TABLE OF CONTENTS

		Page
ARTICLE I. THE MERGER		1
SECTION 1.01	The Merger	1
SECTION 1.02	Closing	1
SECTION 1.03	Effective Time	1
SECTION 1.04	Effect of the Merger	2
SECTION 1.05	Certificate of Incorporation; Bylaws	2
SECTION 1.06	Directors and Officers	2
ARTICLE II. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES		2
SECTION 2.01	Conversion of Securities	2
SECTION 2.02	Exchange of Certificates	3
SECTION 2.03	Stock Transfer Books	5
SECTION 2.04	Company Stock Options	5
SECTION 2.05	Restricted Shares; RSUs.	6
SECTION 2.06	Dissenting Shares	7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY		7
SECTION 3.01	Organization and Qualification	7
SECTION 3.02	Certificate of Incorporation and Bylaws	8
SECTION 3.03	Capitalization	8
SECTION 3.04	Authority Relative to This Agreement	10
SECTION 3.05	No Conflict; Required Filings and Consents	10
SECTION 3.06	Permits; Compliance	11
SECTION 3.07	SEC Filings; Financial Statements; Undisclosed Liabilities	12
SECTION 3.08	Affiliate Transactions	13
SECTION 3.09	Absence of Certain Changes or Events	13
SECTION 3.10	Absence of Litigation	13
SECTION 3.11	Employee Benefit Plans	13
SECTION 3.12	Labor and Employment Matters	15
SECTION 3.13	Real Property	16
SECTION 3.14	Intellectual Property	16
SECTION 3.15	Taxes	19
SECTION 3.16	Environmental Matters	20
SECTION 3.17	Specified Contracts	20
SECTION 3.18	Insurance	22
SECTION 3.19	Board Approval; Vote Required	22
SECTION 3.20	Opinion of Financial Advisor	23
SECTION 3.21	Brokers	23

 

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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER CO		23
SECTION 4.01	Corporate Organization	23
SECTION 4.02	Certificate of Incorporation and Bylaws	24
SECTION 4.03	Authority Relative to This Agreement	24
SECTION 4.04	No Conflict; Required Filings and Consents	24
SECTION 4.05	Absence of Litigation	25
SECTION 4.06	Operations of Parent and Merger Co	25
SECTION 4.07	Financing	25
SECTION 4.08	Guarantees	26
SECTION 4.09	Brokers	26
SECTION 4.10	Ownership of Company Common Stock	26
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER		27
SECTION 5.01	Conduct of Business by the Company Pending the Merger	27
SECTION 5.02	Conduct of Parent and Merger Co	29
ARTICLE VI. ADDITIONAL AGREEMENTS		30
SECTION 6.01	Proxy Statement; Other Filings	30
SECTION 6.02	Company Stockholders’ Meeting; Recommendation	31
SECTION 6.03	Access to Information; Confidentiality	32
SECTION 6.04	Solicitation.	32
SECTION 6.05	Directors’ and Officers’ Indemnification and Insurance.	36
SECTION 6.06	Employee Benefits Matters	38
SECTION 6.07	Notification of Certain Matters	39
SECTION 6.08	Financing	39
SECTION 6.09	Further Action; Reasonable Best Efforts	41
SECTION 6.10	Public Announcements	43
SECTION 6.11	Resignations	43
SECTION 6.12	Debt Tender and Consent Solicitation	43
SECTION 6.13	Section 16(b)	44
ARTICLE VII. CONDITIONS TO THE MERGER		44
SECTION 7.01	Conditions to the Obligations of Each Party	44
SECTION 7.02	Conditions to the Obligations of Parent and Merger Co	45
SECTION 7.03	Conditions to the Obligations of the Company	45
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER		46
SECTION 8.01	Termination	46
SECTION 8.02	Effect of Termination	47
SECTION 8.03	Fees and Expenses	47
SECTION 8.04	Amendment	50
SECTION 8.05	Waiver	50

 

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ARTICLE IX. GENERAL PROVISIONS		50
SECTION 9.01	Non-Survival of Representations, Warranties and Agreements	50
SECTION 9.02	Notices	50
SECTION 9.03	Certain Definitions	52
SECTION 9.04	Severability	59
SECTION 9.05	Entire Agreement; Assignment	59
SECTION 9.06	Parties in Interest	59
SECTION 9.07	Governing Law	59
SECTION 9.08	Specific Performance; Submission to Jurisdiction	59
SECTION 9.09	Waiver of Jury Trial	60
SECTION 9.10	Headings	60
SECTION 9.11	Counterparts	61

 

 

 

Exhibits

 

Exhibit A – Form of Certificate of Incorporation of the Surviving Corporation

 

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AGREEMENT AND PLAN OF MERGER, dated as of October 14, 2006 (this “ Agreement ”), among HARPOON ACQUISITION CORPORATION, a Delaware corporation (“ Parent ”), HARPOON MERGER CORPORATION, a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Co ”), and OPEN SOLUTIONS INC, a Delaware corporation (the “ Company ”).

WHEREAS, the respective Boards of Directors of each of the Company, Parent and Merger Co (and with respect to the Company, based on the unanimous recommendation of the Special Committee of the Board of Directors of the Company (the “ Special Committee ”)) deem it in the best interests of their respective stockholders to consummate the merger (the “ Merger ”), on the terms and subject to the conditions set forth in this Agreement, of Merger Co with and into the Company, and such Boards of Directors have approved this Agreement and declared its advisability (and, in the case of the Board of Directors of the Company (the “ Company Board ”), recommended that this Agreement be adopted by the Company’s stockholders).

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Co and the Company hereby agree as follows:

ARTICLE I.
THE MERGER

SECTION 1.01        The Merger .  Upon the terms and subject to the conditions set forth in Article VII, and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), at the Effective Time, Merger Co shall be merged with and into the Company.  At the Effective Time, the separate corporate existence of Merger Co shall cease and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”).

SECTION 1.02        Closing .  Unless this Agreement shall have been terminated in accordance with Section 8.01 or another time, date and/or place is agreed to in writing by Parent and the Company, the closing of the Merger (the “ Closing ”) will take place at 11:00 a.m., New York time, at the offices of Latham & Watkins LLP, 885 Third Avenue, Suite 1000, New York, NY, 10022-4834, on the third business day after the satisfaction or waiver of the conditions set forth in Article VII (excluding conditions that, by their terms, cannot be satisfied until the Closing but subject to the satisfaction or waiver of such conditions at the Closing); provided , however , that if the fifth calendar day after the final day of the Marketing Period (as herein defined) has not occurred at the time of the satisfaction or waiver of the conditions set forth in Article VII (excluding conditions that, by their terms, cannot be satisfied until the Closing but subject to the satisfaction or waiver of such conditions at the Closing), the Closing shall occur on the date following the satisfaction or waiver of such conditions that is specified by Parent on no less than three business days’ notice to the Company, such date to occur no later than five calendar days after the final day of the Marketing Period.  The date on which the Closing actually occurs is hereinafter referred to as the “ Closing Date ”.

SECTION 1.03        Effective Time .  Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date, the parties hereto shall file, or cause to be filed, a certificate of merger (the “ Certificate of Merger ”) in such form as is required by, and executed

 

 

and acknowledged in accordance with, the relevant provisions of the DGCL.  The Merger shall become effective at such date and time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or at such subsequent date and time as Merger Co and the Company shall agree and specify in the Certificate of Merger.  The date and time at which the Merger becomes effective is referred to in this Agreement as the “ Effective Time ”. 

