AGREEMENT OF MERGER

Exhibit 2.1

Execution Version

AGREEMENT OF MERGER

among:

CMC Holdings LLC

a Delaware limited liability company,

Catalina Merger Sub, Inc.

a Delaware corporation, and

CATALINA MARKETING CORPORATION

a Delaware corporation

___________________________

Dated as of March 8, 2007

___________________________

TABLE OF CONTENTS

TABLE OF CONTENTS

TABLE OF CONTENTS

EXHIBITS

AGREEMENT OF MERGER

THIS AGREEMENT OF MERGER (“ Agreement ”) is made and entered into as of March 8, 2007 (the “ Agreement Date ”) by and among CMC Holdings, LLC (“ Parent ”), a Delaware limited liability company, Catalina Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“ Merger Sub ”) and Catalina Marketing Corporation, a Delaware corporation (the “ Company ”). Certain capitalized terms used in this Agreement are defined in Exhibit A .

RECITALS

WHEREAS, Parent, Merger Sub and the Company intend to effect a merger of Merger Sub with and into the Company (the “ Merger ”) in accordance with this Agreement and the Delaware General Corporation Law (the “ DGCL ”), and upon consummation of the Merger, Merger Sub will cease to exist, and the Company will become a wholly-owned subsidiary of Parent.

WHEREAS, the respective boards of directors of Parent, Merger Sub and the Company (in the case of the Company acting upon the recommendation of a special committee (the “ Special Committee” ) formed for the purpose of evaluating the desirability and directing negotiations for the Company in connection with the possible transactions contemplated hereby) have approved this Agreement and the Merger, and deem it advisable and in the best interest of the stockholders of each of the constituent corporations to consummate the Merger.

WHEREAS, concurrently with the execution of this Agreement, (i) ValueAct Capital Master Fund, L.P. (the “ Guarantor ”) has entered into (A) the Equity Commitment Letter, dated as of the date hereof, with Parent pursuant to which the Guarantor has agreed to provide certain equity financing to Parent, and (B) a limited guarantee, dated as of the date hereof, in favor of the Company with respect to the obligations of Parent and Merger Sub arising under, or in connection with, this Agreement (the “ Limited Guarantee ”), and (ii) the Guarantor has entered into the Voting Agreement, dated as of the date hereof (the “ Voting Agreement ”), in the form set forth as Exhibit B hereto.

AGREEMENT

The parties to this Agreement, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound, agree as follows:

ARTICLE I.

DESCRIPTION OF TRANSACTION

1.1           Merger of Merger Sub into the Company . Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease. The Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation” ).

1.2           Effect of the Merger . The Merger shall have the effects set forth 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, immunities, 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.

1.3           Closing; Effective Time . The consummation of the transactions contemplated by this Agreement (the “Closing” ) shall take place at the offices of Paul, Hastings, Janofsky & Walker LLP at 75 East 55th Street, New York, New York 10022 at 10:00 a.m. New York City Time on the second Business Day after the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions) or at such other place or on such other date as Parent and the Company shall mutually designate; provided, however, that if the Marketing Period has not ended at the time of the satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), the Closing shall occur on the date following the satisfaction or waiver of such conditions that is the earliest to occur of (a) a date during the Marketing Period to be specified by Parent on no less than three Business Days’ notice to the Company, (b) the final day of the Marketing Period, and (c) the Outside Date. The date on which the Closing takes place is referred to herein as the “ Closing Date .” A certificate of merger satisfying the applicable requirements of the DGCL (the “Certificate of Merger” ) shall be duly executed by the Company and simultaneously with the Closing shall be filed with the Secretary of State of the State of Delaware. The Merger shall become effective upon the date and time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or such other date and time as may be mutually agreed upon by Parent and the Company and set forth in the Certificate of Merger (the “Effective Time” ).

(a)           the Certificate of Incorporation of the Company as in effect immediately prior to the Effective Time shall be amended to read in its entirety as set forth on Exhibit C hereto and, as so amended, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended in accordance with the DGCL and such Certificate of Incorporation;

(b)           the Bylaws of the Company as in effect immediately prior to the Effective Time shall be amended to read in their entirety as set forth on Exhibit D hereto and, as so amended, shall be the Bylaws of the Surviving Corporation until thereafter amended in accordance with the DGCL and such Bylaws;

(c)           unless otherwise determined by Parent prior to the Effective Time, the directors of the Surviving Corporation shall be the respective individuals who are directors of Merger Sub immediately prior to the Effective Time, and shall serve until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation and Bylaws of the Surviving Corporation, or until their earlier death, resignation or removal, or otherwise as provided by applicable Legal Requirements. The Company shall

obtain and deliver to Merger Sub the valid resignations, effective as of the Effective Time, of each director of the Company and each Company Subsidiary (except those directors as may be designated by Merger Sub to the Company in writing prior to Closing); and

(d)           unless otherwise determined by Parent prior to the Effective Time, the officers of the Surviving Corporation shall be the respective individuals who are officers of the Company immediately prior to the Effective Time, and shall serve until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation and Bylaws of the Surviving Corporation, or until their earlier death, resignation or removal, or otherwise as provided by applicable Legal Requirements.

(a)           At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company:

(i)          any shares of Company Common Stock held by the Company or any wholly-owned Subsidiary of the Company (or held in the Company’s treasury) immediately prior to the Effective Time shall be canceled and retired and shall cease to exist, and no consideration shall be paid in exchange therefor;

(ii)        any shares of Company Common Stock held by the Guarantor, Parent, Merger Sub or any other Affiliates of the Guarantor immediately prior to the Effective Time shall be canceled and retired and shall cease to exist, and no consideration shall be paid in exchange therefor;

(iii)       except as provided in clauses “(i)” and “(ii)” above and subject to Section 1.5(b) and Section 1.10, each share of Company Common Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive $32.10 in cash (the “ Per Share Merger Price ”), without interest (for purposes hereof, each outstanding Share of Company Common Stock which was issued as part of a Company Stock Award and which is restricted shall be deemed vested (and therefore free of such restrictions) as of, and effective upon, the Effective Time); and

(iv)       each share of the common stock, $0.001 par value per share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into one share of common stock, $0.001 par value per share, of the Surviving Corporation.

(b)           If, during the period commencing on the Agreement Date and ending at the Effective Time, the outstanding shares of Company Common Stock are changed into a different number or class of shares by reason of any stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction, then the Per Share Merger Price and any other term of this Agreement dependent on the Per Share Merger Price shall be appropriately adjusted to provide the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such action and as so adjusted shall, from and after the date of such event, be the Per Share Merger Price or such other dependent term, subject to further adjustment in accordance with this sentence.

1.6           Company Options and Company SARs . As of immediately prior to and conditioned upon the Effective Time, each Company Option and Company SAR that is outstanding at such time shall, by virtue of the Merger, fully vest and become exercisable, without the consent of any holder of a Company Option or Company SAR, and shall, subject to each Company Option and Company SAR holder’s right, for a period of at least thirty (30) days ending at least five (5) days before the Effective Time, to exercise each such Company Option or Company SAR, in whole or in part (in the discretion of such Company Option or Company SAR holder), be converted into the right to receive cash, less any required tax withholdings in accordance with Section 1.10(d) below, in an amount equal to the product of (i) the number of shares of Company Common Stock underlying such Company Option or Company SAR (as adjusted to reflect any stock split, stock dividend, reverse stock split, reclassification, recapitalization or other similar transaction subsequent to the Agreement Date) and (ii) the excess, if any of (A) the Per Share Merger Price over (B) the exercise price or base price (in either case, as adjusted to reflect any stock split, stock dividend, reverse stock split, reclassification, recapitalization or other similar transaction subsequent to the Agreement Date) per share for such Company Option or Company SAR, as applicable.

