EXECUTION COPY AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

by and among

BURT’S BEES, INC.,

THE CLOROX COMPANY,

BUZZ ACQUISITION CORP.

and

BBI HOLDINGS LP

Dated as of October 30, 2007

TABLE OF CONTENTS

i

TABLE OF CONTENTS

(continued)

ii

TABLE OF CONTENTS

(continued)

iii

TABLE OF CONTENTS

(continued)

iv

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (“ Agreement ”) is made and entered into this 30 ^th day of October, 2007, by and among BURT’S BEES, INC., a Delaware corporation (the “ Company ”), The Clorox Company, a Delaware corporation (“ Purchaser ”), Buzz Acquisition Corp., a Delaware corporation wholly owned by Purchaser (“ Merger Sub ”), and BBI Holdings LP, as the initial Escrow Fund Recipient Agent.

RECITALS

WHEREAS, the respective Boards of Directors of the Company, Purchaser and Merger Sub have approved the acquisition of the Company by Purchaser on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the respective Boards of Directors of the Company, Purchaser and Merger Sub have determined that the merger of Merger Sub with and into the Company (the “ Merger ”), upon the terms and subject to the conditions set forth in this Agreement, would be advisable and in the best interests of their respective stockholders;

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and an inducement to Purchaser’s and Merger Sub’s willingness to enter into this Agreement, each individual listed on Schedule I has entered into employment and noncompetition agreements with Purchaser, which agreements will be assigned to the Company at the Effective Time;

WHEREAS, immediately after the execution and delivery of this Agreement and as a condition and an inducement to Purchaser’s and Merger Sub’s willingness to enter into this Agreement, the Company shall submit a written consent approving the Merger, in the form attached hereto as Exhibit A (each, a “ Principal Stockholder Consent ”), to each of the holders of voting capital stock of the Company listed on Schedule II hereto (“ Principal Stockholders ”), which Principal Stockholders have agreed to execute such Principal Stockholder Consents immediately after receipt thereof. Upon valid execution of such Principal Stockholder Consents, the Company shall prepare and mail to every Stockholder as of the record date determined by the Company for such purpose the notices required by Sections 228(e) and 262(d)(2) of the Delaware General Corporation Law (the “ DGCL ”); and

WHEREAS, Purchaser and the Company desire to make, and have relied upon, certain representations, warranties, covenants and agreements in connection with the transactions contemplated hereby.

NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:

1

ARTICLE I

DEFINITIONS

Section 1.1 Defined Terms . When used in this Agreement, the following terms shall have the meanings set forth below:

“ Accounts Receivable ” means all accounts receivable, notes receivable and other monies due to the Company or any of its Subsidiaries for sales and deliveries of goods, performance of services and other transactions, net of any applicable allowances or reserves determined in accordance with GAAP.

“ Affiliate ” means, with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person, including, without limitation, each Subsidiary of such specified Person. For the purposes of this definition, “control”, when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through ownership of voting securities or by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“ Agreement ” has the meaning set forth in the Preamble.

“ Alternative Transaction ” means, with respect to the Company and its Subsidiaries, (i) any transaction or series of related transactions involving (a) the sale of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, or (b) the sale of such number of shares of capital stock of the Company or any of its Subsidiaries entitling the holders thereof to elect a majority of the members of the board of directors of the Company or such Subsidiary, as the case may be, (ii) a merger, consolidation, recapitalization or similar transaction or series of related transactions involving the Company in which the beneficial owners of capital stock of the Company immediately prior to such transaction(s) do not beneficially own, immediately after the consummation of such transaction(s), sufficient shares of capital stock of the Company entitling them to elect a majority of the members of the board of directors of the Company, or (iii) any transaction or series of related transactions that would require the Company to abandon, terminate, or materially delay, or would substantially impair the Company’s ability to consummate, the transactions contemplated hereunder.

“ Certified Closing Report ” has the meaning set forth in Section 2.9(a).

“ Certified Post-Closing Report ” has the meaning set forth in Section 2.12(a).

“ Certified Post-Closing Report Dispute Notice ” has the meaning set forth in Section 2.12(b).

“ Closing ” has the meaning set forth in Section 2.2.

“ Closing Date ” has the meaning set forth in Section 2.2.

2

“ Closing Working Capital Payment ” has the meaning set forth in Section 2.9(b)(i).

“ Closing Working Capital Reduction ” has the meaning set forth in Section 2.9(b)(ii).

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“ Company ” has the meaning set forth in the Preamble.

“ Company Benefit Plans ” means all written material Employee Benefit Plans sponsored, contributed to or maintained by the Company or any of its Subsidiaries for the benefit of current or former employees, consultants or directors of the Company or any of its Subsidiaries.

“ Company Disclosure Schedule ” means the Disclosure Schedule delivered by the Company to Purchaser simultaneously with the execution and delivery of this Agreement.

“ Company Expenses ” has the meaning set forth in Section 2.16.

“ Company Intellectual Property ” has the meaning set forth in Section 3.11(c).

“ Company Material Adverse Effect ” means an event, effect, occurrence, state of facts, change or development that (i) is or is reasonably likely to be materially adverse to the business, assets, financial condition or results of operations of the Company and the Company’s Subsidiaries, taken as a whole, other than effects caused by or relating to: (a) the economy in general or general economic or political conditions, (b) the financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index), (c) the personal care industry generally, (d) changes in Law or GAAP, (e) acts of war or terrorism or the escalation of either of the foregoing, (f) any action taken, delayed or omitted to be taken by the Company or any Subsidiary thereof pursuant to the express terms of this Agreement or taken at the written request of Purchaser and not contemplated by this Agreement, (g) the execution or delivery of this Agreement or the public announcement thereof, or the identity of Purchaser, or (h) any adverse change in or effect on the business of the Company and the Company’s Subsidiaries that, to the reasonable satisfaction of Purchaser, is cured on or prior to the Closing; except in the case of the foregoing clauses (a), (b), and (c) for such changes or developments that disproportionately affect the Company and the Company’s Subsidiaries relative to other participants in the industries in which the Company or its Subsidiaries generally operate; or (ii) impairs in any material respect the ability of the Company to perform its obligations hereunder.

“ Company Stock ” has the meaning set forth in Section 2.8(b).

“ Company’s Organizational Documents ” has the meaning set forth in Section 3.1.

“ Continuation Period ” has the meaning set forth in Section 6.1(a).

