EXECUTION COPY AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

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COGNEX CORPORATION, | TANGO ACQUISITION CORP., | DVT CORPORATION

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Title: EXECUTION COPY AGREEMENT AND PLAN OF MERGER
Governing Law: Georgia Date: 5/11/2005
Industry: Scientific and Technical Instr. Law Firm: Kilpatrick Stockton LLP; Goodwin Procter LLP Sector: Technology

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EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

by and among

COGNEX CORPORATION,

TANGO ACQUISITION CORP.,

and

DVT CORPORATION

May 9, 2005

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TABLE OF CONTENTS

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PAGE

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ARTICLE I - THE MERGER................................................................... 1

Section 1.1. The Merger........................................................... 1

Section 1.2. Effective Time....................................................... 2

Section 1.3. Articles of Incorporation and Bylaws................................. 2

Section 1.4. Closing.............................................................. 2

Section 1.5. Directors and Officers............................................... 2

ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS... 2

Section 2.1. Merger Consideration and Related Definitions......................... 2

Section 2.2. Effect on Capital Stock.............................................. 5

Section 2.3. Company Stock Options and Related Matters............................ 6

Section 2.4. Post-Closing Net Working Capital Adjustment.......................... 6

Section 2.5. Post-Closing Determination of Tax Refund Amount...................... 8

ARTICLE III - PAYMENT OF MERGER CONSIDERATION; DISSENTING SHARES......................... 9

Section 3.1. Payment for Shares of Company Common Stock........................... 9

Section 3.2. Payment for In-the-Money Options..................................... 10

Section 3.3. Escrow Account....................................................... 11

Section 3.4. General Provisions Regarding Payment of Merger Consideration......... 11

Section 3.5. Appraisal Rights..................................................... 12

ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 12

Section 4.1. Organization and Corporate Power..................................... 13

Section 4.2. Authorization, Validity and Effect of Agreement...................... 13

Section 4.3. Capitalization....................................................... 14

Section 4.4. Non-Contravention.................................................... 14

Section 4.5. Corporate Records.................................................... 15

Section 4.6. Subsidiaries; Investments............................................ 15

Section 4.7. Financial Statements................................................. 15

Section 4.8. Absence of Undisclosed Liabilities................................... 16

Section 4.9. Absence of Certain Developments...................................... 16

Section 4.10. Accounts Receivable; Accounts Payable; Inventories................... 16

Section 4.11. Transactions with Affiliates......................................... 17

Section 4.12. Properties........................................................... 17

Section 4.13. Tax Matters.......................................................... 18

Section 4.14. Certain Contracts and Arrangements................................... 19

Section 4.15. Intellectual Property................................................ 20

Section 4.16. Litigation........................................................... 23

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Section 4.17. Labor Matters........................................................ 24

Section 4.18. Permits; Compliance with Laws........................................ 24

Section 4.19. Employee Benefit Programs............................................ 25

Section 4.20. Insurance Coverage................................................... 27

Section 4.21. Investment Banking; Brokerage........................................ 28

Section 4.22. Environmental Matters................................................ 28

Section 4.23. Customers, Distributors and Partners................................. 28

Section 4.24. Suppliers............................................................ 29

Section 4.25. Warranty and Related Matters......................................... 29

Section 4.26. Backlog.............................................................. 29

Section 4.27. Illegal Payments..................................................... 29

Section 4.28. Disclosure........................................................... 29

Section 4.29. No Other Representations............................................. 30

ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO........................ 30

Section 5.1. Organization......................................................... 30

Section 5.2. Authorization, Validity and Effect of Agreement...................... 30

Section 5.3. Non-Contravention.................................................... 30

Section 5.4. Required Financing................................................... 31

Section 5.5. Investment Banking; Brokerage........................................ 31

Section 5.6. Litigation........................................................... 31

ARTICLE VI - ADDITIONAL AGREEMENTS....................................................... 31

Section 6.1. Shareholder Consent.................................................. 31

Section 6.2. Confidentiality...................................................... 31

Section 6.3. Employee Benefit Arrangements........................................ 31

Section 6.4. Director and Officer Indemnification................................. 32

Section 6.5. Further Assurances................................................... 32

ARTICLE VII - CONDITIONS TO THE MERGER; CLOSING DELIVERIES............................... 33

Section 7.1. Conditions to the Obligations of Each Party to Effect the Merger..... 33

Section 7.2. Deliveries at Closing by the Company................................. 33

Section 7.3. Delivery at Closing by Parent........................................ 34

Section 7.4. Right to Proceed..................................................... 34

ARTICLE VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION............... 34

Section 8.1. Survival............................................................. 34

Section 8.2. Indemnification by the Company Equity Holders........................ 35

Section 8.3. Indemnification by Parent............................................ 38

Section 8.4. Treatment of Indemnity Payments...................................... 39

Section 8.5. Remedies Exclusive................................................... 39

ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER........................................... 40

Section 9.1. Termination.......................................................... 40

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Section 9.2. Effect of Termination................................................ 40

Section 9.3. Amendment............................................................ 40

Section 9.4. Extension; Waiver.................................................... 40

ARTICLE X - GENERAL PROVISIONS........................................................... 41

Section 10.1. Notices.............................................................. 41

Section 10.2. Headings............................................................. 42

Section 10.3. Interpretation....................................................... 42

Section 10.4. Assignment........................................................... 42

Section 10.5. Severability......................................................... 42

Section 10.6. No Agreement Until Executed.......................................... 42

Section 10.7. Certain Definitions.................................................. 43

Section 10.8. Shareholders' Representative......................................... 44

Section 10.9. Fees and Expenses.................................................... 45

Section 10.10. Choice of Law........................................................ 45

Section 10.11. Specific Performance................................................. 46

Section 10.12. Mutual Drafting...................................................... 46

Section 10.13. Miscellaneous........................................................ 46

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EXHIBITS:

EXHIBIT A-1 - List of Major Shareholders

EXHIBIT A-2 - Form of Shareholder Non-Competition Agreement

EXHIBIT B - Form of Letter of Transmittal for Shareholders

EXHIBIT C - Form of Acknowledgment Letter for Optionholders

EXHIBIT D - Form of Escrow Agreement

EXHIBIT E - Form of Legal Opinion of Company Counsel

EXHIBIT F - Form of Release

ANNEXES:

ANNEX A - Index of Defined Terms

ANNEX B - List of Schedules

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of May 9,

2005, by and among Cognex Corporation, a Massachusetts corporation ("Parent"),

Tango Acquisition Corp., a Georgia corporation and a wholly owned subsidiary of

Parent ("MergerCo"), and DVT Corporation, a Georgia corporation (the "Company").