SECTION 1.04        Effect of the Merger .  At the Effective Time, the effect of the Merger shall be as provided in Section 259 of the DGCL.

SECTION 1.05        Certificate of Incorporation; Bylaws .  (a)  At the Effective Time, the Certificate of Incorporation of the Company as in effect immediately prior to the Effective Time shall be amended as of the Effective Time to read in its entirety as set forth in Exhibit B attached hereto and, as so amended, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended (subject to the requirements of Section 6.05(a)) in accordance with the provisions thereof and as provided by Law.

(b)               At the Effective Time, the Bylaws of Merger Co as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by Law, the Certificate of Incorporation of the Surviving Corporation and such Bylaws.

SECTION 1.06        Directors and Officers .  The directors of Merger Co 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 the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation,  in each case until their respective successors are duly elected or appointed and qualified or until the earlier of their death, resignation or removal.

ARTICLE II.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

SECTION 2.01        Conversion of Securities .  At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Co, the Company or the holders of any of the following securities:

(a)                Conversion of Company Common Stock .  Each share of common stock, par value $.01 per share, of the Company (the “ Company Common Stock ”) issued and outstanding immediately prior to the Effective Time (such shares, including any shares issued upon conversion of the Convertible Notes, the “ Shares ”) (other than any Shares to be cancelled pursuant to Section 2.01(b) and any Dissenting Shares) shall be canceled and shall be converted automatically into the right to receive $38.00 in cash, without interest (the “ Merger Consideration ”), payable upon surrender in the manner provided in Section 2.02 of the certificate that formerly evidenced such Share (a “ Certificate ”).

(b)               Cancellation of Treasury Stock and Parent and Merger Co-Owned Stock .  Each share of Company Common Stock held in the treasury of the Company and each share of

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Company Common Stock owned by Parent, Merger Co or any direct or indirect wholly-owned subsidiary of Parent or Merger Co or any direct or indirect wholly-owned Subsidiary of the Company immediately prior to the Effective Time shall automatically be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto.

(c)                Capital Stock of Merger Co .  Each share of common stock, par value $.01 per share, of Merger Co issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation.  Following the Effective Time, each certificate evidencing ownership of shares of Merger Co common stock shall evidence ownership of such shares of the Surviving Corporation.

(d)               Adjustments .  If, between the date of this Agreement and the Effective Time, there is a reclassification, recapitalization, stock split, stock dividend, subdivision, combination or exchange of shares with respect to, or rights issued in respect of, the Shares (other than the conversion of Convertible Notes into Shares or the issuance of Shares upon the exercise of Company Stock Options or the vesting of RSUs), the Merger Consideration shall be adjusted accordingly, without duplication, to provide the holders of Shares the same economic effect as contemplated by this Agreement prior to such event.

SECTION 2.02        Exchange of Certificates .  (a)   Paying Agent .  Prior to the Effective Time, the Company shall (i) appoint a bank or trust company reasonably acceptable to Parent (the “ Paying Agent ”), and (ii) enter into a paying agent agreement, in form and substance reasonably acceptable to Parent, with such Paying Agent, to serve as the Paying Agent for the payment of the Merger Consideration in accordance with this Article II and payments in respect of the Company Stock Options and RSUs unless another agent is designated as provided in Section 2.04(a) or Section 2.04(b).  At the Effective Time, the Surviving Corporation shall deposit, or Parent shall cause the Surviving Corporation to deposit, with the Paying Agent for the benefit of the holders of Shares, Company Stock Options and RSUs, cash in an amount sufficient to pay the aggregate Merger Consideration required to be paid pursuant to Section 2.01(a) plus any cash payable to holders of Company Stock Options and RSUs pursuant to Section 2.04 (such cash being hereinafter referred to as the “ Exchange Fund ”).  The Exchange Fund shall not be used for any other purpose.  The Exchange Fund shall be invested by the Paying Agent as directed by the Surviving Corporation; provided , however , that such investments shall be in obligations of or guaranteed by the United States of America or any agency or instrumentality thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $1 billion (based on the most recent financial statements of such bank which are then publicly available).  Any net profit resulting from, or interest or income produced by, such investments shall be payable to the Surviving Corporation.

(b)               Exchange Procedures .  As promptly as practicable after the Effective Time, but in any event within 4 business days after the Effective Time, the Company shall cause the Paying Agent to mail to each Person who was, immediately prior to the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to

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Section 2.01(a):  (i) a letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the Certificates evidencing such Shares shall pass, only upon proper delivery of the Certificates to the Paying Agent) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration.  Upon surrender to the Paying Agent of a Certificate or Certificates for cancellation, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be reasonably required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash that such holder has the right to receive in respect of the Shares formerly represented by such Certificate pursuant to Section 2.01(a), and the Certificate so surrendered shall forthwith be cancelled.  In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, payment of the Merger Consideration may be made to a Person other than the Person in whose name the Certificate so surrendered is registered if the Certificate representing such Shares shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer or other taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of such Certificate or establish to the reasonable satisfaction of the Surviving Corporation that such tax has been paid or is not applicable.  Until surrendered as contemplated by this Section 2.02, each Certificate shall be deemed at all times after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration to which the holder of such Certificate is entitled pursuant to this Article II.  No interest shall be paid or will accrue on any cash payable to holders of Certificates pursuant to the provisions of this Article II.

(c)                No Further Rights .  From and after the Effective Time, holders of Certificates shall cease to have any rights as stockholders of the Company, except as otherwise provided herein or by Law.

(d)               Exchange Fund for Dissenting Shares .  Any portion of the Exchange Fund deposited with the Paying Agent pursuant to Section 2.02(a) to pay for Shares that become Dissenting Shares shall be delivered to the Surviving Corporation upon demand following the filing of a petition for appraisal of the Shares with the Delaware Court of Chancery; provided , however , that Parent and the Surviving Corporation shall remain liable for payment of the Merger Consideration for such Shares held by any stockholder who shall have failed to perfect or who otherwise shall have withdrawn or lost such stockholder’s rights to appraisal of such Shares under Section 262 of the DGCL (“ Section 262 ”).

(e)                Termination of Exchange Fund .  Any portion of the Exchange Fund that remains undistributed to the holders of Shares for one year after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any holders of Shares who have not theretofore complied with this Article II shall thereafter look only to the Surviving Corporation for, and the Surviving Corporation shall remain liable for, payment of their claim for the Merger Consideration.  Any portion of the Exchange Fund remaining unclaimed by holders of Shares as of a date which is immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Authority shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation on such date, free and clear of any claims or interest of any Person previously entitled thereto.

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(f)                No Liability .  None of the Paying Agent, Parent, Merger Co or the Surviving Corporation shall be liable to any holder of Shares for any such Shares (or dividends or distributions with respect thereto), or cash properly delivered to a public official pursuant to any abandoned property, escheat or similar Law. 

(g)               Withholding Rights .  Each of the Paying Agent, the Surviving Corporation and Merger Co shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as it is required to deduct and withhold with respect to such payment under all applicable Tax laws and pay such withholding amount over to the appropriate taxing authority.  To the extent that amounts are so properly withheld by the Paying Agent, the Surviving Corporation or Merger Co, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by the Paying Agent, the Surviving Corporation or Merger Co, as the case may be.

(h)               Lost Certificates .  If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation or the Paying Agent may direct, as indemnity against any claim that may be made against the Surviving Corporation with respect to such Certificate, the Paying Agent shall pay in respect of such lost, stolen or destroyed Certificate the Merger Consideration to which the holder thereof is entitled pursuant to Section 2.01(a).

