AGREEMENT AND PLAN OF MERGER

EXHIBIT 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

among

BABYUNIVERSE, INC.,

BABY ACQUISITION SUB, INC.,

and

ETOYS DIRECT, INC.

Dated as of March 13, 2007

TABLE OF CONTENTS

AGREEMENT AND PLAN OF MERGER

     AGREEMENT AND PLAN OF MERGER, dated as of March 13, 2007 (this “ Agreement” ), by and among BabyUniverse, Inc., a Florida corporation (“ Parent ”), Baby Acquisition Sub, Inc., a Delaware corporation and a direct wholly owned Subsidiary of Parent (“ Merger Sub ”), and eToys Direct, Inc., a Delaware corporation (the “ Company ”).

W I T N E S S E T H :

     WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have each approved and declared advisable the merger of Merger Sub with and into the Company (the “ Merger ”), upon the terms and subject to the conditions set forth in this Agreement, pursuant to which each outstanding share of common stock, par value $0.01 per share, of the Company (the “ Company Common Stock ”) issued and outstanding immediately prior to the Effective Time, other than shares owned or held directly or indirectly by Parent, Merger Sub, the Company or any direct or indirect wholly owned Subsidiary of Parent or the Company, and other than Dissenting Shares, will be converted into the right to receive shares of common stock, par value $0.001 per share, of Parent (“ Parent Common Stock ”);

     WHEREAS, as a condition to the Company entering into this Agreement and incurring the obligations set forth herein, concurrently with the execution and delivery of this Agreement, the Company is entering into a Voting Agreement with certain stockholders (the “ Voting Agreement Stockholders ”) of Parent (the “ Voting Agreement ”) pursuant to which, among other things, such stockholders have agreed, subject to the terms thereof, to vote all shares of Parent Common Stock owned by them in accordance with the terms of the Voting Agreement;

     WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated hereby and also to prescribe various conditions to the transactions contemplated hereby; and

     WHEREAS, for federal income tax purposes, Parent, Merger Sub and the Company intend that the merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the regulations promulgated thereunder (“ Treasury Regulations ”), and, by approving resolutions authorizing this Agreement, to adopt this Agreement as a plan of reorganization within the meaning of Section 368(a) of the Code and the Treasury Regulations.

     NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I.

THE MERGER

      Section 1.1. The Merger . Upon the terms and subject to the conditions hereof, at the Effective Time, Merger Sub shall be merged with and into the Company and the separate existence of Merger Sub shall thereupon cease, and the Company, as the surviving entity in the Merger (the “ Surviving Company ”), shall by virtue of the Merger continue its existence under the laws of the State of Delaware.

      Section 1.2. Closing . Unless this Agreement shall have been terminated pursuant to the provisions of Section 9.1 hereof, the closing of the Merger (the “ Closing ”) will take place on the third Business Day after the satisfaction or waiver (subject to applicable law) of the conditions (excluding conditions that, by their terms, cannot be satisfied until the Closing Date, but subject to the satisfaction or, where permitted, waiver of those conditions as of the Closing) set forth in Article VIII, unless another time or date is agreed to in writing by the parties hereto (the date of the Closing, the “ Closing Date ”). The Closing shall be held at the offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019, unless another place is agreed to in writing by the parties hereto.

      Section 1.3. Effective Time . Upon the Closing, the parties shall file with the Secretary of State of the State of Delaware a certificate of merger (the “ Certificate of Merger ”) executed and acknowledged in accordance with the relevant provisions of the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with and accepted by the Secretary of State of the State of Delaware or at such subsequent time as Parent and the Company shall agree and as shall be specified in the Certificate of Merger (the date and time the Merger becomes effective being the “ Effective Time ”).

      Section 1.4. Effects of the Merger . The Merger shall have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers, and franchises of the Company and Merger Sub shall vest in the Surviving Company, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Company.

      Section 1.5. Certificate of Incorporation . The certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended as of the Effective Time so as to contain the provisions, and only the provisions, contained in the certificate of incorporation of Merger Sub immediately prior to the Effective Time until thereafter amended in accordance with the provisions thereof and as provided by applicable law, except for Article I thereof, which shall read “The name of the corporation is eToys Direct, Inc.”

      Section 1.6. Bylaws . The bylaws of Merger Sub will be the bylaws of the Surviving Company, until thereafter changed or amended as provided therein, in the certificate of incorporation of the Surviving Company or by applicable law.

      Section 1.7. Directors; Officers . The directors of the Company immediately prior to the Effective Time shall be the directors of the Surviving Company, and the officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Company, in each case until their respective successors are duly elected and qualified or until their death, resignation or removal in accordance with the DGCL and the certificate of incorporation and bylaws of the Surviving Company.

      Section 1.8. Effect on Capital Stock . At the Effective Time by virtue of the Merger and without any action on the part of the holder or holders thereof:

     (a) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Company Common Stock owned or held by Parent, Merger Sub, the Company, or any direct or indirect wholly owned Subsidiary of Parent or the Company, all of which shall be canceled as provided in Section 1.8(c) hereof, and other than any Dissenting Shares) shall be converted into the right to receive the number of fully paid and nonassessable shares of Parent Common Stock equal to the quotient of (x) the product of (A) the number of shares of Parent Common Stock outstanding, on a fully diluted basis, as of the Closing and (B) two, divided by (y) the number of shares of Company Common Stock outstanding as of the Closing (the “ Exchange Ratio ”), subject to Section 2.4 hereof with respect to fractional shares (the “ Merger Consideration ”).

     (b) All shares of Company Common Stock (other than shares referred to in Section 1.8(c) and (e) hereof) shall cease to be outstanding and shall be canceled and retired and shall cease to exist, and each holder of a certificate which immediately prior to the Effective Time represented any such shares of Company Common Stock (a “ Certificate ”) shall thereafter cease to have any rights with respect to such shares of Company Common Stock, except the right to receive the applicable Merger Consideration and any dividends or other distributions to which holders become entitled, all in accordance with Article II, upon the surrender of such Certificate.

     (c) Each share of Company Common Stock issued and owned or held by Parent, Merger Sub, the Company or any direct or indirect wholly owned Subsidiary of Parent or the Company at the Effective Time shall, by virtue of the Merger, cease to be outstanding and shall be canceled and retired and no Merger Consideration or other consideration shall be delivered in exchange therefor.

     (d) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Company.

     (e) Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are owned by stockholders that have properly perfected their rights of appraisal within the meaning of Section 262 of the DGCL (the “ Dissenting Shares ”) shall not be converted into the right to receive the Merger Consideration, unless and until such stockholders shall have failed to perfect or shall have effectively withdrawn or lost any available right of appraisal under applicable law, but, instead, the holders thereof shall be entitled to payment of the appraised value of such Dissenting Shares in accordance with Section 262 of the DGCL. If any such

holder shall have failed to perfect or shall have effectively withdrawn or lost such right of appraisal, the shares of Company Common Stock held by such stockholder shall not be deemed Dissenting Shares for purposes of this Agreement and shall thereupon be deemed to have been converted into the Merger Consideration at the Effective Time in accordance with Section 1.8(a) hereof.

     (f) If prior to the Effective Time, Parent or the Company, as the case may be, should split, combine or otherwise reclassify the Parent Common Stock or the Company Common Stock, or pay a stock dividend or other stock distribution in Parent Common Stock or Company Common Stock, as applicable, or otherwise change the Parent Common Stock or Company Common Stock into any other securities, or make any other such stock dividend or distribution in capital stock (or securities convertible into or exchangeable for capital stock) of Parent or the Company in respect of the Parent Common Stock or the Company Common Stock, respectively, then the Exchange Ratio and any other number or amount contained herein which is based upon the number of shares of Company Common Stock or Parent Common Stock, as the case may be, will be appropriately adjusted to reflect such split, combination, dividend or other distribution or change.

      Section 1.9. Treatment of Options .

     (a) At Effective Time, each outstanding option to purchase a share of Company Common Stock (collectively, “ Company Options ”) granted under any Company Stock Plan, whether or not then exercisable or vested, shall automatically be converted, by virtue of the Merger and without any action on the part of the holder thereof, into an option to acquire such number of shares of Parent Common Stock (a “ Rollover Option ”) equal to the product of (x) the number of shares of Company Common Stock subject to such Company Option and (y) the Exchange Ratio (provided that any fractional share resulting from such multiplication shall be rounded down to the nearest whole share). Each Rollover Option shall be subject to, and shall vest and remain exercisable in accordance with, the same terms and conditions of the Company Option it replaces, except that the exercise price per share of each Rollover Option shall be equal to the quotient of (i) the exercise price per share of such Company Option and (ii) the Exchange Ratio (provided that such exercise price shall be rounded up to the nearest whole cent). The conversion of the Company Options to Rollover Options pursuant to this Section 1.9 shall be effected in a manner consistent with Section 424 of the Code.

     (b) All shares of restricted Company Common Stock granted under the Company Stock Plans (and any other shares of Company Common Stock subject to vesting or future issuance under the Company Stock Plans) (collectively, “ Other Stock Awards ”) outstanding immediately prior to the Effective Time, whether or not then vested, shall be treated in the same manner as all other shares of Company Common Stock outstanding immediately prior to the Effective Time; provided, however, that the Merger Consideration received by each holder in exchange for the holder’s Other Stock Awards shall be subject to the terms and conditions (including vesting schedules) applicable to such Other Stock Awards as in effect prior to the Effective Time.

