UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended June 30, 2010

or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from _______ to _______

Commission file number 000-52049

SYNCHRONOSS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		06-1594540 (I.R.S. Employer Identification No.)
750 Route 202 South, Suite 600 Bridgewater, New Jersey (Address of principal executive offices)		08807 (Zip Code)

(866) 620-3940
(Registrant’s telephone number, including area code)

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Shares outstanding of the Registrant’s common stock:

Class		Outstanding at July 29, 2010
Common stock, $0.0001 par value		31,367,545 shares

 

 

SYNCHRONOSS TECHNOLOGIES, INC.
FORM 10-Q INDEX

		PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements and Notes
Consolidated Balance Sheets (unaudited)			2
Consolidated Statements of Income (unaudited)			3
Consolidated Statements of Cash Flows (unaudited)			4
Notes to Consolidated Financial Statements (unaudited)			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
Item 3. Quantitative and Qualitative Disclosures About Market Risk			17
Item 4. Controls and Procedures			18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			18
Item 1A. Risk Factors			19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			19
Item 3. Defaults Upon Senior Securities			19
Item 4. [Reserved]			19
Item 5. Other Information			19
Item 6. Exhibits			19
SIGNATURES			20
Exhibit 10.17
Exhibit 10.18
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

SYNCHRONOSS TECHNOLOGIES, INC.

		June 30,				December 31,
		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	92,168			$	89,924
Marketable securities			2,204				2,558
Accounts receivable, net of allowance for doubtful accounts of $390 and $830 at June 30, 2010 and December 31, 2009, respectively			30,375				25,939
Prepaid expenses and other assets			6,251				4,069
Deferred tax assets			1,468				1,462
Total current assets			132,466				123,952
Marketable securities			7,909				5,202
Property and equipment, net			25,690				23,735
Goodwill			6,911				6,911
Intangible assets, net			2,221				2,727
Deferred tax assets			9,000				8,992
Other assets			2,314				1,040
Total assets		$	186,511			$	172,559
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	4,757			$	5,171
Accrued expenses			6,079				7,350
Deferred revenues			4,023				3,095
Total current liabilities			14,859				15,616
Lease financing obligation — long-term			9,181				9,150
Other liabilities			1,605				1,329
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively			—				—
Common stock, $0.0001 par value; 100,000 shares authorized, 33,366 and 33,104 shares issued; 31,366 and 31,104 outstanding at June 30, 2010 and December 31, 2009, respectively			3				3
Treasury stock, at cost (2,000 shares at June 30, 2010 and December 31, 2009)			(23,713	)			(23,713	)
Additional paid-in capital			126,504				117,797
Accumulated other comprehensive income (loss)			2				(7	)
Retained earnings			58,070				52,384
Total stockholders’ equity			160,866				146,464
Total liabilities and stockholders’ equity		$	186,511			$	172,559

See accompanying consolidated notes.

SYNCHRONOSS TECHNOLOGIES, INC.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Net revenues		$	37,218			$	30,554			$	72,281			$	60,107
Costs and expenses:
Cost of services*			19,013				15,190				36,655				30,389
Research and development			4,907				3,000				9,191				6,116
Selling, general and administrative			6,368				5,588				12,845				11,657
Depreciation and amortization			1,857				2,270				3,852				4,110
Total costs and expenses			32,145				26,048				62,543				52,272
Income from operations			5,073				4,506				9,738				7,835
Interest income and other income			122				153				233				352
Interest expense and other expense			(293	)			(245	)			(567	)			(296	)
Income before income tax expense			4,902				4,414				9,404				7,891
Income tax expense			(1,949	)			(1,857	)			(3,718	)			(3,229	)
Net income		$	2,953			$	2,557			$	5,686			$	4,662
Net income per common share:
Basic		$	0.09			$	0.08			$	0.18			$	0.15
Diluted		$	0.09			$	0.08			$	0.18			$	0.15
Weighted-average common shares outstanding:
Basic			31,206				30,769				31,124				30,722
Diluted			32,203				31,378				32,057				31,289

See accompanying consolidated notes.

SYNCHRONOSS TECHNOLOGIES, INC.

		Six Months Ended
		June 30,
		2010				2009
Operating activities:
Net income		$	5,686			$	4,662
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			3,852				4,110
Loss on disposal of fixed assets			24				—
Deferred income taxes			(14	)			112
Non-cash interest on leased facility			456				226
Stock-based compensation			5,584				3,945
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts			(4,436	)			(1,905	)
Prepaid expenses and other current assets			(1,563	)			(1,711	)
Other assets			(1,274	)			150
Accounts payable			(414	)			3,778
Accrued expenses			(1,271	)			(5,497	)
Tax benefit from the exercise of stock options			(618	)			(215	)
Other liabilities			276				(77	)
Deferred revenues			928				1,418
Net cash provided by operating activities			7,216				8,996
Investing activities:
Purchases of fixed assets			(5,319	)			(9,324	)
Proceeds from the sale of fixed assets			1				—
Purchases of marketable securities available for sale			(4,134	)			(1,165	)
Maturity of marketable securities available for sale			1,794				1,542
Net cash used in investing activities			(7,658	)			(8,947	)
Financing activities:
Proceeds from the exercise of stock options			2,505				733
Excess tax benefit from the exercise of stock options			618				215
Payments on capital obligations			(425	)			—
Net cash provided by financing activities			2,698				948
Effect of exchange rate changes on cash			(12	)			—
Net increase in cash and cash equivalents			2,244				997
Cash and cash equivalents at beginning of year			89,924				72,203
Cash and cash equivalents at end of period		$	92,168			$	73,200
Supplemental disclosures of cash flow information:
Cash paid for income taxes		$	4,460			$	4,327
Supplemental disclosures of cash flow information:
Non-cash increase in building and related lease liability		$	—			$	2,123

See accompanying consolidated notes.

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS — UNAUDITED (Continued)
(in thousands, except per share data unless otherwise noted)

The consolidated financial statements at June 30, 2010 and for the three and six months ended June 30, 2010 and 2009 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the financial statements and notes in the Annual Report of Synchronoss Technologies, Inc. incorporated by reference in the Company’s annual report on Form 10-K for the year ended December 31, 2009. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Synchronoss Technologies UK Ltd., Synchronoss Technologies Ireland, Ltd., Wisor Telecom Corporation (“Wisor”) and Synchronoss Telecom India Private Ltd. All significant intercompany balances and transactions are eliminated in consolidation. The Company has no unconsolidated subsidiaries or investments accounted for under the equity method. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The balance sheet at December 31, 2009 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

1. Description of Business

Synchronoss Technologies, Inc. (the “Company” or “Synchronoss”) is a leading provider of on-demand transaction management platforms that enable communications service providers (CSPs), cable operators/ multi-services operators (MSOs), original equipment manufacturers (OEMs) with embedded connectivity (e.g. smartphones, laptops, netbooks and mobile Internet devices, among others), e-Tailers/retailers and other customers to accelerate and monetize their go-to-market strategies for connected devices. This includes automating subscriber activation, order management and service provisioning from any channel (e.g., e-commerce, telesales, customer stores, indirect and other retail outlets, etc.) to any communication service (e.g., wireless(2G, 3G, 4G), high speed access, local access, IPTV, cable, satellite TV, etc.) across any connected device type. The Company’s ConvergenceNow^®, ConvergenceNow^® Plus⁺ and InterconnectNow^TM platforms provide end-to-end seamless integration between customer-facing channels/applications, communication services, or devices and “back-office” infrastructure-related systems and processes. The Company’s customers rely on its cloud-based solutions and technology to automate the process of activating customers while delivering additional communication services, including new service offerings and ongoing customer care. Synchronoss has designed its platforms to be flexible and scalable to enable multiple converged communication services to be managed across multiple distribution channels, including e-commerce, telesales, customer stores, indirect, and other retail outlets, etc., allowing the Company to meet the rapidly changing and converging services and connected devices offered by its customers. The Company enables its customers to acquire, retain and service subscribers quickly, reliably and cost-effectively by simplifying the processes associated with managing the customer experience for ordering and activating connected devices and services through the use of its platforms.

2. Basis of Presentation

For further information about the Company’s basis of presentation or its significant accounting policies, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2009.

3. Recent Accounting Pronouncements

Impact of Recently Issued Accounting Standards

In April 2010, the FASB issued ASU 2010-17, Revenue Recognition — Milestone Method (Topic 605): Milestone Method of Revenue Recognition (“ASU 2010-17”). ASU 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Consideration that is contingent on achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone is judged to meet certain criteria to be considered substantive. Milestones should be considered substantive in their entirety and may not be bifurcated. An arrangement may contain both substantive and non-substantive milestones, and each milestone should be evaluated individually to determine if it is substantive. ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010, with early adoption permitted. The Company is currently evaluating the early adoption option and because the Company currently does not have performance payment milestones in its contractual arrangements it does not expect that the adoption would have a material impact on the consolidated financial statements.

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS — UNAUDITED (Continued)
(in thousands, except per share data unless otherwise noted)

4. Earnings per Common Share

The Company calculates basic and diluted per share amounts based on net earnings for the periods presented. The Company uses the weighted average number of common shares outstanding during the period to calculate basic earnings per share. The weighted average number of common shares used in the Company’s calculation of diluted per share amounts includes the dilutive effects of stock options and restricted stock awards based on the treasury stock method. The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income attributable to common stockholders per common share. Stock options that are anti-dilutive and excluded from the following table totaled 1,691 and 523 for the three months ended June 30, 2010 and 2009, respectively, and 1,526 and 1,217 for the six months ended June 30, 2010 and 2009, respectively.

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Numerator:
Net income		$	2,953			$	2,557			$	5,686			$	4,662
Denominator:
Weighted average common shares outstanding — basic			31,206				30,769				31,124				30,722
Dilutive effect of:
Options and unvested restricted shares			997				609				933				567
Weighted average common shares outstanding — diluted			32,203				31,378				32,057				31,289

5. Comprehensive Income

The components of comprehensive income are as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Net Income		$	2,953			$	2,557			$	5,686			$	4,662
Translation adjustments			(56	)			114				(2	)			53
Unrealized gain (loss) on securities, (net of tax)			13				(8	)			11				34
Total Other Comprehensive Income		$	2,910			$	2,663			$	5,695			$	4,749

6. Fair Value Measurements of Cash, Cash Equivalents and Marketable Securities

The Company classifies marketable securities as available-for-sale. The fair value hierarchy established in the guidance adopted by the Company prioritizes the inputs used in valuation techniques into three levels as follows:

•

Level 1 — Observable inputs — quoted prices in active markets for identical assets and liabilities;

	•		Level 2 — Observable inputs other than the quoted prices in active markets for identical assets and liabilities — includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets; and
	•		Level 3 — Unobservable inputs — includes amounts derived from valuation models where one or more significant inputs are unobservable and require us to develop relevant assumptions.

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS — UNAUDITED (Continued)
(in thousands, except per share data unless otherwise noted)

The following is a summary of cash, cash equivalents and marketable securities held by the Company and their related classifications under the fair value hierarchy.

		June 30,				December 31,
		2010				2009
Level 1 (A)		$	92,168			$	89,924
Level 2 (B)			10,113				7,760
Total		$	102,281			$	97,684

The Company utilizes the market approach to measure fair value for its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The Company’s marketable securities investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the three months and six months ended June 30, 2010. No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the three months and six months ended June 30, 2010.

The aggregate fair value of available for sale securities and aggregate amount of unrealized gains and losses for available for sale securities at June 30, 2010 were as follows:

						Aggregate Amount of
		Aggregate				Unrealized
		Fair Value				Gains				Losses
Due in one year or less		$	2,204			$	21			$	—
Due after one year, less than five years			7,909				85				(6	)
		$	10,113			$	106			$	(6	)

The aggregate fair value of available for sale securities and aggregate amount of unrealized gains and losses for available for sale securities at December 31, 2009 were as follows:

						Aggregate Amount of
		Aggregate				Unrealized
		Fair Value				Gains				Losses
Due in one year or less		$	2,558			$	43			$	—
Due after one year, less than five years			5,202				48				(6	)
		$	7,760			$	91			$	(6	)

Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. The cost of securities sold is based on specific identification method. No available for sale securities have been in a continuous unrealized loss position for twelve months or longer.

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS — UNAUDITED (Continued)
(in thousands, except per share data unless otherwise noted)

7. Stockholders’ Equity

Stock Options

The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The weighted-average assumptions used in the Black-Scholes option pricing model are as follows:

		Three Months Ended June 30,								Six Months Ended June 30
		2010				2009				2010				2009
Expected stock price volatility			62	%			62	%			63	%			62	%
Risk-free interest rate			2.55	%			2.90	%			2.58	%			2.93	%
Expected life of options (in years)			4.90				4.93				4.91				4.93
Expected dividend yield			0	%			0	%			0	%			0	%

The weighted-average fair value (as of the date of grant) of the options granted was $10.72 and $6.23 per share for the three months ended June 30, 2010 and 2009, respectively, and $10.40 and $6.05 for the six months ended June 30, 2010 and 2009, respectively. During the three months ended June 30, 2010 and 2009, the Company recorded total pre-tax stock-based compensation expense of $2.8 million ($1.8 million after tax or $0.06 per diluted share) and $2.0 million ($1.4 million after tax or $0.04 per diluted share), respectively, which includes both intrinsic value for equity awards issued prior to 2006 and fair value for equity awards issued after January 1, 2006. During the six months ended June 30, 2010 and 2009, the Company recorded total pre-tax stock-based compensation expense of $5.6 million ($3.7 million after tax or $0.12 per diluted share) and $3.9 million ($2.8 million after tax or $0.09 per diluted share), respectively, which includes both intrinsic value for equity awards issued prior to 2006 and fair value for equity awards issued after January 1, 2006. The total stock-based compensation cost related to non-vested equity awards not yet recognized as an expense as of June 30, 2010 was approximately $20.8 million. That cost is expected to be recognized over a weighted-average period of approximately 2.84 years.

The following table summarizes information about stock options outstanding:

		Options Outstanding
										Option
		Shares				Number				Exercise Price				Weighted-
		Available				of				per Share				Average
		for Grant				Shares				Range				Exercise Price
Balance at December 31, 2009			310				4,623			$	0.29 – 38.62			$	13.44
Options granted			686				686			$	15.89 – 20.91			$	20.13
Options exercised			—				(262	)		$	0.29 – 17.90			$	9.57
Options forfeited			17				(29	)		$	10.27 – 35.85			$	15.95
Expansion of pool in May 2010			3,000				—
Balance at June 30, 2010			4,013				5,018			$	0.29 – 38.62			$	14.55

A summary of the Company’s non-vested restricted stock at June 30, 2010, and changes during the six months ended June 30, 2010, is presented below:

		Number of
Non-Vested Restricted Stock		Awards
Non-vested at January 1, 2010			114
Granted			17
Vested			(29	)
Forfeited			—
Non-vested at June 30, 2010			102

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS — UNAUDITED (Continued)
(in thousands, except per share data unless otherwise noted)

8. Capital Transactions

On February 1, 2010, the Company filed with the Securities and Exchange Commission a universal shelf registration statement on Form S-3. The registration statement covers the offer and sale of up to $150 million of securities which may include debt securities, warrants, common stock and preferred stock. The registration statement was declared effective by the Securities and Exchange Commission on April 14, 2010. The Company has no immediate plans or current commitments to sell securities. The terms of any offering under its shelf registration statement will be determined at the time of the offering and disclosed in a prospectus supplement filed with the Securities and Exchange Commission.

