STOCK PURCHASE AGREEMENT

Exhibit 2.2

Execution Copy

STOCK PURCHASE AGREEMENT

among

TARGET SOFTWARE, INC.,

TARGET ANALYSIS GROUP, INC.,

ALL OF THE STOCKHOLDERS OF TARGET SOFTWARE, INC.,
AND TARGET ANALYSIS GROUP, INC.,

Charles Longfield, as Stockholder Representative

and

BLACKBAUD, INC.

January 16, 2007

TABLE OF CONTENTS

STOCK PURCHASE AGREEMENT

     This Stock Purchase Agreement (“ Agreement ”), dated as of January 16, 2007, by and among Blackbaud, Inc., a Delaware corporation (“ Buyer ”), Target Software, Inc., a Massachusetts corporation (“ Target Software ”), Target Analysis Group, Inc., a Delaware corporation (“ Target Analysis ”), the stockholders of Target Software and Target Analysis listed on Exhibit A hereto (respectively, the “ Target Software Stockholders ” and “ Target Analysis Stockholders ”, and collectively the “ Target Stockholders ”) and Charles Longfield as the representative of the Target Stockholders (the “ Target Stockholder Representative ”). Target Software and Target Analysis are referred to collectively herein as the “ Target Entities ” or individually as a “ Target Entity ”.

RECITALS

     A. The Target Stockholders own the number of issued and outstanding shares of the capital stock of the Target Entities set forth on Exhibit A hereto opposite their names (collectively, the “ Shares ”), which are all of the issued and outstanding capital stock of the Target Entities.

     B. Buyer desires to purchase the Shares from the Target Stockholders, and the Target Stockholders desire to sell the Shares to the Buyer, upon the terms and conditions of this Agreement.

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

ARTICLE I

DEFINED TERMS; RULES OF CONSTRUCTION

      1.1 Defined Terms . Capitalized terms used herein but not defined have the respective meanings given to such terms in Appendix A .

      1.2 Usage .

     (a)  Interpretation . In this Agreement, unless a clear contrary intention appears:

          (i) the singular number includes the plural number and vice versa;

          (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

          (iii) reference to any gender includes each other gender;

          (iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

          (v) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

          (vi) references to a “Section” that are not further qualified as to what document the Section is located in shall be deemed to refer to Sections of this Agreement;

          (vii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

          (viii) “or” is used in the inclusive sense of “and/or”;

          (ix) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding”; and

          (x) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

     (b)  Accounting Terms and Determinations . Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.

     (c)  Legal Representation of the Parties . This Agreement was negotiated by the parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation hereof.

ARTICLE II

PURCHASE AND SALE OF SHARES; PURCHASE PRICE, POST-CLOSING
ADJUSTMENT AND RELATED MATTERS

      2.1 Purchase and Sale of Shares . Subject to the terms and conditions set forth in this Agreement, at the Closing, the Target Stockholders shall sell, transfer, convey, assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from such Target Stockholders, all of the Shares owned by the Target Stockholders, with the Target Stockholders delivering to Buyer certificates evidencing the Shares owned by the Target Stockholders, duly endorsed for transfer, and with Buyer making the payments to the Target Stockholders as described in Section 2.2.

      2.2 Purchase Price; Allocation of Payments . The purchase price to be paid by the Buyer to the Target Stockholders for the Shares shall equal the Initial Payment Amount, plus any Earnout Payment, where:

     (a) The “ Initial Payment Amount ” shall equal $54,050,000. At Closing, as set forth in Section 3.1, the Initial Payment Amount shall be allocated to and shall be distributable to the Target Stockholders pursuant to the Target Allocation Percentages set forth on Exhibit A , it being understood that as to any stockholder of a Target Entity, the Target Allocation Percentage shall be equal to the product of (i) the percentage of the outstanding common stock of such Target Entity that is held of record by such stockholder immediately prior to the Closing, multiplied by (ii) 0.5; and

     (b) Any Earnout Payment, up to a maximum amount of Two Million Four Hundred Thousand ($2,400,000), payable pursuant to Section 2.4 of this Agreement, shall be paid to the Target Stockholders pursuant to the Target Allocation Percentages set forth on Exhibit A .

      2.3 Intentionally Deleted .

      2.4 Earnout Payment; Procedures .

     (a)  Earnout Payment . In addition to the Initial Payment Amount, on March 24, 2008 (or such later time as provided in this Section 2.4), the Buyer shall pay to the Target Stockholders, in cash, an amount determined as set forth below (the “ Earnout Payment ”).

     (b)  Target 2007 Revenue and Minimum Revenue Target . The Earnout Payment shall be determined by reference to the Target 2007 Revenue, as defined below, and shall be payable only if the Target 2007 Revenue exceeds $21,000,000 (the “ Minimum Revenue Target ”).

     (c)  Certain Definitions .

          (i) The “ Target 2007 Revenue ” shall mean the amount of revenue recognized by Buyer in its audited consolidated statement of operations for the year ending December 31, 2007, determined in accordance with GAAP, consistently applied by Buyer, that is attributable to the sale or license of any Target Products.

          (ii) “ Target Products ” shall mean any software product or related service currently provided by Target Software to its customers, including those products and services identified on Schedule 2.4, and any data analysis product or service currently provided by Target Analysis to its customers, including those products and services identified on Schedule 2.4, and any improvement, enhancement or extension of any such product or service of Target Software or Target Analysis that is developed by either Target Entity or by Buyer after the date of this Agreement and that, in the absence of this Agreement, could not be sold or licensed by Buyer without infringing Intellectual Property that is owned by or licensed on an exclusive basis to a Target Entity immediately prior to the Closing.

     (d) The Earnout Payment shall be equal to the sum of (A) the product of (i) the amount, if any, by which the Target 2007 Revenue exceeds the Minimum Revenue Target, but in

no event an amount greater than $3,000,000, multiplied by (ii) 0.72 and (B) the product of (i) the amount, if any, by which the Target 2007 Revenue exceeds $24,000,000, multiplied by (ii) 0.24; provided that in no event shall the Earnout Payment be an amount greater than $2,400,000.

     (e)  Earnout Procedures .

          (i) Buyer shall prepare and deliver, or cause to be delivered, to the Target Stockholder Representative not later than March 17, 2008, a statement (the “ Earnout Payment Statement ”) stating the amount of the Earnout Payment, if any, to be made by the Buyer, which statement shall set forth in reasonable detail the basis for such determination. The Target Stockholder Representative shall have the right to examine and audit, at the cost and expense of the Target Stockholders (except as provided in Section 2.4(e)(iii) below), the books and records of the Target Entities, as reasonably necessary to determine the Earnout Payment, during normal business hours upon reasonable advance written notice.

