AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

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MERISEL, INC | TU HOLDINGS, INC | TU MERGER, INC

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Title: AGREEMENT AND PLAN OF MERGER
Governing Law: Delaware Date: 4/1/2008
Industry: Computer Hardware Law Firm: Weil Gotshal;O'Melveny Myers Sector: Technology

AGREEMENT AND PLAN OF MERGER, Parties: merisel inc , tu holdings inc , tu merger inc

EXHIBIT 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

among

TU HOLDINGS, INC.,

TU MERGER, INC.

and

MERISEL, INC.

Dated as of March 28, 2008

TABLE OF CONTENTS

		PAGE
ARTICLE I	THE MERGER	2
Section 1.1.	The Merger	2
Section 1.2.	Closing	2
Section 1.3.	Effective Time	2
Section 1.4.	Effects of the Merger	2
Section 1.5.	Certificate of Incorporation and Bylaws of the Surviving Corporation	3
Section 1.6.	Directors and Officers of the Surviving Corporation	3
Section 1.7.	Effect on Capital Stock	3
Section 1.8.	Exchange of Certificates	4
Section 1.9.	Equity Awards	7
Section 1.10.	Convertible Preferred Stock	7
ARTICLE II	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	7
Section 2.1.	Qualification; Organization, Subsidiaries, etc	8
Section 2.2.	Capitalization	9
Section 2.3.	Corporate Authority Relative to This Agreement; No Violation	10
Section 2.4.	SEC Reports and Financial Statements	11
Section 2.5.	No Undisclosed Liabilities	13
Section 2.6.	Absence of Certain Changes or Events	13
Section 2.7.	Compliance with Law; Permits	14
Section 2.8.	Material Contracts	15
Section 2.9.	Environmental Laws and Regulations	17
Section 2.10.	Employee Benefit Plans	17
Section 2.11.	Labor Matters	19
Section 2.12.	Investigations; Litigation	20
Section 2.13.	Tax Matters	21
Section 2.14.	Intellectual Property	22
Section 2.15.	Real Property	23
Section 2.16.	Assets; Personal Property	24
Section 2.17.	Customers and Suppliers	24
Section 2.18.	Key Salespersons	24
Section 2.19.	Information in Proxy Statement	25

TABLE OF CONTENTS

(continued)

		PAGE
Section 2.20.	Insurance	25
Section 2.21.	Required Vote of the Company Stockholders	25
Section 2.22.	Affiliate Transactions	25
Section 2.23.	Finders or Brokers	25
Section 2.24.	Opinion of Financial Advisors	26
Section 2.25.	State Anti-Takeover Statutes	26
Section 2.26.	Additional Payments; Other Matters	26
Section 2.27.	Outstanding Net Debt	27
Section 2.28.	Transaction Expenses	27
Section 2.29.	No Additional Representations	27
ARTICLE III	REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB	27
Section 3.1.	Qualification; Organization, Subsidiaries, etc	27
Section 3.2.	Corporate Authority Relative to This Agreement; No Violation	28
Section 3.3.	Investigations; Litigation	29
Section 3.4.	Financing	29
Section 3.5.	Commitment Agreement	29
Section 3.6.	Capitalization of Merger Sub; No Prior Activities	29
Section 3.7.	Information in Proxy Statement	29
Section 3.8.	Finders or Brokers	29
Section 3.9.	Lack of Ownership of Company Common Stock	30
Section 3.10.	Solvency	30
Section 3.11.	No Additional Representations	30
Section 3.12.	Acknowledgement Regarding Company Representations	30
ARTICLE IV	ADDITIONAL AGREEMENTS	31
Section 4.1.	Conduct of Business by the Company and Parent	31
Section 4.2.	Access to Information; Confidentiality	34
Section 4.3.	No Solicitation of Transactions	34
Section 4.4.	Company Board Recommendation	36
Section 4.5.	Proxy Statement	37

TABLE OF CONTENTS

(continued)

		PAGE
Section 4.6.	Company Meeting	37
Section 4.7.	Employee Matters	38
Section 4.8.	Reasonable Best Efforts to Complete	39
Section 4.9.	Takeover Statute	40
Section 4.10.	Section 16 Matters	40
Section 4.11.	Certain Notices	40
Section 4.12.	Public Announcements	41
Section 4.13.	Indemnification and Insurance	41
Section 4.14.	Debt Payoff Letters	43
Section 4.15.	Cooperation with Financing	43
Section 4.16.	Cooperation on Letters of Credit	43
Section 4.17.	Obligations of Merger Sub	44
Section 4.18.	Adoption of Agreement by Merger Sub	44
ARTICLE V	CONDITIONS TO THE MERGER	44
Section 5.1.	Conditions to Each Party’s Obligation to Effect the Merger	44
Section 5.2.	Conditions to Obligation of the Company to Effect the Merger	44
Section 5.3.	Conditions to Obligations of Parent and Merger Sub to Effect the Merger	45
Section 5.4.	Frustration of Closing Conditions	46
ARTICLE VI	TERMINATION, AMENDMENT AND WAIVER	46
Section 6.1.	Termination	46
Section 6.2.	Notice of Termination; Effect of Termination	48
Section 6.3.	Termination Fees; Limitation of Liability	48
Section 6.4.	Procedure for Termination	49
ARTICLE VII	MISCELLANEOUS	50
Section 7.1.	No Survival of Representations and Warranties	50
Section 7.2.	Expenses	50
Section 7.3.	Notices	50
Section 7.4.	Amendments	51

Section 7.5.

Waivers

iii

TABLE OF CONTENTS

(continued)

		PAGE
Section 7.6.	Assignment; Binding Effect	52
Section 7.7.	Entire Agreement; No Third-Party Beneficiaries	52
Section 7.8.	Severability	52
Section 7.9.	Governing Law	52
Section 7.10.	Jurisdiction; Enforcement	52
Section 7.11.	Waiver of Jury Trial	53
Section 7.12.	Headings	53
Section 7.13.	Interpretation	53
Section 7.14.	Required Approvals of the Special Committee	54
Section 7.15.	Counterparts; Effectiveness	54
Section 7.16.	Definitions	54

EXHIBITS

Exhibit A – Form of Voting, Support and Redemption Agreement

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

Exhibit C – Form of Commitment Agreement

AGREEMENT AND PLAN OF MERGER , dated as of March 28, 2008 (the “ Agreement ”), among TU HOLDINGS, INC. , a Delaware corporation (“ Parent ”), TU MERGER, INC. , a Delaware corporation and a direct wholly owned subsidiary of Parent (“ Merger Sub ”), and MERISEL, INC. , a Delaware corporation (the “ Company ”). Each of Parent, Merger Sub and the Company is referred to herein as a “ Party ” and together they are referred to herein as “ Parties ”).

