AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

Execution Copy

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April

4, 2005, is entered into by and among John H. Harland Company, a Georgia

corporation ("Buyer"), Justice Acquisition Corporation, a Minnesota corporation

and wholly-owned subsidiary of Buyer ("Sub"), Liberty Enterprises, Inc., a

Minnesota corporation (the "Company"), the shareholders of the Company listed on

the signature page hereto (the "Controlling Shareholders") and David L. Copham

solely in the capacity as the shareholder representative as set forth in this

Agreement (the "Shareholders' Representative").

W I T N E S S E T H:

WHEREAS, the Boards of Directors of Buyer, Sub and the Company deem it

advisable and in the best interests of each respective corporation and its

shareholders that Buyer and the Company combine their businesses upon the terms

and conditions set forth herein;

WHEREAS, the combination of Buyer and the Company shall be effected by

the terms of this Agreement through a transaction in which Sub will merge with

and into the Company, the Company will become a wholly-owned subsidiary of Buyer

and the shareholders of the Company (the "Company Shareholders") will receive

cash (the "Merger"); and

WHEREAS, the parties intend and acknowledge that the Merger will be

treated in accordance with the election under Section 338(h)(10) of the Internal

Revenue Code of 1986, as amended (the "Code");

NOW, THEREFORE, in consideration of the foregoing and the

representations, warranties, covenants and agreements contained in this

Agreement, and intending to be legally bound hereby, the parties hereto agree as

follows:

ARTICLE I

THE MERGER

Section 1.1. Effective Time of the Merger.

(a) Subject to the provisions of this Agreement, articles of merger (the

"Articles of Merger") in substantially the form attached hereto as Exhibit A and

as required by the Minnesota Business Corporation Act ("Minnesota Law") shall be

executed by Sub and the Company and filed with the Secretary of State of the

State of Minnesota on the Closing Date.

(b) The Merger shall become effective upon the filing of the Articles

of Merger with the Minnesota Secretary of State (the "Effective Time").

Section 1.2. Closing. The closing of the Merger (the "Closing") will

take place at 10:00 a.m., Central time, on the date which is as soon as

reasonably practicable after the satisfaction or waiver of the conditions to

Closing set forth in Article VI, but in no event more than 10 days after such

satisfaction or waiver (the "Closing Date"), at the offices of Maslon Edelman

Borman & Brand, LLP or at such other place and time as may be mutually agreed

by the Company and Buyer.

Section 1.3. Effects of the Merger.

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(a) At the Effective Time Sub shall merge with and into the Company,

the separate existence of Sub shall cease, and the Company shall continue as the

surviving corporation and shall become a wholly-owned subsidiary of Buyer (the

Company following consummation of the Merger is sometimes referred to herein as

the "Surviving Corporation"). In addition, the Articles of Incorporation of the

Sub in effect immediately prior to the Effective Time shall become the Articles

of Incorporation of the Surviving Corporation and the Bylaws of the Sub in

effect immediately prior to the Effective Time shall become the Bylaws of the

Surviving Corporation.

(b) At the Effective Time, the effect of the Merger shall be as

provided by the applicable provisions of Minnesota Law.

Section 1.4. Directors and Officers. The directors of Sub immediately

prior to the Effective Time shall become the directors of the Surviving

Corporation, each to hold office in accordance with the Articles of

Incorporation and Bylaws of the Surviving Corporation, and the officers of Sub

immediately prior to the Effective Time shall become the officers of the

Surviving Corporation, in each case until their respective successors are duly

elected or appointed and qualified.

Section 1.5. Section 338(h)(10) Election; Purchase Price Allocation.

(a) Election. Buyer and all Company Shareholders shall join in the

making of a timely election under Section 338(h)(10) of the Code, Treasury

Regulations 1.338(h)(10)-1T, and similar provisions of state law with respect

to the purchase and sale of the Common Stock, $.01 par value ("Company Shares"),

of the Company (the "Section 338(h)(10) Election").

(b) Forms. Buyer (at its sole cost and expense) shall prepare, execute

and deliver to the Shareholders' Representative, who shall arrange for all

Company Shareholders (with respect to the Company and any Purchased Entity that

will become a C corporation as a result of the consummation of the Merger), to

execute and deliver to Buyer, IRS form 8023, which form shall be prepared,

executed and delivered by Buyer to the Shareholders' Representative as soon as

practical after the execution of this Agreement. In addition, Buyer (at its sole

cost and expense) shall prepare, execute and deliver to the Shareholders'

Representative, who shall arrange for all Company Shareholders to execute and

deliver to Buyer, such other documents and forms as Buyer shall reasonably

request or as are required by applicable law for an effective Section 338(h)(10)

Election, including, without limitation, IRS form 8883 (together with any

schedules or attachments thereto) or any successor form required pursuant to

applicable Treasury regulations. The content of any IRS form 8883 to be filed by

the Buyer shall be subject to the terms of Section 1.5(c) hereof. The content of

any document or form contemplated by this Section 1.5(b), other than IRS form

8023 or IRS form 8883, shall be subject to the Company Shareholders' consent,

which consent will not be unreasonably withheld or delayed.