          (ii) The Target Stockholder Representative shall deliver to Buyer, within fifteen (15) Business Days following receipt of the Earnout Payment Statement (the “ Earnout Objection Deadline Date ”), either a notice of acceptance (an “ Earnout Acceptance Notice ”) or a notice of objection (an “ Earnout Objection Notice ”) of the determination of the amount of the Earnout Payment as set forth in the Earnout Payment Statement. If the Target Stockholder Representative delivers to Buyer an Earnout Acceptance Notice, or if the Target Stockholder Representative does not deliver an Earnout Objection Notice by the Earnout Objection Deadline Date, then, effective as of the earlier of (A) the date of delivery of such Earnout Acceptance Notice or (B) the close of business on the Earnout Objection Deadline Date, the amount of the Earnout Payment as set forth in the Earnout Payment Statement shall be final. If the Target Stockholder Representative delivers an Earnout Objection Notice by the Earnout Objection Deadline Date, such objections shall be resolved as follows:

               (A) The Target Stockholder Representative and Buyer shall first use reasonable efforts to resolve such objections.

               (B) If the Target Stockholder Representative and Buyer do not reach a resolution of all objections set forth on such Earnout Objection Notice within thirty (30) days after delivery of such Earnout Objection Notice, then the Target Stockholder Representative and Buyer shall engage the Selected Firm within 15 days following the expiration of such 30-day period to resolve any remaining objections set forth on the Earnout Objection Notice (the “ Unresolved Earnout Objections ”).

               (C) Within sixty (60) Business Days after the date of its engagement hereunder (or as soon as possible thereafter), the Selected Firm shall determine whether the objections raised by the Target Stockholder Representative are valid and shall issue a ruling which shall include (x) a description of any resolutions to objections agreed upon by the Buyer and the Target Stockholder Representative, (y) a description of the Selected Firm’s resolution of the Unresolved Earnout Objections, and (z) a statement of the final amount of the Earnout Payment.

               (D) The resolution by the Selected Firm of the Unresolved Earnout Objections shall be conclusive and binding. The Target Stockholder Representative and Buyer agree that the procedure set forth in this Section 2.4(e)(ii) for resolving disputes with respect to the amount of the Earnout Payment shall be the sole and exclusive method for resolving any such disputes; provided that this provision shall not prohibit either the Target Stockholder Representative or Buyer from instituting litigation to enforce the ruling of the Selected Firm.

          (iii) Within five (5) Business Days after the date on which the amount of the Earnout Payment shall become final in accordance with the foregoing (the “ Earnout Payment Date ”), subject to the provisions of clause (iv) below, Buyer shall pay to the Target Stockholders, in accordance with the Target Allocation Percentages set forth on Exhibit A , the final Earnout Payment as determined by the Selected Firm or otherwise agreed to by the Target Stockholder Representative and Buyer. In the event the Target Stockholder Representative and Buyer engage a Selected Firm pursuant to Section 2.4(e)(ii)(B), (x) the Target Stockholders shall pay all of the costs and expenses of such Selected Firm and shall also reimburse the reasonable out-of-pocket expenses incurred by Buyer, if any, in connection with the Target Stockholder Representatives examining and auditing the amount of the Earnout Payment pursuant to Section 2.4(e)(i), if the difference between the amount of the Earnout Payment originally submitted by Buyer and the amount of the final Earnout Payment, as determined by the parties or by the Selected Firm, is less than $50,000, and (y) the Buyer shall pay all of the costs and expenses of such Selected Firm and shall also reimburse the reasonable out-of-pocket expenses incurred by the Target Stockholder Representatives in examining and auditing the amount of the Earnout Payment pursuant to Section 2.4(e)(i), if the difference between the amount of the Earnout Payment originally submitted by Buyer and the amount of the final Earnout Payment, as determined by the parties or by the Selected Firm, is greater than or equal to $50,000. To the extent that the Target Stockholders are responsible for the fees and expenses of the Selected Firm and fail to pay such fees and expenses, then the Buyer shall have the right to set-off the amount of such unpaid fees and expenses from any payment that the Buyer is required to make to the Target Stockholders pursuant to this Section 2.4. If no set-off is available, then the Buyer and the Target Stockholder Representative shall provide written instructions to the Escrow Agent to remit to Buyer from the Escrow Amount, if any, then held by the Escrow Agent, the aggregate amount of such fees and expenses, with any such amount excluded from the Floor and Claim Minimum.

          (iv) Notwithstanding anything to the contrary contained herein, if, as of the Earnout Payment Date, Buyer has not been fully repaid for the amount of Losses arising out of a claim for fraud or any inaccuracy in or breach of the representations and warranties contained in Sections 4.1, 4.2, 4.3, 4.4, 4.12, 5.1 and 5.5, for which any of the Target Stockholders shall have been finally determined to be obligated to indemnify the Buyer pursuant to Article IX hereof, then the Buyer shall have the right to set-off the amount of such unpaid Losses from any payment that the Buyer is required to make to the Target Stockholders pursuant to this Section 2.4. In the event that, on or before the Earnout Payment Date, the Buyer shall have delivered to the Target Stockholder Representative a written notice with respect to any such claims for indemnification pursuant to Article IX hereof that have not been fully resolved as of the Earnout Payment Date, the Buyer shall be entitled to deposit in escrow in an interest-bearing account with the Escrow Agent, pursuant to an escrow agreement consistent with this paragraph and otherwise reasonably acceptable to Buyer and the Target Stockholder Representative, such

portion of the applicable Earnout Payment then due that does not exceed Buyer’s reasonable, good faith estimate of the amount of such unresolved claim(s), and the amount so deposited shall be retained by the Escrow Agent pending resolution of such unresolved claim(s)) in accordance with Article IX hereof or until its earlier distribution as set forth below. Within three (3) Business Days of the resolution of all such unresolved matters in accordance with Article IX hereof, and, in any event, on the 90 ^th day after the Earnout Payment Date, the Escrow Agent shall (A) distribute to Buyer such portion of the Earnout Payment so deposited in escrow as is equal to the amount, if any, for which the Target Stockholders shall have been finally determined to be obligated to indemnify the Buyer pursuant to Article IX hereof, and (B) distribute to the Target Stockholders the balance of the amount so deposited, plus interest earned on the entire amount so deposited with the Escrow Agent.