     (c) The Company and Parent shall take all such steps and actions as may be required to cause the transactions contemplated by this Section 1.9 and any other dispositions of

Company equity securities (including derivative securities) or acquisitions of Parent equity securities (including derivative securities) in connection with this Agreement by each individual who (i) is a director or officer of the Company or (ii) at the Effective Time will become a director or officer of Parent, to become exempt under Rule 16b-3 promulgated under the Exchange Act.

ARTICLE II.

EXCHANGE OF CERTIFICATES

      Section 2.1. Exchange Procedures . As promptly as practicable after the Effective Time, Parent will send to each record holder of a Certificate (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery to Parent of the Certificates and a duly executed Joinder Agreement, and shall be in customary form) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. As soon as reasonably practicable after the Effective Time, each holder of a Certificate, upon surrender of the Certificate to Parent together with such letter of transmittal and Joinder Agreement, duly executed, and such other documents as may reasonably be required by Parent, shall be entitled to receive in exchange therefor a certificate or certificates representing the number of full shares of Parent Common Stock, and the amount of cash, if any, in respect of fractional shares and any dividends or other distributions to which holders are entitled pursuant to Section 2.2 hereof, into which the aggregate number of shares of Company Common Stock previously represented by such Certificate shall have been converted pursuant to this Agreement. The letter of transmittal, as executed by such holder, shall include such holder’s consent to the placement of the Stop Transfer Order against such certificate or certificates conformably with the provisions of Section 10.2(c). Parent shall accept such Certificates upon compliance with such reasonable terms and conditions as Parent may impose to effect an orderly exchange thereof in accordance with customary exchange practices. No interest will be paid or will accrue on any cash payable in lieu of fractional shares or pursuant to Section 2.2 hereof. In the event that any Merger Consideration is to be paid in a name other than that in which the Certificate surrendered for exchange is registered, as the result of a transfer of ownership of Company Common Stock which was not registered in the transfer records of the Company, one or more certificates evidencing, in the aggregate, the proper number of shares of Parent Common Stock, a check in the proper amount in lieu of fractional shares and with respect to any dividends or other distributions to which such holder is entitled pursuant to Section 2.2 hereof, may be issued with respect to such Company Common Stock to the person so named only if the Certificate representing such shares of Company Common Stock is presented to Parent, properly endorsed, with signature guaranteed, or otherwise in proper form for transfer to the person so named, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.

      Section 2.2. Distributions with Respect to Unexchanged Shares . No dividends or other distributions declared or made with respect to shares of Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock that such holder would be entitled to receive upon surrender of such Certificate. Subject to the effect of applicable laws, following

surrender of any such Certificate, there shall be paid to such holder of shares of Parent Common Stock issuable in exchange therefor, without interest, (a) promptly after the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock, and (b) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such shares of Parent Common Stock.

      Section 2.3. No Further Ownership Rights in Company Common Stock . All shares of Parent Common Stock issued and cash, if any, paid in lieu of fractional shares or pursuant to Section 2.2 hereof paid upon conversion of shares of Company Common Stock in accordance with the terms of Article I hereof and this Article II shall be deemed to have been issued or paid in full satisfaction of all rights pertaining to the shares of Company Common Stock.

      Section 2.4. No Fractional Shares of Parent Common Stock . No certificates or scrip representing less than one share of Parent Common Stock shall be issued upon the surrender for exchange of Certificates representing Company Common Stock pursuant to Section 1.8 hereof. Each holder of shares of Company Common Stock exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock shall receive, in lieu thereof, cash (without interest) in an amount equal to the product of (i) such fractional part of a share of Parent Common Stock and (ii) the Parent Common Stock Price.

      Section 2.5. No Liability . None of Parent, Merger Sub, the Company or the Surviving Company shall be liable to any Person in respect of any Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

      Section 2.6. 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 Company, the posting by such Person of a bond in such reasonable amount as the Surviving Company may direct as indemnity against any claim that may be made against it with respect to such Certificate, and the delivery to Parent of such other documentation (including an indemnity in customary form) reasonably requested by Parent, Parent will deliver in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect to the shares of Company Common Stock formerly represented thereby, and any unpaid dividends and distributions on shares of Parent Common Stock deliverable in respect thereof, pursuant to this Agreement.

      Section 2.7. Withholding Rights . Each of the Surviving Company and Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock and any holder of Company Options such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any applicable provision of state, local or foreign tax law. To the extent that amounts are so deducted or withheld by the Surviving Company or Parent, as the case may be, such deducted or withheld

amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by the Surviving Company or Parent, as the case may be.

      Section 2.8. Further Assurances . At and after the Effective Time, the officers of the Surviving Company will be authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Company any and all right, title and interest in, to and under any of the rights, properties or assets acquired or to be acquired by the Surviving Company as a result of, or in connection with, the Merger.

      Section 2.9. Stock Transfer Books . At the close of business, New York time, on the day the Effective Time occurs, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of shares of Company Common Stock thereafter on the records of the Company. From and after the Effective Time, the holders of Certificates shall cease to have any rights with respect to such shares of Company Common Stock formerly represented thereby, except as otherwise provided herein or by law. On or after the Effective Time, any Certificates presented to Parent for any reason shall be converted into the Merger Consideration with respect to the shares of Company Common Stock formerly represented thereby, and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.2 hereof.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company hereby represents and warrants to Parent and Merger Sub as follows:

      Section 3.1. Corporate Organization . Each of the Company and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate, limited liability company or limited partnership power (as the case may be) to own its properties and assets and to conduct its business as now conducted. Copies of the Company Organizational Documents and the organizational documents of each Subsidiary of the Company, with all amendments thereto to the date hereof, have been made available to Parent or its representatives, and such copies are accurate and complete as of the date hereof. A complete and correct chart showing the Company and all of its direct and indirect Subsidiaries is set forth on Schedule 3.1 .

      Section 3.2. Qualification to Do Business . Except as set forth on Schedule 3.2 , each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation, limited liability company or partnership (as the case may be) and is in good standing in every jurisdiction in which the character of the properties owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a Company Material Adverse Effect.

      Section 3.3. No Conflict or Violation . The execution, delivery and performance by the Company of this Agreement does not and will not (i) violate or conflict with any provision of any Company Organizational Document or any of the organizational documents of the Subsidiaries of the Company, (ii) assuming that the Company makes the filings specified in Section 3.4 hereof and obtains the consents, waivers and approvals specified on Schedule 3.4 (and assuming compliance by Parent with Sections 4.3 and 4.4 hereof), violate any provision of law, or any order, judgment or decree of any Governmental Entity, (iii) except as set forth on Schedule 3.3 , violate or result in a breach of or constitute (with due notice or lapse of time or both) a default under any Company Contract or result in the creation or imposition of any Lien (other than any Permitted Lien) upon any of the assets, properties or rights of either the Company or any of its Subsidiaries or result in or give to others any rights of cancellation, modification, amendment, acceleration, revocation or suspension of any of the Company Contracts or obligations thereunder, or Company Licenses and Permits or (iv) violate or result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, agreement or instrument to which the Company or any of its Subsidiaries is a party or by which it is bound or to which any of its properties or assets is subject, except in each case with respect to clauses (iii) and (iv), for any such violations, breaches or defaults that would not, individually or in the aggregate, have a Company Material Adverse Effect.

      Section 3.4. Consents and Approvals . No consent, waiver, authorization or approval of any Governmental Entity, and no declaration or notice to or filing or registration with any Governmental Entity, is required in connection with the execution and delivery of this Agreement by the Company or the performance by the Company or its Subsidiaries of their obligations hereunder or thereunder, except for: (i) the consents, waivers, authorizations or approvals of any Governmental Entity set forth on Schedule 3.4 ; and (ii) such consents, waivers, authorizations, approvals, declarations, notices, filings or registrations, which if not obtained or made would not have a Company Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

      Section 3.5. Authorization and Validity of Agreement . The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company and all other necessary corporate action on the part of the Company, other than the adoption of this Agreement by the stockholders of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming due execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to (i) the effect of bankruptcy, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors’ rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing.

      Section 3.6. Capitalization and Related Matters .

     (a) As of the date hereof, the authorized capital stock of the Company consists of 27,000,000 shares of Company Common Stock and 13,000,000 shares of Company Preferred Stock. As of the date hereof:

     (i) 9,225,000 shares of Company Common Stock are issued and outstanding and 11,596,382 shares of Company Preferred Stock are issued and outstanding; and

     (ii) 551,075 shares of Company Common Stock are reserved for issuance and issuable upon or otherwise deliverable under the Company’s 2004 Stock Incentive Plan, 2005 Stock Incentive Plan and 2006 Stock Incentive Plan (collectively, the “ Company Stock Plans ”) or otherwise in connection with the exercise of outstanding Company Options and the vesting of outstanding Other Stock Awards. Schedule 3.6(a)(ii) sets forth the names of all holders, the number of             shares of Company Common Stock covered thereby, the vesting schedule and the exercise prices for the Company Options and the outstanding Other Stock Awards.

