AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION VERSION

AGREEMENT AND PLAN OF MERGER

Dated as of October 14, 2007

by and among

DANAHER CORPORATION,

RAVEN ACQUISITION CORP.

and

TEKTRONIX, INC.

TABLE OF CONTENTS

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Index of Defined Terms

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of October 14, 2007, by and among Danaher Corporation, a Delaware corporation (“ Parent ”), Raven Acquisition Corp., an Oregon corporation and an indirect wholly owned subsidiary of Parent (the “ Purchaser ”), and Tektronix, Inc. an Oregon corporation (the “ Company ”).

WHEREAS, the respective Boards of Directors of Parent (the “ Parent Board ”), the Purchaser (the “ Purchaser Board ”) and the Company (the “ Company Board ”) have unanimously approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, pursuant to this Agreement the Purchaser has agreed to commence a tender offer (the “ Offer ”) to purchase all of the Company’s common stock, without par value, including the associated preferred stock purchase rights (the “ Rights ”) issued pursuant to the Rights Agreement, dated as of June 21, 2000, between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the “ Rights Agreement ”) (which shares of the Company’s common stock together with the Rights are hereinafter referred to as the “ Common Shares ”), at a price per Common Share of $38.00 net to the seller in cash (such amount or any greater amount per Common Share paid pursuant to the Offer being hereinafter referred to as the “ Offer Price ”);

WHEREAS, the Company Board has, on the terms and subject to the conditions set forth herein, unanimously (i) approved the Offer and the merger of the Purchaser with and into the Company with the Company as the surviving corporation as contemplated by this Agreement (the “ Merger ”) and adopted this Agreement in accordance with the Oregon Business Corporation Act, as amended (the “ OBCA ”); (ii) determined that each of the transactions contemplated hereby, including each of the Offer and the Merger, is fair to and in the best interests of the Company and its shareholders; (iii) is recommending that the Company’s shareholders accept the Offer, tender their Common Shares to the Purchaser, approve the Merger and approve and adopt this Agreement; (iv) taken all action necessary to render Sections 60.801 through 60.816 and 60.825 through 60.845 of the OBCA and the Rights inapplicable to the Offer and the Merger; and (v) elected that the Offer and the Merger, to the extent of the Company Board’s power and authority and to the extent permitted by Law, not be subject to any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws and regulations (collectively, “ Takeover Laws ”) of any jurisdiction that may purport to be applicable to the Offer, the Merger, this Agreement or the transactions contemplated hereby;

WHEREAS, the Purchaser Board and the Parent Board have approved the Offer and the Merger and adopted this Agreement, in accordance with the OBCA, and upon the terms and subject to the conditions set forth in this Agreement, whereby each of the issued and outstanding Common Shares not owned directly or indirectly by Parent, the Purchaser or the Company will be converted into the right to receive the Offer Price in cash; and

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WHEREAS, Parent, the Purchaser and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, Parent, the Purchaser and the Company agree as follows:

ARTICLE ONE

THE OFFER

SECTION 1.1 The Offer .

(a) Provided that this Agreement shall not have been terminated in accordance with Article Eight hereof as promptly as reasonably practicable, and in any event within seven (7) Business Days, following execution of this Agreement, Parent (i) shall cause the Purchaser to commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder, the “ Exchange Act ”)) an offer to purchase all of the outstanding Common Shares at the Offer Price; (ii) shall, upon commencement of the Offer but after affording the Company a reasonable opportunity to review and comment thereon, file a Tender Offer Statement on Schedule TO and all other necessary documents with the Securities and Exchange Commission (the “ SEC ”) and make all deliveries, mailings and telephonic notices required by Rule 14d-3 under the Exchange Act, in each case in connection with the Offer (the “ Offer Documents ”); and (iii) shall use its reasonable best efforts to consummate the Offer, subject to the terms and conditions thereof. The obligation of the Purchaser to accept for payment or pay for any Common Shares validly tendered and not validly withdrawn pursuant to the Offer will be subject only to the satisfaction or waiver of the conditions set forth in Annex I hereto.

(b) Parent on behalf of the Purchaser expressly reserves the right from time to time subject to Section 1.1(c), to waive any of the Tender Offer Conditions (other than the Minimum Condition (as defined in Annex I hereto)) or to increase the Offer Price or to make any other changes in the terms and conditions of the Offer; provided that , without the prior written consent of the Company, the Purchaser shall not decrease the Offer Price, change the form of consideration payable in the Offer, decrease the number of Common Shares sought to be purchased in the Offer, impose additional conditions to the Offer or amend any other term of the Offer in any manner adverse to the holders of Common Shares. The Offer shall remain open until the date that is twenty (20) Business Days (as such term is defined in Rule 14d-1(g)(3) under the Exchange Act) after (and including the day of) the commencement of the Offer (the “ Expiration Date ”), unless the Purchaser shall have extended the period of time for which the Offer is open pursuant to, and in accordance with, the terms of the succeeding two sentences or as may be required by applicable Law, in which event the term “Expiration Date” shall mean the latest time and date as the Offer, as so extended, may expire; provided , however , that the Purchaser may provide a subsequent offering period after the Expiration Date, in accordance with Rule 14d-11 under the Exchange Act. If at any Expiration Date, any of the conditions set

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forth in Annex I hereto (the “ Tender Offer Conditions ”) is not satisfied or waived by the Purchaser, (i) the Purchaser shall extend the Offer from time to time for periods of not more than five (5) Business Days each until the date that is twenty (20) Business Days after the initial Expiration Date (for the avoidance of doubt, the initial Expiration Date is the twentieth Business Day after the commencement of the Offer) (as long as the Company Board continues to recommend the Offer), and (ii) the Purchaser may extend the Offer from time to time for periods of not more than ten (10) Business Days each until the earlier of (x) the date on which all of the Tender Offer Conditions are satisfied or waived or (y) the date on which this Agreement is terminated in accordance with Article Eight hereof; provided , however , that, on the Expiration Date, if the waiting period under the HSR Act or under any material applicable foreign statutes or regulations applicable to the Merger shall have not expired or been terminated, the Purchaser shall extend the Offer from time to time until such expiration or termination under the HSR Act or such other material applicable foreign statutes or regulations. Notwithstanding the foregoing, the Purchaser and Parent may, without receiving the consent of the Company, extend the Expiration Date for any period required by the applicable rules and regulations of the SEC, New York Stock Exchange (“ NYSE ”) or any other stock exchange or automated quotation system applicable to the Offer. Subject to the terms of the Offer and this Agreement and the satisfaction of all the Tender Offer Conditions as of the Expiration Date, the Purchaser will accept for payment and pay for all Common Shares validly tendered and not validly withdrawn pursuant to the Offer promptly after the Expiration Date. Without the prior written consent of the Company, the Purchaser shall not accept for payment or pay for any Common Shares in the Offer if, as a result, the Purchaser would acquire less than the number of Common Shares necessary to satisfy the Minimum Condition.

(c) Parent and the Purchaser represent that the Offer Documents will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company’s shareholders, shall not 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 made therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or the Purchaser with respect to information supplied by the Company or the dealer-manager in writing for inclusion in the Offer Documents. The Company represents that the information supplied by the Company in writing for inclusion in the Offer Documents will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company’s shareholders, shall not 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 made therein, in light of the circumstances under which they were made, not misleading. Each of Parent and the Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect, and the Purchaser further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to shareholders of the Company, in each case, as and to the extent required by applicable federal securities laws.

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SECTION 1.2 Company Actions .