Certain terms used in this Agreement are defined in Section 10.7 hereof. An

index of defined terms used in this Agreement is attached as Annex A hereto, and

a list of Schedules to this Agreement is attached as Annex B hereto.

WHEREAS, the parties wish to effect a business combination through a merger

(the "Merger") of MergerCo with and into the Company on the terms and conditions

set forth in this Agreement and in accordance with the Georgia Business

Corporation Code, as amended (the "GBCC");

WHEREAS, the Board of Directors of the Company (the "Company Board") has

approved this Agreement, the Merger and the other transactions contemplated by

this Agreement and determined that this Agreement, the Merger and the other

transactions contemplated by this Agreement are advisable and in the best

interest of its shareholders;

WHEREAS, the Boards of Directors of Parent and MergerCo have determined

that this Agreement, the Merger and the other transactions contemplated by this

Agreement are in the best interest of their respective shareholders, and Parent

has approved this Agreement as the sole shareholder of MergerCo;

WHEREAS, as a condition to the willingness of Parent and MergerCo to enter

into this Agreement, certain shareholders of the Company listed on Exhibit A-1

(the "Major Shareholders") are simultaneously herewith entering into

non-competition agreements with the Company in the form attached hereto as

Exhibit A-2 (collectively, the "Non-Competition Agreements"); and

WHEREAS, Parent, MergerCo and the Company desire to make certain

representations, warranties, covenants and agreements in connection with the

Merger, and also to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the mutual agreements and covenants

contained herein, the parties hereto agree as follows:

ARTICLE I - THE MERGER

SECTION 1.1. THE MERGER. Subject to the terms and conditions of this

Agreement, at the Effective Time (as defined in Section 1.2), the Company and

MergerCo shall consummate the Merger pursuant to which (a) MergerCo shall be

merged with and into the Company and the separate corporate existence of

MergerCo shall thereupon cease, (b) the Company shall be the surviving

corporation in the Merger (the "Surviving Corporation") and shall continue to be

governed by the laws of the State of Georgia, and (c) the separate corporate

existence of the

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Company with all its rights, privileges, immunities, powers and franchises shall

continue unaffected by the Merger. The Merger shall have the effects specified

in the GBCC.

SECTION 1.2. EFFECTIVE TIME. On the Closing Date (as defined in Section

1.4), the Company shall duly execute a certificate of merger (the "Certificate

of Merger") and file such Certificate of Merger with the Secretary of State of

the State of Georgia in accordance with the GBCC. The Merger shall become

effective at such time as the Certificate of Merger, accompanied by payment of

the filing fee (as provided in the GBCC), has been filed with the Secretary of

State of the State of Georgia (the "Effective Time").

SECTION 1.3. ARTICLES OF INCORPORATION AND BYLAWS. The articles of

incorporation of the Surviving Corporation shall be amended at the Effective

Time to be identical to the articles of incorporation of MergerCo (except for

any provisions dealing with the incorporator and initial directors, which shall

be omitted, and the name of the Surviving Corporation which shall be as set

forth in the last sentence of this Section 1.3) until thereafter amended as

provided by law and the terms of such articles of incorporation. The bylaws of

MergerCo, as in effect immediately prior to the Effective Time, shall be the

bylaws of the Surviving Corporation until thereafter amended as provided by law,

by the terms of the articles of incorporation of the Surviving Corporation and

by the terms of such bylaws. Notwithstanding the foregoing, the name of the

Surviving Corporation shall be "DVT Corporation" and the articles of

incorporation and bylaws of the Surviving Corporation shall so provide.

SECTION 1.4. CLOSING. Subject to satisfaction or waiver of the conditions

set forth in Article VII, the closing of the Merger (the "Closing") shall occur

as of the date hereof, or on such other date as may be agreed upon by the

parties (the "Closing Date"). The Closing shall take place at the offices of

Goodwin Procter LLP, Exchange Place, Boston, MA 02109, or at such other place as

agreed to by the parties hereto.

SECTION 1.5. DIRECTORS AND OFFICERS. The directors of MergerCo immediately

prior to the Effective Time shall be the initial directors of the Surviving

Corporation and the officers of MergerCo immediately prior to the Effective Time

shall be the initial officers of the Surviving Corporation, each to hold office

in accordance with the articles of incorporation and bylaws of the Surviving

Corporation.

ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL STOCK

OF THE CONSTITUENT CORPORATIONS

SECTION 2.1. MERGER CONSIDERATION AND RELATED DEFINITIONS. For purposes of

this Agreement:

(a) "Base Balance Sheet" means the audited consolidated balance

sheet of the Company and its Subsidiaries (as defined in Section 10.7) as

of December 31, 2004.

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(b) "Closing Per Share Payment" means an amount (in dollars per

share) equal to (i) the Initial Per Share Merger Consideration, less (ii)

the amount obtained by dividing $11,000,000 by the Outstanding Shares.

incurred by or on behalf of, or to be paid by, (whether accrued or

unaccrued) the Company or any of its Subsidiaries relating to the

negotiation, preparation or execution of this Agreement or any documents or

agreements contemplated hereby or the performance or consummation of the

transactions contemplated hereby (excluding any such expenses paid or

accrued by the Company prior to the Effective Time and reflected on the

Base Balance Sheet), including, but not limited to, (i) brokers' or

finders' fees, (ii) fees and expenses of counsel, advisors, consultants,

investment bankers, accountants, auditors and other experts, and (iii) any

expenses of the shareholders or optionholders of the Company incurred by

the Company on their behalf in connection with the transactions

contemplated hereby. Prior to the Closing Date, the Chief Financial Officer

of the Company shall provide Parent with a list of, and supporting

documentation for, all Company Expenses.

(d) "Company Fully Diluted Shares" means the sum of (i) the

Outstanding Shares, plus (ii) the aggregate number of additional shares of

Company Common Stock that would have been issued and outstanding as of the

Effective Time had all of the In-the-Money Options been exercised in full

prior thereto.

(e) "Company Stock Option Plans" means the Company's 1994, 1992

and 1991 Employee Long-Term Stock Investment Plans and 1999 Incentive Stock

Plan.

(f) "Estimated Net Working Capital" means the Company's Net

Working Capital as of the close of business on the Peg Date, as determined

jointly by the Company and Parent prior to the Closing; provided that any

tax provision or tax benefit recorded during the interim period between

January 1, 2005 and the Closing Date shall be excluded from such

calculation. The Estimated Net Working Capital has been calculated by the

parties as set forth on Schedule 2.1(f).