     (b) The outstanding shares of Company Common Stock and Company Preferred Stock (i) have been duly authorized and validly issued and are fully paid and nonassessable and (ii) were issued in compliance with all applicable federal and state securities laws. All grants of Company Options and Other Stock Awards were validly issued and properly approved by the Company’s Board of Directors in accordance with all applicable law and no such grants involved any “backdating” or similar practices with respect to the effective date of grant. Except as set forth above in Section 3.6(a) or Schedule 3.6(b) , no shares of capital stock of the Company are outstanding and the Company does not have outstanding any securities convertible into or exchangeable or exercisable for any shares of capital stock, including Company Options, any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or known claims of any other character relating to the issuance of, any capital stock, or any stock or securities convertible into or exchangeable or exercisable for any capital stock; and the Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire, or to register under the Securities Act, any shares of capital stock. Except as set forth above in Section 3.6(a), the Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter.

     (c) All of the outstanding shares of capital stock of, or membership interests or other ownership interests in, each Subsidiary of the Company, as applicable, are validly issued, fully paid and nonassessable and are owned of record and beneficially by the Company, directly or indirectly. The Company has, as of the date hereof and shall have on the Closing Date, valid and marketable title to all of the shares of capital stock of, or membership interests or other ownership interests in, each Subsidiary of the Company, free and clear of any Liens other than Permitted Liens. Such outstanding shares of capital stock of, or membership interests or

other ownership interests in, the Subsidiaries of the Company, as applicable, are the sole outstanding securities of such Subsidiaries; the Subsidiaries of the Company do not have outstanding any securities convertible into or exchangeable or exercisable for any capital stock of, or membership interests or other ownership interests in, such Subsidiaries, any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any other character relating to the issuance of, any capital stock of, or membership interests or other ownership interests in, such Subsidiaries, or any stock or securities convertible into or exchangeable or exercisable for any capital stock of, or membership interests or other ownership interests in, such Subsidiaries; and neither the Company or any of its Subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire, or to register under the Securities Act, any capital stock of, or membership interests or other ownership interests in, any Subsidiary of the Company.

      Section 3.7. Subsidiaries and Equity Investments . Except as set forth on Schedule 3.7 , the Company and its Subsidiaries do not directly or indirectly own, or hold any rights to acquire, any capital stock or any other securities, interests or investments in any other Person other than investments that constitute cash or cash equivalents.

      Section 3.8. Financial Statements .

     (a) The Company has heretofore made available to Parent copies of the audited consolidated balance sheets of the Company and its Subsidiaries as of January 28, 2006 and January 29, 2005, together with the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the fiscal years then ended and the notes thereto, accompanied by the reports thereon of Ernst & Young LLP, (b) copies of the unaudited consolidated balance sheet of the Company and its Subsidiaries as of February 3, 2007 (“ Company Interim Balance Sheet ”), together with the related consolidated unaudited statements of operations, stockholders’ equity (deficit) and cash flow for the fiscal year then ended and the notes thereto (all the financial statements referred to in clauses (a) and (b) above being hereinafter collectively referred to as the “ Company Financial Statements ”). The Company Financial Statements, including the notes and schedules thereto, (i) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and (ii) present fairly in all material respects the financial position, results of operations and changes in financial position of the Company and its Subsidiaries as of such dates and for the periods then ended (subject, in the case of the unaudited interim Company Financial Statements described in clause (b) above, to notes and normal year-end audit adjustments consistent with prior periods).

     (b) As of the date hereof, the Company and its Subsidiaries had cash and cash equivalents of $366,056, and indebtedness for borrowed money (including accrued interest thereon) outstanding of $59,416,738.

      Section 3.9. Absence of Certain Changes or Events .

     (a) Except as set forth on Schedule 3.9(a) , since the date of the Company Interim Balance Sheet, there has not been:

     (i) any Company Material Adverse Effect;

     (ii) any material loss, damage, destruction or other casualty to the assets or properties of either the Company or any of its Subsidiaries (other than any for which insurance awards have been received or guaranteed);

     (iii) any change in any method of accounting or accounting practice of either the Company or any of its Subsidiaries except for any such change required by reason of a concurrent change in GAAP; or

     (iv) any loss of the employment, services or benefits of the chief executive officer of the Company and members of the Company’s senior management who report directly to such chief executive officer.

          (b) Since the date of the Company Interim Balance Sheet, each of the Company and each of its Subsidiaries has operated in the ordinary course of its business and consistent with past practice and, except as set forth on Schedule 3.9(b) , has not:

     (i) incurred any material obligation or liability (whether absolute, accrued, contingent or otherwise) except in the ordinary course of business and consistent with past practice;

     (ii) failed to discharge or satisfy any material Lien or pay or satisfy any material obligation or liability (whether absolute, accrued, contingent or otherwise), other than Permitted Liens and liabilities being contested in good faith and for which adequate reserves have been provided;

     (iii) mortgaged, pledged or subjected to any Lien (other than Permitted Liens) any of its assets, properties or rights;

     (iv) sold or transferred any of its material assets or cancelled any material debts or claims or waived any material rights;

     (v) disposed of any material patents, trademarks or copyrights or any material patent, trademark or copyright applications or registrations;

     (vi) disclosed any of its material trade secrets, except pursuant to written confidentiality obligations;

     (vii) defaulted on any material obligation;

     (viii) entered into any transaction material to its business, except in the ordinary course of business and consistent with past practice;

     (ix) granted any material increase in the compensation or benefits of its key employees other than increases in accordance with past practice not exceeding 8% of the key employee’s annual base compensation then in effect, or

entered into any employment, change of control, retention or severance agreement or arrangement with any of them;

     (x) contractually committed to make any capital expenditure for any periods after the date hereof or additions to property, plant and equipment used in its operations other than ordinary repairs and maintenance in excess of $100,000 in the aggregate;

     (xi) laid off any significant number of its employees;

     (xii) discontinued the offering of any material services or product;

     (xiii) incurred any material obligation or liability for the payment of severance benefits;

     (xiv) declared, paid, or set aside for payment any dividend or other distribution in respect of shares of its capital stock, membership interests or other securities, or redeemed, purchased or otherwise acquired, directly or indirectly, any shares of its capital stock, membership interests or other securities, or agreed to do so; or

     (xv) entered into any agreement or made any commitment to do any of the foregoing.

      Section 3.10. Tax Matters . Except as set forth on Schedule 3.10 :

     (a) (i) the Company and each of its Subsidiaries have filed when due all income Tax Returns and all other material Tax Returns required by applicable law to be filed with respect to the Company and each of its Subsidiaries; (ii) all income Taxes and all other material Taxes owed by the Company and each of its Subsidiaries, if required to have been paid, have been paid (except for Taxes which are being contested in good faith); and (iii) any liability of the Company or any of its Subsidiaries for Taxes not yet due and payable, or which are being contested in good faith, has been provided for on the financial statements of the Company in accordance with GAAP;

     (b) there is no action, suit, proceeding, investigation, audit or claim now pending with respect to the Company or any of its Subsidiaries in respect of any income Tax or other material Tax, nor has any claim for additional Tax been asserted in writing by any taxing authority;

     (c) since January 1, 2000, no claim has been made in writing by any taxing authority in a jurisdiction where the Company or any of its Subsidiaries has not filed a Tax Return that it is or may be subject to Tax by such jurisdiction;

     (d) (i) there is no outstanding request for any extension of time for the Company or any of its Subsidiaries to pay any Taxes or file any Tax Returns; (ii) there has been no waiver or extension of any applicable statute of limitations for the assessment or collection of any Taxes of the Company or any of its Subsidiaries that is currently in force; (iii) the federal

statute of limitations for tax years of the Company and its Subsidiaries has closed for all years ending prior to January 1, 2002; and (iv) neither the Company nor any of its Subsidiaries is a party to or bound by any agreement, whether written or unwritten, providing for the payment of Taxes, payment for Tax losses, entitlements to refunds or similar Tax matters;

     (e) the Company and each of its Subsidiaries have withheld and paid all Taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other third party;

     (f) the Company has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;

     (g) neither the Company nor any of its Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code;

     (h) there is no Lien, other than a Permitted Lien, affecting any of the assets, properties or rights of the Company and its Subsidiaries that arose in connection with any failure or alleged failure to pay any Tax;

     (i) neither the Company nor any of its Subsidiaries (i) has been a member of an affiliated group (within the meaning of Code § 1504(a)) filing a consolidated federal income Tax Return (other than a group the common parent of which is the Company) or (ii) has any liability for the Taxes of any Person (other than the Company and its Subsidiaries) under Treasury Regulations § 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise;

     (j) the Company and its Subsidiaries have neither (i) made, changed or revoked, or permitted to be made, changed or revoked, any election or method of accounting with respect to Taxes affecting or relating to the Company and its Subsidiaries, nor (ii) entered into, or permitted to be entered into, any closing or other agreement or settlement with respect to Taxes affecting or relating to the Company and its Subsidiaries;

     (k) neither the Company nor any of its Subsidiaries has taken or agreed to take any action, or is aware of any fact or circumstance, that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; and

     (l) neither the Company nor any of its Subsidiaries have a permanent establishment in a foreign jurisdiction.

