AGREEMENT AND PLAN OF MERGER by and among SAN HOLDINGS, INC., SAN MERGER SUBSIDIARY, INC., SUN SOLUNET, LLC and SOLUNET STORAGE HOLDING CORP. March 31, 2003

EXECUTION COPY

_________________________________________________________________________________________________________________

AGREEMENT AND PLAN OF MERGER
by and among
SAN HOLDINGS, INC.,

SAN MERGER SUBSIDIARY, INC.,

SUN SOLUNET, LLC

and

SOLUNET STORAGE HOLDING CORP.
March 31, 2003

_________________________________________________________________________________________________________________

Table of Contents


ARTICLE I	THE MERGER	2
1.01	Basic Transaction	2
1.02	Merger Consideration	2
1.03	Conversion of Capital Stock and Options	2
1.04	Exchange of Certificates, etc	3
1.05	Directors and Officers	3
1.06	Certificate of Incorporation and By-Laws	3
ARTICLE II	THE CLOSING	4
2.01	The Closing	4
2.02	The Closing Transactions	4
ARTICLE III	CONDITIONS TO CLOSING	4
3.01	Conditions to the Obligation of Holding and Sun	4
3.02	Conditions to the Obligation of SANZ and Merger Sub.	7
ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF SANZ AND MERGER SUB	10
4.01	Capacity, Organization, Corporate Power and Licenses	10
4.02	Capital Stock and Related Matters; Title to Shares	11
4.03	Authorization; Noncontravention	11
4.04	Subsidiaries; Investments	12
4.05	Financial Statements	13
4.06	Accounts Receivable	13
4.07	Absence of Undisclosed Liabilities	13
4.08	No Material Adverse Effect	13
4.09	Absence of Certain Developments	14
4.10	Assets	16
4.11	Contracts and Commitments	16
4.12	SANZ Intellectual Property	18
4.13	Litigation	20
4.14	Environmental and Safety Matters	21
4.15	Compliance with Laws	21
4.16	Employees	22
4.17	Employee Benefit Plans	22
4.18	Insurance	24
4.19	Tax Matters	24
4.20	Brokerage and Transaction Bonuses	26
4.21	Bank Accounts	27
4.22	Powers of Attorney	27
4.23	Names and Locations	27
4.24	Affiliate Transactions	27
4.25	Service and Software Warranties	27

4.26	Customers and Suppliers	28
4.27	Real Property	28
4.28	Disclosure	29
4.29	Closing Date	29

ARTICLE V	REPRESENTATIONS AND WARRANTIES OF HOLDING	30
5.01	Capacity, Organization, Corporate Power and Licenses	30
5.02	Capital Stock and Related Matters; Title to Shares	31
5.03	Authorization; Noncontravention	31
5.04	Subsidiaries; Investments	32
5.05	Financial Statements	33
5.06	Accounts Receivable	33
5.07	Absence of Undisclosed Liabilities	33
5.08	No Material Adverse Effect	34
5.09	Absence of Certain Developments	34
5.10	Assets	36
5.11	Contracts and Commitments	36
5.12	Holding Intellectual Property	38
5.13	Litigation	40
5.14	Environmental and Safety Matters	41
5.15	Compliance with Laws	41
5.16	Employees	42
5.17	Employee Benefit Plans	42
5.18	Insurance	44
5.19	Tax Matters	44
5.20	Brokerage and Transaction Bonuses	47
5.21	Bank Accounts	47
5.22	Powers of Attorney	47
5.23	Names and Locations	47
5.24	Affiliate Transactions	47
5.25	Service and Software Warranties	48
5.26	Customers and Suppliers	48
5.27	Real Property	48
5.28	Disclosure	49
5.29	Closing Date	50

ARTICLE VI	REPRESENTATIONS AND WARRANTIES OF SUN	50
6.01	Organization and Power	50
6.02	Authorization; Noncontravention	50
6.03	Investment Representation	51
6.04	Brokerage	51
6.05	Litigation	51
6.06	Title	51
6.07	Disclosure	51
6.08	Closing Date	51

iii


ARTICLE VII	COVENANTS PRIOR TO CLOSING	52
7.01	General	52
7.02	Maintenance of Business	52
7.03	Third Party and Governmental Notices and Consents	52
7.04	Operation of Business	53
7.05	Full Access	54
7.06	Notice of Material Developments	54
7.07	Exclusivity	55
7.08	Tax Matters	57
7.09	Delivery of Interim Financial Statements	57
7.10	Employees and Business Relations	57

ARTICLE VIII	TERMINATION	57
8.01	Termination	57
8.02	Effect of Termination	58

ARTICLE IX	ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING	59
9.01	Survival of Representations and Warranties	59
9.02	Indemnification	60
9.03	Mutual Assistance	64
9.04	Press Release and Announcements	64
9.05	Expenses	64
9.06	Specific Performance	64
9.07	Further Assurances	65
9.08	Confidentiality	65
9.09	Post-Closing Covenants	65
9.10	Directors' and Officers' Insurance	65
9.11	Employee Benefit Plans	66
9.12	Additional Covenants	66
9.13	Exclusive Remedy	67

ARTICLE X	DEFINITIONS	67
10.01	Definitions	67
10.02	Certain Other Definitional Provisions	72

ARTICLE XI	MISCELLANEOUS	72
11.01	Amendment and Waiver	72
11.02	Notices	73
11.03	Successors and Assigns	73
11.04	Severability	74
11.05	Interpretation; Construction	74
11.06	No Third-Party Beneficiaries	74
11.07	Complete Agreement	74
11.08	Counterparts	75
11.09	Delivery by Facsimile	75
11.10	Governing Law	75
11.11	Waiver of Trial by Jury	75
11.12	Submission to Jurisdiction	75
11.13	Legal Fees	75
11.14	Effectiveness	76

SANZ DISCLOSURE SCHEDULE

SANZ Accounts Receivable Schedule
SANZ Affiliate Transactions Schedule
SANZ Assets Schedule
SANZ Bank Account Schedule
SANZ Brokerage Schedule
SANZ Capital Expenditures Schedule
SANZ Capitalization Schedule
SANZ Commitments Schedule
SANZ Compliance Schedule
SANZ Contracts Schedule
SANZ Customers and Suppliers Schedule
SANZ Developments Schedule
SANZ Employee Benefits Schedule
SANZ Employees Schedule
SANZ Environmental and Safety Matters Schedule
SANZ Financial Statement Schedule
SANZ Insurance Schedule
SANZ Intellectual Property Schedule
SANZ Litigation Schedule
SANZ Liabilities Schedule
SANZ Names and Locations Schedule
SANZ Officers and Directors Schedule
SANZ Permits Schedule
SANZ Real Property Schedule
SANZ Restrictions Schedule
SANZ Subsidiary Schedule
SANZ Taxes Schedule
SANZ Transaction Bonuses Schedule
SANZ Warranty Schedule

HOLDING DISCLOSURE SCHEDULE

Holding Accounts Receivable Schedule
Holding Affiliate Transactions Schedule
Holding Assets Schedule
Holding Bank Account Schedule
Holding Brokerage Schedule
Holding Capital Expenditures Schedule
Holding Capitalization Schedule
Holding Commitments Schedule
Holding Compliance Schedule
Holding Contracts Schedule
Holding Customers and Suppliers Schedule
Holding Developments Schedule
Holding Employee Benefits Schedule
Holding Employees Schedule
Holding Environmental and Safety Matters Schedule
Holding Financial Statement Schedule
Holding Insurance Schedule
Holding Intellectual Property Schedule
Holding Litigation Schedule
Holding Liabilities Schedule
Holding Names and Locations Schedule
Holding Officers and Directors Schedule
Holding Permits Schedule
Holding Real Property Schedule
Holding Restrictions Schedule
Holding Subsidiary Schedule
Holding Taxes Schedule
Holding Transaction Bonuses Schedule
Holding Warranty Schedule

EXHIBITS


Exhibit A		Stock Option Agreement
Exhibit B		Credit Support Document
Exhibit C		SANZ Warrant
Exhibit D-1		Opinion of ▇▇▇▇▇ ▇. Key
Exhibit D-2		Opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Fish, LLP
Exhibit E		Management Services Agreement
Exhibit F		Registration Rights Agreement
Exhibit G		Shareholders Agreement
Exhibit H		Amended Charter
Exhibit I		Second Amended By-Laws
Exhibit J		Certificate of Designation
Exhibit K		Opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Exhibit L		Investment Representation Letter
Exhibit M		Form of Promissory Note

ADDITIONAL SCHEDULES

Schedule 3.01(m)
Schedule 9.12

vii

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of March 31, 2003, is made by and among SAN Holdings, Inc., a Colorado corporation (“SANZ”), SAN Merger Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of SANZ (“Merger Sub”), Sun Solunet, LLC, a Delaware limited liability company (“Sun”), and Solunet Storage Holding Corp., a Delaware corporation (“Holding”). SANZ, Merger Sub, Sun and Holding are sometimes collectively referred to herein as the “Parties” and individually as a “Party”. Capitalized terms used and not otherwise defined herein have the meanings set forth in Article X below.

WHEREAS, the respective boards of directors of SANZ, Merger Sub and Holding deem it desirable and in the best interests of their respective corporations and shareholders for Merger Sub to merge with and into Holding, and have approved this Agreement for that purpose;

WHEREAS, this Agreement and the Merger have been approved by SANZ, as the sole shareholder of Merger Sub, and by Sun and the other shareholders of Holding (collectively, the “Holding Shareholders”);

WHEREAS, contemporaneously with the execution and delivery of this Agreement and as a condition and inducement to Holding’s and Sun’s willingness to enter into this Agreement, Holding and SANZ are entering into a Stock Option Agreement dated as of the date hereof in the form of Exhibit A attached hereto (the “Stock Option Agreement”) pursuant to which SANZ is granting to Holding an option to purchase shares of SANZ’s common stock (the “Option”);

WHEREAS, contemporaneously with the execution and delivery of this Agreement and as a condition and inducement to SANZ’s willingness to enter into this Agreement, Sun Capital Partners II, LP (“Sun Capital”) has executed and delivered to SANZ a Credit Support Document dated as of the date hereof in the form of Exhibit B attached hereto (the “Credit Support Document”) pursuant to which Sun Capital has agreed under certain conditions to guaranty a portion of SANZ’s debt after the Effective Time;

WHEREAS, the Parties desire that the merger provided for herein qualify as a reorganization within the meaning of Section 368(a) of the Code and adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-3(a) of the Regulations.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

THE MERGER

1.01 Basic Transaction.

(a) At the Effective Time, Merger Sub shall merge with and into Holding (the “Merger”) subject to and upon the terms and conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (as amended from time to time, the “DGCL”), whereupon the separate existence of Merger Sub shall cease, and Holding shall be the surviving corporation (the “Surviving Corporation”).

(b) The Merger shall become effective (the “Effective Time”) at the time that Holding and Merger Sub have (i) filed a certificate of merger with the Secretary of State of the State of Delaware (the “Delaware Certificate of Merger”) and (iii) made all other filings or recordings required by the DGCL in connection with the Merger.

(d) From and after the Effective Time, the Surviving Corporation shall succeed to all the assets, rights, privileges, powers and franchises and be subject to all of the liabilities, restrictions, disabilities and duties of Holding and Merger Sub, all as provided under the DGCL.

1.02 Merger Consideration. The aggregate merger consideration to be paid in exchange for (i) all of the shares of Holding’s Voting Common Stock, par value $.01 per share (“Holding Voting Common Stock”), issued and outstanding immediately prior to the Effective Time; and (ii) all of the shares of Holding’s Non-Voting Common Stock, par value $.01 per share (“Holding Non-Voting Common Stock” and together with Holding Voting Common Stock, “Holding Common Stock”), issued and outstanding immediately prior to the Effective Time shall be (X) to the Holding Shareholders 748.07306 shares of SANZ’s Series B Preferred Stock, no par value (the “SANZ Series B Preferred Stock”); (Y) to the Holding Shareholders 20,000,000 shares of SANZ’s Common Stock, no par value (the “SANZ Common Stock”), which together with the SANZ Series B Preferred Stock (on an as-if converted basis) shall constitute 60% of the issued and outstanding capital stock of SANZ; and (Z) to Sun a warrant to purchase shares of SANZ Common Stock in substantially the form attached hereto as Exhibit C (the “SANZ Warrant” and together with the SANZ Series B Preferred Stock and SANZ Common Stock, the “Merger Consideration”).

1.03 Conversion of Capital Stock and Options.

(a) At the Effective Time, by virtue of the Merger and without any action on the part of the Sun or Holding, except as otherwise provided in Section 1.03(b) or Section 1.04, each share of Holding Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive a pro rata share of the Merger Consideration, and the shares of SANZ Series B Preferred Stock and SANZ Common Stock constituting a portion of such Merger Consideration shall be deemed validly issued, fully paid and non-assessable. After the Effective Time, subject to Section 1.04, all shares of Holding Common Stock shall no longer be outstanding or have any rights other than those rights set forth in this Section 1.03(a), and shall automatically be cancelled and retired. At the effective Time, each option, warrant, purchase right, subscription right, conversion right, exchange right and other contract or commitment that could require Holding to issue, sell or otherwise cause to become outstanding any capital stock of Holding shall, to the extent not exercised prior to the Effective Time, be deemed to be canceled or otherwise terminated, and neither SANZ nor the Surviving Corporation shall have any obligation to the holders of any such interests.

(b) At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each share of Holding’s capital stock held immediately prior to the Effective Time by Holding as treasury stock shall be canceled and no payment shall be made with respect thereto.

(c) At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each share of Merger Sub’s Common Stock, par value $.01 per share (the “Merger Sub Common Stock”), issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable share of the Surviving Corporation’s Common Stock, par value $.01 per share (the “Surviving Corporation Common Stock”).

1.04 Exchange of Certificates, etc.

(a) At the Effective Time, the Holding Shareholders shall deliver to SANZ the certificates representing all of the shares of Holding Common Stock issued and outstanding immediately prior to the Effective Time, (i) free and clear of all Liens, charges, options, pledges, rights of other parties, voting trusts, proxies, stockholder or similar agreements, encumbrances or restrictions of any nature and (ii) duly endorsed for transfer or accompanied by duly executed stock powers with all requisite state and federal transfer stamps affixed thereto.

(b) At the Effective Time, SANZ shall (i) issue stock certificates, in the name of each Holding Shareholder, and the SANZ Warrant, in the name of Sun, representing the Merger Consideration and (ii) deliver such stock certificates to each Holding Shareholder and the SANZ Warrant to Sun free and clear of all Liens, charges, options, pledges, rights of other parties, voting trusts, proxies, stockholder or similar agreements, encumbrances or restrictions of any nature, except as contemplated by the Ancillary Agreements.

(c) At the Effective Time, the stock transfer books of Holding shall be closed, and there shall be no further registration of transfers on the stock transfer books of SANZ of the Holding Common Stock that was outstanding immediately prior to the Effective Time.

1.05 Directors and Officers. From and after the Effective Time, until successors are duly elected or appointed in accordance with applicable law, (a) the directors of Holding at the Effective Time shall constitute the directors of the Surviving Corporation, and (b) the officers of Holding at the Effective Time shall be the officers of the Surviving Corporation.

1.06 Certificate of Incorporation and By-Laws. At the Effective Time, (a) the Certificate of Incorporation of Holding and the By-Laws of Holding, each as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation and By-Laws of the Surviving Corporation until thereafter amended as provided by the DGCL and the Certificate of Incorporation and By-Laws of Holding.

ARTICLE II

THE CLOSING

2.01 The Closing. Unless this Agreement shall have been terminated pursuant to Article VIII, and subject to the rights of the Parties set forth in Section 7.07, the closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ at 10:00 a.m. on the business day following full satisfaction or due waiver of all of the closing conditions set forth in Article III hereof (other than those to be satisfied at the Closing) or on such other date as is mutually agreeable to SANZ and Holding. The date and time of the Closing are herein referred to as the “Closing Date.” For accounting purposes only, the Closing shall be deemed to have taken place on the first day of the calendar month of the Effective Time.

2.02 The Closing Transactions. Subject to the terms and conditions set forth in this Agreement, the Parties hereto shall consummate the following transactions (the “Closing Transactions”) on the Closing Date:

(a) the Parties shall take such actions and make such deliveries as described in Section 1.04 (including, without limitation, the delivery of the certificates representing the shares of Holding Common Stock and the delivery of the certificates representing the shares of SANZ Common Stock and the shares of SANZ Series B Preferred Stock and the SANZ Warrant in accordance with the terms of Section 1.04).

(b) Holding and Merger Sub shall cause the Delaware Certificate of Merger, in such form as required by, and executed in accordance with, the relevant provisions of the DGCL, to be duly filed with the Secretary of State of the State of Delaware.

(d) Holding shall deliver to Merger Sub all corporate books and records of Holding in its possession.

ARTICLE III

CONDITIONS TO CLOSING

3.01 Conditions to the Obligation of Holding and Sun. The obligation of Holding and Sun to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions on or prior to the Closing Date:

(a) the representations and warranties in Article IV hereof that are subject to materiality qualifications (including qualifications of Material Adverse Effect) shall be true and correct in all respects at and as of the Closing and the representations and warranties contained in Article IV hereof that are not subject to materiality qualifications shall be true and correct in all material respects at and as of the Closing, in each case as though then made and as though the Closing Date was substituted for the date of this Agreement throughout such representations and warranties (without taking into account any disclosures made by SANZ or Merger Sub to Holding and Sun pursuant to Section 7.06 below), except in respect of representations and warranties made as of a specified date, which shall be true and correct, or true and correct in all material respects, as the case may be, as of such specified date, and each of SANZ and Merger Sub shall have performed in all material respects all of the covenants and agreements required to be performed by it hereunder prior to the Closing;

(b) SANZ and Merger Sub shall have received or obtained all third-party consents and approvals, on terms reasonably satisfactory to Holding, that are necessary (i) for the consummation of the transactions contemplated hereby or (ii) to prevent a breach of or default under, or a termination, modification or acceleration of, any instrument, contract, lease, license or other agreement on the attached SANZ Restrictions Schedule, except, in each case, for such consents and approvals the failure to obtain which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effecton SANZ (collectively, the “SANZ Third-Party Approvals”);

(c) SANZ and Merger Sub shall have received or obtained all governmental and regulatory consents, approvals, licenses and authorizations, on terms and conditions reasonably satisfactory to Holding, that are necessary (i) for the consummation of the transactions contemplated hereby, (ii) for SANZ to own the capital stock of the Surviving Corporation and control the Surviving Corporation following the Closing and (iii) for the Surviving Corporation to operate its business, except for such consents, approvals, licenses and authorizations as could not reasonable be expected to have, individually or in the aggregate, a Material Adverse Effect on SANZ (collectively, the “SANZ Governmental Approvals”);

(d) no suit, action or other proceeding shall be pending or threatened before any court or governmental or regulatory official, body or authority or any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent the performance of this Agreement or the consummation of any of the transactions contemplated hereby or declare unlawful any of the transactions contemplated hereby, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (iii) affect adversely the right of SANZ to own the capital stock of the Surviving Corporation or control the Surviving Corporation or (iv) affect adversely the right of the Surviving Corporation to own its assets or operate its business, and no such injunction, judgment, order, decree or ruling shall have been entered or be in effect;

(e) at the Closing, Holding and Sun shall have received from (i) ▇▇▇▇▇ ▇. Key, counsel for SANZ, an opinion, which shall be addressed to Holding and Sun and the Surviving Corporation’s lender, dated as of the Closing Date, and in substantially the form attached hereto as Exhibit D-1; and (ii) ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Fish, LLP, counsel for SANZ and Merger Sub, an opinion, which shall be addressed to Holding and Sun and the Surviving Corporation’s lender, dated as of the Closing Date, and in substantially the form attached hereto as Exhibit D-2;

(f) SANZ shall have obtained and delivered to Holding a written consent for the assignment of each of the SANZ Leases (to the extent required under the terms of each SANZ Lease), and, if requested by the Surviving Corporation’s lender, a waiver of landlord liens or a consent to collateral assignment of lease from the landlord or other party whose consent thereto is required under such SANZ Lease, except, in each case, for such consents and waivers the failure to obtain which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SANZ (the “SANZ Lease Consents”), in form and substance satisfactory to Holding and the Surviving Corporation’s lender;

(g) SANZ shall have delivered to Holding copies of SANZ’s consolidated interim monthly and year-to-date financial statements pursuant to Section 7.09 below;

(h) Holding and Sun shall have received evidence that this Agreement and the Merger shall have been approved and adopted by SANZ as the holder of 100% of the outstanding shares of capital stock of Merger Sub entitled to consent thereto;

(i) at the Closing, SANZ shall have executed and delivered to Holding Shareholders, in accordance with Section 1.04(b) above, the certificates and the SANZ Warrant representing the Merger Consideration, and the SANZ Series B Preferred Stock and SANZ Common Stock represented by such certificates shall be validly issued, fully paid and non-assessable and the SANZ Warrant shall be in full force and effect;

(j) at the Closing, SANZ shall have executed and delivered to Sun or its Affiliates the Management Services Agreement in substantially the form attached hereto asExhibit E (the “Management Services Agreement”) and such Management Services Agreement shall be in full force and effect;

(k) at the Closing, SANZ shall have executed and delivered to Sun the Registration Rights Agreement in substantially the form attached hereto as Exhibit F (the “Registration Rights Agreement”) and such Registration Rights Agreement shall be in full force and effect;

(l) at the Closing, SANZ shall have executed and delivered to Sun the Shareholders Agreement in substantially the form attached hereto as Exhibit G (the “Shareholders Agreement”) and such Shareholders Agreement shall be in full force and effect;

(m) effective as of the Closing, except for ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ who shall remain as members of the board of directors of SANZ, all of the members of the board of directors of SANZ and each Subsidiary of SANZ shall have resigned from the board of directors of SANZ and each Subsidiary of SANZ and the Company shall have taken such action so that (i) ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (collectively, the “New SANZ Directors”) shall be appointed to the board of directors of SANZ, (ii) ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be appointed to the board of directors of each Subsidiary of SANZ and (iii) those persons listed on Schedule 3.01(m) shall have been appointed officers of SANZ and its Subsidiaries, all in accordance with the terms of the constituent documents of SANZ and its Subsidiaries and in compliance with all applicable law;

(n) the board of directors of SANZ shall have adopted resolutions (i) approving an amendment to its Amended and Restated Articles of Incorporation in substantially the form attached hereto as Exhibit H (the “Amended Charter”); (ii) approving an amendment to its Amended By-Laws in substantially the form attached hereto as Exhibit I (the “Second Amended By-Laws”) and such Second Amended By-Laws shall be in full force and effect; (iii) approving the certificate of designation in substantially the form attached hereto as Exhibit J (the “Certificate of Designation”) and such Certificate of Designation shall have been filed with the Secretary of State of Colorado in accordance with the Colorado Business Corporation Act; and (iv) recommending to the shareholders of SANZ the election at the next shareholders meeting of each of the New SANZ Directors and the election of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, M. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ and C. ▇▇▇▇▇ ▇▇▇▇▇▇ to the board of directors of SANZ;

(o) at the Closing, SANZ shall have delivered to Holding and/or Sun, (i) a certificate signed by SANZ, dated the date of the Closing, stating that the conditions specified in subsections (a) through (n) above (other than subsection (e) above) have been satisfied as of the Closing; (ii) copies of all SANZ Third-Party Approvals and SANZ Governmental Approvals; (iii) certified copies of the resolutions of the board of directors of SANZ and Merger Sub authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby and the written consent of SANZ as the sole stockholder of Merger Sub approving the Merger; (iv) the resignations, effective as of the Closing, of each director of Merger Sub; (v) good standing certificates for SANZ and each of its Subsidiaries from their respective jurisdictions of incorporation and each jurisdiction in which SANZ or any of its Subsidiaries is qualified to do business as a foreign corporation, in each case dated as of a recent date prior to the Closing Date; and (vi) such other documents or instruments as are required to be delivered by SANZ and/or Merger Sub at the Closing pursuant to the terms hereof or that Holding and/or Sun reasonably requests prior to the Closing Date to effect the transactions contemplated hereby; and

(p) SANZ shall have executed and delivered to Sun the Agreement for Consulting Services between Storage Area Networks, Inc. and IdeaGenic, Inc., dated as of January 1, 2000, as amended (the “IdeaGenic Consulting Agreement”), and such IdeaGenic Consulting Agreement shall be in form and substance satisfactory to Sun and in full force and effect.