SECTION 2.03        Stock Transfer Books .  At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of Shares thereafter on the records of the Company other than to settle transfers of Shares that occurred prior the Effective Time.  On or after the Effective Time, any Certificates presented to the Paying Agent or the Surviving Corporation for any reason shall be cancelled against delivery of the Merger Consideration to which the holders thereof are entitled pursuant to Section 2.01(a).

SECTION 2.04        Company Stock Options .  (a)  Except as provided for in Section 2.04(b), each option to purchase shares of Company Common Stock (the “ Company Stock Options ”) granted under any plan arrangement or agreement, other than the ESPP (the “ Company Stock Plans ”), which is outstanding immediately prior to the Effective Time, whether or not then exercisable or vested, shall by virtue of the Merger and without any action on the part of the Parent, Merger Co, the Company or the holder thereof, be converted into and shall become a right to receive an amount in cash, without interest, with respect to each share that such Company Stock Option is then convertible into, equal to the excess, if any, of the Merger Consideration over the per share exercise price of such Company Stock Option (such amount being hereinafter referred to as the “ Option Merger Consideration ”) and each Company Stock Option shall be canceled at the Effective Time.  The payment of Option Merger Consideration to the holder of a Company Stock Option shall be reduced by any income or employment tax withholding required under the Code or any provision of state, local or foreign Tax Law.  To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of such Company Stock Option.  The Company agrees to take any and all actions necessary to effectuate immediately prior to the Effective Time

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the cancellation of all Company Stock Options that are eligible for the Option Merger Consideration pursuant to this Section 2.04(a).   All payments with respect to Company Stock Options shall be made by the Paying Agent (or such other agent reasonably acceptable to Parent as the Company shall designate prior to the Effective Time, which may be the Company’s payroll agent) as promptly as reasonably practicable after the Effective Time from funds deposited by or at the direction of the Surviving Corporation to pay such amounts in accordance with Section 2.02(a).

(b)               Notwithstanding the provisions of Section 2.04(a) that provide for the cancellation of the unexercised Company Stock Options, Parent, in its sole discretion, may permit the holders of certain Company Stock Options (the “ Rollover Optionees ”) to exchange some or all of their outstanding Company Stock Options and receive substituted options to purchase common stock of Parent on such terms and conditions as are reasonably acceptable to Parent.  Section 2.04(b) of the disclosure schedule delivered by the Company to Parent and Merger Co concurrently with the execution and delivery of this Agreement (the “ Company Disclosure Schedule ”) sets forth the Rollover Optionees, which schedule may be amended and revised by Parent prior to the Closing Date.  Parent intends that the exchange and substitution of the Company Stock Options for new options shall be effected in a manner, including but not limited to adjustments to the exercise price of the new options, that satisfies the requirements of Section 409A of the Code and the requirements of Treasury Regulation Section 1.424-1 to the extent that such requirements can be satisfied in light of the intended terms of the new options.   Parent and the Company will cooperate to take such actions as they reasonably agree are necessary to effectuate the transactions contemplated by this Section 2.04(b).

SECTION 2.05        Restricted Shares; RSUs .

(a)                As of the Effective Time, except as otherwise agreed by Parent and a holder of Restricted Shares with respect to such holder’s Restricted Shares, each award of Restricted Shares which is outstanding immediately prior to the Effective Time shall vest in full and become free of applicable lapse restrictions as of the Effective Time and shall, as of the Effective Time, be canceled and converted into the right to receive the Merger Consideration in accordance with Section 2.01(a).

(b)               As of the Effective Time, except as otherwise agreed by Parent and a holder of RSUs with respect to such holder’s RSUs, each award of RSUs which is outstanding immediately prior to the Effective Time shall vest in full and become free of applicable lapse restrictions as of the Effective Time and shall, as of the Effective Time, be canceled and extinguished, and the holder thereof shall be entitled to receive an amount in cash equal to (i) the product of (A) the number of shares previously subject to such RSU and (B) the Merger Consideration, and the (ii) the value of any deemed dividend equivalents accrued but unpaid with respect to such RSUs, less any amounts required to be withheld under any applicable Law.  All payments with respect to canceled RSUs shall be made by the Paying Agent (or such other agent reasonably acceptable to Parent as the Company shall designate prior to the Effective Time, which may be the Company’s payroll agent) as promptly as reasonably practicable after the Effective Time from funds deposited by or at the direction of the Surviving Corporation to pay such amounts in accordance with Section 2.02(a).

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SECTION 2.06        Dissenting Shares .  (a)  Notwithstanding any provision of this Agreement to the contrary and to the extent available under the DGCL, Shares that are outstanding immediately prior to the Effective Time and that are held by any stockholder who is entitled to demand and properly demands (and does not timely withdraw such demand) the appraisal of such Shares (the “ Dissenting Shares ”) pursuant to, and who complies in all respects with, the provisions of Section 262 shall not be converted into, or represent the right to receive, the Merger Consideration.  Any such stockholder shall instead be entitled to receive payment of the fair value of such stockholder’s Dissenting Shares in accordance with the provisions of Section 262; provided , however , that all Dissenting Shares held by any stockholder who shall have failed to perfect or who otherwise shall have withdrawn, in accordance with Section 262, or lost such stockholder’s rights to appraisal of such Shares under Section 262 shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender of the Certificate or Certificates that formerly evidenced such Shares in the manner provided in Section 2.02(b), and the Surviving Corporation shall remain liable for the payment thereof.

(b)               The Company shall give Parent (i) prompt notice of any demands received by the Company for appraisal of any Shares and withdrawals of such demands and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to demands for appraisal under the DGCL.  The Company shall not, except with the prior written consent of Parent, make any payment or agree to make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except (i) as set forth in the disclosure letter delivered to Parent and Merger Co by the Company concurrently with entering into this Agreement (the “ Company Disclosure Schedule ”) or (ii) as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 or the Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2006 and June 30, 2006, other than disclosures in the “Risk Factors” sections thereof and any other disclosures included in such filings that are predictive or forward-looking in nature, the Company hereby represents and warrants to each of Parent and Merger Co that: 

SECTION 3.01        Organization and Qualification .  Each of the Company and each subsidiary of the Company (each, a “ Subsidiary ”) is a corporation, limited company, limited partnership, limited liability company or other business entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization (with respect to jurisdictions that recognize the concept of good standing) and has the requisite corporate, limited company, partnership, limited liability company, or other business entity (as the case may be) power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except, in the case of the Subsidiaries, where the failure to be so organized, existing and in good standing or have such power and authority or possess such governmental approvals has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.  The Company and each Subsidiary is duly qualified or licensed as a foreign corporation to do business, and is in good standing (with respect to jurisdictions that recognize the concept of good standing), in each

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jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

SECTION 3.02        Certificate of Incorporation and Bylaws .  The Company has made available to Parent a complete and correct copy of the Certificate of Incorporation and the Bylaws (or similar organizational documents), each as amended to the date hereof, of the Company and each Subsidiary.  Such Certificates of Incorporation and Bylaws (or similar organizational documents) are in full force and effect.