(g) "Estimated Net Working Capital Adjustment" means the amount,

whether positive, negative or zero, equal to (i) the Estimated Net Working

Capital, less (ii) $5,900,000, which amount has been calculated by the

parties to be $5,805,968.

(h) "Estimated Tax Refund Amount" means an estimate of the Tax

Refund Amount as determined jointly by the Company and Parent prior to the

Closing. The Estimated Tax Refund Amount has been calculated by the parties

as set forth on Schedule 2.1(h).

(i) "Final Indemnification Escrow Amount" means the amount of the

Initial Indemnification Escrow Amount remaining on the first (1st)

anniversary of the Closing Date and following the satisfaction of all

claims of the Parent/MergerCo Indemnified Parties with respect thereto as

described in Section 3.3.

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(j) "Final Per Share Merger Consideration" means an amount (in

dollars per share) equal to (i) the Closing Per Share Payment, plus (ii)

the amount obtained by dividing the Final Indemnification Escrow Amount by

the Outstanding Shares.

(k) "In-the-Money Options" means all options granted under the

Company Stock Option Plans which are outstanding immediately prior to the

Effective Time (whether or not then vested or exercisable) and which have

an exercise price per share less than $12.49.

(l) "Initial Indemnification Escrow Amount" means $11,000,000 (as

such amount may be supplemented in accordance with Sections 2.4(d) and

2.5(b)).

(m) "Initial Merger Consideration" means an amount equal to (i)

$110,000,000, less (ii) all Company Expenses, less (iii) the Net Management

Severance Costs, plus (iv) the Estimated Net Working Capital Adjustment,

plus (v) the Estimated Tax Refund Amount, plus (vi) the aggregate exercise

price of all In-the-Money Options. The Initial Merger Consideration has

been calculated by the parties as set forth on Schedule 2.1(m).

(n) "Initial Per Share Merger Consideration" means the amount (in

dollars per share) obtained by dividing the Initial Merger Consideration by

the Company Fully Diluted Shares.

(o) "Management Employment Agreements" means those certain

Employment Agreements, dated as of December 13, 2004, by and between the

Company and each of Robert A. Steinke and Emory O. Berry.

(p) "Management Severance Costs" means all payments to be made as

of the Closing Date under the Management Employment Agreements as described

on Schedule 4.19.

(q) "Net Management Severance Costs" means sixty-five percent

(65%) of the Management Severance Costs (including any employer payroll

taxes thereon), plus $50,000.

(r) "Net Working Capital" means, as of any date, the consolidated

current assets of the Company and its Subsidiaries, reduced by the

consolidated current liabilities, in each case as determined consistent

with the past practice of the Company and in accordance with GAAP (as

defined in Section 10.7) consistently applied.

(s) "Option Consideration" means, for each Option share, (i) the

excess, if any, of the Initial Per Share Merger Consideration over the

exercise price per share of such Option, or (ii) $0.00 if the Initial Per

Share Merger Consideration is less than or equal to the exercise price per

share of such Option.

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(t) "Options" means, collectively, the In-the-Money Options and

the Out-of-the-Money Options.

(u) "Out-of-the-Money Options" means all options granted under

the Company Stock Option Plans which are outstanding immediately prior to

the Effective Time (whether or not then vested or exercisable) and which

have an exercise price per share greater than or equal to the Initial Per

Share Merger Consideration.

(v) "Outstanding Shares" means the total number of shares of

Company Common Stock issued and outstanding as of immediately prior to the

Effective Time, other than shares of Company Common Stock to be canceled in

accordance with Section 2.2(a)(ii).

(w) "Peg Date" means April 30, 2005.

(x) "Tax Refund Amount" means (i) ninety percent (90%) of the Tax

Refund Receivable, less (ii) ninety percent (90%) of all external

accounting and legal fees reasonably incurred by Parent or the Surviving

Corporation to determine and obtain the Tax Refund Receivable.

(y) "Tax Refund Receivable" means the amount, if any, received by

the Surviving Corporation from federal and state taxing authorities with

respect to the carryback net operating losses incurred by the Company for

its taxable year ending on the Closing Date.

SECTION 2.2. EFFECT ON CAPITAL STOCK.

(a) As of the Effective Time, by virtue of the Merger and without

any action on the part of any holder of any shares of common stock, no par

value per share, of the Company ("Company Common Stock") or any shares of

the capital stock of MergerCo:

(i) Each share of common stock, no par value per share, of

MergerCo issued and outstanding immediately prior to the Effective Time

shall be converted into one fully paid and non-assessable share of common

stock, no par value per share, of the Surviving Corporation following the

Merger; and

(ii) Each share of Company Common Stock that is owned by the

Company or by any wholly owned Subsidiary (as defined in Section 10.7) of

the Company immediately prior to the Closing Date shall automatically be

canceled and retired and shall cease to exist, and no cash or other

consideration shall be delivered or deliverable in exchange therefor; and

(iii) Each Outstanding Share (other than Dissenting Shares

as defined in Section 3.4) shall be converted into the right to receive the

Final Per Share Merger Consideration in cash, payable to the holder thereof

in two (2) installments as described below, without any interest thereon,

upon surrender and exchange of the

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Certificate (as defined below) representing such share of Company Common

Stock or the delivery of an affidavit as described in Section 3.1(f). Each

holder of Company Common Stock as of immediately prior to the Effective

Time shall be paid the Closing Per Share Payment for each share owned by

such holder in accordance with the procedures set forth in Section 3.1. The

balance, if any, of the Final Per Share Merger Consideration remaining

after payment of the Closing Per Share Payment, shall be paid to such

holders of Company Common Stock as set forth below in Section 3.3.

(b) All shares of Company Common Stock, when converted into the

right to receive the Final Per Share Merger Consideration as provided in

Section 2.2(a)(iii), shall no longer be outstanding and shall automatically

be canceled and retired and shall cease to exist, and each certificate

("Certificate") previously evidencing such shares shall thereafter

represent only the right to receive the Final Per Share Merger

Consideration applicable to the shares underlying such Certificate. The

holders of Certificates previously evidencing shares of Company Common

Stock outstanding immediately prior to the Effective Time shall cease to

have any rights with respect to the Company Common Stock except as

otherwise provided herein or by law and, upon the surrender of Certificates

in accordance with the provisions of Section 3.1, shall only have the right

to receive the Final Per Share Merger Consideration in exchange for each of

their shares of Company Common Stock.