Any condition specified in this Section 3.01 may be waived if such waiver is set forth in a writing duly executed by Holding and Sun.

3.02 Conditions to the Obligation of SANZ and Merger Sub. The obligations of SANZ and Merger Sub to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions on or prior to the Closing Date:

(a) the representations and warranties in Article V and Article VI hereof that are subject to materiality (including qualifications as to a Material Adverse Effect) qualifications shall be true and correct in all respects at and as of the Closing and the representations and warranties contained in Article V and Article VI hereof that are not subject to materiality qualifications shall be true and correct in all material respects at and as of the Closing, in each case as though then made and as though the Closing Date was substituted for the date of this Agreement throughout such representations and warranties (without taking into account any disclosures made by Holding or Sun to SANZ and Merger Sub pursuant to Section 7.06 below), except in respect of representations and warranties made as of a specified, which shall be true and correct, or true and correct in all material respects, as the case may be, as of such specified date, and each of Holding and Sun shall have performed in all material respects all of the covenants and agreements required to be performed by it hereunder prior to the Closing;

(b) Holding shall have received or obtained all third-party consents and approvals, on terms reasonably satisfactory to SANZ, that are necessary (i) for the consummation of the transactions contemplated hereby or (ii) to prevent a breach of or default under, or a termination, modification or acceleration of, any instrument, contract, lease, license or other agreement on the attached Holding Restrictions Schedule, except, in each case, for such consents and approvals the failure to obtain which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Holding (collectively, the “Holding Third-Party Approvals”);

(c) Holding shall have received or obtained all governmental and regulatory consents, approvals, licenses and authorizations that are necessary for the consummation of the transactions contemplated hereby, except for such consents, approvals, licenses and authorizations as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Holding (collectively, the “Holding Governmental Approvals”);

(e) SANZ and Merger Sub shall have received from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel for Holding and Sun, an opinion, which shall be addressed to SANZ and Merger Sub and the Surviving Corporation’s lender, dated as of the Closing Date, and in substantially the form attached hereto as Exhibit K;

(f) Holding shall have obtained and delivered to SANZ a written consent for the assignment of each of the Holding Leases (to the extent required under the terms of each Holding Lease), and, if requested by the Surviving Corporation’s lender, a waiver of landlord liens or a consent to collateral assignment of lease from the landlord or other party whose consent thereto is required under such Holding Lease, except, in each case, for such consents and waivers the failure to obtain which could not reasonably be excepted to have, individually or in the aggregate, a Material Adverse Effect on Holding (the “Holding Lease Consents”), in form and substance satisfactory to SANZ;

(g) Holding shall have delivered to SANZ copies of Holding’s consolidated interim monthly and year-to-date financial statements pursuant to Section 7.09 below;

(h) SANZ shall have received evidence that this Agreement and the Merger shall have been approved and adopted by the Holding Shareholders entitled to consent thereto;

(i) at the Closing, the Holding Shareholders shall have executed and delivered to SANZ, in accordance with Section 1.04(a) above, the certificates representing all of the issued and outstanding shares of Holding Common Stock;

(j) at the Closing, the Credit Support Document shall be in full force and effect;

(k) the Registration Rights Agreement by and among Sun, Holding and the other Persons listed on the signature pages thereto dated September 26, 2002 shall have been terminated and shall be of no further force and effect;

(l) at the Closing, SANZ shall have received evidence that both the promissory note in the aggregate principal amount of $3,900,000 issued to Sun by Holding on March 19, 2003 and the promissory note in the aggregate principal amount of $100,000 issued to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ by Holding on March 19, 2003 have been cancelled and are of no further force and effect.

(m) the Securityholders’ Agreement by and among Sun, Holding and the other Persons listed on the signature pages thereto dated September 26, 2002 shall have been terminated and shall be of no further force and effect;

(n) at the Closing, SANZ shall have received an investment representation letter in the form attached hereto as Exhibit L from each Holding Shareholder other than Sun;

(o) at the Closing, Sun shall have executed and delivered to SANZ theShareholders Agreement and such Shareholders Agreement shall be in full force andeffect; and

(p) at the Closing, Holding shall have delivered to SANZ, (i) a certificate signed by Holding, dated the date of the Closing, stating that the conditions specified in subsections (a) through (o) above (other than subsection (e) above) have been satisfied as of the Closing; (ii) copies of all Holding Third-Party Approvals and Holding Governmental Approvals; (iii) certified copies of the resolutions of the board of directors of Holding authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby and the written consent of the Holding Shareholders approving the Merger; (iv) good standing certificates for Holding and each of its Subsidiaries from their respective jurisdictions of incorporation and each jurisdiction in which Holding or any of its Subsidiaries is qualified to do business as a foreign corporation, in each case dated as of a recent date prior to the Closing Date; (vi) all minute books, stock books, ledgers, registers, and corporate seals relating to the organization, ownership and maintenance of Holding; and (vii) such other documents or instruments as are required to be delivered by Holding at the Closing pursuant to the terms hereof or that SANZ reasonably requests prior to the Closing Date to effect the transactions contemplated hereby.

Any condition specified in this Section 3.02 may be waived if such waiver is set forth in a writing duly executed by SANZ and Merger Sub.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SANZ AND MERGER SUB

To induce Holding and Sun to enter into this Agreement and consummate the transactions contemplated hereby, SANZ and Merger Sub hereby represent and warrant to Holding and Sun that the statements contained in this Article IV are correct and complete as of the date of this Agreement, except as set forth in the disclosure schedule delivered by SANZ and Merger Sub to Holding and Sun on the date hereof (the “SANZ Disclosure Schedule”). The information disclosed in any section of the SANZ Disclosure Schedule shall be deemed to relate to and to qualify only to the particular representation and warranty set forth in the corresponding section in this Agreement and shall not be deemed to relate to or qualify any other representation or warranty or any other section of the SANZ Disclosure Schedule.

4.01 Capacity, Organization, Corporate Power and Licenses.

(a) SANZ and Merger Sub have full power, authority and legal capacity to enter into this Agreement and the other documents contemplated hereby to which SANZ and Merger Sub is a party (including, without limitation, the Stock Option Agreement) and to perform its obligations hereunder and thereunder. SANZ is a corporation duly organized, validly existing and in good standing under the laws of Colorado. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of Delaware. Except where the failure to obtain such qualification could not reasonably be expected to have a Material Adverse Effect on SANZ, each of SANZ and its Subsidiaries is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. Each of SANZ and its Subsidiaries possess all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties, to carry on its business as now conducted and presently proposed to be conducted and to carry out the transactions contemplated by this Agreement, except where the failure to have such licenses, permits and authorizations could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SANZ . The copies of SANZ’s and Merger Sub’s articles/certificate of incorporation and bylaws that have been furnished to Holding’s and Sun’s counsel reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete. Neither SANZ nor any of its Subsidiaries is in default under or in violation of any provision of its articles/certificate of incorporation or bylaws. The attached SANZ Officers and Directors Schedule sets forth a list all of the officers and directors of SANZ.

(b) The minute books (containing the records of meetings of the stockholders, the board of directors), the stock certificate books and the stock record books of each of SANZ and its Subsidiaries are correct and complete in all material respects.

4.02 Capital Stock and Related Matters; Title to Shares. The authorized capital stock and the number of issued and outstanding shares of capital stock of SANZ and Merger Sub is set forth on the attached SANZ Capitalization Schedule. All of the issued and outstanding shares of SANZ’s and Merger Sub’s capital stock have been duly authorized, are validly issued, fully paid, and nonassessable and are not subject to, nor were they issued in violation of, any preemptive rights or rights of first refusal, and all of the capital stock of Merger Sub are owned of record and beneficially by SANZ. Except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SANZ, neither SANZ nor any of its Subsidiaries has violated any applicable federal or state securities laws or other legal requirements in connection with the offer, sale, or issuances of any of its capital stock or other securities, and the offer, sale and transfer of SANZ Series B Preferred Stock and SANZ Common Stock in connection with the Merger does not require registration under any applicable federal or state securities laws. There are no rights, outstanding commitments, subscriptions, warrants, options, conversion rights or agreements of any kind to which SANZ is a party or to which SANZ has Knowledge relating to the purchase or acquisition of any shares of capital stock of SANZ or its Subsidiaries or securities or obligations of any kind convertible into or exchangeable or exercisable for any shares of capital stock of SANZ or its Subsidiaries or any stock appreciation, phantom stock, profit participation or similar rights with respect to SANZ or any of its Subsidiaries, except as described on the attached SANZ Commitments Schedule. With respect to any options, warrants, convertible securities or other rights to acquire SANZ’s capital stock, the attached SANZ Commitments Schedule sets forth the following information: the holder, the number of shares covered, the exercise or conversion price, and the expiration date. Except as described on the attached SANZ Commitments Schedule, no shares of the capital stock of SANZ or its Subsidiaries is reserved for any purpose and there are no preemptive or similar rights with respect to the issuance, sale or other transfer (whether present, past or future) of the capital stock of SANZ or its Subsidiaries and there are no agreements or other obligations (contingent or otherwise) to which SANZ is a party or to which SANZ has Knowledge that may require SANZ or its Subsidiaries to issue, repurchase or otherwise acquire any shares of its capital stock or any of its other securities of any kind. Except as described on the attached SANZ Commitments Schedule, there are no agreements to which SANZ is a party or to which SANZ has Knowledge with respect to the voting or transfer of capital stock of SANZ or any of its Subsidiaries with respect to any other aspect of their affairs. To SANZ’s Knowledge, no equityholder or former equityholder of SANZ or any Subsidiary has asserted any claim (in his, her or its capacity as an equity holder or former equityholder) against SANZ or any Subsidiary and SANZ and its Subsidiaries do not have any Liability to any equityholder or former equityholder (in his, her or its capacity as an equity holder or former equityholder).

4.03 Authorization; Noncontravention. The execution, delivery and performance of this Agreement and all of the other agreements and instruments contemplated hereby to which each of SANZ and Merger Sub is a party (including, without limitation, the Stock Option Agreement) have been duly authorized by SANZ and Merger Sub, and no other corporate act or other proceeding on the part of SANZ or Merger Sub or their board of directors is necessary to authorize the execution, delivery or performance of this Agreement or the other agreements contemplated hereby (including, without limitation, the Stock Option Agreement) and the consummation of the transactions contemplated hereby or thereby. This Agreement has been duly executed and delivered by each of SANZ and Merger Sub and, assuming the due execution by Holding and Sun, as applicable constitutes a valid and binding obligation of SANZ and Merger Sub, enforceable in accordance with its terms, except as enforceability shall be limited by a court of competent jurisdiction in a proceeding under applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally (whether enforcement is sought by proceedings in equity or at law), and each of the other agreements and instruments contemplated hereby to which SANZ and Merger Sub is a party (including, without limitation, the Stock Option Agreement), when executed and delivered by SANZ and Merger Sub, in accordance with the terms hereof and thereof and, assuming the due execution by Holding and Sun, as applicable, shall each constitute a valid and binding obligation of SANZ and Merger Sub, enforceable in accordance with its respective terms, except as enforceability shall be limited by a court of competent jurisdiction in a proceeding under applicable bankruptcy, insolvency, reorganization,

moratorium or similar laws affecting the enforcement of creditors’ rights generally (whether enforcement is sought by proceedings in equity or at law). Except as set forth on the attached SANZ Restrictions Schedule, the execution and delivery by SANZ and Merger Sub of this Agreement and all of the other agreements and instruments contemplated hereby to which SANZ and Merger Sub is a party (including, without limitation, the Stock Option Agreement) and the fulfillment of and compliance with the respective terms hereof and thereof by SANZ and Merger Sub does not and shall not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under (whether with or without the passage of time, the giving of notice or both), (c) result in the creation of any Lien upon SANZ’s or Merger Sub’s capital stock or assets pursuant to, (d) give any third party the right to modify, terminate or accelerate any obligation under, (e) result in a violation of, or (f) require any authorization, consent, approval, exemption or other action of or by or notice or declaration to, or filing with, any third party or any court or administrative or governmental body or agency pursuant to, (i) SANZ’s or Merger Sub’s charter documents, bylaws or other constituent documents, or (ii) any law, statute, rule or regulation to which SANZ or Merger Sub is subject, or (iii) any material agreement, instrument, license, permit, order, judgment or decree to which SANZ or Merger Sub subject. Neither SANZ nor Merger Sub is a party to or bound by any written or oral agreement or understanding with respect to a Third Party Transaction other than this Agreement, and each such Person has terminated all discussions with third parties (other than with Holding and Sun) regarding Third Party Transactions.

4.04 Subsidiaries; Investments. The attached SANZ Subsidiary Schedule correctly sets forth the name of each Subsidiary of SANZ, the jurisdiction of its incorporation and the Person owning the outstanding capital stock of such Subsidiary. Each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, possesses all requisite corporate power and authority and all material licenses, permits, and authorizations necessary to own its properties and to carry on its business as now being conducted and as presently proposed to be conducted and, except where the failure to obtain such qualification could not reasonably be expected to have a Material Adverse Effect on such Subsidiary, is qualified to do business in every jurisdiction in which its ownership of property or the conduct of its business requires it to qualify. All of the outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and nonassessable, and all such shares are owned by SANZ free and clear of all Liens and encumbrances. Except as set forth on the attached SANZ Subsidiary Schedule, neither SANZ nor any of its Subsidiaries owns or holds the right to acquire any shares of stock or any other security or interest in any other Person or has any obligation to make any Investment in any Person. The attached SANZ Officers and Directors Schedule sets forth a list of all of the officers and directors of each of SANZ’s Subsidiaries.

4.05 Financial Statements. Set forth on the attached SANZ Financial Statement Schedule are copies of SANZ’s and each of its Subsidiaries’ (a) unaudited consolidated balance sheet as of December 31, 2002 (the “SANZ Latest Balance Sheet”) and the related statements of income and cash flows for the 12-month period then ended and (b) audited consolidated balance sheets and statements of income and cash flows for the fiscal year ended December 31, 2001. Except as set forth on the attached SANZ Financial Statement Schedule, each of the foregoing financial statements (including in all cases the notes thereto, if any) (the “SANZ Financial Statements”) (i) is, in all material respects, accurate, complete and consistent with SANZ’s and each of its Subsidiaries’ Books and Records (which, in turn, are, in all material respects, accurate and complete), (ii) presents fairly, in all material respects, SANZ’s and each of its Subsidiaries’ financial condition and results of operations as of the respective dates thereof and for the respective periods referred to therein, and (iii) has been prepared in accordance with GAAP, subject in the case of unaudited financial statements to changes resulting from normal year-end adjustments for recurring accruals (which were or are not expected to be material individually or in the aggregate) and to the absence of footnote disclosure.

4.06 Accounts Receivable. Except as set forth on the attached SANZ Accounts Receivable Schedule, all accounts and notes receivable reflected on the SANZ Latest Balance Sheet (net of allowances for doubtful accounts as reflected thereon and as determined in accordance with GAAP) (a) are or shall be valid (and not subject to any valid counterclaims or setoffs) and (b) resulted from a bona fide sale to a customer in the ordinary course of business on commercially reasonable terms, the amount of which was actually due on the date thereof and are or shall be legally enforceable at the aggregate recorded amount therefor as shown on the SANZ Latest Balance Sheet (net of allowances for doubtful accounts as reflected thereon and as determined in accordance with GAAP). No Person has any Lien on such receivables or any part thereof, and no agreement for deduction, free goods, discount or other deferred price or quantity adjustment has been made with respect to such receivables.

4.07 Absence of Undisclosed Liabilities. Except as set forth on the attached SANZ Liabilities Schedule, neither SANZ nor any of its Subsidiaries has any obligation or Liability arising out of any transaction entered at or prior to the date hereof, or any action or inaction at or prior to the date hereof, or any state of facts existing at or prior to the date hereof, other than (a) Liabilities reflected on the liabilities side of the SANZ Latest Balance Sheet, (b) Liabilities and obligations which have arisen after the date of the SANZ Latest Balance Sheet in the ordinary course of business substantially consistent with the past practices of SANZ (none of which is a Liability for breach of contract, breach of warranty, tort, infringement, violation of law, claim or lawsuit), and (c) obligations under contracts and commitments described on the attached SANZ Contracts Schedule or under contracts and commitments entered into in the ordinary course of business consistent with past practice that are not required to be disclosed on such Schedule pursuant to Section 4.11 below (but not Liabilities for any breach of any such contract or commitment occurring on or prior to the Closing Date).

4.08 No Material Adverse Effect. Since September 30, 2002, there has occurred no fact, event or circumstance which has had or could reasonably be expected to have a Material Adverse Effect on SANZ or its Subsidiaries. Since September 30, 2002, each of SANZ and its Subsidiaries has conducted their respective businesses only in the ordinary course of business substantially consistent with past practice.

4.09 Absence of Certain Developments. Except as set forth on the attached SANZ Developments Schedule, since September 30, 2002, neither SANZ nor any of its Subsidiaries has:

(a) issued any notes, bonds or other debt securities or any capital stock or other equity securities or any securities or rights convertible, exchangeable or exercisable into any capital stock or other equity securities;

(b) borrowed any amount or incurred or become subject to any material Liabilities, except current Liabilities incurred in the ordinary course of business substantially consistent with past practice;

(c) discharged or satisfied any material Lien or paid any material obligation or Liability, other than current Liabilities paid in the ordinary course of business;

(d) declared, set aside or made any payment or distribution of cash (including so-called “tax distributions”) or other property to any of its stockholders with respect to such stockholder’s capital stock or otherwise, or purchased, redeemed or otherwise acquired any shares of its capital stock or other equity securities (including any warrants, options or other rights to acquire its capital stock or other equity);

(e) mortgaged or pledged any of its properties or assets or subjected them to any Lien, except for Permitted Liens;

(f) sold, assigned, transferred, leased, licensed or otherwise encumbered any of its material tangible assets, except in the ordinary course of business substantially consistent with past practice, or canceled any material debts or claims;

(g) sold, assigned, transferred, leased, licensed or otherwise encumbered any material Intellectual Property, received any offers to license material Intellectual Property, disclosed any proprietary confidential information to any Person (other than in the ordinary course of business consistent with past practice in circumstances in which it has imposed reasonable confidentiality restrictions), or abandoned or permitted to lapse any material Intellectual Property;

(h) made or granted any bonus or any wage or salary increase to any employee or group of employees (except as required by pre-existing contracts described on the attached SANZ Contracts Schedule or any bonus or wage increase not in excess of 5% of such employee’s then existing salary), or made or granted any increase in any employee benefit plan or arrangement, or amended or terminated any existing employee benefit plan or arrangement or adopted any new employee benefit plan or arrangement or entered into, amended or terminated any collective bargaining agreement or other employment agreement;

(i) implemented any plant closing or other layoff of employees that could implicate the Worker Adjustment and Retraining Notification Act, as amended, or any similar foreign, state or local law, regulation or ordinance;

(j) suffered any extraordinary losses or waived any rights of material value (whether or not in the ordinary course of business or consistent with past practice) in excess of $25,000 in the aggregate;

(k) made capital expenditures or commitments therefor that amount in the aggregate to more than $50,000;

(l) delayed or postponed the payment of any accounts payable or commissions or any other Liability or obligation or agreed or negotiated with any party to extend the payment date of any accounts payable or commissions or any other Liability or obligation or accelerated the collection of (or discounted) any accounts or notes receivable;

(m) made any loans or advances to, guaranties for the benefit of, or any Investments in, any Person;

(n) made any charitable contributions or pledges exceeding in the aggregate $25,000 or made any political contributions;

(o) suffered any damage, destruction or casualty loss exceeding in the aggregate $25,000, whether or not covered by insurance;

(p) made any change in any method of accounting or accounting policies or made any write-down in the value of its inventory that is material or that is other than in the usual, regular and ordinary course of business consistent with past practice or reversed any accruals (whether or not in the ordinary course of business or consistent with past practice);

(q) made any Investment in any Subsidiary other than Storage Area Networks, Inc. or taken any steps to incorporate any Subsidiary;

(r) amended its articles/certificate of incorporation, bylaws or other organizational documents;

(s) entered into any agreement or arrangement prohibiting or restricting it from freely engaging in any business or otherwise restricting the conduct of its business anywhere in the world;

(t) taken any action or failed to take any action that has, had or could reasonably be expected to have the effect of accelerating to pre-Closing periods sales to customers or other revenues that would otherwise be expected to take place or be incurred after the Closing;

(u) entered into, amended or terminated any material contract other than in the ordinary course of business consistent with past practice, entered into any other material transaction, whether or not in the ordinary course of business or consistent with past practice, or materially changed any business practice; or

(v) agreed, whether orally or in writing, to do any of the foregoing.

4.10 Assets. Except as set forth on the attached SANZ Assets Schedule, SANZ and its Subsidiaries has good and marketable title to, or a valid leasehold interest in, all material properties and assets used by it, located on its premises or shown on the SANZ Latest Balance Sheet or acquired after the date thereof, free and clear of all Liens (other than properties and assets disposed of for fair consideration in the ordinary course of business since the date of the SANZ Latest Balance Sheet and except for Liens disclosed on the SANZ Latest Balance Sheet (including any notes thereto) and Permitted Liens and such Liens as do not materially detract from the value of or interfere with the present use of the property affected thereby). SANZ and each of its Subsidiaries owns, has a valid leasehold or license interest in or has the valid and enforceable right to use all assets, tangible or intangible, necessary for the conduct of their respective businesses as presently conducted. Except as set forth on the attached SANZ Assets Schedule, all of SANZ’s and its Subsidiaries’ buildings (including all components of such buildings, structures and other improvements), equipment, machinery, fixtures, improvements and other tangible assets (whether owned or leased) are in good condition and repair (ordinary wear and tear excepted) and are fit in all material respects for use in the ordinary course of SANZ’s and such Subsidiaries’ business as presently conducted and as presently proposed to be conducted. All such assets have been installed and maintained in all material respects in accordance with all applicable laws, regulations and ordinances.

4.11 Contracts and Commitments.

(a) Except as set forth on the attached SANZ Contracts Schedule, neither SANZ nor any of its Subsidiaries is a party to or bound by any written or oral:

(i) pension, profit sharing, stock option, employee stock purchase, bonus or other plan or arrangement providing for deferred or other compensation to employees, former employees or consultants, or any other employee benefit plan or arrangement, or any collective bargaining agreement or any other contract with any labor union, or severance agreements, programs, policies or arrangements;

(ii) contract for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis or relating to loans to officers, directors or Affiliates;

(iii) contract under which SANZ or any of its Subsidiaries has advanced or loaned any Person amounts exceeding $10,000 individually or $25,000 in the aggregate;

(iv) agreement or indenture relating to borrowed money or other Indebtedness or the mortgaging, pledging or otherwise placing a Lien on any material asset or material group of assets of SANZ or any of its Subsidiaries;

(v) Guaranty, performance bond or similar agreement;

(vi) lease or agreement under which SANZ or any of its Subsidiaries is lessee of or holds or operates any property, real or personal, owned by any other party, except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $20,000 individually or $50,000 in the aggregate;

(vii) material lease or agreement under which SANZ or any of its Subsidiaries is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by SANZ or any of its Subsidiaries;

(viii) contract or group of related contracts with the same party or group of affiliated parties the performance of which involves consideration in the aggregate in excess of $20,000 individually or $50,000 in the aggregate, other than purchase and sales orders (including orders for professional services) incurred in the ordinary course of business;

(ix) assignment, license, indemnification or other agreement with respect to any intangible property (including any Intellectual Property) other than with respect to software that is generally commercially available and is used without material alteration or enhancement;

(x) warranty agreement with respect to its services rendered or its products sold or leased;

(xi) agreement under which it has granted any Person any registration rights (including demand or piggyback registration rights);

(xii) sales, distribution, supply or franchise agreement;

(xiii) agreement with a term of more than six months which is not terminable by SANZ or any of its Subsidiaries upon less than thirty (30) days’ notice without penalty and involves a consideration in excess of $20,000 individually or $50,000 in the aggregate annually;

(xiv) contract regarding voting, transfer or other arrangements related to its capital stock or warrants, options or other rights to acquire any of its capital stock;

(xv) contract or agreement prohibiting it from freely engaging in any business or competing anywhere in the world; or

(xvi) any other agreement which is material to its operations and business prospects or involves a consideration in excess of $20,000 individually or $50,000 in the aggregate annually.