3

“ Contract ” means any legally enforceable note, bond, mortgage, indenture, lease, contract, agreement, obligation or commitment, or any legally enforceable amendment to any of the foregoing, in each case whether written or oral, express or implied.

“ Controls ” has the meaning set forth in Section 3.6(b).

“ Deductible ” has the meaning set forth in Section 9.2(b).

“ DGCL ” has the meaning set forth in the Recitals.

“ Dissenting Stockholders ” has the meaning set forth in Section 2.14.

“ Distribution Schedule ” means (i) Column A of Schedule III hereto, at all times when the sum of (A) the aggregate payments received by the Securityholders in respect of shares of Company Stock and Options pursuant to this Agreement plus (B) the aggregate amount of all Indebtedness of the Company and its Subsidiaries outstanding as of the Closing (the sum of (A) and (B), the “ Aggregate Payments ”) is equal to or less than the “Specified Amount” set forth in Schedule III , and (ii) Column B of Schedule III hereto with respect to the portion, if any, of the Aggregate Payments that exceeds the “Specified Amount” set forth in Schedule III .

“ Effective Time ” has the meaning set forth in Section 2.3.

“ Employee Benefit Plan ” means each plan, program, policy, payroll practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, performance awards, stock or stock-related awards, fringe benefits or other employee benefits of any kind, including, without limitation, each “employee benefit plan”, within the meaning of Section 3(3) of ERISA.

“ Environmental Laws ” means, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq ., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq ., the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq. , the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq ., the Clean Air Act, 42 U.S.C. §§ 7401 et seq ., and the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. §§ 1251 et seq ., all rules and regulations promulgated pursuant to any of the above statutes, and any other federal, state or local law, statute, ordinance, rule or regulation governing, or common law cause of action with respect to, Environmental Matters, in each case as in effect at the Closing Date.

“ Environmental Matters ” means any matters arising out of or relating to health and safety, or pollution or protection of the environment or workplace, including, without limitation, any of the foregoing relating to the use, generation, transport, treatment, storage, or disposal of any Hazardous Substances.

“ Environmental Permits ” has the meaning set forth in Section 3.15(c).

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

4

“ Escrow ” has the meaning set forth in Section 2.11.

“ Escrow Agent ” has the meaning set forth in Section 2.11.

“ Escrow Agreement ” has the meaning set forth in Section 8.1(d).

“ Escrow Consideration ” means Twenty-Five Million U.S. Dollars ($25,000,000).

“ Escrow Expiration Date ” has the meaning set forth in Section 9.1(a).

“ Escrow Fund ” has the meaning set forth in Section 2.11.

“ Escrow Fund Recipient ” means the Securityholders, each individual on Schedule IV identified as an Escrow Fund Recipient and Goldman Sachs, as applicable.

“ Escrow Fund Recipient Agent ” has the meaning set forth in Section 9.2(d)(i).

“ Escrow Payment Amount ” means the amount released from the Escrow Fund on any Escrow Payment Date for distribution to the Escrow Fund Recipients in accordance with the provisions of Article IX and the Escrow Agreement.

“ Escrow Payment Date ” means (i) the Escrow Expiration Date, (ii) the Final Escrow Release Date, or (iii) any other date on which amounts are released by the Escrow Agent for distribution to the Escrow Fund Recipients.

“ Escrow Period ” has the meaning set forth in Section 9.2(c)(i).

“ Estimated Closing Net Working Capital ” has the meaning set forth in Section 2.9(a).

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Exercise Price ” means $8,360.

“ Final Adjusted Amount ” has the meaning set forth in Section 2.12(c).

“ Final Closing Net Working Capital ” has the meaning set forth in Section 2.12(c).

“ Final Escrow Release Date ” has the meaning set forth in Section 9.2(c)(iii).

“ Final Resolution Date ” has the meaning set forth in Section 2.12(b).

“ Final Unpaid Company Expenses ” has the meaning set forth in Section 2.12(c).

“ Final Unpaid Indebtedness ” has the meaning set forth in Section 2.12(c).

5

“ Final Unpaid Transaction Bonus Payments ” has the meaning set forth in Section 2.12(c).

“ Financial Statements ” means the consolidated audited balance sheets, consolidated statements of income and consolidated statements of stockholders’ equity for the Company and its Subsidiaries for the years ended December 31, 2005 and December 31, 2006 and the unaudited consolidated balance sheets, consolidated statements of income and consolidated statements of stockholders’ equity for the nine months ended September 30, 2007 for the Company and its Subsidiaries.

“ Fully Diluted Shares ” means the number of shares of Company Stock outstanding immediately prior to the Effective Time, plus the maximum number of shares of Company Stock issuable upon the exercise of all Options outstanding immediately prior to the Effective Time (whether or not then-exercisable).

“ GAAP ” means United States generally accepted accounting principles and practices as in effect from time to time and applied consistently throughout the periods involved.

“ Governmental Entity ” means any government or any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, federal, state, local or foreign.

“ Hazardous Substance ” means any substance, material, or waste listed, defined, designated or classified as hazardous, dangerous, toxic or radioactive, or as a pollutant or contaminant under any Environmental Law, including petroleum and any derivative or by-products thereof.

“ HSR Act ” has the meaning set forth in Section 3.4.

“ Indebtedness ” means (i) all debt and similar monetary obligations for borrowed money, whether direct or indirect, current or non-current (including the aggregate amounts outstanding or due, including principal, interest accrued and any fees incurred, as of the Closing Date pursuant to (x) the Amended and Restated Credit Agreement, dated as of March 29, 2005, by and among the Company, Canadian Imperial Bank of Commerce, BNP Paribas, CIBC World Markets Corp., and the lenders listed therein, as amended, and (y) the Note Purchase Agreement, dated as of March 29, 2005, by and among the Company, AIG Annuity Insurance Company, and SunAmerica Life insurance Company, as amended), (ii) all amounts owing or due under any interest rate, currency or other hedging agreements (it being agreed and understood that any amounts owed to the Company or any Subsidiary thereof upon the termination of any of the foregoing shall be a reduction in Indebtedness), (iii) any obligation of the Company or any Subsidiary thereof evidenced by bonds, debentures, notes or other similar instruments, (iv) all liabilities associated with capital leases and all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed, (v) any obligation of the Company or any Subsidiary thereof issued or assumed as the deferred purchase price of property or services, (vi) all guaranties, endorsements and other contingent obligations

6

whether direct or indirect in respect of indebtedness or performance of others, including any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase indebtedness, or to assure the owner of indebtedness against loss, through an agreement to purchase goods, supplies or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, (vi) obligations to reimburse issuers of any letters of credit, or (vii) any premiums, prepayment or termination fees, expenses or breakage costs due upon prepayment of the foregoing.

