AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

dated as of

August 8, 2004

by and among

ENCORE MEDICAL CORPORATION,

ENCORE MEDICAL MERGER SUB, INC.,

EMPI, INC.

and

MPI HOLDINGS, LLC

TABLE OF CONTENTS

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Schedules

Schedule 2.1 — Corporate Organization of the Company.

Schedule 2.2(a) — Subsidiaries

Schedule 2.2(b) — Exceptions to the Subsidiaries Representation

Schedule 2.3(a) — Capitalization of the Company

Schedule 2.3(b) — Capitalization of the Company

Schedule 2.4 — Capitalization of Subsidiaries

Schedule 2.6 — Exceptions to No Conflict Representation

Schedule 2.8 — Financial Statements

Schedule 2.9(a) — Contracts; No Defaults

Schedule 2.9(b) — Exceptions to No Defaults

Schedule 2.10(a) — Intellectual Property

Schedule 2.10(b) — Exceptions to Intellectual Property Representation

Schedule 2.11(a) — Real Property

Schedule 2.11(b) — Exceptions to Real Property Representation

Schedule 2.12 — Exceptions to No Undisclosed Liabilities

Schedule 2.13 — Litigation and Proceedings

Schedule 2.14(a) — Employee Benefit Plan

Schedule 2.14(d) — Exceptions to No Employee Transaction Payments

Schedule 2.14(e) — Employee Termination Payments

Schedule 2.14(f) — Unfunded Liability for Accrued Pension Benefits

Schedule 2.15(a) — Labor Relations

Schedule 2.15(b) — Labor Relations

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Schedule 2.16(a) — Legal Compliance

Schedule 2.16(b) — Legal Compliance

Schedule 2.17 — Environmental Matters

Schedule 2.18(a) —Tax Matters

Schedule 2.18(b) —Tax Matters

Schedule 2.18(c) —Tax Matters

Schedule 2.18(d) —Tax Matters

Schedule 2.18(e) —Tax Matters

Schedule 2.19 — Governmental Authorities; Consents

Schedule 2.20(a) — Licenses, Permits and Authorizations

Schedule 2.20(b) — Exceptions to Licenses, Permits and Authorizations Representation

Schedule 2.21(a) — Insurance

Schedule 2.21(b) — Self-Insurance Arrangements

Schedule 2.21(c) — Insurance

Schedule 2.22 — Brokers’ Fees

Schedule 2.24 — Absence of Certain Changes and Events

Schedule 2.26 — Related Persons

Schedule 3.3 — Exceptions to Acquiror No Conflict Representation

Schedule 3.4 — Litigation and Proceedings (Acquiror)

Schedule 3.5 — Governmental Authorities; Consents (Acquiror)

Schedule 3.7 — Brokers’ Fees (Acquiror)

Schedule 3.9 — Capitalization of Acquiror)

Schedule 3.10 — Financial Statements (Acquiror)

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Schedule 3.11 — Exceptions to No Undisclosed Liabilities (Acquiror)

Schedule 4.1 — Conduct of Business

Annexes

Annex A-1 — Articles and Plan of Merger

Annex A-2 — Certificate of Merger

Annex B — Voting Agreement

Annex C-1 — Adjustment Escrow Agreement

Annex C-2 — Summary of Terms of Indemnification Escrow Agreement

Annex D — Form of Lock-Up Agreement

Annex E — Form of Company Principal Shareholder Release

Annex F — Acquiror Commitment Letter

Annex G-1 — Form of Opinion of Counsel to the Company

Annex G-2 — Form of Opinion of Counsel to Acquiror and Merger Sub

Annex H — Summary of Terms of Investor Rights Agreement

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AGREEMENT AND PLAN OF MERGER

     This Agreement and Plan of Merger (this “Agreement”), dated as of August 8, 2004, is entered into by and among Encore Medical Corporation, a Delaware corporation (“Acquiror”), Encore Medical Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Acquiror (“Merger Sub”), Empi, Inc., a Minnesota corporation (the “Company”), MPI Holdings, LLC, a Delaware limited liability company, solely in its capacity as the initial Holder Representative (as defined below) hereunder, and the Company Principal Shareholders (as defined below), solely for the purpose of making the representations and warranties set forth in Section 14.15.

PLAN OF MERGER

     A. Acquiror, Merger Sub and the Company are hereby adopting a plan of merger, providing for the merger of Merger Sub with and into the Company, with the Company being the surviving corporation. This merger (the “Merger”) will be consummated in accordance with this Agreement and evidenced by Articles of Merger to be executed by Merger Sub and the Company in substantially the form of Annex A-1 hereto (the “Articles of Merger”) and a certificate of merger to be executed by the Company in substantially the form of Annex A-2 hereto (the “Certificate of Merger”), such Merger to be consummated as of the Effective Time of the Merger (as defined below).

     B. Upon consummation of the Merger, the separate corporate existence of the Merger Sub shall cease and the Company, as the surviving corporation in the Merger (hereinafter referred to for the periods on and after the Effective Time of the Merger as the “Surviving Corporation”), shall continue its corporate existence under the Minnesota Business Corporation Act, Chapter

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302A of the Minnesota Statutes (the “MBCA”), as a wholly owned Subsidiary (as defined below) of Acquiror.

     C. The Merger shall have the effects set forth in Section 302A.641 of the MBCA and Section 259 of the Delaware General Corporation Law, as amended (the “DGCL”).

     D. At the Effective Time of the Merger, the articles of incorporation and by-laws of Company shall be the articles of incorporation and by-laws of the Surviving Corporation, until thereafter amended as provided therein and under the MBCA, and the directors and officers of Merger Sub shall be the directors and officers of the Surviving Corporation.

     E. Concurrently with the execution of this Agreement, Acquiror and the Company Principal Shareholders, who hold, in the aggregate, a number of shares of Company Common Stock entitling the Company Principal Shareholders to cast votes in excess of that number of votes necessary for the adoption and approval of this Agreement and the transactions contemplated hereby by the shareholders of the Company, are entering into that certain voting agreement, a copy of which is attached hereto as Annex B, pursuant to which each of the Company Principal Shareholders agrees to vote all shares of the Company Common Stock held by such Company Principal Shareholder in favor of approval and adoption of this Agreement and the transactions contemplated hereby. “Company Principal Shareholders” shall mean GE Capital Equity Investments, Inc., MPI Holdings, L.L.C., H. Philip Vierling and Patrick D. Spangler.

     F. For certain limited purposes, and subject to the terms set forth herein, the Holder Representative shall serve as a representative of the holders of Company Common Stock and Options.

     G. Certain capitalized terms used herein have the meanings ascribed to such terms in Article X hereof.

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AGREEMENT

     In order to consummate the Merger, and in consideration of the mutual agreements hereinafter contained, Acquiror, Merger Sub and the Company agree as follows:

ARTICLE I.
THE MERGER

      Section 1.1. Conversion of Company Shares and Options.

          (a) At the Effective Time of the Merger, by virtue of the Merger and without any action on the part of any holder of shares of Company Common Stock or any Option:

               (i) each share (a “Common Share”) of Company Common Stock that is then issued and outstanding (other than shares of Company Common Stock held by Persons who object to the Merger and comply with the provisions of the MBCA concerning the rights of holders of Company Common Stock to dissent from the Merger and require appraisal of their shares of Company Common Stock (“Dissenting Shareholders”), which shares of Dissenting Shareholders will not constitute “Common Shares” hereunder and shall hereafter be referred to as “Dissenting Shares”) and each unexercised option to purchase Common Shares that is outstanding and, immediately prior to the Effective Time of the Merger, fully vested (such options being referred to as the “Options”) shall thereupon be converted into and become the right to receive the applicable portion of the Merger Consideration, as determined pursuant to Section 1.1(d) hereof.

          (b) At the Effective Time of the Merger, by virtue of the Merger and without any action on the part of Acquiror or Merger Sub, each share of common stock, par value $0.001 per share, of Merger Sub shall be converted into one share of Company Common Stock.

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          (c) Subject to the adjustments set forth in Sections 1.4 and 1.5 hereof, the “Merger Consideration” shall consist of (i) (A) Three Hundred and Twenty-Five Million Dollars ($325,000,000) in cash, less (B) the Estimated Closing Date Funded Debt, plus (C) the Estimated Closing Date Cash and Cash Equivalents, less (D) the amount of Holder Allocable Expenses paid by Acquiror to the Holder Representative at Closing in accordance with Section 1.6 hereof (the “Cash Portion of the Merger Consideration”); and (ii) eight million (8,000,000) shares of Acquiror Common Stock (the “Stock Portion of the Merger Consideration”), which Acquiror Common Stock shall not have been registered with the SEC as of the Effective Time of the Merger; provided, however, that the number of shares of Acquiror Common Stock comprising the Stock Portion of the Merger Consideration shall be proportionately adjusted in the event of any stock split, subdivision, stock dividend or recapitalization in respect of the Acquiror Common Stock occurring between the date hereof and the Closing Date. No later than two (2) Business Days prior to the Closing Date, the Company shall prepare and deliver to Acquiror a written statement setting forth (i) the Company’s good faith estimate of the Closing Date Funded Debt (the “Estimated Closing Date Funded Debt”) and (ii) the Company’s good faith estimate of the Closing Date Cash and Cash Equivalents (the “Estimated Closing Date Cash and Cash Equivalents”).