(b) All of the contracts, SANZ Leases, agreements and instruments set forth or required to be set forth on the attached SANZ Contracts Schedule are valid, binding and enforceable in accordance with their respective terms and, to SANZ’s Knowledge, except for such contracts, SANZ Leases, agreements and instruments that shall have expired in accordance with their terms, shall be in full force and effect without penalty in accordance with their terms upon consummation of the transactions contemplated hereby. Except as set forth on the attached SANZ Contracts Schedule: (i) each of SANZ and its Subsidiaries has performed all obligations required to be performed by it and is not in default

under or in breach of nor in receipt of any claim of default or breach under any contract, SANZ Lease, agreement or instrument set forth or required to be set forth on the attached SANZ Contracts Schedule; (ii) no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of noncompliance by SANZ or any of its Subsidiaries under any contract, SANZ Lease, agreement or instrument set forth or required to be set forth on the attached SANZ Contracts Schedule; (iii) neither SANZ nor any of its Subsidiaries has any present expectation or intention of not fully performing all such obligations; (iv) no contract, SANZ Lease, agreement or instrument set forth or required to be set forth on the attached SANZ Contracts Schedule is currently subject to or is expected to be subject to cancellation or any other material modification by the other party thereto (by reason of the Merger or otherwise) or is subject to or is expected to be subject to any penalty, right of set-off or other charge by the other party thereto for late performance or delivery; (v) to SANZ’s Knowledge, there is no breach or anticipated breach by the other parties to any contract, SANZ Lease, agreement or instrument set forth or required to be set forth on the attached SANZ Contracts Schedule, and (vi) SANZ and its Subsidiaries have not subleased, licensed, or otherwise granted any Person the right to use or occupy any leased real property or any portion thereof. Neither SANZ nor any of its Subsidiaries is a party to any contract, agreement or commitment the performance of which could reasonably be expected to have a Material Adverse Effect on SANZ or its Subsidiaries.

(c) Holding’s and Sun’s counsel has been supplied with a true and correct copy of each of the written instruments, plans, contracts and agreements and an accurate description of each of the oral arrangements, contracts and agreements which are referred to on the attached SANZ Contracts Schedule, together with all amendments, waivers or other changes thereto. To the extent applicable, the contracts identified on the attached SANZ Contracts Schedule are separately identified by the type of contract.

4.12 SANZ Intellectual Property.

(a) The attached SANZ Intellectual Property Schedule contains a complete and accurate list of all of the following that are owned by SANZ or its Subsidiaries or used by SANZ or its Subsidiaries in the conduct of their respective businesses; (i) patented or registered Intellectual Property; (ii) pending patent applications and applications for other registrations of Intellectual Property; (iii) material unregistered trademarks, unregistered service marks, trade names, corporate names; (iv) Internet domain names; (v) material unregistered copyrights; (vi) computer software (other than commercially available off-the-shelf software that is used without customization or enhancement and that was purchased or is licensed for less than a total cost of $25,000 in the aggregate); and (vii) any other material Intellectual Property. The attached SANZ Intellectual Property Schedule also contains a complete and accurate list of all material licenses and other rights granted by SANZ or any of its Subsidiaries to any third party and all material licenses and other rights granted by any third party to SANZ or any of its Subsidiaries with respect to any SANZ Intellectual Property, in each case identifying the subject Intellectual Property. Each of SANZ and each of its Subsidiaries owns and possesses all right, title and interest in and to all of the Intellectual Property set forth on the attached SANZ Intellectual Property Schedule indicated as being owned by such entity or has a valid and enforceable license to use all of the Intellectual Property set forth on the attached SANZ Intellectual Property Schedule and all other Intellectual Property necessary for the operation of SANZ’s and its Subsidiaries’ respective businesses as presently conducted and as presently proposed to be conducted (collectively, “SANZ Intellectual Property”), free and clear of all Liens. Without limiting the generality of the foregoing and except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SANZ, or one of its Subsidiaries, as the case may be, owns and possesses all right, title and interest in and to all SANZ Intellectual Property created or developed by SANZ’s and its Subsidiaries’

employees and independent contractors or created or developed under the direction or supervision of SANZ’s and its Subsidiaries’ employees or independent contractors relating to SANZ’s or one of its Subsidiaries’ business or to the actual or demonstratively anticipated research or development conducted by SANZ and its Subsidiaries. Except as set forth on the attached SANZ Intellectual Property Schedule, the loss, termination or expiration of any SANZ Intellectual Property has not had a Material Adverse Effect on SANZ or its Subsidiaries, and no loss, termination or expiration of any SANZ Intellectual Property is pending or, to SANZ’s Knowledge, threatened or reasonably foreseeable. SANZ and each of its Subsidiaries has taken all reasonably necessary steps to maintain and protect all SANZ Intellectual Property and will continue to take all reasonably necessary steps to maintain and protect all SANZ Intellectual Property prior to Closing so as not to adversely affect the validity or enforceability thereof. To SANZ’s Knowledge, the owners of any Intellectual Property licensed to SANZ and its Subsidiaries have taken commercially reasonable action to maintain and protect the Intellectual Property which are subject to such licenses.

(b) Except as set forth on the attached SANZ Intellectual Property Schedule: (i) all of the SANZ Intellectual Property is valid and enforceable and none of the SANZ Intellectual Property has been misused, (ii) no claim by any third party has been made, is currently outstanding or to SANZ’s Knowledge, is threatened, against SANZ or any of its Subsidiaries contesting the validity, enforceability, use or ownership of any of the SANZ Intellectual Property and, to SANZ’s Knowledge, there is no basis for any such claim, (iii) neither SANZ nor any of its Subsidiaries has infringed, misappropriated or otherwise conflicted with, and the operation of SANZ’s and its Subsidiaries’ business as currently conducted does not infringe, misappropriate or conflict with, any Intellectual Property of other Persons, and to SANZ’s Knowledge there are no facts that indicate a likelihood of any of the foregoing and none of SANZ nor any of its Subsidiaries has received any notices regarding any of the foregoing (including, without limitation, any notices to cease and desist or demands or offers to license any Intellectual Property from any third party), (iv) to SANZ’s Knowledge, the SANZ Intellectual Property has not been infringed, disclosed, misappropriated or otherwise conflicted by other Persons and to SANZ’s Knowledge there are no facts that indicate a likelihood of any of the foregoing, and (v) none of SANZ nor any of its Subsidiaries has agreed to indemnify any third party for or against any interference, infringement, misappropriation or other conflict with respect to any Intellectual Property. The transactions contemplated by this Agreement will not adversely affect SANZ’s or any of its Subsidiaries’ right, title or interest in and to the SANZ Intellectual Property and all of the SANZ Intellectual Property shall be owned or available for use by SANZ and its Subsidiaries on identical terms and conditions immediately after the Closing as such Intellectual Property was owned or available immediately prior to the Closing.

(c) The computer systems, including software, hardware, networks and interfaces (collectively, the “Systems”) used by SANZ and its Subsidiaries are sufficient for the immediate and future needs of their respective businesses (including, without limitation, as to capacity and ability to process current peak volumes and anticipated volumes in a timely manner). In the prior twelve months, there have been no failures or bugs in or breakdowns or continued substandard performance of the Systems (as a whole or with respect to any portion thereof) which have caused any substantial disruption or interruption in or use of the Systems (as a whole or with respect to any portion thereof) and, to SANZ’s Knowledge, no fact or matter exists which may disrupt or interrupt or affect the use of the Systems following the Closing on the same basis as the Systems are presently used by SANZ and its Subsidiaries. All Systems (other than software) used in connection with SANZ’s and its Subsidiaries’ respective businesses are owned and operated by and are under the control of SANZ or one of its Subsidiaries, as the case may be, and are not wholly or partly dependent on any facilities that are not under the ownership, operation or control of SANZ or one of its Subsidiaries, as the case may be. No action is necessary to enable the Systems to continue to be used by SANZ or one of its Subsidiaries after the Closing to the same extent and in the same manner as the Systems have been used prior to the date hereof.

4.13 Litigation. Except as set forth on the attached SANZ Litigation Schedule, there are no actions, suits, proceedings (including any arbitration proceedings), orders, investigations, demands to cease and desist, offers to license Intellectual Property or claims pending or, to SANZ’s Knowledge, threatened against or affecting SANZ or any of its Subsidiaries (or to SANZ’s Knowledge, pending or threatened against or affecting any of the officers, directors or employees of SANZ or any of its Subsidiaries with respect to their businesses or proposed business activities), or pending or threatened by SANZ or any of its Subsidiaries against any Person, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality (including any actions, suits, proceedings or investigations with respect to the transactions contemplated by this Agreement); neither SANZ nor any of its Subsidiaries is subject to any arbitration proceedings under collective bargaining agreements or otherwise or any governmental investigations or inquiries; and, to SANZ’s Knowledge, there is no basis for any of the foregoing. The foregoing includes, without limitation, actions pending or, to SANZ’s Knowledge, threatened involving the prior employment of any of SANZ’s or its Subsidiaries’ employees, their use in connection with their respective businesses of any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers. Except as set forth on the attached SANZ Litigation Schedule, during the one year preceding the date hereof, there have not been any actions, suits, proceedings (including any arbitration proceedings), orders or investigations at law or in equity, before or by any governmental department, commission, board, bureau, agency or instrumentality. Neither SANZ nor any of its Subsidiaries is subject to any judgment, order or decree of any court or other governmental agency, and neither SANZ nor any of its Subsidiaries has received any opinion or memorandum or advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any material Liabilities. There are no actions, suits, proceedings (including any arbitration proceedings), orders, investigations or claims pending or, to SANZ’s Knowledge, threatened against or affecting SANZ or any of its Subsidiaries in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with the transactions contemplated hereby. Unless set forth on the SANZ Litigation Schedule, SANZ has not sought any opinions of counsel regarding the Intellectual Property of a third party.

4.14 Environmental and Safety Matters. Except as set forth on the attached SANZ Environmental and Safety Matters Schedule:

(a) each of SANZ, its Subsidiaries, and their respective Affiliates has complied and is in compliance in all material respects with all Environmental and Safety Requirements (including, without limitation, all licenses and permits required thereunder);

(b) neither SANZ, its Subsidiaries, nor their respective Affiliates has received any written or oral notice, report or other information regarding any actual or alleged material violation of Environmental and Safety Requirements, or any material Liabilities or potential material Liabilities, including any material investigatory, remedial or corrective obligations, relating to any of them or, to SANZ’s Knowledge, their predecessors facilities arising under Environmental and Safety Requirements;

(c) none of SANZ, its Subsidiaries, or their respective predecessors or Affiliates has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released Hazardous Substances, or owned or operated any property or facility (and no such property or facility is contaminated by any such Hazardous Substances) so as to give rise to material Liabilities (including any material Liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees) or any material investigatory, corrective or remedial obligations pursuant to CERCLA, the Solid Waste Disposal Act, as amended (“SWDA”) or any other Environmental and Safety Requirements;

(d) SANZ has furnished to Sun all environmental audits, reports and other material environmental documents (“Environmental Reports”) that are in its possession or control (i) relating to the current and former operations and facilities of SANZ and its Subsidiaries and their respective Affiliates and (ii) to the extent that SANZ has Knowledge of such Environmental Reports, relating to predecessors of SANZ and its Subsidiaries.

4.15 Compliance with Laws. Except as set forth on the attached SANZ Compliance Schedule:

(a) Each of SANZ and its Subsidiaries has complied and is in material compliance with all applicable laws, ordinances, codes, rules, requirements and regulations of foreign, federal, state and local governments and all agencies thereof relating to the operation of their respective businesses and the maintenance and operation of their respective properties and assets. No notices have been received by and no claims have been filed against SANZ or any of its Subsidiaries alleging a violation of any such laws, ordinances, codes, rules, requirements or regulations. Neither SANZ nor any of its Subsidiaries has made any bribes, kickback payments or other similar payments of cash or other consideration, including payments to customers or clients or employees of customers or clients for purposes of doing business with such Persons.

(b) Each of SANZ and its Subsidiaries holds and is in compliance with all material permits, licenses, bonds, approvals, certificates, registrations, accreditations and other authorizations of all foreign, federal, state and local governmental agencies required for the conduct of its business and the ownership of its properties (including as the same relate to Environmental and Safety Requirements), and the attached SANZ Permits Schedule sets forth a list of all of such material permits, licenses, bonds, approvals, certificates, registrations, accreditations and other authorizations. No notices have been received by SANZ or any of its Subsidiaries alleging the failure to hold any of the foregoing or notifying SANZ that it is operating in any manner inconsistent with applicable laws and regulations.

4.16 Employees. The attached SANZ Employees Schedule correctly sets forth the name and current annual salary of each employee of SANZ and any of its Subsidiaries and whether any employees are absent from active employment, including, but not limited to, leave of absence or disability. Except as set forth on the attached SANZ Employees Schedule, (a) to SANZ’s Knowledge, no executive or key employee of SANZ or any of its Subsidiaries or any group of employees of SANZ or any of its Subsidiaries have any plans to terminate employment with SANZ or any of its Subsidiaries; (b)SANZ and each of its Subsidiaries have complied with all laws relating to the employment of labor in all material respects (including provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other Taxes), and to SANZ’s Knowledge, neither SANZ nor any of its Subsidiaries has any labor relations problems (including any union organization or decertification activities, threatened or actual strikes or work stoppages or material grievances); and (c) neither SANZ or any of its Subsidiaries nor, to SANZ’s Knowledge, any of their respective employees are subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements relating to, affecting or in conflict with the present or proposed business activities of SANZ or any of its Subsidiaries, except for agreements between SANZ or its Subsidiaries and their present and former employees. The attached SANZ Employees Schedule sets forth the bonuses earned by SANZ’s and its Subsidiaries’ officers and employees for the fiscal year ended December 31, 2002 and reasonably expected to be paid during 2003.

4.17 Employee Benefit Plans.

(a) The attached SANZ Employee Benefits Schedule sets forth an accurate and complete list of each “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) and each other employee benefit plan, program, policy, contract or arrangement (written or oral) providing for payment, reimbursement or benefits to current or former employees (or their beneficiaries or dependents) of SANZ (including any bonus plan, plan for deferred compensation, retirement, severance, sick leave, employee health or other welfare benefit plan or other arrangement), at any time maintained, sponsored, or contributed to by SANZ, or with respect to which SANZ has any Liability or potential Liability. Each such item listed on the attached SANZ Employee Benefits Schedule is referred to herein as a “SANZ Plan.”

(b) Except as set forth in the SANZ Employee Benefits Schedule, SANZ does not have any obligation to contribute to (or any other Liability, including current or potential withdrawal Liability, with respect to) any “multiemployer plan” (as defined in Section 3(37) of ERISA) or any employee benefit plan which is a “defined benefit plan” (as defined in Section 3(35) of ERISA), whether or not terminated.

(c) Except as set forth in the SANZ Employee Benefits Schedule, (i) SANZ has complied in all material respects with the health care continuation requirements of Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code (“COBRA”) applicable to SANZ; and (ii) SANZ does not have any obligation under any SANZ Plan or otherwise to provide medical, health, life insurance or other welfare-type benefits to current or future retired or terminated employees (except as specifically required by COBRA).

(d) Except with respect to such plan(s) identified in the attached SANZ Employee Benefits Schedule under the heading “Profit Sharing Plans,” SANZ does not maintain, contribute to or have any Liability or potential Liability under (or with respect to) any employee benefit plan which is a “defined contribution plan” (as defined in Section 3(34) of ERISA), whether or not terminated.

(e) For purposes of this Section 4.17, the term “SANZ” includes all entities treated as a single employer with SANZ pursuant to Section 414 of the Code.

(f) Except as set forth in the SANZ Employee Benefits Schedule, with respect to the SANZ Plans, all required payments (including all employer contributions and employee salary/wage reduction contributions), premiums, contributions, reimbursements or accruals for all periods ending prior to or as of the Closing shall have been timely made or, to the extent permitted by applicable law, properly accrued on the SANZ Latest Balance Sheet and none of the SANZ Plans has any unfunded liabilities which are not reflected on the SANZ Latest Balance Sheet.

(g) Except as set forth in the SANZ Employee Benefits Schedule, the SANZ Plans and all related trusts, insurance contracts and funds have been maintained, funded and administered in compliance with their terms and with the applicable provisions of ERISA, the Code and other applicable laws in all material respects. Except as set forth in the SANZ Employee Benefits Schedule, to SANZ’s Knowledge, neither SANZ nor any trustee or administrator of any SANZ Plan has engaged in any transaction with respect to the SANZ Plans which could reasonably be expected to subject SANZ or any trustee or administrator of the SANZ Plans, or any party dealing with any such SANZ Plan, nor do the transactions contemplated by this Agreement constitute transactions which would subject any such party, to either a civil penalty pursuant to Section 502(i) of ERISA or the tax or penalty on prohibited transactions imposed by Section 4975 of the Code. Except as set forth in the SANZ Employee Benefits Schedule, no actions, suits or claims with respect to the assets of the SANZ Plans (other than routine claims for benefits) are pending or, to SANZ’s Knowledge, threatened which could reasonably be expected to result in or subject SANZ to any Liability and there are no circumstances which would give rise to or could reasonably be expected to give rise to any such actions, suits or claims. Except as set forth in the SANZ Employee Benefits Schedule, no Liability to the Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA has been or could be incurred by SANZ.

(h) Except as set forth in the SANZ Employee Benefits Schedule, (i) each of the SANZ Plans which is intended to be qualified under Section 401(a) of the Code has received a favorable determination from the Internal Revenue Service that such plan is qualified under Section 401(a) of the Code, and to SANZ’s Knowledge there are no circumstances which would or could reasonably be expected to adversely affect the qualified status of any such Plan, and (ii) all such SANZ Plans have been or will be timely amended for the requirements of the tax legislation commonly known as “GUST” and “EGTRRA” and have been or will be submitted to the Internal Revenue Service for a favorable determination letter within the remedial amendment period prescribed by GUST.

(i) SANZ has provided Holding with true and complete copies of (to the extent applicable) (i) all documents pursuant to which the SANZ Plans are maintained, funded and administered, (ii) and the most recent annual reports (Form 5500 and any attachments thereto) filed with the IRS, (iii) the most recent financial statement and auditors report, and (iv) the most recent IRS determination letter for the SANZ Plans.

(j) Except as set forth in the SANZ Employee Benefits Schedule, none of the SANZ Plans obligates SANZ to pay any separation, severance, termination or similar benefit solely as a result of any transaction contemplated by this Agreement or solely as a result of any change in control or ownership within the meaning of Section 280G of the Code.

4.18 Insurance. The attached SANZ Insurance Schedule contains a list of each insurance policy maintained by SANZ and its Subsidiaries with respect to its properties, assets and businesses, including any medical malpractice policies and fidelity bonds, setting forth the type of coverage, the annual premiums, deductibles and coverage amounts therefor and an indication whether such policy is on a “claims made” or “incurrence” basis, and each such policy is in full force and effect as of the Closing. Neither SANZ nor any of its Subsidiaries is in default with respect to its obligations under any insurance policy maintained by it, and neither SANZ nor any of its Subsidiaries has been denied insurance coverage. To SANZ’s Knowledge, the insurance coverage of SANZ and its Subsidiaries is of a kind and type routinely carried by corporations of similar size engaged in similar lines of business. Except as set forth on the attached SANZ Insurance Schedule, neither SANZ nor any of its Subsidiaries has any self-insurance or co-insurance programs, and the reserves set forth on the SANZ Latest Balance Sheet are adequate to cover all anticipated Liabilities with respect to any such self-insurance or co-insurance programs.

4.19 Tax Matters.

(a) SANZ, each Subsidiary and each Affiliated Group has timely filed all consolidated, combined and unitary Tax Returns required to be filed by it with any Tax Authority and each such Tax Return has been prepared in compliance with all applicable laws and regulations, and all such Tax Returns are true and accurate. All Taxes due and payable by SANZ and its Subsidiaries (whether or not shown or required to be shown on any Tax Return) have been paid and SANZ and its Subsidiaries have withheld and paid over to the appropriate Taxing Authority all Taxes which they are required to withhold from amounts paid or owing to any employee, stockholder, creditor or other third party. All Taxes accrued but not yet due are accrued on the Latest Balance Sheet.

(b) Except as set forth on the attached SANZ Taxes Schedule:

(i) neither SANZ nor any of its Subsidiaries has requested or been granted an extension of the time for filing any Tax Return which has not yet been filed;

(ii) neither SANZ nor any of its Subsidiaries has consented to extend to a date later than the date hereof the time in which any Tax may be assessed or collected by any taxing authority;

(iii) with respect to each taxable period of SANZ and its Subsidiaries and each taxable period of an Affiliated Group during which SANZ or any Subsidiary was a member of the Affiliated Group ending on or before December 31, 1998, either such taxable period has been audited by the relevant Taxing Authority or the time for assessing or collecting Tax with respect to each such taxable period has closed and such taxable period is not subject to review by any relevant Taxing Authority;

(iv) no deficiency or proposed adjustment which has not been settled or otherwise resolved for any amount of Tax has been proposed, asserted or assessed by any Taxing Authority against SANZ or any Subsidiary;

(v) there is no action, suit, Taxing Authority proceeding or audit now in progress, pending or, to SANZ's Knowledge, threatened by a Taxing Authority against or with respect to SANZ or any Subsidiary;

(vi) SANZ does not reasonably expect any Taxing Authority to claim or assess any amount of additional Taxes against SANZ or any Subsidiary;

(vii) no claim has ever been made by a Taxing Authority in a jurisdiction where SANZ or any Subsidiary, respectively, does not file Tax Returns claiming that SANZ or any Subsidiary, respectively, is or may be subject to Taxes assessed by such jurisdiction;

(viii) there are no Liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of SANZ or any of its Subsidiaries;

(ix) neither SANZ nor any of its Subsidiaries is a party to or bound by any Tax allocation or Tax sharing agreement and has no current or potential contractual obligation to indemnify any other Person with respect to Taxes;

(x) the Holding Shareholders will not be required to deduct and withhold any amount pursuant to Section 1445(a) of the Code upon the transfer of any cash or property pursuant to this Agreement;

(xi) each of SANZ and its Subsidiaries has provided to Sun true, correct and complete copies of all Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by any of SANZ or its Subsidiaries for the past three (3) years; and

(xii) none of SANZ or its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); (iii) deferred intercompany gain or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); or (iv) installment sale made prior to the Closing Date.

(c) None of SANZ and its Subsidiaries has filed a consent under Section 341(f) of the Code concerning collapsible corporations or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by SANZ or its Subsidiaries. None of SANZ and its Subsidiaries has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Section 280G or Section 404 of the Code. There is no contract, agreement, plan or arrangement to which SANZ or its Subsidiaries is a party or by which it is bound to compensate any individual for excise taxes paid pursuant to Section 4999 of the Code. None of SANZ or any of its Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Each of SANZ and its Subsidiaries has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code. None of SANZ or any of its Subsidiaries (i) has been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was SANZ) or (ii) has any Liability for the Taxes of any Person (other than any of SANZ and its Subsidiaries) under Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(d) The unpaid Taxes of SANZ and its Subsidiaries (A) did not, as of the date of the SANZ Latest Balance Sheet, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the SANZ Latest Balance Sheet (rather than any notes thereto) in accordance with GAAP and (B) will not exceed that reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of SANZ and its Subsidiaries in filing their tax returns.

(e) Neither SANZ nor any of its Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code.

