EXECUTION COPY AGREEMENT AND PLAN OF MERGER BY AND AMONG GENENTECH, INC. GREEN ACQUISITION CORPORATION and TANOX, INC. Dated as of November 9, 2006

Exhibit 2.1

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AGREEMENT AND PLAN OF MERGER

BY AND AMONG

GENENTECH, INC.

GREEN ACQUISITION CORPORATION

and

TANOX, INC.

Dated as of November 9, 2006

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TABLE OF CONTENTS

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INDEX OF EXHIBITS

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of November 9, 2006 (the “ Agreement ”), by and among Genentech, Inc., a Delaware corporation (“ Parent ”), Green Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), and Tanox, Inc., a Delaware corporation (the “ Company ”).

RECITALS

WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have each determined that it is in the best interests of their respective stockholders for Parent to acquire the Company upon the terms and subject to the conditions set forth herein.

WHEREAS, the Board of Directors of the Company (the “ Board ”) has unanimously (i) determined that the Merger (as defined in Section 1.1 ) is advisable and fair to, and in the best interests of, the Company and its stockholders, (ii) approved this Agreement and the other transactions contemplated by this Agreement, including the Merger and the transactions contemplated by the Company Voting Agreements, and (iii) determined to recommend that the stockholders of the Company adopt this Agreement.

WHEREAS, the Board of Directors of Parent has (i) determined that the Merger is advisable and fair to, and in the best interest of, Parent and its stockholders, and (ii) approved this Agreement.

WHEREAS, concurrently with the execution of this Agreement, as a condition and inducement to Parent’s willingness to enter into this Agreement, certain stockholders of the Company are entering into Voting Agreements, dated as of the date hereof, in substantially the form attached hereto as Exhibit A (the “ Company Voting Agreements ”).

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

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NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

THE MERGER

1.1 The Merger . At the Effective Time (as defined in Section 1.2 ) and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the Delaware General Corporation Law (“ Delaware Law ”), Merger Sub shall be merged with and into the Company (the “ Merger ”), the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation. The Company, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the “ Surviving Corporation .”

1.2 Effective Time; Closing . Upon the terms and subject to the conditions of this Agreement, the parties hereto shall cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware a certificate of merger (the “ Certificate of Merger ”) executed in accordance with the relevant provisions of Delaware Law (the time of such filing, or such later time as may be agreed in writing by the Company and Parent and specified in the Certificate of Merger, being the “ Effective Time ”) on, or as soon as practicable after, the Closing Date (as herein defined). The closing of the Merger (the “ Closing ”) shall take place at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California, at a time and date to be specified by the parties hereto, which shall be no later than the second business day after the satisfaction or waiver of the conditions set forth in Article VI (other than those conditions which, by their terms, are to be satisfied or waived on the Closing Date, but subject to the satisfaction or waiver thereof), or at such other time, date and location as the parties hereto agree in writing. The date on which the Closing occurs is referred to in this Agreement as the “ Closing Date ”.

1.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the assets, properties, rights, privileges,

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powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all of the debts, liabilities, obligations, restrictions and duties of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions and duties of the Surviving Corporation.

1.4 Certificate of Incorporation and Bylaws of Surviving Corporation .

(a) Certificate of Incorporation. As of the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub or the Company, the Certificate of Incorporation of the Surviving Corporation shall be amended and restated to read the same as the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, subject to Section 5.9(a) , until thereafter amended in accordance with Delaware Law and such Certificate of Incorporation; provided, however , that as of the Effective Time the Certificate of Incorporation shall provide that the name of the Surviving Corporation is “Tanox, Inc.”

(b) Bylaws . As of the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub or the Company, the Bylaws of the Surviving Corporation shall be amended and restated to read the same as the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, subject to Section 5.9(a) , until thereafter amended in accordance with Delaware Law, the Certificate of Incorporation of the Surviving Corporation and such Bylaws; provided, however , that all references in such Bylaws to Merger Sub shall be amended to refer to “Tanox, Inc.”

1.5 Directors and Officers of Surviving Corporation .

(a) Directors . The initial directors of the Surviving Corporation shall be the directors of Merger Sub as of immediately prior to the Effective Time, until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation and the Bylaws of the Surviving Corporation.

(b) Officers . The initial officers of the Surviving Corporation shall be the officers of Merger Sub as of immediately prior to the Effective Time, until their respective successors are duly appointed and qualified or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation and the Bylaws of the Surviving Corporation.

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1.6 Effect on Capital Stock . Upon the terms and subject to the conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holders of any of the following securities, the following shall occur:

(a) Conversion of Shares . Each share of common stock, par value $0.01 per share, of the Company (“ Company Common Stock ”) issued and outstanding immediately prior to the Effective Time (other than any shares of Company Common Stock to be canceled pursuant to Section 1.6(b) and any Dissenting Shares, as defined in Section 1.7 ), will be canceled and extinguished and automatically converted into the right to receive, upon surrender of the certificate(s) representing such Company Common Stock in the manner provided in Section 1.8 (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit, and bond, if required, in the manner provided in Section 1.10 ), cash in an amount equal to $20.00 per share, without interest (the “ Per Share Merger Consideration ” and the aggregate of all Per Share Merger Consideration, the “ Merger Consideration ”).

(b) Cancellation of Treasury and Parent-Owned Shares . All Company Common Stock held by the Company or owned by Merger Sub, Parent or any direct or indirect wholly-owned subsidiary of the Company or of Parent immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof.

(c) Capital Stock of Merger Sub . Each share of common stock, par value $0.01 per share, of Merger Sub (the “ Merger Sub Common Stock ”) issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. Each certificate evidencing ownership of shares of Merger Sub Common Stock outstanding immediately prior to the Effective Time shall evidence ownership of such shares of capital stock of the Surviving Corporation.

(d) Stock Options . Except as set forth on Section 1.6(d) of the Company Disclosure Letter (as defined in Article II ), each option to purchase Company Common Stock (the “ Company Stock Options ”), whether vested or unvested, and all stock option plans or other equity-related plans of the Company (the “ Company Stock Plans ”), that are unexpired, unexercised and outstanding

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as of the Effective Time shall on the terms and subject to the conditions set forth in this Agreement, be cancelled in its entirety at the Effective Time, and the holder of each shall be fully vested in such Company Stock Options, and the Parent shall pay or cause to be paid, as soon as reasonably practicable after the Effective Time, to each such holder of Company Stock Options an amount of cash equal to the product of (i) the number of shares of Company Common Stock as to which such Company Stock Option remains unexercised immediately prior to the Effective Time, multiplied by (ii) the Per Share Merger Consideration minus the exercise price of such Company Stock Option immediately prior to the Effective Time (the “ Option Merger Consideration ”); provided, however , that if the Per Share Merger Consideration does not exceed the exercise price of such Company Stock Option immediately prior to the Effective Time, the Option Merger Consideration for such Company Stock Option shall be zero; and provided further , that nothing in this Section 1.6(d) shall prohibit the holder of a Company Stock Option from exercising such Company Stock Option prior to the Effective Time in accordance with its terms and applicable Legal Requirements. Prior to the Effective Time, the Company shall timely deliver any notices to holders of Company Stock Options as may be required by the terms of the Company Stock Plans and take any and all actions necessary or appropriate to effectuate the foregoing, including, without limitation, using all reasonable efforts to obtain any applicable consents or waivers from holders of Company Stock Options that were granted under the Company’s 2000 Non-Employee Directors’ Stock Option Plan. The payment of the Option Merger Consideration to the holder of a Company Stock Option shall be reduced by any income, employment or other Tax withholding required under the Code (as defined in Section 2.13(a)(ii) ) or any provision of state, local or foreign Tax law.

1.7 Dissenting Shares .

(a) Notwithstanding any provision of this Agreement to the contrary, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and that are held by stockholders who shall have not voted in favor of the Merger and who shall have demanded properly in writing appraisal for such Company Common Stock in accordance with Section 262 of Delaware Law (collectively, the “ Dissenting Shares ”) shall not be converted into, or represent the right to receive, the Per Share Merger Consideration payable for each such share of Company Common Stock. Such stockholders shall be entitled to receive payment of the appraised value of such Company Common Stock held

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by them in accordance with the provisions of such Section 262, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Company Common Stock under such Section 262 shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Per Share Merger Consideration payable for each such share of Company Common Stock, without any interest thereon, upon surrender, in the manner provided in Section 1.8 , of the certificate or certificates that formerly evidenced such Company Common Stock.