SECTION 3.03        Capitalization   .  (a)  The authorized capital stock of the Company consists of (i) 95,000,000 shares of Company Common Stock and (ii) 5,000,000 shares of preferred stock, par value $.01 per share (“ Company Preferred Stock ”).  As of September 30, 2006 (the “ Capitalization Date ”), there were (i) 20,797,202 shares of Company Common Stock issued and outstanding of which 546,134 shares of Company Common Stock were held in the Company’s treasury and 20,251,068 were outstanding, (ii) Company Stock Options to purchase an aggregate of 3,524,054 shares of Company Common Stock, issued and outstanding, (iii) RSUs with respect to an aggregate of 253,274 shares of Company Common Stock, (iv) 2,000,000 shares of Company Common Stock available for issuance under the Company’s Employee Stock Purchase Plan (the “ ESPP ”) and 8,236,298 shares of Company Common Stock reserved for issuance under Company Stock Plans (including shares reserved pursuant to outstanding Company Stock Options) other than the ESPP, (v) 4,964,204 shares of Company Common Stock were reserved for issuance upon conversion of the Convertible Notes, (vi) no shares of Company Preferred Stock were issued and outstanding and (vii) no shares of Company Common Stock were held by the Subsidiaries.  All outstanding Shares are duly authorized, validly issued, fully paid and non-assessable, and are not subject to and were not issued in violation of any preemptive or similar right, purchase option, call or right of first refusal or similar right.  Since the Capitalization Date through the date of this Agreement, other than in connection with the issuance of Shares pursuant to the exercise of Company Stock Options, the conversion of Convertible Notes or vesting of awards, Restricted Shares or RSUs, in each case outstanding as of the Capitalization Date, there has been no change in the number of Shares of outstanding or reserved capital stock of the Company or the number of outstanding Company Stock Options, Restricted Shares, RSUs or Convertible Notes.    Section 3.03(a)(i) of the Company Disclosure Schedule sets forth, as of the Capitalization Date, the exercise price of, and the number of Shares issuable under, each Company Stock Option, Restricted Share, RSU or other right set forth on Section 3.03(d) of the Company Disclosure Schedule.  Section 3.03(a)(ii) of the Company Disclosure Schedule sets forth, as of the Capitalization Date, the amount of contributions made to the ESPP through such date.

(b)               Except as set forth in Section 3.03(a) and except for the indenture governing the Convertible Notes (the “ Indenture ”), there are no (i) subscriptions, calls, contracts, options, warrants or other rights, agreements, arrangements, understandings, restrictions or commitments of any character to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound relating to the issued or unissued capital stock or equity interests of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, other equity interests in or debt securities of, the Company

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or any Subsidiary, (ii) securities of the Company or securities convertible, exchangeable or exercisable for shares of capital stock or equity interests of the Company or any Subsidiary, or (iii) equity equivalents, stock appreciation rights or phantom stock, ownership interests in the Company or any Subsidiary or similar rights.  All shares of Company Common Stock subject to issuance as set forth in Section 3.03(a) are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be validly issued, fully paid and nonassessable and free of preemptive (or similar) rights.  Except for the Indenture, there are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any securities or equity interests of the Company or any Subsidiary or to vote or to dispose of any shares of capital stock or equity interests of the Company or any Subsidiary.  None of the Company or any Subsidiary is a party to any stockholders’ agreement, voting trust agreement or registration rights agreement relating to any equity securities or equity interests of the Company or any Subsidiary.  No dividends on the Company Common Stock have been declared or paid.  All of the Shares have been issued by the Company in compliance with applicable Laws, including applicable federal securities Laws.  Other than the Convertible Notes, there are no outstanding bonds, debentures, notes or other indebtedness of the Company or any of its Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter for which the Company’s stockholders may vote.

(c)                Each outstanding share of capital stock (or other unit of equity interest) of each Subsidiary is duly authorized, validly issued, fully paid and nonassessable and was issued free of preemptive (or similar) rights, and each such share or unit is owned by the Company, by one or more wholly-owned Subsidiaries of the Company, or by the Company and one or more wholly-owned Subsidiaries of the Company, free and clear of all options, rights of first refusal, agreements, limitations on the Company’s or any Subsidiary’s voting, dividend or transfer rights, charges and other encumbrances or Liens of any nature whatsoever.   

(d)               Section 3.03(d)(i) of the Company Disclosure Schedule sets forth, as of the Capitalization Date, the name of the record holder of each Company Stock Option, Restricted Share, RSU and other right to purchase, sell, otherwise dispose of or receive Shares under the Company Stock Plans and the expiration date thereof and the vesting date thereof.  A true and complete list of all Subsidiaries, together with the jurisdiction of incorporation of each Subsidiary, is set forth in Section 3.03(d)(ii) of the Company Disclosure Schedule.

(e)                Section 3.03(e) of the Company Disclosure Schedule lists any and all Persons of which the Company directly or indirectly owns an equity or similar interest, or an interest convertible into or exchangeable or exercisable for an equity or similar interest, of less than 50% (collectively, the “ Investments ”).  The Company or a Subsidiary, as the case may be, owns all Investments free and clear of all Liens, and there are no outstanding contractual obligations of the Company or any Subsidiary permitting or requiring the repurchase, redemption or other acquisition of any of its interest in the Investments or requiring the Company or any Subsidiary to provide funds to, make or acquire any investment (in the form of a loan, capital contribution or otherwise) in, provide any guarantee with respect to, or assume, endorse or otherwise become responsible for the obligations of, any Investment or any equity interest in any Person.

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SECTION 3.04        Authority Relative to This Agreement .  The Company has all necessary corporate power and authority to execute and deliver this Agreement and, subject to the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon (the “ Requisite Stockholder Vote ”), to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated by this Agreement to be consummated by the Company (the “ Other Transactions ”).  Assuming the accuracy of Parent’s representations and warranties in Section 4.10, the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the Merger and the Other Transactions have been duly and validly authorized by the Board of Directors of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger or such Other Transactions (other than the adoption of this Agreement by the Requisite Stockholder Vote and the filing of the Certificate of Merger).  This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Co, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors’ rights generally and subject to the effect of general principles of equity.

SECTION 3.05        No Conflict; Required Filings and Consents .  (a)  The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company and the consummation by the Company of the Merger and the Other Transactions will not, (i) conflict with, violate or result in a breach of (A) the Certificate of Incorporation or Bylaws of the Company or (B) similar organizational documents of any Subsidiary, (ii) assuming that all consents, approvals and other authorizations described in Section 3.05(b) and the Requisite Stockholder Vote have been obtained and that all filings and other actions described in Section 3.05(b) have been made or taken, conflict with or violate any U.S. federal, state or local or foreign statute, law, ordinance, regulation, rule, code, executive order, judgment, decree or similar order (“ Law ”) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in any breach or violation of or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, require consent or result in a loss of a material benefit under, give rise to a material obligation under, give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other binding commitment, instrument or obligation (each, a “ Contract ”) to which the Company or any Subsidiary is a party or by which the Company or a Subsidiary or any property or asset of the Company or any Subsidiary is bound or affected, except, with respect to clauses (i)(B), (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which have not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

(b)               The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company and the consummation by the Company of the Merger and the Other Transactions will not, require any consent, approval, authorization or permit of, or filing with or notification to, any supranational, national, provincial, federal, state

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or local or government, regulatory or administrative authority, or any court, tribunal, or judicial or arbitral body (a “ Governmental Authority ”), except for such consents, approvals, authorizations, permits, filings or notifications arising under (i) applicable requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), (ii) the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), and Other Antitrust Laws of any other applicable jurisdiction, (iii) the filing with the Securities and Exchange Commission (the “ SEC ”) of a proxy statement relating to the adoption of this Agreement by the Company’s stockholders (as amended or supplemented from time to time, the “ Proxy Statement ”), (iv) any filings required by, and any approvals required under, the rules and regulations of the NASDAQ National Market, (v) the filing of the Certificate of Merger and any other appropriate merger documents as required by the DGCL, (vi) compliance with any applicable foreign or state securities or blue sky laws, and (vii) such consents, approvals, authorizations, permits, filings or notifications, the failure of which to obtain or make has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

SECTION 3.06        Permits; Compliance .  (a)  Each of the Company and each Subsidiary is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary for each such entity to own, lease and operate its properties or to carry on its business as it is now being conducted (the “ Company Permits ”) and no default has occurred under any such Company Permit, and, to the knowledge of the Company, no written notice of violation has been received from any Governmental Authority, except where the failure to have, or the suspension or cancellation of, or defaults under, or violations of, any Company Permit have not had, and would not reasonably be expected to have, a Company Material Adverse Effect.  As of the date hereof, to the knowledge of the Company, neither it nor any Subsidiary has received any written notification from any Governmental Authority threatening to revoke any such Person’s Company Permit, the revocation of which Company Permit would have, or would reasonably be expected to have, a Company Material Adverse Effect.