      2.5 Treatment of Stock Options . Immediately prior to the Closing, vesting of all options to purchase shares of common stock of the Target Entities (the “ Target Options ”) shall accelerate so that all Target Options shall be fully vested and exercisable. At Closing, all Target Options not previously exercised shall, as consented to prior to Closing by the holders of such Target Options, be cancelled and in lieu thereof the holder shall be entitled to receive an amount or amounts (collectively, the “ Exchange Payments ”) which shall equal to the “in-the-money” value of such Target Option, in the amount and calculated in the manner set forth on Schedule 2.5, minus any withholding or other Taxes required to be withheld by Buyer. In addition, the persons identified on Schedule 2.5 to whom options to purchase common stock of the Target Entities were promised but not delivered, as set forth on Schedule 2.5, shall be entitled upon the Closing to receive from the applicable Target Entity or from the Buyer cash payments equal to the “in-the-money” value of each such unissued Target option, in the amount and calculated in the manner set forth on Schedule 2.5, minus any withholding or other Taxes required to be withheld by Buyer, and any such payment shall be deemed to constitute an Exchange Payment for purposes of this paragraph.

ARTICLE III

CLOSING

      3.1 Time and Place . The closing of the transactions contemplated by this Agreement (the “ Closing ”) will take place at the offices of Wyrick Robbins Yates & Ponton LLP at 4101 Lake Boone Trail, Raleigh, North Carolina 27607 on a date (the “ Closing Date ”) to be mutually agreed upon by the parties.

      3.2 Closing Deliveries of the Target Stockholders . At the Closing, the Target Stockholders and/or the Target Stockholder Representative shall deliver to the Buyer or other applicable party:

     (a) the certificates representing the Shares, endorsed in blank or accompanied by executed blank stock powers, or, if any such certificates have been lost, stolen or destroyed, an affidavit of such loss, theft or destruction in customary form and substance reasonably satisfactory to the Buyer;

     (b) the Escrow Agreement in substantially the form set forth on Exhibit B executed by the Target Stockholder Representative;

     (c) employment agreements with the Key Employees in substantially the form set forth on Exhibit C , executed by the Key Employees (the “ Employment Agreements ”); and

     (d) noncompetition agreements in substantially the form set forth on Exhibit D , executed by the Key Employees (the “ Noncompetition Agreements ”).

      3.3 Closing Deliveries of the Target Entities . At the Closing, each of Target Software and Target Analysis shall deliver to the Buyer:

     (a) certificates with respect to good standing of such company, executed by the appropriate official of each jurisdiction in which such company is incorporated or organized and in which it is qualified to do business as a foreign corporation or other entity;

     (b) resignations of all officers and/or directors of such company effective as of the Closing; and

     (c) a certificate of the Secretary or Assistant Secretary of such company (i) certifying, as complete and accurate as of the Closing, attached copies of the Governing Documents of such company; (ii) certifying and attaching all requisite resolutions or actions of such company’s board of directors and, if required by applicable Law, stockholders, approving the execution, delivery and performance of this Agreement and the consummation of the Transactions; and (iii) certifying to the incumbency and signatures of the officers of such company executing this Agreement and any other document relating to the Transactions; and

     (d) any and all other certificates, documents and instruments required to be delivered by the Target Entities hereunder

      3.4 Buyer Closing Deliveries . At the Closing the Buyer shall deliver to the Target Stockholders, the Target Stockholder Representative or other applicable party:

     (a) a promissory note to the Target Stockholder Representative in the form attached hereto as Exhibit E (the “ Promissory Note ”), pursuant to which the Buyer will pay on the first business day following the Closing Date, an amount equal to the Initial Payment Amount, less the Escrow Amount, to the Target Stockholders by means of wire transfer(s) of immediately available funds into the designated bank account(s) of the Target Stockholders in accordance with the Target Allocation Percentages set forth on Exhibit A hereto;

     (b) the Escrow Agreement, executed by the Buyer and the Escrow Agent, together with the delivery of the Escrow Amount to the Escrow Agent thereunder, by wire transfer to an account specified by the Escrow Agent;

     (c) the Employment Agreements, executed by Buyer;

     (d) the Noncompetition Agreements, executed by the Buyer;

     (e) any and all other certificates, documents and instruments required to be delivered by the Buyer hereunder; and

     (f) promptly after Closing, the Buyer shall make the Exchange Payments to the holders of Target Options, as set forth on Schedule 2.5.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
REGARDING THE TARGET ENTITIES

     Target Software and Target Analysis, jointly and severally, represent and warrant to Buyer that the statements contained in this Article IV are correct and complete as of the date hereof and, except where a representation or warranty expressly speaks as of a particular date, as of the Closing Date as though made on the Closing Date, except as set forth in the schedule of exceptions attached hereto as Exhibit F (the “ Schedule of Exceptions ”) (as may be updated prior to the Closing). The numbering of the Schedule of Exceptions corresponds to the numbered Sections contained in this Article IV, and a disclosure made or referenced in one section of the Schedule of Exceptions shall not amend, modify or alter the representations or warranties in any other section unless, and only to the extent that, it is readily apparent that such matter relates to such other section or subsection of the Schedule of Exceptions and the level of particularity and manner of disclosure of the matter expressly disclosed in one section or subsection of the Schedule of Exceptions would make a reasonable person aware that such disclosure is relevant to such other sections or subsections. Unless specifically referenced as such in this Agreement, the inclusion of any information in any Schedule of Exceptions (or updated Schedule of Exceptions) shall not be deemed to be an admission or acknowledgement by either of the Target Entities, in and of itself, that such information is material to or outside the Ordinary Course of Business.

      4.1 Organization; Good Standing; Power . Each of the Target Entities is duly incorporated, validly existing and in good standing (or its equivalent) under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority, to own, lease and operate its properties and to carry on its business as it is now being conducted. Each of the Target Entities is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified, licensed and in good standing would not have a Material Adverse Effect. Each of the Target Entities has heretofore delivered to Buyer a complete and correct copy of its Governing Documents as currently in effect.

      4.2 Authorization; Validity of Agreement . Each of the Target Entities has all necessary corporate power and authority to execute and deliver this Agreement and the Related Documents, to perform their obligations hereunder and thereunder and to consummate the Transactions. The execution, delivery and performance by each of the Target Entities of this Agreement and the consummation by each of the Target Entities of the Transactions are within their corporate powers and have been duly authorized by all necessary corporate action under the their Governing Documents and applicable provisions of the Law of their jurisdiction of incorporation. This Agreement has been duly and validly executed and delivered by each of the

Target Entities and, assuming this Agreement constitutes a legal, valid and binding agreement of the other parties hereto, constitutes a legal, valid and binding agreement of each of the Target Entities, enforceable against each of them in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and for limitations imposed by general principles of equity.