(c) Purchase Price Allocation. Within 90 days after the Closing Date,

Buyer shall provide the Shareholders' Representative with an interim proposed

schedule (the "Allocation Schedule") allocating the Aggregate Merger

Consideration, as defined in Section 2.1(d), plus any assumed liabilities and

all other items comprising the "Aggregate Deemed Sale Price" of the Company's

assets ("ADSP"), in each case that are apportioned to the purchase of the

Company Shares (the "Section 338(h)(10) Allocable Amount"), among the assets

deemed to be sold as a result of the making of the Section 338(h)(10) Election.

Such ADSP and Allocation Schedule shall comply with the rules of Section 338 of

the Code and the Treasury Regulations promulgated thereunder; provided, however,

that the parties agree that the fair market value of both the Company's tangible

personal property (other than inventory) and the Company's other personal

property acquired by the Company prior to the Effective Time (other than cash,

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accounts receivable, prepaid expenses and the Company's investment in Cavion LLC

("Cavion")), does not exceed $13,000,000. The Shareholders' Representative must

either accept or reject the ADSP and the Allocation Schedule within 30 days of

receipt thereof. If the Shareholders' Representative accepts the ADSP and the

Allocation Schedule, it shall become final and binding on the parties hereto. If

the Shareholders' Representative rejects the ADSP and the Allocation Schedule,

the parties shall in good faith attempt to resolve the dispute within 15 days

after written notice to Buyer of that rejection. Any such resolution shall be

final and binding on all of the parties hereto. Any unresolved disputes shall be

promptly submitted to Ernst & Young LLP or such other independent accounting

firm of national reputation as may be mutually acceptable to the Shareholders'

Representative and Buyer (the "Independent Accountants") for resolution, with

such resolution being final and binding on the parties hereto. Buyer, on the one

hand, and the Shareholders' Representative (from the Escrow Fund), on the other

hand, will each pay one-half of the fees and expenses of the Independent

Accountants. The parties shall cooperate with each other and the Independent

Accountants in connection with the matters contemplated by this Section 1.5(c),

including, without limitation, by furnishing such information and access to

books, records (including, without limitation, accountants work papers),

personnel and properties as may be reasonably requested.

(d) Revisions. The parties hereto will revise the Allocation Schedule

to the extent necessary to reflect any indemnification payment made under

Article VIII hereof or any other post-Closing payment made pursuant to or in

connection with this Agreement. In the case of any such payment, Buyer shall

propose a revised Allocation Schedule, and the parties hereto shall follow the

procedures outlined above with respect to review, dispute and resolution in

respect of such revision.

(e) Consistent Treatment. Each of the parties hereto agrees to (a)

prepare and timely file all Tax Returns, as defined in Section 3.9, including,

without limitation, form 8023 (and all supplements thereto) in a manner

consistent with the Allocation Schedule as finalized and (b) act in accordance

with the Allocation Schedule for all Tax (as such term is defined in Section

3.9) purposes.

(f) Taxes Resulting from Election. All Company Shareholders shall

include any income, gain, loss, deduction or other Tax item resulting from the

Section 338(h)(10) Election on their Tax Returns to the extent required by

applicable law. Notwithstanding any other provision to the contrary in this

Agreement, each Company Shareholder shall be responsible for and shall pay all

Taxes imposed on such respective Company Shareholder resulting from the Section

338(h)(10) Election (the "Section 338(h)(10) Election Taxes").

(g) Expenses of Election. The Company Shareholders, on a pro-rata

basis, shall reimburse Buyer for all Taxes, costs and expenses associated with

or resulting from the Section 338(h)(10) Election applicable to the Company or

any of the Purchased Entities, including but not limited to any transfer Taxes,

deed Taxes, filing fees, sales Taxes, personal property Taxes, real estate Taxes

and income Taxes (the "Shareholder Entity Taxes"), other than any Taxes payable

by the Company Shareholders pursuant to the obligation set forth in Section

1.5(f) above. The Shareholder Entity Tax obligations will be satisfied pursuant

to Section 2.1(d).

ARTICLE II

CONVERSION OF STOCK

Section 2.1. Conversion of Common Stock; Merger Consideration.

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At the Effective Time, by virtue of the Merger and without any further approval

of the holders of any shares of capital stock of the Company or Sub:

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(a) Common Stock of Sub. Each outstanding share of common

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stock of Sub shall be converted into and become one fully paid and

nonassessable share of common stock of the Surviving Corporation.

(b) Cancellation of Certain Shares. Any Company Shares that are owned

immediately prior to the Effective Time by Buyer, Sub, the Company or any

subsidiary thereof shall be canceled and retired and shall cease to exist and no

consideration shall be delivered in exchange therefor.

(c) Conversion of Company Shares. Each Company Share outstanding

immediately prior to the Effective Time (other than any Dissenting Shares, as

defined below) shall be converted, without any action on the part of the holder

thereof, into the right to receive in cash an amount equal to the final

computation of the Aggregate Merger Consideration (as defined below) divided by

the number of Company Shares outstanding immediately prior to the Effective Time

(including the Dissenting Shares) (the "Per Share Merger Consideration"),

without interest, and each Dissenting Share shall be converted into the right to

receive payment from the Surviving Corporation with respect thereto in

accordance with the provisions of Minnesota Law. No Company Share shall be

deemed to be outstanding or to have any rights other than those set forth above

in this Section 2.1(c) after the Effective Time. At and after the Effective

Time, each Company Shareholder shall cease to have any rights as a shareholder

of the Company and, until surrendered in accordance with the provisions of

Section 2.4 below, each certificate representing Company Shares

("Certificates"), other than Certificates representing Dissenting Shares, shall

represent for all purposes only the right to receive the Per Share Merger

Consideration for each Company Share represented thereby.