SECTION 2.3. COMPANY STOCK OPTIONS AND RELATED MATTERS. Each Option shall

be converted at the Effective Time into the right to receive a cash amount equal

to the Option Consideration for each share of Company Common Stock then subject

to the Option. The Option Consideration shall be paid by the Surviving

Corporation to the holder of an In-the-Money Option in accordance with the

procedures set forth in Section 3.2. The Company Stock Option Plans shall

terminate as of the Effective Time and the provisions in any other plan,

agreement, program or arrangement providing for the issuance or grant of any

other interest in respect of the capital stock of the Company or any of its

Subsidiaries shall be of no further force and effect and shall be deemed to be

deleted as of the Effective Time.

SECTION 2.4. POST-CLOSING NET WORKING CAPITAL ADJUSTMENT.

(a) Within sixty (60) days following the Closing Date, Parent

shall prepare and deliver to the Shareholders' Representative (as defined

in Section 10.7) a written statement (the "Closing Statement") of Net

Working Capital as of the close of business on the Peg Date; provided that,

consistent with the Estimated Net Working Capital calculation described in

Section 2.1(f), any tax provision or tax benefit recorded during the

interim period between January 1, 2005 and the Closing Date shall be

excluded from such calculation. The Shareholders' Representative shall have

fifteen (15) days following its receipt of the Closing Statement (the

"Review Period") to review the same. On or before the expiration of the

Review Period, the Shareholders' Representative shall deliver to Parent a

written statement accepting or objecting to the calculation of Net Working

Capital set forth on the Closing Statement. In the event that the

Shareholders' Representative shall object to the Closing Statement, such

statement shall include a detailed itemization of the Shareholders'

Representative's objections and the reasons therefor. If the Shareholders'

Representative does not deliver such statement

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to Parent within the Review Period, the Shareholders' Representative shall

be deemed to have accepted the Closing Statement.

(b) In the event that the Shareholders' Representative shall

accept, or shall be deemed to have accepted, the Closing Statement as

prepared and delivered by Parent, the Net Working Capital set forth on the

Closing Statement shall constitute the "Final Net Working Capital." In the

event, however, that the Shareholders' Representative shall object to the

Closing Statement within the Review Period, Parent and the Shareholders'

Representative shall promptly meet and in good faith attempt to resolve

such objections. Any such objections which cannot be resolved between

Parent and the Shareholders' Representative within thirty (30) days

following Parent's receipt of the Shareholders' Representative's statement

of objections shall be resolved in accordance with Section 2.4(c). The Net

Working Capital set forth on the Closing Statement, as adjusted to reflect

any adjustments agreed upon by the parties, or as determined in accordance

with Section 2.4(c), shall constitute the "Final Net Working Capital."

able to resolve such objections as may be raised with respect to the

Closing Statement, within the thirty (30) day period described in Section

2.4(b), either party may submit the matter to Deloitte & Touche LLP or, if

Deloitte & Touche LLP shall not be independent of both parties at the time

of submission of the matter, another independent nationally recognized

accounting firm mutually agreeable to both parties (the "Arbitrator"), for

review and resolution, with instructions to complete the same as promptly

as practicable, but in any event within thirty (30) days of its engagement,

and to make any calculations in accordance with GAAP and consistent with

the Company's historical practice. The fees and costs of the Arbitrator, if

one is required, shall be paid by the party who submitted the Net Working

Capital amount which was farther away from the Final Net Working Capital

calculated by the Arbitrator and, in the case of the Shareholders'

Representative, shall be paid from the Initial Indemnification Escrow

Amount in accordance with the terms of the Escrow Agreement (as defined in

Section 3.3).

(d) In the event that the Final Net Working Capital is less than

the Estimated Net Working Capital (the amount obtained by subtracting the

Final Net Working Capital from the Estimated Net Working Capital being

referred to herein as the "Net Working Capital Shortfall"), Parent shall be

entitled to receive a refund of an amount equal to the Net Working Capital

Shortfall, which amount shall be paid from the Initial Indemnification

Escrow Amount in accordance with the terms of the Escrow Agreement. In the

event that the Final Net Working Capital is greater than the Estimated Net

Working Capital (the amount obtained by subtracting the Estimated Net

Working Capital from the Final Net Working Capital being referred to herein

as the "Net Working Capital Overage"), within five (5) Business Days of the

determination of the Final Net Working Capital, Parent shall deliver to the

Escrow Agent (as defined in Section 3.3) as a supplement to the Initial

Indemnification Escrow Amount, an amount equal to the Net Working Capital

Overage. In the event that the Final Net Working Capital equals the

Estimated Net Working Capital, no amount shall be deducted from, or added

to, the

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Initial Indemnification Escrow Amount or otherwise paid to any party with

respect thereto.

SECTION 2.5. POST-CLOSING DETERMINATION OF TAX REFUND AMOUNT.

(a) The parties agree that the obligations of the Company to pay

the Aggregate Option Consideration as set forth in Section 3.2(a) and the

Management Severance Costs shall be deemed to have arisen on or prior to

the Closing Date and shall be treated as deductions incurred in the

Company's tax year ending on the Closing Date.

(b) In the event that the actual Tax Refund Receivable as

determined by the applicable regulatory authorities is less than the Tax

Refund Receivable used in the calculation of the Estimated Tax Refund

Amount (the amount obtained by subtracting the actual Tax Refund Receivable

from the Tax Refund Receivable used in the calculation of the Estimated Tax

Refund Amount being referred to herein as the "Tax Refund Shortfall"),

Parent shall be entitled to receive a refund of an amount equal to ninety

percent (90%) of the Tax Refund Shortfall, less the amount of any

additional tax receivable that would have been booked during the interim

period between January 1, 2005 and the Closing Date assuming knowledge of

the Tax Refund Shortfall, which net amount, if positive, shall be paid from

the Initial Indemnification Escrow Amount in accordance with the terms of

the Escrow Agreement. In the event that the actual Tax Refund Receivable as

determined by the applicable regulatory authorities is greater than the Tax

Refund Receivable used in the calculation of the Estimated Tax Refund

Amount (the amount obtained by subtracting the Tax Refund Receivable used

in the calculation of the Estimated Tax Refund Amount from the actual Tax

Refund Receivable being referred to herein as the "Tax Refund Overage"),

within five (5) Business Days of the determination of the Tax Refund

Overage, Parent shall deliver to the Escrow Agent as a supplement to the

Initial Indemnification Escrow Amount, an amount, if positive, equal to

ninety percent (90%) of the Tax Refund Overage, less the amount of any

reduction in the tax receivable that would have been booked during the

interim period between January 1, 2005 and the Closing Date assuming

knowledge of the Tax Refund Overage. In the event that the actual Tax

Refund Receivable as determined by the applicable regulatory authorities is

equal to the Tax Refund Receivable used in the calculation of the Estimated

Tax Refund Amount or the final determination of the Tax Refund Receivable

is made by the applicable regulatory authorities following the first

anniversary of the Closing Date, no amount shall be deducted from, or added

to, the Initial Indemnification Escrow Amount or otherwise paid to any

party with respect thereto.

copy of any application for the Tax Refund Receivable, or any amendments or

supplements thereto, proposed to be filed by the Surviving Corporation

within five (5) Business Days prior to the filing thereof and the

opportunity to discuss with Parent the contents of such filing. Parent

shall promptly notify the Shareholders' Representative in writing of the

results of the audit of any such filing by an applicable regulatory

authority. Until the earlier of the first anniversary of the Closing Date

or final determination of the Tax Refund Receivable, Parent shall provide

the Shareholders' Representative with

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reasonable access to the Surviving Corporation's books and records relating

to taxes for periods prior to the Closing Date.

