AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

SOFTWARE AG,

WIZARD ACQUISITION, INC.

AND

WEBMETHODS, INC.

DATED AS OF APRIL 4, 2007

TABLE OF CONTENTS

AGREEMENT AND PLAN OF MERGER

      THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), is entered into as of this 4th day of April 2007, by and among Software AG, a stock corporation (Aktiengesellschaft) organized under the laws of the Federal Republic of Germany (“ Parent ”), Wizard Acquisition, Inc., a Delaware corporation and wholly-owned indirect subsidiary of Parent (“ Merger Sub ”), and webMethods, Inc., a Delaware corporation (the “ Company ”).

      WHEREAS , Parent, Merger Sub and the Company each have determined that it is advisable, fair to and in the best interests of their respective stockholders for Parent to acquire the Company upon the terms and conditions set forth in this Agreement;

      WHEREAS , in furtherance of such acquisition, Merger Sub has agreed to commence a tender offer (as it may be amended from time to time in accordance with this Agreement, the “ Offer ”) to purchase all of the outstanding shares of common stock, par value $0.01 per share of the Company, including the associated share purchase rights (each, a “ Right ”) under the Company’s Rights Agreement dated as of October 18, 2001, by and between the Company and American Stock Transfer & Trust Company, as rights agent, (the “ Rights Plan ”) (the “ Company Common Stock ”), but excluding any Company Restricted Stock (as defined herein), at a price of $9.15 per share, net to the seller in cash (such amount, or any higher amount per share offered pursuant to the Offer in accordance with the terms of this Agreement, the “ Offer Price ”), on the terms and subject to the conditions set forth herein;

      WHEREAS , following the consummation of the Offer, Merger Sub shall merge with and into the Company with the Company surviving as a wholly-owned subsidiary of Parent (the “ Merger ”), and each share of Company Common Stock that is not tendered and accepted pursuant to the Offer will thereupon be canceled and converted into the right to receive cash in an amount equal to the Offer Price, on the terms and subject to the conditions set forth herein;

      WHEREAS , the board of directors of the Company (the “ Company Board of Directors ”) has (i) determined that this Agreement, the Offer, the Merger and the other transactions contemplated hereby, taken together, are at a price and on terms that are fair to, advisable and in the best interests of the Company and its stockholders (the “ Company Stockholders ”) and (ii) adopted resolutions approving this Agreement and the transactions contemplated hereby, including the Offer and the Merger, declaring their advisability and recommending the adoption by the Company Stockholders of this Agreement, the Offer, the Merger and the other transactions contemplated hereby; and

      WHEREAS , the board of directors of Merger Sub has unanimously (i) determined that this Agreement, the Offer, the Merger and the other transactions contemplated hereby, taken together, are at a price and on terms that are fair to, advisable and in the best interests of Merger Sub and its sole stockholder and (ii) adopted resolutions approving this Agreement and the transactions contemplated hereby, including the Offer and the Merger, declaring their advisability and recommending the adoption by its sole stockholder of this Agreement, the Offer, the Merger and the other transactions contemplated hereby. Following the execution and delivery of this Agreement, the sole stockholder of Merger Sub will adopt this Agreement.

      WHEREAS , concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, each of the executive officers and directors of the Company are entering into Tender and Support Agreements substantially in the form attached as Exhibit A hereto (the “ Tender and Support Agreements ”).

      NOW, THEREFORE , in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the parties agree as follows:

ARTICLE I

THE OFFER

     Section 1.1 The Offer .

          (a) As promptly as practicable after the date of this Agreement (and in no event later than the date that is twelve (12) Business Days after the date of this Agreement (the “ Outside Commencement Date ”)), Merger Sub shall, and Parent shall cause Merger Sub to, commence (within the meaning of Rule 14d-2 under the Exchange Act) the Offer. The Offer shall be subject to the condition that there shall be validly tendered in accordance with the terms of the Offer, prior to the scheduled expiration of the Offer (as it may be extended hereunder) and not properly withdrawn, a number of Shares that, together with the Shares then owned beneficially by Parent and/or Merger Sub (together with their wholly-owned subsidiaries), represents at least a majority of the Shares then outstanding on a fully-diluted basis (the “ Minimum Condition ”) and to the other conditions set forth in Annex I. Merger Subsidiary expressly reserves the right to waive any of the conditions to the Offer and to make any change in the terms of or conditions to the Offer; provided that unless otherwise provided by this Agreement or previously approved by the Company in writing, (i) the Minimum Condition may not be waived, (ii) no change may be made that changes the form of consideration to be paid, decreases the Offer Price or the number of Shares sought in the Offer, imposes conditions to the Offer in addition to those set forth in Annex I or otherwise amends or modifies the Offer in any manner adverse to the holders of Shares and (iii) the Offer may not be extended except as set forth in this Section 1.1(a) . Subject to the prior satisfaction or waiver by Parent or Merger Sub of the Minimum Condition, with the written consent of the Company, and the other conditions of the Offer set forth in Annex I, Merger Sub shall consummate the Offer in accordance with its terms and accept for payment and pay for all Shares tendered and not properly withdrawn pursuant to the Offer as soon as practicable after Merger Sub is legally permitted to do so under Applicable Law. Subject to the terms and conditions of this Agreement, the Offer shall expire at midnight, New York City time, on the date that is 20 business days (calculated in accordance with Rule 14d-1(g)(3) under the Exchange Act) after the date that the Offer is commenced. Merger Sub shall extend the Offer for successive periods of up to twenty (20) Business Days each (1) if, at the scheduled or extended expiration date of the Offer, any of the conditions to the Offer shall not have been satisfied or waived, from time to time, until the earliest to occur of (x) the satisfaction or waiver of such conditions and (y) the Outside Termination Date and (2) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by Applicable Law. Following expiration

of the Offer, Merger Sub may, in its sole discretion, provide for one or more subsequent offering periods (together, the “ Subsequent Offering Period ”) in accordance with Rule 14d-11 of the Exchange Act, if, as of the commencement of each such period, there shall not have been validly tendered and not withdrawn pursuant to the Offer and any prior Subsequent Offering Period that number of Shares necessary to permit the Merger to be effected without a meeting of stockholders of the Company, in accordance with Section 253(a) of the DGCL. Subject to the foregoing, including the requirements of Rule 14d-11, and upon the terms and subject to the conditions of the Offer, Merger Sub shall, and Parent shall cause Merger Sub to, accept for payment all Shares (A) validly tendered and not withdrawn pursuant to the Offer after the final expiration of the Offer, with payment for such Shares to be made as promptly as practicable after the final expiration of the Offer and (B) validly tendered in any Subsequent Offering Period, with payment for such Shares to be made as promptly as practicable after such Shares are validly tendered. The Offer Price payable in respect of each Share validly tendered and not withdrawn pursuant to the Offer or validly tendered in any Subsequent Offering Period shall be paid net to the holder thereof in cash, subject to reduction for any applicable withholding Taxes.