(d) Merger Consideration. The total consideration payable for the

Company Shares in the Merger (the "Aggregate Merger Consideration") shall equal

$160,000,000, plus all cash and cash equivalents held by the Company as of the

Closing Date, minus: (1) all Indebtedness for Borrowed Money (as defined below),

(2) the amounts owed by the Company, unless paid prior to the Closing, as a

result of the Merger pursuant to (i) the engagement agreement between the

Company and Duff & Phelps, LLC (formerly, Valuemetrics Capital, L.L.C.) dated

September 2, 2004 and amended on October 25, 2004; (ii) the Liberty Enterprises,

Inc. Directors' Equity Share Incentive Plan, effective January 1, 2005; (iii)

any executive transaction success bonuses due to the Company's Chief Executive

Officer, Chief Financial Officer, Executive Vice President - Sales and Executive

Vice President - Marketing as determined by the Company's Board of Directors

("Success Bonuses") and the project bonuses due two employees in the aggregate

amount of $40,000; (iv) all fees and expenses payable by the Company to its

legal, accounting, tax and other professional advisors and, to the extent

applicable, the amounts payable by the Company to the trustee, financial advisor

and legal advisor of the Company ESOP (as defined in Section 3.2), all in

connection with the transactions contemplated by this Agreement incurred prior

to the Closing Date ("Professional Fees"); (v) the Change of Control,

Confidentiality and Noncompete Agreement between the Company and David Copham

dated December 15, 2004 if such agreement is in effect on the Closing Date; and

(vi) the cost and expense of the Tax Insurance (as defined in Section 8.1(b)),

and (3) the estimated Shareholder Entity Taxes. To the extent the Tax Insurance

is paid for by any person other than the Company, the Company shall reimburse

such person on the Closing Date. The Professional Fees and the Shareholder

Entity Taxes will be estimated by the Company on the Closing Date. Within 30

days after the Closing Date the Shareholders' Representative and Buyer will

determine the final amount of the Professional Fees (the "Final Expenses"). If

the Final Expenses are less than the Closing estimate, Buyer shall promptly pay

the difference to the Shareholders' Representative for distribution to the

Controlling Shareholders. If the Final Expenses are more than the Closing

estimate, Buyer shall have the right to obtain reimbursement for the difference

from the Escrow Fund, without giving effect to the Threshold set forth in

Section 8.1(b). As soon as the Shareholder Entity Taxes are ascertained and

agreed to by Buyer and the Shareholders' Representative, then if the final

Shareholder Entity Taxes are less than the Closing estimate, Buyer will refund

the over-estimate to the Shareholders' Representative for distribution to the

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Controlling Shareholders and if the final Shareholder Entity Taxes are more than

the Closing estimate, the Shareholders' Representative will pay to Buyer the

under-estimate from the Escrow Fund. "Indebtedness for Borrowed Money" shall

mean (i) the amount owed to Bank One, NA (successor by merger to Bank One,

Wisconsin) as of the Closing Date pursuant to that certain Credit and Term Loan

Agreement dated as of August 28, 2000, as amended, between Bank One, NA and the

Company, and (ii) any other indebtedness for borrowed money of the Company as of

the Closing Date all of which is set forth on Schedule 2.1(d).

Section 2.2. Escrow Fund. Notwithstanding any provision of Section

2.1, at the Effective Time, Buyer shall deliver to SunTrust Bank (the "Escrow

Agent") $8,000,000 in cash (the "Escrow Fund") by wire transfer, to be held and

distributed by the Escrow Agent pursuant to the terms of the Escrow Agreement

substantially in the form attached as Exhibit B hereto (the "Escrow Agreement").

The Escrow Fund shall be withheld pro rata from the Per Share Merger

Consideration otherwise deliverable to the Controlling Shareholders in respect

of their Company Shares. The parties agree that the Controlling Shareholders

are, and shall be treated as, the owners of the Escrow Fund, together with any

earnings thereon, for federal and state income tax purposes and that the

Controlling Shareholders shall, except as may otherwise be provided in the

Escrow Agreement, include in taxable income any earnings on the Escrow Fund on a

pro-rata basis in accordance with their ownership of Company Shares prior to the

Effective Time. Each of the parties hereto which is a party to the Escrow

Agreement agrees to execute and deliver the Escrow Agreement on the Closing

Date, and Buyer agrees to cause the Escrow Agent to execute and deliver the

Escrow Agreement on the Closing Date.

Section 2.3. Dissenting Shares.

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(a) Notwithstanding any provision of this Agreement to the contrary,

any Company Shares held by a Company Shareholder who has exercised such holder's

dissenting rights in accordance with Minnesota Law and who, as of the Effective

Time, has not effectively withdrawn or lost such dissenting rights ("Dissenting

Shares"), shall not be converted into or represent the right to receive any

consideration under this Agreement, and such holder shall only be entitled to

such rights as are granted by Minnesota Law.