          (d) The Merger Consideration shall be allocated among the holders of the Common Shares and the Options as set forth below in this Section 1.1(d).

               (i) Cash Portion of Merger Consideration. Each holder of Common Shares shall be entitled to receive, in respect of the Common Shares held by such holder, a portion of the Cash Portion of the Merger Consideration equal to (x) the Cash Per Fully-Diluted Common Share, multiplied by (y) the number of Common Shares held by such

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holder immediately prior to the Effective Time of the Merger (but not including any Common Shares issuable upon the exercise of any Options held by such holder immediately prior to the Effective Time of the Merger). Each holder of Options shall be entitled to receive, in respect of the Options held by such holder, a portion of the Cash Portion of the Merger Consideration, in respect of the Options held by such holder, equal to (i) the Cash Per Fully-Diluted Common Share, multiplied by the aggregate number of Common Shares issuable upon exercise in full of all Options held by such holder immediately prior to the Effective Time of the Merger, minus (ii) the aggregate cash exercise price payable upon exercise of all Options held by such holder immediately prior to the Effective Time of the Merger. For purposes of the foregoing, the “Cash Per Fully-Diluted Common Share” shall mean (i) the sum of (A) the Cash Portion of the Merger Consideration, plus (B) the Aggregate Option Exercise Price, divided by (ii) the Aggregate Fully-Diluted Common Shares. The “Aggregate Fully-Diluted Common Shares” shall be (i) the aggregate number of Common Shares held by all holders immediately prior to the Effective Time of the Merger, plus (ii) the aggregate number of Common Shares issuable upon the exercise in full of all Options held by all holders immediately prior to the Effective Time of the Merger, plus (iii) the aggregate number of Dissenting Shares (if any); and the “Aggregate Option Exercise Price” shall mean the sum of the exercise prices payable upon exercise in full of all Options held by all holders of Options immediately prior to the Effective Time of the Merger.

               (ii) Stock Portion of Merger Consideration. Each holder of Common Shares shall be entitled to receive, in respect of the Common Shares held by such holder, a portion of the Stock Portion of the Merger Consideration equal to (x) the quotient of (A)

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the Stock Portion of the Merger Consideration, divided by (B) the Aggregate Fully-Diluted Common Shares, multiplied by (y) the number of Common Shares held by such holder immediately prior to the Effective Time of the Merger (but not including any Common Shares issuable upon the exercise of any Options held by such holder immediately prior to the Effective Time of the Merger). Each holder of Options shall be entitled to receive a portion of the Stock Portion of the Merger Consideration, in respect of the Options held by such holder, equal to (x) the quotient of (A) the Stock Portion of the Merger Consideration, divided by (B) the Aggregate Fully-Diluted Common Shares, multiplied by (y) the aggregate number of Common Shares issuable upon exercise in full of all Options held by such holder immediately prior to the Effective Time of the Merger.

          (e) No Fractional Shares. Notwithstanding any provision hereof to the contrary, no certificate or scrip representing fractional shares of Acquiror Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of Acquiror. Notwithstanding any other provision of this Agreement, each holder of shares of Common Shares and Options exchanged pursuant to Section 1.2 hereof who, but for the application of the first sentence of this Section 1.1(e), would otherwise have been entitled to receive a fraction of a share of Acquiror Common Stock (after taking into account all Certificates delivered by such holder) shall receive in lieu thereof, cash (without interest) in an amount equal to (i) such fractional share of Acquiror Common Stock, multiplied by (ii) the average closing price for a share of Acquiror’s Common Stock on the NASDAQ Stock Market for the 10 Business Days ending on the Business Day immediately preceding the date hereof, as reported by the Eastern Edition of The Wall Street

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Journal, as adjusted for stock splits, stock dividends, stock subdivisions or combinations and the like (such average closing price for each such share, the “Closing Stock Price”).

      Section 1.2. Payment and Exchange of Certificates.

          (a) Immediately prior to the Effective Time of the Merger, Acquiror will pay to an exchange agent (the “Exchange Agent”) selected by the Company and reasonably acceptable to Acquiror, by wire transfer of immediately available funds, an amount (the “Funding Amount”) equal to (i) the Cash Portion of the Merger Consideration, as adjusted in accordance with Section 1.4 hereof and determined prior to giving effect to the adjustments provided for in Section 1.5(c) hereof, minus (ii) the product of (x) the number of Dissenting Shares (if any) and (y) the Cash Per Fully-Diluted Common Share. Additionally, Acquiror will issue and deliver to the Exchange Agent for exchange in accordance with this Section 1.2, through such reasonable procedures as Acquiror and the Holder Representative may agree, certificates for the shares of Acquiror Common Stock representing the Stock Portion of the Merger Consideration. Upon (i) payment by Acquiror to the Exchange Agent of the Funding Amount; (ii) delivery by Acquiror of the Stock Portion of the Merger Consideration to the Escrow Agent; (iii) payment of cash by Acquiror to the Exchange Agent in an amount sufficient to permit payment of cash in lieu of fractional shares pursuant to Section 1.1(e); and (iv) payment by Acquiror to the Holder Representative of the estimated Holder Allocable Expenses pursuant to Section 1.6 hereof, Acquiror shall be deemed to have satisfied its obligations to make payments in respect of the Merger Consideration other than (A) Acquiror’s obligation to make payments, if any, required by Section 1.5 hereof and (B) the obligation of Acquiror or the Surviving Corporation to make payments to Dissenting Shareholders, if any, following the Effective Time of the Merger.

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          (b) After the Effective Time of the Merger, each holder of an outstanding certificate or certificates for Common Shares (collectively, the “Certificates”) and/or Options, upon surrender of such Certificates to the Exchange Agent (or, in the case of a holder of Options, upon delivery of a Holder Acknowledgment to the Exchange Agent), shall be entitled to receive from Acquiror (or from the Exchange Agent on Acquiror’s behalf) in exchange therefor (subject to the provisions of Section 1.5 below) such portion of the Merger Consideration into which such holder’s Common Shares and/or Options shall have been converted as a result of the Merger; provided, however, that any payment and other consideration with respect to Options held by employees of the Company or any of its Subsidiaries shall be reduced by the amount of any Taxes required to be withheld under applicable law with respect to the Merger Consideration received by the holders of Options and amounts so withheld shall be paid by the Exchange Agent to the Surviving Corporation for disbursement to the applicable Governmental Authority; and provided, further, (i) a portion of the Cash Portion of the Merger Consideration otherwise payable to each holder of Common Shares and/or Options equal to the Adjustment Escrow Amount multiplied by such holder’s Applicable Percentage shall be held in escrow in accordance with Section 1.5(d) hereof and the Adjustment Escrow Agreement and (ii) the Acquiror Common Stock issuable to each holder of Common Shares and/or Options as the Stock Portion of the Merger Consideration shall be held in escrow in accordance with Section 1.8 hereof and the Indemnification Escrow Agreement. Pending such surrender and exchange (or, in the case of a holder of Options, upon such delivery of a Holder Acknowledgment), a holder’s Certificate or Certificates for Common Shares and/or a holder’s Holder Acknowledgment with respect to Options shall be deemed for all purposes (other than the exchange contemplated by this Section 1.2) to evidence such holder’s

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portion of the Merger Consideration into which such Common Shares and/or Options shall have been converted by the Merger.

          (c) Promptly following the date which is one year after the Effective Time of the Merger, Acquiror will instruct the Exchange Agent to deliver to Acquiror all cash, Certificates and other documents in its possession relating to the transactions contemplated hereby, and the Exchange Agent’s duties will terminate. Thereafter, each holder of a Certificate (other than Certificates representing Dissenting Shares) and each holder of Options who has not delivered a Holder Acknowledgement may surrender such Certificate or deliver such Holder Acknowledgment to Acquiror and (subject to applicable abandoned property, escheat and similar laws) receive in consideration therefor, and Acquiror will promptly pay, the aggregate Merger Consideration relating thereto, without any interest thereon.