(d) The parties agree that all external accounting and legal fees

incurred by Parent and the Surviving Corporation to determine and obtain

the Tax Refund Receivable shall not be treated as Company Expenses for any

purpose of this Agreement, but shall be allocated ninety percent (90%) to

the Company Equity Holders and ten percent (10%) to Parent as described in

Section 2.1(x). To the extent that the actual expenses so incurred by

Parent and the Surviving Corporation exceed the estimated amount of such

expenses used in the calculation of the Estimated Tax Refund Amount, Parent

shall be entitled to receive a refund of ninety percent (90%) of such

excess, which amount shall be paid from the Initial Indemnification Escrow

Amount in accordance with the terms of the Escrow Agreement.

ARTICLE III - PAYMENT OF MERGER CONSIDERATION; DISSENTING SHARES

SECTION 3.1. PAYMENT FOR SHARES OF COMPANY COMMON STOCK.

(a) At the Effective Time, Parent shall deposit, or shall cause

to be deposited, with a bank or trust company as shall be mutually

acceptable to Parent and the Company (the "Exchange Agent"), for the

benefit of the holders of shares of Company Common Stock for exchange

through the Exchange Agent, an amount in cash (the "Exchange Fund") equal

to (i) the Closing Per Share Payment, multiplied by (ii) the Outstanding

Shares.

(b) As promptly as practicable following the Effective Time, but

in any event within five (5) Business Days (as defined in Section 10.7)

thereof, Parent shall cause the Exchange Agent to deliver or mail to each

holder of record of Outstanding Shares, (i) a letter of transmittal in

substantially the form attached hereto as Exhibit B and (ii) instructions

for use in surrendering the Certificates formerly representing such shares

in exchange for an amount equal to the number of such shares, multiplied by

the Final Per Share Merger Consideration.

Exchange Agent together with such letter of transmittal, properly completed

and duly executed, and such other documents as may be required pursuant to

such instructions, the holder of such Certificate shall be entitled to

receive in exchange therefor the Final Per Share Merger Consideration

(payable in accordance with Section 2.2), that such holder has the right to

receive in respect of the shares of Company Common Stock formerly

represented by such Certificate, and the Certificate so surrendered shall

forthwith be canceled. No interest will be paid or accrued on any Final Per

Share Merger Consideration (or portion thereof) payable to holders of

Certificates.

(d) Until surrendered in accordance with this Section 3.1, each

such Certificate (other than Certificates representing shares of Company

Common Stock to be canceled in accordance with Section 2.2(a)(ii) and

Dissenting Shares) shall represent

<PAGE>

solely the right to receive the Final Per Share Merger Consideration

relating thereto. If the Final Per Share Merger Consideration (or any

portion thereof) is to be delivered to any Person (as defined in Section

10.7) other than the Person in whose name the Certificate formerly

representing shares of Company Common Stock surrendered therefor is

registered, it shall be a condition to such right to receive such Final Per

Share Merger Consideration that the Certificate so surrendered shall be

properly endorsed or otherwise be in proper form for transfer and that the

Person surrendering such shares of Company Common Stock shall pay to the

Exchange Agent any transfer or other taxes required by reason of the

payment of the Final Per Share Merger Consideration to a Person other than

the registered holder of the Certificate surrendered, or shall establish to

the satisfaction of the Exchange Agent that such tax has been paid or is

not applicable.

(e) At the Effective Time, the stock transfer books of the

Company shall be closed and, thereafter, there shall be no further

registration of transfers of shares of Company Common Stock on the stock

transfer books of the Surviving Corporation of any shares of Company Common

Stock that were outstanding immediately prior to the Effective Time. On or

after the Effective Time, any Certificates formerly representing shares of

Company Common Stock presented to the Surviving Corporation or the Exchange

Agent shall be surrendered and canceled in return for the payment of the

Final Per Share Merger Consideration relating thereto, as provided in this

Article III.

(f) If any Certificate shall have been lost, stolen or destroyed,

upon the making of an affidavit of that fact by the Person claiming such

Certificate to be lost, stolen or destroyed and, if required by the

Surviving Corporation, the posting by such Person of a bond in such

reasonable amount as the Surviving Corporation may direct as indemnity

against any claim that may be made against it with respect to such

Certificate, the Exchange Agent will issue the applicable portion of the

Exchange Fund in exchange for such lost, stolen or destroyed Certificate.

SECTION 3.2. PAYMENT FOR IN-THE-MONEY OPTIONS.

(a) At the Effective Time, Parent shall deposit, or shall cause

to be deposited, with the Exchange Agent, for the benefit of the holders of

In-the-Money Options, an amount in cash equal to the aggregate Option

Consideration payable with respect thereto in accordance with Section 2.3

(the "Aggregate Option Consideration").

(b) As promptly as practicable following the Effective Time, but

in any event within five (5) Business Days thereof, Parent shall deliver or

mail to each holder of an In-the-Money Option, (i) an optionholder

acknowledgment letter in substantially the form attached hereto as Exhibit

C and (ii) instructions for use in surrendering the original option

agreements formerly representing such In-the-Money Options in exchange for

the Option Consideration relating thereto.

completed and duly executed, and such other documents as may be required

pursuant to such instructions, the holder of such In-the-Money Option shall

be entitled to receive in exchange therefor the Option Consideration

(payable in accordance with Section 2.3),

<PAGE>

and all option agreements so surrendered shall forthwith be marked

canceled. No interest will be paid or accrued on any Option Consideration

(or portion thereof) payable to holders of In-the-Money Options.