(b) Notwithstanding the provisions of Section 2.3(a), if any holder of

Dissenting Shares, after the Effective Time, withdraws such holder's demand for

dissenting rights for such Dissenting Shares or waives or loses dissenting

rights, in either case pursuant to Minnesota Law, such holder's Dissenting

Shares shall thereupon be deemed to have been converted, as of the Effective

Time, into the right to receive the Per Share Merger Consideration with respect

to such Dissenting Shares in accordance with Section 2.1(c), without interest,

which amount shall be paid by Buyer, subject to Section 2.4, upon the later of

the Closing or five (5) days after such dissenting rights lapse.

(c) The Company shall give Buyer (i) prompt notice of any written

demands for dissenting rights pursuant to Minnesota Law, withdrawals of such

demands, and any other instruments that relate to such demands received by the

Company and (ii) subject to Minnesota Law, the opportunity to participate at its

own expense in all negotiations and proceedings with respect to demands for

dissenting rights. The Company shall not voluntarily make any payment with

respect to any demands for dissenting rights or offer to settle or compromise

any such demands without Buyer's consent.

Section 2.4. Exchange of Certificates.

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(a) The Company shall use its best efforts to cause each holder of

Company Shares to deliver to Buyer at the Closing such shareholder's

Certificate. At the Closing, Buyer or the Surviving Corporation shall deliver to

each Company Shareholder who has previously delivered a Certificate the Per

Share Merger Consideration issuable in respect of such shareholder's

Certificate, less, with respect to the Controlling Shareholders only, such

shareholder's pro-rata share of the Escrow Fund (the "Closing Per Share Merger

Consideration"), by wire transfer of immediately available funds to an account

designated in writing by such shareholder to Buyer.

(b) If any Company Shareholder does not deliver his or her Certificate

at or prior to the Closing, then from and after the Effective Time, each holder

of an outstanding Certificate shall have the right to surrender such Certificate

to Buyer and receive promptly (and in any event within 10 days) in exchange

therefor the Closing Per Share Merger Consideration payable in respect of such

Certificate. Until surrendered, each outstanding Certificate that prior to the

Effective Time represented Company Shares shall be deemed for all corporate

purposes to evidence ownership of the Per Share Merger Consideration

attributable to the surrendered Company Shares, but shall, subject to applicable

dissenting rights under Minnesota Law and Section 2.3, have no other rights.

From and after the Effective Time, there shall be no further registration of

transfers on the records of the Company of any Company Shares.

(c) In the event any Certificate shall have been lost, stolen or

destroyed, upon the making of an appropriate affidavit of that fact, Buyer

shall pay in exchange for such Certificate the Closing Per Share Merger

Consideration upon receipt of such affidavit and such shareholder will be

entitled to the Per Share Merger Consideration for each such Company Share,

subject to the terms of this Agreement and the Escrow Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Buyer that:

Section 3.1. Organization and Standing.

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(a) The Company and each of its subsidiaries (i) is a corporation duly

organized, validly existing and in good standing under the laws of the state of

its incorporation, (ii) has all corporate power and authority to own, lease and

operate its properties and assets and to carry on its business as presently

conducted, (iii) is qualified as a foreign corporation to do business and is in

good standing under the laws of each jurisdiction in which the conduct of its

business or the ownership or leasing of its properties or assets requires such

qualification, except for such jurisdictions where the failure to be so

qualified does not have a Material Adverse Effect (as defined below), and (iv)

has all necessary government approvals to own, lease and operate its properties

and assets and to carry on its business as presently conducted, except where the

failure to have such approvals does not have a Material Adverse Effect. Schedule

3.1 sets forth a complete and accurate list of each of the Company's

subsidiaries and the jurisdictions in which they are qualified to do business.

For purposes of this Agreement, a "Material Adverse Effect" shall mean a

material adverse effect on the financial condition, operations, assets or

liabilities of the Company or such subsidiary or the ability of the Company to

consummate the transactions contemplated by this Agreement; provided, however,

that in no event shall either of the following be deemed to constitute, nor

shall they be taken into account in determining whether there has been or will

be a Material Adverse Effect: (i) any changes affecting the industry in which

the Company operates or any changes in general economic conditions that do not

disproportionately impact in any material respect the Company, or (ii) any

action required by this Agreement or to which Buyer has given its prior written

consent.

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(b) The Company has made available for Buyer's review complete and

correct copies of its Articles of Incorporation (the "Company Articles of

Incorporation") and Bylaws (the "Company Bylaws"), each as amended to date. The

Company Articles of Incorporation and the Company Bylaws are in full force and

effect, and the Company is not in violation of any material provision of either

thereof.

(c) The minutes of the meetings of the directors and shareholders and

the stock records of the Company previously made available for review by Buyer

are complete and accurate records of such meetings, through the date hereof.