(b)               Each of the Company and each Subsidiary is, and at all times since January 1, 2003, has been, in compliance with any Law applicable to such entity or by which any property or asset of such entity is bound or affected, and has not received written notice of any violation of any such Law, except such instances of non-compliance and such violations as have not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

(c)                Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, (i) the Company has made all certifications and statements required by the Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated thereunder (the “ Sarbanes-Oxley Act ”) with respect to the SEC Reports (as defined herein); and (ii) the Company has implemented and maintains effective disclosure controls and procedures and, to the Company’s knowledge, an effective system of internal control over financial reporting (in each case as defined in Rule 13a-15 under the Exchange Act). 

(d)               The Company has disclosed, based on its most recent evaluation of its internal control over financial reporting undertaken under Section 404 of the Sarbanes-Oxley Act in connection with its financial statements for the fiscal year ended December 31, 2005, to

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Parent, the Company's outside auditors and the audit committee of the Board of Directors of the Company (x) any significant deficiencies and material weaknesses (as such terms are defined in the Public Company Accounting Oversight Board’s Auditing Standard No. 2) in the design or operation of the Company’s internal control over financial reporting and (y) any fraud, known to the Company, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.   

(e)                To the knowledge of the Company, the Company has not received any complaint, allegation, assertion or claim regarding the accounting practices, procedures, methodologies or methods of the Company or its internal accounting controls, including any such written complaint, allegation, assertion or claim that the Company has engaged in questionable accounting or auditing practices.

SECTION 3.07        SEC Filings; Financial Statements; Undisclosed Liabilities .  The Company has filed all forms, reports, statements, exhibits, schedules, certifications and other documents required to be filed by it with the SEC since August 31, 2003 (including any amendments or supplements thereto, collectively, the “ SEC Reports ”).  The SEC Reports (including any documents or information incorporated by reference therein and including any financial statements or schedules included therein) (i) as finally amended prior to the date of this Agreement, complied as to form in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), the Exchange Act, the Sarbanes-Oxley Act and, in each case, the rules and regulations promulgated thereunder as of the date filed with the SEC, and (ii) did not, at the time they were filed, or, if amended, as of the date of such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  No Subsidiary is or has been required to file any form, report, statement, schedule, certification or other document with the SEC.

(b)               Each of the consolidated financial statements (including, in each case, any notes and schedules thereto) contained in the SEC Reports was prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by the requirements of Form 10-Q promulgated by the SEC and the requirements of Regulation S-X promulgated by the SEC (“ Regulation S-X ”)) and each fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated Subsidiaries as at the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal year-end adjustments as permitted by the requirements of Form 10-Q and Regulation S-X and in the case of pro forma financial statements, to the qualifications set forth therein).  All of the Subsidiaries are consolidated for accounting purposes.

(c)                Except as and to the extent reflected or reserved against on the consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2005 (including the notes thereto), included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, neither the Company nor any Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), except

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for liabilities and obligations (i) incurred in the ordinary course of business and in a manner consistent with past practice since December 31, 2005, (ii) that have been discharged or paid in full prior to the date of this Agreement in the ordinary course of business consistent with past practice, (iii) incurred pursuant to this Agreement or in connection with effecting the Other Transactions or (iv) that would not reasonably be expected to have a Company Material Adverse Effect.  As of the date hereof, the aggregate amount of all “contractual obligations” (as such term is used in Item 303 of Regulation S-K) of the Company and its Subsidiaries does not exceed $830 million.

SECTION 3.08        Affiliate Transactions .  There are no transactions, agreements, arrangements or understandings between (i) the Company or any of its Subsidiaries, on the one hand, and (ii) any Affiliate of the Company (other than any of its Subsidiaries), on the other hand, of the type that would be required to be disclosed under Item 404 of Regulation S-K promulgated by the SEC (“ Regulation S-K ”).

SECTION 3.09        Absence of Certain Changes or Events .  From December 31, 2005 to the date of this Agreement, there has not occurred any Company Material Adverse Effect, or any event, circumstance, development, change or effect that would reasonably be expected to have a Company Material Adverse Effect.  Since December 31, 2005 to the date of this Agreement, (a) the Company and the Subsidiaries have conducted their respective businesses in all material respects in the ordinary course of business and in a manner consistent with past practice and (b) neither the Company nor any Subsidiary has taken any action or agreed to take any action that would be prohibited by clauses (a), (c), (d), (f), (h) or (i) of Section 5.01 if taken after the date hereof. 

SECTION 3.10        Absence of Litigation .  There is no litigation, suit, claim, action, proceeding, hearing, petition, grievance, complaint or investigation (an “ Action ”) pending or, to the knowledge of the Company, overtly threatened, against the Company or any Subsidiary, or any property or asset of the Company or any Subsidiary, or, to the knowledge of the Company, any executive officer or director of the Company or any of its Subsidiaries, before any Governmental Authority except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.  Neither the Company nor any Subsidiary nor any property or asset of the Company or any Subsidiary is subject to any order, writ, judgment, injunction, decree, determination or award of, or, to the knowledge of the Company, any continuing investigation by, any Governmental Authority, except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

SECTION 3.11        Employee Benefit Plans .  (a) Section 3.11(a) of the Company Disclosure Schedule lists all material Plans.  “ Plans ” is defined as (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)), and all bonus, stock option, stock purchase, restricted stock, equity, stock appreciation, profit sharing, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance, layoff, salary continuation, health, life, disability, accident, vacation or other benefit plans, programs or arrangements; and (ii) all employment, termination, change in control or severance contracts or agreements to which the Company or any Subsidiary is a party, with respect to which the Company or any Subsidiary has any present or future liability or obligation or which are maintained, contributed to, required to be contributed to, or

13

 

sponsored by the Company or any Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Subsidiary. 

(b)               The Company has made available to Merger Co a true and complete copy (where applicable) of (i) each Plan document, (ii) each related trust or funding arrangement for each such Plan, (iii) for the most recently completed fiscal year, the most recently filed annual report on Internal Revenue Service (“ IRS ”) Form 5500, (iv) the most recently received IRS determination letter for each such Plan, (v) the most recently prepared actuarial report and financial statement in connection with each such Plan, and (vi) the most recent summary plan description, any summaries of material modification concerning the Plans.