          (d) In the event any Certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, the Exchange Agent or Acquiror, as the case may be, will issue in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration deliverable in respect thereof as determined in accordance with this Article I.

      Section 1.3. Effective Time of the Merger; Closing Date. On the Closing Date, Merger Sub and the Company shall cause (i) the Articles of Merger, effective as of the Closing Date, to be executed and filed with the Secretary of State of the State of Minnesota as provided in Section 302A.615 of the MBCA and (ii) the Certificate of Merger, effective as of the Closing Date, to be executed and filed with the Secretary of State of the State of Delaware in accordance with Section 251 and 252 of the DGCL. For purposes of this Agreement, the “Effective Time of the Merger” shall mean the time at which the Articles of Merger have been duly filed in the Office

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of the Secretary of State of Minnesota or such later time as may be set forth in the Articles of Merger; and the term “Closing Date” shall mean the date that is five (5) Business Days after the date on which all of the conditions set forth in Section 8.1 hereof have been satisfied or waived, or such other date as Acquiror and the Company may mutually agree.

      Section 1.4. Estimated Closing Date Net Working Capital; Estimated Working Capital Adjustment Amount. Within ten (10) Business Days prior to the Closing Date, and in no event less than two (2) Business Days before the Closing Date, the Company shall deliver to Acquiror a certificate signed by the Chief Financial Officer of the Company setting forth a reasonable estimate of the Net Working Capital of the Company and its consolidated Subsidiaries as of the Closing Date (the “Estimated Closing Date Net Working Capital”). If (i) the Estimated Closing Date Net Working Capital minus the Target Net Working Capital Amount (such difference, which may be a positive or negative number, the “Estimated Working Capital Adjustment Amount”) is a positive number, then the Cash Portion of the Merger Consideration and the Funding Amount will be increased by the Estimated Working Capital Adjustment Amount; provided, however, that the amount of such increase shall not exceed $3,000,000, and (ii) if the Estimated Working Capital Adjustment Amount is a negative number, the Merger Consideration and the Funding Amount will be decreased by the absolute value of the Estimated Working Capital Adjustment Amount; provided, however, that the Cash Portion of the Merger Consideration and the Funding Amount shall not be decreased by more than $5,000,000 (the “Initial Cash Reduction”) and, if the Estimated Working Capital Adjustment is negative, any excess of the absolute value of the Estimated Working Capital Adjustment Amount over $5,000,000 shall reduce the number of shares of Acquiror Common Stock constituting the Stock

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Portion of the Merger Consideration by the number of such shares equal to such excess divided by the Closing Stock Price.

      Section 1.5. Adjustments to Merger Consideration.

          (a) As soon as reasonably practicable following the Closing Date, and in any event within ninety (90) calendar days thereof, the Holder Representative shall prepare and deliver to Acquiror (i) an audited consolidated balance sheet of the Company and its consolidated Subsidiaries as of the Closing (the “Closing Balance Sheet”), (ii) a calculation of Net Working Capital of the Company and its consolidated Subsidiaries as set forth on the Closing Balance Sheet (“Closing Date Net Working Capital”), (iii) a calculation of the aggregate principal amount of all Funded Debt of the Company and its consolidated Subsidiaries, if any, as of the Closing Date as set forth on the Closing Balance Sheet (the “Closing Date Funded Debt”) and (iv) a calculation of the Cash and Cash Equivalents as of the Closing Date as set forth on the Closing Balance Sheet (the “Closing Date Cash and Cash Equivalents”). The Closing Balance Sheet shall be prepared in accordance with United States generally accepted accounting principles (“GAAP”) consistent with the preparation of the historical consolidated financial statements of the Company and its consolidated Subsidiaries and shall be prepared using the same accounting methods, policies, practices and procedures, with consistent classifications, judgments and estimation methodology, as were used in preparation of the Interim Balance Sheet and shall fairly present the consolidated financial position of the Company and its consolidated Subsidiaries as of the Closing. Following the Closing, Acquiror shall provide the Holder Representative and its representatives access to the records and employees of the Surviving Corporation and its Subsidiaries to the extent necessary for the preparation of the Closing Balance Sheet and shall cooperate and cause the Surviving Corporation and its Subsidiaries and the employees of the

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Surviving Corporation and its Subsidiaries to cooperate with the Holder Representative, the accounting firm selected by the Holder Representative to audit the Closing Balance Sheet (the “Closing Balance Sheet Auditing Firm”) and their representatives in connection with its preparation and audit of the Closing Balance Sheet, which cooperation shall include executing and delivery to the Closing Balance Sheet Auditing Firm such management representation letters and engagement letters as may be requested by the Closing Balance Sheet Auditing Firm and taking all such reasonable actions necessary to permit completion of the audit of the Closing Balance Sheet. “Net Working Capital” as of any date shall mean (i) the consolidated current assets (excluding Cash and Cash Equivalents) of the Company and its consolidated Subsidiaries as of such date, minus (ii) the consolidated current liabilities (other than the current portion of Funded Debt) of the Company and its consolidated Subsidiaries as of such date, in each case determined in accordance with GAAP applied in a manner consistent with the manner applied in the preparation of the historical financial statements of the Company and its consolidated Subsidiaries and prepared using the same accounting methods, policies, practices and procedures, with consistent classifications, judgments and estimation methodology, as were used in preparation of the Interim Balance Sheet. Notwithstanding anything to the contrary in this Agreement, for the purpose of determining the Estimated Closing Date Net Working Capital and Closing Date Net Working Capital, the consolidated current assets of the Company and its consolidated Subsidiaries shall not reflect the value of the income tax deductions and other tax benefits of the Company and such Subsidiaries resulting from or arising in connection with (i) the vesting, conversion, cancellation and/or exercise of all Options pursuant to the terms hereof or as a result of the consummation of the transactions contemplated hereby, (ii) any cash bonuses that are paid or payable by the Company or its Subsidiaries as a result of the consummation of the transactions

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contemplated hereby (which shall include the payments to holders of Options referenced to on Schedule 4.1 hereof), (iii) any fees and expenses payable by the Company or its consolidated Subsidiaries in connection with or related to the consummation of the transactions contemplated hereby, including, without limitation, counsel fees and disbursements and fees and expenses paid to JP Morgan Securities, Inc. or its Affiliates, (iv) deferred financing costs related to the indebtedness of the Company and its Subsidiaries, and (v) fees and expenses incurred by the Company related to or in connection with its proposed initial public offering (including, without limitation, legal fees and expenses, road show and printing expenses and payments made to underwriters) (collectively, the “Closing Tax Benefits”).

          (b) If Acquiror shall disagree with the calculation of Closing Date Net Working Capital, the Closing Date Funded Debt or the Closing Date Cash and Cash Equivalents, or with the conclusions reached by the calculation of such figures, it shall notify the Holder Representative of such disagreement in writing, setting forth in reasonable detail the particulars of such disagreement, within thirty (30) days after its receipt of the Closing Balance Sheet and such calculations; provided, however, that any such objection shall be limited to any failure on the part of the Holder Representative to prepare the Closing Balance Sheet, or to determine the Closing Date Net Working Capital, the Closing Date Funded Debt or the Closing Date Cash and Cash Equivalents, in accordance with the standards set forth in this Section 1.5. In the event that Acquiror does not provide such a notice of disagreement within such thirty (30) day period, Acquiror shall be deemed to have accepted the Closing Balance Sheet and the calculation of the Closing Date Net Working Capital, the Closing Date Funded Debt and the Closing Date Cash and Cash Equivalents, delivered by the Holder Representative, which shall be final, binding and conclusive for all purposes hereunder. In the event any such notice of disagreement is timely

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provided, Acquiror and the Holder Representative shall use commercially reasonable efforts for a period of thirty (30) days (or such longer period as they may mutually agree) from the date of delivery of such notice of disagreement to resolve any disagreements with respect to the calculation of Closing Date Net Working Capital, the Closing Date Funded Debt or the Closing Date Cash and Cash Equivalents. If, at the end of such period, they are unable to resolve such disagreements, then Deloitte & Touche USA LLP (or such other independent accounting firm of recognized national standing as may be mutually selected by Acquiror and the Holder Representative) (the “Auditor”) shall resolve any remaining disagreements. The Auditor shall determine as promptly as practicable, but in any event within thirty (30) days of the date on which such dispute is referred to the Auditor, whether the Closing Balance Sheet was prepared in accordance with the standards set forth in Section 1.5(a) and (only with respect to the remaining disagreements submitted to the Auditor) whether and to what extent (if any) the Closing Date Net Working Capital, the Closing Date Funded Debt or the Closing Date Cash and Cash Equivalents requires adjustment. The fees and expenses of the Auditor shall be paid one-half by Acquiror and one-half by the Holder Representative as a Holder Allocable Expense pursuant to Section 1.6 hereof. The determination of the Auditor shall be final, conclusive and binding on the parties. The date on which Closing Date Net Working Capital, the Closing Date Funded Debt and the Closing Date Cash and Cash Equivalents are finally determined in accordance with this Section 1.5(b) is hereinafter referred to as the “Determination Date.”

