under any provision of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997Nevada Revised Statutes, the Board of Directors Parent Charter, the Parent Bylaws or any Contract to which the Parent is a party or otherwise bound.. None of the Company approved (i) increasing Parent Securities to be issued to the authorized shares of Common Stock Shareholders on the Closing Date will be subject to 100,000,000 sharesany Liens. Except as set forth in the Parent Disclosure Schedule, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no bonds, debentures, notes or other indebtedness of the Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Parent common stock may vote (“Voting Parent Debt”). Except in connection with the Transactions and except as set forth in the Parent Disclosure Schedule, as of the date of this Agreement and on the Closing Date, there are not and will not be any options, warrants, calls, rights, commitments convertible or agreements exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any character kind to which the Parent is a party or by which it is bound (i) obligating the Parent to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, the Parent or any Voting Parent Debt, (ii) obligating the Parent to issue, grant, extend or enter into any such option, warrant, call, right, commitment security, commitment, Contract, arrangement or agreement. undertaking or (biii) The that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of the Parent. As of the date of this Agreement, there are no outstanding contractual obligations of the Parent to repurchase, redeem or otherwise acquire any shares of capital stock of the Parent. Except as set forth in the Parent Common Stock Disclosure Schedule, the Parent is not a party to be issued pursuant any agreement granting any security holder of the Parent the right to cause the Merger Parent to register shares of the capital stock or other securities of the Parent held by such security holder under the Securities Act. None of the rights of the holders of the preferred stock of Parent will be duly authorizedimpact, validly issuedlimit, fully paid and non-assessableor have any other effect on the payment of the Notes, when due, under this Agreement.

Capital Structure. (a) The authorized capital stock of Parent Driveoff consists of 50,000,000 (i) 35,000,000 shares of stock, of which 28,600,000 shares are designated Common Stock, par value $0.01 per share, and 6,400,000 of which are designated Preferred Stock. Of the authorized shares of Common Stock, $.001 par value23,600,000 shares are designated Series A-1 Common Stock and 5,000,000 shares are designated Series A-2 Common Stock (the Series A-1 and A-2 Common Stock is to be deemed included in the previously-defined term, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 "DRIVEOFF COMMON SHARES"). Of the authorized shares of Preferred Stock, $.001 par value, of which 18,518,500 3,200,000 shares are designated Series A A-1 Preferred StockStock and 3,200,000 shares are designated Series A-2 Preferred Stock (together, the Series A-1 and A-2 Preferred Stock is referred to as "DRIVEOFF PREFERRED SHARES"). 12,800,000 shares of Series A-1 Common Stock are issued and outstanding, all of which are issued and outstanding, and 9,310,001 owned by Navidec; no other shares are designated Series B Preferred Stock, all or series of which capital stock are issued and outstanding. All such shares have been duly authorizedDriveoff Common Shares and Driveoff Preferred Shares and securities convertible into Driveoff Shares outstanding as of the date of this Agreement are set forth on Schedule 1.4, and all such issued no Driveoff Common Shares are held by Driveoff in its treasury. Each Preferred Share is presently convertible into one Driveoff Common Share. The Driveoff Common Shares and outstanding shares have been validly issuedthe Preferred Shares are sometimes collectively referred to as the "DRIVEOFF SHARES." Immediately prior to Closing, and after giving effect to the WFC transactions contemplated by Section 1.4.3(b) and (c), Navidec will own 13,308,300 Driveoff Common Shares and WFC will own 4,645,059 Driveoff Common Shares. (b) As of the date hereof, 3,200,000 Driveoff Preferred Shares are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed reserved for issuance upon the holders thereof. Parent has also conversion of the Term Note and 160,000 Driveoff Common Shares are reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase the WFC Warrant. As of the date hereof, 2,600,000 shares of Driveoff Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of A-1 Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock are reserved for issuance upon the exercise of outstanding warrants stock options under the Driveoff Plan. Pursuant to such plan, options to purchase 2,600,000 Driveoff Common StockShares have been granted and remain outstanding on the date hereof (the "DRIVEOFF OPTIONS"). In FebruaryAttached hereto at Schedule 2.2.2 is a complete and accurate list of all Driveoff Options, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing accurately indicating the number of authorized shares of Preferred Stock Driveoff Common Shares under option by individual optionees, the relevant grant dates, vesting schedules (without reference to 37,764,153 shares, in preparation for a sale of Series C Preferred StockSections 1.4.3(d) and (e)), and exercise prices. (iiic) adopting All outstanding Driveoff Shares are validly issued, fully paid, nonassessable, were issued without violating any preemptive rights, and, other than for the Company's 1997 Acquisition Stock Option PlanInvestor Rights Agreement, reserving 10,000,000 are not subject to any agreement to which Driveoff is a party or by which Driveoff may be bound. All Driveoff Shares to be issued to Navidec and WFC after execution of this Agreement and before Closing will be validly issued, fully paid, nonassessable, will have been issued without violating any preemptive rights, and, other than for the Investor Rights Agreement, will not be subject to any agreement to which Driveoff is a party or by which Driveoff may be bound. Except for the Term Note, the WFC Warrant, the Driveoff Options identified on Schedule 2.2.2, and Driveoff common shares of Common Stock thereunder; all of these actions to be issued to Navidec and WFC to result in the share ownership described in paragraph (a) above, there are currently pending. There are no other not any options, warrants, calls, conversion rights, commitments commitments, agreements, contracts, understandings, restrictions, arrangements, or agreements rights of any type or character to which Parent Driveoff is a party or by which it is bound Driveoff may be bound, obligating Parent Driveoff to issue, deliver, or sell, repurchase or redeem, or cause to be issued, delivered, or sold, repurchased or redeemed, any additional shares of the capital stock of Parent Driveoff, or obligating Parent Driveoff to grant, extend extend, or enter into any such option, warrant, call, conversion right, commitment conversion payment, commitment, agreement, contract, understanding, restriction, arrangement, or agreementright. Except for the Term Note, Driveoff does not have outstanding any bonds, debentures, notes or other indebtedness the holders of which (i) have the right to vote (or to convert into or otherwise acquire securities having the right to vote) with holders of Driveoff Common Shares on any matter ("DRIVEOFF VOTING DEBT") or (ii) are or will become entitled to receive any payment as a result of the execution of this Agreement or the completion of the transactions contemplated hereby. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 28,000,000 shares of Company Common Stock, $.001 par value, of which 29,767,708 shares were issued Stock and outstanding as of December 31, 1996, and 27,988,501 21,100,000 shares of Company Preferred Stock. Of the Company Preferred Stock, $.001 par value, of which 18,518,500 6,000,000 shares are have been designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 6,400,000 shares are have been designated Series B Preferred Stock, and 8,700,000 shares have been designated Series C Preferred Stock. (b) At the close of business on the date hereof: (i) 5,487,004 shares of Company Common Stock were issued and outstanding, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been were validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 nonassessable, 3,597,900 shares of Company Common Stock have been authorized for issuance to employees and consultants pursuant to Parent's 1996 the Company Stock Option Plan over the term of such plan, and 3,160,076 shares of Company Common Stock had been issued under the Company Stock Plan, 267,655 shares of Company Common Stock were subject to outstanding options, whether vested or unvested, and 526,342 shares of Company Common Stock remained available for future award under the Company Stock Plan; (ii) 160,000 6,000,000 shares of Series A Preferred Stock for issuance upon were issued and outstanding, all of which were validly issued, fully paid and nonassessable and are, as of the exercise date hereof, convertible into 6,000,000 shares of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Company Common Stock"), ; (iii) 160,000 6,400,000 shares ------------- of Common Series B Preferred Stock for issuance upon conversion were issued and outstanding, all of which were validly issued, fully paid and nonassessable and are, as of the Warrant Stock and date hereof, convertible into 6,400,000 shares of Company Common Stock; (iv) 1,000,000 6,907,406 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable and are, as of the date hereof, convertible into 6,907,406 shares of Company Common Stock; (v) no shares of Company Common Stock or Company Preferred Stock were held in the treasury of the Company; and (vi) no other equity interests in the Company are outstanding. (c) Schedule 5.2(c)(i) contains a correct and complete list as of the date hereof of each outstanding option to acquire Shares from the Company, whether vested or unvested, and whether granted under the Company Stock Plan or otherwise (“Company Option”) as of the date hereof, including the name of the holder, date of grant, current exercise price per Share and number of Shares subject thereto, the expiration date of the option term, the plan under which such option was granted, the schedule and other terms and conditions on which the option became or will become vested or exercisable and whether such Company Option is an incentive stock option under Section 422 of the Code. Schedule 5.2(c)(i) also lists as of the date hereof each outstanding award of unvested shares of Company Common Stock, whether issued under the Company Stock Plan or otherwise (“Unvested Share Awards”) and (iii) adopting includes, as to each such Unvested Share Award, the Company's 1997 Acquisition Stock Option Planname of the holder, reserving 10,000,000 the number of shares of Company Common Stock thereunder; subject to that award, the vesting schedule for those Shares and the purchase price paid per share for those Shares. On the Closing Date, the Company shall deliver to Parent an updated list of all Company Options and Unvested Share Awards that is current as of these actions are currently pendingthat date. There Each Company Option and Unvested Share Award has been granted in compliance with applicable federal and state securities Laws and, each Company Option either has an exercise price per share not less than the fair market value per share of Company Common Stock on the applicable grant date or has been structured so as to comply with the requirements of Section 409A of the Code applicable to options granted with a below fair market value exercise price. Except as described in Schedule 5.2(c)(i), no Company Option or Unvested Share Award shall vest in whole or in part on an accelerated basis as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby. (d) Except for the Company Charter, the Company Co-Sale Agreement, the Company Investor Rights Agreement and the Company Voting Agreement, each as in effect on the date hereof, and except as set forth on Schedule 5.2(c)(i) and Schedule 5.2(d), there are no other options, warrants, puts, calls, rights, arrangements, commitments or agreements of any character to which Parent the Company is a party or by which it is bound obligating Parent or, to issuethe Knowledge of the Company, deliverto which any other Person is a party, sellrelating to the issuance, repurchase sale, purchase, repurchase, conversion, exchange, registration, voting, transfer or redeemredemption of any Shares or other equity interests or equity equivalents of the Company, whether on conversion of other securities or otherwise, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of obligating the capital stock of Parent or obligating Parent Company to grant, extend or enter into any such option, warrant, put, call, right, arrangement, commitment or agreement, and there are no outstanding contractual rights to which the Company is a party, the value of which is based on the value of any Shares. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any Shares. (be) Except for the Company Voting Agreement, as in effect on the date hereof, and as set forth on Schedule 5.2(e), the Company is not a party to and, to the Knowledge of the Company, there does not exist any stockholder agreement, voting trust agreement or any other similar Contract restricting or otherwise relating to the voting, dividend, ownership or transfer rights of any shares of capital stock of the Company. (f) The Company does not have any outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or that are convertible into or exercisable for securities having the right to vote) with the Stockholders on any matter. (g) None of the Shares has been issued in violation of, or are subject to, any preemptive or subscription rights, and all of the Shares have been offered, issued, sold and delivered by the Company in compliance with all applicable federal and state securities Laws. (h) The Company Stock Plan is the only benefit plan of the Company under which any securities of the Company are issuable to officers, managers, employees and consultants of the Company and the non-employee members of the Company’s board of directors. Except as set forth in Section 5.2(b)(i) and Section 5.2(c), no securities of the Company are issued, reserved for issuance or outstanding under the Company Stock Plan. The terms of the Company Stock Plan and the outstanding Company Options thereunder permit the treatment of the Company Stock Plan and such Company Options in accordance with Section 8.8 and the actions to be taken by the Company’s board of directors thereunder, and do not require the consent or approval of the holders of those Company Options with respect to the disposition of those Company Options in accordance with the provisions of Section 8.8 applicable to those Options. To the Company’s Knowledge, elections under Section 83(b) of the Code have been timely filed with the applicable Internal Revenue Service Center with respect to all unvested shares of Parent Company Common Stock that have been issued to be issued pursuant to the Merger will be duly authorizedofficers, validly issuedmanagers, fully paid and employees, non-assessableemployee members of the board of directors or consultants of the Company, and the Company has provided Parent with a true and correct copy of each such filed election under Section 83(c) of the Code in its possession. (i) Schedule 5.2(i) sets forth (i) as of the date hereof, the aggregate unpaid accrued dividends (whether or not declared) with respect to all outstanding Shares of each series of Company Preferred Stock and (ii) the aggregate applicable per diem amount of dividends with respect to all outstanding Shares of each series of Company Preferred Stock as of the date hereof. Except as set forth in Schedule 5.2(i), no share of any series of Company Preferred Stock entitles the holder thereof to any dividends (whether or not declared) to which each other share of such series of Company Preferred Stock is not entitled.

