Agreement and Plan of Merger dated as of January 24, 2005, by and among International Business Machines Corporation, Nike Acquisition Corp. and Corio, Inc

EXECUTION COPY

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

Among

INTERNATIONAL BUSINESS MACHINES CORPORATION,

NIKE ACQUISITION CORP.

and

CORIO, INC.

Dated as of January 24, 2005

TABLE OF CONTENTS

ii

GLOSSARY

     AGREEMENT AND PLAN OF MERGER dated as of January 24, 2005 (this “Agreement”), by and among INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation (“Parent”), NIKE ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of Parent (“Sub”), and CORIO, INC., a Delaware corporation (the “Company”).

     WHEREAS the Board of Directors of each of the Company and Sub deems it in the best interests of their respective stockholders to consummate the merger (the “Merger”), on the terms and subject to the conditions set forth in this Agreement, of Sub with and into the Company in which the Company would become a wholly owned subsidiary of Parent, and such Boards of Directors have approved this Agreement and declared its advisability (and, in the case of the Board of Directors of the Company, recommended that this Agreement be adopted by the Company’s stockholders);

     WHEREAS concurrently with the execution of this Agreement, and as a condition and inducement to the willingness of Parent and Sub to enter into this Agreement, Parent and certain stockholders of the Company (the “Principal Stockholders”) are entering into a voting agreement (the “Stockholders Agreement”) pursuant to which the Principal Stockholders are agreeing to take certain action in furtherance of the Merger;

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

     WHEREAS concurrently with the execution of this Agreement, certain employees of the Company are entering into agreements with Parent;

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

ARTICLE I

The Merger

     SECTION 1.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), Sub shall be merged with and into the Company at the Effective Time. At the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation (the “Surviving Corporation”).

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     SECTION 1.02. Closing. The closing of the Merger (the “Closing”) will take place at 11:00 a.m., New York time, on a date to be specified by the parties, which shall be not later than the second business day after satisfaction or waiver of the conditions set forth in Article VI (other than those that by their terms are to be satisfied or waived at the Closing, but subject to the satisfaction or waiver of such conditions), at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019, unless another time, date or place is agreed to in writing by Parent and the Company. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.

     SECTION 1.03. Effective Time of the Merger. Upon the terms and subject to the conditions set forth in this Agreement, as soon as practicable on or after the Closing Date, the parties shall file a certificate of merger (the “Certificate of Merger”) in such form as is required by, and executed and acknowledged in accordance with, the relevant provisions of the DGCL. The Merger shall become effective at such date and time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or at such subsequent date and time as Parent and the Company shall agree and specify in the Certificate of Merger. The date and time at which the Merger becomes effective is referred to in this Agreement as the “Effective Time”.

     SECTION 1.04. Effects of the Merger. The Merger shall have the effects set forth in the applicable provisions of the DGCL.

     SECTION 1.05. Certificate of Incorporation and Bylaws. (a) The Amended and Restated Certificate of Incorporation of the Company, shall be amended at the Effective Time to read in the form of Exhibit A hereto and, as so amended, shall be the Certificate of Incorporation of the Surviving Corporation until hereafter changed or amended as provided therein or by applicable Law.

     (a) The Bylaws of Sub as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

     SECTION 1.06. Directors. The directors of Sub immediately prior to the Effective Time shall be 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 1.07. Officers. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.

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ARTICLE II

Conversion of Securities

     SECTION 2.01. Conversion of Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Common Stock, par value $0.001 per share, of the Company (the “Company Common Stock”), or the holder of any shares of capital stock of Sub:

     (a) Capital Stock of Sub. Each issued and outstanding share of common stock of Sub shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

     (b) Cancellation of Treasury Stock and Parent-Owned Stock. All shares of Company Common Stock that are owned by the Company, as treasury stock, Parent or Sub immediately prior to the Effective Time shall automatically be canceled and retired and shall cease to exist and no consideration shall be delivered or deliverable in exchange therefor.

     (c) Conversion of Company Common Stock. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than (x) shares to be canceled and retired in accordance with Section 2.01(b) and (y) the Appraisal Shares) shall be converted into the right to receive $2.82 in cash, without interest (the “Merger Consideration”). At the Effective Time such shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time represented any such shares (a “Certificate”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration. The right of any holder of any share of Company Common Stock to receive the Merger Consideration shall be subject to and reduced by the amount of any withholding that is required under applicable tax Law as provided in Section 2.02(f) hereof.

     (d) Appraisal Rights. Notwithstanding anything in this Agreement to the contrary, shares (the “Appraisal Shares”) of Company Common Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who is entitled to demand and properly demands appraisal of such shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL (“Section 262”) shall not be converted into the right to receive the Merger Consideration as provided in Section 2.01(c), but instead such holder shall be entitled to payment of the fair value of such shares in accordance with the provisions of Section 262. At the Effective Time, the Appraisal Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of Appraisal Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of such shares in accordance with

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the provisions of Section 262. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262, then the right of such holder to be paid the fair value of such holder’s Appraisal Shares under Section 262 shall cease and such Appraisal Shares shall be deemed to have been converted at the Effective Time into, and shall have become, the right to receive the Merger Consideration as provided in Section 2.01(c). The Company shall serve prompt notice to Parent of any demands for appraisal of any shares of Company Common Stock, withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands, or agree to do or commit to do any of the foregoing.

     SECTION 2.02. Exchange of Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall designate a bank or trust company reasonably acceptable to the Company to act as agent for the payment of the Merger Consideration upon surrender of Certificates (the “Paying Agent”), and, from time to time after the Effective Time, Parent shall make available, or cause the Surviving Corporation to make available, to the Paying Agent funds for the benefit of the former holders of Company Common Stock in amounts and at the times necessary for the payment of the Merger Consideration pursuant to Section 2.01(c) upon surrender of Certificates, it being understood that any and all interest earned on funds made available to the Paying Agent pursuant to this Agreement shall be turned over to Parent.

     (b) Exchange Procedure. As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a Certificate (i) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates held by such person shall pass, only upon proper delivery of the Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash into which the shares formerly represented by such Certificate shall have been converted pursuant to Section 2.01(c), and the Certificate so surrendered shall forthwith be canceled. Parent shall not take any action that would prevent the Paying Agent from making payment of the Merger Consideration in accordance with its customary procedures. In the event of a transfer of ownership of Company Common Stock that is not registered in the stock transfer books of the

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Company, payment of the Merger Consideration in exchange therefor may be made to a person other than the person in whose name the Certificate so surrendered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer, and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. No interest shall be paid or shall accrue on the cash payable upon surrender of any Certificate.

     (c) No Further Ownership Rights in Company Common Stock. All cash paid upon the surrender of a Certificate in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock formerly represented by such Certificate. At the close of business on the day on which the Effective Time occurs the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for transfer or any other reason, they shall be canceled and exchanged as provided in this Article II.

     (d) No Liability. None of Parent, Sub, the Company or the Paying Agent shall be liable to any person in respect of any cash delivered to a public official in accordance with any applicable abandoned property, escheat or similar Law. If any Certificates shall not have been surrendered prior to two years after the Effective Time (or immediately prior to such earlier date on which any Merger Consideration would otherwise escheat to or became the property of any Governmental Entity), any such Merger Consideration in respect thereof shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto.

     (e) Lost Certificates. If any Certificate shall have been lost, stolen, defaced or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen, defaced or destroyed and, if required by the Surviving Corporation, the receipt, at the option of such person, of an indemnity or bond (provided that such indemnity or bond is reasonably satisfactory to the Surviving Corporation) against any claim that may be made against it with respect to such Certificate, the Paying Agent shall pay in respect of such lost, stolen, defaced or destroyed Certificate the Merger Consideration.

     (f) Withholding Rights. Parent, the Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as Parent, the Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal

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Revenue Code of 1986, as amended (the “Code”), or any provision of state, local or foreign tax Law. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Parent, the Surviving Corporation or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by Parent, the Surviving Corporation or the Paying Agent.

ARTICLE III

Representations and Warranties

          SECTION 3.01. Representations and Warranties of the Company. Except as set forth in the letter (with specific reference to the section of this Agreement to which the information stated in such disclosure relates, provided that disclosure in any section of such letter shall be deemed to be disclosed with respect to any other Section of this Agreement to the extent that it is readily apparent from the face of such disclosure that such disclosure is applicable to such other Section) delivered by the Company to Parent prior to the execution of this Agreement (the “Company Disclosure Letter”), the Company represents and warrants to Parent and Sub as follows:

          (a) Organization, Standing and Corporate Power. Each of the Company and its subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization (except, in the case of good standing, for entities organized under the Laws of any jurisdiction that does not recognize such concept), (ii) has all requisite corporate, company or partnership power and authority to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing in each jurisdiction (except, in the case of good standing, any jurisdiction that does not recognize such concept) in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, other than where the failure to be so organized, existing, qualified or licensed or in good standing (except in the case of clause (i) above with respect to the Company), individually or in the aggregate, is not reasonably likely to have a material adverse effect on the Company. The Company has made available to Parent complete and correct copies of its Amended and Restated Certificate of Incorporation and Bylaws and the certificate of incorporation and bylaws (or similar organizational documents) of each of its subsidiaries, in each case as amended to the date of this Agreement. The Company has made available to Parent and its representatives true and complete copies of the minutes of all meetings of the stockholders, the Board of Directors and each committee of the Board of Directors of the Company and each of its subsidiaries held since January 1, 2001.

          (b) Subsidiaries. Section 3.01(b) of the Company Disclosure Letter lists each subsidiary of the Company. All the outstanding shares of capital stock of, or other

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equity or voting interests in, each such subsidiary are owned by the Company, by another wholly owned subsidiary of the Company or by the Company and another wholly owned subsidiary of the Company, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, “Liens”), except for transfer restrictions imposed by applicable securities laws, and are duly authorized, validly issued, fully paid and nonassessable. Except for the capital stock of, or other equity or voting interests in, its subsidiaries, the Company does not own, directly or indirectly, any capital stock of, or other equity or voting interests in, any corporation, partnership, joint venture, association, limited liability company or other entity.

          (c) Capital Structure. (i) The authorized capital stock of the Company consists of 200,000,000 shares of Company Common Stock and 10,000,000 shares of Preferred Stock, par value $0.001 per share, of the Company (the “Company Preferred Stock”). At the close of business on January 19, 2005, (A) 64,602,250 shares of Company Common Stock (excluding treasury shares) were issued and outstanding, (B) no shares of Company Preferred Stock were issued as outstanding, (C) no shares of Company Common Stock were held by the Company as treasury shares, (D) options to acquire 17,386,811 shares of Company Common Stock from the Company (the “Stock Options”) pursuant to the 1998 Stock Option Plan and the 2001 Nonstatutory Stock Plan (such plans, collectively, the “Company Stock Plans”) were issued and outstanding, (E) 2,775,245 shares of Company Common Stock were reserved and available for issuance pursuant to the 2000 Employee Stock Purchase Plan (the “ESPP”), (F) no shares of Company Common Stock were subject to a right of repurchase by, or subject to forfeiture back to, the Company (“Restricted Stock”) and (G) no rights to acquire shares of Restricted Stock from the Company, pursuant to the Company Stock Plans were issued and outstanding. No shares of Company Common Stock are owned by any subsidiary of the Company. The Company has delivered to Parent (x) a true and complete list, as of the close of business on January 24, 2005, of all outstanding Stock Options, the number of shares subject to each such Stock Option, the grant dates and exercise prices and vesting schedule of each such Stock Option and the names of the holders thereof and (y) true and complete copies of the forms of Contracts evidencing the Stock Options. All outstanding Stock Options are evidenced by Contracts substantially in one of such forms, and no outstanding Stock Option contains terms that are materially inconsistent with, or in addition to, the terms contained in such forms. As of the close of business on January 19, 2005 there were outstanding Stock Options to purchase 14,335,265 shares of Company Common Stock with exercise prices on a per share basis lower than the Merger Consideration. As of the close of business on January 19, 2005, there were outstanding rights to purchase no more than 446,634 shares of Company Common Stock under the ESPP (assuming the current offering period under the ESPP ended on such date and based on the fair market value of the Company Common Stock on such date). For the most recent bi-weekly payroll period ending prior to January 19, 2005, the aggregate amount of accumulated payroll deductions pursuant to the ESPP was $626,404.48 and the aggregate amount actually deducted for that payroll period was $48,407.14.

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     (iv) All Stock Options may, by their terms, be adjusted or converted in accordance with, and to the extent required by, Section 5.04(a).

     (v) As of the date of this Agreement, the outstanding amount of (i) (a) indebtedness for borrowed money, (b) amounts owing as deferred purchase price for the purchase of any property, (c) indebtedness evidenced by any bond, debenture, note, mortgage, indenture or other debt instrument or debt security, and (d) guarantees with respect to any indebtedness or obligation of a type described in clauses (a) through (c) above of any other person (other than, in the case of clauses (a) through (d), accounts payable to trade creditors and accrued expenses arising in the ordinary course of business) (collectively, “indebtedness”) and (ii) accounts payable to trade creditors not arising in the ordinary course of business, in the case of clauses (i) and (ii), of the Company and its subsidiaries is as set forth on Section 3.01(c)(v) of the Company Disclosure Letter.

          (d) Authority; Noncontravention. The Company has the requisite corporate power and authority to execute and deliver this Agreement, to consummate the transactions contemplated by this Agreement, subject, in the case of the Merger, to obtaining the Stockholder Approval and to comply with the provisions of this Agreement. The execution and delivery of this Agreement by the Company, the consummation by the Company of the transactions contemplated by this Agreement and the Stockholders Agreement and the compliance by the Company with the provisions of this Agreement have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement and the Stockholders Agreement, subject, in the case of the Merger, to obtaining the Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due execution of this Agreement by Parent and Sub, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or

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other similar Laws relating to the enforcement of creditors’ rights generally and by general principles of equity. The Board of Directors of the Company, at a meeting duly called and held at which all directors of the Company were present duly and unanimously adopted resolutions (i) approving and declaring advisable the Merger, this Agreement and the transactions contemplated by this Agreement, (ii) approving the Stockholders Agreement and the transactions contemplated thereby, (iii) declaring that it is in the best interests of the Company’s stockholders that the Company enter into this Agreement and consummate the Merger on the terms and subject to the conditions set forth in this Agreement, (iv) directing that this Agreement be submitted to a vote for adoption at a meeting of the Company’s stockholders to be held as set forth in Section 5.01(b) and (v) recommending that the Company’s stockholders adopt this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement and compliance by the Company with the provisions of this Agreement do not and will not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to a loss of a material benefit under, or result in the creation of any Lien in or upon any of the properties or assets of the Company or any of its subsidiaries under, or give rise to any increased, additional, accelerated or guaranteed rights or entitlements under (including any right of a holder of a security of the Company or any of its subsidiaries to require the Company or any of its subsidiaries to acquire such security), any provision of (i) the Amended and Restated Certificate of Incorporation or the Bylaws, of the Company or the certificate of incorporation or bylaws (or similar organizational documents) of any of its subsidiaries, (ii) any loan or credit agreement, bond, debenture, note, mortgage, indenture, guarantee, lease or other contract, commitment, agreement, instrument, legally binding arrangement, legally binding understanding, obligation or legally binding undertaking, whether oral or written (each, a “Contract”) or any Permit to which the Company or any of its subsidiaries is a party or bound by or to which any of their respective properties or assets are bound by or subject or (iii) subject to the governmental filings and other matters referred to in the following sentence, any (A) law statute, ordinance, rule or regulation (each, a “Law”) or (B) judgment, order or decree (“Judgment”), in each case, applicable to the Company or any of its subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, breaches, defaults, rights, losses, Liens or entitlements that individually or in the aggregate are not reasonably likely to (x) have a material adverse effect on the Company, (y) impair in any material respect the ability of the Company to perform its obligations under this Agreement or (z) prevent or materially impede, or (to the knowledge of the Company as of the date hereof) materially delay, the consummation of any of the transactions contemplated by this Agreement. No consent, approval, order or authorization of, registration, declaration or filing with, or notice to, any Federal, state or local government or any court, administrative agency or commission or other governmental or regulatory authority or agency, domestic or foreign (a “Governmental Entity”), is required by or with respect to the Company or any of its subsidiaries in connection with the execution and delivery of this Agreement by the Company, the

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consummation by the Company of the transactions contemplated by this Agreement or the compliance by the Company with the provisions of this Agreement, except for (1) the filing of a premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and the filings and receipt, termination or expiration, as applicable, of such other approvals or waiting periods required under any other applicable competition, merger control, antitrust or similar law or regulation, (2) the filing with the Securities and Exchange Commission (the “SEC”) of a proxy statement relating to the adoption of this Agreement by the Company’s stockholders (as amended or supplemented from time to time, the “Proxy Statement”) and such reports or other furnished or filed materials under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”), as may be required in connection with this Agreement, the Stockholders Agreement, the Merger and the other transactions contemplated hereby and thereby, (3) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company or any of its subsidiaries is qualified to do business, (4) any filings required under the rules and regulations of The Nasdaq Stock Market Inc. and (5) such other consents, approvals, orders, authorizations, registrations, declarations, filings and notices the failure of which to be obtained or made individually or in the aggregate are not reasonably likely to (x) have a material adverse effect on the Company, (y) impair in any material respect the ability of the Company to perform its obligations under this Agreement or (z) prevent or materially impede, or (to the knowledge of the Company as of the date hereof) materially delay, the consummation of any of the transactions contemplated by this Agreement.