          (b) As soon as practicable on the date of commencement of the Offer, Parent and Merger Sub shall (i) file with the SEC a Tender Offer Statement on Schedule TO with respect to the Offer (together with all amendments and supplements thereto and including exhibits thereto, the “ Schedule TO ”) that shall include the summary term sheet required thereby and, as exhibits, the Offer to Purchase and forms of a letter of transmittal and summary advertisement, if any, in respect of the Offer and other ancillary documents and instruments pursuant to which the Offer will be made (collectively, together with any amendments or supplements thereto, the “ Offer Documents ”) and (ii) cause the Offer Documents to be disseminated to holders of Shares, in each case as and to the extent required by applicable U.S. federal securities Laws. The Company shall promptly furnish to Parent and Merger Sub in writing all information concerning the Company that may be required by applicable securities Laws or reasonably requested by Parent or Merger Sub for inclusion in the Schedule TO or the Offer Documents. Each of Parent, Merger Sub and the Company agrees promptly to correct any information provided by it for use in the Schedule TO and the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and to correct any material omissions in the Schedule TO and the Offer Documents. Parent and Merger Sub agree to take all steps necessary to cause the Schedule TO as so corrected to be filed with the SEC and the Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable U.S. federal securities Laws. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Schedule TO and the Offer Documents each time before any such document is filed with the SEC, and Parent and Merger Sub shall give reasonable and good faith consideration to any comments made by the Company and its counsel. Parent and Merger Sub shall provide the Company and its counsel with (A) any comments or other communications, whether written or oral, that Parent, Merger Sub or their counsel may receive from time to time from the SEC or its staff with respect to the Schedule TO or Offer Documents promptly after receipt of those comments or other communications and (B) a reasonable opportunity to participate in the response of Parent and Merger Sub to those comments and to provide comments on that response (to which reasonable and good faith consideration shall be given), including by participating with Parent and Merger Sub or their counsel in any discussions or meetings with the SEC. If the Offer is terminated or withdrawn by Merger Sub, or this Agreement is terminated prior to the

purchase of the Shares in the Offer, Parent and Merger Sub shall promptly return, and shall cause any depository or paying agent acting on behalf of Parent and Merger Sub to return, all tendered Shares to the holders entitled thereto.

          (c) Parent shall provide or cause to be provided to Merger Sub on a timely basis the funds necessary to purchase any Shares that Merger Sub becomes obligated to purchase pursuant to the Offer and shall cause Merger Sub to perform all of its obligations hereunder.

     Section 1.2 Company Action .

          (a) Subject to Section 6.6 , the Company hereby consents to the Offer and represents that the Company Board of Directors, at a meeting duly called and held prior to the execution of this Agreement at which substantially all directors of the Company were present, has (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are fair to and in the best interests of the Company Stockholders, (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Offer and the Merger, and declared this Agreement advisable, in accordance with the requirements of the DGCL, (iii) approved and adopted an amendment to the Rights Plan to cause the provisions of the Rights Plan not to be applicable to this Agreement or the Transaction Documents or to the transactions contemplated hereby or thereby and to provide for the expiration of the Rights upon the consummation of the Merger and (iv) recommended that the Company Stockholders accept the Offer, tender their Shares to Merger Sub pursuant to the Offer and, if applicable, approve and adopt this Agreement and the Merger. The Company hereby consents to the inclusion of the foregoing determinations and approvals in the Offer Documents and, to the extent that no Adverse Recommendation Change has occurred in accordance with Section 6.6 , the Company hereby consents to the inclusion in the Offer Documents of the recommendation referenced in clause (iv) of the immediately preceding sentence. The Company has been advised that its executive officers and directors who own Shares intend to tender their Shares pursuant to the Offer in accordance with the terms of the Tender and Support Agreement. The Company shall cause its transfer agent to promptly furnish Parent with a list of its stockholders, mailing labels and any available listing or computer file containing the names and addresses of all record holders of Shares and lists of securities positions of Shares held in stock depositories, as of the most recent practicable date, and shall provide to Parent such additional information (including updated lists of stockholders, mailing labels and lists of securities positions) and such other assistance as Parent may reasonably request in connection with communicating the Offer to record and beneficial holders of Shares in accordance with this Agreement and applicable U.S. federal securities Laws. Parent and Merger Sub shall treat the information contained in such lists, labels and files and any additional information referred to in the preceding sentence as confidential in accordance with the terms and conditions of the Confidentiality Agreement.

          (b) On the date that the Offer Documents are filed with the SEC, the Company shall file with the SEC and disseminate to holders of Shares, in each case as and to the extent required by applicable U.S. federal securities Laws, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the “ Schedule 14D-9 ”) that, subject to Section 6.6 , shall reflect the recommendations of the Company Board of Directors referred to above. Each of Parent and Merger Sub shall promptly

furnish to the Company in writing all information concerning Parent and Merger Sub that may be required by applicable securities Laws or reasonably requested by the Company for inclusion in the Schedule 14D-9. Each of the Company, Parent and Merger Sub agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect and to correct any material omissions in the Schedule 14D-9. The Company agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of Shares with the Offer Documents, in each case as and to the extent required by applicable U.S. federal securities Laws. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to its filing with the SEC, and the Company shall give reasonable and good faith consideration to any comments made by Parent, Merger Sub and their counsel. The Company shall provide Parent, Merger Sub and their counsel with (i) any comments or other communications, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt of those comments or other communications and (ii) a reasonable opportunity to participate in the Company’s response to those comments and to provide comments on that response (to which reasonable and good faith consideration shall be given), including by participating with the Company or its counsel in any discussions or meetings with the SEC.

     Section 1.3 Directors .

          (a) Promptly upon the acceptance for payment of any Shares pursuant to the Offer, and from time to time thereafter (including, without limitation, upon acceptance of Shares tendered during any Subsequent Offering Period), Merger Sub shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board of Directors as will give Merger Sub representation on the Company Board of Directors equal to the greater of (i) the product of (x) the total number of directors on the Company Board of Directors (after giving effect to any increase in the number of directors pursuant to this Section 1.3 ) and (y) the percentage that the number of Shares owned by Merger Sub (when combined with all Shares owned by Parent and its wholly-owned Subsidiaries) bears to the total number of Shares outstanding and (ii) the number of directors that, after their designation by Merger Sub, constitutes a majority of the Company Board of Directors, and the Company shall in each case promptly increase the size of the Company Board of Directors or use its reasonable best efforts to secure the resignations of such number of directors as is necessary to provide Merger Sub with such level of representation and shall cause Merger Sub’s designees to be so elected or appointed. The Company shall also use its reasonable best efforts to cause individuals designated by Merger Sub to constitute the same percentage of each committee of the Company Board of Directors as the percentage of the entire Company Board of Directors represented by individuals designated by Merger Sub. The Company’s obligations to appoint designees to the Company Board of Directors shall be subject to Section 14(f) of the Exchange Act. The Company shall take all actions necessary to effect any such election or appointment of Merger Sub’s designees, including mailing to its stockholders the information required by Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder which, unless Merger Sub otherwise elects, shall be so mailed together with the Schedule 14D-9. Parent and Merger Sub will supply to the Company all information with respect to themselves and their respective officers, directors

and Affiliates required by Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder.

          (b) Following the election or appointment of Merger Sub’s designees pursuant to Section 1.3(a) and prior to the Effective Time, any amendment or termination of this Agreement requiring action by the Company Board of Directors, any extension of time for the performance of any of the obligations or other acts of Parent or Merger Sub under this Agreement, any waiver of compliance with any of the agreements or conditions under this Agreement that are for the benefit of the Company, any exercise of the Company’s rights or remedies under this Agreement, any action to seek to enforce any obligation of Parent or Merger Sub under this Agreement (or any other action by the Company Board of Directors with respect to this Agreement or the Merger if such other action adversely affects, or could reasonably be expected to adversely affect, any of the holders of Shares other than Parent or Merger Sub) may only be authorized by, and will require the authorization of, a majority of the directors of the Company then in office who are directors of the Company on the date hereof or their successors as appointed by such continuing directors (the “ Continuing Directors ”); provided , however , that if there shall be no Continuing Directors as a result of such individuals’ deaths, disabilities, resignations or refusal to serve, then such actions may be effected by majority vote of the directors who are considered “independent directors” within the meaning of the Nasdaq’s corporate governance rules and applicable U.S. federal securities Laws, or, if no such directors are then in office, by a majority vote of the Company Board of Directors. Between the time Merger Sub becomes entitled to designate directors pursuant to this Section 1.3 and the Effective Time, none of Parent, Merger Sub or their respective Affiliates shall take any action to remove a Continuing Director from office.

     Section 1.4 Top-Up Option .