WHEREAS , the Parties intend that Merger Sub will be merged with and into the Company (the “ Merger ”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”);

WHEREAS , a Special Committee of independent directors of the Company (the “ Special Committee ”) has (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 and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, and resolved to recommend to the Board of Directors of the Company (the “ Company Board ”) that it approve and declare advisable this Agreement and the transactions contemplated hereby, including the Merger, (iii) resolved to recommend that the holders of Company Common Stock adopt this Agreement and (iv) directed that this Agreement be submitted to the Company Board for its approval and recommendation that the holders of Company Common Stock adopt this Agreement;

WHEREAS , the Company Board (following the recommendation of the Special Committee) has unanimously (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, (iii) directed that this Agreement be submitted to the holders of Company Common Stock for their adoption and (iv) resolved to recommend that the holders of Company Common Stock adopt this Agreement;

WHEREAS , (i) the Board of Directors of Parent has unanimously approved this Agreement, (ii) the Board of Directors of Merger Sub has unanimously approved and declared advisable this Agreement and (iii) Parent, as the sole stockholder of Merger Sub, will adopt this Agreement and the transactions contemplated hereby, including the Merger, promptly after the execution hereof in accordance with the terms hereof;

WHEREAS , as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, simultaneously with the execution of this Agreement, a certain stockholder of the Company is entering into a voting, support and redemption agreement with Parent and the Company substantially in the form of Exhibit A attached hereto (the “ Support Agreement ”); and

WHEREAS , the Company, Parent and Merger Sub each desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe certain conditions to the Merger, as set forth herein.

NOW, THEREFORE , in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, the Parties agree as follows:

ARTICLE I

THE MERGER

Section 1.1. The Merger . At the Effective Time, upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the applicable provisions of the DGCL, Merger Sub shall be merged with and into the Company, whereupon the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”) and a wholly owned subsidiary of Parent.

Section 1.2. Closing . The closing of the Merger (the “ Closing ”) shall take place on a day that is a Business Day at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York at 10:00 a.m., local time, on a date to be specified by the Parties, which shall be no later than the third Business Day after the satisfaction or waiver (to the extent permitted by applicable Law) of the conditions set forth in ARTICLE V (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), or at such other place, date and time as the Company and Parent may agree in writing. The date on which the Closing shall occur is referred to herein as the “ Closing Date ”.

Section 1.3. Effective Time . Subject to the provisions of this Agreement, at the Closing, the Company will cause a certificate of merger (the “ Certificate of Merger ”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with Section 251 of the DGCL. The Merger will become effective at such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by the Company and Merger Sub in writing and specified in the Certificate of Merger in accordance with the DGCL (the effective time of the Merger being hereinafter referred to as the “ Effective Time ”).

Section 1.4. Effects of the Merger . The effects of the Merger shall be as provided in this Agreement and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation, all as provided under the DGCL and the other applicable Laws of the State of Delaware. At and after the Effective Time, the officers and directors of the Surviving Corporation shall 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 Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of the Company.

Section 1.5. Certificate of Incorporation and Bylaws of the Surviving Corporation .

(a) The certificate of incorporation of the Surviving Corporation shall be amended at the Effective Time to read in the form attached hereto as Exhibit B , until thereafter amended in accordance with the provisions thereof and the provisions of this Agreement and applicable Law, in each case consistent with the obligations set forth in Section 4.13 .

(b) The bylaws of Merger Sub as in effect at the Effective Time shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with the provisions thereof and the provisions of this Agreement and applicable Law, in each case consistent with the obligations set forth in Section 4.13 .

Section 1.6. Directors and Officers of the Surviving Corporation . Subject to applicable Law, the directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation. The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, to hold office until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

Section 1.7. Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub or the holders of any securities of the Company or Merger Sub:

(a) Conversion of Company Common Stock. Subject to Section 1.7(b) and Section 1.7(d) , each issued and outstanding share of common stock, par value $0.01 per share, of the Company (“ Company Common Stock ”) outstanding immediately prior to the Effective Time (for the avoidance of doubt, including each Restricted Share in accordance with and subject to the terms of Section 1.9 ), other than any Cancelled Shares and any Dissenting Shares, shall thereupon be converted automatically into and shall thereafter represent the right to receive the Merger Consideration, without any interest thereon. All shares of Company Common Stock that have been converted into the right to receive the Merger Consideration as provided by this Section 1.7(a) shall be automatically cancelled and shall cease to exist, and the holders of certificates which immediately prior to the Effective Time represented such shares of Company Common Stock shall cease to have any rights with respect to such shares of Company Common Stock other than the right to receive the Merger Consideration.

(b) Parent and Merger Sub-Owned Shares . Each share of Company Common Stock that is owned, directly or indirectly, by Parent or Merger Sub immediately prior to the Effective Time or held by the Company immediately prior to the Effective Time (the “ Cancelled Shares ”) shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(c) Conversion of Merger Sub Common Stock . At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, each share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. From and after the Effective Time, all certificates representing the common stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.

(d) Dissenting Shares .

(i) Notwithstanding anything contained in this Agreement to the contrary, no shares of Company Common Stock issued and outstanding immediately prior to the Effective Time the holder of which (A) has not voted in favor of the Merger, (B) has demanded its rights to appraisal in accordance with Section 262 of the DGCL, and (C) has not effectively withdrawn or lost its rights to appraisal (the “ Dissenting Shares ”) shall be converted into or represent a right to receive the Merger Consideration pursuant to Section 1.7(a) . By virtue of the Merger, all Dissenting Shares shall be cancelled and shall cease to exist and shall represent only those rights provided under the DGCL. From and after the Effective Time, a holder of Dissenting Shares shall not be entitled to exercise any of the voting rights or other rights of a member or equity owner of the Surviving Corporation.

(ii) Notwithstanding the provisions of this Section 1.7(d) , if any holder of shares of Company Common Stock who demands appraisal rights shall effectively withdraw or lose (through failure to perfect or otherwise) the right to dissent or its rights of appraisal, then, as of the later of the Effective Time and the occurrence of such event, such holder’s shares of Company Common Stock shall no longer be Dissenting Shares and shall automatically be converted into and represent only the right to receive Merger Consideration, without any interest thereon.

(iii) The Company shall give Parent (A) prompt notice of any written demands for appraisal rights of any shares of Company Common Stock, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by the Company which relate to any such demand for appraisal rights and (B) the opportunity to participate in and direct all negotiations and proceedings with respect to demands for appraisal rights under the DGCL. Prior to the Effective Time, the Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal rights or offer to settle or settle any such demands.

Section 1.8. Exchange of Certificates .

(a) Paying Agent . At the Effective Time, Parent shall deposit, or shall cause to be deposited, with a bank or trust company that is organized and doing business under the Laws of the United States or any state thereof, and has a combined capital and surplus of at least $500 million, that shall be appointed prior to the Closing Date to act as a paying agent hereunder and approved in advance by the Company in writing (and pursuant to an agreement in form and substance reasonably acceptable to Parent and the Company) (the “ Paying Agent ”), in trust for the benefit of holders of the shares of Company Common Stock (other than the Restricted Shares, which shall be governed by Section 1.9(b) ) and the Company Stock Options, cash in U.S. dollars sufficient to pay (i) the amount owing for all of the shares of Company Common Stock converted pursuant to Section 1.7(a) (other than the Restricted Shares, which shall be governed by Section 1.9(b) ) and (ii) the Option Consideration payable pursuant to Section 1.9(a) (such cash referred to in subsections (a)(i) and (a)(ii) being hereinafter referred to as the “ Exchange Fund ”).