      4.3 No Conflicts; Consents . The execution, delivery and performance by each of the Target Entities of this Agreement and the Related Documents and the consummation of the Transactions do not and will not (i) violate the Governing Documents of either of the Target Entities, (ii) violate any applicable Law, or (iii) require any consent or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of either of the Target Entities or to a loss of any benefit to which either of the Target Entities are entitled under any provision of any Material Contract (or result in the imposition of any Lien upon any assets used in the Ordinary Course of Business for either of the Target Entities). No notice, filing, consent, approval, license, permit, order, qualification or authorization of, or registration, declaration, notice or filing with, any Governmental Entity is required for or in connection with the execution and delivery of this Agreement and each other Related Document, and the consummation of the Transactions.

      4.4 Capitalization; Subsidiaries . The authorized and outstanding capital stock of each of the Target Entities is set forth in Section 4.4 of the Schedule of Exceptions. Except as set forth in Section 4.4 of the Schedule of Exceptions, there are no existing (a) options, warrants, calls, subscriptions or other rights, convertible securities, agreements or commitments of any character obligating either of the Target Entities to issue, transfer or sell any equity interests in either of the Target Entities or securities convertible into or exchangeable for such equity interests; (b) contractual obligations of either of the Target Entities to repurchase, redeem or otherwise acquire any equity interests in either of the Target Entities; or (c) voting trusts or similar agreements to which either of the Target Entities is a party with respect to the voting of equity interests in either of the Target Entities. Neither of the Target Entities has any Subsidiaries or currently own or control, directly or indirectly, any shares of or ownership interest in any other corporation, association, or other business entity. Neither of the Target Entities is, directly or indirectly, a participant in any joint venture or partnership.

      4.5 Financial Condition .

     (a)  Financial Statements . Section 4.5(a) of the Schedule of Exceptions contains correct and complete copies of (i) the audited consolidated balance sheets of the Target Entities as of December 31, 2003, 2004 and 2005 (the December 31, 2005 balance sheet of the Target Entities being presented on a combined basis) and the related audited statements of operations, stockholders’ equity and cash flows for the fiscal years ended December 31, 2005 and 2004 and the related unaudited statements of operations, stockholders’ equity and cash flows for the fiscal year ended December 31, 2003, certified (as applicable) by the independent certified auditors for each of the Target Entities, whose report thereon is included therewith (the “ Base Financial Statements ”) and (ii) the unaudited consolidated balance sheets of each of the Target Entities as of November 30, 2006 (the “ Latest Balance Sheets ”) and the related unaudited statements of

operations for the eleven-month period then ended (together with the Latest Balance Sheets and the Base Financial Statements, the “ Financial Statements ”). The Financial Statements have been prepared from the books and records of each of the Target Entities in accordance with GAAP consistently applied except (i) as may be indicated in the footnotes thereto and/or (ii) in the case of unaudited Financial Statements, for the absence of footnotes and for normal year-end adjustments. Except as set forth in Section 4.5 of the Schedule of Exceptions, the Financial Statements fairly present in all material respects the financial condition, results of operations, and cash flows of each of the Target Entities as of the dates and for the periods indicated.

     (b)  No Undisclosed Liabilities . Neither of the Target Entities has any material debts, liabilities or obligation, whether accrued, absolute or otherwise, including any liabilities or obligation on account of Taxes or any governmental charge or penalty, interest or fine, except for (i) those liabilities reflected on face of the Latest Balance Sheets and (ii) liabilities and obligations that have arisen in the Ordinary Course of Business since the date of the Latest Balance Sheets.

     (c)  Accounts Receivable . All of the Accounts Receivable of each of the Target Entities that are reflected properly on their Latest Balance Sheet or have arisen in the Ordinary Course of Business subsequent to the date of their respective Latest Balance Sheet, arose out of bona fide, arms-length transactions, are valid receivables and, to the Knowledge of the Target Entities, are subject to no setoffs or counterclaims.

     (d)  Representation as to Certain Amounts . Schedule 4.5 sets forth the amount of (i) the Target Transaction Expenses, (ii) the Closing Indebtedness and (iii) the Closing Cash and Cash Equivalents. To the extent that (i) the actual Target Transaction Expenses or Indebtedness as of the Closing Date as determined within 30 Business Days of Closing in good faith by Buyer in accordance with GAAP and provided in writing to the Target Stockholder Representative, exceed the amounts set forth on Schedule 4.5, or (ii) the actual Closing Cash and Cash Equivalents, as determined within 30 Business Days of Closing in good faith by Buyer in accordance with GAAP and provided in writing to the Target Stockholder Representative, are less than the amount set forth on Schedule 4.5, the Buyer and the Target Stockholder Representative shall provide written instructions to the Escrow Agent to remit to Buyer from the Escrow Amount the amount of such difference, with any such amount to be excluded from the Floor and the Claim Minimum.

      4.6 Absence of Changes or Events . Except as set forth on Section 4.6 of the Schedule of Exceptions, since December 31, 2005 (the date of the Base Financial Statements):

     (a) Neither of the Target Entities has entered into any material transaction that was not in the Ordinary Course of Business;

     (b) except for sales or licenses of goods and services in the Ordinary Course of Business, there has been no sale, assignment, transfer, mortgage, pledge, encumbrance or lease of any asset or property of either of the Target Entities;

     (c) there has been no declaration or payment of a dividend, or any other declaration or payment of a dividend, or any other declaration, payment or distribution of any type or nature by either of the Target Entities, whether in cash or property, and no purchase or redemption of any Equity Securities or other securities of either of the Target Entities;

     (d) there has been no declaration, payment or commitment for the payment by either of the Target Entities of a bonus or other additional salary, compensation or benefit to any employee of the Target Entities that was not in the Ordinary Course of Business;

     (e) there has been no release, compromise, waiver or cancellation of any debt to, claim by, or right of either of the Target Entities other than in the Ordinary Course of Business;

     (f) there have been no capital expenditures by either of the Target Entities in excess of $25,000 individually or $100,000 in the aggregate;

     (g) there has been no change in accounting methods or practices or revaluation of any asset of either of the Target Entities;

     (h) there has been no damage, destruction to or loss of, physical property of either of the Target Entities;

     (i) there has been no loan by either of the Target Entities, or guaranty by either of the Target Entities of any loan, to any stockholder, director, officer or employee of either of the Target Entities, other than routine advances on account of travel, lodging and other business expenses in the Ordinary Course of Business;

     (j) there has been no amendment or termination of any oral or written contract, agreement or license to which either of the Target Entities is a party or by which either of the Target Entities is bound, except in the Ordinary Course of Business, or except as expressly contemplated thereby;

     (k) neither of the Target Entities has failed to satisfy any of its debts, obligations or liabilities as the same became due and payable;

     (l) neither of the Target Entities has entered, renewed or permitted the renewal of (whether by operation of any term thereof providing for automatic renewal or otherwise) into any agreement, contract, lease or license (or series of related agreements, contracts, leases or licenses) with any vendor or supplier either involving more than $25,000 in any 12-month period, other than in the Ordinary Course of Business;