1.7           Company Stock Units. As of immediately prior to and conditioned upon the Effective Time and without any action on the part of any holder of a Company Stock Unit and notwithstanding any term or condition thereof or the terms and conditions under any plans pursuant to which it was granted or pursuant to which it is held or maintained, each direct or indirect holder of a Company Stock Unit shall receive a number of unrestricted shares of Company Common Stock equal to the number of shares underlying such Company Stock Unit; provided that in the event the Deferred Compensation Plan is not terminated before the Effective Time, for these purposes the Deferred Compensation Plan Trust shall be considered the sole holder of the Company Stock Units attributable to the Deferred Compensation Plan. Each such share of Company Common Stock received in replacement of Company Stock Units shall be automatically converted into the right to receive the Per Share Merger Price, less any required tax withholdings in accordance with Section 1.10(d) below, on the same terms as all other shares of Company Common Stock, except that each such share shall be automatically converted into the right to receive the Per Share Merger Price without the requirement to present a certificate in exchange for receipt of the Per Share Merger Consideration. As of the Effective Time, all Company Stock Units shall no longer be outstanding and shall automatically cease to exist, and each Company Stock Unit holder or participant in the Deferred Compensation Plan shall cease to have any rights with respect thereto. The cash received upon the conversion set forth herein shall be credited to each applicable Deferred Compensation Plan participant’s book account, shall be deemed invested in any available investment fund under the Deferred Compensation Plan (except for a fund based upon the Company Common Stock) and shall be payable to the Deferred Compensation Plan participant only in accordance with the terms of the Deferred Compensation Plan (as amended to effectuate the foregoing).

1.8           ESPP . If the Effective Time occurs on or before June 30, 2007, the Company shall take all actions that may be necessary to terminate the ESPP (and any offering or purchase periods thereunder) contingent upon the occurrence of the Closing and shall refund each ESPP participants payroll deductions under the ESPP without interest as provided therein. If the Effective Time occurs on or after July 1, 2007, the Company shall take all actions that may be necessary to suspend the ESPP immediately following the current offering period under the

ESPP (which ends June 30, 2007). The Company shall provide the Parent with evidence that the ESPP has been administered in accordance with this Section 1.8 no later than five Business Days prior to the Effective Time.

1.9           Closing of the Company’s Transfer Books . At the Effective Time and following conversion into the right to receive the Merger Consideration, (a) all shares of Company Common Stock outstanding immediately prior to the Effective Time shall automatically be canceled and retired and shall cease to exist, and all holders of certificates representing shares of Company Common Stock that were outstanding immediately prior to the Effective Time shall cease to have any rights as stockholders of the Company; and (b) the stock transfer books of the Company shall be closed with respect to all shares of Company Common Stock outstanding immediately prior to the Effective Time. No further transfer of any such shares of Company Common Stock shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any shares of Company Common Stock outstanding immediately prior to the Effective Time (a “ Company Stock Certificate ”) is presented to the Payment Agent or to the Surviving Corporation or Parent, such Company Stock Certificate shall be canceled and shall be exchanged as provided in Section 1.10.

(a)           On or prior to the Closing Date, Parent shall select a reputable bank or trust company reasonably acceptable to the Company to act as payment agent in the Merger (the “ Payment Agent ”). At or prior to the Effective Time, Parent shall have deposited with the Payment Agent cash sufficient to pay the aggregate cash consideration payable to stockholders of record of the Company pursuant to Section 1.5 (such cash amount so deposited with the Payment Agent is referred to as the “ Payment Fund ”). The Payment Fund shall not be used for any other purpose. Until used for that purpose, the Payment Agent will invest the funds included in the Payment Fund in the manner directed by Parent; provided, however , that such investments shall be in obligations of or guaranteed by the United States of America or any agency or instrumentality thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $1 billion (based on the most recent financial statements of such bank which are then publicly available); provided that no such investment or losses thereon shall affect the Merger Consideration payable to stockholders of record of the Company, and Parent shall promptly provide, or shall cause the Surviving Corporation to promptly provide, additional funds to the Paying Agent for the benefit of the stockholders of record of the Company in the amount which is equal to the deficiency in the amount of cash required to fully satisfy such payment obligation. Any interest or other income resulting from the investment of such funds shall be the property of Parent.

(b)           Within five Business Days after the Effective Time, the Payment Agent will mail to the Persons who were record holders of Company Stock Certificates immediately prior to the Effective Time: (i) a letter of transmittal in customary form; and (ii) instructions for use in effecting the surrender of Company Stock Certificates in exchange for Merger Consideration. Upon surrender of a Company Stock Certificate to the Payment Agent for

exchange (or, if such shares are held in book-entry or other uncertificated form, upon the entry through a book-entry transfer agent of the surrender of such shares of Company Common Stock on a book-entry account statement (it being understood that any references herein to “Company Stock Certificates” shall be deemed to include references to book-entry account statements relating to the ownership of shares of Company Common Stock)), together with a duly executed letter of transmittal and such other documents as may be reasonably required by the Payment Agent or Parent: (A) the holder of such Company Stock Certificate shall be entitled to receive in exchange therefor the Merger Consideration, less any required tax withholdings in accordance with Section 1.10(d) below; and (B) the Company Stock Certificate so surrendered shall be canceled. The Payment Agent shall accept such Company Stock Certificates upon such reasonable terms and conditions as the Payment Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Until surrendered as contemplated by this Section 1.10(b), each Company Stock Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive Merger Consideration as contemplated by Section 1.5. If any Company Stock Certificate shall have been lost, stolen or destroyed, Parent or the Payment Agent may, in its discretion and as a condition precedent to the payment of any Merger Consideration with respect to the shares of Company Common Stock previously represented by such Company Stock Certificate, require the owner of such lost, stolen or destroyed Company Stock Certificate to provide an appropriate affidavit in form and substance reasonably satisfactory to the Surviving Corporation and to deliver a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against the Payment Agent, Parent or the Surviving Corporation with respect to such Company Stock Certificate.

(c)            Any portion of the Payment Fund that remains undistributed to holders of Company Common Stock as of the date one year after the Closing Date shall be delivered to the Surviving Corporation upon demand and any holders of Company Stock Certificates who have not theretofore surrendered their Company Stock Certificates in accordance with this Section 1.10 shall thereafter look only to the Surviving Corporation for satisfaction of their claims for Merger Consideration.

(d)           Each of the Payment Agent, Parent and the Surviving Corporation, as applicable, shall be entitled to deduct and withhold from any consideration payable to any (i) holder of any Company Stock Certificate (in his or her capacity as a holder of Company Common Stock), or (ii) holder of any Company Stock Award that was converted into the right to receive cash, pursuant to the Merger or this Agreement, such amounts as are required to be deducted or withheld from such consideration under the Code or any provision of state, local or foreign tax law or under any other applicable Legal Requirement. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

(e)            Neither Parent nor the Surviving Corporation shall be liable to any holder of any Company Stock Certificate or to any other Person with respect to any Merger Consideration delivered to any public official pursuant to any applicable abandoned property law, escheat law or similar Legal Requirement.

(a)          Notwithstanding anything to the contrary contained in this Agreement, shares of Company Common Stock outstanding immediately prior to the Effective Time held by a holder who has properly made a demand for appraisal of such shares in accordance with Section 262 of the DGCL (any such shares being referred to as “ Dissenting Shares ” until such time as such holder fails to perfect or otherwise loses such holder’s appraisal rights under Section 262 of the DGCL with respect to such shares) shall not be converted into or represent the right to receive Merger Consideration in accordance with Section 1.5. At the Effective Time, all Dissenting Shares shall no longer be outstanding and shall automatically be canceled and cease to exist, and each holder of Dissenting Shares shall cease to have any rights with respect thereto, except for such rights as are granted by the DGCL to a holder of Dissenting Shares.

