ASSET PURCHASE AGREEMENT

Asset Purchase Agreement

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ESSEX CORPORATION | PERFORMANCE GROUP, INC.

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Title: ASSET PURCHASE AGREEMENT
Governing Law: Virginia Date: 7/6/2004
Industry: Business Services Law Firm: Hirschler Fleischer, A Professional Corporation Sector: Services

ASSET PURCHASE AGREEMENT, Parties: essex corporation , performance group inc.

Exhibit 2.1

EXECUTION COPY

ASSET PURCHASE AGREEMENT

BY AND BETWEEN

PERFORMANCE GROUP, INC., AS SELLER

AND

ESSEX CORPORATION, AS BUYER

<PAGE>

TABLE OF CONTENTS

RECITALS .......................................................1

AGREEMENT .......................................................1

ARTICLE 1. THE TRANSACTION.............................................1

1.1 PURCHASED ASSETS......................................1

1.2 ASSUMED LIABILITIES...................................1

1.3 ASSIGNMENT AND ASSUMPTION.............................2

1.4 NOVATION..............................................2

ARTICLE 2. PURCHASE AND SALE...........................................6

2.1 TERMS OF PURCHASE AND SALE............................6

2.2 PURCHASE PRICE ADJUSTMENTS............................7

2.3 ESCROW................................................8

2.4 TRANSFER TAXES; PRORATIONS; COOPERATION...............9

2.5 ALLOCATION OF PURCHASE PRICE.........................10

ARTICLE 3. THE CLOSING................................................11

3.1 TIME AND PLACE OF CLOSING............................11

3.2 CLOSING DELIVERIES BY SELLER.........................11

3.3 CLOSING DELIVERIES BY BUYER..........................13

3.4 CLOSING DELIVERIES BY BUYER AND SELLER...............14

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER...................14

4.1 ORGANIZATION AND QUALIFICATION.......................14

4.2 AUTHORITY............................................14

4.3 NO CONFLICTS; REQUIRED CONSENTS......................15

4.4 FINANCIAL STATEMENTS.................................15

4.5 ABSENCE OF UNDISCLOSED LIABILITIES...................16

4.6 ABSENCE OF CHANGES...................................16

4.7 ACCOUNTS RECEIVABLE..................................16

4.8 MATERIAL CONTRACTS...................................17

4.9 INSURANCE............................................17

4.10 TITLE; SUFFICIENCY; CONDITION OF ASSETS..............18

4.11 REAL PROPERTY LEASES.................................18

4.12 INTELLECTUAL PROPERTY................................18

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4.13 CUSTOMERS AND SUPPLIERS..............................18