          (c) The “Adjustment Amount,” which may be a positive or negative number, shall mean the sum of (i) the Net Working Capital True-Up Amount, (ii) the Estimated Closing Date Funded Debt minus the Closing Date Funded Debt and (iii) the Closing Date Cash and Cash Equivalents minus the Estimated Closing Date Cash and Cash Equivalents. If the Adjustment

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Amount is a positive number, then the Cash Portion of the Merger Consideration will be increased by the absolute value of the Adjustment Amount, and if the Adjustment Amount is a negative number, the Merger Consideration will be decreased by the absolute value of the Adjustment Amount. “Net Working Capital True-Up Amount”, which may be a positive or negative number, means the Closing Date Net Working Capital minus the Estimated Closing Date Net Working Capital; provided, however, that, (i) if the Net Working Capital True-Up Amount is a positive number and the Estimated Working Capital Adjustment Amount is a positive number or zero, the Net Working Capital True-Up Amount will not exceed the excess of $3,000,000 over the Estimated Working Capital Adjustment Amount, (ii) if the Net Working Capital True-Up Amount is a positive number and the Estimated Working Capital Adjustment Amount is a negative number, the Net Working Capital True-Up Amount will not exceed the sum of (x) the excess of the Target Net Working Capital Amount over the Estimated Net Working Capital and (y) $3,000,000, and (iii) if the Estimated Closing Date Net Working Capital exceeds the Target Net Working Capital Amount by more than $3,000,000 and the Closing Date Net Working Capital is less than the sum of the Target Net Working Capital Amount and $3,000,000, the Net Working Capital True-Up Amount will equal (x) the Closing Date Net Working Capital, less (y) the sum of the Target Net Working Capital Amount and $3,000,000.

          (d) Notwithstanding the foregoing provisions of this Article I, on the Closing Date, $5,000,000 of the Cash Portion of the Merger Consideration (the “Adjustment Escrow Amount”) shall be paid by Acquiror to an escrow agent to be selected by the agreement of Acquiror and the Company prior to Closing (the “Escrow Agent”), to be held in escrow pending determination of the Adjustment Amount. The Adjustment Escrow Amount shall be held and invested by the Escrow Agent in accordance with the terms of an escrow agreement in the form

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attached hereto as Annex C-1 (the “Adjustment Escrow Agreement”). Upon final determination of the Adjustment Amount in accordance with Sections 1.5(b) and (c) hereof, each of Acquiror and Holder Representative shall execute joint written instructions to the Escrow Agent instructing the Escrow Agent to disburse the Adjustment Escrow Amount as set forth in this Section 1.5(d). If the Adjustment Amount is a positive number, then, promptly following the Determination Date, and in any event within five (5) Business Days of the Determination Date, (i) the Escrow Agent shall pay to the holders of the Common Shares and Options entitled to receive the Merger Consideration (pro rata, in accordance with their respective Applicable Percentages) the Adjustment Escrow Amount, together with any interest earned thereon, and (ii) Acquiror shall pay to the holders of Common Shares and Options entitled to receive the Merger Consideration (pro rata, in accordance with their respective Applicable Percentages) an amount in cash equal to the Adjustment Amount, together with interest thereon from the Closing Date to the date of payment at the prime rate as published in the Eastern Edition of The Wall Street Journal on the Closing Date. If the Adjustment Amount is a negative number and the Estimated Working Capital Adjustment Amount is not a negative number, then, promptly following the Determination Date, and in any event within five (5) Business Days of the Determination Date, (i) the Escrow Agent shall pay to Acquiror out of the Adjustment Escrow Amount an amount equal to the lesser of (x) the absolute value of the Adjustment Amount, together with interest earned thereon, and (y) the Adjustment Escrow Amount, together with any interest earned thereon, (ii) if the absolute value of the Adjustment Amount exceeds the Adjustment Escrow Amount, the Escrow Agent shall deliver to Acquiror from the Indemnification Escrow Amount a number of shares of Acquiror Common Stock equal to the amount of such excess, divided by the Closing Stock Price and (iii) if the absolute value of the Adjustment Amount is less than the Adjustment Escrow Amount, the

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Escrow Agent shall pay to the holders of the Common Shares and/or Options entitled to receive the Merger Consideration (pro rata, in accordance with their respective Applicable Percentages) the balance of the Adjustment Escrow Amount, together with any interest earned thereon. If the Adjustment Amount is a negative number and the Estimated Working Capital Adjustment is a negative number, then, promptly following the Determination Date, and in any event within five (5) Business Days of the Determination Date, (i) the Escrow Agent shall pay to Acquiror out of the Adjustment Escrow Amount, the lesser of (x) the absolute value of the Adjustment Amount, together with interest earned thereon, and (y) the Negative Cash Cap, together with interest earned thereon, and (z) the Adjustment Escrow Amount, together with interest earned thereon, (ii) if the absolute value of the Adjustment Amount exceeds the amount paid to Acquiror from the Adjustment Escrow Amount in clause (i) above, the Escrow Agent shall deliver to Acquiror from the Indemnification Escrow Amount a number of shares of Acquiror Common Stock equal to the amount of such excess, divided by the Closing Stock Price and (iii) if less than 100% of the Adjustment Escrow Amount is paid to Acquiror pursuant to clause (i) above, the Escrow Agent shall pay to the holders of Common Shares and/or Options entitled to receive the Merger Consideration (pro rata in accordance with their Applicable Percentages) the balance of the Adjustment Escrow Amount, together with any interest earned thereon. “Negative Cash Cap” means the excess of (x) the lesser of the absolute value of the Adjustment Amount and $5,000,000 over (y) the absolute value of the Estimated Working Capital Adjustment Amount; provided that, if the foregoing formula would yield a negative number, the Negative Cash Cap shall be zero. In no event shall the Holder Representative or any holder of Company Common Stock and/or Options have any liability under this Section 1.5 in excess of (i) such holders allocable share of the Adjustment Escrow Amount and (ii) such holder’s allocable share of any shares of Acquiror

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Common Stock distributed from the Indemnification Escrow Amount pursuant to this Section 1.5(d). Notwithstanding the foregoing, any distributions to the holders of Options pursuant to this Section 1.5(d) shall be net of any amount of taxes required to be withheld from such distributions under applicable law, and the amounts so withheld shall be paid over to the Surviving Corporation for payment by the Surviving Corporation to the applicable Governmental Authority as required by law. In no event shall Acquiror be entitled to any payment or other amount pursuant to this Section 1.5(d) other than (i) payments from the Adjustment Escrow Amount and (ii) the receipt of shares of Acquiror Common Stock from the Indemnification Escrow Amount but only to the extent provided above in this Section 1.5(d).

          (e) The parties anticipate that as a result of the Closing Tax Benefits, the Company and its Subsidiaries will be entitled to seek a refund of income and franchise Taxes paid for the short taxable year ending on the Closing Date, and in addition will have a net operating loss for such taxable year. Following Closing, Acquiror shall cause the Company and its Subsidiaries to file claims for refunds of prior income Taxes paid as set forth in Section 12.2(a), and shall pay to the Holder Representative as additional Merger Ponsideration (for distribution by the Holder Representative to the holders of Common Shares and Options on a pro rata basis in accordance with their Applicable Percentages) an amount equal to the lesser of (i) $6,000,000 and (ii) the full amount of any such refunds (together with any interest paid by any Taxing authority on Taxes refunded) received following Closing from time to time, within three (3) business days of receipt of any such refunds.

      Section 1.6. Holder Allocable Expenses. On or prior to the Closing Date, the Holder Representative will provide to Acquiror an estimate (which estimate may include such reserves as the Holder Representative determines in good faith to be appropriate for any Holder Allocable

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Expenses that are not then known and determinable) of the following fees and expenses that may be incurred by the Holder Representative on behalf of the Company and the holders of the Common Shares and/or Options in connection with the preparation, negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby: (i) the fees and disbursements of special outside counsel to the Company and/or the Holder Representative incurred in connection with the transactions contemplated hereby, (ii) the fees and expenses of any other agents, advisors, consultants and experts employed by the Company and/or the Holder Representative in connection with the Merger, including but not limited to those of JP Morgan Securities, Inc., (iii) if necessary, one-half of the fees and expenses of the Auditor, (iv) the expenses of the Holder Representative incurred in such capacity, (v) the fees and expenses which Holder Representative is responsible under the Adjustment Escrow Agreement and the Indemnification Escrow Agreement, and (vi) the fees and disbursements of the Closing Balance Sheet Auditing Firm and any other expenses relating to the preparation of the Closing Balance Sheet (collectively, the “Holder Allocable Expenses”). In no event will Acquiror, the Surviving Corporation or the Holder Representative be responsible for payment of Holder Allocable Expenses in excess of the cash amounts paid to the Holder Representative by Acquiror under this Section 1.6. Immediately prior to the Effective Time of the Merger and concurrently with the payment to the Exchange Agent of the Funding Amount in accordance with Section 1.2(a) hereof, Acquiror shall pay to the Holder Representative by wire transfer of immediately available funds an amount equal to the Holder Allocable Expenses.