4.20 Brokerage and Transaction Bonuses. Except for brokerage fees set forth on the attached SANZ Brokerage Schedule, there are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon SANZ or any of its Subsidiaries or Affiliates. Except as set forth on the attached SANZ Transaction Bonuses Schedule, there are no special bonuses or other similar compensation payable to any director, officer or employee of SANZ or any of its Subsidiaries in connection with the transactions contemplated hereby. SANZ shall pay, and hold Holding and its Subsidiaries and Affiliates harmless against, any Liability, loss or expense (including reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any undislcosed claim or special bonus or other similar compensation not reflected on the SANZ Transaction Bonuses Schedule arising in connection with the transactions contemplated hereby.

4.21 Bank Accounts.The attached SANZ Bank Account Schedule sets forth a true and complete list of all banks and other financial institutions and depositories at which SANZ or any of its Subsidiaries maintains (or has caused to be maintained) deposit accounts, spread accounts, yield supplement reserve accounts, operating accounts, trust accounts, trust receivable accounts or other accounts of any kind or nature into which funds of SANZ or any of its Subsidiaries are deposited from time to time. The attached SANZ Bank Account Schedule correctly identifies the name and address of each depository, the name in which each account is held, the purpose of the account, the account number, the contact Person at such depository and his or her telephone number and the name of each Person holding a general or special power of attorney from SANZ or its Subsidiaries with respect to such accounts.

4.22 Powers of Attorney. To SANZ’s Knowledge, there are no outstanding powers of attorney executed on behalf of any of SANZ or its Subsidiaries.

4.23 Names and Locations. Except as set forth on the attached SANZ Names and Locations Schedule, during the five-year period prior to the execution and delivery of this Agreement, neither SANZ nor any of its Subsidiaries or their respective predecessors has used any name or names under which it has invoiced account debtors, maintained records concerning its assets or otherwise conducted business. All of the tangible assets and properties of SANZ and its Subsidiaries are located at the locations set forth on the attached SANZ Names and Locations Schedule.

4.24 Affiliate Transactions. Except as set forth on the attached SANZ Affiliate Transactions Schedule, no officer, director, stockholder, employee or Affiliate of SANZ or any of its Subsidiaries or, to SANZ’s Knowledge, any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment or transaction with SANZ or any of its Subsidiaries or has any interest in any property used by SANZ or any of its Subsidiaries (including any Company Intellectual Property). The attached SANZ Affiliate Transactions Schedule sets forth the amount and general description of each loan, advance, distribution or payment of any kind or character (including salary, bonus and distributions) made by SANZ (other than in the ordinary course of business) since January 1, 2001 to any Subsidiary or Affiliate of SANZ and any of their respective directors and officers.

4.25 Service and Software Warranties. All services rendered or software provided by SANZ or any of its Subsidiaries have been and remain in conformity with all applicable contractual commitments and all express and implied warranties except for such failures to be in conformity as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SANZ, and neither SANZ nor any of its Subsidiaries has any Liability (and, to SANZ’s Knowledge, there is no reasonable basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against it or any of its Subsidiaries giving rise to any such Liability) for curing or providing additional services, software or other damages in connection therewith in excess of any warranty reserve specifically established with respect thereto and included on the face of the SANZ Latest Balance Sheet (rather than the notes thereto). No services rendered or software provided by SANZ or any of its

Subsidiaries are subject to any Guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of such sale or license (including as a result of any course of conduct between SANZ or any of its Subsidiaries and any Person or as a result of any statements in any of SANZ’s or any of its Subsidiaries’ service or promotional literature). The attached SANZ Warranty Schedule includes copies of such standard terms and conditions of sale or license for SANZ and its Subsidiaries (containing currently applicable Guaranty, warranty and indemnity provisions). Neither SANZ nor any of its Subsidiaries has been notified of any claims for, and, to SANZ’s Knowledge, no claims have been threatened for, any extraordinary warranty obligations or additional services or software relating to any of its services or software.

4.26 Customers and Suppliers. The attached SANZ Customers and Suppliers Schedule sets forth (a) a list of the top twenty-five customers of SANZ and its Subsidiaries (by volume of purchases by such customers) and (b) a list of the top twenty-five suppliers of SANZ and its Subsidiaries (on a consolidated basis) (by volume of purchases from such suppliers), for the fiscal year ended December 31, 2002 and a list of the top seven suppliers of SANZ and its Subsidiaries (on a consolidated basis) (by volume of purchases from such suppliers), for the fiscal year ended December 31, 2002 and, with respect to such customers, the committed volume of purchases by such customers for the fiscal year ending December 31, 2003 and December 31, 2004. Except as set forth on the attached SANZ Customers and Suppliers Schedule, to SANZ’s Knowledge, no material customer of SANZ or any of its Subsidiaries has indicated that, and neither SANZ nor any of its Subsidiaries has any reason to believe that, any such customer will stop, materially decrease the rate of, or materially change the terms (whether related to payment, price or otherwise) with respect to, buying materials, products or services from SANZ or any of its Subsidiaries (whether as a result of the consummation of the transactions contemplated hereby or otherwise). Except as set forth on the attached SANZ Customers and Suppliers Schedule, to SANZ’s Knowledge, no material supplier to SANZ or any of its Subsidiaries has indicated that, and neither SANZ nor any of its Subsidiaries has any reason to believe that, such supplier will stop, materially decrease the rate of, or materially change the terms (whether related to payment, price or otherwise) with respect to, supplying materials, products or services to SANZ or any of its Subsidiaries (whether as a result of the consummation of the transactions contemplated hereby or otherwise).

4.27 Real Property.

(a) Neither SANZ nor any of its Subsidiaries owns any real property.

(b) The attached SANZ Real Property Schedule sets forth the address of each parcel of Leased Real Property, and a true and complete list of all Leases for each such Leased Real Property (including the date and name of the parties to such Lease document). Each of SANZ and its Subsidiaries has delivered to SANZ a true and complete copy of each such Lease, and in the case of any oral Lease, a written summary of the material terms of such Lease. Except as set forth in the SANZ Real Property Schedule, with respect to each of the Leases:

(i) such Lease is legal, valid, binding, enforceable and in full force and effect;

(ii) the transaction contemplated by this Agreement does not require the consent of any other party to such Lease (except for those Leases for which Lease Consents are obtained), will not result in a breach of or default under such Lease, and will not otherwise cause such Lease to cease to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing;

(iii) none of SANZ's or its Subsidiaries' possession and quiet enjoyment of the Leased Real Property under such Lease has been disturbed in any material respect and there are no material disputes with respect to such Lease;

(iv) none of SANZ, its Subsidiaries or any other party to the Lease is in breach or default under such Lease, and no event has occurred or circumstance exists which, with the delivery of notice, the passage of time or both, would constitute such a breach or default, or permit the termination, modification or acceleration of rent under such Lease;

(v) no security deposit or portion thereof deposited with respect to such Lease has been applied in respect of a breach or default under such Lease which has not been redeposited in full;

(vi) none of SANZ or its Subsidiaries owes, or will owe in the future, any brokerage commissions or finder's fees with respect to such Lease;

(vii) the other party to such Lease is not an Affiliate of, and otherwise does not have any economic interest in, any of SANZ or its Subsidiaries;

(viii) none of SANZ or its Subsidiaries has subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Real Property or any portion thereof;

(ix) none of SANZ or its Subsidiaries has collaterally assigned or granted any other security interest in such Lease or any interest therein; and

(x) there are no Liens on the estate or interest created by such Lease.

4.28 Disclosure. Without limiting the specific language of any other representation or warranty herein, all information furnished or to be furnished by, or on behalf of, SANZ or Merger Sub in this Agreement, in the Exhibits or SANZ Disclosure Schedule attached hereto, or in any certificate delivered at Closing pursuant to this Agreement is or will be accurate and complete, includes or will include all material facts required to be stated therein and does not or will not contain any untrue statement of a material fact or omit any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. The representations and warranties contained in this Article IV are the only representations and warranties in this Agreement made by SANZ and Merger Sub to Holding and Sun.

4.29 Closing Date. The representations and warranties of SANZ and Merger Sub contained in this Article IV and elsewhere in this Agreement and all information delivered in any schedule, attachment or exhibit hereto or in any certificate delivered by SANZ and Merger Sub to Holding and Sun shall be true and correct on the Closing Date as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties, except in respect of representations and warranties made as of a specified date, which shall be true and correct as of such specified date.

ARTICLE V

REPRESENTATIONS AND WARRANTIES
OF HOLDING

To induce SANZ and Merger Sub to enter into this Agreement and consummate the transactions contemplated hereby, Holding hereby represents and warrants to SANZ and Merger Sub that the statements contained in this Article V are correct and complete as of the date of this Agreement, except as set forth in the disclosure schedule delivered by Holding to SANZ and Merger Sub on the date hereof (the “Holding Disclosure Schedule”). The information disclosed in any section of the Holding Disclosure Schedule shall be deemed to relate to and to qualify only to the particular representation and warranty set forth in the corresponding section in this Agreement and shall not be deemed to relate to or qualify any other representation or warranty or any other section of the Holding Disclosure Schedule.

5.01 Capacity, Organization, Corporate Power and Licenses.

(a) Holding has full power, authority and legal capacity to enter into this Agreement and the other documents contemplated hereby to which Holding is a party (including, without limitation, the Stock Option Agreement) and to perform its obligations hereunder and thereunder. Holding is a corporation duly organized, validly existing and in good standing under the laws of Delaware. Except where the failure to obtain such qualification could not reasonably be expected to have a Material Adverse Effect on Holding on Holding, Holding is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. Holding possesses all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties, to carry on its business as now conducted and presently proposed to be conducted and to carry out the transactions contemplated by this Agreement, except where the failure to have such licenses, permits and authorizations could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Holding. The copies of Holding’s certificate of incorporation and bylaws that have been furnished to SANZ’s and Merger Sub’s counsel reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete. Holding is not in default under or in violation of any provision of its certificate of incorporation or bylaws. The attached Holding Officers and Directors Schedule sets forth a list all of the officers and directors of Holding.

(b) The minute books (containing the records of meetings of the stockholders, the board of directors), the stock certificate books and the stock record books of Holding are correct and complete.

5.02 Capital Stock and Related Matters; Title to Shares. As of the date hereof, the authorized capital stock of Holding consists of 5,200,000 shares of Holding Voting Common Stock, of which 975,000 shares are issued and outstanding, 200,000 shares of Holding Non-Voting Common Stock, par value $.01 per share, of which 25,000 shares are issued and outstanding, and 100,000 shares of Preferred Stock, par value $.01 per share, of which no shares are issued and outstanding. Except as set forth on the Holding Capitalization Schedule, the authorized capital stock of Holding and the number of issued and outstanding shares of Holding Voting Common Stock and Holding Non-Voting Common Stock shall be as set forth in the immediately preceding sentence. All of the issued and outstanding shares of Holding’s capital stock have been duly authorized, are validly issued, fully paid, and nonassessable and are not subject to, nor were they issued in violation of, any preemptive rights or rights of first refusal, and are owned of record and beneficially as set forth on the Holding Capitalization Schedule. Except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Holding, neither Holding nor any of its Subsidiaries has violated any applicable federal or state securities laws or other legal requirements in connection with the offer, sale, or issuance of any of its capital stock or other securities, and the offer, sale and transfer of Holding Common Stock in connection with the Merger does not require registration under any applicable federal or state securities laws. There are no rights, outstanding commitments, subscriptions, warrants, options, conversion rights or agreements of any kind to which Holding is a party or to which Holding has Knowledge relating to the purchase or acquisition of any shares of capital stock of Holding or its Subsidiaries or securities or obligations of any kind convertible into or exchangeable or exercisable for any shares of capital stock of Holding or its Subsidiaries or any stock appreciation, phantom stock, profit participation or similar rights with respect to Holding or any of its Subsidiaries, except as described on the attached Holding Commitments Schedule. With respect to any options, warrants, convertible securities or other rights to acquire Holding’s capital stock, the attached Holding Commitments Schedule sets forth the following information: the holder, the number of shares covered, the exercise or conversion price, and the expiration date. Except as described on the attached Holding Commitments Schedule, no shares of the capital stock of Holding or its Subsidiaries are reserved for any purpose and there are no preemptive or similar rights with respect to the issuance, sale or other transfer (whether present, past or future) of the capital stock of Holding or its Subsidiaries and there are no agreements or other obligations (contingent or otherwise) to which Holding is a party or to which Holding has Knowledge that may require Holding or its Subsidiaries to issue, repurchase or otherwise acquire any shares of its capital stock or any of its other securities of any kind. Except as described on the attached Holding Commitments Schedule, there are no agreements to which Holding is a party or to which Holding has Knowledge with respect to the voting or transfer of capital stock of Holding or any of its Subsidiaries or with respect to any other aspect of their affairs. To Holding’s Knowledge, no equityholder or former equityholder of Holding or any Subsidiary has asserted any claim (in his, her or its capacity as an equity holder or former equityholder) against Holding or any Subsidiary and Holding and its Subsidiaries do not have any Liability to any equityholder or former equityholder (in his, her or its capacity as an equity holder or former equityholder).

5.03 Authorization; Noncontravention. The execution, delivery and performance of this Agreement and all of the other agreements and instruments contemplated hereby to which Holding is a party (including, without limitation, the Stock Option Agreement) have been duly authorized by Holding, and no other corporate act or other proceeding on the part of Holding or its board of directors is necessary to authorize the execution, delivery or performance of this Agreement or the other agreements contemplated hereby (including, without limitation, the Stock Option Agreement) and the consummation of the transactions contemplated hereby or thereby. This Agreement has been duly executed and delivered by Holding and, assuming due execution by SANZ and Merger Sub, as applicable, constitutes a valid and binding obligation of Holding, enforceable in accordance with its terms, except as enforceability shall be limited by a court of competent jurisdiction in a proceeding under applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally (whether enforcement is sought by proceedings in equity or at law), and each of the other agreements and instruments contemplated hereby to which Holding is a party (including, without limitation, the Stock Option Agreement), when executed and delivered by Holding, in accordance with the terms hereof and thereof and, assuming due execution by SANZ and Merger Sub, as applicable, shall each constitute a valid and binding obligation of Holding, enforceable in accordance with its respective terms, except as enforceability shall be limited by a court of competent jurisdiction in a proceeding under applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally (whether enforcement is sought by proceedings in equity or at law). Except as set forth on the attached Holding Restrictions Schedule, the execution and delivery by Holding of this Agreement and all of the other agreements and instruments contemplated hereby to which Holding is a party (including, without limitation, the Stock Option Agreement) and the fulfillment of and compliance with the respective terms hereof and thereof by Holding does not and shall not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under (whether with or without the passage of time, the giving of notice or both), (c) result in the creation of any Lien upon Holding’s or any of its Subsidiaries’ capital stock or assets pursuant to, (d) give any third party the right to modify, terminate or accelerate any obligation under, (e) result in a violation of, or (f) require any authorization, consent, approval, exemption or other action of or by or notice or declaration to, or filing with, any third party or any court or administrative or governmental body or agency pursuant to, (i) Holding’s or any of its Subsidiaries’ charter documents, bylaws or other constituent documents, or (ii) any law, statute, rule or regulation to which Holding or any of its Subsidiaries is subject, or (iii) any material agreement, instrument, license, permit, order, judgment or decree to which Holding is subject. Neither Holding nor any of its Subsidiaries is a party to or bound by any written or oral agreement or understanding with respect to a Third Party Transaction other than this Agreement, and each such Person has terminated all discussions with third parties (other than with SANZ and Merger Sub) regarding Third Party Transactions.

5.04 Subsidiaries; Investments. The attached Holding Subsidiary Schedule correctly sets forth the name of each Subsidiary of Holding, the jurisdiction of its incorporation and the Person owning the outstanding capital stock of such Subsidiary. Each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, possesses all requisite corporate power and authority and all material licenses, permits, and authorizations necessary to own its properties and to carry on its business as now being conducted and as presently proposed to be conducted and, except where the failure to obtain such qualification could not reasonably be expected to have a Material Adverse Effect on such Subsidiary, is qualified to do business in every jurisdiction in which its ownership of property or the conduct of its business requires it to qualify. All of the outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and nonassessable, and all such shares are owned by Holding free and clear of all Liens and encumbrances. Except as set forth on the attached Holding Subsidiary Schedule, neither Holding nor any of its Subsidiaries owns or holds the right to acquire any shares of stock or any other security or interest in any other Person or has any obligation to make any Investment in any Person. The attached Holding Officers and Directors Schedule sets forth a list of all of the officers and directors of each of Holding’s Subsidiaries.

5.05 Financial Statements. Set forth on the attached Holding Financial Statement Schedule are copies of the unaudited balance sheet as of December 31, 2002 of Holding’s only Subsidiary (the “Holding Latest Balance Sheet”) and the related statements of income and cash flows for the 12-month period then ended. Except as set forth on the attached Holding Financial Statement Schedule, each of the foregoing financial statements (including in all cases the notes thereto, if any) (the “Holding Financial Statements”) (i) is, in all material respects, accurate, complete and consistent with such Subsidiary’s Books and Records (which, in turn, are, in all material respects, accurate and complete), (ii) presents fairly, in all material respects, such Subsidiary’s financial condition and results of operations as of the respective dates thereof and for the respective periods referred to therein, (iii) and has been prepared in accordance with GAAP, subject in the case of unaudited financial statements to changes resulting from normal year-end adjustments for recurring accruals (which were or are not expected to be material individually or in the aggregate) and to the absence of footnote disclosure. Holding has no assets other than the capital stock of such Subsidiary and no liabilities other than the promissory note in the aggregate principal amount of $3,900,000 issued to Sun by Holding on March 19, 2003 and the promissory note in the aggregate principal amount of $100,000 issued to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ by Holding on March 19, 2003, both of which, as of the Closing, shall have been cancelled and of no further force and effect.

5.06 Accounts Receivable. Except as set forth on the attached Holding Accounts Receivable Schedule, all accounts and notes receivable reflected on the Holding Latest Balance Sheet (net of allowances for doubtful accounts as reflected thereon and as determined in accordance with GAAP) (a) are or shall be valid (and not subject to any valid counterclaims or setoffs) and (b) resulted from a bona fide sale to a customer in the ordinary course of business on commercially reasonable terms, the amount of which was actually due on the date thereof and are or shall be legally enforceable at the aggregate recorded amount therefor as shown on the Holding Latest Balance Sheet (net of allowances for doubtful accounts as reflected thereon and as determined in accordance with GAAP). No Person has any Lien on such receivables or any part thereof, and no agreement for deduction, free goods, discount or other deferred price or quantity adjustment has been made with respect to such receivables.

5.07 Absence of Undisclosed Liabilities. Except as set forth on the attached Holding Liabilities Schedule, neither Holding nor any of its Subsidiaries has any obligation or Liability arising out of any transaction entered at or prior to the date hereof, or any action or inaction at or prior to the date hereof, or any state of facts existing at or prior to the date hereof, other than (a) Liabilities reflected on the liabilities side of the Holding Latest Balance Sheet, (b) Liabilities and obligations which have arisen after the date of the Holding Latest Balance Sheet in the ordinary course of business substantially consistent with the past practices of Holding (none of which is a Liability for breach of contract, breach of warranty, tort, infringement, violation of law, claim or lawsuit), and (c) obligations under contracts and commitments described on the attached Holding Contracts Schedule or under contracts and commitments entered into in the ordinary course of business consistent with past practice that are not required to be disclosed on such Schedule pursuant to Section 5.11 below (but not Liabilities for any breach of any such contract or commitment occurring on or prior to the Closing Date).

5.08 No Material Adverse Effect. Since September 26, 2002, there has occurred no fact, event or circumstance which has had or could reasonably be expected to have a Material Adverse Effect on Holding or its Subsidiaries. Since September 26, 2002, each of Holding and its Subsidiaries has conducted their respective businesses only in the ordinary course of business substantially consistent with past practice.

5.09 Absence of Certain Developments. Except as set forth on the attached Holding Developments Schedule, since September 26, 2002, neither Holding nor any of its Subsidiaries has:

(b) borrowed any amount or incurred or become subject to any material Liabilities, except current Liabilities incurred in the ordinary course of business substantially consistent with past practice;

(c) discharged or satisfied any material Lien or paid any material obligation or Liability, other than current Liabilities paid in the ordinary course of business;

(e) mortgaged or pledged any of its properties or assets or subjected them to any Lien, except for Permitted Liens;

(h) made or granted any bonus or any wage or salary increase to any employee or group of employees (except as required by pre-existing contracts described on the attached Holding Contracts Schedule or any bonus or wage increase not in excess of 5% of such employee’s then existing salary), or made or granted any increase in any employee benefit plan or arrangement, or amended or terminated any existing employee benefit plan or arrangement or adopted any new employee benefit plan or arrangement or entered into, amended or terminated any collective bargaining agreement or other employment agreement;

(k) made capital expenditures or commitments therefor that amount in the aggregate to more than $50,000;

(m) made any loans or advances to, guaranties for the benefit of, or any Investments in, any Person;

(n) made any charitable contributions or pledges exceeding in the aggregate $25,000 or made any political contributions;

(o) suffered any damage, destruction or casualty loss exceeding in the aggregate $25,000, whether or not covered by insurance;

(q) made any Investment in any Subsidiary other than Solunet Storage, Inc. or taken any steps to incorporate any Subsidiary;

(r) amended its certificate of incorporation, bylaws or other organizational documents;

(s) entered into any agreement or arrangement prohibiting or restricting it from freely engaging in any business or otherwise restricting the conduct of its business anywhere in the world;

(v) agreed, whether orally or in writing, to do any of the foregoing.

5.10 Assets. Except as set forth on the attached Holding Assets Schedule, Holding and its Subsidiaries has good and marketable title to, or a valid leasehold interest in, all material properties and assets used by it, located on its premises or shown on the Holding Latest Balance Sheet or acquired after the date thereof, free and clear of all Liens (other than properties and assets disposed of for fair consideration in the ordinary course of business since the date of the Holding Latest Balance Sheet and except for Liens disclosed on the Holding Latest Balance Sheet (including any notes thereto) and Permitted Liens and such Liens as do not materially detract from the value of or interfere with the present use of the property affected thereby). Holding and each of its Subsidiaries owns, has a valid leasehold or license interest in or has the valid and enforceable right to use all assets, tangible or intangible, necessary for the conduct of their respective businesses as presently conducted. Except as set forth on the attached Holding Assets Schedule, all of Holding’s and its Subsidiaries’ buildings (including all components of such buildings, structures and other improvements), equipment, machinery, fixtures, improvements and other tangible assets (whether owned or leased) are in good condition and repair (ordinary wear and tear excepted) and are fit in all material respects for use in the ordinary course of Holding’s and such Subsidiaries’ business as presently conducted and as presently proposed to be conducted. All such assets have been installed and maintained in all material respects in accordance with all applicable laws, regulations and ordinances.

5.11 Contracts and Commitments.

(a) Except as set forth on the attached Holding Contracts Schedule, neither Holding nor any of its Subsidiaries is a party to or bound by any written or oral:

(ii) contract for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis or relating to loans to officers, directors or Affiliates;

(iii) contract under which Holding or any of its Subsidiaries has advanced or loaned any Person amounts exceeding $10,000 individually or $25,000 in the aggregate;

(v) Guaranty, performance bond or similar agreement;

(vi) lease or agreement under which Holding or any of its Subsidiaries is lessee of or holds or operates any property, real or personal, owned by any other party, except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $20,000 individually or $50,000 in the aggregate;

(vii) material lease or agreement under which Holding or any of its Subsidiaries is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by Holding or any of its Subsidiaries;

(x) warranty agreement with respect to its services rendered or its products sold or leased;

(xi) agreement under which it has granted any Person any registration rights (including demand or piggyback registration rights);

(xii) sales, distribution, supply or franchise agreement;

(xiii) agreement with a term of more than six months which is not terminable by Holding or any of its Subsidiaries upon less than thirty (30) days’ notice without penalty and involves a consideration in excess of $20,000 individually or $50,000 in the aggregate annually;

(xiv) contract regarding voting, transfer or other arrangements related to its capital stock or warrants, options or other rights to acquire any of its capital stock;

(xv) contract or agreement prohibiting it from freely engaging in any business or competing anywhere in the world; or

(xvi) any other agreement which is material to its operations and business prospects or involves a consideration in excess of $20,000 individually or $50,000 in the aggregate annually.