          (a) Subject to the terms and conditions set forth herein, the Company hereby irrevocably grants to Merger Sub an option (the “ Top-Up Option ”), exercisable only after the acceptance by Merger Sub of, and payment for, Shares tendered in the Offer and upon the terms and conditions set forth in this Section 1.4 , to purchase that number (but not less than that number) of shares of Company Common Stock (the “ Top-Up Option Shares ”) equal to the lowest number of shares that, when added to the number of Shares directly or indirectly owned by Parent or Merger Sub or their Subsidiaries at the time of such exercise, shall constitute one share more than 90% of the Shares (taking into account the issuance of the Top-Up Option Shares) at a price per share equal to the Offer Price; provided that (i) the Top-Up Option shall be exercisable only once, on or prior to the earlier to occur of the 21st business day (calculated in accordance with Rule 14d-1(g)(3) under the Exchange Act) after the expiration date of the Offer or the termination of this Agreement in accordance with its terms, (ii) in no event shall the Top-Up Option be exercisable for a number of Shares (x) in excess of the then authorized and unissued shares of Company Common Stock (giving effect, for purposes of this Section 1.4 , to shares reserved for issuance under any Employee Benefit Plan as if such shares were outstanding) or (y) that would require the Company to obtain the approval of its stockholders under Applicable Law or any Nasdaq rule or regulation, (iii) the Top-Up Option may not be exercised if any provision of Applicable Law or any judgment, injunction, order or decree of any Governmental Entity shall prohibit, or require any action, consent, approval, authorization or permit of, action by, or filing with or notification to, any Governmental Entity or the Company’s

stockholders in connection with the exercise of the Top-Up Option or the delivery of the Top-Up Option Shares in respect of such exercise, which action, consent, approval, authorization or permit, action, filing or notification has not theretofore been obtained or made, as applicable.

          (b) If Merger Sub wishes to exercise the Top-Up Option, Merger Sub shall send to the Company a written notice (a “ Top-Up Exercise Notice ”, and the date of receipt of such notice the “ Top-Up Notice Date ”) specifying the place for the closing of the purchase and sale of Shares pursuant to the Top-Up Option (the “ Top-Up Closing ”). The Company shall, promptly after receipt of the Top-Up Exercise Notice, deliver a written notice to Merger Sub confirming (i) the number of Shares then outstanding on a fully-diluted basis, and (ii) the number of Top-Up Shares and the aggregate purchase price therefor.

          (c) At the Top-Up Closing, subject to the terms and conditions of this Agreement, the Company shall deliver to Merger Sub a certificate or certificates evidencing the applicable number of Top-Up Option Shares, and Merger Sub shall purchase each Top-Up Option Share from the Company at a price per Share equal to the Offer Price. Payment by Merger Sub of the purchase price for the Top-Up Option Shares may be made, at Merger Sub’s option, by delivery of immediately available funds by wire transfer to an account designated by the Company. The parties shall cooperate to ensure that the issuance of the Top-Up Option Shares is accomplished consistent with all applicable legal requirements, including all federal securities Laws.

          (d) Upon the delivery by Merger Sub to the Company of the Top-Up Exercise Notice, and the tender of the consideration described in Section 1.4(c), Merger Sub shall be deemed to be the holder of record of the Top-Up Option Shares issuable upon that exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing those Top-Up Option Shares shall not then be actually delivered to Merger Sub or the Company shall have failed or refused to designate the account described in Section 1.4(c) .

          (e) Any certificates evidencing Top-Up Option Shares may include any legends required by applicable securities Laws.

          (f) Parent and Merger Sub acknowledge that the Shares that Merger Sub may acquire upon exercise of the Top-Up Option will not be registered under the Securities Act and will be issued in reliance upon an exemption thereunder for transactions not involving a public offering. Each of Parent and Merger Sub hereby represents and warrants to the Company that Merger Sub is, and will be upon the purchase of the Top-Up Option Shares, an “accredited investor”, as defined in Rule 501 of Regulation D under the Securities Act. Merger Sub agrees that the Top-Up Option and the Top-Up Option Shares to be acquired upon exercise of the Top- Up Option are being and will be acquired by Merger Sub for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof (within the meaning of the Securities Act).

ARTICLE II

THE MERGER

     Section 2.1 The Merger . Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into the Company in accordance with the DGCL, whereupon the separate existence of Merger Sub shall cease and the Company shall continue as the Surviving Corporation under the Laws of the State of Delaware.

     Section 2.2 Closing . Subject to the terms and conditions of this Agreement, the Closing will take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, at 10:00 a.m., local time, as soon as practicable but in no event later than the second Business Day after the satisfaction or waiver of the conditions (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) set forth in Article VII , or at another time, date or place agreed to by the parties.

     Section 2.3 Effective Time . On the Closing Date the parties hereto shall cause the Merger to be consummated by filing all necessary documentation, including a Certificate of Merger or a Certificate of Ownership and Merger, as the case may be, with the Delaware Secretary, and Parent will deliver the Exchange Fund to the Paying Agent in the manner provided in Section 3.1 . The Merger shall be effective upon filing of the Certificate of Merger with the Delaware Secretary, or on such later date as may be specified therein (the time of such effectiveness being, the “ Effective Time ”).

     Section 2.4 Effect of the Merger . The Merger shall have the effects set forth in the DGCL and other applicable Law. Accordingly, from and after the Effective Time, the Surviving Corporation shall have all the properties, rights, privileges, powers, interests and franchises and shall be subject to all restrictions, disabilities, debts, duties and Liabilities of the Company and Merger Sub. The Surviving Corporation may, at any time after the Effective Time, take any action (including executing and delivering any document) in the name and on behalf of either the Company or Merger Sub in order to carry out and effectuate the transactions contemplated by this Agreement.

     Section 2.5 Conversion of the Shares . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities:

          (a) Except as provided in Section 2.5(b) or Section 2.5(c) , each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (excluding Appraisal Shares) (the “ Shares ”) shall be canceled and shall by virtue of the Merger and without any action on the part of the holder thereof be converted automatically into the right to receive an amount equal to the Offer Price in cash, without interest (the “ Merger Consideration ”), upon surrender of the Certificate representing such Shares as provided in Article III . All such Shares, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a Certificate representing such Shares shall cease to have any rights with respect thereto, except the right to

receive the Merger Consideration into which such Shares have been converted, as provided herein.

          (b) Each Share that is owned by the Company (or any Subsidiary of the Company) as treasury stock or otherwise and each Share owned by Parent or Merger Sub (whether as a result of the Offer or otherwise) immediately prior to the Effective Time shall be canceled and retired and cease to exist and no payment or distribution shall be made with respect thereto.

          (c) Each share of common stock of Merger Sub 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 $0.01 per share, of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

     Section 2.6 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 the certificate of incorporation of the Surviving Corporation. Thereafter, the certificate of incorporation of the Surviving Corporation may be amended in accordance with its terms and as provided by Law.

          (b) At the Effective Time, the bylaws of the Company as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation. Thereafter, the bylaws of the Surviving Corporation may be amended or repealed in accordance with their terms and the certificate of incorporation of the Surviving Corporation and as provided by Law.

     Section 2.7 Officers and Directors of the Surviving Corporation . At the Effective Time (i) the directors of Merger Sub shall continue as the directors of the Surviving Corporation, and (ii) the officers of the Company shall be the individuals and shall hold the respective offices designated in writing by Parent to the Company prior to the Effective Time, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified in accordance with and subject to Applicable Law and the Certificate of Incorporation and Bylaws of the Surviving Corporation.

     Section 2.8 Company Stock Options .

          (a) Prior to the Effective Time, each Company Stock Option under or pursuant to any Company Option Plans that is outstanding, unexercised and unexpired, prior to the Effective Time shall be accelerated in full so that each such Company Stock Option is fully vested and exercisable immediately prior to the Effective Time. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of Company Stock Options, each Company Stock Option shall be canceled and extinguished and automatically converted into the right to receive an amount in cash equal to the product obtained by multiplying (x) the aggregate number of shares of Company Common Stock that were issuable upon exercise of such Company Stock Option immediately prior to the Effective Time

and (y) the Merger Consideration less the per share exercise price of such Company Stock Option (the “ Option Consideration ”) (it being understood and agreed that such exercise price shall not actually be paid to the Company by the holder of a Company Stock Option). In the event the Option Consideration to any holder of a Company Stock Option is equal to or less than zero, it shall be understood and agreed that any such Company Stock Option shall be canceled and extinguished immediately upon to the Effective Time without any payment. Parent shall, or shall cause the Surviving Corporation to, pay to holders of Company Stock Options the Option Consideration, less applicable Taxes required to be deducted and withheld with respect to such payments, as soon as practicable after the Effective Time and in any case within ten (10) Business Days thereafter. To the extent that such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the holders of such Company Stock Options to whom such amounts would otherwise have been paid.