      Section 1.7. Dissenting Shares. Notwithstanding the foregoing provisions of this Article I, Dissenting Shareholders who promptly exercise and perfect appraisal rights for Dissenting Shares in accordance with Sections 302A.471 and 302A.473 of the MBCA shall not

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have such Dissenting Shares converted into a right to receive the Merger Consideration and the holders thereof shall be entitled to such rights as are granted by Section 302A.473 of the MBCA; provided, however, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal and payment under the MBCA, the right of such holder to such appraisal of such holder’s shares of Company Common Stock shall cease and such shares shall be deemed to constitute “Common Shares” for all purposes hereunder and shall be converted as of the Effective Time of the Merger into the right to receive the Merger Consideration as provided in this Article I. The Company shall give Acquiror (a) prompt notice of any written demands for appraisal received by the Company, withdrawals of such demands, and any other related instruments served pursuant to Section 302A.473 of the MBCA and received by the Company and (b) the opportunity to direct all negotiations and proceedings with respect to demands for appraisals under the MBCA. The Company shall not, except with the prior written consent of Acquiror or as otherwise required by law, voluntarily make any payment with respect to any demands for appraisal for Dissenting Shares or offer to settle, or settle, any such demands.

      Section 1.8. Indemnification Escrow. Notwithstanding the foregoing provisions of this Article I to the contrary, on the Closing Date, the Stock Portion of the Merger Consideration (the “Indemnification Escrow Amount”) shall be delivered by Acquiror to the Escrow Agent, to be held in escrow (i) as security for the indemnification obligations in favor of Acquiror under Article XIII pursuant to the provisions of an escrow agreement (the “Indemnification Escrow Agreement”) to be entered into by and among Acquiror, the Holder Representative and the Escrow Agent in a form to be agreed upon between the date hereof and the Closing Date by Acquiror, the Company and the Escrow Agent, which form of agreement shall reflect the terms summarized on Annex C-2 attached hereto, and (ii) to provide security for amount payable to the

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Acquiror pursuant to Section 1.5(d) hereof but only to the extent provided in Section 1.5(d). At any time during the Escrow Period, the Holder Representative may elect to remove any of the shares of Acquiror Common Stock from such escrow and replace each such removed share with cash in an amount equal to the Closing Stock Price for such share. Within five (5) Business Days of the date that is the first anniversary of the Closing Date (the “Escrow Termination Date”), each of Acquiror and the Holder Representative shall execute joint written instructions to the Escrow Agent instructing the Escrow Agent to disburse the balance of the Indemnification Escrow Amount (less the aggregate amount of all claims for indemnification asserted in writing by the Purchaser Indemnitees prior to the Escrow Termination Date pursuant to Article XIII hereof to the extent not paid or satisfied prior to the Escrow Termination Date) to the holders of the Common Shares and Options entitled to receive the Merger Consideration (pro rata, in accordance with their respective Applicable Percentages), together with any earnings thereon pursuant to the Indemnification Escrow Agreement.

ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

      Section 2.1. Corporate Organization of the Company. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Minnesota and has the corporate power and authority to own or lease its properties and to conduct its business as it is now being conducted. The copies of the articles of incorporation and by-laws of the Company previously made available by the Company to Acquiror are true, correct and complete. Except as set forth in Schedule 2.1, the Company is duly licensed or qualified and in good standing as a foreign corporation in each jurisdiction in which the ownership of its property or the character of its activities is such as to require it to be so licensed or qualified,

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except where the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect.

      Section 2.2. Subsidiaries. Set forth on Schedule 2.2(a) is a complete and accurate list of each Subsidiary of the Company. Each Subsidiary of the Company has been duly formed and is validly existing under the laws of the jurisdiction of its formation and has the requisite power and authority to own or lease its properties and to conduct its business as it is now being conducted. The copies of the organizational documents of each Subsidiary of the Company previously made available by the Company to Acquiror are true, correct and complete. Except as set forth in Schedule 2.2(b), each Subsidiary of the Company is duly licensed or qualified and in good standing in each jurisdiction in which its ownership of property or the character of its activities is such as to require it to be so licensed or qualified, except where the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect.

      Section 2.3. Capitalization of the Company.

          (a) The authorized capital stock of the Company consists solely of (i) 20,000,000 Common Shares, $0.01 par value per share (“Company Common Stock”), of which 6,191,180 are issued and outstanding as of the date hereof, and (ii) 5,000,000 undesignated shares, $0.01 par value per share, of which no shares have been previously designated as or issued as of the date hereof. All of the issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and were issued in accordance with the Securities Act. Schedule 2.3(a) contains a true and correct copy of the complete list of record holders of Company Common Stock, including their current addresses and the number of such shares held by each.

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          (b) Except as set forth on Schedule 2.3(b), the Company has not granted any outstanding options (whether vested or unvested), warrants, rights or other securities convertible into or exchangeable or exercisable for shares of Company Common Stock or other capital stock of the Company, any other commitments or agreements providing for the issuance of additional shares or for the repurchase or redemption of shares of Company Common Stock or other capital stock of the Company, and there are no agreements of any kind which may obligate the Company to issue, purchase, register for sale under the Securities Act or any other federal or state securities law or to include in any registration of its capital stock shares held by others, or to redeem or otherwise acquire any of its capital stock.

      Section 2.4. Capitalization of Subsidiaries. The outstanding shares of capital stock of each Subsidiary of the Company have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth on Schedule 2.4, the Company owns of record and beneficially, directly or indirectly, all the issued and outstanding shares of capital stock or other equity interests of each of its Subsidiaries, free and clear of any Liens other than Permitted Liens. There are no outstanding options (whether vested or unvested), warrants, rights or other securities exercisable or exchangeable for any capital stock or other equity interests of any Subsidiary of the Company, any other commitments or agreements providing for the issuance of additional shares or other equity interests, the sale of treasury shares, or for the repurchase or redemption of shares of capital stock or other equity interests of any Subsidiary of the Company, or any agreements of any kind which may obligate any Subsidiary of the Company to issue, purchase, register for sale, redeem or otherwise acquire any of its capital stock or any of its other equity interests.

      Section 2.5. Due Authorization.

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          (a) The Company has all requisite corporate power and authority to execute and deliver this Agreement and (subject to the approvals discussed below) to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized and approved by the Board of Directors of the Company, and, except for the adoption and approval of this Agreement and the transactions contemplated hereby by the shareholders of the Company in accordance with the MBCA, no other corporate proceeding on the part of the Company is necessary to authorize this Agreement. This Agreement has been duly and validly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to (i) the adoption and approval of this Agreement and the transactions contemplated hereby in accordance with the MBCA by the shareholders of the Company and (ii) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity.

          (b) The affirmative vote of the holders of a majority of the Company Common Shares outstanding on the record date of such vote is the only vote of the holders of any class or series of the capital stock of the Company necessary (under applicable law or otherwise) to approve this Agreement and the Merger.

      Section 2.6. No Conflict. Except as set forth in Schedule 2.6, the execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby does not and will not:

          (a) violate any provision of, or result in the breach of, any applicable law, rule or regulation of any Governmental Authority, the articles of incorporation, by-laws or other

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organizational documents of the Company or any of its Subsidiaries, or any Company Material Contract, or of any order, judgment or decree applicable to any of them;

          (b) terminate or result in the termination of any such Company Material Contract;

          (c) result in the creation of any Lien (other than Permitted Liens) upon any of the properties or assets of the Company or any of its Subsidiaries, or constitute an event, which after notice or lapse of time or both, would result in any such violation, breach, termination or creation of a Lien; or

          (d) contravene in any material respect, conflict in any material respect with or result in a material violation or revocation of any required material license, permit or approval from any governmental body, or give any governmental body the right to withdraw, revoke, suspend, cancel, terminate or modify any governmental authorization that is held by Company or any of its Subsidiaries or that otherwise relates to the business of, or any of the material assets owned or used by, Company or any of its Subsidiaries.