(b) Payment Procedures .

(i) As soon as reasonably practicable after the Effective Time and in any event not later than the third Business Day following the Effective Time, the Paying Agent shall mail (x) to each holder of record of shares of Company Common Stock whose shares of Company Common Stock were converted into the right to receive the Merger Consideration pursuant to Section 1.7 , other than the Restricted Shares, for which the payment procedures shall be as described in Section 1.9(b) , (A) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to Certificates shall pass, only upon delivery of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares to the Paying Agent and shall be in such form and have such other provisions as Parent and the Company may mutually agree), and (B) instructions for use in effecting the surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares in exchange for the Merger Consideration, as applicable, and (y) to each holder of a Company Stock Option, a check in an amount due and payable to such holder pursuant to Section 1.9 of this Agreement in respect of such Company Stock Option.

(ii) Upon surrender of the certificates that immediately prior to the Effective Time represented shares of Company Common Stock (“ Certificates ”) (or effective affidavits of loss in lieu thereof) or non-certificated shares of Company Common Stock represented by book-entry (“ Book-Entry Shares ”) to the Paying Agent together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may customarily be required by the Paying Agent, the holder of such Certificates or Book-Entry Shares shall be entitled to receive in exchange therefor a check in an amount equal to the product of (x) the number of shares of Company Common Stock represented by such holder’s properly surrendered Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares multiplied by (y) the Merger Consideration. No interest will be paid or accrued on any amount payable upon due surrender of Certificates or Book-Entry Shares. In the event of a transfer of ownership of shares of Company Common Stock that is not registered in the transfer records of the Company, a check for any cash to be paid upon due surrender of the Certificate may be paid to such a transferee if the Certificate formerly representing such shares of Company Common Stock is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer Taxes have been paid or are not applicable.

(iii) The Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable under this Agreement to any holder of shares of Company Common Stock or Company Stock Options, such amounts as are required to be withheld or deducted under the United States Internal Revenue Code of 1986, as amended (the “ Code ”) or any provision of United States state or local Tax Law or any foreign Tax Law with respect to the making of such payment. To the extent that amounts are so withheld or deducted and paid over to the applicable Governmental Entity, such withheld or deducted amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock or Company Stock Options, in respect of which such deduction and withholding were made.

(c) Closing of Transfer Books . At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or Parent for transfer, they shall be cancelled and exchanged for a check in the proper amount pursuant to this ARTICLE I .

(d) Termination of Exchange Fund . Any portion of the Exchange Fund (including the proceeds of any investments thereof) that remains undistributed to the former holders of shares of Company Common Stock for six months after the Effective Time shall be delivered to the Surviving Corporation upon demand, and any former holders of shares of Company Common Stock who have not surrendered their shares of Company Common Stock in accordance with this Section 1.8 shall thereafter look only to the Surviving Corporation for payment of their claim for the Merger Consideration without any interest thereon, upon due surrender of their shares.

(e) No Liability . Notwithstanding anything herein to the contrary, none of the Company, Parent, Merger Sub, the Surviving Corporation, the Paying Agent or any other person shall be liable to any former holder of shares of Company Common Stock for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

(f) 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 United States government. Any interest and other income resulting from such investments shall be paid to the Surviving Corporation pursuant to Section 1.8(d) .

(g) Lost Certificates . In the case of any Certificate that has 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 Paying Agent or Parent, the posting by such person of a bond in customary amount as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate a check in the amount of the number of shares of Company Common Stock as applicable, represented by such lost, stolen or destroyed Certificate multiplied by the Merger Consideration.

Section 1.9. Equity Awards .

(a) Effective as of the Effective Time, each option to purchase shares of Company Common Stock, including options granted under the Company Stock Plans (each, a “ Company Stock Option ”), whether vested or unvested, that is outstanding immediately prior to the Effective Time shall, as of the Effective Time, be cancelled in exchange for the right to receive an amount in cash in U.S. dollars equal to the product of (x) the total number of shares of Company Common Stock subject to such Company Stock Option and (y) the excess, if any, of the amount of the Merger Consideration over the exercise price per share of Company Common Stock subject to such Company Stock Option, with the aggregate amount of such payment rounded to the nearest cent (the aggregate amount of such cash hereinafter referred to as the “ Option Consideration ”) less such amounts as are required to be withheld or deducted under the Code or any provision of United States state or local Tax Law or any foreign Tax Law with respect to the making of such payment. For the avoidance of doubt, any Company Stock Option with a per-share exercise price that equals or exceeds the amount of the Merger Consideration shall be cancelled and no payment shall be made in respect thereof.

(b) (i) Effective as of the Effective Time, each award of a share of Company Common Stock granted under the 1997 Plan that is unvested immediately prior to the Effective Time (the “ Restricted Shares ”) shall, as of the Effective Time, subject to Section 1.9(b)(ii) , be cancelled in exchange for the right to receive the Merger Consideration in accordance with the provisions of Section 1.7(a) , less such amounts as are required to be withheld or deducted under the Code or any provision of United States state or local Tax Law or any foreign Tax Law with respect to the making of such payment.

(ii) With respect to each Restricted Share, the right to receive the Merger Consideration shall be subject to the terms and conditions of the 1997 Plan and the applicable Award Agreement that evidences such award, including any escrow, forfeiture and payment provisions thereunder.

(c) Prior to the Effective Time, the Company shall take all necessary and appropriate action (including obtaining any required consents) to effectuate the transactions contemplated by this Section 1.9 .

Section 1.10. Convertible Preferred Stock . On the Closing Date, the Company shall use its reasonable best efforts to cause all the outstanding shares of the Company Convertible Preferred Stock to be redeemed in consideration for the payment of the Redemption Amount.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as disclosed (i) in the Company SEC Documents that were publicly available on or prior to the date of this Agreement (other than disclosures in “Risk Factors” sections thereof and any other disclosures that are predictive or forward looking in nature) or (ii) in the disclosure schedule of even date herewith delivered by the Company to Parent immediately prior to the execution of this Agreement (the “ Company Disclosure Schedule ”), the Company represents and warrants to Parent and Merger Sub as follows:

Section 2.1. Qualification; Organization, Subsidiaries, etc.