(b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to Delaware Law and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under Delaware Law. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

1.8 Surrender of Certificates .

(a) Paying Agent . At the Effective Time, Parent shall deposit or cause to be deposited with a bank or trust company reasonably acceptable to the Company to act as agent (the “ Paying Agent ”), for the benefit of the holders of Company Common Stock to receive the funds to which holders of Company Common Stock shall become entitled pursuant to Section 1.6(a) , a cash amount sufficient to pay the Merger Consideration. Such funds shall be invested by the Paying Agent as directed by Parent; earnings from such investments shall be the sole and exclusive property of Parent and the Surviving Corporation, and no part of such earnings shall accrue to the benefit of holders of the shares of Company Common Stock.

(b) Payment Procedures . As soon as reasonably practicable after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record (as of the Effective Time) of a certificate or certificates (the “ Certificates ”), which immediately prior to the Effective Time represented the outstanding shares of Company Common Stock, (i) a letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates

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to the Paying Agent and shall contain such other provisions as Parent shall reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the portion of the Merger Consideration payable upon surrender of said Certificates. Upon surrender of Certificates for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to those instructions, the holders of such Certificates formerly representing the Company Common Stock shall be entitled to receive in exchange therefor the portion of the Merger Consideration payable for such shares of Company Common Stock, and the Certificates so surrendered shall forthwith be canceled. Until so surrendered, outstanding Certificates shall be deemed from and after the Effective Time, for all corporate purposes, to evidence only the ownership of the respective portion of the Merger Consideration to which the record holder of such Certificate is entitled by virtue thereof. Promptly following surrender of any such Certificates and the duly executed letters of transmittal, the Paying Agent shall deliver to the record holders thereof, without interest, the portion of the Merger Consideration to which such holder is entitled upon surrender of said Certificates, subject to the restrictions set forth herein.

(c) Payments with respect to Unsurrendered Company Common Stock; No Liability . At any time following the 180 ^th day after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Company Common Stock (including all interest and other income received by the Paying Agent in respect of all funds made available to it), and, thereafter, such holders shall be entitled to look to Parent (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any portion of the Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, none of Parent, the Surviving Corporation nor the Paying Agent shall be liable to any former holder of Company Common Stock for any portion of the Merger Consideration delivered in respect of such Company Common Stock to a public official pursuant to any abandoned property, escheat or other similar Legal Requirement.

(d) Transfers of Ownership . If the payment of the portion of the Merger Consideration to which such holder is entitled is to be paid to a person

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other than the person in whose name the Certificates surrendered in exchange therefor are registered, it will be a condition of payment that the Certificates so surrendered be properly endorsed and otherwise in proper form for transfer (including, if requested by Parent or the Paying Agent, a medallion guarantee), and that the persons requesting such payment will have paid to Parent or any agent designated by it any transfer or other Taxes required by reason of the payment of a portion of the Merger Consideration to a person other than the registered holder of the Certificates surrendered, or established to the satisfaction of Parent or any agent designated by it that such Tax has been paid or is not applicable.

(e) Required Withholding . Each of the Paying Agent, Parent and the Surviving Corporation shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any holder or former holder of the Company Common Stock such amounts as may be required to be deducted or withheld therefrom under the Code or under 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.

1.9 No Further Ownership Rights in Company Common Stock . Payment of the Merger Consideration shall constitute payment in full satisfaction of all rights pertaining to the Company Common Stock. From and after the Effective Time, there shall be no further registration of transfers on the records of the Surviving Corporation of shares of the Company Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article I .

1.10 Lost, Stolen or Destroyed Certificates . In the event that any Certificates shall have been lost, stolen or destroyed, the Paying Agent shall pay in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, the portion of the Merger Consideration payable with respect thereto; provided, however , that Parent or the Paying Agent may, in its discretion and as a condition precedent to the payment of such portion of the Merger Consideration, require the owner of such lost, stolen or destroyed Certificates to deliver a bond (at the sole expense of the holder of such Certificate) in such reasonable and customary amount as it may direct as

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indemnity against any claim that may be made against Parent, the Surviving Corporation or the Paying Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.

1.11 Adjustments . In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock, whether directly or indirectly), reorganization, reclassification, combination, recapitalization or other like change with respect to the Company Common Stock occurring after the date of this Agreement and prior to the Effective Time, all references in this Agreement to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.

1.12 Taking of Necessary Action; Further Action . If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the officers and directors of the Company and Merger Sub will take all such lawful and necessary action.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF COMPANY

The Company hereby represents and warrants to Parent and Merger Sub, except as are specifically disclosed in writing in the disclosure schedule supplied by the Company to Parent (which such exceptions shall reference the specific section and, if applicable, subsection number of this Article II to which it applies, and, if applicable, any information disclosed in any such section or subsection shall also be deemed to be disclosed with respect to each other such section or subsection to the extent that it is reasonably apparent on its face that such disclosure should also apply to such other section or subsection), dated as of the date hereof and certified by a duly authorized officer of the Company (the “ Company Disclosure Letter ”), as follows:

2.1 Organization and Qualification; Subsidiaries .

(a) Each of the Company and its subsidiaries is a corporation duly organized, validly existing and in good standing (with respect to jurisdictions that recognize the concept of good standing) under the laws of its respective jurisdiction of organization and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted, except for such failures to be so organized, existing and in good standing (with respect to such jurisdictions that recognize the concept of good standing) or to have such power and authority that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company.

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(b) The Company has no subsidiaries except for the persons identified in Section 2.1(b) of the Company Disclosure Letter. Section 2.1(b) of the Company Disclosure Letter also sets forth the form of ownership and percentage voting and/or equity interest of the Company in its subsidiaries and, to the extent that a subsidiary set forth thereon is not wholly owned by the Company, lists the other persons that have an ownership interest in such subsidiary and sets forth the percentage of each such ownership interest. Neither the Company nor any of its subsidiaries has agreed to make nor is obligated to make nor is bound by any written, oral, express or implied agreement, contract, subcontract, lease, mortgage, indenture, understanding, arrangement, instrument, note, bond, warranty, purchase order, license, sublicense, benefit plan, franchise or other instrument, obligation, commitment or undertaking that is legally binding and with respect to which there are continuing obligations, rights, or liabilities, including any amendments thereto (a “ Contract ”) or Legal Requirement (as defined in Section 2.3(a) below), in effect as of the date hereof, to make any future investment in or capital contribution to any other person or any sale or other disposition of the capital stock or any of the assets or operations of any such person.

(c) Other than the subsidiaries set forth in Section 2.1(b) of the Company Disclosure Letter, neither the Company nor any of its subsidiaries directly or indirectly owns any equity or similar interest in or any interest convertible, exchangeable or exercisable for, any equity or similar interest in, any person.

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(d) The Company and each of its subsidiaries is duly qualified to do business as a foreign corporation, and is in good standing (with respect to jurisdictions that recognize the concept of good standing), under the laws of all jurisdictions where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification necessary, except where the failure to be so qualified and in good standing has not had, and would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Company. Section 2.1(d) of the Company Disclosure Letter sets forth a true and complete list of each state and other jurisdiction which the Company and each of its subsidiaries is qualified to do business as a foreign corporation.

2.2 Certificate of Incorporation and Bylaws; Minutes .

(a) The Company has previously furnished to Parent (i) a complete and correct copy of its Certificate of Incorporation and Bylaws as amended to date (together, the “ Company Charter Documents ”) and (ii) the equivalent organizational documents for each subsidiary of the Company, each as amended to date. The Company Charter Documents and equivalent organizational documents of each subsidiary of the Company are in full force and effect. The Company is not in violation of any of the provisions of the Company Charter Documents, and no subsidiary of the Company is in violation of its equivalent organizational documents.

(b) The Company has delivered to Parent and its representatives true and complete copies of the minutes (or, in the case of minutes that have not yet been finalized, the most recent drafts thereof) of all meetings of the stockholders, the Board of Directors and each committee of such Board of Directors of the Company and each of its subsidiaries held since January 1, 2000.