     (m) neither of the Target Entities has imposed any Lien, other than Permitted Liens, upon any of its assets or properties, tangible or intangible;

     (n) Neither of the Target Entities has made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital

investments, loans, and acquisitions) either involving more than $25,000 or outside the Ordinary Course of Business;

     (o) neither of the Target Entities has issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation either involving more than $25,000 singly or $100,000 in the aggregate;

     (p) neither of the Target Entities has delayed or postponed the payment of accounts payable or other liabilities or indebtedness outside the Ordinary Course of Business;

     (q) neither of the Target Entities has transferred, assigned or granted any license or sublicense of any rights under or with respect to any Intellectual Property other than in the Ordinary Course of Business;

     (r) there has been no change made or authorized in the Governing Documents of either of the Target Entities;

     (s) neither of the Target Entities has issued, sold, or otherwise disposed of any of its Equity Securities or other securities, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its Equity Securities or other securities other than in the Ordinary Course of Business pursuant to the Stock Option Plans;

     (t) neither of the Target Entities has adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other benefit plan);

     (u) neither of the Target Entities has made or pledged to make any material charitable contribution; and

     (v) there has been no agreement or commitment by either of the Target Entities to do any of the foregoing.

      4.7 Assets . As of the date hereof, each of the Target Entities has good, valid and marketable title to all of the assets and properties reflected on its respective Latest Balance Sheet or acquired subsequent thereto (except for assets and properties sold, consumed or otherwise disposed of in the Ordinary Course of Business since the date of its respective Latest Balance Sheet), free and clear of all Liens, other than Permitted Liens. The assets and properties of each of the Target Entities include all of the assets, properties and rights of every type and description, real, personal and mixed, tangible and intangible, that are necessary to conduct its Business in the Ordinary Course of Business. All material items of tangible personal property (including computer hardware) used in, in use or useable in the operation of the Business of each of the Target Entities, are free from defects (patent and, to the Knowledge of the Target Entities, latent), have been maintained in accordance with normal industry practice, and are in good operating condition and repair, ordinary wear and tear and minor defects that do not materially interfere with the use thereof excepted, and are suitable for the purposes for which they are

presently used and for the operation of the Business of each of the Target Entities in the manner in which it is currently operated.

      4.8 Real Property and Leases . Neither of the Target Entities own any real property. Section 4.8 of the Schedule of Exceptions identifies each parcel of real property in which either of the Target Entities has a leasehold or similar interest (the “ Leased Real Property” ). Each of Target Entities has the valid legal right to use all Leased Real Property under the leases described in Section 4.8 of the Schedule of Exceptions, including leaseholds and all other interests in real property, and such other material assets, utilities and properties that are used in or necessary for the conduct of its Business as conducted immediately prior to the date hereof, subject to no Liens except for Permitted Liens. All of the Leased Real Property is held under valid, binding and enforceable leases, except as such enforceability may be limited by (i) bankruptcy laws and other similar laws affecting creditors’ rights generally, and (ii) general principles of equity, regardless of whether asserted in a proceeding in equity or at law. True and correct copies of all such leases (and all amendments thereto) have been made available to the Buyer. There is no pending, or to the Knowledge of either of the Target Entities, threatened action that could reasonably be expected to interfere with the quiet enjoyment of any such leasehold by either of the Target Entities. Neither of the Target Entities has been notified that it is in breach of, in violation of, in default under or not in compliance with any of its obligations in any lease under which it occupies any Leased Real Property. Neither of the Target Entities has received any notice of violation or claimed violation by it of any applicable building, zoning, subdivision and other land use and similar applicable Laws affecting its Leased Real Property. Neither of the Target Entities has received notice (and neither of the Target Entities has Knowledge) of any pending or threatened condemnation or similar proceedings affecting the Leased Real Property.

      4.9 Intellectual Property .

     (a) Each of the Target Entities own or is properly licensed to use all Intellectual Property used in or necessary to the conduct of its Business as presently conducted.

     (b) Section 4.9(b) of the Schedule of Exceptions sets forth a true and complete list of all: (i) Copyrights that have been filed with, or issued or registered with any Governmental Entity and for in either of the Target Entities has an ownership interest; (ii) Patents that have been filed with, issued or registered by any Governmental Entity and for which either of the Target Entities has an ownership interest; (iii) Trademarks that have been filed with, issued or registered by any Governmental Entity and for which either of the Target Entities has an ownership interest; (iv) material unregistered Trademarks in which either of the Target Entities has an ownership interest and that are currently in use; (v) internet domain names in which either of the Target Entities has an ownership interest; and (vi) Contracts to which either of the Target Entities is a party which grant licenses of Intellectual Property of any other Person to either of the Target Entities (other than shrinkwrap or other commercially available off-the-shelf software product licenses granted to either of the Target Entities) (each an “ Intellectual Property License ”).

     (c) All Owned Intellectual Property was entirely written and developed by employees of either Target Software or Target Analysis within the course and scope of their duties while

employed by the applicable Target Entity and who have a duty of assignment to Target Software or Target Analysis or by Persons who have assigned such property to Target Software or Target Analysis. No Person other than the Target Entities has any ownership interest in any Owned Intellectual Property. All of the products offered by each of the Target Entities as of or prior to the date hereof and currently under development (collectively, the “ Products ”) consist of Owned Intellectual Property and Licensed Intellectual Property.

     (d) Each of the Target Entities has taken commercially reasonable measures to protect for its benefit the confidential and proprietary nature of its Trade Secrets. Each Person, including employees, agents, consultants, distributors and licensees of each of the Target Entities, who has had access to or otherwise been exposed in any material respect to any Trade Secrets of either of the Target Entities, has entered into an agreement with one or both of the Target Entities regarding the confidential nature of the Trade Secrets and limiting the use and disclosure of the Trade Secrets. Except as set forth on Section 4.9(d) of the Schedule of Exceptions, each of the Target Entities has kept all source code of the Software that is Owned Intellectual Property and all Trade Secrets confidential. Neither of the Target Entities has disclosed, divulged or otherwise provided access to the Trade Secrets of either of the Target Entities, other than to Persons that have entered into a written confidentiality agreement with one or both of the Target Entities with respect thereto. To the Knowledge of each of the Target Entities, no Person that is a party to any Contract with either of the Target Entities concerning the confidentiality of Trade Secrets is in violation of, or in default under, any term or provision of such Contract.