(a) Each of the Company and its Subsidiaries is a legal entity duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted. Each of the Company and its Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification and good standing, except where the failure to be so qualified or in good standing, individually or in the aggregate, would not have a Company Material Adverse Effect. The Company has made available to Parent prior to the date of this Agreement a true and complete copy of the Company’s certificate of incorporation (the “ Company Charter ”) and the Company’s bylaws (the “ Company Bylaws ”), each as amended through the date of this Agreement. The Company Charter, the Company Bylaws and the certificate of incorporation and bylaws (or equivalent organizational documents) of each of the Company’s Subsidiaries (the “ Subsidiary Governance Documents ”) are in full force and effect. None of the Company or any of its Subsidiaries is in violation of any provision of the Company Charter, the Company Bylaws or the Subsidiary Governance Documents.

(b) Section 2.1(b) of the Company Disclosure Schedule lists each Subsidiary of the Company and its jurisdiction of organization. All the outstanding shares of capital stock or other ownership interests of each Subsidiary of the Company have been validly issued and are fully paid and nonassessable and are owned by the Company or by another Subsidiary of the Company, free and clear of all Liens. Except for its interests in the Subsidiaries of the Company set forth in Section 2.1(b) of the Company Disclosure Schedule, the Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person.

(c) As used in this Agreement, any reference to any fact, circumstance, event, change, effect or occurrence having a “ Company Material Adverse Effect ” means any fact, circumstance, event, change, effect or occurrence (each, an “ Effect ”) that, individually or in the aggregate with all other Effects, has had or would reasonably be expected to have a material adverse effect on the assets, liabilities, business, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole; provided , however , that in no event shall any of the following Effects, alone or in combination, be deemed to constitute, or be taken into account, in determining whether there is a Company Material Adverse Effect: (A) any change in general economic, business, financial, credit or market conditions; (B) any action taken by the Company that is expressly permitted or required by this Agreement; (C) any occurrence generally affecting the graphics and visual communications services industries or other industries in which the Company or any of its Subsidiaries operate in the United States; (D) any change in GAAP or applicable Law or the interpretation thereof; (E) any act of terrorism, war (whether or not declared), national disaster or any national or international calamity affecting the United States; (F) any change in the price or trading volume of the Company Common Stock in and of itself (provided that the underlying causes of such change may be taken into account in determining whether there is a Company Material Adverse Effect); or (G) any effect resulting from the announcement of this Agreement; or (H) any action taken at the written request of Parent or any of its affiliates or mutually agreed to in writing by the parties to this Agreement that, if taken without the written consent of Parent, would have been prohibited by the terms of this Agreement; except , in the case of the foregoing clauses (A), (C), (D) or (E), to the extent such Effect has a disproportionate impact on the Company and its Subsidiaries, taken as a whole, relative to the other participants in the industries in which they operate.

Section 2.2. Capitalization .

(a) The authorized capital stock of the Company consists of 30,000,000 shares of Company Common Stock and 1,000,000 shares of preferred stock of the Company, par value $0.01 per share, (“ Company Preferred Stock ”, and collectively with the Company Common Stock, “ Company Capital Stock ”). As of March 27, 2008, (i) 8,452,723 shares of Company Common Stock were issued and 8,033,943 shares of Company Common Stock (including 439,758 Restricted Shares) were outstanding, (ii) 418,780 shares of Company Common Stock were held in treasury, (iii) 300,000 Company Stock Options were outstanding, the holders and exercise prices of which are set forth in Section 2.2(a) of the Company Disclosure Schedule, (iv) 300,000 shares of Company Common Stock were reserved for issuance upon the exercise of stock options held by employees or directors of the Company pursuant to the employee and director stock plans of the Company (the “ Company Stock Plans ”) and (v) 267,595 shares of Company Preferred Stock, all of which were shares of convertible preferred stock, par value $0.01 per share, of the Company (“ Company Convertible Preferred Stock ”), were issued or outstanding, and related thereto, 5,352 shares of Company Convertible Preferred Stock were reserved for issuance in respect of accrued dividends on such shares of Company Convertible Preferred Stock, and 1,559,697 shares of Company Common Stock were reserved for issuance upon the conversion of such shares of Company Convertible Preferred Stock. All outstanding shares of Company Capital Stock and all shares of Company Capital Stock reserved for issuance as noted in clauses (iv) and (v) when issued in accordance with the respective terms thereof, are or will be duly authorized, validly issued, fully paid and non-assessable and free of pre-emptive rights, rights of first refusal or any similar rights. All Restricted Shares were issued pursuant to the Company’s 1997 Stock Award and Incentive Plan (the “ 1997 Plan ”) and the form of the Award Agreement thereunder, copies of which are attached to Section 2.2(a) of the Company Disclosure Schedule.

(b) Except as set forth in subsection (a) above, as of the date of this Agreement, (i) the Company does not have any shares of its capital stock issued or outstanding other than shares of Company Common Stock that have become outstanding after March 27, 2008, but were reserved for issuance as set forth in subsection (a) above, and (ii) there are no outstanding subscriptions, options, warrants, calls, convertible securities or other similar rights, agreements or commitments relating to the issuance of capital stock to which the Company or any of its Subsidiaries is a party obligating the Company or any of its Subsidiaries to (A) issue, transfer or sell any shares of capital stock or other equity interests of the Company or any Subsidiary of the Company or securities convertible into or exchangeable for such shares or equity interests, (B) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, (C) redeem or otherwise acquire any such shares of capital stock or other equity interests, or (D) provide a material amount of funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary.

(c) Neither the Company nor any of its Subsidiaries has outstanding preferred stock, 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 holders of the Company Common Stock on any matter in connection with the Merger and the transactions contemplated hereby.

(d) Pursuant to the terms of the Support Agreement and notwithstanding anything to the contrary set forth in the terms of the Company Convertible Preferred Stock, at the Effective Time, the Company Convertible Preferred Stock shall be redeemed in exchange for the payment of an amount set forth in the Support Agreement (the “ Redemption Amount ”).

(e) Except for the Support Agreement, there are no 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 2.3. Corporate Authority Relative to This Agreement; No Violation .

(a) The Company has requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby subject, in the case of the consummation of the Merger, to receipt of the Company Stockholder Approval. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Company Board (after the recommendation of the Special Committee) and, except with respect to the Merger for the Company Stockholder Approval, no other corporate proceedings on the part of the Company are necessary to authorize the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming this Agreement has been duly executed and delivered by Parent and Merger Sub, constitutes the valid and binding agreement 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, relating to creditors’ rights generally and (ii) equitable remedies 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 (the “ Bankruptcy and Equity Exception ”).

(b) The Company Board has unanimously (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) adopted and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, (iii) directed that this Agreement be submitted to the Company’s stockholders for their approval and (iv) resolved to recommend that the Company’s stockholders adopt this Agreement (collectively, the “ Recommendation ”).

(c) Other than in connection with or in compliance with (i) the DGCL and (ii) the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) or any applicable state securities or “blue sky” Laws (collectively, the “ Company Approvals ”), and subject to the accuracy of the representations and warranties of Parent and Merger Sub in Section 3.9 , no authorization, consent or approval of, or filing with, any United States or foreign federal, state or local governmental or regulatory agency, commission, court, body, entity or authority (each, a “ Governmental Entity ”) is necessary, under applicable Law, for the consummation by the Company of the transactions contemplated by this Agreement, except for such authorizations, consents, approvals or filings that, if not obtained or made, would not have, individually or in the aggregate, a Company Material Adverse Effect.