“ Indemnified Persons ” has the meaning set forth in Section 6.2(a).

“ Independent Accounting Firm ” has the meaning set forth in Section 2.12(c).

“ Information Statement ” has the meaning set forth in Section 5.4.

“ Initial Merger Consideration ” means an amount equal to the Merger Consideration less the Escrow Consideration.

“ Initial Price Per Option ” means the Initial Price Per Share less the Exercise Price.

“ Initial Price Per Share ” means the Initial Merger Consideration divided by the Fully Diluted Shares.

“ Intellectual Property ” means (i) patents and patent applications, together with all reissuances, continuations, continuations-in-part, divisions, extensions and reexaminations thereof, (ii) trademarks, service marks, trade names, and trade dress, together with all goodwill associated with any of the foregoing (collectively, “ Trademarks ”), and all applications, registrations and renewals for and relating thereto, (iii) copyrights, and all applications, registrations, and renewals for and relating thereto, (iv) trade secrets, and confidential and proprietary information (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methods, data, designs, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals) (collectively, “ Trade Secrets ”), and (v) domain names.

“ Inventory ” means any finished products, any works-in-progress or other inventory, wherever located and whether held by the Company, any Subsidiary thereof, or any third parties, including all samples, promotional displays, packaging, supplies, purchased parts and goods and damaged or fragmented inventory, net of any applicable allowances or reserves determined in accordance with GAAP.

“ IRS ” means the Internal Revenue Service.

“ knowledge of the Company ” (or any similar terms) means the actual knowledge of those individuals listed on Schedule V after such individuals have familiarized themselves with the representations and warranties set forth in this Agreement.

7

“ Law ” means any United States national, state, foreign, provincial, municipal or local statute, law, ordinance, regulation, rule, code, legally binding guidance document, executive order, injunction, judgment, decree or other order.

“ Leased Real Property ” means the real property leased or subleased, licensed or sublicensed, by the Company or any of its Subsidiaries, as tenant, subtenant, licensee or sublicensee, together with, to the extent leased by the Company or any of its Subsidiaries, all buildings and other structures, facilities or improvements currently located thereon, all fixtures, systems and equipment attached or appurtenant thereto.

“ Leases ” means all leases, subleases, licenses, concessions and other agreements (written or oral), including all amendments, extensions, renewals, guaranties and other agreements with respect thereto, pursuant to which the Company or any of its Subsidiaries holds any Leased Real Property.

“ Liability ” means any debt, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, strict, joint, several or secondary liability, debt, obligation, or duty), regardless of whether such debt, obligation, duty, or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation, duty or liability is immediately due and payable.

“ Lien ” means any adverse claim, restriction on voting or transfer or pledge, mortgage, lien (including, without limitation, environmental and tax liens), charge, encumbrance, restriction or security interest of any kind.

“ Loss ” has the meaning set forth in Section 9.2(a).

“ Material Contracts ” has the meaning set forth in Section 3.12(a).

“ Merger ” has the meaning set forth in the Recitals.

“ Merger Consideration ” means an amount equal to (i) Nine Hundred Twenty-Five Million U.S. Dollars ($925,000,000); plus (ii) Closing Working Capital Payment, if any; less (iii) Closing Working Capital Reduction, if any; less (iv) the aggregate amount of all Indebtedness of the Company and its Subsidiaries outstanding as of the Closing; less (v) all Company Expenses; plus (vi) Twenty-Five Million U.S. Dollars ($25,000,000), which amount reflects an estimate of certain potential tax benefits.

“ Merger Consideration Spreadsheet ” has the meaning set forth in Section 2.10.

“ Merger Sub ” has the meaning set forth in the Preamble.

“ Net Working Capital ” means the (i) the sum of the amount of cash, cash equivalents, short-term investments, Accounts Receivable, Inventory, prepaid expenses, and all other current assets, including, without limitation, accrued tax assets (which have been, and will be, accrued and maintained in accordance with GAAP) but excluding any deferred tax assets and

8

excluding any refunds reasonably anticipated as a result of claiming any deductions associated with Transaction Bonus Payments or amounts paid or payable to holders of Options pursuant to Section 2.8(d), of the Company and its Subsidiaries net of any applicable allowances or reserves and determined in accordance with GAAP consistently applied with prior periods (but subject to the absence of any footnotes required under GAAP and to year-end adjustments), less (ii) the sum of the amount of all accounts payable, accrued liabilities, accrued payroll and related obligations, deferred revenue and other current liabilities, including, without limitation, accrued tax liabilities and reserves (which have been, and will be, accrued and maintained in accordance with GAAP consistently applied with prior periods) but excluding any deferred tax liabilities, of the Company and its Subsidiaries determined in accordance with GAAP consistently applied with prior periods (but subject to the absence of any footnotes required under GAAP and to year-end adjustments); provided , that the amount calculated pursuant to (ii) shall not include the aggregate amount of all Indebtedness and Company Expenses of the Company and its Subsidiaries outstanding as of the Closing and to be paid or repaid pursuant to Section 2.15 and Section 2.16.

“ Option ” has the meaning set forth in Section 2.8(d).

“ Optionholder ” means the holder of an Option outstanding immediately prior to the Effective Time.

“ Other Filings ” means any filings required to be filed by the Company or any Subsidiary thereof or Purchaser with any Governmental Entity under the Securities Act, the Exchange Act, any stock exchange rule or any other federal, state, local or foreign Laws in connection with the transactions contemplated hereby.

“ Per Option Consideration ” means the sum of (i) the Initial Price Per Option, plus (ii) the Per Security Post-Closing Purchase Price Payment, if any, plus (iii) the Total Escrow Payments Per Security.

“ Per Security Post-Closing Purchase Price Payment ” means the amount equal to (i) the aggregate applicable percentages relating to all Securityholders as set forth opposite each such Securityholder’s name on the Distribution Schedule multiplied by the Post-Closing Purchase Price Payment, if any; divided by (ii) the Fully Diluted Shares.

“ Per Share Stock Consideration ” means the sum of (i) the Initial Price Per Share, plus (ii) the Per Security Post-Closing Purchase Price Payment, if any, plus (iii) the Total Escrow Payments Per Security.

“ Permit ” means any license, franchise, permit, consent, concession, order, approval, authorization or registration from, of or with a Governmental Entity.