          (e) SEC Documents. (i) The Company has filed with the SEC, and has heretofore made available to Parent, true and complete copies of, all reports, schedules, forms, statements and other documents required to be filed with the SEC by the Company since January 1, 2001 (together with all information incorporated therein by reference, the “SEC Documents”). No subsidiary of the Company is required to file any report, schedule, form, statement or other document with the SEC. As of their respective dates, each of the SEC Documents complied in all material respects with the requirements of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), the Exchange Act and the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder (“SOX”), in each case, applicable to such SEC Documents as of their respective dates, and none of the SEC Documents at the time they were filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of the date hereof, except to the extent that information contained in any SEC Document filed and publicly available prior to the date of this Agreement (a “Filed SEC Document”) has been revised or superseded by a later filed SEC Document, none of the Filed SEC Documents contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the

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statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including the related notes) of the Company included in the SEC Documents comply as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) (except, in the case of unaudited statements, as permitted by Form 10-Q) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments, none of which are expected to be material). Except (x) as set forth or fully reserved against in the financial statements as of and for the period ended September 30, 2004 included in the Filed SEC Documents (the “Baseline Financials”), (y) incurred since the date of the Baseline Financials and prior to the date hereof in the ordinary course of business consistent with past practice or in connection with the transactions contemplated by this Agreement or (z) incurred after the date hereof in accordance with the terms of this Agreement, the Company and its subsidiaries have no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that individually or in the aggregate are, or are reasonably likely to become, material to the Company and its subsidiaries, taken as a whole.

     (ii) Each of the Company and its senior financial officers has consulted with the Company’s independent auditors and with the Company’s outside counsel with respect to, and (to the extent applicable to the Company) is familiar in all material respects with, the requirements of SOX as in existence on the date hereof. The Company is, and has been, in compliance in all material respects with the provisions of SOX applicable to it.

     (iii) Each of the principal executive officer of the Company and the principal financial officer of the Company has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of SOX with respect to the SEC Documents, and the statements contained in such certifications are accurate in all material respects as of the date hereof. For purposes of this Agreement, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in SOX. Neither the Company nor any of its subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors or executive officers within the meaning of Section 402 of SOX.

     (iv) Neither the Company nor any of its subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract relating to any transaction or relationship between or among the Company and any of its

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     (v) The books, records and accounts of the Company, all of which have been made available to Parent upon Parent’s request, are complete and correct in all material respects.

     (vi) The Company’s system of internal controls over financial reporting are reasonably sufficient in all material respects to provide reasonable assurance (A) that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, (B) that receipts and expenditures are executed only in accordance with the authorization of management, and (C) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the Company’s assets that could materially affect the Company’s financial statements.

     (vii) The Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are reasonably designed to ensure that (i) all information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and (ii) all such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and principal financial officer of the Company required under the Exchange Act with respect to such reports.

     (viii) Since the date of this Agreement, neither the chief executive officer nor the chief financial officer of the Company has become aware of any fact or circumstance that is reasonably likely to result in a substantial change to the Company’s internal controls over financial reporting.

     (ix) Since the date of the most recent Filed SEC Report, neither the chief executive officer nor the chief financial officer of the Company has become aware of any fact, circumstance or change that is reasonably likely to result in a “material weakness” in the Company’s internal controls over financial reporting.

     (x) The audit committee of the Board of Directors of the Company includes an Audit Committee Financial Expert, as defined by Item 401(h)(2) of Regulation S K.

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     (xi) The Company has adopted a code of ethics, as defined by Item 406(b) of Regulation S-K, for senior financial officers, applicable to its principal financial officer, comptroller or principal accounting officer, or persons performing similar functions. The Company has promptly disclosed, by filing a Form 8-K, any change in or waiver of the Company’s code of ethics, as required by Section 406(b) of SOX. To the knowledge of the Company, there have been no violations of provisions of the Company’s code of ethics.

          (f) Information Supplied. None of the information included or incorporated by reference in the Proxy Statement will, at the date it is first mailed to the Company’s stockholders or at the time of the Stockholders Meeting or at the time of any amendment or supplement thereof, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Sub for inclusion or incorporation by reference in the Proxy Statement. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act.

          (g) Absence of Certain Changes or Events. (i) From December 31, 2003, to the date of this Agreement, the Company and its subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice. Since December 31, 2003, there has not been any material adverse effect on the Company or any Effect that is reasonably likely to result in a material adverse effect on the Company

(ii) From the date of the Baseline Financials to the date of this Agreement, there has not been (A) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Company’s or any of its subsidiaries’ capital stock or other equity or voting interests, except for dividends by a direct or indirect wholly owned subsidiary of the Company to its parent, (B) any split, combination or reclassification of any of the Company’s or any of its subsidiaries’ capital stock or other equity or voting interests or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of, or other equity or voting interests in, the Company or any of its subsidiaries, (C) (v) (I) any granting by the Company or any of its subsidiaries to any current or former director, officer, employee, independent contractor or consultant of the Company or any of its subsidiaries (collectively, “Company Personnel”) of any bonus opportunity or any increase in any type of compensation or benefits, except for grants of bonus opportunities and increases in base compensation, in each case, in the ordinary course of business consistent with past practice, or (II) any payment or accrual by the Company or any of its subsidiaries to any Company Personnel of any bonus, except for bonuses paid or accrued in the ordinary course of business

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     (iii) Since the date of the Baseline Financials, there has not been any damage, destruction or loss, whether or not covered by insurance, that individually or in the aggregate is reasonably likely to have a material adverse effect on the Company.

          (h) Litigation. There is no suit, claim, action or proceeding pending or, to the knowledge of the Company, threatened in writing, or to the knowledge of the Company, any investigation pending or threatened in writing, against or affecting the Company or any of its subsidiaries that individually or in the aggregate is reasonably likely to have a material adverse effect on the Company, nor is there any applicable Judgment of any Governmental Entity or arbitrator outstanding against, or, to the knowledge of the Company, investigation, proceeding, notice of violation or complaint by any Governmental Entity involving the Company or any of its subsidiaries that individually or in the aggregate is reasonably likely to have a material adverse effect on the Company.

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          (i) Contracts. (i) Except for Contracts filed as exhibits to the Filed SEC Documents, none of the Company or any of its subsidiaries is a party to or bound by or otherwise has rights or benefits under, and none of their respective properties or assets are bound by or subject to, any Contracts that are required to be filed as an exhibit to any Filed SEC Document under the Exchange Act. Except for Contracts (including any Contract which is substantially similar to any form of Contract so filed) filed in unredacted form as exhibits to the Filed SEC Documents, as of the date of this Agreement, none of the Company or any of its subsidiaries is a party to or bound by or otherwise has rights or benefits under, and none of their respective properties or assets are bound by or subject to, any:

     (A) Contract pursuant to which the Company or any of its subsidiaries has agreed not to compete with any person or to engage in any activity or business, or pursuant to which any benefit is required to be given or lost as a result of so competing or engaging;

     (B) Contract providing for “exclusivity” or any similar requirement, the terms of which provide that after the Closing Parent or any of its subsidiaries (including the Company and its subsidiaries) would be restricted with respect to the development, manufacture, marketing or distribution of their respective products or services;

     (C) material Contract with (I) any affiliate of the Company or any of its subsidiaries, (II) any Company Personnel, (III) any union or other labor organization or (IV) any affiliate of any such person (other than, in each case (w) Contracts on arm’s length terms with companies whose common stock is publicly traded, (x) offer letters, employment agreements or consulting agreements providing solely for “at will” employment with no right to severance benefits except as required by applicable Law, (y) invention assignment and confidentiality agreements relating to the assignment of inventions to the Company or any of its subsidiaries not involving the payment of money and (z) Benefit Plans and Benefit Agreements referred to in Section 3.01(m));

     (D) license or franchise granted by the Company or any of its subsidiaries pursuant to which the Company or any such subsidiary has agreed to refrain from granting license or franchise rights to any other person;

     (E) Contract under which the Company or any of its subsidiaries has (i) incurred any indebtedness that is currently owing or (ii) given any guarantee in respect of indebtedness, other than in the case of clause (i) or (ii), indebtedness that constitutes a capital lease obligation of the Company or any of its subsidiaries entered into in the ordinary course of business consistent with past practice;

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     (F) Contract creating or granting a Lien (including Liens upon properties acquired under conditional sales, capital leases or other title retention or security devices), other than Liens created or granted in the ordinary course of business consistent with past practice which are not material to the Company and its subsidiaries or their businesses;

     (G) material Contract (other than any Contract with Parent or any of its subsidiaries) containing any provisions (x) dealing with a “change of control” or similar event with respect to the Company or any of its subsidiaries, (y) requiring consent, approval or waiver of, or notice to, a Governmental Entity or other third party in the event of or with respect to the transactions contemplated by this Agreement or the Stockholders Agreement or (z) having the effect of providing that the consummation of any of the transactions contemplated by this Agreement or the Stockholders Agreement or the execution, delivery or effectiveness of this Agreement or the Stockholders Agreement will conflict with, result in a violation or breach of, or constitute a default (with or without notice or lapse of time or both) under, such Contract or give rise under such Contract to any right of, or result in, a termination, right of first refusal, amendment, revocation, cancellation or acceleration, or a loss of a material benefit or the creation of any Lien upon any of the properties or assets at the Company, Parent or any of their respective subsidiaries, or to any increased, guaranteed, accelerated or additional rights or entitlements of any person;

     (H) material Contract granting a third party any license to Intellectual Property that is not limited to the internal use of such third party, other than in the ordinary course of business consistent with past practice;

     (I) material Contract pursuant to which the Company or any of its subsidiaries has been granted any license to Intellectual Property;

     (J) material Contract providing for payments of royalties or other license fees to third parties;

     (K) Contract granting the other party to such Contract or a third party “most favored nation” status that, following the Merger, would in any way apply to Parent or any of its subsidiaries;

     (L) Contract that restricts the ability of the Company or any of its subsidiaries to (i) conduct any part of its operations outside the United States or (ii) outsource any of its operations to a third party (any such Contract described in clause (i) or (ii), an “Outsourcing Agreement”);

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     (M) Contract containing any “non-solicitation”, “no-hire” or similar provision that restricts the Company or any of its subsidiaries;

     (N) Contract for any joint venture or general or limited partnership agreement;

     (O) material Contract for any joint development, or marketing arrangements or resale or distribution arrangement relating to any product or service;

     (P) Contract with any Governmental Entity;

     (Q) Contract entered into in the last two years in connection with the settlement or other resolution of any suit, claim, action, investigation or proceeding, that (1) provides or provided for payments by the Company to any third party in excess of $50,000, (2) provides or provided for the compromise or waiver by the Company of its rights to more than $250,000 of any obligations owing to the Company by any third party and (3) provides for ongoing obligations on the part of the Company or any third party other than terms providing for confidentiality or non-disparagement;

     (R) Contract between the Company or any of its subsidiaries and any of the ten largest customers of the Company and its subsidiaries (determined on the basis of revenues received by the Company or any of its subsidiaries in the four consecutive fiscal quarter period ended September 30, 2004 (the “Major Customers,” and each such Contract, a “Major Customer Contract”);

     (S) Contract between the Company or any of its subsidiaries and any of the ten largest suppliers of goods or services to the Company and its subsidiaries (determined on the basis of amounts paid by the Company or any of its subsidiaries in the four consecutive fiscal quarter period ended September 30, 2004 (the “Major Suppliers,” and each such Contract, a “Major Supplier Contract”); and

     (T) Contract which (I) has aggregate future sums due from the Company or any of its subsidiaries in excess of $100,000 and is not terminable by the Company or any such subsidiary (x) for a cost of less than $100,000 and (y) on 90 (or fewer) days’ notice or (II) is entered into prior to the date of this Agreement and is material to the business of the Company and its subsidiaries, taken as a whole, as presently conducted or as proposed to be conducted and is, in each case, not otherwise listed in Sections 3.01(i)(i)(A) through (S) or (T)(I) of the Company Disclosure Letter.

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Each Contract of the Company or any of its subsidiaries is in full force and effect (except for those Contracts that have expired in accordance with their terms) and is a legal, valid and binding agreement of the Company or its subsidiaries, as the case may be, and, to the knowledge of the Company, of each other party thereto, enforceable against the Company or such subsidiary, as the case may be, and, to the knowledge of the Company, against the other party or parties thereto, in each case, in accordance with its terms, except for such failures to be in full force and effect, to be legal, valid and binding or to be enforceable that individually or in the aggregate are not reasonably likely to have a material adverse effect on the Company and, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to the enforcement of creditors’ rights generally and by general principles of equity. Each of the Company and its subsidiaries has performed or is performing all material obligations required to be performed by it under its Contracts and is not (with or without notice or lapse of time or both) in breach or default in any material respect and has not waived or failed to enforce any material rights thereunder, and, to the knowledge of the Company, no other party to any of its Contracts is (with or without notice or lapse of time or both) in breach or default in any material respect thereunder and, to the knowledge of the Company, there has occurred no event giving (with or without notice or lapse of time or both) to others any right of termination, amendment or cancellation of any such Contract except, in each case, for such breaches, defaults, waivers or failures that individually or in the aggregate are not reasonably likely to have a material adverse effect on the Company. To the knowledge of the Company, there are no circumstances that are reasonably likely to occur that could reasonably be expected to adversely affect the ability of the Company or any of its subsidiaries to perform its obligations under any material Contract except for such circumstances that individually or in the aggregate are not reasonably likely to have a material adverse effect on the Company.