(b)           If any Dissenting Shares shall lose their status as such (through failure to perfect or otherwise), then, as of the later of the Effective Time or the date of loss of such status, such shares shall automatically be converted into and shall represent only the right to receive Merger Consideration in accordance with Section 1.5, without interest thereon, upon surrender of the Company Stock Certificate representing such shares.

(c)           The Company shall give Parent: (i) prompt written notice of (A) any demand for appraisal received by the Company prior to the Effective Time pursuant to the DGCL, (B) any withdrawal received by the Company of any such demand and (C) any other demand, notice or instrument received by the Company prior to the Effective Time pursuant to the DGCL; and (ii) the opportunity to participate in all negotiations and proceedings with respect to any such demand, notice or instrument. The Company shall not make any payment or settlement offer prior to the Effective Time with respect to any such demand, notice or instrument unless Parent shall have given its prior written consent to such payment or settlement offer or unless otherwise required by an order, decree, ruling or injunction of a court of competent jurisdiction.

1.12         Further Action . If, at any time after the Effective Time, any further action is determined by Parent to be necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession of and to all rights and property of Merger Sub and the Company, the officers and directors of the Surviving Corporation and Parent shall be fully authorized (in the name of Merger Sub, in the name of the Company and otherwise) to take such action.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and Merger Sub that the statements contained in this Article II are true and correct, except as expressly set forth herein or in the disclosure schedule delivered by the Company to Parent and Merger Sub on the Agreement Date (the “ Disclosure Schedule ”) and except as set forth in the Company SEC Documents filed on or prior to the Agreement Date (other than disclosure of “Risk Factors” and other forward-looking or predictive statements). The Disclosure Schedule shall be arranged in parts corresponding to the numbered and lettered sections and paragraphs contained in this Article II and the disclosure in any section or paragraph shall qualify (a) the corresponding section or paragraph in this

Article II and (b) other sections and paragraphs in this Article II only to the extent that it is reasonably apparent that such disclosure qualifies, and constitutes an exception to, another representation and warranty contained in this Article II.

(a)           (i) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and (ii) each of the other Acquired Corporations, except for the Entities identified in Part 2.1(a) of the Disclosure Schedule, is a corporation, limited liability company or other legal Entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as applicable, except in the case of clause “(ii)” where the failure to be in good standing would not have a Company Material Adverse Effect. Each of the Acquired Corporations has all necessary corporate or similar power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own, lease and use its assets in the manner in which its assets are currently owned, leased and used; and (iii) to perform its obligations under all Contracts by which it is bound.

(b)           Each of the Acquired Corporations is qualified to do business as a foreign corporation, limited liability company or other legal entity and is in good standing, under the laws of all jurisdictions where the nature of its business requires such qualification, except where the failure to be so qualified would not have a Company Material Adverse Effect.

(c)           The Company has no Subsidiaries, except for the Entities identified in Part 2.1(c) of the Disclosure Schedule; and neither the Company nor any of the other Entities identified in Part 2.1(c) of the Disclosure Schedule owns any capital stock of, any equity or voting interest of any nature in, or any interest convertible into or exchangeable or exercisable for any equity or voting interest of, any other Entity, other than interests in the Entities identified in Part 2.1(c) of the Disclosure Schedule. Each of the Entities identified in Part 2.1(c) of the Disclosure Schedule is a wholly-owned direct or indirect subsidiary of the Company and, except as indicated in Part 2.1(c) of the Disclosure Schedule, no other Person holds any equity interest (contingent or otherwise) in such Entities. Part 2.1(c) of the Disclosure Schedule sets forth the jurisdiction of incorporation or organization of each such Entity. There is no Contract pursuant to which the Company is obligated to make or may become obligated to make any future investment in or capital contribution to any other Entity.

2.2           Certificate of Incorporation; Bylaws; Charters and Codes of Conduct . The Company has made available to Parent accurate and complete copies of the certificate of incorporation, bylaws and other charter and organizational documents of each of the respective Acquired Corporations, including all amendments thereto. Each such certificate of incorporation, bylaws or similar organizational documents are in full force and effect, and no Acquired Corporation is in violation of any of the provisions of its certificate of incorporation, bylaws or similar organizational documents, except as would not have a Company Material Adverse Effect. The Company has made available to Parent accurate and complete copies of: (a) the charters of all committees of the board of directors of the Company (the “ Company Board ”); and (b) any code of conduct or similar policy adopted by any of the Acquired Corporations or by

the board of directors, or any committee of the board of directors, of any of the Acquired Corporations, each as in effect on the Agreement Date.

2.3           Authority; Binding Nature of Agreement. The Company has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement and, subject to receipt of the Required Stockholder Vote, to consummate the transactions contemplated hereby. The Company Board, acting upon the unanimous recommendation of the Special Committee, has duly and unanimously (with Jeffrey W. Ubben not participating) adopted resolutions by which the Company Board has: (a) determined that this Agreement and the Merger and the consummation of the transactions contemplated hereby are advisable and fair to and in the best interests of the Company and its stockholders; (b) authorized and approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby; and (c) recommended the adoption of this Agreement by the holders of Company Common Stock and directed that this Agreement be submitted for consideration by the Company’s stockholders at the Company Stockholders Meeting. This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

(a)           The authorized capital stock of the Company consists of 150,000,000 shares of Company Common Stock, par value $0.01 per share, of which 46,883,841 shares were issued and outstanding as of March 2, 2007; and 5,000,000 shares of Preferred Stock, par value $0.01 per share, of which (1) 2,000,000 shares have been designated as Series X Junior Participating Preferred Stock and were reserved for issuance upon the exercise of rights granted under the Company Rights Agreement and (2) no shares have been issued or are outstanding. As of March 2, 2007: (i) no shares of Company Common Stock are held in the treasury of the Company; (ii) 6,856,003 shares of Company Common Stock are subject to issuance pursuant to stock options granted under the 1989 Plan and the 1999 Plan (stock options granted by the Company pursuant to the 1989 Plan, the 1999 Plan or otherwise are referred to collectively herein as “ Company Options ”); (iii) 1,002,406 shares of Company Common Stock are subject to issuance pursuant to the Company SARs granted under the 1999 Plan; (iv) 107,802 shares of Company Common Stock are subject to issuance pursuant to Company Stock Units held pursuant to the terms of the Deferred Compensation Plan; and (v) 1,221,972 shares of Company Common Stock are reserved for future issuance pursuant to the Company’s ESPP. Of the shares of Company Common Stock outstanding, 3,342,534 are subject to vesting under the terms of the 1999 Plan. All of the outstanding shares of Company Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable. There are no shares of Company Common Stock held by any of the Company’s Subsidiaries. None of the outstanding shares of Company Common Stock are entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right or subject to any right of first refusal in favor of the Company and, other than the Voting Agreement, there is no Company Contract relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any shares of Company Common Stock. No Acquired Corporation is under any obligation or bound by any

Contract pursuant to which it may become obligated to repurchase, redeem or otherwise acquire any outstanding shares of Company Common Stock. The Company is not a party to any voting agreements with respect to any shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries other than the Voting Agreement and, to the Knowledge of the Company, other than the Voting Agreement there are no irrevocable proxies and no voting agreements with respect to any shares of capital stock of, or voting interests in, the Company or any of its Subsidiaries.