9. Legal Matters

On September 5, 2008, September 18, 2008, and September 23, 2008, three complaints were filed against the Company and certain of its officers and directors in the United States District Court for the District of New Jersey purportedly on behalf of a class of shareholders who purchased the Company’s common stock between February 4, 2008 and June 9, 2008 (the “Securities Law Actions”). The complaints were consolidated and an amended complaint was filed by the plaintiffs on March 13, 2009. The plaintiffs in each complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. They alleged that certain of the Company’s public disclosures regarding its financial prospects during the proposed class period were false and/or misleading. The principal allegation set forth in each complaint was that the Company issued misleading statements concerning its business prospects relating to the activation of Apple Inc.’s iPhone product. On April 7, 2010, the Court granted the Company’s Motion to Dismiss all of the claims against all of the defendants without prejudice.

On October 23, 2008 and November 3, 2008, complaints were filed in the state court of New Jersey and the United States District Court for the District of New Jersey against certain of the Company’s officers and directors, purportedly derivatively on behalf of the Company (the “Derivative Suits”). The Complaints in the Derivative Suits assert that the named officers and directors breached their fiduciary duties and other obligations in connection with the disclosures that also are the subject of the Securities Law Actions described above. The Company is also named as a nominal defendant in the Derivative Suits, although the lawsuits are derivative in nature and purportedly asserted on the Company’s behalf. The plaintiffs seek compensatory damages, costs, fees, and other relief within the Court’s discretion. The plaintiffs in the Derivative Suits have agreed to stay their claims pending the court’s decision in the Defendant’s Motion to Dismiss in the Securities Laws Actions. The proceedings in the state court of New Jersey are currently subject to the stay order in that case, and in the U.S. District Court for the District of New Jersey Defendants’ deadline to answer or otherwise respond is currently set for September 17, 2010. Due to the inherent uncertainties of litigation, the Company cannot predict the outcome of the Derivative Suits at this time, and the Company can give no assurance that the claims in these complaints will not have a material adverse effect on its financial position or results of operations.

Except for the above claims, the Company is not currently subject to any legal proceedings that could have a material adverse effect on its operations; however, it may from time to time become a party to various legal proceedings arising in the ordinary course of its business.

10. Subsequent Events Review

The Company has evaluated all subsequent events and transactions through the filing date. On July 19, 2010 the Company acquired 100% of FusionOne, Inc. (“FusionOne”) a leader in mobile content transfer and synchronization software. The Company paid approximately $40 million at closing, comprised of approximately $32 million in cash and issued approximately 400 thousand shares totaling $8 million in stock, and potentially may make payments totaling up to $35 million in cash and stock, based on achievements of certain financial targets for the period from July 1, 2010 through December 31, 2011. The acquisition of FusionOne accelerates the Company’s overall connected device growth strategy and customer diversification efforts. The Company is currently evaluating the acquisition-date fair value and the acquisition-related costs.

On July 29, 2010, the Company’s Board of Directors adopted the Synchronoss Technologies, Inc. 2010 New Hire Equity Incentive Plan. The Company’s Board of Directors also granted options to purchase an aggregate of 410,000 shares of the Company’s common stock and 20,000 shares of restricted common stock of the Company to certain employees of FusionOne in connection with the Company’s acquisition of FusionOne.

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the information set forth in our consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q and in our annual report Form 10-K for the year ended December 31, 2009. This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management as of the date hereof based on information currently available to our management. Use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “should, “continues,” “likely” or similar expressions, indicate a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions. Actual results may differ materially from the forward-looking statements we make. We caution investors not to place substantial reliance on the forward-looking statements included in this report. These statements speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments. All numbers are expressed in thousands unless otherwise stated.

Overview

We are a leading provider of on-demand transaction management platforms that enable communications service providers (CSPs), cable operators/ multi-services operators (MSOs), original equipment manufacturers (OEMs) with embedded connectivity (e.g. smartphones, laptops, netbooks and mobile Internet devices, among others), e-Tailers/retailers and other customers to accelerate and monetize their go-to-market strategies for connected devices. This includes automating subscriber activation, order management and service provisioning from any channel (e.g., e-commerce, telesales, customer stores, indirect and other retail outlets, etc.) to any communication service (e.g., wireless(2G, 3G, 4G), high speed access, local access, IPTV, cable, satellite TV, etc.) across any connected device type. Our ConvergenceNow^®, ConvergenceNow^® Plus⁺ and InterconnectNow^TM platforms provide end-to-end seamless integration between customer-facing channels/applications, communication services, or devices and “back-office” infrastructure-related systems and processes. Our customers rely on our cloud-based solutions and technology to automate the process of activating customers while delivering additional communication services, including new service offerings and ongoing customer care. Our platforms are designed to be flexible and scalable to enable multiple converged communication services to be managed across multiple distribution channels allowing us to meet the rapidly changing and converging services and connected devices offered by our customers. We enable our customers to acquire, retain and service subscribers quickly, reliably and cost-effectively by simplifying the processes associated with managing the customer experience for ordering and activating connected devices and services through the use of our platforms.

Our industry-leading customers include tier 1 service providers such as AT&T Inc., Verizon Wireless and Vodafone, tier 1 cable operators /MSOs like Cablevision, Charter Communications, Comcast, and Time Warner Cable and large OEMs/e-Tailers such as Apple, Dell and Nokia. These customers utilize our platforms, technology and services to service both consumer and business customers, including over 300 of the Fortune 500 companies.

Revenues

We generate a substantial portion of our revenues on a per-transaction basis, most of which is derived from contracts that extend up to 60 months from execution. For the three months ended June 30, 2010 and 2009, we derived approximately 79% and 81%, respectively, of our revenues from transactions processed. Most of the remainder of our revenues was generated by professional services.

Historically, our revenues have been directly impacted by the number of transactions processed. In recent years, the fourth quarter has had the highest volume of transactions processed due to increased consumer activation activity during the holiday season. The future success of our business depends on the continued growth of consumer and business transactions and, as such, the volume of transactions that we process could fluctuate on a quarterly basis. See “Current Trends Affecting Our Results of Operations” for certain matters regarding future results of operations.

We currently derive a significant portion of our revenues from one customer, AT&T. For the three months ended June 30, 2010 and 2009, AT&T accounted for approximately 66% of our revenues. Our agreement with AT&T was renewed effective January 1, 2009 and runs through December of 2011. AT&T may renew this agreement for two additional one year periods. This agreement defines the work activities, transaction pricing, forecasting process, service level agreements and remedies associated with certain services performed by us for AT&T’s ecommerce organization. The agreement provides for AT&T to pay us (i) a monthly hosting fee, (ii) a fee based on the number of transactions processed through our technology platform, (iii) a fee based on manual processing services and (iv) for professional services rendered by us. A copy of this agreement has been previously filed with the Securities & Exchange Commission.

Our five largest customers, for the three months ending June 30, 2010 were AT&T, Time Warner Cable, Level 3, Frontier Communications and Dell, which accounted for approximately 83% of our revenues, compared to 86% of our revenues from our five largest customers, AT&T, Time Warner Cable, Level 3, Vonage and Cablevision, for the three months ended June 30, 2009. See “Risk Factors” for certain matters bearing risks on our future results of operations.

Costs and Expenses

Our costs and expenses consist of cost of services, research and development, selling, general and administrative, depreciation and amortization and interest and other expense.

Cost of services includes all direct materials, direct labor, cost of facilities and those indirect costs related to revenues such as indirect labor, materials and supplies. Our primary cost of services is related to our information technology and systems department, including network costs, data center maintenance, database management and data processing costs, as well as personnel costs associated with service implementation, customer deployment and customer care. Also included in cost of services are costs associated with our exception handling centers and the maintenance of those centers. Currently, we utilize a combination of employees and third-party providers to process transactions through these centers.

Research and development costs are expensed as incurred unless they meet GAAP criteria for deferral and amortization. Software development costs incurred prior to the establishment of technological feasibility do not meet these criteria, and are expensed as incurred. Research and development expense consists primarily of costs related to personnel, including salaries and other personnel-related expenses, consulting fees and the cost of facilities, computer and support services used in service technology development. We also expense costs relating to developing modifications and minor enhancements of our existing technology and services.

Selling, general and administrative expense consists of personnel costs including salaries, sales commissions, sales operations and other personnel-related expense, travel and related expense, trade shows, costs of communications equipment and support services, facilities costs, consulting fees and costs of marketing programs, such as Internet and print. General and administrative expense consists primarily of salaries and other personnel-related expense for our executive, administrative, legal, finance and human resources functions, facilities, professional services fees, certain audit, tax and bad debt expense.

Depreciation and amortization relates to our property and equipment and includes our network infrastructure and facilities. Amortization relates to the customer lists and technology acquired from Wisor in 2008.

Interest and other expense consist of interest on our lease financing obligations and other non-operating expenses.

Current Trends Affecting Our Results of Operations

Our on-demand business model enables delivery of our proprietary solutions over the Web as a service and has been driven by market trends such as various forms of order provisioning, local number portability, the implementation of new technologies, subscriber growth, competitive churn, network changes, growth of the emerging device market (i.e., smartphone devices, netbooks, etc.) and consolidations in the industry. In particular, the emergence of order provisioning of e-commerce transactions for smartphone devices, wireless, VoIP, LNP, and other communication services surrounding the convergence of bundled services has increased the need for our services and we believe will continue to be a source of growth for us.

To support the growth driven by the favorable industry trends mentioned above, we continue to look for opportunities to improve our operating efficiencies, such as the utilization of offshore technical and non-technical resources for our exception handling center management. We believe that these opportunities will continue to provide future benefits and position us to support revenue growth. In addition, we anticipate further automation of the transactions generated by our more mature customers and additional transaction types. Our cost of services can fluctuate from period to period based upon the level of automation and the on-boarding of new transaction types.

We continue to advance our plans for the expansion of our platform footprint with international carriers to support connected devices and multiple networks through our focus on transaction management. Our initiatives with AT&T across direct and indirect commerce channels, business and consumer segments continue to grow along with our account presence with a number of Tier 1 cable MSO’s and connected device OEM’s. We are also exploring additional opportunities through merger and acquisition activities to support our customer, product and geographic diversification strategies.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these consolidated financial statements in accordance with GAAP requires us to utilize accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during a fiscal period. The Securities and Exchange Commission (“SEC”) considers an accounting policy to be critical if it is important to a company’s financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. We have discussed the selection and development of the critical accounting policies with the audit committee of our board of directors, and the audit committee has reviewed our related disclosures in this Form 10-Q. Although we believe that our judgments and estimates are appropriate, correct and reasonable under the circumstances, actual results may differ from those estimates.

We believe that of our significant accounting policies, which are described in Note 2 in our Annual Report on Form 10-K for the year ended December 31, 2009, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected. See “Risk Factors” for certain matters bearing risks on our future results of operations.

•

Revenue Recognition and Deferred Revenue

•

Income Taxes

•

Goodwill and Impairment of Long-Lived Assets

•

Stock-Based Compensation

•

Allowance for Doubtful Accounts

There were no significant changes in our critical accounting policies and estimates during the three months ended June 30, 2010. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2009 for a more complete discussion of our critical accounting policies and estimates.

Results of Operations

Three months ended June 30, 2010 compared to the three months ended June 30, 2009

The following table presents an overview of our results of operations for the three months ended June 30, 2010 and 2009.

		Three Months Ended																Three Months Ended
		June 30,																June 30,
		2010								2009								2010 vs 2009
		$				% of Revenue				$				% of Revenue				$ Change				% Change
		(in thousands)
Net revenue		$	37,218				100.0	%		$	30,554				100.0	%		$	6,664				21.8	%
Cost of services*			19,013				51.1	%			15,190				49.7	%			3,823				25.2	%
Research and development			4,907				13.2	%			3,000				9.8	%			1,907				63.6	%
Selling, general and administrative			6,368				17.1	%			5,588				18.3	%			780				14.0	%
Depreciation and amortization			1,857				5.0	%			2,270				7.4	%			(413	)			(18	)%
			32,145				86.4	%			26,048				85.3	%			6,097				23.4	%
Income from operations		$	5,073				13.6	%		$	4,506				14.7	%		$	567				12.6	%

Net Revenue. Net revenues increased $6.7 million to $37.2 million for the three months ended June 30, 2010, compared to the three months ended June 30, 2009. This increase was due primarily to increased transaction volumes and expansion into new programs from our AT&T relationship. Net revenues related to AT&T increased $4.4 million to $24.5 million for the three months ended June 30, 2010 compared to the same period in 2009. AT&T represented 66% of our revenues for the three months ended June 30, 2010 and 2009. Net revenues outside of AT&T generated $12.7 million of our revenues during the three months ended June 30, 2010 as compared to $10.4 million during the three months ended June 30, 2009. Net revenues outside of AT&T represented 34% of our revenues during the three months ended June 30, 2010 and 2009. Transaction revenues recognized for the three months ended June 30, 2010 and 2009 represented 79% or $29.4 million and 81% or $24.6 million of net revenues, respectively. Professional service revenues increased as a percentage of sales to 19% or $7.2 million for the three months ended June 30, 2010, compared to 18% or $5.6 million for the previous three months ended June 30, 2009.

Expense

Cost of Services. Cost of services increased $3.8 million to $19.0 million for the three months ended June 30, 2010, compared to the same period in 2009, due primarily to an increase of $1.5 million in personnel and related costs and an increase of $341 thousand in stock-based compensation. The increase in personnel and related costs and stock-based compensation was due primarily to an increase in headcount. There was an increase of $1.2 million for outside consultants related to growth in programs with existing customers. There was an increase of $703 thousand in telecommunication and facility costs related to the increased capacity associated with our data facilities that included increases related to the global deployment of our ConvergenceNow^® Plus⁺ platform. Additionally there was an increase in travel costs of $89 thousand related to our global and domestic expansion. Cost of services as a percentage of revenues increased to 51.1% for the three months ended June 30, 2010, as compared to 49.7% for the three months ended June 30, 2009.

Research and Development. Research and development expense increased $1.9 million to $4.9 million for the three months ended June 30, 2010, compared to the same period in 2009, due primarily to an increase of $983 thousand in personnel and related costs and an increase of $196 thousand in stock based compensation. The increase in personnel and related costs and stock-based compensation was due to increased headcount. In addition there was an increase of $541 thousand in consulting costs related to the development of new technologies and an increase of $215 thousand in telecommunication and facility costs related to the increase in headcount and the utilization of our expanded resources. Research and development expense as a percentage of revenues increased to 13.2% for the three months ended June 30, 2010 as compared to 9.8% for the three months ended June 30, 2009.

Selling, General and Administrative. Selling, general and administrative expense increased $780 thousand to $6.4 million for the three months ended June 30, 2010, compared to the same period in 2009 due to an increase in personnel and related costs of $316 thousand and stock-based compensation expense of $251 thousand, consulting costs of $333 thousand and marketing costs of $132 thousand offset by a decrease in professional services of $187 thousand and a decrease in telecommunication and facility costs of $91 thousand. The increase in personnel and related and stock-based compensation costs was primarily due to an increase in headcount. The consulting and marketing costs increases relate to our expanded business development and marketing activities. Included in the increase of consulting costs were acquisition-related costs of $314 thousand related to the activities prior to the July 19, 2010 acquisition of FusionOne. The decrease in professional services was primarily due to a reduction in legal fees and the decrease in telecommunication and facility costs was primarily due to a reduction in services. In addition there was an increase in our bad debt expense of $43 thousand. Selling, general and administrative expense as a percentage of revenues decreased to 17.1% for the three months ended June 30, 2010, compared to 18.3% for the three months ended June 30, 2009. The decrease in percentage was a result of a higher revenue base as compared to the same period 2009.