     (ii) The Company has made available to Parent true and complete copies of all material Contracts of the Company and any of its subsidiaries, including copies of any (A) Outsourcing Agreements, (B) Major Customer Contracts and (C) Major Supplier Contracts. As of the date hereof, the Company has disclosed to Parent the material terms and status of all negotiations in respect of any proposed material Contracts with any Major Customer or Major Supplier and none of the Major Customers or Major Suppliers has terminated or failed to renew, or is currently negotiating any material amendment to, any of the Major Customer Contracts or Major Supplier Contracts.

     (j) Compliance with Laws. Each of the Company and its subsidiaries is, and since January 1, 2001 has been, in compliance in all material respects with all applicable material Laws and Judgments of any Governmental Entity applicable to their businesses or operations. None of the Company or any of its subsidiaries has received, since January 1, 2001 and through the date hereof, a notice or other written communication alleging a possible material violation by the Company or any of its

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subsidiaries of any applicable material Law or Judgment of any Governmental Entity applicable to its businesses or operations. The Company and its subsidiaries have in effect all Federal, state and local, domestic and foreign, governmental consents, approvals, orders, authorizations, certificates, filings, notices, permits, concessions, franchises, licenses and rights (collectively “Permits”) necessary for them to own, lease or operate their material properties and assets and to carry on their businesses as now conducted, except where the failure to have such Permits would not constitute a material violation of a material Law applicable to their businesses or operations, and there has occurred no material violation of, or default (with or without notice or lapse of time or both) under, or event giving to any other person any right of termination, amendment or cancellation of (with or without notice or lapse of time or both), any such material Permit.

          (k) Absence of Changes in Benefit Plans; Labor Relations. Except as consented to in writing by Parent, disclosed in the Filed SEC Documents or contemplated by Section 4.01(a)(xii) or (xvi), since the date of the Baseline Financials, none of the Company or any of its subsidiaries has terminated, adopted, amended or agreed to amend in any material respect any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock appreciation, restricted stock, stock repurchase rights, stock option (including the Company Stock Plans), phantom stock, performance, retirement, welfare, vacation, severance, disability, death benefit, hospitalization, medical or other material plan, policy or Contract (whether or not legally binding or subject to the Laws of the United States) sponsored, maintained, contributed to or required to maintained or contributed to by the Company, any of its subsidiaries or any other person that, together with the Company, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code or any other applicable Law (each, a “Commonly Controlled Entity”), in each case, providing benefits to any Company Personnel (collectively, “Benefit Plans”) or made any change in the manner in which contributions to any Pension Plan are made or the basis on which such contributions are determined. There are no collective bargaining or other labor union Contracts to which the Company or any of its subsidiaries is a party or by which it is bound. Since January 1, 2001, neither the Company nor any of its subsidiaries has encountered any labor union organizing activity, or had any actual or threatened employee strikes, organized work stoppages, organized slowdowns or lockouts. None of the employees of the Company or any of its subsidiaries is represented by any union with respect to his or her employment by the Company or such subsidiary. Each of the Company and its subsidiaries is, and since January 1, 2001 has been, in compliance in all material respects with all applicable material Laws relating to employment and employment practices, occupational safety and health standards, terms and conditions of employment and wages and hours, and is not, and since January 1, 2001 has not, engaged in any material unfair labor practice. As of the date hereof, the Company has not received written notice of any unfair labor practice charge or complaint against the Company or any of its subsidiaries which is pending and, to the knowledge of the Company, there is no unfair labor practice charge or complaint against the Company

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or any of its subsidiaries threatened before the National Labor Relations Board or any comparable Governmental Entity.

          (l) Environmental Matters. Except with respect to instances that individually or in the aggregate are not reasonably likely to have a material adverse effect on the Company: (i) the Company and each of its subsidiaries are, and since January 1, 2001 have been, in compliance with all applicable Environmental Laws; (ii) the Company and each of its subsidiaries have, and are in compliance with, all Permits required under Environmental Laws for the operation of their respective businesses and all such Permits are valid and in good standing; (iii) there are no pending, or to the knowledge of the Company, threatened Environmental Claims against the Company or any of its subsidiaries; (iv) neither the Company nor any of its subsidiaries have received notice that the Company or any of its subsidiaries is in non-compliance with any Environmental Law or subject to potential liability under any Environmental Law, including potential liability for the costs of investigating or remediating contaminated property pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, or analogous state Law; (v) to the knowledge of the Company, there have been no Releases or threatened Releases of Hazardous Substances on, at, under or about any properties currently or formerly owned, leased or operated by the Company or any of its subsidiaries, or any of their respective predecessors, and neither the Company nor any of its subsidiaries has Released, disposed of or arranged for the disposal of Hazardous Substances at any on-site or off-site location; (vi) there are no facts, circumstances or conditions that are reasonably likely to give rise to any liability of, or form the basis of an Environmental Claim against, the Company or any of its subsidiaries in connection with any Environmental Law; and (vii) (A) neither the Company nor any of its subsidiaries has retained or assumed, either contractually or by operation of Law, any liabilities or obligations that are reasonably likely to form the basis of any Environmental Claim against the Company or any of its subsidiaries, and (B) to the knowledge of the Company, no Environmental Claims are pending against any person whose liabilities for such Environmental Claims the Company or any of its subsidiaries has, or may have, retained or assumed, either contractually or by operation of Law. For purposes of this Agreement, the term “Environmental Claim” shall mean any and all administrative, regulatory or judicial actions, suits, orders, demands, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by or from any person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from (x) the presence or Release of, or exposure to, any Hazardous Materials at any location or (y) the failure to comply with any Environmental Law. For purposes of this Agreement, the term “Environmental Laws” shall mean any applicable Federal, state or local, domestic or foreign, statutes, laws, regulations, ordinances, rules, codes, enforceable requirements, agreements, orders, decrees, judgments, Permits or injunctions issued, promulgated or entered into by any

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Governmental Entity relating to protection of the environment, natural resources or human health and safety, or to the use, management, disposal, Release or threatened Release of Hazardous Substances. For purposes of this Agreement, the term “Hazardous Substances” shall mean any explosive, radioactive, toxic or hazardous substances or materials (including asbestos or asbestos-containing materials, polychlorinated biphenyls, petroleum and petroleum products, and any other substances or materials defined as, or included in the definition of, “hazardous substances”, “hazardous wastes”, “hazardous materials” or “toxic substances”) but excluding office and janitorial supplies properly and safely maintained. For purposes of this Agreement, the term “Release” shall mean any release, spilling, leaking, pumping, pouring, discharging, emitting, emptying, leaching, injecting, dumping, disposing or migrating into or through the environment.

           (m) ERISA; Benefit Plans and Benefit Agreements. (i) Section 3.01(m)(i) of the Company Disclosure Letter contains a list of all “employee welfare benefit plans” (as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended “ERISA”)), all “employee pension benefit plans” (as defined in Section 3(2) of ERISA) (each, a “Pension Plan”) and all other Benefit Plans and all material Benefit Agreements that are in effect, are or will provide any benefit to any person, or with respect to which the Company or any Commonly Controlled Entity has or could have any liability or obligation, as of the date of this Agreement. The Company has delivered or made available to Parent true, complete and correct copies of (A) each Benefit Plan and each material Benefit Agreement (or, in the case of any unwritten Benefit Plans or Benefit Agreements, descriptions thereof), (B) the two most recent annual reports on Form 5500 required to be filed with the Internal Revenue Service (the “IRS”) with respect to each Benefit Plan, (C) the most recent summary plan description for each Benefit Plan for which such summary plan description is required and (D) each trust, insurance or group annuity Contract relating to each Benefit Plan. Each Benefit Plan has been administered in accordance with its terms in all material respects. The Company and its subsidiaries and all the Benefit Plans are in compliance with all applicable provisions of ERISA, the Code and all other applicable Laws in all material respects.

     (ii) All Pension Plans intended to be tax qualified are so qualified and have been the subject of determination letters (or opinion letters valid as to the adopting employer) from the IRS or other Governmental Entity with respect to all tax law changes prior to the Economic Growth and Tax Relief Reconciliation Act of 2001 to the effect that such Pension Plans are qualified and exempt from United States Federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such determination or opinion letter has been revoked (or has revocation been threatened) and no event has occurred since the date of the most recent determination or opinion letter or application therefor relating to any such Pension Plan that would be reasonably likely to adversely affect the qualification of such Pension Plan or increase the costs relating thereto or require security under Section 307 of ERISA. All employee benefit plans, and policies required to have

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been approved by any non-United States Governmental Entity have been so approved or timely submitted for approval, no such approval has been revoked (nor has revocation been threatened) and no event has occurred since the date of the most recent approval or application therefor relating to any such plan or policy that would be reasonably likely to adversely affect any such approval relating thereto or materially increase the costs relating thereto. The Company has made available to Parent a true, complete and correct copy of the most recent determination or approval letter received with respect to each Pension Plan, as well as a true, complete and correct copy of each pending application for a determination or approval letter, if any.

          (iii) Neither the Company nor any Commonly Controlled Entity has sponsored, maintained, contributed to or been obligated to maintain or contribute to, or has any actual or contingent liability under, any Benefit Plan that is subject to Section 302 or Title IV of ERISA or is otherwise a defined benefit pension plan.

          (iv) There are no understandings, agreements or undertakings, written or oral, that would prevent any Benefit Plan or Benefit Agreement pursuant to which welfare benefits are provided (each, a “Welfare Plan”) (including any Welfare Plan covering retirees or other former employees) from being amended or terminated without material liability to the Company or any of its subsidiaries on or at any time after the Effective Time (except for accrued benefits payable thereunder or ordinary administrative expenses). No Welfare Plan provides benefits after termination of employment, except where the cost thereof is borne entirely by the former employee (or his eligible dependents or beneficiaries) or as required by Section 4980B(f) of the Code.

          (v) No Company Personnel will be entitled to any additional compensation or benefits or any acceleration of the time of payment or vesting of any compensation or benefits as a result of the transactions contemplated by this Agreement (alone or in conjunction with the termination of employment) or any benefits the value of which will be calculated on the basis of any of the transactions contemplated by this Agreement (alone or in conjunction with the termination of employment). Neither the execution and delivery of this Agreement, nor the consummation of any transaction contemplated by this Agreement (alone or in conjunction with the termination of employment) will (A) entitle any Company Personnel to severance, termination, “change of control” or similar compensation or benefits, (B) trigger any funding (through a grantor trust or otherwise) of any compensation or benefits, any accelerated vesting of any award (including Stock Options) or the forgiveness of any indebtedness owed by any Company Personnel to the Company or any of its affiliates or (C) result in any violation or breach of, or a default (with or without notice or lapse of time or both) under, any Benefit Plan or Benefit Agreement.

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          (vi) The deduction of any amount payable pursuant to the terms of the Benefit Plans or Benefit Agreements will not be subject to disallowance under Section 162(m) of the Code.

          (vii) Neither the Company nor any of its subsidiaries has received notice of any, and, to the knowledge of the Company, there are no, pending investigations by any Governmental Entity with respect to, or pending termination proceedings or other material claims, suits or proceedings (except claims for benefits payable in the normal operation of the Benefit Plans) against or involving or asserting any rights or claims to benefits under, any Benefit Plan or Benefit Agreement.

          (viii) All contributions, premiums and benefit payments required to have been made under or in connection with the Benefit Plans or Benefit Agreements have been timely made in all material respects. Neither the Company nor any of its subsidiaries has incurred, or is reasonably likely to incur, any unfunded liabilities in relation to any Benefit Plan or Benefit Agreement. No Pension Plan has an “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived.

          (ix) With respect to each Benefit Plan, (A) there has not occurred any prohibited transaction in which the Company, any of its subsidiaries or any of their respective employees has engaged that could subject the Company, any of its subsidiaries or any of their respective employees, or, to the knowledge of the Company, a trustee, administrator or other fiduciary of any trust created under such Benefit Plan, to any material tax or penalty on prohibited transactions imposed by Section 4975 of the Code or any material sanctions imposed under Title I of ERISA or any other applicable Law and (B) none of the Company, any of its subsidiaries, or, to the knowledge of the Company, any trustee, administrator or other fiduciary of such Benefit Plan nor any agent of any of the foregoing has engaged in any transaction or acted in a manner that could, or failed to act so as to, subject the Company, any of its subsidiaries or, to the knowledge of the Company, any trustee, administrator or other fiduciary to any material liability for breach of fiduciary duty under ERISA or any other applicable Law.

          (x) The Company and its subsidiaries do not have any material liabilities or obligations, including under or on account of a Benefit Plan or Benefit Agreement, arising out of the hiring of persons to provide services to the Company or any of its subsidiaries and treating such persons as consultants or independent contractors and not as employees of the Company or any of its subsidiaries.

          (xi) Other than the Company Personnel set forth on Section 3.01(m)(xi) of the Company Disclosure Letter, no Company Personnel (i) have entered into any employment agreements or arrangements with the Company or any of its affiliates that differs in any material respect from the form offer letter that is used by the Company or its affiliates in the country in which such Company Personnel is

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employed (which forms have been provided to Parent prior to the date hereof) or (ii) are entitled to receive any (A) severance, termination, “change of control” or similar compensation or benefits, bonus payments or additional compensation or benefits (including any indemnity or tax gross-up) under any Benefit Plan, Benefit Agreement or otherwise or (B) other payment or benefit, in the case of clause (A) or (B), that is related to, or contingent upon, the consummation of the transactions contemplated by this Agreement, including, without limitation, the accelerated vesting of Stock Options or the forgiveness of indebtedness owed by such Company Personnel to the Company or any of its affiliates.

             (n) Taxes. (i) Each of the Company and its subsidiaries and each Company Affiliated Group (as defined below) has timely filed all Federal, state and local, domestic and foreign, income and franchise tax returns and reports and all other material tax returns and reports required to be filed by it and all such returns and reports are complete and correct, except for such failures to file or to be complete and correct that individually or in the aggregate are not reasonably likely to result in a material liability for the Company. Each of the Company and its subsidiaries and each Company Affiliated Group has timely paid all taxes due with respect to the taxable periods covered by such tax returns and reports and all other material taxes, and the Baseline Financials reflect an adequate reserve for all taxes payable by the Company and its subsidiaries for all taxable periods and portions thereof through the date of such financial statements, except for failure to pay, or reserve for, such taxes that individually or in the aggregate is not reasonably likely to result in a material liability for the Company and its subsidiaries.

          (ii) No Federal, state or local, domestic or foreign, income or franchise tax return or report or any other material tax return or report of the Company or any of its subsidiaries or any Company Affiliated Group is currently under audit or examination by any taxing authority, and no written or unwritten notice of such an audit or examination has been received by the Company or any of its subsidiaries. There is no deficiency, refund litigation, proposed adjustment or matter in controversy with respect to any taxes due and owing by the Company, any of its subsidiaries or any Company Affiliated Group (except for those arising after the date of this Agreement that individually or in the aggregate are not reasonably likely to result in a material liability for the Company). Each deficiency resulting from any completed audit or examination relating to taxes by any taxing authority has been timely paid. No issues relating to taxes were raised by the relevant taxing authority during any presently pending audit or examination, and no issues relating to taxes were raised by the relevant taxing authority in any completed audit or examination that could reasonably be expected to recur in a later taxable period, except for issues first raised after the date of this Agreement that individually or in the aggregate are not reasonably likely to result in a material liability for the Company. All assessments for taxes due and owing by the Company, any of its subsidiaries or any Company Affiliated Group with respect to completed and settled examinations or concluded litigation have been paid. As of the date of this

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Agreement, no Federal, state or local, domestic or foreign, tax return or report of the Company or any of its subsidiaries or any Company Affiliated Group has ever been under audit or examination by the IRS or other relevant taxing authority. The relevant statute of limitations is closed with respect to the United States Federal and foreign tax returns of the Company and its subsidiaries for all years through 1998.