Section 3.2. Capitalization. The capital stock of the Company consists

of 10,000,000 authorized shares of capital stock, $.01 par value, of which

2,300,644 voting and 2,213,775 non-voting common shares are issued and

outstanding. As of immediately prior to the Effective Time, (i) the issued and

outstanding Company Shares will be held of record by the Controlling

Shareholders and by the Employee Stock Ownership Plan component of the Liberty

Shares Freedom Plan (the "Company ESOP") as set forth in Schedule 3.2, (ii) such

shares will constitute all of the issued and outstanding capital stock of the

Company, and (iii) all of such shares will be validly issued, fully paid and

nonassessable and free of preemptive rights. The Company does not have any

outstanding options, warrants, convertible securities, subscriptions, stock

appreciation rights, phantom stock rights or other agreements or commitments

obligating the Company to issue or sell any shares of capital stock of the

Company. All issuances, transfers, purchases or redemptions of the capital stock

of the Company have been in compliance in all material respects with all

applicable agreements and United States federal, state or local statutes, laws,

rules, regulations, ordinances, codes, orders, decrees or other requirements or

rules of law ("Laws"). Except as set forth in Schedule 3.2, there are no

outstanding obligations of the Company to repurchase, redeem or otherwise

acquire any Company Shares or to pay any dividend or make any other distribution

in respect thereof.

Section 3.3. Authority for Agreement.

(a) The Company has all necessary corporate power and authority to

execute and deliver this Agreement, and subject to the approval of the Merger

by the holders of the Company Shares, to perform its obligations hereunder and

to consummate the transactions contemplated hereby. The execution, delivery and

performance by the Company of this Agreement, and the consummation by the

Company of the transactions contemplated hereby, have been duly authorized by

all necessary corporate action, other than the approval of the Merger and the

adoption of this Agreement by the holders of the Company Shares and the approval

of the Articles of Merger as contemplated by Section 1.1. This Agreement has

been duly executed and delivered by the Company and constitutes a valid and

binding obligation of the Company enforceable against the Company in accordance

with its terms, except as enforcement thereof may be limited by (i) bankruptcy,

insolvency, reorganization, moratorium and similar laws affecting the

enforcement of creditors' rights or remedies in general as from time to time in

effect or (ii) the exercise by courts of equity powers.

(b) The Controlling Shareholders have the right, power and capacity to

execute, deliver and perform this Agreement and to consummate the transactions

contemplated hereby. This Agreement has been duly executed and delivered by the

Controlling Shareholders and constitutes a valid and binding obligation of the

Controlling Shareholders enforceable against each of them in accordance with its

terms.

Section 3.4. No Conflict.

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(a) Except as disclosed on Schedule 3.4, the execution and delivery of

this Agreement by the Company do not, and, subject to the terms of this

Agreement, the performance of this Agreement by the Company and the consummation

of the transactions contemplated hereby will not, (i) conflict with or violate

the Company Articles of Incorporation or Company Bylaws, (ii) conflict with or

violate in any material respect any Law applicable to the Company or by which

any property or asset of the Company is bound or affected, or (iii) result in a

breach of or constitute a default under any agreement to which the Company is a

party or by which it is bound, except for any such breaches or defaults which in

the aggregate would not reasonably be expected to have a Material Adverse Effect

on the Company.

(b) Except as disclosed on Schedule 3.4, the execution and delivery of

this Agreement by the Controlling Shareholders do not, and the performance by

the Controlling Shareholders of their obligations under this Agreement and the

consummation of the transactions contemplated hereby will not, (i) violate in

any material respect any provision of any Law applicable to the Controlling

Shareholders, or (ii) violate or conflict with in any material respect, or

result in a material breach or default under, any term or condition of any court

order, agreement, document or other instrument to which any Controlling

Shareholder is a party or by which any Company Shares held by a Controlling

Shareholder are bound.

Section 3.5. Required Filings and Consents. The execution

and delivery of this Agreement by the Controlling Shareholders and the Company

do not, and the performance of this Agreement by the Controlling Shareholders

and the Company will not, require any consent, approval, authorization or permit

of, or filing with or notification to, any United States federal, state or local

or any foreign government or any court, administrative or regulatory agency or

commission or other governmental authority or agency, domestic or foreign (a

"Governmental Entity"), except for (i) the filing of the Articles of Merger with

the Minnesota Secretary of State, (ii) those required by the Hart-Scott-Rodino

Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (iii) such

other consents, approvals, authorizations, permits, filings or notifications by

or with any Governmental Entity, which in the aggregate, if not obtained or

made, would not reasonably be expected to have a Material Adverse Effect on the

Company.

Section 3.6. Compliance. The Company (i) has been operated in

compliance in all material respects with all Laws applicable to the Company or

by which any property or asset of the Company is bound or affected, and (ii)

is not in default or violation in any material respect of any note, mortgage,

indenture, contract, lease, license, permit, franchise or other agreement to

which the Company is a party or by which any property or asset of the Company

is bound, except for any noncompliance, defaults or violations which in the

aggregate would not reasonably be expected to have a Material Adverse Effect on

the Company.

Section 3.7. Financial Statements; Absence of Undisclosed Liabilities.

Schedule 3.7 sets forth (i) the audited consolidated balance sheet of the

Company as of December 31, 2004, the related consolidated statements of income

and cash flows for the year then ended and the footnotes related thereto,

together with the audit report of Grant Thornton LLP, and (ii) the audited

consolidated balance sheet of the Company as of December 31, 2003, the related

consolidated statements of income and cash flows for the year then ended and the

footnotes related thereto, together with the audit report of

PricewaterhouseCoopers LLP (collectively, the "Financial Statements"). The

Financial Statements (i) have been prepared in accordance with generally

accepted accounting principles ("GAAP") consistently applied throughout the

periods indicated, (ii) have been prepared from, and are in accordance with,

the books and records of the Company, and (iii) present fairly, in all material

respects, the financial position of the Company as of each balance sheet date

and the results of its operations for the periods indicated. To the Company's

Knowledge (as defined in Section 3.9), the Company has not incurred any material

debt, Indebtedness for Borrowed Money, liability or obligation of any nature,

whether accrued, absolute, contingent or otherwise, that would reasonably be

xpected to have a Material Adverse Effect, except (i) as reflected or reserved

against in the Financial Statements, (ii) those arising in the ordinary course

of business of the Company, or (iii) as reflected on any Schedule to this

Agreement.