(a) The Company shall, after affording Parent a reasonable opportunity to review and comment thereon, file with the SEC and mail to the holders of Common Shares, as promptly as practicable on the date of the filing by Parent and the Purchaser of the Offer Documents, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the “ Schedule 14D-9 ”) reflecting the unanimous recommendation of the Company Board that holders of Common Shares tender their Common Shares pursuant to the Offer (the “ Company Recommendation ”) and shall disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby represents, that the Company Board, at a meeting duly called and held at which a quorum was present throughout, has unanimously (i) approved the Offer and the Merger and adopted this Agreement in accordance with the OBCA, (ii) determined that each of the transactions contemplated hereby, including each of the Offer and the Merger, is fair to and in the best interests of the Company and its shareholders, (iii) recommended that the Company’s shareholders accept the Offer tender their Common Shares to the Purchaser and approve the Merger and this Agreement, (iv) taken all action necessary to render Sections 60.801 through 60.816 and 60.825 through 60.845 of the OBCA and the Rights inapplicable to the Offer and the Merger and (v) elected that the Offer and the Merger, to the extent of the Company Board’s power and authority and to the extent permitted by Law, not be subject to any Takeover Laws of any jurisdiction that may purport to be applicable to the Offer, the Merger, this Agreement or the transactions contemplated hereby; provided , however , that the Company Recommendation may be withdrawn, modified or amended only prior to the acceptance for payment of Common Shares pursuant to the Offer, and only to the extent permitted by Section 6.2. The Company Board has received the opinion of Goldman, Sachs & Co., the Company’s financial advisor, to the effect that, as of October 13, 2007, the consideration to be received by the holders of Common Shares (other than Parent and its Affiliates) pursuant to the Offer and the Merger is fair to such holders from a financial point of view. The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Company Board described in this Section 1.2(a).

(b) The Company represents that the Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company’s shareholders, shall not 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 made therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Parent or the Purchaser in writing for inclusion in the Schedule 14D-9. Parent and the Purchaser represent that the information supplied by them in writing for inclusion in the Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company’s shareholders, shall not 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 made therein, in light of the circumstances under which they were made, not misleading. Each of the Company, on the one hand, and Parent and the Purchaser, on the other hand, agree promptly to correct any information provided by either of them for use in the Schedule 14D-9 if and to the extent that it shall have

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become false or misleading, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the holders of Common Shares, in each case, as and to the extent required by applicable federal securities Law.

(c) In connection with the Offer, the Company will promptly furnish the Purchaser with mailing labels, security position listings, non-objecting beneficial owner lists and any available listing or computer list containing the names and addresses of the record holders of the Common Shares as of the most recent practicable date and shall furnish the Purchaser with such additional available information (including, but not limited to, updated lists of holders of Common Shares and their addresses, mailing labels and lists of security positions and non-objecting beneficial owner lists) and such other assistance as the Purchaser or its agents may reasonably request in communicating the Offer to the Company’s record and beneficial shareholders. Subject to the requirements of applicable Law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent, the Purchaser and their Affiliates, associates, agents and advisors, shall keep such information confidential and use the information contained in any such labels, listings and files only in connection with the Offer and the Merger and, should the Offer terminate or if this Agreement shall be terminated, will deliver to the Company all copies of such information then in their possession.

SECTION 1.3 Directors .

(a) Subject to compliance with applicable Law, effective upon the payment by the Purchaser for Common Shares pursuant to the Offer representing at least such number of Common Shares as shall satisfy the Minimum Condition, and from time to time thereafter, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board as is equal to the product of the total number of directors on the Company Board (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Common Shares beneficially owned by Parent or its Affiliates bears to the total number of Common Shares then outstanding, and the Company shall, upon request of Parent, promptly take all actions necessary to cause Parent’s designees to be so elected, including, if necessary, by obtaining the resignations of one or more existing directors; provided , however , that Parent shall be entitled to designate at least a majority of the directors on the Company Board (as long as Parent and its Affiliates beneficially own a majority of the Common Shares of the Company); provided further , that prior to the Effective Time, the Company Board shall always have at least two members who were members of the Company Board as of immediately prior to payment by the Purchaser for Common Shares pursuant to the Offer (each such member a “ Company Director ” and, collectively, “ Company Directors ”). If the number of directors who are Company Directors is reduced below two prior to the Effective Time, the remaining director who is a Company Director shall be entitled to designate a Person to the Company Board who is not an officer, director, employee or designee of the Purchaser or any of its Affiliates and who shall be considered a Company Director for purposes of this Agreement. At each such time Parent is entitled to designate directors on the Company Board, the Company will, subject to any limitations imposed by applicable Law, also cause (i) each committee of the Company Board, (ii) the board of directors of each of the Subsidiaries and (iii) each committee of such board of directors of each of the Subsidiaries to include persons designated by Parent constituting at least the same percentage of each such committee or board as Parent’s designees constitute on the Company Board.

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(b) The Company’s obligations to cause the election or appointment of Parent’s designees to the Company Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take all actions required pursuant to such Section and Rule in order to fulfill its obligations under this Section 1.3 and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as is required under such Section and Rule in order to fulfill its obligations under this Section 1.3. Parent will supply to the Company any information with respect to itself and its officers, directors and Affiliates required by such Section and Rule.

(c) Following the election or appointment of Parent’s designees pursuant to this Section 1.3 and prior to the Effective Time, any amendment or termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or the Purchaser or waiver of any of the Company’s rights hereunder, will require the concurrence of a majority of the directors of the Company then in office who are Company Directors (or in the case where there are two or fewer directors who are Company Directors, the concurrence of one director who is a Company Director) if such amendment, termination, extension or waiver would be reasonably likely to have an adverse effect on the minority shareholders of the Company.

SECTION 1.4 Top-Up Option .

(a) The Company hereby grants to the Purchaser an irrevocable option (the “ Top-Up Option ”) to purchase, at a price per share equal to the Offer Price, a number of Common Shares (the “ Top-Up Option Shares ”) that, when added to the number of Common Shares owned by Parent or the Purchaser or any direct or indirect wholly owned Subsidiary of Parent or the Purchaser at the time of exercise of the Top-Up Option, constitutes one Common Share more than 90% of the number of Common Shares that will be outstanding immediately after the issuance of the Top-Up Option Shares. The Top-Up Option may be exercised by the Purchaser, in whole, at any time on or after the date on which the Purchaser accepts for payment and pays for all Common Shares validly tendered and not validly withdrawn pursuant to the Offer (the “ Acceptance Date ”) and on or prior to the fifth Business Day after the later of the Acceptance Date and the expiration of any subsequent offering period under Rule 14d-11 under the Exchange Act; provided , however , that the obligation of the Company to deliver Top-Up Option Shares upon the exercise of the Top-Up Option is subject to the conditions that (i) the number of Top-Up Option Shares to be issued by the Company shall in no event exceed 19.90% of the number of outstanding Common Shares or the voting power of the Company, in each case, as of immediately prior to the issuance of the Top-Up Option Shares, (ii) no provision of any applicable Law and no judgment, injunction, order or decree shall prohibit the exercise of the Top-Up Option or the delivery of the Top-Up Option Shares in respect of such exercise, (iii) the issuance of Top-Up Option Shares pursuant to the Top-Up Option would not require approval of the Company’s shareholders under applicable Law or regulation (including the NYSE rules and regulations), (iv) upon exercise of the Top-Up Option, the number of Common Shares owned by Parent or the Purchaser or any direct or indirect wholly owned Subsidiary of Parent or the Purchaser constitutes one Share more than 90% of the number of Common Shares that will be

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outstanding immediately after the issuance of the Top-Up Option Shares and (v) the Purchaser has accepted for payment and paid for all Common Shares validly tendered in the Offer and not validly withdrawn. The parties shall cooperate to ensure that the issuance of the Top-Up Option Shares is accomplished consistent with all applicable legal requirements of all Governmental Entities, including compliance with an applicable exemption from registration of the Top-Up Option Shares under the Securities Act.