2.3 Capitalization .

(a) The authorized capital stock of the Company consists of 120,000,000 shares of Company Common Stock and 10,000,000 shares of Preferred Stock, par value of $0.01 per share (“ Company Preferred Stock ”). At the close of business on the date of this Agreement (i) 45,258,927 shares of Company Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable; (ii) no shares of Company Common Stock were held by subsidiaries of the Company; (iii) 554,700 shares of Company

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Common Stock were held in treasury by the Company; (iv) 2,677,418 shares of Company Common Stock were reserved for issuance upon the exercise of outstanding options to purchase Company Common Stock under the Company Stock Plans and (v) 5,248,185 additional shares of Company Common Stock were reserved for future issuance pursuant to the Company Stock Plans. The Company does not have any employee stock purchase plan, as such term is defined in Section 423 of the Code. As of the date hereof, no shares of Company Preferred Stock were issued or outstanding and there are no outstanding shares of Company Common Stock that are subject to risk of forfeiture. All shares of Company Common Stock subject to issuance upon exercise of such Company Stock Options, upon issuance on the terms and conditions specified in the instrument pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. Except as set forth in Section 2.3(a) of the Company Disclosure Letter, there are no Contracts to which the Company is bound obligating the Company to accelerate the vesting of any Company Stock Option as a result of the transactions contemplated hereby (the “ Transactions ”) or upon termination of employment or service with the Company or with any of its subsidiaries following the Merger (whether alone or in combination with any other events) or otherwise. All outstanding shares of Company Common Stock, all outstanding Company Stock Options and all outstanding shares of capital stock of each subsidiary of the Company have been issued and granted in compliance with all applicable securities laws and other applicable Legal Requirements (as defined below). The exercise price of each Company Stock Option is no less than the fair market value of a share of Company Common Stock as determined on the date of grant of such Company Stock Option. All grants of Company Stock Options were properly approved by the Board or a duly and validly appointed committee of the Board in compliance with all applicable Legal Requirements and recorded on the Financial Statements (as defined in Section 2.9(b) ) in accordance with GAAP, and no such grants involved any inappropriate “back dating,” “forward dating” or similar practices with respect to the effective date of grant. All repurchases of Company securities have been made in compliance with all applicable Legal Requirements. For the purposes of this Agreement, “ Legal Requirements ” means any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, binding resolution, ordinance, code, edict, order, injunction, judgment, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity (as defined in Section 2.5(b)) hereof. There are no declared or accrued but unpaid dividends with respect to any shares of Company Common Stock.

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(b) Section 2.3(b) of the Company Disclosure Letter sets forth, as of the date of this Agreement the following information with respect to each Company Stock Option outstanding as of the date of this Agreement: (i) the name and address of the optionee; (ii) the particular plan pursuant to which such Company Stock Option was granted; (iii) the number of shares of Company Common Stock subject to such Company Stock Option; (iv) the exercise price of such Company Stock Option; (v) the date on which such Company Stock Option was granted; (vi) the applicable vesting schedule; (vii) the date on which such Company Stock Option expires; (viii) whether the exercisability of such Company Stock Option will be accelerated in any way by the transactions contemplated by this Agreement, and indicates the extent of acceleration; and (ix) whether such Company Stock Option is intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(c) Except for the Company Stock Options and the rights designated in connection with the Rights Agreement, dated July 27, 2001 between the Company and American Stock Transfer & Trust Company as rights agent (the “ Rights Agreement ”), there are no subscriptions, options, warrants, equity securities, partnership interests or similar ownership interests, calls, rights (including preemptive rights), Contracts to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound obligating the Company or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition of, any shares of capital stock, partnership interests or similar ownership interests of the Company or any of its subsidiaries or obligating the Company or any of its subsidiaries to grant, extend, accelerate the vesting of or enter into any such subscription, option, warrant, equity security, call, right, commitment or agreement. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or other similar rights, contingent or accrued, to receive shares of Company Common Stock or benefits measured in whole or part by the value of a number of shares of Company Common Stock with respect to the Company or any of its subsidiaries. Except for the Company Stock Options, the Company Voting Agreements and the Rights Agreement, there are no voting trusts, proxies, rights plans, anti-takeover plans or Contracts to which the Company or any of its subsidiaries is a party or by

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which the Company or any of its subsidiaries is bound with respect to the voting, acquisition, disposition of or imposition of any Encumbrance on (i) any class of equity security of the Company or (ii) any equity security, partnership interest or similar ownership interest of any of its subsidiaries.

(d) True, correct and complete copies of (i) each of the Company Stock Plans, (ii) the standard form of all Contracts and instruments relating to or issued under the Company Stock Plans or Company Stock Option, (iii) each Contract or instrument relating to or issued under the Company Stock Plans or Company Stock Option where the terms of such grant differ in any material respect from such standard form agreements, and (iv) Contracts relating to unvested shares, have been made available to Parent, and such Contracts and instruments have not been amended, modified or supplemented since being made available to Parent, and, except as contemplated by this Agreement, there are no Contracts to amend, modify or supplement such agreements or instruments in any case from those made available to Parent.

2.4 Authority Relative to this Agreement . The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions, subject, with respect to the Merger, to the Company Stockholder Approval (as defined below). The execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions other than (i) with respect to the Merger, the filing with the Securities and Exchange Commission (the “ SEC ”) of a proxy statement with respect to, and the receipt of, the Company Stockholder Approval and (ii) the filing of the Certificate of Merger as required by Delaware Law, subject, in each case, to the receipt of the Required Consents. The affirmative vote of the holders of a majority of the shares of Company Common Stock issued and outstanding on the record date set for the meeting of the Company’s stockholders to adopt this Agreement is the only vote of the holders of capital stock of the Company necessary to adopt this Agreement and approve and adopt the Merger under applicable Legal Requirements and the Company Charter Documents (the “ Company Stockholder Approval ”). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal

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and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Legal Requirements affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law).

2.5 No Conflict; Required Filings and Consents .

(a) The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, (i) result in the creation of any material Encumbrance (as defined below) on any of the material properties or assets of the Company or any of its subsidiaries, (ii) conflict with or violate the Company Charter Documents or the equivalent organizational documents of any of the Company’s subsidiaries, (iii) subject, (A) with respect to the Merger, to the Company Stockholder Approval and (B) to compliance with the requirements set forth in Section 2.5(b) , conflict with or violate in any material respect any Legal Requirements applicable to the Company or any of its subsidiaries or by which its or any of their respective properties is bound or affected, (iv) conflict with or violate, or result in any breach, impermissible assignment or non-transferability of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or materially impair the Company’s or any of its subsidiaries’ rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of any Company Contract (as defined in Section 2.20(a) ) or (v) except to the extent that such conflicts, violations, breaches, defaults, impairments, rights of termination, cancellation, acceleration, Encumbrance or other effects would not in the aggregate have a material negative impact on the Company, conflict with or violate, or result in any breach, impermissible assignment or non-transferability of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair the Company’s or any of its subsidiaries’ rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of any Contract (other than a Company Contract) to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties are bound or affected. “ Encumbrance ” means, with respect to any asset, mortgage, deed of trust, lien, pledge, charge, security interest, title retention device, conditional sale or other security arrangement, collateral assignment,

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claim, charge, adverse claim of title, third person ownership or right to use, restriction or other encumbrance of any kind in respect of such asset (including any restriction on (1) the voting of any security or the transfer of any security or other asset, (2) the receipt of any income derived from any asset, (3) the use of any asset, and (4) the possession, exercise or transfer of any other attribute of ownership of any asset, but excluding current Taxes not yet due and payable).

(b) The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency or commission or other governmental authority or instrumentality, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority (a “ Governmental Entity ”), except (i) for applicable requirements, if any, of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), state securities laws (“ Blue Sky Laws ”) and state takeover laws, such filings as may be required under, and compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) and any other applicable Antitrust Law (as defined herein), the rules and regulations of Nasdaq, and the filing and recordation of the Certificate of Merger as required by Delaware Law, (ii) as set forth in Section 2.5(b) of the Company Disclosure Letter and (iii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, could not, individually or in the aggregate, be material to the Company or its subsidiaries or prevent or materially delay consummation of the Transactions or otherwise prevent the Company from performing its obligations under this Agreement (collectively, the “ Required Consents ”).

2.6 Compliance with Health Care Laws .

(a) Neither the Company nor any of its subsidiaries has been the subject of any investigation by a Governmental Entity as a result of or in connection with the Company’s or any of its subsidiaries’ research, development, clinical activities, production or distribution activities related to the Company Products.

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(b) The Company and each of its subsidiaries are in material compliance and, except for any non-compliance that occurred prior to January 1, 2003 which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company, have at all times been in material compliance with all relevant federal and other Legal Requirements applicable to the Company and its subsidiaries, including the federal Anti-kickback and Fraud and Abuse Prohibition Statutes (42 U.S.C. § 1320a-7b) and all other Legal Requirements prohibiting false statements and improper remuneration for purchasing products or services, the civil False Claims Act (31 U.S.C. §§ 3729 et seq .), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1301 et seq . and implementing regulations), the exclusion laws, SSA § 1128 (42 U.S.C. 1320a-7) and the regulations promulgated pursuant to such laws and regulations, relating to the regulation of the Company and its subsidiaries (including the pertinent requirements of Good Laboratory Practices, Good Clinical Practices, Good Manufacturing Practices and the U.S. Food, Drug and Cosmetic Act and its implementing regulations, including 21 CFR Parts 50, 54, 56, 58, 210, and 211 and the respective counterparts thereof promulgated by Governmental Entities in countries outside the United States) (collectively, “ Health Care Laws ”). To its knowledge, the Company and each of its subsidiaries are in material compliance and have at all times been in material compliance with all Health Care Laws. Since January 1, 2003, neither the Company nor any of its subsidiaries has received any written notice or communication and, to the knowledge of the Company, prior to January 1, 2003, neither the Company nor any of its subsidiaries received a written notice or communication, in each case, from any Governmental Entity with respect to the Company regarding, and, to the knowledge of the Company, there are no facts or circumstances that would reasonably be expected to give rise to, any material violation of applicable Health Care Laws or any other applicable Legal Requirement. To the knowledge of the Company, no change in the current conduct of the Company or its subsidiaries, or their internal procedures or processes, is required in order to materially comply with Health Care Laws.