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Section 3.8. Absence of Certain Changes or Events. Except as

contemplated by this Agreement or disclosed on Schedule 3.8, since December 31,

2004 the Company has conducted its business only in the ordinary course and

consistent with prior practice, and there has not been (i) any event that has

had or would reasonably be expected to have a Material Adverse Effect, (ii) any

declaration or payment of any dividend or other distribution with respect to the

capital stock of the Company other than tax dividends in the ordinary course of

business, (iii) any material change in accounting methods, principles or

practices employed by the Company, or (iv) any action of the type described in

Sections 5.1(b) or 5.1(c) which if taken after the date of this Agreement would

be in violation of either such Section.

Section 3.9. Tax Matters.

(a) All Tax Returns required to be filed by or on behalf of the Company

or any of its direct or indirect, partly or wholly-owned subsidiaries, including

interests in partnerships, trusts and limited liability companies (collectively

with the Company referred to as "Purchased Entities") have been duly and timely

filed with the appropriate Governmental Entity in all jurisdictions in which

such Tax Returns are required to be filed (after giving effect to any valid

extensions of time in which to make such filings), and all such Tax Returns are

true, complete and correct in all material respects. All Taxes (whether or not

shown on any Tax Return) payable by or on behalf of any Purchased Entity have

been timely paid. With respect to any period for which Tax Returns of or

relating to any Purchased Entity have not yet been filed or for which Taxes are

not yet due or owing as of December 31, 2004, the relevant Purchased Entity has

made adequate accruals for such Taxes on the face of the December 31, 2004

balance sheet included in the Financial Statements and on its books and records.

(b) Each Purchased Entity has complied in all material respects with

all applicable Laws relating to the payment and withholding of Taxes and has

duly and timely withheld and paid over to the appropriate Governmental Entity

all amounts required to be so withheld and paid under all applicable Laws.

(c) Buyer has been given the opportunity to review complete copies of

all federal, state, local and foreign income or franchise Tax Returns of each

Purchased Entity that have been filed for the taxable periods ended December 31,

2001 and thereafter.

(d) Except as disclosed on Schedule 3.9(d), there have been no audits

or notice of pending audits or inquiries by the IRS or any other Governmental

Entity within the last four years relating to any Taxes due from or with respect

to any Purchased Entity. No issue has been raised by a Governmental Entity in

any prior examination of any Purchased Entity that, by application of the same

or similar principles, could reasonably be expected to result in a proposed

deficiency for any subsequent taxable period. No claim has been made or, to the

Knowledge of the Company, threatened by a Governmental Entity in a jurisdiction

where any Purchased Entity does not file Tax Returns that a Purchased Entity is

or may be subject to taxation by that jurisdiction. Except as set forth on

Schedule 3.9(d), none of the Purchased Entities has consented to extend the

statute of limitations with respect to any Tax.

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(e) None of the Controlling Shareholders or the Company ESOP, the

Purchased Entities or any other person on their behalf has filed a consent

pursuant to Section 341(f) of the Code (as in effect prior to the repeal under

the Jobs and Growth Tax Reconciliation Act of 2003) or agreed to have Section

341(f)(2) of the Code (as in effect prior to the repeal under the Jobs and

Growth Tax Reconciliation Act of 2003) apply to any disposition of a subsection

(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by

any Purchased Entity.

(f) None of the Controlling Shareholders, the Company ESOP, the

Purchased Entities or any other person on their behalf: (i) is required to make

any adjustments pursuant to Section 481(a) of the Code or any similar provision

of Law or has any Knowledge that any Governmental Entity has proposed any such

adjustment, or has any application pending with any Governmental Entity

requesting permission for any changes in accounting methods that relate to any

Purchased Entity, (ii) has executed or entered into a closing agreement pursuant

to Section 7121 of the Code or any similar provision of Law with respect to any

Purchased Entity, or (iii) has granted to any Person any power of attorney that

is currently in force with respect to any Tax matter.

(g) The Company has not been a U.S. real property holding corporation within the

meaning of Section 897(c)(2) of the Code during the applicable period specified

in Section 897(c)(1)(A)(ii) of the Code.

(h) None of the Purchased Entities is a party to any tax sharing, allocation,

indemnity or similar agreement or arrangement (whether or not written) pursuant

to which it will have any obligation to make any payments after the Closing.

Except as disclosed on Schedule 3.9(h), none of the Purchased Entities has ever

been a member of any consolidated, combined, affiliated or unitary group of

corporations for any Tax purposes. None of the Purchased Entities is subject to

any private letter ruling of the IRS or comparable rulings of any foreign, state

or local Governmental Entity that has been directed specifically to the

Purchased Entity.