4.14 EMPLOYEES............................................19

4.15 SELLER BENEFIT PLANS.................................20

4.16 COMPLIANCE WITH LAWS; GOVERNMENTAL APPROVALS.........20

4.17 LITIGATION...........................................21

4.18 ENVIRONMENTAL MATTERS................................21

4.19 TAXES................................................21

4.20 BROKERS..............................................22

4.21 FRAUDULENT CONVEYANCE................................22

4.22 TRANSACTIONS WITH AFFILIATES.........................22

4.23 PRODUCT WARRANTIES...................................22

4.24 PRODUCT LIABILITIES..................................22

4.25 FULL DISCLOSURE......................................23

ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER....................23

5.1 ORGANIZATION AND GOOD STANDING.......................23

5.2 AUTHORITY............................................23

5.3 NO CONFLICTS; REQUIRED CONSENTS......................23

5.4 FINANCIAL CAPACITY...................................24

5.5 NOVATION EXPERIENCE..................................24

5.6 BROKERS..............................................24

ARTICLE 6. CONDUCT PRIOR TO CLOSING...................................24

6.1 SELLER'S CONDUCT OF THE BUSINESS.....................24

6.2 NO SOLICITATION......................................26

ARTICLE 7. ADDITIONAL AGREEMENTS......................................26

7.1 STOCKHOLDER VOTE.....................................26

7.2 CERTAIN NOTIFICATIONS................................27

7.3 ACCESS TO INFORMATION................................27

7.4 BEST EFFORTS.........................................27

7.5 CONSENTS.............................................27

7.6 EXPENSES.............................................27

7.7 CONFIDENTIALITY......................................27

7.9 EMPLOYEES............................................28

7.10 KNOWLEDGE OF BREACH..................................28

<PAGE>

ARTICLE 8. CONDITIONS TO CLOSING......................................29

8.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.........29

8.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER........30

ARTICLE 9. TERMINATION................................................31

9.1 CIRCUMSTANCES FOR TERMINATION........................31

9.2 EFFECT OF TERMINATION................................32

ARTICLE 10. INDEMNIFICATION...........................................32

10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES...........32

10.2 INDEMNIFICATION BY SELLER AND SHAREHOLDER............32

10.3 INDEMNIFICATION BY BUYER.............................33

10.4 PROCEDURES FOR INDEMNIFICATION.......................33

10.5 LIMITATIONS ON INDEMNIFICATION.......................34

10.6 INSURANCE; THIRD PARTY PAYMENTS; TAX BENEFITS

OR DETRIMENT.........................................35

10.7 EXCLUSIVE REMEDY....................................35

ARTICLE 11. MISCELLANEOUS PROVISIONS..................................35

11.1 AMENDMENTS AND WAIVERS...............................35

11.2 NOTICES..............................................36

11.3 GOVERNING LAW........................................36

11.4 EXHIBITS AND SCHEDULES...............................36

11.5 ASSIGNMENTS PROHIBITED; SUCCESSORS AND ASSIGNS.......36

11.6 COUNTERPARTS.........................................37

11.7 SEVERABILITY.........................................37

11.8 ENTIRE AGREEMENT.....................................37

11.9 CONSTRUCTION.........................................37

11.10 WAIVER OF JURY TRIAL.................................37

11.11 FURTHER ASSURANCES...................................37

11.12 CONFIDENTIALITY; PUBLICITY...........................38

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SCHEDULES

Schedule 1.1(a) Purchased Assets and Excluded Assets

Schedule 1.2 Assumed Liabilities

Schedule 2.5 Purchase Price Allocation

Schedule 8.1(g) Key Employees

EXHIBITS

Exhibit 1.4(b)(ii) Novation Documentation Responsibilities

Exhibit 1.4(c)(i) Subcontract

Exhibit 2.1 Escrow Agreement

Exhibit 2.3 Military Installations Under the Principal Government

Contract

Exhibit 3.2(a) General Assignment and Bill of Sale

Exhibit 3.2(i) Legal Opinion of Seller's Counsel

Exhibit 3.2(o) FIRPTA Certification

Exhibit 3.3(d) Legal Opinion of Buyer's Counsel

Exhibit 3.4(a) Assignment and Assumption Agreement

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made as of June 3,

2004, by and between Essex Corporation, a Virginia corporation (the "BUYER"),

Performance Group, Inc., a Virginia corporation (the "SELLER") and Ronald Horn,

sole shareholder of Seller (the "SHAREHOLDER").

RECITALS

WHEREAS, Seller is engaged in the business of providing geographic

information system engineering products and services and other related services

(the "BUSINESS"); and

WHEREAS, Buyer desires to purchase from Seller, and Seller desires to

sell to Buyer; substantially all of the assets, properties, rights and claims of

the Business on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing recitals and the

mutual representations, warranties, covenants and promises contained herein, the

adequacy and sufficiency of which are hereby acknowledged, the parties hereto

agree as follows:

AGREEMENT

ARTICLE 1. THE TRANSACTION

1.1 PURCHASED ASSETS. Subject to the terms and conditions of this

Agreement, at the Closing (as defined below), Seller shall sell, transfer,

convey, assign and deliver to Buyer, and Buyer shall purchase from Seller, all

of Seller's right, title and interest in the assets, properties, goodwill and

rights of Seller related to the Business, other than the Excluded Assets

(collectively, the "PURCHASED ASSETS"), all as more specifically described on

SCHEDULE 1.1(A). Seller shall retain all right, title and interest in and to the

Excluded Assets, including the right to take all actions reasonably necessary to

collect any accounts receivable not included within the Purchased Assets.

1.2 ASSUMED LIABILITIES. Subject to the terms and conditions of this

Agreement, at the Closing, as defined below, Seller shall assign, and Buyer

shall assume, the Assumed Liabilities. For the purposes of this Agreement, the

"Assumed Liabilities" shall mean only the following liabilities of Seller: (a)

Any liability arising after the Closing Date under the Seller's contracts that

are included in this Agreement as Purchased Assets, which shall be deemed to

include any such liability to which Seller may be subject under any related

novation or similar agreement; and (b) The liabilities of Seller specifically

listed on SCHEDULE 1.2. The Assumed Liabilities shall not include any Excluded

Liabilities as of the date of this Agreement as defined on SCHEDULE 1.2.

Schedules 1.1(a) and 1.2 attached hereto have been prepared as of the

date of this Agreement. Updated versions of such Schedules as of the Closing

Date shall be delivered at Closing.

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1.3 ASSIGNMENT AND ASSUMPTION.

(a) Notwithstanding anything herein to the contrary, if

an attempted sale, assignment, transfer or delivery of any Purchased Asset would

be ineffective without the consent of any third party, or if such an act would

violate the rights of any third party in the Purchased Assets or otherwise

affect adversely the rights of Buyer in the Purchased Assets, and the applicable

consent has not been obtained on or prior to the Closing Date, this Agreement

shall not constitute an actual or attempted sale, assignment, transfer or

delivery of such Purchased Asset (each, a "RESTRICTED ASSET"). Unless and until

any such consent is obtained, such Restricted Asset shall not constitute a

Purchased Asset and any associated Liability shall not constitute an Assumed

Liability for any purpose hereunder, but upon receipt of consent will constitute

same.

(b) In any such case, with respect to Purchased Assets

and Assumed Liabilities other than Government Contracts (which are addressed in

SECTION 1.4 below), if the Closing has occurred, Seller shall use best efforts

to obtain, as soon as practicable, such consent. Buyer shall cooperate

reasonably with Seller in obtaining such consents, PROVIDED, that neither Buyer

nor Seller shall be required to pay any cash consideration therefor or give or

allow to remain in effect any guaranty, letter of credit, performance bond or

other financial assurance.

are addressed in SECTION 1.4 below), until such consent shall have been

obtained, Seller shall at its expense effect an alternate arrangement, in the

form of a license, sublease, operating agreement or other arrangement, in any

case reasonably satisfactory to Buyer, which results in Buyer receiving all the

benefits and bearing all the ordinary course costs, liabilities and other

obligations with respect to each Restricted Asset.