(b) Upon the exercise of the Top-Up Option in accordance with Section 1.4(a), the Purchaser shall so notify the Company and shall set forth in such notice (i) the total number of Common Shares that are expected to be owned by Parent, the Purchaser or any direct or indirect wholly owned Subsidiary of Parent or the Purchaser immediately preceding the purchase of the Top-Up Option Shares and (ii) a place and time for the closing of the purchase of the Top-Up Option Shares. The Company shall, as soon as practicable following receipt of such notice, notify Parent and the Purchaser of the number of Common Shares then outstanding and the number of Top-Up Option Shares. At the closing of the purchase of the Top-Up Option Shares, the Purchaser shall pay the Company the aggregate price required to be paid for the Top-Up Option Shares, and the Company shall cause to be issued to the Purchaser a certificate representing the Top-Up Option Shares. The aggregate purchase price payable for the Top-Up Shares may be paid by the Purchaser by executing and delivering to the Company a full recourse promissory note having a principal amount equal to the balance of the aggregate purchase price for the Top-Up Shares. Any such promissory note shall bear interest at the rate of interest per annum equal to the rate of interest publicly announced by Citibank, in the City of New York from time to time during such period, as such bank’s Prime Lending Rate, shall mature on the first anniversary of the date of execution and delivery of such promissory note and may be prepaid without premium or penalty. In the event that this Agreement is terminated after the Top-Up Option is exercised and prior to the Effective Time, all amounts then owing pursuant to the promissory note (including all interest) shall thereupon become immediately due and payable.

ARTICLE TWO

THE MERGER

SECTION 2.1 The Merger . Upon the terms and subject to the satisfaction or waiver of the conditions hereof, and in accordance with the applicable provisions of this Agreement and the OBCA, at the Effective Time the Purchaser shall be merged with and into the Company. Following the Merger, the separate corporate existence of the Purchaser shall cease and the Company shall continue as the surviving corporation (the “ Surviving Corporation ”) and shall continue its corporate existence under the laws of the State of Oregon as an indirect wholly owned Subsidiary of Parent. The closing of the Merger (the “ Closing ”) shall take place at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019 at 10:00 a.m., local time, on a date which shall be the second Business Day after the satisfaction or waiver (to the extent permitted by applicable Law) of the conditions set forth in Article VII, or at such other place, date and time as the Company and Parent may agree in writing.

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SECTION 2.2 Effective Time . Subject to the provisions of this Agreement, at the Closing, the Company will cause articles of merger (the “ Articles of Merger ”) to be executed and filed with the Secretary of State of the State of Oregon in accordance with the OBCA. The Merger will become effective at such time as the Articles of Merger have been duly filed with the Secretary of State of the State of Oregon or at such later date or time as may be agreed by the Company and the Purchaser in writing and specified in the Articles of Merger in accordance with the OBCA (the effective time of the Merger being hereinafter referred to as the “ Effective Time ”).

SECTION 2.3 Effects of the Merger . At and after the Effective Time, the Merger shall have the effects set forth in this Agreement and the OBCA. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and the Purchaser shall become the debts, liabilities and duties of the Surviving Corporation.

SECTION 2.4 Articles of Incorporation and Bylaws of the Surviving Corporation .

(a) The Articles of Incorporation of the Purchaser, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended, subject to the provisions of Section 6.6, in accordance with the provisions thereof and hereof and applicable Law.

(b) The Bylaws of the Purchaser, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until amended, subject to the provisions of Section 6.6, in accordance with the provisions thereof and applicable Law.

SECTION 2.5 Directors . Subject to applicable Law, the directors of the Purchaser immediately prior to the Effective Time shall be the directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

SECTION 2.6 Officers . The individuals specified by Parent prior to the Effective Time shall, subject to applicable Law, be the initial officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

SECTION 2.7 Conversion of Common Shares . At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each Common Share issued and outstanding immediately prior to the Effective Time (other than (a) any Common Shares held by Parent or the Purchaser, which Common Shares, by virtue of the Merger and without any action on the part of the holder thereof, shall be cancelled and retired and shall cease to exist with no payment being made with respect thereto, (b) any Dissenting Shares and (c) any Common Shares held by any wholly owned Subsidiary of Parent (other than the Purchaser), the Purchaser or the Company, which Common Shares shall remain outstanding except that the number of such Common Shares shall be appropriately adjusted in the Merger), shall be

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cancelled and retired and shall be converted into the right to receive the Offer Price in cash (the “ Merger Price ”), payable to the holder thereof, without interest thereon, upon surrender of the certificate formerly representing such Common Share.

SECTION 2.8 Conversion of Purchaser Common Stock . At the Effective Time, each share of common stock of the Purchaser issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become one validly issued, fully paid and non-assessable share of common stock, without par value, of the Surviving Corporation.

SECTION 2.9 Company Stock Options; Company RSUs; Company Restricted Shares; ESPP .

(a) At the Effective Time, each Cashout Company Stock Option (as defined below) shall be converted into the right to receive, as soon as practicable following the Effective Time, an amount in cash (less any applicable withholding taxes) equal to the product of (i) the excess, if any, of (x) the Merger Price over (y) the exercise price per Common Share subject to such Cashout Company Stock Option (the excess of (x) over (y) for any Company Stock Option (as defined below) (including the Cashout Company Stock Options), the applicable “ Spread ”), multiplied by (ii) the number of Common Shares for which such Cashout Company Stock Option shall not theretofore have been exercised. “ Cashout Company Stock Option ” means each outstanding Company stock option (each, a “ Company Stock Option ”) to purchase Common Shares granted under the 1998 Stock Company Stock Option Plan, the INET Technologies, Inc. 1998 Stock Option / Stock Issuance Plan (the “ Inet Stock Plan ”), the 2001 Stock Company Stock Option Plan, the 2002 Stock Incentive Plan, the 2005 Stock Incentive Plan or the 1989 Stock Incentive Plan (each a “ Company Stock Plan ” and collectively the “ Company Stock Plans ”) (1) that is vested and exercisable at the Effective Time (including any Company Stock Option that vests by its terms upon a change in control occurring as a result of the consummation of this Agreement), (2) that would, to the extent not vested at the Effective Time, pursuant to its terms and without any action on the part of the Company vest and become exercisable on or prior to January 31, 2008 or (3) that is scheduled to vest after January 31, 2008 pursuant to its terms and without any action on the part of the Company (each a “ Longer Term Company Stock Option ”); provided , however , that where an individual holds Longer Term Company Stock Options which have an aggregate Spread in excess of $50,000, only Longer Term Company Stock Options with an aggregate Spread of $50,000 (rounded up to the nearest whole share) will be treated as Cashout Company Stock Options, such that those Longer Term Company Stock Options with the shortest remaining vesting period (or such portion of such Longer Term Company Stock Options with the shortest remaining vesting period as will have an aggregate spread of $50,000, rounded up to the nearest whole share) shall be treated as Cashout Company Stock Options and the remaining Longer Term Company Stock Options shall be treated in accordance with Section 2.9(b) (any Cashout Company Stock Options under this clause (3), “ Additional Cashout Options ”).