     (e) The Target Entities possess all right, title and interest in and to all Owned Intellectual Property, free and clear of any Lien, other than rights under non-exclusive written end-user licenses granted to customers in the Ordinary Course of Business (“ Customer Licenses ”). Other than pursuant to Customer Licenses or as set forth on Section 4.9(e) of the Schedule of Exceptions, neither of the Target Entities has granted to any Person, or obligated itself to grant to any Person, any license, option or other right in or with respect to any of the Owned Intellectual Property, whether or not requiring payment to the Target Entities. The Target Entities have received no notice that any Person has either asserted any rights in or offered to grant either of the Target Entities a license or any other right of use with respect to the Owned Intellectual Property. Neither of the Target Entities has an obligation to compensate any Person, other than its employees and consultants in the Ordinary Course of Business, for any development, license, use, sale, distribution or modification of any of the Owned Intellectual Property.

     (f) Neither of the Target Entities is in material breach of or default under any Intellectual Property License or any other Contract or Law relating to the Owned Intellectual Property or Licensed Intellectual Property. Each Intellectual Property License to which either of the Target Entities is a party is valid and in full force and effect, and neither of the Target Entities has Knowledge that any such Intellectual Property License will cease to be valid and in full force and effect at any time during the foreseeable future, other than by reason of its expiration in accordance with its terms.

     (g) To the Knowledge of the Target Entities, the development, license, use, sale, distribution, modification and other exploitation of the Owned Intellectual Property in the Businesses as currently conducted does not infringe on, or otherwise violate the rights of, any other Person, or constitute an unlawful disclosure, use or misappropriation of the right or rights of any other Person. To the Knowledge of the Target Entities, the use of the Licensed Intellectual Property does not infringe on or otherwise violate the rights of any other Person or constitute an unlawful disclosure, use or misappropriation of the right or rights of any other Person.

     (h) There is no Proceeding, petition to cancel, interference, or re-examination, or to the Knowledge of either of the Target Entities, threatened, that is reasonably likely to result in any Proceeding with respect to, any of the following: (i) the Owned Intellectual Property, (ii) any moral rights or rights of publicity, or (iii) any right of either of the Target Entities to develop, license, use, sell, distribute, modify or otherwise exploit the Owned Intellectual Property.

     (i) To the Knowledge of each of the Target Entities, there is no Proceeding pending or threatened that would adversely affect the right of either of the Target Entities to use the Licensed Intellectual Property in accordance with its respective Intellectual Property License.

     (j) Except for customary indemnities consistent with software industry practice that are contained in Customer Licenses, neither of the Target Entities has agreed to indemnify any Person against any charge of infringement or other violation with respect to any Intellectual Property.

     (k) Neither of the Target Entities has: (i) knowingly infringed, misappropriated or otherwise violated, (ii) knowingly contributed to the infringement, misappropriation or other violation by others, or (iii) knowingly induced the infringement, misappropriation or other violation by others, of any rights to any Patents, Trademarks, Copyrights, Trade Secrets or other Intellectual Property of any Person. Neither of the Target Entities has received any assertion, complaint, demand or any notice whatsoever alleging any such infringement, misappropriation or other violation.

     (1) To the Knowledge of the Target Entities, no Person is infringing upon, misappropriating or otherwise violating the rights of the Target Entities with respect to the Owned Intellectual Property. To the Knowledge of each of the Target Entities, no Person has made a complaint, allegation, charge or assertion that any Owned Intellectual Property is invalid or unenforceable.

     (m) Each of the Target Entities has the right, which is non-terminable and not subject to expiration or revocation, to develop, license, control, regulate the use of or otherwise exploit its Owned Intellectual Property without any valid legal or equitable claim by, or payment or other obligation owing to, or required consent from, any Person.

     (n) All Copyrights included in the Owned Intellectual Property are either works made “for hire” as that term is used in Title 17 of the United States Code or have been assigned to one or both of the Target Entities pursuant to valid written assignments. The Owned Intellectual

Property does not include (i) any Intellectual Property in which any Person other than one of the Target Entities has or may acquire any right of ownership, control or compensation, or (ii) to the Knowledge of the Target Entities, any Invention made by any employee of either of the Target Entities at any time other than during his or her employment. None of the Owned Intellectual Property is the product of a joint invention or authorship where at least one of the inventors or authors was not an employee of one of the Target Entities and was not otherwise obligated by a written contract to assign all of his or her rights therein to one of the Target Entities, and all such inventors and authors validly assigned all of such rights to one of the Target Entities.

     (o) To the Knowledge of each of the Target Entities, there exists no internet domain name registered to any Person that is confusingly similar to any Trademarks or internet domain names of either of the Target Entities. To the Knowledge of the Target Entities, neither of the Target Entities has adopted an internet domain name confusingly similar to any Trademarks or internet domain names of any other Person.

     (p) Neither of the Target Entities has contracted with any Person to provide advertising through any World Wide Web site.

     (q) Except as disclosed on Section 4.9(q) of the Schedule of Exceptions list, no Software or software used in any service of or sold by either of the Target Entities (including Software under development) is, or, at Closing, will be, in whole or in part, governed by an Excluded License. For purposes of this Agreement, “ Excluded License ” is any license that requires, as a condition of modification and/or distribution of software subject to the Excluded License, that (i) such software and/or other software combined and/or distributed with such software be disclosed or distributed in source code form, or (ii) such software and/or other software combined and/or distributed with such software and any associated intellectual property be licensed on a royalty free basis (including for the purpose of making additional copies or derivative works).

     (r) Neither of the Target Entities has distributed or published to any third party any Software or software used in any Target service (including Software under development) that is governed by an Excluded License.

     (s) Other than Excluded Licenses that are disclosed under Section 4.9(q) of the Schedule of Exceptions list, neither of the Target Entities has incorporated into any Software or software used in any of the Target Entities services any code, modules, utilities, or libraries that are covered in whole or in part by a license that triggers the discontinuance of some or all license rights if certain intellectual property enforcement suits are brought.

     (t) Neither of the Target Entities has incorporated into any Software or software used in any either of the Target Entities services any code, modules, utilities, or libraries that are covered in whole or in part by a license that requires that either of the Target Entities give attribution for its use of such code, modules, utilities, or libraries.

     (u) Neither of the Target Entities are members of any technology standards organizations (including similar organizations, such as special interests groups or associations).

     (v) None of the Products of either of the Target Entities contain any “back door”, “time bomb”, “trojan horse”, “worm”, “drop dead device”, “virus”, “software lock” or “hardware lock” (as such terms are generally known in the computer industry) or other instructions to intentionally disable or erase Products of either of the Target Entities.

     (w) There are no errors in either of the Target Entities’ Products (excluding beta versions) other than any minor “bugs” or “glitches” that are generally acceptable within industry standards or that otherwise do not materially affect the functionality of the Target Entities’ Products.