1.4 NOVATION.

(a) GENERAL. The parties recognize that, in accordance

with the Federal Acquisition Regulation ("FAR") 42.1200 et seq., novation of any

contract, subcontract, offer or teaming agreement with or related to any federal

or state governmental authority that is included in the Purchased Assets (each,

a "GOVERNMENT CONTRACT") is necessary for the full transfer and assignment of

the Government Contracts to the Buyer and that application for novation cannot

be made until after the execution of this Agreement and may take a substantial

amount of processing time. The parties intend, however, to submit the necessary

documents in accordance with FAR 42.1204(e)(1) prior to Closing, and the

remainder of the required documents as they become available in an attempt to

obtain a preliminary decision from the responsible contracting officer

expressing the Government's consent to the transfer and assignment of the

Government Contracts. As used in this SECTION 1.4, the term "GOVERNMENT

CONTRACTS" includes current proposals relating to potential government contracts

and contracts issued in response thereto.

(b) NOVATION PROCESS.

(i) During the Interim Period each party will

cooperate fully and reasonably assist the other to obtain novation of each

Government Contract into the name of the Buyer and under substantially the same

terms and conditions as in effect at the time of Closing

<PAGE>

and without materially adverse conditions upon either the Seller or the Buyer,

and to facilitate performance thereof by the Buyer. Neither party will take any

action intended to, or which could reasonably be expected to, interfere with,

delay or otherwise adversely affect novation. The Buyer shall reimburse the

Seller for any third party out-of-pocket expenses attributable to the novation

process described in this SECTION 1.4 and exceeding One Thousand Dollars

($1,000.00) in the aggregate, provided that such expenses were incurred at the

request of the Buyer and, if in excess of $100, were pre-approved by the Buyer

in writing and such reimbursement shall occur only after the Seller submits an

invoice reasonably satisfactory to the Buyer for such expenses.

(ii) Promptly following the execution of this

Agreement, each party shall complete its respective portion of the

documentation required for novation of each Government Contract by FAR

42.1204(e), as identified for each party on EXHIBIT 1.4(B)(II), and the Buyer

and Seller shall each deliver its respective portion to the other. On behalf of

the Seller, the Buyer shall promptly submit the required documentation to

the appropriate contracting officer and provide a copy thereof to the Seller.

Each party will thereafter, promptly and in coordination and cooperation with

the other party, (i) respond appropriately to any requests from the

contracting officer for additional information or documentation relating to such

novation, and (ii) take all other actions reasonably necessary to complete

novation of all Government Contracts on a timely basis. Each party shall keep

the other fully informed, on a current and timely basis, as to the progress

of the novation process and provide copies of all letters, correspondence,

and other material documents to or from the governmental authority with

respect thereto. Buyer will use its best efforts to not engage in any material

communication, oral or written, with any contracting officer or other person

involved in the novation process without the prior consent of Seller, and

Seller shall have the right to participate in all such communications.

To the extent such prior consent is not possible, Buyer shall notify Seller

promptly after the communication and disclose to Seller the nature and content

of the communication. Buyer shall provide all support necessary to facilitate

completion of novation as quickly as possible, including having Buyer's CEO

participate in the meetings. Buyer will not take or omit to take any action that

would have an adverse effect on Seller's ability to complete novation quickly.

(iii) Solely with respect to the Principal Government

Contract, after execution of this Agreement and prior to Closing, Seller and

Buyer will seek a written indication from the appropriate contracting officer

(the "CONTRACT ADMINISTRATOR") pursuant to FAR 42.1204(e) that the Contract

Administrator is not aware of any requirement, circumstance or consideration

pertaining to the Principal Government Contract or the process for its novation

that would create a substantial likelihood that its novation (within the meaning

of this Section 1.4) from the Seller for the benefit of the Buyer would (i) not

occur within a period of 180 days after the Closing Date, or (ii) require the

imposition of materially adverse conditions upon either the Seller or the Buyer,

such indication being referred to for all purposes of this Agreement as the

"PRELIMINARY NOVATION APPROVAL." Upon execution of this Agreement, and in

conjunction with the submission of the documentation referenced in Section

1.4(b)(ii) above, the Seller shall promptly contact the Contract Administrator

to arrange a meeting for the purpose of discussing the documentation and seeking

the Preliminary Novation Approval. The Buyer shall provide all assistance and

support the Seller may reasonably request, including participation of the

Buyer's Chief Executive Officer and other senior management in preparation for,

conduct of, and follow up to all meetings and other communications with the

Contract Administrator and other government personnel. The Buyer acknowledges

that while the Seller will use its best efforts to

<PAGE>

obtain the Preliminary Novation Approval and to otherwise obtain novation of all

Government Contracts to which the Seller is a party in accordance with this

Agreement, the Seller neither makes any representation or warranty nor offers

any other assurance that any such novation can be obtained.

With respect to each Government Contract the novation of which has not occurred

prior to the Closing Date, in the interim period between (i) the Closing Date

and (ii) the novation of each of the Government Contracts, or final close-out

and payment of the respective Government Contract, whichever first occurs (as to

each individual Government Contract, the "INTERIM PERIOD"):

(i) The Buyer, to the extent legally permissible,

will perform in a good and workmanlike manner and otherwise in full compliance

with all requirements of the Government Contracts, using to the extent

appropriate all Seller personnel and Purchased Assets conveyed to the Buyer

hereunder, the Seller's obligations and receive all economic and operational

benefits under each of the Government Contracts in lieu of the Seller, in

accordance with a subcontract to be executed by the parties at the Closing in

the form set forth in EXHIBIT 1.4(C)(I) (each, a "SUBCONTRACT"), which shall

incorporate to the maximum extent practicable the terms, conditions, and

requirements of the respective Government Contract. In no event will the Buyer

or the Seller be liable or responsible for failure to comply with the

requirements associated with the Government Contracts if the non-compliance

arose out of causes beyond the control and without the fault or negligence of

the Buyer, or the Seller, as the case may be. The Seller, promptly following

execution of this Agreement, will advise the respective contracting officer of

the intended Subcontract, obtain approval if required, and facilitate

appropriate meetings between the Buyer and the contracting officer, and Buyer

and Seller shall perform their respective obligations under SECTION 1.4.