“ Permitted Liens ” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (i) Liens for taxes, assessments and governmental charges or levies not yet delinquent or for which adequate reserves are maintained on the consolidated financial statements of the Company and its

9

Subsidiaries as of the Closing Date, (ii) Liens imposed by Law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than sixty (60) days or which are being contested in good faith by appropriate proceedings (and for which adequate reserves are maintained on the consolidated financial statements of the Company and its Subsidiaries as of the Closing Date in conformity with GAAP), (iii) pledges or deposits to secure obligations under workers’ compensation Laws or similar legislation or to secure public or statutory obligations, (iv) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business consistent with past practice, (v) all matters of record, including, without limitation, survey exceptions, reciprocal easement agreements and other encumbrances on title to real property, (vi) all applicable zoning, entitlement, conservation restrictions and other land use and environmental regulations, (vii) all exceptions, restrictions, easements, charges, rights-of-way and other Liens set forth in any Permits or other state, local or municipal franchise applicable to the Company or any of its Subsidiaries or any of their respective properties, (viii) Liens securing the obligations of the Company and its Subsidiaries under the Indebtedness and (ix) Liens referred to in the Company Disclosure Schedule.

“ Person ” means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a Governmental Entity.

“ Personal Information ” means any personally identifiable information collected, processed, stored, used, or held for use by the Company or any of its Subsidiaries.

“ Post-Closing Purchase Price Payment ” has the meaning set forth in Section 2.12(f).

“ Post-Closing Purchase Price Reduction ” has the meaning set forth in Section 2.12(g).

“ Pre-Closing Taxes ” means any Taxes of the Company or its Subsidiaries (i) for any taxable period ending on or before the Closing Date, or (ii) allocable to the portion of a Straddle Period ending on the Closing Date (determined in accordance with Section 7.8), but in each case (a) excluding any Taxes arising as a result of actions taken by Purchaser or its Affiliates (including the Company and its Subsidiaries) after the Closing, and (b) calculated without reduction for any deductions associated with Transaction Bonus Payments or amounts paid or payable to holders of Options pursuant to Section 2.8(d).

“ Principal Stockholder ” has the meaning set forth in the Recitals.

“ Principal Stockholder Consent ” has the meaning set forth in the Recitals.

“ Proceeding ” means any injunction, decree, order, judgment, lawsuit, or summons.

10

“ Product ” means any product manufactured, developed, sold, marketed, or distributed by the Company or any of its Subsidiaries at any time prior to the Effective Time.

“ Purchaser ” has the meaning set forth in the Preamble.

“ Purchaser Disclosure Schedule ” means the Disclosure Schedule delivered by Purchaser to the Company simultaneously with the execution and delivery of this Agreement.

“ Purchaser Indemnified Parties ” has the meaning set forth in Section 9.2(a).

“ Registered Intellectual Property ” has the meaning set forth in Section 3.11(b).

“ Reported Closing Net Working Capital ” has the meaning set forth in Section 2.12(a).

“ Section 2.12 Shortfall ” has the meaning set forth in Section 2.12(a).

“ Section 2.12 Upwards Adjustment ” has the meaning set forth in Section 2.12(a).

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Securityholders ” means the Stockholders and the Optionholders.

“ September Balance Sheet ” means the unaudited consolidated balance sheet of the Company and its Subsidiaries as of September 30, 2007.

“ Stockholders ” means all of the stockholders of the Company as listed on Section 3.2(a) of the Company Disclosure Schedule.

“ Straddle Period ” means any taxable period that includes but does not end on the Closing Date.

“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, joint venture, or other legal entity of which such Person (either alone or through or together with any other Subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

“ Surviving Corporation ” has the meaning set forth in Section 2.1.

“ Target Net Working Capital ” means Thirty-Two Million U.S. Dollars ($32,000,000).

“ Tax ” or “ Taxes ” means any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, payroll, employment, excise, severance, stamp, capital stock, occupation, property, environmental or windfall profits tax, or other like assessment or charge, together with any interest, penalty, addition to tax or additional amount imposed by any tax authority responsible for the imposition of any such tax (domestic or foreign).

11

“ Tax Return ” means any return, declaration or information return relating to Tax, including any schedule or attachment thereto, and including any amendment thereto, required to be filed with any tax authority.

“ Termination Date ” means February 29, 2008.

“ Total Escrow Payments Per Security ” means the amount equal to (i) the aggregate applicable percentages relating to all Securityholders as set forth opposite each such Securityholder’s name on the Distribution Schedule multiplied by the total of all Escrow Payment Amounts; divided by (ii) the Fully Diluted Shares.

“ Transaction Agreements ” means the Escrow Agreement and any other ancillary agreement contemplated by this Agreement to be executed and delivered in connection with the transactions contemplated hereby.

“ Transaction Bonus Payments ” means the transaction bonus or change of control amounts payable and due upon consummation of the Merger (without a requirement of employment termination) in respect of any employees or officers of the Company or any of its Subsidiaries (whether paid to such employees or officers or deposited into the Escrow Fund in respect of such employees or officers) as set forth on Schedule IV , as such Schedule may be amended prior to Closing by the Escrow Fund Recipient Agent.

“ Transfer Taxes ” has the meaning set forth in Section 2.17.

“ Unpaid Company Expenses ” has the meaning set forth in Section 2.12(a).

“ Unpaid Indebtedness ” has the meaning set forth in Section 2.12(a).

“ Unpaid Transaction Bonus Payments” has the meaning set forth in Section 2.12(a).

Section 1.2 Interpretation . Meanings specified in this Agreement shall be applicable to both the singular and plural forms of such terms and to the masculine, feminine and neuter genders, as the context requires and the words “include”, “includes” or “including” shall be deemed to be followed by the words “without limitation”.

ARTICLE II

THE MERGER

Section 2.1 The Merger . Upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall

12

thereupon cease. The Company shall be the surviving corporation in the Merger (the Company in its capacity as the surviving corporation is sometimes hereinafter referred to as the “ Surviving Corporation ”) and the Surviving Corporation shall have the name “Burt’s Bees, Inc.” The Merger shall have the effects specified in the DGCL.

Section 2.2 Closing . Unless this Agreement is sooner terminated as provided in Article X, upon the terms and subject to the conditions set forth in this Agreement, the closing of the Merger (the “ Closing ”) shall take place at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP, One New York Plaza, New York, New York 10004, at 9:00 a.m. local time, on the second business day following the satisfaction or waiver of the conditions set forth in Article VIII (other than those conditions that by their nature are to be fulfilled at the Closing, but subject to the fulfillment of such conditions), or at such other time or date as the parties hereto may agree. The date on which the Closing shall occur is hereinafter referred to as the “ Closing Date ”.