          (b) Except as otherwise agreed to by the parties, the Company Option Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any Subsidiary thereof shall be canceled as of the Effective Time.

          (c) The Company shall provide notice (in a form reasonably satisfactory to Parent) to each holder of an outstanding Company Stock Option describing the treatment of such Company Stock Option in accordance with this Section 2.8 .

          (d) Prior to the Effective Time, the Company shall take such actions as may be necessary to give effect to the transactions contemplated by this Section 2.8 , including, but not limited to, satisfaction of the requirements of Rule 16b-3(e) under the Exchange Act.

     Section 2.9 Restricted Stock; Deferred Compensation Plan .

          (a) If any share of Company Common Stock outstanding immediately prior to the Effective Time is unvested or subject to a repurchase option or forfeiture in favor of the Company (any such shares, “ Company Restricted Stock ”), then, effective immediately prior to the Effective Time, such Company Restricted Stock shall be fully vested and any repurchase option or forfeiture restriction shall lapse.

          (b) Prior to the Effective Time, all accrued account balances under the Company’s Deferred Compensation Plan for Directors (the “ Deferred Compensation Plan ”) shall be distributed pursuant to Section 5.B of such plan. Shares of Company Common Stock so distributed under the Deferred Compensation Plan shall be subject to Section 2.5 of this Agreement. Following and subject to the payment of all accrued account balances under the Deferred Compensation Plan, the Company shall take all actions necessary so that such plan shall terminate at the Effective Time.

          (c) Immediately prior to the Effective Time, the holder of each Director Deferred Share will receive from the Company an amount in cash equal to the Offer Price in exchange for the surrender to the Company of the certificate or other document evidencing such Director Deferred Share and each outstanding Director Deferred Share thereupon will be

canceled and the holders of Director Deferred Shares will have no further rights in respect of any Director Deferred Share.

     Section 2.10 Company ESPP . The Company shall take all actions necessary pursuant to the terms of the Company ESPP in order to (i) shorten the offering period under the Company ESPP which includes the date on which the Effective Time occurs (the “ Current ESPP Offering ”), if applicable, such that the Current ESPP Offering shall terminate on the payroll date immediately prior to the Effective Time (the “ New Exercise Date ”) and (ii) ensure that no offerings under the Company ESPP commence after the date of this Agreement. On the New Exercise Date, any purchase rights existing under the Company ESPP to acquire Company Common Stock shall be exercised. Conditional upon the Closing, the Company shall terminate the Company ESPP. The Company shall provide notice (in a form reasonably satisfactory to Parent) at least ten (10) days prior to the New Exercise Date to each participant in the Company ESPP describing the treatment of purchase rights under the Company ESPP in accordance with this Section 2.10 .

     Section 2.11 Appraisal Shares . Notwithstanding anything in this Agreement to the contrary, any Appraisal Shares shall not be converted into the right to receive the Merger Consideration as provided in Section 2.5(a) , but instead such holders of Appraisal Shares shall be entitled to payment of the fair value of such shares in accordance with the provisions of Section 262. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the rights to appraisal under Section 262 or a court of competent jurisdiction shall determine that such holder is not entitled to an appraisal of such holder’s Shares under Section 262, then the right of such holder to be paid the fair value of such holder’s Shares under Section 262 shall cease and such Shares shall be deemed to have been converted at the Effective Time into, and shall have become, the right to receive the Merger Consideration as provided in Section 2.5(a) , without interest. The Company shall serve prompt notice to Parent of any demands for appraisal of any of the Shares, attempted withdrawals of such demands and any other instruments served pursuant to Section 262 received by the Company, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company shall not, without the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed), or as otherwise required under the DGCL, voluntarily make any payment with respect to, or settle or offer to settle, any such demands, or agree to do or commit to do any of the foregoing.

     Section 2.12 Adjustments to Prevent Dilution . Subject to the restrictions contained in Section 6.1 , in the event that the Company changes the number of Shares, or securities convertible or exchangeable into or exercisable for Shares, issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other similar transaction, the Offer Price and the Merger Consideration shall be proportionately adjusted to reflect such change.

ARTICLE III

EXCHANGE OF CERTIFICATES

     Section 3.1 Paying Agent . Prior to the Effective Time, Parent shall appoint a paying agent (the “ Paying Agent ”) to act as paying agent for the payment of the Merger Consideration upon surrender of the Certificates pursuant to this Article III . At or prior to the Effective Time, Parent shall deposit with the Paying Agent cash in an amount sufficient to pay the aggregate Merger Consideration (such cash being hereinafter referred to as the “ Exchange Fund ”), payable pursuant to Section 2.5 in exchange for outstanding Shares. Any income from investment of the Exchange Fund, which shall be in accordance with the instructions of Parent, will be payable solely to Parent. Parent shall, or shall cause the Surviving Corporation to, pay all fees and expenses of the Paying Agent.

     Section 3.2 Exchange Procedures .

          (a) As soon as practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a Certificate or Certificates that, immediately prior to the Effective Time, represented outstanding Shares subsequently converted into the right to receive the Merger Consideration, as set forth in Section 2.5 : (i) a letter of transmittal (a “ Letter of Transmittal ”) that (A) shall specify that delivery shall be effected and risk of loss and title to the Certificates shall pass only upon proper delivery of the Certificates to the Paying Agent (or an affidavit of loss in lieu thereof, together with any bond or indemnity agreement, as contemplated by Section 3.6 ) and (B) shall be in such form and have such other provisions as the Surviving Corporation may reasonably specify and the Company shall have reasonably approved and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the applicable Merger Consideration.

          (b) Upon surrender of a Certificate for cancellation to the Paying Agent, together with a Letter of Transmittal, duly completed and executed, and any other documents reasonably required by the Paying Agent or the Surviving Corporation, (i) the holder of such Certificate shall be entitled to receive in exchange therefor a check representing the applicable amount of cash that such holder has the right to receive pursuant to Section 2.5 and (ii) the Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on the cash payable upon surrender of the Certificates. Until surrendered as contemplated by this Section 3.2 , each such Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Merger Consideration.

          (c) In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, the appropriate amount of the Merger Consideration may be paid to a transferee if the Certificate representing such Shares is presented to the Paying Agent properly endorsed or accompanied by appropriate stock powers and otherwise in proper form for transfer and accompanied by all documents reasonably required by the Paying Agent to evidence and effect such transfer and to evidence that any applicable Taxes have been paid.

     Section 3.3 No Further Ownership Transfers . All Merger Consideration paid upon the surrender for exchange of the Certificates representing Shares in accordance with the terms

hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Shares and, after the Effective Time, there shall be no further registration of transfers on the transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article III , subject to applicable Law in the case of Appraisal Shares.

     Section 3.4 Termination of Exchange Fund . Any portion of the Exchange Fund (including any interest and other income received with respect thereto) that remains undistributed to the former Company Stockholders on the date 365 days after the Effective Time shall be delivered to Parent upon demand, and any former holder of Shares who has not theretofore received any applicable Merger Consideration to which such Company Stockholder is entitled under this Article III shall thereafter look only to Parent or the Surviving Corporation (subject to abandoned property, escheat or other similar Laws) for payment of claims with respect thereto and only as a general creditor thereof.

     Section 3.5 No Liability . None of Parent, the Surviving Corporation or Merger Sub shall be liable to any holder of Shares for any part of the Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by holders of any such Shares at such date as is immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Entity shall, to the extent permitted by applicable Law or Order, become the property of Parent free and clear of any claims or interest of any such holders or their successors, assigns or personal representatives previously entitled thereto.