Capital Structure. (a) The authorized capital stock of Parent consists of 50,000,000 (i) 400,000,000 shares of Parent Common Stock, $.001 par valueand (ii) 10,000,000 shares of Parent Preferred Stock, of which 29,767,708 (a) 1,500 shares have been designated as Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”), (b) 1,600 shares have been designated as Series B-1 Convertible Preferred Stock (“Series B-1 Convertible Preferred Stock”), (c) 500 shares have been designated as Series B-2 Convertible Preferred Stock (“Series B-2 Convertible Preferred Stock”), (d) 5,369 shares have been designated as Series C 8% Convertible Preferred Stock (“Series C Convertible Preferred Stock”) and (e) 4,600 shares have been designated as Series D 8% Convertible Preferred Stock (“Series D Convertible Preferred Stock”). As of October 18, 2013, (i) 5,445,315 shares of Parent Common Stock were issued and outstanding as outstanding, all of December 31, 1996which have been duly authorized and validly issued, and 27,988,501 are fully paid and nonassessable, (ii) 5,980,941 shares of Preferred StockParent Common Stock were subject to future issuance pursuant to outstanding notes, $.001 par valueoptions, warrants and rights, (iii) 194,797 shares of which 18,518,500 Parent Common Stock were reserved for future issuance pursuant to stock options remaining available for grant under Parent’s stock option plans; (iv) no shares are designated of Series A Convertible Preferred StockStock have been issued and no shares of Series A Convertible Preferred Stock are outstanding; (v) 1,600 shares of Series B-1 Convertible Preferred Stock have been issued and no shares of Series B-1 Convertible Preferred Stock are outstanding; (vi) 500 shares of Series B-2 Convertible Preferred Stock have been issued and no shares of Series B-2 Convertible Preferred Stock are outstanding; (vii) 5,369 shares of Series C Convertible Preferred Stock have been issued and 1,370 shares of Series C Convertible Preferred Stock are outstanding; and (viii) 4,600 shares of Series D Convertible Preferred Stock have been issued and 4,600 shares of Series D Convertible Preferred Stock are outstanding. The shares of Parent Capital Stock issuable pursuant to the transactions contemplated by this Agreement have been duly authorized and reserved for issuance and, all when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. The authorized capital stock of Purchaser consists of 1,000 shares of common stock, par value $.0001 per share, 1,000 of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which shares are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid paid, nonassessable and non-assessableowned by Parent.

Capital Structure. (a) The Parent's authorized capital stock consists solely of Parent consists 90,000,000 shares, 54,824,782 of 50,000,000 shares of which have been designated common stock, par value $.01 per share (the "Common Stock, $.001 par value"), of which 29,767,708 2,334,512 shares were are issued and outstanding as of December 31, 1996outstanding, and 27,988,501 35,175,218 of which have been designated preferred stock, par value $.01 per share (the "Preferred Stock"). 4,100,000 of the authorized shares of Preferred Stock, $.001 par value, of which 18,518,500 shares Stock are designated as "Series A Preferred Stock", all of which are issued and outstanding, and 9,310,001 5,533,031 of the authorized shares of Preferred Stock are designated as "Series B Preferred Stock", all of which are issued and outstanding. All such , 4,206,666 of the authorized shares have been duly authorizedof Preferred Stock are designated as "Series C Preferred Stock", all of which are issued and outstanding, 9,487,179 of the authorized shares of Preferred Stock are designated as "Series D Preferred Stock", 5,213,675 of which are issued and outstanding, and all such 11,848,342 of the authorized shares of Preferred Stock are designated as "Series E Preferred Stock", 10,235,188 of which are issued and outstanding shares have been validly issuedoutstanding. As of the date hereof, are fully paid and nonassessable and are free 9,150,000 of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 Corporation's authorized but unissued shares of Common Stock have been reserved for issuance to employees and consultants pursuant to Parentunder the Corporation's 1996 Stock 1997 Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock Plan (the "Warrant Stock1997 Plan"), (iii) 160,000 of which options to purchase 6,032,478 shares ------------- of Common Stock are currently outstanding. A total of 35,175,218 of the Corporation's authorized but unissued shares of Common Stock have been reserved for issuance upon conversion of the Warrant Stock authorized Series A Shares, Series B Shares, Series C Shares, Series D Shares, and (iv) 1,000,000 shares Series E Shares whether or not currently issued and outstanding. A total of Common Stock 4,273,504 of the Corporation's authorized but unissued Series D Shares have been reserved for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreementD Warrants. (b) The Except as provided above, the Corporation has no other shares of Parent Common Stock capital stock reserved for issuance, and no outstanding options or warrants related to be its shares of capital stock or any outstanding securities or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire from the Corporation, any shares of capital stock. There are no preemptive or other subscription rights with respect to any shares of capital stock. All of the shares of capital stock which are issued pursuant to the Merger will be and outstanding have been duly authorized, authorized and validly issued, issued and are fully paid and non-assessableare nonassessable. All securities issued by the Corporation prior to the date of this Agreement have been issued in compliance with all applicable securities laws or pursuant to a valid exemption therefrom.