      Section 3.11. Absence of Undisclosed Liabilities . Except as set forth on Schedule 3.11(a) , there are no material liabilities or obligations of the Company or any Subsidiary thereof of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that could be reasonably expected to result in such a liability or obligation, other than (A) liabilities or obligations disclosed and provided for in the Company Interim Balance Sheet, or

(B) liabilities or obligations incurred in the ordinary course of business consistent with past practice since the date of the Company Interim Balance Sheet. Except as shown on Schedule 3.11(b) , neither the Company nor any of its Subsidiaries is directly or indirectly liable upon or with respect to (by discount, repurchase agreements or otherwise), or obliged in any other way to provide funds in respect of, or to guarantee or assume, any material debt, obligation or dividend of any Person, except endorsements in the ordinary course of business in connection with the deposit, in banks or other financial institutions, of items for collection.

           Section 3.12. Company Property .

          (a) The Company owns no real property.

          (b) Schedule 3.12(b) sets forth a list of all leases, licenses, permits, subleases and occupancy agreements, together with all material amendments thereto, in which either the Company or any of its Subsidiaries has a leasehold interest or similar occupancy rights, whether as lessor or lessee, and (i) which are material to the operation of the Company and its Subsidiaries, taken as a whole, or (ii) which involve payments by the Company or its Subsidiaries in excess of $50,000 per year (each, a “ Company Lease ” and collectively, the “ Company Leases ”; the property covered by Company Leases under which either the Company or any of its Subsidiaries is a lessee is referred to herein as the “ Company Leased Real Property ”). Neither the Company nor any of its Subsidiaries is a party to any Company Contract (other than a Lease) with the lessor of any Company Leased Real Property, which gives such lessor any right to terminate or adversely alter the terms of the Company Lease to which such lessor is a party. The Company or its Subsidiaries enjoys peaceful and undisturbed possession of the Company Leased Real Property pursuant to the Company Leases. No option has been exercised under any of such Company Leases, except options whose exercise has been evidenced by a written document, a true, complete and accurate copy of which has been made available to Parent with the corresponding Company Lease. Except as set forth on Schedule 3.12(b) , the transactions contemplated by this Agreement do not require the consent or approval of the other party to the Company Leases.

          (c) Since the date of the Company Interim Balance Sheet, no Company Lease has been modified or amended in writing in any way materially adverse to the business of the Company and its Subsidiaries except as set forth on Schedule 3.12(c) and no party to any Company Lease has given either the Company or any of its Subsidiaries written notice of or, to the Knowledge of the Company, made a claim with respect to, any breach or default thereunder.

          (d) Except as set forth on Schedule 3.12(d) and other than rights incidental to the provision of services established in the ordinary course of business, none of the Company Leased Real Property is subject to any option, lease, sublease, license or other agreement granting to any Person any right to the use, occupancy or enjoyment of such property or any portion thereof or to obtain title to all or any portion of such property.

          (e) All material improvements, systems and fixtures on the Company Leased Real Property are in good operating condition and repair and generally are adequate and suitable in all material respects for the present and continued use, operation and maintenance thereof as now used, operated or maintained. All improvements on the Company Leased Real Property

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constructed by or on behalf of the Company or any Subsidiary were constructed, to the Knowledge of the Company, in compliance in all material respects with applicable laws, ordinances and regulations affecting such Company Leased Real Property.

           Section 3.13. Assets of the Company and its Subsidiaries .

          (a) The assets, properties and rights of the Company and its Subsidiaries constitute all of the assets, properties and rights which are used in the operation of their business as currently conducted. Except as set forth on Schedule 3.13(a) , there are no material assets, properties, rights or interests of any kind or nature that either the Company or any of its Subsidiaries has been using, holding or operating in their business prior to the Closing that will not be used, held or owned by the Company or its Subsidiaries immediately following the Closing.

          (b) Each of the Company and its Subsidiaries has good and valid fee simple title, free and clear of any Liens other than Permitted Liens, to, or a valid leasehold interest under enforceable Leases in, all of its material assets, properties and rights.

           Section 3.14. Intellectual Property .

          (a) The Company and its Subsidiaries own, or have valid and enforceable licenses to use, all the Intellectual Property used by the Company and its Subsidiaries, and such Intellectual Property represents all intellectual property rights necessary for the conduct of their business as and where conducted on the date hereof. The Company and its Subsidiaries are in compliance in all material respects with all licenses relating to the protection of such of the Intellectual Property used by the Company and its Subsidiaries as it uses pursuant to license or other agreement. To the Knowledge of the Company, there are no conflicts with or infringements of any Intellectual Property owned or used by the Company and its Subsidiaries by any third party. To the Knowledge of the Company, the conduct of the business of the Company and its Subsidiaries does not conflict with, violate, misappropriate, misuse or infringe any proprietary right of any third party. Except as set forth on Schedule 3.14(a) , there is no claim, suit, action or proceeding pending or, to the Knowledge of the Company, threatened, against the Company or its Subsidiaries: (i) alleging any such conflict, violation, misappropriation, misuse or infringement with or of any third party’s proprietary rights; or (ii) challenging the Company’s or its Subsidiaries’ ownership or use of, or the validity or enforceability of, any Intellectual Property owned or used by the Company and its Subsidiaries.

          (b) Schedule 3.14(b) sets forth a complete and current list of all registrations, applications or filings pertaining to the Intellectual Property owned by the Company and its Subsidiaries (“ Company Registered Intellectual Property ”) as of the date hereof and the owner of record, date of application or issuance, and relevant jurisdiction as to each. Except as described on Schedule 3.14(b) , all Company Registered Intellectual Property is owned by the Company and/or its Subsidiaries, free and clear of all Liens other than Permitted Liens. All Company Registered Intellectual Property is valid, subsisting, unexpired, and all renewal fees and other maintenance fees that have fallen due on or prior to the Closing have been paid. Except as listed on Schedule 3.14(b) , there are no actions that must be taken or payments that must be made by the Company or its Subsidiaries within one hundred eighty (180) days of the Closing that, if not

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taken or paid, will adversely affect the Intellectual Property owned or used by the Company and its Subsidiaries or the right of the Company or its Subsidiaries to use the same as and where used as of the date hereof. Except as listed on Schedule 3.14(b) , no Company Registered Intellectual Property is the subject of any proceeding before any governmental, registration or other authority in any jurisdiction, including any office action or other form of preliminary or final refusal of registration. The consummation of the transactions contemplated by this Agreement will not alter or impair in any material respect any Intellectual Property owned or used by the Company and its Subsidiaries.

          (c) Schedule 3.14(c) sets forth a complete list of all material license agreements pertaining to Intellectual Property owned or used by the Company and its Subsidiaries as of the date hereof, except for agreements pertaining to commercially available, off-the-shelf software. Except as set forth on Schedule 3.14(c) , neither the Company nor any of its Subsidiaries is under any obligation to pay royalties or other payments in connection with any agreement, nor restricted from assigning its rights respecting Intellectual Property owned or used by the Company and its Subsidiaries. Neither the Company nor any of its Subsidiaries will be, as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any agreement relating to the Intellectual Property owned or used by the Company and its Subsidiaries. Neither the Company nor its Subsidiaries is in material default of any such agreement.

          (d) Except as set forth on Schedule 3.14(d) , neither the Company nor any of its Subsidiaries has made any claim of a violation, infringement, misuse or misappropriation by any third party (including any employee or former employee of the Company or its Subsidiaries) of its rights to, or in connection with, any Intellectual Property owned or used by the Company and its Subsidiaries, which claim is pending. Except as set forth on Schedule 3.14(d) , neither the Company nor any of its Subsidiaries has entered into any agreement to indemnify any other Person against any charge of infringement of any Intellectual Property owned or used by the Company and its Subsidiaries, other than indemnification provisions contained in employment policies and agreements, customer agreements, purchase orders or license agreements arising in the ordinary course of business.

           Section 3.15. Software . To the Knowledge of the Company, none of the operating and applications computer software programs and databases used by the Company and its Subsidiaries that are material to the conduct of their business (collectively, the “ Company Software ”), nor any use thereof, conflicts with, infringes upon or violates any intellectual property or other proprietary right of any other Person and, no claim, suit, action or other proceeding with respect to any such infringement or violation is pending, or to the Knowledge of the Company, threatened.

           Section 3.16. Licenses and Permits .

          (a) The Company and its Subsidiaries own or possess all right, title and interest in and to each of their respective material licenses, permits, franchises, registrations, authorizations and approvals issued or granted to the Company or any of its Subsidiaries by any Governmental Entity (the “ Company Licenses and Permits ”) and have taken all necessary action to maintain such Company Licenses and Permits. Each Company License and Permit has been

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duly obtained, is valid and in full force and effect, and is not subject to any pending or, to the Knowledge of the Company, threatened administrative or judicial proceeding to revoke, cancel, suspend or declare invalid such Company License and Permit in any respect. The Company Licenses and Permits are sufficient and adequate in all respects to permit the continued lawful conduct of the business of the Company and its Subsidiaries, and none of the operations of the Company or its Subsidiaries are being conducted in a manner that violates in any material respect any of the terms or conditions under which any Company License and Permit was granted.