(b) Each Company Stock Option that is not a Cashout Company Stock Option that is outstanding as of the Effective Time (each such Company Stock Option, a “ Rollover Company Stock Option ”) shall, at the Effective Time, cease to represent a right to acquire Common Shares and shall be converted automatically into a Company stock option to acquire shares of common stock of Parent (“ Parent Common Stock ”) as provided below, and Parent shall

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assume each Rollover Company Stock Option subject to the terms of the Company Stock Plans and the agreements evidencing the grants thereunder; provided that , from and after the Effective Time, (i) the number of shares of Parent Common Stock issuable upon the exercise of each outstanding Rollover Company Stock Option shall be equal to the product of (x) the number of Common Shares that were issuable upon exercise of such Rollover Company Stock Option immediately prior to the Effective Time and (y) the Exchange Ratio (as defined in Section 2.9(f)), rounded down to the nearest whole share of Parent Common Stock, and (ii) the exercise price per share of Parent Common Stock under each Rollover Company Stock Option shall be obtained by dividing (A) the exercise price per Common Share of each Rollover Company Stock Option immediately prior to the Effective Time by (B) the Exchange Ratio, rounded up to the nearest cent. Notwithstanding the foregoing or anything to the contrary in any Company Stock Plan or in any award agreement governing any Rollover Company Stock Option or otherwise (except as may otherwise be agreed to by and between the Parent or, after the Effective Time, the Company, on the one hand, and the holder of the Rollover Company Stock Option, on the other hand), (1) subject to the holder’s continued employment with Parent or a subsidiary thereof through the applicable vesting date, each Rollover Company Stock Option shall vest and become exercisable as to one-fifth (1/5) of the shares of Parent Common Stock subject to such Rollover Company Stock Option on each of the first five (5) anniversaries of the Effective Time and (2) no holder of a Rollover Company Stock Option shall be entitled to (and no such Rollover Company Stock Option shall become subject to) any additional or accelerated vesting with respect to such Rollover Company Stock Option upon a termination of employment of the holder thereof for any reason or no reason. For the avoidance of doubt, the term of each Rollover Company Stock Option shall be the same as the term of such Rollover Company Stock Option as of immediately prior to the Effective Time.

(c) At the Effective Time, each Cashout Company Restricted Share Award (as defined below) shall be converted into the right to receive, as soon as practicable following the Effective Time, an amount in cash (less any applicable withholding taxes) equal to the product of (i) the Merger Price and (ii) the number of Common Shares underlying such Cashout Company Restricted Share Award. “ Cashout Company Restricted Share Award ” means collectively, (1) each outstanding restricted stock unit and share right denominated in Common Shares under the Company Stock Plans that is outstanding as of the Effective Time (each, a “ Company RSU ”) and (2) each outstanding restricted Common Share under the Company Stock Plans that is outstanding at the Effective Time (each, a “ Company Restricted Share ”) (w) that is vested at the Effective Time (including any Company Restricted Share Award that vests by its terms upon a change in control occurring as a result of the consummation of this Agreement), (x) that would, to the extent not vested at the Effective Time, pursuant to its terms and without any action on the part of the Company vest on or prior to January 31, 2008, (y) that was granted under the INET Stock Plan prior to the date hereof or (z) that is scheduled to vest after January 31, 2008 pursuant to its terms and without any action on the part of the Company (each a “ Longer Term Restricted Share Award ”); provided , however , that where an individual holds Longer Term Restricted Share Awards which have an aggregate pre-tax value (determined by multiplying the Merger Price by each Longer Term Restricted Share Award) in excess of the positive difference, if any, between (1) $25,000 and (2) the aggregate pre-tax Spread of any Additional Cashout Options, the Longer Term Restricted Share Awards representing such positive difference, if any, shall be treated as Cashout Company Restricted Share Awards and the remaining Longer Term Restricted Share Awards shall be treated in accordance with Section 2.9(d) or Section 2.9(e), as applicable.

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(d) Each Company RSU that is not a Cashout Company Restricted Share Award (each such Company RSU, a “ Rollover Company RSU ”) shall cease to represent an award with respect to Common Shares, and shall be converted automatically into a restricted stock unit award with respect to shares of Parent Common Stock as provided below, and Parent shall assume all obligations with respect to the Rollover Company RSU, subject to the terms of the Company Stock Plans and any agreements evidencing grants thereunder; provided that , at the Effective Time, each Rollover Company RSU shall be converted into the right to receive a number of shares of Parent Common Stock equal to the product of (x) 1.2 multiplied by (y) the number of Common Shares that related to such Rollover Company RSU immediately prior to the Effective Time multiplied by (z) the Exchange Ratio, with such product rounded down to the nearest whole share of Parent Common Stock. Notwithstanding the foregoing or anything to the contrary in any Company Stock Plan or in any award agreement governing any Rollover Company RSU or otherwise (except as may otherwise be agreed to by and between the Parent or, after the Effective Time, the Company, on the one hand, and the holder of the Rollover Company RSU, on the other hand), (A) subject to the holder’s continued employment with Parent or a subsidiary thereof through the applicable settlement date, each Rollover Company RSU shall vest and be settled as to (1) one-sixth (1/6) of the shares of Parent Common Stock subject to such Rollover Company RSU on each of the first four anniversaries of the Effective Time and (2) two-sixths (2/6) of the shares of Parent Common Stock subject to each such Rollover Company RSU on the fifth anniversary of the Effective Time and (B) no holder of a Rollover Company RSU shall be entitled to (and no such Rollover Company RSU shall become subject to) any additional or accelerated vesting with respect to such Rollover Company RSU upon a termination of employment of the holder thereof for any reason or no reason.

(e) Each Company Restricted Share that is not a Cashout Company Restricted Share Award (each such Company Restricted Share, a “ Rollover Company Restricted Share ”) shall cease to represent an award with respect to Common Shares, and shall be converted automatically into a restricted stock award with respect to shares of Parent Common Stock as provided below, and Parent shall assume all obligations with respect to the Rollover Company Restricted Shares, subject to the terms of the Company Stock Plans and any agreements evidencing grants thereunder; provided that , at the Effective Time, each Rollover Company Restricted Share shall be converted into the right to receive a number of shares of Parent Common Stock equal to the product of (x) 1.2 multiplied by (y) the number of Common Shares that related to such Rollover Company Restricted Share immediately prior to the Effective Time multiplied by (z) the Exchange Ratio, with such product rounded down to the nearest whole share of Parent Common Stock. Notwithstanding the foregoing or anything to the contrary in any Company Stock Plan or in any award agreement governing any Rollover Company Restricted Share or otherwise (except as may otherwise be agreed to by and between the Parent or, after the Effective Time, the Company, on the one hand, and the holder of the Rollover Company Restricted Share, on the other hand), (A) subject to the holder’s continued employment with Parent or a subsidiary thereof through the applicable vesting date, each Rollover Company Restricted Share shall vest as to (1) one-sixth (1/6) of the shares of Parent Common Stock subject to such Rollover Company Restricted Share on each of the first four anniversaries of the Effective Time and (2) two-sixths (2/6) of the shares of Parent Common Stock subject to each such Rollover Company Restricted Share on the fifth anniversary of the Effective Time and (B) no holder of a Rollover Company Restricted Share shall be entitled to (and no such Rollover Company Restricted Share shall become subject to) any additional or accelerated vesting with respect to such Rollover Company Restricted Share upon a termination of employment of the holder thereof for any reason or no reason.

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(f) For purposes of this Section 2.9, the “ Exchange Ratio ” means the quotient, rounded to the nearest 1/100,000 ^th , determined by dividing the Merger Price by the Parent Share Price, and the “ Parent Share Price ” shall be equal to the average of the closing prices of the shares of Parent Common Stock on the New York Stock Exchange Composite Transactions Reporting System, as reported in The Wall Street Journal, for the ten (10) trading days immediately preceding the second trading day prior to the Effective Time.

(g) Immediately prior to the Effective Time, all amounts credited to participant accounts and denominated in Common Shares either under the Company’s Deferred Compensation Plan or the Company’s Stock Deferral Plan (each, as amended through the date hereof) (collectively, the “ Non-Qualified Account Plans ”) or pursuant to individual deferred compensation agreements, shall be converted into the right to receive the Merger Price, based on the number of Common Shares credited to such participant accounts (“ Deferred Equity Units ”). Such obligation shall vest and be payable or distributable in accordance with the terms of the agreement, plan or arrangement relating to such Deferred Equity Units and prior to the time of any distribution, such deferred amounts shall be permitted to be deemed invested in another investment option under the applicable agreement, plan or arrangement.