Capital Structure. (a) The authorized stock of Parent consists of 50,000,000 100,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 21,068,321 shares were issued and outstanding as of December May 31, 19961997, and 27,988,501 37,764,153 shares of Preferred Stock, $.001 par value, of which 18,518,500 18,678,500 shares are designated Series A Preferred Stock, all 18,518,500 of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and 10,200,000 shares are designated Series C Preferred Stock, 8,529,141 of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan and the 1996 Equity Compensation Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) ------------- 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and Stock, (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of warrants issued or outstanding warrants to purchase Common Stock. In Februaryissuable pursuant to the Company's Affiliate Warrant Program, 1997, the Board of Directors of the Company approved and (iv) increasing the authorized 10,000,000 shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting issuance under the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent Applicant consists of 50,000,000 100,000,000 shares of Common Stock, $.001 0.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 38,188,501 shares of Preferred Stock, $.001 0.001 par value, of which 18,518,500 18,678,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock and 10,200,000 shares are designated Series C Preferred Stock. As of October 10, all 1997, 39,421,722 shares of which are its Common Stock were issued and outstanding, 18,518,500 shares of its Series A Preferred Stock were issued and outstanding, 9,310,001 shares of its Series B Preferred Stock were issued and outstanding and 8,454,580 shares of its Series C Preferred Stock were issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent The Applicant has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to ParentApplicant's 1996 Stock Option Plan and the 1996 Equity Compensation Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and Stock, (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of warrants issued or outstanding warrants to purchase Common Stock. In Februaryissuable pursuant to the Applicant's Affiliate Warrant Program, 1997, the Board of Directors of the Company approved and (iv) increasing the authorized 24,000,000 shares of Common Stock to 100,000,000 shares, (ii) increasing for issuance under the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the CompanyApplicant's 1997 Acquisition Stock Option Plan. Except for stock and options issuable in connection with potential acquisitions by Applicant, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character character, written or oral, to which Parent Applicant is a party or by which it is bound obligating Parent Applicant to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent Applicant or obligating Parent Applicant to grant, extend extend, or enter into any such option, warrant, call, right, commitment or agreement. The Merger will not change the rights of the existing stockholders of Applicant; however, the Merger will diminish USWeb stockholders' equity interest in USWeb because of the increase in the number of shares of Common Stock of Applicant outstanding. (b) The shares of Parent Common Stock to be issued pursuant to the Merger Merger, when issued as contemplated hereby, will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent consists of 50,000,000 (i) 40,000,000 shares of common stock, $.01 par value per share, of which (A) 34,500,000 shares have been designated as Class A Common Stock, 18,215,442 shares of which were issued and outstanding as of July 31, 2000 (the "Capitalization Date"), (B) 2,000,000 shares have been designated as Class E-1 Common Stock, 1,508,267 shares of which were issued and outstanding as of the Capitalization Date, (C) 2,000,000 shares have been designated as Class E-2 Common Stock, 1,508,267 shares of which were issued and outstanding as of the Capitalization Date, and (D) 1,500,000 shares have been designated as Class E-3 Common Stock, 1,005,503 shares of which were issued and outstanding as of the Capitalization Date and (ii) 5,000,000 shares of preferred stock, $.001 .01 par valuevalue per share, of which 29,767,708 (A) 250 shares have been designated as Series A Preferred Stock, of which no shares were outstanding as of the Capitalization Date, (B) 300 shares have been designated as Series B Preferred Stock, of which no shares were outstanding as of the Capitalization Date, (C) 500 shares have been designated as Series C Preferred Stock, of which no shares were outstanding as of the Capitalization Date, (D) 100,000 shares have been designated as Series D Preferred Stock, of which no shares were outstanding as of the Capitalization Date, and (E) 500 shares have been designated as Series F Preferred Stock, of which 127 shares were issued and outstanding as of December 31, 1996, and 27,988,501 the Capitalization Date. All outstanding shares of Preferred Stock, $.001 par value, capital stock of which 18,518,500 shares Parent are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, fully paid and nonassessable and not subject to preemptive rights contained in Parent's charter documents or in any contract or agreement to which Parent is a party. All outstanding shares of the capital stock of each of Parent's subsidiaries are validly issued, fully paid and nonassessable and are owned by Parent or one of its subsidiaries free and clear of any liens liens, security interests, pledges, agreements, claims, charges or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreementencumbrances. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent the Company consists of 50,000,000 200,000,000 shares of Company Common Stock, $.001 par value, of which 29,767,708 shares were issued Stock and outstanding as of December 31, 1996, and 27,988,501 10,000,000 shares of Company Preferred Stock, $.001 par value, 216,000 shares of which 18,518,500 shares are have been designated as Series A Preferred Stock, all 925,000 shares of which are issued and outstanding, and 9,310,001 shares are have been designated as Series B Preferred StockStock (the "Series B Preferred"), all 625,000 shares of which are issued and outstanding. All such shares have been duly authorizeddesignated as Series C Preferred Stock (the "Series C Preferred"), 1,000,000 shares of which have been designated as 1996 Series A Convertible Preferred Stock (the "1996 Preferred"), 500,000 shares of which have been designated as 1998 Series A Junior Participating Preferred Stock (the "1998 Preferred") and all such 50,000 shares of which have been designated as 1999 Series A 8% Convertible Preferred Stock (the "1999 Preferred"). (b) As of the close of business on January 24, 2005, there were (i) 91,469,696 issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved Company Common Stock (i) 3,900,000 including 2,163,992 shares of Company Common Stock for issuance to employees held by the KSOP (as herein defined) and consultants pursuant to Parent's 1996 including 3,926,034 shares of Company Common Stock Option Planheld directly or indirectly by the Company as treasury stock), (ii) 160,000 80,000 issued and outstanding shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 no shares ------------- of the Series B Preferred issued or outstanding, (iv) no shares of the Series C Preferred issued or outstanding, (v) 1,000,000 shares of the 1996 Preferred issued and outstanding, (vi) no shares of the 1998 Preferred issued or outstanding, (vii) no shares of the 1999 Preferred issued or outstanding, (viii) Company Stock Options that were issued and outstanding relating to 5,673,002 shares of Company Common Stock, (ix) reserved for issuance up to 10,255,000 shares of Company Common Stock for issuance upon conversion of the Warrant Company Convertible Notes (assuming the Company Convertible Notes were to be converted as of January 24, 2005 and the Ten Day Average Closing Stock Price (as defined in the indenture relating to the Company Convertible Notes) were calculated for the period ended January 24, 2005, the number of shares of Company Common Stock issuable upon the conversion of the Company Convertible Notes would be 353,366), and (x) Company Warrants relating to 7,228,457 shares of Company Common Stock that were issued and outstanding. As of the close of business on January 24, 2005 and as of the date hereof, 3,926,034 shares of Company Common Stock were issued and held directly or indirectly by the Company as treasury stock and no shares of Company Preferred Stock were issued and held directly by the Company as treasury stock. As of the close of business on January 24, 2005 and as