2.7 Permits . The Company and each of its subsidiaries have obtained all federal, state, county, local or foreign permits, authorizations, licenses, grants, variances certifications, clearances, consents, franchises, exemptions, orders and approvals (a) that are required by the Federal Food and Drug Administration (the “ FDA ”), any other Governmental Entity engaged in the regulation of the

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Company Research Programs, Company Products or the Company’s or its subsidiaries’ manufacturing and quality system or that are required by Health Care Laws or (b) that are otherwise material to the Company and its subsidiaries (other than those specified in Section 2.7(a) above) and that are required for operating the Company or its subsidiaries in the manner currently conducted in any location in which they currently operate (including those required to be obtained under Environmental and Safety Laws (as defined in Section 2.17(a) ) (each, a “ Company Permit ” and collectively, the “ Company Permits ”). All such Company Permits are valid and in full force and effect. Section 2.7 of the Company Disclosure Letter lists all Company Permits. The Company and its subsidiaries are in compliance in all material respects with all covenants, terms and conditions of such Company Permits. Neither the Company nor any of its subsidiaries has received any written notice or communication with respect to the Company from any Governmental Entity regarding, and, to the knowledge of the Company, there are no facts or circumstances that could give rise to, (i) any violation of any Company Permit or (ii) any revocation, non-renewal, withdrawal, suspension, cancellation, limitation, termination or adverse modification of any Company Permit. No such Company Permit will be terminated or impaired, or will become terminable, in whole or in part, as a result of the consummation of the Transactions.

2.8 FDA; Global Regulation Compliance; Company Products and Company Research Programs.

(a) The operation of the Company and the operation of its subsidiaries, including the research, manufacture, import, export, testing, development, processing, packaging, labeling, storage and distribution of all Company Products, is in material compliance and, except for non-compliance prior to January 1, 2003 which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, have at all times been in material compliance with all applicable Health Care Laws and other applicable Legal Requirements, including to the extent applicable (1) those administered by the FDA and (2) those administered by Governmental Entities in countries outside the United States (including requirements for the manufacture of Company Products for administration in human subjects). To the Company’s knowledge, the operation of the Company and the operation of its subsidiaries are in material compliance and have at all times been in material compliance with all applicable Health Care Laws and other applicable Legal Requirements, including to the

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extent applicable (1) those administered by the FDA and (2) those administered by Governmental Entities in countries outside the United States (including requirements for the manufacture of Company Products for administration in human subjects). There is no pending or, to the knowledge of the Company, threatened Action in respect of the Company or Company Products by the FDA or any other Governmental Entity which has jurisdiction over the Company Products or the operations, properties or processes of the Company or the Company’s subsidiaries, or, to the knowledge of the Company, in respect of any third person’s activities on behalf of the Company or its subsidiaries (excluding Parent and Parent’s subsidiaries). The Company has no knowledge of any facts or circumstances that are likely to give rise to any such Action.

(b) (A) Except for non-compliance prior to January 1, 2003 which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company, and (B) at all times to the Company’s knowledge, neither the Company nor any of its subsidiaries has had any Company owned or leased manufacturing site (nor, to the knowledge of the Company, has any third person (other than Parent and Parent’s subsidiaries) had any manufacturing site that produces Company Products) subject to a Governmental Entity (including FDA) shutdown or import or export prohibition, nor received any FDA Form 483 notice or similar notification from a Governmental Entity, “warning letters,” “untitled letter” or, to the knowledge of the Company, requests or requirements to make changes to the operations of the Company, a Company Research Program or the Company Products that have not been complied with and, if not complied with, would reasonably be expected to result in a material effect that is adverse to the Company’s or any of its subsidiaries’ ability to continue with the planned activities at that manufacturing site, and, to the knowledge of the Company, neither the FDA nor any Governmental Entity is considering such action. To the knowledge of the Company, no vigilance report or adverse event report is under investigation by any Governmental Entity with respect to any Company Products, the Company or its subsidiaries.

(c) All activities (including, without limitation, clinical trials and any studies, tests, and other preclinical activities the results of which have been or will be submitted to a Governmental Entity (such as the FDA or its counterparts worldwide), but excluding clinical trials conducted or being conducted by Parent or Parent’s subsidiaries) conducted by the Company in connection with any Company Product or Company Research Program, and, to

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the Company’s knowledge, all such activities conducted by third persons on behalf of the Company, which activities are required or purported to be conducted under statutory or regulatory “good practices” applicable to biopharmaceutical companies ( e.g., Good Laboratory Practices, Good Clinical Practices and Good Manufacturing Practices), have been conducted in compliance in all material respects with the required experimental protocols required by applicable Institutional Review Boards, applicable Health Care Laws, and other applicable Legal Requirements.

(d) Neither the Company nor any of its subsidiaries has received any notices, correspondence or other communication in respect of the Company, any subsidiary, or any Company Product from the FDA or any other Governmental Entity requiring the termination or suspension of any clinical trials of any Company Product, or any clinical trials conducted by, or on behalf of, the Company or any of its subsidiaries and, to the knowledge of the Company, neither the FDA nor any other Governmental Entity is considering such action. Neither the Company nor any of its subsidiaries has received notification from a Governmental Entity of the rejection of data obtained from any clinical trials conducted by, or at the request of, the Company with respect to any Company Products, which data was submitted to the Governmental Entity and which was necessary to obtain regulatory approval of a particular Company Product or to move such Company Product to the next phase of clinical development.

(e) The manufacture of the Company Products by or, to the knowledge of the Company, on behalf of, the Company or any of its subsidiaries (other than by Parent or Parent’s subsidiaries) is being conducted in compliance in all material respects with all applicable Health Care Laws and other applicable Legal Requirements, including the FDA’s Good Manufacturing Practices at 21 CFR §§210-211 and applicable guidelines for products sold or used for clinical trials in the United States, and the respective counterparts thereof promulgated by Governmental Entities in countries outside the United States.

(f) Neither the Company nor any of its subsidiaries is the subject of any pending or, to the knowledge of the Company, threatened investigation in respect of the Company by the FDA pursuant to its “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” Final Policy set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto. Neither the Company nor any of its subsidiaries has committed any act,

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made any statement, or failed to make any statement, in each case in respect of the Company or a subsidiary and that would provide a basis for the FDA to invoke its policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities” and any amendments thereto. Neither the Company nor any of its subsidiaries nor any of their respective officers or, to the knowledge of the Company after reasonable inquiry by the Company of its Employees (other than Consultants) on or about the date of hire for each such Employee, its Employees (other than Consultants) has been convicted of any crime or engaged in any conduct that could result in a debarment or exclusion (i) under 21 U.S.C. Section 335a, or (ii) similar applicable Legal Requirement. The Company and its subsidiaries have implemented reasonable practices (consistent with prevailing industry standards) to determine whether any of its Employees (other than Consultants who are not Significant Consultants) have been convicted of any crime or engaged in any conduct that could result in a debarment or exclusion (i) under 21 U.S.C. Section 335a, or (ii) similar applicable Legal Requirement. To the knowledge of the Company, no debarment or exclusionary claims, actions, proceedings or investigations in respect of the Company or any of its subsidiaries is pending or threatened against the Company, any of its subsidiaries or any of their respective officers, employees or agents. For purposes of this Agreement, a “ Significant Consultant ” is a Consultant (as defined in Section 2.13(a)(iv) ) who (i) has responsibility for a function that is regulated by Health Care Laws (as opposed to advising a regular Company employee who has such responsibility) or (ii) devotes more than eighty (80) hours per month for three or more months, in each case performing functions for the Company or its subsidiaries.

(g) The Company has delivered or made available to Parent true and complete copies of all data, studies, results, and other information set forth in Section 2.8(g) of the Company Disclosure Letter. Such information provided or made available by the Company fairly represents all of the material ongoing research and development of the Company Products and Company Research Programs (as defined in Section 2.19), and, to the knowledge of the Company, there is no scientific information, data or results in the Company’s possession or control that have not been provided to Parent that a reasonable scientist would conclude is necessary to accurately assess or value such program or project.