          (iii) There is no currently effective agreement or other document extending, or having the effect of extending, the period of assessment or collection of any taxes and no power of attorney (other than powers of attorney authorizing employees of the Company to act on behalf of the Company) with respect to any taxes has been executed or filed with any taxing authority.

          (iv) No Liens for taxes exist with respect to any assets or properties of the Company or any of its subsidiaries, except for statutory Liens for taxes not yet due and Liens for taxes that the Company or any of its subsidiaries is contesting in good faith through appropriate proceedings and for which adequate reserves have been established.

          (v) None of the Company or any of its subsidiaries is a party to or bound by any tax sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any taxing authority).

          (vi) None of the Company or any of its subsidiaries will be required to include in a taxable period ending after the Effective Time material taxable income attributable to income that accrued (for purposes of the financial statements of the Company included in the Filed SEC Documents) in a prior taxable period but was not recognized for tax purposes in any prior taxable period as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 481 of the Code or comparable provisions of state or local tax Law, domestic or foreign, or for any other reason.

          (vii) No amount or other entitlement that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any “disqualified individual” (as such term is defined in Treasury Regulation Section 1.280G-1) with respect to the Company would be characterized as an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of the Code) and no such disqualified individual is entitled to receive any tax gross-up or other additional payment from the Company, the Surviving Corporation or any other person in the event that the excise tax required by Section 4999(a) of the Code is imposed on such disqualified individual.

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          (viii) The Company and its subsidiaries have complied with all applicable Laws relating to the payment and withholding of taxes (including withholding of taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under any Federal, state or local laws, domestic or foreign) and have, within the time and the manner prescribed by Law, withheld from and paid over to the proper governmental authorities all amounts required to be so withheld and paid over under applicable laws, except for failure to withhold or pay over that individually or in the aggregate is not reasonably likely to result in a material liability for the Company.

          (ix) Neither the Company nor any of its subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (A) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement or (B) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the Merger.

          (x) Each of the Company and its subsidiaries has disclosed on its Federal income tax returns and reports all positions taken therein that could give rise to a substantial understatement of Federal income tax within the meaning of Section 6662 of the Code.

          (xi) All related party transactions involving the Company or any of its subsidiaries are at arm’s length in compliance with Section 482 of the Code and the Treasury Regulations promulgated thereunder. None of the Company or any of its subsidiaries is a party to any cost-sharing agreement or similar arrangement which is not a “qualified cost sharing arrangement” within the meaning of U.S. Treasury Regulation Section 1.482-7. All intercompany payments have been calculated in accordance with U.S. Treasury Regulation Section 1.482-7. Each of the Company and its subsidiaries has maintained all necessary documentation in connection with such related party transactions in accordance with Sections 482 and 6662 of the Code and the Treasury Regulations promulgated thereunder.

          (xii) No subsidiary of the Company is a “passive foreign investment company” within the meaning of Section 1297(a) of the Code and the Treasury Regulations promulgated thereunder.

          (xiii) Each of the Company and its subsidiaries has conducted all aspects of its business in accordance with the terms and conditions of all tax rulings and tax concessions that were provided by any relevant Governmental Entity.

          (xiv) The Company has never participated in any listed transaction, as defined in Treasury Regulation Section 1.6011-4(b)(2), required to be reported in a disclosure statement pursuant to Treasury Regulation Section 1.6011-4.

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          (xv) For purposes of this Agreement, “taxes” shall include all (A) Federal, state and local, domestic and foreign, income, franchise, property, sales, excise, employment, payroll, social security, value-added, ad valorem, transfer, withholding and other taxes, including taxes based on or measured by gross receipts, profits, sales, use or occupation, tariffs, levies, impositions, assessments or governmental charges of any nature whatsoever, including any interest penalties or additions with respect thereto, and any obligations under any Contracts with any other person with respect to such amounts, (B) liability for the payment of any amounts of the types described in clause (A) as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group and (C) liability for the payment of any amounts as a result of an express or implied obligation to indemnify any other person with respect to the payment of any amounts of the type described in clause (A) or (B). For purposes of this Agreement, “Company Affiliated Group” shall mean each affiliated, combined, consolidated or unitary group of which the Company or any of its subsidiaries is or has been a member.

               (o) Title to Properties. (i) The Company and each of its subsidiaries has good and marketable title to, or valid and enforceable leasehold interests in, all of its material properties and tangible assets, except for such properties and tangible assets as are no longer used or useful in the conduct of its businesses or as have been disposed of in the ordinary course of business and except for defects in title, easements, restrictive covenants, taxes that are not yet delinquent and similar encumbrances that individually or in the aggregate are not reasonably likely to have a material adverse effect on the Company. All such material tangible assets and properties, other than assets and properties in which the Company or any of its subsidiaries has a leasehold interest, are free and clear of all Liens, except for Permitted Liens and Liens that individually or in the aggregate are not reasonably likely to have a material adverse effect on the Company.

          (ii) Each of the Company and its subsidiaries is in compliance in all material respects with the terms of all material leases to which it is a party and under which it is in occupancy, and all such leases are in full force and effect, except for such instances of noncompliance or failures to be in full force and effect that individually or in the aggregate are not reasonably likely to have a material adverse effect on the Company. The Company and its subsidiaries enjoy peaceful and undisturbed possession under all such material leases, except for failures to do so that individually or in the aggregate are not reasonably likely to have a material adverse effect on the Company.

          (iii) Neither the Company nor any of its subsidiaries holds any fee or other ownership interest in any real property. Section 3.01(o)(iii) of the Company Disclosure Letter sets forth, as of the date hereof, a true and complete list of all material real property and interests in real property leased or subleased by the Company or any of its subsidiaries.

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               (p) Intellectual Property. (i) Section 3.01(p)(i) of the Company Disclosure Letter sets forth a true and complete list of all patents, patent applications, registered trademarks and applications therefor, registered tradenames, registered service marks, registered copyrights and applications therefor and material proprietary software programs owned by the Company or any of its subsidiaries as of the date of this Agreement.

          (ii) (A) The Company and each of its subsidiaries owns, or is licensed or otherwise has the right to use (in each case, free and clear of any Liens), (x) all Intellectual Property necessary for the conduct of its business as currently conducted and (y) all other Intellectual Property used in the conduct of its business as currently conducted, except in either case such failures to own, be licensed or have rights to use Intellectual Property that, individually or in the aggregate, are not reasonably likely to adversely affect the Company in any material respect.

          (B) All material issued patents, patent applications, registered trademarks, trademark applications, registered service marks and registered copyrights of the Company or any of its subsidiaries have been duly registered and/or filed, as applicable, with or issued by each applicable Governmental Entity in each jurisdiction in which the Company has sought to register such rights, all necessary affidavits of continuing use have been filed, and all necessary maintenance fees have been paid to continue all such rights in effect, except where the Company has made a reasonable business judgment not to continue to register or maintain the same.

          (C) None of the Company or any of its subsidiaries or any of its or their products or services has infringed upon or otherwise violated, or is infringing upon or otherwise violating, the Intellectual Property rights of any person, except for such infringements or violations that, individually or in the aggregate, are not reasonably likely to adversely affect the Company in any material respect.

          (D) There is no suit, claim, action or proceeding pending or, to the knowledge of the Company, threatened in writing or, to the knowledge of the Company, any investigation pending or threatened in writing, with respect to, and the Company has not been notified of, any possible infringement or other violation by the Company or any of its subsidiaries or any of its or their products or services of the Intellectual Property rights of any person, except for any such suits, claims, actions, proceedings and investigations with respect to, or notifications of, infringement that, individually or in the aggregate, are not reasonably likely to adversely affect the Company in any material respect.

          (E) To the knowledge of the Company, no person is infringing on or otherwise violating any Intellectual Property rights owned by or exclusively licensed to the Company or any of its subsidiaries, except for any such

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infringement or violation that, individually or in the aggregate, is not reasonably likely to adversely affect the Company in any material respect.

          (F) Each of the former or current members of management or key personnel of the Company or any of its subsidiaries, including all former and current employees, agents, consultants and independent contractors who have (in their capacity as a member of management, key personnel, employee, agent, consultant or independent contractor of the Company or any of its subsidiaries) contributed to or participated in the conception and development of material Intellectual Property owned or used by the Company or any of its subsidiaries, have assigned or otherwise transferred to the Company all ownership and other rights of any nature whatsoever (to the extent permitted by Law) of such person in such Intellectual Property and none of the former or current members of management or key personnel of the Company or any of its subsidiaries, including all former and current employees, agents, consultants and contractors who have contributed to or participated in the conception and development of material Intellectual Property owned or used by the Company or any of its subsidiaries, have a valid claim against the Company or any of its subsidiaries as to the ownership or use of such Intellectual Property, and no such claim has been asserted or, to the knowledge of the Company, threatened.

          (G) The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and the compliance with the provisions of this Agreement will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under, or give rise to any right, license or encumbrance relating to, any material Intellectual Property owned or used by the Company or any of its subsidiaries or with respect to which the Company or any of its subsidiaries now has or has had any agreement with any third party, or any right of termination, cancellation or acceleration of any material Intellectual Property right or obligation set forth in any agreement to which the Company or any of its subsidiaries is a party, or the loss or encumbrance of any material Intellectual Property or material benefit related thereto, or result in the creation of any Lien in or upon any material Intellectual Property or right, except with respect to those Contracts which by their terms or nature are not transferable to Parent in connection with any of the transactions contemplated by this Agreement and are listed in Section 3.01(p)(ii)(I) of the Company Disclosure Letter.

          (H) To the extent material Third Party Software is distributed to customers of the Company or any of its subsidiaries together with the products or services of the Company or any of its subsidiaries, (w) the third party rights have been identified in Section 3.01(p)(ii)(H) of the Company Disclosure Letter, (x) all necessary licenses have been obtained to permit such distribution, (y) except pursuant to the Contracts listed in Section 3.01(p)(ii)(H) of the Company

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Disclosure Letter, the Company does not have any obligations to make royalty or other similar payments in respect of any such distribution in any fiscal year in excess of $200,000 in the aggregate for such fiscal year and (z) there are no obligations to provide access to any third party to, or permit any third party to copy, distribute or create Derivative Works of the proprietary source code for material software products owned by the Company or any of its subsidiaries.

          (I) None of the material proprietary source code or other material trade secrets (other than trade secrets with respect to which the Company knowingly made a reasonable judgment to not keep such trade secrets confidential) of the Company or any of its subsidiaries has been published or disclosed by the Company or any of its subsidiaries, except pursuant to a non-disclosure agreement that is in the standard form used by the Company (or a similar standard non-disclosure agreement) that has been made available to Parent prior to the date of this Agreement, or to the knowledge of the Company or any of its subsidiaries, by any other person to any person except pursuant to licenses or Contracts requiring such other persons to keep such trade secrets confidential.

          (J) Neither the Company nor any of its subsidiaries has assigned, sold or otherwise transferred ownership of any material patent, patent application, registered trademark or application therefor, registered service mark, registered copyright or application therefor since January 1, 2001.

          (K) No licenses or rights have been granted to a third party to distribute the material proprietary source code of the Company, or to use such material proprietary source code to create Derivative Works (as defined below) thereof.

          (L) The Company and each of its subsidiaries has taken all reasonable and necessary steps to protect their rights under their material Intellectual Property, and to the knowledge of the Company no such rights to any material Intellectual Property have been lost or are in jeopardy of being lost through failure to act by the Company or any of its subsidiaries, except for instances in which the Company knowingly made a reasonable business judgment not to protect such rights.

          (iii) For purposes of this Agreement, “Derivative Work” shall have the meaning set forth in 17 U.S.C. Section 101.

          (iv) For purposes of this Agreement, “Intellectual Property” shall mean trademarks (registered or unregistered), service marks, brand names, domain names, certification marks, trade dress, assumed names, trade names and other indications of origin, and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; inventions, discoveries and ideas, whether patented, patentable or not in any jurisdiction; computer programs and

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software (including object code, source code, and associated data and documentation), know-how and any other technology; trade secrets and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by a third party; writings and other works, whether copyrighted, copyrightable or not in any jurisdiction; registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; any similar intellectual property or proprietary rights similar to any of the foregoing; licenses, immunities, covenants not to sue and the like relating to any of the foregoing; and any claims or causes of action arising out of or related to any infringement, misuse or misappropriation of any of the foregoing. For purposes of this Agreement, “Third Party Software” shall mean software (including object code, source code, and associated data and documentation) with respect to which a third party holds any copyright or other ownership right (and, therefore, such software is not owned exclusively by the Company or any of its subsidiaries).

          (q) State Takeover Statutes. The approval of the Merger and the Stockholders Agreement by the Board of Directors of the Company referred to in Section 3.01(d) constitutes approval of the Merger and the Stockholders Agreement for purposes of Section 203 of the DGCL and represents the only action necessary to ensure that Section 203 of the DGCL does not and will not apply to the execution and delivery of this Agreement, the Stockholders Agreement or the consummation of the Merger or the other transactions contemplated hereby and thereby. No other state takeover or similar statute or regulation is applicable to this Agreement, the Merger or the other transactions contemplated by this Agreement.

          (r) Voting Requirements. The affirmative vote at the Stockholders Meeting or any adjournment or postponement thereof of the holders of a majority of the outstanding shares of Company Common Stock in favor of adopting this Agreement (the “Stockholder Approval”) is the only vote of the holders of any class or series of the Company’s capital stock necessary to approve or adopt this Agreement or the consummation of the transactions contemplated by this Agreement.

          (s) Brokers; Schedule of Fees and Expenses. No broker, investment banker, financial advisor or other person, other than Credit Suisse First Boston, the fees and expenses of which will be paid by the Company, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based on arrangements made by or on behalf of the Company. The Company has delivered to Parent true and complete copies of all agreements under which any such fees or commissions are payable and all indemnification and other agreements related to the engagement of the persons to whom such fees or commissions are payable. The fees and expenses of any accountant, broker, financial advisor, consultant, legal counsel or other person retained by the Company in connection with this Agreement or the transactions contemplated hereby incurred or to be incurred by the Company in connection with this Agreement and the transactions

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contemplated by this Agreement will not exceed the fees and expenses set forth in Section 3.01(s) of the Company Disclosure Letter.

              (t) Opinion of Financial Advisor. The Company has received the opinion of Credit Suisse First Boston, in customary form to the effect that, as of the date hereof, the Merger Consideration to be received by the stockholders of the Company pursuant to this Agreement is fair to such stockholders from a financial point of view, and a copy of the written confirmation of such opinion will be delivered to Parent promptly after receipt thereof.

              SECTION 3.02. Representations and Warranties of Parent and Sub. Parent and Sub represent and warrant to the Company as follows:

          (a) Organization. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to carry on its business as now being conducted.