Section 2.3 Effective Time . If all the conditions to the Merger set forth in Article VIII shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated as provided in Article X, the parties hereto shall cause a Certificate of Merger meeting the requirements of Section 251 of the DGCL to be properly executed and filed in accordance with such Section on the Closing Date. The Merger shall become effective at the time of filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL or at such later time which the parties shall have agreed upon and designated in such filing as the effective time of the Merger (the “ Effective Time ”).

Section 2.4 Certificate of Incorporation . The certificate of incorporation of the Surviving Corporation in effect immediately prior to the Effective Time shall, at the Effective Time, be amended to conform to the certificate of incorporation of Merger Sub until duly amended in accordance with the terms thereof and the DGCL.

Section 2.5 Bylaws . The bylaws of the Surviving Corporation in effect immediately prior to the Effective Time shall, at the Effective Time, be amended to conform to the bylaws of Merger Sub until duly amended in accordance with the terms thereof and the DGCL.

Section 2.6 Directors of the Surviving Corporation . As of the Effective Time, the directors of Merger Sub immediately prior to the Effective Time shall become the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

Section 2.7 Officers of the Surviving Corporation . As of the Effective Time, the officers of the Company immediately prior to the Effective Time shall become the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

Section 2.8 Effect of Merger on Capital Stock . As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of the capital stock of the Company or any shares of the capital stock of Merger Sub:

(a) Each share of common stock, $.001 par value, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and nonassessable share of voting common stock, $.001 par value, of the Surviving Corporation.

13

(b) Except as otherwise provided herein, including the provisions relating to appraisal rights set forth in Sections 2.8(c) and 2.14 hereof, each share of common stock of the Company (“ Company Stock ”) issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive from the Surviving Corporation upon the consummation of the Merger the Per Share Stock Consideration. The Per Share Stock Consideration payable to any Stockholder shall be paid solely in cash. As of the Effective Time, all shares of Company Stock issued and outstanding immediately prior to the Effective Time shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Company Stock shall cease to have any rights with respect thereto, except the right to receive the Per Share Stock Consideration upon surrender of such certificate in accordance with Section 2.13.

(c) Notwithstanding anything in this Agreement to the contrary, shares of Company Stock issued and outstanding immediately prior to the Effective Time held by a holder (if any) who has the right to demand payment for and an appraisal of such shares in accordance with the DGCL shall not be converted into a right to receive the Per Share Stock Consideration unless such holder fails to perfect or otherwise loses such holder’s right to such payment or appraisal, if any.

(d) All options to purchase shares of capital stock of the Company (individually, an “ Option ” and collectively, the “ Options ”) outstanding immediately prior to the Effective Time whether under any Company stock option plan or otherwise, and whether or not then exercisable, shall be cancelled and each Optionholder will be entitled to receive from the Surviving Corporation, for each share of Company Stock subject to an Option, the Per Option Consideration in cash. The Initial Price Per Option shall be paid as soon as practicable, but no later than one (1) business day after the Closing Date. The Company shall request each Optionholder to submit to the Company, not later than five (5) business days prior to the Effective Time, instructions for delivery of amounts payable to such holder pursuant to this Section 2.8(d) after giving effect to Section 2.8(e) below.

(e) The Company and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to Section 2.8(d) of this Agreement such amounts as it is required to deduct and withhold pursuant to the Code and applicable Law. To the extent that amounts are so withheld, such withheld amounts shall be treated for purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

Section 2.9 Closing Net Working Capital Adjustment .

(a) At least three (3) business days prior to the Closing Date, the Company shall furnish to Purchaser the following (the “ Certified Closing Report ”): (i) an estimated unaudited consolidated balance sheet as of the proposed Closing Date of the Company and its Subsidiaries

14

certified by an executive officer of the Company and setting forth a good faith estimate of the Net Working Capital of the Company as of the proposed Closing Date (“ Estimated Closing Net Working Capital ”), (ii) a reasonably detailed supporting calculation of the Estimated Closing Net Working Capital, and (iii) a statement of the amount of any proposed Closing Working Capital Payment or Closing Working Capital Reduction calculated in accordance with Section 2.9(b); provided that the estimated value of the Inventory in the Certified Closing Report shall be determined based on the books and records of the Company, and not on a physical Inventory count. The Certified Closing Report shall be reasonably acceptable to Purchaser.

(b) The Merger Consideration and the corresponding amount payable to Securityholders shall:

(i) be increased , by the amount, if any, that Estimated Closing Net Working Capital exceeds Target Net Working Capital (the amount of any such increase, the “ Closing Working Capital Payment ”); or

(ii) be decreased , by the amount, if any, that Estimated Closing Net Working Capital is less than Target Net Working Capital (the amount of any such decrease, the “ Closing Working Capital Reduction ”).

Section 2.10 Merger Consideration Spreadsheet . At least three (3) business days prior to the Closing Date, the Company shall furnish to Purchaser the following (“ Merger Consideration Spreadsheet ”) with respect to each Securityholder: his, her or its name, the number of shares of Company Stock held, the number of shares subject to each Option held, the Initial Price Per Share, the Initial Price Per Option, payment delivery instructions to the extent the Company has received such instructions, and the amount to be withheld, if any, pursuant to Section 2.8(e).

Section 2.11 Escrowed Consideration . As collateral for the indemnification obligations of the Company and the Securityholders pursuant to Article IX of this Agreement and the Post-Closing Purchase Price Adjustment in Section 2.12, upon the Closing, Purchaser shall deposit the Escrow Consideration in escrow with such institution acting as escrow agent (the “ Escrow Agent ”) as shall be acceptable to Purchaser and the Escrow Fund Recipient Agent, which amount (the “ Escrow Fund ”) shall be held pursuant to the terms of this Agreement and the Escrow Agreement (the “ Escrow ”).

Section 2.12 Post-Closing Purchase Price Adjustment .