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(h) As of the date of this Agreement, the Company has in its control the amounts of each Company Product set forth in Section 2.8(g) of the Company Disclosure Letter (including TNX 355, TNX 650, TNX 234, and any other anti-CD4 product), in the form described therein (whether filled containers, drug product, bulk drug substance or otherwise) (“ Product Inventory ”). All such Product Inventory has stability sufficient (and, where applicable, approved by applicable Governmental Entities) such that it will not expire prior to use in the study or research for which it was manufactured, and all such Product Inventory has been manufactured and stored in accordance with Good Manufacturing Practices and applicable Health Care Laws.

(i) Where data with respect to a particular Company Product or a product candidate being studied in a Company Research Program has been provided to Parent (a) the underlying Company Product or product candidate is in Company’s possession and control as of the date hereof, along with any cell lines, reagents or other materials necessary to produce that Company Product or product candidate in its current form, and (b) the Company has in its possession and control the reagents and other materials required to reproduce the experiments that generated the data provided to Parent, except to the extent such reagents or other materials are readily commercially available and are identified as such.

2.9 SEC Filings; Financial Statements .

(a) Since January 1, 2004, the Company has filed or furnished each form, report, document, schedule, registration statement and definitive proxy statement with the SEC required to be filed or furnished by the Company with the SEC under the Securities Act of 1933, as amended (the “ Securities Act ”) or the Exchange Act, as then in effect (the “ Company SEC Reports ”). The Company SEC Reports (i) were filed or furnished on a timely basis, (ii) were prepared in accordance with the requirements of the Securities Act or the Exchange Act and the rules and regulations of the SEC then in effect, as the case may be, and (iii) did not at the time they were filed or furnished (and if amended or superseded by a filing prior to the date of this Agreement, then on the date of such amended or superseding filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Company’s subsidiaries is required to file or furnish any reports or other documents with the SEC.

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(b) Each set of consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports (the “ Financial Statements ”) (including any Company SEC Report filed after the date of this Agreement): (i) complied and will comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto in effect at the time of such filing; (ii) was and will be prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, may not contain footnotes as permitted by Form 10-Q or Form 8-K) and fairly presented and will fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries at the respective dates thereof and the consolidated results of the Company’s and its subsidiaries’ operations and cash flows for the periods indicated. Except as reflected in the Financial Statements, neither the Company nor any of its subsidiaries is a party to any material off-balance sheet arrangement (as defined in Item 303 of Regulation S-K promulgated under the Securities Act (“ Regulation S-K ”)). All reserves that are set forth in or reflected in the Interim Balance Sheet (as defined below) have been established in accordance with GAAP consistently applied. At June 30, 2006 (the “ Interim Balance Sheet Date ”), there were no material loss contingencies (as such term is used in Statement of Financial Accounting Standards No. 5 (“ Statement No. 5 ”) issued by the Financial Accounting Standards Board in March 1975) that are not adequately provided for in the balance sheet as of the Interim Balance Sheet Date (the “ Interim Balance Sheet ”) as required by Statement No. 5. The Company has not had any dispute with any of its auditors regarding accounting matters or policies during any of its past three full fiscal years or during the current fiscal year-to-date. The books and records of the Company and each of its subsidiaries have been, and are being maintained in all material respects in accordance with applicable legal and accounting requirements.

(c) To the Company’s knowledge, no fact, event or circumstance currently exists that will prevent any material amount of the cash, investments or securities represented by the line items “Cash and cash equivalents” and “Short-term investments” on the face of the Company’s Condensed Consolidated Balance Sheet included in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2006 (collectively, the “ Closing Cash Items ”) from being available as cash in the United States and the

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repatriation to the Company of any such cash held outside of the United States will not result in the imposition of any material United States or foreign Tax Liability.

(d) Section 2.9(d) of the Company Disclosure Letter sets forth the Company’s forecasted expenses for Tanox West for the Company’s fiscal year 2006 as of the date hereof (the “ Forecast ”). The Company prepared the Forecast in good faith.

(e) The Company has previously furnished to Parent a complete and correct copy of any amendments or modifications, which have not yet been filed with the SEC but which are required to be filed, to agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act.

(f) The Company has established and maintains “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) that are reasonably designed to ensure that material information (both financial and non-financial) relating to the Company and its subsidiaries required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to the Company’s principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and the principal financial officer of the Company required by Section 302 of the Sarbanes-Oxley Act of 2002 (“ SOX ”) with respect to such reports. For purposes of this Agreement, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in SOX.

(g) The Company and each of its subsidiaries has established and maintains, adheres to and enforces a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) which is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP and SEC rules and regulations (including the Financial Statements), including policies and procedures that (i) require the maintenance of

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records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company and its subsidiaries, (ii) provide reasonable assurance that material information relating to the Company and its subsidiaries is promptly made known to the officers responsible for establishing and maintaining the system of internal controls; (iii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company and its subsidiaries are being made only in accordance with appropriate authorizations of management and the Board; (iv) provide reasonable assurance that access to assets is permitted only in accordance with management’s general or specific authorization; (v) provide reasonable assurance that the reporting of assets is compared with existing assets at regular intervals and appropriate action is taken with respect to any differences; (vi) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company and its subsidiaries; and (vii) provide reasonable assurance that any “significant deficiencies” or “material weaknesses” (as such terms are defined in Auditing Standard No. 2, promulgated by the Public Company Accounting Oversight Board, (“ AS-2” ) in the design or operation of internal controls which are reasonably likely to materially and adversely affect the ability to record, process, summarize and report financial information, and any fraud, whether or not material, that involves the Company’s management or other Employees (other than Consultants who are not Significant Consultants) who have a role in the preparation of financial statements or the internal controls used by the Company and its subsidiaries, are adequately and promptly disclosed to the Company’s independent auditors and the audit committee of the Board. There (i) are no significant deficiencies or material weaknesses in the system of internal control over financial reporting used by the Company and its subsidiaries, (ii) is no fraud, whether or not material, that involves the Company’s management or other Employees (other than Consultants who are not Significant Consultants) who have a role in the preparation of financial statements or the internal control over financial reporting used by the Company and its subsidiaries or (iii) is no claim or allegation regarding any of the foregoing. Section 2.9(g) of the Company Disclosure Letter summarizes each “control deficiency” (as defined in AS-2) identified by the Company’s independent auditors since January 1, 2004 through the date of this Agreement and not disclosed in the Company SEC Reports.

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(h) Each of the principal executive officer of the Company and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company, as applicable) has made all certifications required by Sections 302 and 906 of SOX and the rules and regulations promulgated thereunder with respect to the Company SEC Reports. The Company’s management has completed an assessment of the effectiveness of the Company’s system of internal control over financial reporting in compliance with the requirements of Section 404 of SOX for the fiscal year ended December 31, 2005, and such assessment concluded that such controls were effective and the Company’s independent registered accountant has issued (and not subsequently withdrawn or qualified) and attestation report concluding the Company maintained effective internal control over financial reporting as of December 31, 2005. Since December 31, 2005 and through the date hereof, to the knowledge of the Company, no events, facts or circumstances have occurred, or exist, such that management would not be able to complete its assessment of the effectiveness of the Company’s system of internal control over financial reporting in compliance with the requirements of Section 404 of SOX for the fiscal year ended December 31, 2006, and conclude, after such assessment, that such controls were effective.

(i) To the Company’s knowledge, Ernst & Young LLP, which has expressed its opinion with respect to the financial statements of the Company and its subsidiaries as of December 31, 2005, December 31, 2004 and December 31, 2003 and for each of the fiscal years in the three fiscal year period ended December 31, 2005 included in the Company SEC Reports (including the related notes), is “independent” with respect to the Company and each of its subsidiaries within the meaning of Regulation S-X since the appointment of Ernst & Young LLP in that capacity. The Company is in compliance with the applicable criteria for continued listing of the Company Common Stock on Nasdaq and has not since January 1, 2004 received any written notice from Nasdaq asserting any non-compliance with such rules and regulations.

(j) The Company has timely responded to all comment letters of the staff of the SEC relating to the Company SEC Reports, and the SEC has not advised the Company that any final responses are inadequate, insufficient or otherwise non-responsive. The Company has made available to Parent true, correct and complete copies of all correspondence between the SEC, on the one hand, and the Company and any of its subsidiaries, on the other, since January 1,

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2004, including all SEC comment letters and responses to such comment letters by or on behalf of the Company. To the Company’s knowledge, none of the Company SEC Reports is the subject of ongoing SEC review or outstanding SEC comment.