     Section 3.6 Lost, Stolen or Destroyed 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 and at the discretion of Parent or the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as Parent or the Surviving Corporation may direct, or the execution and delivery by such Person of an indemnity agreement in such form as Parent or the Surviving Corporation may direct, in each case as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate the appropriate amount of the Merger Consideration.

     Section 3.7 Withholding of Tax . Parent, the Surviving Corporation, any Affiliate thereof or the Paying Agent shall be entitled to deduct and withhold from amounts otherwise payable pursuant to this Agreement to any holder of Shares, Appraisal Shares or Company Stock Options such amount as Parent, the Surviving Corporation, any Affiliate thereof or the Paying Agent is legally required to deduct and withhold with respect to the making of such payment under the Code or any provision of Law relating to Taxes. To the extent that amounts are so withheld by Parent, the Surviving Corporation, any Affiliate thereof or the Paying Agent, such withheld amounts shall be (a) paid over to the applicable Governmental Entity in accordance with applicable Law or Order and (b) treated for all purposes of this Agreement as having been paid to the holder in respect of which such deduction and withholding was made.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as set forth in the Company SEC Reports filed after March 31, 2006, and prior to the date of this Agreement, or as disclosed in the Company Disclosure Schedules, the Company represents and warrants to Parent and Merger Sub as follows:

     Section 4.1 Organization and Good Standing; Charter Documents .

          (a) The Company and each of its Subsidiaries (i) is a corporation duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the Laws of its jurisdiction of incorporation, (ii) has full corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and assets and to conduct its business as presently conducted, and (iii) is duly qualified or licensed to do business as a foreign corporation and is in good standing (with respect to jurisdictions that recognize such concept) in each 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 would not reasonably be expected to have a Company Material Adverse Effect.

          (b) The copies of the Company Certificate of Incorporation and Company Bylaws that are filed as exhibits to the Company 10-K are complete and correct copies thereof as in effect on the date hereof. The Company is not in violation of any of the provisions of the Company Certificate of Incorporation or the Company Bylaws.

     Section 4.2 Authority for Agreement .

          (a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated by this Agreement. The execution, delivery and performance by the Company of this Agreement, and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement, have been duly authorized by all necessary corporate action (including the approval of the Company Board of Directors) and no other corporate proceedings on the part of the Company, and no other votes or approvals of any class or series of capital stock of the Company, are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated hereby (other than, with respect to the consummation of the Merger and the adoption of this Agreement and to the extent required by Applicable Law, the Company Stockholder Vote). This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited against the Company by (i) bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting the enforcement of creditors’ rights or remedies in general as from time to time in effect or (ii) the exercise by courts of equity powers.

          (b) At a meeting duly called and held, the Company Board of Directors has (i) determined that this Agreement, the Merger and the other transactions contemplated hereby, taken together, are at a price and on terms that are fair to, advisable and in the best interests of the Company Stockholders, and (ii) adopted resolutions approving this Agreement and the transactions contemplated hereby, including the Merger, declaring its advisability and recommending the adoption by the Company Stockholders of this Agreement and the Merger and the other transactions contemplated hereby.

          (c) As of the date of this Agreement, each of the Company and the Company Board of Directors has taken all action required to be taken by it to exempt this Agreement and the other Transaction Documents, and the Offer and the other transactions contemplated hereby and thereby from, and this Agreement and the other Transaction Documents, and the Offer and the other transactions contemplated hereby and thereby are exempt from, the requirements of Section 203 of the DGCL and any and all other Antitakeover Laws.

          (d) As of the date of this Agreement, each of the Company and the Company Board of Directors has taken all action required to be taken by it to cause the provisions of the Rights Plan not to be applicable to this Agreement or the other Transaction Documents or to the Offer or the other transactions contemplated hereby or thereby and to provide for the expiration of the Rights upon the consummation of the Merger.

     Section 4.3 Capitalization .

          (a) The authorized capital stock of the Company consists of 500,000,000 shares of Company Common Stock and 50,000,000 shares of preferred stock. As of March 31, 2007, 56,794,631 shares of Company Common Stock are issued and outstanding, no shares of preferred stock are issued and outstanding and no shares of Company Common Stock or preferred stock are held in the Company’s treasury. All outstanding Shares are duly authorized and validly issued, fully paid and nonassessable, free of any Encumbrances other than Encumbrances imposed upon the holder thereof by reason of the acts or omissions of such holder, not subject to any preemptive rights or rights of first refusal created by statute, and issued in compliance in all material respects with all applicable federal and state securities Laws.

          (b) As of March 31, 2007, there are outstanding Company Stock Options to purchase 16,683,584 shares of Company Common Stock pursuant to the Company Option Plans and 9,297,720 additional shares of Company Common Stock are authorized and reserved for future issuance pursuant to the Company Option Plans. As of March 31, 2007, 96,282 shares of Company Common Stock were subject to outstanding awards of Director Deferred Shares. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable and issued in compliance in all material respects with all applicable federal and state securities Laws. Except as set forth above and other than (i) shares of Company Common Stock issued after March 31, 2007 through the exercise of Company Stock Options outstanding as of March 31, 2007, (ii) the Rights, (iii) rights pursuant to the Company ESPP, (iv) shares of Company Common Stock and Company Stock Options issued after the date of this Agreement in accordance with the provisions of Section 6.1(b)(v) hereof, (v) shares issuable in connection with the Deferred Compensation Plan and (vi) Director

Deferred Shares issued pursuant to agreements that were in place as of March 31, 2007, there are no outstanding (x) shares of capital stock of or other voting securities or ownership interests in the Company or (y) Company Stock Rights. The copies of the Company Option Plans that are filed as exhibits to the Company SEC Reports are complete and correct copies thereof as in effect on the date hereof.

          (c) As of March 31, 2007, the Company has reserved 6,750,000 shares of Company Common Stock for issuance under the Company ESPP.

          (d) As of March 31, 2007, 130,000 shares of Company Common Stock are subject to a repurchase option or forfeiture in favor of the Company that lapses over a vesting period related to the holder’s period of employment.

          (e) There are no rights of first refusal, co-sale rights or registration rights granted by and binding upon the Company with respect to the Company’s capital stock and in effect as of the date hereof. Except as set forth above, there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any Shares or to pay any dividend or make any other distribution in respect thereof. As of the date hereof, there are no voting trusts or other agreements or understandings to which the Company is a party with respect to the voting of stock of the Company.

     Section 4.4 Company Subsidiaries . A true and complete list of all the Subsidiaries of the Company is set forth on Section 4.4 of the Company Disclosure Schedules. The Company is the owner of all outstanding shares of capital stock of each Subsidiary of the Company and all such shares are duly authorized, validly issued, fully paid and nonassessable. All of the outstanding shares of capital stock of each Subsidiary of the Company are owned by the Company free and clear of all Encumbrances. Except as set forth on Section 4.4 of the Company Disclosure Schedules, there are no outstanding Subsidiary Stock Rights.

     Section 4.5 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 of the Merger (subject to the adoption of this Agreement by the Company Stockholder Vote, if required by Applicable Law) and the other transactions contemplated by this Agreement will not, (i) conflict with or violate any provision of the Company Certificate of Incorporation or Company Bylaws, or the equivalent charter documents of any Subsidiary of the Company, (ii) conflict with or violate any Law applicable to the Company or its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, or (iii) result in a breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to others (immediately or with notice or lapse of time or both) any right of termination, amendment, acceleration or cancellation of, result (immediately or with notice or lapse of time or both) in triggering any payment or other obligations, or result (immediately or with notice or lapse of time or both) in the creation of an Encumbrance on any property or asset of the Company or its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its

Subsidiaries is a party or by which the Company or any of its Subsidiaries, or any property or asset of the Company or any of its Subsidiaries, is bound or affected, except in the case of clauses (ii) and (iii) above for any such conflicts, violations, breaches, defaults or other occurrences that 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 of the Merger and the other transactions contemplated by this Agreement will not, require any action, consent, approval, authorization or permit of, or filing with or notification to, or registration or qualification with, any Governmental Entity, except for applicable requirements, if any, of the Securities Act, the Exchange Act, state securities laws or “blue sky” laws, any Antitrust Law, the Exon-Florio Amendment to the Defense Production Act of 1950 (“ Exon-Florio ”) and the filing and recordation of the Certificate of Merger, as required by the DGCL.