(b) All of the contracts, Holding Leases, agreements and instruments set forth or required to be set forth on the attached Holding Contracts Schedule are valid, binding and enforceable in accordance with their respective terms and, to Holding’s Knowledge, except for such contracts, Holding Leases, agreements and instruments that shall have expired in accordance with their terms, shall be in full force and effect without penalty in accordance with their terms upon consummation of the transactions contemplated hereby. Except as set forth on the attached Holding Contracts Schedule: (i) each of Holding and its Subsidiaries has performed all obligations required to be performed by it and is not in default under or in breach of nor in receipt of any claim of default or breach under any contract, Holding Lease, agreement or instrument set forth or required to be set forth on the attached Holding Contracts Schedule; (ii) no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of noncompliance by Holding or any of its Subsidiaries under any contract, Holding Lease, agreement or instrument set forth or required to be set forth on the attached Holding Contracts Schedule; (iii) neither Holding nor any of its Subsidiaries has any present expectation or intention of not fully performing all such obligations; (iv) no contract, Holding Lease, agreement or instrument set forth or required to be set forth on the attached Holding Contracts Schedule is currently subject to or is expected to be subject to cancellation or any other material modification by the other party thereto (by reason of the Merger or otherwise) or is subject to or is expected to be subject to any penalty, right of set-off or other charge by the other party thereto for late performance or delivery; (v) to Holding’s Knowledge, there is no breach or anticipated breach by the other parties to any contract, Holding Lease, agreement or instrument set forth or required to be set forth on the attached Holding Contracts Schedule, and (vi) Holding and its Subsidiaries have not subleased, licensed, or otherwise granted any Person the right to use or occupy any leased real property or any portion thereof. Neither Holding nor any of its Subsidiaries is a party to any contract, agreement or commitment the performance of which could reasonably be expected to have a Material Adverse Effect on Holding or its Subsidiaries.

(c) SANZ’s and Merger Sub’s counsel has been supplied with a true and correct copy of each of the written instruments, plans, contracts and agreements and an accurate description of each of the oral arrangements, contracts and agreements which are referred to on the attached Holding Contracts Schedule, together with all amendments, waivers or other changes thereto. To the extent applicable, the contracts identified on the attached Holding Contracts Schedule are separately identified by the type of contract.

5.12 Holding Intellectual Property.

(a) The attached Holding Intellectual Property Schedule contains a complete and accurate list of all of the following that are owned by Holding or its Subsidiaries or used by Holding or its Subsidiaries in the conduct of their respective businesses; (i) patented or registered Intellectual Property; (ii) pending patent applications and applications for other registrations of Intellectual Property; (iii) material unregistered trademarks, unregistered service marks, trade names, corporate names; (iv) Internet domain names; (v) material unregistered copyrights; (vi) computer software (other than commercially available off-the-shelf software that is used without customization or enhancement and that was purchased or is licensed for less than a total cost of $25,000 in the aggregate); and (vii) any other material Intellectual Property. The attached Holding Intellectual Property Schedule also

contains a complete and accurate list of all material licenses and other rights granted by Holding or any of its Subsidiaries to any third party and all material licenses and other rights granted by any third party to Holding or any of its Subsidiaries with respect to any Holding Intellectual Property, in each case identifying the subject Intellectual Property. Each of Holding and each of its Subsidiaries owns and possesses all right, title and interest in and to all of the Intellectual Property set forth on the attached Holding Intellectual Property Schedule indicated as being owned by such entity or has a valid and enforceable license to use all of the Intellectual Property set forth on the attached Holding Intellectual Property Schedule and all other Intellectual Property necessary for the operation of Holding’s and its Subsidiaries’ respective businesses as presently conducted and as presently proposed to be conducted (collectively, “Holding Intellectual Property”), free and clear of all Liens. Without limiting the generality of the foregoing, and except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Holding, or one of its Subsidiaries, as the case may be, owns and possesses all right, title and interest in and to all Holding Intellectual Property created or developed by Holding’s and its Subsidiaries’ employees and independent contractors or created or developed under the direction or supervision of Holding’s and its Subsidiaries’ employees or independent contractors relating to Holding’s or its Subsidiaries’ business or to the actual or demonstratively anticipated research or development conducted by Holding and its Subsidiaries. Except as set forth on the attached Holding Intellectual Property Schedule, the loss, termination or expiration of any Holding Intellectual Property has not had a Material Adverse Effect on Holding or its Subsidiaries, and no loss, termination or expiration of any Holding Intellectual Property is pending or, to Holding’s Knowledge, threatened or reasonably foreseeable. Holding and each of its Subsidiaries has taken all reasonably necessary steps to maintain and protect all Holding Intellectual Property and will continue to take all reasonably necessary steps to maintain and protect all Holding Intellectual Property prior to Closing so as not to adversely affect the validity or enforceability thereof. To Holding’s Knowledge, the owners of any Intellectual Property licensed to Holding and its Subsidiaries have taken commercially reasonable action to maintain and protect the Intellectual Property which are subject to such licenses.

(b) Except as set forth on the attached Holding Intellectual Property Schedule: (i) all of the Holding Intellectual Property is valid and enforceable and none of the Holding Intellectual Property has been misused, (ii) no claim by any third party has been made, is currently outstanding or to Holding’s Knowledge, is threatened, against Holding or any of its Subsidiaries contesting the validity, enforceability, use or ownership of any of the Holding Intellectual Property and, to Holding’s Knowledge, there is no basis for any such claim, (iii) neither Holding nor any of its Subsidiaries has infringed, misappropriated or otherwise conflicted with, and the operation of Holding’s and its Subsidiaries’ business as currently conducted does not infringe, misappropriate or conflict with, any Intellectual Property of other Persons, and to Holding’s Knowledge there are no facts that indicate a likelihood of any of the foregoing and none of Holding nor any of its Subsidiaries has received any notices regarding any of the foregoing (including, without limitation, any notices to cease and desist or demands or offers to license any Intellectual Property from any third party), (iv) to Holding’s Knowledge, the Holding Intellectual Property has not been infringed, disclosed, misappropriated or otherwise conflicted by other Persons and to Holding’s Knowledge there are no facts that indicate a likelihood of any of the foregoing, and (v) none of Holding nor any of its Subsidiaries has agreed to indemnify any third party for or against any interference, infringement, misappropriation or other conflict with respect to any Intellectual Property. The transactions contemplated by this Agreement will not adversely affect Holding’s or any of its Subsidiaries’ right, title or interest in and to the Holding Intellectual Property and all of the Holding Intellectual Property shall be owned or available for use by Holding and its Subsidiaries on identical terms and conditions immediately after the Closing as such Intellectual Property was owned or available immediately prior to the Closing.

(c) The Systems used by Holding and its Subsidiaries are sufficient for the immediate and future needs of their respective businesses (including, without limitation, as to capacity and ability to process current peak volumes and anticipated volumes in a timely manner). In the prior twelve months, there have been no failures or bugs in or breakdowns or continued substandard performance of the Systems (as a whole or with respect to any portion thereof) which have caused any substantial disruption or interruption in or use of the Systems (as a whole or with respect to any portion thereof) and, to Holding’s Knowledge, no fact or matter exists which may disrupt or interrupt or affect the use of the Systems following the Closing on the same basis as the Systems are presently used by Holding and its Subsidiaries. All Systems (other than software) used in connection with Holding’s and its Subsidiaries’ respective businesses are owned and operated by and are under the control of Holding or one of its Subsidiaries, as the case may be, and are not wholly or partly dependent on any facilities that are not under the ownership, operation or control of Holding or one of its Subsidiaries, as the case may be. No action is necessary to enable the Systems to continue to be used by Holding or one of its Subsidiaries after the Closing to the same extent and in the same manner as the Systems have been used prior to the date hereof.

5.13 Litigation. Except as set forth on the attached Holding Litigation Schedule, there are no actions, suits, proceedings (including any arbitration proceedings), orders, investigations, demands to cease and desist, offers to license Intellectual Property or claims pending or, to Holding’s Knowledge, threatened against or affecting Holding or any of its Subsidiaries (or to Holding’s Knowledge, pending or threatened against or affecting any of the officers, directors or employees of Holding or any of its Subsidiaries with respect to their businesses or proposed business activities), or pending or threatened by Holding or any of its Subsidiaries against any Person, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality (including any actions, suits, proceedings or investigations with respect to the transactions contemplated by this Agreement); neither Holding nor any of its Subsidiaries is subject to any arbitration proceedings under collective bargaining agreements or otherwise or any governmental investigations or inquiries; and, to Holding’s Knowledge, there is no basis for any of the foregoing. The foregoing includes, without limitation, actions pending or, to Holding’s Knowledge, threatened involving the prior employment of any of Holding’s or its Subsidiaries’ employees, their use in connection with their respective businesses of any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers. Except as set forth on the attached Holding Litigation Schedule, during the one year preceding the date hereof, there have not been any actions, suits, proceedings (including any arbitration proceedings), orders or investigations at law or in equity, before or by any governmental department, commission, board, bureau, agency or instrumentality. Neither Holding nor any of its Subsidiaries is subject to any judgment, order or decree of any court or other governmental agency, and neither Holding nor any of its Subsidiaries has received any opinion or memorandum or advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any material Liabilities. There are no actions, suits, proceedings (including any arbitration proceedings), orders, investigations or claims pending or, to Holding’s Knowledge, threatened against or affecting Holding or any of its Subsidiaries in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with the transactions contemplated hereby. Unless set forth on the Holding Litigation Schedule, Holding has not sought any opinions of counsel regarding the Intellectual Property of a third party.

5.14 Environmental and Safety Matters. Except as set forth on the attached Holding Environmental and Safety Matters Schedule:

(a) each of Holding, its Subsidiaries, and their respective Affiliates has complied and is in compliance in all material respects with all Environmental and Safety Requirements (including, without limitation, all licenses and permits required thereunder);

(b) neither Holding, its Subsidiaries, nor their respective Affiliates has received any written or oral notice, report or other information regarding any actual or alleged material violation of Environmental and Safety Requirements, or any material Liabilities or potential material Liabilities, including any material investigatory, remedial or corrective obligations, relating to any of them or, to Holding’s Knowledge, their predecessors facilities arising under Environmental and Safety Requirements;

(c) none of Holding, its Subsidiaries, or their respective predecessors or Affiliates has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released Hazardous Substances, or owned or operated any property or facility (and no such property or facility is contaminated by any such Hazardous Substances) so as to give rise to material Liabilities (including any material Liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees) or any material investigatory, corrective or remedial obligations pursuant to CERCLA, the SWDA or any other Environmental and Safety Requirements;

(d) Holding has furnished to SANZ all Environmental Reports that are in its possession or control (i) relating to the current and former operations and facilities of Holding and its Subsidiaries and their respective Affiliates and (ii) to the extent that Holding has Knowledge of such Environmental Reports, relating to predecessors of Holding and its Subsidiaries.

5.15 Compliance with Laws. Except as set forth on the attached Holding Compliance Schedule:

(a) Each of Holding and its Subsidiaries has complied and is in material compliance with all applicable laws, ordinances, codes, rules, requirements and regulations of foreign, federal, state and local governments and all agencies thereof relating to the operation of their respective businesses and the maintenance and operation of their respective properties and assets. No notices have been received by and no claims have been filed against Holding or any of its Subsidiaries alleging a violation of any such laws, ordinances, codes, rules, requirements or regulations. Neither Holding nor any of its Subsidiaries has made any bribes, kickback payments or other similar payments of cash or other consideration, including payments to customers or clients or employees of customers or clients for purposes of doing business with such Persons.

(b) Each of Holding and its Subsidiaries holds and is in compliance with all material permits, licenses, bonds, approvals, certificates, registrations, accreditations and other authorizations of all foreign, federal, state and local governmental agencies required for the conduct of its business and the ownership of its properties (including as the same relate to Environmental and Safety Requirements), and the attached Holding Permits Schedule sets forth a list of all of such material permits, licenses, bonds, approvals, certificates, registrations, accreditations and other authorizations. No notices have been received by Holding or any of its Subsidiaries alleging the failure to hold any of the foregoing or notifying Holding that it is operating in any manner inconsistent with applicable laws and regulations.

5.16 Employees. The attached Holding Employees Schedule correctly sets forth the name and current annual salary of each employee of Holding and any of its Subsidiaries and whether any employees are absent from active employment, including, but not limited to, leave of absence or disability. Except as set forth on the attached Holding Employees Schedule, (a) to Holding’s Knowledge, no executive or key employee of Holding or any of its Subsidiaries or any group of employees of Holding or any of its Subsidiaries have any plans to terminate employment with Holding or any of its Subsidiaries; (b) Holding and each of its Subsidiaries have complied with all laws relating to the employment of labor in all material respects (including provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other Taxes), and to Holding’s Knowledge, neither Holding nor any of its Subsidiaries has any labor relations problems (including any union organization or decertification activities, threatened or actual strikes or work stoppages or material grievances); and (c) neither Holding or any of its Subsidiaries nor, to Holding’s Knowledge, any of their respective employees are subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements relating to, affecting or in conflict with the present or proposed business activities of Holding or any of its Subsidiaries, except for agreements between Holding or its Subsidiaries and their present and former employees. The attached Holding Employees Schedule sets forth the bonuses earned by Holding’s and its Subsidiaries’ officers and employees for the fiscal year ended December 31, 2002 and reasonably expected to be paid during 2003.

5.17 Employee Benefit Plans.

(a) The attached Holding Employee Benefits Schedule sets forth an accurate and complete list of each “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) and each other employee benefit plan, program, policy, contract or arrangement (written or oral) providing for payment, reimbursement or benefits to current or former employees (or their beneficiaries or dependents) of Holding (including any bonus plan, plan for deferred compensation, retirement, severance, sick leave, employee health or other welfare benefit plan or other arrangement), at any time maintained, sponsored, or contributed to by Holding, or with respect to which Holding has any Liability or potential Liability. Each such item listed on the attached Holding Employee Benefits Schedule is referred to herein as a “Holding Plan.”

(b) Except as set forth in the Holding Employee Benefits Schedule, Holding does not have any obligation to contribute to (or any other Liability, including current or potential withdrawal Liability, with respect to) any “multiemployer plan” (as defined in Section 3(37) of ERISA) or any employee benefit plan which is a “defined benefit plan” (as defined in Section 3(35) of ERISA), whether or not terminated.

(c) Except as set forth in the Holding Employee Benefits Schedule, (i) Holding has complied in all material respects with the health care continuation requirements of Part 6 of Subtitle B of Title I of ERISA and COBRA applicable to Holding; and (ii) Holding does not have any obligation under any Holding Plan or otherwise to provide medical, health, life insurance or other welfare-type benefits to current or future retired or terminated employees (except as specifically required by COBRA).

(d) Except with respect so such plan(s) identified in the attached Holding Employee Benefits Schedule under the heading “Profit Sharing Plans,” Holding does not maintain, contribute to or have any Liability or potential Liability under (or with respect to) any employee benefit plan which is a “defined contribution plan” (as defined in Section 3(34) of ERISA), whether or not terminated.

(e) For purposes of this Section 5.17, the term “Holding” includes all entities treated as a single employer with Holding pursuant to Section 414 of the Code.

(f) Except as set forth in the Holding Employee Benefits Schedule, with respect to the Holding Plans, all required payments (including all employer contributions and employee salary/wage reduction contributions), premiums, contributions, reimbursements or accruals for all periods ending prior to or as of the Closing shall have been timely made or, to the extend permitted by applicable law, properly accrued on the Holding Latest Balance Sheet and none of the Holding Plans has any unfunded liabilities which are not reflected on the Holding Latest Balance Sheet.

(g) Except as set forth in the Holding Employee Benefits Schedule, the Holding Plans and all related trusts, insurance contracts and funds have been maintained, funded and administered in compliance with their terms and with the applicable provisions of ERISA, the Code and other applicable laws in all material respects. Except as set forth in the Holding Employee Benefits Schedule, to Holding’s Knowledge, neither Holding nor any trustee or administrator of any Holding Plan has engaged in any transaction with respect to the Holding Plans which could reasonably be expected to subject Holding or any trustee or administrator of the Holding Plans, or any party dealing with any such Holding Plan, nor do the transactions contemplated by this Agreement constitute transactions which would subject any such party, to either a civil penalty pursuant to Section 502(i) of ERISA or the tax or penalty on prohibited transactions imposed by Section 4975 of the Code. Except as set forth in the Holding Employee Benefits Schedule, no actions, suits or claims with respect to the assets of the Holding Plans (other than routine claims for benefits) are pending or, to Holding’s Knowledge, threatened which could reasonably be expected to result in or subject Holding to any Liability and there are no circumstances which would give rise to or could reasonably be expected to give rise to any such actions, suits or claims. Except as set forth in the Holding Employee Benefits Schedule, no Liability to the Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA has been or could be incurred by Holding.

(h) Except as set forth in the Holding Employee Benefits Schedule, (i) each of the Holding Plans which is intended to be qualified under Section 401(a) of the Code has received a favorable determination from the Internal Revenue Service that such plan is qualified under Section 401(a) of the Code, and to Holding’s Knowledge there are no circumstances which would or could reasonably be expected to adversely affect the qualified status of any such Plan and (iii) all such Holding Plans have been or will be timely amended for the requirements of the tax legislation commonly known as “GUST” and “EGTRRA” and have been or will be submitted to the Internal Revenue Service for a favorable determination letter within the remedial amendment period prescribed by GUST.

(i) Holding has provided SANZ with true and complete copies of (to the extent applicable) (i) all documents pursuant to which the Holding Plans are maintained, funded and administered, (ii) and the most recent annual reports (Form 5500 and any attachments thereto) filed with the IRS, (iii) the most recent financial statement and auditors report, and (iv) the most recent IRS determination letter for the Holding Plans.

(j) Except as set forth in the Holding Employee Benefits Schedule, none of the Holding Plans obligates Holding to pay any separation, severance, termination or similar benefit solely as a result of any transaction contemplated by this Agreement or solely as a result of any change in control or ownership within the meaning of Section 280G of the Code.

5.18 Insurance. The attached Holding Insurance Schedule contains a list of each insurance policy maintained by Holding and its Subsidiaries with respect to its properties, assets and businesses, including any medical malpractice policies and fidelity bonds, setting forth the type of coverage, the annual premiums, deductibles and coverage amounts therefor and an indication whether such policy is on a “claims made” or “incurrence” basis, and each such policy is in full force and effect as of the Closing. Neither Holding nor any of its Subsidiaries is in default with respect to its obligations under any insurance policy maintained by it, and neither Holding nor any of its Subsidiaries has been denied insurance coverage. To Holding’s Knowledge, the insurance coverage of Holding and its Subsidiaries is of a kind and type routinely carried by corporations of similar size engaged in similar lines of business. Except as set forth on the attached Holding Insurance Schedule, neither Holding nor any of its Subsidiaries has any self-insurance or co-insurance programs, and the reserves set forth on the Holding Latest Balance Sheet are adequate to cover all anticipated Liabilities with respect to any such self-insurance or co-insurance programs.

5.19 Tax Matters.

(a) Holding, each Subsidiary and each Affiliated Group has timely filed all consolidated, combined and unitary Tax Returns required to be filed by it, with any Tax Authority and each such Tax Return has been prepared in compliance with all applicable laws and regulations, and all such Tax Returns are true and accurate. All Taxes due and payable by Holding and its Subsidiaries (whether or not shown or required to be shown on any Tax Return) have been paid and Holding and its Subsidiaries have withheld and paid over to the appropriate Taxing Authority all Taxes which they are required to withhold from amounts paid or owing to any employee, stockholder, creditor or other third party. All Taxes accrued but not yet due are accrued on the Latest Balance Sheet.

(b) Except as set forth on the attached Holding Taxes Schedule:

(i) neither Holding nor any of its Subsidiaries has requested or been granted an extension of the time for filing any Tax Return which has not yet been filed;

(ii) neither Holding nor any of its Subsidiaries has consented to extend to a date later than the date hereof the time in which any Tax may be assessed or collected by any taxing authority;

(iii) with respect to each taxable period of Holding and its Subsidiaries and each taxable period of an Affiliated Group during which Holding or any Subsidiary was a member of the Affiliated Group ending on or before December 31, 1998, either such taxable period has been audited by the relevant Taxing Authority or the time for assessing or collecting Tax with respect to each such taxable period has closed and such taxable period is not subject to review by any relevant Taxing Authority;

(v) there is no action, suit, Taxing Authority proceeding or audit now in progress, pending or, to Holding's Knowledge, threatened by a Taxing Authority against or with respect to Holding or any Subsidiary;

(vi) Holding does not reasonably expect any Taxing Authority to claim or assess any amount of additional Taxes against Holding or any Subsidiary;

(vii) no claim has ever been made by a Taxing Authority in a jurisdiction where Holding or any Subsidiary, respectively, does not file Tax Returns claiming that Holding or any Subsidiary, respectively, is or may be subject to Taxes assessed by such jurisdiction;

(viii) there are no Liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of Holding or any of its Subsidiaries;

(ix) neither Holding nor any of its Subsidiaries is a party to or bound by any Tax allocation or Tax sharing agreement and has no current or potential contractual obligation to indemnify any other Person with respect to Taxes;

(x) SANZ will not be required to deduct and withhold any amount pursuant to Section 1445(a) of the Code upon the transfer of any cash or property pursuant to this Agreement;

(xi) each of Holding and its Subsidiaries has provided to SANZ true, correct and complete copies of all Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by any of Holding or its Subsidiaries for the past three (3) years; and

(xii) none of Holding or its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); (iii) deferred intercompany gain or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); or (iv) installment sale made prior to the Closing Date.

(c) None of Holding and its Subsidiaries has filed a consent under Section §341(f) of the Code concerning collapsible corporations or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by Holding or its Subsidiaries. None of Holding and its Subsidiaries has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Section 280G or Section 404 of the Code. There is no contract, agreement, plan or arrangement to which SANZ or its Subsidiaries is a party or by which it is bound to compensate any individual for excise taxes paid pursuant to Section 4999 of the Code. None of Holding or any of its Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Each of Holding and its Subsidiaries has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code. None of Holding or any of its Subsidiaries (i) has been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was Holding) or (ii) has any Liability for the Taxes of any Person (other than any of Holding and its Subsidiaries) under Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(d) The unpaid Taxes of Holding and its Subsidiaries (A) did not, as of the date of the Holding Latest Balance Sheet, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Holding Latest Balance Sheet (rather than any notes thereto) in accordance with GAAP and (B) will not exceed that reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of Holding and its Subsidiaries in filing their tax returns.

(e) Neither Holding nor any of its Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code.

5.20 Brokerage and Transaction Bonuses. Except for brokerage fees set forth on the attached Holding Brokerage Schedule, there are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon Holding or any of its Subsidiaries or Affiliates. Except as set forth on the attached Holding Transaction Bonuses Schedule, there are no special bonuses or other similar compensation payable to any director, officer or employee of Holding or any of its Subsidiaries in connection with the transactions contemplated hereby. Holding shall pay, and hold SANZ and its Subsidiaries and Affiliates harmless against, any Liability, loss or expense (including reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any undisclosed claim or special bonus or other similar compensation not reflected on the Holding Transaction Bonuses Schedule arising in connection with the transactions contemplated by hereby.

5.21 Bank Accounts. The attached Holding Bank Account Schedule sets forth a true and complete list of all banks and other financial institutions and depositories at which Holding or any of its Subsidiaries maintains (or has caused to be maintained) deposit accounts, spread accounts, yield supplement reserve accounts, operating accounts, trust accounts, trust receivable accounts or other accounts of any kind or nature into which funds of Holding or any of its Subsidiaries are deposited from time to time. The attached Holding Bank Account Schedule correctly identifies the name and address of each depository, the name in which each account is held, the purpose of the account, the account number, the contact Person at such depository and his or her telephone number and the name of each Person holding a general or special power of attorney from Holding or its Subsidiaries with respect to such accounts.

5.22 Powers of Attorney. To Holding’s Knowledge, there are no outstanding powers of attorney executed on behalf of any of Holding or its Subsidiaries.