(a) As promptly as practicable, but in no event later than sixty (60) days following the Closing Date, Purchaser shall cause the following to be prepared and furnished to the Escrow Fund Recipient Agent (the “ Certified Post-Closing Report ”): (i) an unaudited consolidated balance sheet as of the Closing Date of the Company and its Subsidiaries certified by an executive officer of Purchaser and setting forth the Net Working Capital of the Company as of the Closing Date (“ Reported Closing Net Working Capital ”), (ii) a reasonably detailed supporting calculation of Reported Closing Net Working Capital, (iii) a statement of any Indebtedness of the Company and its Subsidiaries outstanding as of the Closing but not repaid at

15

the Effective Time pursuant to Section 2.15 (such unpaid Indebtedness, the “ Unpaid Indebtedness ”), (iv) a statement of any Company Expenses not paid at the Effective Time pursuant to Section 2.16 (such unpaid Company Expenses, the “ Unpaid Company Expenses ”), (v) a statement of Transaction Bonus Payments (or other payments that otherwise fall within the definition of Transaction Bonus Payments but are not listed on Schedule IV ) not paid immediately prior to Closing pursuant to Section 5.5 (such unpaid amounts, the “ Unpaid Transaction Bonus Payments ”), and (vi) a statement of the amount of any proposed Post-Closing Purchase Price Payment calculated in accordance with Section 2.12(d) or Post-Closing Purchase Price Reduction calculated in accordance with Section 2.12(e). In the event that the Certified Closing Report is delivered prior to December 31, 2007, for purposes of the Certified Post-Closing Report, the value of the Inventory shall be increased by the Section 2.12 Upwards Adjustment or decreased by the Section 2.12 Shortfall, as applicable. For purposes of the foregoing, the “ Section 2.12 Upwards Adjustment ” means the amount by which the value of the Inventory resulting from an actual physical Inventory count of the Inventory as of December 31, 2007 exceeds the value of such Inventory on the books and records of the Company and its Subsidiaries as of December 31, 2007, and the “ Section 2.12 Shortfall ” means the amount by which the value of the Inventory resulting from the actual physical Inventory count of the Inventory of the Company and its Subsidiaries as of December 31, 2007 is less than the value of such Inventory on the books and records of the Company and its Subsidiaries as of December 31, 2007. Purchaser shall use commercially reasonable efforts to provide Escrow Fund Recipient Agent and its advisors and representatives access to the Company’s books and records, during normal business hours, as they relate to the calculations and amounts set forth in the Certified Post-Closing Report, as Escrow Fund Recipient Agent may reasonably request.

(b) The Certified Post-Closing Report and related calculations shall be prepared independently by Purchaser based on its own review of the financial information and the books and records of the Company and its Subsidiaries, in good faith and in accordance with GAAP consistently applied with prior periods; provided that the estimated value of the Inventory in the Certified Post Closing Report shall be determined based on the books and records of the Company and not on a physical Inventory count. The Certified Post-Closing Report shall be deemed to be and shall be final, binding and conclusive on the parties hereto upon the earliest of (the “ Final Resolution Date ”): (i) Escrow Fund Recipient Agent’s delivery of a written notice to Purchaser of Escrow Fund Recipient Agent’s approval of the Certified Post-Closing Report, (ii) the failure of Escrow Fund Recipient Agent to notify Purchaser in writing of a dispute regarding the Certified Post-Closing Report within thirty (30) days after the delivery of such report to Escrow Fund Recipient Agent, (iii) the resolution of all disputes pursuant to this Section 2.12(b) by Purchaser and the Escrow Fund Recipient Agent, and (iv) the resolution of all disputes pursuant to Section 2.12(c) by the Independent Accounting Firm. Escrow Fund Recipient Agent may dispute the Certified Post-Closing Report (and the amount of any item included in or forming the basis of any such report) by delivering a written notice to Purchaser setting forth each specific matter to be disputed and describing the dispute and the underlying facts in reasonable detail (the “ Certified Post-Closing Report Dispute Notice ”). If Escrow Fund Recipient Agent timely delivers a Certified Post-Closing Report Dispute Notice to Purchaser, the Company and Escrow Fund Recipient Agent, together with their accountants, shall attempt to reconcile such parties’ differences in good faith, and any resolution approved in writing by Purchaser and Escrow Fund Recipient Agent as to any disputed amounts shall be reflected in an amendment to the Certified Post-Closing Report and shall be final, binding and conclusive on all parties hereto.

16

(c) If Purchaser and Escrow Fund Recipient Agent are unable to reach a resolution within forty-five (45) days after the delivery of any Certified Post-Closing Report Dispute Notice, such parties shall submit their respective determinations and calculations and the items remaining in dispute for resolution to the accounting firm of Deloitte & Touche LLP unless one or more of the parties have developed a material relationship with such accounting firm, in which case Purchaser and Escrow Fund Recipient Agent shall select within five (5) days following such forty-five (45) day period another mutually acceptable independent accounting firm of national or international reputation which does not have a material relationship with any party hereto (the “ Independent Accounting Firm ”). The parties shall use their commercially reasonable efforts to cause the Independent Accounting Firm to submit a report to Purchaser and Escrow Fund Recipient Agent, based on the submissions of Purchaser and Escrow Fund Recipient Agent and any additional examination deemed reasonably necessary by the Independent Accounting Firm, with a determination regarding the disputed items, within thirty (30) days after submission of the matter, and such report shall be final, binding and conclusive on the parties hereto. The scope of the disputes to be resolved by the Independent Accounting Firm is limited to any such items included in the Certified Post-Closing Report that the Escrow Fund Recipient Agent has disputed in writing. In resolving any disputed item, the Independent Accounting Firm shall be bound by the principles set forth in this Section 2.12 and shall not assign a value to any item greater than the greatest value for such item being claimed by any party or less than the smallest value for such item being claimed by any party. The provisions of Section 9.2(d) shall apply to any and all acts by the Escrow Fund Recipient Agent in connection with this Section 2.12. The fees, costs and expenses of the Independent Accounting Firm, if any, shall be apportioned between Purchaser, on the one hand, and the Securityholders, on the other, based upon the inverse proportion of the amount of disputed items resolved in favor of such party (i.e., so that the prevailing party bears a lesser amount of such fees and expenses). Any fees to be paid by the Escrow Fund Recipients shall be paid from the Escrow Fund. As finally determined pursuant to Section 2.12(b) or this Section 2.12(c): (i) Net Working Capital in the Certified Post-Closing Report shall be “ Final Closing Net Working Capital ”, (ii) Unpaid Indebtedness in the Certified Post-Closing Report shall be “ Final Unpaid Indebtedness ”, (iii) Unpaid Company Expenses in the Certified Post-Closing Report shall be “ Final Unpaid Company Expenses ”, and (iv) Unpaid Transaction Bonus Payments in the Certified Post-Closing Report shall be “ Final Unpaid Transaction Bonus Payments ”. “ Final Adjusted Amount ” means Final Closing Net Working Capital less Final Unpaid Company Expenses (if any), less Final Unpaid Indebtedness (if any), less Final Unpaid Transaction Bonus Payments (if any).