          (b) The operations of the Company and its Subsidiaries are in compliance in all material respects with applicable federal and state law and the published rules, regulations, and policies promulgated by any Governmental Entity, and neither the Company nor its Subsidiaries have done anything or failed to do anything which reasonably could be expected to cause the loss of any of the Company Licenses and Permits.

          (c) Other than those listed on Schedule 3.16 , no petition, action, investigation, notice of violation or apparent liability, notice of forfeiture, order to show cause, complaint, or proceeding seeking to revoke, reconsider the grant of, cancel, suspend, or modify any of the Company Licenses and Permits is pending or, to the Knowledge of the Company, threatened before any Governmental Entity. No notices have been received by and, no claims have been filed against, the Company or its Subsidiaries alleging a failure to hold any requisite permits, regulatory approvals, licenses and other authorization.

           Section 3.17. Compliance with Law .

          (a) Except as set forth on Schedule 3.17 , the operations of the business of the Company and its Subsidiaries have been conducted in accordance in all material respects with all applicable laws, regulations, orders and other requirements of all Governmental Entities having jurisdiction over such entity and its assets, properties and operations. Except as set forth on Schedule 3.17 , since January 1, 2005, none of the Company or its Subsidiaries has received notice of any material violation (or any investigation with respect thereto) of any such law, regulation, order or other legal requirement, and none of the Company or its Subsidiaries is in material default with respect to any order, writ, judgment, award, injunction or decree of any national, state or local court or governmental or regulatory authority or arbitrator, domestic or foreign, applicable to any of its assets, properties or operations.

          (b) The management of the Company has (i) implemented (x) disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the management of the Company by others within those entities and (y) a system of internal control over financial reporting sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and (ii) has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s auditors and the audit committee of the Company’s Board of Directors (A) any significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls and (B) any fraud, whether or not material,

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that involves management or other employees who have a significant role in the Company’s internal controls. The Company has made available to Parent a summary of any such disclosure made by management to the Company’s auditors and the audit committee of the Company’s Board of Directors.

           Section 3.18. Litigation . Except as set forth on Schedule 3.18 , there are no material claims, actions, suits, proceedings, subpoenas or, to the Knowledge of the Company, investigations (each, an “ Action ”) pending or, to the Knowledge of the Company, threatened, before any Governmental Entity, or before any arbitrator, of any nature, brought by or against any of the Company or its Subsidiaries or any of their officers or directors involving or relating to the Company or its Subsidiaries, the assets, properties or rights of any of the Company and its Subsidiaries or the transactions contemplated by this Agreement. There is no material judgment, decree, injunction, rule or order of any Governmental Entity or before any arbitrator, of any nature outstanding, or to the Knowledge of the Company, threatened, against either the Company or its Subsidiaries.

           Section 3.19. Contracts .

          (a) Schedule 3.19(a) sets forth a complete and correct list of all Company Contracts as of the date hereof.

          (b) Each Company Contract is valid, binding and enforceable against the Company or its Subsidiaries and, to the Knowledge of the Company, against the other parties thereto in accordance with its terms, and in full force and effect. Each of the Company and its Subsidiaries has performed all material obligations required to be performed by it to date under, and is not in material default or delinquent in performance, status or any other respect (claimed or actual) in connection with, any Company Contract, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default. To the Knowledge of the Company, no other party to any Company Contract is in material default in respect thereof, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default. The Company has made available to Parent or its representatives true and complete originals or copies of all the Company Contracts.

          (c) A “ Company Contract ” means any agreement, contract or commitment, oral or written, to which either the Company or any of its Subsidiaries is a party or by which it or any of its assets are bound constituting:

               (i) a contract or agreement for the purchase, license (as licensee) or lease (as lessee) by the Company or any of its Subsidiaries of services, materials, products, personal property, supplies, Intellectual Property rights or other assets from any supplier or vendor or for the furnishing of services to the Company or any of its Subsidiaries reasonably expected to involve total payments by the Company and its Subsidiaries in excess of $100,000 in 2007 (the “ Company Vendor Contracts ”);

               (ii) a mortgage, indenture, security agreement, guaranty, pledge and other agreement or instrument relating to the borrowing of money or extension of

credit (other than accounts receivable or accounts payable in the ordinary course of business and consistent with past practice);

               (iii) an employment, change of control, retention, severance or material consulting agreement;

               (iv) a joint venture, partnership or limited liability company agreement with third parties;

               (v) a non-competition agreement or any other agreement or obligation which purports to limit in any material respect (i) the manner in which, or the localities in which, the business of the Company or any of its Subsidiaries may be conducted or (ii) the ability of either of the Company or any of its Subsidiaries to provide any type of service presently conducted by the Company or its Subsidiaries;

               (vi) an agreement containing any exclusivity clause, most-favored-nations clause, benchmarking clause or marked-to-market pricing provision;

               (vii) a Lease requiring annual payments in excess of $50,000;

               (viii) an agreement limiting or restricting the ability of either the Company or any of its Subsidiaries to make distributions or declare or pay dividends in respect of its capital stock or membership interests, as the case may be;

               (ix) an agreement or offer to acquire all or a substantial portion of the capital stock, business, property or assets of any other Person; or

               (x) any other material agreement not in the ordinary course of the business of the Company and its Subsidiaries.

           Section 3.20. Employee Plans .

          (a) Schedule 3.20(a) sets forth: (i) all “employee benefit plans”, as defined in Section 3(3) of ERISA, and all material employee benefit programs, policies, arrangements or payroll practices, including, without limitation, any such programs, policies, arrangements or payroll practices providing severance pay, sick leave, vacation pay, salary continuation, disability, retirement benefits, deferred compensation, bonus pay, incentive pay, equity or equity-based compensation, stock purchase, hospitalization insurance, medical insurance, life insurance, cafeteria benefits, dependent care reimbursements, prepaid legal benefits, scholarships or tuition reimbursements, sponsored or maintained by the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is obligated to contribute thereunder for current or former employees of the Company and its Subsidiaries (the “ Company Employee Benefit Plans ”), and (ii) all “employee pension plans”, as defined in Section 3(2) of ERISA, maintained or sponsored by the Company or any trade or business (whether or not incorporated) which is under control or treated as a single employer with the Company under Section 414(b), (c), (m), or (o) of the Code

(a “ Company ERISA Affiliate ”) or to which the Company or any Company ERISA Affiliate has contributed or has been obligated to contribute thereunder (the “ Company Pension Plans ”).

          (b) True, correct and complete copies of the following documents, with respect to each of the Company Employee Benefit Plans and Company Pension Plans, have been made available to Parent, to the extent applicable: (i) all plans and related trust documents, and amendments thereto; (ii) Forms 5500 filed for the three most recent plan years; (iii) the most recent IRS determination letter; (iv) the most recent summary plan descriptions, annual reports and material modifications; (v) the most recent actuarial report, if any; and (vi) written descriptions of all non-written agreements relating to the Company Employee Benefit Plans. In addition, the most recent financial statements and actuarial valuations for the Company Pension Plans have been made available to Parent.

          (c) None of the Company Employee Benefit Plans or Company Pension Plans is a multiemployer plan, as defined in Section 3(37) of ERISA (“ Company Multiemployer Plan ”) or subject to Title IV of ERISA or Section 412 of the Code. The Company has not incurred any liability due to a complete or partial withdrawal from a multiemployer plan or due to the termination or reorganization of a multiemployer plan (except for any such liability that has been satisfied in full), and no events have occurred and no circumstance exists, to the Knowledge of the Company, that would reasonably be expected to result in any liability to the Company or a Company ERISA Affiliate.

          (d) Each Company Pension Plan that is intended to qualify under Section 401 of the Code has received a determination letter from the IRS, or can rely on an opinion letter, that it so qualifies and that the trust is exempt from taxation under Section 501 of the Code, and to the Knowledge of the Company, nothing has occurred since the date of determination that would reasonably be expected to cause the loss of such qualification or exemption or the imposition of any material liability, penalty or tax under ERISA or the Code.

          (e) All contributions (including all employer contributions and employee salary reduction contributions) and all premiums required to have been paid under any of the Company Employee Benefit Plans or Company Pension Plans or by law (without regard to any waivers granted under Section 412 of the Code) to any funds or trusts established thereunder or in connection therewith have been made by the due date thereof (including any valid extension).

          (f) To the Knowledge of the Company, there has been no material violation of ERISA or the Code with respect to the filing of applicable reports, documents and notices regarding the Company Employee Benefit Plans or Company Pension Plans with the Secretary of Labor or the Secretary of the Treasury or the furnishing of required reports, documents or notices to the participants or beneficiaries of the Company Employee Benefit Plans or Company Pension Plans.

          (g) Except as set forth on Schedule 3.20(g) , there are no pending actions, claims or lawsuits which have been asserted or instituted against the Company Employee Benefit Plans or Company Pension Plans, the assets of any of the trusts under such plans or the plan sponsor or the plan administrator, or against any fiduciary of the Company Employee Benefit Plans or Company Pension Plans with respect to the operation or administration of such plans or

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the investment of plan assets (other than routine benefit claims), nor does the Company have Knowledge of facts which could form the basis for any such claim or lawsuit. No Company Employee Benefit Plan or Company Pension Plan has been the subject of an audit, investigation or examination by any Governmental Entity to the Knowledge of the Company.