(d) The execution and delivery by the Company of this Agreement does not, and, except as described in Section 2.3(c) or set forth on Section 2.3(d) of the Company Disclosure Schedule, the consummation of the transactions contemplated hereby and compliance by the Company with the provisions of this Agreement will not (i) result in any material violation of, or material default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to the loss of a material benefit under any loan, guarantee of indebtedness or credit agreement, note, bond, mortgage, indenture, lease, sublease or similar arrangement, agreement, contract, instrument, permit, concession, franchise, right or license binding upon the Company or any of its Subsidiaries or to which any of them is a party or result in the creation of any liens, claims, mortgages, encumbrances, pledges, security interests, equities or charges of any kind (each, a “ Lien ”), other than any such Lien (A) for Taxes or governmental assessments, charges or claims of payment not yet due or being contested in good faith or for which adequate accruals or reserves have been established, (B) which is a carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar lien arising in the ordinary course of business, (C) which is disclosed on the most recent consolidated balance sheet of the Company or notes thereto or securing liabilities reflected on such balance sheet) or (D) which was incurred in the ordinary course of business since the date of the most recent consolidated balance sheet of the Company (each of the foregoing, a “ Permitted Lien ”), upon any of the properties or assets of the Company or any of its Subsidiaries, (ii) conflict with or result in any violation of any provision of the Company Charter or the Company Bylaws or any Subsidiary Government Document or (iii) conflict with or violate, in any material respect, any applicable Laws that are material to the Company and its Subsidiaries.

Section 2.4. SEC Reports and Financial Statements .

(a) Except as set forth on Section 2.4 of the Company Disclosure Schedule, the Company has filed or furnished (as applicable) all reports, forms, schedules, statements, certifications and other documents required to be filed or furnished with or to the United States Securities and Exchange Commission (the “ SEC ”) from January 1, 2006 (the “ Company SEC Documents ”). As of their respective dates, or, if amended, as of the date of the last such amendment, the Company SEC Documents complied in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), and the Exchange Act at the time they were filed (or, if amended at the time of such amendment), as the case may be, and the applicable rules and regulations promulgated thereunder, and none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Except for the Company’s Form 10-K for the year ended December 31, 2007, the Form 8-K filed on March 28, 2007 and the schedules, statements, certifications and other documents related thereto, the Company has not filed any reports, forms, schedules, statements, certifications and other documents with the SEC in the two Business Days immediately preceding the date of this Agreement.

(b) The consolidated financial statements (including all related notes and schedules) of the Company included in the Company SEC Documents (i) fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their consolidated cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein, including the notes thereto) and (ii) were prepared in conformity with United States generally accepted accounting principles (“ GAAP ”) (except, in the case of the unaudited statements, as permitted by the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto).

(c) The Company has made available to Parent true, correct and complete copies of the consolidated financial statements for the month of January of 2008, and such consolidated financial statements (i) fairly present the consolidated financial position of the Company and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their consolidated cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein, including the notes thereto) and (ii) were prepared in conformity with GAAP applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto).

(d) The Company SEC Documents include all certificates required to be included therein pursuant to Sections 302 and 906 of the Sarbanes Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder (“ SOX ”), and the internal control report and attestation of the Company’s outside auditors required by Section 404 of SOX. To the knowledge of the Company, the Company has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities. The Company’s principal executive officer and principal financial officer have no knowledge of any fraud that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. The Company has not identified any material weaknesses in the design or operation of its internal controls over financial reporting.

(e) The Company has made available to Parent true, correct and complete copies of all material written correspondence between the SEC, on the one hand, and the Company and any Subsidiary of the Company, on the other hand, since December 1, 2006. As of the date of this Agreement, there are no outstanding or unresolved comments in comment letters received from the SEC staff with respect to the Company SEC Documents. To the knowledge of the Company, none of the Company SEC Documents is the subject of ongoing SEC review or outstanding SEC comment.

Section 2.5. No Undisclosed Liabilities . Except (a) as reflected or reserved against in the Company’s consolidated balance sheets (or the notes thereto) included in the Company SEC Documents that were publicly available on or prior to the date of this Agreement, (b) as permitted or contemplated by this Agreement, (c) for liabilities and obligations incurred in the ordinary course of business since December 31, 2007, (d) for liabilities or obligations which have been discharged or paid in full in the ordinary course of business and (f) as set forth on Section 2.5 of the Company Disclosure Schedule, as of the date of this Agreement, neither the Company nor any Subsidiary of the Company has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries (or in the notes thereto).

Section 2.6. Absence of Certain Changes or Events . From December 31, 2007 through the date of this Agreement:

(a) except as contemplated by this Agreement, the businesses of the Company and its Subsidiaries have been conducted, in all material respects, in the ordinary course of business consistent with past practice;

(b) there has not been any event, development or state of circumstances that has had, individually or in the aggregate, a Company Material Adverse Effect;

(c) except as set forth in Section 2.6 of the Company Disclosure Schedule, there has not been any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any Company Capital Stock or any repurchase for value by the Company of any Company Capital Stock;

(d) there has not been any split, combination or reclassification of any Company Capital Stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of Company Capital Stock;

(e) except as set forth in Section 2.6 of the Company Disclosure Schedule, there has not been any sale, lease (as lessor), assignment, license, failure to maintain or other disposition of any material properties or assets, except in the ordinary course of business;

(f) there have not been any amendments to or changes in the Company Charter, Company Bylaws or Subsidiary Governance Documents;

(g) there has not been any change in accounting methods, principles or practices by the Company or any Subsidiary materially affecting the consolidated assets, liabilities or results of operations of the Company, except insofar as may have been required by a change in GAAP;

(h) to the knowledge of the Company, there have not been any claims, charges or grievances filed with any Governmental Entity by any individual, or asserted or threatened by any individual, Governmental Entity or any workers’ representative organization, bargaining unit or union regarding any unfair labor practice, claim of wrongful discharge or other unlawful employment or labor practice or action with respect to the Company or any Subsidiary;

(i) except as required pursuant to any existing contract set forth in Section 2.8 of the Company Disclosure Schedule, in the ordinary course of business, or set forth in Section 2.6 of the Company Disclosure Schedule, there has not been any increase in or other change to the salary, bonus or other compensation payable or to become payable by the Company to any of its officers, directors, employees or advisors, any execution of or amendment to any Employee Agreement, or any declaration, payment or commitment or obligation of any kind for the payment (whether in cash or equity) by the Company of a severance payment, change in control payment, termination payment, bonus or other additional salary or compensation (including any equity-based compensation) to any such person;

(j) except as set forth in Section 2.6 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has commenced, settled or, to the knowledge of the Company, been named a party to any lawsuit, and neither the Company nor any of its Subsidiaries has received written notice of any threat of any lawsuit or proceeding or other investigation against the Company or any of its Subsidiaries or relating to any of their businesses, properties or assets;