(d) If the Final Adjusted Amount is greater than Estimated Closing Net Working Capital, Purchaser shall pay in cash to each Escrow Fund Recipient an amount equal to (x)(i) the Final Adjusted Amount less (ii) Estimated Closing Net Working Capital, multiplied by (y) the applicable percentage relating to such Escrow Fund Recipient as set forth opposite such Escrow Fund Recipient’s name on the Distribution Schedule.

17

(e) If the Final Adjusted Amount is less than Estimated Closing Net Working Capital, the Escrow Fund Recipient Agent and Purchaser shall deliver joint written instructions to the Escrow Agent instructing the Escrow Agent to pay to Purchaser an amount equal to Estimated Closing Net Working Capital less the Final Adjusted Amount.

(f) Any payment by Purchaser to the Escrow Fund Recipients pursuant to (d) above (a “ Post-Closing Purchase Price Payment ”) shall be made within two (2) business days of the Final Resolution Date.

(g) Any payment from the Escrow Fund to Purchaser pursuant to (e) above (a “ Post-Closing Purchase Price Reduction ”) shall be made within two (2) business days of the Final Resolution Date.

Section 2.13 Exchange of Certificates . (a) Each holder of an outstanding certificate or certificates which prior thereto represented shares of Company Stock shall surrender to the Company the certificate or certificates representing such shares of Company Stock and, upon acceptance thereof by the Company prior to the Effective Time, be entitled to the Initial Price Per Share in cash at the Effective Time and, if applicable in accordance with the terms of this Agreement, the amounts payable pursuant to Section 2.12 and Article IX in cash to be paid as soon as practicable. After the Effective Time, each holder of an outstanding certificate or certificates which prior thereto represented shares of Company Stock shall surrender to the Surviving Corporation the certificate or certificates representing such shares of Company Stock and, upon acceptance thereof by the Surviving Corporation, be entitled to the Initial Price Per Share and, if applicable in accordance with the terms of this Agreement, the amounts payable pursuant to Section 2.12 and Article IX in cash to be paid as soon as practicable. After the Effective Time, there shall be no further transfer on the records of the Company or its transfer agent of certificates representing shares of Company Stock which have been converted, in whole or in part, pursuant to this Agreement into the right to receive cash and if such certificates are presented to the Surviving Corporation for transfer, they shall be canceled against delivery of cash. Until surrendered as contemplated by this Section 2.13, each certificate for shares of Company Stock shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Per Share Stock Consideration as contemplated by Section 2.8(b). No interest will be paid or will accrue on any amounts payable as Per Share Stock Consideration.

(b) No dividends or other distributions with respect to Company Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered certificate for shares of Company Stock with respect to the shares of Company Stock represented thereby.

(c) Neither Purchaser nor the Company shall be liable to any Person in respect of any shares of retained Company Stock (or dividends or distributions with respect thereto) or the Per Share Stock Consideration required to be delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

18

(d) If any consideration is to be paid to a Person other than the Person in whose name the certificate or Option surrendered in exchange therefor is registered, it shall be a condition to such exchange that the Person requesting such exchange shall pay to the Surviving Corporation any Transfer Taxes or other Taxes required by reason of the payment of such consideration to a Person other than that of the registered holder of the certificate or Option so surrendered, or such person shall establish to the reasonable satisfaction of the Surviving Corporation that such Tax has been paid or is not applicable.

(e) If any certificate for shares of Company Stock shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate to be lost, stolen or destroyed the Surviving Corporation will pay, in exchange for such lost, stolen or destroyed certificate, the Per Share Stock Consideration to be paid in respect of the shares of Company Stock represented by such certificate.

(f) Purchaser may, at its option, meet its obligations under this Section 2.13 through a bank, trust company or other third party reasonably selected by Purchaser to act as exchange agent in connection with the Merger.

Section 2.14 Appraisal Rights . Holders of shares of Company Stock who have complied with all requirements for demanding and perfecting appraisal rights as set forth in Section 262 of the DGCL (“ Dissenting Stockholders ”) are entitled to their rights under such Laws. Each share of Company Stock held by Dissenting Stockholders shall not be converted into or represent the right to receive the Per Share Stock Consideration. Dissenting Stockholders shall be entitled to receive payment of the appraised value of such shares held by them in accordance with the provisions of Section 262 of the DGCL. Each share of Company Stock held by holders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such shares under 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 Stock Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.13, of the certificate or certificates that formerly evidenced such shares. The Company shall give Purchaser prompt written notice of any assertions of appraisal rights or withdrawals of assertions of appraisal rights, and any other instrument in respect thereof received by the Company and the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL.

Section 2.15 Payment at the Effective Time for Indebtedness . At least three (3) business days prior to the Closing Date, the Company shall furnish to Purchaser a report prepared in good faith and certified by the Company’s Chief Executive Officer or Chief Financial Officer setting forth a reasonably detailed description of the estimated Indebtedness of the Company and its Subsidiaries outstanding as of the Closing and wire transfer information for each person to whom such Indebtedness is to be paid. As of the Effective Time, Purchaser or Merger Sub shall provide sufficient funds to the Company to enable the Company to repay in full the aggregate amount of all Indebtedness of the Company and its Subsidiaries outstanding as of the Closing.

Section 2.16 Payment at the Effective Time for Company Expenses . At least three (3) business days prior to the Closing Date, the Company shall furnish to Purchaser the following: (i) a report prepared in good faith and certified by the Company’s Chief Executive Officer or Chief Financial Officer setting forth the Company Expenses, and (ii) wire transfer

19

information for each person to whom the Company Expenses are to be paid. As of the Effective Time, Purchaser or Merger Sub shall provide sufficient funds to the Company to enable the Company to pay all Company Expenses that are incurred and owed as of the Closing Date but have not been paid on or prior to the Closing Date. “ Company Expenses ” means all outstanding fees and expenses of the Company and each of its Subsidiaries in connection with the transactions contemplated hereby, including the structuring, documentation, negotiation, and consummation thereof, that are incurred as of the Closing Date but have not been paid on or prior to the Closing Date.