(h) The Company shall take any and all actions with respect to the Company’s Employee Stock Purchase Plan (the “ ESPP ”) as are necessary to provide that (i) the ESPP shall terminate, effective as of the date hereof and (ii) all cash and Common Shares, if any, held in each participant’s account thereunder, shall be distributed to such participant or such participant’s order as soon as practicable after the date hereof.

(i) The Company agrees to take any and all actions necessary (including the adoption of resolutions by the Company Board and any other action reasonably requested by Parent) to approve and effectuate the actions contemplated by this Section 2.9.

SECTION 2.10 Shareholders’ Meeting .

(a) If required by applicable Law in order to consummate the Merger, the Company, acting through the Company Board, shall, and Parent shall cause the Company to, in accordance with applicable Law:

(i) duly call, give notice of, convene and hold a special meeting of its shareholders (the “ Special Meeting ”) as promptly as practicable following the Acceptance Date (or if Purchaser has provided for a subsequent offering period after the Expiration Date in accordance with Section 1.1(b), as promptly as practicable following the expiration of such subsequent offering period) for the purpose of considering and taking action upon this Agreement;

(ii) prepare and file with the SEC a preliminary proxy statement relating to this Agreement, and use its reasonable best efforts (A) to obtain and furnish the information required to be included by the SEC in the Proxy Statement (as hereinafter defined) and, after consultation with Parent, to respond promptly to any comments made

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by the SEC with respect to the preliminary proxy statement and cause a definitive proxy statement (the “ Proxy Statement ”) to be mailed to its shareholders and (B) to obtain the necessary approvals of the Merger and this Agreement by its shareholders;

(iii) subject to the fiduciary duties of the Company Board, include in the Proxy Statement the Company Recommendation that shareholders of the Company vote in favor of the approval of this Agreement; and

(iv) include in the Proxy Statement the opinion of Goldman, Sachs & Co. referred to in Section 1.2(a).

(b) Parent agrees that it will vote, or cause to be voted, all of the Common Shares then owned by it, the Purchaser or any of its other subsidiaries in favor of the approval of the Merger and of this Agreement.

SECTION 2.11 Merger Without Meeting of Shareholders . Notwithstanding Section 2.10, in the event that Parent, the Purchaser or any other subsidiary of Parent shall acquire, in the aggregate, at least 90% of the outstanding Common Shares pursuant to the Offer or otherwise, the parties hereto agree to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the Acceptance Date without a meeting of shareholders of the Company, in accordance with Section 60.491 of the OBCA.

ARTICLE THREE

DISSENTING SHARES; PAYMENT FOR SHARES

SECTION 3.1 Dissenting Shares . Notwithstanding Section 2.7, if required by Sections 60.551 to 60.594 of the OBCA (but only to the extent required thereby), Common Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Common Shares in accordance with, and who have complied with, Sections 60.551 to 60.594 of the OBCA (“ Dissenting Shares ”) shall not be converted into a right to receive the Merger Price, and holders of such Dissenting Shares will be entitled to receive payment of the fair value of such Dissenting Shares in accordance with the provisions of such Sections 60.551 to 60.594 unless and until such holder fails to perfect or withdraws or otherwise loses his right to appraisal under the OBCA. If after the Effective Time such holder fails to perfect or withdraws or loses his right to appraisal, such Common Shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Price, without any interest thereon, and the Surviving Corporation shall remain liable for payment of the Merger Price for such Common Shares without any interest. At the Effective Time, any holder of Dissenting Shares shall cease to have any rights with respect thereto, except the rights provided under Sections 60.551 to 60.594 of the OBCA and as provided in the previous sentence. The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Common Shares, and Parent shall have the right to participate in and to control all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands.

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SECTION 3.2 Payment for Common Shares .

(a) From and after the Effective Time, such bank or trust company as shall be designated by Parent and reasonably acceptable to the Company shall act as paying agent (the “ Paying Agent ”) in effecting the payment of the Merger Price in respect of certificates (the “ Certificates ”) that, prior to the Effective Time, represented Common Shares entitled to payment of the Merger Price pursuant to Section 2.7. Promptly following the Effective Time, Parent or the Purchaser shall deposit, or cause to be deposited, with the Paying Agent the aggregate Merger Price to which holders of Common Shares shall be entitled at the Effective Time pursuant to Section 2.7 (such cash being hereinafter referred to as the “ Exchange Fund ”).

(b) Promptly after the Effective Time, Parent shall cause the Paying Agent to mail to each record holder of Certificates that immediately prior to the Effective Time represented Common Shares (i) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in surrendering such Certificates and receiving the Merger Price in respect thereof. Upon the surrender of each such Certificate to the Paying Agent together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the Paying Agent shall pay the holder of such Certificate the Merger Price multiplied by the number of Common Shares formerly represented by such Certificate, in consideration therefor, and such Certificate shall forthwith be cancelled. Until so surrendered, each such Certificate (other than Certificates representing Common Shares held by Parent or the Purchaser, by any wholly owned subsidiary of Parent or the Purchaser or by any wholly owned Subsidiary of the Company or Dissenting Shares) shall represent solely the right to receive the Merger Price relating thereto. No interest or dividends shall be paid or accrued on the Merger Price. If the Merger Price (or any portion thereof) is to be delivered to any Person other than the Person in whose name the Certificate formerly representing Common Shares surrendered therefor is registered, it shall be a condition to such right to receive such Merger Price that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person surrendering such Common Shares shall pay to the Paying Agent any transfer or other similar taxes required by reason of the payment of the Merger Price to a Person other than the registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Paying Agent that such tax has been paid or is not applicable.

(c) Promptly following the date which is 180 days after the Effective Time, the Paying Agent shall deliver to the Surviving Corporation any portion of the Exchange Fund (including the proceeds of any investments thereof) that remains undistributed, and all Certificates and other documents in its possession relating to the transactions described in this Agreement, and the Paying Agent’s duties shall terminate. Thereafter, each holder of a Certificate formerly representing a Common Share shall look only to the Surviving Corporation for payment of claims to the Merger Price and may surrender such Certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in consideration therefor the Merger Price relating thereto, without any interest thereon.

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(d) After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any Common Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates formerly representing Common Shares are presented to the Surviving Corporation or the Paying Agent, they shall be surrendered and cancelled in return for the payment of the Merger Price relating thereto (subject to applicable abandoned property, escheat and similar laws), as provided in this Article Three.

SECTION 3.3 No Liability . Anything herein to the contrary notwithstanding, none of the Company, Parent, the Purchaser, the Surviving Corporation, the Paying Agent or any other Person shall be liable to any former holder of Common Shares for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

SECTION 3.4 Investment of Exchange Fund . The Paying Agent shall invest all cash included in the Exchange Fund as reasonably directed by Parent; provided , however , that any investment of such cash shall be limited to direct short-term obligations of, or short-term obligations fully guaranteed as to principal and interest by, the U.S. Government. Any interest and other income resulting from such investments shall be paid to the Surviving Corporation pursuant to Section 3.2(c).

SECTION 3.5 Certificates; Withholding; Lost Certificates . Until surrendered as contemplated by Section 3.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Price. Each of the Surviving Corporation, Parent, the Purchaser and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Common Shares, Company Stock Options, Company Restricted Shares, Company RSUs, rights under the ESPP or other Person such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of applicable Tax Law. To the extent that amounts are so withheld by the Surviving Corporation, Parent, the Purchaser or the Paying Agent as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of such Common Shares, Company Stock Options, Company Restricted Shares, Company RSUs, rights under the ESPP or other Person in respect of which such deduction and withholding was made by Parent, the Purchaser, the Surviving Corporation or the Paying Agent, as the case may be. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation or Parent, the posting by such Person of a bond in such amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate and entry into any other agreements or undertakings required by the Paying Agent, the Paying Agent will issue, in exchange for such lost, stolen or destroyed Certificate, a check in the amount of the number of Common Shares represented by such lost, stolen or destroyed Certificate multiplied by the Merger Price.