(c)                None of the Company or any Subsidiary or any other Person or entity that, together with the Company or any Subsidiary, is or was treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each, together with the Company and any Subsidiary, an “ ERISA Affiliate ”), has now or at any time within the past six years (and in the case of any such other Person or entity, only during the period within the past six years that such other Person or entity was an ERISA Affiliate) contributed to, sponsored, or maintained (i) a pension plan (within the meaning of Section 3(2) of ERISA) subject to Section 412 of the Code or Title IV of ERISA; (ii) a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA or the comparable provisions of any other applicable Law) (a “ Multiemployer Plan ”); or (iii) a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which an ERISA Affiliate would reasonably be expected to incur liability under Section 4063 or 4064 of ERISA (a “ Multiple Employer Plan ”).  No payment or other benefit that has been or may be made to any current or former employee or independent contractor of the Company or any Subsidiary under any employment, severance or termination agreement, other compensation arrangement or employee benefit plan or arrangement with the Company or any Subsidiary may be characterized as an “excess parachute payment,” as such term is defined in Section 280G of the Code.

(d)               Except as set forth on Section 3.11(b) of the Company Disclosure Schedule (each, a “ Change in Control Agreement ”), no Plan exists that could, as a result of the consummation of the transactions contemplated by this Agreement, (i) result in any material severance pay, the forgiveness of indebtedness or any material increase in severance pay upon any termination of employment after the date of this Agreement, or (ii) accelerate the time of payment or vesting or result in any material payment of compensation, other property or benefits under, or materially increase the amount payable under, a Plan.

(e)                Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect:

(i)             Each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS that the Plan is so qualified, and, to the knowledge of the Company, no fact or circumstance exists that would reasonably be expected to result in the revocation of such letter;

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(ii)            Each Plan has been established, maintained and administered in accordance with its terms, and in compliance with the applicable provisions of ERISA, the Code and other applicable Laws;

(iii)           no Plan provides post-termination or retiree benefits, and neither the Company nor any Subsidiary has any obligation to provide any post-termination or retiree benefits, in each case other than for health care continuation as required by Section 4980B of the Code or any similar statute;

(iv)           (A) no Actions (other than routine claims for benefits in the ordinary course) are pending or, to the knowledge of the Company, threatened; (B) to the knowledge of the Company, no facts or circumstances exist that would reasonably be expected to give rise to any such Actions, and (C) no administrative investigation, audit or other administrative proceeding by the Department of Labor, the IRS or other Governmental Authority is pending, in progress or, to the knowledge of the Company, threatened;

(v)            Neither the Company nor, to the knowledge of the Company, any fiduciary of any Plan has any liability with respect to any transaction in violation of Sections 404 or 406 of ERISA or any “prohibited transaction,” as defined in Section 4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code; and

(vi)           Each Employee Benefit Plan that is subject to Section 409A of the Code has been administered in good faith compliance with Section 409A of the Code.

(f)                With respect to each Plan that is not subject to United States Law (a “ Foreign Benefit Plan ”), except as would not reasonably be expected to have a Company Material Adverse Effect:  (i) all employer and employee contributions to each Foreign Benefit Plan required by Law or by the terms of such Foreign Benefit Plan have been made or, if applicable, accrued in accordance with normal accounting practices; (ii) each Foreign Benefit Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities; and (iii) each Foreign Benefit Plan has been established, maintained and administered in accordance with its terms, and in compliance with the applicable provisions of applicable Laws.

SECTION 3.12        Labor and Employment Matters .  Neither the Company nor any Subsidiary is, nor at any time has been, a party to any collective bargaining agreement or other labor union agreements applicable to Persons employed by the Company or any Subsidiary, nor, to the knowledge of the Company, are there any such employees represented by a works council or a labor organization or activities or proceedings of any labor union to organize any such employees.  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, no work stoppage, slowdown, labor dispute or labor strike against the Company or any Subsidiary is pending or, to the knowledge of the Company, threatened in writing.  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, the Company and its Subsidiaries (a) have no direct or indirect liability with respect to any misclassification of any Persons as an independent contractor rather than as

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an employee and (b) are in compliance with all applicable Laws respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to their employees.

SECTION 3.13        Real Property .  (a)  Neither the Company nor any Subsidiary owns any parcel of real property.

(b)               Section 3.13(b) of the Company Disclosure Schedule lists by address each parcel of real property leased or subleased by the Company or any Subsidiary that is currently used in and material to the conduct of the business of the Company and the Subsidiaries, taken as a whole (the “ Leased Properties ”), with any guaranty given by the Company or any Subsidiary in connection therewith.  The Company or one of its Subsidiaries has a valid leasehold interest in all of the Leased Properties, free and clear of all Liens, except (i) Liens for current taxes and assessments not yet past due, (ii) inchoate mechanics’ and materialmen’s Liens for construction in progress, (iii) workmen’s, repairmen’s, warehousemen’s and carriers’ Liens arising in the ordinary course of business of the Company or such Subsidiary consistent with past practice, and (iv) all Liens and other imperfections of title (including matters of record) and encumbrances that do not materially interfere with the conduct of the business of the Company and the Subsidiaries, taken as a whole, or as have not had, and would not reasonably be expected to have, a Company Material Adverse Effect (collectively, “ Permitted Liens ”).  True and complete copies of all agreements under which the Company or any of its Subsidiaries leases or subleases the Leased Properties (the “ Leases ”) have been made available to Parent and Merger Co.  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, the Company or one of its Subsidiaries has the right to the use and occupancy of the Leased Properties, subject to the terms of the applicable Lease relating thereto and Permitted Liens.

SECTION 3.14        Intellectual Property .  (a)  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, to the knowledge of the Company (i) the Company and its Subsidiaries own or have the valid right to use all the Intellectual Property (as defined below) that is used in, and all the Intellectual Property that is necessary for, the conduct of the business of the Company and the Subsidiaries, and (ii) the conduct of the business of the Company and its Subsidiaries as currently conducted does not infringe upon, misappropriate, dilute, or otherwise violate (“ Infringe ”) any Intellectual Property rights of any third party.  No claim or demand has been given in writing to the Company or any Subsidiary that the Company or any Subsidiary is Infringing upon or may Infringe upon, or that the conduct of the business of the Company or any Subsidiary Infringes upon or may Infringe upon, the Intellectual Property rights of any third party (including any demand that the Company or a Subsidiary must license or refrain from using any Intellectual Property of a third party).

(b)               Section 3.14(b) of the Company Disclosure Schedule sets forth a true and complete list of all (i) registered trademarks, service marks, trade dress, and domain names, and applications to register the foregoing, (ii) copyright registrations, and (iii) patents and patent applications, in each case which are currently owned by the Company and its Subsidiaries (collectively, “ Scheduled Intellectual Property ”).  Each item listed on Section 3.14(b) of the Company Disclosure Schedule has been duly registered or applied for with the U.S. Patent and Trademark Office, the Canadian Intellectual Property Office, or such other governmental or

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organizational authority.  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, all prosecution, maintenance, renewal and other similar fees for the Scheduled Intellectual Property have been properly paid and are current, and all registrations and filings thereof remain in full force and effect.  There are no actual or, to the knowledge of the Company, threatened opposition proceedings, reexamination proceedings, cancellation proceedings, interference proceedings or other similar actions challenging the validity, existence, ownership, registration or use of any portion of the Scheduled Intellectual Property.   None of the Scheduled Intellectual Property has been previously adjudged to be invalid or unenforceable in whole or in part.

(c)                Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, with respect to the Scheduled Intellectual Property, and with respect to all other Intellectual Property rights that are owned by the Company or any of its Subsidiaries (except for portions thereof that consist of third-party products licensed from others) which are either embodied in products of the Company or any of its Subsidiaries or are otherwise material to the business of the Company and its Subsidiaries, taken as a whole (collectively, “ Owned Intellectual Property ”), the Company or a Subsidiary is the owner of the entire right, title and interest in and to such Owned Intellectual Property and is entitled to make, use, offer for sale, sell, import, license and transfer products made in accordance with the Owned Intellectual Property and otherwise to exploit such Owned Intellectual Property in the continued operation of its respective business consistent with past practice.  To the knowledge of the Company, no Person has or is engaged in any activity that has Infringed upon the Owned Intellectual Property. Neither the Company nor any Subsidiary has exclusively licensed any material Owned Intellectual Property to any Person.