(i) There are no Liens (as defined below), other than Permitted Liens (as

defined below), as a result of any unpaid Taxes upon any of the assets of any

Purchased Entity.

(j) Schedule 3.9(j) sets forth each corporation in which the Company either

currently or previously has held shares, directly or indirectly. Except as set

forth in Schedule 3.9(j), each of the entities set forth on Schedule 3.9(j)

(each, a "Schedule 3.9(j) Entity") is or was (prior to its sale or dissolution),

as appropriate, a qualified subchapter S subsidiary within the meaning of

Section 1361(b)(3)(B) of the Code. Except as set forth on Schedule 3.9(j), each

Schedule 3.9(j) Entity is or was (prior to its sale or dissolution), as

appropriate, a qualified subchapter S subsidiary in all states (including the

District of Columbia) that follow Federal income Tax laws concerning qualified

subchapter S subsidiaries and in which the Company is required to file a Tax

Return.

(k) Schedule 3.9(k) sets forth each partnership, limited liability company or

other entity, foreign or domestic, in which the Company has owned any equity

interest (other than marketable securities) since December 31, 1997. Except as

noted on Schedule 3.9(k), each entity set forth therein is or was (prior to its

sale or dissolution), as appropriate, either (i) properly treated as a

disregarded entity under Treasury Regulations Section 301.7701-3 and under

similar provisions of state or local law in each jurisdiction where such entity

is or was required to file a Tax Return, or (ii) properly treated as a

partnership under Subchapter K of the Code and in each jurisdiction where such

entity is or was required to file a Tax Return.

(l) The Company has been a validly electing S corporation within the meaning of

Sections 1361 and 1362 of the Code at all times from December 31, 1997 through

the Closing Date. Except as set forth on Schedule 3.9(l), at all times from

December 31, 1997 through the Closing Date the Company has been a valid S

corporation in all states (including the District of Columbia) that follow

Federal income Tax laws concerning S corporation elections and in which the

Company is required to file a Tax Return.

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(m) Schedule 3.9(m) sets forth each trust, estate or any other person who is not

an individual that has owned any capital stock in the Company and the period for

which the stock was owned. Each trust listed on Schedule 3.9(m) is a trust

described in Section 1361(c)(2)(A)(i) or Section 1361(c)(6) of the Code. All of

the Company Shareholders are permitted shareholders of an S corporation within

the purview of Section 1361(b)(1)(B) and (C) of the Code.

(n) The Company does not have more than one class of stock within the meaning of

Section 1361(b)(1)(D) of the Code.

(o) The Company has not, since January 1, 1998, acquired assets from another

corporation in a transaction in which the Company's Tax basis for the acquired

assets was determined, in whole or in part, by reference to the Tax basis of the

acquired assets in the hands of the transferor.

(p) No Purchased Entity has constituted either a "distributing corporation" or a

"controlled corporation" (within the meaning of Section 355(a)(1)(A) of the

Code) during a distribution of stock qualifying for tax-free treatment under

Section 355 of the Code (A) in the two years prior to the date of this Agreement

or (B) in a distribution which 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 transactions contemplated by this Agreement.

(q) There is no taxable income of any Purchased Entity that will be required

under applicable Tax Law to be reported by any Purchased Entity for a taxable

period beginning after the Closing Date which taxable income was realized prior

to the Closing Date.

(r) None of the Purchased Entities has participated in any reportable

transaction, as defined in Treasury Regulation Section 1.6011-4(b)(1), or a

transaction substantially similar to a reportable transaction.

(s) None of the Purchased Entities has, or has ever had, a permanent

establishment in any country other than the United States, or has engaged in a

trade or business in any country other than the United States that subjected it

to Tax in such country.

(t) The Company is not subject to the tax imposed under Section 1374(a) of the

Code or under similar provisions of state or local law on recognized built-in

gains arising from its S election effective December 31, 1997.

(u) The Company

has not made and is not required to make any payment that would constitute an

"excess parachute payment" within the meaning of Section 280G of the Code.

(v) For purposes of this Agreement:

(i) "Tax" means any applicable federal, state, local or

foreign income, sales, use, gross receipts, license, payroll,

employment, excise, capital stock, franchise, withholding, social

security, disability, real or personal property, escheat, unclaimed

property, value added or other tax or claim of any kind whatsoever,

including any interest, penalty or addition thereto, as required by

applicable law.

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(ii) "Tax Return" means any report, return, declaration or

other information required to be supplied to a Governmental Entity by

applicable law in connection with Taxes, including estimated returns,

tax shelter disclosure and reportable transactions regulations and

reports of every kind with respect to Taxes, as required by applicable

law.

(iii) "Knowledge" means when used with respect to a natural

person, the actual knowledge of such person. "Knowledge" means when

used with respect to an entity that is not a natural person, the actual

knowledge of the executive officers of such entity. With respect to the

Company, its executive officers for purposes of this definition of

Knowledge shall mean the Shareholders' Representative and the current

Chief Executive Officer, Chief Financial Officer, Executive Vice

President - Sales and Executive Vice President - Marketing.

Section 3.10. Title to Properties.

(a) The Company does not own any real property. Schedule 3.10(a) sets forth a

complete and accurate list of all individual items of property with a current

book value in excess of $100,000 that the Company owns or leases (the "Personal

Property").