(k) No attorney representing the Company or any of its subsidiaries, whether or not employed by the Company or any of its subsidiaries, or Employee has reported to the Board or any committee thereof or to any director or officer of the Company evidence of a material violation of securities laws, breach of fiduciary duty, fraudulent conduct (whether or not material) or similar violation by an Employee or agent (while acting in that capacity).

2.10 No Undisclosed Liabilities . Neither the Company nor any of its subsidiaries has any liability, indebtedness, obligation, deficiency, guaranty or endorsement of any type (whether absolute, accrued, contingent, direct, indirect, or otherwise) (collectively, “ Liabilities ”) of a nature required to be disclosed on a balance sheet or in the related notes to the consolidated financial statements prepared in accordance with GAAP and which are, individually or in the aggregate with such other items, material to the business, assets, financial condition, results of operations or cash flows of the Company and its subsidiaries taken as a whole, except (i) Liabilities reflected or reserved in the Interim Balance Sheet, (ii) Liabilities incurred since the Interim Balance Sheet Date in the ordinary course of business consistent with past practices, (iii) Liabilities incurred since the Interim Balance Sheet date which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company, or (iii) Liabilities permitted under Section 4.1 hereof or otherwise reasonably incurred in connection with the Company’s performance of its obligations hereunder.

2.11 Absence of Certain Changes or Events . From the Interim Balance Sheet Date through the date hereof, there has not been, occurred or arisen: (a) any event or condition of any character that has had or would be reasonably expected to have a Material Adverse Effect on the Company; (b) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Company’s or any of its subsidiaries’ capital stock, or any purchase, redemption or other acquisition by the Company of any of the Company’s capital stock or any other securities of the Company or its subsidiaries or any options, warrants, calls or rights to acquire any such shares or

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other securities, except for repurchases from Employees following their termination pursuant to the terms of stock option or purchase agreements existing as of the Interim Balance Sheet Date; (c) any split, combination or reclassification of any of the Company’s or any of its subsidiaries’ capital stock; (d) any granting by the Company or any of its subsidiaries of any increase in compensation or fringe benefits to any Employee (other than Consultants who are not Significant Consultants) or any payment by the Company or any of its subsidiaries of any bonus or any entry by the Company or one of its subsidiaries into any Contract (or amendment of an existing Contract) to grant or provide severance, acceleration of vesting, termination pay or other similar benefits; (e) the execution of any employment Contract or service Contract, the extension of the term of any existing employment Contract or service Contract with any Employee, or any entry or other modification by the Company or any of its subsidiaries of any employment, severance, termination or indemnification Contract or any Contract the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company of the nature contemplated hereby; (f) entry by the Company or any of its subsidiaries into (i) any licensing or other Contract providing for the use, acquisition or disposition of any Intellectual Property (as defined in Section 2.19 hereof) other than (A) licenses of commercially available third party software applications for internal use by the Company or otherwise in the Company’s ordinary course of business consistent with past practice and (B) confidentiality agreements in the ordinary course of business consistent with past practice, or (ii) any amendment or consent with respect to any material licensing or other Contract providing for the use, acquisition or disposition of any Intellectual Property, other than confidentiality agreements in the ordinary course of business consistent with past practice; (g) any change by the Company in its accounting methods, principles or practices (including any change in depreciation or amortization policies or rates or revenue recognition policies), except as required by concurrent changes in GAAP; (h) any revaluation by the Company of any of its assets, including writing off promissory notes or accounts receivable, or any sale of assets of the Company; (i) entry by the Company or any of its subsidiaries into any Contract (other than the Voting Agreements) filed or required to be filed by the Company with the SEC; (j) the incurrence, creation or assumption of any material Encumbrance (other than a Permitted Encumbrance) or any discharge of any material Encumbrance, any material Liability for borrowed money or any material Liability or obligation as guaranty or surety with respect to the obligations of others who are not wholly-owned subsidiaries of the Company, (k) any purchase, offer to purchase, sale, offer to sell, option to purchase or sell, agreement to transfer any interest in, or any lease, right to use, sublease or other occupancy, of any Company Real Estate (as defined in Section 2.15(a) ) by the Company or its subsidiaries; and (l) any announcement of or any agreement by the Company, any of its subsidiaries, or any Employee on behalf of the Company, to do any of the things described in the preceding clauses (a) through (k) (other than negotiations or agreements with Parent and Merger Sub regarding the Transactions).

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2.12 Absence of Litigation . Except as would not result in a material Liability, there are no claims, actions, charges, investigations or other proceedings pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries, or any of their respective properties or any of the executive officers or directors of the Company or any of its subsidiaries before any Governmental Entity or otherwise (each, an “ Action ”). No investigation or review by any Governmental Entity is pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries, or any of their respective properties or any of the executive officers or directors of the Company or any of its subsidiaries, nor has any Governmental Entity indicated to the Company an intention to conduct the same. The Company has provided or made available to Parent true, correct and complete copies of all complaints regarding the litigation referred to in Section 2.12 of the Company Disclosure Letter and has made available to Parent true, correct and complete copies of all pleadings, motions and non-privileged written correspondence regarding the litigation referred to in Section 2.12 of the Company Disclosure Letter. There has not been since January 1, 2000, nor are there currently any internal investigations being conducted by the Company, the Board (or any committee thereof) or any third party at the request of any of the foregoing concerning any financial, accounting, auditing, Tax, conflict of interest, illegal activity, fraudulent or deceptive conduct or other misfeasance or malfeasance issues with respect to the Company or any of its subsidiaries.

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2.13 Employee Benefit Plans .

(a) Definitions . Except as otherwise provided for herein, for purposes of this Agreement, the following terms shall have the meanings set forth below:

(i) “ COBRA ” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and as codified in Section 4980B of the Code and Section 601 et. seq. of ERISA;

(ii) “ Code ” shall mean the Internal Revenue Code of 1986, as amended;

(iii) “ Company Employee Plan ” shall mean any Employee Plan, including all International Employee Plans;

(iv) “ Consultant ” shall mean any current or former independent contractor or leased employee who is (i) a natural person or (ii) a staffing agency or other entity that leases or otherwise supplies employees to third persons on a consulting, contract or project basis;

(v) “ DOL ” shall mean the U.S. Department of Labor;

(vi) “ Employee ” shall mean any current or former or retired employee, officer, Consultant or director of the Company or any ERISA Affiliate;

(vii) “ Employment Agreement ” shall mean each management, employment, severance, change of control, retention, consulting (with a Consultant), relocation, repatriation, expatriation, visas, work permit or other agreement, contract or understanding, written or otherwise, between the Company or any ERISA Affiliate and any Employee under which the Company has current or future obligations;

(viii) “ Employee Plan ” shall mean any plan, program, policy, practice, Contract or other arrangement, providing for compensation, severance, termination pay, deferred compensation, performance awards, bonuses, stock or stock-related awards or purchases, fringe benefits, loans, or other employee benefits or remuneration of any kind, whether written or unwritten,

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funded or unfunded, including each “employee benefit plan,” within the meaning of Section 3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by the Company or any ERISA Affiliate for the benefit of any Employee, and with respect to which the Company or any ERISA Affiliate has or may have any Liability, including all International Employee Plans;

(ix) “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended;

(x) “ ERISA Affiliate ” shall mean any other person or entity under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder;

(xi) “ FMLA ” shall mean the Family and Medical Leave Act of 1993, as amended;

(xii) International Employee Plan ” shall mean each Employee Plan that has been adopted or maintained by the Company or any ERISA Affiliate pursuant to the laws of any country outside the United States, whether informally or formally, or with respect to which the Company or any ERISA Affiliate will or may have any Liability, for the benefit of Employees who perform services outside the United States;

(xiii) “ IRS ” shall mean the U.S. Internal Revenue Service;

(xiv) “ Multiemployer Plan ” shall mean any “Pension Plan” (as defined below) which is a “multiemployer plan,” as defined in Section 3(37) of ERISA;

(xv) “ Pension Plan ” shall mean each Company Employee Plan which is an “employee pension benefit plan,” within the meaning of Section 3(2) of ERISA.

(b) Schedule . Section 2.13(b) of the Company Disclosure Letter contains an accurate and complete list of each Company Employee Plan, and each Employment Agreement existing as of the date of this Agreement. Neither the Company nor any ERISA Affiliate has any plan or commitment to

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establish any new Company Employee Plan or Employment Agreement, to modify any Company Employee Plan or Employment Agreement (except to the extent required by applicable Legal Requirements, in each case as previously disclosed to Parent in writing, or as required by this Agreement), or to adopt or enter into any Company Employee Plan or Employment Agreement.