          (h) The Company Employee Benefit Plans have been maintained, in all material respects, in accordance with their terms and with all provisions of ERISA and the Code (including rules and regulations thereunder) and other applicable federal and state laws and regulations. None of the Company, its Subsidiaries, or, to the Knowledge of the Company, any “party in interest” or “disqualified person” with respect to the Company Employee Benefit Plans or Company Pension Plans has engaged in a non-exempt “prohibited transaction” within the meaning of Section 406 of ERISA or 4975 of the Code pursuant to which the tax or penalty could be material. Except as set forth on Schedule 3.20(h) , no stock or other security issued by the Company or any Affiliate forms or has formed a part of the assets of any Company Employee Benefit Plan or Company Pension Plan.

          (i) None of the Company Employee Benefit Plans provide retiree life or retiree health benefits except as may be required under COBRA or any similar state or local law.

          (j) Except as set forth on Schedule 3.20(j) hereto, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, either alone or together with the occurrence of subsequent events, (i) increase any benefits otherwise payable under any Company Employee Benefit Plan or Company Pension Plan; (ii) result in the acceleration of the time of payment or vesting of any benefits including, but not limited to, benefits under any Company Employee Benefit Plan or Company Contract to any current or former employee; or (iii) entitle any current or former employee, officer, director or independent contractor of the Company or any of its Subsidiaries to a payment or benefit that is not deductible by reason of Section 280G of the Code.

          (k) No Company Contract, Company Employee Benefit Plan, warrant or other compensatory or equity-based arrangement with any employee, officer or director of the Company contains any provision requiring the Company to pay on behalf of, or otherwise reimburse, any such individual for any income or excise taxes due by such individual upon payment of any benefits by the Company, other than any such obligations as required by applicable laws or regulations.

          (l) With respect to each option to purchase Company Common Stock, (i) each such option has been granted with an exercise price no lower than “fair market value” (within the meaning of Section 409A of the Code) as of the grant date, (ii) the “grant date” of such option, determined in accordance with applicable tax laws and GAAP, is the same grant date as reflected in the Company’s option and/or stock ledger and (iii) such option has been properly expensed by the Company in accordance with GAAP.

          (m) Each “non qualified deferred compensation plan” (as defined in Section 409(d)(1) of the Code) of the Company (i) has been operated, since January 1, 2005, in good faith compliance with Section 409A of the Code, IRS Notice 2005-1 and Proposed Treasury Regulations promulgated under Section 409A of the Code (the “ Proposed Regulations ”) and (ii)

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has not been “materially modified” (within the meaning of IRS Notice 2005-1 or the Proposed Regulations) at any time after October 3, 2004.

           Section 3.21. Insurance . The Company has made available to Parent a true, complete and accurate copy of the material surety bonds, fidelity bonds and all material policies of title, liability, fire, casualty, business interruption, workers’ compensation and other forms of insurance insuring each of the Company and its Subsidiaries and their assets, properties and operations. Except as set forth on Schedule 3.21 , all such policies and bonds are in full force and effect. None of the Company or its Subsidiaries is in material default under any provisions of any such policy of insurance nor has any of the Company or its Subsidiaries received notice of cancellation of or cancelled any such insurance. For all material claims made under such policies and bonds, the Company and its Subsidiaries have timely complied with any applicable notice provisions.

           Section 3.22. Affiliate Transactions . Except as set forth on Schedule 3.22 , there are no transactions, agreements, arrangements or understandings between the Company or any of its Subsidiaries, on the one hand, and any director or executive officer of the Company, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act (if such Act were applicable to the Company) other than ordinary course of business employment agreements and similar employee arrangements otherwise set forth on Schedule 3.24 to the extent required to be set forth thereon (or any such ordinary course employment agreements and similar arrangements not required to be set forth on Schedule 3.24 by the limitations contained in the representation and warranty set forth in Section 3.24 hereof).

           Section 3.23. Relationships with Vendors and Content Providers .

          (a) Schedule 3.23(a) sets forth a list of the top 25 vendors by dollar amount paid to such vendors by the Company and its Subsidiaries (taken together) for the fiscal year ended February 3, 2007. To the Knowledge of the Company, no such vendor has expressed in writing or verbally to the Company or any of its Subsidiaries its intention to cancel or otherwise terminate or materially reduce or modify its relationship with the Company or any of its Subsidiaries.

          (b) Schedule 3.23(b) sets for a list of the top 25 content providers for the Internet Web sites and other electronic media of the Company and its Subsidiaries by dollar amount paid to such providers by the Company and its Subsidiaries for the fiscal year ended February 3, 2007. To the Knowledge of the Company, no such content provider has expressed in writing or verbally to the Company or any of its Subsidiaries its intention to cancel or otherwise terminate or materially reduce or modify its relationship with the Company or any of its Subsidiaries.

           Section 3.24. Labor Matters .

          (a) Except as set forth on Schedule 3.24(a) : (i) neither the Company nor any of its Subsidiaries is a party to any outstanding employment agreements or contracts with officers, managers or employees of either of the Company or its Subsidiaries that are not terminable at will; (ii) neither the Company nor any of its Subsidiaries is a party to any

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agreement, policy or practice that requires it to pay termination, change of control or severance pay to salaried, non-exempt or hourly employees of such company (other than as required by law); (iii) neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to its employees nor does the Company have Knowledge of any activities or proceedings of any labor union to organize any such employees; and (iv) neither the Company nor any of its Subsidiaries is a party to any material consulting agreements with any Person providing services to the Company or any of its Subsidiaries.

          (b) Except as set forth on Schedule 3.24(b) : (i) each of the Company and its Subsidiaries is in compliance in all material respects with all applicable laws relating to employment and employment practices, the classification of employees, wages, hours, collective bargaining, unlawful discrimination, civil rights, safety and health, workers’ compensation and terms and conditions of employment; (ii) there are no charges with respect to or relating to either the Company or its Subsidiaries pending or, to the Knowledge of the Company, threatened before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices; and (iii) neither the Company nor any of its Subsidiaries has received any notice from any national, state, local or foreign agency responsible for the enforcement of labor or employment laws of an intention to conduct an investigation of either of the Company or its Subsidiaries and no such investigation is in progress.

          (c) Except as set forth on Schedule 3.24(c) , there has been no “mass layoff” or “plant closing” as defined by the Worker Adjustment and Retraining Notification Act or any similar state or local “plant closing” law (“ WARN ”) with respect to the current or former employees of the Company or its Subsidiaries.

          (d) Except as set forth on Schedule 3.24(d) , neither the Company nor any of its Subsidiaries has any severance plan or severance obligation with respect to its employees.

           Section 3.25. Environmental Matters .

          (a) Each of the Company and its Subsidiaries is and has been at all times prior to the date hereof, in compliance in all material respects with all applicable laws, regulations, common law and other requirements of governmental or regulatory authorities relating to pollution, to the protection of the environment or to natural resources (“ Environmental Laws ”). Each of the Company and its Subsidiaries has in effect all material licenses, permits and other authorizations required under all Environmental Laws and is in compliance in all material respects with all such licenses, permits and authorizations.

          (b) The Company and its Subsidiaries have not received any notice of violation or potential liability under any Environmental Laws from any Person or any Governmental Entity inquiry, request for information, or demand letter under any Environmental Law relating to operations or properties of the Company or its Subsidiaries which would be reasonably expected to result in the Company or any of its Subsidiaries incurring material liability under Environmental Laws. None of the Company or its Subsidiaries is subject to any orders arising under Environmental Laws nor are there any administrative, civil or criminal actions, suits, proceedings or investigations pending or, to the Knowledge of the Company,

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threatened, against the Company or its Subsidiaries under any Environmental Law which would reasonably be expected to result in the Company or any of its Subsidiaries incurring material liability under Environmental Laws. None of the Company or its Subsidiaries has entered into any agreement pursuant to which the Company or its Subsidiaries has assumed or will assume any liability under Environmental Laws, including, without limitation, any obligation for costs of remediation, of any other Person.

          (c) To the Knowledge of the Company, there has been no release or threatened release of a hazardous substance, hazardous waste, contaminant, pollutant, toxic substance or petroleum and its fractions, the presence of which requires investigation or remediation under any applicable Environmental Law (“ Hazardous Material ”), on, at or beneath any of the Company Leased Real Property or other properties currently or previously owned or operated by the Company or its Subsidiaries or any surface waters or groundwaters thereon or thereunder which requires any material disclosure, investigation, cleanup, remediation, monitoring, abatement, deed or use restriction by the Company, or which would be expected to give rise to any other material liability or damages to the Company or its Subsidiaries under any Environmental Laws.

          (d) None of the Company or its Subsidiaries has arranged for the disposal of any Hazardous Material, or transported any Hazardous Material, in a manner that has given, or reasonably would be expected to give, rise to any material liability for any damages or costs of remediation.

          (e) The Company has made available to Parent copies of all environmental studies, investigations, reports or assessments concerning the Company, its Subsidiaries, the Company Leased Real Property and any real property currently or previously owned or operated by the Company or its Subsidiaries.