(k) except as set forth in Section 2.6 of the Company Disclosure Schedule, there has not been any issuance, grant, delivery, sale or purchase, or contract or agreement to issue, grant, deliver, sell or purchase, by the Company or any of its Subsidiaries, any shares of Company Common Stock or securities convertible into, or exercisable or exchangeable for, shares of Company Common Stock, or any subscriptions, warrants, options, rights or securities to acquire any of the foregoing;

(l) except as set forth in Section 2.6 of the Company Disclosure Schedule, there has not been any grant by the Company or any of its Subsidiaries of any severance, change-in-control or termination pay (in cash or otherwise) to any employee, including any officer;

(m) to the knowledge of the Company, there has not been any material damage to, destruction or loss of any material asset of the Company or any of its Subsidiaries (whether or not covered by insurance);

(n) there has not been any revaluation by the Company or any of its Subsidiaries of any of its assets, including the writing off of any notes or accounts receivable other than in the ordinary course of business; and

(o) there has not been any authorization, commitment or agreement to take, any of the foregoing actions.

Section 2.7. Compliance with Law; Permits .

(a) The Company and each of its Subsidiaries are in compliance with and are not in default under or in violation of any applicable federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, rule, regulation, ruling, judgment, order, injunction, decree or agency requirement issued, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity (collectively, “ Laws ” and each, a “ Law ”), except where such non-compliance, default or violation would not be material to the Company and its Subsidiaries, taken as a whole. Notwithstanding anything contained in this Section 2.7 , no representation or warranty shall be deemed to be made in this Section 2.7 in respect of the matters referenced in Section 2.4 , Section 2.5 or Section 2.6 or in respect of environmental matters (which are addressed exclusively in Section 2.9 ), employee benefits matters (which are addressed exclusively in Section 2.10 ), labor matters (which are addressed exclusively in Section 2.11 ), tax matters (which are addressed exclusively in Section 2.13 ) or intellectual property matters (which are addressed exclusively in Section 2.14 ).

(b) The Company and its Subsidiaries are in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for the Company and its Subsidiaries to own, lease and operate their properties and assets or to carry on their businesses as they are now being conducted (the “ Company Permits ”). The Company and each of its Subsidiaries are in compliance, in all material respects, with and are not in default under or in violation, in all material respects, of any Company Permit. All Company Permits are in full force and effect, except where the failure to be in full force and effect would not have, individually or in the aggregate, a Company Material Adverse Effect. No suspension or cancellation of any of the Company Permits is pending or, to the knowledge of the Company, threatened, except where such suspension or cancellation, individually or in the aggregate, would not have a Company Material Adverse Effect.

Section 2.8. Material Contracts .

(a) Except for this Agreement, the Company Benefit Plans or as filed with the SEC, Section 2.8(a) of the Company Disclosure Letter sets forth a correct and complete list of each contract (whether written or oral) to which the Company or any of its Subsidiaries is a party or by which any of them is bound which (all contracts of the type described in this Section 2.8 being referred to herein as “ Company Material Contracts ”):

(i) contains outstanding obligations in excess of two hundred fifty thousand dollars $250,000) in any twelve (12)-month period or is otherwise material (as such term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act) to the business of the Company and its Subsidiaries taken as a whole as currently conducted that cannot be terminated without penalty upon sixty (60) days’ prior written notice;

(ii) contains covenants limiting, in any material respect, the freedom of the Company or any of its Subsidiaries to engage in any line of business or to provide any products or services generally or in any market segment or in any geographic area, or to compete with any Person or restricting, in any material respect, the ability of the Company or any of its Subsidiaries to acquire equity securities of any Person;

(iii) provides that the Company or any of its Subsidiaries has (A) incurred, or may incur, any indebtedness for borrowed money or (B) given any guarantee in respect of indebtedness for borrowed money;

(iv) provides for a joint venture or partnership (without regard to legal form);

(v) is a standby letter of credit, performance or payment bond, or surety bond of any nature;

(vi) relates to an acquisition, divestiture, merger or similar transaction;

(vii) obligates the Company to make any capital commitment or expenditure (including pursuant to any joint venture) in excess of $250,000;

(viii) is a contract with any Material Customer or Material Supplier;

(ix) is an agreement under which the Company or any Subsidiary of the Company (A) grants to a third party any licenses or covenants not to sue or (B) is granted by a third party any licenses or covenants not to sue, in each case with respect to any Intellectual Property material to the Company or its Subsidiaries;

(x) is a contract, agreement or commitment with any employee, individual consultant, contractor, or salesperson of the Company or any of its Subsidiaries that (a) provides for annual compensation in excess of $50,000, (b) is not terminable at-will or (c) includes any obligation to provide severance benefits, termination pay (in cash, equity or otherwise), indemnification or advance notice of termination of the employment or consulting relationship;

(xi) is an agreement or plan, including any stock option plan, stock appreciation rights plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement;

(xii) restricts or prohibits, in any material respect, the Company or any Subsidiary from hiring or soliciting for hire any individual to perform employment or consulting services for the Company or any of its Subsidiaries; and

(xiii) was entered into after January 1, 2005 and provides for the settlement or release of any litigation or dispute involving the Company or any of its Subsidiaries that is material to the Company or any of its Subsidiaries, individually or in the aggregate.

(b) Neither the Company nor any Subsidiary of the Company is in breach of or default under the terms of any Company Material Contract in any material respect. To the knowledge of the Company, no other party to any Company Material Contract is in breach of, or default under, the terms of any Company Material Contract in any material respect. Each Company Material Contract is a valid and binding obligation of the Company or the Subsidiary of the Company which is party thereto and, to the knowledge of the Company, of each other party thereto, and is in full force and effect, subject to the Bankruptcy and Equity Exception.

(c) The Company has filed with the SEC each contract required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act or disclosed by the Company on a Current Report on Form 8-K.

Section 2.9. Environmental Laws and Regulations .

(a) Except as set forth on Section 2.9 of the Company Disclosure Schedule, (i) the Company and each of its Subsidiaries is in compliance, in all material respects, with all applicable Environmental Laws; (ii) the Company and each of its Subsidiaries possess and are in compliance, in all material respects, with all Company Permits required pursuant to Environmental Laws; (iii) none of the Company or any of its Subsidiaries has received any written claim or notice of violation from any Governmental Entity alleging that the Company or any of its Subsidiaries is in material violation of, or liable under, any Environmental Law that is otherwise unresolved; and (iv) there are no Actions pending (or, to the knowledge of the Company, threatened) against the Company or any of its Subsidiaries and there are no Orders of, or before, any Governmental Entity which are binding upon the Company or any of its Subsidiaries, in each case, relating to Environmental Laws, except, in each case, as would not be material to the Company and its Subsidiaries taken as a whole. This Section 2.9 sets forth the sole representation and warranty of the Company relating to environmental, health and safety matters, including those relating to Environmental Laws.