(b)           Part 2.4(b) of the Disclosure Schedule sets forth the following information with respect to each Company Option outstanding as of March 2, 2007: (i) the name of the optionee; (ii) the number of shares of Company Common Stock subject to such Company Option; (iii) the exercise price of such Company Option; (iv) the date on which such Company Option was granted; (v) the extent to which such Company Option is vested and exercisable as of the Agreement Date; and (vi) the date on which such Company Option expires. The Company has made available to Parent accurate and complete copies of all stock option plans pursuant to which all currently outstanding Company Stock Awards were granted, and the forms of all stock option agreements evidencing such options.

(c)            Part 2.4(c) of the Disclosure Schedule sets forth the following information with respect to each Company SAR outstanding as of March 2, 2007: (i) the name of the holder of such Company SAR; (ii) the number of shares of Company Common Stock subject to such Company SAR; (iii) the exercise price of such Company SAR; (iv) the date on which such Company SAR was granted; (v) the extent to which such Company SAR is vested and exercisable as of the Agreement Date; and (vi) the date on which such Company SAR expires. The Company has made available to Parent accurate and complete copies of all plans pursuant to which all currently outstanding Company SARs were granted, and the forms of all agreements evidencing such Company SARs.

(d)           Part 2.4(d) of the Disclosure Schedule sets forth the following information with respect to each Company Stock Unit outstanding as of March 2, 2007: (i) the name of the beneficial holder of such Company Stock Unit; (ii) the number of shares of Company Common Stock subject to such Company Stock Unit; (iii) the extent to which such Company Stock Unit is vested as of the Agreement Date; and (iv) the date, if any, on which such Company Stock Unit expires.

(e)           Except as set forth in Sections 2.4(a), 2.4(b), 2.4(c) or 2.4(d) above, and except as set forth in Part 2.4(e) of the Disclosure Schedule and for rights under the ESPP to purchase shares of Company Common Stock, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital stock or other securities of any of the Acquired Corporations; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of the capital stock or other securities of any of the Acquired Corporations or otherwise has the right to vote on any matters on which the stockholders of any Acquired Corporation have the right to vote; (iii) rights agreement, stockholder rights plan (or similar plan commonly referred to as a “ poison pill ” ) or Contract under which any of the Acquired Corporations are or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities; (iv) stock appreciation rights, phantom stock awards or other similar rights that are linked to the

value of the Company Common Stock or the value of the Company or any part thereof, or (v) to the Company’s Knowledge, condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares of capital stock or other securities of any of the Acquired Corporations from any Acquired Corporation (items “(i)” through “(v)” above, collectively, “ Company Stock Rights ”).

(f)            All outstanding shares of Company Common Stock, Company Options, Company SARs, Company Stock Units and other securities of the Company have been issued and granted in compliance with: (i) all applicable securities laws and other applicable Legal Requirements; and (ii) all requirements set forth in applicable Contracts.

(g)           All of the shares of capital stock of each of the Company’s Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof, and are owned beneficially and of record by the Company or another wholly-owned Subsidiary of the Company, free and clear of any Encumbrances (except as set forth in Part 2.4(g) of the Disclosure Schedule), other than restrictions on transfer imposed by applicable securities laws.

(a)           The Company has made available to Parent accurate and complete copies of all registration statements, proxy statements, and other statements, reports, schedules, forms and other documents filed or furnished by the Company with the SEC since January 1, 2005 (the “ Company SEC Documents ”). All statements, reports, schedules, forms and other documents required to have been filed or furnished by the Company with the SEC have been so filed or furnished on a timely basis. None of the Company’s Subsidiaries is required to file any documents with the SEC. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the Agreement Date, then on the date of such filing): (i) each of the Company SEC Documents (including all financial statements included therein, exhibits and schedules thereto and documents incorporated by reference therein) complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be), including the Sarbanes-Oxley Act, to the extent then in effect and applicable; and (ii) none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The certifications and statements required by Rule 13a-14 of the Exchange Act, and Section 906 of the Sarbanes-Oxley Act relating to the Company SEC Documents required of the principal executive officer of the Company and principal financial officer of the Company are accurate and complete, and complied as to form and content with all applicable Legal Requirements as of the date of such filing (or, if amended or superseded by a filing prior to the Agreement Date, then on the date of such filing).

(b)           The financial statements (including any related notes) contained in the Company SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated in the

notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q or Form 8-K of the SEC, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments that will not, individually or in the aggregate, be material in amount); and (iii) fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of the Company and its consolidated subsidiaries for the periods covered thereby. For purposes of this Agreement, “ Company Balance Sheet ” means that consolidated balance sheet of the Company and its consolidated subsidiaries as of December 31, 2006 made available to Parent and the “ Company Balance Sheet Date ” means December 31, 2006.

(c)           The Company maintains disclosure controls and procedures that satisfy the requirements of Rule 13a-15 under the Exchange Act. Such disclosure controls and procedures are effective to ensure that all material information concerning the Acquired Corporations is made known on a timely basis to the individuals responsible for the preparation of the Company’s filings with the SEC.

(d)           The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(e)           The Company is in compliance in all material respects with the provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder applicable to it. To the Knowledge of the Company, there have been no material violations of provisions of the Company’s code of ethics. Neither the Company nor any of its Subsidiaries is a party to, or has a legally binding obligation to become a party to, any joint venture, off-balance sheet partnership or any similar contract (including any contract relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including any structured finance, special purpose or limited purpose entity or person, on the other hand, or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC but excluding any leases, deferred purchase price or other Ordinary Course transaction)), where the purpose or effect of such contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company’s or any of its Subsidiaries published financial statements or other Company SEC Documents.

(f)            Except for this Agreement and the Merger, or as contemplated hereby, there are no transactions, or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions, or series of related transactions, between any Acquired Corporation, on the one hand, and the Company’s Affiliates (other than Subsidiaries of the Company), on the other hand, that would be required to be

disclosed under Item 404 of Regulation S-K promulgated under the Securities Act as currently applicable to the Company.

2.6           Absence of Changes. Since the Company Balance Sheet Date, except as set forth in Part 2.6 of the Disclosure Schedule:

(a)           each of the Acquired Corporations has operated its respective business in the ordinary course and consistent with past practices;

(b)           there has not been any Company Material Adverse Effect, and no fact, event, circumstance or condition exists or has occurred that could reasonably be expected to have a Company Material Adverse Effect;

(c)           none of the Acquired Corporations has (i) declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock or other securities, payable in cash, stock, property or otherwise, or set aside funds therefor, or (ii) reclassified, combined, split, subdivided, repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities;

(d)           none of the Acquired Corporations has sold, issued or granted, pledged, encumbered, transferred or authorized the issuance of, (i) any capital stock (except for Company Common Stock issued upon the valid exercise of outstanding Company Stock Awards or pursuant to the ESPP), (ii) any option, warrant or right to acquire any capital stock or any other security (except under any outstanding awards under the Award Plans on the Company Balance Sheet Date or pursuant to the ESPP), (iii) any instrument convertible into or exchangeable for any capital stock or other security (except for outstanding Company Stock Awards on the Company Balance Sheet Date), or (iv) any other ownership interest or “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units of the Company or any of its Subsidiaries (except under any outstanding awards under the Award Plans on the Company Balance Sheet Date or pursuant to the ESPP);

(e)            the Company has not amended or waived any of its material rights under, or permitted the acceleration of vesting under, any provision of (i) any of the Award Plans; (ii) any Company Stock Awards or any Contract evidencing or relating to any Company Stock Awards; (iii) any restricted stock purchase agreement; or (iv) any other Contract evidencing or relating to any equity award (whether payable in cash or stock);

(f)            there has been no amendment to the certificate of incorporation, bylaws or other charter or organizational documents of any of the Acquired Corporations, and none of the Acquired Corporations has effected or been a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

(g)           none of the Acquired Corporations has formed any Subsidiary or acquired any equity interest or other interest in any other Entity in excess of $10 million, either individually or in the aggregate (including by merger, consolidation or acquisition of stock or assets or other business combination);