(d) Parent shall instruct the Exchange Agent, upon receipt of an

optionholder acknowledgment letter, properly completed and duly executed,

and such other documents as may be required, to remit the Option

Consideration related to the In-the-Money Options of such holder to the

payroll service provider of Parent or the Surviving Corporation. Payment of

the Option Consideration shall be made by the payroll service provider of

Parent or the Surviving Corporation as promptly as practicable thereafter

(but in no event before the next regularly-scheduled payroll payment date)

after receipt by such payroll service provider of the Option Consideration

related to such In-the-Money Options from the Exchange Agent.

SECTION 3.3. ESCROW ACCOUNT. At the Effective Time, Parent shall pay to

HSBC Bank USA (the "Escrow Agent") an amount in cash equal to $11,000,000. The

Initial Indemnification Escrow Amount shall be held by the Escrow Agent in

accordance with the terms of an Escrow Agreement in the form attached hereto as

Exhibit D (the "Escrow Agreement"), for purposes of (i) satisfying any claims of

the Parent/MergerCo Indemnified Parties pursuant to Section 8.2, (ii) paying up

to $350,000 to Parent and/or the Surviving Corporation for certain costs

incurred by them in obtaining non-competition obligations from any or all of the

Company employees listed on Schedule 3.3 (the "Non-Compete Escrow Amount"),

(iii) refunding to Parent any amount due under Section 2.4(d) or Section 2.5(b)

or (d), and (iv) in certain circumstances specifically set forth in this

Agreement, reimbursing the expenses of the Shareholders' Representative, all as

further described in the Escrow Agreement. The Final Indemnification Escrow

Amount shall be paid to the holders of the Company Common Stock as of

immediately prior to the Effective Time (collectively, the "Company Equity

Holders") on a pro rata basis as promptly as practicable following the first

(1st) anniversary of the Closing Date and in accordance with the terms of the

Escrow Agreement.

SECTION 3.4. GENERAL PROVISIONS REGARDING PAYMENT OF MERGER CONSIDERATION.

(a) Promptly following the date that is one hundred twenty (120)

days after the Effective Time, the Exchange Agent shall deliver to the

Surviving Corporation all cash, Certificates, option agreements, and other

documents in its possession relating to the Merger, and the Exchange

Agent's duties shall terminate; provided that Parent may re-engage the

Exchange Agent to distribute the Final Indemnification Escrow Amount in

accordance with the terms of the Escrow Agreement. Thereafter, (i) each

holder of a Certificate formerly representing shares of Company Common

Stock may surrender such Certificate to the Surviving Corporation and

(subject to applicable abandoned property, escheat and similar laws)

receive in consideration therefor (payable as provided in Section 2.2) the

Final Per Share Merger Consideration relating thereto, and (ii) each holder

of a cancelled In-the-Money Option may surrender the original option

agreement related thereto to the Surviving Corporation and (subject to

applicable abandoned property, escheat and similar laws) receive in

consideration therefor (payable as provided in Section 2.3) the Option

Consideration relating thereto.

<PAGE>

(b) None of Parent, the Surviving Corporation or the Exchange

Agent or any of their respective Subsidiaries or Affiliates (as defined in

Section 10.7) shall be liable to any Person in respect of any cash from the

Exchange Fund or the Aggregate Option Consideration delivered to a public

official pursuant to any applicable abandoned property, escheat or similar

law.

Surviving Corporation shall be entitled to deduct and withhold from the

Final Per Share Merger Consideration or the Option Consideration to any

holder of shares of Company Common Stock or In-the-Money Options,

respectively, such amounts as the Exchange Agent, the Escrow Agent, Parent

or the Surviving Corporation is required to deduct and withhold with

respect to the making of such payment under the Internal Revenue Code of

1986, as amended (the "Code"), or any provision of United States federal,

state or local tax laws. To the extent that amounts are so withheld by the

Exchange Agent, the Escrow Agent, Parent or the Surviving Corporation, such

amounts withheld shall be treated for all purposes of this Agreement as

having been paid to the holder of the shares of Company Common Stock or

In-the-Money Options in respect of which such deduction and withholding was

made by the Exchange Agent, the Escrow Agent, Parent or the Surviving

Corporation, as the case may be.

SECTION 3.5. APPRAISAL RIGHTS. Notwithstanding anything in this Agreement

to the contrary, shares of Company Common Stock that are outstanding immediately

prior to the Effective Time and that are held by a "dissenter" as defined in

Section 14-2-1301 of the GBCC (such shares are referred to herein as "Dissenting

Shares") shall not be converted into the right to receive the Final Per Share

Merger Consideration but, instead, the holder thereof shall be entitled to

receive payment of the fair value of such Dissenting Shares as determined in

accordance with the provisions of Sections 14-2-1301 through 14-2-1332 of the

GBCC (the "GBCC Dissenters' Rights"); provided, however, that if any holder of

Dissenting Shares shall subsequently withdraw his or her demand for the payment

of the fair value of such shares or fails to establish or perfect or otherwise

loses his or her entitlement to payment of the fair value of such shares as

provided in the GBCC Dissenters' Rights, such holder shall not be entitled to

receive payment of the fair value of such shares of Company Common Stock as

contemplated by the GBCC Dissenters' Rights, and each such Dissenting Share

shall thereupon be deemed to have been canceled, extinguished and converted, as

of the Effective Time, into and represent the right to receive from Parent, the

Final Per Share Merger Consideration as provided in Section 2.2(a)(iii).

ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY

In order to induce Parent and MergerCo to enter into this Agreement and

consummate the transactions contemplated hereby, the Company hereby makes to

Parent and MergerCo the representations and warranties contained in this Article

IV. Such representations and warranties are subject to the qualifications and

exceptions set forth in the Schedules delivered by the Company to Parent

pursuant to this Agreement. References to the knowledge or awareness of the

Company are deemed to mean the actual knowledge of the following officers and

managers

<PAGE>

of the Company after reasonable inquiry: Robert Steinke, Emory Berry, Michael

Schreiber and Robert Settle.

SECTION 4.1. ORGANIZATION AND CORPORATE POWER.

(a) The Company is a corporation duly organized, validly existing

and in good standing under the laws of the State of Georgia, and is duly

qualified or registered to do business as a foreign corporation and in good

standing in each jurisdiction where the character of its properties, owned,

operated or leased or the nature of its activities makes such qualification

necessary, except where the failure to be so qualified or in good standing

would not reasonably be expected to have, individually or in the aggregate,

a Company Material Adverse Effect (as defined in Section 10.7).

(b) Copies of the Articles of Incorporation, as amended (the

"Articles of Incorporation"), and the Bylaws, as amended (the "Bylaws"), of

the Company have been furnished to Parent by the Company and are correct

and complete as of the date hereof. The Company is not in violation of any

term of the Articles of Incorporation or Bylaws.