(ii) Any modification to a Government Contract

approved by the Seller prior to the Closing Date will be duly signed by the

Seller.

(iii) Any other correspondence, invoices, or other

written submissions, including requests for equitable adjustments, claims,

contract modifications, and requests for final decisions will be prepared by the

Seller (with the Buyer's assistance as requested by the Seller), coordinated

with and submitted for the Buyer's final approval, which approval shall not

unreasonably be withheld, signed by the Seller if approved, and submitted by the

Seller to the government. The Buyer shall respond promptly to any request for

approval and shall provide all reasonable assistance to the Seller needed to

effectuate this Section. In this context, the Seller hereby designates

Shareholder as "SELLER'S DESIGNATED CONTRACT REPRESENTATIVE", and the Buyer

hereby designates Frederick Funk as the "BUYER'S DESIGNATED CONTRACT

REPRESENTATIVE" for all purposes of this Section 1.4(c). Either party may change

its Designated Contract Representative by written notice to the other. In

addition, if any certification is required, the Buyer shall certify to the

Seller in writing that such certification is proper under the Contract Disputes

Act of 1978 (the "CDA"), and not in violation of the False Claims Act, and upon

receipt of such certification the Seller shall review and certify the claim

under the CDA for submittal to and decision by the contracting officer.

<PAGE>

(iv) During the Interim Period, the Seller will be

responsible for preparing and certifying all pre-Closing Date cost claims,

including all of the Seller's direct, indirect, and general and administrative

cost claims, for each Government Contract through the Closing Date. During the

Interim Period, the Seller will submit such claims to the contracting officer.

Following the Interim Period, the Seller will be responsible for preparing and

certifying to the Buyer all pre-Closing Date cost claims, including all of the

Seller's direct, indirect, and general and administrative cost claims, for each

Government Contract through the Closing Date. The Buyer will be responsible for

certifying (based on the Seller's certificate) and submitting such claims to the

contracting officer. During and following the Interim Period, each party will

cooperate reasonably with the other in preparing and submitting such claims.

With respect to all cost claims covering periods prior to the Closing Date, (i)

to the extent included in the Purchased Assets (whether as an account receivable

or otherwise), the Buyer shall be entitled to all cost reimbursements and fees

and other entitlements, (ii) to the extent not included in the Purchased Assets

(whether as an account receivable or otherwise), the Seller shall be entitled to

all cost reimbursements and fees and other entitlements, and (iii) the Seller

shall be responsible for any and all liabilities and obligations (other than

Assumed Liabilities) arising from such claims and shall pay or otherwise

discharge such liabilities and obligations when due.

(v) If the appropriate contracting officer refuses to

allow the Buyer to perform a Government Contract pursuant to a Subcontract

during the Interim Period, has not acted on the request for novation on a

Government Contract by August 30, 2004, or refuses to permit novation of a

Government Contract under substantially the same terms and conditions as in

effect at the time of the Closing in the name of the Buyer and without material

adverse conditions upon either the Seller or the Buyer (collectively, a

"Governmental Refusal") and, (i) the Governmental Refusal is no longer

appealable by law or regulation, or (y) the parties jointly agree that the

Governmental Refusal cannot or should not as a practical matter be further

pursued, appealed, or submitted for reconsideration, the parties shall for a

period of thirty (30) days consult in good faith on how to proceed.

(A) If the parties fail within such period to agree

jointly on the disposition of an affected Government Contract other than the

Principal Government Contract, either the Buyer or the Seller may elect to cause

all remaining performance obligations under such contract to be retransferred to

the Seller (a "Retransfer Event"). Upon such Retransfer Event, the Interim

Period will end as to such contract, and all performance obligations, payments,

expenses, cost reimbursements, fees, and other matters attributable to the

period subsequent to the Interim Period will be for the account of the Seller.

The parties will thereupon negotiate in good faith and agree upon an equitable

adjustment to the Purchase Price considering the relative value of the

respective Government Contract, and the Buyer's net-of-tax profit to date under

the respective Subcontract and arrangements to enable the Seller to perform its

ongoing obligations under any Government Contract that is the subject of a

Retransfer Event.