(h)          except in the ordinary course of business consistent with past practices, none of the Acquired Corporations has amended or terminated, or knowingly waived any material right or remedy under, any Material Contract;

(i)            none of the Acquired Corporations has written off as uncollectible other than in the ordinary course of business consistent with past practice, or established any extraordinary reserve with respect to, any account receivable or other indebtedness;

(j)            except in the ordinary course of business consistent with past practices, none of the Acquired Corporations has made any pledge of any of its assets or otherwise permitted any of its assets to become subject to any Encumbrance, except for Permitted Encumbrances;

(k)           none of the Acquired Corporations has: (i) lent money to any Person other than money advanced to its employees in the ordinary course of business consistent with past practice or to an Acquired Corporation; or (ii) except under the Company Senior Credit Facility, incurred, guaranteed or assumed any indebtedness for borrowed money (other than intercompany transactions between Acquired Corporations) or entered into any “keep well” or other arrangement to maintain the financial condition of any Person having the same economic effect;

(l)            none of the Acquired Corporations has changed any of its methods of accounting or accounting practices other than as required by the rules and regulations of the SEC or by GAAP;

(m)          except to the extent consistent with past practices, none of the Acquired Corporations has made any material Tax election;

(n)           none of the Acquired Corporations has commenced or settled any material Legal Proceeding which would reasonably be expected to expose any Acquired Corporation to any material liability;

(o)           none of the Acquired Corporations has entered into any material transaction or taken any other material action, in each case, outside the ordinary course of business or inconsistent with past practices;

(p)           none of the Acquired Corporations has, except as required by applicable Legal Requirements: (i) except in the ordinary course of business consistent with past practices, adopted, established or entered into any Company Employee Plan or caused or permitted any Company Employee Plan to be amended in any material respect; (ii) adopted, established or entered into any collective bargaining agreement; or (iii) paid any bonus or made any profit-sharing or similar payment to, or materially increased the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, officers or employees other than in the ordinary course of business consistent with past practices;

(q)           except in the ordinary course of business consistent with past practices or with the approval of the compensation committee of the Company Board, none of the Acquired Corporations has (i) granted to any current or former executive officer any increase in

compensation, severance, termination, pay or fringe or other benefits, or (ii) entered into a new, or amended (including by accelerating rights or benefits under) any existing employment, consulting, indemnification, change of control, severance or termination agreement with any current or former officer (other than in connection with the hiring of new employees);

(r)           none of the Acquired Corporations has made any capital expenditures in excess of $7.5 million in the aggregate over and above the budget for capital expenditures made available to Parent and Merger Sub prior to the date of this Agreement;

(s)            none of the Acquired Companies has entered into any contracts, agreements or arrangements that materially limit the ability of any Acquired Corporation to compete in the Company’s currently contemplated lines of business with any Person in any geographic area for any period of time; and

(t)            none of the Acquired Corporations has agreed or committed to take any of the actions referred to in clauses “(c)” through “(s)” above.

2.7           Title to Assets . The Acquired Corporations own, and have good and valid title to, all assets purported to be owned by them, including all assets reflected on the Company Balance Sheet (except for inventory sold or otherwise disposed of in the ordinary course of business consistent with past practices since the Company Balance Sheet Date). All of said assets are owned by the Acquired Corporations free and clear of any Encumbrances, except for (i) Permitted Encumbrances, and (ii) liens of immaterial amount or significance. The Acquired Corporations are the lessees of, and hold valid leasehold interests in, all assets purported to have been leased by them, including all assets reflected as leased on the Company Balance Sheet.

2.8           Receivables . All existing material accounts receivable of the Acquired Corporations: (i) represent valid obligations of customers of the Acquired Corporations arising from bona fide transactions entered into in the ordinary course of business consistent with past practices; and (ii) are current and, to the Company’s Knowledge, will be collected in full when due, without any counterclaim or set off (net of allowances for doubtful accounts taken in the ordinary course of the Acquired Corporations’ businesses consistent with past practices (taken as a whole)).

2.9           Intellectual Property . Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, and except as set forth in Part 2.9 of the Disclosure Schedule,

(a)           the Acquired Corporations own all right, title, and interest in, or have the right to use, pursuant to a license or otherwise, in each case, free and clear of all Encumbrances except Permitted Encumbrances, all Intellectual Property (the “ Company Intellectual Property ”) required to operate their respective businesses as presently conducted;

(b)           Part 2.9(b) of the Disclosure Schedule lists all registrations and applications for registration or issuance of Company Intellectual Property owned or purported to be owned by the Acquired Corporations and included in the Company Intellectual Property, and all such registrations and applications are subsisting in good standing, unexpired, and are not the subject of any opposition, cancellation, re-examination or other invalidation proceeding;

(c)          the Acquired Corporations have filed or caused to be filed all affidavits, renewals, statements of use, maintenance filings and declarations, and paid or caused to be paid all fees and charges necessary to maintain in good standing the items of Intellectual Property disclosed at Part 2.9(b) of the Disclosure Schedule;

(d)           as of the date hereof, the Acquired Corporations have not received any written notice of any claims or threatened Legal Proceedings alleging that the conduct of the businesses of the Acquired Corporations infringe, misappropriate or otherwise violate the Intellectual Property of any other Person, including without limitation cease and desist letters or offers of license, except for any of the foregoing that have since been resolved;

(e)            to the Company’s Knowledge, no third party has interfered with, infringed upon, misappropriated, or otherwise violated any Company Intellectual Property;

(f)            there are no Legal Proceedings pending or, to the Company’s Knowledge, threatened in writing, challenging the ownership, enforceability, validity or use of any Company Intellectual Property owned by the Acquired Corporations;

(g)           the Acquired Corporations take and have taken commercially reasonable actions to maintain and preserve their material Company Intellectual Property; and

(h)           the information technology systems used in the businesses of the Acquired Corporations, including by way of example and not limitation, the transaction processing, point of sale and other enterprise software, hardware and telecommunications systems owned, licensed leased, operated on behalf of, or otherwise held for use in the business of the Acquired Corporations, perform reliably and are adequate to meet the needs of the businesses of the Acquired Corporations as currently conducted.

(a)           For purposes of this Agreement, each of the following shall be deemed to constitute a “Material Contract” (whether written or oral):

(i)          any Company Contract that is required by the rules and regulations of the SEC to be filed as an exhibit to the Company SEC Documents;

(ii)        any Company Contract: (A) relating to the employment of any employee or retention of any consultant or independent contractor that requires payments of base salary or amounts in excess of $300,000 on an annual basis to any Person; (B) the terms of which obligate or may in the future obligate any of the Acquired Corporations to make any severance, termination or similar payment to any current employee relating to a period of 12 months or more following termination of employment or resulting solely from the consummation of the transactions contemplated by this Agreement; or (C) pursuant to which any of the Acquired Corporations is obligated to make any bonus payment (other than payments constituting sales commissions or sales-related bonuses) in excess of $150,000 to any current or former employee or director;

(iii)      any Company Contract relating to the acquisition, transfer, development or sharing of any material Intellectual Property (except for any Company Contract pursuant to which (A) any material Intellectual Property is licensed to the Acquired Corporations under any third party software license generally available to the public, or (B) any material Intellectual Property is licensed by any of the Acquired Corporations to any Person on a non-exclusive basis);

(iv)       any Company Contract which provides for indemnification of any officer, director or employee;

(v)         any Company Contract which is reasonably likely to involve aggregate annual payments by any Acquired Corporation of more than $10,000,000 or annual revenue of more than $10,000,000;

(vi)       any Company Contract that materially limits the ability of any Acquired Corporation to compete in any currently contemplated line of business with any Person in any geographic area for any period of time; and

(vii)      any joint venture Contracts, partnership arrangements or other agreements outside the ordinary course of business involving a sharing of profits, losses, costs or liabilities of any Person by any Acquired Corporation;

(viii)     any Company Contract entered into by any Acquired Corporation and any other Person providing for the acquisition by any Acquired Corporation (including by merger, consolidation, acquisition of stock or assets or any other business combination) of any corporation, partnership, other business organization or division or unit thereof or any material amount of assets of such other Person in an amount in excess of $3,000,000, in the aggregate.