(d)               Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, to the knowledge of the Company, the Company and its Subsidiaries use the Intellectual Property of third parties only pursuant to valid, effective written license agreements (collectively, the “ Third Party Licenses ”) that will allow the continued operation of the Company’s business consistent with past practice, subject to Sections 3.05(a)(ii) and 3.05(a)(iii) of the Company Disclosure Schedule.  Section 3.14(d) of the Company Disclosure Schedule sets forth a true and complete list of all third-party Software contained or embedded in the Owned Software (as defined below) that, if the Company or any of its Subsidiaries did not have the right to make, use, offer for sale, sell, import, license, transfer, sublicense, or otherwise exploit, would have, or could reasonably be expected to have, a Company Material Adverse Effect. 

(e)                Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, the Company and its Subsidiaries have taken commercially reasonable actions to protect, preserve and maintain the Owned Intellectual Property and to maintain the confidentiality and secrecy of and restrict the improper use of confidential information, trade secrets and proprietary information under applicable Law.  Without limitation, such reasonable actions have included requiring employees and consultants to enter into non-disclosure and intellectual property assignment agreements, in each case to the extent that such employees or consultants have worked with or have developed any part of the Owned Intellectual Property.  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, to the knowledge of the Company, (i) there has been no

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unauthorized disclosure of any confidential information, trade secrets or proprietary information of the Company or any Subsidiary, and (ii) there has been no breach of the Company’s or any Subsidiary’s security procedures wherein any Company or Subsidiary confidential information, trade secrets or proprietary information has been disclosed to a third Person.

(f)                With respect to each item of Computer Software which is included in Owned Intellectual Property (“ Owned Software ”), the Company or a Subsidiary is in actual possession and control of the applicable source code, object code, code writes, notes, documentation, programmers’ notes, source code annotations, user manuals and know-how to the extent required for use, distribution, development, enhancement, maintenance and support of the Owned Software, subject to any licenses granted to third parties therein.  Neither the Company nor any of it Subsidiaries has disclosed Owned Software source code to any other Person, except in connection with (i) a source code escrow agreement in which release of the Owned Software source code is generally limited to the following contingencies: (x) the Company ceases to support the relevant software as required by the relevant license agreement, (y) the Company fails adequately to maintain service levels established in the relevant license agreement, or (z) the Company ceases to conduct the relevant business, becomes insolvent or enters into bankruptcy; or (ii) a non-exclusive license of Owned Software source code to clients.  Such disclosures of source code have only been made pursuant to written confidentiality terms that reasonably protect the Company’s or Subsidiary’s rights in the Owned Software.  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, neither the Company nor any Subsidiary is obligated to operate in accordance with any outsourcing agreement or to support or maintain any of the Owned Software except pursuant to agreements that provide for periodic payments to the Company or a Subsidiary for such services or pursuant to warranty obligations.

(g)               Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, none of the Computer Software products of the Company or any of its Subsidiaries incorporates or is comprised of or distributed with any Publicly Available Software (as defined below), or is otherwise subject to the provisions of any “open source” or third party license agreement that (i) requires the distribution of source code in connection with the distribution of such software in object code form; (ii) materially limits the Company’s and its Subsidiaries’ freedom to seek full compensation in connection with marketing, licensing, and distributing such software products; or (iii) allows a customer or requires that a customer have the right to decompile, disassemble or otherwise reverse engineer the software by its terms and not by operation of law.  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, to the knowledge of the Company, the Owned Software does not contain any Self-Help Code or Unauthorized Code (as defined below).

(h)               Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect (i) the Company and its Subsidiaries have complied with all applicable contractual and legal requirements pertaining to information privacy and security, and the consummation of the transactions contemplated hereunder will not result in a violation thereof, and (ii) no written complaint relating to an improper use or disclosure of, or a breach in the security of, any such information has been made against the Company or any Subsidiary.

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(i)                 For purposes of this Agreement, “ Intellectual Property ” means the following and all rights pertaining thereto:  (i) inventions (whether patentable or not), improvements thereto, and patents, patent applications, provisional patent applications, patent disclosures and statutory invention registrations (including all utility models and other patent rights under the laws of all countries), (ii) trademarks, service marks, trade dress, distinguishing guises, logos, trade names, service names, corporate names, domain names and other brand identifiers, and registrations and applications for registration thereof, (iii) copyrights, proprietary designs, Computer Software (as defined below), mask works, databases, and registrations and applications for registration thereof, (iv) confidential and proprietary information, trade secrets, know-how and show-how, and (v) all similar rights, however denominated, throughout the world.  

SECTION 3.15        Taxes .

(a)            All Tax Returns required to be filed by or with respect to the Company or any of its Subsidiaries have been properly prepared and timely filed, and all such Tax Returns (including information provided therewith or with respect thereto) are true, correct and complete, except for Tax Returns as to which the failure to so file or be true and complete has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

(b)            The Company and its Subsidiaries have fully and timely paid all Taxes (whether or not shown to be due on the Tax Returns referred to in Section 3.15(a)), except for Taxes being contested in good faith and for which adequate reserves have been established in accordance with GAAP and for Taxes as to which the failure to pay has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, and without taking into account any transaction contemplated by this Agreement and based on activities to date, adequate reserves in accordance with GAAP have been established by the Company and its Subsidiaries for all Taxes not yet due and payable in respect of taxable periods ending on the date hereof.

(c)            All amounts of Tax required to be withheld by the Company and its Subsidiaries have been or will be timely withheld and paid over to the appropriate Tax authority, except for Taxes as to which the failure to withhold has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

(d)            Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, no deficiency for any amount of Tax has been asserted or assessed by any Governmental Authority in writing against the Company or any Subsidiary (or, to the knowledge of the Company, has been threatened or proposed), except for deficiencies which have been satisfied by payment, settled or been withdrawn or which are being contested in good faith and are Taxes for which the Company or the appropriate Subsidiary has set aside adequate reserves in accordance with GAAP.  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, no audit or other proceeding by any Governmental Authority is pending or threatened in writing with respect to any Taxes due from or with respect to the Company or any of its Subsidiaries.

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(e)            There are no Tax indemnification, allocation or sharing agreements (or similar agreements) under which the Company or any of its Subsidiaries could be liable for the Tax liability of an entity that is neither the Company nor any or its Subsidiaries, except for such agreements that would not reasonably be expected to have a Company Material Adverse Effect.

(f)             Neither the Company nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement.

(g)            None of the Company or any of its Subsidiaries has entered into a “listed transaction” that has given rise to a disclosure obligation under Section 6011 of the Code and the Treasury Regulations promulgated thereunder and that has not been disclosed in the relevant Tax Return of the Company or relevant Subsidiary.

SECTION 3.16        Environmental Matters .  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, (i) to the knowledge of the Company, there is and has been no release of Materials of Environmental Concern that requires response action under applicable Environmental Law at, on or under any of the properties currently owned, leased or operated by the Company or any of the Subsidiaries or, during the period of the Company’s or the Subsidiaries’ ownership, lease or operation thereof, formerly owned, leased or operated by the Company or any of the Subsidiaries; and (ii) there are no written claims or notices pending or, to the knowledge of the Company, issued to or threatened against the Company or any of the Subsidiaries alleging violations of or liability under any Environmental Law or otherwise concerning the release or management of Materials of Environmental Concern.