          (b) Authority; Noncontravention. Parent and Sub have the requisite corporate power and authority to execute and deliver this Agreement, to consummate the transactions contemplated by this Agreement and to comply with the provisions of this Agreement. The execution and delivery of this Agreement by Parent and Sub, the consummation by Parent and Sub of the transactions contemplated by this Agreement and the compliance by Parent and Sub with the provisions of this Agreement have been duly authorized by all necessary corporate action on the part of Parent and Sub and no other corporate proceedings on the part of Parent or Sub are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Parent and Sub, as applicable, and, assuming the due execution of this Agreement by the Company constitutes a valid and binding obligation of Parent and Sub, as applicable, enforceable against Parent and Sub, as applicable, in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to the enforcement of creditors’ rights generally and by general principles of equity. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement and compliance by Parent and Sub with the provisions of this Agreement do not and will not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to a loss of a material benefit under, or result in the creation of any Lien in or upon any of the properties or assets of Parent or Sub under, or give rise to any increased, additional, accelerated or guaranteed rights or entitlements under, any provision of (i) the Certificate of Incorporation or Bylaws

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of Parent or Sub, (ii) any Contract to which Parent or Sub is a party or bound by or their respective properties or assets are bound by or subject to or (iii) subject to the governmental filings and other matters referred to in the following sentence, any (A) applicable Law or (B) Judgment, in each case, applicable to Parent or Sub or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, breaches, defaults, rights, losses, Liens or entitlements that individually or in the aggregate are not reasonably likely to impair in any material respect the ability of each of Parent and Sub to perform its obligations under this Agreement or prevent or materially impede, or (to the knowledge of Parent as of the date hereof) materially delay, the consummation of any of the transactions contemplated by this Agreement. No consent, approval, order or authorization of, registration, declaration or filing with, or notice to, any Governmental Entity is required by or with respect to Parent or Sub in connection with the execution and delivery of this Agreement by Parent and Sub, the consummation by Parent and Sub of the transactions contemplated by this Agreement or the compliance by Parent and Sub with the provisions of this Agreement, except for (1) the filing of a premerger notification and report form under the HSR Act and the filings and receipt, termination or expiration, as applicable, of such other approvals or waiting periods required under any other applicable competition, merger control, antitrust or similar law or regulation, (2) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company or any of its subsidiaries is qualified to do business and (3) such other consents, approvals, orders, authorizations, registrations, declarations, filings and notices, the failure of which to be obtained or made individually or in the aggregate are not reasonably likely to impair in any material respect the ability of each of Parent and Sub to perform its obligations under this Agreement or prevent or materially impede, or (to the knowledge of Parent as of the date hereof) materially delay, the consummation of any of the transactions contemplated by this Agreement.

          (c) Information Supplied. None of the information supplied or to be supplied by Parent or Sub for inclusion or incorporation by reference in the Proxy Statement will (except to the extent revised or superseded by amendments or supplements contemplated hereby), at the date the Proxy Statement is first mailed to the Company’s stockholders or at the time of the Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

          (d) Interim Operations of Sub. Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has engaged in no business other than in connection with the transactions contemplated by this Agreement.

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          (e) Capital Resources. Parent has sufficient cash or access to cash to pay the aggregate Merger Consideration.

ARTICLE IV

Covenants Relating to Conduct of Business

               SECTION 4.01. Conduct of Business. (a) Conduct of Business by the Company. During the period from the date of this Agreement to the Effective Time, except (i) as specifically disclosed in Section 4.01 of the Company Disclosure Letter, (ii) with the prior written consent of Parent (the decision with respect to which shall not be unreasonably delayed) or (iii) as specifically contemplated by this Agreement, the Company shall, and shall cause each of its subsidiaries to, carry on their respective businesses in the ordinary course consistent with past practice and use commercially reasonable efforts to comply with all applicable Laws and, to the extent consistent therewith, use commercially reasonable efforts to keep available the services of their present officers and other employees and to preserve their assets and technology and preserve their relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with them and maintain their franchises, rights and Permits. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, except (i) as specifically disclosed in Section 4.01 of the Company Disclosure Letter, (ii) with the prior written consent of Parent (the decision with respect to which shall not be unreasonably delayed) or (iii) as specifically contemplated by this Agreement, the Company shall not, and shall not permit any of its subsidiaries to:

          (i) (w) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital stock or other equity or voting interests, except for dividends by a direct or indirect wholly owned subsidiary of the Company to its parent, (x) split, combine or reclassify any of its capital stock or other equity or voting interests, or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or other equity or voting interests, (y) purchase, redeem or otherwise acquire any shares of capital stock or any other securities of the Company or any of its subsidiaries or any options, warrants, calls or rights to acquire or receive any such shares or other securities (including any Stock Options) or (z) take any action that would result in any amendment, modification or change of any term of any debt security of the Company or any of its subsidiaries;

          (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other equity or voting interests or any securities convertible into, or exchangeable for, or any options, warrants, calls or rights to acquire or receive, any such stock, interests or securities or any stock appreciation rights phantom

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stock awards or other rights that are linked in any way to the price of Company Common Stock or the value of the Company or any part thereof (other than (x) the issuance of shares of Company Common Stock upon the exercise of Stock Options, or rights under the ESPP outstanding on the date of this Agreement in accordance with their present terms and (y) the granting of rights under the terms of the ESPP to the extent permitted under Section 5.04(b));

          (iii) amend or propose to amend its certificate of incorporation or bylaws (or similar organizational documents);

          (iv) acquire or agree to acquire (x) by merging or consolidating with, or by purchasing all or a substantial portion of the assets of, or by purchasing all or a substantial equity or voting interest in, or by any other manner, any business or any corporation, partnership, limited liability company, joint venture, association or other entity or division thereof or (y) any material assets other than in the ordinary course of business consistent with past practice;

          (v) sell, lease, license, sell and lease back, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its material properties or assets, except sales of inventory or used equipment in the ordinary course of business consistent with past practice, except for (A) Liens for taxes not yet due and payable, that are payable without penalty or that are being contested in good faith and for which adequate reserves have been recorded, (B) Liens for assessments and other governmental charges or liens of landlords, carriers, warehousemen, mechanics and repairmen incurred in the ordinary course of business, in each case for sums not yet due and payable or due but not delinquent or being contested in good faith by appropriate proceedings, (C) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations and (D) Liens that do not materially interfere with the conduct of the Company’s business or do not materially affect the use or value of the Company’s assets (“Permitted Liens”);

          (vi) (x) repurchase, prepay or incur any indebtedness or guarantee any indebtedness of another person or issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of the Company or any of its subsidiaries, guarantee any debt securities of another person, enter into any “keep well” or other Contract to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing or (y) make any loans, advances or capital contributions to, or investments in, any other person, other than the Company or any direct or indirect wholly owned subsidiary of the Company;

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          (vii) incur or commit to incur any capital expenditures, or any obligations or liabilities in connection therewith that, in the aggregate, are in excess of $1,000,000 (other than to the extent required in connection with new customer Contracts or by existing customer Contracts);

          (viii) (x) pay, discharge, settle or satisfy any material claims (including any claims of stockholders and any stockholder litigation relating to this Agreement, the Merger, the Stockholders Agreement or any other transaction contemplated hereby or thereby or otherwise), liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business consistent with past practice or as required by their terms as in effect on the date of this Agreement, of claims, liabilities or obligations reflected or reserved against in the most recent audited financial statements (or the notes thereto) of the Company included in the Filed SEC Documents (for amounts not in excess of such reserves) or incurred since the date of such financial statements in the ordinary course of business consistent with past practice, (y) waive, release, grant or transfer any right of material value other than in the ordinary course of business consistent with past practice or (z) waive any material benefits of, or agree to modify in any adverse respect, or consent to any matter with respect to which its consent is required under, any material confidentiality, standstill or similar agreement to which the Company or any of its subsidiaries is a party;

          (ix) enter into any lease or sublease of real property (whether as a lessor, sublessor, lessee or sublessee) or modify, amend, terminate or fail to exercise any right to renew any lease or sublease of real property, except for subleases, termination agreements and amendments shortening the term of any such lease or sublease, each on commercially reasonable terms with respect to excess real property leased or subleased to the Company or such subsidiary;

          (x) modify or amend in any material respect any Contract which is material to the Company or any of its subsidiaries (including any Contract described in Section 3.01(i)(A) through (T)) to which the Company or such subsidiary is a party, or terminate, or waive, release or assign any rights or claims under, any material Contract (as defined in Section 3.01(i)) to which the Company or such subsidiary is a party, in each case in a manner materially adverse to the Company and its subsidiaries, taken as a whole;

          (xi) enter into any material Contract not in the ordinary course of business or inconsistent with past practice;

          (xii) except as required to comply with applicable Law or any Benefit Plan or Benefit Agreement as in effect on the date of this Agreement and except as set forth in Section 4.01(a)(ii) or clause (F) below, (A) increase in any manner the compensation or benefits of, or grant any bonus opportunity or pay or accrue any

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bonus to, any Company Personnel, (B) pay or provide to any Company Personnel any benefit not provided for under a Benefit Plan or Benefit Agreement as in effect on the date of this Agreement, other than the payment of base compensation in the ordinary course of business consistent with past practice, (C) grant any awards under any Benefit Plan (including the grant of Stock Options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock or the removal or material modification of existing restrictions in any Contract, Benefit Plan or Benefit Agreement or awards made thereunder), (D) take any action to fund or in any other way secure the payment of compensation or benefits under any Contract, Benefit Plan or Benefit Agreement, (E) take any action to accelerate the vesting or payment of any compensation or benefit under any Contract, Benefit Plan or Benefit Agreement, (F) adopt, enter into, amend, modify or terminate any Benefit Plan or Benefit Agreement other than offer letters (the forms of which have been previously provided to Parent) entered into with new employees in the ordinary course of business consistent with past practice that provide for “at-will employment” or (G) make any material determination under any Benefit Plan or Benefit Agreement that is inconsistent with the ordinary course of business or past practice;

          (xiii) enter into any Contract if consummation of the transactions contemplated by this Agreement or compliance by the Company with the provisions of this Agreement will conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to a loss of a material benefit under, or result in the creation of any Lien (other than a Permitted Lien) in or upon any of the properties or assets of the Company or Parent or any of their respective subsidiaries under, or give rise to any increased, additional, accelerated or guaranteed rights or entitlements under, any provision of such Contract;

          (xiv) subject to the written consent of Parent, which shall not be unreasonably withheld or delayed, enter into any Contract (other than an immaterial Contract) containing any restriction on the ability of the Company or any of its subsidiaries to assign all or any portion of its rights, interests or obligations thereunder, unless such restriction expressly excludes any assignment to Parent and any of its subsidiaries in connection with or following the consummation of the Merger and the other transactions contemplated by this Agreement;

          (xv) take any action (or omit to take any action) if such action (or omission) would or is reasonably likely to result in (A) any representation and warranty of the Company set forth in this Agreement that is qualified as to materiality becoming untrue (as so qualified) or (B) any such representation and warranty that is not so qualified becoming untrue in any material respect;

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          (xvi) except as required by applicable Law, adopt or enter into any collective bargaining agreement or other labor union Contract applicable to any Company Personnel or terminate the employment of any Company Personnel (other than for “cause” (as defined in the applicable Contract)) who has the right under any Contract to receive severance payments or similar benefits as a result of such termination;

          (xvii) except as required by GAAP or applicable Law, change its fiscal year, revalue any of its material assets or make any changes in financial or tax accounting methods, principles or practices;

          (xviii) engage in (A) any trade loading practices or any other promotional sales or discount activity with any customers or distributors with any intent of accelerating to prior fiscal quarters (including the current fiscal quarter) sales to the trade or otherwise that would otherwise be expected (based on past practice) to occur in subsequent fiscal quarters, (B) any practice which would have the effect of accelerating to prior fiscal quarters (including the current fiscal quarter) collections of receivables that would otherwise be expected (based on past practice) to be made in subsequent fiscal quarters, (C) any practice which would have the effect of postponing to subsequent fiscal quarters payments by the Company or any of its subsidiaries that would otherwise be expected (based on past practice) to be made in prior fiscal quarters (including the current fiscal quarter) or (D) any other promotional sales or discount activity, in each case in clauses (A) through (D) in a manner outside the ordinary course of business or inconsistent with past practice;

          (xix) enter into any Contract of the type described in Sections 3.01(i)(i)(A)-(C) or Sections 3.01(i)(i)(J)-(L);

          (xx) enter into any Contract of the type described in Section 3.01(i)(i)(D), other than in the ordinary course of business consistent with past practice; or

          (xxi) authorize any of, or commit, resolve or agree to take any of, the foregoing actions.

                 (b) Certain Tax Matters. During the period from the date of this Agreement to the Effective Time, (i) the Company and each of its subsidiaries shall timely file all Federal, state and local, domestic and foreign, income and franchise tax returns and reports and all other material tax returns and reports (“Post-Signing Returns”) required to be filed by each such entity (after taking into account any extensions) and all Post-Signing Returns shall be complete and correct in all material respects; (ii) the Company and each of its subsidiaries will timely pay all taxes due and payable in respect of such Post-Signing Returns that are so filed; (iii) the Company will accrue a reserve in its books and records and financial statements in accordance with past practice for all taxes payable by the Company or any of its subsidiaries for which no Post-Signing Return is due prior to the Effective Time; (iv) the Company and each of its subsidiaries

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will promptly notify Parent of any suit, claim, action, investigation, proceeding or audit (collectively, “Actions”) pending against or with respect to the Company or any of its subsidiaries in respect of any tax and will not settle or compromise any such Action without Parent’s prior written consent; (v) none of the Company or any of its subsidiaries will make or change any material tax election without Parent’s consent, which consent shall not be unreasonably withheld; and (vi) the Company and each of its subsidiaries will retain all books, documents and records necessary for the preparation of tax returns and reports and tax audits.

          (c) Advice of Changes; Filings. The Company shall confer with Parent at the times that Parent shall reasonably request (which is expected to be on a regular and frequent basis) to report on operational matters and other matters requested by Parent. The Company shall promptly advise Parent of its receipt of any notice or other written communication alleging a possible material violation by the Company or any of its subsidiaries of any applicable Law or Judgment of any Governmental Entity applicable to its business or operations. The Company and Parent shall each promptly provide the other copies of all filings made by such party with any Governmental Entity in connection with this Agreement and the transactions contemplated hereby, other than (x) the portions of such filings that include confidential information not directly related to the transactions contemplated by this Agreement and (y) the notification pursuant to the HSR Act or other antitrust filings, which shall be provided, if requested by Parent, pursuant to a joint defense agreement in customary form entered into between Parent and the Company or each of their respective counsel.

          SECTION 4.02. No Solicitation. (a) The Company shall not, nor shall it permit any of its subsidiaries to, nor shall it authorize any person or permit any director, officer or employee of the Company or any of its subsidiaries or any investment banker, attorney, accountant or other advisor or representative of the Company or any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage, or take any other action knowingly to facilitate, any Takeover Proposal or the making of any inquiry or proposal that could reasonably be expected to lead to a Takeover Proposal or (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person (other than Parent or its representatives or the Company’s representatives) any information with respect to any Takeover Proposal; provided, however, that at any time prior to obtaining the Stockholder Approval, the Board of Directors of the Company may, in response to a written Takeover Proposal that such Board of Directors determines in good faith to be bona fide and determines in good faith constitutes or is reasonably likely to lead to a Superior Proposal, and which Takeover Proposal was unsolicited and did not otherwise result from a breach of this Section 4.02, and subject to compliance with Section 4.02(c) and (d), (x) furnish information with respect to the Company and its subsidiaries to the person making such Takeover Proposal (and its representatives) pursuant to a confidentiality agreement which contains terms that are substantially equivalent to, and in no respect less favorable to the Company than, the terms of the Confidentiality Agreement dated April 1, 2004 (as amended June 30, 2004

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and October 15, 2004 and as it may thereafter be amended from time to time), between Parent and the Company (the “Confidentiality Agreement”); provided that all such information is provided on a prior or substantially concurrent basis to Parent and (y) participate in discussions or negotiations with the person making such Takeover Proposal (and its representatives) regarding such Takeover Proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any director, officer or employee of the Company or any of its subsidiaries or any investment banker, attorney, accountant or other advisor or representative of the Company or any of its subsidiaries shall be deemed to be a breach of this Section 4.02(a) by the Company.