(c) Documents . The Company has provided or made available to Parent correct and complete copies of: (i) all material documents embodying each Company Employee Plan and each Employment Agreement including all amendments thereto and all related trust documents; (ii) the most recent annual actuarial valuations and annual and periodic accounting, if any, prepared for each Company Employee Plan; (iii) the three (3) most recent annual reports (Form Series 5500 and all schedules and financial statements attached thereto), if any, required under ERISA or the Code in connection with each Company Employee Plan; (iv) the most recent summary plan description together with the summary(ies) of material modifications thereto, if any, required under ERISA with respect to each Company Employee Plan; (v) the most recent IRS determination or opinion letter issued with respect to each Company Employee Plan, if applicable, and all applications and correspondence to or from the IRS or the DOL with respect to any such application or letter; (vi) all communications material to any Employee or Employees relating to any Company Employee Plan and any proposed Company Employee Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events which would result in any material Liability to the Company; (vii) all correspondence to or from any Governmental Entity relating to any Company Employee Plan; (viii) all COBRA forms and related notices (or such forms and notices as required under comparable law); (ix) the three (3) most recent plan years discrimination tests for each Company Employee Plan, where applicable; (x) all material written agreements and contracts relating to each Company Employee Plan, including administrative service agreements and group insurance contracts and group annuity contracts; and (xi) all registration statements, annual reports (Form 11-K and all attachments thereto, if applicable to be filed) and prospectuses prepared in connection with each Company Employee Plan, as applicable.

(d) Employee Plan Compliance . Company and its ERISA Affiliates have performed, in all material respects, all obligations required to be performed by them under, are not in material default or violation of, and neither

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Company nor its ERISA Affiliates have any knowledge of any material default or violation by any other party to, any Company Employee Plan, and each Company Employee Plan has been established and maintained in all material respects (i) in accordance with its terms and (ii) in compliance with all applicable laws, statutes, orders, rules and regulations, including but not limited to ERISA and the Code. Any Company Employee Plan intended to be qualified under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code (i) has either applied for, prior to the expiration of the requisite period under applicable U.S. Department of the Treasury (“ Treasury ”) Regulations or IRS pronouncements, or obtained a favorable determination, notification, advisory and/or opinion letter, as applicable, as to its qualified status from the IRS, and (ii) incorporates or has been amended to incorporate all provisions required to comply with the Tax Reform Act of 1986 and subsequent legislation. For each Company Employee Plan that is intended to be qualified under Section 401(a) of the Code, there has been no event, condition or circumstance that has adversely affected or would reasonably be expected to adversely affect the qualified status of such Company Employee Plan. No “prohibited transaction,” within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Company Employee Plan. There are no Actions pending or, to Company’s or any ERISA Affiliates’ knowledge, threatened (other than routine claims for benefits) against any Company Employee Plan or against the assets of any Company Employee Plan. Each Company Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, and the act of amending, terminating or discontinuing any Company Employee Plan will not result in any Liability to Parent, Company or any of its ERISA Affiliates (other than routine administration expenses incurred with respect to any such amendment, termination or discontinuance). There are no audits, inquiries or proceedings pending or to Company’s or any of its ERISA Affiliates’ knowledge threatened by the IRS, DOL, or any other Governmental Entity with respect to any Company Employee Plan. Neither Company nor any ERISA Affiliate is subject to any penalty or Tax with respect to any Company Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code. The Company and its ERISA Affiliates have, in all material respects, each timely made all contributions and other payments required by and due under the terms of each Company Employee Plan.

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(e) No Pension or Funded Welfare Plans . Neither the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in, or contributed to, or could have any obligation to, any (i) Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code, or (ii) “funded welfare plan” within the meaning of Section 419 of the Code. Neither the Company nor any Company subsidiary or ERISA Affiliate has incurred or expects to incur any Liability under Title IV of ERISA or Section 412 of the Code. No Company Employee Plan provides health benefits that are not fully insured through an insurance contract.

(f) Collectively Bargained, Multiemployer and Multiple Employer Plans . At no time has the Company or any ERISA Affiliate contributed to or been obligated to contribute to any Multiemployer Plan. Neither the Company, nor any affiliate has at any time ever maintained, established, sponsored, participated in, or contributed to any multiple employer plan, or to any plan described in Section 413 of the Code.

(g) Deferred Compensation Compliance . The Company does not have a Company Benefit Plan that is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code).

(h) Executive Loans . Neither the Company nor any ERISA Affiliate has violated the provisions of Section 402 of SOX applicable to loans to key executives, and the execution of this Agreement and the consummation of the transactions contemplated hereby will not, to the knowledge of the Company, cause such a violation of such provisions of Section 402 of SOX.

(i) Fair Market Value . No Company Stock Option or other right to acquire Company Common Stock or other equity of the Company (i) has an exercise price that has been or may be determined to be less than the fair market value of the underlying equity as of the date such Company Stock Option or other equity right was granted, (ii) has any feature for the deferral of compensation other than the deferral of recognition of income until the later of exercise or disposition of such Company Stock Options or other equity rights, or (iii) has been granted after December 31, 2004, with respect to any class of stock of the Company that is not “service recipient stock” (within the meaning of applicable regulations under Section 409A).

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(j) Plan Contributions . With respect to the Company Employee Plans, there are no benefit or funding obligations for which contributions have not been made or properly accrued to the extent required by GAAP or will not be offset by insurance. The assets of each Company Employee Plan which is fully funded are reported at their fair market value in the books and records of such Company Plan, the applicable related trust as indicated on the Financial Statements and, if applicable, on Forms 5500, and/or the Company and its subsidiaries.

(k) No Post-Employment Obligations . No Company Employee Plan provides, or reflects or represents any Liability to provide retiree insurance or other retiree benefits to any person for any reason, except as may be required by COBRA or other applicable statute, and the Company has never represented, promised or contracted (whether in oral or written form) to any Employee (either individually or to Employees as a group) or any other person that such Employee(s) or other person would be provided with retiree insurance or other benefits, except to the extent required by applicable Legal Requirements.

(l) Effect of Transaction .

(i) The execution of this Agreement and the consummation of the Transactions or any termination of employment or service in connection therewith will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Employee Plan, Employment Agreement, trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Employee other than accrued payments.

(ii) No payment or benefit could give rise, directly or indirectly, to the payment of any amount that could reasonably be expected to be (i) non-deductible to Company under Section 280G of the Code, (ii) characterized as a “parachute payment” within the meaning of Section 280G of the Code or (iii) subject to the excise Tax under Section 4999 of the Code. The Company is not a party to or bound by any Tax indemnity agreement or any other agreement that will require Parent or the Surviving Corporation to “gross-up” or otherwise compensate any Employee because of the imposition of any excise Tax. Section 2.13(l)(ii) of the Company Disclosure Letter lists as of the date of this

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Agreement each person who the Company reasonably believes is, with respect to the Company, any Company subsidiary and/or any ERISA affiliate, a “disqualified individual” (within the meaning of Section 280G of the Code and the regulations promulgated thereunder).

(m) Employment Matters . The Company: (i) is in compliance in all material respects with all applicable foreign, federal, state and local laws, rules, regulations and ordinances respecting employment, employment practices, terms and conditions of employment, discrimination in employment, worker classification, wages, benefits, hours, working conditions and occupational safety and health and employment practices, in each case, with respect to Employees; (ii) has, in all material respects, withheld and reported all amounts required by Legal Requirements or by agreement to be withheld and reported with respect to wages, benefits, salaries and other payments to Employees (excluding Consultants); (iii) is not liable for any material arrears of wages, salaries, commissions, bonuses, benefits or other compensation due or any Taxes or any penalty for failure to comply with any of the foregoing; and (iv) is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any governmental authority, with respect to unemployment compensation benefits, social security or other retiree benefits, or other benefits or obligations for Employees (excluding Consultants) (other than routine payments to be made in the normal course of business and consistent with past practice). There are no pending or reasonably anticipated or, to the knowledge of the Company, threatened Actions, audits or administrative matters against the Company or any ERISA Affiliate relating to any Employee, Employee Agreement, or Company Employee Plan, or under any workers’ compensation policy or long-term disability policy. The employment or services of each of the Employees located in the United States is terminable at the will of the Company or its ERISA Affiliates and any such termination would result in no Liability to the Company or to any ERISA Affiliate. Neither the Company nor any ERISA Affiliate has direct or indirect material Liability with respect to any misclassification of any person as an independent contractor rather than as an employee, or with respect to any worker leased from another employer.