SECTION 4.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT.

(a) The Company has all requisite corporate power and authority

to execute and deliver this Agreement and to consummate the transactions

contemplated hereby and perform its obligations hereunder. Subject only to

the approval of this Agreement by the holders of Company Common Stock as

described in clause (b) below, the execution, delivery and performance of

this Agreement and the consummation of the transactions contemplated hereby

have been duly authorized by all necessary corporate action on behalf of

the Company. In connection with the foregoing, the Company Board has

unanimously (i) determined that this Agreement, the Merger and the other

transactions contemplated hereby are advisable and in the best interests of

the Company and its shareholders, (ii) adopted this Agreement in accordance

with the provisions of the GBCC, (iii) directed that this Agreement be

submitted to the shareholders of the Company for their approval and (iv)

resolved to recommend that the shareholders of the Company vote in favor of

the approval of this Agreement. The Company Board has taken such actions

and votes as are necessary to render all applicable takeover statutes

inapplicable to this Agreement. This Agreement, assuming due and valid

authorization, execution and delivery hereof by Parent and MergerCo,

constitutes a valid and legally binding obligation of the Company,

enforceable against the Company in accordance with its terms, subject only

to applicable bankruptcy, insolvency, moratorium or other similar laws

relating to creditors' rights and general principles of equity.

(b) The affirmative vote of the holders of at least a majority of

the outstanding shares of Company Common Stock is the only vote of holders

of any shares of the capital stock of the Company necessary to approve this

Agreement and the transactions contemplated hereby at a meeting of the

Company's shareholders held for that purpose. Approval of this Agreement

and the transactions contemplated hereby by the shareholders of the Company

without a meeting thereof requires action by the written

<PAGE>

consent of such shareholders having the requisite number of votes necessary

to approve such action at a meeting of shareholders as described in the

preceding sentence.

SECTION 4.3. CAPITALIZATION. The authorized capital stock of the Company

consists of (a) 20,000,000 shares of Company Common Stock, of which 8,439,259.92

shares are issued and outstanding and of which 547,064.03 shares were held by

the Company in treasury, and (b) 1,000,000 shares of preferred stock, no par

value per share, of which no shares are issued and outstanding. All such issued

and outstanding shares of Company Common Stock are duly authorized, validly

issued, fully paid, non-assessable and free of preemptive rights. Schedule 4.3

sets forth a complete and accurate list of (i) all shareholders of the Company,

indicating the number of shares held by each shareholder, (ii) all outstanding

Options, indicating (A) the holder thereof, (B) the number of shares subject to

each Option, and (C) the exercise price, date of grant, vesting schedule and

expiration date for each Option, and (iii) all stock option plans and other

stock or equity related plans of the Company. The Company has taken all actions

necessary to ensure that all Options, to the extent not exercised prior to the

Effective Time, shall terminate and be cancelled immediately following the

Effective Time. Except as set forth on Schedule 4.3, there are no outstanding or

authorized options, warrants, rights, agreements or commitments to which the

Company is a party or which are binding upon the Company providing for the

issuance or redemption of any of its capital stock. There are no outstanding or

authorized stock appreciation, phantom stock or similar rights with respect to

the Company. Except as set forth on Schedule 4.3, there are no agreements to

which the Company is a party or by which it is bound with respect to the voting

(including, without limitation, voting trusts or proxies) or sale or transfer

(including, without limitation, agreements relating to preemptive rights, rights

of first refusal, co-sale rights or "drag-along" rights) of any securities of

the Company. To the knowledge of the Company, there are no agreements among

other parties, to which the Company is not a party, with respect to the voting

(including, without limitation, voting trusts or proxies) or sale or transfer

(including, without limitation, agreements relating to rights of first refusal,

co-sale rights or "drag-along" rights) of any securities of the Company. All of

the issued and outstanding shares of Company Common Stock were issued in

compliance with applicable federal and state securities laws.

SECTION 4.4. NON-CONTRAVENTION. Except for the filing of the Certificate of

Merger and as otherwise set forth on Schedule 4.4, neither the execution and

delivery of this Agreement by the Company, nor the consummation by the Company

of the transactions contemplated hereby, will: (a) violate or result in a

violation of, conflict with, constitute or result in a default (whether after

the giving of notice, lapse of time or both) under, accelerate any obligation

under, or give rise to a right of termination of, (i) any Contract (as defined

in Section 10.7) listed or required to be listed on Schedule 4.12, Schedule

4.14, or Schedule 4.15(b), (ii) any other Contract to which the Company or any

Subsidiary of the Company is a party or by which its assets are bound, which

violation, conflict, default, acceleration or right of termination, individually

or in the aggregate, would reasonably be expected to have a Company Material

Adverse Effect, or (iii) any Permit (as defined in Section 4.18) of the Company

or any Subsidiary of the Company, or cause the creation of any Encumbrance (as

defined in Section 10.7) upon any of the assets of the Company or any of its

Subsidiaries; (b) violate any provision of the Articles of Incorporation or

Bylaws; (c) violate, conflict with or result in a violation of, or constitute a

default (whether after the giving of notice, lapse of time or both) under, any

provision of any

<PAGE>

law, regulation or rule, or any order of, or any restriction imposed by, any

Governmental Authority (as defined in Section 10.7) applicable to the Company or

any Subsidiary of the Company; or (d) require from the Company or any Subsidiary

of the Company any notice to, declaration or filing with, or consent or approval

of any Governmental Authority or other third party.

SECTION 4.5. CORPORATE RECORDS. The corporate record books of the Company

accurately reflect in all material respects all corporate action taken by its

shareholders and the Company Board and any committees thereof. The copies of the

corporate records of the Company, as delivered to Parent, are true and complete

copies of the originals of such documents.

SECTION 4.6. SUBSIDIARIES; INVESTMENTS. Schedule 4.6 sets forth the name

and jurisdiction of incorporation or organization of each Subsidiary of the

Company. Each Subsidiary of the Company is duly organized, validly existing and

in good standing under the laws of the jurisdiction of its incorporation or

organization, and has all required corporate or other power and authority to

carry on its business as presently conducted. Each Subsidiary is duly qualified

or registered to do business as a foreign corporation and in good standing in

each jurisdiction where the character of its activities makes its qualification

necessary, except where the failure to be so qualified or in good standing would

not reasonably be expected to have, individually or in the aggregate, a Company

Material Adverse Effect. All issued and outstanding shares or other equity

interests of each such Subsidiary are duly authorized, validly issued, fully

paid and non-assessable, and are owned, directly or indirectly, by the Company

free and clear of all Encumbrances. There are no outstanding subscriptions,

options, warrants, commitments, preemptive rights, agreements, arrangements or

commitments of any kind relating to the issuance or sale of, or outstanding

securities convertible into or exercisable or exchangeable for, any shares of

capital stock or other equity interests of any Subsidiary of the Company. The

Company does not own or control, directly or indirectly, any interest in any

other corporation, partnership, limited liability company, association or other

business entity, except as set forth on Schedule 4.6.