      Section 2.7. Books and Records. The stock record books, books of account and minute books of the Company, all of which have been made available to Acquiror, are complete and correct and have been maintained in accordance with sound business practices, except as would not have a Material Adverse Effect. The minute books of the Company and its Subsidiaries contain accurate and complete records of all meetings of, and corporate action taken by, the stockholders, the Boards of Directors and committees of the Boards of Directors of the Company and its Subsidiaries, and no meeting of any such stockholders, Board of Directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company.

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The Company has appropriate internal controls to ensure that all corporate transactions are properly authorized and recorded and to protect against fraud or inaccuracy in financial reporting, except as would not have a Material Adverse Effect.

      Section 2.8. Financial Statements. Attached as Schedule 2.8 hereto are (a) the audited consolidated balance sheets and statements of income, cash flows and shareholders’ equity of the Company and its consolidated Subsidiaries as of, and for the periods ended, December 31, 2003, 2002 and 2001, together with the auditor’s report thereon (the “Audited Financial Statements”) and (b) the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as of June 30, 2004 (the “Interim Balance Sheet”) and the unaudited consolidated statement of income of the Company and its consolidated Subsidiaries for the six-month period ended June 30, 2004 (together with the Interim Balance Sheet, the “Interim Financial Statements”), all of which (i) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except, in the case of the Audited Financial Statements, as otherwise stated in the footnotes or the audit opinion related thereto, copies of which are included in Schedule 2.8), and (ii) present fairly, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries at the dates stated in such financial statements and the results of operations of the Company and its consolidated Subsidiaries for the periods stated therein (subject, in the case of the Interim Financial Statements, with respect to clauses (i) and (ii), to year-end adjustments and the absence of footnotes).

      Section 2.9. Contracts; No Defaults.

          (a) Schedule 2.9(a) contains a listing of all Contracts described in clauses (i)-(viii) below to which, as of the date hereof, the Company or any of its Subsidiaries is a party or by

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which any of their material assets may be bound (the “Company Material Contracts”). True, correct and complete copies of Contracts referred to in clauses (i)-(viii) below have been delivered to or made available to Acquiror or its agents or representatives.

               (i) Each Contract which involves performance of services by the Company or any of its Subsidiaries of an amount or value in excess of $250,000;

               (ii) Each note, debenture, other evidence of Indebtedness, guarantee, loan, credit or financing agreement or instrument or other Contract for money borrowed, including any agreement or commitment for future loans, credit or financing in excess of $50,000;

               (iii) Each Contract not in the ordinary course of business involving expenditures or receipts of the Company or any of its Subsidiaries in excess of $250,000;

               (iv) Each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Contract affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal (both tangible and intangible) property and involving aggregate payments in excess of $150,000;

               (v) Each license agreement with respect to Intellectual Property (as defined in Section 2.10) providing for the payment of royalties in any year in excess of $25,000 (excluding licenses by the Company or any of its Subsidiaries of any “off the shelf” software products);

               (vi) Each joint venture Contract, partnership agreement, or limited liability company agreement;

               (vii) Each Contract containing covenants that in any way expressly purport to restrict the business activity of the Company or any of its Subsidiaries or

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expressly limits the freedom of the Company or any of its Subsidiaries to engage in any line of business or to compete with any person; and

               (viii) Each Contract requiring capital expenditures after the date hereof in an amount in excess of $250,000.

          (b) Except as set forth on Schedule 2.9(b) and except as would not reasonably be expected to have a Material Adverse Effect, all the Company Material Contracts, as of the date hereof (i) are in full force and effect and (ii) represent the legal, valid and binding obligations of the Company or its Subsidiary party thereto and, to the knowledge of the Company, represent the legal, valid and binding obligations of the other parties thereto. Except as set forth on Schedule 2.9(b), no condition exists or event has occurred which, with notice or lapse of time or both, would constitute a default under such Company Material Contracts by the Company or its Subsidiary party thereto or, to the knowledge of the Company, any other party thereto, except where the occurrence of such event or existence of any such condition would not reasonably be expected to have a Material Adverse Effect.

      Section 2.10. Intellectual Property.

          (a) Schedule 2.10(a) lists each patent, registered trademark, registered service mark, registered trade name or registered copyright, and applications for any of the foregoing (collectively “Registered Intellectual Property”), held by the Company and its Subsidiaries as of the date hereof. Except as set forth on Schedule 2.10(b), (i) the Company or one of its Subsidiaries has good title to each item of Registered Intellectual Property owned by it, free and clear of any Lien other than Permitted Liens and (ii) the Company or one of its Subsidiaries owns or has the right to use pursuant to license, sublicense, agreement or permission all items of

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Registered Intellectual Property used in the operation of the business of the Company and its Subsidiaries, as presently conducted.

          (b) The term “Intellectual Property” means the following:

               (i) the name EMPI, all fictional business names, trading names, registered and unregistered trademarks, service marks, and applications (collectively, “Marks”);

               (ii) all patents, patent applications, and inventions and discoveries that may be patentable (collectively, “Patents”);

               (iii) all copyrights in both published works and unpublished works (collectively, “Copyrights”); and

               (iv) all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints (collectively, “Trade Secrets”); owned, used, or licensed by the Company as licensee or licensor.

          (c) Patents.

               (i) The Company or one of its Subsidiaries is the owner of all right, title, and interest in and to each of the Patents listed on Schedule 2.10(a), free and clear of all Liens other than Permitted Liens.

               (ii) All of the issued Patents listed on Schedule 2.10(a) are currently in compliance with formal legal requirements (including payment of filing, examination, and maintenance fees and proofs of working or use), and are, to the knowledge of the Company, valid and enforceable.

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               (iii) No Patent listed on Schedule 2.10(a) is currently involved in any interference, reissue, reexamination or opposition proceeding. Neither the Company nor any of its Subsidiaries has filed with the United State Patent and Trademark Office any currently pending objection to any patent application filed by any Person.

               (iv) To the Company’s knowledge, no Patent listed on Schedule 2.10(a) is infringed or has been challenged or threatened. To the Company’s knowledge, none of the products manufactured and sold, nor any process or know-how used, by the Company or any of its Subsidiaries infringes any patent or other proprietary right of any other Person.

          (d) Marks.

               (i) The Company or one of its Subsidiaries is the owner of all right, title, and interest in and to each of the Marks listed on Schedule 2.10(a), free and clear of all Liens other than Permitted Liens.

               (ii) All Marks listed on Schedule 2.10(a) are currently in compliance with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), and, to the knowledge of the Company, are valid and enforceable.

               (iii) No Mark listed on Schedule 2.10(a) is currently involved in any opposition, invalidation or cancellation proceeding and, to the Company’s knowledge, no such action is threatened with the respect to any of the Marks listed on Schedule 2.10(a).

               (iv) To the knowledge of the Company, no Mark listed on Schedule 2.10(a) is infringed or has been challenged or threatened. To the knowledge of the

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Company, none of the Marks listed on Schedule 2.10(a) used by the Company or any of its Subsidiaries infringes any trade name, trademark, or service mark of any third party.

          (e) Copyrights.

               (i) All the Copyrights listed on Schedule 2.10(a) are currently in compliance with formal legal requirements, and, to the knowledge of the Company, are valid and enforceable.

               (ii) To the knowledge of the Company, no Copyright is infringed or has been challenged or threatened. To the knowledge of the Company, none of the subject matter of any of the Copyrights listed on Schedule 2.10(a) infringes any copyright of any third party or is a derivative work based on the work of a third party.

      Section 2.11. Real Property.

          (a) Schedule 2.11(a) lists all Owned Real Property and Leased Real Property, or other interests therein owned by Company or any Subsidiary. Except as disclosed on Schedule 2.11(b), the Company or one of its Subsidiaries has good and marketable title to, or a valid leasehold interest in, all of its Owned Real Property and Leased Real Property, free and clear of all Liens, subject only to any (i) Permitted Liens and (ii) Liens constituting a lease, sublease or occupancy agreement that gives any third party the right to occupy any portion of the Owned Real Property or Leased Real Property. The Company or one of its Subsidiaries own all the properties and assets (other than the Owned Real Property and Leased Real Property), personal or mixed and whether tangible or intangible reflected as owned on the Interim Balance Sheet (other than properties and assets conveyed or disposed of since the date of the Interim Balance Sheet) free and clear of all Liens other than Permitted Liens.

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          (b) Except as set forth on Schedule 2.11(b), to the knowledge of the Company, the material buildings, plants, structures and equipment owned by the Company or any of its Subsidiaries are, taken as a whole, in good operating condition and repair (normal wear and tear excepted), except as would not reasonably be expected to have a Material Adverse Effect.