Depreciation and amortization. Depreciation and amortization expense decreased $413 thousand to $1.9 million for the three months ended June 30, 2010, compared to the same period in 2009, related to the disposition of certain assets and completion of the amortization over the useful lives offset by investments in the new facility. Depreciation and amortization expense as a percentage of revenues decreased to 5.0% for the three months ended June 30, 2010, as compared to 7.4% for the same period in 2009.

Income from Operations. Income from operations increased $567 thousand to $5.1 million for the three months ended June 30, 2010, compared to the same period in 2009. This increase was due primarily to increased revenues from our AT&T relationship. Income from operations decreased as a percentage of revenues to 13.6% for the three months ended June 30, 2010, as compared to 14.7% for the three months ended June 30, 2009.

Interest and other income. Interest and other income decreased $31 thousand to $122 thousand for the three months ended June 30, 2010, compared to the same period in 2009. Interest and other income decreased primarily due to lower effective interest rates on our investments.

Interest and other expense. Interest expense and other expense increased $48 thousand to $293 thousand for the three months ended June 30, 2010, compared to the same period in 2009. Interest and other expense increased primarily due to currency fluctuations related to the settlement of our customer account sales. During three months ended June 30, 2010 and 2009 we recognized $228 thousand and $221 thousand of interest expense related to the facility lease.

Income Tax. Our effective tax rate was approximately 39.8% and approximately 42.1% during the three months ended June 30, 2010 and 2009, respectively. We review the expected annual effective income tax rate and make changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income, changes to the actual and forecasted permanent book-to-tax differences, or changes resulting from the impact of a tax law change. Our effective tax rate is higher than our US federal statutory rate due to state income taxes offset by taxes in foreign jurisdictions where the tax rate is lower than the US federal statutory rate. During the three months ended June 30, 2010 and 2009, we recognized approximately $1.9 million in related tax expense.

Results of Operations

Six months ended June 30, 2010 compared to the three months ended June 30, 2009

The following table presents an overview of our results of operations for the six months ended June 30, 2010 and 2009.

		Six Months Ended																Six Months Ended
		June 30,																June 30,
		2010								2009								2010 vs 2009
		$				% of Revenue				$				% of Revenue				$ Change				% Change
		(in thousands)
Net revenue		$	72,281				100.0	%		$	60,107				100.0	%		$	12,174				20.3	%
Cost of services*			36,655				50.7	%			30,389				50.6	%			6,266				20.6	%
Research and development			9,191				12.7	%			6,116				10.2	%			3,075				50.3	%
Selling, general and administrative			12,845				17.8	%			11,657				19.4	%			1,188				10.2	%
Depreciation and amortization			3,852				5.3	%			4,110				6.8	%			(258	)			(6	)%
			62,543				86.5	%			52,272				87.0	%			10,271				19.6	%
Income from operations		$	9,738				13.5	%		$	7,835				13.0	%		$	1,903				24.3	%

Net Revenue. Net revenues increased $12.2 million to $72.3 million for the six months ended June 30, 2010, compared to the six months ended June 30, 2009. This increase was due primarily to increased transaction volumes and expansion into new programs from our AT&T relationship. Net revenues related to AT&T increased $9.2 million to $47.8 million for the six months ended June 30, 2010 compared to the same period in 2009. AT&T represented 66% and 64% of our revenues for the six months ended June 30, 2010 and 2009, respectively. Net revenues outside of AT&T generated $24.5 million of our revenues during the six months ended June 30, 2010 as compared to $21.5 million during the six months ended June 30, 2009. Net revenues outside of AT&T represented 34% and 36% of our revenues during the six months ended June 30, 2010 and 2009, respectively. Transaction revenues recognized for the six months ended June 30, 2010 and 2009 represented 80% or $57.7 million and 84% or $50.3 million of net revenues, respectively. Professional service revenues increased as a percentage of sales to 19% or $13.6 million for the six months ended June 30, 2010, compared to 15% or $9.3 million for the previous six months ended June 30, 2009. Professional services contributed to the increased sales volume as new programs begin to ramp and will continue to fluctuate until they are replaced with transactional volume.

Expense

Cost of Services. Cost of services increased $6.3 million to $36.7 million for the six months ended June 30, 2010, compared to the same period in 2009, due primarily to an increase of $2.3 million in personnel and related costs and an increase of $723 thousand in stock-based compensation. The increase in personnel and related costs and stock-based compensation was due primarily to an increase in headcount. There was an increase of $1.9 million for outside consultants related to growth in programs with existing customers. There was an increase of $1.1 million in telecommunication and facility costs related to the increased capacity associated with our data facilities that included increases related to the global deployment of our ConvergenceNow^® Plus⁺ platform. Additionally there was an increase in travel costs of $209 thousand related to our global and domestic expansion. Cost of services as a percentage of revenues increased to 50.7% for the six months ended June 30, 2010, as compared to 50.6% for the six months ended June 30 2009.

Research and Development. Research and development expense increased $3.1 million to $9.2 million for the six months ended June 30, 2010, compared to the same period in 2009, due primarily to an increase of $1.3 million in personnel and related costs and an increase of $418 thousand in stock based compensation. The increase in personnel and related costs and stock-based compensation was due to increased headcount. In addition there was an increase of $962 thousand in consulting costs and professional services related to the development of new technologies and an increase of $393 thousand in telecommunication and facility costs related to the increase in headcount and the utilization of our expanded resources. Research and development expense as a percentage of revenues increased to 12.7% for the six months ended June 30, 2010 as compared to 10.2% for the six months ended June 30, 2009.

Selling, General and Administrative. Selling, general and administrative expense increased $1.2 million to $12.8 million for the six months ended June 30, 2010, compared to the same period in 2009 due to an increase in personnel and related costs of $490 thousand and stock-based compensation expense of $499 thousand, consulting costs of $523 thousand and marketing costs of $293 thousand offset by a decrease in professional services of $529 thousand and a decrease in telecommunication and facility costs of $130 thousand. The increase in personnel and related and stock-based compensation costs was primarily due to an increase in headcount. The consulting and marketing costs increases relate to our expanded business development and marketing activities. Included in the increase of consulting costs were acquisition-related costs of $314 thousand related to the activities prior to the July 19, 2010 acquisition of FusionOne. The decrease in professional services relates to a reduction in legal fees and the decrease in telecommunication and facility costs was primarily due to a reduction in services. In addition there was an increase in our bad debt expense of $93 thousand and a decrease of $17 thousand in other costs. Selling, general and administrative expense as a percentage of revenues decreased to 17.8% for the six months ended June 30, 2010, compared to 19.4% for the six months ended June 30 2009. The decrease in percentage was a result of a higher revenue base as compared to the same period 2009.

Depreciation and amortization. Depreciation and amortization expense decreased $258 thousand to $3.9 million for the six months ended June 30, 2010, compared to the same period in 2009, related to the disposition of certain assets and completion of the amortization over the useful lives offset by investments in the new facility. Depreciation and amortization expense as a percentage of revenues decreased to 5.3% for the six months ended June 30, 2010, as compared to 6.8% for the same period in 2009. The decrease in percentage was a result of a higher revenue base as compared to the same period 2009.

Income from Operations. Income from operations increased $1.9 million to $9.7 million for the six months ended June 30, 2010, compared to the same period in 2009. This increase was due primarily to increased revenues from our AT&T relationship. Income from operations increased as a percentage of revenues to 13.5% for the six months ended June 30, 2010, as compared to 13% for the six months ended June 30, 2009.

Interest and other income. Interest and other income decreased $119 thousand to $233 thousand for the six months ended June 30, 2010, compared to the same period in 2009. Interest and other income decreased primarily due to lower effective interest rates on our investments.

Interest and other expense. Interest expense and other expense increased $271 thousand to $567 thousand for the six months ended June 30, 2010, compared to the same period in 2009. Interest and other expense increased primarily due to the lease financing obligation related to our Pennsylvania facility that began in April 2009. During six months ended June 30, 2010 and 2009 we recognized $456 thousand and $221 thousand of interest expense related to the facility lease.

Income Tax. Our effective tax rate was approximately 39.5% and approximately 40.9% during the six months ended June 30, 2010 and 2009, respectively. We review the expected annual effective income tax rate and make changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income, changes to the actual and forecasted permanent book-to-tax differences, or changes resulting from the impact of a tax law change. Our effective tax rate is higher than our US federal statutory rate due to state income taxes offset by taxes in foreign jurisdictions where the rate is lower than the US federal statutory rate. During the six months ended June 30, 2010 and 2009, we recognized approximately $3.7 million and $3.2 million in related tax expense, respectively.

Liquidity and Capital Resources

Our principal source of liquidity has been cash provided by operations. Our cash, cash equivalents and marketable securities balance was $102 million at June 30, 2010, an increase of $4.6 million as compared to the end of 2009. This increase was due to cash provided by operations and the exercise of stock options, offset by acquisitions of fixed assets associated with our facilities. We anticipate that our principal uses of cash in the future will be to fund the expansion of our business through both organic growth as well as possible acquisition activities and the expansion of our customer base internationally. We anticipate that our cash will be sufficient to fund our July 2010 Acquisition of FusionOne, Inc. For further discussion refer to footnote 10 in the Notes to our Condensed Consolidated Financial Statements in this Quarterly Report for the six months ended June 30, 2010. Uses of cash will also include facility expansion, capital expenditures and working capital.

Discussion of Cash Flows

Cash flows from operations. Net cash provided by operating activities for the six months ended June 30, 2010 was $7.2 million, as compared to $9.0 million for the six months ended June 30, 2009. Our primary uses of cash from operating activities are for personnel related expenditures and outside consultants. We also make cash payments related to taxes and leased facilities. The decrease of $1.8 million is primarily due to the increase in working capital and net income as compared to 2009. The cash provided by working capital included a $1.7 million increase in our accounts payable and accrued expenses offset by a $4.4 million increase in our accounts receivable balance as our collection of customer accounts only partially offset the increase of $12.2 million in customer sales. Additionally net income increased to $5.7 million, as compared to 2009.

Cash flows from investing. Net cash used in investing activities for the six months ended June 30, 2010 was $7.7 million, as compared to $8.9 million for the six months June 30, 2009. The primary use of cash was $4.1 million used to purchase marketable securities and $5.3 million used to purchase property and equipment primarily related to our continued investments in our global information technology and business system infrastructure. The decrease in cash used in investing was due to the completion of our Pennsylvania data facility in June 2009.

Cash flows from financing. Net cash provided by financing activities for the six months ended June 30, 2010 was $2.7 million, as compared to $948 thousand for the six months ended June 30, 2009. The increase was due to the increase in proceeds from the exercise of stock options and an increase in the tax benefit from the exercise of stock options, offset by payments on our capital obligation related to our data facility in the six months ended June 30, 2010.

We believe that our existing cash and cash equivalents, and cash generated from our existing operations will be sufficient to fund our operations for the next twelve months.

Effect of Inflation

Although inflation generally affects us by increasing our cost of labor and equipment, we do not believe that inflation has had any material effect on our results of operations for the three months ended June 30, 2010 and 2009.

Impact of Recently Issued Accounting Standards

In April 2010, the FASB issued ASU 2010-17, Revenue Recognition — Milestone Method (Topic 605): Milestone Method of Revenue Recognition (“ASU 2010-17”). ASU 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Consideration that is contingent on achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone is judged to meet certain criteria to be considered substantive. Milestones should be considered substantive in their entirety and may not be bifurcated. An arrangement may contain both substantive and non-substantive milestones, and each milestone should be evaluated individually to determine if it is substantive. ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010, with early adoption permitted. We are currently evaluating the early adoption option and because we currently do not have performance payment milestones in our contractual arrangements we do not expect that the adoption would have a material impact on the consolidated financial statements.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of June 30, 2010 and December 31, 2009.

ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part II, “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2009, which could materially affect our business, financial condition or future results. We believe our exposure associated with these market risks has not changed materially since December 31, 2009.

Foreign Currency Exchange Risk

We conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, and Indian Rupee. The financial statements of these foreign subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates for the period for revenues and expenses.

We do not hold any derivative instruments and do not engage in any hedging activities. Although our reporting currency is the U.S. dollar, we may conduct business and incur costs in the local currencies of other countries in which we may operate, make sales and buy materials. As a result, we are subject to currency translation risk. Further, changes in exchange rates between foreign currencies and the U.S. dollar could affect our future net sales and cost of sales and could result in exchange losses.

We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our business, results of operations and financial condition. To the extent that our international activities recorded in local currencies increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase and hedging activities may be considered if appropriate.

ITEM 4.		CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2010. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of June 30, 2010, the end of the period covered by this quarterly report, to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in internal controls over financial reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1.		LEGAL PROCEEDINGS

On September 5, 2008, September 18, 2008, and September 23, 2008, three complaints were filed against us and certain of our officers and directors in the United States District Court for the District of New Jersey purportedly on behalf of a class of shareholders who purchased our common stock between February 4, 2008 and June 9, 2008 (the “Securities Law Actions”). The complaints were consolidated and an amended complaint was filed by the plaintiffs on March 13, 2009. The plaintiffs in each complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. They alleged that certain of our public disclosures regarding our financial prospects during the proposed class period were false and/or misleading. The principal allegation set forth in each complaint was that we issued misleading statements concerning our business prospects relating to the activation of Apple Inc.’s iPhone product. On April 7, 2010, the Court granted our Motion to Dismiss all of the complaints against all of the defendants without prejudice.

On October 23, 2008 and November 3, 2008, complaints were filed in the state court of New Jersey and the United States District Court for the District of New Jersey against certain of our officers and directors, purportedly derivatively on our behalf (the “Derivative Suits”). The Complaints in the Derivative Suits assert that the named officers and directors breached their fiduciary duties and other obligations in connection with the disclosures that also are the subject of the Securities Law Actions described above. We are also named as a nominal defendant in the Derivative Suits, although the lawsuits are derivative in nature and purportedly asserted on our behalf. The plaintiffs seek compensatory damages, costs, fees, and other relief within the Court’s discretion. We are in the process of evaluating the claims in the Derivative Suits. The plaintiffs in the Derivative Suits have agreed to stay their claims pending the court’s decision in the Defendant’s Motion to Dismiss in the Securities Laws Actions. The proceedings in the state court of New Jersey are currently subject to the stay order in that case, and in the U.S. District Court for the District of New Jersey Defendants’ deadline to answer or otherwise respond is currently set for September 17, 2010. Due to the inherent uncertainties of litigation, we cannot predict the outcome of the Derivative Suits at this time, and we can give no assurance that the claims in these complaints will not have a material adverse effect on our financial position or results of operations.

Except for the above claims, we are not currently subject to any legal proceedings that could have a material adverse effect on our operations; however, we may from time to time become a party to various legal proceedings arising in the ordinary course of our business.

ITEM 1A.		RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, which could materially affect our business, financial condition or future results. The risks described in our Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our stock could decline, and our stockholders may lose part or all of their investment.

ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Use of Proceeds

On June 14, 2006, our Registration Statement on Form S-1 (File No. 333-132080) relating to the IPO was declared effective by the SEC. The managing underwriters of our IPO were Goldman, Sachs & Co., Deutsche Bank Securities Inc. and Thomas Weisel Partners LLC. On June 20, 2006, we closed the sale of 6,532,107 shares of common stock in our IPO for net proceeds to us of $45.7 million. In July 2006, we sold an additional 959,908 shares of common stock upon the exercise of an over-allotment option granted to the underwriters for net proceeds to us of $7.1 million. No offering expenses were paid directly or indirectly to any of our directors or officers or persons owning ten percent or more of any class of our equity securities or to any other affiliates. We have invested our net proceeds of the offering in money market funds pending their use to fund our expansion. Part of our current growth strategy is to further penetrate the North American markets and expand our customer base internationally. We anticipate that a portion of the proceeds of the offering will enable us to finance this expansion. In addition, we could use a portion of the proceeds of our IPO to make strategic investments in, or pursue acquisitions of, other businesses, products or technologies.

ITEM 3.		DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.		Reserved

ITEM 5.		OTHER INFORMATION

None.

ITEM 6.		EXHIBITS

Exhibit No.				Description
	3.2	*		Restated Certificate of Incorporation of the Company
	3.4	*		Amended and Restated Bylaws of the Company
	4.2	*		Form of Company’s Common Stock certificate
	10.17			Employment Agreement Dated as of December 3, 2008 between the Company and Daniel Rizer
	10.18			Agreement and Plan of Merger dated as of July 6, 2010 among the Company, Echo Merger Sub, Inc., FusionOne Inc. and John Malloy
	31.1			Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2			Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1			Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2			Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Synchronoss Technologies, Inc.
		/s/ Stephen G. Waldis
		Stephen G. Waldis
		Chairman of the Board of Directors,
		President and Chief Executive Officer
		(Principal executive officer)
		/s/ Lawrence R. Irving
		Lawrence R. Irving
		Executive Vice President,
		Chief Financial Officer and Treasurer

August 5, 2010

Exhibit 10.17

Employment Agreement

This Agreement is entered into as of December 30, 2008, by and between Daniel Rizer (the “Executive”) and Synchronoss Technologies, Inc., a Delaware corporation (the “Company”). Executive and the Company agree that the Employment Agreement dated as of November 21, 2008 between the Company and the Executive shall be terminated as of December 31, 2008.

1. Duties and Scope of Employment.

(a) Position. For the term of his employment under this Agreement (the “Employment”), the Company agrees to employ the Executive in the position of Executive Vice President of Business Development. The Executive shall report to the Company’s President or Chief Executive Officer.

(b) Obligations to the Company. During his Employment, the Executive (i) shall devote his full business efforts and time to the Company, (ii) shall not engage in any other employment, consulting or other business activity that would create a conflict of interest with the Company, (iii) shall not assist any person or entity in competing with the Company or in preparing to compete with the Company and (iv) shall comply with the Company’s policies and rules, as they may be in effect from time to time.

(c) No Conflicting Obligations. The Executive represents and warrants to the Company that he is under no obligations or commitments, whether contractual or otherwise, that are inconsistent with his obligations under this Agreement. The Executive represents and warrants that he will not use or disclose, in connection with his Employment, any trade secrets or other proprietary information or intellectual property in which the Executive or any other person has any right, title or interest and that his Employment will not infringe or violate the rights of any other person. The Executive represents and warrants to the Company that he has returned all property and confidential information belonging to any prior employer.

(d) Commencement Date. The Executive previously commenced full-time Employment. This Agreement shall govern the terms of Executive’s Employment effective as of January 1, 2009 (the “Commencement Date”) through the Term.

2. Compensation

(a) Salary. The Company shall pay the Executive as compensation for his services a base salary at a gross annual rate of not less than $275,000. Such salary shall be payable in accordance with the Company’s standard payroll procedures. (The annual compensation specified in this Subsection (a), together with any increases in such compensation that the Company may grant from time to time, is referred to in this Agreement as “Base Salary.”).

(b) Incentive Bonuses. The Executive shall be eligible for an annual incentive bonus with a target amount equal to 50% of his Base Salary (the “Target Bonus”). The Executive’s bonus (if any) shall be awarded based on criteria established by the Company’s Board of Directors (the “Board”) or its Compensation Committee. The determinations of the Board or its Compensation Committee with respect to such bonus shall be final and binding. The Executive shall not be entitled to an incentive bonus if he is not employed by the Company on the last day of the fiscal year for which such bonus is payable.

3. Vacation and Employee Benefits. During his Employment, the Executive shall be eligible for paid vacations in accordance with the Company’s vacation policy, as it may be amended from time to time, with a minimum of 20 vacation days per year. During his Employment, the Executive shall be eligible to participate in the employee benefit plans maintained by the Company, subject in each case to the generally applicable terms and conditions of the plan in question and to the determinations of any person or committee administering such plan.

4. Business Expenses. During his Employment, the Executive shall be authorized to incur necessary and reasonable travel, entertainment and other business expenses in connection with his duties hereunder. The Company shall reimburse the Executive for such expenses upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the Company’s generally applicable policies.

5. Term of Employment.

(a) Employment Term. The Company hereby employs Executive to render services to the Company in the position and with the duties and responsibilities described in Section 1 for the period commencing on the Commencement Date and ending upon the earlier of (i) three (3) years from such date, and (ii) the date Executive’s Employment is terminated in accordance with Subsection 5(b) through the Term. After the initial three-year term of this Agreement Executive’s Employment shall be “at will” and either Executive or the Company shall be entitled to terminate Executive’s Employment at any time and for any reason, with or without cause. However, this Agreement will not govern the terms of Executive’s employment after the Term.

(b) Termination of Employment. The Company may terminate the Executive’s Employment at any time and for any reason (or no reason), and with or without Cause (as defined below), by giving the Executive 30 days’ advance notice in writing. The Executive may terminate his Employment by giving the Company 30 days’ advance notice in writing. The Executive’s Employment shall terminate automatically in the event of his death. The termination of the Executive’s Employment shall not limit or otherwise affect his obligations under Section 7.

(c) Rights Upon Termination. Upon Executive’s voluntary termination of Employment or the Company’s termination of Executive’s Employment for Cause, Executive shall only be entitled to the compensation, benefits and reimbursements described in Sections 1 2, and 3 for the period preceding the effective date of the termination and no other benefits. Upon the Company’s termination of Executive’s Employment other than for Cause, Executive shall only be entitled to the compensation, benefits and reimbursements described in Sections 1, 2, and 3 for the period preceding the effective date of the termination and the severance pay benefits described in Section 6. The payments under this Agreement shall fully discharge all responsibilities of the Company to Executive. This Agreement shall terminate when all obligations of the parties hereunder have been satisfied.

(d) Rights Upon Death or Disability. If Executive’s Employment ends due to death, Executive’s estate shall be entitled to receive an amount equal to his target bonus for the fiscal year in which his death occurred, prorated based on the number of days he was employed by the Company during that fiscal year. If Executive’s Employment ends due to Permanent Disability (as such term is defined below), Executive shall be entitled to receive an amount equal to his Target Bonus for the fiscal year in which his Employment ended, prorated based on the number of days he was employed by the Company during that fiscal year. and the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) benefits described in the next sentence. If Executive or his personal representative elects to continue health insurance coverage under COBRA for Executive and his dependents following the termination of his Employment due to Permanent Disability, then the Company will pay the monthly premium under COBRA until the earliest of (a) the close of the 24-month period following the termination of his Employment, (b) the expiration of his continuation coverage under COBRA or (c) the date he becomes eligible for substantially equivalent health insurance coverage in connection with new employment

6. Termination Benefits.

(a) Preconditions. Any other provision of this Agreement notwithstanding, Subsections (b) and (c) below shall not apply unless the Executive:

(i) Has executed a general release of all claims (substantially in the form attached hereto as Exhibit A) (the “Release”);

(ii) Has returned all property of the Company in the Executive’s possession; and

(iii) If requested by the Board, has resigned as a member of the Board and as a member of the boards of directors of all subsidiaries of the Company, to the extent applicable.

The Executive must execute and return the Release within the period of time set forth in the Release.

(b) Severance Pay in the Absence of a Change in Control. If, during the term of this Agreement and prior to the occurrence of a Change in Control or more than 12 months following a Change in Control, the Company terminates the Executive’s Employment with the Company for a reason other than Cause or Permanent Disability and a Separation occurs (as such terms are defined below), then the Company shall pay the Executive a lump sum severance payment equal to (i) one and one-half times his Base Salary in effect at the time of the termination of Employment and (ii) his average annual bonus based on the actual amounts received in the immediately preceding two years. If, during the term of this Agreement and prior to the occurrence of a Change in Control or more than 12 months following a Change in Control, Executive resigns his Employment for Good Reason and a Separation occurs (as such term is defined below), then the Company shall pay the Executive a lump sum

severance payment equal to (i) one times his Base Salary in effect at the time of the termination of Employment and (ii) his average annual bonus based on the actual amounts received in the immediately preceding two years. Notwithstanding anything herein to the contrary, in the event that the Executive Employment is terminated for a reason other than Cause or Permanent Disability or the Executive resigns his Employment for Good Reason under this subsection (b) within the initial two years of this Agreement, then in lieu of using the average bonus received in the immediately preceding two years for the above calculation, such calculation shall use his Target Bonus Amount if such termination under this Subsection (b) occurs in the first year of the Agreement and the actual bonus the Executive received during the initial year of the Agreement if such termination under this Subsection (b) occurs in the second year of the Agreement. However, the amount of the severance payment under this Subsection (b) shall be reduced by the amount of any severance pay or pay in lieu of notice that the Executive receives from the Company under a federal or state statute (including, without limitation, the Worker Adjustment and Retraining Notification Act).

(c) Severance Pay in Connection with a Change in Control. If, during the term of this Agreement and within 12 months following a Change in Control, the Company terminates the Executive’s Employment with the Company for a reason other than Cause or Permanent Disability or the Executive resigns his Employment for Good Reason and a Separation occurs, then the Company shall pay the Executive a lump sum severance payment equal to two times his Base Salary in effect at the time of the termination of Employment plus two times the Executive’s average bonus received in the immediately preceding two years. Notwithstanding anything herein to the contrary, in the event that the Executive is terminated or resigns his Employment for Good Reason under this subsection (b) within the initial two years of this Agreement, then in lieu of using the average bonus received in the immediately preceding two years for the above calculation, such calculation shall use his Target Bonus Amount if such termination under this Subsection (b) occurs in the first year of the Agreement and the actual bonus the Executive received during the initial year of the Agreement if such termination under this Subsection (b) occurs in the second year of the Agreement. However, the amount of the severance payment under this Subsection (c) shall be reduced by the amount of any severance pay or pay in lieu of notice that the Executive receives from the Company under a federal or state statute (including, without limitation, the Worker Adjustment and Retraining Notification Act).

(d) Parachute Taxes. If amounts paid or payable or distributed or distributable pursuant to the terms of this Agreement (the “Total Payments”) would be subject to the excise tax imposed by section 4999 of the Code, and the regulations thereunder or any interest or penalties with respect to such excise tax (such excise tax and any such interest or penalties are collectively referred to as the “Excise Tax”), then the Total Payments shall be reduced to ensure that the Total Payments are not subject to Excise Tax. In determining whether to cap the Total Payments, compensation or other amounts that the Executive is entitled to receive other than pursuant to this Agreement shall be disregarded. All determinations and calculations required to be made under this provision will be made by an independent accounting firm selected by Executive from among the largest eight accounting firms in the United States (the “Accounting Firm”). If the Accounting Firm determines that the Total Payments are to be reduced under the preceding sentences, then the Company will promptly give Executive notice to that effect and a copy of the detailed calculation thereof. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Total Payments equal the reduced amount determined by the Accounting Firm, then the reduction shall occur in the following order: (1) reduction of cash severance payments and (2) reduction of other benefits paid to the Executive under this Agreement. All determinations made by the Accounting Firm under this Subsection 6(d) shall be binding upon the Company and the Executive and shall be made within 10 business days of the date when an amount becomes payable or transferable. As promptly as practicable following such determination, the Company shall pay or transfer to or for the benefit of the Executive such amounts as are then due to him. The fees of the Accounting Firm shall be paid by the Company.

(e) Definition of “Cause.” For all purposes under this Agreement, “Cause” shall mean:

(i) An unauthorized use or disclosure by the Executive of the Company’s confidential information or trade secrets, which use or disclosure causes material harm to the Company;

(ii) A material breach by the Executive of any material agreement between the Executive and the Company;

(iii) A material failure by the Executive to comply with the Company’s written policies or rules;

(iv) The Executive’s conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State thereof;

(v) The Executive’s gross negligence or willful misconduct which causes material harm to the Company;

(vi) A continued failure by the Executive to perform reasonably assigned duties after receiving written notification of such failure from the Board; or

(vii) A failure by the Executive to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested the Executive’s cooperation

(f) Definition of “Code.” For all purposes under this Agreement, “Code” means the Internal Revenue Code of 1986, as amended.

(g) Definition of “Good Reason.” For all purposes under this Agreement, “Good Reason” exists upon:

(i) a change in the Executive’s position with the Company that materially reduces his level of authority or responsibility;

(ii) a reduction in the Executive’s base salary by more than 10% unless pursuant to a Company-wide salary reduction affecting all Executives proportionately;

(iii) relocation of the Executive’s principal workplace by more than 50 miles;

(iv) a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Executive immediately prior to such reduction; or

(v) a material reduction in the kind or level of employee benefits to which the Executive is entitled immediately prior to such reduction with the result that the Executive’s overall benefits package is significantly reduced, unless such reduction is made in connection with a reduction in the kind or level of employee benefits of employees of the Company generally.

A condition shall not be considered “Good Reason” unless the Executive gives the Company written notice of such condition within 90 days after such condition comes into existence and the Company fails to remedy such condition within 30 days after receiving the Executive’s written notice. In addition, the Executive’s resignation must occur within 12 months after the condition comes into existence.

(h) Definition of “Permanent Disability.” For all purposes under this Agreement, “Permanent Disability” shall mean the Executive’s inability to perform the essential functions of the Executive’s position, with or without reasonable accommodation, for a period of at least 120 consecutive days because of a physical or mental impairment.

(i) Commencement of Severance Payments. Payment of the severance pay provided for under this Agreement will be made on the first regularly scheduled payroll date that occurs on or after 45 days after the Executive’s Separation, but only if the Executive has complied with the release and other preconditions set forth in Subsection (a) (to the extent applicable). If the Company determines that the Executive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code and the regulations thereunder at the time of his Separation, then (i) the severance payments under Section 6, to the extent not exempt from Section 409A of the Code, shall be paid during the seventh month after the Executive’s Separation and (ii) the amounts that otherwise would have been paid during the first six months following the Executive’s Separation shall be paid in a lump sum when such payments commence.

(j) Definition of “Separation”. For all purposes under this Employment Agreement, “Separation” means a “separation from service,” as defined in the regulations under Section 409A of the Code.

7. Non-Solicitation and Non-Disclosure.

(a) Non-Solicitation. During the period commencing on the date of this Agreement and continuing until the second anniversary of the date the Executive’s Employment terminated for any reason, the Executive shall not directly or indirectly, personally or through others, solicit or attempt to solicit (on the Executive’s own behalf or on behalf of any other person or entity) either (i) the employment of any employee or consultant of the Company or any of the Company’s affiliates or (ii) the business of any customer of the Company or any of the Company’s affiliates in a manner that could constitute engaging in sale of goods or services in or for a Restricted Business (as defined below) or otherwise interferes with Company’s relationship with such customer.