          For purposes of this Agreement, the term “Takeover Proposal” means any inquiry, proposal or offer from any person (other than Parent or Sub) relating to, or that is reasonably likely to lead to, any direct or indirect acquisition, in one transaction or a series of transactions, including by way of any merger, consolidation, tender offer, exchange offer, stock acquisition, asset acquisition, binding share exchange, business combination, recapitalization, liquidation, dissolution, joint venture or similar transaction, of (A) assets or businesses that constitute or represent 15% or more of the total revenue or assets of the Company and its subsidiaries, taken as a whole, or (B) 15% or more of the outstanding shares of Company Common Stock or of any class of capital stock of, or other equity or voting interests in, one or more of the Company’s subsidiaries which, in the aggregate, directly or indirectly hold the assets or businesses referred to in clause (A) above, in each case other than the transactions contemplated by this Agreement or the Stockholders Agreement.

          (b) Neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify in a manner adverse to Parent or Sub, or propose publicly to withdraw or modify in a manner adverse to Parent or Sub, the recommendation or declaration of advisability by such Board of Directors or any such committee of this Agreement or the Merger or resolve or agree to take any such action (any such action or any such resolution or agreement to take such action being referred to herein as an “Adverse Recommendation Change”), unless the Board of Directors of the Company or a committee thereof determines in good faith that the failure to take such action would be reasonably likely to result in a breach of its fiduciary duties under applicable Law, (ii) recommend, adopt or approve any Takeover Proposal or propose publicly to recommend, adopt or approve any Takeover Proposal or resolve or agree to take any such action or (iii) cause or permit the Company to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other agreement (each, an “Acquisition Agreement”) constituting or related to, or which is intended to or is reasonably likely to lead to, any Takeover Proposal (other than a confidentiality agreement referred to in Section 4.02(a)) or resolve or agree to take any such action. Notwithstanding anything in this Section 4.02(b) to the contrary, at any time prior to obtaining the Stockholder Approval, the Board of Directors of the Company may,

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in response to a Superior Proposal that was unsolicited and that did not otherwise result from a breach of Section 4.02(a), cause the Company to terminate this Agreement pursuant to Section 7.01(f) and concurrently enter into an Acquisition Agreement; provided, however, that the Company shall not terminate this Agreement pursuant to Section 7.01(f), and any purported termination pursuant to Section 7.01(f) shall be void and of no force or effect, unless the Company shall have complied with all the provisions of this Section 4.02, including the notification provisions in this Section 4.02, and with all applicable requirements of Section 5.06(b) (including the payment of the Termination Fee prior to or concurrently with such termination) in connection with such Superior Proposal; and provided further, however, that the Company shall not exercise its right to terminate this Agreement pursuant to Section 7.01(f) until after the fifth business day following Parent’s receipt of written notice (a “Notice of Superior Proposal”) from the Company advising Parent that the Board of Directors of the Company has received a Superior Proposal, specifying the terms and conditions of the Superior Proposal, identifying the person making such Superior Proposal and stating that the Board of Directors of the Company intends to exercise its right to terminate this Agreement pursuant to Section 7.01(f) (it being understood and agreed that, prior to any such termination taking effect, any amendment to the price or any other material term of a Superior Proposal shall require a new Notice of Superior Proposal and a new five business day period).

          For purposes of this Agreement, the term “Superior Proposal” means any binding written offer not solicited by or on behalf of the Company or any of its subsidiaries made by a third party that the Board of Directors of the Company determines in good faith to be bona fide which, if consummated, would result in such third party (or in the case of a direct merger between such third party and the Company, the stockholders of such third party) acquiring, directly or indirectly, more than 50% of the voting power of the Company Common Stock or all or substantially all the assets of the Company and its subsidiaries, taken as a whole, for consideration consisting of cash and/or securities that the Board of Directors of the Company determines in its good faith judgment to have a higher value than the consideration payable in the Merger and which proposal is determined in good faith by the Board of Directors of the Company to be more favorable to the Company’s stockholders than the Merger, in each case taking into account any changes to the terms of this Agreement proposed by Parent in response to such Superior Proposal or otherwise.

          (c) In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 4.02, the Company promptly shall advise Parent orally and in writing of any request for information that contemplates a possible Takeover Proposal or of any Takeover Proposal, or any inquiry the Company reasonably believes could lead to a Takeover Proposal, the terms and conditions of such request, Takeover Proposal or inquiry (including any subsequent amendment or other modification to such terms and conditions) and the identity of the person making any such request, Takeover Proposal or inquiry. The Company will (i) on a daily basis,

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confer with Parent regarding the progress of negotiations concerning any such Takeover Proposal and the material resolved and unresolved issues related thereto, (ii) promptly advise Parent of any material amendments or proposed amendments as to price and other material terms of any such request, Takeover Proposal or inquiry and (iii) promptly upon receipt or delivery thereof, provide Parent with copies of all documents and written communications in the possession or control of the Company or any of its directors, officers, employees, representatives or advisors relating to such Takeover Proposal exchanged between the Company or any of its officers, directors, investment bankers, attorneys, accountants or other advisors, on the one hand, and the party making a Takeover Proposal or any of its officers, directors, investment banks, attorneys, accountants or other advisors, on the other hand.

          (d) Nothing contained in this Section 4.02 or elsewhere in this Agreement shall prohibit the Company from (i) taking and disclosing to its stockholders a position contemplated by Rule 14d-9 and 14e-2(a) promulgated under the Exchange Act or (ii) making any disclosure to the Company’s stockholders if, in the good faith judgment of the Board of Directors of the Company failure so to disclose would be inconsistent with applicable Law; provided, however, that in no event shall the Company or its Board of Directors or any committee thereof take, agree or resolve to take any action prohibited by Section 4.02(b).

          SECTION 4.03. Conduct by Parent. During the period from the date of this Agreement to the Effective Time, except as consented to in writing by the Company prior to such action or as specifically contemplated by this Agreement, Parent shall not, and shall not permit any of its subsidiaries to, take any action that would or is reasonably likely to result in (i) any representation and warranty of Parent or Sub set forth in this Agreement that is qualified as to materiality or material adverse effect becoming untrue (as so qualified) or (ii) any such representation and warranty that is not so qualified becoming untrue in any material respect.

ARTICLE V

Additional Agreements

          SECTION 5.01. Preparation of the Proxy Statement; Stockholders Meeting. (a) As promptly as practicable following the date of this Agreement, the Company shall prepare and, no later than the 10th business day immediately following the later of (x) the date of the public announcement of this Agreement and (y) the date on which Parent provides to the Company all information required to be provided by Parent for inclusion in the Proxy Statement, file with the SEC the preliminary Proxy Statement. Notwithstanding anything contained in this Agreement to the contrary, absent any Legal Restraint which has the effect of preventing such action, the Company shall, subject to Parent’s reasonable cooperation, file with the SEC the definitive Proxy Statement on the 10th calendar day (or, if such calendar day is not a business day, the first business day

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subsequent to such calendar day) immediately following the filing of the preliminary Proxy Statement with the SEC and shall cause the mailing of the definitive Proxy Statement to the stockholders of the Company to occur on that day or as promptly as reasonably practicable thereafter. Each of the Company and Parent shall furnish all information concerning such person to the other as may be reasonably requested in connection with the preparation, filing and distribution of the Proxy Statement. The Company shall promptly notify Parent upon the receipt of any comments from the SEC or its staff or any request from the SEC or its staff for amendments or supplements to the Proxy Statement and shall provide Parent with copies of all correspondence between it and its representatives, on the one hand, and the SEC and its staff, on the other hand. Each of the Company and Parent shall use its commercially reasonable efforts to respond as promptly as practicable to any comments of the SEC with respect to the Proxy Statement. Notwithstanding any of the foregoing sentences in this paragraph, prior to filing or mailing the Proxy Statement (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto, the Company (i) shall provide Parent an opportunity to review and comment on such document or response, (ii) shall include in such document or response all comments reasonably proposed by Parent and (iii) shall not file or mail such document or respond to the SEC prior to receiving the approval of Parent, which approval shall not be unreasonably withheld or delayed. If at any time prior to the Stockholders Meeting, any information relating to the Company, Parent or any of their respective affiliates, officers or directors, should be discovered by the Company or Parent which should be set forth in an amendment or supplement to the Proxy Statement, so that the Proxy Statement shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be filed with the SEC by the Company and, to the extent required by applicable Law, disseminated to the stockholders of the Company.

          (b) The Company shall, as promptly as practicable after the date of this Agreement, establish a record date (which will be as promptly as reasonably practicable following the date of this Agreement) for, duly call, give notice of, convene and hold a meeting of its stockholders, which meeting the Company shall, absent any Legal Restraint which has the effect of preventing such action, cause to occur on the 20th calendar day (or, if such calendar day is not a business day, the first business day subsequent to such calendar day) immediately following the mailing of the Proxy Statement (the “Stockholders Meeting”), for the purpose of obtaining the Stockholder Approval, regardless of whether the Board of Directors of the Company determines at any time that this Agreement is no longer advisable or recommends that the stockholders of the Company reject it or any other Adverse Recommendation Change has occurred at any time; provided, however, that (i) if the Company is unable to obtain a quorum of its stockholders at such time, the Company may extend the date of the Stockholders Meeting by no more than ten business days and the Company shall use its commercially

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reasonable efforts during such ten-business day period to obtain such a quorum as soon as practicable and (ii) the Company may delay the Stockholders Meeting to the extent (and only to the extent) the Company reasonably determines that such delay is required by applicable Law to comply with written or oral comments made by the SEC with respect to the Proxy Statement (the date on which the Stockholders Meeting would be held pursuant to this Section 5.01(b) (without giving effect to any extension pursuant to Section 5.01(c) or 5.10(d)) the “Meeting Date”). Subject to Section 4.02(b)(i), the Board of Directors of the Company shall recommend to holders of the Company Common Stock that they adopt this Agreement, and shall include such recommendation in the Proxy Statement. Without limiting the generality of the foregoing, the Company agrees that its obligations pursuant to this Section 5.01(b) shall not be affected by the commencement, public proposal, public disclosure or communication to the Company or any other person of any Takeover Proposal.

          (c) Parent may, in its sole discretion, extend, prior to the mailing of the definitive Proxy Statement to the stockholders of the Company, any of (x) the time period from the filing of the preliminary Proxy Statement to the mailing of the definitive Proxy Statement to the stockholders of the Company as set forth in Section 5.01(a) and (y) the time period from the mailing of the definitive Proxy Statement to the stockholders of the Company to the date on which the Stockholders Meeting is held as set forth in Section 5.01(b) (in each of (x) and (y), after giving effect to any extension thereof resulting from the exercise by the Company of any of its rights provided for in Section 5.01(d)); provided, however, that in no event will the aggregate extensions by Parent pursuant to this Section 5.01(c) and the Company pursuant to Section 5.01(d) extend the Meeting Date by more than ten (10) calendar days.

          (d) The Company may, in its sole discretion, extend, prior to the mailing of the definitive Proxy Statement to the stockholders of the Company, any of (x) the time period from the filing of the preliminary Proxy Statement to the mailing of the definitive Proxy Statement to the stockholders of the Company as set forth in Section 5.01(a) and (y) the time period from the mailing of the definitive Proxy Statement to the stockholders of the Company to the date on which the Stockholders Meeting is held as set forth in Section 5.01(b) (in each of (x) and (y), after giving effect to any extension thereof resulting from the exercise by Parent of any of its rights provided for in Section 5.01(c)); provided, however, that in no event will the aggregate extensions by the Company pursuant to this Section 5.01(d) and Parent pursuant to Section 5.01(c) extend the Meeting Date by more than ten (10) calendar days.

          SECTION 5.02. Access to Information; Confidentiality. (a) At Parent’s reasonable request, subject to the requirements of applicable Law, the Company shall, and shall cause each of its subsidiaries to, afford to Parent’s officers, employees, investment bankers, attorneys, accountants, environmental consultants and other advisors and representatives, reasonable access during normal business hours upon reasonable notice, and in a manner that is not materially disruptive to the Company’s business

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operations, during the period prior to the Effective Time or the termination of this Agreement to all their respective properties, assets, books, contracts, commitments, directors, officers, employees (provided that any such access to employees be in the presence of an officer of the Company), attorneys, accountants, auditors (and, to the extent within the Company’s control, former auditors), other advisors and representatives and records and, during such period, the Company shall, and shall cause each of its subsidiaries to, make available to Parent and allow Parent to make copies (at its own expense) of, (i) each report, schedule, form, statement and other document filed or received by it during such period pursuant to the requirements of any applicable Law or Judgment (other than the notification pursuant to the HSR Act or other antitrust filings, which shall be provided, if requested by Parent, pursuant to a joint defense agreement in customary form entered into between Parent and the Company or each of their respective counsel, (ii) all organizational documents, stock certificates and other evidences of equity interests, shareholders’ registers and other registers of equity interests, minute books, certificates of good standing, authorizations to do business and certified accounts of each subsidiary of the Company and (iii) all other information concerning its business, properties and personnel as Parent may reasonably request (including using its commercially reasonable efforts to cause Stonefield Josephson, Inc. to make its work papers available to Parent). Parent will hold, and will direct its officers, employees, investment bankers, attorneys, accountants and other advisors and representatives to hold, any and all information received from the Company, directly or indirectly, in confidence in accordance with, and subject to the exceptions contained in, the Confidentiality Agreement.

          (b) Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, the Company shall, and shall cause each of its subsidiaries to, as and to the extent requested by Parent, provide Parent with (A) a complete and correct list of all licenses issued by the Federal Communications Commission (the “FCC”) and held by the Company or any of its subsidiaries (the “FCC Licenses”), (B) complete and correct copies of each FCC License, (C) the address and physical location of the device(s) covered by each FCC License, (D) a written description of the purpose of the device(s) covered by each FCC License, (E) complete and correct copies of any Notices of Apparent Liability for Forfeiture issued by the FCC against the Company or any of its subsidiaries and (F) all reasonable information necessary for Parent to make an independent determination that the Company and its subsidiaries have complied with FCC rules regarding changes of ownership control of the FCC Licenses (including descriptions of any transactions that effected a change of ownership or control of the FCC Licenses (including any intracompany reorganizations) and corporate organizational charts depicting the ownership structure of the holder of the FCC Licenses before and after any such change of ownership or control.)

          (c) The Company and Parent shall, and shall cause each of their respective subsidiaries to, cooperate to develop an orderly transition and integration process in connection with the Merger with the objective of minimizing the disruption to,

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and preserving the value of, the business of the Surviving Corporation and its subsidiaries during the period from and after the Effective Time. The Company and Parent agree that such cooperation shall include taking such actions as may be reasonably requested by Parent to assist Parent in the development as soon as reasonably practicable following the date hereof of a mutually acceptable integration plan.