      Section 2.12. No Undisclosed Liabilities. Except as set forth in Schedule 2.12, as of the date hereof, neither the Company nor any of its Subsidiaries has liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) of the type required to be reflected on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP except for (a) liabilities or obligations reflected or reserved against in the Closing Balance Sheet or the Interim Balance Sheet, (b) liabilities incurred since the date of the Interim Balance Sheet in the ordinary course of business, (c) liabilities disclosed on the Schedules hereto (including Schedule 2.12) and (d) liabilities arising under this Agreement.

      Section 2.13. Litigation and Proceedings. Except as set forth on Schedule 2.13, as of the date hereof, there are no lawsuits, actions, suits, claims or other proceedings at law or in equity, or to the knowledge of the Company, investigations, before or by any Governmental Authority pending or, to the knowledge of the Company, threatened, against the Company or any of its Subsidiaries in which the relief sought includes damages in excess of $50,000 in any individual case or $250,000 in the aggregate or that seeks injunctive relief. Except as set forth on Schedule 2.13, there is no unsatisfied judgment, order or decree requiring payment in excess of $25,000 or any open injunction binding upon the Company or any of its Subsidiaries.

      Section 2.14. Employee Benefit Plans.

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          (a) Schedule 2.14(a) sets forth a complete and accurate list of the following (whether oral or in writing) which is or has been sponsored, maintained or contributed to since January 1, 2001 by the Company or any of its Subsidiaries for the benefit of any person who, as of the Closing, is a current or former employee or subcontractor of the Company and is otherwise material: (i) each “employee benefit plan,” as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (each, a “Company Employee Plan”); and (ii) each personnel policy, stock option plan, bonus plan or arrangement, incentive award plan or arrangement, vacation policy, severance pay plan, policy, program or agreement, deferred compensation contract, executive compensation or supplemental income arrangement, retiree benefit plan or arrangement, fringe benefit program or practice (whether or not taxable), employee loan, severance plan, change of control plan or agreement and each other employee benefit plan, contract, program or practice which is not described in Section 2.14(a)(i) (each, a “Company Benefit Program or Agreement”) (such Company Employee Plans and Company Benefit Programs or Agreements are sometimes collectively referred to in this Agreement as the “Company Employee Benefit Plans”).

          (b) True, correct and complete copies of each of the Company Employee Plans and related trusts, insurance policies, annuity contracts or other funding vehicles, if applicable, including all amendments thereto, have been made available to the Acquiror. There has also been made available to the Acquiror, with respect to each Company Employee Plan required to file such report and description, the report filed on Form 5500 for the past three (3) years, to the extent applicable, and the most recent summary plan description. True, correct and complete copies or descriptions of all other Company Benefit Programs or Agreements have also been made available to the Acquiror.

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          (c) Except as would not reasonably be expected to result in a Material Adverse Effect: (i) none of the Company nor any of its Subsidiaries contributes to, nor has an obligation to contribute to, nor has at any time since January 1, 2001, contributed to or had an obligation to contribute to, a “multiemployer plan,” within the meaning of Section 3(37) of ERISA, or to any other plan subject to Title IV of ERISA; (ii) each of the Company Employee Plans intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS regarding such qualified status and has not been amended, operated or administered in a way which would reasonably be expected to adversely affect such qualified status; (iii) there are no actions, suits or claims pending (other than routine claims for benefits) or, to the knowledge of the Company, contemplated or threatened against, or with respect to, any of the Company Employee Benefit Plans or their assets; (iv) each trust maintained in connection with each Company Employee Plan which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS regarding the tax exempt nature of such trust under Section 501(a) of the Code; (v) no act, omission or transaction has occurred which could result in imposition on the Company and its Subsidiaries of (A) breach of fiduciary duty liability monetary obligations under Section 409 of ERISA, (B) a civil penalty assessed pursuant to subsections (c), (i) or (1) of Section 502 of ERISA, (C) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (D) any liability for any reason under Title IV of ERISA, including due to the Company being considered a “single employer” with any other trade or business under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA; (vi) there is no matter pending with respect to any of the Company Employee Plans before the IRS, the Department of Labor or the PBGC; (vii) each of the Company Employee Benefit Plans complies, in form and operation, with the applicable provisions of the Code and ERISA; (viii) none of the Company nor any of its

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Subsidiaries have any liabilities or other obligations, whether current or future, under any Company Employee Benefit Plan for post-employment welfare benefits of any nature (other than continuation coverage under the requirements of Section 4980B of the Code and Sections 601-609 of ERISA); (ix) none of the Company nor any of its Subsidiaries nor any present or former director, officer, employee or other agent of the Company or any of its Subsidiaries has made any written or oral representations or promises to any present or former director, officer, employee or other agent concerning his or her terms, conditions or benefits of employment, including the tenure of any such employment or the conditions under which such employment may be terminated by any of the Company or any of its Subsidiaries which will be binding upon or enforceable against the Company on or after the Closing Date; (x) none of the Company Employee Benefit Plans provide that payments made pursuant to such plan may or shall be made in any common stock or any other equity interests of the Company or any of its Subsidiaries and no trust maintained pursuant to any Company Employee Benefit Plan holds any such equity interest; and (xi) there has been no termination or partial termination of any Company Employee Plan within the meaning of Section 411(d)(3) of the Code.

          (d) Except as set forth in Schedule 2.14(d), neither the execution nor delivery of this Agreement nor the consummation of the transactions contemplated hereby is reasonably expected to result in any payment becoming due to any employee or group of employees of the Company under any Company Employee Benefit Plans.

          (e) Except as set forth in Schedule 2.14(e), no payments are reasonably expected to be due to any current or former employee of the Company by virtue of the termination of such employment relationship for any reason, including termination without cause pursuant to any Company Employee Benefit Plan that is a severance or change of control plan or agreement.

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Schedule 2.14(e) sets forth the name of each employee of the Company to whom such payments may become due and separately sets forth for each employee the amounts of any severance or change in control payment due, or potentially due, to each such person, calculated as of the date hereof.

          (f) Except as set forth in Schedule 2.14(f), neither the Company nor any of its Subsidiaries has any unfunded liability, determined on an accumulated benefits obligation basis, for accrued pension benefits of employees outside the United States related to periods of employment prior to the Closing Date, which are not otherwise reflected on the Interim Financial Statements or the Audited Financial Statements.

      Section 2.15. Labor Relations.

          (a) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement. Except as set forth on Schedule 2.15(a), there are no material strikes, work stoppages, slow-downs or lock-outs pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries. Except as would not reasonably be expected to result in a Material Adverse Effect there are no proceedings against or affecting Company or any Subsidiary relating to the alleged violation of any legal requirement pertaining to labor relations or employment matters, including any charge or complaint filed by any employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable governmental body, nor any organizational activity or other labor or employment dispute against or affecting Company or its premises. Except as would not reasonably be expected to result in a Material Adverse Effect, the Company and each of its Subsidiaries has complied in all respects with all legal requirements relating to employment, equal employment

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opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing.

          (b) The Contracts listed on Schedule 2.15(b) include all written employment or severance agreements to which either the Company or any of its Subsidiaries is a party as of the date hereof with respect to any employee or former employee whose compensation or benefits during the fiscal year ended December 31, 2003 exceeded $100,000 and which may not be terminated at will, or by giving notice of 30 days or less, without cost or penalty. The Company has delivered or made available to Acquiror or its agents or representatives true, correct and complete copies of each such Contract, as amended to date.

      Section 2.16. Legal Compliance.

          (a) Except with respect to (i) matters set forth on Schedule 2.16(a) and (ii) compliance with Environmental Laws (as to which certain representations and warranties are made pursuant to Section 2.17 hereof), the Company and each of its Subsidiaries are in compliance with all laws (including rules and regulations thereunder) of federal, state, local and foreign governments (and all agencies thereof) applicable thereto, except where such instances, individually or in the aggregate, of non-compliance would not reasonably be expected to have a Material Adverse Effect.

          (b) Schedule 2.16(b)(i) contains a complete and accurate list of each material governmental authorization that is held by the Company or any of its Subsidiaries as of the date hereof. Each governmental authorization listed or required to be listed on Schedule 2.16(b)(i) is, as of the date hereof, valid and in full force and effect. Except as would not reasonably be expected to have a Material Adverse Effect and except as set forth in Schedule 2.16(b)(ii):

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               (i) the Company or any of its Subsidiaries is, and at all times has been, in full compliance with all of the terms and requirements of each governmental authorization identified or required to be identified on Schedule 2.16(b)(i);

               (ii) no event has occurred or circumstance exists that may (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any governmental authorization listed or required to be listed on Schedule 2.16(b)(i), or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any governmental authorization listed or required to be listed on Schedule 2.16(b)(i);

               (iii) neither the Company nor any of its Subsidiaries has received, at any time, any notice or other communication (whether oral or written) from any governmental body or any other person regarding (A) any actual, alleged, possible, or potential violation of or failure to comply with any term or requirement of any governmental authorization, or (B) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any governmental authorization; and

               (iv) all applications required to have been filed for the renewal of the governmental authorizations listed or required to be listed on Schedule 2.16(b)(i) have been duly filed on a timely basis with the appropriate governmental bodies, and all other filings required to have been made with respect to such governmental authorizations have been duly made on a timely basis with the appropriate governmental bodies.