(B) If the parties fail within such period to agree

jointly on the disposition of the Principal Government Contract, so long as the

Government Refusal shall not be primarily attributable to a breach by the Seller

of this Agreement, the parties will work together in good faith to take all

actions necessary to restructure the transaction contemplated by this Agreement

as a purchase of all of the issued and outstanding shares of capital stock of

the Seller substantially in accordance with the terms and conditions set forth

in this Agreement and

<PAGE>

the other agreements provided for herein; provided, however, that the terms and

conditions of the transaction will be modified to reflect the inherent legal and

economic differences between an asset purchase and a stock purchase as follows;

(i) the Buyer shall have the right to conduct all additional due diligence it

reasonably determines necessary to address the liability issues associated with

a stock purchase, and as a result of such due diligence shall be entitled to

require commercially reasonable changes to the Buyer indemnification rights

hereunder to the extent necessary to reflect such changes in the Buyer's

liability exposure without otherwise departing from the principal terms,

conditions and limitations of such indemnification; (ii) the Seller shall make

such additional representations, warranties and covenants as are customary in a

stock purchase transaction, including without limitation those addressing clear

title to all of the capital stock of the Seller; and (iii) the Purchase Price

shall be adjusted to reflect (x) any additional liability exposure the parties

shall reasonably determine would result from the change in deal structure,

taking into account changes which may be made to the indemnification rights of

the Buyer, and (y) any variation in the tax consequences to the Buyer of the

change in transaction structure, taking into account the right of the Buyer to

make a Section 338(h)(10) election with respect to the transaction. The parties

shall execute and deliver a Stock Purchase Agreement and related documentation

providing for a transaction structure intended to facilitate the obtaining, if

required, of any governmental consents or approvals for the transaction and

shall, consistent with the provisions of Section 1.4(a), take such actions as

shall be reasonably necessary to obtain such government consents or approvals.

(d) If a Retransfer Event occurs as to any Government

Contract, the Buyer shall remain responsible for payment of all expenses

incurred and other matters and shall be entitled to retain all cost

reimbursements and fees and other entitlements applicable to the Interim Period.

(e) Notwithstanding any provisions or language contained

herein, the Seller shall not compromise, settle, or release any existing

requests for equitable relief or claims pertaining to the Government Contracts,

whether asserted or unasserted, prior to the Closing Date, or the government's

approval of the novation, whichever is later, without the express written

consent of the Buyer, which shall not be unreasonably withheld. The Seller

further agrees to indemnify the Buyer in accordance with SECTION 10.2 herein,

for any Government or third-party liability or claims arising out of the

Seller's violation or non-compliance with any Government Contract requirements

resulting from acts or omissions on or prior to the Closing Date, and the Buyer

agrees to indemnify the Seller in accordance with SECTION 10.3 herein, for any

government or third-party liability or claims arising out of the Buyer's

violation or non-compliance with any Government Contract requirements resulting

from acts or omissions following the Closing Date.

ARTICLE 2. PURCHASE AND SALE

2.1 TERMS OF PURCHASE AND SALE. Subject to the terms of this Agreement,

including adjustment pursuant to Section 2.2, the purchase price for the sale,

transfer, conveyance, assignment and delivery of the Purchased Assets shall be

Five Million Dollars ($5,000,000) (the "PURCHASE PRICE"), payable by Buyer as

follows: (i) by a payment to Seller on the Closing Date in the amount of

$3,500,000 by wire transfer of immediately available U.S. funds, and (ii) by a

payment on the Closing Date in the amount of $1,500,000 (the "ESCROW AMOUNT") by

wire

<PAGE>

transfer of immediately available U.S. funds to U.S. Bank National Association,

as escrow agent (the "ESCROW AGENT"), which amount shall be governed by the

terms and conditions of an Escrow Agreement by and among Seller, Buyer and

Escrow Agent in the form attached hereto as EXHIBIT 2.1 (the "ESCROW

AGREEMENT").

2.2 PURCHASE PRICE ADJUSTMENTS.

(a) As promptly as practicable, but no later than thirty

(30) days after the Closing Date, the Buyer shall prepare and deliver to the

Seller a statement of Working Capital as of the close of business on the Closing

Date ("CLOSING DATE WORKING CAPITAL"), which shall set forth the Buyer's

determination of the Closing Date Working Capital prepared on the basis of, and

using the same accounting policies, principles, methodologies and preparations

as, the audited balance sheet as of December 31, 2003 (the "AUDITED BALANCE

SHEET") but excluding the Excluded Assets and Excluded Liabilities. At all

reasonable times following the Seller's receipt of Buyer's statement of the

Closing Date Working Capital, the Seller and its representatives shall be

permitted to review the Buyer's respective working papers relating to its

Closing Date Working Capital determination, and the Buyer shall make reasonably

available the individuals responsible for the preparation of the statement in

order to respond to the inquiries of the Seller related thereto. As used herein,

the term "WORKING CAPITAL" consists of the following items relating to the

Business and included in the Purchased Assets and the Assumed Liabilities: (i)

accounts receivable; plus (ii) inventory (which shall be deemed to include work

performed but not billed through the Closing Date); plus (iii) other current

assets; minus (iv) accounts payable; minus (v) accrued expenses; provided that

the items described in clauses (i) through (v) above shall be determined in

accordance with U.S. GAAP, and, for purposes of the calculation of the Closing

Date Working Capital, shall be determined as of the close of business on the

Closing Date.