      4.10 Material Contracts .

     (a) Section 4.10 of the Schedule of Exceptions contains a list of each Contract to which either of the Target Entities is a party, in its own name or as a successor in interest (each Contract of the character described below being referred to as a “ Material Contract ”), which:

          (i) expressly limits or restricts in any material respect the ability of either of the Target Entities to compete or otherwise to conduct its Business as currently conducted in any manner or place;

          (ii) involves an obligation of confidentiality on either of the Target Entities other than Contracts entered into by the Target Entities with their customers in the Ordinary Course of Business;

          (iii) involves an obligation for borrowed money in excess of $25,000, or provides for a guaranty for borrowed money, letter of credit, comfort letter, surety or other bond in an amount in excess of $25,000 by either of the Target Entities in respect of any Person;

          (iv) creates or relates to a joint venture, limited liability company or partnership in which either Target Entity is a partner, member or other equity participant;

          (v) obligates the Target Entities, individually or collectively, to pay an amount in excess of $25,000 during any twelve (12) month period after the date hereof;

          (vi) relates to the sale of goods and/or the provision of services pursuant to which the Target Entities, individually or collectively, expect to accrue revenue in excess of $25,000 in any twelve (12) month period after the date hereof;

          (vii) requires lease payments to or from the Target Entities, individually or collectively, in excess of $25,000 during any twelve (12) month period after the date hereof;

          (viii) involves a capital lease obligation or other lease of any tangible personal property required to conduct its Business in the Ordinary Course of Business or imposes a Lien on any material tangible or intangible asset or property of either of Target Entities required to conduct its Business in the Ordinary Course of Business;

          (ix) involves the lease by either of Target Entities, as lessor or lessee, of any real property;

          (x) creates or involves any profit sharing, option, purchase, equity appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of any of the Target Entities’ current or former directors, officers, and employees;

          (xi) includes any collective bargaining agreement or arrangement;

          (xii) relates to the advancement or loan of any amount to any of the Target Entities’ directors, officers, and employees, other than routine advances to employees on account of travel, lodging and other business expenses made in the Ordinary Course of Business;

          (xiii) provides for consequences upon a default or termination that could reasonably be expected to have a Material Adverse Effect, other than license agreements, agreements for services or other agreements entered into by the Target Entities with their customers in the Ordinary Course of Business; or

          (xiv) otherwise involves consideration payable by or to the Target Entities, individually or collectively, in any twelve-month period after the date hereof, in excess of $100,000.

     (b) True and complete copies of the Material Contracts, including all amendments and modifications thereto, have previously been made available to Buyer. Neither of the Target Entities nor, to the Knowledge of the Target Entities, any other party to any of the Material Contracts (i) is in default or breach under (nor does there exist any condition that, with notice or lapse of time or both, would cause such a breach or default under or permit termination, modification or acceleration of any obligation under) any Material Contract, or (ii) has waived any right it may have under any of the Material Contracts, except for such defaults, breaches or waivers as could not reasonably be expected to have a Material Adverse Effect. Neither of the Target Entities has received any notice that any other party to any Material Contract intends to cancel, suspend or terminate such Material Contract. Each Material Contract constitutes the legal, valid and binding obligation of the applicable Target Entity and, to the Knowledge of the Target Entities, the other parties thereto, is in full force and effect and is enforceable in accordance with its terms against the applicable Target Entity. Neither of the Target Entities has any Knowledge that any Material Contract of the Target Entities will cease to be legal, valid, binding and enforceable and in full force and effect on identical terms following the consummation of the Transactions, except to the extent that such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). To the Knowledge of each of the Target Entities, no party has repudiated any provision of any Material Contract.

      4.11 Permits . Listed on Section 4.11 of the Schedule of Exceptions are all of the certificates, licenses, permits, authorizations and approvals (collectively, “ Permits ”) held by each of the Target Entities that are necessary or material to the operation of their Businesses. The

Permits set forth on Section 4.11 of the Schedule of Exceptions constitute all of the certificates, licenses, permits, operating authority and regulatory approvals which are required for the lawful conduct of the Businesses. To the Knowledge of the Target Entities, each of such Permits are in full force and effect in accordance with their terms on the date of this Agreement, and will be in full force and effect in accordance with their terms at the time of Closing, and there is no outstanding notice of cancellation or termination or, any threatened revocation, cancellation or termination in connection therewith, nor are any of such Permits subject to any restrictions or conditions that materially limit the operation of the Businesses (other than restrictions or conditions generally applicable to licenses of that type). Such Permits are free from all Liens, claims and encumbrances of any nature whatsoever. None of the Permits will be adversely impacted or affected by or as a result of the Transactions.

      4.12 Taxes .

     (a) Except as set forth on Section 4.12(a) of the Schedule of Exceptions: (i) each of the Target Entities has filed all Returns required to be filed by it prior to the date hereof, (ii) all such Returns were true and correct in all respects and were prepared in compliance with all applicable Laws; (iii) all Taxes due and owing by the Target Entities (whether or not shown on any Returns) have been duly and timely paid or accrued on the Financial Statements in accordance with GAAP; (iv) no statute of limitations has been waived and no extension of time during which a Tax assessment or deficiency assessment may be made has been agreed to, which waiver or extension is still outstanding with respect to any Tax Liability of the Target Entities; (v) there are no pending Tax audits of any Returns of either of the Target Entities, and neither of the Target Entities has received any notice of any unresolved questions or claims concerning its Tax Liability; and (vi) each of the Target Entities has complied in all respects with all applicable Laws, rules and regulations relating to the payment and withholding of Taxes.

     (b) Neither of the Target Entities is currently the beneficiary of any extension of time within which to file any Return. No claim has ever been made by a Governmental Entity in a jurisdiction where the Target Entities do not file Returns that either of the Target Entities is or may be subject to taxation by that jurisdiction or may be subject to any type of Taxes in that jurisdiction for which Returns have not been filed. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of either of the Target Entities.

     (c) Each of the Target Entities has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

     (d) Neither of the Target Entities has received from any foreign, federal, state, or local taxing authority (including jurisdictions where they have not filed Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against such Target Entity. Section 4.12(d) of the Schedule of Exceptions lists all federal, state, local, and foreign income Returns filed with respect to each of the Target Entities for taxable periods ended on or after January 1, 2003, and indicates the Returns of the Target Entities that have been audited. Each of the Target Entities has delivered to Buyer correct and complete copies of all federal, state and local income Returns,

examination reports, and statements of deficiencies assessed against or agreed to by it filed or received since June 30, 2003.