5.23 Names and Locations. Except as set forth on the attached Holding Names and Locations Schedule, during the five-year period prior to the execution and delivery of this Agreement, neither Holding nor any of its Subsidiaries or their respective predecessors has used any name or names under which it has invoiced account debtors, maintained records concerning its assets or otherwise conducted business. All of the tangible assets and properties of Holding and its Subsidiaries are located at the locations set forth on the attached Holding Names and Locations Schedule.

5.24 Affiliate Transactions. Except as set forth on the attached Holding Affiliate Transactions Schedule, no officer, director, stockholder, employee or Affiliate of Holding or any of its Subsidiaries or, to Holding’s Knowledge, any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment or transaction with Holding or any of its Subsidiaries or has any interest in any property used by Holding or any of its Subsidiaries (including any Company Intellectual Property). The attached Holding Affiliate Transactions Schedule sets forth the amount and general description of each loan, advance, distribution or payment of any kind or character (including salary, bonus and distributions) made by Holding (other than in the ordinary course of business) since January 1, 2001 to any Subsidiary or Affiliate of Holding and any of their respective directors and officers.

5.25 Service and Software Warranties. All services rendered or software provided by Holding or any of its Subsidiaries have been and remain in conformity with all applicable contractual commitments and all express and implied warranties except for such failures to be in conformity as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Holding, and neither Holding nor any of its Subsidiaries has any Liability (and, to Holding’s Knowledge, there is no reasonable basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against it or any of its Subsidiaries giving rise to any such Liability) for curing or providing additional services, software or other damages in connection therewith in excess of any warranty reserve specifically established with respect thereto and included on the face of the Holding Latest Balance Sheet (rather than the notes thereto). No services rendered or software provided by Holding or any of its Subsidiaries are subject to any Guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of such sale or license (including as a result of any course of conduct between Holding or any of its Subsidiaries and any Person or as a result of any statements in any of Holding’s or any of its Subsidiaries’ service or promotional literature). The attached Holding Warranty Schedule includes copies of such standard terms and conditions of sale or license for Holding and its Subsidiaries (containing currently applicable Guaranty, warranty and indemnity provisions). Neither Holding nor any of its Subsidiaries has been notified of any claims for, and, to Holding’s Knowledge, no claims have been threatened for, any extraordinary warranty obligations or additional services or software relating to any of its services or software.

5.26 Customers and Suppliers. The attached Holding Customers and Suppliers Schedule sets forth (a) a list of all of the top twenty-five customers of Holding and its Subsidiaries (by volume of purchases by such customers) and (b) a list of the top twenty-five suppliers of Holding and its Subsidiaries (on a consolidated basis) (by volume of purchases from such suppliers), for the fiscal years ended December 31, 2001 and December 31, 2002 and, with respect to such customers, the committed volume of purchases by such customers for the fiscal year ending December 31, 2003 and December 31, 2004. Except as set forth in the attached Holding Customers and Suppliers Schedule, to Holding’s Knowledge, no material customer of Holding or any of its Subsidiaries has indicated that, and neither Holding nor any of its Subsidiaries has any reason to believe that, any such customer will stop, materially decrease the rate of, or materially change the terms (whether related to payment, price or otherwise) with respect to, buying materials, products or services from Holding or any of its Subsidiaries (whether as a result of the consummation of the transactions contemplated hereby or otherwise). Except as set forth on the attached Holding Customers and Suppliers Schedule, to Holding’s Knowledge, no material supplier to Holding or any of its Subsidiaries has indicated that, and neither Holding nor any of its Subsidiaries has any reason to believe that, such supplier will stop, materially decrease the rate of, or materially change the terms (whether related to payment, price or otherwise) with respect to, supplying materials, products or services to Holding or any of its Subsidiaries (whether as a result of the consummation of the transactions contemplated hereby or otherwise).

5.27 Real Property.

(a) Neither Holding nor any of its Subsidiaries owns any real property.

(b) The attached Holding Real Property Schedule sets forth the address of each parcel of Leased Real Property, and a true and complete list of all Leases for each such Leased Real Property (including the date and name of the parties to such Lease document). Each of Holding and its Subsidiaries has delivered to SANZ a true and complete copy of each such Lease, and in the case of any oral Lease, a written summary of the material terms of such Lease. Except as set forth in the Holding Real Property Schedule, with respect to each of the Leases:

(i) such Lease is legal, valid, binding, enforceable and in full force and effect;

(iii) none of Holding's or its Subsidiaries' possession and quiet enjoyment of the Leased Real Property under such Lease has been disturbed in any material respect and there are no material disputes with respect to such Lease;

(iv) none of Holding, its Subsidiaries or any other party to the Lease is in breach or default under such Lease, and no event has occurred or circumstance exists which, with the delivery of notice, the passage of time or both, would constitute such a breach or default, or permit the termination, modification or acceleration of rent under such Lease;

(v) no security deposit or portion thereof deposited with respect to such Lease has been applied in respect of a breach or default under such Lease which has not been redeposited in full;

(vi) none of Holding or its Subsidiaries owes, or will owe in the future, any brokerage commissions or finder's fees with respect to such Lease;

(vii) the other party to such Lease is not an Affiliate of, and otherwise does not have any economic interest in, any of Holding or its Subsidiaries;

(viii) none of Holding or its Subsidiaries has subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Real Property or any portion thereof;

(ix) none of Holding or its Subsidiaries has collaterally assigned or granted any other security interest in such Lease or any interest therein; and

(x) there are no Liens on the estate or interest created by such Lease.

5.28 Disclosure. Without limiting the specific language of any other representation or warranty herein, all information furnished or to be furnished by, or on behalf of, Holding in this Agreement, in the Exhibits or Holding Disclosure Schedule attached hereto, or in any certificate delivered at Closing pursuant to this Agreement is or will be accurate and complete, includes or will include all material facts required to be stated therein and does not or will not contain any untrue statement of a material fact or omit any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. The representations and warranties contained in this Article V are the only representations and warranties in this Agreement made by Holding to SANZ and Merger Sub.

5.29 Closing Date. The representations and warranties of Holding contained in this Article V and elsewhere in this Agreement and all information delivered in any schedule, attachment or exhibit hereto or in any certificate delivered by Holding to SANZ or Merger Sub shall be true and correct on the Closing Date as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties, except in respect of representations and warranties made as of a specified date, which shall be true and correct as of such specified date.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF SUN

To induce SANZ and Merger Sub to enter into this Agreement and consummate the transactions contemplated hereby, Sun hereby represents and warrants to SANZ and Merger Sub that the statements contained in this Article VI are correct and complete as of the date of this Agreement.

6.01 Organization and Power. Sun is duly organized, validly existing and in good standing under the laws of its state of Delaware, with full power and authority to enter into this Agreement and perform its obligations hereunder and under the other documents contemplated to which it is a party.

6.02 Authorization; Noncontravention. The execution, delivery and performance of this Agreement and all of the other agreements and instruments contemplated hereby to which Sun is a party have been duly authorized by Sun. This Agreement has been duly executed and delivered by Sun and, assuming the due execution by SANZ and Merger Sub, as applicable constitutes a valid and binding obligation of Sun, enforceable in accordance with its terms, except as enforceability shall be limited by a court of competent jurisdiction in a proceeding under applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally (whether enforcement is sought by proceedings in equity or at law), and each of the other agreements and instruments contemplated hereby to which Sun is a party, when executed and delivered by Sun, in accordance with the terms hereof and thereof and, assuming the due execution by SANZ and Merger Sub, as applicable, shall each constitute a valid and binding obligation of Sun, enforceable in accordance with its respective terms, except as enforceability shall be limited by a court of competent jurisdiction in a proceeding under applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally (whether enforcement is sought by proceedings in equity or at law). The execution and delivery by Sun of this Agreement and all of the other agreements and instruments contemplated hereby to which Sun is a party and the fulfillment of and compliance with the respective terms hereof and thereof by Sun does not and shall not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under (whether with or without the passage of time, the giving of notice or both), (c) result in the creation of any Lien upon Sun’s equity securities or assets pursuant to, (d) give any third party the right to modify, terminate or accelerate any obligation under, (e) result in a violation of, or (f) require any authorization, consent, approval, exemption or other action of or by or notice or declaration to, or filing with, any third party or any court or administrative or governmental body or agency pursuant to, (i) Sun’s constituent documents, or (ii) any law, statute, rule or regulation to which Sun is subject, or (iii) any material agreement, instrument, license, permit, order, judgment or decree to which Sun is subject.

6.03 Investment Representation. Sun is acquiring the SANZ Common Stock and SANZ Series B Preferred Stock and the SANZ Warrant pursuant to the Merger solely for investment purposes and not with a view to, or intention of, distribution thereof in violation of the Securities Act, as amended (the “Securities Act”), or any applicable state securities laws. Sun is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act.

6.04 Brokerage. There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any contract binding upon Sun. Sun shall pay, and hold SANZ and Merger Sub harmless against, any Liability, loss or expense (including reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Sun.

6.05 Litigation. There are no actions, suits, proceedings, orders or investigations pending or, to Sun’s Knowledge, threatened against or affecting Sun, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would adversely affect Sun’s performance under this Agreement or the consummation of the transactions contemplated hereby.

6.06 Title. Sun is the record and beneficial owner of, and has good and marketable title to, all of the issued and outstanding shares of Holding Voting Common Stock, free and clear of any Liens, restrictions on transfer (other than any restrictions under the Securities Act, and applicable state securities laws), options, warrants, rights, calls, commitments, proxies or other contract rights.

6.07 Disclosure. The representations and warranties contained in this Article VI are the only representations and warranties in this Agreement made by Sun to SANZ and Merger Sub.

6.08 Closing Date.The representations and warranties of Sun contained in this Article VI andelsewhere in this Agreement and all information delivered in any schedule, attachment or exhibit hereto or in any certificate delivered by Sun to SANZ or Merger Sub shall be true and correct on the Closing Date as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties, except in respect of representations and warranties made as of a specified date, which shall be true and correct as of such specified date.

ARTICLE VII

COVENANTS PRIOR TO CLOSING

Each of the Parties agrees as follows with respect to the period between the date of this Agreement and the Closing:

7.01 General. Subject to the terms of this Agreement, each Party shall use commercially reasonable efforts to take all actions and do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the conditions set forth in Article III above). At the Closing, the applicable Parties shall execute and deliver the agreements and instruments contemplated hereby to be executed and delivered at the Closing. Without limiting the generality of the foregoing, (a) Holding and Sun agree that they will use commercially reasonable efforts to cause each of the Registration Rights Agreement by and among Sun, Holding and the other Persons listed on the signature pages thereto dated September 26, 2002 and the Securityholders’ Agreement by and among Sun, Holding and the other Persons listed on the signature pages thereto dated September 26, 2002 to be terminated in connection with the Closing, and (b) each of SANZ and Sun agree that it will execute and deliver at the Closing the Registration Rights Agreement and Shareholders Agreement. At SANZ’s request, Sun will reasonably cooperate with SANZ and SANZ’s lenders with respect to the negotiation of the guaranty contemplated by the Credit Support Document.

7.02 Maintenance of Business. SANZ, on the one hand, and Holding, on the other hand, shall use commercially reasonable efforts (and each shall use commercially reasonable efforts to cause its Subsidiaries) to (a) conduct and maintain its business without interruption or material diminution, (b) maintain its assets in good operating condition and repair in accordance with past practices (normal wear and tear excepted), (c) maintain insurance reasonably comparable to that in effect on the date of the SANZ Latest Balance Sheet and Holding Latest Balance Sheet, as applicable, (d) maintain inventory and supplies at customary and adequate operating levels consistent with past practice and replace in accordance with past practice any inoperable, worn out, damaged or obsolete assets with modern assets of at least comparable quality, (e) maintain its books, accounts and records in accordance with past custom and practice as used in the preparation of the SANZ Latest Balance Sheet and the financial statements described in Section 4.05 above and Holding Latest Balance Sheet and the financial statements described in Section 5.05 above, as applicable, and provide accruals for Taxes, obsolete inventory, vacation and other items to the full extent required under GAAP, (f) make capital expenditures in a manner consistent with past practice and (g) maintain in full force and effect the existence of all SANZ Intellectual Property and Holding Intellectual Property, as applicable.

7.03 Third Party and Governmental Notices and Consents. SANZ, on the one hand, and Holding, on the other hand, shall use commercially reasonable efforts (and each shall use commercially reasonable efforts to cause its Subsidiaries) to take or cause to be taken all action and do or cause to be done all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement, including, without limitation, (a) to obtain all consents, approvals and authorizations of third parties, governments and governmental agencies, (b) to make all filings with and give all notices to third parties, governments and governmental agencies which may be necessary or required in order to effectuate the transactions contemplated hereby, and (c) to obtain landlords’ estoppels and landlords’ lenders’ waivers. Each Party shall use commercially reasonable efforts to fulfill or obtain the fulfillment of the conditions set forth in Article III of this Agreement.

7.04 Operation of Business. SANZ, on the one hand, and Holding, on the other hand, shall (and each shall cause its Subsidiaries to) operate its business only in the usual and ordinary course of business consistent with past practice and use commercially reasonable efforts to preserve the goodwill and organization of its business and the relationships with its customers, suppliers, employees and other Persons having business relations with it and its Subsidiaries. Without limiting the generality of the foregoing, prior to the Closing, SANZ, on the one hand, and Holding, on the other hand, shall not (and each shall not permit any of its Subsidiaries to):

(a) take or omit to take any action that would require disclosure underSection 4.09 or Section 5.09 above, as applicable, or that would otherwise result in a breach of any of the representations, warranties or covenants made by it or its Subsidiaries in this Agreement or any of the agreements contemplated hereby;

(b) take any action or omit to take any action which act or omission couldreasonably be expected to have a Material Adverse Effect;

(c) (i) enter into any contract out of the ordinary course of business or restricting in any material respect the conduct of its business, (ii) make any loans or Investments, (iii) increase the compensation, incentive arrangements or other benefits to any officer or employee, (iv) redeem, purchase or otherwise acquire directly or indirectly any of its issued and outstanding capital stock, or any outstanding rights or securities exercisable or exchangeable for or convertible into its capital stock or make any distribution with respect to its capital stock, (v) amend its articles/certificate of incorporation or bylaws or issue or agree to issue any capital stock or any rights or options to acquire, or securities convertible into or exchangeable for, any of its capital stock, (vi) directly or indirectly engage in any transaction, arrangement or contract with any officer, director, stockholder or other insider or Affiliate of it or any of its Subsidiaries, (vii) execute any Guaranty, issue any debt, borrow any money or otherwise incur or create any Indebtedness or Liability (other than trade payables in the ordinary course of business consistent with past practice), (viii) purchase, sell, lease, license, dispose or allow to lapse any material property including, without limitation, material Intellectual Property or assets, (ix) take or omit to take any action that has or could reasonably be expected to have the effect of accelerating sales to customers or revenues to pre-Closing periods that could otherwise be expected to take place or be incurred in post-Closing periods, (x) delay or postpone the payment of any accounts payable, (xi) accelerate the collection of or discount any accounts receivable, (xii) make any capital expenditures or commitments therefor in excess of $10,000 except as set forth on the attached SANZ Capital Expenditures Schedule and Holding Capital Expenditures Schedule, as applicable; (xiii) make any changes to its normal and customary practices regarding the solicitation, booking and fulfillment of orders or the shipment and delivery of goods, (xiv) cease from making accruals for Taxes, obsolete inventory, vacation and other customary accruals, (xv) cease from maintaining adequate levels of inventory or cease from insuring that accounts payable are current consistent with past practice, or (xvi) abstain from making payments on any Taxes, principal or interest on borrowed funds and other customary expenses as they become due; or

(d) enter into any transaction, arrangement or contract with any Person except on arm’s length basis in the ordinary course of business consistent with past customs and practices.

Notwithstanding the foregoing, nothing in this Section 7.04 shall prohibit SANZ, on the one hand, or Holding, on the other hand, from taking any action or omitting to take any action (or each causing its Subsidiaries to take any action or omit to take any action) as required or as expressly contemplated by this Agreement.

7.05 Full Access. SANZ, on the one hand, and Holding, on the other hand, shall (and each shall cause its Subsidiaries to) afford, and cause its officers, directors, employees, attorneys, accountants and other agents to afford, to the other Parties and their accounting, legal and other representatives, as well as their respective officers, employees, affiliates and other agents, full and complete access at all reasonable times and during normal business hours to its and its Subsidiaries’ personnel and to business, financial, legal, tax, compensation and other data and information concerning its and its Subsidiaries’ affairs and operations; provided that such other Parties shall use commercially reasonable efforts to conduct its due diligence review in a manner which will not unreasonably disrupt the operation of its business.

7.06 Notice of Material Developments.

(a) Each Party shall give prompt written notice to the other Parties of (i) any variances in any of its representations or warranties contained in Article IV, Article V or Article VI above, as the case may be, (ii) any breach of any covenant or agreement hereunder by such Party and (iii) any other material development affecting the ability of such Party to consummate the transactions contemplated by this Agreement. Notwithstanding the foregoing, the delivery of any notice pursuant to this Section 7.06(a) shall not (x) be deemed to amend or supplement any of the Schedules contemplated hereby, (y) be deemed to cure any breach of any representation, warranty, covenant or agreement or to satisfy any condition or (z) limit or otherwise affect the remedies available hereunder to the Party receiving such notice.

(b) Each Party acknowledges that certain of the representations and warranties require such Party to list certain factual information on its Schedules attached hereto. Each Party shall be permitted to update such Party’s Schedules on or prior to the Closing Date but only with respect to events or circumstances arising between the date hereof and the Closing Date. No additional disclosure or update by such Party, however, shall be deemed to amend or supplement the Schedules attached hereto or to prevent or cure any misrepresentation, breach of warranty, breach of covenant, or right of any other Party to terminate this Agreement in accordance with the terms hereof.

(c) Each Party shall, within a reasonable period of time following any disclosure, amendment or supplement pursuant to Sections 7.06(a) or (b) negotiate in good faith with respect to the consequences of any such disclosure, amendment or supplement.

7.07 Exclusivity.

(a) Each Party shall, and each Party shall cause each of their respective Subsidiaries, Affiliates, representatives, officers, employees, directors or agents not to, directly or indirectly, (a) submit, solicit, initiate, encourage or discuss any proposal or offer from any Person (other than any other Party in connection with the transactions contemplated hereby) or enter into any agreement or accept any offer relating to or consummate any (i) reorganization, liquidation, dissolution or recapitalization of it or any of its Subsidiaries, (ii) merger or consolidation involving it or any of its Subsidiaries, (iii) purchase or sale of any assets (other than any purchase or sales of inventory or services in the ordinary course of business) or capital stock (or any rights to acquire, or securities convertible into or exchangeable for, any such capital stock) of it or any of its Subsidiaries, or (iv) similar transaction or business combination involving it or any of its Subsidiaries or its business or assets (each of the foregoing transactions described in clauses (i) through (iv), a “Third Party Transaction”) or (b) furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person (other than any other Party in connection with the transactions contemplated hereby) to do or seek to do any of the foregoing; provided, that nothing contained in this Section 7.07(a) shall prohibit (i) SANZ from disclosing to its shareholders any information required by Rule 14e-2 promulgated under the Securities Exchange Act of 1934, as amended or (ii) SANZ from furnishing information to, or engaging in discussions or negotiations with, any Person that makes a Qualified Proposal or provides an unsolicited written expression of interest believed by the SANZ board of directors in good faith to be a bona fide indication of such Person’s desire to pursue the possibility of entering into a Third Party Transaction that, in the good faith judgment of the SANZ board of directors, could reasonably lead to the submission of a Qualified Proposal from such Person (which Qualified Proposal or expression of interest did not result from a breach of this Section 7.07(a)) so long as prior to furnishing such information, or engaging in such discussions or negotiations, SANZ received from such Person an executed confidentiality agreement (which agreement shall be provided to Holding for information purposes) in a form customary for such circumstances.

(b) As used herein, “Qualified Proposal” shall mean any written offer or proposal for, or any indication of interest in, (i) any merger, consolidation, recapitalization or other similar transaction involving SANZ and its Subsidiaries, (ii) any acquisition or purchase of all or substantially all of the outstanding capital stock of SANZ and its Subsidiaries or (iii) any acquisition or purchase of all or substantially all of the assets of SANZ and its Subsidiaries; provided that (X) the aggregate net cash proceeds to be received by each shareholder of SANZ (including, without limitation, Holding assuming it has exercised the Option on a net exercise basis) upon consummation of such Qualified Proposal is in excess of 120% of the Fair Market Value as of the date hereof of all the outstanding capital stock of SANZ held by such shareholder or (Y) in the event the Qualified Proposal is not for all cash consideration, the sum of the cash consideration, if any, plus the Fair Market Value of the aggregate securities to be received by each shareholder of SANZ (including, without limitation, Holding assuming it has exercised the Option on a net exercise basis) upon consummation of such Qualified Proposal has a Fair Market Value, as of the termination of this Agreement pursuant to Article VIII, in excess of 120% of the Fair Market Value as of the date hereof of all of the outstanding capital stock of SANZ held by such shareholder and (Z) such Qualified proposal is reasonably capable of being consummated within a customary timeframe (taking into account all financial, regulatory, legal and other aspect of such proposal) and for which customary commitments have been obtained for any third party financing required to consummate such transaction. As used herein, “Fair Market Value” as of the date hereof of the outstanding capital stock of SANZ shall be calculated using a value of $0.61 per share of SANZ Common Stock (such amount being the per share exercise price of SANZ Common Stock under the Stock Option Agreement), and for all other purposes, “Fair Market Value” of a security means the average of the closing prices of such security on all securities exchanges on which such security may at the time be listed, or, if there has been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such date, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization (including, without limitation, the OTC Bulletin Board or any similar successor organization), in each such case averaged over a period of 20 days consisting of the day on which “Fair Market Value” is being determined and the 19 consecutive business days prior to such day. If at any time such security is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the “Fair Market Value” of any security shall be the fair value thereof determined jointly by SANZ and Holding; provided that if SANZ and Holding are unable to reach agreement within a reasonable period of time, SANZ and Holding shall jointly select an appraiser to determine “Fair Market Value”; provided further that if SANZ and Holding are unable to jointly select an appraiser within a reasonable period of time, SANZ and Holding shall each select one appraiser who then shall jointly appoint a third appraiser who shall act as the appraiser for purposes of determining “Fair Market Value.” The determination of “Fair Market Value” by such appraiser shall be final and binding on SANZ and Holding; provided that such appraiser’s determination of “Fair Market Value” shall not be higher than the highest determination of “Fair Market Value” claimed by either party or lower than the lowest determination of “Fair Market Value” claimed by either party. SANZ and Holding shall split the fees and expenses of such appraiser in proportion to the amount by which their determination of “Fair Market Value” differed from that of such appraiser (e.g., if SANZ’s determination of “Fair Market Value” is $5, Holding’s determination of “Fair Market Value” is $20 and such appraiser’s determination of “Fair Market Value” is $10, SANZ shall pay 1/3 of the fees and expenses of such appraiser and Holding shall pay 2/3 of the fees and expenses of such appraiser).

(c) Prior to engaging in any substantive discussion, to the extent permitted under this Section 7.07, with any Person in connection with an existing or possible Qualified Proposal, SANZ shall notify Holding and Sun orally and in writing of the existence of any Qualified Proposal and the terms and conditions thereof (including, without limitation, the cash consideration to be received by the shareholders of SANZ and/or the valuation ascribed to the capital stock of SANZ by such Person) or any inquiry indicating that any Person is considering making or wishes to make a Qualified Proposal, as promptly as practicable (but in no event later than 48 hours) after its receipt thereof. SANZ will, to the extent reasonably practicable, promptly inform Holding and Sun upon request of the status of any discussion or negotiation with any such Person, and any material change to the terms and conditions of such Qualified Proposal (including, without limitation, the cash consideration to be received by the shareholders of SANZ and/or the valuation ascribed to the capital stock of SANZ by such Person), and shall promptly give Holding and Sun a copy of any information or materials delivered to such Person that has not previously been provided by SANZ or its advisors to Holding or Sun or any of their advisors. Notwithstanding anything to the contrary contained in this Agreement, SANZ may upon written notice to Holding and Sun, at its sole election, postpone the Closing Date for up to thirty (30) days for the purpose of engaging in discussions or negotiations, to the extent permitted under this Section 7.07, with a Person regarding a Qualified Proposal. Upon expiration of such thirty (30) day period, unless this Agreement has been terminated pursuant to Article VIII, the Closing shall take place as contemplated by Section 2.01.