          SECTION 5.03. Commercially Reasonable Efforts; Notification. (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties hereto agrees to use its commercially reasonable efforts to take, or cause to be taken, all actions, that are necessary, proper or advisable to consummate and make effective, in the most reasonably expeditious manner practicable, the Merger and the other transactions contemplated by this Agreement and to use its commercially reasonable efforts to forebear from taking any actions that would cause the Merger and the other transactions contemplated by this Agreement not to be consummated and made effective in the most reasonably expeditious manner practicable, including using its commercially reasonable efforts to accomplish the following: (i) the taking of all reasonable actions necessary to cause the conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining of all necessary actions or non-actions, waivers, consents, approvals, orders and authorizations from, and the giving of any necessary notices to, Governmental Entities and the making of all necessary registrations, declarations and filings (including filings under the HSR Act and other registrations, declarations and filings with, or notices to, Governmental Entities, if any), (iii) the taking of all reasonable steps as may be necessary to avoid any suit, claim, action, investigation or proceeding by any Governmental Entity and (iv) the obtaining of all necessary consents, approvals or waivers from third parties. In connection with and without limiting the generality of the foregoing, each of the Company and its Board of Directors shall, if any state takeover statute or similar statute or regulation is or becomes applicable to this Agreement, the Merger or any of the other transactions contemplated by this Agreement, use its commercially reasonable efforts to ensure that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation on this Agreement, the Merger and the other transactions contemplated by this Agreement. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, in no event shall any party hereto be obligated to, and the Company and its subsidiaries shall not, (A) agree or proffer to divest or hold separate, or enter into any licensing or similar arrangement with respect to, any assets (whether tangible or intangible) or any portion of any business of Parent, the Company or any of their respective subsidiaries or (B) litigate any suit, claim, action, investigation or proceeding, whether judicial or administrative, brought by any Governmental Entity (1) challenging or seeking to restrain or prohibit the consummation of the Merger; (2) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective affiliates of any portion of the business or assets of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, or to require any such person to dispose of or hold separate any portion of the business or

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assets of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, as a result of the Merger; (3) seeking to impose limitations on the ability of Parent or any of its affiliates to acquire or hold, or exercise full rights of ownership of any shares of common stock of the Surviving Corporation, including the right to vote the common stock of the Surviving Corporation on all matters properly presented to the stockholders of the Surviving Corporation; or (4) seeking to prohibit Parent or any of its affiliates from effectively controlling the business or operations of the Company and its subsidiaries, taken as a whole. The Company and Parent shall provide such assistance, information and cooperation to each other as is reasonably required to obtain any such non-actions, waivers, consents, approvals, orders and authorizations and, in connection therewith, will notify the other person promptly following the receipt of any comments from any Governmental Entity and of any request by any Governmental Entity for amendments, supplements or additional information in respect of any registration, declaration or filing with, or notice to, such Governmental Entity and shall supply the other person with copies of all correspondence between such person or any of its representatives, on the one hand, and any Governmental Entity, on the other hand.

          (b) The Company shall give prompt notice to Parent of (i) any representation or warranty made by it contained in this Agreement becoming untrue or inaccurate such that the condition set forth in Section 6.02(a) would not be satisfied or (ii) the failure of it to perform in any material respect any obligation to be performed by it under this Agreement such that the condition set forth in Section 6.02(b) would not be satisfied; provided, however, that no such notification shall affect the representations, warranties, covenants, agreements or obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement.

          (c) Parent shall give prompt notice to the Company of (i) any representation or warranty made by it or Sub contained in this Agreement becoming untrue or inaccurate such that the condition set forth in Section 6.03(a) would not be satisfied or (ii) the failure of it or Sub to perform in any material respect any obligation to be performed by such party under this Agreement such that the condition set forth in Section 6.03(b) would not be satisfied; provided, however, that no such notification shall affect the representations, warranties, covenants, agreements or obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement.

          (d) Without limiting the generality of the foregoing, the Company shall give Parent the opportunity to participate in the defense of any litigation against the Company and/or its directors relating to this Agreement, the Merger and the other transactions contemplated by this Agreement, it being understood and agreed that this Section 5.03(d) shall not give Parent the right to direct such defense.

          SECTION 5.04. Equity Awards; ESPP. (a) (i) As soon as practicable following the date of this Agreement, the Company agrees that the Board of Directors of

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the Company (or, if appropriate, any committee administering the Company Stock Plans) shall adopt such resolutions or take such other actions (but not including the payment of any cash or non cash consideration without Parent’s consent) as may be required to effect the following:

     (A) each Stock Option that is vested and outstanding immediately prior to the Effective Time with an exercise price per share of Company Common Stock lower than the Merger Consideration (each, a “Vested In-the-Money Option”) (other than those granted under the ESPP) shall be converted into the right to receive an amount in cash equal to (1) the excess of the Merger Consideration over the exercise price per share of Company Common Stock subject to such Stock Option, multiplied by (2) the number of shares of Company Common Stock subject to such Stock Option; and such amount shall be paid promptly after the Closing (without interest), subject to applicable withholdings and deductions for taxes;

     (B) each Stock Option outstanding immediately prior to the Effective Time (other than any Vested In-the-Money Option, Affected Stock Option or option granted under the ESPP) (each, a “Substituted Stock Option”) shall be converted into an option to acquire, on the same terms and conditions as were applicable under the Substituted Stock Option, the number of shares of Parent common stock, par value $0.20 per share (“Parent Common Stock”) (rounded down to the nearest whole share) determined by multiplying the number of shares of Company Common Stock subject to such Substituted Stock Option by a fraction (the “Option Exchange Ratio”), the numerator of which is the Merger Consideration and the denominator of which is the average closing price of Parent Common Stock on the New York Stock Exchange Composite Transactions Tape on the ten trading days immediately preceding the date on which the Effective Time occurs at an exercise price per share of Parent Common Stock equal to (1) the per share exercise price for the shares of Company Common Stock otherwise purchasable pursuant to such Substituted Stock Option divided by (2) the Option Exchange Ratio (each, as so adjusted, an “Adjusted Option”); provided that such exercise price shall be rounded up to the nearest whole cent; provided, however, that any Substituted Stock Option that is intended to be an “incentive stock option” (as defined in Section 422 of the Code), and that may not be adjusted in the foregoing manner and remain an incentive stock option, shall be adjusted in accordance with the requirements of Section 424 of the Code in a manner which most closely produces the economic results obtained with respect to other Adjusted Options (it being understood that it is the intention of the parties that Substituted Stock Options so assumed by Parent qualify, to the maximum extent permissible following the Effective Time, as “incentive

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stock options” (as defined in Section 422 of the Code), to the extent that such Substituted Stock Options qualified as “incentive stock options” prior to the Effective Time);

     (C) each Stock Option outstanding immediately prior to the Effective Time with an exercise price of $4.00 or more per share of Company Common Stock (each, an “Affected Stock Option”) (other than those granted under the ESPP) shall be terminated prior to the Effective Time by (A) providing timely notice (to allow for the termination of the Affected Stock Options prior to the Effective Time) to holders of Affected Stock Options that neither Parent nor any of its subsidiaries shall assume such Affected Stock Options or substitute Parent options for such Affected Stock Options and (B) permitting holders of Affected Stock Options to exercise such Affected Stock Options during the applicable exercise period specified by the applicable Company Stock Plan (which, in each case, shall expire on the date that is no later than one day before the Effective Time) (the “Exercise Period”);

     (D) to the extent permitted by applicable Law, make such other changes to the Company Stock Plans as Parent and the Company may agree are appropriate to give effect to the Merger;

     (E) take such action as necessary under the Company Stock Plans to ensure that all restrictions or limitations on transfer and vesting and all repurchase rights with respect to the Substituted Stock Options, to the extent that such restrictions or limitations shall not have already lapsed, and all other terms thereof, shall remain in full force and effect pursuant to their terms with respect to the corresponding Adjusted Options after giving effect to the Merger and the assumption by Parent as set forth below, subject to any acceleration of modification thereof pursuant to any Contract disclosed on Section 3.01(m) of the Company Disclosure Letter; and

     (F) ensure that, after the Effective Time, no Stock Options, restricted stock rights, restricted stock or other awards based on the value of Company Common Stock may be granted under any Company Stock Plan or otherwise.

     (ii) At the Effective Time, by virtue of the Merger and without the need of any further corporate action, Parent shall assume the Company Stock Plans, with the result that all obligations of the Company under the Company Stock Plans, including with respect to Substituted Stock Options outstanding at the Effective Time, shall be obligations of Parent following the Effective Time. Parent may assume the Adjusted Options under an existing equity incentive plan of Parent.

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     (iii) As soon as reasonably practicable following the Effective Time, Parent shall either (i) prepare and file with the SEC a registration statement on Form S-8 (or another appropriate form) registering a number of shares of Parent Common Stock equal to the number of shares subject to the Adjusted Options or (ii) assume the Adjusted Options under an existing equity incentive plan with respect to which a registration statement on Form S-8 (or another appropriate form) is currently effective. Any such registration statement shall be kept effective (and the current status of the prospectus or prospectuses required thereby shall be maintained) as long as any Adjusted Options may remain outstanding.

     (iv) As soon as reasonably practicable after the Effective Time, Parent shall deliver to the holders of Adjusted Options appropriate notices setting forth such holders’ rights pursuant to the respective Company Stock Plans and the agreements evidencing the grants of such Adjusted Options and that such Adjusted Options and agreements shall be assumed by Parent and shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 5.04 after giving effect to the Merger).

          (b) The Company shall amend the ESPP, or take such other actions with respect to the ESPP as are necessary to provide that (i) participation in the ESPP shall be limited to those employees who were participants on the date hereof, (ii) such participants may not increase their payroll deductions or purchase elections from those in effect on the date hereof, (iii) the ESPP shall terminate, effective immediately prior to the Effective Time, (iv) each purchase right under the ESPP outstanding on the New Exercise Date (as defined in the ESPP) shall be automatically exercised by applying the payroll deductions of each current participant in the ESPP that have accumulated through such date to purchase whole shares of Company Common Stock in accordance with the ESPP, and any remaining deducted amounts shall be returned to such participant without interest and (v) there shall not be any additional offering period commencing following the date of this Agreement under the ESPP.

          SECTION 5.05. Indemnification, Exculpation and Insurance. (a) Parent and Sub agree that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time (and rights for advancement of expenses) now existing in favor of the current or former directors or officers of the Company and its subsidiaries as provided in their respective certificates of incorporation or bylaws (or comparable organizational documents) and any indemnification or other agreements of the Company and/or its subsidiaries as in effect on the date of this Agreement shall be assumed by the Surviving Corporation in the Merger, without further action, at the Effective Time and shall survive the Merger and shall continue in full force and effect in accordance with their terms, and Parent shall ensure that the Surviving Corporation complies with and honors the foregoing obligations.

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          (b) In the event that the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all its properties and assets to any person, or if Parent dissolves the Surviving Corporation then, and in each such case, Parent shall cause proper provision to be made so that the successors and assigns of the Surviving Corporation assume the obligations set forth in this Section 5.05.

          (c) For six years after the Effective Time, Parent shall maintain in effect the Company’s current directors’ and officers’ liability insurance covering each person currently covered by the Company’s directors’ and officers’ liability insurance policy for acts or omissions occurring prior to the Effective Time on terms with respect to such coverage and amounts no less favorable than those of such policy in effect on the date of this Agreement; provided that Parent may substitute therefor policies of a reputable insurance company the material terms of which, including coverage and amount, are no less favorable to such directors and officers than the insurance coverage otherwise required under this Section 5.05(c); provided, however, that in no event shall Parent be required to pay annualized aggregate premiums for insurance under this Section 5.05(c) in excess of 200% of the amount of the aggregate premiums paid by the Company for the period from August 20, 2004 to, and including, August 20, 2005 for such purpose (which premiums for such period are hereby represented and warranted by the Company to be $154,530); provided that Parent shall nevertheless be obligated to provide such coverage as may be obtained for such 200% amount.

          (d) The provisions of this Section 5.05 (i) are intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and (ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise.

          SECTION 5.06. Fees and Expenses. (a) Except as expressly set forth in this Section 5.06, all fees and expenses incurred in connection with this Agreement, the Merger and the other transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated.

          (b) In the event that (i) (A) a Takeover Proposal has been publicly proposed by any person (other than Parent or any of its affiliates) or any such person has publicly announced an intention (whether or not conditional and whether or not withdrawn) to make a Takeover Proposal, or any such Takeover Proposal or intention otherwise becomes widely known to the stockholders of the Company, (B) thereafter this Agreement is terminated by either Parent or the Company pursuant to Section 7.01(b)(i) (but only if the Stockholders Meeting has not been held by the date that is five business days prior to the date of such termination) or 7.01(b)(iii) and (C) within 12 months after such termination, the Company or any of its subsidiaries enters into a definitive

agreement providing for, or consummates, any Takeover Proposal (solely for purposes of this Section 5.06(b)(i)(C), the term “Takeover Proposal” shall have the meaning set forth in the definition of Takeover Proposal contained in Section 4.02(a) except that all references to 15% shall be deemed references to 40%), (ii) this Agreement is terminated by Parent pursuant to Section 7.01(c) or (iii) this Agreement is terminated by the Company pursuant to Section 7.01(f), then the Company shall pay Parent a fee equal to $6,800,000 (the “Termination Fee”) by wire transfer of same day funds to an account designated by Parent (x) in the case of a termination by Parent pursuant to Section 7.01(c), within two business days after such termination, (y) in the case of a termination by the Company pursuant to Section 7.01(f), prior to or concurrently with such termination and (z) in the case of a payment as a result of any event referred to in Section 5.06(b)(i)(C), upon the first to occur of such events. The Company acknowledges that the agreements contained in this Section 5.06(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Parent would not enter into this Agreement; accordingly, if the Company fails promptly to pay the amounts due pursuant to this Section 5.06(b), and, in order to obtain such payment, Parent commences a suit that results in a judgment against the Company for the amounts set forth in this Section 5.06(b), the Company shall pay to Parent its reasonable costs and expenses (including attorneys’ fees and expenses) in connection with such suit and any appeal relating thereto, together with interest on the amounts set forth in this Section 5.06(b) at the prime rate of Citibank, N.A. in effect on the date such payment was required to be made.

          SECTION 5.07. Benefits Matters. Except as set forth below, following the Effective Time, the Surviving Corporation shall honor, or cause to be honored, all obligations of the Company and its subsidiaries under Benefit Agreements and Benefit Plans as of the Effective Time in accordance with the terms thereof. Nothing herein shall be construed to prohibit the Surviving Corporation from amending or terminating such Benefit Agreements and Benefit Plans in accordance with the terms thereof and with applicable Law.

          SECTION 5.08. Public Announcements. Parent and Sub, on the one hand, and the Company, on the other hand, shall not issue any press release with respect to this Agreement, the Merger the Stockholders Agreement and the other transactions contemplated hereby and thereby without the consent of the other party, except as may be required by applicable Law, court process or obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system, in which circumstances reasonable efforts to consult with the other party will still be required to the extent practicable. The parties agree that the initial press release to be issued with respect to the transactions contemplated hereby and all communications material to employees of the Company made on the day of the public announcement of the Merger shall be in the form heretofore agreed to by the parties. Parent and Sub, on the one hand, and the Company, on the other hand, shall, to the extent reasonably practicable, consult with each other before making, and give each other a reasonable

opportunity to review and comment upon, any public statements (other than press releases) with respect to this Agreement, the Merger, the Stockholders Agreement and the other transactions contemplated hereby and thereby, and shall not make any such public statement prior to such reasonably practicable consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system. Notwithstanding the foregoing, neither consent nor consultation shall be required if such press release or public statement relates to an Adverse Recommendation Change.