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SECTION 3.6 Adjustments to Prevent Dilution . In the event that the Company changes the number of Common Shares or securities convertible or exchangeable into or exercisable for Common Shares issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger or other similar extraordinary transaction, the Merger Price shall be equitably adjusted to reflect such change; provided that nothing herein shall be construed to permit the Company to take any action with respect to its securities that is prohibited by the terms of this Agreement.

ARTICLE FOUR

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and the Purchaser that, except (i) to the extent disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended May 26, 2007, the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 1, 2007, and the Company’s Current Report on Form 8-K dated September 20, 2007 (in each case, as such reports have been amended prior to the date hereof but not including any documents filed as exhibits, annexes or schedules thereto or incorporated by reference therein or any risk factors or forward-looking statements and any other disclosures included therein to the extent they are predictive or forward-looking in nature) or (ii) as described in the section of the Company Disclosure Schedule corresponding to the section of this Article Four to which exception is being taken or in another section of the Company Disclosure Schedule to the extent that (1) such other section is reasonably cross-referenced in the section of the Company Disclosure Schedule to which the exception is being taken or (2) the applicability of such disclosure is clearly apparent on its face:

SECTION 4.1 Organization and Qualification . The Company is a corporation duly organized and validly existing under the laws of the State of Oregon. Each of the Company’s Subsidiaries is a corporation or other business entity duly organized, validly existing and in good standing or has comparable status under the laws of the jurisdiction of its incorporation or organization. The Company and each of its Subsidiaries has the requisite corporate or similar organizational power and authority to own, operate or lease its properties and to carry on its business as it is now being conducted and is duly qualified or licensed to do business, and is in good standing or has comparable status, in each jurisdiction in which the nature of its business or the properties owned, operated or leased by it makes such qualification, licensing or good standing (or comparable status) necessary, except where the failure to have such power or authority, or the failure to be so qualified, licensed or in good standing, would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company. The Company has provided or made available to Parent and the Purchaser a complete and correct copy of the articles of incorporation and bylaws or comparable organizational documents, each as amended to and in effect as of the date hereof, of the Company and each of its Subsidiaries, and has provided a complete and correct copy of the Rights Agreement.

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SECTION 4.2 Capitalization .

(a) The authorized capital stock of the Company consists of 200,000,000 Common Shares and 1,000,000 shares of preferred stock, without par value (“ Preferred Shares ”). As of the close of business on October 12, 2007, 75,084,510 Common Shares were issued and outstanding, and no Common Shares were held in treasury. Since such time and date, no additional Common Shares have been issued except for exercises of Company Stock Options and stock issuances pursuant to Company RSUs or Company Restricted Shares, in each case, in accordance with their terms and as specifically described in Section 4.2(a) of the Company Disclosure Schedule. The Company has no Preferred Shares issued or outstanding, and no Preferred Shares are reserved for issuance or otherwise designated as a series or class other than 125,000 shares of Series B No Par Preferred Shares reserved under the Rights Agreement. No Common Shares are reserved for issuance other than 13,670,943 Common Shares reserved for issuance pursuant to the Company Stock Plans (consisting of 10,286,185 shares subject to outstanding Company Stock Options, 34,492 Common Shares subject to outstanding Company RSUs, and 3,350,266 shares available for future grants), 772,314 Common Shares reserved for issuance pursuant to the ESPP, an indeterminate number of Common Shares reserved for issuance in connection with conversions of the Company’s outstanding 1.625% Senior Convertible Notes due 2012 into Common Shares (the “ Notes ”), which are convertible into Common Shares on the terms described in Section 4.2(a) of the Company Disclosure Schedule ( provided , however , that the Company has the right under the indenture governing the Notes to settle any and all conversion obligations with respect to the Notes entirely in cash instead of in Common Shares), 13,017,092 Common Shares reserved for issuance in connection with the OTC Convertible Note Hedges and Warrant Transaction (consisting of 10,413,674 shares with respect to the Confirmation of OTC Warrant Transaction between the Company and Merrill Lynch Financial Markets, Inc., dated as of June 29, 2007, and 2,603,418 shares with respect to the Confirmation of OTC Warrant Transaction, dated June 29, 2007, between the Company and Citibank, N.A., dated as of June 29, 2007). Section 4.2(a) of the Company Disclosure Schedule sets forth (i) as of the close of business on October 8, 2007 the holders of all outstanding Company Stock Options, Company Restricted Shares and Company RSUs and the number, vesting schedules, exercise prices (where applicable), and expiration dates of each grant to such holders and (ii) all exercises of Company Stock Options and issuances of Common Shares pursuant to the settlement of Company RSUs and the vesting of Company Restricted Shares from the close of business on October 8, 2007 through the close of business on October 12, 2007. Since October 8, 2007, no additional warrants, Company Stock Options, Company Restricted Shares or Company RSUs have been issued or granted. All the outstanding Common Shares are, and all Common Shares that may be issued pursuant to the exercise of outstanding warrants and Company Stock Options, the vesting of Company Restricted Shares and the settlement of Company RSUs will, when issued in accordance with the respective terms of the applicable warrants, Company Stock Options, Company Restricted Shares and Company RSUs, be, duly authorized, validly issued, fully paid and non-assessable and are not and will not be subject to or issued in violation of, any preemptive rights. There are no bonds, debentures, notes or other Indebtedness having voting rights (or, other than the Notes, convertible into securities having such rights) of the Company or any of its Subsidiaries (“ Voting Debt ”), whether issued by the Company, any of its Subsidiaries or any other Person, issued and outstanding. Except for the warrants listed in this Section 4.2 and the Company Stock Options, Company Restricted Shares and Company RSUs set forth on Section 4.2(a) of the Company Disclosure Schedule, there are no options, warrants, calls, subscriptions or other rights, agreements, arrangements or commitments of any character

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obligating the Company or any of its Subsidiaries to issue, transfer or sell or cause to be issued, transferred or sold any capital stock or Voting Debt of, or other equity interest in, the Company or any of its Subsidiaries or securities convertible into or exchangeable for such shares or equity interests or obligating the Company or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment. Except as provided in award agreements relating to Company Stock Options, Company Restricted Shares, or Company RSUs as they relate to using Common Shares to pay income taxes, there are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Common Shares or other capital stock of the Company or any of its Subsidiaries. No Subsidiary of the Company owns any capital stock of the Company.

(b) Section 4.2(b) of the Company Disclosure Schedule lists all the Subsidiaries of the Company, whether consolidated or unconsolidated. Section 4.2(b) of the Company Disclosure Schedule also sets forth the jurisdiction of organization and percentage of outstanding equity interests (including partnership interests and limited liability company interests) owned by the Company or its Subsidiaries. All outstanding shares of capital stock in each Subsidiary: (i) are owned, directly or indirectly, by the Company; (ii) have been validly issued and are fully paid and non-assessable; (iii) are owned directly or indirectly by the Company free and clear of all pledges, claims, liens, charges, encumbrances or security interests of any kind or nature whatsoever (collectively, “ Liens ”); and (iv) are free of any other restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests) that would prevent the operation by the Surviving Corporation of such Subsidiary’s business as currently conducted. Other than the Subsidiaries of the Company, the Company does not own or control, directly or indirectly, a 5% or greater equity interest in any Person.