7.08 Tax Matters. Without the prior written consent of the other Parties, neither SANZ, on the one hand, nor Holding, on the other hand, shall make or change any election, change an annual accounting period, adopt or change any accounting method, file any amended Tax Return, enter into any closing agreement, settle any Tax claim or assessment relating to it or any of its Subsidiaries, surrender any right to claim a refund of Taxes, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to it or any of its Subsidiaries, or take any other similar action, or omit to take any action relating to the filing of any Tax Return or the payment of any Tax, if such election, adoption, change, amendment, agreement, settlement, surrender, consent or other action or omission would have the effect of increasing the present or future Tax Liability or decreasing any present or future Tax benefit of it or any of its Subsidiaries.

7.09 Delivery of Interim Financial Statements. SANZ, on the one hand, and Holding, on the other hand, shall deliver to the other Party copies of its interim monthly and year-to-date consolidated financial statements, including a schedule of customer sales on a customer-by-customer basis, as soon as reasonably practicable (and in any event within 15 days) following the end of each monthly accounting period during the period between the date of this Agreement and the Closing. These financial statements shall include income statements, balance sheets, profit and loss and other analyses and comparisons to its budget, as well as an explanation of the assumptions and the accounting policies and practices used in preparation thereof and such other matters as any other Party may reasonably request.

7.10 Employees and Business Relations. SANZ, on the one hand, and Holding, on the other hand, shall (and each shall cause its Subsidiaries to) use its commercially reasonable efforts to keep available the services of its current employees and agents and to maintain its relations and goodwill with its suppliers, customers, distributors and any others with whom or with which it has business relations.

ARTICLE VIII

TERMINATION

8.01 Termination. This Agreement may be terminated at any time prior to the Closing only as follows:

(a) by the mutual written consent of SANZ, on the one hand, and Holding, onthe other hand;

(b) by SANZ, if (i) there has been a material misrepresentation or a material breach of warranty or a material breach of a covenant by Holding or Sun in the representations and warranties or covenants set forth in this Agreement or the Schedules and Exhibits attached hereto, which in the case of any breach of covenant which is curable has not been cured within ten (10) days after written notification thereof by Holding and Sun to SANZ or (ii) by SANZ if it shall have reasonably determined that one or more conditions set forth inSection 3.02 has not been and cannot be fulfilled or satisfied prior to the date specified in such condition (if such condition specifies a date by which such condition must be satisfied);

(c) by Holding, if (i) there has been a material misrepresentation or a material breach of warranty or a material breach of a covenant by SANZ or Merger Sub in the representations and warranties or covenants set forth in this Agreement or the Schedules and Exhibits attached hereto, which in the case of any breach of covenant which is curable has not been cured within ten (10) days after written notification thereof by SANZ and Merger Sub or (ii) by Holding if it shall have reasonably determined that one or more conditions set forth in Section 3.01 has not been and cannot be fulfilled or satisfied prior to the date specified in such condition (if such condition specifies a date by which such condition must be satisfied); or

(d) by SANZ or Holding on any day on or after the 120th day following the date hereof if the Closing shall not have been consummated by such date (or by such later date as shall be mutually agreed to by SANZ or Holding in writing), unless the Closing has not occurred due to a material failure of the Party electing to terminate to perform or observe its agreements as set forth in this Agreement required to be performed or observed by it on or before the Closing Date.

(e) by SANZ following receipt by SANZ after the date hereof, under circumstances not involving any breach of Section 7.07, of an unsolicited bona fide written Qualified Proposal, provided that SANZ has complied in all material respects with Section 7.07 (including, without limitation, the notice provisions therein).

8.02 Effect of Termination. In the event of termination of this Agreement by either SANZ or Holding as provided above, this Agreement shall forthwith terminate and have no further force and effect, except that (a) the covenants and agreements set forth in thisSection 8.02 and Sections 9.06 (Expenses), 9.07 (Specific Performance) and 9.09 (Confidentiality) and Article XI (Miscellaneous) shall survive such termination indefinitely, and (b) nothing in Section 8.01 or this Section 8.02 shall be deemed to release any Party from any Liability for any breach by such Party of the terms and provisions of this Agreement or to impair the right of any party to compel specific performance by another party of its obligations under this Agreement.

ARTICLE IX

ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING

9.01 Survival of Representations and Warranties. The representations and warranties in this Agreement and in any schedule, exhibit, certificate or other instrument delivered pursuant to this Agreement or in any writing delivered by any Party to another Party in connection with this Agreement shall survive the Closing as follows:

(a) the representations and warranties in Sections 4.17 and 5.17 (Employee Benefit Plans), Sections 4.19 and 5.19 (Tax Matters) and Section 4.29 (Closing Date) with respect to Sections 4.17 and 4.19 and Section 5.29 (Closing Date) with respect to Sections 5.17 and 5.19 shall terminate ninety (90) days following the expiration of the applicable statutes of limitations in respect of such matters (after giving effect to any extensions or waivers thereof);

(b) the Critical Representations shall survive indefinitely;

(c) the representations and warranties in Sections 4.14 and 5.14 (Environmental and Safety Matters) and Section 4.29 (Closing Date) with respect to Section 4.14 and Section 5.29 (Closing Date) with respect to Section 5.14 shall terminate on the third anniversary of the Closing;

(d) the representations and warranties in Sections 4.05 and 5.05 (Financial Statements), and Section 4.29 (Closing Date) with respect to Section 4.05 andSection 5.29 (Closing Date) with respect to Section 5.05 shall terminate on the second anniversary of the Closing; and

(e) all other representations and warranties in this Agreement and the Schedules and Exhibits attached hereto or in any writing delivered by any Party to another Party in connection with this Agreement shall terminate at the Effective Time.

provided that any representation or warranty in respect of which indemnity may be sought under Section 9.02 below, and the indemnity with respect thereto, shall survive the time at which it would otherwise terminate pursuant to this Section 9.01 if notice of the inaccuracy or breach or potential inaccuracy or breach thereof giving rise to such right or potential right of indemnity shall have been given to the Party against whom such indemnity may be sought prior to such time (regardless of when the Losses in respect thereof may actually be incurred). The representations and warranties in this Agreement and the Schedules and Exhibits attached hereto or in any writing delivered by any Party to another Party in connection with this Agreement shall survive for the periods set forth in thisSection 9.01 and shall in no event be affected by any investigation, inquiry or examination made for or on behalf of any Party, or the knowledge of any Party’s officers, directors, stockholders, employees or agents or the acceptance by any Party of any certificate or opinion hereunder. The Parties acknowledge that indemnification hereunder with respect to the breach of any covenant or agreement contained herein, including any breach of any covenant or agreement contained in this Article IX, shall not be subject to any time or other limitations (other than those imposed under any applicable statute of limitations).

9.02 Indemnification.

(a) Indemnification by Holding. Holding shall indemnify SANZ and its Subsidiaries (including the Surviving Corporation after the Closing), stockholders (other than Sun or any of its Affiliates), officers, directors, employees, agents, partners, representatives, successors and assigns (collectively, the “SANZ Parties”) and save and hold each of them harmless against and pay on behalf of or reimburse such SANZ Parties as and when incurred for any loss, Liability, demand, claim, action, cause of action, cost, damage, deficiency, Tax, penalty, fine or expense, whether or not arising out of third-party claims (including interest, penalties, reasonable attorneys’ fees and expenses and all amounts paid in investigation, defense or settlement of any of the foregoing) (collectively, “Losses”), which any such SANZ Party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of: (i) any breach by Holding of any representation or warranty made by Holding or Sun in this Agreement or any of the Schedules or Exhibits attached hereto, or in any of the certificates or other instruments or documents furnished by Holding or Sun pursuant to this Agreement; (ii) any nonfulfillment or breach of any covenant or agreement of Holding under this Agreement or any of the Schedules and Exhibits attached hereto; and (iii) any action, demand, proceeding, investigation or claim by any Person against or affecting SANZ or any SANZ Party which, if successful, would give rise to or evidence the existence of or relate to a breach of any of the representations, warranties, covenants or agreements of Holding under this Agreement. Notwithstanding any other provision of this Agreement, if SANZ or any of its Subsidiaries (including the Surviving Corporation after the Closing) has a claim under this Section 9.02(a) to be indemnified for any Loss, such claim shall be deemed to be a claim exclusively for the benefit of SANZ stockholders (other than Sun or any of its Affiliates).

(b) Indemnification by Sun. Sun shall indemnify the SANZ Parties and save and hold each of them harmless against and pay on behalf of or reimburse such SANZ Parties as and when incurred for any Losses which any such SANZ Party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of: (i) any breach by Sun of any representation or warranty made by Sun in this Agreement or any of the Schedules or Exhibits attached hereto, or in any of the certificates or other instruments or documents furnished by Sun pursuant to this Agreement; (ii) any nonfulfillment or breach of any covenant or agreement of Sun under this Agreement or any of the Schedules and Exhibits attached hereto; and (iii) any action, demand, proceeding, investigation or claim by any Person against or affecting SANZ or any SANZ Party which, if successful, would give rise to or evidence the existence of or relate to a breach of any of the representations, warranties, covenants or agreements of Sun under this Agreement.

(c) Indemnification by SANZ and Merger SubM. SANZ and Merger Sub shall indemnify Holding and the Holding Shareholders and their Subsidiaries (including the Surviving Corporation after the Closing), stockholders, officers, directors, employees, agents, partners, representatives, successors and assigns (collectively, the “Holding Parties”) and save and hold each of them harmless against and pay on behalf of or reimburse such Holding Parties as and when incurred for any Losses which any such Holding Party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of: (i) any breach by SANZ or Merger Sub of any representation or warranty made by SANZ or Merger Sub in this Agreement or any of the Schedules or Exhibits attached hereto, or in any of the certificates or other instruments or documents furnished by SANZ or Merger Sub pursuant to this Agreement; (ii) any nonfulfillment or breach of any covenant or agreement of SANZ or Merger Sub under this Agreement or any of the Schedules and Exhibits attached hereto; and (iii) any action, demand, proceeding, investigation or claim by any Person against or affecting Holding or Sun or any Holding Party which, if successful, would give rise to or evidence the existence of or relate to a breach of any of the representations, warranties, covenants or agreements of SANZ or Merger Sub under this Agreement.

(d) Manner of Payment.

(i) Any indemnity payments made pursuant to this Section 9.02 shall be treated for tax purposes as an adjustment to the Merger Consideration to the extent such characterization is proper and permissible under relevant tax authorities.

(ii) In the event that after the Closing a SANZ Party is entitled to an indemnification payment pursuant to Section 9.02(b), such Person shall be paid by Sun, in its sole discretion, either in cash or through the issuance of a promissory note made by Sun in favor of the Indemnitee, which promissory note shall be in the original aggregate amount equal to the amount of Losses for which such Person is entitled to be indemnified and in the form attached hereto as Exhibit M. Until the later of the third anniversary of the Closing and the settlement of all claims for indemnification by a SANZ Party under Section 9.02(b), Sun shall not make any distribution of any capital stock of SANZ to its interest holders or members, as the case may be. In no event shall a SANZ Party be deemed to have incurred any Loss for which it shall be entitled to an indemnification payment pursuant to Section 9.02(b) merely as a result of Sun’s election to satisfy an indemnification obligation through the issuance of a promissory note in accordance with the terms of this Section 9.02(d)(ii) rather than through the delivery of cash.

(iii) In the event that after the Closing a SANZ Party is entitled to an indemnification payment by Holding pursuant to Section 9.02(a), such Person shall be paid by SANZ in cash or in the form of newly issued shares of SANZ Series A Preferred Stock, no par value (the “SANZ Series A Preferred Stock”), with an aggregate liquidation value equal to the amount of Losses for which such Person is entitled to be indemnified. In no event shall a SANZ Party be deemed to have incurred any Loss for which it shall be entitled to an indemnification payment pursuant to this Section 9.02 merely as a result of SANZ’s election to satisfy an indemnification obligation through the issuance of Series A Preferred Stock in accordance with the terms of this Section 9.02(d)(iii) rather than through the delivery of cash.

(iv) In the event that after the Closing a Holding Party is entitled to an indemnification payment pursuant to this Section 9.02(c), such Person shall be paid by SANZ in cash or in the form of newly issued shares of SANZ Series A Preferred Stock, with an aggregate liquidation value equal to the amount of Losses for which such Person is entitled to be indemnified; provided, however, that if a Holding Party is entitled to indemnification because a Holding Shareholder received fewer shares of SANZ Series B Preferred Stock or SANZ Common Stock than such Holding Shareholder was entitled under Section 1.02, SANZ at its election may satisfy such indemnification claim by issuing additional SANZ Common Stock or, if there is an insufficient amount of SANZ Common Stock authorized and unissued and unreserved, by issuing additional SANZ Series B Preferred Stock (or, if such indemnification claim relates to the SANZ Warrant, by substituting a revised Schedule A to the SANZ Warrant). In no event shall a Holding Party be deemed to have incurred any Loss for which it shall be entitled to an indemnification payment pursuant to this Section 9.02 merely as a result of SANZ’s election to satisfy an indemnification obligation through the issuance of Series A Preferred Stock in accordance with the terms of this Section 9.02(d)(iv) rather than through the delivery of cash.

(v) Notwithstanding Sections 9.02(d)(ii), 9.02(d)(iii) and 9.02(d)(iv), any costs and expenses of a defense assumed or participated in by anIndemnitor pursuant to Section 9.02(d) shall be paid in cash.

(vi) Notwithstanding anything to the contrary contained in this Section 9.02, (a) in no event shall an Indemnitor be liable for any Losses in excess of an aggregate of $2,000,000 and (b) in no event shall an Indemnitor be liable for any Losses unless such Indemnitor’s liability exceeds on a cumulative basis $200,000 (after which point such Indemnitor shall be liable for all Losses in excess of $200,000).

(vii) With respect to any indemnity payment made pursuant to Sections 9.02(c)(iii) or 9.02(c)(iv) in shares of SANZ Series A Preferred Stock, SANZ shall deliver the certificate or certificates representing such shares of SANZ Series A Preferred Stock free and clear of all Liens, charges, options, pledges, rights of other parties, voting trusts, proxies, stockholder or similar agreements, encumbrances or restrictions of any nature, other than as may exist under the Ancillary Agreements, and duly endorsed for transfer to the Indemnitee with all requisite transfer stamps (if any) affixed thereto and accompanied by duly executed stock powers.

(e) Defense of Third-Party Claims. Any Person making a claim for indemnification under this Section 9.02 (an “Indemnitee”) shall notify the indemnifying party (an “Indemnitor”) of the claim in writing promptly after receiving written notice of any action, lawsuit, proceeding, investigation or other claim against it (if by a third party), describing the claim, the amount thereof (if known and quantifiable) and the basis thereof; provided that the failure to so notify an Indemnitor shall not relieve the Indemnitor of its obligations hereunder except to the extent that (and only to the extent that) such failure shall have caused the damages for which the Indemnitor is obligated to be greater than such damages would have been had the Indemnitee given the Indemnitor prompt notice hereunder. Any Indemnitor shall be entitled to participate in the defense of such action, lawsuit, proceeding, investigation or other claim giving rise to an Indemnitee’s claim for indemnification at such Indemnitor’s expense, and at its option (subject to the limitations set forth below) shall be entitled to assume the defense thereof by appointing a recognized and reputable counsel acceptable to the Indemnitee to be the lead counsel in connection with such defense; provided that prior to the Indemnitor assuming control of such defense it shall first (1) verify to the Indemnitee in writing that such Indemnitor shall be fully responsible (with no reservation of any rights) for all Liabilities and obligations relating to such claim for indemnification (without regard to any dollar limitations otherwise set forth herein) and that it shall provide full indemnification (whether or not otherwise required hereunder) to the Indemnitee with respect to such action, lawsuit, proceeding, investigation or other claim giving rise to such claim for indemnification hereunder and (2) enter into an agreement with the Indemnitee in form and substance satisfactory to the Indemnitee which agreement unconditionally guarantees the payment and performance of any Liability or obligation which may arise with respect to such action, lawsuit, proceeding, investigation or facts giving rise to such claim for indemnification hereunder; and provided further, that:

(i) the Indemnitee shall be entitled to participate in the defense of such claim and to employ counsel of its choice for such purpose; provided that the fees and expenses of such separate counsel shall be borne by the Indemnitee (other than any fees and expenses of such separate counsel that are incurred prior to the date the Indemnitor effectively assumes control of such defense which, notwithstanding the foregoing, shall be borne by the Indemnitor, and except that the Indemnitor shall pay all of the fees and expenses of such separate counsel if the Indemnitee has been advised by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnitor and the Indemnitee);

(ii) the Indemnitor shall not be entitled to assume control of such defense (unless otherwise agreed to in writing by the Indemnitee) and shall pay the fees and expenses of counsel retained by the Indemnitee if (A) the claim for indemnification relates to or arises in connection with any criminal or quasi-criminal proceeding, action, indictment, allegation or investigation; (B) the Indemnitee reasonably believes an adverse determination with respect to the action, lawsuit, investigation, proceeding or other claim giving rise to such claim for indemnification would be detrimental to or injure the Indemnitee’s reputation or future business prospects; (C) the claim seeks an injunction or equitable relief against the Indemnitee; (D) the Indemnitee has been advised by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnitor and the Indemnitee; (E) the claim involves environmental or safety matters concerning any real property of the Indemnitee in which case the Indemnitee shall have sole control and management authority over the resolution of such claim (including hiring legal counsel and environmental consultants, conducting environmental investigations and cleanups, negotiating with governmental agencies and third parties and defending or settling claims and actions); or (F) the claim involves Taxes; provided that the Indemnitee shall keep the Indemnitor apprised of any major developments relating to any environmental or safety claim; or (G) upon petition by the Indemnitee, the appropriate court rules that the Indemnitor failed or is failing to vigorously prosecute or defend such claim; and

(iii) if the Indemnitor shall control the defense of any such claim, the Indemnitor shall obtain the prior written consent of the Indemnitee before entering into any settlement of a claim or ceasing to defend such claim if, pursuant to or as a result of such settlement or cessation, injunctive or other equitable relief will be imposed against the Indemnitee or if such settlement does not expressly and unconditionally release the Indemnitee from all Liabilities and obligations with respect to such claim, with prejudice.

(iv) If notice is given to Sun of the commencement of any lawsuit, action, arbitration, administrative or other proceeding, criminal prosecution or governmental investigation or inquiry or examination or audit involving any SANZ Party or any contract to which any SANZ Party is a party or by which it or any of the assets of any SANZ Party may be bound and Sun does not, within sixty (60) days after notice is given by such SANZ Party, give notice to such SANZ Party of Sun’s election to assume the defense thereof, subject to Section 9.02(e)(iii) above, Sun shall be bound by any determination made in such action or any compromise or settlement thereof effected by such SANZ Party.

(v) If notice is given to SANZ of the commencement of any lawsuit, action, arbitration, administrative or other proceeding, criminal prosecution or governmental investigation or inquiry or examination or audit involving any Holding Party or any contract to which any Holding Party is a party or by which it or any of the assets of any Holding Party may be bound and SANZ does not, within sixty (60) days after notice is given by such SANZ Party, give notice to such SANZ Party of Sun’s election to assume the defense thereof, subject to Section 9.02(e)(iii) above, Sun shall be bound by any determination made in such action or any compromise or settlement thereof effected by such SANZ Party.

(f) Payment. In the event that any Indemnitee determines that it is entitled to an indemnity payment pursuant to this Section 9.02, the Indemnitee shall deliver a written notice to the Indemnitor. If the Indemnitor disputes all or any portion of the claim, the Indemnitor must provide written notice of its objection (reasonably detailing the objection) to the Indemnitee within thirty (30) days after receipt of the notice by the Indemnitee from the Indemnitor. Failure by the Indemnitor to give any notice shall be deemed acknowledgment and agreement by the Indemnitor that it is liable for that portion of the claim as to which no objection is made.

9.03 Mutual Assistance. Each Party agrees that it will cooperate with the other Parties in the expeditious filing of all notices, reports and other filings with any governmental authority required to be submitted by such other Parties in connection with the execution and delivery of this Agreement and/or the other agreements contemplated hereby and the consummation of the transactions contemplated hereby or thereby.

9.04 Press Release and Announcements. Unless required by law (in which case each of Holding and SANZ agree to use reasonable efforts to consult with the other Party prior to any such disclosure as to the form and content of such disclosure), after the date hereof and through and including the Closing Date, no press releases, announcements to the employees, customers or suppliers of Holding or SANZ or any of their Subsidiaries or other releases of information related to this Agreement or the transactions contemplated hereby will be issued or released without the consent of each of Holding and SANZ. After the Closing, Holding and SANZ may issue any such releases of information without the consent of any other Party.

9.05 Expenses. Except as otherwise provided herein, Holding and Sun, on the one hand, and SANZ and Merger Sub, on the other hand, shall pay all of their own respective fees, costs and expenses (including fees, costs and expenses of legal counsel, investment bankers, brokers and other representatives and consultants) incurred in connection with the negotiation of this Agreement, the performance of their obligations hereunder and the consummation of the transactions contemplated hereby.

9.06 Specific Performance. Each of the Parties acknowledge and agree that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement is not performed in accordance with its specific terms or is otherwise breached. Accordingly, each of the Parties agree that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court in the United States or in any state having jurisdiction over the Parties and the matter in addition to any other remedy to which they may be entitled pursuant hereto.

9.07 Further Assurances. In the event that at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party hereto reasonably may request. Holding acknowledges and agrees that, from and after the Closing, the Surviving Corporation will be entitled to possession of all documents, books, records (including Tax records), agreements and financial data of any sort relating to Holding and its Subsidiaries. Each Party shall not in any manner take any action which is designed, intended or might be reasonably anticipated to have the effect of discouraging customers, suppliers, lessors, licensors and other business associates from maintaining the same business relationships with any other Party and its Subsidiaries and Affiliates at any time after the date of this Agreement as were maintained with such other Party and its Subsidiaries and Affiliates prior to the date of this Agreement.

9.08 Confidentiality. Each Party agrees not to disclose or use at any time before and after Closing (and each Party shall cause each of its Subsidiaries and Affiliates not to use or disclose at any time) any other Party’s Confidential Information. Each Party further agrees to take all appropriate steps (and to cause each of its Subsidiaries and Affiliates to take all appropriate steps) to safeguard such other Party’s Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. In the event any Party or any of its Subsidiaries or Affiliates is required by law to disclose any other Party’s Confidential Information, such Party shall promptly notify such other Party in writing, which notification shall include the nature of the legal requirement and the extent of the required disclosure, and such Party and its Subsidiaries and Affiliates shall cooperate with such other Party to preserve the confidentiality of such information consistent with applicable law.

9.09 Post-Closing Covenants. After the Closing, (i) at the next annual meeting of the stockholders of SANZ, SANZ will use (and Sun will not take any action to prevent SANZ from using) commercially reasonable efforts to amend its Amended and Restated Articles of Incorporation with the Amended Charter; and (ii) SANZ will use (and Sun will not take any action to prevent SANZ from using) commercially reasonable efforts to conduct a reverse stock split to increase the price of the SANZ Common Stock to levels consistent with NASDAQ National Market listing requirements. Sun agrees that is will vote its shares of SANZ equity securities as recommended by the board of directors of SANZ with respect to the foregoing charter amendment and reverse stock split.

9.10 Directors’ and Officers’ Insurance.

(a) For a period of six years after the Closing Date, SANZ shall continue (and Sun shall not take any action to prevent SANZ from continuing) to indemnify and hold harmless each present and former director and officer of it and its Subsidiaries and other persons entitled to indemnification under the charter, bylaws or similar organizational documents of SANZ or its Subsidiaries as in effect on the date hereof (“Covered Persons”) against any and all losses, costs, settlement payments, awards, judgments, fines, penalties, damages, expenses, deficiencies or other charges (including court filing fees, court costs, arbitration fees or costs, witness fees and fees and disbursements of legal counsel, expert witnesses, accountants and other professionals) (“Losses”) arising out of or pertaining to matters existing or occurring prior to the Closing Date, whether asserted or claimed prior to, at or after the Closing Date, to the fullest extent permitted under applicable law.