(b) Non-Competition. As one of the Company’s executive and management personnel and officer, Executive has obtained extensive and valuable knowledge and confidential information concerning the business of the Company, including certain trade secrets the Company wishes to protect. Executive further acknowledges that during his Employment he will have access to and knowledge of Proprietary Information (as defined below). To protect the Company’s Proprietary Information, Executives agrees that during his Employment with the Company, whether full-time or half-time and for a period of 24 months after his last day of Employment with the Company, he will not directly or indirectly engage in (whether as an employee, consultant, proprietor, partner, director or otherwise), or have any ownership interest in, or participate in the financing, operation, management or control of, any person, firm, corporation or business that engages in a “Restricted Business” in a “Restricted Territory” as defined below. It is agreed that ownership of (i) no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation, or (ii) any stock he presently owns shall not constitute a violation of this provision.

(c) Definitions. The term “Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company. By way of illustration but not limitation, Proprietary Information includes (a) trade secrets, inventions, mask works, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques; and (b) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) information regarding the skills and compensation of other employees of the Company. “Restricted Business” shall mean the design, development, marketing or sales of software, or any other process, system, product, or service marketed, sold or under development by the Company at the time Executive’s Employment with the Company ends. “Restricted Territory” shall mean any state, county, or locality in the United States in which the Company conducts business.

(d) Reasonable. Executive agrees and acknowledges that the time limitation on the restrictions in this Section 7, combined with the geographic scope, is reasonable. Executive also acknowledges and agrees that this provision is reasonably necessary for the protection of Proprietary Information, that through his Employment he shall receive adequate consideration for any loss of opportunity associated with the provisions herein, and that these provisions provide a reasonable way of protecting the Company’s business value which will be imparted to him. If any restriction set forth in this Section 7 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

(e) Non-Disclosure. The Executive has entered into a Proprietary Information and Inventions Agreement with the Company, which is incorporated herein by this reference.

8. Successors.

(a) Company’s Successors. This Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which becomes bound by this Agreement.

(b) Employee’s Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

9. Miscellaneous Provisions.

(a) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered, when delivered by FedEx with delivery charges prepaid, or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Executive, mailed notices shall be addressed to him at the home address that he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.

(b) Modifications and Waivers. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Whole Agreement. No other agreements, representations or understandings (whether oral or written and whether express or implied) that are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. This Agreement and the Proprietary Information and Inventions Agreement contain the entire understanding of the parties with respect to the subject matter hereof.

(d) Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to be withheld by law. The Company shall not have a duty to design its compensation policies in a manner that minimizes the Executive’s tax liabilities, and the Executive shall not make any claim against the Company or the Board related to tax liabilities arising from the Executive’s compensation.

(e) Choice of Law and Severability. This Agreement shall be interpreted in accordance with the laws of the State of New Jersey (except their provisions governing the choice of law). If any provision of this Agreement becomes or is deemed invalid, illegal or unenforceable in any applicable jurisdiction by reason of the scope, extent or duration of its coverage, then such provision shall be deemed amended to the minimum extent necessary to conform to applicable law so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision shall be stricken and the remainder of this Agreement shall continue in full force and effect. If any provision of this Agreement is rendered illegal by any present or future statute, law, ordinance or regulation (collectively the “Law”), then such provision shall be curtailed or limited only to the minimum extent necessary to bring such provision into compliance with the Law. All the other terms and provisions of this Agreement shall continue in full force and effect without impairment or limitation.

(f) No Assignment. This Agreement and all rights and obligations of the Executive hereunder are personal to the Executive and may not be transferred or assigned by the Executive at any time. The Company may assign its rights under this Agreement to any entity that assumes the Company’s obligations hereunder in connection with any sale or transfer of all or a substantial portion of the Company’s assets to such entity.

(g) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.

		Daniel Rizer
		Synchronoss Technologies, Inc.
		By
				Stephen G. Waldis President and Chief Executive Officer

Exhibit 10.18

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

among

SYNCHRONOSS TECHNOLOGIES, INC.,

ECHO MERGER SUB, INC.,

FUSIONONE, INC.

and

JOHN MALLOY, as

STOCKHOLDERS’ REPRESENTATIVE

Dated as of July 6, 2010

TABLE OF CONTENTS

		Page
ARTICLE I THE MERGER			2
SECTION 1.01 The Merger			2
SECTION 1.02 Effective Time; Closing			2
SECTION 1.03 Effect of the Merger			2
SECTION 1.04 Certificate of Incorporation and Bylaws of the Surviving Corporation			2
SECTION 1.05 Directors and Officers			3
ARTICLE II TRANSACTION CONSIDERATION; EXCHANGE OF CERTIFICATES			3
SECTION 2.01 Transaction Consideration			3
SECTION 2.02 Post-Closing Payments			13
SECTION 2.03 Exchange of Certificates; Closing Payments			23
SECTION 2.04 Stock Transfer Books			26
SECTION 2.05 Dissenting Shares			26
SECTION 2.06 Notices			27
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY			28
SECTION 3.01 Organization and Qualification			28
SECTION 3.02 Certificate of Incorporation and Bylaws			29
SECTION 3.03 Subsidiaries			29
SECTION 3.04 Capitalization			30
SECTION 3.05 Authority Relative to This Agreement			33
SECTION 3.06 No Conflict; Required Filings and Consents			33
SECTION 3.07 Permits; Compliance			34
SECTION 3.08 Financial Statements			35
SECTION 3.09 Absence of Certain Changes or Events			36
SECTION 3.10 Absence of Litigation			37
SECTION 3.11 Employee Benefit Plans; Labor Matters			37
SECTION 3.12 Contracts			42
SECTION 3.13 Environmental Matters			44
SECTION 3.14 Intellectual Property			45
SECTION 3.15 Taxes			50
SECTION 3.16 Vote Required			53
SECTION 3.17 Assets; Absence of Liens and Encumbrances			53
SECTION 3.18 Real Property			54
SECTION 3.19 Certain Interests			54
SECTION 3.20 Insurance Policies			55
SECTION 3.21 Restrictions on Business Activities			55
SECTION 3.22 Brokers			56
SECTION 3.23 State Takeover Statutes			56
SECTION 3.24 Customers and Suppliers			56
SECTION 3.25 Accounts Receivable; Bank Accounts			56

		Page
SECTION 3.26 Powers of Attorney			57
SECTION 3.27 Warranties			57
SECTION 3.28 Books and Records			57
SECTION 3.29 Foreign Corrupt Practices Act			57
SECTION 3.30 Debt			57
SECTION 3.31 No Misstatements			58
SECTION 3.32 Reliance			58
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB			58
SECTION 4.01 Organization and Qualification			58
SECTION 4.02 Authority Relative to This Agreement			59
SECTION 4.03 No Conflict; Required Filings and Consents			59
SECTION 4.04 SEC Filings; Financial Statements			60
SECTION 4.05 Interim Operations of Merger Sub			60
SECTION 4.06 Valid Issuance of Parent Shares			60
SECTION 4.07 Required Financing			60
SECTION 4.08 Brokers and Finders			60
SECTION 4.09 Litigation			60
SECTION 4.10 Reliance			60
ARTICLE V CONDUCT OF BUSINESSES PENDING THE MERGER			61
SECTION 5.01 Conduct of Business by the Company and the Subsidiaries Pending the Merger			61
SECTION 5.02 Litigation			64
SECTION 5.03 Notification of Certain Matters			64
ARTICLE VI ADDITIONAL AGREEMENTS			65
SECTION 6.01 Access to Information; Confidentiality			65
SECTION 6.02 No Solicitation of Transactions			65
SECTION 6.03 Employee Benefits Matters			66
SECTION 6.04 Further Action; Consents; Filings			67
SECTION 6.05 Transfer Taxes			68
SECTION 6.06 Satisfaction of Conditions Precedent			68
SECTION 6.07 No Public Announcement			69
SECTION 6.08 Expenses			69
SECTION 6.09 Preliminary Closing Consideration Schedule			69
SECTION 6.10 State Takeover Statutes			69
SECTION 6.11 Termination of the Company’s Agreements			69
SECTION 6.12 Securities Laws			70
SECTION 6.13 Officers’ and Directors’ Indemnification			71
SECTION 6.14 Provision Respecting Legal Representation			72
ARTICLE VII CONDITIONS TO THE MERGER			72
SECTION 7.01 Conditions to the Obligations of Each Party			72
SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub			73
SECTION 7.03 Conditions to the Obligations of the Company			74

		Page
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER			75
SECTION 8.01 Termination			75
SECTION 8.02 Effect of Termination			76
SECTION 8.03 Waiver			76
ARTICLE IX INDEMNIFICATION			76
SECTION 9.01 Survival of Representations and Warranties			76
SECTION 9.02 Indemnification by the Company Participants			77
SECTION 9.03 Indemnification of Stockholder Indemnified Parties			80
SECTION 9.04 Calculation of Losses			80
SECTION 9.05 Indemnification Procedures			81
SECTION 9.06 Stockholders’ Representative			83
SECTION 9.07 Setoff			84
SECTION 9.08 Remedies Exclusive			84
ARTICLE X GENERAL PROVISIONS			85
SECTION 10.01 Notices			85
SECTION 10.02 Certain Definitions			86
SECTION 10.03 Severability			87
SECTION 10.04 Assignment; Binding Effect; Benefit			87
SECTION 10.05 Incorporation of Exhibits			88
SECTION 10.06 Specific Performance			88
SECTION 10.07 Governing Law; Forum			88
SECTION 10.08 Time of the Essence			88
SECTION 10.09 Waiver of Jury Trial			88
SECTION 10.10 Construction and Interpretation			88
SECTION 10.11 Further Assurances			89
SECTION 10.12 Headings			89
SECTION 10.13 Counterparts			89
SECTION 10.14 Entire Agreement; Amendment			89

DEFINED TERMS

Term		Section
401(k) Plan		6.03(d)
Accredited Investor		2.01(b)(i)(B)
Accredited Stockholder		2.01(b)(i)(B)
Acquisition Documents		9.01
Act		6.12(c)
Additional Earn-Out Amount		2.02(c)
Advisor		3.22
affiliate		10.02(a)
Aggregate Earn-Out Amount		2.02(f)(i)
Aggregate Option Exercise Price		2.01(a)(i)
Aggregate Preference Amount		2.01(a)(xix)
Aggregate Warrant Exercise Price		2.01(a)(ii)
Agreement		Preamble
Antitrust Laws		6.04(b)
Applicable Per Share Closing Equity Consideration		2.01(a)(iii)
Assets		3.17
Audited Financial Statements		3.08(a)
business day		10.02(b)
Business of the Company		2.02(d)(i)
Bylaws		Recitals
CEO		2.02(h)
CERCLA		3.13(d)
Certificate of Incorporation		Recitals
Certificate of Merger		1.02
Claim		6.13(a)
Closing		1.02
Closing Cash Consideration		2.01(c)(v)
Closing Consideration Recipients		2.01(a)(iv)
Closing Consideration Schedule		2.03(a)(ii)
Closing Date		1.02
Closing Date Warrant Cancellation Payment		2.01(b)(iii)(A)
Closing Equityholder Consideration		2.01(c)(v)
Closing Payments		2.03(a)(iii)
Closing Shares		2.01(c)
COBRA		3.11(d)
Code		2.03(g)
Common Control		3.06(c)
Common Stock		Recitals
Common Stock Equivalent Earn-Out Amount		2.01(a)(v)
Company		Preamble
Company Confidential Information		3.14(f)
Company Disclosure Schedule		Article III

Term		Section
Company Equityholders		2.01(a)(vi)
Company Intellectual Property		3.14(a)
Company Leases		3.18
Company Material Adverse Effect		3.01
Company Optionholders		2.01(a)(vii)
Company Options		2.01(a)(viii)
Company Participant		2.01(a)(ix)
Company Permits		3.07(a)
Company Preferred Stock		Recitals
Company Products		2.02(d)(ii)
Company Products and Services		2.02(d)(iv)
Company Services		2.02(d)(iii)
Company Share Certificates		2.03(a)(i)
Company Stock		Recitals
Company Stockholder		2.01(b)(i)(A)
Company Transaction Expenses		2.01(a)(x)
Company Warrantholder		2.01(b)(iii)
Company Warrants		2.01(a)(xi)
Competing Transaction		6.02(b)
Consent Request Document		6.12(b)
Control		3.06(c)
Copyrights		3.14(a)
Current Assets		2.01(c)(iv)(F)
Current Liabilities		2.01(c)(iv)(F)
D&O Indemnified Parties		6.13(a)
D&O Tail Policy		6.13(b)
Debt		3.30
DGCL		Recitals
Dissenting Shares		2.05(a)
Divestiture		2.02(g)
Domain Names		3.14(a)
Earn-Out Consideration Recipients		2.02(a)
Earn-Out Consideration Schedule		2.02(f)(iv)(A)
Earn-Out Eligible Employees		2.02(a)
Earn-Out Payment Date		2.02(f)(iv)(A)
Earn-Out Period		2.02(b)
Earn-Out Shares		2.02(f)(iv)(D)
Effective Time		1.02
Employee Earn-Out Percentage		2.01(a)(xii)
Employee Obligation		3.14(i)
Employee Residual Sharing Percentage		2.02(f)(iv)(H)
Employment Arrangement		6.03(b)
Entity Representatives		10.02(d)
Environmental Laws		3.13(d)
Environmental Permits		3.13(d)
Equityholder Earn-Out Percentage		2.01(a)(xiii)

Term		Section
ERISA		3.11(a)
ERISA Affiliate		3.11(e)
Escrow Agent		2.03(b)
Escrow Agreement		2.03(b)
Escrow Amount		2.01(a)(xiv)
Escrow Fund		2.01(c)(vi)
Escrow Materials		3.14(c)
Escrow Percentage		2.01(a)(xv)
Estimated Deficiency Amount		2.01(c)(iv)(A)
Estimated Net Working Capital		2.01(c)(iv)(A)
Exchange Agent		2.03(a)(i)
Existing Investment Documents		6.11
Extraordinary Matters		2.01(a)(x)
Final Deficiency Amount		2.01(c)(iv)(E)
Final Earn-Out Statement		2.02(f)(i)
Final Net Working Capital Schedule		2.01(c)(iv)(B)
FIRPTA		7.02(k)
Fundamental Representations		9.01(a)
GM		2.02(h)
Governmental Entity		3.06(b)
Gross Closing Consideration		2.01(c)
Hazardous Materials		3.13(d)
Holder Group		6.14
HSR Act		3.06(b)
Indemnified Party		9.05(a)
Indemnifying Party		9.05(a)
Independent CPA		2.01(c)(iv)(F)
Infringement		3.14(a)
Intellectual Property		3.14(a)
Interim Financial Statements		3.08(a)
Investment Representation Letter		2.01(b)(i)(B)
IP Rights		3.14(a)
Item of Earn-Out Dispute		2.02(f)(ii)
Item of Working Capital Dispute		2.01(c)(iv)(C)
Junior Preferred Stock		2.01(b)(i)(A)
knowledge		10.02(d)
Law		3.06(a)
Leased Real Property		3.17
Legal Proceeding		3.10
Letter of Transmittal		2.03(a)(i)
Liabilities		3.08(b)
Liens		3.17
Losses		9.04(a)
made available		10.02(e)
Material Contracts		3.12(a)
Merger		Recitals