of the date hereof, shares of Company Common Stock were issued and held by a Company Subsidiary or Affiliate of the Company and 1,000,000 shares of the 1996 Preferred were issued and held by Company Subsidiaries that are Controlled By the Company, which represents all the issued and outstanding shares of the 1996 Preferred. (c) Except as set forth in Section 3.8(b), there are outstanding (i) no shares of capital stock or other voting securities of the Company, (ii) no securities of the Company or any other Person convertible into or exchangeable or exercisable for shares of capital stock or other voting securities of the Company, (iii) no stock appreciation rights or phantom stock rights to which any of the Target Companies are obligated and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In Februaryno subscriptions, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights (including preemptive rights), commitments commitments, understandings or agreements of any character to which Parent the Company is a party or by which it is bound obligating Parent the Company to issue, deliver, sell, repurchase purchase, redeem or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any acquire shares of the capital stock or other voting securities of Parent the Company (or securities convertible into or exchangeable or exercisable for shares of capital stock or other voting securities of the Company) or obligating Parent the Company to grant, extend or enter into any such subscription, option, warrant, call, right, commitment commitment, understanding or agreement. (bd) The All outstanding shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, Company capital stock are validly issued, fully paid and nonassessable and not subject to any preemptive right. There are no shares of Company capital stock reserved for issuance. (e) All outstanding shares of capital stock and other voting securities of each of the corporate Company Subsidiaries are (i) validly issued, fully paid and nonassessable and not subject to any preemptive right, and (ii) owned by the Target Companies, free and clear of all Liens, claims and options of any nature (except for Permitted Encumbrances). There are outstanding (y) no securities of any Company Subsidiary or any other Person convertible into or exchangeable or exercisable for shares of capital stock, other voting securities or other equity interests of such Company Subsidiary, and (z) no subscriptions, options, warrants, calls, rights (including preemptive rights), commitments, understandings or agreements to which any Company Subsidiary is a party or by which it is bound obligating such Company Subsidiary to issue, deliver, sell, purchase, redeem or acquire shares of capital stock, other voting securities or other equity interests of such Company Subsidiary (or securities convertible into or exchangeable or exercisable for shares of capital stock, other voting securities or other equity interests of such Company Subsidiary) or obligating any Company Subsidiary to grant, extend or enter into any such subscription, option, warrant, call, right, commitment, understanding or agreement. (f) There is no stockholder agreement, voting trust or other agreement or understanding to which the Company is a party or by which it is bound relating to the voting of any shares of the capital stock of any of the Target Companies. There are no bonds, debentures, notes or other indebtedness of the Target Companies having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which the stockholders of any of the Target Companies may vote. (g) None of the Target Companies is obligated to redeem or otherwise repurchase any of its capital stock. (h) The Company is in compliance with the applicable listing rules of the New York Stock Exchange and has not, since January 1, 2003, received any notice from the New York Stock Exchange asserting any non-assessablecompliance with such rules. (i) Following the Effective Time, there shall be no securities of any of the Surviving Corporation, the Target Companies or any other Person convertible into or exchangeable or exercisable for shares of capital stock or other voting securities of the Surviving Corporation or any of the Target Companies. (j) The Board of Directors has made an irrevocable determination that an event similar to the commencement of a tender or exchange offer which would, if successful, result in a Change of Control (as defined in the Company's stock option agreements) has occurred and would, if consummated, materially alter the structure or business of the Company. (k) The exercise price for the Company Warrants is $15.00 per share of Company Common Stock. The conversion price of the Company Convertible Notes is, as of the date of this Agreement, $12.19 per share of Company Common Stock which price will be adjusted immediately following the TEL Distribution pursuant to the terms of the indenture relating to the Company Convertible Notes. For example, based on an average closing price for Company Common Stock for the 20-trading day period ended January 18, 2005 of $12.427, and the closing price of the TEL Units on January 18, 2005 of $10.395, the revised conversion price would be $12.032. (l) There have never been any liquidation proceeds of any kind regarding the West ▇▇▇▇▇▇ Prospect. There are no accrued or unpaid dividends on the Series A Preferred Stock.

Capital Structure. (a) The authorized stock of Parent consists of 50,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, 18,518,500 shares all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Employee Stock Option PlanPlans, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) ------------- 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of warrants issued or outstanding warrants to purchase issuable pursuant to the Company's Affiliate Warrants Program. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock for issuance thereunder; all of these actions are currently pending Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.

Capital Structure. (a) The authorized capital stock of Parent Telenetics consists of 50,000,000 25,000,000 shares of Common Stockcommon stock, $.001 no par valuevalue per share ("TELENETICS COMMON STOCK"), of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 1,480,000 shares of Series A 7.0% Convertible Redeemable Preferred Stock, no par value per share (the "SERIES A PREFERRED STOCK"), 128,571 shares of Series B Convertible Preferred Stock, no par value per share (the "SERIES B PREFERRED STOCK"), 400,000 shares of Series C 7.0% Convertible Preferred Stock, no par value per share (the "SERIES C PREFERRED STOCK"), and 2,991,429 shares of undesignated preferred stock, no par value per share (the "UNDESIGNATED PREFERRED STOCK"). As of the date hereof, 10,273,754 shares of Telenetics Common Stock are issued and outstanding (which amount does not include the Base Stock issuable hereunder), 12,628,106 shares of Telenetics Common Stock are reserved for issuance upon the exercise of outstanding options and warrants to purchase Series A Preferred Telenetics Common Stock (which amount includes the "Warrant shares underlying the Options and the Additional Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance and upon conversion of the Warrant Series A Preferred Stock, Series B Preferred Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 736,884 shares of Series A Preferred Stock are issued and outstanding, 128,571 shares of Series B Preferred Stock are issued and outstanding, 400,000 shares of Series C Preferred Stock are issued and outstanding, and no shares of Undesignated Preferred Stock are issued and outstanding. Except for the options, warrants and convertible securities for which shares of Telenetics Common Stock thereunder; all of these actions are currently pending. There reserved for issuance as described in this SECTION 3.2, and except as provided in the Telenetics Transaction Agreements, there are no other options, warrants, calls, rights, commitments commitments, conversion rights or agreements of any character to which Parent Telenetics is a party or by which it Telenetics is bound obligating Parent Telenetics to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any shares of the capital stock of Parent Telenetics or securities convertible into or exchangeable for shares of capital stock of Telenetics, or obligating Parent Telenetics to grant, extend or enter into any such option, warrant, call, right, commitment commitment, conversion right or other agreement. (b) The . None of the outstanding shares of Parent Telenetics Common Stock, Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock are subject to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessablepreemptive rights.