(b) The Seller shall notify the Buyer in writing (the

"NOTICE OF DISAGREEMENT") within thirty (30) days of Seller's receipt of the

statement of Closing Date Working Capital if Seller disagrees with the Buyer's

calculation of the Closing Date Working Capital. The Notice of Disagreement

shall set forth in reasonable detail the basis for such dispute, the dollar

amounts involved and the Seller's good faith estimate of the Closing Date

Working Capital. If the Seller does not deliver a Notice of Disagreement to the

Buyer within such thirty (30) day period, then the Closing Date Working Capital

set forth in Buyer's statement shall be deemed to have been accepted by the

Seller, shall become final and binding upon the parties and shall be deemed the

final working capital statement (the "FINAL WC STATEMENT"). At all reasonable

times following the Buyer's receipt of a Notice of Disagreement, the Buyer and

its representatives shall be permitted to review the Seller's respective working

papers relating to the Notice of Disagreement, and the Seller shall make

reasonably available the individuals responsible for the preparation of the

Notice of Disagreement in order to respond to the inquiries of the Buyer related

thereto.

delivery of a Notice of Disagreement, the Seller and the Buyer shall seek to

resolve any differences that they may have with respect to any matter specified

in the Notice of Disagreement. If at the end of such thirty (30) day period the

Seller and the Buyer have been unable to agree upon a Final WC Statement, then

the Seller and the Buyer shall submit to RSM McGladrey or another certified

<PAGE>

public accounting firm mutually agreed to by them (the "INDEPENDENT ACCOUNTING

FIRM") for review and resolution any and all matters that remain in dispute with

respect to the Notice of Disagreement. The Buyer and the Seller shall cause the

Independent Accounting Firm to make a final determination (which determination

shall be binding on the parties hereto) of the Closing Date Working Capital

within thirty (30) days from such submission, and such final determination shall

be deemed the Final WC Statement. During the thirty (30) day review by the

independent accounting firm, the Buyer and the Seller will each make available

to the Independent Accounting Firm such individuals and such information, books

and records as may be reasonably required by the Independent Accounting Firm to

make its final determination.

(d) If the Closing Date Working Capital as set forth in

the Final WC Statement (the "FINAL WORKING CAPITAL") exceeds $442,500 (the

"WORKING CAPITAL TARGET"), then the Buyer shall pay to the Seller as additional

Purchase Price an amount equal to such excess, or (ii) if the Final Working

Capital is less than $442,500, then the Seller shall pay to the Buyer an amount

equal to such shortfall, in either case within five (5) business days after the

Final WC Statement becomes or is deemed final and binding on the parties hereto

and, in either case, together with interest on the amount of such excess or

shortfall from the Closing Date until the date of payment at the rate of four

percent (4%) per annum.

(e) In the event that the parties submit any unresolved

objections to the Independent Accounting Firm for resolution as provided in this

Section 2.2, the Buyer and the Seller will share responsibility for the fees and

expenses of the Independent Accounting Firm as follows:

(i) if the Independent Accounting Firm resolves all

of the remaining objections in favor of the Buyer (the Final Working Capital so

determined is referred to herein as the "Low Value"), the Seller will be

responsible for all of the fees and expenses of the Independent Accounting Firm;

(ii) if the Independent Accounting Firm resolves all

of the remaining objections in favor of the Seller (the Final Working Capital so

determined is referred to herein as the "High Value"), the Buyer will be

responsible for all of the fees and expenses of the Independent Accounting Firm;

and

(iii) if the Independent Accounting Firm resolves

some of the remaining objections in favor of the Buyer and the rest of the

remaining objections in favor of the Seller (the Final Working Capital so

determined is referred to herein as the "Actual Value"), the Seller will be

responsible for that fraction of the fees and expenses of the Independent

Accounting Firm equal to (x) the difference between the High Value and the

Actual Value over (y) the difference between the High Value and the Low Value,

and the Buyer will be responsible for the remainder of the fees and expenses.

2.3 ESCROW.

(a) Upon the first to occur of (i) novation of contract

number DABJ03-03-D-0005 described on SECTION 4.8(A) of the Seller Disclosure

Schedule (the "PRINCIPAL GOVERNMENT

<PAGE>

CONTRACT") as required in SECTION 1.4, (ii) the work anticipated to be performed

and paid for pursuant to the Principal Government Contract becoming the subject

of another contract in which Buyer has an interest, or (iii) Buyer becoming the

provider of the services to be provided pursuant to the Principal Government

Contract at the military installations listed on EXHIBIT 2.3, to the extent such

services are required by the Government, the parties shall take all actions

necessary to cause the Escrow Agent to deliver to Seller One Million Dollars

($1,000,000) of the Escrow Amount (the "NOVATION AMOUNT") in accordance with the

Escrow Agreement and in the manner reasonably designated by Seller to the Escrow

Agent.

(b) From time to time prior to the one (1) year

anniversary of the Closing Date (the "ESCROW TERMINATION DATE"), the parties

shall take all actions necessary to cause the Escrow Agent to pay from the

Escrow Account all Buyer Damages for which Buyer has asserted a claim (subject

to the limitations of Section 10.5) and as to which (i) Seller has not contested

the claim as provided below or (ii) all disagreements between Buyer and Seller

shall have been resolved by mutual agreement or a final, nonappealable decision

of a court of competent jurisdiction, in accordance with the Escrow Agreement.

Buyer may assert claims for Buyer Damages by written notice to the Seller and

the Escrow Agent, and payment of any such claim shall be effected on the later

to occur of the expiration of fifteen (15) Business Days from the date of such

notice or, if such claim is contested in writing within such fifteen (15)

Business Day period, the date the dispute is resolved either by mutual agreement

or a final, nonappealable decision of a court of competent jurisdiction.

the Escrow Agent to deliver any remaining amounts of the Escrow Amount to Seller

on the Escrow Termination Date, in the manner reasonably designated by Seller to

the Escrow Agent in writing at least ten (10) days prior to such date; PROVIDED

that the parties shall authorize the Escrow Agent to withhold from delivery of

any remaining amounts of the Escrow Amount the equivalent of any amounts then in

dispute related to Buyer Damages (subject to the limitations of Section 10.5);

PROVIDED FURTHER, that the withheld Escrow Amount, to the extent not applied in

satisfaction of such indemnification obligations, shall be paid to Seller

promptly upon resolution of such dispute. Nothing in this Section 2.3 shall be

construed as limiting the liability of Seller to the Escrow Amount, nor shall

payments from the Escrow Amount be considered as liquidated damages for any

breach under this Agreement or any other Seller Transaction Document.