     Section 4.6 Compliance . The Company and its Subsidiaries hold all Company Permits and are in compliance with the terms of such Company Permits, except where the failure to hold or be in compliance with such Company Permits would not reasonably be expected to have a Company Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted in violation of any Law or Order, except for violations that would not reasonably be expected to have a Company Material Adverse Effect. Except as set forth on Section 4.6 of the Company Disclosure Schedules, no investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries or their respective businesses is pending or, to the Knowledge of the Company, threatened.

     Section 4.7 Litigation .

          (a) There is no claim, suit, action, proceeding, investigation or arbitration pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or their respective directors or officers in their capacities as such, other than as disclosed in the Company SEC Reports filed prior to the date of this Agreement or as set forth on Section 4.7 of the Company Disclosure Schedules.

          (b) There is no Order outstanding against the Company or any of its Subsidiaries or their respective businesses that (i) would reasonably be expected to have the effect of materially restricting or materially impairing any current or future business practice of, or acquisition of property by, the Company or any of its Subsidiaries or Affiliates or (ii) would reasonably be expected to have a Company Material Adverse Effect.

     Section 4.8 Company SEC Reports; Financial Statements .

          (a) Except as set forth on Section 4.8(a) of the Company Disclosure Schedules, the Company has timely filed all Company SEC Reports required to be filed with the SEC on or prior to the date hereof. Each Company SEC Report has complied in all material respects with the applicable requirements of the Securities Act, and the rules and regulations promulgated thereunder, and the Exchange Act, and the rules and regulations promulgated thereunder, as applicable, each as in effect on the date so filed. None of the Company SEC Reports (including any financial statements or schedules included or incorporated by reference

therein) contained when filed (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of mailing, respectively) any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading.

          (b) The Company has made available (including via the SEC’s EDGAR system, as applicable) to Parent all of the Company Financial Statements. All of the Company Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company at the respective dates thereof and the consolidated results of its operations and changes in cash flows for the periods indicated (subject, in the case of unaudited statements, to normal year-end audit adjustments consistent with GAAP).

          (c) Except as disclosed in the Company 10-K or as set forth on Section 4.8(c) of the Company Disclosure Schedules, as of the date hereof the Company and its Subsidiaries have implemented and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Except as disclosed in the Company 10-K or as set forth on Section 4.8(c) of the Company Disclosure Schedules, as of the date hereof the Company has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to ensure that information relating to the Company, including its consolidated Subsidiaries, required to be disclosed in the reports the Company files or submits under the Exchange Act is made known on a timely basis to the chief executive officer and the chief financial officer of the Company by others within those entities.

          (d) Except as disclosed in the Company Disclosure Schedules, there are no Liabilities of the Company or any of its Subsidiaries of any kind other than:

               (i) Liabilities disclosed in the consolidated balance sheet of the Company dated December 31, 2006 (including the notes thereto) or in the Company SEC Reports filed prior to the date of this Agreement;

               (ii) Transaction Expenses and other Liabilities incurred on behalf of the Company under this Agreement;

               (iii) Liabilities under any Company Material Contract (other than Liabilities arising from breach thereof);

               (iv) Liabilities incurred in the ordinary course of business consistent with past practice since December 31, 2006 that would not reasonably be expected to have a Company Material Adverse Effect; and

               (v) Liabilities not required by GAAP to be set forth or reserved on a consolidated balance sheet of the Company or in the notes thereto.

     Section 4.9 Absence of Certain Changes or Events . Except as disclosed in the Company SEC Reports, since March 31, 2006 through to the date of this Agreement, and except as specifically contemplated by, or as disclosed in, this Agreement, the Company and its Subsidiaries have conducted their businesses in the ordinary course consistent with past practice and, since such date, there has not been, with respect to the Company and its Subsidiaries, (i) any action that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of any of Sections 6.1(b)(i)-(iv) , (vii)-(x) , (xii)-(xiv) or (xvii)(A) , (ii) any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or assets of the Company or any of its Subsidiaries that is or would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, (iii) any material labor dispute, other than routine individual grievances, or, to the Knowledge of the Company, any activity or proceeding by a labor union or representative thereof to organize any employees of the Company or any of its Subsidiaries, which employees were not subject to a collective bargaining agreement at March 31, 2006, or any material lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to such employees or (iv) any event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

     Section 4.10 Taxes .

          (a) The Company and each of its Subsidiaries has filed by the applicable deadlines (taking into account any extensions) with the appropriate Governmental Entities all Tax Returns that are required to have been filed by it. All such Tax Returns were correct and complete in all material respects. Except as set forth on Section 4.10(a) of the Company Disclosure Schedules, all material Taxes required to have been paid by the Company and each of its Subsidiaries (whether or not shown on such Tax Returns) have been paid or are either currently being disputed by appropriate proceedings described in Section 4.10(c) or are reserved for in the most recently filed Company Financial Statements. Neither the Company nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any unfiled Tax Return. No claim has been made in writing by a Governmental Entity in a jurisdiction where the Company or its Subsidiaries do not currently file Tax Returns that any such company is subject to taxation by that jurisdiction. There are no security interests or other liens on any of the assets of the Company or its Subsidiaries that arose in connection with any failure (or alleged failure) to timely pay any Tax.

          (b) The Company and its Subsidiaries have withheld and paid to the appropriate Governmental Entity all material Taxes required to have been withheld and paid by the Company or its Subsidiaries in connection with amounts paid to any employee, independent contractor, creditor, stockholder or other Third Party.

          (c) Except as set forth on Section 4.10(c) of the Company Disclosure Schedules, there are no claims, audits, actions, suits, proceedings or investigations presently pending with respect to the Company or any of its Subsidiaries in respect of any Tax or Tax Return of which the Company or its Subsidiaries has received written notice, or of which the Company otherwise has Knowledge, none of the Company or its Subsidiaries has received written notice of any threatened audits or investigations relating to any Tax or Tax Return of the

Company or its Subsidiaries and do not otherwise have any Knowledge of any material threatened audits or investigations relating to any Tax or Tax Return of the Company or its Subsidiaries.

          (d) Neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of assessment or collection of Taxes or agreed to, or requested, any extension of time for assessment or collection of any Tax, which waiver or extension is currently effective.

          (e) The Company has made available to Parent complete and accurate copies of (i) all material Tax Returns filed by the Company and any of its Subsidiaries with a Governmental Entity on or prior to the date hereof for taxable periods beginning on or after January 1, 2002; (ii) all written rulings from, and written agreements with, any Governmental Entity relating to Taxes of the Company or its Subsidiaries that would have continuing effect in the determination of Tax for a taxable period for which a Tax Return has not yet been filed by the Company or its Subsidiaries; (iii) all elections relating to Taxes of the Company or any of its Subsidiaries that have been filed with any Governmental Entity (other than elections which are included in or apparent from the Tax Returns referred to in (i) above) that would have continuing effect in the determination of Tax for any taxable period for which a Tax Return has not yet been filed by the Company or its Subsidiaries.

          (f) Except as set forth on Section 4.10(f) of the Company Disclosure Schedules, there are no agreements relating to the allocating or sharing of Taxes to which the Company or any of its Subsidiaries is a party the principal purpose of which is or was the allocation of Tax Liabilities computed on a consolidated, combined, unitary or similar basis among entities that have or will be required to compute their Tax Liability by filing Tax Returns on such a basis other than agreements solely among the Company and its Subsidiaries.