SECTION 3.17        Specified Contracts .  (a)  Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, (i) each Specified Contract is a legal, valid and binding obligation of the Company or a Subsidiary, as applicable, in full force and effect and enforceable against the Company or a Subsidiary in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors’ rights generally and subject to the effect of general principles of equity, (ii) to the knowledge of the Company, each Specified Contract is a legal, valid and binding obligation of the counterparty thereto, in full force and effect and enforceable against such counterparty in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium, or similar laws affecting creditors’ rights generally and subject to the effect of general principles of equity, (iii) neither the Company nor any of its Subsidiaries is and, to the Company’s knowledge, no counterparty is, in breach or violation of, or in default under, any Specified Contract, (iv) none of the Company or any of the Subsidiaries has received any written claim of default under any Specified Contract or any written notice of an intention to terminate, not renew or challenge the validity or enforceability of any Specified Contract and (v) and except for the execution, delivery and performance of this Agreement and the transactions contemplated hereby, to the Company’s knowledge, no event has occurred which will result in a breach or violation of, or a default under, any Specified Contract (in each case, with or without notice or lapse of time or both).

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(b)               For purposes of this Agreement, the term “ Specified Contract ” means any of the following Contracts (together with all exhibits and schedules thereto) to which the Company or any Subsidiary is a party as of the date of this Agreement: 

(i)             any limited liability company agreement, joint venture or other similar agreement or arrangement with respect to any material business of the Company and the Subsidiaries, taken as a whole, other than any such limited liability company, partnership or joint venture that is a wholly-owned Subsidiary;

(ii)            any Contract or Contracts relating to or evidencing Indebtedness in an amount in excess of $1,000,000, individually or in the aggregate, other than capital and equipment leases entered into in the ordinary course of business; 

(iii)           any Contract filed or required to be filed as an exhibit to the Company’s Annual Report on Form 10-K pursuant to Item 601(b)(10) of Regulation S-K or disclosed or required to be disclosed by the Company in a Current Report on Form 8-K, other than Plans disclosed in Section 3.11(a) of the Company Disclosure Schedule;

(iv)           any material Contract that purports to limit the right of the Company or the Subsidiaries or any Affiliate of the Company (A) to engage or compete in any line of business or (B) to compete with any Person or operate in any location;

(v)            any Contract that (A) contains most favored customer pricing provisions with any third party (other than Contracts entered into in the ordinary course of business consistent with past practice) or (B) grants any exclusive rights, rights of first refusal, rights of first negotiation or similar rights to any Person, in the case of each of (A) and (B) in a manner which is material to the business of the Company and its Subsidiaries, taken as a whole;

(vi)           any Contract entered into after January 1, 2003, or not yet consummated, for the acquisition or disposition, directly or indirectly (by merger or otherwise), of assets or capital stock or other equity interests of any Person for aggregate consideration under such Contract in excess of $5,000,000 individually, or $10,000,000 in the aggregate or pursuant to which the Company or any of its Subsidiaries has continuing indemnification, “earn-out” or other contingent payment obligations;

(vii)          any Contract of the type specified in Section 5.01(n) or between or among the Company or a Subsidiary, on the one hand, and any of their respective Affiliates (other than the Company or any Subsidiary), on the other hand, that involves amounts of more than $60,000;

(viii)         any Contract with any customer of the Company or any Subsidiary providing for annual payments to the Company and its Subsidiaries in excess of $250,000 during the Company’s 2006 fiscal year (a “ Customer Agreement ”);

(ix)            any Contract with any supplier of the Company or any Subsidiary providing for annual payments from the Company and its Subsidiaries in excess of $250,000 during the Company’s 2006 fiscal year;

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(x)             any annual software maintenance contract or agreement (an “ Annual Maintenance Agreement ”) providing for payments to the Company and its Subsidiaries in excess of $250,000 during the Company’s 2006 fiscal year;

(xi)            any Contract providing for payments to the Company and its Subsidiaries in excess of $250,000 during the Company’s 2006 fiscal year in which the Company or any Subsidiary performs any processing services for a third party, including, but not limited to, receipt and reconciliation of third-party data and/or reporting reconciliation of data to a third party (an “ Outsourcing Agreement ”);

(xii)           any Lease; and

(xiii)          any Third Party Licenses related to the Company’s or any Subsidiary’s use of third party Computer Software or other Intellectual Property that, if the Company or any of its Subsidiaries did not have the right to make, use, offer for sale, sell, import, license, transfer, sublicense or otherwise exploit, would have, or would reasonably be expected to have, a Company Material Adverse Effect.

The Company has made available to Parent true and correct copies of each Specified Contract.  A true and complete list of the Customer Agreements with the Company’s 30 largest banking and credit union customers (as measured by the total asset size of such customers) is set forth on Section 3.17(b) of the Company Disclosure Schedule.  Neither the Company nor any Subsidiary has been notified in writing by any party to any (i) Customer Agreement with a reseller (a “ Reseller Agreement ”), (ii) Annual Maintenance Agreement or (iii) Outsourcing Agreement that such party intends to terminate such Reseller Agreement, Annual Maintenance Agreement or Outsourcing Agreement, as the case may be, or fail to renew such Reseller Agreement, Annual Maintenance Agreement or Outsourcing Agreement, as the case may be, at the end of its current term.

SECTION 3.18        Insurance .  The Company has made available to Parent true and complete copies of all material insurance policies owned or held by the Company and each Subsidiary.  With respect to each such insurance policy, except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect:  (i) the policy is legal, valid, binding and enforceable in accordance with its terms and, except for policies that have expired under their terms in the ordinary course, is in full force and effect; (ii) neither the Company nor any Subsidiary is in material breach or default (including any such breach or default with respect to the payment of premiums or the giving of notice), and, to the Company’s knowledge, no event has occurred which, with notice or the lapse of time, will constitute such a breach or default, or permit termination or modification, under the policy; (iii) to the knowledge of the Company, as of the date hereof, no insurer on the policy has been declared insolvent or placed in receivership, conservatorship or liquidation; and (iv) to the knowledge of the Company, no written notice of cancellation or termination has been received other than in connection with ordinary renewals.

SECTION 3.19        Board Approval; Vote Required .  (a)  The Company Board and the Special Committee, by resolutions duly adopted at a meeting duly called and held, which resolutions, subject to Section 6.04, have not been subsequently rescinded, modified or

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withdrawn in any way, has by unanimous vote of those directors, or members, as the case may be, present (who constituted 100% of the directors or members, as the case may be, then in office) duly (i) determined that this Agreement, the Merger and the Other Transactions are fair to and in the best interests of the Company and its stockholders, (ii) approved this Agreement, the Merger and the Other Transactions and with respect to this Agreement, declared its advisability, and (iii) recommended that the stockholders of the Company adopt this Agreement and directed that this Agreement be submitted for consideration by the Company’s stockholders at the Company Stockholders’ Meeting.  Assuming the accuracy of Parent’s representations and warranties in Section 4.10, the approval of this Agreement by the Company Board and the Special Committee constitutes approval of this Agreement and the Merger for purposes of Section 203 of the DGCL (“ Section 203 ”) and represents the only action necessary to ensure that the restrictions on "Business Combinations" (as that term is defined in Section 203) of Section 203 do not apply to the execution and delivery of this Agreement or the consummation of the Merger and the Other Transactions.  To the knowledge of the Company, no “fair price,” “moratorium,” “co