2.4 TRANSFER TAXES; PRORATIONS; COOPERATION.

(a) Notwithstanding any legal requirements to the

contrary, Buyer shall be responsible for and shall pay any transfer taxes when

due, and shall, at its own expense, file all necessary tax returns and other

documentation with respect to all such transfer taxes; PROVIDED, that, if

required by any legal requirement, Buyer will join in the execution of any such

tax returns and other documentation.

(b) Seller shall be responsible for and shall pay any

taxes arising or resulting from or in connection with the conduct of the

Business or the ownership of the Purchased Assets attributable to the

Pre-Closing Period (as defined below). Buyer shall be responsible for and shall

pay any taxes arising or resulting from or in connection with the conduct of the

Business or the ownership of the Purchased Assets attributable to the

Post-Closing period. "POST-CLOSING

<PAGE>

PERIOD" means any taxable period beginning after the close of business on the

Closing Date or, in the case of any tax period which includes, but does not

begin, after the close of business on the Closing Date, the portion of such

period beginning after the close of business on the Closing Date, and

"PRE-CLOSING PERIOD" means any taxable period ending on or before the close of

business on the Closing Date or, in the case of any taxable period which

includes, but does not end on, the Closing Date, the portion of such period up

to and including the close of business on the Closing Date.

other similar taxes (not including income taxes) levied with respect to the

Purchased Assets or the Business for a taxable period which includes (but does

not end on) the Closing Date shall be apportioned between Buyer and Seller based

on the number of days included in such period through and including the Closing

Date and the number of days included in such period after the Closing Date.

(d) Unless Internal Revenue Code of 1986, as amended (the

"CODE") or Treasury Regulations require otherwise, the parties shall treat the

Seller as the owner of the Escrow Amount and earnings thereon for tax purposes

unless and until such amount (or portion thereof) is returned to Buyer.

(e) After the Closing, Seller and Buyer will each afford

(or cause its respective affiliates to afford) to the other or to such other's

representatives or agents reasonable access during normal business hours (on

terms not unreasonably disruptive to the business, operations or employees of

the party or parties of which access is sought) to the records and all other

data and information relating to taxes pertaining to any Pre-Closing Period and

to Seller's employees, or such other employees providing services in respect of

the Business and auditors for the purpose of obtaining information relating to

taxes, to the extent such access is reasonably necessary: (i) to prepare and

complete any tax returns required to be made hereunder; (ii) to prosecute or

defend on behalf of Seller's litigation or administrative controversies

controlled by Seller or Purchaser; and (iii) to comply with requests made by any

tax authority conducting an audit, investigation or inquiry relating to Seller's

activities. After the Closing, Buyer and Seller agree (x) to retain all books

and records with respect to tax matters pertinent to Seller relating to any

Pre-Closing Period until the expiration of the statute of limitations (and, to

the extent notified by Buyer or Seller, any extensions thereof) of the

respective tax periods, and to abide by all record retention agreements entered

into with any governmental authority; and (y) if the other party reasonably

requests, to allow the other party hereto to make copies of such books and

records.

2.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated

among the various classes of Purchased Assets (as such classes are defined for

the purposes of Section 1060 of the Code) at Closing consistent with the

allocation schedule attached hereto as SCHEDULE 2.5, which is derived from the

Interim Balance Sheet. In the event the Purchase Price is adjusted post-Closing

pursuant to SECTION 2.2, the amounts allocated to each class of the Purchased

Assets on SCHEDULE 2.5 shall be adjusted to reflect the changes in the

respective asset classes that necessitated adjustment of the Purchase Price.

Promptly following the determination of the Final Working Capital Amount, the

parties shall cooperate in the execution of Form 8594 to be filed with the

Internal Revenue Service which reflects the final allocation of the Purchase

Price. All allocations made pursuant to this SECTION 2.5 shall be made in

accordance with the requirements

<PAGE>

of Section 1060 of the Code. None of the parties shall take a position on any

tax return (including IRS Form 8594), before any tax authority or in any

judicial proceeding that is in any manner inconsistent with such allocation

without the written consent of the other parties to this Agreement or unless

specifically required pursuant to a determination by an applicable tax

authority. The parties shall promptly advise each other of the existence of any

tax audit, controversy or litigation related to any allocation hereunder.

ARTICLE 3. THE CLOSING

3.1 TIME AND PLACE OF CLOSING. The closing of the purchase and sale

provided for in this Agreement (the "CLOSING") shall occur at the offices of

Hirschler Fleischer, 725 Jackson Street, Suite 200, Fredericksburg, Virginia

22401-5720, at 10:00 A.M. on June 25, 2004 assuming that all conditions to

closing set forth in Article 8 are satisfied or waived (other than conditions

that are intended to be satisfied at the Closing), or at such other date, time

or place as the parties may agree (the "CLOSING DATE").