Capital Structure. (a) The authorized capital stock of Parent consists the ----------------- Company is 28,000,000 shares consisting of 50,000,000 shares of Common Stock, $.001 par value, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 20,000,000 shares of Common Stock and 8,000,000 shares of Preferred Stock (the "Preferred Shares"). There are two ---------------- classes of Preferred Stock designated in the Company's Amended and Restated Articles of Incorporation: (i) the Series A Preferred, which consists of 2,540,000 shares and (ii) the Series B Preferred which consists of 4,849,167 shares. As of the date of this Agreement, there were outstanding 7,640,037 shares, of Common Stock 2,540,000 shares of Series A Preferred and 3,849,167 shares of Series B Preferred. All of the outstanding shares of Common Stock and Preferred Shares have been duly authorized and are validly issued, fully paid and nonassessable. Other than shares of Common Stock reserved for issuance to employees and consultants pursuant to Parentfor (i) Options under the Company's 1996 1999 Stock Option Plan, (ii) 160,000 conversion of Preferred Shares and (iii) conversion of that certain loan under the Bridge Loan Agreement, dated as of April 19, 2000, among the Company and certain persons (the "Convertible Loan"), the Company has no shares reserved for issuance. Other ---------------- than with respect to warrants to purchase 1,000,000 shares of Series A B Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant StockWarrants"), (iii) 160,000 shares ------------- the Company has no Preferred Shares reserved for issuance. The -------- Company Disclosure Letter contains a correct and complete list of Common Stock for issuance upon conversion each outstanding Option, including the holder, date of the Warrant Stock grant, exercise price and (iv) 1,000,000 number of shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stocksubject thereto. In February, 1997, the Board of Directors Each of the Company approved (i) increasing the authorized outstanding shares of Common Stock to 100,000,000 shares, (ii) increasing the number capital stock or other securities of authorized shares each of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent Subsidiaries is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.nonassessable and owned by the Company, free and clear of any lien, pledge, security interest, claim or other encumbrance. Except with respect to the Options, the Preferred Shares, the Warrants, and the Convertible Loan, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company or any of its Subsidiaries to issue or sell any shares of capital stock or other securities of the Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. Other than the Convertible Loan, the Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the shareholders of the Company on any matter ("Voting Debt"). -----------

Capital Structure. (ai) The authorized capital stock of Parent Company consists of 50,000,000 30,000,000 shares of Class A Common Stock, 1,689,256 shares of Class B Common Stock, 367,344 shares of Class C Common Stock, 1,444,366 shares of Class D Common Stock and 4,000,000 shares of preferred stock, par value $.001 par value.01 per share ("Authorized Preferred Stock"), of which 29,767,708 which, as of the date of this Agreement, (A) 3,172,533 shares were of Class A Common Stock are issued and outstanding as of December 31outstanding, 1996, and 27,988,501 (B) 244,890 shares of Class B Common Stock are issued and outstanding, (C) 31,000 shares of Class C Common Stock are issued and outstanding, (D) 1,444,366 shares of Class D Common Stock are issued and outstanding, (E) 600,000 shares of Authorized Preferred Stock are designated as Series B Preferred Stock, $.001 par value, 565,000 shares of which 18,518,500 shares are issued and outstanding, (F) 598,000 of the Authorized Preferred Stock are designated Series A as Mandatory Preferred Stock, all 583,400 shares of which are issued and outstanding, and 9,310,001 (G) no shares of Class A Common Stock, Class B Common Stock, Class C Common Stock or Class D Common Stock are designated held by the Company in its treasury or by any of the Company's Subsidiaries. (ii) As of the date hereof, there are no bonds, debentures, notes or other indebtedness issued or outstanding having the right to vote on any matters on which holders of Common Stock or Authorized Preferred Stock may vote, including without limitation the Merger. (iii) Section 3.01(c)(iii) of the Company's Disclosure Schedule sets forth a complete and correct list as of the date hereof, of each holder of record of shares of Class B Common Stock, Class C Common Stock, Class D Common Stock and Series B Preferred StockStock and, all in each case, the number of which are issued shares held of record by each such holder. (iv) Giving effect to the applicable provisions of the Company's Amended and outstanding. All such shares have been duly authorizedRestated Certificate of Incorporation (the "Restated Certificate"), and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free the Certificate of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares Designation of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A B Convertible Preferred Stock (the "Warrant StockSeries B Designation"), (iii) 160,000 shares ------------- the Certificate of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares Designations of Preferred Stock of Triathlon Broadcasting Company to 37,764,153 shares, in preparation for a sale be designated 9% Mandatory Convertible Preferred Stock (the "Mandatory Designation") and all other instruments affecting the rights of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition holders of Capital Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent the Company is a party or by which it is bound obligating Parent to issue(which, deliverif any, sellother than the Restated Certificate, repurchase or redeemthe Series B Designation, or cause to be issuedthe Mandatory Designation and the Transaction Documents (as defined in Section 8.03), delivered, sold, repurchased or redeemed, any shares are set forth in Section 3.01(c)(iv) of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.Company Disclosure Schedule):

Capital Structure. (a) The authorized stock share capital of Parent consists of 50,000,000 shares of Common Stockis IR(Pounds)11,250,000 divided into 120,000,000 Ordinary Shares, $.001 par valuevalue IR9.375 ▇▇▇▇▇ per share, of which 29,767,708 50,486,843 shares were issued and 50,461,074 were outstanding as of December 31March 27, 1996, and 27,988,501 2000. No shares of Preferred Stock, $.001 par value, preferred stock are issued or outstanding. The authorized capital stock of which 18,518,500 Merger Sub consists of 1,000 shares are designated Series A Preferred of Common Stock, all of which are issued and outstanding, outstanding and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstandingheld by Parent. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereofnonassessable. Parent has also reserved (i) 3,900,000 shares an aggregate of Common Stock 26,112,646 Ordinary Shares for issuance to employees employees, directors and consultants pursuant to Parent's 1996 Stock Option Planemployee benefit plans, (ii) 160,000 of which 9,472,565 shares of Series A Preferred Stock have been exercised, 13,246,580 shares are subject to outstanding, unexercised options and 3,893,501 shares remain available for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pendingfuture grant. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares Ordinary Shares of Parent Common Stock to be issued pursuant to the Merger will be be, at the Effective Date, duly authorized, validly issued, fully paid paid, not subject to any call, preemptive or similar rights. Upon issuance of the ADSs issued pursuant to Article I, the right, title and non-assessableinterest to such ADSs other than the Escrow Shares will be transferred to the holders of Company Interests, free and clear of all liens, charges, encumbrances, security interests and claims. (c) Parent meets all requirements for the qualification of the inclusion and quotation of ADSs on the Nasdaq National Market ("NNM"). ADSs to --- be issued pursuant to the Merger will be included and quoted in the NNM.