Section 2.17 Transfer Taxes . Subject to Section 2.13(d), Purchaser shall assume liability for and pay all sales, use, transfer, real property transfer, documentary, recording, gains, stock transfer and similar Taxes and fees, and any deficiency, interest or penalty asserted with respect thereof (collectively, “ Transfer Taxes ”) arising out of or in connection with the transactions effected pursuant to this Agreement. The Company shall timely file all necessary documentation and Tax Returns with respect to such Transfer Taxes.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Purchaser and Merger Sub as follows:

Section 3.1 Organization and Qualification . The Company and each of its Subsidiaries is duly formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, has the requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and is in good standing and duly qualified to do business in each jurisdiction in which the transaction of its business makes such qualification necessary, except where the failure to be so organized, existing, qualified and in good standing or to have such power or authority would not have a Company Material Adverse Effect. True and complete copies of the Company’s and each of its Subsidiary’s certificate of incorporation and by-laws (or if such Subsidiary is not a corporation, its organizational documents) (collectively, the “ Company’s Organizational Documents ”), each as amended to date and currently in full force and effect, have been made available to Purchaser.

Section 3.2 Capitalization . (a) The authorized capital stock of the Company consists of 25,500 shares of Company Stock. As of the date of this Agreement, (i) 16,256 shares of Company Stock are issued and outstanding and (ii) 2,146 shares of Company Stock are reserved or required to be reserved for issuance pursuant to outstanding Options and 416 shares of Company Stock are reserved or required to be reserved for issuance in respect of future grants of Options. All outstanding shares of Company Stock are validly issued, fully paid and nonassessable, and are not subject to preemptive rights. All outstanding securities of the Company have been issued in compliance with applicable federal and state securities laws. Section 3.2 of the Company Disclosure Schedule sets forth complete and accurate lists of the Stockholders and the number of shares of Company Stock held by each such Stockholder, and the Optionholders and the number of shares of capital stock subject to each Option; provided ,

20

that Section 3.2 of the Company Disclosure Schedule does not reflect the exercise of any Option exercised in whole or in part by an Optionholder after the date of this Agreement and prior to the Closing Date. Except as set forth in Section 3.2(a) of the Company Disclosure Schedule, there are no outstanding subscriptions, options, warrants, calls, rights, commitments or any other agreements to which the Company is a party or by which the Company is bound which obligate the Company to (i) issue, deliver or sell or cause to be issued, delivered or sold any additional shares of Company Stock or any other capital stock of the Company or any other securities convertible into, or exercisable or exchangeable for, or evidencing the right to subscribe for, any shares of Company Stock or any other capital stock of the Company or (ii) purchase, redeem or otherwise acquire any shares of Company Stock or any other capital stock of the Company. At the Effective Time, all of the outstanding Options will be terminated and the Company will have no further obligations to the holders thereof with respect thereto except to remit the Per Option Consideration and the applicable withholding taxes. Except as set forth in Section 3.2(a) of the Company Disclosure Schedule, to the knowledge of the Company, there are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Company Stock.

(b) Except as set forth in Section 3.2(b) of the Company Disclosure Schedule, the Company does not have any Subsidiaries nor does it presently own, directly or indirectly, any capital stock or other proprietary interest in any Person. Except as set forth in Section 3.2(b) of the Company Disclosure Schedule, all such interests are owned by the Company and are held free and clear of all Liens, other than Permitted Liens. There are not outstanding (i) any options, warrants or other rights to purchase from any of Subsidiary of the Company any capital stock or other ownership interests in or any other securities of any Subsidiary of the Company, (ii) any securities convertible into or exchangeable for shares of such capital stock or securities or (iii) any other contract, understanding, commitments, rights or obligations of any kind for any Subsidiary of the Company to issue additional shares of capital stock, options, warrants or other securities of any Subsidiary of the Company. There are no outstanding contractual obligations of the Company’s Subsidiaries to repurchase, redeem or otherwise acquire any outstanding shares of capital stock or other ownership interests in any Subsidiary.

Section 3.3 Authorization and Validity of Agreement . The Company has the requisite power and authority to execute and deliver this Agreement and each Transaction Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby in accordance with the terms hereof and thereof. The Company has duly authorized the execution, delivery and performance of this Agreement and each Transaction Agreement and no other proceedings on the part of the Company are necessary to authorize this Agreement, any Transaction Agreement or the transactions contemplated hereby or thereby. This Agreement and each Transaction Agreement have been duly executed and delivered by the Company and assuming the due authorization, execution and delivery hereof and thereof by the parties (other than the Company) hereto and thereto constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally or by general principles of equity.

21

Section 3.4 Consents and Approvals . Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will require on the part of the Company or any Subsidiary thereof any consent, approval, authorization or permit of, or filing with, or notification to, any Governmental Entity or any other Person, except (a) for any applicable filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (b) as set forth in Section 3.4 or Section 3.5 of the Company Disclosure Schedule, (c) as provided for in Section 2.3 or (d) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Company Material Adverse Effect or prevent the consummation of the transactions contemplated hereby.

Section 3.5 No Violations . Except as set forth in Section 3.5 of the Company Disclosure Schedule, neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (a) conflict with or violate any of the Company’s Organizational Documents, (b) result in a violation or breach of, constitute a default (with or without notice or lapse of time, or both) under, give rise to any right of termination, cancellation or acceleration of, or result in the imposition of any Lien, other than a Permitted Lien, on any assets or property of the Company or any Subsidiary thereof pursuant to any Contract or other obligation to which the Company or any Subsidiary thereof is a party or by which the Company or any Subsidiary thereof or any of its assets or properties are bound, except for such violations, breaches and defaults (or rights of termination, cancellation or acceleration or Lien) as to which requisite waivers or consents have been obtained or which would not have in the aggregate a Company Material Adverse Effect or prevent the consummation of the transactions contemplated hereby or (c) assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 3.4 and this Section 3.5 are duly and timely obtained or made, violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its Subsidiaries or any of their respective assets and properties, except for such conflicts, violations, breaches or defaults which would not have in the aggregate a Company Material Adverse Effect or prevent the consummation of the transactions contemplated hereby.

Section 3.6 Financial Statements; Undisclosed Liabilities; Internal Controls .

(a) The Financial Statements have been previously made available to Purchaser. The Financial Statements (including any related notes and schedules thereto) are (i) complete and correct in all material respects (except that such Financial Statements which are unaudited do not contain all of the footnotes required under GAAP and are subject to year-end adjustments), (ii) have been prepared from the books and records of the Company and its Subsidiaries in accordance with GAAP applied on a consistent basis throughout the periods indicated (except that such Financial Statements which ar