(c) There are no shareholder agreements, voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of the capital stock or other equity interest of the Company or any of its Subsidiaries.

SECTION 4.3 Authority Relative to this Agreement and Related Matters . The Company has all necessary corporate power and authority to execute and deliver this Agreement and (subject, if required, to receipt of the Company Shareholder Approval) to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company, the performance of its obligations hereunder and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized and approved by the Company Board and no other corporate proceedings on the part of the Company or any of its Subsidiaries are necessary to authorize or approve this Agreement or to consummate the transactions contemplated hereby (other than, with respect to the Merger, the Company Shareholder Approval, if required, and the filing of the Articles of Merger in each case pursuant to the requirements of the OBCA). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due and valid authorization, execution and delivery of this Agreement by Parent and the Purchaser, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect,

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affecting creditors’ rights and remedies generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefore may be brought. If required, the affirmative vote of the holders of a majority of the outstanding Common Shares in favor of approval of this Agreement (the “ Company Shareholder Approval ”) is the only vote of the holders of any capital stock of the Company or any Subsidiary of the Company necessary to approve this Agreement and the transactions contemplated hereby, including the Merger. The Company has taken all appropriate actions so that the restrictions on business combinations contained in Sections 60.801 through 60.816 and 60.825 through 60.845 of the OBCA or any other Takeover Laws will not apply with respect to or as a result of the Offer, this Agreement or the transactions contemplated hereby, including the Merger, and that no further action on the part of the shareholders or the Company Board is required to effect such non-application of Sections 60.801 through 60.816 and 60.825 through 60.845 of the OBCA or application of any other Takeover Laws of any jurisdiction that may purport to be applicable to the Offer, this Agreement or the transactions contemplated hereby. No other state takeover statute or similar statute or regulation applies or purports to apply to the Offer, the Merger or the transactions contemplated by this Agreement.

SECTION 4.4 No Conflict; Required Filings and Consents .

(a) None of the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder and the consummation by the Company of the transactions contemplated hereby will (i) conflict with or violate the articles of incorporation or bylaws of the Company or the comparable organizational documents of any of its Subsidiaries; (ii) assuming that all Consents described in Section 4.4(b) have been obtained and, if required, the Company Shareholder Approval is received, conflict with or violate any federal, state, local, foreign or supranational law, common law, case law, statute, ordinance, code, rule, regulation, order, judgment, decree, stipulation, writ, injunction, award, permit or license (collectively, “ Law ”) applicable to the Company or any of its Subsidiaries, or by which any of them or any of their respective properties or assets may be bound or affected; or (iii) result in a violation or breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any benefit, or the creation of any Lien on any of the properties or assets of the Company or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets may be bound or affected (any of the foregoing referred to in clause (ii) above or this clause (iii) being a “ Company Violation ”), other than, in the case of clause (ii) or clause (iii) above, any such Company Violations that would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company.

(b) Other than (i) the filing with the Federal Trade Commission and the Antitrust Division of the Department of Justice of a premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) and any applicable foreign antitrust filings, (ii) the requirements of the Exchange Act and any applicable state securities, “blue sky” or takeover Law (including the filing of the

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Schedule 14D-9 in connection with the Offer and the Proxy Statement), (iii) the appropriate applications, filings and notices to, and approval of, the NYSE and (iv) the filing of the Articles of Merger with the Secretary of State of the State of Oregon, none of the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder or the consummation by the Company of the transactions contemplated hereby does or will require any material consent, waiver, approval, authorization or permit of, or registration or filing with or notification to (any of the foregoing being a “ Consent ”), any domestic, foreign or supranational government or subdivision thereof, administrative, governmental or regulatory authority, agency, commission, tribunal or body or self-regulatory organization (each a “ Governmental Entity ”).

SECTION 4.5 SEC Reports and Financial Statements .

(a) The Company has filed (or furnished, as applicable) with the SEC all forms, reports, schedules, registration statements, proxy statements, certifications and other documents required to be filed (or furnished, as applicable) by the Company or its directors and executive officers (in their capacity as such) with the SEC since June 1, 2003 (as they have been amended since the time of their filing, and including any documents filed as exhibits, annexes or schedules thereto, collectively, the “ Company SEC Reports ”) and complete and correct copies of all such Company SEC Reports are available to Parent through public sources. As of their respective dates, the Company SEC Reports (including but not limited to any financial statements or schedules included or incorporated by reference therein) complied as to form in all material respects with the requirements of the Exchange Act or the Securities Act of 1933, as amended (and the rules and regulations of the SEC promulgated thereunder) (the “ Securities Act ”) applicable, as the case may be, to such Company SEC Reports, and none of the Company SEC Reports so filed or furnished or that will be filed or furnished subsequent to the date of this Agreement contained or will contain, as of the date of filing and of any amendment or supplement and, in the case of any proxy statement, at the date mailed to shareholders and at the date of the meeting, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements (including all related notes and schedules) of the Company included in the Company SEC Reports complied in all material respects with all applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and presented fairly in all material respects the consolidated financial position and the consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates or for the periods presented therein. The Company has heretofore furnished to Parent a complete and correct copy of any amendments or modifications which have not yet been filed with the SEC to agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act.

(b) None of the preliminary or final offering memoranda or any amendments or supplements thereto, including exhibits, financial statements and schedules thereto and any documents incorporated therein by reference, or any related documents (including final pricing term sheets) or written communications concerning the solicitation, purchases of or offering of

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the Notes (the “ Notes Disclosure Package ”) as of the time of pricing, as of the dates delivered to any potential or actual purchasers or offerees and as of June 29, 2007 included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements, together with the related schedules and notes, included in the Notes Disclosure Package (i) presented fairly in all material respects the financial position of the Company and its consolidated subsidiaries at the dates indicated and the results of operations, changes in shareholders’ equity and cash flows of the Company and its consolidated subsidiaries for the periods specified and (ii) were prepared in conformity with GAAP applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Notes Disclosure Package presented fairly in accordance with GAAP the information required to be stated therein, and the selected financial data and the summary financial information included in the Notes Disclosure Package presented fairly in all material respects the information shown therein and were compiled on a basis consistent with that of the audited financial statements included in the Notes Disclosure Package. The Company has heretofore made available to Parent a complete and correct copy of the Notes Disclosure Package (other than final pricing term sheets and any other written communications concerning the solicitation, purchases of, or offering of the Notes that are not within the possession of the Company). The solicitation, issuance, and sale of the Notes complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act including with respect to qualifying for the exemptions from registration provided for in Section 4(2) of the Securities Act.

(c) Since the enactment of the Sarbanes-Oxley Act of 2002, the Company has been and is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act, as amended, and related rules and regulations promulgated thereunder (the “ Sarbanes-Oxley Act of 2002 ”).

(d) There are no outstanding loans made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company. Since the enactment of the Sarbanes-Oxley Act of 2002, neither the Company nor any of its Subsidiaries has made any loans to any executive officer or director of the Company or any of its Subsidiaries.

(e) The management of the Company (i) has established and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that all information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is timely accumulated and communicated to the individuals responsible for the preparation of the Company’s filings with and submissions to the SEC and all other public disclosure documents within the time periods specified in the rules and forms of the SEC and sufficiently in advance of the date on which filings or submissions are required to be made to allow timely decisions to be made regarding required disclosures; (ii) has established and maintains internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) to ensure the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including without limitation such policies and procedures specified in Rule 14a-15(f)(1)-(3) of the Exchange Act; and (iii) has disclosed, based on its most recent evaluation, to the Company’s outside auditors and the audit committee of the Company Board (A) all significant deficiencies and material weaknesses in the design or

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operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. A summary of any and all disclosures made by management to the Company’s auditors and audit committee has previously been made available to Parent. To the Company’s knowledge, there is no reason to believe that its auditors and its Chief Executive Officer and Chief Financial Officer will not be able to give the certification and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 when next due.