3.2 CLOSING DELIVERIES BY SELLER. At the Closing, Seller shall (i) take

all steps reasonably necessary to place Buyer in actual possession and operating

control of the Business and the Purchased Assets (other than Government

Contracts, which shall be handled in accordance with Section 1.4), and (ii)

deliver the following items, duly executed by Seller as applicable, all of which

shall be in form and substance reasonably acceptable to Buyer:

(a) The Escrow Agreement;

(b) UPDATED SCHEDULES. Updated versions of Schedules 1.1(a)

and 1.2 reflecting the Purchased Assets and Assumed Liabilities as of the

Closing Date;

Assignment and Bill of Sale covering all of the applicable Purchased Assets,

substantially in the form attached hereto as EXHIBIT 3.2(A) (the "GENERAL

ASSIGNMENT AND BILL OF SALE");

(d) OTHER CONVEYANCE INSTRUMENTS. Such other specific

instruments of sale, transfer, conveyance and assignment as Buyer may reasonably

request;

(e) ASSIGNMENTS OF LEASES. Assignments of real property

leases and personal property leases;

(f) CONSENTS. Duly executed consents of all third parties

required by Seller to consummate the transaction, in form and substance

reasonably satisfactory to Buyer, including those consents listed in SECTION 4.3

of the Seller Disclosure Schedule other than government consents required for

conveyance of Government Contracts;

(g) PAYOFF AND RELEASE LETTERS. Payoff and release

letters from creditors of Seller, together with UCC-3 termination statements,

with respect to any financing statements filed against any of the Purchased

Assets, terminating all encumbrances (including tax liens other than Permitted

Liens, as defined in Section 3.4(b) below) on any of the Purchased Assets;

<PAGE>

(h) EMPLOYMENT AGREEMENT. Employment agreement and

noncompetition agreement between Shareholder and Buyer on customary and

reasonable terms to the parties;

(i) OPINION OF SELLER'S COUNSEL. An opinion, dated as of

the Closing Date, from Hirschler Fleischer, A Professional Corporation, Seller's

legal counsel, substantially in the form attached hereto as EXHIBIT 3.2(I);

(j) OFFICER'S CERTIFICATE. A certificate executed on

behalf of Seller by its President or Chief Executive Officer, dated as of the

Closing Date, certifying that:

(i) the representations and warranties of Seller set

forth in this Agreement, or in any written statement or certificate that shall

be delivered to Buyer by Seller under this Agreement,

(x) that are not qualified as to materiality are

true and correct in all material respects, and

(y) that are qualified as to materiality are true

in all are true and correct in all respects, on and as of the date made and as

of the Closing Date as if made on the date thereof (except to the extent such

representation or warranty specifies an earlier date), and

(ii) Seller has performed in all material respects all

obligations and covenants required to be performed by it prior to the Closing

Date under this Agreement and any other agreement or document entered into in

connection herewith;

(k) SECRETARY'S CERTIFICATE. A certificate of Seller's

Secretary certifying as to:

(i) the Articles of Incorporation and bylaws of Seller

as in effect as of the Closing Date,

(ii) resolutions of Seller's stockholder and its board

of directors authorizing the execution, delivery and performance of this

Agreement and the other Seller Transaction Documents, and

(iii) the incumbency of Seller's officers executing this

Agreement and all other Seller Transaction Documents;

(l) CERTIFICATE OF GOOD STANDING. A certificate from the

Virginia State Corporation Commission as to Seller's good standing;

(m) CERTIFICATE OF AMENDMENT. Articles of Amendment to

Seller's Articles of Incorporation to be filed by Buyer after the Closing Date

with the clerk of the Virginia State Corporation Commission, changing Seller's

corporate name to one dissimilar to Performance Group, Inc.;

<PAGE>

(n) BOOKS AND RECORDS. The books and records of the

Seller, except for books and records designated as Excluded Assets; and

(o) FIRPTA CERTIFICATION. Certification by Seller of

United States person status substantially in the form attached hereto as EXHIBIT

3.2(O).

3.3 CLOSING DELIVERIES BY BUYER. At the Closing, Buyer shall

deliver the following items, duly executed by Buyer as applicable, all of which

shall be in a form and substance reasonably acceptable to Seller:

(a) WIRE TRANSFER. A wire transfer to Seller's bank in

accordance with wire instructions Seller shall provide at least three business

days prior to Closing for credit to Seller's account, in the amount of the

Purchase Price less the Escrow Amount, and a wire transfer to the Escrow Agent

in the amount of the Escrow Amount to be held in accordance with the terms and

conditions of the Escrow Agreement;

(b) OFFICER'S CERTIFICATE. A certificate executed on

behalf of Buyer by its President or Chief Executive Officer, dated as of the

Closing Date, certifying that:

(i) the representations and warranties of Buyer set

forth in this Agreement, or in any written statement or certificate that shall

be delivered to Seller by Buyer under this Agreement,

(x) that are not qualified as to materiality are

true and correct in all material respects, and

(y) that are qualified as to materiality are true

in all are true and correct in all respects, on and as of the date made and as

of the Closing Date as if made on the date thereof (except to the extent such

representation or warranty specifies an earlier date), and

(ii) Buyer has performed all obligations and

covenants required to be performed by it under this Agreement and any other

agreement or document entered into in connection herewith prior to the Closing

Date;

Shareholder and Buyer described in Section 3.2(h);

(d) OPINION OF BUYER'S COUNSEL. An opinion, dated as of the

Closing Da

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