Term		Section
Merger Sub		Preamble
Mooreland		2.01(a)(xvi)
Mooreland Earn-Out Payment		2.02(f)(iv)(C)
Mooreland Earn-Out Percentage		2.01(a)(xvii)
Multi-employer Plan		3.11(c)
Multiple Employer Plan		3.11(c)
Net Closing Consideration		2.01(c)(v)
Net Earn-Out Amount		2.02(f)(iv)(C)
Net Earn-Out Cash Amount		2.02(f)(iv)(D)
Net Earn-Out Share Number		2.02(e)
Net Working Capital		2.01(c)(iv)(F)
Non-Disclosure Agreement		6.01(b)
Open Source Materials		3.14(n)
Operating Margin		2.02(d)(v)
Order		7.01(a)
Out-of-the-Money Warrant		2.01(b)(iii)(D)
Outside Date		8.01(b)
Owned Company Intellectual Property		3.14(q)
Parent		Preamble
Parent Common Stock		2.01(a)(xviii)
Parent Disclosure Schedule		Article IV
Parent Indemnified Parties		9.02(a)(i)
Parent Material Adverse Effect		4.01(a)
Parent SEC Reports		4.04
Patents		3.14(a)
Per Share Closing Common Amount		2.01(a)(xix)
Permitted Liens		3.17
Person		10.02(f)
Plan		3.11(a)
Plans		3.11(a)
Preference Amount		2.01(b)(i)(A)
Preliminary Closing Consideration Schedule		6.09
Principal Stockholders		Recitals
Prior Merger Agreements		3.12(a)(xvii)
Pro Rata Percentage		10.02(g)
Quarterly Earn-Out Amount		2.02(b)
Quarterly Estimate		2.02(e)
Quarterly Operating Margin		2.02(b)(iii)
Quarterly Revenue		2.02(b)(i)
Quarterly Target Revenue		2.02(b)(i)
Quarterly Target Transaction-Related Revenue		2.02(b)(ii)
Quarterly Transaction-Related Revenue		2.02(b)(ii)
Reference Balance Sheet		3.08(a)
Remaining Preference Amount		2.01(a)(xx)
Representatives		6.01(a)
SEC		4.04

Term		Section
Section 262 Notice		2.06(d)
Securities Act		2.01(b)(i)(B)
Series A Preference Amount		2.01(a)(xxii)
Series A-1 Preference Amount		2.01(a)(xxi)
Series A Preferred Stock		Recitals
Series A-1 Preferred Stock		Recitals
Series A-1 Warrant		2.01(b)(iii)
Series B Preference Amount		2.01(a)(xxiii)
Series B Preferred Stock		Recitals
Series C Cap		2.02(f)(iv)(E)
Series C Preference Amount		2.01(a)(xxiv)
Series C Preferred Stock		Recitals
Series D Cap		2.02(f)(iv)(E)
Series D Preference Amount		2.01(a)(xxv)
Series D Preferred Stock		Recitals
Signing Price		2.01(a)(xxvi)
Software		3.14(a)
Source Materials		3.12(a)(xviii)
Special Losses		9.02(c)
Special Payment		2.01(a)(x)
Statement No. 5		3.08(c)
Stock Plans		3.04(b)
Stockholder Closing Consideration		2.01(c)(v)
Stockholder Indemnified Parties		9.03
Stockholder Notices		2.06(c)
Stockholders’ Representative		9.06(a)
Subsidiary		3.03(a)
Subsidiaries		3.03(a)
subsidiary		10.02(h)
Surviving Corporation		1.01
Target Operating Margin		2.02(d)(vi)
Target Revenue		2.02(d)(vii)
Target Transaction-Related Revenue		2.02(d)(viii)
Tax		3.15(bb)
Tax Benefit		9.04(b)
Taxes		3.15(bb)
Taxable		3.15(bb)
Tax Authority		3.15(bb)
Tax Return		3.15(a)
Tax Returns		3.15(a)
Terminating Company Breach		8.01(d)
Terminating Parent Breach		8.01(e)
Termination for Cause		10.02(c)
Termination Payments		2.01(a)(x)
Third Party Claims		9.05(b)
Threshold Amount		2.01(a)(xxvii)

Term		Section
Total Revenue		2.02(d)(ix)
Trademarks		3.14(a)
Trade Secrets		3.14(a)
Transaction Consideration		2.01(a)(xxviii)
Transaction-Related Revenue		2.02(d)(x)
Transfer Taxes		6.05
Ultimate Parent		3.06(c)
U.S. GAAP		3.08(a)
Use(d)		3.14(a)
Verizon		2.01(a)(xxix)
Verizon Consent Agreement		2.01(c)(ii)
Verizon Earn-Out Payment		2.02(f)(iv)(B)
Verizon Earn-Out Percentage		2.01(a)(xxx)
Verizon Warrant Cancellation Payment		2.01(c)(ii)
Written Consent		Recitals

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of July 6, 2010 (this “Agreement”), among Synchronoss Technologies, Inc., a Delaware corporation (“Parent”), Echo Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), fusionOne, Inc., a Delaware corporation (the “Company”), and John Malloy, as Stockholders’ Representative (as defined in Section 9.06(a) hereof).

W I T N E S S E T H

WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “DGCL”), Parent and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the “Merger”);

WHEREAS, the Board of Directors of the Company has (i) determined that the Merger is fair to, and in the best interests of, the Company and its stockholders, (ii) unanimously approved and adopted this Agreement, the Merger, and the other transactions contemplated by this Agreement, and (iii) determined to unanimously recommend that the stockholders of the Company approve and adopt this Agreement and the Merger;

WHEREAS, the Boards of Directors of each of Parent and Merger Sub have (i) determined that the Merger is in the best interests of Parent, Merger Sub and their respective stockholders and (ii) approved and adopted this Agreement, the Merger, and the other transactions contemplated by this Agreement;

WHEREAS, certain stockholders of the Company own such number of shares of common stock, $0.001 par value, of the Company (the “Common Stock”), such number of shares of Series A Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”), such number of shares of Series A-1 Preferred Stock, par value $0.001 per share, of the Company (the “Series A-1 Preferred Stock”) such number of shares of Series B Preferred Stock, par value $0.001 per share, of the Company (the “Series B Preferred Stock”), such number of shares of Series C Preferred Stock, par value $0.001 per share, of the Company (the “Series C Preferred Stock”), such number of shares of Series D Preferred Stock, par value $0.001 per share, of the Company (the “Series D Preferred Stock”, and together with the Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, the “Company Preferred Stock,” and, the Common Stock together with the Company Preferred Stock, the “Company Stock”) as is set forth opposite such stockholder’s name in Schedule 1.01 (such stockholders being referred to herein as the “Principal Stockholders”); and

WHEREAS, as an inducement to the willingness of Parent to enter into this Agreement, the Principal Stockholders have indicated that they expect to deliver, following the approval and adoption of this Agreement by the Board of Directors of the Company and within one (1) day following the execution of this Agreement, their irrevocable approval and adoption of this Agreement, the Merger and the other transactions contemplated thereby pursuant to a written consent, in the form attached hereto as Exhibit A, signed by the Principal Stockholders, pursuant to and in accordance with the applicable provisions of the DGCL, the Certificate of Incorporation of the Company (the “Certificate of Incorporation”) and the bylaws of the Company (the “Bylaws”) (such consent, the “Written Consent”).

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub, the Company, and the Stockholders’ Representative hereby agree as follows:

ARTICLE I

THE MERGER

SECTION 1.01 The Merger. Upon the terms of this Agreement and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time (as defined in Section 1.02), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation of the Merger (the “Surviving Corporation”).

SECTION 1.02 Effective Time; Closing. As promptly as practicable following the satisfaction or, if permissible by the express terms of this Agreement, waiver of the conditions set forth in Article VII (but in no event more than three (3) business days thereafter) (or such other date as may be agreed by each of the parties hereto), the parties hereto shall cause the Merger to be consummated by (i) filing a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL and (ii) making all other filings and recordings required under the DGCL. The term “Effective Time” means the date and time of the filing of the Certificate of Merger (or such later time as may be agreed by each of the parties hereto and specified in the Certificate of Merger). Immediately prior to the filing of the Certificate of Merger, a closing (the “Closing”) will be held at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP at 850 Winter Street, Waltham, MA 02451 (or such other place as the parties may agree). The date on which the Closing shall occur is referred to herein as the “Closing Date.”

SECTION 1.03 Effect of the Merger. At and after the Effective Time, the Merger shall have the effects as set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of each of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

SECTION 1.04 Certificate of Incorporation and Bylaws of the Surviving Corporation.

(a) At the Effective Time, the Certificate of Incorporation of the Company as the Surviving Corporation shall be amended and restated to read the same as the Certificate of Incorporation of Merger Sub as in effect immediately prior to the Effective Time, except that Section 1 of the amended and restated Certificate of Incorporation of the Surviving Corporation, rather than reading the same as Section 1 of the Certificate of Incorporation of Merger Sub, shall read as follows: “The name of this corporation is fusionOne, Inc.”

(b) At the Effective Time, the Bylaws of the Company as the Surviving Corporation shall be amended to read the same as the Bylaws of Merger Sub as in effect immediately prior to the Effective Time, except that all references to Merger Sub in the Bylaws of the Surviving Corporation shall be changed to refer to fusionOne, Inc.

SECTION 1.05 Directors and Officers. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified.

ARTICLE II

TRANSACTION CONSIDERATION; EXCHANGE OF CERTIFICATES

SECTION 2.01 Transaction Consideration.

(a) Definitions. As used in this Section 2.01 and elsewhere in this Agreement, the following terms have the following meanings:

(i) “Aggregate Option Exercise Price” means the sum of the exercise prices of all Company Options, in each case, that are outstanding immediately prior to the Effective Time to the extent unexercised as of immediately prior to the Effective Time.

(ii) “Aggregate Warrant Exercise Price” means the sum of the exercise prices of all Series A-1 Warrants, in each case, that are outstanding immediately prior to the Effective Time to the extent unexercised as of immediately prior to the Effective Time.

(iii) “Applicable Per Share Closing Equityholder Consideration” shall mean, (A) with respect to a share of Series A-1 Preferred Stock, the Series A-1 Preference Amount plus the Per Share Closing Common Amount, (B) with respect to a share of Series A Preferred Stock, the Series A Preference Amount, (C) with respect to a share of Series B Preferred Stock, the Series B Preference Amount, (D) with respect to a share of Series C Preferred Stock, the lesser of (x) Series C Preference Amount plus the Per Share Closing Common Amount, and (y) $0.4912, (E) with respect to a share of Series D Preferred Stock, the lesser of (x) Series D Preference Amount plus the Per Share Closing Common Amount, and (y) $0.7430, (F) with respect to a share of Common Stock, the Per Share Closing Common Amount.

(iv) “Closing Consideration Recipients” shall mean, collectively, each Company Stockholder, each Company Warrantholder and Verizon.

(v) “Common Stock Equivalent Earn-Out Amount” means the sum of (A) the quotient of (x) the value of the cash and Earn-Out Shares (valued at the Signing Price) payable or issuable pursuant to Section 2.02(f)(iv)(E) plus the Aggregate Option Exercise Price, divided by (y) the number of shares of Series A-1 Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common Stock outstanding immediately prior to the Effective Time (assuming that all Series A-1 Warrants have been converted into shares of Series A-1 Preferred Stock and all Company Options have been exercised for shares of Common Stock, in each case as of immediately prior to the Effective Time), plus (B) the Per Share Closing Common Amount, if any.

(vi) “Company Equityholders” shall mean, collectively, each Company Stockholder, Company Warrantholder and Company Optionholder.

(vii) “Company Optionholder” shall mean each holder of a Company Option outstanding immediately prior to the Effective Time to the extent unexercised as of immediately prior to the Effective Time.

(viii) “Company Options” shall mean each option to purchase shares of Company Stock (or exercisable for cash) outstanding under the Stock Plans or otherwise, other than any Company Warrant.

(ix) “Company Participant” shall mean, collectively, each Company Stockholder, Company Warrantholder, Company Optionholder and Earn-Out Eligible Employee.

(x) “Company Transaction Expenses” means (i) all fees and expenses incurred by the Company in connection with this Agreement and the transactions contemplated hereby or, to the extent such fees or expenses are incurred before the Closing and remain unpaid, any actual or contemplated underwriting, equity or debt financing, refinancing, recapitalization, change in control transaction, business combination transaction, sale of assets or similar matter (“Extraordinary Matters”), including all legal, accounting, brokerage, finder’s, commission, financial advisory, consulting and all other fees and expenses of third parties incurred by the Company in connection with the negotiation or effectuation of the terms and conditions of this Agreement or any Extraordinary Matter, or the transactions contemplated hereby or any Extraordinary Matter, including any payments made or anticipated to be made by the Company as a brokerage or finders’ fee, agents’ commission or any similar charge, in connection therewith, (ii) payments set forth on the attached Schedule 2.01(a)(ix) under the heading “Termination Payments” to be made to the recipients set forth thereon (the “Termination Payments”), (iii) payroll Taxes of the Company and its Subsidiaries (whether or not accrued) resulting from the payment of the Termination Payments, (iv) payments set forth on the attached Schedule 2.01(a)(ix) under the heading “Special Payments” to be made to the recipients described thereon (such payments, the “Special Payments”), (v) payroll Taxes of the Company and its Subsidiaries (whether or not accrued) resulting from the payment of the Special Payments, (vi) bonuses or other compensatory payments required to be made to employees or directors of the Company or its Subsidiaries (other than in connection with the Special Payments) as a result of the transactions contemplated by this Agreement (provided that any right to severance or similar amounts upon the termination of employment, whether or not arising as a result of the consummation of the transactions contemplated by the Agreement, or quarterly, management or similar bonuses previously disclosed to Parent shall not be considered “Company Transaction Expenses” pursuant to this clause (vi)). All items comprising Company Transaction Expenses and the parties to which such items are payable are set forth on Schedule 2.01(a)(ix); provided, however, that items marked on such schedule with an “*” are acknowledged to be estimated amounts.

(xi) “Company Warrants” shall mean each warrant to purchase shares of Company Stock (or exercisable for cash), including the Series A-1 Warrants.

(xii) “Equityholder Earn-Out Percentage” means, with respect to any Company Equityholder, a fraction expressed as a percentage equal to (A) Seventy-Seven and Four One Hundredths (77.04%), multiplied by (B) the quotient of (x) the number of shares of Series A-1 Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common Stock held by such Company Participant immediately prior to the Effective Time (assuming that all Series A-1 Warrants have been converted into shares of Series A-1 Preferred Stock and all Company Options with a Threshold Amount less than the applicable Common Stock Equivalent Earn-Out Amount have been exercised for shares of Common Stock, in each case as of immediately prior to the Effective Time), divided by (y) the number of shares of Series A-1 Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common Stock outstanding immediately prior to the Effective Time (assuming that all Series A-1 Warrants have been converted into shares of Series A-1 Preferred Stock and all Company Options with a Threshold Amount less than the applicable Common Stock Equivalent Earn-Out Amount have been exercised for shares of Common Stock, in each case as of immediately prior to the Effective Time).

(xiii) “Employee Earn-Out Percentage” means, with respect to any Earn-Out Eligible Employee, a fraction expressed as a percentage equal to (A) Twenty-Two and Ninety-Six One Hundredths (22.96%), multiplied by (B) the percentage set forth opposite the name of such Earn-Out Eligible Employee on Schedule 2.02(a).

(xiv) “Escrow Amount” means an amount in cash equal to $4,000,000.

(xv) “Escrow Percentage” means, with respect to each Closing Consideration Recipient, the percentage set forth opposite the name of such Closing Consideration Recipient under the heading “Escrow Percentage” on the Closing Consideration Schedule, which percentages shall equal 100%.