          (g) None of the Company or its Subsidiaries is or has been a member of an affiliated group (within the meaning of section 1504(a) of the Code) or similar group of entities with which the Company or any of its Subsidiaries joined, or was or may be required to join, for any taxable period through the date hereof in making a consolidated federal income Tax Return or other Tax Return in which Tax Liability was or would be computed on a consolidated, combined, unitary or similar basis, and which would cause the Company or its Subsidiaries to be liable for Taxes of another Person pursuant to Treasury Regulations Section 1.1502-6(a) or any similar provision of Law, other than such a group of entities including only the Company, its Subsidiaries, and predecessors thereof.

          (h) Neither the Company nor any of its Subsidiaries has been either a “distributing corporation” or a “controlled corporation” within the meaning of Section 355(a)(1)(A) of the Code in a distribution qualifying (or intended to qualify) under Section 355 of the Code (or so much of Section 356 as relates to Section 355) since January 1, 2002.

          (i) Neither the Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code at any time during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

          (j) Neither the Company nor any of its Subsidiaries has constituted either an “expatriated entity” within the meaning of Section 7874(a)(2)(A) of the Code or a “surrogate foreign corporation” within the meaning of Section 7874(a)(2)(B) of the Code.

          (k) Neither the Company nor any of its Subsidiaries has agreed, or is it required, to make any adjustment to income pursuant to Section 481(a) of the Code or any similar provision of state, local or foreign law by reason of a change in accounting method initiated by it or any other relevant party, and no Governmental Entity has proposed any such change in accounting method in writing or, to the Knowledge of the Company, otherwise proposed any material change in accounting method, nor does the Company or any of its Subsidiaries have any application pending with any Governmental Entity requesting permission for any changes in accounting method that relates to the business or assets of the Company or any of its Subsidiaries that would require such an adjustment.

          (l) None of the Company or its Subsidiaries has been a beneficiary of or participated in any “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(1) that was, is, or, to the Knowledge of the Company, will ever be, required to be disclosed under Treasury Regulations Section 1.6011-4. No Tax Return filed by or on behalf of the Company or its Subsidiaries has contained a disclosure statement under Section 6662 of the Code (or any similar provision of Law).

          (m) Except as described in Section 4.10(m) of the Company Disclosure Schedules, the Company and its Subsidiaries have not made any payments or provided any benefits, are not obligated to make any payments or provide any benefits, and are not a party to any contract, agreement, plan or arrangement requiring it to make any payments or provide any benefits to any person that would, either alone or in combination with another event, be a parachute payment (within the meaning of Section 280G of the Code) as a result of any event connected with the acquisition of the Company by Parent contemplated by this Agreement.

          (n) None of the Company or its Subsidiaries (i) is a party to any joint venture, partnership or other agreement or arrangement which is treated as a partnership for U.S. federal income Tax purposes or (ii) owns any interest in an entity that either is treated as an entity disregarded as separate from its owner for federal Tax purposes or is an entity as to which an election pursuant to Treasury Regulations Section 301.7701-3 has been made.

          (o) Schedule 4.10(o) contains a list of all jurisdictions (whether foreign or domestic) in which the Company or any of its Subsidiaries currently files income Tax Returns.

     Section 4.11 Title to Personal Properties; No Real Property . Each of the Company and its Subsidiaries has good and marketable title to, or a valid leasehold interest in, all of its tangible personal properties and assets reflected in the Company 10-K or acquired after March 31, 2006 (other than assets disposed of since March 31, 2006 in the ordinary course of business consistent with past practice), in each case free and clear of all Encumbrances, except for Encumbrances that secure indebtedness and that are properly reflected in the Company 10-K and Encumbrances that can be removed for a cost of less than $50,000. The tangible personal property and assets of the Company and its Subsidiaries are in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, are operated in accordance with all

applicable licenses, permits, consents and governmental authorizations, and are usable in the regular and ordinary course of business, except as would not reasonably be expected to have a Company Material Adverse Effect. Each of the Company and each of its Subsidiaries either owns, or has valid leasehold interests in, all tangible personal properties and assets used by it in the conduct of its business, except where the absence of such ownership or leasehold interest would not reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries has any legal obligation, absolute or contingent, to any other Person to sell or otherwise dispose of any of its tangible personal properties or assets (other than the sale of the Company’s products in the ordinary course of business) with an individual value in excess of $50,000 or an aggregate value in excess of $100,000. Neither the Company nor any of its Subsidiaries owns any real property.

     Section 4.12 Officers, Directors, Employees and Affiliates .

          (a) Except as disclosed in the Company SEC Reports filed since March 31, 2006 and prior to the date hereof or as set forth on Section 4.12(a) of the Company Disclosure Schedules, (i) neither the Company nor any of its Subsidiaries is a party to or bound by any Employment Agreement and (ii) except as otherwise contemplated by Section 2.8 , Section 2.9 and Section 2.10 , no severance or other payment will become due or benefits or compensation increase or accelerate as a result of the transactions contemplated by this Agreement, solely or together with any other event, including a subsequent termination of employment.

          (b) Except for compensation and benefits received in the ordinary course of business as an employee or director of the Company or its Subsidiaries, no director, officer or other Affiliate or Associate of the Company or any entity in which, to the Knowledge of the Company, any such director, officer or other Affiliate or Associate owns any beneficial interest (other than a beneficial interest in a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market and less than 5% of the stock of which is beneficially owned by any such Persons) is currently a party to or has any interest in (i) any partnership, joint venture, contract, arrangement or understanding with, or relating to, the business or operations of the Company or its Subsidiaries, (ii) any loan, arrangement, understanding, agreement or contract for or relating to indebtedness of the Company or its Subsidiaries or (iii) any property (real, personal or mixed), tangible or intangible, used or currently intended to be used in the business or operations of the Company or its Subsidiaries.

     Section 4.13 Employee Benefit Plans .

          (a)  Section 4.13(a) of the Company Disclosure Schedules sets forth a true and complete list of each Company Benefit Plan.

          (b) In respect of each Company Benefit Plan, a complete and correct copy of each of the following documents (if applicable) has been made available to Parent: (i) the most recent plan documents or written agreement thereof, and all amendments thereto and all related trust or other funding vehicles or insurance policies with respect to each such Company Benefit Plan; (ii) the most recent summary plan description, and all related summaries of material modifications thereto; (iii) the most recent Form 5500 (including schedules and attachments) and

financial statements for the past three (3) plan years; and (iv) the most recent IRS determination or opinion letter.

          (c) Neither the Company nor any entity treated as a single employer with the Company under Section 414(b), (c), (m) or (o) of the Code maintains, contributes to or is required to maintain or contribute to, or has in the past six years maintained or contributed to, or been required to maintain or contribute to, or had any liability in respect of, any Employee Benefit Plan that (i) is a “multiemployer plan” as defined in Sections 3(37) of ERISA, (ii) is subject to the funding requirements of Section 412 of the Code or Title IV of ERISA, or (iii) provides for post-retirement medical, life insurance or other welfare-type benefits (other than, at the sole expense of the employee or former employee, as required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code or under a similar state law).

          (d) The Company Benefit Plans and their related trusts intended to qualify under Sections 401 and 501(a) of the Code are subject to current favorable determination or opinion letters from the IRS and, to the Knowledge of the Company, nothing has occurred that is reasonably likely to adversely affect such determination or opinion.

          (e) Except as set forth on Section 4.13(e) of the Company Disclosure Schedules, the Company Benefit Plans have been maintained and administered in all material respects in accordance with their terms and Applicable Law.

          (f) There are no suits, actions, disputes, claims (other than routine claims for benefits), arbitrations, administrative or other proceedings of the IRS, the United States Department of Labor or any other Governmental Entity pending or, to the Knowledge of the Company, threatened, anticipated or expected to be asserted with respect to any Company Benefit Plan or any related trust or other funding medium thereunder or with respect to the Company or its Subsidiaries as the sponsor or fiduciary thereof or with respect to any other fiduciary thereof, and no facts or circumstances exist that could give rise to any such suits, actions, disputes, claims, arbitrations or proceedings, which would reasonably be expected to have a Company Material Adverse Effect.