(b) The Company has title to, or a valid leasehold interest in, the Personal

Property, in each case free and clear of all mortgages, liens, pledges, security

interests, charges, and encumbrances on title of any nature ("Liens"), except

for Liens for Taxes accrued but not yet payable, purchase money security

interests and those mortgages, liens, pledges, security interests, charges, and

encumbrances on title set forth on Schedule 3.10(b) (collectively, "Permitted

Liens"). Section 3.11. Change of Control Agreements. Except as set forth on

Schedule 3.11, or as otherwise contemplated by this Agreement, neither the

execution and delivery of this Agreement nor the consummation of the

transactions contemplated hereby will result in, cause the accelerated vesting

or increase the amount of any payment or benefit to any director, officer or

employee of the Company.

Section 3.12. Litigation. Except as set forth on Schedule 3.12, (a)

there are no claims, suits, actions, arbitration or other material proceedings

("Litigation") pending or, to the Knowledge of the Company, material Litigation

threatened against the Company, and (b) there are no outstanding judgments,

orders, injunctions or awards against or relating to the Company.

Section 3.13. Material Contracts. Schedule 3.13 sets forth a complete

and accurate list of all executory contracts or contractual arrangements to

which the Company is a party involving annual payments by the Company after

January 1, 2005 in excess of $100,000 ("Material Contracts"), including: (i)

agreements for the purchase or sale of any assets, (ii) agreements relating to

indebtedness for borrowed money, (iii) contracts or licenses with customers,

independent contractors, joint venture partners, suppliers, software developers,

host providers, resellers or others, including all sales and open purchase

orders, and (iv) leases of any real property or Personal Property. Schedule 3.13

sets forth a complete and accurate list of all executory contracts or

contractual arrangements (without reference to the actual customer) to which the

Company is a party which resulted in billings by the Company to any of the

Company's current customers in calendar year 2004 in excess of $250,000

("Customer Contracts"). Except as disclosed on Schedule 3.13, neither the

Company nor, to the Knowledge of the Company, any other party thereto is in

default in any material respect under any Material Contract or Customer

Contract, nor to the Knowledge of the Company has any event occurred that could

result in any such default. The Company has no "side agreement" or other

understanding that would give any person the right to modify or amend any

Material Contract or Customer Contract. Schedule 3.13 identifies with an

asterisk each Material Contract or Customer Contract set forth therein that

requires the consent of the other party thereto to avoid any breach, default or

violation thereof in connection with the transactions contemplated hereby.

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Section 3.14. Employee Benefit Plans.

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(a) Schedule 3.14(a) sets forth all plans, funds, programs, agreements

or arrangements (whether written or oral) pursuant to which the Company or any

of its subsidiaries provides benefits or remuneration (other than salaries and

wages) to its employees, former employees, directors, independent contractors or

contingent or leased employees or the dependents of any of them, including any

bonus, incentive compensation, stock option, deferred compensation, severance or

other compensation plan or employment agreement, any employee welfare plan or

any defined benefit, profit sharing or savings or other employee pension benefit

plan (collectively, "Current Benefit Plans").

(b) For purposes of this Agreement, the term "Benefit Plan" includes

each of the Current Benefit Plans and the Past Benefit Plans; and the term "Past

Benefit Plan" means any plan, fund, program, agreement or arrangement that would

be a Current Benefit Plan if it were now in effect, and was at any earlier time

within the past six years sponsored or maintained or required to be sponsored or

maintained by the Company or any of its subsidiaries or to which the Company or

any of its subsidiaries has made, or had an obligation to make, contributions

providing for employee benefits or for the remuneration (other than salaries or

wages), direct or indirect, of their employees, former employees, directors,

independent contractors, contingent or leased employees, the spouses or the

dependents of any of them. To the extent applicable, to the Knowledge of the

Company, the Current Benefit Plans now comply, and the Past Benefit Plans did

comply when they were in effect, in all material respects with the Employee

Retirement Income Security Act of 1974, as amended ("ERISA") and the Code. Any

Current Benefit Plan intended to be qualified under Section 401(a) of the Code

has received a favorable determination letter or is an approved prototype plan

with an opinion letter upon which the Company or a subsidiary is entitled to

rely, and continues to satisfy in all material respects the requirements for

such qualification. Neither the Company nor any affiliate of the Company that

would be considered a single employer with the Company or any subsidiary under

Section 414 of the Code has maintained or contributed in the past six years to

any Benefit Plan that is or was then covered by Title IV of ERISA or Section 412

of the Code that could reasonably be expected to result in a material penalty to

the Company. Neither the Company, any subsidiary nor any Benefit Plan has

incurred any material liability or penalty under Section 4975 of the Code or

Section 502(i) of ERISA, or engaged in any transaction that is reasonably likely

to result in any such liability or penalty. To the Knowledge of the Company, the

Company has complied in all material respects with the notice and continuation

requirements of Section 4980B of the Code and the regulations thereunder

("COBRA"), and with the applicable requirements of the Health Insurance

Portability and Accountability Act of 1996. To the Knowledge of the Company,

except as described in Schedule 3.14(b), each Benefit Plan has been maintained

and administered during the past six years in material compliance with its terms

and with all applicable law, including ERISA, the Code and federal and state

securities laws.

(c) There is no pending or, to the Knowledge of the Company, threatened

Litigation involving any Benefit Pla