(b) As used herein, “ Environmental Law ” means any Law relating to (i) human health or safety as related to environmental protection or the protection or pollution of the environment (including air, water vapor, surface water, groundwater, drinking water supply, surface land or subsurface land) or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, in each case as in effect at the date of this Agreement.

(c) As used herein, “ Hazardous Substance ” means any substance, material or waste that is regulated, classified or otherwise characterized under, or pursuant to, an Environmental Law as “hazardous,” “toxic,” a “pollutant”, a “contaminant” or a “regulated substance.”

Section 2.10. Employee Benefit Plans .

(a) Section 2.10(a) of the Company Disclosure Schedule sets forth a true and complete list of each “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ ERISA ”)), and each employment, severance, consulting or similar contract, plan, arrangement or policy and each other material employee benefit, pension, profit-sharing, savings, deferred compensation, bonus, incentive stock option, and welfare plan and program, whether or not subject to ERISA, of the Company or its Subsidiaries or any person that, together with the Company or any of its Subsidiaries, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (an “ ERISA Affiliate ”) for the benefit of current or former employees, directors, or consultants of the Company or any of its Subsidiaries (the “ Company Benefit Plans ”).

(b) The Company has made available to Parent true and complete copies of each of the Company Benefit Plans and related documents, including (i) each writing constituting a part of such Company Benefit Plan (or in the case of an unwritten Company Benefit Plan, a written description thereof), including all amendments thereto and trust documents (if applicable), (ii) the three most recent Annual Reports (Form 5500 Series) and accompanying schedules, if any, and (iii) the most recent determination letter from the IRS (if applicable) for such Company Benefit Plan. Each of the Company Benefit Plans that is intended to be qualified under Section 401(a) of the Code and each trust established in connection with any such Company Benefit Plan that is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a favorable determination letter from the Internal Revenue Service (the “ IRS ”) and the Company is not aware of any reason why any such determination letter should be revoked or not be reissued.

(c) (i) Each of the Company Benefit Plans has been operated and administered in all material respects in accordance with its terms and the requirements of applicable Laws, including ERISA and the Code, (ii) no “prohibited transaction” within the meaning of Section 4975 of the Code or Sections 406 or 407 of ERISA and not otherwise exempt under Section 408 of ERISA that would result in material liability has occurred with respect to any Company Benefit Plan, (iii) there are no actions pending, or, to the knowledge of the Company, threatened or anticipated (other than routine claims for benefits in the ordinary course) by, on behalf of or against any of the Company Benefit Plans which could reasonably be expected to result in any material liability to the Company or any of its Subsidiaries and (iv) no administrative investigation, audit or other administrative proceeding by any Governmental Entity with respect to a Company Benefit Plan is pending, in progress, or, to the knowledge of the Company, threatened with respect to any Company Benefit Plan. In all material respects, all contributions (including all employer contributions and employee salary reduction contributions) required to have been made under any Company Benefit Plan to any funds or trusts established thereunder or in connection therewith have been timely made by the due date thereof.

(d) Neither the Company, any of its Subsidiaries or any ERISA Affiliate has, at any time within the last six years, maintained, contributed to, or had any obligation to contribute to, or has any liability (fixed or contingent) with respect to, any plan described in Section 413 of the Code, subject to Section 302 or Title IV of ERISA or to the funding requirements of Section 412 of the Code including any plan which constituted a “multiemployer plan” as defined in Section 3(37) or 4001(a)(3) of ERISA or a plan maintained in connection with any trust described in Section 501(c)(9) of the Code.

(e) Except as set forth on Section 2.10(e) of the Company Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not, alone or in combination with another event, (i) entitle any current or former employee, consultant, director, or officer of the Company or any of its Subsidiaries to severance pay, unemployment compensation or any other payment, except as expressly provided in this Agreement or under applicable Law, (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee, consultant, director or officer or result in any payment or funding of compensation or benefits under any of the Company Benefit Plans, except as expressly provided in this Agreement, or (iii) give rise to the payment of any amount that would not be deductible pursuant to Section 280G or Section 162(m) of the Code.

(f) Except as disclosed in Section 2.10(f) of the Company Disclosure Schedule, each Company Benefit Plan that is a “nonqualified deferred compensation plan” (as defined for purposes of Section 409A(d)(1) of the Code) has been operated since January 1, 2005 in good faith compliance with Section 409A of the Code and all applicable IRS guidance promulgated thereunder.

Section 2.11. Labor Matters .

(a) Neither the Company nor any of its Subsidiaries is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization. There are no labor unions or other or other organizations that have filed a petition with the National Labor Relations Board or any other government entity since January 1, 2005 seeking certification as the collective bargaining representative of any employee of the Company or any of its Subsidiaries. Since January 1, 2005, there has not been, and there is not pending or, to the knowledge of the Company, threatened, any (i) strike, lockout, slowdown, picketing or work stoppage with respect to any current or former employee of the Company or any Subsidiary or (ii) unfair labor practice charge, grievance or complaint filed or pending against the Company or any of the Subsidiaries. To the knowledge of the Company, there are no organizational efforts with respect to the formation of a collective bargaining unit presently being made or threatened involving employees of the Company or any of its Subsidiaries.

(b) Section 2.11(b) of the Company Disclosure Schedule contains a true and correct list of each employee of the Company and its Subsidiaries (the “ Business Employees ”) and, for each such Business Employee, Section 2.11(b) of the Company Disclosure Schedule identifies the following information: (i) employer; (ii) job title; (iii) job location; (iv) date of hire; (v) amount of current base salary or hourly rate of pay (as applicable); (vi) target incentive compensation for 2007 (commission and/or bonus, as applicable); (vii) total compensation received in 2006; (viii) any other special compensation or perquisites (e.g. automobile allowance); (ix) status as exempt or non-exempt from applicable overtime Laws; (x) accrued but unused vacation or paid time off; and (xi) whether such person is on a leave of absence and, if so, the type of leave of absence and the expected date of return from such leave of absence.

(c) There are no claims pending or, to the knowledge of the Company, threatened, before any Governmental Entity or arbitral forum against the Company or any of its Subsidiaries asserting any breach of contract, tort, or violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Equal Pay Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, ERISA or any other similar federal, state or local employment Law.

(d) Since January 1, 2005, neither the Company nor any of its Subsidiaries has effectuated (i) a “plant closing” (as defined in the Worker Adjustment and Retraining Notification Act (the “ WARN Act ”) (or any similar state, local or foreign law)) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or any Subsidiary or (ii) a “mass layoff” (as defined in the WARN Act (or any similar state, local or foreign law)) affecting any site of employment or facility of the Company or any of the Subsidiaries.