           Section 3.26. No Brokers . No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker’s, finder’s or similar fee or other commission from, the Company or its Subsidiaries in connection with this Agreement or the transactions contemplated hereby, other than Financo, Inc. The Company has heretofore furnished to Parent a complete and correct copy of all agreements between the Company and Financo, Inc. pursuant to which Financo, Inc. would be entitled to any payment relating to the transactions contemplated hereby.

           Section 3.27. State Takeover Statutes; Rights Agreement . The Board of Directors of the Company has taken all action necessary to ensure that any restrictions on business combinations contained in the DGCL, including Section 203 of the DGCL, will not apply to the Merger and the transactions contemplated by this Agreement. No other “fair price”, “moratorium”, “control share acquisition” or other similar anti-takeover statute or regulation or any anti-takeover provision in the Company’s Organizational Documents is, or at the Effective Time will be, applicable to the Company, the Company Common Stock, the Merger or the other transactions contemplated by this Agreement. The Company does not have a poison pill or a shareholders rights agreement in effect.

           Section 3.28. Information Supplied . The information supplied or to be supplied by the Company specifically for inclusion or incorporation in the registration statement on Form S-4 or any amendment or supplement thereto pursuant to which shares of Parent Common Stock issuable in the Merger will be registered with the SEC (the “ Registration Statement ”) shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The information supplied or to be supplied by the Company specifically for inclusion in the proxy statement or any amendment or supplement thereto (the “ Proxy Statement ”) to be included in the Registration Statement and to be sent to the stockholders of Parent in connection with the Parent stockholders meeting to adopt this Agreement and the transactions contemplated hereby (the “ Parent Stockholders Meeting ”) shall not, on the date the Proxy Statement is first mailed to the stockholders of Parent or at the time of the Parent Stockholders Meeting or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

           Section 3.29. Board Approval . The Board of Directors of the Company, at a meeting duly called and held, by unanimous vote (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable and fair to, and in the best interests of, the Company and its stockholders, (ii) approved this Agreement and the transactions contemplated hereby, including the Merger, and (iii) resolved to recommend that the holders of the shares of Company Common Stock approve and adopt this Agreement and the transactions contemplated hereby, including the Merger.

           Section 3.30. Vote Required . The only vote of the holders of any class or series of the Company’s capital stock necessary to approve and adopt this Agreement and the transactions contemplated hereby, including the Merger, is (i) the affirmative vote of the holders of a majority of (x) the outstanding shares of Company Common Stock entitled to vote thereon and (y) the shares of Company Common Stock into which the outstanding shares of Company Preferred Stock are convertible, voting together as a single class (the “ Required Common Vote ”) and (ii) the affirmative vote of the holders of a majority of the outstanding shares of Company Preferred Stock (the “ Required Preferred Vote , and together with the Required Common Vote, the “ Required Company Vote ”). As of the date hereof, D.E. Shaw Composite Side Pocket Series I, L.L.C. is the legal and beneficial owner of (A) 100% of the issued and outstanding shares of the Company Preferred Stock and (B) 77.5% of the issued and outstanding shares of the Company Common Stock, and Michael J. Wagner is the legal and beneficial owner of 5.4% of the issued and outstanding shares of the Company Common Stock.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.

          Parent and Merger Sub hereby jointly and severally represent and warrant to the Company as follows:

           Section 4.1. Corporate Organization . Each of Parent and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate, limited liability company or limited partnership power (as the case may be) to own its properties and assets and to conduct its business as now conducted. Copies of the Parent Organizational Documents and the organizational documents of each Subsidiary of Parent, including Merger Sub, with all amendments thereto to the date hereof, have been made available to the Company or its representatives, and such copies are accurate and complete as of the date hereof. A complete and correct chart showing Parent and all of its direct and indirect Subsidiaries is set forth on Schedule 4.1 . The Board of Directors of Parent consists of seven members.

           Section 4.2. Qualification to Do Business . Each of Parent and its Subsidiaries is duly qualified to do business as a foreign corporation, limited liability company or partnership (as the case may be) and is in good standing in every jurisdiction in which the character of the properties owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a Parent Material Adverse Effect.

           Section 4.3. No Conflict or Violation . The execution, delivery and performance by Parent and Merger Sub of this Agreement do not and will not (i) violate or conflict with any provision of any Parent Organizational Document or any of the organizational documents of the Subsidiaries of Parent, (ii) assuming that Parent makes the filings specified in Section 4.4 and obtains the consents, waivers and approvals specified on Schedule 4.4 (and assuming compliance by the Company with Sections 3.3 and 3.4 hereof), violate any provision of law, or any order, judgment or decree of any Governmental Entity, (iii) except as set forth on Schedule 4.3 , violate or result in a breach of or constitute (with due notice or lapse of time or both) a default under any Parent Contract or result in the creation or imposition of any Lien (other than any Permitted Lien) upon any of the assets, properties or rights of either Parent or any of its Subsidiaries or result in or give to others any rights of cancellation, modification, amendment, acceleration, revocation or suspension of any of the Parent Contracts or obligations thereunder, or Parent Licenses and Permits or (iv) violate or result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, agreement or instrument to which Parent or any of its Subsidiaries is a party or by which it is bound or to which any of its properties or assets is subject, except in each case with respect to clauses (iii) and (iv), for any such violations, breaches or defaults that would not, individually or in the aggregate, have a Parent Material Adverse Effect.

           Section 4.4. Consents and Approvals . No consent, waiver, authorization or approval of any Governmental Entity, and no declaration or notice to or filing or registration with any Governmental Entity, is required in connection with the execution and delivery of this Agreement by Parent or Merger Sub or the performance by Parent or its Subsidiaries of their obligations hereunder or thereunder, except for: (i) the consents, waivers, authorizations or approvals of any Governmental Entity set forth on Schedule 4.4 ; and (ii) such consents, waivers, authorizations, approvals, declarations, notices, filings or registrations, which if not obtained or made would not have a Parent Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.

           Section 4.5. Authorization and Validity of Agreement . Parent and Merger Sub have the requisite corporate power and authority to execute, deliver and perform their respective obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Merger Sub and the performance by Parent and Merger Sub of their obligations hereunder and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub, other than the adoption of this Agreement by the stockholders of Parent and Merger Sub, and no other corporate proceedings on the part of Parent and Merger Sub are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming due execution and delivery by the Company, constitutes a legal, valid and binding obligation of Parent and Merger Sub, enforceable against them in accordance with its terms, subject to (i) the effect of bankruptcy, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors’ rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing.

           Section 4.6. Capitalization and Related Matters .

          (a) As of the date hereof, the authorized capital stock of Parent consists of 50,000,000 shares of Parent Common Stock and 10,000,000 shares of Parent Preferred Stock. As of the date hereof:

               (i) 5,646,470 shares of Parent Common Stock are issued and outstanding and no             shares of Parent Preferred Stock are issued and outstanding;

               (ii) 132,000 shares of Parent Common Stock are reserved for issuance and issuable upon or otherwise deliverable under the Parent’s 2005 Stock Incentive Plan (the “ Parent Stock Plan ”) or otherwise in connection with the exercise of outstanding options to purchase Parent Common Stock (“ Parent Options ”). Schedule 4.6(a)(ii) sets forth the names of all holders, the number of             shares of Parent Common Stock covered thereof, the vesting schedule and the exercise prices for the Parent Options and the outstanding shares of restricted Parent Common Stock; and

               (iii) 334,669 shares of Parent Common Stock are reserved for issuance and issuable upon exercise of warrants to purchase Parent Common Stock (“ Parent Warrants ”). Schedule 4.6(a)(iii) sets forth the names of all holders of Parent Warrants, the number of shares of Parent Common Stock purchasable thereunder and the exercise price(s) therefor.

          (b) The outstanding shares of Parent Common Stock (i) have been duly authorized and validly issued and are fully paid and nonassessable and (ii) were issued in compliance with all applicable federal and state securities laws. All grants of Parent Options were validly issued and properly approved by Parent’s Board of Directors in accordance with all applicable law and no such grants involved any “backdating” or similar practices with respect to the effective date of grant. Except as set forth above in Section 4.6(a) or Schedule 4.6(b) , no

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shares of capital stock of Parent are outstanding and Parent does not have outstanding any securities convertible into or exchangeable or exercisable for any shares of capital stock, including Parent Options, any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or known claims of any other character relating to the issuance of, any capital stock, or any stock or securities convertible into or exchangeable or exercisable for any capital stock; and Parent is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire, or to register under the Securities Act, any shares of capital stock. Except as set forth above in Section 4.6(a), Parent does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of Parent on any matter.

          (c) All of the outstanding shares of capital stock of, or membership interests or other ownership interests in, each Subsidiary of Parent (including Merger Sub), as applicable, are validly issued, fully paid and nonassessable and are owned of record and beneficially by Parent, directly or indirectly. Parent has, as of the date hereof and shall have on the Closing Date, valid and marketable title to all of the shares of capital stock of, or membership interests or other ownership interests in, each Subsidiary of Parent, free and clear of any Liens other than Permitted Liens. Such outstanding shares of capital stock of, or membership interests or other ownership interests in, the Subsidiaries of Parent, as applicable, are the sole outstanding securities of such Subsidiaries; the Subsidiaries of Parent do not have outstanding any securities convertible into or exchangeable or exercisable for any capital stock of, or membership interests or other ownership interests in, such Subsidiaries, any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any other character relating to the issuance of, any capital stock of, or membership interests or other ownership interests in, such Subsidiaries, or any stock or securities convertible into or exchangeable or exercisable for any capital stock of, or membership interests or other ownership interests in, such Subsidiaries; and neither Parent nor any of its Subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire, or to register under the Securities Act, any capital stock of, or membership interests or other ownership interests in, any Subsidiary of Parent.