(xvi) “Mooreland” means Mooreland Partners, LLC.

(xvii) “Mooreland Earn-Out Percentage” means one and five tenths percent (1.5%).

(xviii) “Parent Common Stock” shall mean Parent’s authorized Common Stock, par value $0.0001 per share.

(xix) “Per Share Closing Common Amount” shall mean an amount equal to the quotient of (A) the Closing Equityholder Consideration, (u) plus the Aggregate Warrant Exercise Price, less (v) the Series A-1 Preference Amount multiplied by the number of shares of Series A-1 Preferred Stock outstanding immediately prior to the Effective Time (assuming that all Series A-1 Warrants have been converted into shares of Series A-1 Preferred Stock as of immediately prior to the Effective Time), less (w) the Series A Preference Amount multiplied by the number of shares of Series A Preferred Stock outstanding immediately prior to the Effective Time, less (x) the Series B Preference Amount multiplied by the number of shares of Series B Preferred Stock outstanding immediately prior to the Effective Time, less (y) the Series C Preference Amount multiplied by the number of shares of Series C Preferred Stock outstanding immediately prior to the Effective Time, less (z) the Series D Preference Amount multiplied by the number of shares of Series D Preferred Stock outstanding immediately prior to the Effective Time (the sum of (v) through (z), the “Aggregate Preference Amount”), divided by (B) the number of shares of Series A-1 Preferred Stock (assuming that all Series A-1 Warrants have been converted into shares of Series A-1 Preferred Stock as of immediately prior to the Effective Time), Series C Preferred Stock, Series D Preferred Stock and Common Stock outstanding immediately prior to the Effective Time; provided, however, that the Per Share Closing Common Amount shall not be less than zero.

(xx) “Remaining Preference Amount” means the amount, if any, by which the Aggregate Preference Amount exceeds the amount of Closing Equityholder Consideration paid at the Closing in respect of shares of Company Preferred Stock (without regard to any reduction in such amount on account of the Escrow Amount).

(xxi) “Series A-1 Preference Amount” shall mean $0.284 per share of Series A-1 Preferred Stock.

(xxii) “Series A Preference Amount” shall mean $0.0322 per share of Series A Preferred Stock.

(xxiii) “Series B Preference Amount” shall mean $0.0930 per share of Series B Preferred Stock.

(xxiv) “Series C Preference Amount” shall mean $0.2456 per share of Series C Preferred Stock.

(xxv) “Series D Preference Amount” shall mean $0.3715 per share of Series D Preferred Stock.

(xxvi) “Signing Price” shall mean the weighted average trading price per share of the Parent Common Stock during the thirty (30) trading days immediately up to and including the day prior to the date of this Agreement.

(xxvii) “Threshold Amount” means, with respect to any Company Option outstanding immediately prior to the Effective Time, the exercise price per share of Common Stock attributable to such Company Option immediately prior to the Effective Time at set forth on Section 3.04(b) of the Company Disclosure Schedule.

(xxviii) “Transaction Consideration” means, collectively, the Net Closing Consideration and the Aggregate Earn-Out Amount.

(xxix) “Verizon” means Cellco Partnership d/b/a Verizon Wireless.

(xxx) “Verizon Earn-Out Percentage” means eleven and four tenths percent (11.4%).

(b) Treatment of Capital Stock; Company Options and Company Warrants.

(i) Company Stock.

(A) Subject to Section 2.05, at the Effective Time, by virtue of the Merger, without any action on the part of Parent, Merger Sub, the Company or the holders of Company Stock (each such holder, a “Company Stockholder”), in accordance with the Certificate of Incorporation, each share of Company Stock held by a Company Stockholder and issued and outstanding immediately prior to the Effective Time shall be canceled and extinguished and automatically converted into the right to receive, without interest, (i) the aggregate Applicable Per Share Closing Equityholder Consideration payable on account of such shares of Company Stock held by a Company Stockholder and issued and outstanding immediately prior to the Effective Time less an amount in cash equal to the amount of such Company Stockholder’s Escrow Percentage of the Escrow Amount, (ii) the right to receive such Company Stockholder’s Equityholder Earn-Out Percentage of the payments, if any, pursuant to Section 2.02 (subject to the provisions thereof), and (iii) the right to receive such Company Stockholder’s Escrow Percentage of any cash disbursements made from the Escrow Fund in accordance with the terms of this Agreement and the Escrow Agreement, as and when such disbursements are made. Notwithstanding the foregoing, in the event that the holders of any Company Preferred Stock would, on account of each share of Company Preferred Stock held by such Company Stockholders immediately prior to the Effective Time, receive an amount per share pursuant to Section 2.01(b)(i)(A)(i) (without taking into account any reduction on account of such Company Stockholder’s Escrow Percentage of the Escrow Amount) less than the applicable Preference Amount for such series of Company Preferred Stock set forth above, then, (i) if such Company Preferred Stock is Series A-1 Preferred Stock, no payments shall be made in respect of any shares of Company Stock other than Series A-1 Preferred Stock, and such amounts shall be paid ratably to the holders of Series A-1 Preferred Stock in proportion to the number of shares of Series A-1 Preferred Stock held by each such Company Stockholder immediately prior to the Effective Time and (ii) if such Company Preferred Stock is Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, or Series D Preferred Stock (collectively, the “Junior Preferred Stock”), subsequent to the payment in full of the Series A-1 Preference Amount to the holders of Series A-1 Preferred Stock, the remaining proceeds available for distribution shall be paid ratably to the holders of Junior Preferred Stock on a per share basis in proportion to the applicable Preference Amount of each such series (and, for the avoidance of doubt, no payments shall be made in respect of any shares of Common Stock, including any shares of Company Preferred Stock which have converted to Common Stock prior to the Effective Time). For purposes hereof, “Preference Amount” means, with respect to any share of Company Preferred Stock, the Series A-1 Preference Amount, the Series A Preference Amount, the Series B Preference Amount, the Series C Preference Amount or the Series D Preference Amount, as applicable.

(B) The aggregate Applicable Per Share Closing Equityholder Consideration payable at Closing to each Company Stockholder shall be payable in cash and Closing Shares as follows: each Company Stockholder (i) receiving Closing Equityholder Consideration on account of shares of Preferred Stock (unless Parent determines that such Company Stockholder is not an Accredited Investor (as defined below)), or (ii) that has executed and delivered to Parent, no later than two (2) days prior to the Closing, an investment representation letter in form and substance reasonably satisfactory to Parent (an “Investment Representation Letter”) representing to such party’s status as an “accredited investor” (an “Accredited Investor”) within the meaning of Rule 501 of the Securities Act of 1933, as amended (the “Securities Act”) ((i) and (ii), collectively, the “Accredited Stockholders”), shall receive (x) that number of Closing Shares equal to the product of (a) the aggregate number of Closing Shares and (b) the quotient of (i) the aggregate Applicable Per Share Closing Equityholder Consideration payable at Closing to such Accredited Stockholder divided by (ii) the aggregate Applicable Per Share Closing Equityholder Consideration payable at Closing to all Accredited Stockholders, rounded down to the nearest whole share and (y) that amount of cash equal to the aggregate Applicable Per Share Closing Equityholder Consideration payable at Closing to such Accredited Stockholder less the product of (i) the number of Closing Shares to be issued to such Accredited Stockholder and (ii) the Signing Price. Notwithstanding the foregoing, if the aggregate Applicable Per Share Closing Equityholder Consideration payable at Closing to all Accredited Stockholders is less than $8,000,000 (taking into account any reduction on account of such Company Stockholder’s Escrow Percentage of the Escrow Amount), each Accredited Stockholder shall receive Closing Shares with an aggregate value, valued at the Signing Price, equal to the aggregate Applicable Per Share Closing Equityholder Consideration payable at Closing to such Accredited Stockholder; provided that in no event shall the aggregate value of all such Closing Shares, valued at the Signing Price, exceed $8,000,000. The aggregate Applicable Per Share Closing Equityholder Consideration payable at Closing to each Company Stockholder that is not an Accredited Stockholder shall be paid in cash.

(ii) Company Options. At or before the Effective Time, the Company shall have taken all necessary action, including, if necessary, obtaining the consent of any holder of Company Options and the adoption of resolutions by the Board of Directors, to: (A) terminate, as of the Effective Time, the Stock Plans, and (B) cancel, as of the Effective Time, each Company Option that is outstanding and unexercised or unconverted, whether vested (including Company Options that become vested as a result of the consummation of the transactions contemplated by this Agreement) or unvested, in exchange for the right to receive the payments described in Section 2.02(f)(iv)(F), subject to the terms and conditions set forth therein. The amounts payable with respect to each Company Option hereunder shall be paid on the same schedule and under the same terms and conditions as apply to payments to Company Stockholders hereunder generally (taking into account reductions on account of the Threshold Amount), and shall be paid in no event later than five (5) years after the Effective Time.

(iii) Company Warrants. Each holder of a warrant to purchase shares of Series A-1 Preferred Stock (a “Series A-1 Warrant”) that is outstanding as immediately prior to the Effective Time (each, a “Company Warrantholder” and, collectively with the Company Stockholders and the Company Optionholders, the “Company Equityholders”) shall be entitled to receive, in full consideration of the cancellation of all Series A-1 Warrants held by such holder:

(A) a lump-sum cash payment on the Closing Date equal to (x) the product of (1) the number of shares of Series A-1 Preferred Stock the holder of each Series A-1 Warrant would be entitled to purchase upon the exercise of such Series A-1 Warrant and (2) the Applicable Per Share Closing Equityholder Consideration applicable to a share of Series A-1 Preferred Stock, less (y) the product of (1) the number of shares of Series A-1 Preferred Stock the holder of each Series A-1 Warrant would be entitled to purchase upon the exercise of such Series A-1 Warrant and (2) the per share exercise price of such Series A-1 Warrant, less (z) the amount of such Company Warrantholder’s Escrow Percentage of the Escrow Amount (a “Closing Date Warrant Cancellation Payment” and collectively, the “Closing Date Warrant Cancellation Payments”);

(B) the right to receive such Company Warrantholder’s Equityholder Earn-Out Percentage of the payments, if any, pursuant to Section 2.02 (subject to the provisions thereof); and

(C) the right to receive such Company Warrantholder’s Escrow Percentage of any cash disbursements made from the Escrow Fund in accordance with the terms of this Agreement and the Escrow Agreement, as and when such disbursements are made.

At or before the Effective Time, the Company shall have taken all necessary action, including, if necessary, obtaining the consent of any holder of any Company Warrants other than Series A-1 Warrants (each, a “Out-of-the-Money Warrant”), to terminate, as of or prior to the Effective Time all Out-of-the-Money Warrants.

(iv) Each share of Company Stock held in the treasury of the Company and each share of Company Stock owned by Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company immediately prior to the Effective Time shall be cancelled and extinguished without any conversion thereof and no payment or distribution shall be made with respect thereto.

(v) Each share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation. The stock certificate evidencing shares of common stock of Merger Sub shall then evidence ownership of the outstanding share of common stock of the Surviving Corporation.

(c) Adjustment and Distribution of Gross Closing Consideration. The “Gross Closing Consideration” shall consist of (x) $32,172,000.00 in cash and (y) 397,990 shares of Parent Common Stock (such amount to be adjusted appropriately for any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares of Parent Common Stock, or any stock dividend thereon, the “Closing Shares”). The Gross Closing Consideration shall be adjusted and distributed in accordance with the terms of this Section 2.01(c).

(i) Company Transaction Expenses. Any Company Transaction Expenses incurred or accrued by the Company in connection with the Merger on or prior to the Closing Date shall be paid in cash from the Gross Closing Consideration on the Closing Date.

(ii) Verizon Payment. $3,500,000 of the Gross Closing Consideration less the amount of Verizon’s Escrow Percentage of the Escrow Amount, in the form of cash (the “Verizon Warrant Cancellation Payment”), shall be paid in cash on the Closing Date to Verizon pursuant to the terms of the Warrant Cancellation Agreement dated as of June 30, 2010 in the form attached hereto as Exhibit 2.01(c)(ii) (the “Verizon Consent Agreement”) by and between the Company and Verizon. In addition to the foregoing, Verizon shall also have the right to receive its Escrow Percentage of any cash disbursements made from the Escrow Fund in accordance with the terms of this Agreement and the Escrow Agreement, as and when such disbursements are made. For the avoidance of doubt, for all purposes under this Agreement (i) the warrant held by Verizon to be cancelled pursuant to the terms of the Verizon Consent Agreement shall not constitute a Company Warrant or Series A-1 Warrant and (ii) Verizon shall not be a Company Warrantholder.

(iii) Warrant Cancellation Payments. Each Company Warrantholder shall be paid from the Gross Closing Consideration, in the form of cash, the Closing Date Warrant Cancellation Payments to which such Company Warrantholder is entitled under Section 2.01(b)(iii) from the Gross Closing Consideration on the Closing Date.

(iv) Working Capital.

(A) At least three (3) business days preceding the Closing Date, the Company shall prepare and deliver to Parent a consolidated calculation of the estimated Net Working Capital of the Company and its Subsidiaries as of the Closing (the “Estimated Net Working Capital”). The amount, if any, by which the Estimated Net Working Capital is less than zero shall be referred to herein as the “Estimated Deficiency Amount”. The Estimated Deficiency Amount shall reduce the amount of Closing Equityholder Consideration in accordance with Section 2.01(c)(v) below.

(B) Within sixty (60) days following the Closing, Parent shall prepare and deliver to the Stockholders’ Representative a balance sheet and a schedule (the “Final Net Working Capital Schedule”) which includes a consolidated calculation of the Net Working Capital of the Company and its Subsidiaries as of the Closing.

(C) During the thirty (30) day period after the receipt of the Final Net Working Capital Schedule, the Stockholders’ Representative may notify Parent in writing, of any objections to such Final Net Working Capital Schedule, setting forth a reasonably specific and detailed description of the objections (each, an “Item of Working Capital Dispute”); provided, however, that the only basis on which the Stockholders’ Representative shall be permitted to submit an Item of Working Capital Dispute is that such Item of Working Capital Dispute was not prepared in accordance with this Section 2.01(c)(iv) or contains mathematical or clerical errors. If the Stockholders’ Representative does not deliver such notice within such thirty (30) day period, the Final Net Working Capital Schedule shall be final, binding and conclusive upon Parent, the Company, the Stockholders’ Representative, the Earn-Out Consideration Recipients and the Closing Consideration Recipients.

(D) If the Stockholders’ Representative provides a timely notice of objection to the proposed Final Net Working Capital Schedule pursuant to subsection (C) above, Parent and the Stockholders’ Representative shall attempt to amicably resolve any Item of Working Capital Dispute by the end of a thirty (30) day review period but in no event later than thirty (30) days thereafter. If the parties are unable to resolve any difference within such period, they shall promptly (within fifteen (15) days thereafter) and jointly appoint an Independent CPA to resolve each Item of Working Capital Dispute and make any resulting adjustments to the Final Net Working Capital Schedule. The scope of the work assignment for the Independent CPA shall be limited to the resolution of any Item of Working Capital Dispute not previously resolved by the parties and be based solely on whether each such unresolved Item of Working Capital Dispute was prepared in accordance with the terms of this Agreement or whether each such Item of Working Capital Dispute contains a mathematical or clerical error or errors. No Item of Working Capital Dispute shall be resolved such that the final amount determined by the Independent CPA is more favorable to the Parent than the calculation(s) presented in the Final Net Working Capital Schedule delivered by the Parent to the Stockholders’ Representative or more favorable to the Closing Consideration Recipients than the calculation(s) presented in any unresolved Item of Working Capital Dispute delivered by the Stockholders’ Representative. The resolution of each Item of Working Capital Dispute by the Independent CPA and corresponding adjustments to the Final Net Working Capital Schedule shall be final, binding and conclusive upon Parent, the Company, the Stockholders’ Representative and the Closing Consideration Recipients. The costs, fees and expenses of the Independent CPA will be allocated by the Independent CPA, in its sole discretion, between Parent, on the one hand, and Closing Consideration Recipients, on the other hand, taking into account the extent to which each Item of Working Capital Dispute was, or was not, resolved in favor of the Closing Consideration Recipients.