SECTION 4.7. FINANCIAL STATEMENTS. The Company has previously furnished to

Parent and attached hereto on Schedule 4.7, copies of the following financial

statements: (a) the Company's unaudited consolidated balance sheet for the

fiscal quarter ended March 31, 2005 and the related unaudited consolidated

statements of income, retained earnings and cash flows for the fiscal quarter

then ended; (b) the Base Balance Sheet and the Company's audited consolidated

balance sheets for the fiscal years ended December 31, 2003, December 31, 2002

and December 31, 2001; and (c) the related audited consolidated statements of

income, retained earnings and cash flows for the fiscal years ended December 31,

2004, 2003, 2002 and 2001, with a report thereon by the independent certified

public accountants of the Company. Such financial statements were prepared in

conformity with GAAP applied on a consistent basis, are consistent in all

material respects with the books and records of the Company, and fairly present

in all material respects the financial position of the Company as of the dates

thereof and the results of operations and cash flows of the Company for the

periods shown therein; provided, however, that the unaudited financial

statements do not include all of the disclosures required by GAAP as, by way of

example, certain footnote disclosures have been omitted. Nothing has

<PAGE>

come to the attention of the Company since such respective dates that would

indicate that such financial statements are not true and correct in all material

respects as of the date thereof.

SECTION 4.8. ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor

any of its Subsidiaries has any liabilities or obligations of any nature,

whether accrued, absolute, contingent, asserted, unasserted or otherwise, except

liabilities or obligations (a) stated, adequately reserved against or otherwise

disclosed in (i) the Base Balance Sheet or other audited consolidated financial

statements of the Company for the fiscal year ended December 31, 2004 as

attached hereto on Schedule 4.7 (including the notes thereto) or (ii) the

Company's unaudited consolidated financial statements for the fiscal quarter

ended March 31, 2005 as attached hereto on Schedule 4.7, (b) incurred in the

ordinary course of business since the date of the Base Balance Sheet or (c) as

set forth in Schedule 4.8.

SECTION 4.9. ABSENCE OF CERTAIN DEVELOPMENTS. Since the date of the Base

Balance Sheet, the Company has conducted its business only in the ordinary

course consistent with past practice and, except as set forth in Schedule 4.9,

there has not been: (a) any declaration, setting aside or payment of any

dividend or other distribution with respect to any shares of capital stock of

the Company or any redemption, purchase or other acquisition of any securities

of the Company by the Company or any Subsidiary of the Company; (b) any material

commitment, Contract, borrowing, liability, guaranty, capital expenditure or

transaction (each, a "Commitment") entered into by the Company or any of its

Subsidiaries outside the ordinary course of business except for Commitments for

expenses of attorneys, accountants and investment bankers incurred in connection

with the Merger; (c) any material change in the Company's accounting principles,

practices or methods; (d) any change in the financial condition, results of

operations, or business of the Company or any of its Subsidiaries that,

individually or in the aggregate, has had or would reasonably be expected to

have a Company Material Adverse Effect; (e) any increase to, or establishment

of, any severance plan or agreement with any director, officer or employee of

the Company or any of its Subsidiaries; or (f) any incurrence of Indebtedness by

the Company or any of its Subsidiaries.

SECTION 4.10. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE; INVENTORIES.

(a) All of the accounts receivable of the Company and its

Subsidiaries are valid and enforceable claims consistent with and subject

to the Company's bad debt reserve as set forth on the Base Balance Sheet,

are subject to no set-off or counterclaim, arose in the ordinary course of

business, and are reflected on the Base Balance Sheet in a manner

consistent with past practice. Since the date of the Base Balance Sheet,

the Company and its Subsidiaries have collected their accounts receivable

in the ordinary course of their business and have not accelerated any such

collections.

(b) All accounts payable and notes payable of the Company and its

Subsidiaries arose in bona fide arm's length transactions in the ordinary

course of business. Since the date of the Base Balance Sheet, the Company

and its Subsidiaries have paid their accounts payable in the ordinary

course of their business.

Subsidiaries are of a quality and quantity salable in the ordinary course

of business. The values of the

<PAGE>

inventories stated in the Base Balance Sheet reflect the normal inventory

valuation policies of the Company and were determined in accordance with

GAAP consistently applied. Since the date of the Base Balance Sheet, no

inventory items have been sold or disposed of except through sales in the

ordinary course of business. Since October 1, 2004, neither the Company nor

any Subsidiary of the Company (i) has delivered to any of its distributors,

inventory in excess of the amount that was requested by such distributor,

or (ii) requested that any such distributor take delivery of any amount of

inventory in excess of the amount so requested by such distributor.

SECTION 4.11. TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule

4.11, there are no loans, leases or other agreements or transactions between the

Company or any Subsidiary of the Company and any present or former shareholder,

director, officer or employee of the Company or any such Subsidiary, or to the

knowledge of the Company, any member of such officer's, director's, employee's

or shareholder's immediate family, or any Person controlled by such officer,

director, employee or shareholder or his or her immediate family. No

shareholder, director, officer or employee of the Company or any Subsidiary of

the Company, or to the knowledge of the Company, any of their respective

immediate family members, owns, directly or indirectly, any interest in, or

serves as an officer or director or in another similar capacity of, any

competitor, customer or supplier of the Company or any Subsidiary of the

Company, or any organization which has a material Contract or arrangement with

the Company or any Subsidiary of the Company.

SECTION 4.12. PROPERTIES.

(a) Neither the Company nor any of its Subsidiaries owns any real

property. Schedule 4.12 lists all real property leased or subleased to or

by the Company or any Subsidiary of the Company. The Company has delivered

to Parent complete and accurate copies of the leases and subleases (as

amended to date) listed in said Schedule. With respect to each lease and

sublease listed in said Schedule: (i) the lease or sublease is, and will be

following the Closing, a legal, valid and binding obligation of the Company

or such Subsidiary of the Company and, to the knowledge of the Company, the

other parties thereto, enforceable in accordance with its terms, subject

only to applicable bankruptcy, insolvency, moratorium or other similar laws

relating to creditors' rights and general principles of equity; (ii) no

such lease

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