     (e) Neither of the Target Entities is a party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in the payment of (i) any “excess parachute payment” within the meaning of Code section 280G (or any corresponding provision of state, local or foreign Tax law) or (ii) any amount that will not be fully deductible as a result of Code section 162(m) (or any corresponding provision of state, local or foreign Tax law). Neither of the Target Entities is, and never has been, a United States real property holding corporation within the meaning of Code section 897(c)(2) during the applicable period specified in Code section 897(c)(1)(A)(ii). Each of the Target Entities has disclosed on its federal income tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code section 6662. Neither of the Target Entities is, or has ever been, a party to or bound by any Tax allocation or Tax sharing agreement. Neither of the Target Entities (i) is or has ever been a member of an “affiliated group” (within the meaning of Code section 1504(a)) filing a consolidated federal income Return or (ii) has any Liability for the Taxes of any Person under Treasury Regulations section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

     (f) Section 4.12(f) of the Schedule of Exceptions sets forth the following information with respect to each of the Target Entities as of the most recent practicable date: (i) the basis of such Target Entity in its assets; (ii) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to such Target Entity; and (iii) the amount of any deferred gain or loss allocable to such Target Entity arising out of any intercompany transaction.

     (g) The unpaid Taxes of each of the Target Entities (i) did not, as of the date of the Latest Balance Sheets, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Latest Balance Sheet for such Target Entity (rather than in any notes thereto) and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of such Target Entity in filing its Returns. Since the date of the Latest Balance Sheets, neither of the Target Entities has incurred any Liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.

     (h) Neither of the Target Entities will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any:

          (i) change in method of accounting for a taxable period ending on or prior to the Closing Date;

          (ii) “closing agreement” as described in Code section 7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date;

          (iii) intercompany transaction or excess loss account described in Treasury Regulations issued under Code section 1502 (or any corresponding or similar provision of state, local or foreign income Tax law);

          (iv) installment sale or open transaction disposition made on or prior to the Closing Date; or

          (v) prepaid amount received on or prior to the Closing Date.

     (i) Neither of the Target Entities has ever distributed stock of another Person, or had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Code sections 355 or 361.

     (j) Each of the Target Entities has made a valid election to be treated as, and has been and will be, an S corporation (an “ S Corp ”) within the meaning of section 1361 of the Code and comparable provisions of any state or local Tax law under which the Target Entities file Returns as an S Corp for any period prior to Closing, and such election has been, and will be, in effect for each taxable year commencing on or after January 1, 1987 (or such later date of such Target Entities’ formation), and ending on or before the Closing Date.

     (k) Neither of the Target Entities is, will be for any period prior to or including the Closing Date, or has ever been, liable for any Tax imposed under sections 1374(a) or 1375(a) of the Code (or any comparable provision of state, local or foreign Tax law).

      4.13 Proceedings . There is no Proceeding pending or, to the Knowledge of either of the Target Entities, threatened against either of the Target Entities. Neither of the Target Entities is subject to the provisions of any judgment, order or decree applicable to such Target Entity, its assets or its business. There are no investigations by any Governmental Entity that are pending or, to the Knowledge of either of the Target Entities, threatened against either of the Target Entities.

      4.14 Benefit Plans .

     (a) Section 4.14(a) of the Schedule of Exceptions contains a list of all employee benefit plans, agreements or arrangements maintained or contributed to by each of the Target Entities, including (i) “employee benefit plans” (as defined in Section 3(3) of ERISA) (ii) current or deferred compensation, pension, profit sharing, retirement, vacation, bonus or severance plans or programs or other fringe benefit plans or programs, and (iii) medical, hospital, accident, disability, insurance or death benefit plans (all of the foregoing collectively, the “ Target Benefit Plans ”).

     (b) Each Target Benefit Plan is and has been operated and administered pursuant to its terms and in material compliance, in form and operation, with ERISA, the Code, and all applicable Laws; (ii) Each Target Benefit Plan that is required to meet the requirements of Section 401(a) of the Code (including, but not limited to, all Employee Pension Benefit Plans, as defined in Section 3(2) of ERISA) meets such requirements within the meaning of such provision, has received a favorable determination letter from the Internal Revenue Service, and

such determination has not been revoked or withdrawn, and to the Knowledge of the Target Entities, no event has occurred that could result in a disqualification of such Target Benefit Plan; (iii) No Target Benefit Plan is subject to Title IV of ERISA or Section 412 of the Code; (iv) No material default exists with respect to the obligations of either of the Target Entities under a Target Benefit Plan; (v) Neither of the Target Entities has engaged in a “prohibited transaction” as such term is defined in Section 4975 of the Code or Section 406 of ERISA with respect to a Target Benefit Plan that would subject either of the Target Entities to any Tax or penalty imposed under Sections 4975 of the Code or Section 502 (i), (j) or (l) of ERISA; (vi) Neither of the Target Entities has engaged in any transaction described in Section 4069 of ERISA within the last five (5) years; (vii) no Target Benefit Plan subject to Part (3) of Subtitle B of Title I of ERISA or Section 412 of the Code has incurred any “accumulated funding deficiency” (as defined in Section 412(a) of the Code), whether or not waived; (viii) no notice of a “reportable event” within the meaning of Section 4043 of ERISA, for which the 30-day reporting requirement has not been waived, has been required to be filed for Target Benefit Plan that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA and that is intended to meet the requirements of Section 401(a) of the Code, or by either of the Target Entities or any entity that is considered one employer with either of the Target Entities under Section 4001 of ERISA or Section 414 of the Code, within the 12-month period ending on the Closing Date; (ix) as of the date hereof, no Proceedings (other than routine benefit claims) are pending or, to the Knowledge of the Target Entities, threatened against or relating to a Target Benefit Plan, or any fiduciary thereof; and (x) neither of the Target Entities has incurred any Liability to the Pension Benefit Guaranty Corporation in respect of a Target Benefit Plan that remains unpaid.

     (c) Neither the execution and delivery hereof nor the consummation of the Transactions will (i) result in any payment (including severance, unemployment compensation or golden parachute) becoming due to any director, officer of other employee of either of the Target Entities, or (ii) increase any benefit otherwise payable under a Target Benefit Plan or result in the acceleration of the time of payment or vesting of any such benefit, which would require either of the Target Entities to make additional contributions to a Target Benefit Plan. Neither of the Target Entities has current or projected Liability in respect of post-employment or post-retirement health or medical or life insurance benefits except as required to avoid excise tax under Section 4980B of the Code. Each of the Target Entities is in compliance with Section 4980B of the Code. No condition exists that could prevent either of the Target Entities from terminating or amending a Target Benefit Plan. Neither of the Target Entities contribute to, has ever contributed to, and has ever been required to contribute to any multiemployer plan (as defined in Section 3(37) of ERISA) or has any Liability (including withdrawal liability as defined in Section 4201 of ERISA) under any multiemployer plan.

     (d) All contributions (including all employer contributions and employee salary reduction contributions) and payments which are due or are