(e) Except as set forth in Section 2.11(e) of the Company Disclosure Schedule, since January 1, 2005, the Company and each of the Subsidiaries has complied in all material respects with all Laws relating to the hiring of employees and the employment of labor, including provisions thereof relating to the calculation and payment of wages, hours, classification as exempt or non-exempt from applicable minimum wage and overtime Laws, equal opportunity, employment discrimination, harassment, and retaliation, disability rights or benefits, employee leave issues, immigration, occupational safety and health, collective bargaining and the payment of social security and other Taxes.

(f) In all material respects, the Company and each of the Subsidiaries currently, and since January 1, 2005, has completed and maintain in its files Form I-9s with respect to each of its employees. Since January 1, 2005, neither the Company nor any of its Subsidiaries has received any notice from any Governmental Entity that any of its employees has a name or social security number that does not match the name or social security number maintained by any Governmental Entity.

(g) The Company and each of the Subsidiaries has no material liability for (i) any arrears of wages, severance pay or any penalty relating thereto for failure to comply with withholding and reporting all material amounts required by applicable Law or by agreement to be withheld and reported with respect to wages, salaries and other payments or (ii) with respect to any misclassification of any person as (A) an independent contractor rather than as an employee or (B) an employee exempt from state or federal minimum wage or overtime Laws.

(h) Except as set forth in Section 2.11(h) of the Company Disclosure Schedule, neither the Company nor any Subsidiary is a party to any contract, agreement, or arrangement with any employee or independent contractor receiving in excess of $50,000 of annual compensation from the Company or any Subsidiary that (i) restricts the right of the Company or any Subsidiary to terminate such person’s employment or consulting relationship without cause or without a specified notice period, or (ii) obligates the Company or any Subsidiary to pay severance equivalent to more than two weeks’ of such person’s base compensation or to provide vesting acceleration on shares, stock options, or other securities of the Company or any Subsidiary upon either a termination of such person’s employment or consulting relationship with the Company or any Subsidiary, or upon a change in control of the Company or any Subsidiary.

(i) To the knowledge of the Company, no officer, key employee, or group of employees of the Company or any Subsidiary has as of the date hereof given notice or indicated any intent to terminate their employment before the Closing Date or as a result of the transactions contemplated by this Agreement.

Section 2.12. Investigations; Litigation . Except as set disclosed on Section 2.12 of the Company Disclosure Schedule, as of the date of this Agreement, (a) to the knowledge of the Company, there is no investigation, inquiry or review pending or threatened by any Governmental Entity with respect to the Company or any of its Subsidiaries and (b)(i) there are no material Actions pending (or, to the knowledge of the Company, threatened) against or affecting the Company or any of its Subsidiaries, or any of their respective properties, at law or in equity, and (ii) there are no Orders of, or before, any Governmental Entity against or affecting the Company or any of its Subsidiaries or any of their respective properties.

Section 2.13. Tax Matters .

(a) Except as disclosed on Section 2.13 of the Company Disclosure Schedule, (i) the Company and each of its Subsidiaries have prepared and timely filed (taking into account any extension of time within which to file) all income Tax Returns and other material Tax Returns required to be filed by any of them as of the date of this Agreement and all such tax returns are true, correct and complete in all material respects, (ii) the Company and each of its Subsidiaries have paid all Taxes required to be paid by it (whether or not shown on any Tax Return), except Taxes which have not yet accrued or otherwise become due or that are being contested in good faith by appropriate proceedings, (iii) as of the date of this Agreement there are not pending or, threatened in writing, any audits, examinations, investigations, claims, disputes, actions or other proceedings in respect of Taxes against the Company or any of its Subsidiaries and since January 1, 2003 no claim for the assessment or collection of any Taxes has been asserted in writing against the Company or any of its Subsidiaries that has not been settled with all amounts due having been paid, (iv) no officer responsible for Tax matters of the Company has personal knowledge that any authority will propose or assess any additional material Taxes with respect to the Company or any Subsidiary (other than Taxes incurred in the ordinary course on income accruing after the date hereof), (v) neither the Company nor any of the Subsidiaries are presently the beneficiary of any extension of time within which to file any Tax Return, (vi) no written claim, or written notice of claim, has been made since January 1, 2003, by an authority in a jurisdiction where the Company or any of the Subsidiaries do not file Tax Returns, and no officer responsible for Tax matters of the Company has personal knowledge that the Company or any of the Subsidiaries is or may be subject to taxation by an authority in a jurisdiction where the Company or any of the Subsidiaries do not file Tax Returns, (vii) there are no liens for Taxes (other than Permitted Liens) upon any of the assets of the Company or any of the Subsidiaries, (viii) the Company and each of the Subsidiaries have delivered to Parent true, correct and complete copies of all Tax Returns, ruling requests, private letter rulings, closing agreements, settlement agreements, tax opinions, examination reports and statements of deficiencies filed or received since January 1, 2003, (ix) neither the Company nor any of the Subsidiaries have waived any statute of limitations in respect of material Taxes or agreed to any extension of time with respect to any material Tax payment, assessment, deficiency or collection, (x) since January 1, 2003, neither the Company nor any of the Subsidiaries has been a member of an affiliated group of corporations within the meaning of Section 1504(a) of the Code filing a consolidated federal income Tax Return nor does the Company or any of the Subsidiaries have any liability for Taxes of any other Person under Treasury Regulations § 1.1502-6 (or any similar provision of foreign, state or local Law), other than the consolidated group of which the Company is currently the parent corporation, (xi) 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, (xii) neither the Company nor any of the Subsidiaries is a party to any Tax allocation, indemnity or sharing arrangement (other than agreements among the Company and any of its Subsidiaries and other than customary Tax indemnifications contained in credit or other commercial agreements the primary purpose of which does not relate to Taxes), (xiii) the Company and each of the Subsidiaries has disclosed to the IRS all positions taken on their federal income Tax Returns which could give rise to a substantial understatement of Tax under Section 6662 of the Code and the Company and each of the Subsidiaries have not engaged in any transaction that could give rise to a disclosure obligation as a “listed transaction” under Section 6011 of the Code and Treasury Regulations promulgated thereunder during the four (4) year period ending on the date hereof, (xiv) neither the Company nor any of the Subsidiaries has any material income or gain reportable for a taxable period ending after the Closing Date but attributable to (A) a transaction occurring in, or (B) a change in accounting method made for, a taxable period beginning prior to the Closing Date which resulted in a deferred reporting of material income or gain from such transactions, a timing difference in the reporting of material income or gain between Tax and GAAP accounting methods or from such change in accounting method, (xv) neither the Company nor any of the Subsidiaries has distributed stock of another entity, and have not had its stock distributed by another entity, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or 361 of the Code, and (xvi) neither the Company nor any of the Subsidiaries are currently subject to a limitation pursuant to Section 382 or 383 of the Code or similar provisions of state, local or foreign law, other than with respect to the “ownership change” (within the meaning of Section 382 of the Code or a similar concept under the relevant state, local or foreign law) which occurred in 1997.

(b) As used in this Agreement, (i) “ Tax ” or “ Taxes ” means (A) any and all United States or foreign, federal, state, local or other taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity, including taxes on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, escheat,

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