Capital Structure. (a) The As of the date hereof, the authorized capital stock of Parent IES consists of 50,000,000 (i) 24,000,000 shares of IES Common Stock, (ii) 120,000 shares of 4.30% Cumulative Preferred Stock, par value $.001 50 per share ("4.30% Preferred Stock"), 146,406 shares of 4.80% Cumulative Preferred Stock, par valuevalue $50 per share ("4.80% Preferred Stock") and 200,000 shares of Cumulative Preferred Stock, par value $50 per share, of which 29,767,708 100,000 shares were issued and outstanding have been designated as of December 31Series 6.10% ("6.10% Preferred Stock") (collectively, 1996the "IES Preferred Stock"), and 27,988,501 (iii) 700,000 shares of preference stock, par value $100 per share ("IES Preference Stock"). At the close of business on September 30, 2000, (i) 13,370,788 shares of IES Common Stock were outstanding, all of said shares being held by Alliant Energy Corporation ("Alliant"), (ii) 120,000 shares of 4.30% Preferred Stock, $.001 par value, 146,406 shares of which 18,518,500 shares are designated Series A 4.80% Preferred Stock, all and 100,000 shares of which are issued 6.10% Preferred Stock were outstanding and (iii) no shares of IES Preference Stock were outstanding. At the close of business on September 30, 2000, no shares of IES Preferred Stock were held by IES or any of its affiliates, and 9,310,001 shares are designated Series B Preferred Stockno bonds, all of debentures, notes or other indebtedness having the right to vote (or convertible into securities having the right to vote) on any matters on which are shareholders may vote ("Voting Debt") were issued and or outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been of IES Common Stock and IES Preferred Stock are validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereofnot subject to preemptive rights. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion As of the Warrant Stock date of this Agreement and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In Februaryexcept as otherwise contemplated herein, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent IES is a party or by which it is bound obligating Parent IES to issue, deliver, deliver or sell, repurchase or redeem, or cause to be issued, delivered, delivered or sold, repurchased or redeemed, any additional shares of the capital stock or any Voting Debt of Parent IES or obligating Parent IES to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable."

Capital Structure. (a) The authorized stock of Parent consists of 50,000,000 48,000,000 shares of Common Stock, USD $.001 par value, of which 29,767,708 approximately 6,205,559 shares were issued and outstanding as of December 31July 12, 19962000, and 27,988,501 1,300,000 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstandingoutstanding as of the date hereof, and 9,310,001 1,281,000 shares are designated of Series B Preferred Stock, all of which are issued and outstandingoutstanding as of the date hereof, 544,998 shares of Series C Preferred Stock, all of which are issued and outstanding as of the date hereof, 1,500,000 shares of Series D Preferred Stock, all of which are issued and outstanding as of the date hereof, 857,988 shares of Series E-1 Preferred Stock, all of which are issued and outstanding as of the date hereof, 6,621,268 shares of Series E-2 Preferred Stock, all of which are issued and outstanding as of the date hereof, and 8,071,207 shares of Series F Preferred Stock, all of which are issued and outstanding as of the date hereof. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 9,872,968 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding its employee and director stock and option plans. Other than warrants to purchase Series A Preferred Stock (the "Warrant Stock"), (iii) 160,000 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 373,210 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stock, and (iii) adopting the Company's 1997 Acquisition Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There there are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or other similar rights with respect to Parent. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and paid, non-assessable, free of any liens or encumbrances and not subject to any preemptive rights or rights of first refusal created by statute or the certificate of incorporation or bylaws of Parent or any agreement to which Parent is a party or is bound except as provided in this Agreement.