          SECTION 5.09. Sub Compliance. Parent shall cause Sub to comply with all of Sub’s obligations under this Agreement. Sub shall not engage in any business other than in connection with the transactions contemplated by this Agreement.

ARTICLE VI

Conditions Precedent

          SECTION 6.01. Conditions to Each Party’s Obligation to Effect the Merger. The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:

     (a) Stockholder Approval. The Stockholder Approval shall have been obtained.

     (b) Antitrust. Any waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have been terminated or shall have expired and any other material approval or waiting period under any other applicable competition, merger control, antitrust or similar law or regulation that is required to consummate the Merger shall have been obtained or terminated or shall have expired.

     (c) No Injunctions or Legal Restraints. No temporary restraining order, preliminary or permanent injunction or other Judgment issued by any court of competent jurisdiction or other legal restraint or prohibition (collectively, “Legal Restraints”) which has the effect of preventing the consummation of the Merger shall be in effect.

          SECTION 6.02. Conditions to Obligations of Parent and Sub. The obligations of Parent and Sub to effect the Merger are further subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:

     (a) Representations and Warranties. The representations and warranties of the Company contained herein that are qualified as to materiality or material adverse effect shall be true and correct (as so qualified), and the representations and warranties of the Company contained herein that are not so qualified shall be

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true and correct in all material respects, in each case, as of the date of this Agreement and as of the Closing Date with the same effect as though made as of the Closing Date, except that the accuracy of representations and warranties that by their terms speak as of a specified date will be determined as of such date, in each case other than any failures to be so true and correct that do not make it inadvisable, in the reasonable judgment of Parent, to proceed with the Merger. Parent shall have received a certificate signed on behalf of the Company by the chief executive officer and chief financial officer of the Company to such effect.

     (b) Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer and the chief financial officer of the Company to such effect.

     (c) No Litigation. There shall not be pending any claim, suit, action or proceeding brought or threatened by any Governmental Entity, (i) challenging or seeking to restrain or prohibit the consummation of the Merger; (ii) seeking to prohibit or limit in any respect, or place any conditions on, the ownership or operation by the Company, Parent or any of their respective affiliates of any portion of the business or assets or any product of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, or to require any such person to dispose of, license (whether pursuant to an exclusive or nonexclusive license) or hold separate any portion of the business or assets or any products of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole; (iii) seeking to impose limitations on the ability of Parent or any of its affiliates to acquire or hold, or exercise full rights of ownership of, any shares of common stock of the Surviving Corporation, including the right to vote the shares of common stock of the Surviving Corporation on all matters properly presented to the stockholders of the Surviving Corporation; or (iv) seeking to (x) prohibit Parent or any of its affiliates from effectively controlling in any respect the business or operations of the Company or its subsidiaries or (y) prevent the Company or its subsidiaries from operating their business in substantially the same manner as operated by the Company and its subsidiaries prior to the date of this Agreement.

     (d) Legal Restraint. No Legal Restraint that could reasonably be expected to result, directly or indirectly, in any of the effects referred to in clauses (i) through (iv) of paragraph (c) of this Section 6.02 shall be in effect.

     (e) Consents. Parent shall have received evidence, in form and substance reasonably satisfactory to it, that Parent or the Company shall have obtained all material consents, approvals, authorizations, qualifications and orders of all Governmental Entities legally required under applicable Law to effect the Merger.

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          SECTION 6.03. Conditions to Obligation of the Company. The obligation of the Company to effect the Merger is further subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:

     (a) Representations and Warranties. The representations and warranties of Parent and Sub contained herein that are qualified as to materiality shall be true and correct (as so qualified), and the representations and warranties of Parent and Sub contained herein that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date with the same effect as though made as of the Closing Date, except that the accuracy of representations and warranties that by their terms speak as of a specified date will be determined as of such date, in each case other than any failures to be so true and correct that do not make it inadvisable, in the reasonable judgment of the Company, to proceed with the Merger. The Company shall have received a certificate signed on behalf of Parent and Sub by an authorized signatory of Parent and Sub to such effect.

     (b) Performance of Obligations of Parent and Sub. Parent and Sub shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of Parent by an authorized signatory of Parent to such effect.

          SECTION 6.04. Frustration of Closing Conditions. None of the Company, Parent or Sub may rely on the failure of any condition set forth in Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was caused by such party’s failure to use commercially reasonable efforts to consummate the Merger and the other transactions contemplated by this Agreement, as required by and subject to Section 5.03.

ARTICLE VII

Termination, Amendment and Waiver

          SECTION 7.01. Termination. This Agreement may be terminated, and the Merger contemplated hereby may be abandoned, at any time prior to the Effective Time:

          (a) by mutual written consent of Parent, Sub and the Company;

          (b) by either Parent or the Company:

     (i) if the Merger shall not have been consummated by May 31, 2005 for any reason; provided, however, that the right to terminate this Agreement under this Section 7.01(b)(i) shall not be available to any party

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whose action or failure to act has been a principal cause of or resulted in the failure of the Merger to occur on or before such date and such action or failure to act constitutes a breach of this Agreement;

     (ii) if any Legal Restraint having the effect set forth in Section 6.01(c) shall be in effect and shall have become final and nonappealable; or

     (iii) if, upon a vote at a duly held Stockholders Meeting to obtain the Stockholder Approval, the Stockholder Approval shall not have been obtained;

     (c) by Parent in the event an Adverse Recommendation Change has occurred;

     (d) by Parent, (i) if any event shall have occurred which (A) would give rise to the inability of any condition set forth in Section 6.02(a) or (b) to be satisfied prior to May 31, 2005, and (B) has not been or is incapable of being cured by the Company within 30 calendar days after its receipt of written notice thereof from Parent; provided, however, that Parent shall not have the right to terminate this Agreement under clause (i) of this Section 7.01(d) if any breach of this Agreement by Parent shall have been a principal cause of the failure of such condition to be satisfied or (ii) if any Legal Restraint having any of the effects referred to in clauses (i) through (iv) of Section 6.02(c) shall be in effect and shall have become final and nonappealable;

     (e) by the Company, if any event shall have occurred which (i) would give rise to the inability of any condition set forth in Section 6.03(a) or(b) to be satisfied prior to May 31, 2005, and (ii) has not been or is incapable of being cured by Parent within 30 calendar days after its receipt of written notice thereof from the Company; provided, however, that the Company shall not have the right to terminate this Agreement under this Section 7.01(e) if any breach of this Agreement by the Company shall have been the principal cause of the failure of any such condition to be satisfied; or

     (f) by the Company in accordance with the terms and subject to the conditions of Section 4.02(b).

          SECTION 7.02. Effect of Termination. In the event of termination of this Agreement by either the Company or Parent as provided in Section 7.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Parent, Sub or the Company, other than the provisions of the last sentence of Section 5.02(a), Section 5.06, this Section 7.02 and Article VIII and except for any willful or intentional breach by a party of any of its representations, warranties, covenants or agreements set forth in this Agreement (which willful or intentional breach and

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liability therefor shall not be affected by termination of this Agreement or any payment of the Termination Fee pursuant to Section 5.06(b)).

          SECTION 7.03. Amendment. This Agreement may be amended by the parties hereto at any time, whether before or after the Stockholder Approval has been obtained; provided, however, that after the Stockholder Approval has been obtained, there shall be made no amendment that by Law requires further approval by stockholders of the parties without the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

          SECTION 7.04. Extension; Waiver. At any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto or (c) waive compliance with any of the agreements or conditions contained herein; provided, however, that after the Stockholder Approval has been obtained, there shall be made no waiver that by Law requires further approval by stockholders of the parties without the further approval of such stockholders. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure or delay by any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights nor shall any single or partial exercise by any party to this Agreement of any of its rights under this Agreement preclude any other or further exercise of such rights or any other rights under this Agreement.

ARTICLE VIII

General Provisions

          SECTION 8.01. Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 8.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time.

          SECTION 8.02. Notices. All notices, requests, claims, demands, waivers and other communications under this Agreement shall be in writing and shall be deemed given upon (a) personal delivery, (b) transmitter’s confirmation of a receipt of a facsimile transmission, (c) confirmed delivery by standard overnight carrier or when mailed in the United States by certified or registered mail, postage prepaid, addressed to the parties at the following addresses (or at such other address for a party as shall be specified by notice hereunder):

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if to Parent or Sub, to:

International Business Machines Corporation
New Orchard Road Avenue
Armonk, NY 10504
Facsimile No: (914)  ###-###-####

Attention: David L. Johnson

with a copy to:

International Business Machines Corporation
New Orchard Road Avenue
Armonk, NY 10504
Facsimile No: (914)  ###-###-####

Attention: Gregory C. Bomberger, Esq.

and with a copy to:

Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile No: (212)  ###-###-####

Attention: Scott A. Barshay, Esq.

if to the Company, to:

Corio, Inc.
959 Skyway Road, Suite 100
San Carlos, CA 94070
Facsimile No: (650)  ###-###-####

Attention: George Kadifa

with a copy to:

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Corio, Inc.
959 Skyway Road, Suite 100
San Carlos, CA 94070
Facsimile No: (650)  ###-###-####

Attention: General Counsel

and with a copy to:

Wilson Sonsini Goodrich & Rosati Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
Facsimile No: (650)  ###-###-####

Attention: Douglas H. Collom, Esq.
                    Michael S. Dorf, Esq.

          SECTION 8.03. Definitions. For purposes of this Agreement:

     (a) an “affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person;

     (b) as it relates to the Company, “knowledge” means, with respect to any matter in question, the actual knowledge after reasonable inquiry of the Company’s employees who would reasonably be expected to have knowledge of the matter in question, of the individuals listed on Section 8.03(b) of the Company Disclosure Letter; and

     (c) “material adverse effect” on or with respect to the Company means any state of facts, change, development, effect or occurrence (any such item, an “Effect”) that is materially adverse to the business, assets, liabilities, properties, condition (financial or otherwise) or results of operations of the Company and its subsidiaries, taken as a whole; provided, however, that in no event shall any of the following, alone or in combination, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been, or will be, a material adverse effect on or with respect to the Company; (i) actions or omissions of the Company or any of its subsidiaries taken with the prior written consent of Parent, (ii) any change in the price or trading volume of the Company Common Stock in and of itself (but not any Effect underlying such change), (iii) any Effect to the extent (A) resulting from changes affecting the United States economy in general or (B) generally affecting the industries in which the Company operates, except, in the case of this clause (iii)(B), if the impact on the

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Company’s business is materially disproportionate to the impact on the business of other entities operating in such industries, (iv) any Effect to the extent resulting from changes affecting general worldwide economic or capital market conditions or (v) any Effect that the Company has demonstrated is principally the result of the announcement or pendency of the Merger and the other transactions contemplated by the Merger Agreement (and not principally the result of any other circumstance).

     (d) “person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, Governmental Entity, unincorporated organization or other entity; and

     (e) a “subsidiary” of any person means another person (i) of which 50% or more of any class of capital stock, voting securities, other voting ownership or voting partnership interests (or, if there are no such voting interests, 50% or more of the equity interests) are owned or controlled, directly or indirectly, by such first person or (ii) of which such first person is a general partner.

          SECTION 8.04. Interpretation. When a reference is made in this Agreement to an Article or to a Section, Subsection, Exhibit or Schedule, such reference shall be to an Article of, a Section or Subsection of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “hereto”, “hereby”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “date hereof” shall refer to the date of this Agreement. The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms. Any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented. References to a person are also to its permitted successors and assigns. The qualification of a particular representation or warranty in this Agreement as to materiality or material adverse effect shall not affect in any way the meaning or interpretation of any other representation or warranty in this Agreement that relates to the same or a similar subject matter, notwithstanding the fact that such other representation or warranty is qualified by materiality or material adverse effect or is not so qualified.

          SECTION 8.05. Counterparts. This Agreement may be executed in one or more counterparts (including by telecopy), all of which shall be considered one and the

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same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

          SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries. This Agreement (a) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement, except for the Confidentiality Agreement and (b) except for the provisions of Section 5.05, is not intended to confer upon any person other than the parties hereto (and their respective successors and assigns) any rights or remedies (including any rights or remedies relating to Section 5.07 hereof).

          SECTION 8.07. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

          SECTION 8.08. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise by any of the parties hereto without the prior written consent of the other parties, except that Sub may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to Parent or to any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Sub of any of its obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by, the parties hereto and their respective successors and assigns.

          SECTION 8.09. Consent to Jurisdiction. Each of the parties hereto irrevocably and unconditionally submits to the exclusive jurisdiction of any Delaware State court, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby (and each agrees that no such action, suit or proceeding relating to this Agreement shall be brought by it or any of its affiliates except in such courts). Each of the parties hereto further agrees that, to the fullest extent permitted by applicable Law, service of any process, summons, notice or document by U.S. registered mail to such person’s respective address set forth above shall be effective service of process for any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the parties hereto irrevocably and unconditionally waives (and agrees not to plead or claim) any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in any Delaware State court, or that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

          SECTION 8.10. Waiver of Jury Trial. Each party hereto hereby waives, to the fullest extent permitted by applicable Law, any right it may have to a trial by jury in respect of any suit, action or other proceeding directly or indirectly arising out of, under or in connection with this Agreement. Each party hereto (a) certifies that no

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representative, agent or attorney of any other party has represented, expressly or otherwise, that such party would not, in the event of any action, suit or proceeding, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to enter into this Agreement, by, among other things, the mutual waiver and certifications in this Section 8.10.

          SECTION 8.11. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Delaware State court, this being in addition to any other remedy to which they are entitled at Law or in equity.

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          IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.

EXHIBIT A

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

OF

SURVIVING CORPORATION

ARTICLE I

          The name of the corporation (hereinafter called the “Corporation”) is Corio, Inc.

ARTICLE II

          The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware. The name of the registered agent at such address is The Corporation Trust Company.

ARTICLE III

          The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE IV

          The total number of shares of all classes of stock that the Corporation shall have authority to issue is 1,000 shares of Common Stock having the par value of $1.00 per share.

ARTICLE V

          The number of directors of the Corporation shall be fixed from time to time by the Board of Directors of the Corporation.

2

ARTICLE VI

          In furtherance and not in limitation of the powers conferred upon it by law, the Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation.

ARTICLE VII

          Unless and except to the extent that the Bylaws of the Corporation so require, the election of directors of the Corporation need not be by written ballot.

ARTICLE VIII

          To the fullest extent from time to time permitted by law, no director of the Corporation shall be personally liable to any extent to the Corporation or its stockholders for monetary damages for breach of his fiduciary duty as a director.

ARTICLE IX

          Each person who is or was or had agreed to become a director or officer of the Corporation, and each such person who is or was serving or who had agreed to serve at the request of the Corporation as a director, officer, partner, member, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise (including the heirs, executor, administrators or estate of such person), shall be indemnified by the Corporation to the fullest extent permitted from time to time by applicable law. Any repeal or modification of this Article X shall not adversely affect any right to indemnification of any person existing at the time of such repeal or modification with respect to any matter occurring prior to such repeal or modification.