(b)           Except as would not reasonably be expected to cause a Company Material Adverse Effect, each Material Contract is valid and in full force and effect, and is enforceable by one or more Acquired Corporations and to the Knowledge of the Company, each other party thereto, in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

(c)           To the Company’s Knowledge and except as would not reasonably be expected to cause a Company Material Adverse Effect, (i) none of the Acquired Corporations has violated or breached, or committed any default under, any Material Contract, and (ii) no other Person has violated or breached, or committed any default under, any Material Contract.

(d)           To the Company’s Knowledge, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to: (i) result in a violation or breach of any provision of any Material Contract; (ii) give any Person the right to declare a default or exercise any remedy under any Material Contract; (iii) give any Person the right to receive or require a rebate, chargeback, penalty or change in delivery schedule under any Material Contract; (iv) give any Person the right to accelerate the maturity or performance of any Material Contract; or (v) give any Person the right to cancel, terminate or

modify any Material Contract; in each case of clauses “(i)” through “(v)” above, except as would not reasonably be expected to have a Company Material Adverse Effect.

(e)            Part 2.10(e) of the Disclosure Schedule lists all Material Contracts as of the Agreement Date. The Company has made available to Parent true and correct copies of each Material Contract (including all amendments thereto and modifications and waivers thereunder).

2.11         Liabilities. Except as would not reasonably be expected to have a Company Material Adverse Effect, none of the Acquired Corporations has any accrued, contingent or other liabilities or obligations of any nature, either matured or unmatured, except for: (a) liabilities identified as such in the “ liabilities ” column of the Company Balance Sheet; (b) normal and recurring liabilities that have been incurred by the Acquired Corporations since the Company Balance Sheet Date in the ordinary course of business and consistent with past practices; (c) liabilities for performance of obligations under Company Contracts; and (d) liabilities and obligations under this Agreement.

2.12         Compliance with Legal Requirements. Each of the Acquired Corporations is, and at all times since April 1, 2005, has been, in compliance in all material respects with all applicable Legal Requirements, except for any noncompliance which would not reasonably be expected to have a Company Material Adverse Effect. Since April 1, 2005, none of the Acquired Corporations has received any written notice or other communication from any Governmental Body regarding any actual or possible violation of, or failure to comply with, any Legal Requirement, except for violations or failures to comply which would not reasonably be expected to have a Company Material Adverse Effect.

2.13         Governmental Authorizations. The Acquired Corporations hold all Governmental Authorizations necessary to enable the Acquired Corporations to conduct their respective businesses in the manner in which such businesses are currently being conducted, except where the failure to have such authorization would not reasonably be expected to have a Company Material Adverse Effect. All such Governmental Authorizations are valid and in full force and effect, and no suspension of any Governmental Authorization is pending, or to the Knowledge of the Company, threatened. Each Acquired Corporation is, and at all times since April 1, 2005 has been, in compliance in all material respects with the terms and requirements of such Governmental Authorizations. Since April 1, 2005, none of the Acquired Corporations has received any notice or other communication from any Governmental Body regarding: (a) any actual or possible violation of or failure to comply with any term or requirement of any Governmental Authorization; or (b) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Authorization, except in the case of clause “a” and “b” for any violation, failure to comply, revocation, withdrawal, suspension, cancellation, termination or modification which would not reasonably be expected to have a Company Material Adverse Effect.

2.14         Tax Matters. In each case, except as set forth in Part 2.14 of the Disclosure Schedule:

(a)           All Tax Returns required to be filed by or with respect to each Acquired Corporation have been properly prepared and timely filed, and all such Tax Returns (including

information provided therewith or with respect thereto) are true, correct and complete, except for Tax Returns as to which the failure to so file or be true and complete has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

(b)           Each Acquired Corporation has fully and timely paid all Taxes (whether or not shown to be due on the Tax Returns referred to in Section 2.14(a)), except for Taxes being contested in good faith and for which adequate reserves have been established in accordance with GAAP and for Taxes as to which the failure to pay has not had, and would not reasonably be expected to have, a Company Material Adverse Effect. Without taking into account any transaction contemplated by this Agreement and based on activities to date, adequate reserves in accordance with GAAP have been established by each Acquired Corporation for all material Taxes not yet due and payable in respect of taxable periods ending on the date hereof.

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

(d)           No material deficiency for any amount of Tax has been asserted or assessed by any Taxing Authority in writing against any Acquired Corporation (or, to the knowledge of the Company, has been threatened or proposed), except for deficiencies which have been satisfied by payment, settled or been withdrawn or which are being contested in good faith and are Taxes for which such Acquired Corporation has set aside adequate reserves in accordance with GAAP. No audit or other proceeding by any Taxing Authority is pending or threatened in writing with respect to a material amount of Taxes due from or with respect to any Acquired Corporation. No claim has been made in writing by a Taxing Authority in a jurisdiction in which the Company or any Subsidiary of the Company does not file Tax Returns that the Company or any Subsidiary or Company is or may be subject to taxation in that jurisdiction. None of the Acquired Companies has waived the statute of limitations with respect to any material amount of Taxes or agreed to an extension of time with respect to any material amount of Tax assessment or deficiency.

(e)           There are no Tax indemnification, allocation or sharing agreements (or similar agreements) under which any Acquired Corporation could be liable for the Tax liability of an entity that is not an Acquired Corporation.

(f)            There are no material Liens with respect to Taxes upon any of the assets or properties of any Acquired Corporation, other than with respect to Taxes not yet due and payable.

(g)           Except as disclosed in its Tax Returns, each Acquired Corporation has not received approval to make or agreed to a change in any accounting method or has any written application pending with any Taxing authority requesting permission for any such change. There are no requests for rulings or determinations in respect of any Taxes or Tax Returns pending between the Company or any Subsidiary of the Company and any Taxing Authority.

(h)          Each Acquired Corporation is not party to or bound by any active closing agreement pursuant to Section 7121 of the Code (or any similar provision of state, local or foreign law) or offer in compromise with any Taxing authority.

(i)            Each Acquired Corporation has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement.

(j)            Each Acquired Corporation has not entered into a “listed transaction” that has given rise to a disclosure obligation under Section 6011 of the Code and the Treasury Regulations promulgated thereunder and that has not been disclosed in the relevant Tax Return of such Acquired Corporation.

(k)           None of the Acquired Corporations (i) has been a member of an affiliated group of corporations filing a consolidated federal income tax return (other than the group the common parent of which is the Company) or has any liability for Taxes of any Person (other than an Acquired Corporation) pursuant to Treasury Regulations Section 1.1502-6 or similar provision of state local or foreign law).

(l)            The Company has made available to Parent true and correct copies of all federal income Tax Returns filed by the Acquired Corporations for each of the fiscal years ended March 31, 2006, 2005 and 2004.