(n) Labor . No work stoppage or labor strike against the Company is pending or reasonably anticipated or, to the knowledge of the Company, threatened. The Company does not know of any current activities or proceedings of any labor union to organize any Employees (excluding

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Consultants) or of any such activities or proceedings within the preceding three (3) years. There are no Actions, audits, administrative matters, labor disputes or grievances pending, or, to the knowledge of the Company, threatened or reasonably anticipated relating to any wage, benefit, medical or family leave, labor, safety or discrimination matters involving any Employee, including charges of wage and/or hour violations, unfair labor practices, discrimination, or wrongful termination complaints. Neither the Company nor any ERISA Affiliate is party to a current conciliation agreement, consent decree, or other agreement or order with any federal, state, or local agency or Governmental Entity with regard to employment practices. Neither the Company nor any ERISA Affiliate has engaged in any unfair labor practices within the meaning of the National Labor Relations Act. The Company is not presently, nor has it been in the past, a party to, or bound by, any collective bargaining agreement or union contract with respect to Employees, no collective bargaining agreement is being negotiated by the Company or any of its subsidiaries and neither the Company or any of its subsidiaries has any duty to bargain with any labor organization.

(o) International Employee Plan . Each International Employee Plan has been established, maintained and administered in compliance with its terms and conditions and with the requirements prescribed by any and all statutory or regulatory laws that are applicable to such International Employee Plan. Furthermore, no International Employee Plan has unfunded liabilities, that as of the Effective Time, will not be offset by insurance or fully accrued. Except as required by applicable Legal Requirements, no condition exists that would prevent the Company or Parent from terminating or amending any International Employee Plan at any time for any reason without Liability to the Company or its affiliates (other than ordinary administration expenses or routine claims for benefits). Each International Employee Plan has obtained from the Governmental Entity having jurisdiction with respect to such International Employee Plan any required determinations, if any, that such International Employee Plan is in compliance with the laws of the relevant jurisdiction if such determinations are required in order to give effect to such International Employee Plan.

(p) WARN Act . The Company and any ERISA Affiliate have complied with the Workers Adjustment and Retraining Notification Act of 1988, as amended (“ WARN Act ”) and all similar state or local laws, including applicable provisions of state or local law. All Liabilities relating to the employment, termination or employee benefits of any former Employees

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(excluding Consultants) previously terminated by the Company or an affiliate including all termination pay, severance pay or other amounts in connection with the WARN Act and all similar state laws, have been paid, and no terminations prior to the Closing Date shall result in unsatisfied Liability under WARN or any similar state or local law.

(q) Employee Information . The Company and each of its subsidiaries has made available to Parent a true, correct and complete list of the names of all current officers, directors, and employees of the Company and each subsidiary showing each such person’s name, position, date of hire, work location, and each such person’s annualized salary and target commission (as applicable), status as exempt/non-exempt, status as full-/part-time, target bonus(es) and fringe benefits for the current fiscal year and the most recently completed fiscal year. The Company and each of its subsidiaries has made available to Parent the following additional information for each of its current international employees: city/country of employment; citizenship; date of hire; manager’s name and work location; date of birth; any material special circumstances; and whether the employee was recruited from a previous employer.

(r) True and Correct Copies . In addition to the documents referred to in Section 2.13(c) above, the Company and each of its subsidiaries has made available to Parent true, correct and complete copies of each of the following: (i) all affirmative action plans; (ii) all forms of offer letters currently in use; (iii) all forms of employment agreements and severance agreements for current Employees (excluding Consultants); (iv) all forms of consultant and/or independent contractor agreements currently in effect, (v) all forms of confidentiality, non-disclosure, non-solicitation, non-competition or inventions agreements between Employees and the Company or any of its subsidiaries currently in use for such matters (and a true, correct and complete list of current Employees not subject thereto); (vi) any agreements that deviate in any material respect from forms described in (i) through (v) above; (vi) all current management organization chart(s); (vii) all current, in force agreements and/or insurance policies providing for the indemnification of any officers or directors of the Company or any of its subsidiaries; (viii) summary of the Company’s current standard severance policy and any policy in existence or effect during the immediately preceding twelve (12) months; (ix) summary of outstanding Liability for termination payments and benefits to Employees; and (x) a schedule of bonus commitments made to Employees.

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2.14 Proxy Statement . The proxy statement to be sent to the stockholders of the Company in connection with the Stockholders’ Meeting (as hereinafter defined) (such proxy statement, as amended or supplemented, being referred to herein as the “ Proxy Statement ”), shall not, at the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company, at the time of the Stockholders’ Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it was made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies, if any, for the Stockholders’ Meeting which shall have become false or misleading. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent, Merger Sub or any of Parent’s or Merger Sub’s representatives in writing for inclusion in the Proxy Statement. The Proxy Statement shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder.

2.15 Title to Property .

(a) Section 2.15(a) of the Company Disclosure Letter sets forth a complete and accurate list as of the date of this Agreement of all real property owned by the Company or any of its subsidiaries, or in which the Company or any of its subsidiaries has an ownership interest, including, without limitation, any rights, contracts or options to acquire real property other than the Leased Real Estate defined below (the “ Owned Real Estate ”).

(b) Section 2.15(b) of the Company Disclosure Letter sets forth a list of all real property currently leased, subleased by or from the Company or any of its subsidiaries or otherwise used or occupied by the Company or any of its subsidiaries (the “ Leased Real Estate ” and together with the Owned Real Estate, the “ Company Real Estate ”), the name of the lessor, sublessor, master lessor and/or lessee, the date and term of the lease, sublease or other occupancy right and each amendment thereto, the aggregate annual rental payable thereunder, the

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size of the Leased Real Estate and a description of renewal options contained in such lease. The Company has provided or made available to Parent true, correct and complete copies of all leases, lease guaranties, subleases, agreements for the leasing, use or occupancy of, or otherwise granting a right in or relating to the Leased Real Estate, including all amendments, terminations and modifications thereof (the “ Real Estate Leases ”). All such Real Estate Leases are in full force and effect, are valid and enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar state and federal laws affecting the rights of creditors generally and equitable limitations, and there is not, under any such leases, any existing material breach, default or event of default (or event which with notice or lapse of time, or both, would constitute a material default) of the Company or any of its subsidiaries, or to the Company’s knowledge, of any other party thereto.

(c) To the knowledge of the Company, neither the operations of the Company nor any of its subsidiaries on the Company Real Estate nor such Company Real Estate, violate in any material respect any Legal Requirement or Company Permit relating to the particular property or such operations. The Company or its subsidiaries currently occupies all of the Company Real Estate for the operation of its business and there are no other parties occupying, or with a right to occupy, the Company Real Estate. Section 2.15(c)(i) of the Company Disclosure Letter sets forth a list of all leasehold improvements to real property and improvements and other capital equipment used or held for use by the Company and its subsidiaries in their business operations as of September 30, 2006. Such list includes pertinent information related to property, plant and equipment (including leasehold improvements) such as asset identification, location, acquisition date, original cost, accumulated depreciation and net book value.

(d) To the knowledge of the Company, the covenants, conditions, rights-of-way, easements and similar restrictions affecting all or any portion of the Company Real Estate (the “ Exceptions to Title ”) do not, in each case, materially impair the ability to use any such Company Real Estate in the operation of the businesses of the Company or its subsidiaries as presently conducted, and no material default or breach exists thereunder by the Company or any of its subsidiaries.

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(e) To the knowledge of the Company, there are no requirements (including any Legal Requirements) imposed on the Owned Real Estate that require the Company or any of its subsidiaries to construct or pay for the cost of construction of any off-site improvements or pay any other impact fee.

(f) Neither the Company, nor any subsidiary of the Company has received any written notice from any insurance company of any material defects or inadequacies in any Company Real Estate or any part thereof which could materially and adversely affect the insurability of such property or the premiums for the insurance thereof, nor has any written notice been given by any insurer of any such property requesting the performance of any repairs, alterations or other work with which substantial compliance has not been made.

(g) The Company has received no written notice with respect to pending, and, to the knowledge of the Company, there are no threatened, condemnation or eminent domain actions or proceedings, or any special assessments or other activities of any public or quasi-public body that would materially adversely affect the Company Real Estate for use in the operations of its business as currently conducted.

(h) The Company and each of its subsidiaries has good and indefeasible title to all Owned Real Estate, or, in the case of leased properties and assets, valid leasehold interests in or other valid contractual rights of use with respect to, all of its other properties and assets, used or held for use in its business, free and clear of all Encumbrances except for the Exceptions to Title and indebtedness that is reflected on the Interim Balance Sheet and (i) Encumbrances for Taxes (as herein defined) not yet due and payable, (ii) statutory Encumbrances which arise in the ordinary course of business, are not material in amount and do not materially impair the Company’s or its subsidiaries’ ownership or use of such properties and assets, (iii) liens securing indebtedness that are reflected on the Interim Balance Sheet or (iv) with respect to Owned Real Estate, minor imperfections of title, if any, and land use laws which do not materially impair the use, occupancy or value of the Company’s or