Capital Structure. (ai) The authorized capital stock of Parent the Company consists of 50,000,000 (A) 100,000,000 Common Shares, (B) 6,200,000 shares of Class B Non-Voting Common Stock, par value $.001 0.000006 per share (the “Class B Common Shares”) and (C) 100,000 shares of preferred stock, par valuevalue $0.10 per share, of which 29,767,708 shares were issued and outstanding as of December 31, 1996, and 27,988,501 shares of Preferred Stock, $.001 par value, of which 18,518,500 shares are designated Series A Preferred Stock, all of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred Stock, all of which are issued and outstanding. All such 38,000 shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. Parent has also reserved (i) 3,900,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 Stock Option Plan, (ii) 160,000 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants to purchase designated Series A Preferred Stock (the "Warrant Stock"“Series A Preferred Shares”), 50,000 shares have been designated Series B Preferred Stock (the “Series B Preferred Shares”) and 3,500 shares have been designated Series C Preferred Shares. As of the close of business on August 22, 2006, (1) 76,059,735 Common Shares were issued and outstanding (and no shares, were held by the Company in its treasury or by any Subsidiary of the Company), (iii2) 160,000 shares ------------- of Common Stock for issuance upon conversion none of the Warrant Stock Class B Common Shares, Series A Preferred Shares and (iv) 1,000,000 shares of Common Stock for issuance upon Series B Preferred Shares were issued or outstanding or were held by the exercise of outstanding warrants to purchase Common Stock. In February, 1997, the Board of Directors Company in its treasury or by any Subsidiary of the Company approved and (i3) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of 3,202.780099 Series C Preferred StockShares were issued and outstanding. All of the outstanding Common Shares and Series C Preferred Shares have been duly authorized and are validly issued, fully paid and nonassessable. The Company has no Common Shares, Class B Common Shares, Series A Preferred Shares, Series B Preferred Shares or Series C Preferred Shares reserved for issuance, except that, as of the close of business on August 22, 2006, there were (x) 6,223,522 Common Shares reserved for options granted pursuant to the Firearms Training Systems, Inc. Stock Option Plan and 613,367 Common Shares reserved for future option grants under such plan (none of which shall be issued) and (iiiy) adopting 189,733 Common Shares reserved for issuance pursuant to the Company's 1997 Acquisition Firearms Training Systems, Inc. Employee Stock Option PlanCompensation Plan (the plans referred to in the foregoing clauses (x) and (y), reserving 10,000,000 as amended, supplemented or otherwise modified through the date hereof, the “Stock Plans”). Except as set forth above, no shares of Common Stock thereunder; all capital stock or other voting securities of these actions are currently pendingthe Company were, and, immediately prior to the Effective Time no shares of capital stock or other voting securities of the Company will be, issued, reserved for issuance or outstanding. There are no outstanding stock appreciation rights linked to the price of Common Shares and granted under any Stock Plan or otherwise. None of the outstanding shares of Company capital stock are, and none of such shares that may be issued prior to the Effective Time will be when issued, subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Company Charter, the Company Bylaws or any Contract (as defined in Section 5.1(d)(ii)) to which the Company is a party or otherwise bound. All Common Shares issued under the Stock Plans have been offered, issued and sold pursuant to a registration statement declared effective by the U.S. Securities and Exchange Commission (the “SEC”) and for which no stop order or investigation is pending. Except as set forth above, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, rights, commitments or agreements rights of any character kind that obligate the Company or any of its Subsidiaries to which Parent is a party issue or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, sell any shares of the capital stock or other securities of Parent the Company or obligating Parent any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to grantsubscribe for or acquire, extend any securities of the Company or enter into any of its Subsidiaries, and no securities or obligations evidencing such optionrights are authorized, warrant, call, right, commitment issued or agreementoutstanding. (bii) The Section 5.1(b)(ii) of the Company Disclosure Letter lists each of the Company’s Subsidiaries, its jurisdiction of organization, and the number of shares outstanding of its capital stock and the number of shares of Parent Common Stock to be issued pursuant to its outstanding capital stock owned directly or indirectly by the Merger will be Company. Each of the outstanding shares of capital stock or other equity securities of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid and nonnonassessable and, except for directors’ qualifying shares, owned by the Company or by a wholly-assessableowned Subsidiary of the Company, free and clear of any Encumbrance (as defined below), other than Permitted Encumbrances (as defined below). (iii) Except for its interests in the Subsidiaries and except for the ownership interests set forth in Section 5.1(b)(iii) of the Company Disclosure Letter, the Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.

Capital Structure. (a) The authorized capital stock of Parent Target consists of 50,000,000 38,400,000 shares of Common Stock and 25,067,984 shares of Preferred Stock, $.001 par value, of which 29,767,708 shares there were issued and outstanding as of December 31the close of business on the date hereof, 1996, and 27,988,501 2,624,520 shares of Preferred Common Stock, $.001 par value, 2,020,000 shares of which 18,518,500 shares are designated Series A Preferred StockStock (the "Series A Preferred"), all 2,716,667 shares of which are issued and outstanding, and 9,310,001 shares are designated Series B Preferred StockStock (the "Series B Preferred"), all 4,392,400 shares of which Series C Preferred Stock (the "Series C Preferred"), 1,480,500 shares of Series D Preferred Stock (the "Series D Preferred"), 3,290,750 shares of Series E Preferred Stock (the "Series E Preferred"), 501,000 shares of Series F Preferred Stock (the "Series F Preferred"), 4,811,586 shares of Series G Preferred Stock (the "Series G Preferred," together with the Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series E Preferred and Series F Preferred, the "Series Preferred"). There are issued outstanding warrants to purchase 150,000 shares of Target Common Stock and outstanding395,998 shares of Series G Preferred. There are no other outstanding shares of capital stock or voting securities and no outstanding commitments to issue any shares of capital stock or voting securities other than pursuant to the exercise of options currently outstanding under the Target Stock Option Plan. All such outstanding shares have been of Target Capital Stock are duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable non-assessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof, and are not subject to preemptive rights or rights of first refusal created by statute, the Articles of Incorporation or Bylaws of Target or any agreement to which Target is a party or by which it is bound. Parent All outstanding shares of Target Common Stock and Series Preferred were issued in compliance with all applicable federal and state securities laws. Target has also reserved (i) 3,900,000 sufficient shares of Common Stock for issuance upon conversion of the Series Preferred, and (ii) 4,875,000 shares of Common Stock for issuance to employees and consultants pursuant to Parent's 1996 the Target Stock Option Plan, (ii) 160,000 of which 1,659,519 shares of Series A Preferred Stock for issuance upon the exercise of outstanding warrants have been issued pursuant to purchase Series A Preferred Stock (the "Warrant Stock")option exercises or direct stock purchases, (iii) 160,000 2,953,273 shares ------------- of Common Stock for issuance upon conversion of the Warrant Stock and (iv) 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding warrants are subject to purchase Common Stock. In Februaryoutstanding, 1997, the Board of Directors of the Company approved (i) increasing the authorized shares of Common Stock to 100,000,000 shares, (ii) increasing the number of authorized shares of Preferred Stock to 37,764,153 shares, in preparation for a sale of Series C Preferred Stockunexercised options, and (iii) adopting no shares are subject to outstanding stock purchase rights. Except as set forth above, Target has not issued or granted additional options under the Company's 1997 Acquisition Target Stock Option Plan, reserving 10,000,000 shares of Common Stock thereunder; all of these actions are currently pending. There are no other options, warrants, calls, rights, commitments or agreements of any character to which Parent is a party or by which it is bound obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Parent or obligating Parent to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. (b) The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and non-assessable.