(a)           Part 2.15(a) of the Disclosure Schedule lists all material employee pension benefit plans (as defined in Section 3(2) of ERISA), all employee welfare benefit plans (as defined in Section 3(1) of ERISA), and all other material bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance, “voluntary employee benefit association” (“ VEBA ”) within the meaning of Section 501(c)(9) of the Code, and other similar benefit plans, programs, Contracts, arrangements or policies (including a specific identification of those which contain change of control provisions or pending change of control provisions), and any employment, executive compensation, or severance agreements (including a specific identification of those which contain change of control provisions or pending change of control provisions), written or otherwise, as amended, modified or supplemented, for the benefit of, or relating to, any foreign or domestic former or current employee, officer, director, independent contractor or consultant (or any of their beneficiaries) of any Acquired Corporation or any other Entity (whether or not incorporated) which is a member of a controlled group which includes any of the Acquired Corporations or which is under common control with any of the Acquired Corporations within the meaning of Sections 414(b), (c), (m) or (o) of the Code or Section 4001(a) (14) or (b) of ERISA (each an “ ERISA Affiliate ”), as well as each plan with respect to which any of the Acquired Corporations could incur material liability (collectively, the “ Company Employee Plans ”). The Company has made available to Parent copies of (i) each such written Company Employee Plan, including (without limitation) all material amendments thereto and all related trust agreements, administrative service agreements, group annuity contracts, group insurance contracts, and policies pertaining to liability insurance covering the fiduciaries for each Company Employee Plan, summary plan descriptions, summaries of material

modifications, registration statements (including all attachments), prospectuses and communications distributed to plan participants, (ii) with respect to any such Company Employee Plan and related trust which is intended to qualify under Sections 401(a) and 501(a) of the Code, respectively, the most recent favorable determination or opinion letter from the IRS as to its qualified status under the Code; (iii) the three most recent annual reports on Form 5500 series, with accompanying schedules and attachments, filed with respect to each Company Employee Plan required to make such a filing, (iv) the latest reports which have been filed with the U.S. Department of Labor with respect to each Company Employee Plan required to make such filing, (v) financial and other information regarding current and projected liabilities with respect to each Company Employee Plan for which the filings described in (ii), (iii) or (iv) above are not required under ERISA, (vi) all correspondence between the Internal Revenue Service and/or the Department of Labor and the Company and/or any of the other Acquired Corporations.

(b)           (i) Other than as set forth in Part 2.15(b) of the Disclosure Schedule, (A) No Company Employee Plan is now or at any time has been subject to Part 3, Subtitle B of Title I of ERISA or Title IV of ERISA, and (B) none of the Company Employee Plans promises or provides retiree medical, death, disability or other retiree welfare benefits to any person (other than continuation coverage to the extent required by law, whether pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 or otherwise); (ii) to the Company’s Knowledge, no party in interest or disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of the Code) has engaged in a transaction with respect to any Company Employee Plan which could subject any of the Acquired Corporations, directly or indirectly, to a material tax, penalty or other material liability for prohibited transactions under ERISA or Section 4975 of the Code; (iii) to the Company’s Knowledge, no fiduciary of any Company Employee Plan has breached any of the responsibilities or obligations imposed upon fiduciaries under Title I of ERISA; (iv) all Company Employee Plans have been established and maintained substantially in accordance with their terms (except that in any case in which any Company Employee Plan is currently required to comply with a provision of ERISA or of the Code, but is not yet required to be amended to reflect such provision, it has been maintained, operated and administered in accordance with such provision) and have been operated in compliance in all material respects with all applicable Legal Requirements, and may by their terms be amended and/or terminated at any time without the consent of any other Person subject to applicable Legal Requirements and the terms of each Company Employee Plan; (v) each of the Acquired Corporations has performed all material obligations required to be performed by them under, and are not in any material respect in default under or in violation of, any Company Employee Plan, and none of the Acquired Corporations has any Knowledge of any default or violation by any other Person with respect to, any of the Company Employee Plans; (vi) each Company Employee Plan which is intended to be qualified under Section 401(a) of the Code is the subject of a favorable determination letter from the Internal Revenue Service as to such plan’s qualified status under Section 401(a) of the Code (or comparable letter, such as an opinion or notification letter as to the form of plan or prototype plan adopted by one or more Acquired Corporations upon which such Acquired Corporation is permitted to rely), and nothing has occurred since the issuance of such letter which may reasonably be expected to impair such favorable determination or otherwise impair or result in the revocation of the qualified status of such plan; provided that the Company shall not be responsible for any such occurrences resulting from actions taken by third party service providers to any such plan, unless such actions were taken with the Company’s

Knowledge, (vii) the Acquired Corporations and each ERISA Affiliate are in compliance in all material respects with the provisions of ERISA and the Code applicable to the Company Employee Plans; (viii) all contributions to, and payments from, the Company Employee Plans which have been required to be made in accordance with the Company Employee Plans have been timely made (including without limitation any insurance premiums due under an insurance policy related to a Company Employee Plan); and (ix) except those to be made from a trust qualified under Section 401(a) of the Code, for any period ending before the Company Balance Sheet Date that were not yet required to be made are properly accrued and reflected on the Company Balance Sheet.

(c)         Except as set forth in Part 2.15(c) of the Disclosure Schedule or would not reasonably be expected to cause a Company Material Adverse Effect:

(i)          None of the Acquired Corporations currently maintains an employee stock ownership plan (within the meaning of Section 4975(e)(7) of the Code) or any other Company Employee Plan that invests in Company capital stock;

(ii)        Since the Company Balance Sheet Date, none of the Acquired Corporations has agreed to any increase in benefits under any Company Employee Plan (or the creation of new benefits) or change in employee coverage which would materially increase the expense of maintaining any Company Employee Plan;

(iii)       The consummation of the transactions contemplated by this Agreement will not result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits or compensation payable in respect of any employee, except as contemplated by Article I;

(iv)       No person will be entitled to any severance benefits under the terms of any Company Employee Plan solely as a result of the consummation of the transactions contemplated by this Agreement;

(v)         The Acquired Corporations and each ERISA Affiliate have complied in all material respects with (A) the notice and continuation coverage requirements of Section 4980B of the Code and the regulations thereunder with respect to each Company Employee Plan that is a group health plan within the meaning of Section 5000(b)(1) of the Code, and (B)with the applicable provisions of the Health Insurance Portability and Accountability Act of 1996 (“ HIPAA ”) and the regulations issued thereunder;

(vi)       There are no pending audits or investigations by any governmental agency involving any Company Employee Plan, no termination proceedings involving any Company Employee Plan, and no threatened or pending claims (except for individual claims for benefits payable in the normal operation of the Company Employee Plans), suits or proceedings involving any Company Employee Plan or asserting any rights or claims to benefits under any Company Employee Plan, nor, to the best of the Company’s Knowledge are there any facts which could reasonably give rise to any material liability in the event of any such audit, investigation, claim, suit or proceeding; and

(vii)     To the extent that any Company Employee Plan constitutes a “non-qualified deferred compensation plan” within the meaning of Section 409A of the Code, such Company Employee Plan has been operated in good faith compliance with Section 409A of the Code.

(viii)     No payment which is or may be made by, from or with respect to any Company Employee Plan, to any employee, former employee, director or agent of an Acquired Corporation or any ERISA Affiliate, either alone or in conjunction with any other payment, event or occurrence, (A) will or could properly be characterized as an “excess parachute payment” under section 280G of the Code (or any corresponding provision of state, local or foreign Tax law) and (B) will not be fully deductible as a result of Code 162(m) (or any corresponding provision of state, local or foreign Tax law); and

(ix)       The only Company Stock Units or other phantom equity awarded by the Company is awarded pursuant to the Deferred Compensation Plan.