(b) SANZ shall and shall cause its Subsidiaries (and Sun shall not take any action to prevent SANZ from continuing) to maintain for a period of at least six years the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by SANZ on the date hereof with respect to claims arising from facts or events that occurred on or prior to the Closing Date, including in respect of the transactions contemplated by this Agreement. The provisions of the immediately preceding sentence and subsection (a) shall be deemed to have been satisfied if prepaid “tail” policies have been obtained by SANZ (or by the Person into which SANZ or any of its Subsidiaries has merged, or by any Person that acquires at least a majority of SANZ’s or its Subsidiaries’ outstanding voting securities or to which SANZ or its Subsidiaries have sold all or substantially all of its assets prior to the relevant transaction) prior to the closing of any such transaction in which SANZ or its Subsidiaries merges or sells all or substantially all of its assets, or a Person acquires a majority of the outstanding voting securities of SANZ or its Subsidiaries, which policies provide the Covered Persons with coverage at least as favorable to the Covered Persons as SANZ’s current policies of directors’ and officers’ liability insurance and fiduciary liability insurance for an aggregate period of not less than six years with respect to claims arising from facts or events that occurred on or prior to the Closing Date, including in respect of the transactions contemplated by this Agreement.

(c) This Section 9.10 is intended to survive the Closing, is intended to benefit SANZ and the Covered Persons, shall be binding on all successors and assigns of SANZ, and shall be enforceable by the Covered Persons. If SANZ or any of its Subsidiaries or any of their successors or assigns (i) consolidates with or merges with or into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, (ii) transfers or conveys all or substantially all of its properties and assets to any person or (iii) dissolves or liquidates, then, and in each such case, to the extent that the provisions of the second sentence of subsection (b) above are not satisfied, it shall be a condition precedent to such transaction or event that proper provision shall be made so that the successors and assigns of SANZ, such Subsidiary or such successor or assign assume the obligations set forth in this Section 9.10 or the prepaid policies described in (b) above are obtained.

9.11 Employee Benefit Plans. Following the Effective Time, SANZ shall, notwithstanding any provision of this Agreement to the contrary, for a period of at least six (6) months maintain and/or establish employee benefit plans that, in the aggregate, provide employees of SANZ and its Subsidiaries with benefits of substantially equal value to (i) those benefits they had immediately prior to the Effective Time or (ii) those benefit that employees of Holding had immediately prior to the Effective Time.

9.12 Additional Covenants. The Parties agree to be bound by each of the agreements set forth on Schedule 9.12 attached hereto.

9.13 Exclusive Remedy. The sole and exclusive remedy of any SANZ Party or any Holding Party for a breach of any representation or warranty contained in Article IV, Article V and Article VI, respectively, shall be limited to the right to seek indemnification to the extent expressly provided in Section 9.02, except in the case of fraud.

ARTICLE X

DEFINITIONS

10.01 Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:

“Affiliates” of any particular Person means any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and such “control” will be presumed if any Person owns 15% or more of the voting capital stock or other ownership interests, directly or indirectly, of any other Person.

“Affiliated Group” means an affiliated group as defined in Section 1504 of the Code (or any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law) of which any Person or any of its Subsidiaries is or has been a member, including any attachments thereto or any amendments thereof.

“Ancillary Agreements” means the Management Services Agreement, the Registration Rights Agreement, the Shareholders Agreement, the Credit SupportDocument and the Stock Option Agreement.

“Agreement” means this Agreement and Plan of Merger, including all Exhibits and Schedules hereto, as the same may be amended from time to time in accordance with its terms.

“Applicable Rate” means the prime rate of interest reported from time to time in The Wall Street Journal.

“Books and Records” means (a) all records and lists of the applicable Person and its Subsidiaries pertaining to their respective businesses (including, without limitation, merchandise and post-season analysis reports, marketing analysis reports and creative material) or customers, suppliers or personnel of the applicable Person or its Subsidiaries (including, without limitation, customer lists, mailing lists, e-mail address lists, recipient lists, sales records, correspondence with customers, customer files and account histories, supply lists and records of purchases from and correspondence with suppliers), (b) all product, business and marketing plans of the applicable Person and its Subsidiaries and (c) all books, ledgers, files, reports, plans, drawings and operating records of every kind maintained by the applicable Person and its Subsidiaries.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.).

“Code” means the Internal Revenue Code of 1986, as amended, and any reference to any particular Code section shall be interpreted to include any revision of or successor to that section regardless of how numbered or classified.

“Confidential Information” means all information of a confidential or proprietary nature (whether or not specifically labeled or identified as “confidential”), in any form or medium, that relates to the applicable Person’s business or the products, financial condition, services or research or development of the applicable Person or its Subsidiaries or their respective suppliers, distributors, customers, independent contractors or other business relations. Confidential Information includes, but is not limited to, the following: (i) internal business and financial information (including information relating to strategic and staffing plans and practices, business, finances, training, marketing, promotional and sales plans, data and practices, cost, rate and pricing structures and accounting and business methods); (ii) identities of, individual requirements of, specific contractual arrangements with, and information about, the applicable Person’s or any of its Subsidiaries’ current or potential suppliers, distributors, customers, independent contractors or other business relations and their confidential information; (iii) trade secrets, know-how, compilations of data and analyses, techniques, systems, formulae, recipes, research, records, reports, manuals, documentation, models, data and data bases relating thereto; (iv) inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable and whether or not reduced to practice); and (v) other Intellectual Property.

“Critical Representations” means the representations set forth in (i)Sections 4.01(a), 4.02, 4.03, 4.04 and the first sentence of 4.20, (ii) Sections 5.01(a), 5.02, 5.03, 5.04 and the first sentence in 5.20 and (iii) Sections 6.01, 6.02, 6.04 and 6.06.

“Disclosure Schedule” means the Holding Disclosure Schedule or SANZDisclosure Schedule, as applicable.

“Environmental and Safety Requirements” means all federal, state, local and foreign statutes, Regulations, ordinances and other provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law concerning worker health and safety, pollution or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, Release, threatened Release, control, or cleanup of any Hazardous Substances (including without limitation CERCLA and analogous state laws), each as amended or in effect prior to, on or after Closing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and all regulations issued thereunder.

“GAAP” means United States generally accepted accounting principles, as in effect from time to time.

“Guaranty” means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon the debt, obligation or other Liability of any other Person (other than by endorsements of instruments in the ordinary course of collection), or guaranties of the payment of dividends or other distributions upon the shares of any other Person.

“Hazardous Substances” means any pollutants, contaminants or chemicals, and any industrial, toxic or otherwise hazardous materials, substances or wastes with respect to which Liability or standards of conduct are imposed under any Environmental and Safety Requirements, including without limitation, noise, odors, radiation, petroleum and petroleum-related substances, products, by-products and wastes, asbestos, urea formaldehyde and lead-based paint.

“Indebtedness” means, with respect to any Person at any date, without duplication: (i) all obligations of such Person for borrowed money or in respect of loans or advances, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or debt securities, (iii) all obligations in respect of letters of credit and bankers’ acceptances issued for the account of such Person, (iv) all obligations arising from cash/book overdrafts, (v) all obligations arising from deferred compensation arrangements, (vi) all obligations of such Person secured by a Lien, (vii) all Guaranties of such Person in connection with any of the foregoing, (viii) all capital lease obligations, (ix) all deferred rent, (x) all indebtedness for the deferred purchase price of property or services with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables incurred in the ordinary course of business which are not past due), (xi) all other Liabilities classified as non-current Liabilities in accordance with GAAP as of the date of determination of such Indebtedness and (xii) all accrued interest, prepayment premiums or penalties related to any of the foregoing.

“Intellectual Property” means all of the following in any jurisdiction throughout the world: (i) patents, patent applications, patent disclosures, methods of doing business and inventions (whether or not patentable and whether or not reduced to practice), (ii) Internet domain names, trademarks, service marks, trade dress, trade names, slogans, logos and corporate names and all translations, adaptations, derivations and combination of the foregoing and registrations and applications for registration thereof together with all of the goodwill associated therewith, (iii) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof, (iv) mask works and registrations and applications for registration thereof, (v) computer software (including, without limitation, source code, executable code, data, databases and documentation); (vi) trade secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information), (vii) all other intellectual property rights and (viii) copies and tangible embodiments thereof (in whatever form or medium).

“Investment” as applied to any Person means (i) any direct or indirect purchase or other acquisition by such Person of any notes, obligations, instruments, stock, securities or ownership interest (including limited liability company interests, partnership interests and joint venture interests) of any other Person and (ii) any capital contribution by such Person to any other Person.

“Knowledge” means the knowledge of such Person’s and its Subsidiaries’ directors and executive officers, including facts of which such directors and officers should be aware after reasonable inquiry.

“Leased Real Property” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interest in real property held by Holding or its Subsidiaries or SANZ or its Subsidiaries, as applicable.

“Leases” means all leases, subleases, licenses, concessions and other agreements (written or oral), including all amendments, extensions, renewals, guaranties and other agreements with respect thereto, pursuant to which Holding or its Subsidiaries or SANZ or its Subsidiaries, as applicable, holds any Leased Real Property, including the right to all security deposits and other amounts and instruments deposited by or on behalf of Holding or its Subsidiaries or SANZ or its Subsidiaries, as applicable, thereunder.

“Liability” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due and regardless of when or by whom asserted), including, without limitation, any liability for Taxes.

“Lien” means any mortgage, pledge, hypothecation, lien (statutory or otherwise), preference, priority, security interest, Tax, security agreement, easement, covenant, restriction or other encumbrance of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any lease having substantially the same effect as any of the foregoing and any assignment or deposit arrangement in the nature of a security device).

“Material Adverse Effect” means a material and adverse effect, change or development upon the business or the operations, assets, Liabilities, financial condition, value, business prospects, operating results, cash flow, net worth or employee, customer or supplier relations of the applicable Person and its Subsidiaries, as the case may be, in each case taken as a whole, other than any such effects, changes or developments set forth with particularity by the SANZ Disclosure Schedule or the Holding Disclosure Schedule, as the case may be, and provided that none of the following shall be deemed by itself or by themselves, either alone or in combination with one another, to constitute a Material Adverse Effect on SANZ or Holding (as applicable): (a) any change in the market price or trading volume of the SANZ Common Stock; (b) any change arising out of conditions affecting the industry in which SANZ or Holding operates as a whole or the U.S. economy as a whole; (c) any change in Laws or Orders or interpretations thereof by courts or Governmental Authorities generally applicable to companies in the industry in which SANZ or Holding operates; (d) the expenses reasonably incurred by SANZ or Holding in entering into this Agreement and consummating the transactions contemplated hereby; or (e) any action or omission by either SANZ or Holding or any of their respective Subsidiaries, as the case may be, taken with the written permission of the other Party in connection with the transactions contemplated hereby.

“Permitted Liens” means (i) Liens for Taxes not yet due or the validity of which are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established on the applicable Person’s financial statements in accordance with GAAP and (ii) statutory landlord’s, mechanic’s, carrier’s, workmen’s, repairmen’s or other similar Liens arising or incurred in the ordinary course of business for amounts which are not due and payable and which would not, individually or in the aggregate, have a Material Adverse Effect on the applicable Person as currently conducted thereon.

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated association, corporation, limited liability company, entity or governmental entity (whether federal, state, county, city or otherwise and including any instrumentality, division, agency or department thereof).

“Regulation” means any law, statute, regulation, ruling, rule or order of, administered or enforced by or on behalf of, any court or governmental authority.

“Schedules” means the schedules attached hereto.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, association or other business entity, either (A) a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof, or (B) such Person is a general partner, managing member or managing director of such partnership, limited liability company, association or other entity.

“Tax” and, with correlative meaning, “Taxes” mean with respect to any Person (a) all federal, state, local, county, foreign and other taxes, assessments or other government charges, including, without limitation, any income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, registration, recording, documentary, conveyancing, gains, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property (real and personal), intangible, environmental or windfall profit tax, custom duty or other tax, governmental fee or other like assessment, charge, or tax of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any Taxing Authority responsible for the imposition of any such tax (domestic or foreign) and (b) Liability for the payment of any amounts of the type described in clause (a) above relating to any other Person as a result of being party to any agreement to indemnify such other Person, being a successor or transferee of such other Person, or being a member of the same affiliated, consolidated, combined, unitary or other group with such other Person.

“Tax Returns” means returns, declarations, reports, claims for refund, estimates, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Taxes of any party or the administration of any laws, regulations or administrative requirements relating to any Taxes.

“Taxing Authority” means any governmental authority.

“Treasury Regulations” means the United States Treasury Regulations promulgated under the Code, and any reference to any particular Treasury Regulation section shall be interpreted to include any final or temporary revision of or successor to that section regardless of how numbered or classified.

10.02 Certain Other Definitional Provisions.

(a)Accounting Terms. Accounting terms which are not otherwise defined in this Agreement have the meanings given to them under GAAP. To the extent that the definition of accounting term that is defined in this Agreement is inconsistent with the meaning of such term under GAAP, the definition set forth in this Agreement will control.

“Hereof,” etc. The terms “hereof,” “herein” and “hereunder” and terms of similar import are references to this Agreement as a whole and not to any particular provision of this Agreement. Section, clause, Schedule and Exhibit references contained in this Agreement are references to Sections, clauses, Schedules and Exhibits in or to this Agreement, unless otherwise specified.

ARTICLE XI

MISCELLANEOUS

11.01 Amendment and Waiver. Prior to the Effective Time, this Agreement may be amended, and any provision of this Agreement may be waived; provided that any such amendment or waiver will be binding upon the Parties only if such amendment or waiver is set forth in a writing executed by SANZ and Holding. No course of dealing between or among any Persons having any interest in this Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any Person under or by reason of this Agreement. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver. Following the Effective Time, (i) this Agreement, the SANZ Warrant and the Credit Support Document may not be amended if such amendment would have a material adverse effect on the shareholders of SANZ other than Sun and (ii) no provision of this Agreement may be waived by SANZ if such waiver would have a material adverse effect on the shareholders of SANZ other than Sun. Notwithstanding the immediately preceding sentence, Schedule 9.12 may only be amended in accordance with its terms.

11.02 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (i) when personally delivered, sent by telecopy (with hard copy to follow); (ii) one day after sent by reputable overnight express courier (charges prepaid), or (iii) five days following mailing by certified or registered mail, postage prepaid and return receipt requested. Unless another address is specified in writing, notices, demands and communications to Parties shall be sent to the addresses indicated below:

Notices to SANZ and Merger Sub:

SAN Holdings, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇’▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇

with a copy to (which shall not constitute notice to SANZ and Merger Sub):

▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Fish, LLP
World Trade Center West
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇

Notices to Holding and Sun:

Solunet Storage Holding Corp.
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Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and C. ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇

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

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Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇

11.03 Successors and Assigns. This Agreement and all of the covenants and agreements contained herein and rights, interests or obligations hereunder, by or on behalf of any of the Parties, shall bind and inure to the benefit of the respective heirs, successors and assigns of the Parties whether so expressed or not, except that neither this Agreement nor any of the covenants and agreements herein or rights, interests or obligations hereunder may be assigned or delegated by any Party prior to or after the Closing, without the prior written consent of the other Parties.

11.04 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

11.05 Interpretation; Construction. The headings and captions used in this Agreement, in any Schedule or Exhibit hereto, in the table of contents or in any index hereto are for convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize or in any way affect any provision of this Agreement or any Schedule or Exhibit hereto, and all provisions of this Agreement and the Schedules and Exhibits hereto shall be enforced and construed as if no caption or heading had been used herein or therein. Any capitalized terms used in any Schedule or Exhibit attached hereto and not otherwise defined therein shall have the meanings set forth in this Agreement. Each defined term used in this Agreement shall have a comparable meaning when used in its plural or singular form. The use of the word “including” herein shall mean “including without limitation” and, unless the context otherwise required, “neither,” “nor” “any” “either” and “or” shall not be exclusive. The parties hereto intend that each representation, warranty and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such Party has not breached shall not detract from or mitigate the fact that such Party is in breach of the first representation, warranty or covenant. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

11.06 No Third-Party Beneficiaries. Other than Sections 9.10 and 9.11 (which are intended to be for the benefit of the Persons specified therein and may be enforceable by such Persons), nothing herein expressed or implied is intended or shall be construed to confer upon or give to any Person other than the Parties and their respective permitted successors and assigns, any rights or remedies under or by reason of this Agreement, such third parties specifically including employees and creditors of the Parties.

11.07 Complete Agreement. This Agreement and the agreements and documents referred to herein contain the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter in any way.

11.08 Counterparts. This Agreement may be executed in one or more counterparts (including by means of telecopied signature pages), all of which taken together shall constitute one and the same instrument.

11.09 Delivery by Facsimile. This Agreement and any signed agreement or instrument entered into in connection with this Agreement, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any Party, each other Party shall re-execute original forms thereof and deliver them to all other Parties. No Party shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation of a contract and each such party forever waives any such defense.

11.10 Governing Law. This Agreement and all questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal law of the State of Delaware without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware.

11.11 Waiver of Trial by Jury. Each Party hereby irrevocably and unconditionally waive the right to a trial by jury in any action, suit, counterclaim or other proceeding (whether based on contract, tort or otherwise) arising out of, connected with or relating to this Agreement, any other transaction document, the transactions contemplated hereby or thereby.

11.12 Submission to Jurisdiction. Each Party submits to the jurisdiction of any federal court sitting in the state in which SANZ’s corporate headquarters is then located or (ii) if a federal court may not exercise jurisdiction, any state court sitting in the state in which SANZ’s corporate headquarters is then located in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of such action or proceeding may be heard and determined in any such court. Each Party also agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each Party waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. Any Party may make service on any other party by sending or delivering a copy of the process to the party to be served at the address and in the manner provided for the giving of notices in Section 11.02 above. Nothing in this Section 11.12, however, shall affect the right of any Party to bring any action or proceeding arising out of or relating to this Agreement in any other court or to serve legal process in any other manner permitted by law or at equity. Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity.

11.13 Legal Fees. If any Party to this Agreement seeks to enforce the terms and provisions of this Agreement, then the prevailing Party in such action shall be entitled to recover from the non-prevailing Party, all costs incurred in connection with such action, including without limitation reasonable fees, expenses and costs incurred at the trial court, all appellate courts and during negotiations.

11.14 Effectiveness. This Agreement shall be effective with respect to each Party hereto when such Party has executed and delivered to each other Party a counterpart signature page to this Agreement.

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement and Plan of Merger on the day and year first above written.

SAN HOLDINGS, INC.

By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇

Its: CEO

SAN MERGER SUBSIDIARY, INC.

By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇

Its: CEO

SUN SOLUNET, LLC

By: /s/ M. ▇▇▇▇▇▇ ▇▇▇▇
        Name: M. ▇▇▇▇▇▇ ▇▇▇▇
        Title: Vice President

SOLUNET STORAGE HOLDING CORP.

By: /s/ M. ▇▇▇▇▇▇ ▇▇▇▇
        Name: M. ▇▇▇▇▇▇ ▇▇▇▇
        Title: Vice President

SCHEDULE 9.12

As of immediately following the first shareholder meeting after the Effective Time, the SANZ board of directors shall have not less than three (3) directors who are Independent Directors. For purposes of this Agreement, an “Independent Director” means a person other than (i) an officer or employee of SANZ or any of its Affiliates; (ii) an officer or employee of Sun Capital or any of its Affiliates; (iii) a person having a relationship which, in the determination of the board of directors of SANZ, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director; or (iv) a person that would not qualify as an Independent Director under Rule 4200(a)(14) of the NASD Marketplace Rules or any similar or successor rule of the NASD, whether or not such rule is then otherwise applicable to SANZ. Notwithstanding the foregoing, (X) a person serving on the board of directors of one or more Affiliates of Sun Capital shall not be disqualified as an Independent Director pursuant to item (iii) or (iv) of the immediately preceding sentence merely as a result of his or her service as a member of the board of directors or one or more Affiliates of Sun Capital, and (Y) ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ and C. ▇▇▇▇▇ ▇▇▇▇▇▇ shall qualify as Independent Directors so long as, after the date of this Agreement, (i) such Person does not otherwise become an officer or employee of SANZ or any its Affiliates or an officer or employee of Sun Capital or any of its Affiliates and (ii) such Person does not form a new relationship which, in the determination of the board of directors of SANZ, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Following the Effective Time, SANZ shall maintain corporate governance policies that are consistent with the NASD Marketplace Rules, as in effect from time to time.

As of immediately following the first shareholder meeting after the Effective Time, there shall be a duly authorized committee (the “Independent Committee”) of the SANZ board of directors consisting of all of the Independent Directors, and the Independent Committee shall be duly authorized and directed to take any and all action that the Independent Committee determines in good faith is necessary or desirable to enforce this Schedule 9.12 and Section 9.02 of the Agreement for the benefit of SANZ stockholders other than Sun. At all times immediately following the first shareholder meeting after the Effective Time, the Independent Committee shall be duly authorized to retain such advisers reasonably acceptable to the SANZ board of directors and incur such expenses as the Independent Committee determines is necessary or desirable to carry out the respective purposes of this Schedule 9.12 and Section 9.02 of the Agreement.

Following the Effective Time, without the prior approval of a majority of the Independent Committee, SANZ shall not effect or enter into any agreement or understanding providing for, and neither Sun nor any Affiliate of Sun shall effect or enter into, or take any action to cause SANZ to effect or enter into, any agreement or understanding providing for a Related Party Transaction (as defined below). “Related Party Transaction” shall mean any one of the following: (i) any sale of or transfer of an interest in all or substantially all of the assets of SANZ or any of its Subsidiaries to Sun or any one or more of Sun’s Affiliates, in one or more related transactions, whether such sale is effected by merger, consolidation, recapitalization, sale of securities, sale of assets, or otherwise; or (ii) any sale of or transfer of an interest in all or substantially all of the assets of Sun or any of Sun’s Affiliates to SANZ or any one or more of its Subsidiaries, in one or more related transactions, whether such sale is effected by merger, consolidation, recapitalization, sale of securities, sale of assets, or otherwise. If at any time there is no Independent Committee, SANZ shall not effect or enter into any agreement or understanding providing for, and neither Sun nor any Affiliate of Sun shall effect or enter into, or take any action to cause SANZ to effect or enter into, any agreement or understanding providing for a Related Party Transaction.

Notwithstanding anything to the contrary contained herein, no provision of this Schedule 9.12 may be amended or waived unless such amendment or waiver is approved in advance by a majority of the Independent Committee.

The terms of this Schedule 9.12 shall be separately enforceable by SANZ against Sun notwithstanding any claim that Sun may have against SANZ arising under this Agreement. Under no circumstances ▇▇▇ ▇▇▇ setoff any claim of SANZ for monetary damages arising under this Schedule 9.12 against any right that Sun many have for monetary damages arising under this Agreement or any of the Ancillary Agreements.

AGREEMENT AND PLAN OF MERGER by and among SAN HOLDINGS, INC., SAN MERGER SUBSIDIARY, INC., SUN SOLUNET, LLC and SOLUNET STORAGE HOLDING CORP. March 31, 2003

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Table of Contents

AGREEMENT AND PLAN OF MERGER by and among SAN HOLDINGS, INC., SAN MERGER SUBSIDIARY, INC., SUN SOLUNET, LLC and SOLUNET STORAGE HOLDING CORP. March 31, 2003

SANZ DISCLOSURE SCHEDULE

HOLDING DISCLOSURE SCHEDULE

EXHIBITS

AGREEMENT AND PLAN OF MERGER

ARTICLE I

THE MERGER

ARTICLE II

ARTICLE III

ARTICLE IV

ARTICLE V

REPRESENTATIONS AND WARRANTIESOF HOLDING

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF SUN

ARTICLE VII

COVENANTS PRIOR TO CLOSING

ARTICLE VIII

TERMINATION

ARTICLE IX

ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING

ARTICLE X

DEFINITIONS

ARTICLE XI

MISCELLANEOUS

SCHEDULE 9.12

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REPRESENTATIONS AND WARRANTIES
OF HOLDING