(f) Since June 1, 2003, (i) neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents to the Company Board or any committee thereof or to any director or officer of the Company.

SECTION 4.6 Undisclosed Liabilities; Absence of Certain Changes .

(a) Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, except for (i) liabilities and obligations that are reflected in the balance sheet of the Company as of September 1, 2007 (the “ Company Balance Sheet ”) or disclosed in the notes thereto and (ii) liabilities and obligations incurred in the ordinary course of business consistent with past practice since September 1, 2007 that, in each case, are not and would not, individually or in the aggregate with all other liabilities and obligations of the Company and its Subsidiaries (other than those reflected in the Company Balance Sheet or disclosed in the notes thereto), reasonably be expected to have a Material Adverse Effect on the Company. Without limiting the foregoing, the Company Balance Sheet reflects reasonable reserves in accordance with GAAP for contingent liabilities relating to pending litigation and other contingent obligations of the Company and its Subsidiaries (including liabilities under escheat and similar Laws).

(b) Since May 26, 2007, (i) there has not been any Material Adverse Effect on the Company or any change, effect, event, occurrence or state of facts that would reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company, (ii) the businesses of the Company and each of its Subsidiaries have been conducted only in the ordinary course of business consistent with past practice and (iii) there has not been any action taken by the Company or any of its Subsidiaries during the period from May 26, 2007 through the date of this Agreement that, if taken during the period from the date of this Agreement

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through the Effective Time, would constitute a breach of any of Sections 6.1(b)(i), (iv) (other than regular quarterly cash dividends consistent with past practice), (v), (vii)(A), (viii), (ix)((A), (B), (D), (E) or (F)), (xiv), (xv), (xix) or (xx) or Section 6.1(b)(vi) as it applies to the Company’s directors and officers (of the level of Vice President or higher) or the Company’s employees generally or the Company’s (or any of its Subsidiaries’) employees within any specified geographical region; provided that with respect to Section 6.1(b)(vi)(D), this representation and warranty shall not be so limited but shall apply to any employee).

SECTION 4.7 Environmental Matters .

(a) The business and operations of the Company and its Subsidiaries and their respective predecessors have been and are being conducted in compliance in all respects with all applicable Environmental Laws; the Company and its Subsidiaries have obtained all Governmental Permits relating to Environmental Laws necessary for the operation of their businesses; and all such Governmental Permits are in full force and effect and the Company and its Subsidiaries are in compliance with such permits, except, in the case of each of the foregoing, for such events or circumstances as would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries has received notice of, or, to the knowledge of the Company, is subject to, any investigation by, order from or claim by any Person (including any Governmental Entity or prior owner or operator of any of the Company Property) respecting (i) any Environmental Law, (ii) any remedial action or (iii) any claim arising from a Release or threatened Release except as would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries is subject to or has been served with any judicial or administrative proceeding, order, judgment or decree, or entered into a settlement alleging or addressing a violation of or liability under any Environmental Law, except as would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company.

(b) Neither the Company nor any of its Subsidiaries has (i) reported a Release of a hazardous substance pursuant to Section 103(a) of CERCLA, or any state equivalent; (ii) filed a notice pursuant to Section 103(c) of CERCLA; or (iii) filed any notice under any applicable Environmental Law reporting a violation of any applicable Environmental Law. There is not now with respect to the operations of the Company or any of its Subsidiaries, nor to the knowledge of the Company has there ever been, on or in any Company Property: (A) any Release, (B) any treatment, recycling, disposal or storage, other than short term storage prior to removal by a licensed transporter for off-site disposal, of any Contaminant, (C) any underground storage tank or surface impoundment or landfill or waste pile or (D) any event, condition or circumstance that could give rise to liability under any applicable Environmental Law, except, in the case of each of the foregoing, for such events which would not, individually or in the aggregate, have a Material Adverse Effect on the Company. No amount of any Contaminant is present in, on or under any real property that has given rise to or, to the knowledge of the Company, could reasonably be expected to give rise to, liability on behalf of the Company or any of its Subsidiaries under any applicable Environmental Law, except as would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company.

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(c) There is not now on or in any Company Property any polychlorinated biphenyls (PCB) used in the Company’s operations in pigments, hydraulic oils, electrical transformers or other equipment except as would not, individually or in the aggregate, have a Material Adverse Effect on the Company.

(d) There is no asbestos contained in or forming part of any building, structure or asset currently owned or leased by the Company or any of its Subsidiaries (or by any Person or entity whose liability the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of Law) and there is no asbestos or silica contained in or forming part of any products currently or previously manufactured, distributed or sold by the Company or any of its Subsidiaries (or by any Person or entity whose liability the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of Law). To the knowledge of the Company, the presence and condition of any asbestos-containing material or presumed asbestos-containing material which is on or part of any Company Property presently owned, leased or operated by the Company or any of its Subsidiaries, as currently configured and operated do not materially violate any currently applicable Environmental Law.

(e) Except for any such material documents that are publicly available from any Governmental Entity (all of which to the Company’s knowledge are listed or described on Section 4.7(e) of the Company Disclosure Schedule), the Company has delivered to Parent, or provided Parent with access to, a complete and accurate copy of all material documents (whether in hard copy or electronic form) that contain any environmental reports, environmental investigations and environmental audits relating to the business and operations of the Company and its subsidiaries, including the Company Property (whether conducted by or on behalf of the Company or any Subsidiary, or a third party, and whether done at the initiative of the Company or any Subsidiary, or directed by a Governmental Entity or other third party) which the Company or any Subsidiary has possession of or access to.

(f) For purposes of this Section:

(i)   “ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 USC §9601 et seq ., as amended, and any regulations promulgated thereunder.

(ii)   “ Company Property ” means any real property, plant, building or facility now or previously owned, leased, used or operated by the Company, any of its present or former Subsidiaries or any of their respective predecessors.

(iii)   “ Contaminant ” means any pollutant, hazardous or toxic substance or waste (including without limitation asbestos), petroleum, petroleum-based substance, special waste, hazardous material or any constituent of any such substance, waste or material, in each case to the extent regulated by Environmental Law, and including without limitation hazardous waste or hazardous substance, as those terms are defined under CERCLA, RCRA or any other Environmental Law.

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(iv) “ Environmental Law ” means all foreign, federal, state and local Laws relating to or addressing the environment or health and safety, including but not limited to CERCLA and RCRA and any foreign or state equivalent thereof.

(v) “ RCRA ” means the Resource Conservation and Recovery Act, 42 USC §6901 et seq ., as amended, and any regulations promulgated thereunder.

(vi) “ Release ” means release, spill, escape, emission, leaking, pumping, pouring, emptying, leaching, dumping, injection, deposit, disposal or discharge of a Contaminant into the environment, including through or in the air, soil, surface water or groundwater.

SECTION 4.8 Compliance with Applicable Laws .

(a) Each of the Company and its Subsidiaries holds all material Governmental Permits, and no Person or entity other than the Company or a Subsidiary thereof owns or has any proprietary, financial or other interest (direct or indirect) in any of the material Governmental Permits. Each of the Company and its Subsidiaries is in compliance in all material respects with the terms of the Governmental Permits, and all such Governmental Permits are in full force and effect in all material respects. No suspension or cancellation of any of the Governmental Permits is pending or, to the knowledge of the Company, threatened. The businesses and operations of the Company and its Subsidiaries and their respective predecessors have been and are being conducted in compliance in all material respects with all Laws. Neither the Company nor any Subsidiary has conducted any internal investigation with respect to any actual, potential or alleged material violation of any Law or Company or Subsidiary policy by any director, officer or employee. To the knowledge of the Company, neither the C