          (d) As of the Closing, the shares of Parent Common Stock issuable in connection with the Merger pursuant to this Agreement shall be duly authorized and, upon issuance, sale and delivery as contemplated by this Agreement, such shares of Parent Common Stock will be validly issued, fully paid and non-assessable securities of Parent.

           Section 4.7. Subsidiaries and Equity Investments . Except as set forth on Schedule 4.7 , Parent and its Subsidiaries do not directly or indirectly own, or hold any rights to acquire, any capital stock or any other securities, interests or investments in any other Person other than investments that constitute cash or cash equivalents.

           Section 4.8. Parent SEC Reports .

          (a) Parent and its Subsidiaries have filed each report and definitive proxy statement (together with all amendments thereof and supplements thereto) required to be filed by

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Parent or any of its Subsidiaries pursuant to the Exchange Act with the SEC since January 1, 2005 (as such documents have since the time of their filing been amended or supplemented, the “ Parent SEC Reports ”). Each of the Parent SEC Reports filed on or prior to the date hereof, at the time of its filing (except as and to the extent such Parent SEC Report has been modified or superseded in any subsequent Parent SEC Report filed and publicly available prior to the date hereof), and each of the Parent SEC Reports filed after the date hereof, (i) complied or will comply as to form in all material respects with the requirements of the Exchange Act and (ii) did not and will not 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 therein, in light of the circumstances under which they were made, not misleading. The Parent SEC Reports filed on or prior to the date hereof included, and if filed after the date hereof, will include, all certificates required to be included therein pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated under such act or the Exchange Act (the “ Sarbanes-Oxley Act ”), and the internal control report and attestation of Parent’s outside auditors required by Section 404 of the Sarbanes-Oxley Act.

          (b) The audited consolidated financial statements and unaudited interim consolidated financial statements (including, in each case, the notes and schedules, if any, thereto) included in the Parent SEC Reports complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto and except with respect to unaudited statements as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited interim financial statements included therein, to normal year-end adjustments and the absence of complete footnotes) in all material respects the consolidated financial position of Parent and its consolidated Subsidiaries as of the respective dates thereof and the consolidated results of their operations and cash flows for the respective periods then ended.

          (c) As of March 12, 2007, Parent and its Subsidiaries had cash and cash equivalents of $1,668,343, and indebtedness for borrowed money (including accrued interest thereon) outstanding of $7,023,202.

           Section 4.9. Absence of Certain Changes or Events .

          (a) Except as set forth on Schedule 4.9(a) , since the date of the Parent Interim Balance Sheet, there has not been:

               (i) any Parent Material Adverse Effect;

               (ii) any material loss, damage, destruction or other casualty to the assets or properties of either Parent or any of its Subsidiaries (other than any for which insurance awards have been received or guaranteed);

               (iii) any change in any method of accounting or accounting practice of either Parent or any of its Subsidiaries except for any such change required by reason of a concurrent change in GAAP; or

               (iv) any loss of the employment, services or benefits of the chief executive officer of Parent and members of Parent’s senior management who report directly to such chief executive officer.

           (b) Since the date of the Parent Interim Balance Sheet, each of Parent and each of its Subsidiaries has operated in the ordinary course of its business and consistent with past practice and, except as set forth on Schedule 4.9(b) , has not:

               (i) incurred any material obligation or liability (whether absolute, accrued, contingent or otherwise) except in the ordinary course of business and consistent with past practice;

               (ii) failed to discharge or satisfy any material Lien or pay or satisfy any material obligation or liability (whether absolute, accrued, contingent or otherwise), other than Permitted Liens and liabilities being contested in good faith and for which adequate reserves have been provided;

               (iii) mortgaged, pledged or subjected to any Lien (other than Permitted Liens) any of its assets, properties or rights;

               (iv) sold or transferred any of its material assets or cancelled any material debts or claims or waived any material rights;

               (v) disposed of any material patents, trademarks or copyrights or any material patent, trademark or copyright applications or registrations;

               (vi) disclosed any of its material trade secrets, except pursuant to written confidentiality obligations;

               (vii) defaulted on any material obligation;

               (viii) entered into any transaction material to its business, except in the ordinary course of business and consistent with past practice;

               (ix) granted any material increase in the compensation or benefits of its key employees other than increases in accordance with past practice not exceeding 8% of the key employee’s annual base compensation then in effect, or entered into any employment, change of control, retention or severance agreement or arrangement with any of them;

               (x) contractually committed to make any capital expenditure for any periods after the date hereof or additions to property, plant and equipment used in its operations other than ordinary repairs and maintenance in excess of $100,000 in the aggregate;

               (xi) laid off any significant number of its employees;

               (xii) discontinued the offering of any material services or product;

               (xiii) incurred any material obligation or liability for the payment of severance benefits;

               (xiv) declared, paid, or set aside for payment any dividend or other distribution in respect of shares of its capital stock, membership interests or other securities, or redeemed, purchased or otherwise acquired, directly or indirectly, any shares of its capital stock, membership interests or other securities, or agreed to do so; or

               (xv) entered into any agreement or made any commitment to do any of the foregoing.

           Section 4.10. Tax Matters . Except as set forth on Schedule 4.10 :

          (a) (i) Parent and each of its Subsidiaries have filed when due all income Tax Returns and other material Tax Returns required by applicable law to be filed with respect to Parent and each of its Subsidiaries; (ii) all income Taxes and other material Taxes owed by Parent and each of its Subsidiaries, if required to have been paid, have been paid (except for Taxes which are being contested in good faith); and (iii) any liability of Parent or any of its Subsidiaries for Taxes not yet due and payable, or which are being contested in good faith, has been provided for on the financial statements of Parent in accordance with GAAP;

          (b) there is no action, suit, proceeding, investigation, audit or claim now pending with respect to Parent or any of its Subsidiaries in respect of any income Tax or other material Tax, nor has any claim for additional Tax been asserted in writing by any taxing authority;

          (c) since January 1, 2000, no claim has been made in writing by any taxing authority in a jurisdiction where Parent or any of its Subsidiaries has not filed a Tax Return that it is or may be subject to Tax by such jurisdiction;

          (d) (i) there is no outstanding request for any extension of time for Parent or any of its Subsidiaries to pay any Taxes or file any Tax Returns; (ii) there has been no waiver or extension of any applicable statute of limitations for the assessment or collection of any Taxes of Parent or any of its Subsidiaries that is currently in force; (iii) the federal statute of limitations for tax years of Parent and its Subsidiaries has closed for all years ending prior to January 1, 2002; and (iv) neither Parent nor any of its Subsidiaries is a party to or bound by any agreement, whether written or unwritten, providing for the payment of Taxes, payment for Tax losses, entitlements to refunds or similar Tax matters;

          (e) Parent and each of its Subsidiaries have withheld and paid all Taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other third party;

          (f) Parent has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;

          (g) neither Parent nor any of its Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code;

          (h) there is no Lien, other than a Permitted Lien, affecting any of the assets, properties or rights of Parent and its Subsidiaries that arose in connection with any failure or alleged failure to pay any Tax;

          (i) neither Parent nor any of its Subsidiaries (i) has been a member of an affiliated group (within the meaning of Code § 1504(a)) filing a consolidated federal income Tax Return (other than a group the common parent of which is Parent) or (ii) has any liability for the Taxes of any Person (other than Parent and its Subsidiaries) under Treasury Regulations § 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise;

          (j) Parent and its Subsidiaries have neither (i) made, changed or revoked, or permitted to be made, changed or revoked, any election or method of accounting with respect to Taxes affecting or relating to Parent and its Subsidiaries, nor (ii) entered into, or permitted to be entered into, any closing or other agreement or settlement with respect to Taxes affecting or relating to Parent and its Subsidiaries;

          (k) neither Parent nor any of its Subsidiaries has taken or agreed to take any action, or is aware of any fact or circumstance, that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; and

          (l) neither Parent nor any of its Subsidiaries have a permanent establishment in a foreign jurisdiction.

           Section 4.11. Absence of Undisclosed Liabilities . Except as set forth on Schedule 4.11(a) , there are no material liabilities or obligations of Parent or any Subsidiary thereof of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that could be reasonably expected to result in such a liability or obligation, other than (A) liabilities or obligations disclosed and provided for in the consolidated balance sheet of Parent as of September 30, 2006 included in the Parent SEC Reports (the “ Parent Interim Balance Sheet ”) or (B) liabilities or obligations incurred in the ordinary course of business consistent with past practice since the date of the Parent Interim Balance Sheet. Except as shown on Schedule 4.11(b) , neither Parent nor any of its Subsidiaries is directly or indirectly liable upon or with respect to (by discount, repurchase agreements or otherwise), or obliged in any other way to provide funds in respect of, or to guarantee or assume, any material debt, obligation or dividend of any Person, except e