          (g)  Section 4.13(g)(i) of the Company Disclosure Schedules lists each Company Benefit Plan that is subject to any law or applicable custom of any jurisdiction outside of the United States (each, an “ International Plan ”). Each International Plan has been maintained in material compliance with its terms and with the requirements prescribed by Applicable Law (including any special provisions relating to qualified plans where such International Plan was intended to so qualify) and has been maintained in good standing with the applicable regulatory authorities. Except as set forth in Section 4.13(g)(ii) of the Company Disclosure Schedule, according to the actuarial assumptions and valuations most recently used for the purpose of funding each International Plan (or, if the same has no such assumptions and valuations or is unfunded or is not subject to statutory funding requirements, according to the actuarial assumptions and valuations prescribed by applicable local accounting standards and principles), as of December 31, 2006, the total amount or value of the funds available under such International Plan to pay benefits accrued thereunder or segregated in respect of such accrued benefits, together with any reserve or accrual with respect thereto, exceeded the present value of all benefits (actual or contingent) accrued as of such date of all participants and past participants

therein in respect of which the Company or any of its Subsidiaries has or would have after the Effective Time any obligation.

          (h) No transaction prohibited by Section 406 of ERISA or Section 4975 of the Code has occurred with respect to any Company Benefit Plan that is covered by Title I of ERISA, which transaction has or will cause the Company or any of its Subsidiaries to incur any material liability under ERISA, the Code or otherwise, excluding transactions effected pursuant to and in compliance with a statutory or administrative exemption.

          (i) Neither the Company nor any of its Subsidiaries has effectuated (i) a “plant closing” (as defined in WARN) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or any of its Subsidiaries; (ii) a “mass layoff” (as defined in WARN); or (iii) such other transaction, layoff, reduction in force or employment terminations sufficient in number to trigger application of any similar Law that could result in a material liability to the Company and its Subsidiaries, taken as a whole.

          (j) No Company Benefit Plan (i) would reasonably be expected to give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 162(m) of the Code or (ii) would reasonably be expected to cause any participant therein to incur additional taxes or interest under Section 409A of the Code or any regulations or IRS guidance promulgated thereunder (including with respect to any stock option that has an exercise price that has been or may be less than the fair market value of the underlying stock as of the date such option was granted).

          (k) All contributions and payments accrued under each Company Benefit Plan, determined in accordance with prior funding and accrual practices, as adjusted to include proportional accruals for the period ending as of the date hereof, have been discharged and paid on or prior to the date hereof except to the extent reflected as a liability on the Company’s Financial Statements.

          (l) On or prior to the date hereof, the Compensation Committee of the Company Board of Directors (the “ Compensation Committee ”) has (i) approved each agreement set forth in Section 4.13(l) of the Company Disclosure Schedules (each, a “ Company Compensation Arrangement ”) as an “employment compensation, severance or other employee benefit arrangement” within the meaning of Rule 14d-10(d)(2) under the Exchange Act, and (ii) taken all other action necessary to satisfy the requirements of the non-exclusive safe harbor with respect to such Company Compensation Arrangements in accordance to Rule 14d-10(d)(3) under the Exchange Act (the approvals and actions referred to in clauses (i) and (ii) above, the “ Company Compensation Approvals ”). The Company Board has determined that each of the members of the Compensation Committee is an “independent director” as defined in the Nasdaq Marketplace Rules.

     Section 4.14 Labor Relations .

          (a) Except as set forth on Section 4.14(a) of the Company Disclosure Schedules, the Company and its Subsidiaries are in compliance with all applicable Laws and Orders governing or concerning conditions of employment, employment discrimination and harassment, wages, hours or occupational safety and health, including the Labor Laws, except where the failure to so comply would not reasonably be expected to have a Company Material Adverse Effect.

          (b) Except as set forth on Section 4.14(b) of the Company Disclosure Schedules, the employees of the Company and its Subsidiaries have not been, and currently are not, represented by a labor organization or group that was either certified or voluntarily recognized by any labor relations board, including the NLRB, or certified or voluntarily recognized by any other Governmental Entity and there is not, to the Knowledge of the Company, any attempt to organize any employees of the Company or its Subsidiaries. There has not been, nor is there existent or, to the Knowledge of the Company, threatened, any material strike, slowdown, picketing or work stoppage by the employees of the Company or its Subsidiaries. Except as would not, individually or in the aggregate, be material to the Company and its Subsidiaries, taken as a whole, there are no unfair labor practice charges or complaints against the Company or any of its Subsidiaries pending before the NLRB or any foreign equivalent.

          (c) Except as set forth on Section 4.14(c) of the Company Disclosure Schedules, no claim, complaint, charge or investigation for unpaid wages, bonuses, commissions, employment withholding Taxes, penalties, overtime or other compensation, benefits, child labor or record-keeping violations has been filed and is pending or, to the Knowledge of the Company, is threatened under the FLSA, the Davis-Bacon Act, the Walsh-Healey Act or the Service Contract Act, or any other Law. No discrimination, illegal harassment and/or retaliation claim, complaint, charge or investigation has been filed and is pending or, to the Knowledge of the Company, is threatened against the Company or any Subsidiary of the Company under the 1964 Civil Rights Acts, the Equal Pay Act, the ADEA, the ADA, the FMLA, the FLSA, ERISA or any other federal Law or comparable state fair employment practices act or foreign Law, including any provincial Law regulating discrimination in the workplace. No wrongful discharge, retaliation, libel, slander or other claim, complaint, charge or investigation that arises out of the employment relationship between the Company or any of its Subsidiaries and their respective employees has been filed and is pending or, to the Knowledge of the Company, is threatened against the Company or any of its Subsidiaries under any applicable Law.

     Section 4.15 Contracts and Commitments .

          (a) Except as disclosed in the Company SEC Reports filed since March 31, 2006 and prior to the date hereof or as otherwise listed on Section 4.15 of the Company Disclosure Schedules, neither the Company nor any of its Subsidiaries is a party to, is bound or affected by, or receives any benefits under, any agreement, contract or legally binding understanding, whether oral or written: (i) providing for (A) aggregate noncontingent unpaid payments by or to the Company or any of its Subsidiaries in excess of $100,000 or (B) potential

unpaid payments by or to the Company or any of its Subsidiaries reasonably expected to exceed $500,000 during the current term thereof, in each case other than an Excluded Contract; (ii) limiting the freedom of the Company to engage in any line of business or sell, supply or distribute any service or product, or to compete with any entity or to conduct business in any geography; (iii) any agreement (A) that after the Effective Time would, to the Company’s Knowledge, have the effect of limiting in any material respect the freedom of Parent or any of its Subsidiaries (other than the Company and its Subsidiaries) to engage in any line of business or sell, supply or distribute any service or product, or to compete with any entity or to conduct business in any geography, (B) pursuant to which the Company or any of its Subsidiaries has granted pricing to a Third Party on a “most favored nation” or similar basis or (C) pursuant to which the Company or any of its Subsidiaries has agreed to deal with a Third Party on an exclusive basis; (iv) providing for any joint venture, partnership or similar arrangement; (v) relating to the borrowing of money or the guarantee of any such obligation (other than trade payables and instruments relating to transactions entered into in the ordinary course of business); (vi) containing severance or termination pay Liabilities related to termination of employment; (vii) related to product supply, manufacturing, distribution or development, or the license of Company Intellectual Property to or from the Company or its Subsidiaries (except for nonexclusive software licenses granted to end-user customers, value added resellers, OEMs, integrators and distributors in the ordinary course of business (“ Excluded Contracts ”), or standard licenses purchased by the Company or its Subsidiaries for off-the-shelf software and except for licenses in which either the aggregate noncontingent payments to or by the Company are not in excess of $100,000 or the potential payment to or by the Company is not expected to exceed $500,000 during any term thereof); or (viii) otherwise required to be filed as an exhibit to an Annual Report on Form 10-K, as provided by Rule