          (c) The governmental authorizations listed on Schedule 2.16(b)(i) collectively constitute all of the governmental authorizations necessary to permit the Company or any of its

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Subsidiaries to lawfully conduct and operate their businesses in the manner they currently conduct and operate such businesses and to permit the Company or any Subsidiary to own and use their assets in the manner in which they currently own and use such assets, except where the failure to hold any such governmental authorization would not reasonably be expected to have a Material Adverse Effect.

      Section 2.17. Environmental Matters. Except as set forth on Schedule 2.17:

          (a) The Company, each of its Subsidiaries and, to the knowledge of the Company or any of its Subsidiaries, any other person for whose conduct the Company or any of its Subsidiaries is legally responsible are in full compliance with, and have not been and are not in violation of or liable under, any Environmental Law, except for any such violation or non-compliance that would not reasonably be expected to have a Material Adverse Effect. As of the date hereof, neither the Company nor any of its Subsidiaries has, during the past three (3) years, received any actual or threatened written order, notice or other communication from (i) any governmental body or private citizen acting in the public interest, or (ii) the current or prior owner or operator of any Owned Real Property or Leased Real Property, of any actual or potential violation or failure to comply with any Environmental Law by the Company or any of its Subsidiaries, or of any actual or threatened material obligation of the Company or any of its Subsidiaries, to undertake or bear the cost of any environmental, health, and safety liabilities with respect to any of the Owned Real Property or Leased Real Property or any other properties or assets (whether real, personal, or mixed) in which the Company or any of its Subsidiaries has had an interest, or with respect to any property at or to which Hazardous Materials (as defined below) were generated, manufactured, refined, transferred, imported, used, or processed by Company or any of its Subsidiaries or, to the knowledge of the Company, any other Person for whose conduct

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the Company or any of its Subsidiaries is legally responsible. “Hazardous Materials” shall mean any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefore and asbestos or asbestos-containing materials.

          (b) As of the date hereof, there are no pending or, to the knowledge of Company, threatened claims asserted against the Company or any of its Subsidiaries resulting from any environmental, health, and safety liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting any of the Owned Real Property or Leased Real Property, or any other properties and assets (whether real, personal, or mixed) in which Company or any Subsidiary has or had an interest.

          (c) As of the date hereof, neither the Company, any of its Subsidiaries nor, to the knowledge of the Company, any other Person for whose conduct the Company or any of its Subsidiaries is legally responsible has, during the past three (3) years, received any citation, directive, inquiry, notice, order, summons, warning, or other communication that alleges any actual or potential violation or failure to comply with any Environmental Law by the Company or any of its Subsidiaries, or of any alleged, actual, or potential obligation of the Company or any of its Subsidiaries to undertake or bear the cost of any environmental, health, and safety liabilities with respect to any Owned Real Property or Leased Real Property, or any other properties or assets (whether real, personal, or mixed) in which the Company or any of its Subsidiaries had an interest, or with respect to any property or facility to which Hazardous Materials generated, manufactured, refined, transferred, imported, used, or processed by the Company or any of its

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Subsidiaries or, to the knowledge of the Company, any other Person for whose conduct the Company or any of its Subsidiaries is legally responsible.

          (d) To the knowledge of the Company, neither the Company, any of its Subsidiaries nor any other Person for whose conduct the Company or any of its Subsidiaries is legally responsible has any environmental, health, and safety liabilities with respect to the Owned Real Property or Leased Real Property with respect to any other properties and assets (whether real, personal, or mixed) in which the Company or any of its Subsidiaries (or any predecessor), has or had an interest, or at any property geologically or hydrologically adjoining the Owned Real Property or Leased Real Property or any such other property or assets, except for such liabilities as would not reasonably be expected to have a Material Adverse Effect.

          (e) To the knowledge of Company, there has been no release of any Hazardous Materials at or from the Owned Real Property or Leased Real Property, except as would not reasonably be expected to have a Material Adverse Effect.

          (f) The Company has delivered to Acquiror true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by the Company or any of its Subsidiaries pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Owned Real Property or Leased Real Property, or concerning compliance by the Company or any of its Subsidiaries, or any other person for whose conduct it is or may be held responsible, with environmental laws, regulations or statutes.

      Section 2.18. Taxes.

          (a) Except as otherwise disclosed in Schedule 2.18(a), all Tax Returns required to be filed with respect to the Company and each of its Subsidiaries (each, a “Taxpayer”) have been timely filed, taking into account all applicable extensions, and all such Tax Returns were

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true, correct and complete in all material respects. All Taxes shown thereon and which are due and payable or which have otherwise become due from any Taxpayer have been paid or have otherwise been accrued or reserved for in the Company’s financial statements. The Audited Financial Statements and the Interim Financial Statements contain adequate accruals (without regard to reserves for deferred Taxes established to reflect timing differences) for the unpaid Taxes of each Taxpayer through the date of such financial statements. Other than Taxes incurred in the ordinary course of business, no Taxpayer has any liability for unpaid Taxes accruing after the date of the Interim Financial Statements. The Company has made available to Acquiror copies of such Tax Returns.

          (b) Except as otherwise disclosed in Schedule 2.18(b), there are no Liens for Taxes upon the assets of the Taxpayers, except with respect to Taxes being contested in good faith. Each Taxpayer has withheld and paid over all Taxes required to have been withheld and paid over by it and has complied in all material respects with all information reporting and back-up withholding requirements relating to Taxes. No Taxpayer is or has been (i) a party to any tax sharing or tax allocation agreement, or (ii) a member of a consolidated, combined, unitary or similar group for Tax purposes, other the group of which the Company is the common parent.

          (c) Except as otherwise disclosed in Schedule 2.18(c), no Tax Return filed by or on behalf of a Taxpayer is currently being audited. There is no claim or assessment pending against any Taxpayer for any alleged deficiency in Taxes or for the failure to file any Tax Return. There are no agreements in effect to extend the period of limitations for the assessment or collection of any Tax for which a Taxpayer could be liable other than statutory extensions which result from filing Tax Returns by the extended due date.

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          (d) Except as set forth in Schedule 2.18(d-1), none of the Taxpayers has distributed the stock of any corporation in a distribution of stock qualifying under Section 355 of the Code. Except as set forth in Schedule 2.18(d-2), no Taxpayer (i) has made any payment or is a party to any agreement that could obligate it to make any payment that is not deductible by reason of Section 280G or 404 of the Code, or any comparable provision of state, local or foreign Tax laws, (ii) is a party to any agreement or arrangement for which partnership Tax Returns are required to be filed, (iii) is required to make any adjustment under Code Section 481(a) or 263A of the Code, or any comparable provision of state, local or foreign Tax laws, by reason of a change in accounting method or otherwise. No Taxpayer has entered into any transaction required to be registered or disclosed to the Internal Revenue Service pursuant to Section 6111 of the Code or Section 1.6011-4 of the Treasury Regulations promulgated under the Code (or any predecessor thereto), or for which lists are required to be maintained pursuant to Section 6112 of the Code (nor has any Taxpayer entered into any transaction subject to similar requirements under any comparable provisions of state, local or foreign Tax laws).

          (e) Except as set forth in Schedule 2.18(e), none of the Company or its Subsidiaries is a party to (i) any advance pricing agreement, closing agreement or other agreement relating to Taxes with any taxing authority or (ii) any tax indemnity obligation in connection with any sale, transfer or other disposition after August 31, 1999 to an unrelated third party of stock of any Subsidiary or any group of assets constituting a business, in each case for consideration in excess of $250,000.

          (f) The Company and its Subsidiaries have complied in all material respects with their obligations under Sections 6038, 6038A, 6038B and 6038C of the Code.

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      Section 2.19. Governmental Authorities; Consents. Assuming the truth and completeness of the representations and warranties of Acquiror contained in this Agreement, no consent, approval or authorization of, or designation, declaration or filing with, any Governmental Authority or other third party is required on the part of the Company with respect to the Company’s execution or delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (a) applicable requirements of the HSR Act or any similar foreign law, (b) any consents which th