(d)              Each Company Employee Plan covering non-U.S. employees (a “ Company International Plan ”) is separately listed on Part 2.15(d) of the Disclosure Schedule, and has been maintained in material compliance with its terms and with the requirements prescribed by any and all applicable Legal Requirements (including any special provisions relating to registered or qualified plans where such Company International Plan was intended to so qualify). Except as may be set forth in Part 2.15(d)(i) of the Disclosure Schedule or which would not reasonably be expected to cause a Company Material Adverse Effect, (i) all contributions to, and payments from, the Company International Plans (other than payments to be made from a trust, insurance contract or other funding medium) which may have been required to be made in accordance with the terms of any such plan, and, when applicable, the law of the jurisdiction in which such plan is maintained, have been timely made, (ii) all such contributions to the Company International Plans, and all payments under the Company International Plans, for any period ending before the date hereof that are not yet required to be made are properly accrued and reflected on the financial statements of the Company, (iii) all material reports, returns, approvals and similar documents with respect to any Company International Plan required to be filed with any government agency or distributed to any Company International Plan participant have been duly and timely filed or distributed, and (iv) there are no pending investigations by any governmental agency involving the Company International Plans, no claims pending or threatened in writing (except for claims for benefits payable in the normal operation of the Company International Plans), suits or proceedings against any Company International Plan or asserting any rights or claims to benefits under any Company International Plan which could give rise to any liability, in each case of which the Company has been notified.

(e)              Except as set forth in the Company SEC Documents or would not reasonably be expected to cause a Company Material Adverse Effect: (i) there are no controversies pending or, to the Knowledge of the Company, threatened, between any of the Acquired Corporations and any of their respective employees; (ii) except for agreements identified in Part 2.15(e) of the Disclosure Schedule, there are no collective bargaining agreements applicable to the Acquired Corporations; (iii) except for employee representative bodies or works councils identified in Part 2.15(e) of the Disclosure Schedule, there are no

employee representative bodies or works councils; (iv) none of the Acquired Corporations is in breach of any material collective bargaining agreement or other labor union contract applicable to persons employed by any of the Acquired Corporations, nor does the Company know of any activities or proceedings of any labor union to organize any significant number of such employees; (v) none of the Acquired Corporations is in breach of any material collective bargaining agreement or other labor union contract, nor has any Knowledge of any activities or proceedings of any labor unions to organize employees, or of any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to any employees (foreign or domestic) of any of the Acquired Corporations; (vi) none of the Acquired Corporations is engaged in any unfair labor practice and there is no unfair labor practice complaint pending or, to the Knowledge of the Acquired Corporations, threatened against any of them before the National Labor Relations Board; and (vii) each of the Acquired Corporations has materially complied with all Legal Requirements applicable to employees, including but not limited to those relating to employment discrimination, disability rights or benefits, equal opportunity, plant closure and other employee protections such as those provided under the Federal Worker Adjustment Retraining and Notification (“ WARN ”) Act, affirmative action, workers’ compensation, employee benefits, severance payments, labor relations, employee leave issues, wage and hour standards, occupational safety and health requirements and unemployment insurance and related matters, immigration, and the classification of employees and independent contractors.

(f)            Neither the consideration nor implementation of the transactions contemplated under this Agreement will increase (i) the obligation of any Acquired Corporation to make contributions or any other payments to fund benefits accrued under the Company Employee Plans, or (ii) the benefits accrued or payable with respect to any participant under the Company Employee Plans. Each of the Company Employee Plans may be amended or terminated at any time by action of the plan sponsor’s board of directors, or a committee of such board of directors or duly authorized officer, in each case subject to the terms of the Company Employee Plan and compliance with applicable Legal Requirements.

2.16         Real Property; Leasehold . None of the Acquired Corporations own any real property or any interest in any real property, except for the ownership and leasehold interests identified in Part 2.16 of the Disclosure Schedule. One of the Acquired Corporations has a good and valid leasehold interest in each parcel of real property leased by the Acquired Corporations necessary for the conduct of the business of the Company (the “ Company Leased Real Property ”), which leasehold interest is free and clear of all Encumbrances (other than Permitted Encumbrances) and except for any failures which would not reasonably be expected to have a Company Material Adverse Effect. Except as does not have and would not reasonably be expected to have a Company Material Adverse Effect, (a) an Acquired Corporation has the right to use and occupancy of the Company Leased Real Property for the full term of the lease or sublease relating thereto, (b) all leases for the Company Leased Real Property are in good standing, legal, binding, valid and effective and enforceable agreements of an Acquired Corporation and of the other parties thereto in accordance with their respective terms, and no Acquired Corporation has received written notice of any default (or any condition or event, which, after notice or a lapse of time or both, would constitute a default thereunder) and (c) no Acquired Corporation has assigned its interest under any such lease or sublease or sublet any part of the premises covered thereby. Each Company Leased Real Property has received all Governmental Authorization (including licenses and permits) required in connection with the

ownership and operation thereof and has been operated and maintained in accordance with legal requirements, except where failure to receive such Governmental Authorization and where noncompliance with such legal requirements has not had and would not reasonably be expected to have a Company Material Adverse Effect. To the Knowledge of the Company, there are no pending or threatened condemnation proceedings with respect to the Company Leased Real Property that would materially and adversely affect the use, occupancy or value thereof.

2.17         Insurance . The Company has made available to Parent accurate and complete copies of all current material insurance policies and all material self insurance programs and arrangements relating to the business, assets, liabilities, operations, employees, officers and directors of the Acquired Corporations. To the Company’s Knowledge, each of such insurance policies are valid and in full force and effect. Since April 1, 2006, none of the Acquired Corporations has received any notice or other communication regarding any actual or possible: (a) cancellation or invalidation of any such insurance policy; (b) refusal or denial of any material coverage, reservation of rights or rejection of any material claim under any such insurance policy; or (c) material adjustment in the amount of the premiums payable with respect to any such insurance policy. All information provided to insurance carriers (in applications and otherwise) on behalf of each of the Acquired Corporations is accurate and complete to the extent that the failure of such information to be accurate and complete would entitle the applicable insurance carrier to cancel such insurance policy procured on the basis of or in reliance on such information, reduce the scope of coverage under such policy, increase the premiums payable by the Acquired Corporations or otherwise take any action adverse to any of the Acquired Corporations in any material respect. Part 2.17 of the Disclosure Schedule includes a list of material pending or threatened claims which have been tendered to the insurance carriers for the Acquired Corporations and indicates which of such claims have been denied by such insurance carriers or subjected to a reservation of rights in writing by such carrier, except to the extent such claim, denial or reservation has been resolved.

(a)           Except as would not reasonably be expected to cause a Material Adverse Effect or which is listed on Part 2.18(a) of the Disclosure Schedule, there is no pending Legal Proceeding and, to the Company’s Knowledge, no Person has threatened to commence any Legal Proceeding against the Acquired Corporations or any of their officers or directors. Except which may be described in Part 2.18(a) of the Disclosure Schedule, there is no pending Legal Proceeding that challenges, or that, if decided adversely to any Acquired Corporation, would reasonably be expected to have the effect of preventing, delaying, making illegal or otherwise interfering with, the Merger.

(b)           There is no order, writ, injunction, judgment or decree to which any of the Acquired Corporations, or any of the assets owned or used by any of the Acquired Corporations, is subject that would reasonably be expected to have a Company Material Adverse Effect. To the Company’s Knowledge, no officer or other key employee of any of the Acquired Corporations is subject to any order, writ, injunction, judgment or decree that prohibits such officer or other employee from engaging in or continuing any conduct, activity or practice relating to the business of any of the Acquired Corporations.

2.19         Vote Required. The affirmative vote of (a) a majority of the shares of Company Common Stock outstanding on the record date for the Company Stockholders Meeting and entitled to vote and (b) a majority of the shares of Company Common Stock outstanding on the record date for the Company Stockholders Meeting and entitled to vote excluding shares held by the Guarantor or any Affiliates thereof (together, the “Required Stockholder Vote” ) are the only votes of the holders of any class or series of the Company’s c