(E) If the Final Net Working Capital (as finally determined in accordance with subsection (D) above) is less than zero (the amount of such deficiency, the “Final Deficiency Amount”) and the absolute value of the Final Deficiency Amount exceeds the absolute value of the Estimated Deficiency Amount, then Parent shall be entitled to immediate recovery from the Escrow Fund in an amount equal to (x) the difference between the Final Deficiency Amount and the Estimated Deficiency Amount or (y) if the Estimated Net Working Capital is greater than zero, the Final Deficiency Amount.

(F) As used in this Section 2.01(c)(iv) and elsewhere in this Agreement, the following terms have the following meanings:

a. “Current Assets” shall mean all current assets of the Company and its Subsidiaries, in each case, as determined in accordance with U.S. GAAP.

b. “Current Liabilities” means all current liabilities of the Company and its Subsidiaries, in each case, as determined in accordance with U.S. GAAP, including all quarterly, management or similar bonuses but specifically excluding deferred revenue (or liabilities in respect thereof), those items set forth on Schedule 2.01(c)(iv) (the “Verizon Items”), Company Transaction Expenses and any severance or similar amounts paid or payable upon the termination of the employment of any employee of the Company and its Subsidiaries, whether or not arising as a result of the consummation of the transactions contemplated by the Agreement.

c. “Independent CPA” shall mean an independent, nationally recognized accounting firm jointly selected by the Stockholders’ Representative and Parent.

d. “Net Working Capital” means, as of the time of any determination, (A) Current Assets less (B) Current Liabilities.

(v) Closing Equityholder Consideration; Net Closing Consideration. The amount equal to (A) the Gross Closing Consideration, less (B) the aggregate amount of Company Transaction Expenses paid pursuant to subsection (c)(i) above, less (C) the Estimated Deficiency Amount, if any, less (D) the Verizon Warrant Cancellation Payment, shall be referred to herein as the “Closing Equityholder Consideration”. The Closing Equityholder Consideration less the aggregate amount of the Closing Date Warrant Cancellation Payments is referred to herein as the “Stockholder Closing Consideration,” which shall be paid, in accordance with Section 2.01(b)(i)(B) in the form of cash (the “Closing Cash Consideration”) and Closing Shares. The sum of the Stockholder Closing Consideration plus the amount of the Verizon Warrant Cancellation Payment plus the aggregate amount of the Closing Date Warrant Cancellation Payments is referred to herein as the “Net Closing Consideration.”

(vi) Escrow Amount. An amount of the Net Closing Consideration in cash equal to the Escrow Amount shall, on the Closing Date, be deposited by the Parent with the Escrow Agent in an escrow fund (with any interest earned thereupon, the “Escrow Fund”) for the purpose of satisfying claims by Parent and Parent Indemnified Parties under Section 2.01(c)(iv)(E) or Article IX, as applicable, to be held and disbursed by the Escrow Agent in accordance with the terms of this Agreement and the Escrow Agreement. The portion of the Escrow Amount contributed by the Parent with respect to each Closing Consideration Recipient shall be made in accordance with the each Closing Consideration Recipient’s Escrow Percentage.

(vii) Changes in Parent Capital Stock. If, during the period between the date hereof and the Effective Time, any change in the capital stock of Parent shall occur by reason of reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, or any stock dividend thereon with a record date during such period or any similar event, the Signing Price shall be correspondingly equitably adjusted to the extent appropriate to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination, exchange or readjustment of shares.

SECTION 2.02 Post-Closing Payments.

(a) Subject to, and in accordance with, the terms of this Section 2.02, Parent shall pay or cause to be paid to Verizon, Mooreland, the Company Equityholders and those certain employees of the Company listed on Schedule 2.02(a) (the “Earn-Out Eligible Employees” and, with the Company Equityholders, Verizon and Mooreland, the “Earn-Out Consideration Recipients”) an additional payment in an amount not greater than $35,000,000, calculated as provided herein.

(b) Subject to the terms of this Section 2.02, the “Quarterly Earn-Out Amount” in respect of each fiscal quarter of the Surviving Corporation during the consecutive six (6) fiscal quarter period beginning on July 1, 2010 (the “Earn-Out Period”), shall be an amount equal to:

(i) $1,000,000 multiplied by (A) if the Total Revenue for such fiscal quarter (the “Quarterly Revenue”) is greater than or equal to 100% of the Target Revenue for such fiscal quarter (the “Quarterly Target Revenue”), 1, (B) if the Quarterly Revenue is greater than or equal to 90%, but less than 100%, of the Quarterly Target Revenue, 0.4, (C) if the Quarterly Revenue is greater than or equal to 85%, but less than 90%, of the Quarterly Target Revenue, 0.15, or (D) if the Quarterly Revenue is less than 85% of the Quarterly Target Revenue, zero; plus

(ii) $3,250,000 multiplied by (A) if the Transaction-Related Revenue for such fiscal quarter (the “Quarterly Transaction-Related Revenue”) is greater than or equal to 100% of the Target Transaction-Related Revenue for such fiscal quarter (the “Quarterly Target Transaction-Related Revenue”), 1, (B) if the Quarterly Transaction-Related Revenue is greater than or equal to 90%, but less than 100%, of the Quarterly Target Transaction-Related Revenue, 0.4, (C) if the Quarterly Transaction-Related Revenue is greater than or equal to 85%, but less than 90%, of the Quarterly Target Transaction-Related Revenue, 0.15, or (D) if the Quarterly Transaction-Related Revenue is less than 85% of the Quarterly Target Transaction-Related Revenue, zero; plus

(iii) $750,000 multiplied by (A) if the Operating Margin for such fiscal quarter (the “Quarterly Operating Margin”) is greater than or equal to the Target Operating Margin, 1, (B) if the Quarterly Operating Margin is greater than or equal to 90% of the Target Operating Margin, but less than 100% of the Target Operating Margin, 0.4, (C) if the Quarterly Operating Margin is greater than or equal to 85% of the Target Operating Margin, but less than 90% of the Target Operating Margin, 0.15, or (D) if the Quarterly Operating Margin is less than 85% of the Target Operating Margin, zero. Notwithstanding the foregoing, if the Quarterly Revenue in respect of any fiscal quarter is less than 85% of the Quarterly Target Revenue for such fiscal quarter, than the amount payable pursuant to this subsection (iii) in respect of the Quarterly Earn-Out Amount for such fiscal quarter shall be zero.

(c) Subject to the terms of this Section 2.02, the “Additional Earn-Out Amount” in respect of the calendar year ended December 31, 2011, shall be an amount equal to the product of (i) .25, multiplied by (ii) the amount by which Total Revenue in respect of such calendar year exceeds $48,000,000 (calculated without giving effect to any adjustments associated with FAS 141R); provided (x) in no event shall the Additional Earn-Out Amount exceed $5,000,000, and (y) no Additional Earn-Out Amount shall be payable unless Operating Margin in respect of the calendar year ended December 31, 2011 equals or exceeds the Target Operating Margin.

(d) Applicable Definitions. As used in this Section 2.02 and elsewhere in the Agreement, the following terms shall have the following meanings:

(i) “Business of the Company” shall mean the researching, developing, manufacturing, marketing, distributing and selling of the Company Products and Services.

(ii) “Company Products” shall mean the Company’s Mighty Back-up product, the Company’s Network Address Book product, the Company’s Social Address Book product, the Company’s See Me Ring product and the Company’s Handset Transfer System product.

(iii) “Company Services” shall mean support, maintenance and professional services provided in respect of the Company Products.

(iv) “Company Products and Services” shall mean, collectively, the Company Products and the Company Services.

(v) “Operating Margin” shall mean, in respect of any fiscal quarter, the pre-interest, pre-tax profit earned in such fiscal quarter by Parent (or any subsidiary thereof) from the operation of the Business of the Company, calculated in accordance with U.S. GAAP (but without giving effect to any adjustments associated with FAS 141R) and expressed as a percentage of Total Revenue for such fiscal quarter; provided, however, (x) any compensation or similar expense associated with any Company Transaction Expenses or any other payments made to the Earn-Out Consideration Recipients pursuant to this Section 2.02, and (y) any severance or similar amounts paid or payable upon the termination of the employment of any employee of the Surviving Corporation or the Company and its Subsidiaries, whether or not arising as a result of the consummation of the transactions contemplated by the Agreement, shall not be taken into account for purposes of calculating Operating Margin.

(vi) “Target Operating Margin” shall mean the percentage set forth on Schedule 2.02(d) hereto under the heading “Target Operating Margin.”

(vii) “Target Revenue” shall mean, in respect of any fiscal quarter, the amount set forth under the heading “Target Revenue” for such fiscal quarter as set forth on Schedule 2.02(d) hereto, provided that the “Target Revenue” for any particular fiscal quarter shall be reduced on a dollar-for-dollar basis by the amount of any deferred revenue of the Company that would otherwise have been earned in such fiscal quarter but cannot be recognized by Parent on account of any adjustments associated with FAS 141R.

(viii) “Target Transaction-Related Revenue” shall mean, in respect of any fiscal quarter, the amount set forth under the heading “Target Transaction-Related Revenue” for such fiscal quarter as set forth on Schedule 2.02(d) hereto, provided that the “Target Transaction-Related Revenue” for any particular fiscal quarter shall be reduced on a dollar-for-dollar basis by the amount of any deferred revenue of the Company that would otherwise have been earned in such fiscal quarter but cannot be recognized by Parent on account of any adjustments associated with FAS 141R.

(ix) “Total Revenue” shall mean, in respect of any fiscal quarter, the aggregate revenue, calculated in accordance with U.S. GAAP, earned in such fiscal quarter by Parent (or any subsidiary thereof) from the sale of the Company Products and Services to Verizon, Nextel International, Portugal Telecom, Qualcomm, Bell Mobility, Telus and/or Embarq/CenturyTel (in the case of Embaq/CenturyTel, specifically excluding any revenue arising from contracts entered into with Embarq/CenturyTel prior to the Effective Time).

(x) “Transaction-Related Revenue” shall mean, in respect of any fiscal quarter, (i) the aggregate amount of transaction revenue, subscription revenue and application revenue relating to the Company’s Products from agreements with Verizon, Nextel International, Portugal Telecom, Qualcomm, Bell Mobility, Telus and/or Embarq/CenturyTel (in the case of Embaq/CenturyTel, specifically excluding any revenue arising from contracts entered into with Embarq/CenturyTel prior to the Effective Time), and (ii) maintenance and support revenue under the Company’s agreements with Verizon with respect to the Company’s Network Address Book product, calculated in accordance with U.S. GAAP, for such fiscal quarter by the Parent (or any subsidiary thereof).

(e) Interim Estimates; Inspection. Within sixty (60) days following the end of each fiscal quarter during the Earn-Out Period, Parent or its representatives shall prepare and deliver to the Stockholders’ Representative a non-binding estimate of the Quarterly Earn-Out Amount for such fiscal quarter (each, a “Quarterly Estimate”), together with a statement setting forth the calculation of Quarterly Revenue, Quarterly Transaction-Related Revenue and Quarterly Operating Margin for such fiscal quarter. During the Earn-Out Period, and the period of any dispute with respect thereto within the contemplation of Section 2.02(f), Parent and the Surviving Corporation shall on a timely basis (but, during the Earn-Out Period, not more than once per fiscal quarter), provide to the Stockholders’ Representative and its Representatives, upon reasonable notice, reasonable access to all records, and on terms reasonably determined by Parent, the Surviving Corporation’s outside accountants, utilized in preparing the applicable Quarterly Estimates and the Final Earn-Out Statement; provided, however, that no such access shall be granted unless and until the Stockholders’ Representative and such Representatives enter into a confidentiality agreement with respect to such information in a form reasonably acceptable to Parent.

(f) Final Calculation and Payment.

(i) Within sixty (60) days following the end of the Earn-Out Period, the Parent shall determine, in accordance with this Section 2.02, the sum of the Quarterly Earn-Out Amounts earned in respect of each fiscal quarter during the Earn-Out Period and the Additional Earn-Out Amount earned in respect of the calendar year ended December 31, 2011 (such sum, less any setoff to the extent provided in Article IX of this Agreement, the “Aggregate Earn-Out Amount”) and deliver to the Stockholders’ Representative a statement setting forth such Aggregate Earn-Out Amount and the calculation thereof (the “Final Earn-Out Statement”).

(ii) Within thirty (30) days after delivery by Parent of the Final Earn-Out Statement pursuant to subsection (f)(i) above, the Stockholders’ Representative may notify the Parent in writing of any objections to the Final Earn-Out Statement setting forth a reasonably specific and detailed description of the objections, including the amount disputed (each, an “Item of Earn-Out Dispute”). If the Stockholders’ Representative does not deliver such notice within such period provided for in this subsection, the Final Earn-Out Statement and the Aggregate Earn-Out Amount set forth thereon shall be final, binding and conclusive upon the Stockholders’ Representative and the Earn-Out Consideration Recipients.

(iii) If the Stockholders’ Representative provides a notice of objection to the Final Earn-Out Statement within the time periods specified in subsection (f)(ii) above, Parent and the Stockholders’ Representative shall attempt to amicably resolve any such Item of Earn-Out Dispute by the end of such period but in no event later than fifteen (15) days thereafter. If the parties are unable to resolve any difference within such period, they shall promptly and jointly appoint an Independent CPA to resolve each such Item of Earn-Out Dispute and make any resulting adjustments to the Final Earn-Out Statement. The scope of the work assignment for the Independent CPA shall be limited to the resolution of any unresolved Item of Earn-Out Dispute and shall be based solely on whether each such unresolved Item of Earn-Out Dispute was prepared in accordance with the terms of this Section 2.02 or whether each such Item of Earn-Out Dispute contains a mathematical or clerical error or errors. No Item of Earn-Out Dispute shall be resolved such that the final amount determined by the Independent CPA is more favorable to the Parent than the calculation(s) presented in the Final Earn-Out Statement delivered by the Parent to the Stockholders’ Representative or more favorable to the Earn-Out Consideration Recipients than the calculation(s) presented in any unresolved Item of Earn-Out Dispute delivered by the Stockholders’ Representative. The resolution of each Item of Earn-Out Dispute by the Independent CPA and the corresponding adjustments to the Final Earn-Out Statement shall be final, binding and conclusive upon Parent, the Company, the Stockholders’ Representative and the Earn-Out Consideration Recipients. The costs, fees and expenses of the Independent CPA will be allocated by the Independent CPA, in its sole discretion, between Parent, on the one hand, and Earn-Out Consideration Recipients, on the other hand, taking into account the extent to which each Item of Earn-Out Dispute was, or was not, resolved in favor of the Earn-Out Consideration Recipients.

(iv) Payment of the Aggregate Earn-Out Amount.